Given the extant tariff policy and Power Purchase Agreements, the Centre’s plans to reform PPAs to provide power at competitive prices and make discoms viable fall far short The Union Government has set up a committee to reform Power Purchase Agreements (PPAs) to ensure power availability at competitive prices and make distribution companies (discoms) viable. A PPA is a contract between a generation company (genco) and discom which lays down the terms of electricity purchase by the latter from the former, including the tariff, which is subject to approval by the State Electricity Regulatory Commission (SERC). The Cabinet is also considering a new tariff policy which will inter alia require discoms to pay a surcharge to the genco for delayed payment, which...
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News & Media
Much ado about surplus
The tussle over surfeit transfer has clipped the Centre’s wings as in future, being bound to the Economic Capital Framework, RBI will continue to keep a tight leash on funds On the face of it, the Reserve Bank of India’s (RBI) decision to transfer a whopping surplus of Rs 176,000 crore to the Government of India (GOI) for its accounting year July 2018-June 2019 gives the impression that the latter has got a bonanza. While, some argue that the Centre has “stolen” a humungous amount from India’s apex bank, which manages the currency and payment systems as also the borrowings of the Centre and States, others aver that this is easy money which the Centre will use for bridging its fiscal deficit....
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Promote self-sufficiency
The big bang reforms proposed by the Government for the oil and gas sector are laudable but without a stable and predictable policy environment in place, they can’t make much headway The Union Government is considering far-reaching reforms in the gas sector. These include the setting up of a local gas trading platform to facilitate price discovery, stripping the power sector off its priority status by withdrawing priority allocation of natural gas and hiving off the transportation unit of the Gas Authority of India Limited (GAIL), a public sector undertaking (PSU) which currently holds an overwhelming 75 per cent share of the gas transmission network. The stated objective of these reforms is to enable energy firms to invest in exploration and...
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Why DBT of fertiliser subsidy won’t happen anytime soon
A panel under Niti Aayog member Ramesh Chand has recommended direct benefit transfer [DBT] of fertilizer subsidy with the stated objective to “dis-incentivize farmers from excessive use, ensure delivery to the end-user and reduce outgo on subsidy.” The intent is to launch the scheme in three-four months DBT for fertilizer has been on the radar of policymakers for three decades. In July 1991, vowing to eliminate fertilizer subsidy in three years — under pressure from the International Monetary Fund and World Bank — the government had increased prices of all fertilizers by 40%. However, fearing political backlash, the hike was restricted to 30%, with a proviso that small and marginal farmers will be exempt from it. The Centre gave money...
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Bring transparency to the table
Extra-budgetary resources translate to about 2.3 per cent of the GDP. Had they been included, the FD for 2018-19 would have been 5.7 instead of 3.4 per cent All through its tenure beginning 2014, the Modi Government demonstrated a high degree of sensitivity to millions of poor and downtrodden and spent prodigious sums on providing basic amenities such as affordable housing, electricity, sanitation, toilets, fuel and liquefied petroleum gas (LPG), health care, education etc to improve their lot. In the last five years, it built 1.5 crore affordable housing units and nine crore toilets, gave 2.6 crore and seven crore electricity and gas connections respectively and assured free medical treatment up to Rs 500,000 that covered 10 crore families (or 50 crore...
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Latest solar scheme is a non-starter
The Government’s launch of the KUSUM programme to promote solar power bodes well for farmers, DISCOMs and the environment. But there are impending challenges, including a huge financial liability on farmers themselves. Moreover, will they really be willing to join the scheme? In a recent interview, Minister of State for Power and Renewable Energy RK Singh informed about a scheme viz the Kisan Urja Suraksha evam Utthaan Mahabhiyan (KUSUM), which the Government proposes to implement over a period of three years. Intended to promote the use of solar energy in rural areas, KUSUM allows a farmer to use his barren land — currently lying fallow — to set up a solar plant on it for 1 MW or so (in...
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How sugar turns bitter for the consumer…
The Cabinet Committee on Economic Affairs (CCEA) has approved a proposal of the food ministry for creation of four million tons of sugar buffer stock between August 1, 2019 and July 31, 2020. The government will spend Rs 1,674 crore towards the cost of carrying the stock. The amount will be directly credited into farmers’ accounts on behalf of sugar mills against their cane price dues. It has also decided to keep the Fair and Remunerative Price (FRP) of sugarcane unchanged at Rs 275 per quintal. FRP is the minimum price which mills have to pay farmers to buy sugarcane – the raw material for making sugar. The price is applicable to sugarcane purchases made during the sugar marketing year...
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A tightrope walk
Instead of mobilising funds through overseas sovereign bonds, the Government must focus on making its balance sheet more robust and improve the quality of fiscal discipline In the Union Budget presented on July 5, Finance Minister Nirmala Sitharaman proposed an “overseas sovereign borrowing plan” to partly fund an ambitious investment programme that will involve a mammoth spending of Rs 100,00,000 crore ($ 1.4 trillion) for the building of infrastructure to make India a $ 5 trillion economy by 2024-25. During the current year, the Government intends to raise $ 10 billion from this source. The contours of the plan are expected to be finalised by October. In sync with the character of the many infrastructure projects such as roads, highways/expressways, railways, ports,...
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Change the narrative
Asking the super-rich to pay a little extra is a modest step in reducing inequalities. Instead, the Government must work towards bringing such citizens under a tax net In the Union Budget 2019-20 presented by Finance Minister Nirmala Sitharaman on July 5, the Government levied a new surcharge on individuals, Association of Persons (AOP) and trusts with an annual income between Rs 2 crore and Rs 5 crore from the existing 15 per cent to 25 per cent and on individuals/AOS/trusts with income an income more that Rs 5 crore from the existing 15 per cent to 37 per cent. Post the hike, the effective incidence of tax will be 39 per cent on earners between Rs 2 crore and Rs 5...
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Disinvestment: half-truths and clever babudom so far
Union Finance Minister Nirmala Sitharaman has set an ambitious target of Rs 1.05 lakh crore as proceeds of disinvestment of government shares in public sector undertakings (PSUs). She has also proposed aggressive pursuit of ‘strategic’ disinvestment by reducing government’s shareholding in PSUs to below 51% on a case-by-case basis. The route to garnering one-third of this target, or Rs 35,000 crore, has been set. This includes proceeds from divestment of Air India, which could not go through last year, courtesy the government’s decision then to retain 24% shareholding with itself (besides other riders such as a three-year lock-in period on disposition of shares by the acquirer) which discouraged prospective bidders. Strategic disinvestment involves transfer of a sizeable portion of ownership and...
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