Deepak Parekh panel wants 100% FDI in telecom

The Deepak Parekh committee on infrastructure has suggested removing a cap on Foreign Direct Investment in the telecom sector and removing regulatory uncertainties in allocating, sharing of spectrum distributed in the past. Currently, there is a cap of 74% in telecom services.

The committee, which tabled its interim report to Prime Minister Manmohan Singh, also wanted the government to address taxation issues such as the General Anti Avoidance Rules as well as other concerns relating to land acquisition and environment.

"Overarching impediments such as delays in land acquisition and environmental clearances, taxation/GAAR related issues and regulatory uncertainties need to be addressed urgently,” the committee said.

 

The proposal to introduce regulatory reforms through an overarching legislation also needs to be implemented. In the absence of these measures, not only will future investments be constrained even the existing investments may be at risk in some cases, it added.

The Committee has identified a number of sector-specific issues constraining investment in infrastructure, especially private investment.
In doing so, the committee noted that the projected investment of about Rs 51 lakh crore cannot be taken for granted. On the contrary, it is likely to fall short significantly if a number of measures necessary for removing policy and implementation impediments are not taken within a short time frame.

The Planning Commission has set a target of $1 trillion (over Rs 50 lakh crore) investment in the infrastructure during 12th five year plan. Out of this 50% is expected to come from the private sector. The Committee feels acceptance and implementation of its suggestions may help the Government to attract this.

It suggested that for mobilizing the projected level of private capital, it would be necessary to pursue reforms in several directions. Sustainable pricing of commodities and services especially energy would be necessary. The policy and regulatory framework for ‘Public Private Partnership (PPP)’ would need to be reinforced, particularly in sectors such as Railways. The committee has also advocated for privatization and disinvestment.

According to the Committee, in making the investment projections for the 12th plan, Planning Commission has broadly indicated that budgetary allocation can be expected to increase by a compounded annual rate of about 9% in real terms. This would translate into 16% in nominal terms

However, the public sector undertakings could possibly raise comparatively larger resources through internal generation and market borrowings. After accounting for these projections of public investment, the remaining would have to be funded from private capital.

Key suggestions

Telecom

Increase FDI to 100%, remove regulatory uncertainties related to allocation, pricing and sharing of the spectrum allotted in the past

Power

Import coal through STC/MMTC or directly through power producers, set tariff at sustainable level

Railway

Rationalisation of passenger fare

Airports

Expedite award of greenfield airport in Navi Mumbai, Goa, Kannaur and Chandigarh in current year

Role of IIFCL

Guarantee operations to enable the flow of non-Bank long term credit for infra projects, especially insurance and pension funds.