South-Indian state, Karnataka, is the nation’s IT hub and one of the major investment destinations for industrial and infrastructure projects. It is also amongst India’s top five states in terms of new project investment. D. V. Sadananda Gowda, Chief Minister, Karnataka, in an exclusive interaction with Sandeep Menezes, dwells on the state’s focus in harnessing the efficiency of private sector in infrastructure services.
What are the measures initiated by the Government of Karnataka to give a new life to the public- private partnership format in the infrastructure space?
The Karnataka government is according high priority to invite private capital and efficiency in the infrastructure sector. With an intention to encourage private investors to partner with government to deliver public services, the Government is introducing the Karnataka Infrastructure Development and Regulation Bill in the ensuing session of the State Legislature. This is a comprehensive and an overarching legislation to provide statutory support for development of infrastructure and encourage investments in the State.
The law intends to streamline the process of identifying, structuring, procurement, awarding and implementing infrastructure projects. It also enables setting up of a separate institutional framework known as “the Karnataka Infrastructure Authority” with the Chief Secretary as its Chairperson. The Authority will review and approve infrastructure projects taken up under PPP frameworks on public need basis and value for money principles. It is important that proper project development activities are carried out before private participation is sought. The proposed law sets out clear provisions in this regard. It also envisages setting up of a fund known as “the Karnataka Viability Gap Fund” to meet the funding requirements of projects approved by the Authority. Government will contribute an initial amount of Rs.500 crore to this fund.
The mode of implementation of projects in Karnataka is gradually shifting from government sponsored to public-private partnership.
How many projects are under PPP?
Across Karnataka, around 105 infrastructure projects worth Rs.80,946 crore are being undertaken through PPP mode and are at various stages of development. We do foresee a gradual shift from government-sponsored projects towards PPP. However, certain projects will require budgetary support. The state also intends to invite private capital to fund infrastructure projects. The state is also looking at utilising the efficiency of private sector in providing infrastructure services.
It is estimated that Karnataka is reeling under power shortage of around 27 per cent. Does the State Government have a road map to improve the situation?
Karnataka’s present restricted peak demand is about 8,800 mw. The power availability from all internal sources and CGS units during peak period is about 6,400 mw. To mitigate the shortage, the state is procuring about 1,200 mw on a daily basis from outside sources. The net daily power availability is about 7,600 mw. Hence, the shortage is about 13.64 per cent. To mitigate the shortage, the government has undertaken several initiatives which include short term, medium term and long term measures, viz.,
- Procurement of about 1,300 mw power on a daily basis from outside sources.
- Taken initiative to commission BTPS-II and UPCL-II units of 500 mw and 600 mw at the earliest. UPCL-II is awaiting environmental clearance.
- By March 2012, 500 mw of renewable energy power will be commissioned.
- Action has been initiated for obtaining coal linkages for Yeramarus and Yedlapura projects of 1,600 mw and 800 mw respectively from Central Government.
- The State will avail 2,000 mw of power from NTPC’s 4,000 mw UMPP at Kudgi in Bijapur district to be commissioned by 2015-16.
- Coal linkage to 1,600-mw Chattisgarh pit head project by KPCL is awaited from Centre. MOEF clearance follows coal allocation.
- A 1,320mw thermal project at Gulbarga will be commissioned by private investors. The land is being procured for the project. The project is expected by 2015-16.
- 700mw Bidadi combined cycle gas project is expected by 2014-15, subject to gas allocation by the Centre.
How is your government ensuring normalcy in State Mining Policy as the state expected a shortfall of around Rs.2,500 crore in non-tax revenue receipts in 2011-12 on account of dip in mineral royalty following ban on iron ore?
Earlier royalty on iron-ore was being collected at rates specified in schedule-II of MMRD Act 1957 under section 9 (3) of the Act which was very meagre. Government of India in exercise of powers conferred under the said section has revised the rates of royalty on Iron ore at the rate 10 per cent of sale price on ad valorem vide order No: GSR.574 (E) dated: 13.08.2009. Accordingly royalty on Iron ore being levied and collected as per the guidelines issued under rule 64 D of MCR 1960.
Government of Karnataka imposed ban on export of iron ore from 28.07.2010. At present “illegal mining in the State of Karnataka” the issue is before the Supreme Court as challenged in WP no 562/2009 wherein Supreme Court imposed ban both on iron ore mining and transportation with effect from 29.07.2011. Revenue realized in the year 2011-12 up to the end of November 2011 is Rs.382 crore as against the target of Rs.464 crore (82.37 per cent).
However as per the directions of the Supreme Court 25 million tons of already mined/stored iron ore is being disbursed through e-auction. A quantity of 103.52 lakh tons of iron ore is auctioned up to the end December 2011 and a total Rs.255.146 crore of royalty was realized at the rate of 10 per cent of e-proceedings thereby causing no direct loss to the State exchequer or no hindrance/impediment in achieving the revenue target set for the year.
All the issues related to mining sector are before Supreme Court further action to frame any policy if required will be framed in accordance with the directions on final adjudication by the Supreme Court.
Karnataka aims to hike spending on infrastructure from 3.2 per cent of Gross State Domestic Product to 8-9 per cent during the XII Plan. Comment.
Karnataka wants to spend more money on infrastructure. Vision Document 2020 has identified infrastructure gaps in the form of indices. For example, in case of road projects, the density of 1.05 km. needs to be improved to 1.5 km by 2020. Similarly, in case of Railways, the rail density of 16.9 km per 1000 km needs to be improved to 41 km. Infrastructure requires investment of more than Rs.30,000 crore per year for the next 10 years. Therefore, spending has to be increased from the present level to 9 per cent of state GDP.
I have the vision of bringing in economic prosperity to the poorest of the poor. I intend to create sufficient number of jobs for youth by skill upgradation and creation of jobs in industrial sector. In the Infrastructure sector, we aim to achieve high growth with equity so that infrastructure facilities could be provided or made accessible and affordable to all. We will achieve this vision by an inclusive approach and providing investor friendly atmosphere.