Indicus Analytics, An Economics Research Firm
   http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Instituti...
Indicus Analytics, An Economics Research Firm
   http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Instituti...
Indicus Analytics, An Economics Research Firm
   http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Instituti...
Indicus Analytics, An Economics Research Firm
   http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Instituti...
Indicus Analytics, An Economics Research Firm
   http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Instituti...
Indicus Analytics, An Economics Research Firm
   http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Instituti...
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Economic Policy News & Views November 2009

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HIGHWAYS

Norms for highway projects pact changed

The threshold limit in the conflict of interest clause in the model concession agreement (MCA) for highway projects has been increased from 5 percent to 25 percent.
Our view is that UPA II will have to work hard in order to put the national highway development programme (NHDP) back on track. Some of the problems were institutional with the National Highway Authority of India (NHAI) not acting autonomously but most of the problems lay with the MCA. The Cabinet Committee on Infrastructure is changing many clauses of the MCA, which were the main cause of investor apathy. In fact the conflict of interest clause was a major stumbling block in the NHDP progress. In the last five years, NHAI completed only 7759 km of highways, about 4 km/day. The target for building 7300 Km. per annum with a four fold increase in the contracts awarded will require a massive change in policy and institutional arrangement governing the highway programme.

TELECOM

CBI searches department of telecom offices

The CBI searched offices of the Department of Telecom in connection with alleged irregularities in allocation of 2G spectrum.
The Minister of Communications Mr. A. Raja committed a major policy blunder in not auctioning the cellular licences awarded in January 2008 and in bundling 4.4+4.4 MHz of start up spectrum with the licence. Never in the history of India’s policymaking has the exact cost that a government policy has imposed on the society been this clear. World over spectrum sale is a major source of revenue for governments to carry out their social programmes. The minister denied the country of huge amount of resources of around 60,000 crores. Scam or no scam such a grave error of judgment should not go unpaid for. Without getting into the criminality of the issue accountability asks for Mr. A. Raja to lose his job, but will it ever happen in our country?

OIL & GAS

EGoM on gas to keep off pricing issue

A new empowered group of ministers will focus on the allocation of additional gas from the Krishna-Godavari basin operated by RIL and steer clear of fixing the prices.
As we have been commenting through these columns, government will have to establish market based mechanisms with a few checks and balances for the discovery of gas prices. Our view is that the current gas allocation policy is predicated on a completely faulty price-fixation policy. An open bidding process, a cost-plus method or an indexation to oil prices would have been a better way for price discovery in this crucial sector. So while some part of the allocation can be at a pre-determined price a large part of the allocation should be based on a bidding process that should be transparent and unrestricted, unlike the quasi-tender that Reliance used to persuade the GoM to fix its gas price at $4.20 per million British thermal units. The Prime Minister’s Economic Advisory Council examining the bid said it was opaque; it suggested that new bids be invited “in a transparent and well-publicised manner from all parties so as to discover the true arm’s-length competitive price for gas”.

POWER

Eight new ultra supercritical power plants on anvil
After deciding to set up ultra mega power projects (UMPPs) to improve power supply across the country, the government’s next big step would be to set up eight ultra supercritical power plants (USCPPs).
It is well accepted that power generation is the primary contributor to greenhouse gas (GHG) emissions in India. This however, does not mean that in meeting our electricity needs we have to be environmentally insensitive. A viable and sustainable solution lies in encouraging generation from “clean” coal. It is important that India moves away from subcritical pulverized coal or “dirty” coal to commercial supercritical combustion technology. The supercritical coal based units have faster starting time & load changes and are more suitable for daily

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Economic Policy News & Views November 2009

  1. 1. Indicus Analytics, An Economics Research Firm http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/ Policy News & Views Volume 1, Issue 12, November 2009 HIGHWAYS Norms for highway projects pact changed The threshold limit in the conflict of interest clause in the model concession agreement (MCA) for highway projects has been increased from 5 percent to 25 percent. Our view is that UPA II will have to work hard in order to put the national highway development programme (NHDP) back on track. Some of the problems were institutional with the National Highway Authority of India (NHAI) not acting autonomously but most of the problems lay with the MCA. The Cabinet Committee on Infrastructure is changing many clauses of the MCA, which were the main cause of investor apathy. In fact the conflict of interest clause was a major stumbling block in the NHDP progress. In the last five years, NHAI completed http://www.indicus.net/Newsletter/Policy_News_Views.aspx
  2. 2. Indicus Analytics, An Economics Research Firm http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/ only 7759 km of highways, about 4 km/day. The target for building 7300 Km. per annum with a four fold increase in the contracts awarded will require a massive change in policy and institutional arrangement governing the highway programme. TELECOM CBI searches department of telecom offices The CBI searched offices of the Department of Telecom in connection with alleged irregularities in allocation of 2G spectrum. The Minister of Communications Mr. A. Raja committed a major policy blunder in not auctioning the cellular licences awarded in January 2008 and in bundling 4.4+4.4 MHz of start up spectrum with the licence. Never in the history of India’s policymaking has the exact cost that a government policy has imposed on the society been this clear. World over spectrum sale is a major source of revenue for governments to carry out their social programmes. The minister denied the country of huge amount of resources of around 60,000 crores. Scam or no scam such a grave error of judgment should not go unpaid for. Without getting into the criminality of the issue accountability asks for Mr. A. Raja to lose his job, but will it ever happen in our country? OIL & GAS EGoM on gas to keep off pricing issue A new empowered group of ministers will focus on the allocation of additional gas from the Krishna-Godavari basin operated by RIL and steer clear of fixing the prices. As we have been commenting through these columns, government will have to establish market based http://www.indicus.net/Newsletter/Policy_News_Views.aspx
  3. 3. Indicus Analytics, An Economics Research Firm http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/ mechanisms with a few checks and balances for the discovery of gas prices. Our view is that the current gas allocation policy is predicated on a completely faulty price- fixation policy. An open bidding process, a cost-plus method or an indexation to oil prices would have been a better way for price discovery in this crucial sector. So while some part of the allocation can be at a pre- determined price a large part of the allocation should be based on a bidding process that should be transparent and unrestricted, unlike the quasi-tender that Reliance used to persuade the GoM to fix its gas price at $4.20 per million British thermal units. The Prime Minister’s Economic Advisory Council examining the bid said it was opaque; it suggested that new bids be invited “in a transparent and well-publicised manner from all parties so as to discover the true arm’s-length competitive price for gas”. POWER Eight new ultra supercritical power plants on anvil After deciding to set up ultra mega power projects (UMPPs) to improve power supply across the country, the government’s next big step would be to set up eight ultra supercritical power plants (USCPPs). It is well accepted that power generation is the primary contributor to greenhouse gas (GHG) emissions in India. This however, does not mean that in meeting our electricity needs we have to be environmentally insensitive. A viable and sustainable solution lies in encouraging generation from “clean” coal. It is important that India moves away from subcritical pulverized coal or “dirty” coal to commercial supercritical combustion technology. The supercritical coal based units have faster starting time & load changes and are more suitable for daily start up/shut down operation and have better efficiency at part load operation. While the adoption of http://www.indicus.net/Newsletter/Policy_News_Views.aspx
  4. 4. Indicus Analytics, An Economics Research Firm http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/ supercritical technology in the coal power plants is a part of the proclaimed government agenda, the poor achievements of the same in the tenth five year plan mean a lot has to be done in order to make them a reality. MORE NEWS 3G spectrum auction from 14 January; government allows foreign bidders The DoT would hold a pre-bid conference on 16 November 2009 and the mock auction would be conducted on 11-12 January next year. Textile Ministry gives Rs 3,500 crore subsidy to farmers through MSP Through the minimum support price (MSP) in cotton, the Ministry of Textiles has disbursed around Rs 3,500 crore worth subsidy to farmers. Right to Education Act to be amended The government is likely to amend the Right to Education Act in the winter session of Parliament to exempt the minority institutions from implementing admission quota and give them right to form governing body of their choice. New norms to restrict bidding at PPP port projects The Ministry of Shipping is revising the policy guidelines for awarding projects on the public-private partnership (PPP) basis for expanding capacities at major ports across the country. http://www.indicus.net/Newsletter/Policy_News_Views.aspx
  5. 5. Indicus Analytics, An Economics Research Firm http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/ Autonomous body to look into broadcasting: Soni Minister for Information and Broadcasting Ambika Soni has said the government was mandated to set up an independent mechanism, which would look at all aspects of the broadcasting sector. Government to amend print media Act The government will soon amend a 142-year-old law to make it contemporary with the phenomenal growth of the print media in the country. Banks may be kept out of CCI ambit The government would examine the possibility of keeping banking and shipping sectors out of the purview of the Competition Commission of India, Corporate Affairs Minister Salman Khurshid said. Government may take six months to notify CCI's M&A norms The government may take at least six months more to notify the crucial provisions of the Competition Act that would empower Competition Commission of India (CCI) to scrutinise high value mergers and acquisitions (M&A). Rs 21,000 crore investment in fertiliser stuck for want of gas Over Rs 21,000 crore investments in six new fertiliser plants, that would have raised India's urea making capacity by 30 percent, is stuck for want of natural gas. HC issues notice to Centre on reservation policy The Rajasthan High Court has issued notice to the Centre and the state government on a petition challenging the http://www.indicus.net/Newsletter/Policy_News_Views.aspx
  6. 6. Indicus Analytics, An Economics Research Firm http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/ 109th Constitutional amendment extending the reservation policy by another ten years. Price control stifles ethanol projects Price control derails India’s biofuel investments; industry hopes government will hike ethanol price in November; supplies fall short of refiners’ requirement. Planning Commission wing to evaluate government schemes Planning Commission deputy chairman Montek Singh Ahluwalia said an independent evaluation office would be set up to study if the poor are benefited from different government schemes. http://www.indicus.net/Newsletter/Policy_News_Views.aspx

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