Govt presses the reforms pedal

Panel to be set up to fast-track clearance of infra projects; Land Bill approved; 2G base price cut by 30% in 3 circles; Urea policy to incentivise fertiliser firms setting up plants

A week after winning in Parliament the vote on 51 per cent foreign direct investment (FDI) in multi-brand retail, the United Progressive Alliance (UPA) government on Thursday gave a big push to its reforms agenda. The Union Cabinet cleared the much-awaited proposal to set up the Cabinet Committee on Investment (CCI) and amendments to the Land Acquisition Bill.

The Cabinet also approved re-auction of the 1,800-MHz band spectrum in three telecom circles at a base price 30 per cent lower than that fixed for the recently concluded auction. The proceeds from the re-auction are likely to support the government’s dwindling finances.

DECISIONS AT A GLANCE

INVESTMENT COMMITTEE

• Cabinet Committee on Investment to fast-track stuck projects with Rs 1,000 crore-plus value, initially the infrastructure ones
• To give timelines for projects within which ministries would take decisions
• Ministers of all infrastructure-related ministries to be part of the committee
• Prime Minister Manmohan Singh to chair the committee
• About 47% of the 183 central projects, all with more tha Rs 1,000 crore, were delayed by up to 5 years, while 37% reported cost overruns of up to 200% as on March 31

LAND ACQUISITION BILL

• Consent of 80% land losers required for private projects, 70% for PPP ones; no consent required for government projects
• Landless and tenant farmers will also be compensated
• Compensation to apply on pending disputed cases; projects with pending compensation to lapse
• Compensation to be double the market rate in urban areas, to go up to four times in rural ones

Besides, the Cabinet Committee on Economic Affairs (CCEA) approved the new investment policy for urea, which might help garner investments worth Rs 35,000 crore. The new policy will incentivise setting up of new fertiliser plants and expansion of existing ones, aimed at cutting import dependence.

CUT IN 2G BASE PRICE

• The re-auction of 1,800-MHz band spectrum to take place in three telecom circles — Delhi, Mumbai and Karnataka
• Base price to be 30% lower than fixed for the auction concluded last month
• Spectrum in the 900-MHz band to also be re-auctioned in the Delhi, Mumbai and Kolkata circles
• No decision on re-auctioning of the 800-MHz band of CDMA spectrum, which had received no bidders earlier

UREA POLICY

• To give 12-20% post-tax returns on fresh capital infused in greenfield projects
• Expected to attract investments worth Rs 35,000 crore
• Investments for eight-million-tonne capacity said tio be lined up
• The subsidy reimbursement cap on urea said to be raised to $20 per mBtu

The proposed CCI would speed up clearances for infrastructure projects above Rs 1,000 crore. The body, to be chaired by Prime Minister Manmohan Singh, is being set up at a time when the Planning Commission has envisaged investments to the tune of Rs 56,14,730 crore in the infrastructure sector over the 12th Five-Year Plan (2012-13 to 2016-17). Later, the body might take up other mega projects as well.

Earlier, a proposal to this effect was deferred by the Cabinet after Environment & Forests Minister Jayanthi Natarajan protested against the move to set up an investment panel, as she feared her ministry’s powers might be curtailed. On Thursday, she said: “All concerns have been addressed. I am satisfied.”

After Natarajan raised the banner of revolt and Tribal Affairs Minister Kishore Chandra Deo said he feared tribal rights might be jeopardised, the prime minister seemed in no mood to take chances. In a departure from past practice, every Cabinet minister present was asked for an individual opinion and endorsement of the new body. “Ultimately, the decision was unanimous,” a Cabinet minister told Business Standard.

Recently, Finance Minister P Chidambaram had said there were over 100 projects, each involving an investment of Rs 1,000 crore or more, that were delayed.

“Our problem is not conceptualising projects. Our problem lies in getting the numerous clearances and getting the project off the ground within reasonable time,” he had said. For example, there are NTPC projects of 11,000-Mw capacity stuck due to delays in various clearances.

The Cabinet also cleared amendments to the Land Acquisition Bill, though in a diluted form. The cleared Bill requires the consent of only 70 per cent of land owners when the government acquires their land for a public-private partnership (PPP) project. For all other types of projects, 80 per cent consent would be required. It also refers to those who would get compensation as land losers. Where absentee landlords are involved, those actually tilling the land would be entitled to compensation.

In its original form, the legislation, the Right to Fair Compensation, Resettlement, Rehabilitation and Transparency in Land Acquisition Bill, had required 80 per cent consent not just from landowners, but also from dependent farm workers. This provision was removed after protests from industry and infrastructure lobbies.

Earlier, the high base price for 2G services had prevented telcos from bidding in the Delhi, Mumbai and Karnataka circles. This had forced the government to go for a re-auction, this time at a substantially lower price. The three circles are crucial as these account for a substantial portion of the auction revenue for the government, as well as its future earnings from revenue share.