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Economic Policy News And Views June 2009
 

Economic Policy News And Views June 2009

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AGRICULTURE ...

AGRICULTURE
Centre to allow private traders to export wheat
The committee of secretaries (CoS) has decided to open up wheat exports to private traders and a notification is expected soon.
The agricultural procurement policy of the government has outlived its use by date label and in our view opening trade in agricultural commodities is a welcome step. Till now denying farmers access to markets was a key element of India’s food and agricultural policy and this was attained through instruments like procurement levies at below market prices or zoning regulations that prevented free movement of grain, monopoly exports through commodity boards or through prohibition of exports, the policy object was to acquire commodities cheaply. Draconian laws like The Essential Commodities Act were invoked, limiting the stocks that could be held by private traders and giving the government indiscriminate powers to inspect and raid their premises. However, expanding markets for agriculturists is important to get them out of the vicious circle of debt and penury. This has to be a commitment to the farmers and not just ad-hoc responses to the prevailing market conditions.
GOVERNANCE
Increased penalty for firms unwilling to dispense data
The statistics ministry has started the process to operationalise the newly passed Collection of Statistics Act, 2008, by framing draft rules and guidelines that will enable better data collection and dissemination.
Our view is that the Central Statistical Authority of the country that is governed by a statute should be vested with enough powers in order to collect various statistics in a systematic manner. In order to do this the statute should be strict and penalties should be an enough deterrent for non compliance. In addition to the firms not dispensing data, another problem is the multiplicity of government authorities that house data. It is important that the line ministries recognize the importance of a single centralized statistical office and extend their cooperation. More often than not these ministries do not support the efforts of the authority for data collection.

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    Economic Policy News And Views June 2009 Economic Policy News And Views June 2009 Document Transcript

    • Indicus Analytics, An Economics Research Firm http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/ Policy News & Views Volume 1, Issue 7, June 2009 AGRICULTURE Centre to allow private traders to export wheat The committee of secretaries (CoS) has decided to open up wheat exports to private traders and a notification is expected soon. The agricultural procurement policy of the government has outlived its use by date label and in our view opening trade in agricultural commodities is a welcome step. Till now denying farmers access to markets was a key element of India’s food and agricultural policy and this was attained through instruments like procurement levies at below market prices or zoning regulations that prevented free movement of grain, monopoly exports through commodity boards or through prohibition of exports, the policy object was to acquire http://www.indicus.net/Newsletter/Policy_News_Views.aspx
    • Indicus Analytics, An Economics Research Firm http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/ commodities cheaply. Draconian laws like The Essential Commodities Act were invoked, limiting the stocks that could be held by private traders and giving the government indiscriminate powers to inspect and raid their premises. However, expanding markets for agriculturists is important to get them out of the vicious circle of debt and penury. This has to be a commitment to the farmers and not just ad-hoc responses to the prevailing market conditions. GOVERNANCE Increased penalty for firms unwilling to dispense data The statistics ministry has started the process to operationalise the newly passed Collection of Statistics Act, 2008, by framing draft rules and guidelines that will enable better data collection and dissemination. Our view is that the Central Statistical Authority of the country that is governed by a statute should be vested with enough powers in order to collect various statistics in a systematic manner. In order to do this the statute should be strict and penalties should be an enough deterrent for non compliance. In addition to the firms not dispensing data, another problem is the multiplicity of government authorities that house data. It is important that the line ministries recognize the importance of a single centralized statistical office and extend their cooperation. More often than not these ministries do not support the efforts of the authority for data collection. OIL & GAS http://www.indicus.net/Newsletter/Policy_News_Views.aspx
    • Indicus Analytics, An Economics Research Firm http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/ Cheap oil policy shrinks tax kitty The government has systematically choked its cash cow, the petroleum industry, with its cheap-oil policy. Not only has tax collection from this sector dwindled, but dividend payouts by government-owned oil companies too have been severely cut. In 2007-08, India’s five largest companies in terms of sales were oil companies. Four out of five were owned by the government. However, government introduced distortions in the pricing and taxing of oil has decreased the profitability of these companies and hence they are no longer a source of revenue. Our view is that the domination of the electricity and the fertilizer industries by the central and state governments, the losses they make and the consequent pressure to keep input prices low make the two industries unattractive as customers. This is not so material to public enterprises whose losses are borne by the government, but their ability to bear losses gives them an advantage against power plants, and discourages private investment in hydrocarbons. Unless electricity and fertilizer markets are decontrolled, this handicap of private hydrocarbon firms cannot be removed. TELECOM Panel backs M&A in telecom A committee set up to resolve the controversy over allocation of airwaves or spectrum to telecom operators asked the government to modify its policies to allow consolidation in the industry. One of the major impediments for the consolidation of the telecom industry is how to deal with http://www.indicus.net/Newsletter/Policy_News_Views.aspx
    • Indicus Analytics, An Economics Research Firm http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/ spectrum and value it. Infrastructure sharing though allowed does not allow the sharing of spectrum. Moreover, for the pricing of spectrum it is not sufficient to have auctions to determine the market price of spectrum at a given time and amongst a group of players willing to bid. This does not incentivise consolidation. In the absence of an option to buy and sell spectrum in the secondary market, there are few advantages of transparent auctions since the ‘now or never’ situation reflected in such an auction would raise incentives to overbid. The knowledge that a company can buy spectrum in the market if it’s going price i.e. bidding in auction – were to be too high can itself keep bids in check. In addition, the option to sell spectrum in case a company cannot justify its cost in an auction, can help reduce – though not eliminate entirely- the impact of the ‘winner’s curse’. MORE NEWS Plan Panel identifies four PPP models for higher education Setting agenda for the new UPA government, the planning commission has zeroed in on four business models to promote higher education through Public- Private Partnership (PPP) mode. Government power firms to reduce supply to defaulting state utilities Power generating companies owned by the central government have now been given the green light to reduce power supply to a state utility in case it defaults in opening of or maintaining the letter of credit (LC) for paying its dues. http://www.indicus.net/Newsletter/Policy_News_Views.aspx
    • Indicus Analytics, An Economics Research Firm http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/ Government seeks common regulator for markets The government has reopened the case for convergence between the capital market and commodity futures regulator, a move that has attracted opposition from the Forward Markets Commission (FMC), which regulates the commodities futures business. Government panel blasts SEZ policy The Special Economic Zones (SEZs) have come in for a sharp criticism from a high-level government panel which said that creation of SEZs not only meant “betting on the strong” but also providing a “special level-playing field” for the mighty companies. SC strikes down two CERC regulations The Supreme Court has declared unconstitutional two rules under which the Central Electricity Regulatory Commission (CERC) could disqualify companies that trade in power across states. Panel for market determined pricing of spectrum The government-appointed committee for allocating and pricing spectrum has recommended doing away with the bundled start-up frequency with the new licence and suggested that radio waves should be given at a market determined price. Ban on wheat futures lifted This could go down as one of the most politically- sensitive decisions before the formation of the new government. A little more than two years after it was imposed, the government has lifted the ban on wheat futures. http://www.indicus.net/Newsletter/Policy_News_Views.aspx
    • Indicus Analytics, An Economics Research Firm http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/ SBI to push for mergers of associate banks After merging State Bank of Saurashtra, India's largest lender State Bank of India might soon start the process of integrating its remaining associates, beginning with two large ones -- State Bank of Patiala and State Bank of Hyderabad. Fuel prices likely to be decontrolled soon Politically tough decisions such as free-market pricing of fuels such as petrol and diesel may happen sooner than expected now, with the election of India’s most stable government in decades speeding long-delayed reforms in the country’s petroleum sector, government officials say. CCI can now take up cases against anti-competitive agreements The government has empowered the Competition Commission to take up cases against companies indulging in anti-competitive practices and abusing their dominance in the market. Power ministry switches on divestment plan The prospect of a revival of the disinvestment agenda has prompted bureaucrats in the power ministry to revive plans for utilities to raise money from the markets, so that the government gains the opportunity to sell its shares. Flagships to get regulator in 100 days The new government will set up an independent regulator to monitor the progress of key flagship programmes and submit quarterly reports, as it tries to ensure that the funds earmarked for social sector schemes reach the intended targets in a timely and efficient manner. http://www.indicus.net/Newsletter/Policy_News_Views.aspx