Better infra: Is the government listening?

Infrastructure CEOs emphasise the need to shift focus from operational interventions in the sector to structural changes

On March 23, a delegation of India's top infrastructure CEOs led by the Confederation of Indian Industry discussed issues in different infrastructure sectors and came up with 30 possible solutions. The first part of the article yesterday summarised 13 of them. The second part today looks at the remaining 17 recommendations:

Renewable energy
Issues: Non-enforceability of renewables purchase obligation (RPO), since there is no penalty or deterrence for non-compliance; discontinuity of tariff orders and hence, lack of visibility/policy for investment decisions; inadequate grid evacuation.

Recommendations
14. To achieve the stated objective of generating 15 per cent power from renewable energy, RPO has to be enforced; and there should be penalties for non-compliance;

15. Tariff orders should be issued with validity of at least three to five years, so investors can plan investments;

16. Need to urgently improve grid evacuation. The Power Grid Corporation of India should create green corridors to evacuate and transfer.

Electricity distribution reform
Issues: Non-periodic and inadequate tariff revision; huge liquidity stuck in regulatory assets (Delhi has Rs 20,000 crore stuck in regulatory assets); political interference in the State Electricity Regulatory Commissions (SERCs') functioning.

Recommendations
17. The Electricity Act, 2003 should be amended to ensure regular and cost-reflective tariff, including, if required, suo-moto as function of SERCs;

18. Perspective and operational plans for regulatory asset recovery;

19. Independence of SERCs - Electricity Act, 2003 shall provide for the independence of SERCs both in appointment and functioning. In this respect, the recommendations of the Shunglu Committee must be considered.

Independent power production
Issues: In interpreting the power purchase agreement (PPA) terms for the quantity of coal to be supplied; coal companies are giving the annual contract quantity (ACQ) of coal in the fuel supply agreement (FSA) close to 50 per cent of what is required to feed the power demand of PPA; in the absence of active case-I tenders and on account of delayed finalisation of case-I bids, constructed plant capacity would be idle for want of FSA; historic shortfall of coal and gas.

Recommendations
20. According to the discussion held in October 2012 in the Prime Minister's Office and the subsequent instruction of the coal secretary, the suggested basis of calculation of ACQ would have met the demands of PPA. Coal companies do not have instructions from Coal India/coal ministry. This needs to be sorted out;

21. Bilateral PPAs with the states be allowed, and these PPAs can be regulated tariff (according to the Central Electrical Authority norms);

22. Urgent roll out of pooled-price mechanism for domestic and imported coal and gas.

Railways
Issues: Rolling stock; dedicated freight corridors.

Recommendations
23. Put out tenders for electric and diesel high horsepower locomotives. This matter has been pending since 2009. The magnitude of orders would be such that over $6 billion of locomotives would be ordered with new factories to be built, and jobs created;

24. Pace of projectisation for the dedicated freight corridors needs to be accelerated.

Urban water PPP
Issues: Positive political atmosphere needs to be created for enabling public-private partnership (PPP), as is being advocated in electricity distribution; urban local bodies need to be galvanised into action.

Recommendations
25. Next burst of the Jawaharlal Nehru National Urban Renewal Mission funding should have clear linkages to capacity-building in urban local bodies for PPP formats in urban water, and their purposeful and practical projectisation.

Ports
Issues: Most ports facing bottlenecks in cargo evacuation; captive user policy is essential for the growth of the port sector and port-based industries; the role of the Tariff Authority for Major Ports; regular and impactful dredging can immediately enhance port capacities significantly; corporatisation.

Recommendations
26. Port connectivity projects should move along with port-expansion plans;

27. Draft of this "captive user" policy has already been circulated and the ministry has received the comments of various stakeholders. Policy should be notified at the earliest;

28. A comprehensive new architecture for port regulation may be synthesised, including common rules of the game for major (central) and minor (state) ports;

29. Capital expenditure and maintenance for dredging may be taken up as a key sovereign activity in a far more focused and professional manner than presently;

30. The archaic trust structure of major ports may be changed to the more contemporary corporatised structure.

It would be interesting to observe that this current clutch of recommendations in the spring of 2013 have moved on to a greater focus on structural and institutional changes required as distinct from the more operational interventions requested in the summer of 2012. We would like to believe that the government is listening, and more importantly, acting on some of the key recommendations.

Vinayak Chatterjee is the Chairman of Feedback Infrastructure
vinayak.chatterjee@feedbackinfra.com; Twitter: @Infra_VinayakCh