March 21-22, 2010

March 21, 2010

Ø       Union Petroleum Secretary S Sundareshan on Saturday said that south India will start getting natural gas from the Krishna-Godavari basin from 2012.

·         Reliance has been authorised by the government to lay a pipeline from Kakinada to Chennai and this pipeline would further extend to Tuticorin.

·         Reliance would also lay a pipeline between Chennai and Bangalore.

·         The gas would start flowing to Tamil Nadu anytime between March 2012 and the end of that year.

·         This leaves us with an important question. Pricing/ Deregulation of petroleum products,

o    What is deregulation? Deregulation generally means lifting of government control and letting market forces control the price of the product.

o    For the oil industry, it may be of two scales. (1) Price decontrol ; (2) Removal of restrictions on the establishment, operation, export and import of oil.

o    India’s history - In April 2002, in an attempt to phase out subsidy on petroleum products, the government dismantled the administered pricing mechanism (APM) paving the way for free pricing mechanism for petrol and diesel, while prices of kerosene and LPG were still kept under the Regulator's purview.

o    During 2002, the government gave limited freedom to the OMCs to revise retail prices within a band of +/-10% of the mean of rolling average of the last 12 months and the last 3 months international cost and freight prices.

o    When the crude prices began to increase in 2004 and oil companies wanted to pass on the same, but the government interference halted the free pricing of petrol and diesel.

o    What are the pre requisites for successful implementation of price deregulation? (1) Stability in crude prices; (2) Stable price range for lower products like diesel and kerosene as these are the most used; (3) Stable government; (4) Efficient subsidy sharing mechanism.

o    But who will benefit?

o    (1) The government will feel lesser pinch on its finances. (2) Since, there are no oil bonds to be going to be disbursed, more money would be available for other projects and reduce the fiscal deficit; (3) The Oil Marketing Companies would benefit with better profit and better control over oil prices.

o    But who will lose?

o    (1) The end consumer might not be protected from the oil shocks; (2) The agriculture farmers and rural households which consume the most diesel and kerosene stand to suffer more; (3) Even industries relying on gasoline might be affected because of uncertainties in the prices.

Ø       The Union Cabinet has approved a proposal of the Labour Ministry to amend the Employees State Insurance Act, 1948, to provide medical facilities to unorganised workers in ESIC hospitals and recognised private hospitals under the Rashtriya Swasthya Bima Yojna (RSBY), a cashless health insurance scheme.

·         This scheme was originally started to cover the Below Poverty Line families in the unorganised sector.

·         Later, construction workers, railway porters and beneficiaries under the Mahatma Gandhi National Rural Employment Guarantee Scheme were included.

·          There are about 43 crore unorganised workers in the country, which make up about 94 per cent of the total workforce.

·          The ESIC will be empowered to enter into an agreement with any local authority, local body or private body for commissioning or running ESI hospitals through third party participation for providing medical treatment and attendance to insured persons.

·         So far, the Centre has distributed about 1.14 crore smart cards under the RSBY. A smart card issued to each beneficiary under the scheme covers a family of five persons, providing health cover for hospitalisation up to Rs. 30,000 per annum.

Ø       The West Bengal government is raising a special force to counter the Maoists active in certain parts of the State. It will be trained by the elite Greyhounds of Andhra Pradesh.

·         Personnel selected from the State Armed Police will receive training at the Greyhounds Academy in Andhra Pradesh that trains commandos to tackle extremists.

March 22, 2010

Ø       BrahMos, the supersonic cruise missile, lifted off vertically from Naval destroyer INS Ranvir and punched a hole in a decommissioned vessel 290 km away in the Bay of Bengal off the Orissa coast on Sunday.

·          The missile, which was fired at 11.30 a.m. from INS Ranvir, climbed 200 metres vertically, then manoeuvred at supersonic speeds to cruise horizontally before smashing into the vessel INS Meen.

·         This is the 22nd launch of BrahMos, which has already been inducted into the Army and the Navy. It has been jointly developed by India and Russia.

Ø       The third National Free Software conference brought together ideologues, Free Software organisations and stake-holders in the public sectors, from at least 10 States across the country and announced the formation of National Free Software Coalition.

·         This coalition, which has 16 movements in its fold, to begin with, aims at taking Free Software and its ideological implications to computer users “across the digital divide” and to various streams of science and research.

Ø       Now that a final price tag of $2.33 billion has been fixed on aircraft carrier INS Vikramaditya (Admiral Gorshkov) going against the proverbial caution, perhaps it is time to look the ‘gift' horse in the mouth.

·         Navy officials maintain that the aircraft carrier will be good for the next three to four decades.

·          Its hull remains good with value additions done to modify the cruiser class to meet the force requirement.

·         Some of the features built into the contract are replacement of the entire length of cables/wiring running into thousands of kilometres; delivering infrastructure machinery for repair and maintenance support in Indian docks; training of personnel from Indian docks and personnel on board the carrier and spare parts for 10 years from the time the carrier is to be handed; repair and technical detail documents for maintenance; and pilot training/trials.

Ø       China's Commerce Minister and several of the country's leading economists have rejected American claims that China was undervaluing its Yuan currency, and have warned of an “all-round trade war” if the U.S. imposed trade sanctions on China.

·         What is happening in China?

o    Political leaders and economists in Washington have been calling on the U.S. Treasury Department to officially label China a “currency manipulator”.

o    The U.S., and several other countries, say China has artificially undervalued its Yuan currency to support exporters here.

o    The value of the Yuan has been pegged at around 6.83 to the dollar since mid-2008.

·         But, what determines an exchange rate?

o    Short run exchange rates are determined by the supply and demand of a currency. For example, if a person wants to buy Indian goods, he would need Indian currency and thus demand for Indian currency would shoot up.

o    At the constant supply, we understand that when demand goes up, price of the currency also goes up.

o    Speculators and Central Banks also play an important part in shooting up the price of the currency.

o    In the same way, if the demand for foreign goods increases, the person of a particular country will sell of his home currency in exchange of the foreign currency and hence supply of the home currency increases.

o    Thus, the value of the currency is basically decided by demand and supply.

·         But, the above explanation is valid only if the currency is free floating. Chinese Yuan is a currency that is pegged to a certain value and does not reciprocate to the changes of the market factors

Blogorial

What’s wrong with our national air carrier?

Air India is the national air carrier and operates out of Air India Building, Nariman Point, Mumbai.  The merger of Air India and Indian Airlines is operated by National Aviation Company of India Limited.

After India got its independence, the availability of the cheap planes from World War 2 had given an impetus for several private airlines. Their deteriorating financial status prompted the government to nationalize these services and start the Indian Airlines in 1953.

Famously known as the Maharaja, Air India, after decades of indulgence and pampering as a state-owned airline, has been struggling to survive the global aviation downturn. The civil aviation minister Mr. Praful Patel has stated that the National Carrier will possibly incur a loss of Rs. 5400 crores in the fiscal year 2009-10, leading to a cumulative loss of Rs. 13,714 crores in the past 3 years. Moreover, he also stated that Air India will be able to save only Rs 753 crores as against the Rs 1911 crores envisaged.

But, where does the root of the problem lie? We need to take a look at what is causing the losses. Around 80 percent of losses are on account of paying interest on borrowing, depreciation and rentals.

Experts have suggested that the problem has been brewing for the past 15 years. The airline began facing its problems since the liberalization of the Indian economy. Still, for several years after liberalization, Indian Airlines used to command the lions share in the market.

With a plethora of competition stepping in, Air India allowed decades of problems to heap on and failed to utilize its dominant position and gave the newer players an easier way of establishing their feet in the industry.

Air India also suffered from other major problems like a bloated workforce, political interference, underinvestment and a weak management. Moreover, the decision taken b Praful Patel to purchase 111 new aircrafts and the merger with Indian Airlines added to its woes. Handicapped by the financial stress, the company was not able to utilize the synergies of the merger purposefully. Add to that, the monthly loss and the ever diminishing market share.

But, can Air India fly again? The government has been trying its best. It recently infused Rs 800 crore as equity base and has been restructuring and implementing cost cutting measures. But the foreign players and other domestic players have brought in a sense of competition under which Air India is crumbling.

The airline needs to look at privatization. True, the flavor of being the national carrier might be lost, but it will infuse a new life along with more funds, better restructuring and a better and stronger management. Pay cuts and job cuts seem inevitable, but it could help in the longer run. Moreover, a government stake would help in keeping the controls. Hope the Maharaja does not lose his way.

March 16-18, 2010

March 16, 2010

Ø       Amid stiff opposition from the political parties, particularly the Left, the government on Monday decided against introducing in the Lok Sabha the Civil Liability for Nuclear Damage Bill, 2010 that provides for compensation in the event of a nuclear accident.

·         Under Rule 72 of the Rule of Procedures of the Lok Sabha, any government motion that is opposed at the time of introduction has to be put to vote. Since the government lacked the numbers in the House, it decided to withdraw the Bill instead.

·         What is Nuclear Liability Bill?

o    Nuclear Liability Bill is one of the 3 laws that have to be enforced as part of the Indo-US 123 Deal.

o    It limits the liability of the foreign manufacturers and US government to a sum of $300 million, in case of an accident.

o    The remaining liability can be passed on to the Nuclear Power Corporation of India Ltd.

o    The government has claimed that it is essential for India so that it can join the international convention on supplementary compensation. Even the Paris and Vienna conventions would need that.

o    But, history has several pointers like Chernobyl, Three Mile Island and Bhopal Gas Tragedy where there have been wrong consequences

o    Moreover, such a law goes against the principle of” Polluter Pays”

o    Such a law could also be against the Article 21 of constitution that says ” Protection Of Life And Personal Liberty: No person shall be deprived of his life or personal liberty except according to procedure established by law”

o    But, it has to be noted that some of the major companies have been lobbying in New Delhi and eyeing the Rs 60,000 crore nuclear reactor sector in India, some of them being General Electric, Areva, Westinghouse, and Rosatom Corp.

o    The Nuclear Power Corporation of India is the nodal agency that has been talking to foreign manufacturers of power plants.

o    Reliance, Tata Power and GMR have also shown interest in undertaking joint ventures with the NPCIL.

Ø       The Union Cabinet on Monday cleared the Foreign Educational Institutions (Regulation of Entry and Operation) Bill, 2010, for introduction in Parliament.

·         It seeks to allow foreign education providers to set up campuses in the country and offer degrees.

·         The Foreign Universities Bill, 2010, has been pending for the last four years owing to opposition from various quarters, including the Left parties, over certain provisions.

·         Last year, it was referred to a Committee of Secretaries which brought modifications to certain provisions.

·         The Bill was approved by the Cabinet, presided over by Prime Minister Manmohan Singh, without any change.

·         It prescribes an eight-month, time-bound format for granting approval to foreign educational institutions to set up campuses.

·         Finally, they will be registered with the University Grants Commission or any other regulatory body to be put in place that will scrutinise the proposals of the aspiring institution as per India's priorities and advise the government whether to allow it to operate in India.

·         As for the reservation policy in the higher educational institutions, the law of the land will prevail.

·         Though 100 per cent foreign direct investment through the automatic route is permitted in the education sector since 2000, the legal structure does not allow granting of degrees by foreign educational institutions here.

·         Ministry of Human Resources has asked to deposit Rs. 50 crore if a foreign university wants to start its venture in India.

·         But what are the advantages?

o    The one obvious advantage is the better standard that is expected from a foreign university.

o    There are reports claiming that the academicians would be able to get higher salary

o    But, it is to be understood that apart from these uncertain advantages, there can’t be any solid rationale behind the move.

·         Foreign universities might come to India only if their profit is allowed to be taken back home.

·         Moreover, the cost of education would also be out of reach for the larger section of the society.

March 17, 2010

Ø       Several academicians have criticised the Council of Boards of School Education (COBSE) for pushing for a common curriculum in science and mathematics across the country.

·         Describing the move as an “overstep” of its role on the part of the Council, a joint statement issued by four academicians have raised questions over the preparation of the curriculum by the COBSE, which is the coordinating body for school boards in the country.

·         The COBSE last month prepared a common core curriculum for science and mathematics for the Plus 2 stream and got it approved by the States.

·         While it is true that the apparent difference between several boards of education would be solved by this step, the real question would be are the students really prepared for such a move.

·         Several people might prefer the old school of education.

Ø       The Supreme Court-appointed Central Vigilance Committee (CVC) has slammed the Public Distribution System as one of the most corrupt sectors, saying the root cause of its failure in several States is political interference.

·         PDS is an important factor in ensuring food security.

·         In the context of national food security and poverty alleviation, it is essential to take a look at the ``efficiency and efficacy'' of the public distribution system (PDS), which has been operating as the food access mechanism for several decades.

·         It was the compulsions at the time of World War II that forced the then British Government to introduce the first structured public distribution of cereals in India through the rationing system -- sale of a fixed quantity of ration (rice or wheat) to ent itled families (ration cardholders) in specified cities/towns.

·         When the War ended, India, like many other countries, abolished the rationing syste m in 1943.

·         In the face of renewed inflationary pressures in the economy immediately after Independence, the Government had to reintroduce rationing in 1950.

·         India retained public distribution of foodgrains as a deliberate social policy, when it embarked on the path of planned economic development in 1951.

·         Towards the end of the First Plan (1956), rationing had started losing its relevance due to comfortable foodgrains availability.

·         But as the supply dropped and demand swelled, the Government had to reintroduce PDS.

·         What is the difference between rationing and PDS?

o    In rationing, a particular amount, usually restricted to a small amount, of resource is allocated to a particular person or family, not always at a lower price.

o    In PDS, the prices of the resources are reduced and is made available for the poorer sections of the society.

·         The creation of the Food Corporation of India and the Agricultural Prices Commission in 1965 consolidated the position of the PDS.

·         The Government was now committed to announce a minimum support price for wheat and paddy and procure quantities that could not fetch even such minimum prices in the market.

·         The 3 fold aims of PDS were:

o    Providing foodgrains and other essential items to vulnerable sections of society at reasonable (subsidised) prices

o    Having a moderating influence on the open market prices of cereals

o    Ensuring equity in the matter of distribution of essential commodities

·         The greatest achievement of PDS was claimed to be ``preventing any more famines in India''.

·         But, still some demerits exist

o    The urban and pro-rich bias of the system

o    Its ineffectiveness in reaching the poor

o    The lack of effective contribution towards household food security

o    PDS is not cost-effective and its operations are too costly due to `wasteful' movements of grain and high storage losses.

o    Another valid deficiency was its marginal impact, as far as income transfer to poor households is concerned.

o    Obvious fiscal stress on Government

·         The PDS system was revamped and the Targeted PDS (targeting the marginalised sections of the society) was launched.

·         But, still the system faced several problems.

o    The monthly quota of rice/wheat was less in several cases.

o    The methodology used in identifying the BPL families was a doubt.

o    The PDS faces several problems based on how well off the area is, for e.g., regions like Kerala do well.

o    The cost of operation is too high.

o    Welfare gain from PDS is negligible

·         Despite such a huge cost to the exchequer and burden to the taxpayer, PDS and, by extension, the FCI, have not achieved any of the primary requirements of food security and poverty alleviation.

·         This is primarily because of the vast chasm that exists between policy formulation and implementation.

·         So, what is the alternative?

o    Given the liberalised atmosphere and comfortable foodgrain situation, it is better to rely on the personal involvement of the stakeholders, who are the producers, and the open market mechanism that influences the consumption for India's food security.

o    At the same time, the farmer and the consumer need to be protected against the vagaries of production and the market forces to enhance agricultural productivity and ensure fair prices.

o    The delivery system would also be efficient since it has to be competitive and competent.

o    For the genuinely needy, `food vouchers/stamps' could be supplied through the Panchayat Raj or local government machinery that could be strengthened and empowered for the purpose.

March 18, 2010

Ø       A bonanza in the shape of expanded piped natural gas (PNG) for households and compressed natural gas (CNG) infrastructure for transportation and clean environment awaits lakhs of consumers with the government contemplating empowering the Petroleum and Natural gas Regulatory Board (PNGRB) to issue retail expansion licences to both private and public players.

·         The first phase will entail expansion of the CNG and PNG network to 200 cities identified by the private and public sector companies, and reaching out to industrial clusters and power plants.

·         With CNG expansion, especially in public transport, environmental concerns and vehicular pollution are also likely to be addressed in the long run.

Ø       The maritime security of the country's west coast got a boost on Wednesday with the induction of a state-of-the-art new generation Offshore Patrol Vessel (OPV) — ICGS ‘Vishwast' — into the Indian Coast Guard (ICG).

·         ‘Vishwast,' which means ‘trustworthy,' is an OPV indigenously designed in-house and built by the Goa Shipyard Limited (GSL), the south Goa-based Defence shipyard, and was formally commissioned into the ICG by Defence Minister A.K. Antony at a ceremony at the GSL on Wednesday.

Ø       A framework for cooperation on trade and investment was on Wednesday signed by Indian Minister of Commerce and Industry Anand Sharma and U.S. Trade Representative Ronald Kirk.

·         The agreement aims to strengthen bilateral cooperation between India and the U.S., building on rapid growth between the two countries in recent years.

March 10, 2010

March 10, 2010

Ø       The Rajya Sabha on Tuesday voted to amend the Constitution to reserve one-third of seats in Parliament and the State Assemblies for women.

·         The House recorded its vote of 191 for and 1 against at 7.25 p.m.

·         Sharad Joshi of the Swatanatra Bharat Paksh was the lone naysayer.

·         The Bill, formally known as the 108th constitutional amendment, must now be passed by the Lok Sabha and ratified by at least half the States for becoming effective.

·         But do you know how a bill becomes an act?

o    A Bill is the draft of a legislative proposal.

o    The legislative process starts with the introduction of a Bill in either House of Parliament—Lok Sabha or Rajya Sabha and can be introduced by a Minister or by a private member. In the former case it is known as a Government Bill and in the latter case it is known as a Private Member’s Bill.

o    It is necessary for a member-in-charge of the Bill to ask for leave to introduce the Bill.

o    This stage is known as the First Reading of the Bill.

o    After a Bill has been introduced, it is published in the Official Gazette..

o    After a Bill has been introduced, Presiding Officer of the concerned House can refer the Bill to the concerned Standing Committee for examination and make report thereon.

o    The Second Reading consists of consideration of the Bill which is in two stages.

o    The first stage consists of general discussion on the Bill as a whole when the principle underlying the Bill is discussed.

o    The second stage of the Second Reading consists of clause-by-clause consideration of the Bill as introduced or as reported by Select/Joint Committee.

o    Thereafter, the member-in-charge can move that the Bill be passed. This stage is known as the Third Reading of the Bill.

o    In passing an ordinary Bill, a simple majority of members present and voting is necessary. But in the case of a Bill to amend the Constitution, a majority of the total membership of the House and a majority of not less than two-thirds of the members present and voting is required in each House of Parliament.

o    After the Bill is passed by one House, it is sent to the other House for concurrence with a message to that effect, and there also it goes through  the stages described above except the introduction stage.

o    Money Bills can be introduced only in Lok Sabha. Rajya Sabha cannot make amendments in a Money Bill passed by Lok Sabha and transmitted to it. It can, however, recommend amendments in a Money Bill, but must return all Money Bills to Lok Sabha within fourteen days from the date of their receipt.

o    Please read my write up on the women’s bill here.

Ø       The United States will start accepting applications for H-1B visas, most sought after by Indians, from April 1 for the fiscal year 2011.

·         In a statement, the U.S. Citizenship and Immigration Services (USCIS) said it would accept petitions for 65,000 H-1B visas as mandated by Congress.

·          The first 20,000 H-1B petitions filed on behalf of individuals who have earned a U.S. master's degree or higher are exempt from this 65,000 cap.

·         U.S. businesses use the H-1B programme to employ foreign workers in specialty occupations that require theoretical or technical expertise in specialised fields — such as scientists, engineers, or computer programmers.

·         Official figures reveal that because of stringent monitoring provisions and the recession, there has been a sharp drop in the number of Indians receiving H-1B visas in the last few years.

Ø       Irom Sharmila, who has been on a fast-unto-death since November 4, 2000 demanding the repeal of the Armed Forces (Special Powers) Act, 1958 (AFSPA) in Manipur, was rearrested on Tuesday, as she continued her fast despite being released by the court.

·         The Act, under which she was arrested (for attempt to commit suicide), does not permit the authorities to detain her for more than one year at one go.

·         She was released on Monday after she completed one year of detention. As her condition without medication and nose-feeding became precarious, the police rearrested her.

·         Who is Irom Sharmila?

o    Menghaobi" Irom Sharmila Chanu (born March 14, 1972), also known as the Iron Lady of Manipur, is a civil rights activist, political activist, journalist and poet from Manipur.

o    Irom Sharmila Chanu was born to Irom Nanda Singh and Irom Ongbi Sakhi Devi at Kongpal Kongkham Leikai in Imphal East district.

o    On November 1, 2000, in Malom, a town in the Imphal Valley of Manipur, ten innocent people who were waiting for their buses at a bus station were gunned down by the Assam Rifles, one of the Indian Paramilitary forces operating in the state.

o    On November 1, 2000, in Malom, a town in the Imphal Valley of Manipur, ten innocent people who were waiting for their buses at a bus station were gunned down by the Assam Rifles, one of the Indian Paramilitary forces operating in the state.

o    Soon afterwards, that very day, the people of Manipur, including major civil society organisations and other state institutions, agitated and demanded a magisterial inquiry into the incident.

o    The army, using the unperturbed authority given to them by AFSPA, however, disallowed any such inquiry, leaving the people of Manipur frustrated and helpless yet again.

o    This convinced Sharmila, then only 28, that she must take a decision and act. On the evening of November 4, after taking blessings from her mother, she launched her hunger strike against the widespread repression unleashed against the people of Manipur by the Indian state.

o    On 6 November 2000, three days after she launched the strike, she was arrested by the police and charged with "attempt to commit suicide", which is unlawful under section 309 of the Indian Penal Code.

o    She has been kept alive on the constant painful nasogastric intubation.

Ø       Do you know which country leads in the women representation in parliament? Click here to find out.

Ø       Impressed by the emergence of a ‘new Assam,' top industry captains on Tuesday pledged their commitment towards industrial and overall development of State at the first meeting of the Assam Investment Advisory Board.