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31 AUG, 2012, 03.53AM IST, ET BUREAU
Wholesale cancellation of coal blocks is beginning of country's end: Deepak
Parekh, Chairman, HDFC
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Deepak Parekh, a senior statesman of Indian finance and chairman of HDFC, has warned that the wholesale cancellation of coal blocks
damage to India's international reputation and endanger the banking system as loans of Rs 1,00,000 crore would turn sticky. He spoke to MC
and Bodhisatva Ganguli. Edited excerpts:
What are your views on the demand that coal blocks allocated be cancelled?
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 licences, 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
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
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
Rs 1 lakh crore... Over Rs 1 lakh crore of loans, which have been disbursed, goods ordered, turbines ordered, (projects) completed or nearly
take away the coal, what do you expect these people to do?
So, what is the way out?
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.
So, you are saying don't cancel across the board?
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. Andhra (Pradesh) and all other places have major power cuts.
Now, one thing they have done. The Attorney General GoolamVahanvati has come out with an opinion that we have to give Central Electricity
Commission (CERC) the power to change tariffs. So, power to amend PPA or power to amend FSS, fuel supply link is being vested with CERC. Earlier,
wanted to take that decision. So, now at least the CERC can take some decisions, whether it is on imported coal where no one wants to touch
What is the wider fallout of this?
No one wants to take a decision. Even transparent people and honest people are now not willing to take decision. I know many people in the government who says
why I should decide. Only pushing (of) files is happening. How will India progress? Do you want to see a collapse in our system? I think it's very critical that we find
alternative ways rather than (resort to) de-allocation of all coal blocks. In telecom, the Supreme Court felt that two licencees - DB and
in proper circumstances and you cancel their licences. But, the telecom system is not dependent on these two players. But the future of
(depends on) power and it's dependent on this coal.
But, in case total non-performance you don't have any objection to blocks being taken back?
No no... not at all. You have to take it away. Only thing is an argument will be made that we were not told that if we don't use it we will lose it.
But, that's a strange argument.
There are iron ore blocks taken by people in Orissa and they have not used it at all. And the reason is if they sit on it, it appreciates. You have a friendly minister. So,
they think let me sit on natural resource, which is not going to disappear underground. The value will always be there whenever you evacuate it.
What you are saying is very much the government's view. But, now, there is momentum building up in the political system for cancelling everything.
I think we must learn form other countries. In the financial sector, (there are) massive fines that foreign banks have paid. Whether it is for
trading losses, the regulators have fined them for lack of systems and lack of procedures; even for not doing KYC fines are there. Now, let these people who have
heavily misused (captive mines) be fined. If they don't pay the money in 30 days or in 21 days, then you cancel the licence. But, there are a different ways of
stripping a cat as they say. You have to go on a case-by-case basis and not generalise and just de-allocate all of it. If opposition parities come to power what will
they do? Will they undo everything?
Our problem in India is that we have various problems but we never seem to get out of it and move forward. Take the London Libor case. Many banks are involved
but has Libor fixing stopped? Has business stopped? Libor is still the rate accepted by everyone. That misappropriation or miscalculation has stopped.
Some banks have even filed an FIR against their own staff. So, regulators will fine the institutions and institutions will fire individuals and go after them. But, life has
not stopped. We need coal desperately, we don't have power.
Have you spoken to anyone in the BJP on this?
No...no, I have not spoken to anyone in the Congress either. But, all I am saying is, is it worth being in infrastructure finance with all these uncertainties? And, public
sector banks, what is going to happen to these huge debts they have in the infrastructure sector?
See, we have to be proud of our financial system. Due to a conservative and cautious regulator we have survived all these things. No financial crisis abroad has
impacted us because of the conservative policies. If any bubble happens, they (regulator) are acting immediately. People are applauding us for our financial
NPAs are manageable today. Why are we doing this to our financial sector?
Even (the RBI) governor has said that a downgrade may happen but we are prepared for it. Can we afford a downgrade? I think the finance minister
choice but to increase diesel prices in September. Industry bodies have been very reticent so far. I think some people have to speak up, and Indian industry has to
speak up.
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