India moves to dismantle stifling infrastructure controls

* Cabinet likely to approve infrastructure board this week -minister

* Board cheers investors, but analysts say hurdles remain * Hundreds of big-ticket projects stuck By Rajesh Kumar Singh and Matthias Williams

NEW DELHI, Oct 8 (Reuters) - India looks set to begindismantling a complex web of regulatory requirements thatthrottle its infrastructure growth, with plans to set up aspecial body this week to speed up projects in a sector seen asvital to reviving economic momentum.

The move is the latest in a slew of big-ticket reforms byPrime Minister Manmohan Singh's government, from raising dieselprices to opening supermarkets to foreign competition, to spurgrowth which is at its slowest pace in nearly three years.

Finance Minister P. Chidambaram said the cabinet wasexpected to establish a National Investment Board (NIB) thisweek, to speed up clearances for projects that are now bouncedfrom one ministry to another in a process that can stretch foryears and frustrates investors.

Government officials say regulatory delays have held upprojects worth nearly 2 trillion rupees ($38.6 billion) in theroad, power, coal and mining sectors alone.

However, this latest reform initiative may not be thepanacea for a sector hobbled by layers of bureaucracy because,despite the single-window in New Delhi, approvals could still beheld up by mandarins in the states where projects are proposed.

In what is seen as a hangover from the days of India's"Licence Raj" economy of quotas and permits - which Singh helpedabolish as finance minister more than two decades ago - atypical infrastructure project requires clearances from 19federal ministries ranging from environment to defence.

"The idea is nothing should be held up beyond a reasonabletimeframe," a senior Finance Ministry official said, when askedabout the board. "You cannot just sit over it. You cannot justsit over a file."

The government's investment reforms of recent weeks areexpected to help turn around bearish investor sentiment but theymay not perk up growth without a rapid upgrade to the nation'spot-holed roads and stretched power networks.

India's investment rate has fallen to 32 percent from 38percent in 2007/08. Analysts say investment needs to pick upbefore the economy returns to the 9 percent growth it wasclocking before the 2008 global financial crisis.

Poor infrastructure is a blight on the economy. Frequentpower cuts, poor roads and an antiquated railway network sap thecompetitiveness of Indian businesses and leave hundreds ofmillions of people without basic utilities.

In July, a collapse in three of India's five transmissiongrids cut power to 670 million people.

SIX-YEAR WAIT

U. Kumar, an adviser to Essel Mining in the Aditya Birlagroup, said the group's Hindalco Industries wasawarded permission to mine a coal field six years ago, but wasstill awaiting environmental clearance to start.

Even though the number of desks a mining application has topass through in the forest department has been reduced by 10 to26, there are about 28 acts and rules under which clearances arerequired, he said.

To start an infrastructure project, it requires on average56 permissions from different federal, state and local agencies.The whole process takes about up to 24 months.

The proposed investment board, headed by Singh, will focuson fast-tracking the execution of approved projects by gettingall regulatory clearances.

Singh has already set up panels and instituted an investmenttracking system to speed up stalled projects. However, thosemeasures have done little to cut the bureaucratic tape.Chidambaram recently said the experiment had failed.

Regulatory hurdles forced firms to shelve 1.8 trillionrupees ($34.7 billion) worth of projects between April-August2012. Similar issues resulted in the deferment of 4.5 trillionrupees ($86.8 billion) of projects in 2011-12.

Investors have welcomed plans to create the board, butanalysts warn that it is unlikely to be a perfect solution.

While it will cut the amount of time needed for federalapprovals, it has no power over individual states in whichprojects are located, leaving construction at the mercy ofstate-level permissions.

"Different ministries, at times, work in isolation, whichfurther delays projects. A board, chaired by the prime minister,will certainly help in expediting projects," said VishwasUdgirkar, a senior director at Deloitte.

"But it will not solve all the problems facing the sector."

($1=51.86 rupees)

(Additional reporting by Archana Narayanan, Arup Roychoudhury,Malini Menon and Rosemary Arackaparambil; Editing by RobertBirsel)

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Keywords: INDIA INFRASTRUCTURE/