Parekh panel for hiking power charges, rail fares

Suggesting big-ticket reforms to attract investment in the infrastructure sector, a high-level committee on Wednesday recommended increasing electricity charges and rail fares.

The high-level committee on financing of infrastructure, which is headed by HDFC Chairman Deepak Parekh, also pitched for 100 per cent foreign direct investment (FDI) in the telecom sector. The limit at present is 74 per cent.

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The panel also suggested raising prices of natural gas. 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 which was presented to Prime Minister Manmohan Singh earlier in the day.

The government, the report said, should draw "a time- bound action plan...with a view to improving the enabling environment for private investment which is expected to finance about 47 per cent of the projected investment during the 12th Plan".

The share of private sector in infrastructure funding was 37.53 per cent during the 11th Plan, the report said, adding, the contribution of public sector is estimated to decline to 53.32 per cent in the 12th Plan from 62.47 per cent in the previous Plan.

Suggesting a slew of reforms in various sectors, including rail, power, coal, gas supply and telecom highways, the report said that projected investment of about Rs 51 lakh crore during the 12th Plan should be taken for granted.

"...it is likely to fall short significantly in a number of measures necessary for removing policy and implementation impediments are not taken within a short time-frame," it said.

Sustainable pricing of commodities and services, especially energy, would be necessary, it said, while underlining the need for promoting Public Private Partnership (PPP) model of development for projects in sectors like rail, ports, airports and highways.

In order to maintain flow of investment in the power sector, the report said, "Tariffs will have to be set at sustainable levels, while also improving the collection efficiency and reducing losses".

The report further said that the increase in fuel cost should be passed on to the consumers to prevent piling up of losses of the power distribution companies.

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The Committee suggested rationalisation of gas allocations and pricing policy within the next two months as further delay would impact the viability of gas-based power stations.

With regard to rail fares, the report called for "rationalisation of the prevailing uneconomic rail fares, which have not been revised for a decade". It suggested greater involvement of private sector in rail projects and revamping of the Railway Board on commercial lines.

As far as telecom sector is concerned, the Committee made a strong case for raising FDI cap to 100 per cent from 74 per cent currently, arguing that it might be difficult for Indian partners to provide 26 per cent capital to companies seeking pan-India presence.

The Committee suggested that the progress of projects and award of contracts in the infrastructure sector should be monitored on monthly basis by the Cabinet Committee on Infrastructure (CCI).

Elaborating on the need for power sector reforms, the Committee suggested that the government should operationalise the open access system to introduce competition.

"This will not only introduce competition, but (will) also help in attracting the much needed private investment in power generation as producers will be able to sell directly to bulk consumers in a competitive market as against the present reliance on financially unviable discoms", the report added.

With regard to highways, the committee suggested that the National Highways Authority of India should draw a month-wise plan to award contract for 10,000 km during 2012-13.

The government, it added, should expeditiously set up long-awaited Express Authority of India and ensure that engineering procurement and construction projects for 5,000 km are awarded in the current fiscal.

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With regard Kolkata and Chennai airports, which is being constructed by Airports Authority of India (AAI), the committee said, "The operation and management of these airports, including the airside and city side facilities, may be undertaken through PPP...".

In case of telecom sector, the report underlined the need for rationalisation of the mergers and acquisitions policy to encourage consolidation in line with international experience.

It also wanted the government to permit 2G licencees to raise funds through external commercial borrowings (ECB).

The committee recommended that future metro rail projects should be taken up through the PPP mode so that available budgetary resources could be put to better use.

The PPP model, it added, should also be taken up for development of projects in irrigation, water supply, sanitation and food storage.