A little over 18 months ago, in a bizarre move rarely seen before in any part of the world, a Greenfield 4G operator viz. Reliance Jio [RJ] entered the Indian telecomm market with ‘free’ and ‘unlimited’ voice calls and low-cost data. After launching an introductory offer in September, 2016 for free – both data and voice for 6 months, from April, 2017, it charged data at throwaway price Rs 50 per GB, even as voice calls continue to be free ad infinitum. For a conglomerate [read: RJ] investing hundreds of thousands crores in laying infrastructure and paying heavily for purchase of spectrum, an attempt to sell services virtually for free was a brazen case of ‘predatory’ pricing with the sole...
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Rising gas price, fledgling fertilizer reform
The price of domestic gas is expected to go up from existing US$ 3.21 per million British thermal unit [mBtu] [on net calorific value basis] to US$ 3.40 per mBtu for six month period beginning April 1, 2018. The hike taking the price back to the level reached two years ago – has brought to the fore some niggling questions which successive ruling dispensations have dodged for several decades. First, who pays for the extra price that user industries – mainly fertilizers [besides power, CNG and PNG] – shell out? The urea industry alone requires over 45 million standard cubic meter [mmscmd] of gas as against total domestic supply of 90 mmscmd. The maximum retail price [MRP] of urea is...
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Rule based global trade – are there any takers?
The 11th WTO [World Trade Organization] ministerial conference held in Buenos Aires during December 10-13, 2017 had ended up in a fiasco as there was not even a customary declaration not to talk of specific mandate/work program to take things forward. Meanwhile, Indian commerce minister, Suresh Prabhu held an informal meeting of the members of the WTO in New Delhi on March 19-20, 2018 [delegates from as many as 52 countries, including the US and China participated] to “find ways to identify common ground for strengthening and re-invigorating the Organization”. Even as these efforts go on to ensure that WTO stays relevant, Donald Trump is leaving no stone un-turned in demolishing the very foundation of this multilateral body. In Buenos Aires,...
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Bank loot – humans fail systems not vice versa
In the wake of over Rs 13,000 crores fraud perpetrated by Nirav Modi and Mehul Choksi on Punjab National Bank [PNB] – second largest public sector bank [PSB] – the Reserve Bank of India [RBI] has barred banks from issuing letters of undertaking [LoUs] and letters of comfort [LoCs] with immediate effect. However, it has allowed banks to continue to issue letters of credit [LCs] and bank guarantees [BGs]. The decision has caused consternation in industry circles who argue that this move will cause a big disruption in trade financing [as LoUs/LoCs currently account for about US$ 20-40 billion worth of outstanding finance] and raise credit costs for importers. In a country ridden with a flood of scams, it is...
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DBT fertilizer – this is not what doctor ordered!
The Cabinet has approved direct benefit transfer [DBT] of fertilizer subsidy. However, the subsidy will continue to be routed through fertilizer manufacturers. They will receive 100% of the subsidy amount after fertilizer is delivered to the farmer and his identity viz. Aadhaar [and other details such as plot size, crop, nutrient use] is captured on the electronic point of sale [e-PoS] machine. At present, manufacturers sell urea at the maximum retail price [MRP] controlled by union government at a low level and get subsidy reimbursement on unit-specific basis under the new pricing scheme [NPS]. On the other hand, manufacturers of non-urea fertilizers viz. DAP/MOP/SSP/complexes theoretically are given ‘uniform’ subsidy [on per nutrient basis] under the nutrient based scheme [NBS]. However,...
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Rejuvenating Indian soils – shun flawed policies
According to a 10 year study “The Indian Nitrogen Assessment” carried out by the Indian Nitrogen Group [ING] for Down To Earth [DTE] – a New Delhi-based environment and health magazine – Nitrogen-based fertilizers like urea, which have been instrumental in increasing crop yields in India, are now turning into potent destroyers by polluting land and water, affecting people’s health and leading to climate change. The study says that “agriculture is the main source of nitrogen pollution in India; further cereals like rice and wheat accounting for maximum cropped area pollute the most”. In the past five decades, every Indian farmer has, on an average, used up over 6,000 kg of urea or 120 kg annually. Only 33 per cent...
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Power projects – flirtation with public money
In the midst of public sector banks [PSBs] losing lakhs of crore due to the so called non-performing assets [NPAs] – a sophisticated nomenclature for sheer loot of public money by dubious businessmen/industrialists acting in collusion with pliable politicians and bureaucrats – one comes across reports of the ‘government nudging bankers to take criminal action against independent power producers [IPPs] that have inflated project costs’. The diktat is a follow-up to the new power minister RK Singh last year hinting at the government’s intent to investigate ‘whether private developers gold-plated project costs’. He had suspicion that IPPs inflated project costs to raise a higher amount of debt to cover their equity component—a practice called ‘gold-plating’. This has far reaching ramifications. Let...
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Stopping fertilizer subsidy misuse – Aadhaar authentication alone won’t help
In the Union Budget for 2018-19, the finance minister, Arun Jaitely has made a provision of Rs 70,080 crore for fertilizer subsidy which is just about Rs 5000 crore higher than the revised estimate [RE] for 2017-18 at Rs 65,000 crore and almost the same as the budget estimate [BE] of Rs 70,000 crore for that year. The international price of crude oil during the ensuing year is projected to be 15-20% higher. Considering that the international prices of urea as also raw materials/feedstock [natural gas, phosphoric acid, ammonia, sulfur] also increase in tandem and India is heavily dependent on their imports, the requirement for subsidy would be higher. Add to this carry forward of over Rs 30,000 crore from...
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Scam tainted PSBs – is privatization the way forward?
In the wake of Punjab National Bank [PNB] mega scam in which it has lost a mammoth Rs 13,000 crore [about US$ 2 billion] and bunch of other public sector banks [PSBs] related scams, commentators have resurrected the idea of privatizing PSBs. The NDA-government under the then, prime minister Vajpayee [1998-2004] had mooted union government relinquishing majority control [it implies lowering of its share holding to less than 50%] in PSBs initially and eventually to 33%. Recently, a committee set up by the Reserve Bank of India [RBI] under P Nayak also recommended reducing its share to below 50% and housing the residual shares in a holding company. But, finance minister, Arun Jaitely even while expressing serious concern over proliferating...
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Guaranteeing 50% profit to farmers – much ado about nothing
In its 2014 poll manifesto, BJP had promised to guarantee farmers a price equal to 1.5 times the cost of production. However, finance minister, Arun Jaitely made the announcement in the budget speech for 2018-19. The minimum support prices [MSPs] determined on the basis of this formula will be applicable to crop production starting ensuing kharif season [April-September, 2018]. Later, replying to the debate in the parliament, Jaitely clarified that the production cost would be taken as ‘A2+FL’. A2 costs basically cover all paid-out expenses, both in cash and in kind, incurred by farmers on seeds, fertilizers, chemicals, hired labor, fuel, irrigation etc whereas FL is the imputed value of unpaid family labor. Under the extant dispensation, the Commission for...
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