SUMMARY The subsidy ONGC gets on crude sales to downstream oil PSUs is not a part of its sales realisation and, hence, Gujarat’s demand for high royalty is illogical While administrative and judicial bodies are expected to aid the process of economic reforms, they sometimes tend to obstruct the smooth conduct of business. A case in point is the decision of Gujarat government to collect a royalty of 20% on the discount given by Oil and Natural Gas corporation (ONGC)—an upstream central oil & gas PSU—on the sale of crude to downstream oil PSUs. The decision has been upheld by the Gujarat High Court, which has ordered ONGC to pay dues worth R5,000–6,000 crore retrospectively from 2008. ONGC is already...
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Category: The Financial Express
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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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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Cause for indigestion
During the debate on the Food Security Bill (FSB) in the Lok Sabha on August 26, 2013, Congress president Sonia Gandhi observed “it is time to send out a big message that India can take the responsibility of ensuring food security of all Indians”. She added, “the question is not whether we have the resources to implement the food Bill; we have to mobilise resources anyhow”. She also acknowledged leakages in the PDS and asked the states to strengthen it. Gandhi’s observation would appeal to almost all Indians with the promise of subsidised access to food in ‘adequate’ quantities (though 5 kg a month per person is hotly contested) to all. Thus, even those with the lowest income imaginable would...
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Running out of gas
In its meeting held on July 17, 2013, the Empowered Group of Ministers (EGoM) considered the ministry of petroleum and natural gas’ (MPNG) proposal to re-prioritise allocation of domestic gas from RIL’s KG-D6 fields ‘to treat power on par with fertilisers’. It was decided to retain extant top priority for the fertiliser sector for now. The fertiliser sector was spared the ignominy of snatching away its claim on gas not because members of the EGoM recognised its legitimacy. It was the fear of reduction in urea production due to curtailment in gas supply and the resultant shortage at the time of impending elections that drove them to maintain the status quo. Gas is a national resource and its use has...
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Food Security Act – A recipe for disaster
The Cabinet has approved promulgation of an ordinance to give effect to the Food Security Act (FSA). Far from providing food security, the Act will crack at its very foundation. The FSA guarantees availability of 5 kg of cereals per person per month at R3 per kg rice, R2 per kg wheat and R1 per kg coarse cereals to 67% of India’s population (75% rural and 50% urban). This is an astounding admission that six-and-a-half decades after Independence, nearly 800 million of country’s population is so poor that it needs be given food at ‘close to zero’ prices. The huge gulf between what people can pay for food and the cost of supply (R20 per kg plus) makes a mockery...
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Debate – Should gas prices be raised as per Rangarajan plan?
While a price hike to about $8/mmBtu from $4.2 at the moment will increase fertiliser production costs and subsidies, even this hike will not be enough to bring in new investments or prop up gas production from existing fields Uttam Gupta Gas is a natural resource which is ‘inherently’ more energy efficient. It is much cleaner and environment friendly and requires less investment, and is much sought after. It is also most preferred for production of fertilisers. About 80% of urea capacity in India is based on gas. The rest on fuel oil and naphtha is being switched over to gas. A spate of projects under new urea investment policy (UIP) are also based on natural gas. The viability of...
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A logical step to honour patents
Once wedded to patent, the government should take all steps to ensure that holder’s rights are fully protected In recent times, MNC pharmaceutical companies have approached Indian courts seeking to prevent regulatory authorities from granting market approval to generic companies for drugs they hold patent. Thus far, the courts have acted in a denial mode. In the 2010 Bayer-Cipla case, a division bench of the Delhi High Court had refused to ask the government to link the patent status of a drug to grant of market approval for generic version. Recently, US drug giant Merck Sharp & Dohme petitioned the court to restrain an Indian firm Glenmark from making and selling anti-diabetes drugs which violated its patents in India. Like...
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Don’t kill the goose that lays golden eggs
Though TRIPS allows patent laws to take care of public interest, this should not be pushed to a point whereby the very incentive to innovate is stifled The Supreme Court verdict in the Glivec case – the cancer treatment drug for which the Swiss major Novartis had sought a patent – has generated an air of exuberance amongst the ‘generic’ producers. It is good news for lakhs of patients who will have access to this drug at a fraction of the treatment cost offered by Novartis (already some generic companies are offering at one-tenth; this will go down further). Millions of patients in other parts of the developing world, especially Africa, also have reasons to rejoice even as Indian companies...
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