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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 staterun 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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