Economic Survey calls for sweeping reforms in critical sectors

New Delhi, Feb 28 (UNI) Notwithstanding the stiff opposition from the Left parties, the Economic Survey 2007-08 makes out a case for widnening and deeppening the reforms in several critical sectors, including permitting 49 per cent foreign equity in the insurance sector and divesting part equity of profitable non-navratna companies.

The wide ranging reforms suggested in the Survey includes sectors such as Banking, Oil, Urban transport, Railways, Power, Coal and Retail.

Tabled by Finance Minister Palaniappan Chidambaram in Parliament today, it suggests auctioning of all the loss making PSU's, allowing share of foreign equity in all retail trade and increasing the work week to 60 hours.

The Survey has suggested to amend the Factories Act, by increasing the work week from from 48 hours to 60 hours and daily limit to 12 hours to meet seasonal demand through overtime.

The Survey said the loss making PSU's that cannot be revived should be auctioned. For those in which net worth is zero, allow negative bidding in the form of debt write off.

Further, the survey states that the process of selling of 5-10 per cent equity in previously identified profit making non-navratnas needs to be completed. List of all unlisted public sector enterprise and sell a minimum of 10 per cent of equity to the public.

The Survey has asked to allow a share of foreign equity in all retail trade. Allow 51 per cent foreign equity in foreign branded, specialised retail chains (eg Luxury Brands, Consumer Durables, Semi-Durables).

Further it suggests amending the Coal Mines Nationalisation Act to allow regulated private entry into coal mining. Privatise old coal mines to recovery of 'in-place' reserves of 5-10 per cent, subject to a professional, independent regulator for safety and environment issue. Phasing out control on sugar, fertilizer and drugs under Industrial decontrol.

Selling oil fields to private sector for application of Improved/Enhanced oil recovery techniques.

In the insurance sector, the Survey suggested, raising of foreign equity share in insurance to 49 per cent and allowing 51 per cent foreign equity in a special category of insurance companies that provide all types of insurance (eg health, weather) to rural residents and for all agriculture related activities including agro-processing.

Under Banking, the Survey suggested allowing 100 per cent FDI in Greenfield Private Rural-Agricultural Banks. The Survey adds that such a Bank would be free to set up any number of branches in any rural or semi-rural area.

It would be free to lend to agriculture and allied sectors, agro processing and agro-input industries anywhere in the country and to any industry located in non-urban area (negative list).

Such a Bank would also be free to takeover (buy out) other private banks. As an incentive, such a Bank could be allowed to expand into small towns when the general FDI policy on banks are liberalised.

Under Power, the Survey suggested that the State Electricity Regulatory Commissions should notify rational, credible, cross subsidy for open access so that it can become a reality.

Open access should include access to electricity pillars to string a wire. Accountability for T&D losses on this wire will be with the wire owner and not on the distribution company that owns the towers.

The Survey also calls for permitting private corporate investment in nuclear power, subject to regulation by AERB and AEC.

Under Railways, the Survey suggested that in the freight corridor, Public Sector Rail track company should own new tracks and signals and free entry of private and public-private partnership in rail freight companies.

The Survey suggested that the Public Transport (bus) systems in metros and large cities, must be run by organised private companies that can use modern logistics and back office systems for planning routes and timings, acquiring and analysing data on usage densities ad running an integrated people movement system.

A comprehensive system of road parking fees must be devised and introduced in metros and large congested cities.

Under the Bankruptcy Law, the Survey suggested the introduction of either a separate section in the Company Law or introduce a new Bankruptcy Law that facilitates exit of old/failed management as expeditiously as possible.

UNI BJR PBB AS1524