The malady afflicting the power sector in Delhi is suggestive of a deeper mess in the country and calls for prompt action During his first shot as the Chief Minister of Delhi, Mr Arvind Kejriwal promised that he would slash power tariff by 50 per cent. He did so, primarily on his conviction that the power distribution companies indulged in financial irregularities, leading to inflated cost of procurement and distribution, which were approved by a pliable Delhi Electricity Regulatory Commission. A clear indication of how the DERC played to its masters tune (under the Sheila Dikshit Government) can be gauged from the fact that former DERC chairman approved 23 per cent reduction in tariff in 2010. After he was removed,...
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News & Media
Uniform fertilizer subsidy policy must for DBT
The subsidy regime, covering both subsidy rates and payment terms, for P&K fertilisers should be brought in sync with urea The discriminatory policy treatment impairs the ability of industry to supply P&K fertilisers to farmers at affordable prices, which will aggravate imbalance in fertiliser use. This makes a mockery of Prime Minister Narendra Modi’s vision behind giving farmers a Soil Health Card so that they apply fertilisers as per soil needs. On May 13, the government released press notes on the approval of the comprehensive New Urea Policy 2015 and the nutrient-based subsidy rates for phosphate and potash fertilisers for FY16. A key announcement was: “Movement plan for P&K fertilisers has also been freed to reduce monopoly of a few...
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Gas policy: Don’t drag courts into executive domain
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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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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