Economic Policy News And Views October 2009
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Economic Policy News And Views October 2009

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TELECOM

PMO moots cell banking for masses


PMO asked the department of telecommunications to find ways to expand mobile banking services to the remotest corners of the country.

This in our view is a welcome announcement by the PMO and is a step to ensure financial inclusion. Given that limited access of the poor to established financial channels exposes them to financial risks and less secure transactions, several developing countries have introduced simple, low-cost mobile systems for transferring funds. The G-CASH system, launched in the Phillipines in 2004, is a pioneer in enabling mobile phone users to send remittances, make donations, settle loans, and pay bills with a simple text message. M-PESA, introduced in Kenya in March 2007, also uses SMS to support financial transactions, including depositing and withdrawing money, transferring money to another party, or buying prepaid airtime. India needs to put in place a regulatory system that encourages m-banking for the unbanked. The regulatory system has to ensure security of such transactions and also the Central Bank does require that the amount of m-money in circulation should always be backed up with an equal amount by its issuer. Banks should see it as an exciting chance to exploit telecom firms’ vast retail networks and powerful brands to reach new customers. Tie-ups between banks and operators will help reassure regulators. The regulatory ecosystem has to evolve to allow such exciting innovations and should not act as a constraint

Government to hold 3G spectrum auction on December 7

The government will hold the much-awaited 3G spectrum auction for GSM operators on December 7.
In our view delaying spectrum allocation has meant that services to consumers are held up by the government resulting in a potential loss of consumer surplus. Moreover, too high a reserve price might drive away potential international bidders. There have been complaints that the licensing process already favors established domestic players. Under these circumstances one must take into account the actual likelihood of collusion as well as the nature of the players that may or not be affected by how the reserve price is set. The fact that capital is very scarce at the moment may also be worth considering in setting auction terms (i.e. look at the ability to pay of different parties). So what matters is how the auction designed. Poor designPoor outcomes. The auction has become a mere budgetary exercise!



GOVERNANCE
States resent BPL numbers ‘thrust’ on them by Centre
The States have called upon the Centre to allow States to have their own lists pertaining to the BPL category and also desist from targeting the public distribution system (PDS).
Our view is that in the spirit of decentralization of the PDS, the beneficiaries of the PDS should be identified by the states. In fact the Food Security Act is in an imbroglio as the issue of contention is who should be the beneficiaries. The problem arises as there are disparate numbers when it comes to the number of BPL households. Moreover, a centralized targeted scheme has been prone to corruption and leakages. Under these circumstances universalizing food security as has been achieved by the states of Tamil Nadu and Kerala has to be seriously considered. This may be a feasible option if the PDS system is revamped to address the problems of leakages, such that costs of a universal system are minimized. Food stamps may be one such solution.

COMPETITION POLICY AND REGULATION

CCI cries foul over shipping firms’ lobby for anti-trust immunity
The ship liners association has approached the corporate affairs ministry seeking exemption from competition law, a move that is being severely opposed by the
Competition Commission of India (CCI).
Shipping carriers are often members of several consortia. Mostly the carriers also offer services, both individually and within a consortium. However, these practices may have impact on the competitive o

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Economic Policy News And Views October 2009 Economic Policy News And Views October 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 11, October 2009 TELECOM PMO moots cell banking for masses PMO asked the department of telecommunications to find ways to expand mobile banking services to the remotest corners of the country. This in our view is a welcome announcement by the PMO and is a step to ensure financial inclusion. Given that limited access of the poor to established financial channels exposes them to financial risks and less secure transactions, several developing countries have introduced simple, low-cost mobile systems for transferring funds. The G-CASH system, launched in the Phillipines in 2004, is a pioneer in enabling mobile phone users to send remittances, make donations, settle loans, and pay bills 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/ with a simple text message. M-PESA, introduced in Kenya in March 2007, also uses SMS to support financial transactions, including depositing and withdrawing money, transferring money to another party, or buying prepaid airtime. India needs to put in place a regulatory system that encourages m-banking for the unbanked. The regulatory system has to ensure security of such transactions and also the Central Bank does require that the amount of m-money in circulation should always be backed up with an equal amount by its issuer. Banks should see it as an exciting chance to exploit telecom firms’ vast retail networks and powerful brands to reach new customers. Tie-ups between banks and operators will help reassure regulators. The regulatory ecosystem has to evolve to allow such exciting innovations and should not act as a constraint Government to hold 3G spectrum auction on December 7 The government will hold the much-awaited 3G spectrum auction for GSM operators on December 7. In our view delaying spectrum allocation has meant that services to consumers are held up by the government resulting in a potential loss of consumer surplus. Moreover, too high a reserve price might drive away potential international bidders. There have been complaints that the licensing process already favors established domestic players. Under these circumstances one must take into account the actual likelihood of collusion as well as the nature of the players that may or not be affected by how the reserve price is set. The fact that capital is very scarce at the moment may also be worth considering in setting auction terms (i.e. look at the ability to pay of different parties). So what matters is how the auction designed. Poor designPoor outcomes. The auction has become a mere budgetary exercise! 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/ GOVERNANCE States resent BPL numbers ‘thrust’ on them by Centre The States have called upon the Centre to allow States to have their own lists pertaining to the BPL category and also desist from targeting the public distribution system (PDS). Our view is that in the spirit of decentralization of the PDS, the beneficiaries of the PDS should be identified by the states. In fact the Food Security Act is in an imbroglio as the issue of contention is who should be the beneficiaries. The problem arises as there are disparate numbers when it comes to the number of BPL households. Moreover, a centralized targeted scheme has been prone to corruption and leakages. Under these circumstances universalizing food security as has been achieved by the states of Tamil Nadu and Kerala has to be seriously considered. This may be a feasible option if the PDS system is revamped to address the problems of leakages, such that costs of a universal system are minimized. Food stamps may be one such solution. COMPETITION POLICY AND REGULATION CCI cries foul over shipping firms’ lobby for anti- trust immunity The ship liners association has approached the corporate affairs ministry seeking exemption from competition law, a move that is being severely opposed by the Competition Commission of India (CCI). Shipping carriers are often members of several consortia. Mostly the carriers also offer services, both individually 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/ and within a consortium. However, these practices may have impact on the competitive outcomes. It has been alleged that shipping carriers are involved in horizontal price fixing and they use consortia and shared operations as platform for this. As a result, some of the competition agencies around the world have been taking steps to restrain these activities. For example EU, which initially had exempted shipping consortia and their shared agreements from competition policy, has now changed consortia regulations and imposed restrictions and even forced many agreements to be dissolved. On the other hand it is argued that these agreements improve roundtrip vessel economics resulting in lower freight rates in the long-term. In our view it is important for the CCI to carry out a comprehensive economic analysis of the arrangements and their impact on prices before taking any view. MORE NEWS Draft bill on realty watchdog unveiled The government has unveiled a draft new law on the real estate regulator that when implemented, will protect homebuyers’ interest and discipline builders and lead to a transparent and healthy real estate sector. Government to set up autonomous environment regulator The Ministry of Environment and Forests has proposed to set up a National Environment Protection Authority to grant environmental clearances to different projects, besides ensuring compliance with environmental laws. 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/ Delayed monsoon: CERC to cap price of traded power In the wake of delayed monsoon, which has enhanced power shortages in the country, the Central Electricity Regulatory Commission (CERC) has decided to control the escalating price of power traded in the domestic market. Online registration of companies gets e-stamp Entrepreneurs can now pay stamp duty sitting anywhere in India electronically by logging on to the corporate affairs ministry’s website. Miners get new lease of life in fresh norms A mining lease that is not renewed or cancelled by a state government in the two years to its expiry may be extended for 20 years, benefiting companies that lose time and revenues due to states’ apathy. Rs. 1 lakh crore fertiliser sop going down drain? A steep increase in fertiliser subsidy, currently touching Rs 100,000 crore, have failed to bring about anything more than a niggardly 1.3% annual growth in farm production over the past 6-7 years. Expert group set up for faster winding up of sick companies The government has set up an expert group to suggest ways to speed up liquidation of sick companies by resolving procedural and legal complexities involved. 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/ RIL losing $120 mn on less gas production than capacity Reliance Industries Ltd is losing over $ 120 mn in revenues every month on being forced to produce natural gas less than capacity as the Government is yet to name buyers for the fuel beyond the initial volumes. Trai asks DoT to refer uniform licence fee to regulator The Telecom Regulatory Authority of India (Trai) has urged the government to consult it before deciding on a uniform license fee for operators, saying it has implications on the Centre’s revenue as well as on service providers. ‘Short-term power’ price surges on peak shortage Short-term electricity prices in the country have tripled over the last five years, with forecasts of a further rise as the peak shortage is projected to cross 18 % by the end of this fiscal. Finmin rejects BRPSE plan to revive fertiliser PSUs The finance ministry has turned down a proposal by the Board for Reconstruction of Public Sector Enterprises (BRPSE) to use government funds to revive loss-making public sector fertiliser units. States asked to form independent redress forum for electricity 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/ The Chairman of the Appellate Tribunal for Electricity has urged the State Governments to set up an independent consumer redressal forum and ombudsman. http://www.indicus.net/Newsletter/Policy_News_Views.aspx