Raise key tariffs: Parekh panel

It wants govt to remove delays in land acquisition and environmental clearances, and clear air on taxation issues such as GAAR

To attract big ticket investment in the beleaguered infrastructure sector, a high-level committee headed by HDFC chairman Deepak Parekh has asked the government and regulators to take tough decisions--hike railway passenger fares as well as electricity, natural gas and port tariffs.

In its interim report submitted to Prime Minister Manmohan Singh today, the panel also advocated bringing in overarching legislation to reform regulatory structures in infrastructure sector.

It wanted the government to remove delays in land acquisition, environmental clearances and clear the air about taxation issues like the General Anti Avoidance Rules to bring in required investment in the sector.

The committee favoured redefining the role of India Infrastructure Finance Corporation Ltd (IIFCL) by accompanying its direct lending operations with guarantee operations. It wanted IIFCL to lend directly to infrastructure companies in case it is lending for 20 years, otherwise rely on funding by others like commercial banks.

It also favoured removing a cap on foreign direct investment (FDI) in telecommunication from the existing 74%, besides providing clarity in allocation, pricing and sharing of spectrum.

SECTOR-WISE SUGGESTIONS

Railways

• Raise passenger fares

Power

• Set electricity distribution tariffs at sustainable levels
• Import coal through STC/MMTC or directly via power producers

Telecom

• Increase FDI limit to 100 per cent, remove regulatory uncertainties related to allocation, pricing and sharing of spectrum

Gas

• Rationalise gas allocation and pricing within two months

Ports

• Deregulate tariffs; follow international best practices
• Accelerate the pace of capital dredging

IIFCL

• Guarantee operations to enable the flow of non-bank long-term credit for infra projects, especially insurance and pension funds
• Lend only for tenures of 20 yrs or more

The panel, which also comprised regulators like  IRDA chairman J Hari Narayan, PFRDA chairman Yogesh Agarwal, bankers ICICI Bank managing director Chanda Kochar, chairman of State Bank of India, Pratip Chaudhury, corporate heads like GMR Group chairman G M Rao, GVK group MD Sanjay Reddy and others.

“Government has to bite the bullet on some issues like raising railway passenger fares. They have made a start by increasing fares of AC class passengers,” Deepak Parekh, chairman of the Committee told reporters.

On railways, the report said that apart from realistically pricing passenger fares, investments through the public-private partnership mode should be encouraged in new freight corridors, redevelopment of railway stations and high-speed rail projects.

On power, the report advocated import of coal through STC/MMTC or directly through power producers to meet the domestic coal shortage.  It also favoured rationalizing gas allocation and pricing within two months.

“Further delay in doing so ( rationalizing gas allocation) will only postpone the requisite imports of gas, thus reducing power supply as well as the viability of several gas-based power stations,” the report said.

It also wanted setting of power tariffs at sustainable levels. The Committee favoured deregulation of tariff of bulk consumers and allocation of 25% of unallocated central power for open access consumers.

For roads and bridges, it advocated operationalsing the Expressway programme and constitution of Expressway Authority.

For ports, the panel apart from advocating deregulation of tariffs also advocated accelerating the pace of capital dredging.

In telecom, the committee wanted FDI cap to be raised to 100% from the existing 74%. It also said there needs to be a clarity on spectrum sharing, pricing and also regulatory issues.

“We don’t want to infringe on the independence of the regulators, but they should be responsive to the needs of sector, be practical and quick,” Parekh said.

In airports, the Deepak Parekh panel called for public-private partnership in operation and management of 15 non-metro airports and fast racking the completion of Greenfield airports in Navi Mumbai, Goa, Kannur and Chandigarh.

It also favoured PPP in Metro Rail, Irrigation, Water Supply and Sanitation, Oil and Gas Pipelines and Foodgrain Storage Projects.

These recommendations are aimed at attracting Rs 51.46 lakh crore for funding infrastructure sector during the 12th Five Year Plan (2012-17), said the report.

“Of the estimated 51.46 lakh crore, one-third will have to be spent on power generation, 18% in roads and bridges, 17% in telecommunications and 11% in railways, totaling around 9% of the GDP in the 12th five-year plan,” Parekh said.

He said matters related to quantum of funding, debt and equity ratios will be deliberated when the final report is submitted

On tax related and other issues, the committee said that over-arching impediments such as delays in land acquisition and environment clearances, taxation and GAAR related issues and regulatory uncertainties need to address urgently.