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Policy News
&
Views
Volume 1, Issue 4, March 2009

ENERGY

Government may limit Ultra mega power Projects


(UMPPs) number per company
The government is mulling over limiting the number of
UMPPs per bidder. The government has sought private
investment in 13 projects through competitive bidding.
However, out of last four UMPP bids Reliance Power has
bagged three, which is why government is considering
putting cap on number of UMPPs a bidder can get.

Our view is that given that the projects are awarded


through a transparent mechanism of competitive

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bidding rather than through the “old fashioned” MoU


route, this will be a step in the wrong direction. What
motivates the government to adopt this stand? If it is
the issue of competition then it is unfounded, as
currently only 12 percent of the installed capacity is in
the private sector. Why did this issue not concern the
government when the Central power utility NTPC and
NHPC together have 35 percent of the installed
capacity?
Read More ...

CLIMATE CHANGE

Delayed clearance clouds CDM projects


Domestic companies are waiting for the UN-led clean
development mechanism (CDM) executive board’s
approval to implement their CDM projects. Of the 1,174
projects cleared by the Indian government, 748 are
pending for registration with the international agency.
According to a FICCI report, the CDM executive body
lacks transparency and consistency and apparent political
interferences in the decision-making body weigh down the
credibility of the CDM process.

Our view is that CDM is a flawed mechanism to


address the problem of climate change. CDM and the
manner in which it is operationalized, shifts the onus
of reducing GHGs to the developing world. On the
other hand the developing world is using this
mechanism as a lucrative opportunity. The CDM fails
as a market because accounting tricks allow
participants to manufacture Certified Emissions
Reductions at little or no cost
Read More ...
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COMPETITION COMMISSION

Competition Commission of India to become


functional from April 1??
The much-awaited competition watchdog CCI would
become functional and replace the existing MRTPC from
April 1, also on the same day a new business form called
Limited Liability Partnership is expected to register in
India.

Our view is that the political masters are not willing to


establish a truly functional Competition Commission,
a very important institution for the effective
functioning of a market based economy. This is has to
be seen in the light of the fact that the issues the
Commission will be handling pertain to an economy of
size more than $1 trillion, with the largest number of
listed companies, and the third largest investor base
in the world. As we were writing this edit we got the
news that the appointments have hit a glitch and the
appointments are not to happen soon.

Read More ...

POWER

Power companies to sell 3 percent output in open


market
Power generators may soon be able to sell 3% of their
capacity through open access system as the Planning
Commission would include this suggestion in its advisory
to the Prime Minister. The Planning Commission would
also recommend the ceiling of 3% be expanded in the
future. This will allow power distributors to capture 10% of
the power market through open access.

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Our view is that one of the most disappointing


aspects of the reform process has been the slow
(actually negligible) progress on competition.
Competition requires open access to wires. This is an
area that significant responsibility may be placed on
electricity regulators, who should have been more
proactive in “encouraging” introduction of open
access and third party sales to break the monopoly of
the state-owned utilities. Although in India, several
SERCs have notified the open access regulations
besides fixing surcharge, transmission and wheeling
charges, it has hardly helped consumers to come
forward to avail of the open access facility.

Read More ...

Edited by: Payal Malik


25th February 2009

MORE NEWS

Power regulator set to review trading margins


CERC has decided to review the power trading margin,
which is presently fixed at 4-paise-a-unit. This move has
welcomed by the power companies. This could give the
required push to power trading market in the country,
according to industry analysts. In 2007-08, only 3.15% of
the total 666.01 billion units (BUs) electricity generated
was traded.

Highway projects that failed to attract bids may be


‘restructured’
With its efforts to bid out highway stretches getting very
little response from the private sector, the highways
regulator is looking at “restructuring” projects which are
not attracting any bids, an official said. The National

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Highways Authority of India, or NHAI, is drafting a cabinet


note that will allow it—if it gets necessary approvals—to
offer highway stretches under the so-called annuity mode.
GoM asks defence to vacate spectrum
The Group of Ministers (GoM), headed by external affairs
minister Pranab Mukherjee, has asked defence forces to
vacate 15 MHz of spectrum. While 10 MHz will be for third
generation (3G) services, 5 MHz will be for second
generation (2G) services. The spectrum would be
released on signing of MoU between MoD and DoT, said
sources. However, DoT officials said there was still some
work to be done to reach the MoU signing stage.
Govt. provides sops for fertiliser companies to switch
to natural gas
National Fertilizers Ltd (NFL) and Gujarat Narmada Valley
Fertilizers Company (GNFC) will benefit hugely from the
Centre’s new policy providing for a ‘special fixed cost’
reimbursement to enable conversion of their existing urea
plants running on furnace oil into gas-based units
Infra growth to suffer more unless funding costs ease
India's infrastructure growth will slow further if funding
costs are not brought down, as companies pinched by
plunging bottom lines turn their focus away from
expansion. Corporates started paying higher attention to
the development of India's highways, metros and airports
about five years ago after the government began offering
them as build-operate-transfer projects to bring in private
funding.
Telecom, retail, aviation to gain from FDI policy
The Government’s decision to relax foreign direct
investments norms will have major benefits for companies
in telecom, aviation, retail, insurance and media sectors.
In the telecom sector, Bharti Airtel and Vodafone could be
the major beneficiaries as a result of the Government’s

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decision to not consider foreign investment made through


an Indian company for calculating indirect foreign
investment.
Insurance out of new FDI policy; no specific bar on
retail
The new FDI policy excluding indirect foreign stake from
the sectoral caps will not be applicable to the insurance
sector, while the fine-print issued today does not debar
overseas players from investing in multi-brand retail
through parent company, "owned and controlled" by an
Indian.
Fertiliser cos hope to benefit from higher subsidy flow

Fertiliser companies are expecting a higher flow of


subsidies, following an increase in the allocation to about
Rs 44,863 crore in the interim budget presented on
Monday. Although the subsidy component was expected
to go up by over Rs 50,000 crore from Rs 14,000 crore
during the year, with the recent drop in prices of raw
materials, the amount has been reined in.
Pranab rejects higher support for PPP deals
Finance Minister Pranab Mukherjee, who took additional
charge of the finance ministry recently, has rejected a
Planning Commission proposal to increase the upper limit
for Viability Gap Funding (VGF) for infrastructure projects
coming up under the public-private partnership model.
ONGC directors oppose discount
In a marked departure from their malleable dispositions,
Oil and Natural Gas Corporation's independent directors
have questioned the discount on crude -- given to state-
run refiners under government orders -- saying this is
against the interest of shareholders, especially those with
small holdings.

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SEBI, IRDA flout norms on surplus funds: CAG


The capital market and insurance sector regulators —
Securities and Exchange Board of India (SEBI) and
Insurance Regulatory and Development Authority (IRDA)
— are flouting Finance Ministry instructions by parking
their surplus funds generated through fee charges,
penalties, among other things outside the Government
accounts.

Mobile number portability by August, says Raja


Union Communications and IT Minister A Raja today
said the Department of Telecommunications (DoT)
was planning to start mobile number portability (MNP)
in major cities of the country by August, and in the
remaining cities by the end of this year. Bids had
already been invited for providing the MNP switches,
the minister added.

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