Mr Deepak Parekh, a senior statesman of Indian finance and chairman of HDFC, has warned that the wholesale cancellation of coal blocks would cause further damage to India's international reputation and endanger the banking system as loans of INR 100,000 crore would turn sticky.
He spoke to MC Govardhana Rangan and Bodhisatva Ganguli.
Edited excerpts:
Q - What are your views on the demand that coal blocks allocated be cancelled?
A - It will be a blow to the country. The opposition parties may take joy in reversing the policies of the ruling party. But do we know that this is the ruination of India? What are we trying to do? You give licenses, you cancel it. You give coal blocks, you cancel it. Tomorrow, a new party will come to power and will undo everything what the earlier government has done.
Is this the democracy that India wants? Is this what we want to see in India? I am not saying nothing wrong has been done. Whether it's telecom licences or coal. If coal block has been given to an industrial group and they have done nothing about it for five years (then cancellation is justified). We are importing coal, we desperately need coal for our industries. We desperately need power for our households and industries. There are massive power cuts across the country. And you are sitting on a coal block, which is not going to run away. You have not made any efforts all these years to evacuate coal and use it for public purpose. Then you should take it away. Then you look at those who got coal blocks (and are using it) and now you are (talking of) re-allocating them. These reallocations, according to me, would be a big disaster. Power companies have borrowed money, put massive amount of equity and debt, domestic and international, to put up power plants. Power plants are ready or power plants are 50% ready and coal is not there. Money has been drawn from the banks and the institutions, which happens to be over Rs 1 lakh crore... Over Rs 1 lakh crore of loans, which have been disbursed, goods ordered, turbines ordered, (projects) completed or nearly completed. Now, if you take away the coal, what do you expect these people to do?
Q - So, what is the way out?
A - What you have to do is (deal with these) on a case-by-case basis in an impartial and transparent process. If you have power plant and coal next to it and you are going to take it away, it's not going to help you. You fine them, charge them more. So, there are different solutions for different projects.
What I feel is you cannot reverse all economic policies. Reversing every economic policy is the beginning of the end of the country. A new government will come in and they will reverse all the decisions of the previous government. Have we done this in the past? Why are we doing this now? In coal we should look at (it) case by case and form a three-member committee of senior people in government and give them enough authority and make that the final decision.
Q - So, you are saying don't cancel across the board?
A - No, you have to take a practical view. I think we have a major issue on power. Re-allocation will take years and tariffs will increase, power cuts will increase, blackouts will increase.
Source - Economic Times
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