Land acquisition bill may be reintroduced

Mrs Pratibha Patil, President of India, is expected to reintroduce the Amendment Bill to the Land Acquisition Act and the Rehabilitation and Resettlement Bill in the forthcoming budget session of Parliament. The Land Acquisition (Amendment) Bill allows government to acquire only 30 per cent of the land for private projects, while the rest will have to be bought by the developer himself. Moreover, land rights are to be extended to tenant farmers, artisans and those indirectly drawing sustenance from the land in question. Also, compensation could be in the form of jobs and equity shares in the company that has bought the land. The Resettlement and Rehabilitation (R&R) Bill lays down guidelines on how the people affected by projects will have to be rehabilitated and the contours of compensation packages. In addition, this Bill also seeks to set up a National Rehabilitation Commission. Therefore, the enactment of these bills will not only help in better implementation of infrastructure and industrial projects, but also safeguard the interests of farmers.

New PPP norms to attract serious bids

The Union Government has enhanced the entrance technical capacity of bidders to twice the estimated cost of projects under the PPP model. The Finance Ministry revised the RfQ norms for such projects on 21 June 2009. As per the new norms, a developer should have a record of executing projects worth Rs 1,000 crore or double the cost of the new project if the project is worth Rs 500 crore. Earlier, a developer in order to qualify needed to have executed projects one-and-a-half times the cost of the proposed project in the last five years. According to sources, of the 60 projects put up for bids last year, only 13 attracted bidders. Of the rest, 10 have been bid under the old RFQ. The remaining 37 will follow the new RFQ norms. In the revised guidelines, the number of short-listed bidders has been increased to six and for projects of less than Rs 500 crore or repetitive projects; it has been hiked to seven. Another obstacle, the 1 per cent cap of cross holding, or the percentage a common shareholder can have in two companies that are bidding for a project, has now been hiked to 5 per cent. In a significant change to the earlier norms, each of the consortium members will now also be required to hold equity equal to at least 5 per cent of the total project cost for a period of two years since the project is commissioned. The notification also says that the project authority will be allowed to put a clause, which restricts the number of projects awarded to a single bidder.

National Fibre Policy by end-2009

The Union Government is mulling over a 'national fibre policy' for the textile industry by end-2009 to help the sector by removing discriminations among sectors with conflicting interests within the industry. Dayanidhi Maran, Union Minister for Textiles, has reportedly expressed the proposed policy as a neutral policy which is likely to be helpful both to the exporters and the domestic market. The new policy is aimed at restoring competitiveness of the industry. From raw materials such as cotton, cotton yarn and man-made fibres to garments, spinning sector, exporters and domestic markets, the policy is likely to benefit all.

Coal mining likely to take private route

The Union Government is mulling over a proposal to open coal mining to the private sector to bridge the gap between the demand and supply of coal in India. Currently, Coal India is allowed to mine the dry fuel in India whereas private companies are allowed to mine only for their captive consumption. Even, a Bill in this regard, introduced in the Rajya Sabha in 2000, is still pending. The proposed bill is expected to be revived by the government after the Union Budget is presented in July 2009. Allowing private companies to mine coal will not only benefit domestic but also overseas firms like Gujarat NRE and Rio Tinto. It will also reduce India's dependence on coal imports to meet domestic requirement. India produces around 450 million tonne of coal annually, around 50 million tonne less than the domestic requirement. Coal requirement is expected to go up to 1,000 million tonne by 2030.

Allotment of coal blocks via auction route

The Union Coal Ministry has made a decision that captive coal blocks will now be allocated through the auction route in order to maintain transparency and fetch better price. The Government is expected to amend the Mines and Minerals (Development and Regulation) Act, 1957, to effect changes in the policy. At present allocation of coal blocks is done by a screening committee. So far the Government has allotted 196 blocks for captive use and most of them have not come to production. According to sources, notices have also been served to parties not taking the initiative to develop the blocks. And they will get the opportunity to explain their stand as well. However, a coal regulator will be appointed soon, who will look into the aspect of disciplined mining, increasing coal production, grading of coal as well as the issue of pricing.

Unexplored coal blocks likely to be scrapped

The Union Government is planning to cancel the coal block allotments if the companies failed to explore such assets despite all necessary approvals. In early 2009, the government had reviewed the progress of work on the captive coal blocks allotted to the private and public sector companies between 2003 and 2007 and had decided to serve de-allocation notices on 14 coal properties. Among the firms, which have been issued show-cause notices include Tata Sponge, NCT Delhi, Monnet Ispat, Adhunik Group, Tamil Nadu Electricity Board and Jharkhand State Electricity Board, power corporations of Maharashtra and Haryana, and mineral development corporations of Chhattisgarh, Assam and Meghalaya. So far, the government has allotted 196 captive coal blocks with a cumulative reserve of 51 billion tonne.

Captive, merchant power plant to get no incentives

The Union Power Ministry has decided against extending mega power benefits to merchant power plants (MPPs) as well as captive power plants (CPPs) in the near future. In an earlier draft Cabinet note, the ministry had proposed that CPPs and MPPs may be brought in the ambit of the mega power policy for grant of incentives, subject to fulfillment of threshold capacity limit of 1,000 MW for thermal power. The ministry has reportedly sought Cabinet approval on getting rid of the price preference clause while granting mega power status, saying it is not in the interest of obtaining cheapest power for the consumer. Making a case for having a re-look at the policy, the ministry pointed out that the per capita consumption of electricity (about 700 units) in India at present is very low when compared to the world average of about 2,600 units (in 2005-06).

NHAI formulates new norms for bidders

The NHAI in a board meeting on 12 June 2009 has decided to issue the LoA to a highway developer only after it has acquired 80 per cent of the land required for the project while the remaining 20 per cent will have to be handed over within 90 days of the project award. The new norm will reduce the likelihood of the highway developer's work getting delayed after the project is awarded. Currently, the authority awards the project after acquiring 50 per cent of land.

Committee recommends captive use policy for major ports

A Committee comprising of officials from Union Ministry of Shipping and major port trusts members is likely to finalise its recommendations shortly to improve efficiencies at the ports. One of the suggestions of the committee is the captive facility proposal which will allow major port trusts to handover water front or port facilities to a public or private enterprise on nomination basis without going through a competitive bidding process. Within captive use, port trusts have been asked to prefer an industry- or a commodity-specific facility (rather than a company-specific facility) as this will allow easier price discovery. For a commodityspecific facility, the port can invite EoIs from firms dealing with that commodity by specifying minimum level of guaranteed cargo. The trust can then award the facility through the competitive bidding route to ensure maximum revenue to the port. The traffic guarantee and revenue share guarantee over a 30-year period will be the parameters on which the competitive bidding can be done. In case a captive facility is not fully utilised during the concession period, the port shall have the right to allow other users to use the facility and also collect charges from the latter. The berth hire charges shall be collected by the port and passed on to the captive user. However, if the berth is constructed by the port trust, the port can keep the charges.

Shipping Ministry moots Major Ports Regulatory Authority Act

The Union Ministry of Shipping's proposal to introduce Major Ports Regulatory Authority Act 2009 has reportedly suggested many measures that widen the function of Tariff Authority of Major Ports (TAMP) and provide powers to the regulatory body to enforce its orders. The ministry has invited comments on the proposed act, which will replace the Major Port Trusts Act 1963. TAMP's descendant is proposed to be named Major Ports Regulatory Authority. As per the proposed act, the regulatory authority will lay down the performance norms and standards of quality, continuity and reliability of service to be provided by the port authorities and private operators. It is also required to monitor actual performance and services levels provided in the port with a view to secure compliance of such prescribed norms and standards by the port authorities and private operators. If a person violates the Scale of Rates or contravenes the directions or fails to comply with the order of the Authority, such person shall be punishable with fine which may extend to Rs 1 crore and in case of continuing contravention with additional fine which may extend to Rs 1 lakh for every day during which the contravention continues. Presently, TAMP's function is limited to specifying tariffs, several of which are challenged by the port terminal operators in courts.

Refund of sops to be made mandatory for denotified SEZs

According to a new policy likely to be formulated by the Union Government, developers of denotified SEZs will have to refund tax sops given by the government. The government has found it necessary to draw up rules for denotification of SEZs after some developers recently sought permission to close projects due to the economic slowdown and contraction in demand. The new rules are likely to disallow denotification if a considerable amount of construction has happened in the zone or if units have come up there. An SEZ developer according to sources, gets a number of tax sops, including exemption from customs duties and excise on goods used in the project and from payment of income tax. All such sops will have to be necessarily paid back with interest before the denotification is allowed.

Renewable energy use to be made compulsory for SEZs

The Ministries of Commerce & Industry and New & Renewable Energy plan to make a regulation to make use of renewable energy mandatory for SEZs to save on traditional fuel like coal and diesel. According to sources, every SEZ developer should create a mechanism for producing 1 KW of renewable energy for one ha of development in the SEZ. It should be ensured that the buildings are constructed on green designs based on solar passive architecture concepts and become model of efficiency. The government hopes to keep a target of producing 10,000 kW of renewable energy in SEZs. At present, there are around 300 notified SEZs in the country and 20 are being developed as green SEZs.

SEZ developers may be allowed to raise ECBs

The Union Government may allow developers and units in the SEZs to raise external commercial borrowings (ECBs), a move that could reopen the window for mopping up overseas funds. According to sources, the decision to permit SEZ developers to raise ECBs, is expected to promote development of the SEZs, besides helping the government in arresting decline in the foreign exchange reserves. The latest master circular (of Reserve Bank of India {RBI}) on ECB guidelines does not provide for this facility. However, sources reveal that ECB is likely to address the problem of funds at least partially and the RBI should allow the developers to raise money from abroad especially when there is lack of funds domestically.