Government finds its mojo again

With a spate of clearances, including relief to companies facing delay in development of coal mines, the government is getting its act together

The government seems to be on an overdrive, not only in terms of clearing projects, but also when it comes to relaxing its own norms. This is best demonstrated in the recent approval by the Cabinet Committee of Economic Affairs (CCEA) of a Coal Ministry proposal to provide relief to companies facing delays in development of captive coal mines by offering them additional supplies from Coal India over and above the quantity offered under 'tapering fuel linkage'.

As per the current policy tapering, fuel linkage is provided for three years during which Coal India provides for 75% of plant's requirement in first year, 50% in the second year and 25% in the third year. Coal India was supposed to taper its supplies till 2016. The current proposal means that there is an extension of another three years to five years.

The proposal cleared by CCEA entails clearing supply of coal to nine out of 24 power projects where development of mines has been delayed because of a policy by the environment ministry. These power plants account for 11,000 megawatts (MW) by investing around Rs 60,000 crore. Out of the 78,000 MW of thermal power plants, which were approved for coal supplies, the current proposal clears around 14% of the capacity. Beneficiaries of these projects are a mix of public sector and private sector ones.

The important message coming out of the CCEA clearance is that the government was willing to acknowledge the delays caused by one of its ministries and suggest corrective actions which will cushion the negative impact of such delays. It is attitude like this that improves the business environment significantly.

 
It has also identified four coal blocks for allocation to power producers on tariff-based bidding and has invited applications for it. After being stung by the coal scam, these clearances signify that the government machinery is back in action.

While it might still take time for the clearances to actually fructify into asset creation, the signals being sent to the business community are correct. An important message was recently sent across when the government replaced the environment minister, who many believed to be behind delays of significant projects. Reports suggest that the ministry was responsible for delays of project worth over Rs 10 lakh crore.

The multiplier impact of such high level of investment, if and when finally cleared, has the potential of taking the country's growth to a new orbit. But till then we have to be satisfied with the fact that the government has finally found its mojo.