Five top government officials—economic affairs secretary Shaktikanta Das, coal secretary Anil Swarup, steel secretary Aruna Sundararajan, telecom secretary J.S. Deepak and National Highways Authority of India chairman Raghav Chandra—talk about the state of the infrastructure in India at the “Infra Ministerial” event organized by CNBC TV 18 and Mint in New Delhi on 21 March. Edited excerpts:
On funding constraints faced by infrastructure, and the National Investment and Infrastructure Fund (NIIF), set up to finance public works projects.
Das: When the budget was prepared, we knew about the ground realities with regard to the problem of NPAs (non-performing assets) in the banks. So that was factored into budget proposals.
Secondly, the budget itself has allocated a huge amount for public investment into infrastructure. The budgetary outlay is around Rs.2.21 trillion in infrastructure. The government did this while maintaining the fiscal deficit to ensure that government bond yields come down and the borrowing rate of the government is within manageable limits.
NIIF was announced in the previous budget. It has been set up and we are now in the process of selecting the chief executive officer. We have received a good number of quality applications. The selection committee will meet within the next fortnight and shortlist the possible candidates.
The government has also decided that individual units of infrastructure companies can be divested by central public sector undertakings. This will help them raise resources. For example, if a power station has been completed by a power generating company in the public sector, then it can divest his stake.
On a possible review in the cut in small saving interest rates, and reduction in rates by the Reserve Bank of India and commercial banks.
Das: I am not aware of any such plan. The small saving rates, particularly PPF (public provident fund), were 8.5% when inflation was 10% plus. Today CPI (consumer price index) inflation has come down to around 5.5%. So inflation has come down by half and now investors are getting a real rate of return as against a negative rate of return earlier. Also, the tax benefit continues.
The government’s decision is a strong signal to the banks to take the cue and take their decision. As far as RBI is concerned, they will take their own policy call with regard to interest rates.
On what more needs to be done in the coal sector.
Swarup: The work is not totally done. The coal production has gone up. We have a comfortable situation in the power plants. Not a single plant has critical or super critical shortage as compared to a year ago. We have brought down the imports by 15%, saving around Rs.24,000 crore.
But there is a lot of work to be done still—on the quality front, on the grade slippage front and on the environment front.
There is a lot to be done in terms of quality. There have been huge complaints on the quality of coal that is being provided by the virtual monopolist coal provider—Coal India. There have also been complaints about grade slippage. We are focusing on these. This January, we set in motion the third-party sampling and quality check. We have also focused on providing crushed coal. We are looking at washing coal by 1 October 2017, which will take care of environmental concerns. There is a lot of work to be done even in terms of production because we are still importing about 160 million tons of coal.
But it is still better than what the situation was in the year before.
We do not have any plans of bailing out the companies that bid at high prices in last year’s auction (of coal mines). They do not require a bailout. In any such business decisions, there are problems on some occasions. Out of the 70 blocks that were settled, the problem was in four-five. Our focus is on 66 blocks that need to start production.
On bailout package for steel sector being worked out by the government.
Sundararajan: The biggest support that the steel industry has been asking is for the minimum import price. Already, even though it is early days yet since the minimum import (price) was announced, we are seeing a much better sentiment in the market. Prices are going up and banks and companies’ financial health is improving.
There are companies that are over-leveraged. Those kinds of companies have to bring in some kind of discipline. For others, we are looking at what can be done in terms of a broad financial package. We are in consultation with the department of financial services.
I would not be able to give you specifics at this stage because there are a broad range of proposals which include things like the banks taking certain equity as redeemable preference shares and then giving the companies enough time to redeem them. There are other proposals where we are looking at bringing in financial investors who can hold some of these stakes for a period of time and if the companies come back to health, then they can disinvest.
We are also looking at bringing in certain external investors, international investors who could pump in some fresh equity into these companies. There has been a fair degree of interest, particularly from international investors. I won’t be able to put a definite time frame to it because a lot of discussions have to go on and restructuring has to be done. Within the next two months, we will be able to have agreement on at least the broad contours of the package.
On continuation of minimum import price (MIP) on steel imports.
Sundararajan: The MIP is an interim measure. We will have to move over to a permanent measure which can be sustained over a longer period time. The steel ministry will be looking at how we can downstream interests for users. If you are not able to protect an upstream steel industry, it’s going to be far simpler for importers to bring in finished goods.
On the upcoming spectrum auctions, high reserve price and the steep revenue targets set in the budget.
Deepak: The telecom industry has for a very long time been saying that there is fragmentation of spectrum and that they do not have enough spectrum, affecting the quality of the services. The spectrum auction, which will happen very soon will put enough spectrum on the table that this problem of spectrum shortage should be sorted out once and for all.
Since we are putting in a large volume of valuable spectrum in different bands and all the bands from 700Mhz to 2,300-2,500MHz are going to be auctioned, we are optimistic about the revenue potential of the auction.
The Trai (Telecom Regulatory Authority of India) recommendation on reserve price of spectrum has come out after detailed consultations. It includes the input of Trai, industry, academia and experts. The only major stakeholder whose inputs have not been considered is the government. We are looking into the recommendations and we may have a few questions or a few points on which we may send the back reference to Trai.
On pod taxis or metrino for decongestion of the national capital region (NCR). The metrino system envisages small, driverless vehicles, or pods, travelling suspended under an overhead network.
Chandra: For decongestion of Delhi and the surrounding areas, we have been contemplating a public rapid transport system. We have got a feasibility report analysed. We are planning to do a pilot project in Gurgaon. The chief minister and government of Haryana have offered to collaborate with us to undertake this.
This will be like a sky cable train which will have multiple pods. There will be over 105 pods working over a 10km stretch. The cost of the ticket should be ideally not more than the equivalent cost of a metro ticket.
The total cost of the project should be less than Rs.1,000 crore. We are allowing multiple options to come forward. We will go in for global bids. While we have a concept, we are asking private developers to come up with different ideas.
It is under the principle of design, build, finance and operate. We will only provide the facilitation. We are looking at a premium sharing or a revenue sharing arrangement.
We are looking to do this in a year and a half.
On reducing regulatory uncertainty and resolving disputes.
Das: The key aspects of the Kelkar committee (report) have been included in the budget speech—to issue guidelines for renegotiation of contracts and for bringing in a bill for dispute resolution in PPP (public-private partnership) projects.
Even before this announcement, during the last one year, the highways ministry with cabinet approval has already sorted out a number of issues that were dogging this sector—by infusing equity, bringing in mezzanine finance or by introducing hybrid PPP models. A lot of steps have been taken to resolve disputes in the highways sector but a lot needs to be done.
The draft of the dispute resolution bill is ready and we are putting it into inter-ministerial consultation shortly. It is our endeavour to introduce it in the second half of the budget session.
Other recommendations of the Kelkar committee report are administrative steps that have to taken by individual ministries. Each infrastructure ministry is supposed to take a view and dovetail it into their specific sector requirement.
Steps being considered for improving ease of doing business in the telecom sector.
Deepak: As far as making things easy for the sector are concerned, on the anvil are certain very far reaching reforms, which should make telecom operations more efficient and help the top line and the bottom line.
First, the industry has been demanding a new licence of a virtual network operator. That is something that is on the anvil and awaiting a final decision. It should go to the Telecom Commission next week and if it is agreed upon, it is a reform which will happen in weeks rather than months.
The second thing is as far as fibre networks and tower locations are concerned.
We are working on right of way rules which would ensure, at least as per our proposal, that permissions for underground fibre and telecom towers should be given in a time-bound manner. If not done in say two months, then it would be deemed approved. That should help in the roll-out of infrastructure. We have approved the draft rules, put them on our website. We are consulting with states and asking them for their recommendations by 20 April.
By May, we should be able to come out with right of way rules under the Indian Telegraph Act. So it will be backed by a central law.
On a private sector role in coal mining.
Swarup: The necessary groundwork has been done by us. As a consequence of the increase in production, suddenly the production is more than the demand at this time. The fourth round of the coal auction had to be called off because there weren’t many takers. So there is no point in putting more coal blocks on auction unless there is demand.
One way is to reduce production of Coal India, which we will not do, and the other is the demand which I think will pick up as a consequence of UDAY (Ujwal Discom Assurance Yojana). It will be the Uday for the coal, power and many other sectors. It will drive the economy.
On digital connectivity in rural India.
Deepak: Broadband connectivity is the essence of the vision of Digital India. Mobile broadband is happening. We have an ambitious BharatNet programme for rural areas. It is being done in three phases. The first is to get connectivity to 100,000 gram panchayats, which should be complete in a year from now. We have full funding and approval for this. The second phase is to get it to all the villages. And the third phase would be make it into a world-class network for an era like 5G.
The private sector will come forward if there is a business case for it. Government intervention will be there because the base isn’t there yet.
In the first phase of BharatNet, the role of the private sector would be laying the network and in the contracts. In the second phase, it would be to include the last-mile connectivity. In the third phase, there would be options for equity.
On the need for amendments to the Prevention of Corruption Act.
Das: Honest decisions need to be protected. Bona fide decisions taken in a particular context need to be protected. The bill is before Parliament. We do hope that Parliament will see merit in the amendment proposal and pass the bill. If you want quick, bold decisions then some kind of protection to honest decisions are necessary
Sundararajan: The amendment should come sooner rather than later. Overall much greater credibility needs to be built in the system which is what we are struggling to do.