SEZs are a thing of the past, says Deepak Parekh

‘Every system is equally bad, but if the top person is committed and passionate about growth, development and investment in his state, then things work better’

Deepak Parekh has just retired from the position of executive chairman of HDFC. A few days ago, we carried Mr Parekh’s candid thoughts on the housing shortage due to bottlenecks in urban infrastructure, expressed during the conversation with Moneylife. Mr Parekh has equally strong and clear views on infrastructure projects thanks to the fact that HDFC has been involved in the formation of Infrastructure Leasing & Financial Services Ltd as also Infrastructure Development & Finance Corporation of India. Mr Parekh has spent decades getting a ringside view of the problems of launching a viable infrastructure project. Here are his thoughts on these issues, as part of his conversation with Moneylife magazine, for the Pathbreaker series of interviews

Moneylife (ML): On infrastructure, land acquisition had come to a halt all over the country after the special economic zone (SEZ) related excesses. Where do you see India going if there are no new cities being built with new infrastructure? Do you see any thinking on this issue at a time when riots are breaking out over ownership of cities—like in Hyderabad?
Deepak Parekh (DP):
McKinsey has done a study, which says that 400 million people are going to move into cities in the coming years. Where are they going to stay? Where are they going to work? How are they going to travel? It is a frightening number. But there is no discussion on this, because land is a big stumbling block in India for all infrastructure projects—roads, power or steel plants, not necessarily for housing. We must have clarity on what is agricultural and what is not agricultural land and how to convert agricultural land into non-agricultural land, how to acquire land for infrastructure and pay market prices for that acquisition. Don’t save money and forcibly take away land from someone, because then he goes to court and your project gets stalled. We don’t want to force people to give up land or to convert land. What happened in the east with the Nano project or at Singur was that the payment was not made to the poor farmers. The land accumulators/aggregators had already bought pockets of land in anticipation of this and they were all staying in Delhi and Kolkata in posh localities.

The poor farmers had been paid a paltry sum, so the benefit was going to someone else—the middlemen—and not to the actual farmer.

ML: Is it the same everywhere, or do you think things are better in places like Gujarat?
It is the same everywhere. The problem in Gujarat is less because there is a better development agenda and more fairness in the system. The tone has to come from the top. Every system is equally bad but if the top person is committed and passionate about growth and development and investment in his state then things work better. For instance, I read somewhere that after trying for years to put up a project in the east, LN Mittal says that he wants to put up a project in Karnataka or Gujarat. A steel plant would have come up in the time he waited for land. Posco is another example. A $10-billion project—the single largest investment, but what a sad state of affairs. The state government is saying, I will give you the mines, I will give you the land for the plant but there is no road or railway between them or at the ports and I don’t have the money to build them. You have to build it yourself. Now why would anyone build that? Land acquisition in Posco's case was less of a problem. In the Tata Steel case, land is a big problem in Orissa.

Tata Steel is waiting for so many years and has even ordered some equipment for the plant. As for the SEZs, they are now a thing of the past. Someone must do a survey on what kind of money has been lost by industrialists on the SEZs that are unlikely to come up.

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    Avinash Murkute

    1 decade ago

    Liked the statement - ‘Every system is equally bad, but if the top person is committed and passionate about growth, development and investment in his state, then things work better’.

    New policy likely to ease pressure on merchant power tariffs

    Experts from the industry expect the new open access policy to ease pressure on merchant power tariffs, if it is implemented

    The Cabinet note for allowing the Indian government’s discretionary power quota being pooled into open access has been floated. Industry experts believe that the new policy could help ease fluctuating merchant power tariffs.

    “It will free sufficient amount of capacity for the merchant market. I think that will also help in stabilising the tariffs in the merchant market to a reasonable level. Today, there is too much of fluctuation, it (the tariff) has also come down to as low as Re1 per unit. There is a lot of fluctuation and uncertainty. This (the policy) will surely have a stabilising effect,” said Raaj Kumar, chief executive for energy sector, GMR Energy Ltd.

    On Monday, market price for merchant power fluctuated from Rs99.70 per megawatt hour (MWh) to Rs3,350 per MWh.

    However, some analysts are still in the wait-and-watch mode over the policy. “There still needs to be certain clarity on the proposed law. More clarity is required on the new capacities and new plants that are being spoken about. If it is new plants, then the power would take another five years to be made available,” said an analyst from a leading brokerage.

    Based on the inputs available at the moment on the proposed policy, the law will allow 25% of the government’s discretionary quota for open-access customers. The power ministry has discretion of using 15% of the output from federal generating stations.

    The proposal also speaks about allowing State-run power producer NTPC Ltd to sell 50% from the government’s (up to) 50% unallocated quota in new plants to open-access customers. The existing power projects of NTPC would also be allowed to sell 25% of the government allocation.

    “Open access is a requirement for all of us, if it comes out as a policy it will come out for all of us and not only for the central stations,” Mr Kumar further added.

    When asked whether NTPC’s additional capacity in the merchant power segment would mean overcapacity in the merchant power segment, he added, “No, ultimately, the capacity remains the same.”

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    SC extends its order prohibiting mining by OMC in AP

    The Supreme Court extended its interim order banning mining and transportation of iron ore by Obulapuram Mining Company, owned by the Reddy brothers, in Anantapur district of Andhra Pradesh

    The Supreme Court on Monday extended its interim order banning mining and transportation of iron ore by Obulapuram Mining Co Pvt Ltd (OMC), owned by the Reddy brothers, in Anantapur district of Andhra Pradesh, reports PTI.

    The Bench comprising Chief Justice KG Balakrishnan and Justice BS Chauhan decided to continue with its 17 December 2009 order after both the Andhra Pradesh Government and OMC preferred that the matter be heard by the Supreme Court instead of the Andhra Pradesh High Court.

    The Supreme Court had stayed the High Court order allowing the mining and transportation of iron ore by OMC.

    Attorney general GE Vahanvati appearing for the Andhra Pradesh Government assailed the High Court order which allowed the mining activities despite the apex court—appointed by the central empowered committee (CEC)—and the government appointed three-member committee pointing out irregularities in the mining operation which was carried out by encroaching on the forest area.

    He said the committee criticised Karnataka minister G Janardhana Reddy and his brother for the illegal mining done by them in the Bellary reserve forest.

    Mr Vahanvati said that the CEC report alleged that OMC had extended the area of mining operations by removing the pillars which formed the boundary of the area for which the lease was granted.

    Further, he submitted that the company had not allowed the carrying out of the survey in the area.

    The attorney general argued that the matter was of serious concern as there was "complete breakdown" of law and order and around 1,95,000 tonnes of minerals were being mined "illegally" from the encroached area.

    Senior advocate KK Venugopal, appearing for the public interest litigation (PIL) petitioner, made submissions on similar lines and alleged that the Reddy brothers have taken the whole area as their fiefdom.

    OMC countered the allegations through senior advocate Mukul Rohatgi who alleged that the private matter has been turned into a political battle. He said that even the issue of survey, which had been raised, was not the order of the apex court.

    Mr Rohatgi also argued that there was no order for the CEC to give a report about the mine in question and the same was prepared without giving any notice to the party. He accused the Telugu Desam Party of giving the private matter the colour of a political battle.

    Pointing out that the company was having lease for three mines and the report was only related to one of them, he requested the apex court to allow the company to carry out mining activities in the rest of the two.

    The Bench observed that the main allegation against the company was that it has exceeded the boundary line. It said it would be for the High Court to hear the parties to pass an appropriate order on the merits of the case at the earliest. However, the parties urged the apex court to hear the matter.

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