One of the major accomplishments of Modi – government during its two years stint has been in alleviating the constraints facing power generation companies/entities. It has done so by increasing production of coal by Coal India Limited [CIL] and filling all voids in the evacuation, transportation and distribution infrastructure to reach supplies to generating stations. It has also helped gas based power plants by arranging supplies of gas at lower rates enabled by pooling of imported LNG [liquefied natural gas] with cheaper domestic gas. The cost of LNG itself has been brought down drastically by re-working an existing long-term 25 year contract with RasGas [Qatar] to align the formula with its low current international price [courtesy, low crude price]. It...
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‘Make in India’ skips fertilizers
Even as Modi – government has unleashed a wave of reforms to accelerate the pace of foreign direct investment [FDI] and give a boost to prime minister’s flagship “Make in India”, fertilizers happens to be one sector that has been completely bypassed. While, indigenous production in all segments of this crucial industry continues to languish, the most neglected is DAP [di-ammonium phosphate; it contains 18% nitrogen [N] and 46% phosphate [P]] where traders have hey-day at the expense of domestic industry. Of the total DAP consumption in India, nearly 60% is met from imports. India is the single biggest buyer of DAP in global market with a share of more than 50 per cent of globally-traded DAP. Even for domestically-manufactured...
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Permanent solution to public stock holding – India must not give up
In a severe indictment of India’s stand at World Trade Organization [WTO], the Economic Survey [2015-16] presented to parliament in February, 2016 unequivocally questioned India’s long-time stance of insisting on special safeguards mechanism [SSM] and permanent solution to its public stock holding issue. Dr Arvind Subramanian, author of the Survey and chief economic advisor [CEA] argued that the country’s strategy should instead evolve around the need to shift away from tariff armours for producers to domestic support, and that too at an appropriate level and form. He pointed out that the policies being defended are those that “India intends to move out of in any case” due to well documented impacts, including a decline in water tables and over-use of...
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GM technology under siege
On May 18, 2016, the agriculture ministry issued an order that makes it mandatory for the GM [genetically modified] technology provider to license the technology to any seed company that approaches it. If the former does not give the license in 30 days, it is ‘deemed to have been given’ and the latter can use. At the same time, the order also makes it mandatory for the seed company to pay the trait license fee or royalty to the technology provider. Further, it caps the maximum royalty at 10% of the maximum retail price [MRP] for the first 5 years to be reduced by 10% from 6th year. It prescribes a 10-year life for every GM trait which implies that...
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Stressed assets scheme – soft on borrowers, harsh on lenders
If, there is any sector that is under maximum stress today it is banking. And, the sole reason for this is monumental loans given in the past that turned in to non-performing assets [NPAs]. For public sector banks [PSBs], these are Rs 476,000 crores on March, 2016 [up from Rs 267,000 crores on March, 2015]. In the past, their managements suffered from inertia of two types; first, they won’t recognize the existence of the problem and second, despite recognition they would do nothing to solve it. Raghuram Rajan – the tough governor, Reserve Bank of India [RBI] forced them to clean up their balance sheets. As a result, some 20 banks who would have otherwise made a profit of Rs...
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Local sourcing – license raj through back-door
In the context of the raging debate over relaxing local sourcing norms for 100% foreign direct investment [FDI] in single-brand retail, finance minister, Arun Jaitely [he is the controlling authority for Foreign Investment Promotion Board (FIPB) which approves proposals for FDI] observed that India cannot be turned in to a ground for proliferation of trading activities. The strident observation came in response to intense lobbying by commerce minister, Nirmala Sitharaman for dropping of 30% local sourcing requirement for setting up of retail shop by Apple for selling its hand-sets [i-phones, i-pads etc] directly to customers. She was relying on recent amendment in policy guidelines which provided for such exemption in case of high-tech items. The exemption was justified on the...
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Rajan halts rate cut journey, midstream
In the bi-monthly monetary policy review announced on June 7, 2016, RBI governor, Raghuram Rajan has left the repo rate [interest rate at which the apex bank lends money to commercial banks] and cash reserve ratio [CRR] [funds that banks have to keep with RBI as a percentage of their deposits] unchanged at 6.5% and 4% respectively. In sync with repo rate, the reverse repo [rate at which banks lend money to RBI] remains un-altered at 6.0%. During his press briefing, however, Rajan maintained that his so called accomodative stance [implies being receptive to borrower’s sensitivities by way of lowering lending rate and making adequate funds available] continues. That should have called for reduction in the policy rate or pumping...
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Fiscal deficit ‘range’ – stepping in dangerous terrain
One of the most laudable achievements of Modi – government is its sticking to the fiscal consolidation road-map. Thus, even as it stuck to fiscal deficit [FD] target of 3.9% of GDP during 2015-16, for current year also, it has set an ambitious target of 3.5%. For 2017-18, it aims at lowering it further to 3.0%. In this backdrop, it was rather intriguing for finance minister, Arun Jaitely announcing [budget speech for 2016-17], the government’s intent to review Fiscal Responsibility and Budget Management [FRBM] Act with a view to make the target flexible. He was alluding to make it range bound instead of a fixed number as has been the position hitherto under the extant Act in vogue since 2003....
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ONGC-GSPC tying knot – good for India’s energy security
There are reports of Oil and Natural Gas Corporation [ONGC] – a central public sector undertaking in the upstream oil & gas sector – picking up a majority stake in gas assets of Gujarat State Petroleum Corporation [GSPC] – an undertaking of Gujarat government – in Krishna-Godavari [KG] basin near coast of Andhra Pradesh. GSPC was awarded the high profile KG-OSN-2001/3 field in the second round of the new exploration and licensing policy [NELP]. Critics are branding this as an attempt by Modi – government at the centre [it was Narendra Modi who as then, chief minister, Gujarat in 2005 had announced discovery in this area with in-place reserves of over 20 trillion cubic ft] to bail out GSPC which...
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Empowering poor via stemming loot
On completion of 2 years in office, Modi – government is presently taking stock of what it has done and its achievements. Even while directing all his cabinet ministers to disseminate their work to the public at large, prime minister himself has taken the lead and is addressing a number of public rallies to highlight key thrust areas. Undoubtedly, this government has many achievements to its credit and as rightly observed during his address at India Gate on May 28, 2016, highlighting all its major programs/schemes and initiatives will consume a full week of broadcast from Doordarshan [the official channel of the Government of India]. While, every bit of Team Modi’s dedicated and relentless work is worth capturing for its...
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