Open coal, power sectors to private competition to revive investment: Deepak Parekh report

Report details investment revival path in coal mining, power distribution

Days after the Supreme Court cancelled coal block allocations to the private sector between 1993 and 2010, a committee headed by HDFC chief Deepak Parekh has pitched for public-private partnerships (PPPs) in the coal mining and power distribution segments.

The committee, set up in 2010 to look at financing for infrastructure development, gave its report on Wednesday, after filing an interim one in July 2012. The latest report provides a plan for reviving investment in key sectors during the 12th Plan.

“There is a shortfall of 100 million tonnes of coal a year. As a result, a significant share of the current generation is expected to remain idle. The committee has, therefore, recommended adoption of the PPP model in coal mining, as Coal India Ltd (CIL) cannot meet this mammoth challenge,” the report said.

REPORT RECOMMENDATIONS

• Adoption of PPP in coal mining as CIL cannot meet the shortfall of 100 million tonnes of coal per annum
• Setting up a new public sector undertaking to award and manage PPP concessions
• Inviting private investment for augmenting and modernising the power distribution systems

The 190 coal blocks allotted through the past two decades have been directed to CIL, for re-auctioning in six months.

The report also recommends setting up a new public sector undertaking to award and manage PPP concessions. “To introduce healthy competition and eliminate incumbent resistance from CIL, the new company should be allocated mines which either have all the clearances or are in advanced stages of getting clearances,” it said.

The power distribution segment faced losses of Rs 1 a unit and was nearing a financial collapse, the committee said. “Given the deteriorating financial health of distribution companies, there is a need to attract private investment to augment and modernise distribution systems and to operate them efficiently, on commercial lines.”

Members of the committee included Kotak Mahindra Bank chief Uday Kotak, GMR Group’s G M Rao and GVK Group’s Sanjay Reddy. Various officials from Life Insurance Corporation of India, State Bank of India, ICICI Bank and IDFC were also on the panel.