The Union government has received a notice from the Supreme Court (SC) on a petition filed by Independent Gas-based Power Producers Association (IGPPA) seeking priority in allocation of gas produced from the Reliance Industries Limited (RIL) operated Krishna – Godavari (KG) basin. The IGPPA has contended that the gas allocated from the KG basin was not allotted to them on priority basis but was given to fertilizer units. The Federation of Farmers Associations (FFA) has also filed a PIL in SC backing the IGPPA demand. Earlier, in its order delivered in January, 2015, the Andhra Pradesh High Court (APHC) had refused to interfere with the government policy decision on the issue, saying the Centre has powers to fix priorities as...
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News & Media
Food subsidies still haunt India at WTO
But they needn’t, if India sticks to the view that the benchmark price for measuring extent of support is too low and outdated India is concerned over the delay in reaching a ‘permanent solution’ to the problem of dealing with food procurement subsidies. The WTO members are thrashing out a work programme for the 10th Ministerial to be held in Nairobi this December. Under Agreement on Agriculture (AoA), developing countries can give agricultural subsidies or aggregate measurement support (AMS) up to 10 per cent of the value of agricultural production. AMS has two components viz., (i) ‘product-specific’ or the excess of price paid to farmers over international price or ERP (external reference price) multiplied by quantum of produce; (ii) ‘non-product...
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Go for course correction in urea pricing
The real reason for diversion of urea to industrial use, smuggling, black marketing and its excessive use is its ridiculously low selling price. On May 13, the government approved the Comprehensive New Urea Policy, which seeks to promote energy-efficiency, maximise indigenous urea production, and reduce subsidy burden on the budget. At present, under the New Pricing Scheme (NPS), in use since 2003, each of the 30 urea manufacturing units gets a retention price (or ex-factory price) based on the production cost specific to it. Since all of them are required to sell urea at ‘uniform’ controlled price which is lower, the difference is reimbursed as subsidy. NPS was designed as a group-based uniform pricing scheme, whereby each unit in a...
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HIGH COST OF POPULIST UREA POLICY
By keeping urea fertiliser prices artificially low, while non-urea fertilisers have been de-controlled, the Modi regime is encouraging an unhealthy dependence on this product, ignoring its smuggling and pilferage, and allowing the subsidy bill to increase The Union Government’s decision to freeze the maximum retail price of urea for four years is bewildering. The decision was taken on May 13 at a Union Cabinet meeting chaired by Prime Minister Narendra Modi. During the past one-and-a-half decade or so, the MRP of urea, which has been under statutory control for close to six decades now, was not touched at all — except once in 2010, when it was increased by a meagre 10 per cent. This was despite the fact that...
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OIL ECONOMICS AND POLITICS
The BJP must now stop the practice of asking oil companies to give discounts to downstream PSUs Presenting his first maiden Budget in July 2014, Union Minister for Finance Arun Jaitley had accepted the daunting challenge to retain the fiscal deficit target for 2014-15 at 4.1 per cent. On February 28, while presenting the Budget for 2015-16, he reported that the target had been achieved. However, this achievement was at the cost of massive reduction in plan expenditure from the Budget estimate of Rs5,75,000 crore to about Rs4,68,000 crore as per revised estimate, a fall of Rs1,07,000 crore. For this, one cannot blame the present Government as ,when it came to power, it had inherited a weak economy which resulted in...
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DISBAND THE CULT OF FREELOADERS
To fix the crumbling power generation and distribution systems, the Modi regime has to crack down on the political class that promises free or cheap electricity. All other steps, such as amending the Electricity Act, are just cosmetic Inaugurating the first Renewable Energy Global Investors Meet & Expo (RE-Invest), Prime Minister Narendra Modi wondered how political parties could promise to supply electricity at reduced rates when their States are dependent on electricity supply from outside. The remark was targeted at the Aam Aadmi Party which, in its election manifesto, had promised to cut electricity bills by half, even as Delhi gets nearly 70 per cent of its power from other States. In 2015-2016, Delhi’s total power requirement is expected to...
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FUNCTIONAL SYSTEMS DON’T NEED FIXING
Capping the price of domestic gas will be a retrograde step. It will undermine the 2014 formula-based pricing system and also give bureaucrats unnecessary powers The Union Government is contemplating putting a cap on the price of domestic gas. The Ministry of Petroleum and Natural Gas has prepared a draft note for consideration by the Cabinet Committee on Economic Affairs. Based on the recommendations of the Committee of Secretaries, the National Democratic Alliance regime in October 2014 approved of the new pricing guidelines for domestic gas. According to the guidelines, the price of gas will be determined based on the ‘modified’ Rangarajan formula that came into effect from November 1, 2014. The R-formula, used the average prices of global benchmarks...
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Switch to accrual-based accounting for subsidies
In his maiden Budget, finance minister Arun Jaitley had announced the setting up of an Expenditure Management Commission (EMC) to recommend a roadmap for rationalising and phasing out the major subsidies. As a follow-up, on September 4, the government constituted the EMC with former RBI Governor Bimal Jalan as the chairman. The EMC’s mandate puts under the scanner the government’s spending on all its programmes and schemes, all its procurement (from defence to office items) besides the methodology for counting receipts and expenditure. It is expected to recommend measures for utilisation of allocated funds in the most cost-effective manner. Jaitley has said that the recommendations the EMC made in its interim report will form the basis for subsidy reforms—with emphasis...
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DE-CONTROLLING UREA PRODUCTION
Removing the archaic ceiling on urea prices, which is a political sop to secure votebanks, will energise domestic production. This, in turn, will ensure consistent supply and also lessen the public’s subsidy burden India was able to import only about 9,00,000 tonnes of urea between April and November, 2014, which was 16 per cent less than what was imported during the same period in 2013. This put tremendous pressure on local markets. The problem was aggravated by a drop in supply from the Oman India Fertiliser Company SAOG. At home, three naphtha-fed urea production plants viz, Madras Fertilisers Limited, Mangalore Chemicals and Fertilisers, and Southern Petrochemicals Industries Corporation, also had to stop production after the Government decided to suspend subsidy payments....
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Fertiliser self-sufficiency is a pipe dream
For nearly four decades successive governments have vowed to achieve self-sufficiency in the production of fertilisers, yet this goal has eluded them so far, barring for a brief while in the early 1990s. Will things be different under Modi? Immediately after the current government took charge, fertiliser minister Ananth Kumar reiterated the need to reinvigorate the sick plants of the Fertiliser Corporation of India (FCIL) and Brahmaputra Valley Fertiliser Corporation of India (BVFCL)—earlier known as HFCL—both central PSUs. Both have been incurring losses for decades. Indeed, some plants—Ramagundum and Talcher (FCIL) and Haldia (BVFCL)—were babies born sick. These PSUs have been on the ventilator for ages with the Centre pumping in thousands of crores of rupees to keep them alive....
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