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The Cabinet Committee on Investments should speed up approvals and get big investment moving

Consider this: a power plant expected to produce 4,000 MW of electricity costs upward of Rs 16,000 crore to build. The interest cost on the funds raised by the developer at current rates, for a year, would be over Rs 2,000 crore. If the approvals for the project are delayed after the developer has laid out the funds, the additional cost for the project is easy to calculate. Multiply this problem by the 350-odd projects of above Rs 1,000 crore that are pending at various levels within the government. The reason for delay in many of these projects, according to the ministry of statistics and programme implementation, is the lack of timely clearance from either a state or a Central government agency. In other words, it is not lack of funds, it is the lack of administrative energy that hobbles project execution. Both public and private sector projects suffer. Since many of these projects carry a concomitant financial approval from banks, the delay constrains their ability to finance fresh projects, reduces their income and hurts the economy in more ways than one.

The importance of the National Investment Board, now renamed the Cabinet Committee on Investments (CCI), rests here. Thursday's clearance for the CCI will now hopefully ensure that some of this gargantuan backlog is dealt with. The CCI proposal was circulated by Finance Minister P. Chidambaram as a cabinet note, around the same time that the commerce minister issued the press note for FDI in multibrand retail. The slow progress of both proposals illustrated that the objection to reformist ideas can emanate from the opposition as well as the ruling party.

The cabinet approval for the CCI will, of course, have to fine-tune some issues. For instance, there will soon be clarity on whether all investment plans of above Rs 1,000 crore will travel to the CCI, or only those where all other options have failed, including a reference to the cabinet and the cabinet committee on economic affairs. Also, since all ministers from the infrastructure sector will be part of the CCI, it stands to reason that some of the groups of ministers (GoMs) could be disbanded. The key change, however, should be the collective recognition that once the CCI takes on a project, it will provide the final seal of approval.

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