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Thursday, 4 April 2013

PM’s pep talk to India Inc - Focus on power, raising FDI caps



PM's pep talk to India Inc
- Focus on power, raising FDI caps

OUR SPECIAL CORRESPONDENT
Prime Minister Manmohan Singh with CII president Adi Godrej at the conference in New Delhi on Wednesday. AFP photo
New Delhi, April 3: Prime Minister Manmohan Singh today said his government will resolve fuel supply problems holding up mega power projects within three weeks, make more room for FDI, besides ensuring strong foreign exchange inflows over the next two years.
Singh asked business leaders for help to "prove the prophets of gloom wrong. I would urge Indian industry to have faith in our determination and avoid getting swamped by a mood of negativism".
The Prime Minister, who was speaking at a CII annual meeting, readily acknowledged that "bureaucratic inertia" and corruption were problems for investors, but added that economic growth above 8 per cent was possible if his government and industry worked together.
"The main thing we can do to revive investment is to deal with the impediments affecting infrastructure projects …. The problem of fuel supply — both coal and gas — to power projects has been posing problems … I hope we will see results in the next three weeks," Singh said.
A plan to pool price of imported coal with coal mined locally by state-run Coal India has run into rough weather with ministries bickering over it and state governments strongly objecting to the move.
They expect the move to make coal available at cheaper rates to upcoming mega power plants being set up by big power houses — Reliance, Tata and Adani — but at the same time make electricity sold by state power boards costlier for end-users. Top officials said the government was working on a new formula to break the conundrum.
A similar plan to pool imported and locally mined gas for sale to power plants is also stuck over the pricing formula. Officials say non availability of natural gas at reasonable rates for the power sector has put at risk new-capacity investments worth Rs 36,000 crore, including Rs 25,000 crore of bank finance.
A fortnight back, new power plant owners, including Reliance ADAG chairman Anil Ambani, Lanco chief Madhusudhan Rao, GVK Group chairman G.V.K Reddy and GMR's G.M. Rao had met petroleum minister Veerappa Moily, seeking a solution.
Unlocking these coal-fired and gas-fired power investment in the pipeline are expected to create thousands of new jobs, add big-ticket investment and help catalyse faster economic growth.
India's markets in the Western world are either in recession or showed zero growth, which has affected exports, Singh said.
As a result, India's current account deficit, or the gap between what it earns and spends in foreign exchange, has expanded to around 5 per cent.
To bring this down, India "will take all steps to ensure (foreign exchange) inflows remain strong for the next two years," he said.
The Prime Minister also made it clear he expected to deliver on liberalising FDI rules. "We are reviewing the FDI policy comprehensively to see what more can be done."
Besides liberalising defence sector FDI, which could go up to 49 per cent, the government wants to build a consensus on raising the insurance and pension sector FDI caps to 49 per cent, a goal which may prove to be politically more difficult to attain.
Besides, officials said, the government was planning to tweak sectoral caps in foreign investment to allow higher investment in most sectors.
The government has already allowed foreign airlines to invest up to 49 per cent in domestic carriers and allowed transnational retailers such as Walmart and Tesco to set up shop in India.
Officials said rule-and-clearance impediments that were holding up investments in these two areas would also be addressed in the next few weeks.
Industry leaders seemed satisfied by the Prime Minister's pep talk. Rahul Bajaj, chairman of Bajaj Group, told reporters, "As the Prime Minister said, we had an 8 per cent growth earlier although we had the same problems. We still have the same problems, then why should we be satisfied with 5 per cent. That is the question we all have to work on."