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 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?
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
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Economic Policy News & Views March 2009
1. Indicus Analytics, An Economics Research Firm
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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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2. Indicus Analytics, An Economics Research Firm
http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/
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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3. Indicus Analytics, An Economics Research Firm
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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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4. Indicus Analytics, An Economics Research Firm
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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 Highways
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5. Indicus Analytics, An Economics Research Firm
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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
decision to not consider foreign investment made through
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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, quot;owned and controlledquot; 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.
SEBI, IRDA flout norms on surplus funds: CAG
The capital market and insurance sector regulators —
Securities and Exchange Board of India (SEBI) and
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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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