In its election manifesto, Aam Aadmi Party (AAP) had promised to reduce electricity rates by 50% if voted to power in Delhi. Even before new Government under Mr Kejriwal settles down, doubts have been raised whether he can do it. Staunch critiques rule it out completely on the ground that a 50% cut would require a steep increase in subsidy from existing Rs 550 crores per annum to nearly Rs 5000 crores. But, Mr Kejriwal is certainly not looking at this option. He alleges that there is lot of ‘bungling’ in the manner three power distribution companies (PDCs) viz., BSES Yamuna Power/Rajdhani Power and Tata Power Delhi Distribution are run. They mis-appropriate funds through un-metered sales, inflated operation & maintenance...
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Coal allocation – robbing peter to pay paul
PM’s statement dated October 19, 2013 regarding allocation ofTalabira-II coal block in Odisha to Hindalco for its 650 Mw captive power plant (CPP) in its integrated aluminium project in Sambalpur, Odisha and for a 100 Mw CPP for expansion of its Hirakud aluminium plant in Odisha throws up some serious questions on approach of GOI towards central PSUs. In August 2005, Ministry of Coal had informed PM about the decision of the Screening Committee to allocate Talabira-II block to Neyveli Lignite Corporation (NLC). The allocation was made to NLC in the 90s under a ‘special dispensation’ for public sector undertakings (PSUs). Committee felt that Talabira-II & III blocks [Talabira-III had been separately allocated to Mahanadi Coalfields Ltd (MCL)] needed to...
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No reason to fear WTO on farm subsidy
Commerce Minister Anand Sharma managed to wrest some elbow room for India’s food subsidy programme, bringing around the US and other developed countries to accept his point of view. The agreement finalised at the Ninth WTO Ministerial in Bali is expected to let the ‘peace clause’ — a euphemism for not taking any action for supposedly violating commitments under the Agreement on Agriculture (AoA) — continue till a permanent solution comes into being. Developed countries (DCs) wanted this window to be only for four years, without even drawing a time line for a lasting solution. They were merely willing to discuss it at the next Ministerial in 2017. Sharma exudes confidence that subsidy under Food Security Act (FSA) is now...
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Why beg at Bali?
The Indian delegation, led by commerce minister Anand Sharma, is approaching the WTO Ministerial in Bali with a ‘begging bowl’. The government has agreed to the so-called ‘peace clause’—a euphemism for not taking any penal action for violating commitments under Agreement on Agriculture (AoA)—proposed by WTO Director General but with the caveat that this will remain in place until a permanent relief is granted. India’s concurrence with the ‘peace clause’ proposal of DG tantamounts to conceding that India has committed a violation but would want WTO to alter rules to allow developing countries to maintain agricultural subsidies in excess of 10% of agricultural GDP. This has catapulted developed countries to a position from where they resort to aggressive posturing. They...
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Why genuflect before WTO?
India is making a big mistake. It is asking the WTO to be flexible about farm subsidy thresholds in view of its commitments under the Food Security Act (FSA), when, in fact, it has no reason to be on the defensive. The commitments under the FSA, humongous as they are, cannot be included under ‘trade-distorting food subsidy’ as defined by the WTO. The government should do its homework, before seeking favours it does not need. To be sure, the FSA — enacted in the monsoon session of Parliament — will entail a subsidy outgo of Rs 6,80,000 crore over a period of three years, as per the Commission for Agricultural Costs and Prices (CACP) or Rs 2,27,000 crore per annum....
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Don’t give into this power game
The ultra-mega power project (UMPP) producers have managed to convince the government and power regulator that they need an increase in power tariff to offset the hike in price of Indonesian coal. In being allowed to do so, we are effectively back to the times of input prices being passed through to power distribution companies and consumers. The promise of a fixed tariff from UMPPs, contained in their power purchase agreements, has been effectively put aside. With Discoms unable to recover the higher costs from farmers, industry and business will have to bear the brunt. That apart, the finances of Discoms will sink further into a mess, requiring a further injection of relief from the Centre and states, in turn...
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Retail-FDI lost in policy maze
More than a year after the government approved FDI in multi-brand retail with 51% foreign ownership, India has not received even a dollar’s worth of investment. Now, retail-giant Walmart, which had a 50:50 JV with Bharti for wholesale cash-and-carry depots and was contemplating a retail partnership with the latter, has exited the JV and put the other plan on hold, the sole reason being regulatory hurdles. Why is our regulatory environment not conducive? Why, even after protracted efforts to streamline rules, does the regulatory maze refuse to go away? Let us reflect a bit on the Indian retail scenario—its challenges and opportunities, and, most importantly, its need for foreign investment. The Indian retail market is worth around $500 billion. The...
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Stand firm on farm subsidies
In the run-up to the WTO ministerial meeting at Bali on December 3-4, the G33 developing countries, led by India, have sought ‘flexibility to continue helping poor farmers through support prices without a limit on subsidy’. The US promptly rejected it on the grounds that this will be tantamount to altering the rules of the game. Pascal Lamy, former WTO director general, promptly echoed the US stance. However, the rejection is without basis. Under the Agreement on Agriculture (AoA) 1995, support to poor farmers was excluded from the calculation of the aggregate measurement of support (AMS) and the decisions regarding subsidy reduction commitments with reference to the 1986-94 Uruguay Round. The reason for this exclusion was that support to poor...
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Oil PSUs squeezed mercilessly
Despite all-out efforts to build indigenous capabilities in the energy sector for decades, India remains dependent on imports to the extent of 80 per cent for its oil needs. The Oil & Natural Gas Corporation — a central public sector maharatna company — currently produces about 30 million tonnes of crude oil or 80 per cent of domestic output. It has plans to invest Rs 11,00,000 crore ($177 billion) in oil exploration till 2030. That is expected to yield additional production of 60 million tonnes and should help in lowering import. Financing this gargantuan investment poses a huge challenge. All along, the Government had been goading profit-making central PSUs to fund their capital expenditure from ‘internal’ resources. Essentially, ‘internal’ resources...
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Gas policy – from one mess to another
Immediately after the Cabinet decision on a new structure of gas pricing – that would double gas price from April 2014 — the Ministry of Finance asked the Ministry of Petroleum and Natural Gas to consider “making up for quantity by which RIL had missed target of supplies from its KG-D6 block at old price”. Now, Parliament’s Standing Committee on Finance has endorsed the MoF’s stance. The context here is supplies from Dhirubhai 1 and 3 fields (D 1& 3). These fields commenced gas production in 2009. After reaching a peak of 60 mmscmd in 2010, production declined to 26 mmscmd in 2012-13 and further down to 14 mmscmd in 2013-14, against a commitment of 80 mmscmd. The concept of...
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