Cabinet may ban iron ore exports

Union Cabinet to also consider N.K. Singh panel report on power reforms today.

The meeting, which is scheduled for today, is expected to ban iron ore exports and consider several key recommendations made by the Singh Committee on power sector investments and reforms.

Domestic steel producers have been lobbying with the government for banning iron ore exports to bargain for better and cheaper metallurgical coke (metcoke) from China.

The recommendations of the Singh committee, included in the Cabinet note, seek to fix the post-tax return on equity at 14 per cent for power generation companies and at 16 per cent for distribution companies, raise the depreciation rates to 5.6 per cent from the current 3.6 per cent of the fixed assets, retain the debt-equity norm at 70:30, abolish the development surcharge which state-owned power generating companies are allowed to levy and restructure the state-owned National Thermal Power Corporation (NTPC) into five independent generating companies.

Though the item was not listed on the Cabinet meeting agenda till late evening, government sources said the power ministry was trying hard to get it included.

Going beyond the NK Singh Committee's recommendations, the power ministry note for the Cabinet suggests that the post-tax return on equity for distribution companies should be raised from 16 per cent to 19 per cent, subject to their achieving higher reduction in transmission and distribution losses.

The ministry's argument is that the post-tax return on capital formula should provide an incentive to the distribution companies to reduce their T&D losses and earn a higher return.

There is no change in the recommendation for the post-tax return on equity for the private generating companies, which if accepted will mean a cut in the rate from the present 16 per cent.

Official sources are surprised by the speed at which the power ministry has processed the recommendations of the committee, which completed its deliberations only in the last week of January.

Power Secretary R V Shahi has taken special initiative in finalising the cabinet note. Power minister Anant G Geete had earlier shown reluctance to push these proposals for clearance by the Cabinet in a hurry, but was later persuaded by Shahi.

In fact, Geete even met Prime Minister Atal Bihari Vajpayee on this issue.

It is possible that Geete may not be present at tomorrow's cabinet meeting. As a fall-back option, Planning Commission deputy chairman K C Pant has been briefed by the power ministry on the merits of the proposal so that he could pilot it at the Cabinet meeting.

The government had set up the task force, headed by Planning Commission member NK Singh in August 2003 to address various issues of power sector reforms. The task force's members included S. Narayan, economic advisor to PM, revenue secretary, Vineeta Rai, CEA chairman, HL Bajaj and former UPERC chairman, JL Bajaj.