To fix the crumbling power generation and distribution systems, the Modi regime has to crack down on the political class that promises free or cheap electricity. All other steps, such as amending the Electricity Act, are just cosmetic Inaugurating the first Renewable Energy Global Investors Meet & Expo (RE-Invest), Prime Minister Narendra Modi wondered how political parties could promise to supply electricity at reduced rates when their States are dependent on electricity supply from outside. The remark was targeted at the Aam Aadmi Party which, in its election manifesto, had promised to cut electricity bills by half, even as Delhi gets nearly 70 per cent of its power from other States. In 2015-2016, Delhi’s total power requirement is expected to...
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FUNCTIONAL SYSTEMS DON’T NEED FIXING
Capping the price of domestic gas will be a retrograde step. It will undermine the 2014 formula-based pricing system and also give bureaucrats unnecessary powers The Union Government is contemplating putting a cap on the price of domestic gas. The Ministry of Petroleum and Natural Gas has prepared a draft note for consideration by the Cabinet Committee on Economic Affairs. Based on the recommendations of the Committee of Secretaries, the National Democratic Alliance regime in October 2014 approved of the new pricing guidelines for domestic gas. According to the guidelines, the price of gas will be determined based on the ‘modified’ Rangarajan formula that came into effect from November 1, 2014. The R-formula, used the average prices of global benchmarks...
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Switch to accrual-based accounting for subsidies
In his maiden Budget, finance minister Arun Jaitley had announced the setting up of an Expenditure Management Commission (EMC) to recommend a roadmap for rationalising and phasing out the major subsidies. As a follow-up, on September 4, the government constituted the EMC with former RBI Governor Bimal Jalan as the chairman. The EMC’s mandate puts under the scanner the government’s spending on all its programmes and schemes, all its procurement (from defence to office items) besides the methodology for counting receipts and expenditure. It is expected to recommend measures for utilisation of allocated funds in the most cost-effective manner. Jaitley has said that the recommendations the EMC made in its interim report will form the basis for subsidy reforms—with emphasis...
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DE-CONTROLLING UREA PRODUCTION
Removing the archaic ceiling on urea prices, which is a political sop to secure votebanks, will energise domestic production. This, in turn, will ensure consistent supply and also lessen the public’s subsidy burden India was able to import only about 9,00,000 tonnes of urea between April and November, 2014, which was 16 per cent less than what was imported during the same period in 2013. This put tremendous pressure on local markets. The problem was aggravated by a drop in supply from the Oman India Fertiliser Company SAOG. At home, three naphtha-fed urea production plants viz, Madras Fertilisers Limited, Mangalore Chemicals and Fertilisers, and Southern Petrochemicals Industries Corporation, also had to stop production after the Government decided to suspend subsidy payments....
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Fertiliser self-sufficiency is a pipe dream
For nearly four decades successive governments have vowed to achieve self-sufficiency in the production of fertilisers, yet this goal has eluded them so far, barring for a brief while in the early 1990s. Will things be different under Modi? Immediately after the current government took charge, fertiliser minister Ananth Kumar reiterated the need to reinvigorate the sick plants of the Fertiliser Corporation of India (FCIL) and Brahmaputra Valley Fertiliser Corporation of India (BVFCL)—earlier known as HFCL—both central PSUs. Both have been incurring losses for decades. Indeed, some plants—Ramagundum and Talcher (FCIL) and Haldia (BVFCL)—were babies born sick. These PSUs have been on the ventilator for ages with the Centre pumping in thousands of crores of rupees to keep them alive....
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LET’S HAVE THAT RATE CUT, PLEASE
The Modi Government’s focus is on creating assets. With this, fiscal deficit will be under control and there will be no risk of banks’ money landing in pockets which could destabilise the economy and aggravate inflatio For the sixth time in succession, Reserve Bank of India Governor Raghuram Rajan has refused to budge. In its monetary policy stance released early this month, the RBI has retained the repo rate (rate at which banks borrow from RBI) at eight per cent. This is despite a retail inflation during November at 4.3 per cent (wholesale inflation has plunged to ‘zero’) already hovering at just half the eight per cent benchmark set by the RBI for January, 2015, below which, a cut in...
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What is holding back direct fertiliser subsidy transfer?
SUMMARY Direct transfer of subsidy to farmers holds the key to countering all ills afflicting the fertiliser sector Direct transfer of subsidy to farmers holds the key to countering all ills afflicting the fertiliser sector in India. Successive governments have talked about it and yet none has ventured to implement this. What has held them back? The idea was first mooted nearly four decades ago when, in March 1976, faced with increasing prices of complex phosphate fertilisers—then, there were no controls and manufacturers were free to fix price—the government introduced a flat subsidy at the rate of R1,250 per tonne phosphate nutrient (P2O5). The initial plan was to give the money directly to farmers so that the effective price (net...
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WTO GAME IS NOT OVER YET
By getting the US to extend the peace clause, India has scored a win on the farm subsidy issue. But to secure interests in the long term, it must insist that the minimum support price it offers to farmers be excluded from subsidy calculations India had faced all-round flak for its stance at the World Trade Organisation’s General Council meeting, in Geneva on July 31, that linked approval of the Trade Facilitation Agreement with time-bound actions to address the concerns of developing countries with regards to food grain stockpiling. In December 2013, India was accused of going back on the Bali ministerial declaration and creating obstacles in the progress of the Doha round talks. Some developed countries were even willing...
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We need a coherent urea investment policy
A burden: And nobody will gain from it – A MURALITHARAN The urea industry is in need of wholesome nourishment rather than the piecemeal changes the Centre has been offering October 26, 2014: In January 2013, the Government had notified a urea investment policy (UIP) for new greenfield projects; expansion of existing units; additional urea from revamp of existing units and revival of projects of sick public sector units of the Fertilizer Corporation of India (FCIL) and Hindustan Fertilizer Corporation (HFCL). Early this year, it made two amendments in the UIP. The first dispensed with the “dispensation of guaranteed buy-back”, while the second requires interested private companies to give a bank guarantee of ₹300 crore for every project, while PSUs...
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Stop skirting fertiliser reform
Soil remedies Fertiliser reforms are good for farmers P RAJU By taking tough decisions now on MRP and subsidies, the Government will ensure better times to follow September 10, 2014: The Prime Minister unveiled a five-point agenda for ushering in a technology-led second green revolution in India. One of these is the issuing of a soil health card (SHC) to every farmer, with recommendations for fertiliser use. But will this help address the persisting imbalance in fertiliser use? Though the Economic Survey recognised the seriousness of the problem, the Budget was silent on any policy steps to address it. To get maximum crop yield from fertiliser use and maintain soil health, a farmer needs to apply all three major nutrients,...
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