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Core Sector – Mining + Power – Some Action

September 7, 2011

The lethargic and potentially the most corrupt Government in Indian history has finally woken up to the needs of Indian Economy. Feelers from the Joint Secretaries in the ministries of coal, mines, power, and also a member of the Planning Commission is that Government is moving towards the reforms process.

Coal Sector:
Domestic coal availability is an issue of paramount importance and Ministry of Coal (MoC) remains focused on addressing bottlenecks in domestic production ramp-up and evacuation. Evacuation issues are being addressed through close consultation with Ministry of Railways. Mining tax would be debated well by Group of Ministers (GoM) before final framework is ready, but MoC has proposed mining tax based on profit (rather than revenue) as impact is nearly half.

Power Sector:
Ministry of Power expects 11th Plan capacity addition of 69GW (including renewable), and is also not concerned about capacity addition in the 12th Plan (FY13-17) as over 80GW of projects are already under construction. Central government is tightening short-term funding for SEBs; it would also not intervene if CPSUs cut power supply to states if dues are not paid as per “commercial terms”. Key challenges facing the sector are: a) Fuel availability and b) Financial health of SEBs.

Planning Commission:
Mr Chaturvedi, Member of Planning Commission gave some early indications of priorities that would guide the 12th Plan (FY13-17). First, the Planning Commission seeks to raise the growth bar to 9% from ~8% of 11th Plan. Inclusive growth would receive enhanced attention, and subsidies reduced through better targeting.

Hopefully, all the Sectors of the Government are functioning at Higher Pace now.

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