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Government finalises IT investment regions policy
The government has finalised its policy for the IT investment regions (ITIRs), which requires the ITIRs to be large sized townships of minimum 40 sq.km area.
The minimum processing area for each ITIR will be 40 per cent of the total area, with a clear demarcation between IT/BPO and Electronic Hardware Manufacturing (EHM) units.
The policy resolution has been sent for approvals to the Cabinet Committee on Economic Affairs. According to the policy, state governments will identify the area to set up an ITIR and forward their applications to the DIT (department of information technology), the nodal body for ITIRs. A management board constituted by state governments will manage the ITIRs, and the board will have the authority to issue state level approvals.
While the Centre will encourage development of national highways towards the ITIRs, the state governments will assist with local infrastructure like power, water, health, education, state roads etc.
SEZ rehabilitation policy cleared
On 11 October 2007, the cabinet has cleared the Rehabilitation & Resettlement Policy. The policy was created for farmers whose lands were being acquired for setting up large industrial projects including special economic zones (SEZs).
A Group of Ministers, headed by Agriculture Minister Sharad Pawar, seems to have recommended that states be allowed 30 per cent of the land that is required for SEZs. This was in contrast to a decision in April 2007, made by a different panel to completely ban compulsory land acquisition by government agencies.
The policy may facilitate contiguity of land by developers, who would have to directly buy 70 per cent of the land from farmers. However, the policy is understood to protect the farmers' interests.
Mineral policy to be placed before cabinet by end-October
The Cabinet will put forth the National Mineral Policy (NMP) for approval, by the end-October 2007.
The NMP seeks to remove bottlenecks in a sector where the government expects investments close to Rs.1,00,000 crore, during the next 10 years. The government is also proposing a single window clearance system where ministry officials will address the bottlenecks for investments in the sector
Government to announce hardware policy soon
The Union Government is finalising the new hardware policy by early- November 2007. The draft policy includes changes in the tariff policy like zero custom duty on all raw material and capital goods imports, unification of manufacturing investments for the domestic and export markets in the EXIM policy, amendment of labour laws, upgradation of infrastructure and income tax benefits.
The government is also contemplating to form special manufacturing regions for electronic hardware and specialised IT services based on the Integrated Petroleum, Chemicals & Petrochemical Investment Regions (PCPIR), already being set up in India.
New biotech policy to be finalised by end-October
By end-October 2007, the government is likely to finalise the framework for a biotech policy that will boost research and development in the sector. The new policy objective will be to assist life science companies at all stages of drug development, and to deal with intellectual property right issues. It will also help smoothen the co-ordination between industry and government-owned research institutes.
Changes likely in bid evaluation norms of NELP VII
The New Exploration Licensing Policy (NELP) VII is likely to seek some changes in the areas of bid evaluation criteria and model production sharing contract (MPSC).
While proposing changes in the fiscal package criteria for the prospective bidders and definition of hydrocarbon discovery, the Petroleum & Natural Gas Ministry is likely to suggest a new sub-criterion of "consortium/partnership" for deepwater blocks. The Ministry plans to offer about 80-85 blocks, both onshore and deepwater.
These modifications would ensure that the government's share of profit petroleum remains unaffected during the period of production. As per the proposal, when bids are placed, the government's share of profit petroleum will be calculated against two tranches of pre-fixed formula, as opposed to the six tranches mechanism adopted in the previous round.
The minimum and maximum share for the government will be calculated as per the pre-fixed formula of revenue generated from the investments in the block, the remaining shares of profit petroleum falling between the prescribed range are proposed to be worked out on a pro-rata basis.
Government approves new coal distribution policy
On 19 October 2007, the Government approved a new coal distribution policy which seeks to supply assured quantities of coal to various categories of consumers, at pre-determined prices.
It envisages enhancing the role of the state governments in supplying coal to a large number of small and medium industries. Also, the e-auction sale of coal will be re-introduced with modified features, to encourage a healthy coal market in the country.
The key features of the new policy are as under:
I. Classification of consumers and supply of coal thereof:
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The existing classification of coal consumers into core and non-core sectors is being dispensed with.
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Presently, the core sector consists of power, steel, cement, fertilizer, paper, aluminum, defense, loco, central PSUs and exports.
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Non-core sector comprises of remaining consumers in various industries like textiles, rubber, engineering, glass, refractory, lime, jute, copper, foundries, crockery etc., besides seasonal consumers like the brick sector.
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Since the power and fertilizer sectors are operating in a price regulatory regime, coal companies will make coal available to the extent of 100 per cent of the normative requirement of the units in these two sectors, as is at present, but only under Fuel Supply Agreements (FSAs).
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In view of the importance of the defense sector and railways, their total requirement will continue to be met.
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All other consumers with coal requirements of more than 4,200 tpa, will be provided 75 per cent of their normative requirement of coal under FSAs.
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Supply of coking coal to steel plants would be based on FSAs, as is at present.
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For small and medium sector consumers, the existing cap of 500 tonne of coal per year will be increased to 4,200 tpa.
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Since Coal India and its subsidiaries cannot deal with a large number of small and medium sector consumers, state governments will have to undertake identifying such consumers and arrange for coal supply through their designated agencies.
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Initially 8 mln tpa of coal will be made available to meet the needs of small and medium sector consumers.
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State governments will enter into Fuel Supply Agreements with public sector coal companies, to source coal for distribution through their designated agencies, which could include National Cooperative Consumers Federation, National Small Industries Corporation, any state government agency and established industrial bodies.
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II. Letter of Assurance and Fuel Supply Agreements:
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An innovative feature of the new policy is the Letter of Assurance (LoA), which will be granted by coal companies to the project developers, as against the present system of granting coal linkages.
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Such LoAs will be converted into FSAs after specific milestones are achieved by the project promoters within two years in case of power plants and one year in case of other consumers.
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Consumers granted LoA have to furnish a Bank Guarantee equivalent to 5 per cent of their annual requirement of coal, which will be forfeited if the suggested milestones are not achieved within the stipulated time.
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The bank guarantee system is being introduced to encourage genuine consumers, and to prevent pre-emption of coal linkages without developing the end-use projects in time, as is currently happening.
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LoAs in case of power (including power utilities, IPPs and captive power plants), steel (including sponge and pig iron) and cement sectors, will be granted by the Standing Linkage Committee (Long Term) functioning in the Ministry of Coal.
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For all other consumers, LoA will be issued by Coal India Limited.
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Coal India Limited will be at liberty to import coal for meeting supply commitments for their consumers, and in such case necessary price adjustments will be made by the coal companies
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III. Introduction of e-auction sale of coal:
E-auction sale of coal will be re-introduced with certain modifications like:
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There will be no floor price for bidding under the e-auction scheme, as was the case in the last phase of e-auction.
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Coal PSUs will, however, have the liberty of a reserve price which is not lesser than the notified price of coal for appropriate commercial decision making.
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There will be two platforms; one to supply coal for one year or more, and the other to supply coal for shorter periods as per the frequency of offer of e-auction.
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All the coal PSUs will be required to announce a schedule at the start of the year, for the sale offer of coal under the e-auction mode. This is to help plan for coal supplies and consumers.
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IV. Efficiency norms:
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To encourage economic and efficient use of coal by consumers. The norms of consumption for all the major sectors like power, steel, cement etc., will be reviewed taking into account continuous improvements in technology, manufacturing and other developments.
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V. Pricing of coal supplies:
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Coal to be supplied under FSAs will be charged at notified prices of CIL. Accordingly, for supplies to small and medium consumers, the state government designated agencies will charge actual freight and an additional 5 per cent as service charge over and above the basic price charged by the coal company.
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VI. Implementation of new policy:
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1. All the existing linked consumers shall enter into FSAs with respective coal companies within six months, failing which, coal supplies can be discontinued.
2. State governments shall put in place necessary institutional mechanisms to supply coal to small and medium sector consumers as envisaged in the new policy, within six months.
3. Provisions of the new policy applicable to the new consumers will be immediately effected.
4. E-auction sale of coal to be introduced within one month and until such time, the present scheme of coal sale under e-booking, will continue.
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Various provisions of the new Coal Distribution Policy will be operationalised as per the following time schedules :
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Draft airport policy finalised
The government announced a draft policy to lay guidelines for greenfield airports; for state governments, private investors, and the Airports Authority of India (AAI).
The policy encourages public-private partnership (PPP) mode to be employed in constructing airport infrastructure, and proposes to dispense the mandatory approval of the Centre in all cases of greenfield airports, barring those where the project proposal was not in conformity with the policy.
Also, air traffic services, security, and customs & immigration work will be performed only by central agencies. A company seeking license to build an airport will have to obtain clearances from these agencies. The guidelines for the respective agencies will be notified, accordingly.
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