FICCI calls for radical policy reforms in energy sector

May 7th, 2012 - 7:18 pm ICT by IANS  

Hyderabad, May 7 (IANS) Voicing its concern over the emerging energy crisis in India, the Federation of Indian Chambers of Commerce and Industry (FICCI) Monday called for radical policy reforms on immediate basis.

Stating that the energy outlook is scary, the industry body urged the government to bring holistic policy reforms in all three sectors of coal, oil and gas.

Addressing a press conference here, FICCI chief R.V. Kanoria stressed the need for ending the government monopoly over coal sector and called for rationalizing subsidies to save the industry from massive losses and to protect the competitiveness of the manufacturing sector.

FICCI demanded that the government break up Coal India and privatize as this would not only make the coal sector competitive thereby increasing production but would also help the government tide over the fiscal deficit.

“The market capitalization of Coal India is Rs.250,000 crore but if it is privatised in a fragmented way this will exceed,” he said.

He said the energy issue needed to be addressed immediately if the manufacturing GDP is to grow from current 16 percent to 25 percent and to meet the growth aspiration of young population.

Stating that the country was increasingly depending on imported coal, he predicted that the coal imports in five years could climb to 250 million tons per year, valued at $75 billion. The coal imports are projected to touch 400 million tons by 2030.

Expressing concern over the increasing fuel subsidies, Kanoria warned that the populism would erode competitiveness of the manufacturing sector and at a time when the sector is moving away from China, countries like Vietnam, Indonesia, Laos, Myanmar and Brazil would benefit.

He said increasing fuel subsidy burden, rising under-recoveries of the oil marketing companies (OMCs), volatile international crude oil prices, irrational domestic pricing mechanism, lack of fuel availability for power generation, slow policy reforms in power distribution sector and inadequate infrastructure had thrown the energy economy out of gear.

“Cross-subsidies prevail among consumer categories, particularly due to populism which leads to virtually free power for the agricultural sector, which rather than be subsidised through budgetary provisions is being subsidised by industry,” he said.

While noting that revision of tariffs is often guided by political pressures than economic reasons, FICCI president called for rationalisation of tariff for industry by reducing the gap between industry and domestic tariff.

FICCI has suggested measures like allowing the entry of private coal production/coal mining companies, setting up of coal regulator, accelerating coal exploration, expediting environment and forest clearances, seamless synchronization of rail, road and port infrastructure for transportation of coal and redistribution of coal linkages.

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