Govt should not cancel allocation of all coal blocks: Godrej

Opposing calls for cancellation of allocated coal blocks summarily in the wake of CAG report, CII President Adi Godrej today asked the government to take action against only those companies which have acquired them fraudulently.

He said the cancellation of coal blocks which were allocated as per due process will adversely impact business sentiment.

Citing reasons like delay in environment clearances and problems related to land acquisition, law and order, he said that due to these issues many domestic companies were not able to start the coal production on time.

Official auditor CAG in its recent report has stated that private firms made undue gains to the tune of Rs 1.86 lakh crore on account of allocation of 57 mines to them and a part of it could have accrued to the national exchequer. The CBI is already probing 12 firms that were granted licences in fast track mode but have not started operations.

"The law should take its own course and no precipitate action should be taken. The coal blocks which were allocated as per due process, should not be cancelled. Any such cancellation will adversely impact business sentiment," Godrej told reporters here.

However, the President said that any coal block allocation where it is established that due process has not been followed, "should be reviewed and appropriate action taken in accordance with law".

He said that before taking any action, the government should keep in mind that almost 40 per cent of the revenue from coal mining goes to them as taxes and royalties.

"There are several issues which lead to delays in the start of production in coal blocks.

These are related to environment clearances and security issues and lack of supporting infrastructure, especially in the case of blocks in remote areas," he said.

Godrej asked the government to address these gaps in a time–bound manner and also through single–window mechanism.

Talking about the economic reforms which are needed to boost the country's economy, he said there is an urgent requirement to take steps in the areas like taxation and foreign direct investment (FDI).

"For various reasons, decision taking (process in the government) is slow. If we do not take the reform programme agenda forward and leverage on the opportunities, we might get into further difficulties in terms of rating agencies, perception and investors shying away," he added.

On the back of India's GDP slowing down to 5.5 per cent in the first quarter of this fiscal, he asked the government to immediately take steps like allowing FDI in multi-brand retail, domestic airlines; interest subsidy for small exporters; clarification on retrospective amendment in the Income Tax Act and easing land acquisition process for industry.

On allocation of natural resources, Godrej said "auction" is the preferred method but it should not be the only method.

Citing examples of telecom and civil aviation, he said the government should allow the private sector to participate in all the sectors as it would hugely benefit the country.
The government should also allow private players to enter the coal mining business.

"Nothing should be reserved for government. In the long term, the government should get out of most of the business areas, it will have a long term benefit," he said.

Godrej said the country's macro economic conditions have deteriorated further.

"The deteriorating macro-economic conditions and the slowing down of industrial output and GDP growth has contributed to declining business sentiments. The situation is unlikely to turnaround any time soon," he added.

He said there are concerns on multiple fronts including weak growth momentum, persistent inflation, policy lethargy, and high fiscal and current account deficits.

He suggested the government to extend interest subsidy to sectors like engineering, automobiles and chemicals. He also called for setting up of an export development fund to support small exporters.

For a pick up in rural demand, the government could consider fast tracking implementing the Bharat Nirman programme, he said. Besides, he added, it should also encourage pension funds and insurance companies to invest in long term investments especially in infrastructure projects.

On land acquisition for the industry, Godrej suggested that the government must play a prominent role.

Godrej suggested to create a board of mediation consisting of the judiciary, legislature, bureaucracy and the private sector to expedite dispute settlements especially in the areas like land, clearances and taxation.

On whether CII favours additional tax on diesel cars, he said out of the total oil consumption in the country, they consumes only 2 per cent of it. "It would be dangerous to put additional duty on the cars" as it would impact the sector growth, he added.

On disinvestments, the CII president said, "A special body should be created to monitor the private infrastructure projects. There is need to appoint 2-3 more expert committees to expedite project approvals."

On retrospective amendment in the Income Tax Act, he said they were "inconsistent" with DTC proposals, not "clarificatory".

He said the amendments should be applied prospectively and not with retrospective effect.

"The finance ministry should clarify the effect of the amendments on the 82 treaty countries as well as the cases where the assessment was finalised," he added