Member of the prime minister’s economic advisory council, M Govinda Rao, wants the government to take steps to break Coal India Ltd’s (CIL) monopoly if it can’t ensure seven-eight per cent increase in coal production every year for the next 10-15 years. In an interview with Santosh Tiwari, he stressed the government should stop fire-fighting and take quick action to enhance production. Edited excerpts:
What are the key areas which need immediate attention to improve investor sentiment?
Fiscal deficit, current account deficit and infrastructure problems. Infrastructure issues are mainly power sector woes, which are largely on account of problems in the coal sector. Non-availability of coal will be a long-term problem. You can’t live with increase in supply by three-five per cent a year if you want to grow at the rate of eight-nine per cent in the medium term. You have got to act today and see that coal output increases at least eight-nine per cent every year consistently for a period of 10-15 years. You need to act immediately on this sector which will have its repercussions on the power and manufacturing sectors.
The prime minister’s office is trying to improve the situation. Is it not working?
You might do anything; coax, persuade and cajole. But you have to remember that CIL has a monopoly. So, does it have plans to increase supply at the required rate of seven-eight per cent every year? If it doesn’t, then is there a separate way of doing away with the monopoly. This can be done by breaking CIL into two-three companies, ensuring proper competition, allocating coal blocks and asking them to develop them. Development of blocks will take time but for how long we can go on waiting. We have to really act fast.
CIL is a government company and it can be done even now. Isn’t it?
Today, if you try to enforce that, they will say they can’t do this. There are a huge number of problems associated with coal.
What about the other issues which need immediate attention?
On the fiscal deficit side, the government has to give credible mechanism, the way in which it will contain subsidies. Which implies it will have to go for partial de-control of some of these prices, whether it is urea or diesel or cooking gas. You don’t have much time to bite the bullet, however hard they are.
With the prime minister handling the additional charge of the finance ministry, these can be expedited.
I cannot say when it has to be done or when they will do. I think even if matters get rolling in one or two sectors, the sentiments will improve. It’s not that people don’t want to invest, they are waiting. The second thing is depreciating value of rupee. We have got to arrest that.
PM’s economic advisory council has these thoughts, still things are not moving. Why?
The point is, everyone is seized of the matter, the prime minister himself is seized of the matter, I am sure. But, somewhere along the line, they have to implement. Possibly, they are waiting for the right time. I have not said anything that is not known and this is the reason why the principal secretary to the prime minister, Pulok Chaterji, is cajoling and persuading CIL to act. But, one has to look beyond that and see that in the medium term how can you really increase coal supply substantially. They are basically fire fighting at this stage. They need to go beyond that.
Do you expect this will happen now?
The government has a very short window of 8-10 months before the election fever grips again. And, possibly, the next budget will be the last before the elections. If that is the case, I think if you don’t bring the economy back on track again, you are going to be in a very difficult situation, even for electoral purposes.