KARNATAKA FIASCO
The Karnataka coalition drama has provided an opportunity to the administration, the protectors of the constitution and the well wishers of the Indian constitution to re look at the issues that affect the Indian polity today.
Given the increasingly fractured verdict which the Parliamentary system of selecting the representative is throwing up, coupled with voter''s apathy, it is time constitutional experts got their act together to preserve the intent and main aim of the provisions in the constitution regarding constitution of the governing machinery; namely provide stable governance.
Citing judgments of decade old cases in politics, is akin to citing the Red Herring to decide the course of next action. We need to look at the political realities of the day and take decisive actions to provide the bench mark for the future, lest future generations are compelled to live by what our fore fathers decided.
If the current combination of BJP - JD(S) is allowed to form the government, it will set a bad precedent. They have gained power at the first instant based on numbers, but with the solemn promise that they will provide stable governance. Now that they have failed, the Executive must exercise his powers to reject this alliance which has failed to stick to its original commitment made to the people and the constitutional authority in words (!) and spirit.
If the opportunistic alliance is once again allowed to assume power, be that as it may be for a few weeks, it will embolden those elements who think that merely winning a seat to the legislative assembly, guarantees them power and opens up many revenue streams. It would also encourage further splitting of the Parties and render the coalition exercise a mere number game. Coalition politics by intent and practice should not be degraded to a number game as it is being made out to be.
This opportunity shall be exploited by the administration and the judiciary to spell out clearly what is the form of Coalition government, that is acceptable to provide a stable governance. Opportunistic alliances can not be handed over power just because a judgment says that it should be decided by the numbers.
Given the increasingly fractured verdict which the Parliamentary system of selecting the representative is throwing up, coupled with voter''s apathy, it is time constitutional experts got their act together to preserve the intent and main aim of the provisions in the constitution regarding constitution of the governing machinery; namely provide stable governance.
Citing judgments of decade old cases in politics, is akin to citing the Red Herring to decide the course of next action. We need to look at the political realities of the day and take decisive actions to provide the bench mark for the future, lest future generations are compelled to live by what our fore fathers decided.
If the current combination of BJP - JD(S) is allowed to form the government, it will set a bad precedent. They have gained power at the first instant based on numbers, but with the solemn promise that they will provide stable governance. Now that they have failed, the Executive must exercise his powers to reject this alliance which has failed to stick to its original commitment made to the people and the constitutional authority in words (!) and spirit.
If the opportunistic alliance is once again allowed to assume power, be that as it may be for a few weeks, it will embolden those elements who think that merely winning a seat to the legislative assembly, guarantees them power and opens up many revenue streams. It would also encourage further splitting of the Parties and render the coalition exercise a mere number game. Coalition politics by intent and practice should not be degraded to a number game as it is being made out to be.
This opportunity shall be exploited by the administration and the judiciary to spell out clearly what is the form of Coalition government, that is acceptable to provide a stable governance. Opportunistic alliances can not be handed over power just because a judgment says that it should be decided by the numbers.
Sub Prime Mortage Fall out
We are reading different reports of the impact of the US Sub Prime Mortgage fall out on developing markets and emerging economies. The reports unfortunately have to rely on information which are handed over to you by the administrations and regulators, who have the powers to remain opaque.
Given the levels of visibility reached through satellite imaging techniques such as Google Earth, it is surprising that in large financial transactions running to billions of dollars, opacity stares at you. The crisis which is purportedly created by a few banks, seem to have had regulatory sanction, as you find the Regulators coming out openly in support of them, with the public fund. The Regulator in UK has come out openly to save a bank and the US Fed is reportedly injecting billions to allow some of the entrenched entities to move out in a more orderly manner. In a mature functioning capital market, it is indeed strange that we are seeing certain Regulatory actions, which can be clearly interpreted to be in support of defined entities who have abused the rules.
In such circumstances, given the opacity of the transactions, it is but natural that one would come to the logical conclusion that the excesses committed by these entities, have been enjoying the Regulators tacit support all along. No wonder, RBI governor in his inimitable manner has warned of surprises and indicated recently his resolve to take "unconventional" actions as necessary.
All these point to more major events in the immediate future. The tremors of Sub Prime Mortgage, are still traveling through the depths of integrated global economy sea. One is not sure where it is heading and which is the shore it is going to hit. There are no sensors to track this "Tsunami"(financial) and predict land fall.
Planners may be warned to plan for the landing and put in place emergency mechanisms to evacuate and provide "First Aid"
Given the levels of visibility reached through satellite imaging techniques such as Google Earth, it is surprising that in large financial transactions running to billions of dollars, opacity stares at you. The crisis which is purportedly created by a few banks, seem to have had regulatory sanction, as you find the Regulators coming out openly in support of them, with the public fund. The Regulator in UK has come out openly to save a bank and the US Fed is reportedly injecting billions to allow some of the entrenched entities to move out in a more orderly manner. In a mature functioning capital market, it is indeed strange that we are seeing certain Regulatory actions, which can be clearly interpreted to be in support of defined entities who have abused the rules.
In such circumstances, given the opacity of the transactions, it is but natural that one would come to the logical conclusion that the excesses committed by these entities, have been enjoying the Regulators tacit support all along. No wonder, RBI governor in his inimitable manner has warned of surprises and indicated recently his resolve to take "unconventional" actions as necessary.
All these point to more major events in the immediate future. The tremors of Sub Prime Mortgage, are still traveling through the depths of integrated global economy sea. One is not sure where it is heading and which is the shore it is going to hit. There are no sensors to track this "Tsunami"(financial) and predict land fall.
Planners may be warned to plan for the landing and put in place emergency mechanisms to evacuate and provide "First Aid"
TNEB through the Years
Tamilnadu Electricity Board (TNEB) , from the days of independence has always been at the fore front of managing the state's Power requirements fairly well. Especially so, when compared with like enabled boards and organizations, who also operate in similar regulatory environment. There are interesting lessons available in the recent initiatives of the board for those who are propagating the PPP, Public Private Participatory model.
Till the late eighties, the entire investment plans for the Power network, be it Generation or Transmission & Distribution (T&D) was fully managed by the state entity. Given the socialistic approach then practiced that limited the return to just 6% on your investment, the planners, realised the need to bring in robust billing and collection systems. This ensured that billing is done for the services used and what is billed is collected. Default in payment resulted in punitive action of disconnection, which has been practiced over the years. This helped build a good culture, where the consumers built a healthy habit of paying electricity bills. This is similar to the situation where no one questions, why one should buy a ticket when you board a bus.
Having built a system for strong revenue collection, the board could go about the task of implementing capacity additions to the generation and distribution network. Here again the planners understanding of the requirements and deciding on technical merits is there for all to appreciate.
There are Hydel stations, Thermal (coal & lignite) based stations, Nuclear stations, eco friendly Wind mills and sugar mills based co generation plants. These are spread across the geography of the state to assist in overall development of the state. The selection of Mettur which is land locked thermal station based on Indian coal is a case in point. There are coastal plants as well, which are not hampered by the conditions of local availability of coal. In the early seventies, it would have been unthinkable for any one to plan for import of coal given the impression of abundant availability of local coal and the controlled Export - import regime then prevailing.
Similarly the T & D network is built to deliver the generated power across the state. There are no un electrified villages in the state and there are not many instances of power connection being denied for protracted periods of time in the state.
During the Enron era of the nineties, the state also jumped in to the band wagon of liquid fuel power stations. The move was mainly due to the collective hype around these stations and Tamilnadu was not wanting to be left behind. Like other boards, TNEB also suffered. But here again, the board has distinguished itself from others by at least partly putting to use the majority of these plants.
Around this time the concept of Private enterprise building Utility assets was gaining momentum and TNEB adopted it. The main reason being the perceived in capability of the state government to fund capital expenditure of the board. But the board realised that it was being asked to explain their business model to the investor who was looking to maximise the returns on their investment with minimum risk. But the entire exercise has left the board poorer, but richer by experience.
When the signs of economic growth was visible in the mid 2000 and the board started seeing significant demand growth (over 14% in some pockets), they decided to look at alternate models for finding the investment. They have gone about the task in a very commendable manner and have also prepared a scheme for other states to emulate. They have encouraged Wind Power, reactivated dormant schemes and have signed joint development scheme with central organizations. Given the experience of the nineties, the board has this time placed its bets on Public sector entities rather than private enterprises. Plans are in place to double the installed generation capacity through these efforts in the next 8 years.
One awaits a similar approach to increase investments in the T & D Segment. New models, be it the franchise model of PPP (Public Private Partnership) or transfer of assets to joint venture, have to be put in place quickly to fully deliver the large quantum of Power that will be generated in the state. Otherwise one runs the risk of exporting this power to neighbouring states to earn short term profits.
Till the late eighties, the entire investment plans for the Power network, be it Generation or Transmission & Distribution (T&D) was fully managed by the state entity. Given the socialistic approach then practiced that limited the return to just 6% on your investment, the planners, realised the need to bring in robust billing and collection systems. This ensured that billing is done for the services used and what is billed is collected. Default in payment resulted in punitive action of disconnection, which has been practiced over the years. This helped build a good culture, where the consumers built a healthy habit of paying electricity bills. This is similar to the situation where no one questions, why one should buy a ticket when you board a bus.
Having built a system for strong revenue collection, the board could go about the task of implementing capacity additions to the generation and distribution network. Here again the planners understanding of the requirements and deciding on technical merits is there for all to appreciate.
There are Hydel stations, Thermal (coal & lignite) based stations, Nuclear stations, eco friendly Wind mills and sugar mills based co generation plants. These are spread across the geography of the state to assist in overall development of the state. The selection of Mettur which is land locked thermal station based on Indian coal is a case in point. There are coastal plants as well, which are not hampered by the conditions of local availability of coal. In the early seventies, it would have been unthinkable for any one to plan for import of coal given the impression of abundant availability of local coal and the controlled Export - import regime then prevailing.
Similarly the T & D network is built to deliver the generated power across the state. There are no un electrified villages in the state and there are not many instances of power connection being denied for protracted periods of time in the state.
During the Enron era of the nineties, the state also jumped in to the band wagon of liquid fuel power stations. The move was mainly due to the collective hype around these stations and Tamilnadu was not wanting to be left behind. Like other boards, TNEB also suffered. But here again, the board has distinguished itself from others by at least partly putting to use the majority of these plants.
Around this time the concept of Private enterprise building Utility assets was gaining momentum and TNEB adopted it. The main reason being the perceived in capability of the state government to fund capital expenditure of the board. But the board realised that it was being asked to explain their business model to the investor who was looking to maximise the returns on their investment with minimum risk. But the entire exercise has left the board poorer, but richer by experience.
When the signs of economic growth was visible in the mid 2000 and the board started seeing significant demand growth (over 14% in some pockets), they decided to look at alternate models for finding the investment. They have gone about the task in a very commendable manner and have also prepared a scheme for other states to emulate. They have encouraged Wind Power, reactivated dormant schemes and have signed joint development scheme with central organizations. Given the experience of the nineties, the board has this time placed its bets on Public sector entities rather than private enterprises. Plans are in place to double the installed generation capacity through these efforts in the next 8 years.
One awaits a similar approach to increase investments in the T & D Segment. New models, be it the franchise model of PPP (Public Private Partnership) or transfer of assets to joint venture, have to be put in place quickly to fully deliver the large quantum of Power that will be generated in the state. Otherwise one runs the risk of exporting this power to neighbouring states to earn short term profits.
From a country where, food shortages was an accepted fact and we had to go through periods when we needed administration's permission to host a family marriage lunch and dinner, we have come far. But the sad fact remains that all are yet to travel this distance.
While the intelligentsia, discuss in forums issues that need to be done to rectify this anomaly, little gets done at ground level. From the mid seventies till now, the misuse of funds earmarked for irrigation projects is a classic case in point. Where, irrigation projects got done and rivers regulated, we see prosperity. But the millions which were wasted on the canals which never got made or got built as per intended specifications, have brought misery to many.
Today, India is at cross roads, as your editorial points out.
Given the communication access to many even in the hinterlands of the country, today the rural urban divide is visible to many and increasingly people are demanding answers. With the increased thrust being seen internationally for allocating the necessary importance to increased food production, it is time our ministries got their act together, to bring in the next major thrust..
Today, the cultivated land share is reducing by the year due to rapid industrialisation. We had still not perfected the model of transferring the correct costs for the agricultural produce, before which, this IT led industrialisation has landed on us. Our Economy managers, are now compelled to choose between segments, which they cannot. If one has to pay the correct price for the agricultural produce, we run the risk of increasing inflation and more by way of inflation expectations. But before long one has to do something about it.
We cannot subsidise imported food, but we can extend subsidy to our own agriculturists. While we are moving towards a full fledged market economy, where services are paid at cost, it is essential that the sector which gives the maximum employment opportunities in the country pay the labour minimum wages in relation to industry wages. This has to be achieved through direct subsidies.
Subsidies, however need to be made in transparent manner and cannot again be routed through free services like the Free electricity or through corporations such as subsidised prices for fertilizers. Pay a remunerative price for the farm produce, but demand remunerative price for the inputs used by the beneficiaries of the subsidy. This demands a significant change in the mind set and political will, and one only wishes that our politicians see the long term benefits in such an approach.
Development efforts, to introduce new grain strains, which reduce the water intake, cuts down sow to reap time, is resistant to known strains of diseases , has to be encouraged with state funded initiatives.
It is a mission to increase agricultural production and therefore it has to be taken up with the same zeal it demands; anything less can damage what we have gained since independence.
Any regulator would insist that the system where stake holders process their transactions capture trails which can be utilised to trace participants role leave alone their antecedents. He will be extra cautious about intermediaries, who transact on behalf of clients. The details of the clients though not available at the time of processing the transaction through the system, is an essential data which needs to be recorded. It shall be available to the regulator and the other participants of the transaction and cannot be the left indeterminate.
PN falls short of this and makes the transaction opaque. Especially, where the intermediaries are understood to have offered exotic products through their own financial engineering, the regulator needs to intervene to demand either transparency or prescribe different set of guidelines for such transactions to limit their scope.
Whether it is a cash market dealing or a derivative dealing the completed transaction over a period the owner parties (buyer or seller) to the deal are to be identified. It is therefore essential that funds behind PN needs to be identified and cannot forever hide from the purview of regulator.
While one may fault the manner in which the announcements have been made, the timing, the intent and the prescription are timely.
PGCIL share allotment
A preliminary study of the Demand & Basis of Allotment of PGCIL shares makes an interesting case study from the view of the Basis of allotment of employees quota.
Here is a case of over subscription of the employee quota by 3,18 times and some of the employees have been denied FIRM allotment even though they have subscribed to the reserved quota. The shares available for allotment under the employees quota totals up to Rs. 72. 68 crores which has been subscribed for Rs.231.78 Crores. Given the fact that the EMPLOYEE quota no longer has the restriction of Lock in period, the overwhelming response needs to be discounted for the possibility of proxy subscription.
Under such circumstances, is the basis of allotment justified, in as much as it has denied original allotment to some genuine employees, while making allotment on a proportionate basis to the level of interest shown. It is a different factor that such employees can now definitely buy these shares from the market at a premium(more than 75% as per Grey market indications).
In my opinion this basis of allotment is flawed as it ignores the fact that all employees are to be treated equal. We need to therefore ensure that
Here is a case of over subscription of the employee quota by 3,18 times and some of the employees have been denied FIRM allotment even though they have subscribed to the reserved quota. The shares available for allotment under the employees quota totals up to Rs. 72. 68 crores which has been subscribed for Rs.231.78 Crores. Given the fact that the EMPLOYEE quota no longer has the restriction of Lock in period, the overwhelming response needs to be discounted for the possibility of proxy subscription.
Under such circumstances, is the basis of allotment justified, in as much as it has denied original allotment to some genuine employees, while making allotment on a proportionate basis to the level of interest shown. It is a different factor that such employees can now definitely buy these shares from the market at a premium(more than 75% as per Grey market indications).
In my opinion this basis of allotment is flawed as it ignores the fact that all employees are to be treated equal. We need to therefore ensure that
- Minimum shares based on market lot considerations need to be allotted to all those who have applied for under the quota and
- Full allotment of the applied shares are alloted to the maximum number of persons with out denying anybody allotment.
Determination of Price for IPO by auction
Determination of IPO price by auction does increase the probability of pricing the issue much closer to the open market level as compared to any other form of discovery of price. By definition, the auction process is much closer to the open market but with out circuit breaker given the enabling controlled environment, effectively supervised by the Regulator for compliance.
Hence a solution could be, to put in place a system where IPO prices can be determined through auction, at the option of issuer, but with a lower limit on the price of the scrip, specified by the issuer, below which he may with draw the issue. With such an approach, the investor, especially the retail investor and HNI investors get a better role to play in the determination of price. This system will also usher in a mind set, where long term (read 2 to 3 years) outlook is essential to capture the value of the scrip.
In a developing economy like ours where the stock market is discovering new growth stories every month, we need to move to an auction platform quickly so that the issuer is provided an alternate option and is not necessarily compelled to accept the price suggested by the "Book Builder".
Determination of Price for IPO by auction
Determination of IPO price by auction does increase the probability of pricing the issue much closer to the open market level as compared to any other form of discovery of price. By definition, the auction process is much closer to the open market but with out circuit breaker given the enabling controlled environment, effectively supervised by the Regulator for compliance.
Hence a solution could be, to put in place a system where IPO prices can be determined through auction, at the option of issuer, but with a lower limit on the price of the scrip, specified by the issuer, below which he may with draw the issue. With such an approach, the investor, especially the retail investor and HNI investors get a better role to play in the determination of price. This system will also usher in a mind set, where long term (read 2 to 3 years) outlook is essential to capture the value of the scrip.
In a developing economy like ours where the stock market is discovering new growth stories every month, we need to move to an auction platform quickly so that the issuer is provided an alternate option and is not necessarily compelled to accept the price suggested by the "Book Builder".
Cheaper Credit? is it the cure for all?
But if the government and the industrialist do come together and initiate steps which can cut down costs then there may be not an immediate need to reduce this impost. As your leader correctly points out there are sections such as realty, which have absorbed this impost (through external flows), which is once again hurting the same industrialist. Any early redemption of this impost could hurt the sections it is wishing to protect by causing runaway inflation.
As a first step the government can authorise free movement of goods across states to recognized Logistics providers who will be responsible for the movement of goods and the sales tax compliance there off. Given the ground reality of the infrastructure bottle necks, the least government could do is to reduce the transit time of goods and thereby reduce inventory and costs there off. Cost of compliance will also be low as the logistics provider can be authorised to ensure compliance.
Grwoth Pangs - Engage
Engaging the key stake holders in dialogue to understand their views and share the promoters' and governments' view is the need of the hour. Corporates, starting from Reliance should heed to this intelligentsia's call and engage the masses in a continuous dialogue.
Corporate giants moving in to retail business is definitely encroaching in to another business persons territory and it reflects poorly off the corporates capabilities to move into new territories where entrenched players exist. The rush in to occupy window's space in markets across the country with out understanding the locale conditions, can be described as simple bad planning
To retain the first mover advantage if the corporates like Reliance move in at breakneck speed, they may definitely maximise the foot falls at their stores, but risk causing irreparable damage to the entire model. Better sense should prevail on these organizations, who should engage well intentioned local NGOs, to explain their plans and address issues which may be thrown up in such engagements. They should move in to occupy in steps and not rush in as they have done now.
With the larger than life size image which these corporates occupy in the minds of rural folk (read Rakshashas), it is easy for other vested interests to move in to exploit and create panic.
It is still not too late for the corporate to appreciate the errors they have committed and correct it by engaging with the stake holders.
Prescription for PN
Any regulator would insist that the system where stake holders process their transactions capture trails which can be utilised to trace participants role leave alone their antecedents. He will be extra cautious about intermediaries, who transact on behalf of clients. The details of the clients though not available at the time of processing the transaction through the system, is an essential data which needs to be recorded. It shall be available to the regulator and the other participants of the transaction and cannot be the left indeterminate.
PN falls short of this and makes the transaction opaque. Especially, where the intermediaries are understood to have offered exotic products through their own financial engineering, the regulator needs to intervene to demand either transparency or prescribe different set of guidelines for such transactions to limit their scope.
Whether it is a cash market dealing or a derivative dealing the completed transaction over a period the owner parties (buyer or seller) to the deal are to be identified. It is therefore essential that funds behind PN needs to be identified and cannot forever hide from the purview of regulator.
While one may fault the manner in which the announcements have been made, the timing, the intent and the prescription are timely.
Power to Unlock
There are significant pointers available to the policy makers in the phenomenal success of the PGCIL IPO, both at the state and central levels.
First and foremost, it is important to establish through policies, regulations and the administrative machinery, a viable business model. When established systems are unbundled or restructured, it is necessary to keep in mind the possible future options and decide on the policy frame work.
The second important pointer is that of the organisational culture and capabilities of the public sector entity, to benefit from the enabling environment. PGCIL through its employees, have established a bench mark in performance, which is comparable to its peers abroad.
Market is also rating the NTPC Scrip (another major player in the Power sector) with lots of expectations. NTPC has also benefited from similar policy initiatives and is a well manged and run organisation with committed employees. All these augurs well for the sector as a whole. The prevailing sentiment should be capitalised to bring in part of the enormous funds required to make power for all by 2012.
Forward looking state governments should be encouraged to corporatise packets of distribution network, along with or as a separate entity the transmission systems and approach the market for equity. Every state through the Electricity act have put in place a regulator who is guiding the policy issues. In the case of Tamilnadu for instance, aggregate commercial losses on a grossed basis may look marginally higher compared to what the market would like to see. But one can look at significant pockets(geographical areas) which can be spun off into separate companies and corporatised.
Tamilnadu should take the lead to bring in the much needed funds to improve the balance network with out loosing government's control.
Indian Governments need to be more proactive
Choke Eases Even More
RBI has done its bit to unshackle the Indian Entrepreneur and industrialists from the chains of bondage to the Indian currency. The Investors are, by the day being encouraged to, explore new markets, compete globally to maximise returns on their capital.
It is now the turn of the Government to step in an unobtrusive way to support the initiative. In this era of globalisation, we need to ensure energy security, and committed linkages to commodities that help us meet our growing needs. This is best done through selective investments, which also translate to export of our capital globally. All these can be front ended by the nibble footed Indian investor, but he surely needs the unfailing commitment of the government.
We need politicians who will understand the dynamics of the Indian multinationals' support requirements and guide the policies. They should intervene to nudge friendly governments to grant a license or exclusivity. They should also provide the bureaucratic support to secure favourable terms for our capital such as Sovereign government guarantees, negotiate hard during bilateral exchanges with the Indian investors capital in mind.
Bulk of our increasing foreign exchange reserves are due to the earnings of Indian diaspora who are toiling away to bring in the riches to the country. It would befit all their efforts if the governments and Indian Entrepreneurs use this capital to further enhance the Indian growth story.
RBI has done its bit to unshackle the Indian Entrepreneur and industrialists from the chains of bondage to the Indian currency. The Investors are, by the day being encouraged to, explore new markets, compete globally to maximise returns on their capital.
It is now the turn of the Government to step in an unobtrusive way to support the initiative. In this era of globalisation, we need to ensure energy security, and committed linkages to commodities that help us meet our growing needs. This is best done through selective investments, which also translate to export of our capital globally. All these can be front ended by the nibble footed Indian investor, but he surely needs the unfailing commitment of the government.
We need politicians who will understand the dynamics of the Indian multinationals' support requirements and guide the policies. They should intervene to nudge friendly governments to grant a license or exclusivity. They should also provide the bureaucratic support to secure favourable terms for our capital such as Sovereign government guarantees, negotiate hard during bilateral exchanges with the Indian investors capital in mind.
Bulk of our increasing foreign exchange reserves are due to the earnings of Indian diaspora who are toiling away to bring in the riches to the country. It would befit all their efforts if the governments and Indian Entrepreneurs use this capital to further enhance the Indian growth story.
Wired Broad band in India
Wired broad band is one of the most cost effective of building the backbone to deliver high speed connectivity to Tier II, Tier III cities and rural India. While providing "Open Access" on the existing fiber and copper is one of the best ways there are other interesting possibilities as well waiting to be exploited.
And that is the Optic Fiber run on Transmission Lines. Composite Optic Power Ground wire, which is run on existing Transmission Lines serve two distinct purposes. It acts as earth wire for the Line(shielding) and also provide Optic fiber (up to 24 fibers as a standard).
With the Electrical utilities, already having a ready made "Right of Way" , these Optic Fibers which are run on thees lines with the end equipments housed in various stations provide the opportunity to take Fiber along all the main state trunk routes. It also saves enormous costs for the utilities who are increasingly going on for Automation of billing, etc for which they are currently hiring broad band from ISPs.
With the enormous reach of the Electrical utility in the state and their established mechanism to provide O&M services, the Optic fiber once laid will provide additional revenue streams. It is also easy to break the fiber at intermediate Substations and add signals, This facilitates additions of intermediate stations which are other wise unattractive locations from the revenue point of view of Service Providers. One can also look at the possibility of leasing out space for the Mobile operators in the substations, along with back bone connectivity to provide wireless signals for the last mile.
For the utilities this provide a new stream of revenue and the government a cost effective solution.
Once the Optic fiber is in place connected, the Government can lease some of the fibers for its educational services, Telemedicine and e Governance. The surplus fiber can be either leased out as "Dark Fiber " or the utility can provide bandwidth as well.
TRAI shall take the decision to provide "Automatic" state level Service Provider's Licence to the Electric public utility as a starter.
PGCIL has already laid the fiber and is generating revenues. Some of the forward looking electricity boards are already working on it and has commenced the work. The time is right to take a decisive move on this initiative.
Olympic Myths
Olympic Myths
An interesting locals perspective on the Olympics has been presented in this article. While I agree with the views presented, it would do us all lots of good if we look at a possible solution as well for this "distortion" to ordinary lives and permanent alterations(damage!) to the locale.
Given the proven business model of Olympics, any progressive thinker like you (Mike) should propose an alteration to the model so that part of the business model stays. Any effort to totally alter the scheme will bring with it the enormous clout of the forces that stand to benefit from this once a 4 year show.
Some of my suggestion are:
An interesting locals perspective on the Olympics has been presented in this article. While I agree with the views presented, it would do us all lots of good if we look at a possible solution as well for this "distortion" to ordinary lives and permanent alterations(damage!) to the locale.
Given the proven business model of Olympics, any progressive thinker like you (Mike) should propose an alteration to the model so that part of the business model stays. Any effort to totally alter the scheme will bring with it the enormous clout of the forces that stand to benefit from this once a 4 year show.
Some of my suggestion are:
- Leverage technology: With the enormous capability of technology one can synchronize multiple locational events and present a coherent continuous spectacle to the Television audience which is the key funder of such extravagance.
- Allow to bid for hosting specialized events only instead of the entire games. Such an effort will make it easier for new comers to look at creating a part of the facility and not burden itself with the issues of hosting the entire paraphernalia of the Olympic teams. It will drastically reduce the logistics effort required to move men and materials for the event, while bringing in more live(read physical) participation to encourage the sport and the participants.
- Make use of the created facilities game after game. Such large facilities can be wasted away for a once in life time function. It has to be reused to conserve energy if not anything else. It also brings in enormous savings in costs of hosting subsequent Olympics.
- Such an approach reduces the risk of security and partly saves the games from the efforts of evil minded eliminating the possibility of whole some interruption.
Accounting for Power
Minimizing the human effort at the stage of collection and assimilation of consumption data through IT enabled environment will bring in the much needed transparencies and accountability to the Power Sector. Data accuracy will improve and so will the revenue. Efforts are needed to bring in this change across all levels of consumption.
Under the Accelerated Power Development and Reforms programme (APDRP) an effort to bring in energy accounting system was launched. This failed to take off, for the consumers did not see the benefit from this. The consumers were not educated on the likely benefits which accrue to them due to the possible reduction of commercial losses. A lesson is available for all, to therefore not repeat the same mistake when we grapple with new technologies and initiatives.
To bring in IT enabled accounting system, as your leader suggests, should be done with innovative tariff mechanism with inbuilt incentives for the consumer. A classic instance is that of the group accounting system. Each of our multi storied apartments has a dedicated transformer (if not more). Each of these transformers shall be metered and reconciled with the energy consumed as measured through the individual meter recordings to record the losses. Allowing for technical losses, the rest of the losses shall be recovered from all the consumers at a flat rate. This brings in a collective responsibility to the consumers in that apartment block as they see immediate benefit to themselves. The same model can be replicated across a commercial street where the losses could be substantial because of influential elements interests. Villages, with the promise of continued supply will also join the effort if for instance a scheme is drawn up where say for the "day and peak power" the villagers pay and the "night power" it is free.
Today technology (read IT) is available to make this whole effort automatic and with minimum human interface. Once the system is established the housing society's representative (or the local representative of the commercial street) can themselves tally and zero in on the reasons for losses. To start this entire exercise we need to prepare simple and easily understandable tariff models.
Today the tariff for say, TNEB is uniform across the state for identified slabs and has factored in it the aggregate commercial and technical losses as allowed by the Regulator. As and when we move to collective accountability system the new tariff called "Group Tariff" which shall not have any losses loaded in the base tariff (Losses as applicable for the appropriate voltage levels) but will have provision to load at actuals arrived at every reading.The recovery for the cost of providing this IT enabled environment should be spread over say a 5 year period, through BOT models for which I am sure we can find dedicated and competent firms.
One should put in special efforts to educate the consumer after launching such an incentivized scheme, so that popular will supports the implementation and minor vested interests are not allowed to derail the effort. Data generated through such dedicated IT enabled metering system could be used for planning, monitoring and establishing the performance of equipments and systems, so on & so forth.
Under the Accelerated Power Development and Reforms programme (APDRP) an effort to bring in energy accounting system was launched. This failed to take off, for the consumers did not see the benefit from this. The consumers were not educated on the likely benefits which accrue to them due to the possible reduction of commercial losses. A lesson is available for all, to therefore not repeat the same mistake when we grapple with new technologies and initiatives.
To bring in IT enabled accounting system, as your leader suggests, should be done with innovative tariff mechanism with inbuilt incentives for the consumer. A classic instance is that of the group accounting system. Each of our multi storied apartments has a dedicated transformer (if not more). Each of these transformers shall be metered and reconciled with the energy consumed as measured through the individual meter recordings to record the losses. Allowing for technical losses, the rest of the losses shall be recovered from all the consumers at a flat rate. This brings in a collective responsibility to the consumers in that apartment block as they see immediate benefit to themselves. The same model can be replicated across a commercial street where the losses could be substantial because of influential elements interests. Villages, with the promise of continued supply will also join the effort if for instance a scheme is drawn up where say for the "day and peak power" the villagers pay and the "night power" it is free.
Today technology (read IT) is available to make this whole effort automatic and with minimum human interface. Once the system is established the housing society's representative (or the local representative of the commercial street) can themselves tally and zero in on the reasons for losses. To start this entire exercise we need to prepare simple and easily understandable tariff models.
Today the tariff for say, TNEB is uniform across the state for identified slabs and has factored in it the aggregate commercial and technical losses as allowed by the Regulator. As and when we move to collective accountability system the new tariff called "Group Tariff" which shall not have any losses loaded in the base tariff (Losses as applicable for the appropriate voltage levels) but will have provision to load at actuals arrived at every reading.The recovery for the cost of providing this IT enabled environment should be spread over say a 5 year period, through BOT models for which I am sure we can find dedicated and competent firms.
One should put in special efforts to educate the consumer after launching such an incentivized scheme, so that popular will supports the implementation and minor vested interests are not allowed to derail the effort. Data generated through such dedicated IT enabled metering system could be used for planning, monitoring and establishing the performance of equipments and systems, so on & so forth.
My comment of AVOIDABLE BURDEN - an Editorial in Business Line
AVOIDABLE BURDEN - an Editorial in Business Line
Dear Editor,
Due to our inadequacies in handling the globalisation process we allow ourselves to be surprised by the international prices of Wheat or rice or pulses or other commodities. As in the case of price of crude oil, which the "Oil Cartel" has hijacked to the ill fate of so many, the trend is continuing to other commodities. We saw the coffee prices zoom a few years ago and recently Rubber was very volatile. Base metals copper and Zinc played out their scintillating run towards the latter part of 2006.
Now it is the turn of wheat which affects many who are otherwise normally not concerned with globalisation.While we may believe in the strengths of market economy to provide the best to the consumer, we cannot be seen to be doing nothing in the case of wheat a basic commodity which will hurt the poor very badly.
It is therefore essential to build a system where the poor and needy are insulated from these shocks, lest the "price shocks" sway the government itself. As a first step it is essential to bring in efficiencies in handling the farm produce. As your paper through its numerous articles on related topics, have highlighted, there are serious inadequacies in proper storage, Distribution and logistics. As the leading industrialist of the country opined in a popular channel, there are forces both in and outside the administration who have vested interests, which do not drive efficiency.
In an era of globalisation, where some of our actions are influenced based on happenings elsewhere in the globe which are beyond our control, it is necessary for us to have in place an efficient system which is lean and functional. It is time non performing monoliths like the Food Corporation of India are given a quite burial and the handling switched to more efficient hands. Technology (read IT) should be brought in to bring in transparency and accountability. Functional and independent management shall be assigned the responsibility of driving down holding costs and create surpluses.
The need to purchase wheat at $390 dollar per tonne, should galvanise the government in to action to bring in more efficiency and transparency int he whole management of the farm produce.
Regards,
Balakrishnan
Dear Editor,
Due to our inadequacies in handling the globalisation process we allow ourselves to be surprised by the international prices of Wheat or rice or pulses or other commodities. As in the case of price of crude oil, which the "Oil Cartel" has hijacked to the ill fate of so many, the trend is continuing to other commodities. We saw the coffee prices zoom a few years ago and recently Rubber was very volatile. Base metals copper and Zinc played out their scintillating run towards the latter part of 2006.
Now it is the turn of wheat which affects many who are otherwise normally not concerned with globalisation.While we may believe in the strengths of market economy to provide the best to the consumer, we cannot be seen to be doing nothing in the case of wheat a basic commodity which will hurt the poor very badly.
It is therefore essential to build a system where the poor and needy are insulated from these shocks, lest the "price shocks" sway the government itself. As a first step it is essential to bring in efficiencies in handling the farm produce. As your paper through its numerous articles on related topics, have highlighted, there are serious inadequacies in proper storage, Distribution and logistics. As the leading industrialist of the country opined in a popular channel, there are forces both in and outside the administration who have vested interests, which do not drive efficiency.
In an era of globalisation, where some of our actions are influenced based on happenings elsewhere in the globe which are beyond our control, it is necessary for us to have in place an efficient system which is lean and functional. It is time non performing monoliths like the Food Corporation of India are given a quite burial and the handling switched to more efficient hands. Technology (read IT) should be brought in to bring in transparency and accountability. Functional and independent management shall be assigned the responsibility of driving down holding costs and create surpluses.
The need to purchase wheat at $390 dollar per tonne, should galvanise the government in to action to bring in more efficiency and transparency int he whole management of the farm produce.
Regards,
Balakrishnan
An interesting Article from my favorite columnist Swaminathan Ankaleswara Iyer (with my editorial flourish)
The slump in global stock markets since July has wiped out an estimated $5 trillion of wealth, five times the GDP of India. So, world inequality has fallen dramatically. Are poor people across the world celebrating the great reduction of global inequalities? Are socialists celebrating increased equality ? No, not at all.
But why not? For years, analysts have worried about rising inequalities in India. Rapid growth has sent the stock markets soaring, and several Indians have entered the Forbes list of top billionaires of the world. Simultaneously, 300 million remain below the poverty line. This stark contrast has evoked much outrage.
Prime Minister Manmohan Singh says that unless the poor participate in fast growth, uprisings could disrupt our nationhood - over 150 out of 600 districts are affected by Maoist violence. The same theme is echoed in a recent study of Asian inequality by the Asian Development Bank. The ADB chief economist has been widely quoted as saying that high levels of inequality disrupt social cohesion, and could lead to civil war.
If this were really true, then the stock market slump should have healed social tensions. An Indian Express story on August 12 estimated that the richest five Indians had lost more than $10 billion in the previous fortnight. The total wealth lost by all shareholders was $52 billion (Rs 210,000 crore), almost equal to the GDP of Bangladesh.
So, inequalities in India have fallen dramatically. Not even the most draconian tax measures could have reduced the wealth of shareholders by $52 billion.
But are the 300 million poor people of India celebrating? Are landless labourers in Bihar delighted that the wealth of the Ambanis has suddenly fallen by billions? Are the tribals of Chattisgarh and Jharkand joyous that the Tatas have become poorer? Are illiterate Dalit women, the most oppressed and powerless section of our population, ecstatic that the stock market slump has improved income distribution?
Of course not. And this has consequences for theories of social tension. Now that the stock market slump has significantly improved India's Gini coefficient of wealth, will Maoist insurgents in Chatttisgarh give up insurrection? Will ULFA in Assam cease its depredations because of greater equality between the people of Assam and those of Dalal Street? Will the militants in Kashmir become less militant because of an improved income distribution?
To even suggest this would be farcical. Yet that farcical notion is deeply entrenched in much socio-economic analysis. The millionaires of Nepal are deeply invested in Indian stock markets. Does the ADB think that their stock market losses, which have reduced inequalities, will ease tensions in the neglected Himalayan region of Nepal?
Economists focus on measures of inequality like the Gini coefficient. But ordinary folk have very different concerns. Bihar is the poorest state and Goa the richest, but the poor Bihari does not worry about the disparity. He knows that his travails are due to local politicians and mafia, not rich Goans. He is not interested in impoverishing the Ambanis, he wants to become rich himself. He welcomes a booming stock market that might bring investment and jobs to Bihar.
Many analysts think society is happier when inequalities fall and unhappier when inequalities rise. Really? In an economic recession, profits fall much faster than wages, so equality improves. But do the poor enjoy a recession , with its unemployment and weak wages? Not at all. They far prefer an economic boom, even though profits rise much faster than wages.
People want more income, not better Gini coefficients. They are concerned with inequality only when they see some powerful people gaining at their expense. They don't grudge Sachin Tendulkar or Shah Rukh Khan their riches. Both these gentlemen are from families of modest means, and have become billionaires through talent. That makes them role models, not hate objects. They are examples of what ordinary Indians seek - a chance to become rich and famous themselves They do not want a slice of Mao's China, they want a slice of Deng's China. They want the opportunity to rise.
The ADB review is dead right in its key conclusion: governments in Asia must do much more to improve equality of opportunity. In India, it is shocking that after six decades of independence and the spending of millions of crores, literacy is barely 65%, and most people who complete school cannot read simple paragraphs or do simple maths sums.
It is outrageous that every village does not have a functioning school and health clinic; does not have electricity, telecom and a pukkaroad ; does not have access to effective rule of law or judicial redress.
This is the inequality that I keep complaining about. Instead of doing something about it, socialists point fingers at the rising wealth of Ambanis and Tatas, as though that is responsible for the sad plight of our villages. It would be as ridiculous to blame Tendulkar and Shah Rukh Khan.
The shocking denial of access to basic facilities at the village level institutionalises inequality of opportunity, and prevents the poor from rising. Urban facilities provide some social mobility. But rural facilities are typically so pathetic as to become poverty traps.
For this, our netas and babus are fairly and squarely to blame. These heroes of the Left are the zeros that have ensured continuing inequality of opportunity, poverty and powerlessness. Their solution is to compete in offering castebased reservations, not in providing the equality of opportunity that might make caste irrelevant.
I too am outraged that 300 million Indians remain poor. I am outraged not that a few Indians have become billionaires but that thousands more have not, for want of equality of opportunity. I look forward to an India with thousands of billionaires and millions of millionaires. I do not wish to give the poor a few doles, keeping them as objects of pity. I want to them to be given equal opportunity so that they too can be independent and aspire to provide to their progeny what they did not have but always wanted.( convert them to millionaires, to objects of envy).
But why not? For years, analysts have worried about rising inequalities in India. Rapid growth has sent the stock markets soaring, and several Indians have entered the Forbes list of top billionaires of the world. Simultaneously, 300 million remain below the poverty line. This stark contrast has evoked much outrage.
Prime Minister Manmohan Singh says that unless the poor participate in fast growth, uprisings could disrupt our nationhood - over 150 out of 600 districts are affected by Maoist violence. The same theme is echoed in a recent study of Asian inequality by the Asian Development Bank. The ADB chief economist has been widely quoted as saying that high levels of inequality disrupt social cohesion, and could lead to civil war.
If this were really true, then the stock market slump should have healed social tensions. An Indian Express story on August 12 estimated that the richest five Indians had lost more than $10 billion in the previous fortnight. The total wealth lost by all shareholders was $52 billion (Rs 210,000 crore), almost equal to the GDP of Bangladesh.
So, inequalities in India have fallen dramatically. Not even the most draconian tax measures could have reduced the wealth of shareholders by $52 billion.
But are the 300 million poor people of India celebrating? Are landless labourers in Bihar delighted that the wealth of the Ambanis has suddenly fallen by billions? Are the tribals of Chattisgarh and Jharkand joyous that the Tatas have become poorer? Are illiterate Dalit women, the most oppressed and powerless section of our population, ecstatic that the stock market slump has improved income distribution?
Of course not. And this has consequences for theories of social tension. Now that the stock market slump has significantly improved India's Gini coefficient of wealth, will Maoist insurgents in Chatttisgarh give up insurrection? Will ULFA in Assam cease its depredations because of greater equality between the people of Assam and those of Dalal Street? Will the militants in Kashmir become less militant because of an improved income distribution?
To even suggest this would be farcical. Yet that farcical notion is deeply entrenched in much socio-economic analysis. The millionaires of Nepal are deeply invested in Indian stock markets. Does the ADB think that their stock market losses, which have reduced inequalities, will ease tensions in the neglected Himalayan region of Nepal?
Economists focus on measures of inequality like the Gini coefficient. But ordinary folk have very different concerns. Bihar is the poorest state and Goa the richest, but the poor Bihari does not worry about the disparity. He knows that his travails are due to local politicians and mafia, not rich Goans. He is not interested in impoverishing the Ambanis, he wants to become rich himself. He welcomes a booming stock market that might bring investment and jobs to Bihar.
Many analysts think society is happier when inequalities fall and unhappier when inequalities rise. Really? In an economic recession, profits fall much faster than wages, so equality improves. But do the poor enjoy a recession , with its unemployment and weak wages? Not at all. They far prefer an economic boom, even though profits rise much faster than wages.
People want more income, not better Gini coefficients. They are concerned with inequality only when they see some powerful people gaining at their expense. They don't grudge Sachin Tendulkar or Shah Rukh Khan their riches. Both these gentlemen are from families of modest means, and have become billionaires through talent. That makes them role models, not hate objects. They are examples of what ordinary Indians seek - a chance to become rich and famous themselves They do not want a slice of Mao's China, they want a slice of Deng's China. They want the opportunity to rise.
The ADB review is dead right in its key conclusion: governments in Asia must do much more to improve equality of opportunity. In India, it is shocking that after six decades of independence and the spending of millions of crores, literacy is barely 65%, and most people who complete school cannot read simple paragraphs or do simple maths sums.
It is outrageous that every village does not have a functioning school and health clinic; does not have electricity, telecom and a pukkaroad ; does not have access to effective rule of law or judicial redress.
This is the inequality that I keep complaining about. Instead of doing something about it, socialists point fingers at the rising wealth of Ambanis and Tatas, as though that is responsible for the sad plight of our villages. It would be as ridiculous to blame Tendulkar and Shah Rukh Khan.
The shocking denial of access to basic facilities at the village level institutionalises inequality of opportunity, and prevents the poor from rising. Urban facilities provide some social mobility. But rural facilities are typically so pathetic as to become poverty traps.
For this, our netas and babus are fairly and squarely to blame. These heroes of the Left are the zeros that have ensured continuing inequality of opportunity, poverty and powerlessness. Their solution is to compete in offering castebased reservations, not in providing the equality of opportunity that might make caste irrelevant.
I too am outraged that 300 million Indians remain poor. I am outraged not that a few Indians have become billionaires but that thousands more have not, for want of equality of opportunity. I look forward to an India with thousands of billionaires and millions of millionaires. I do not wish to give the poor a few doles, keeping them as objects of pity. I want to them to be given equal opportunity so that they too can be independent and aspire to provide to their progeny what they did not have but always wanted.( convert them to millionaires, to objects of envy).
TRAI initiative on DTH
(Telecom Regulatory Authority Initiative of India initiative on Direct Transmission to Home)
It is important to understand that at the core of the initiatives of the TRAI(Telecom Regulatory Authority of India) should lie the consumers interest and the investor's healthiness so that the consumer gets to access to latest technology at competitive costs over time.
It is therefore obvious that convergence of technologies need to be encouraged and starting from brand related barriers to technology related barriers need to be broken down. Today the business models of the telecoms have to be dynamic to capture the fast changing impact that technology advancements are bringing. While continuity in policy and guidelines to nurture an enterprise is essential, TRAI must be complemented in addressing the consumers interests simultaneously.
DTV is one such convergent technology tool which will have to be exploited to the larger consumers' benefit. Individual players who have outbid others to corner bandwidth(be it satellite or Air Spectrum) should not be encouraged to drive away consumers by imposing artificial restrictions which are purely based on short term revenues considerations.
(My letter to the Editor of Economic Times)
It is important to understand that at the core of the initiatives of the TRAI(Telecom Regulatory Authority of India) should lie the consumers interest and the investor's healthiness so that the consumer gets to access to latest technology at competitive costs over time.
It is therefore obvious that convergence of technologies need to be encouraged and starting from brand related barriers to technology related barriers need to be broken down. Today the business models of the telecoms have to be dynamic to capture the fast changing impact that technology advancements are bringing. While continuity in policy and guidelines to nurture an enterprise is essential, TRAI must be complemented in addressing the consumers interests simultaneously.
DTV is one such convergent technology tool which will have to be exploited to the larger consumers' benefit. Individual players who have outbid others to corner bandwidth(be it satellite or Air Spectrum) should not be encouraged to drive away consumers by imposing artificial restrictions which are purely based on short term revenues considerations.
(My letter to the Editor of Economic Times)
Going over the Hill
I know that at some age one is supposed to feel old and that it is not fixed that one should feel old say at fifty. It varies from person to person.
But when you do feel it, it is shocking.
It is shocking because suddenly you are aware of things which are common knowledge to you but are historical facts for many!
It is shocking because, even though you want to do something, your body does not respond as it has been for decades and you know that you have to slow down.
It is shocking because, you eat less and you do not crave for food.
It is shocking because you have joined the walking group till recently you used to avoid because they were slow
It is shocking because that you know that you have limited (but still lots and lots) time to complete the things you set of to do.
One of the person whom I respect used to say that when you cross fifty you realise that the world can do with out you and when you cross Seventy the world is better off with out you. Now that I have crossed fifty, I do not have that feeling. I am relaising that the infinite energy and time which I had always assumed to be my birth right is no longer true. They are limited and I have used up quite a lot.
I need to commit myself to the job at hand more diligently and complete what I had been made for and that too as early as possible
But when you do feel it, it is shocking.
It is shocking because suddenly you are aware of things which are common knowledge to you but are historical facts for many!
It is shocking because, even though you want to do something, your body does not respond as it has been for decades and you know that you have to slow down.
It is shocking because, you eat less and you do not crave for food.
It is shocking because you have joined the walking group till recently you used to avoid because they were slow
It is shocking because that you know that you have limited (but still lots and lots) time to complete the things you set of to do.
One of the person whom I respect used to say that when you cross fifty you realise that the world can do with out you and when you cross Seventy the world is better off with out you. Now that I have crossed fifty, I do not have that feeling. I am relaising that the infinite energy and time which I had always assumed to be my birth right is no longer true. They are limited and I have used up quite a lot.
I need to commit myself to the job at hand more diligently and complete what I had been made for and that too as early as possible
OPGW - A communication solution for Power Utilities
Any Power utility has to set up dedicated communication links connecting all its operating centers spread through out its geographical area. This network primarily conveys voice signals (conventional telephone conversations), data regarding the operating parameters of the system and electrical protection of transmission line. As on date this is achieved through Power Line Carrier Communication (PLCC) and Microwave. Microwave is weather Dependant and does see rare interruptions, but is expensive as the utility has to pay annual license fees. PLCC has a limitation as it can carry only narrow band signals.
The alternative is Fiber Optic based communication, which has phenomenal band width. For this purpose one has to lay the optic fiber physically connecting the end points. Since the electricity board has dedicated transmission lines Cris crossing the entire state, a scheme was thought of to exploit this "Right of Way" which is other wise lying idle.
In this scheme the earth wire ( a galvanized steel wire which is run on the peak of transmission lines) is replaced with a OPGW (Composite Optical Power Ground Wire) which serves the purpose of acting as earth wire and has an embedded stainless steel tube which carry a bunch of fibers.The transmission line terminates at Receiving stations or generating stations and at these locations the OPGW is terminated and the fiber carried to special equipments called Optical Line Terminal Equipments(OLTE). These OLTE are similar to the ones currently used by the major telecom companies and carry signals in the SDH format. ( An international telecom standard accepted across globe).
The signals of the utility which may start from their telephone exchanges or computer network such as Ethernet or their Data Commendation equipments called RTU(remote terminal unit) or connected to the SDH gateway through specialised equipment called Primary multiplexer at the sending end. At the receiving end these are again "dropped" out of SDH gateway through another set of similar equipment and connected to the exchange or ethernet.
Some of the major advantages of this system over existing comparable communication links of Electricity utilities are the phenomenal increase in band width at a low investment. With increased automation being taken by TNEB in terms of computerisation of billing and collection, accessing their main load center points and generating stations on Real time basis, this network will go a long way in providing fail safe & effective communication link.
Last but not the least - the replacement of existing earth wire typically should call for shutting down the concerned power lines. In this case M/s BGR Energy System, the agency executing this project on a turnkey basis are adopting a system called "live Line working" where they will replace the existing earth wire with optic fiber embedded Ground wire(OPGW) under live conditions, minimising inconvenience to consumers.
Once the Optic fiber is laid and commissioned, TNEB has in its asset a dedicated link which can be used by other state departments. TNEB can also lease out to outsiders after complying with the necessary regulatory compliance's.
NOVARTIS Patents Case Madras High Court Judgement
To Choose not to Choose is one of the most difficult choice any informed person can take on any given circumstances, leave alone under this extremely hyper sensitive NOVARTIS case. To exercise a choice becomes easier when the possible outcomes due to your choice are clear, especially if it were worked out on mathematical models or based on historical data. Not only the outcome in this case is unpredictable, the grounds which has forced one to make a choice is in itself challengable.
History will remember the Madras High Court Judgment on the NOVARTIS case as one of the steps which went on to undo the many damages which TRIPS, WTO has inflicted up on the developing economy in the name of globalisation.The case as widely covered in your paper, has two main elements - EFFICACY & INNOVATION.
The interpretation of EFFICACY and the way it is used to manipulate the protection granted to patents is being well documented. In the near future one can not be surprised even genuine discoveries get branded as manipulation due to this rampant trend of securing patents with tweaking of a few molecules, which is more of a streamlining of process rather than original discoveries.
History will remember the Madras High Court Judgment on the NOVARTIS case as one of the steps which went on to undo the many damages which TRIPS, WTO has inflicted up on the developing economy in the name of globalisation.The case as widely covered in your paper, has two main elements - EFFICACY & INNOVATION.
The interpretation of EFFICACY and the way it is used to manipulate the protection granted to patents is being well documented. In the near future one can not be surprised even genuine discoveries get branded as manipulation due to this rampant trend of securing patents with tweaking of a few molecules, which is more of a streamlining of process rather than original discoveries.
INNOVATION as a tool has also been exploited by the developed world through a much more grandiose design. When the representatives of developing countries negotiated TRIPS and WTO with the rich countries to get additional foothold to the protected markets, they were not equipped and knowledgeable enough to appreciate the long term adverse impact on their health care system due to the agreements on Patents.For starters many of the countries did not have a government funded health care system and may be that is one of the reason why the impact was not properly assessed. For many in the poor countries it was the relatively well off who could afford many treatment and a little bit more additional cost on such select few, was not something they were willing to make noise about. The issue had not raised enough debate to become politically relevant.
The rich countries though, were fully prepared and argued their case and won the case for their multinational corporations. The result is working out to the disadvantage of many in the developing country and the pain & hurt is beginning to be felt. A wrong committed by ignorant few cannot be allowed to decide the innocent lives of many and that too public at large.
Another important aspect is the one related to the near absence of encouragement for INNOVATION in this country or for that matter in any developing country. Innovation, is achieved through incubation of ideas nurtured under experienced hands in carefully guided steps. It needs a steady supply of streams of young talented exploring minds well educated and trained. Their efforts are to be supported through adequately funded labs either by the government or private sector. Entrepreneurship backed by venture funds also make Innovation possible by fresh minds. All these efforts means, access to the best of infrastructure to continue their pursuits and earn enough to continue to be at it.
The rich countries though, were fully prepared and argued their case and won the case for their multinational corporations. The result is working out to the disadvantage of many in the developing country and the pain & hurt is beginning to be felt. A wrong committed by ignorant few cannot be allowed to decide the innocent lives of many and that too public at large.
Another important aspect is the one related to the near absence of encouragement for INNOVATION in this country or for that matter in any developing country. Innovation, is achieved through incubation of ideas nurtured under experienced hands in carefully guided steps. It needs a steady supply of streams of young talented exploring minds well educated and trained. Their efforts are to be supported through adequately funded labs either by the government or private sector. Entrepreneurship backed by venture funds also make Innovation possible by fresh minds. All these efforts means, access to the best of infrastructure to continue their pursuits and earn enough to continue to be at it.
The near absence of such support therefore prevents an opportunity to have a level playing field across countries where due to globalisation one has to abide by the rules of Patents from a given cutoff date. Since the rules are framed by some one outside, centuries old home grown cures such SIDDA medicine, UNANI Medicine and AYUERVEDA are left outside the realm of Patents citing sub clauses of the patent act.
Such is the force of market economy, which allows well intended provisions for market making, capital formation and encouraging of competition, to lend itself to abuses by a few for creating monopoly and indulge in over exploitation.
Starting from Open source software to Scientific leaders engaged in Bio Technology research and Stem Cell Research are increasingly sharing their discoveries and making it available in public domain to benefit and add value. This sort of openness, they are realising, is bringing in substantial benefits to themselves, by cutting down on drug discovery time.
All this is leading to the question of GOOD and BAD capitalism , which is agitating the minds of policy makers world over. Under these circumstances, by deciding not to choose the learned Judge have acknowledged the inherent weakness of the law and its larger implications on the sovereign & constitutional rights of the public. Kudos to my home land Judiciary MADRAS High Court.
Presidential Prescrition - An over reach of Press
This presidential election from the start has been a controversial one. To a very large extent it reflects the mindset of the politicians on the purported fluid political situation. The ground reality is different. It is therefore unbecoming of leading news papers to further disillusion the ruling class by prescribing restraint when there is no cause of a provocation. The opposition is fragmented and no one, even the worst enemy of the congress will like to rock the boat now.
Coming to the prescription itself and the instances quoted in the history based on which such prescriptions are handed over, it is to be said that times are changing and the same Victorian approach may not be what the doctor will order. The media is only partly free and excessive restraints at the wrong time on the part of the President may not be advised.
One needs to allow the incumbent to act and have faith in her advisers and the other administrators of the constitution of India. In our 57 years of Republic, except for a brief period in 1975, our independence was never at risk. We managed to come out of that crisis as well.
I would strongly argue for an active President of India, whose actions will of course have to be within the powers granted by the constitution. While restraint and private reprimand in some cases may produce extraordinary results, it must be left to the judgment of the first person to choose the option.
One stop solution as indicated in the Leader is not what the doctor will order
The Leader is Looking Ahead .
SEZ Policy
SEZ policy which was supposed to be a single stop solution for all the ills of the exporters has hit a road block much to the chagrin of some in the government. The issue is the land which in most of cases is snatched from small farmers and handed over to the industrialists & corporates. Our rural folk have skill sets which support agriculture and it is naive to expect that reclassification of Land use which effectively rules out the repossession of the land by the current owners for generations will be smooth. Further the literacy level and the language barriers prohibit these farmers to move on to another location in our own country with out major setback. Policy makers and corporates should be humane enough to understand these issues and take appropriate action.
For instance in the case of Reliance, one of the suggestions is to take these farmers on contract basis and provide them with leased land and need based funds to engage in farming. Such farm output could be sold through their own proposed retail network. Such forward thinking and inclusive development models should be deployed by the corporate leaders like Reliance.
For instance in the case of Reliance, one of the suggestions is to take these farmers on contract basis and provide them with leased land and need based funds to engage in farming. Such farm output could be sold through their own proposed retail network. Such forward thinking and inclusive development models should be deployed by the corporate leaders like Reliance.
The Need for Talent to multiply Talent
The Need for the Talented to Multiply Talent
In the Indian context not a day passes with out a mention of the looming talent crisis to be faced by the IT and ITES sector. A shortage of similar magnitude is increasingly being felt by the brick and mortar industry, in infrastructure projects, Neither the Services segment is spared, as is seen in the shortage of qualified accountants. We are recruiting at third year level (two years prior to graduation) and the trend may continue.
What is needed is a multi pronged approach to tackle the problem on an immediate basis.
Education being a concurrent subject, has now become every government’s (state and central) problem. As is always the case under such circumstances every decision maker has come with up quick fix short term stand alone solutions with out a clear cut approach to prepare talent which are recognized at the state and national level as well as the international level. One wonders whether the decision makers at the education departments are aware of the need to nurture talent and provide enough opportunities for them to develop. While it is impossible to alter the basic structure of decision-making and governance, we need to start to address the issue.
The best way to start is by appointing a Central Education Regulator supplemented by state Education regulators. The Education Regulator functions and powers shall be structured in a similar manner as is done for the other industry like the Telecom. Today most of the institutions in the private sector are being run as an enterprise with clear responsibility to the promoters rather than to the student. Such undertakings need to be regulated and a quasi-judicial body needs to be constituted to streamline their operations on an immediate basis.
The regulator shall at the policy level lay down the following guidelines:
· Uniform Syllabus across states from the Higher secondary School onwards(8th Standard onwards),
· Lay down the principle of selection of teachers and their appointment, including fixing their service conditions.
· Fix Student – teacher ratios for each level
· Define minimum infrastructure requirements for each type of curriculum
· Define evaluation procedure
· Evaluate new specialization avenues and through the support of expert bodies and consultants formulate structured courses for new avenues.
· Specify minimum funding requirements
· Bring in a system of transparent accounting and acceptable maximum norms of return on the investment, Debt - equity norms and other investment guidelines to encourage Public Private partnership.
At the implementation level regulators role will be supported by multiple organisations and it is therefore necessary to appoint State Regulators. The state regulators in addition to laying all policy framework for the primary education, will be responsible for the implementation of the Central Regualtor's policies with in the defined state geographical boundaries.
The central regulator as an overseer of the implementation shall
· Introduce Licenses and certification mechanisms to ensure orderly implementation of its policies
· Shall establish transparently educational fees to be paid by the public at large
· Shall regulate the pricing of the educational materials which are consumed by public at large
· Establish cross subsidy norms and generate funds for rural education utilising the premiums now being paid at the Metro level through a transparent mechanism.
· Regulate coaching centers and monitor them.
· Regulate Mid day meal scheme
· Regulate student concessions
· Intervene in any area of concern (such as Vehicular Transportation for Children) which affect the student or the teaching community at large
· Adjudicate on issues related to examination are recruitment
As is clearly seen above there are various agencies either attempting to regulate these issues and in some of the cases the issues are not addressed at all. Providing such an encompassing role for the regulator could be contested by many, it is necessary to understand that unless all these issues are addressed it will be impossible to move quickly forward.
The main fall out of such a transparent regulatory policy frame work will be to encourage private investment. If our software companies are hesitant to invest in large scale in education, it is because of the need for themselves to collate data on the institutions. Further they need to supervise the implementation themselves and that requires a lot of responsibility which is outside their core competencies. No wonder there are so many crying over issues in the educational system with out doing anything about it.
Taxation Policy of the government and the credit policy shall be structured to encourage investment by corporates in to the certified institutions. At the personnel level outright allowance of say Rs. 1 lac per individual as set of in the taxable income from the salaried class will see the investments rushing in to the system. There are many a professional who will be willing to invest directly given this additional incentive.
e Learing which is a nascent phenomena needs to be encouraged. Innovative mechanisms shall be thought of to use such as utilising the off peak bandwidth available with leading service providers to deliver content to remotest areas of the country.
Across sectors Indians have proven their mettle and will definitely look at an opportunity to spend more time in India and invest their talent and resources. Persons in the educational field especially, given their typically strong religious leaning, will not waste an opportunity to return. But they will return only if the climate is right and the overall environment is conducive to investment and nurturing of talent, their own, their peers and the new stock.
India is currently uniquely poised to leverage its position in the Knowledge based industry. There are many diverse issues starting from the robust all round performance of our own economy, a renewed interest in the Indian market by our own Diaspora, the crashing of the distances and increased globalisation, etc which have created an opportunity for the government to seize the moment and provide the frame work to the talented to multiply talent.
Last but not the least, the talented Indian Diaspora is aware of the increased inequalities that are getting created in the western world, which are solely attributable to their talent. If it were to boil over it is any body's guess, who will be the first affected and no body can pretend to be not aware of the such a situation developing.
Disinvestment a different Perspective
All the assets which are currently considered as Navaratnas have reached that status due to the protection they enjoyed during the start up stage through various tariff protection measures and in some cases by denial of permission to create additional competing capacities by governments diktat. It is therefore not wrong to say that these assets are created through Regulation efforts and not necessarily through the enterprise efforts of the government. Such being the case, it is but obvious that the ownership will have to be transferred to the public who has basically suffered to create this asset. One cannot wait generations to reap the benefit.
It will be therefore appropriate to offload the Navartna equity to individual citizens who have suffered to build these capacities and have the first moral lien on these assets. So the return of the equity to the public cannot be considered as "Dis Investment". By this process funds are garnered for creating similar assets, which over a period of time can again be returned to citizens thereby creating a value creation. In appropriate naming has vitiated the entire process of returning the assets to the true holders.
Automatic Meter Reading Solutions
The caption is misleading as the author is actually in favour of locating Mega Power Projects along coastal basis. His main concern is water and hence he prefers coastal based power plants.
Given the current Power deficit in India we need to have many more of these Mega Power Projects to provide even a single lamp connection to many of our citizens' households. While the Distributed generation modules will survive in a grid backed up by good base load generating capacity, the model will fail miserably in our country where we have severe shortages.
Mega projects bring with it scale of operation and high level of automation and latest technology. If we have to achieve 4000 MW of generating capacity even by 3 to 4 plants as suggested by the author we will add up a minimum of 3 times the labour force required to operate a 4000 MW power plant. And that is sheer waste and even in a populous country like ours we are running short of qualified staff today.
It is therefore in the interest of the nation that power professionals appreciate the need to bridge the gap quickly and work for it.
Given the current Power deficit in India we need to have many more of these Mega Power Projects to provide even a single lamp connection to many of our citizens' households. While the Distributed generation modules will survive in a grid backed up by good base load generating capacity, the model will fail miserably in our country where we have severe shortages.
Mega projects bring with it scale of operation and high level of automation and latest technology. If we have to achieve 4000 MW of generating capacity even by 3 to 4 plants as suggested by the author we will add up a minimum of 3 times the labour force required to operate a 4000 MW power plant. And that is sheer waste and even in a populous country like ours we are running short of qualified staff today.
It is therefore in the interest of the nation that power professionals appreciate the need to bridge the gap quickly and work for it.
Ultra Mega Power Projects - A great Idea for the Indian Power Sector
The caption is misleading as the author is actually in favour of locating Mega Power Projects along coastal basis. His main concern is water and hence he prefers coastal based power plants.
Given the current Power deficit in India we need to have many more of these Mega Power Projects to provide even a single lamp connection to many of our citizens' households. While the Distributed generation modules will survive in a grid backed up by good base load generating capacity, the model will fail miserably in our country where we have severe shortages.
Mega projects bring with it scale of operation and high level of automation and latest technology. If we have to achieve 4000 MW of generating capacity even by 3 to 4 plants as suggested by the author we will add up a minimum of 3 times the labour force required to operate a 4000 MW power plant. And that is sheer waste and even in a populous country like ours we are running short of qualified staff today.
It is therefore in the interest of the nation that power professionals appreciate the need to bridge the gap quickly and work for it.
Given the current Power deficit in India we need to have many more of these Mega Power Projects to provide even a single lamp connection to many of our citizens' households. While the Distributed generation modules will survive in a grid backed up by good base load generating capacity, the model will fail miserably in our country where we have severe shortages.
Mega projects bring with it scale of operation and high level of automation and latest technology. If we have to achieve 4000 MW of generating capacity even by 3 to 4 plants as suggested by the author we will add up a minimum of 3 times the labour force required to operate a 4000 MW power plant. And that is sheer waste and even in a populous country like ours we are running short of qualified staff today.
It is therefore in the interest of the nation that power professionals appreciate the need to bridge the gap quickly and work for it.
Irrelevance of Inflation Targetting
In spite of phenomenal increases in the basic prices of Metals and Oil, which we import to run our economy, our economy is ticking and moving forward reporting marginal increase in inflation rate. This shows that we have found a way to scale up volumes and efficiency. We are also increasingly shedding cost plus factors, as is evident in air travel and communication costs which are no longer operating on social basis but are driven by market forces and hence competitive. I still remember the news stories, (similar to the ones which we are seeing in Oil sector today), that Indian Airlines request for revisions are not decided by the government and hence the Airlines is likely to report losses!
Therefore monetary policies should factor in structural changes and encourage on a sustained basis the attempt to bring an impetus to growth. We are at this stage a unique economy where our knowledge workers are gaining recognition and bringing in large profits which are retained in the nation. Consumption is increasing and goods are being delivered to meet the demand. Sustained corporate earnings growth across sectors is aided in no small measure by volume growth.
So we need to have our own policies, which in this case may even call for increased deficit financing or using the forex reserves. We need to therefore find the way to sustain this growth through monetary policy and be very cautious in our moves lest, this momentum gained over ten years of 5 year planning is challenged.
Therefore monetary policies should factor in structural changes and encourage on a sustained basis the attempt to bring an impetus to growth. We are at this stage a unique economy where our knowledge workers are gaining recognition and bringing in large profits which are retained in the nation. Consumption is increasing and goods are being delivered to meet the demand. Sustained corporate earnings growth across sectors is aided in no small measure by volume growth.
So we need to have our own policies, which in this case may even call for increased deficit financing or using the forex reserves. We need to therefore find the way to sustain this growth through monetary policy and be very cautious in our moves lest, this momentum gained over ten years of 5 year planning is challenged.
Economic Renaissance in the Developed World
Economic Renaissance is sustainable and the Developed world is looking up to India to bolster their economy through the improved performance of our economy and increased consumption. Just to illustrate - Today our earnings in foreign exchange is across a much wider spectrum as compared to a decade ago. While there used to be only remittances from sweat labour from across the middle east and supporting funds from non resident residents to the near and dear ones, today Indian born and international entrepreneurs are returning to their mother land with ideas, systems and seed capital. This is setting in a new chain of growth which will take our economy to new levels, leave alone sustain. Their presence and their interactions with the world clearly demonstrate the sustainability of the growth story, for these are definitely not "Fair weather Friends".
True any mismanagement of the macro economy can undo part of the growth story. But the current government has not given any indication of such actions. On the contrary, the government owned Goliath the Indian Railways has returned surplus and is set to surpass its own stellar performance last year. The investment in the aviation sector is returning surplus as well.
The capacity addition being seen in the Capital goods industry, the booming service sector and the additional investment being planned for in the Retail, Infrastructure through Public Private participation, indicate that the Indian corporate and international private fund managers have a diametrically opposite perception from that of IMF. They believe in the Indian growth story and are eager to participate at the first opportunity, rather than wait and be left behind.
Retailing in India - New Revolution
With the who is who of Indian corporate announcing ambitious schemes for the retail space, it is indeed a question how the neighbourhood small retailer will manage to retain his own. Grandma's wisdom suggests that the small retailer will continue to staty. Is that the case?
Let us look at similarities in few other major retail spaces - the eateries, the road side mechanics for 2 wheelers.
I remember the early 80s when we had very little choice in class restaurants in Chennai. As a matter of fact if you move out of one part of town, you are literally on your own or you will have to be dependant on the small road side restaurant, with its basic facilities. But today, we have choices and this has not reduced the number of small eateries; on the contrary the small eateries have also increased in numbers.
Similarly we were wholly dependant on the road side mechanics but now we have a choice for the place of service; but that has not eliminated the road side mechanics, but has only added in numbers.
The main reason for easy accommodation of the variety of service providers is the latent demand which has not been met, be it in terms of quality or quantity or infrastructure the service provider offers. Similarly in the retail space there are people who are looking for shopping in large Retail chain stores, which they can not do so now. When such an opportunity arises they will definitely shift. But that would not mean that the entire lot who are shopping with the neighbourhood retailer will shift. There will be pressure on the local small timer to improve and attract new customers, retain existing ones. So will be the case for the Super Bazzars;
The key differentiator between the big and small will be Technology. This will play an edge as it can be leveraged to assure consistent quality in all aspects. Indian consumer is very demanding as many marketing surveys has established and the big ones are aware of it. So if they provide quality products and service they will have their own space and will manage to wean away a larger segment. But they can never dream of eliminating the small retailer.
Indians are masters in retailing and will put the large international logistics firms and whole sellers to shame by their rudimentary solutions, as in the case of the panwallahs. These road side delivery centers are are so excellently linked through out India by a supply chain mechanism, which even the giants such as HLL have not been able to replicate after years of attempts. The pan (beatle leaf)is fresh and so is the gulkand! And please note this chain works with out proper refrigerated storage and refrigerated handling vehicles.
NTPC as an Investor in TELK
It is heartening to note that NTPC is considering picking up 49% of the equity in TELK. For all professionals in the Power Sector this is good news, for we are at least sure that TELK will definitely not go the NGEF way.
The report also hints at TELK facility being used for repairing the failed Transformers and other equipment of NTPC . This adds a jarring note. As an investor one can not fault NTPC for negotiating a deal most suited for their needs. But one would expect a more proactive role from NTPC, in the interest of their own share holders.
TELK, as a manufacturer of Generator Transformers has a unique position in the country. On last count their Transformers were supporting more than 25000 MW of generating capacity in the country be it Nuclear or Thermal or Hydro Electric Projects. The performance of their units have also been by and large satisfactory. Given this back ground and the current boom in the market with so much of accelerated investment flowing in the Generation and Transmission segment, NTPC as an investor should immediately ensure maximisation of the capacity utilisation by providing working capital funds. Price realisations in the Transformer industry has gone up with existing capacities being utilised fully. Even Chinese vendors are picking up orders in the Indian market.
Today when multinational Power companies such as Siemens, ABB & AREVA are investing in the India for establishment of green field capacity or expansion of their existing capacity, it will be indeed sad, if the existing capacity of a leading indigenous manufacturer is turned in to repair facility.
NTPC's Merchant Power Plants
It is heartening to note that NTPC plans to quickly strengthen their balance sheet using the Merchant Plant route. These plants when they come on to the Grid, a National Power Exchange will be functional as envisaged by CERC. In the Draft paper on Power exchange published by CERC, the Prices are to be discovered using the Double side Bidding process where, the aggregated demand at different prices is matched with Supply Prices quoted by Power Producers, for different quantum. Such a system as the paper very correctly points out, will minimise market manipulations, by providing equal say to both the Buyers and Sellers. It is therefore expected that the tariff of the Merchant Plants of NTPC will be discovered through such transparent Double Side bidding process and not determined by the penal rates of Unscheduled Interchange which it seems is their current expectation.
Another factor which one needs to keep in mind is that these Merchant Plants are planned on the balance sheet of NTPC and NTPC assets are built by all the Distribution companies and the erstwhile electricity Boards. It is but natural that the Distribution licensee (or Electricity Boards) while willing to accommodate certain level of competition(read higher prices), expect that the prices are either discovered through the Power Exchange in a transparent manner or guided by the well founded tariff setting principles, including the competitive route. This is especially applicable for the large Hydro stations which are being named as Merchant Plants, where the benefit of lower tariff should not be blocked to all the stake holders, in the interest of one company.
Disgorgement Order of SEBI
Whether it is the "Disgorgement Order" or the move to accept and recognise the offer of "Super Self Regulatory Organisations" of a section of the market participants, SEBI's initiative have to be complemented and encouraged. The man at the helm Sri M.Damodaran deserves all the praise he is rightfully receiving..
His recent remarks that "Absence of Precedence would not be a deterrent for the Regulator" as quoted in your column deserves to be singled out and appreciated. India is unique and is today a thriving financial market where the psychology and the behavioural aspects of the market participants are strikingly different than those of the other developed economies. The lax in non compliance to the laws of the land (read - feeling we can manage it all) be it a simple a traffic rule or the tax compliance, emboldens the individual to use his capabilities to influence.
He comes with this mind set to the market, which the Regulator has to take note of. Regulators actions will therefore need to be punitive and swift to change this mind set. The over reach of the regulator in commenting on the media is another case where he is moving on to ensure investors protection. Regulators actions are crucial as his dithering can shake up investors confidence and scare away the fair weather friends.
Increasing appetitie for Investments in Indian Power Sector
With the "Electrifying Start" achieved in the implementation of Ultra Mega Power Projects, it is clear that the present policy initiatives has met with more than anticipated response. This is a land mark event in the country and will clearly be remembered for times to come.
Two significant changes have been heralded in this start. One; it is now clear that there is an enormous appetite for investments in the Power Generation Segment. Given the mind set of some in the government who still complain of lack of response of the Private sector in participating in the addition of more than 120,000 MW of Power Generation, the current response of Indian Companies with the support of the international equipment manufacturers and investment agencies, should be satisfying.
Power sector is unique with its own typical issues. It cannot be compared to Automobile Industry (as done by a senior government official in a conference recently) for the Dealers in the Power Sector decide what the consumers get and not the Consumers or the Producers.. The freedom the consumer enjoys in choosing the Automobile he wants, whether it is the class or brand, it comes to Power, the same consumers do not have the luxury of choosing between a Maruti or Tata or Honda, even for a given segment. He has to live with the dealer with whom he is connected or generate on his own. In the other industry Dealers have a limited role and the market is governed by consumer demands and the Suppliers capabilities. To add to the trouble, in India the "Power Dealer" (Distribution Licensee / Board) can simply report that he has lost 60% of the goods delivered to him! Can a dealer in Cement or Automobile report a similar loss and still continue to be in Business?
Given this scenario where the Producers cannot choose consumers, it is necessary for the government intervention to guarantee returns on investment or provide policy initiatives where the investor will be able to recover his investments and see guaranteed returns. When such micro management takes place, then the prices are artificial and are not typically governed by Free market dynamics. And the prices tend to be higher when the Public sector takes the major role as being in house, the Prices are not put through hard negotiation. It is therefore to the Credit of the persons at the helm of Ministry of Power (MoP) for introducing a high degree of competition and bringing in an era of Ultra Low Prices.
The Second important change that this Start will bring in is a significant improvement in Public Sector Operations in this sector. With this policy initiative the Generator is given the option of integrating two distinct elements in the value chain namely mining and Power Generation. The price now received is stripped of the high cost on both these counts. NTPC which had teamed up with BHEL for equipments has quoted a price in excess of Rs.2.00 per unit while three Private sector Companies have submitted offer less than Rs.1.40. To understand the magnitude of the impact one needs to work out the additional cash flow which NTPC tariff would have generated in the 25 year life cycle of the plant. Taking an average PLF(Plant Load Factor) of 80% with 8000 hrs of annual operation, the amount is Rs 45000 Crores for 4000MW. Some would argue that "that is the kind of inefficiency which the country is bearing today".
The equipment maker BHEL has to review the cost of his operations as he is no longer operating in a protected environment. NTPC, should sharpen its skills on mining and also negotiate finer rates of finance. I am sure there will be lots of introspection in these companies and there future actions will factor in these market dynamics.
All of this euphoria will quickly disappear if the planned evacuation arrangement (over which the Generating companies do not have any control) do not come up in time. With the MoP planning to do a similar act in the Transmission segment, part of this issue will be addressed. Focused initiatives are needed to strengthen the sub transmission segment as well.
The MoP literally talked down the Prices in this bidding round, when they indicated that their expectation of the Price for Sasan power should be in the region of Rs.1.50 to Rs. 1.60 per unit; a reserve price of sort. Any serious player would not have quoted more than that and the results bear this out. It is of course another thing that the government corporations which derive the maximum support from the MoP do not seem to concur with this view!
With such significant changes the Indian consumer can clearly look forward to an illuminated future.
Two significant changes have been heralded in this start. One; it is now clear that there is an enormous appetite for investments in the Power Generation Segment. Given the mind set of some in the government who still complain of lack of response of the Private sector in participating in the addition of more than 120,000 MW of Power Generation, the current response of Indian Companies with the support of the international equipment manufacturers and investment agencies, should be satisfying.
Power sector is unique with its own typical issues. It cannot be compared to Automobile Industry (as done by a senior government official in a conference recently) for the Dealers in the Power Sector decide what the consumers get and not the Consumers or the Producers.. The freedom the consumer enjoys in choosing the Automobile he wants, whether it is the class or brand, it comes to Power, the same consumers do not have the luxury of choosing between a Maruti or Tata or Honda, even for a given segment. He has to live with the dealer with whom he is connected or generate on his own. In the other industry Dealers have a limited role and the market is governed by consumer demands and the Suppliers capabilities. To add to the trouble, in India the "Power Dealer" (Distribution Licensee / Board) can simply report that he has lost 60% of the goods delivered to him! Can a dealer in Cement or Automobile report a similar loss and still continue to be in Business?
Given this scenario where the Producers cannot choose consumers, it is necessary for the government intervention to guarantee returns on investment or provide policy initiatives where the investor will be able to recover his investments and see guaranteed returns. When such micro management takes place, then the prices are artificial and are not typically governed by Free market dynamics. And the prices tend to be higher when the Public sector takes the major role as being in house, the Prices are not put through hard negotiation. It is therefore to the Credit of the persons at the helm of Ministry of Power (MoP) for introducing a high degree of competition and bringing in an era of Ultra Low Prices.
The Second important change that this Start will bring in is a significant improvement in Public Sector Operations in this sector. With this policy initiative the Generator is given the option of integrating two distinct elements in the value chain namely mining and Power Generation. The price now received is stripped of the high cost on both these counts. NTPC which had teamed up with BHEL for equipments has quoted a price in excess of Rs.2.00 per unit while three Private sector Companies have submitted offer less than Rs.1.40. To understand the magnitude of the impact one needs to work out the additional cash flow which NTPC tariff would have generated in the 25 year life cycle of the plant. Taking an average PLF(Plant Load Factor) of 80% with 8000 hrs of annual operation, the amount is Rs 45000 Crores for 4000MW. Some would argue that "that is the kind of inefficiency which the country is bearing today".
The equipment maker BHEL has to review the cost of his operations as he is no longer operating in a protected environment. NTPC, should sharpen its skills on mining and also negotiate finer rates of finance. I am sure there will be lots of introspection in these companies and there future actions will factor in these market dynamics.
All of this euphoria will quickly disappear if the planned evacuation arrangement (over which the Generating companies do not have any control) do not come up in time. With the MoP planning to do a similar act in the Transmission segment, part of this issue will be addressed. Focused initiatives are needed to strengthen the sub transmission segment as well.
The MoP literally talked down the Prices in this bidding round, when they indicated that their expectation of the Price for Sasan power should be in the region of Rs.1.50 to Rs. 1.60 per unit; a reserve price of sort. Any serious player would not have quoted more than that and the results bear this out. It is of course another thing that the government corporations which derive the maximum support from the MoP do not seem to concur with this view!
With such significant changes the Indian consumer can clearly look forward to an illuminated future.
Free the Pipe and avoid Monopoly
We have a lot to learn from the Electricity Distribution model when we are on the anvil of launching a pan India network of Pipes for gas with the last mile connectivity to deliver to individual homes. Four major points emerge from the success as well as the failure of the National Power network. These are:
- National Grid is best owned by a single operator who can not have distribution rights at the local level. This is to ensure that the pipes are not monopolised, which link gas wells and LNG terminals at port to City Bulk storage points, and bulk consumers. GAIL has to be given the mandate and the Gas Transmission tariff should be regulated. As in the case of the Power sector where Private participants invest in the formation of major national links, the Joint venture route with GAIL ownership up to 49 % shall be insisted up on.
- City Distribution shall be sub divided to two segments - the main trunks which run across the city and the sub transmission which connect the trunks to individual consumers. We must avoid the model which we have in electricity, where when we are in the fourth year of reforms and are unable to free the wires for open access. It is therefore necessary to allocate city distribution to a minimum of three players for each city through a competitive bidding route as done in the telecom sector. The selected operator shall be mandated to build the minimum quantum of the Main trunk routes and the sub transmission network as required for servicing his consumers. The main trunks should be free to be used by the other Gas Providers by paying the transmission charge which can be regulated. While individual consumers cannot have the choice at this stage, this kind of structure will finally enable the pipe assets to be spun of to a separate company which may not have interest in distribution.
- Metering has to be state of the art, along with the connected remote control mechanisms. This would facilitate dynamic pricing to reflect the global price trends and the foreign exchange rates. We need to encourage Pre Paid metering which would facilitate the consumers to move from the Cylinder era to the Piped era, with out complaining of high energy bills.
- Finally Energy in India is subsidised and moving over to market related pricing quickly can enlarge the social disparities. It is therefore prudent to plan the network reckoning some element of subsidy which can be clearly traced to the beneficiary instead of "un metered Freebies" now being practised in the electricity sector.
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