Govt to revive power sector’s health, vows Arun Jaitley

Finance Minister Arun Jaitley on Saturday said the Government will now look into the issues being faced by the power sector, after having taken steps to pull the highways and steel sectors out of distress. “We’ve taken some steps to pull out highways and steel sectors out of distress. Now something needs to be done on stalled projects and most important is to improve the health of the power sector,” he said at the Credia-Bankcon summit, a housing market conference here attended by real estate players and housing finance firms.

The minister also said the main challenge in the power sector is at the last mile as many discoms are in distress. “Discoms in some states are in distress mainly due to their policy of not charging consumers for the cost of power, making the discoms dependent on bank loans. Banks cannot indefinitely fund them to subsidise consumers for political reasons.

“The problem is that not only discoms owe money to banks, even power producers also feel distressed as nobody is buying power,” he said. On the distress in the banking and finance sector, the minister said, “We have tried to recapitalise banks and given a road map for three-four years. Hopefully this will give more strength and muscle to our banks in the days to come.” 

He further said, “On account of the slowdown, the health of the banking system itself has been raising eyebrows. While the extra spending on highways has pulled one sector out of stress, I hope the recent tax measures will help pull out the steel sector from distress as well.” 

Jaitley also said that the Government will very soon revive stalled projects, without elaborating further. Hopeful that the age of economic slowdown will end soon for the real estate business, Jaitley said that the sector must survive on market economy and subsidies should not be the “essence of survival”. He also asked the sector to submit their taxation related suggestions to the recently appointed panel on tax issues and said the government would seriously look into the final recommendations of the committee.

Jaitley said that the sector will be the next big mover as far as the Indian economy was concerned. He said that easier availability of land for housing was very important while interest rates have already come down to bring down the cost of funding.

“The real estate should survive on market economy (and) subsidies should not be essence of survival for the industry,” Jaitley said. He said that inflation has been brought under control and Reserve Bank has already cut rates four times this year, which was a positive move for the sector and “hopefully those moves are here to stay”.

“The age of slowdown for realty sector should now come to an end,” he said. On macro issues, the finance minster said the global environment has not been helpful and the impact was visible in exports slowing down in India. “The biggest strength of India and the silver lining is its resilience... Our systematic firewalls have to be such that the ability to resist the global volatility are strengthened,” he said. 

“We are unquestionably one of the fastest, if not the fastest growing major economies... On revenue collection, the indications look more on the optimistic side,” Jaitley said. The minister further said that the savings from low global commodity prices were being used in irrigation and infrastructure while improving the health of power sector was also one of the most important tasks.

On the improvement in India’s ranking in global ease of doing business by the World Bank, Jaitley had said last week, “I am grateful that the World Bank has recognised that India is now becoming an easier place to do business... I believe that this 12-point movement does not reflect the full pace of reforms that we have done.” 

Last week NITI Aayog Vice-Chairman Arvind Panagariya expressed the hope that rating agencies would take note as they “always follow, not lead”. 

“Rating agencies often follow, they don’t lead. There is a huge jump in India’s ranking in ease of doing business. It is very positive. The data on foreign investment in the first half is also very encouraging. Several companies are investing in India, including Foxconn,” Panagariya told reporters.