The Union Cabinet headed by weak PM Dr Manmohan Singh finally undertook three sets of decisions aimed at the broader agenda of revitalising the Indian economy.
The pre-existing Cabinet Committee on Investments (CCI) was created to fast-track clearances for projects requiring an investment in excess of INR 10bn under the leadership of the PM.
New Land Acquisition Bill – The proposed law, rechristened as the Right to Fair Compensation, Resettlement, Rehabilitation and Transparency in Land Acquisition Bill, 2011 was approved by the Cabinet but requires parliamentary approval before being deemed a law.
The new Bill requires the consent of 70% of landowners for PPP projects and the consent of 80% of landowners for private projects for the land acquisition process to begin. The 80% requirement for private projects is likely to be opposed by corporates as industrial bodies have demanded that the consent of around 66% of landowners should suffice
New Urea Investment Policy approved: In a bid to incentivise fertiliser firms setting up new plants and expanding existing capacity the New Urea Investment Policy guarantees 12-20% post-tax return on fresh capital infused by manufacturers for setting up of new plants as well as for expansion and the revamp of the existing ones.
The new Urea policy aims to attract fresh investment of about 350bn over next 3-4 years. To assure 12-20% post-tax return, the government will set a floor and ceiling price for urea, based on the price of natural gas (which accounts for ~80% of the total cost) plus 12-20% equity returns. This compares with current regime where the government controls the urea sector and has fixed the maximum retail price (MRP) of Urea at 5,360/ton. This will expedite the capacity expansion plans of companies like IFFCO, Chambal Fertilizers, Rashtriya Chemical and Fertilisers, Indo-Gulf, Tata Chemical and Zuari Industries, who had earlier put their capex on hold awaiting clarity on the new urea policy.