In the just released Special 301 report on trade and industry practices,the US Trade Representative (USTR) has stopped short of downgrading India to ‘Priority Foreign Country’ (PFC) list. Under Special 301, USTR tracks intellectual property (IP) rights record of countries and lists countries that could face trade sanctions and other countries whose IPR regimes are deemed to be areas of lesser concern. If on review, it identifies substantial deterioration in its IP regime, the country gets downgraded to PFC status. India may have escaped it for now, but ‘damocles sword’ hangs as USTR intends to conduct what it calls ‘out-of-cycle’ reviews to promote engagements on IPR challenges with India. Describing as unilateral probe under US law which India has not...
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KG-D6 gas fiasco – defending the ‘indefensible’
In any natural resource-based industry where exploration, development and commercialization of a resource involves substantial investment, the investor has to be extremely careful and circumspect. Before initiating the project and spending money, through a rigorous and scientific process involving inter alia surveys and complex exploration techniques, the company must make a credible assessment of the quantum of resources in place and projection of viability taking in to account the production and likely price. For a resource like gas which belongs to the nation and where necessary investment running in to billions of dollars are allowed to be fully recuperated ‘up front’ by the operator under production sharing contract (PSC), the bar in terms of ‘credibility’ and ‘authenticity’ of reserves in...
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Who is polarizing the voters in India?
Ever since his anointment as BJP’s prime ministerial candidate over 6 months ago, all along Narendra Modi has kept development and good governance at the center stage of election campaign. He has not deviated even an inch from this agenda despite an orchestrated game plan by his opponents (Congress and its allies) to brand him as communal and a polarizing figure. In hundreds of speeches delivered across length and breadth of India, Modi has been extremely circumspect in choice of his words to leave no scope for subjective interpretations and has come un-scathed so far. That is a huge accomplishment in back drop of a hostile environment and provocative statements hurled from all sides. Modi has carved out a space...
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RIL/BP/Niko exploit ‘fault line’ in Rangarajan formula – for a bonanza
On January 10, 2014, Government had notified new guidelines for pricing of domestic gas applicable from April 1, 2014 that would lead to doubling from current US$ 4.2 per mBtu. Even as EC has deferred its implementation for now, meanwhile, fertilizer industry has got another shocker. In the gas sales purchase agreement (GSPA) for supplies from D-6 block of Krishna-Godavari (KG-D6) basin, Reliance Industries (RIL) has proposed that government fixed rate will be charged on gross calorific value (GCV) basis instead of current practice of charging on net calorific value (NCV). It also moots marketing margin of US$ 0.135 per mBtu on GCV basis. For arriving at price applicable to all domestic gas, Rangarajan formula takes average of hub prices...
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Why BJP must cross the ‘272’ milestone?
Poll surveys conducted by various agencies/new channels are unanimous in giving a clear lead to BJP in ensuing Lok Sabha elections during April/May, 2014. The chances are bolstered by a perception that there is a ‘Modi wave’ all over India. ‘Modi wave’ is a euphemism for majority of people expressing a strong feeling that a government led by Modi can fulfil their aspirations in regard to increasing employment, reducing inflation, combating corruption and ensuring rapid development. An emboldened BJP is pulling all stops to sustain the momentum till voting is completed in every parliamentary constituency by May 12, 2014. It’s objective is to cross 272 mark on its own to ensure that new government is not hamstrung by compulsions of...
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Sahara scam – a crystal clear case of ‘money laundering’
It is almost 20 months since Supreme Court (SC) ordered Dr Subroto Roy, chairman, Sahara Group in August, 2012 to return a gargantuan sum of Rs 20,000 crores that two of its group companies in real estate sector had taken from millions of investors. Dr Roy had contested the amount stating that its outstanding liability to investors was only about Rs 5000 crores and this was deposited with SEBI towards end of 2012. SEBI – with full backing of SC – has been doing a wild goose chase to ensure recovery of full amount with interest and penalties. But, that has not yielded results leading to recent arrest of Dr Roy. SC had directed him to come up with a...
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Urea investment policy – a flop show, yet again
The Cabinet has recently approved an ‘amended’ new urea investment policy (UIP) which was notified in January 2013. The amendment drops the provision of guaranteed buy-back of urea from projects covered by it. Key features of the policy are in order. It assures investors in green-field and revival projects of sick public sector units of FCI & HFC a price linked to import parity price (IPP) with a floor (F) US$ 305 per ton and ceiling (C) US$ 335 per ton. This corresponds to gas price of up to US$ 6.5 per mbtu. For increase in gas price beyond this level, it provides for suitable adjustment in ‘F’ and ‘C’. Thus, for each $ increase up to US$14 per mbtu,...
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Gas pricing – plunder camouflaged as incentive
The anti-corruption branch (ACB) of Delhi Government – On Kejriwal’s behest – has filed FIR against Veerappa Moily et al for criminal conspiracy to double gas price to US$ 8.4 per mBtu (million British thermal unit) from April, 2014. He opines this will give a windfall of Rs 54,000 crores annually to RIL which produces gas ‘allegedly’ at cost of US$ 1 per mBtu. However, Moily justifies saying ‘system of pricing is based on expert advice’. So, what system has government adopted? RIL discovered gas in D 1&3 fields in KG basin in 2002. It was awarded these fields under NELP-I in 1999. Under production sharing contract (PSC), price was to be market determined keeping in mind ‘arms-length’ principle and...
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Interim Budget 2014-15 – Fiscal consolidation or mathematical jugglery
In the interim budget presented to Parliament on February 17, 2014 Mr Chidambaram has achieved fiscal deficit at 4.6% of GDP during 2013-14 against target of 4.8%. He has set a target of 4.1% for 2014-15 which is even lower than 4.2% as per road map laid last year. When viewed in backdrop of shortfall of around Rs 77,000 crores in in tax collections and Rs 30,000 crores in proceeds of disinvestment crores totalling Rs 107,000 crores, this makes one suspect about the quality of much touted fiscal consolidation. During the last decade of UPA dispensation, he has mastered the art of mathematical jugglery to camouflage the true inflows and outflows with eloquence. In recent years, Mr Chidambaram has used...
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Consumers fleeced yet, power companies lose – can CAG unravel mystery?
Aam Aadmi Party (AAP) commitment to reduce electricity rates by 50% generated some hope for consumers in Delhi who had suffered steep increase in power tariff by nearly 70% since privatization of distribution in 2002. AAP has been in power for almost 6 weeks and yet hapless consumers have no relief in sight. Government is yet to give effect to a cut of 50% for consumption up to 400 units a month announced on assuming office. Meanwhile, Delhi Electricity Regulatory Commission (DERC) has hiked in power purchase cost adjustment charge (PPAC) by 6-8%. Even worse, an imminent cut in supply haunts them due to a threat given by NTPC (it supplies around 50% of Delhi’s power need) as power distribution companies...
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