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Thursday, 4 April 2013

Singh lists growth drivers


Singh lists growth drivers

OUR SPECIAL CORRESPONDENT
Manmohan Singh in New Delhi on Wednesday. Picture by Ramakant Kushwaha
New Delhi, April 3: Prime Minister Manmohan Singh today said his government would resolve fuel supply problems holding up mega power projects within three weeks, make more room for FDI and ensure 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 the 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 the price of imported coal with that of 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.
While the move to pool prices is expected to make coal available at cheaper rates to upcoming mega power plants being set up by big corporate houses Reliance, Tata and Adani, it will 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 the prices of imported and locally mined gas for sale to power plants is also stuck over the pricing formula.
Officials say the non availability of natural gas at reasonable rates to the power sector has put at risk 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 investments in coal-fired and gas-fired power plants are expected to create thousands of jobs and help to catalyse faster economic growth.
Liberalise FDI
India's markets in the Western world are either in recession or showing 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 jumped to 6.7 per cent of the gross domestic product in the third quarter.
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 FDI cap in insurance and pension to 49 per cent, a goal which may prove to be politically more difficult to attain.
Besides, officials said, the government is planning to tweak sectoral caps in foreign investment to allow higher dollar flow in most sectors.
The government has already allowed foreign airlines to invest up to 49 per cent in domestic carriers and permitted multinational retailers such as Walmart and Tesco to set up shop in India.
Officials said procedural impediments that were holding up foreign investments would 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."