l Power tariffs for consumers need to be rationalised with very low tariff levels for some consumers progressively raised to economically viable levels while very high tariffs to other consumers (e.g industry) are not raised.
State Electricity Regulatory Commission have to bring about this tariff rationalisation.
l The huge transmission and distribution (T&D) losses need to be brought down. Privatisation of distribution in our view will help to bring down losses. In retrospect, it can be said that it would have been better to have focussed on distribution reform and privatisation first in order to get the cash flow position on even keel rather than pushing with reforms in generation in the first stage.
l In order to privatise distribution some solution must be found to the outstanding dues of the existing system. These are reported to have mounted to Rs 30,000 crore. Unless this problem is satisfactorily resolved, privatisation will be difficult. It can be attempted in parts of the system but this will only leave the rest of the system burdened with all the past dues, which is not equitable. Since a large part of these dues are to central government organisations, the central government has a role to play.
l Regulators have to provide clearer indications of tariff policies over much longer horizons to reassure private investors if privatisation of distribution is to succeed....
Telecom: It is observed internationally that telecom service costs are coming down relentlessly because of increasing competition and decreasing actual costs. For Indian industry to be competitive, it will be necessary for services to be priced in a similar fashion. The following are suggested:
Consideration should be given to allowing voice telephony over the Internet since that will bring down the costs of users significantly.As the coverage of telecom expands over time, a high proportion of the new users would be smaller users. As the sector is unbundled, it will be increasingly difficult to cross-subsidise local services from long-distance services. Thus, the universal service obligation needs to be defined carefully and the universal service fund used to finance such services.Roads: Highways are difficult to finance exclusively through tolls and some other form of indirect user charge is therefore needed. The government has levied a cess of Re 1 per litre on petrol and diesel and the resources collected from this cess will go a long way to finance the ambitious road development's programme. However, these funds will not be adequate to finance the full programme as envisaged. Hence, all other means of funding or leveraging existing funds should be explored. Tolls should be imposed on all four-lane stretches of national highways to ensure maximum inflow of resources and especially to provide maintenance expenditure....
Private sector participation in road construction should be encouraged to the extent possible through BOT/annuity system. Under this EPC and O&M contracts will be merged and given to the same contractor who would be responsible for construction and maintenance of the road during the concession period....
High density corridors have several deficiencies at present, in the form of missing links, weak and narrow bridges, and the absence of bypasses. These should receive high priority. There is also an urgent need for the introduction of new technology in the design, engineering and construction methods....One of the reasons for the use of inappropriate technology in road construction and maintenance lies in the practice of awarding a large number of contracts. A review, therefore, needs to be made of existing outdated contracting mechanisms. The possibility of creating engineering leasing companies needs to be encouraged.
Ports: Low port productivity in India is to a considerable extent a consequence of obsolete equipment, inadequate mechanised handling facilities, poor port management techniques and outdated labour practices.
Port handling needs upgradation in technology... Private investment in port infrastructure will have to be encouraged actively. Existing port trusts should be corporatised and turned into landlord ports that then invite different operators, both public and private, to invest in cargo handling and infrastructure services. The corporatised landlord ports should concentrate on the development of common user general cargo facilities....
JNPT and Chennai ports which are capable of berthing mother vessels, need to be developed as mainline gateway ports connected by a rail/road bridge and equipped with efficient, modern container handling facilities.... The pricing policy of port services needs to be such that it helps in raising resources internally. Cross-subsidisation needs to be phased out. Tariff policy should be used as an instrument of rationing port capacity i.e., higher tariff should be charged for the most congested facilities/periods.
In the same way differential tariffs need to be introduced for discouraging used vessels. Tariff Authority for Major Ports (TAMP)) should be developed as a statutory autonomous body and its orders should be enforceable.
Railways: The fare/freight ratio (earning per passenger km vis-a-vis earning per tonne km) at present is 0.32, which one of the lowest in the world. If it is increased to 0.5 as it was in 1951-52, it would result in additional earnings of Rs 4,400 crore. Reluctance to impose passenger tariffs which cover costs only prevents the railways from mobilising the resource needs to modernise and upgrade the quality of their services...There is need to phase out subsidies both in respect of passengers and freight over a period of the next three years.
There is need to increase Inland Container Depots. Their establishment should take place at the crossings of the three modes of surface transport i.e rail, road and inland waterways in order to minimise costs and time....
The existing six manufacturing units of Indian Railways should be split into independent profit and cost centres and thereafter corporatised....The scope of private sector participation in acquiring rolling stock, particularly high speed wagons and new generation locos, needs to be enlarged gradually through innovative leasing schemes. (Excerpted from the Prime Minister's Economic Advisory Council's report, Economic Reforms: A Medium-Term Perspective)
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
