India's New Leader Promises 'No Red Tape, Only Red Carpet' for Investors as Coal/Power Sectors Head for Shake-Up

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Narendra Modi, India's prime minister elect, has shown he has a warm attitude toward business, as witnessed by his ability to attract new projects to the state of Gujarat under his leadership. In his ambition to restore strong economic growth to India, he has coined the phrase "no red tape, only red carpet" for investors.

It is very likely, according to informed reports, that his new government is considering a break-up of the mega public sector entity Coal India Limited (CIL) and opening up the coal sector to foreign investment, smashing a few bureaucratic bottlenecks in the process.

Modi's desire to ensure the security of the country's power supply would first sort out the coal sector and give the power sector an easier ride than it has been having. CIL produces up to 80% of coal mined in India and fires more than 50% of power generated.

A fresh round of funding, with a preference for foreign capital, is expected to fast-track development of coal blocks. The new government also is expected to focus on power projects' captive coal blocks and project coal linkages to boost the sector.

Red tape, strikes, protests against land acquisitions and delays in obtaining environmental approvals have suppressed coal output far below demand. India has the world's fifth-largest coal reserves, but is the world's third-largest importer.

Reforms in the coal sector are likely to start with CIL and could see the conversion units of the state-controlled company into independent companies. State governments would become equity holders, which would assist in speeding up land acquisition and other facilitating processes.

New funding would introduce modern mining technologies to boost efficiencies and convert "challenging mines into modern mines." The government also will explore international private-sector partnerships to boost the mining sector, according to the winning BJP party's sources.

For related information, see May 19, 2014, article - India's Thermal Power Stations See 54 Million Ton Coal Shortfall.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.