The reforms engine chugs along

Wed, 31 Dec Pre-Open

   Previous Close   

   09:30 am   

   11:30 am   

   01:30 pm   

   Closing   

If recent developments are anything to go by, the government seems serious about clearing the roadblocks in the road to robust economic growth. Two of the areas where it has taken some commendable steps are coal supplies and land acquisition act. As we all know, coal shortage and land acquisition issues are some of the major hurdles that have put a number of large projects in limbo and led to slowdown in investments in the country.

Coal is the most important energy source accounting for 55% of India's energy needs. Coal production has risen from 70 m tonnes in the early 1970's to 565.6 m tonnes in FY14. Coal India Ltd is the largest coal company servicing 82% of the coal supplies in the country. However the mining major has been unable to meet its production target for the past few years on account of difficulties in land acquisition, delay in environmental clearances and lack of infrastructure for coal evacuation. As a result coal based thermal power generation, which accounts for lion's share of 60% of overall power generation, has been hit. The coal shortfall is being met through costly imports. In FY14, 168.4 m tonnes (MT) of coal were imported to meet domestic energy needs.

As per an economic survey, the coal demand in the country is projected to grow at a compounded annual growth rate of 7% and reach 1,373 MT by FY22. With an aim to boost efficiency in the operations of mining major CIL, the government's attempt to divest stake has been met with strong opposition from the employee unions. Therefore to encourage domestic production and reduce reliance on imports, the government has proposed opening up coal production for the private sector. The government recently passed an ordinance allowing for commercial mining of coal.

Land acquisition has been another major bottleneck for infrastructure development in the country. Continuing with its reform push, the government has eased rules for land acquisition through the ordinance route. The relaxation has been extended for projects belonging to defence, rural electrification, affordable housing and industrial corridors. As per the relaxed norms, these projects would be exempted from consent clause and social impact assessment. However, the level of compensation remains unchanged keeping the interest of landowners in mind. The government has stuck to its agenda of easing the investment climate in the country. While the key reforms in coal mining, insurance and land acquisition have been brought out through ordinances, they will have to be ratified and approved by the parliament before they are legally enforced. While actual approval is likely to face challenges, we hope this time the economic interests of the nation will not be compromised for the lack of enough support.