Large projects to get a CCI boost

Dec 14 2012, 03:37 IST
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SummaryEnvironment ministry remains final arbiter, panel won’t have appellate powers.

The Cabinet on Thursday took a host of decisions aimed at imparting further momentum to the economy, which the government believes has turned the corner after three quarters of sluggish growth. It cleared the creation of a Cabinet Committee on Investment for large projects — although with much less teeth than originally conceived — and the land Bill that seeks to make it easier for industry to acquire land for projects and entails government assistance for acquiring land for public-private partnerships with defined public purpose.

The Cabinet Committee on Economic Affairs (CCEA) also cleared the new urea investment policy that promises to generate investments of R30,000-40,000 crore in the sector, hamstrung by gas shortage and the subsidy regime that involves control on the retail price of urea.

In what could help the government bridge the yawning budget deficit, the Cabinet also endorsed an earlier EGoM decision to reduce the reserve price for 2G spectrum auction by 30% in the four circles of Delhi, Mumbai Karnataka and Rajasthan which did not receive any bids in the auctions held last month. It also approved the reserve price for spectrum in the 900 MHz at twice the price of 1,800 MHz.

If both auctions are successful, the government can hope to raise around R27,000 crore but the amount could be lower at around R8,000 crore if the companies opt for the staggered payment route.

The new Cabinet Committee on Investment will be chaired by the Prime Minister and will fast-track the process of granting clearances to infrastructure projects above R1,000 crore. It won’t get the virtual veto power which the finance ministry had sought. Line ministries will retain their respective authorities and the new panel will have only a coordinating role. A secretariat attached to the PMO where all ministries concerned — including the environment ministry, seen to be holding up many large projects — will have an equal say and will take the call.

The new Cabinet committee’s overriding powers will be used for clearing “unduly delayed projects”.

The existing Cabinet Committee on Infrastructure would be dissolved and all its functions will vest with CCEA. Projects in sectors such as ports, railway, petroleum, railway, roads and mining (especially coal) will benefit from the fast-track clearing mechanism.

Another key proposal which won the Cabinet nod is the new Land Bill that seeks to replace the 117-year-old Land Acquisition Act of 1894. The Bill makes it mandatory for the government, if it acquires any land for a project involving public-private partnership (PPP), to obtain the consent of 70% of land owners. However, if a private entity wants to acquire land for private use, consent of 80% of land owners is mandatory. The Bill also has a new section listing projects that will expand on the definition of “public purpose” for PPP projects. Industrial corridors, mining projects, national investment zones and national manufacturing zones are the categories which will fall under PPP. The Bill also has provisions for penalty for those who furnish false information regarding R&R – one-month jail or Rs 1 lakh fine or both, among others.

With Cabinet approving the reduction in reserve price for spectrum auction, the government can go ahead and schedule both auctions – 1,800 MHz and 900 MHz – simultaneously by March 2013. The auctions for 900 MHz will be held only for Delhi, Mumbai and Kolkata circles because these licences come up for renewal in November 2014.

A key change in the new urea investment policy is the permission to private companies to import costlier imported liquefied natural gas (LNG) to run fertiliser plants. Imported LNG is nearly three times costlier than scarce domestic gas. Under the proposed policy, the government will provide subsidy to meet the extra fuel cost on imported LNG or coal gas. This would make fertiliser units profitable as companies would be insulated from any abrupt variation in fuel prices, experts said.

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