PolicyWatch - CUTS CCIER Plans Bharat Mala ... 4 April-June 2015 PolicyWatch OIL & GAS INFRASTRUCTURE UrgeforLPGSubsidy The Ministry of Petroleum and NaturalGasurgedliquefiedpetroleum

PolicyWatchPolicyWatchVolume 16, No. 2 April-June 2015

Covering developmentson policy responses,policy implementationand policy distortionson a quarterly basis.Comments are welcome.

Low Fares Leave AirlinesStranded ........................... 8

The Truth behind India�sNewGDPNumbers ......... 11

An Agenda forModiGovernment ....................15

India�s Health andBiopharma Sector DeserveMore Attention ............... 20

Smash the PSU OilCartel .............................. 22

Published by Consumer Unity & Trust Society (CUTS), D-217, Bhaskar Marg, Bani Park, Jaipur 302 016, IndiaPhone: 91.141.228 2821, Fax: 91.141.228 2485 Email: [email protected], Website: www.cuts-ccier.org

Printed by: Jaipur Printers P. Ltd., M.I. Road, Jaipur 302 001, India.

�The reformer has enemies inall those who profit by the oldorder and only lukewarmdefenders in all those whowould profit by the new�.Machiavelli in The Prince

H IGHL IGHTS

I N S I D E T H I S I S S U E

Net Neutrality Violated ......... 2

Nod for Hydrogen Plant ....... 4

CurbingHumanTrafficking .......................... 16

Afforestation FundBill ....... 17

Maggi: Safety NormsViolated .............................. 19

There is a Gap betweenPolicy and Practice

Aftermaking a big bang announcement in the Budget, the FinanceMinisterArun Jaitley had to rollback his proposal to establish a �separate� Public

Debt Management Agency (PDMA). The Government will be consulting theReserve Bank of India (RBI) and come up with a detailed roadmap for a newagency. The text of the erstwhile Chapter VII (on PDMA)was heavily borrowedfrom the draft Indian Financial Code, prepared by the Financial SectorLegislativeReformsCommission (FSLRC).However, the structure of the PDMAwas starkly different.

The Governmentproposalwould have led toa separate PDMA, but itsindependence would havebeen compromised.Experience with separateregulatory institutionsproves that their efficiencyand performance isinversely proportional topolitical interference in their management.

Separate institutions must not become parking lots for retired judges andbureaucrats. Unfortunately, the text of the erstwhile Finance Bill reeked of thispossibility. Further, no consequent accountability provisions were designedfor the PDMA in the Finance Bill, other than the power of the CentralGovernment to remove PDMA board members.

Consequently, the policy design for establishing the PDMAwas a recipe fordisaster. One wonders why the Government allowed such designed faults toremain in the Bill. The Government and the RBI being the two most importantstakeholders in establishing PDMA, is the knowledge, expertise and skill relatingto regulatory design limited to them?

Moreover, the PDMAwill deal with public money, management of whichhas been delegated by the citizenry to its elected representatives. Consequently,the public has the right to be involved in the process of development of theexpert body.

Besides stripping the powers tomanage public debt from theRBI, the FinanceBill�s proposal to shift regulation of government securities to Security andExchange Board of India (SEBI) has also has been rolled back. However,capacity constraints seem to be ignored while transferring regulation of non-debt foreign exchange-related transactions to the Centre and shifting regulationof commodity derivatives from ForwardMarkets Commission (FMC) to SEBI.

The Government must undertake an in-depth evaluation of its policyproposals, estimate technical and financial resources required, and people,structures and processes for converting its ideas into practice It must develop acomprehensive transition path in this regard.

Such comprehensive structured process of policy-making is known asregulatory impact assessment. It is the best practice for designing policies, isfollowed in several jurisdictions, and has been recommended for India as well.

www.cdn.static-econom

ist.com

2 April-June 2015 PolicyWatch

COMMUNICATION

I N F R A S T R U C T U R E

an operator can charge amaximumof25 paise only for a local SMS insteadof the current M1 per SMS. Vodafonehas introduced special roaming tariffplans for its prepaid and postpaidcustomers. The revised tariff will beapplicable fromMay 01, 2015 for allthree telecom operators. (ToI, 01.05.15)

Norms for Quality ServicesThe Telecom Regulatory

Authority of India (TRAI) wouldsoon put in place a service qualitybenchmark for mobile operators,TRAIChairmanRahulKhullar stated.Non-adherence to the new qualitystandards, would lead to penal actionagainst mobile operators, he added.TRAI has defined quality of servicebenchmarks for the telecomoperators.These include benchmarks for call

drops, billing, complaint redressaltime and time taken to attend customercalls, among others. TRAI measuresperformance of operators on the basisof 10 parameters. Service providersare penalised up toM10 lakh for eachparameter furnished incorrectly intheir report submitted to the regulator.It startswithM50,000 fine for first non-compliance and M1lakh for eachsubsequent non-compliance.

(BS, 29.04.15)

Rolling out Full MNPTelecom service providers will

have to fork out M200-300 crore toupgrade their networks and installnew equipment for implementation offullmobile number portability (MNP)across the country. MNP allows

mobile subscribers to retain theirnumbers while changing their statesor circles.Full MNP was to be implemented

fromMay03, 2015but theGovernmenthas presently extended the deadlineby another two months as operatorsare yet to test the new software.In addition, for implementation of

full MNP, the current networks ofoperators have to be reconfigured totreat a mobile user�s calls in the newcircle as local and vice-versa, besidesaligning their network, according tothe new national numbering plan.

(BS, 03.05.15)

FreeWi-Fi in PanchayatsAbout 12,909 gram panchayats,

46,000 government offices,educational institutions and hospitalsare slated to receive free Wi-Fi overthe next three years through the OpticFibre Grid being set up in AndhraPradesh (AP).InformationTechnology advisor to

Andhra Pradesh Government,J Satyanarayana said that the projectwill cost M4,660 crore of which theCentrewill provideM3,840 crore as partof the National Optic Fibre Network,and the State Government will allotM820 crore.The Chief Minister of AP

N Chandrababu Naidu has set adeadline of three years for completionof the grid in the State after it islaunched adding that the fibre gridmust be put to full utilisation in sectorslike education,medicine, e-governance,agriculture, rural development and e-commerce. (IE, 11.05.15)

Explicit Consent a MustThe Telecom Regulatory

Authority of India (TRAI) hasproposed that data services shouldbe activated or deactivated only withthe explicit consent of the subscriberthrough toll-free short code 1925.Further, the customers should also beinformed through SMS at periodicintervals, not exceeding six months,about the prescribed procedure fordeactivation of data.The regulator said that it has been

receiving several complaints fromconsumers regarding non-availabilityof information relating to the amountof data used during a data session.The service providers offer

concessional tariff for data, up to acertain limit.However, the tariff for anyusage beyond the specified limit issubstantially higher, leading tosudden bill shock or unexpecteddeduction of balance amount TRAIstated. (BL, 30.04.15 & ET, 30.04.15)

Roaming Tariffs SlashedIndia�s top telecom operators

Airtel, Vodafone and Idea Cellularhave announced that they will are cutnational roaming tariff, soon aftertelecom regulator TRAI reduced theceiling tariffs. TRAI had earlier cut themaximumor ceiling rate that a telecomoperator could charge for STD callson roaming toM1.15 per minute fromM1.50.Similarly, national short message

service (SMS) rate has been reducedto 38 paise from M1.5 per SMS.Also,

Net Neutrality ViolatedThe launch of the Airtel Zero platform by Bharti Airtel

and Internet.org by Facebook in partnership withReliance Communications are prima facie in violationof net neutrality principles as these are based ondifferential tariffs for end-consumers, said the departmentof telecommunications (DoT) Secretary Rakesh Garg.

When asked about telecom players� concern of over-the-top (OTT) players having a free ride through theirnetwork while they pay licence fees, spectrum chargesand others to the Government, the Secretary stated thatthe two issues are not comparable.

However, he said that a DoT Committee will takethe final call on whether OTT players have to be brought

under the licensing framework or not. Meanwhile, DoT, through its internal committee, is in the process offormulating a report on the net neutrality issue. (BS, 05.05.15)

www.gadgetgyaan.com

3April-June 2015 PolicyWatch

TRANSPORT


New Aviation PolicyThe Minister of State for Civil

AviationMahesh Sharma said that theGovernment plans to put in place theCivilAviation policy by themiddle ofMay 2015. According to an official,the Civil Aviation Ministry hasalready circulated the proposed normsfor permitting Indian airlines to startinternational operations for inter-ministerial consultations.�The Ministry has sent its

proposed revised norms for thedomestic carrierswishing to fly abroadfor inter-ministerial consultations,before sending it to the Cabinet forapproval�, the official added.Sharma, however, said that since

the policy deals with severalimportant issues including new normsfor international operations bydomestic carriers and regionalconnectivity, widespreadconsultationswith all the stakeholdersare necessary. Sharma said there isalso a need for regulating predatoryair fares. (IE, 09.04.15)

Time-bound TargetsTo boost connectivity and lower

congestion in key routes, the railwaysplans to double or quadruple nearly11,000 km of the total 64,000 km oftrack length by 2019- 20.The target was discussed at a

meeting chaired by the PrimeMinister,to review infrastructure projects. Therailways, it has been decided, shouldfocus more on doubling andquadrupling of existing lines, over thenext four to five years, rather than newprojects, except those in North-eastand JammuandKashmir.The aim is toensure existing tracks aredecongested rather than laying newprojects.The Railway Minister also

acknowledged thatwith an investmentplan of M8.5 lakh crore they werefocussing on decongesting thenetwork. (BS, 17.06.15)

Exit Policy ProjectsThe Government has recently

cleared the decks for themuch awaitedexit policy, which would allowdevelopers to exit highway projectstwo years after completion of

construction. Themove is to expectedto immediately unlock investments tothe tune of M4500 crore as potentialcapital for future projects and providerenewed thrust to the roadsdevelopment sector.The Cabinet Committee on

Economic Affairs (CCEA) hasadditionally approved a specialintervention and authorised theNational HighwayAuthority of India(NHAI) to inject funds on a loan basisin projects that are at advanced stagesof completion but are stuck due toadditional equity or lender�s inabilityto disburse further resources. Thepolicy permits concessionaires ordevelopers to divest 100 percentequity two years after completion ofconstruction. (IE, 13.05.15)

Low Fare Airlines StrandedDomestic airlines in India seem

intent on digging their own grave.With oil prices slowly inching up andfares heading south, airline losses arelikely to mount. It is almost as if thepresent accumulated losses are notquite enough.According to data compiled by

Clear trip, average fares in 2015 arealmost 15 percent lower than the sametime the previous year. Some routesshow a sharper drop.Samyukth Sridharan, President

andChiefOperatingOfficer, Cleartrip,said the lower fares partly reflect thelower fuel prices but also partiallyadditional capacity on certain routesand increased competition, as a result.

(BS, 07.05.15)

Building National WaterwaysThe Centre has asked State

Governments to join hands indeveloping the 101waterways, whichare going to be declared nationalwaterways as part of an initiative tomake the vast network ready forbusiness.The Inland Waterways Authority

of India (IWAI) has written to thestate governments, asking them tostart the exercise of classifying therivers and ensuring that minimumhorizontal and vertical clearance ismaintained for navigation.The Cabinet gave its nod to enact

the legislation to declare 101 rivers partof the national waterways network.

(ET, 02.05.15)

Kaya KalpMeet of RailwaysThe innovation council of the

railways, headed by industrialistRatan Tata had a discussion for thefirst time to identify globalbenchmarks for operations andmaintenance of railways. Closecooperation and incrementalimprovements across various aspectsof railways will mark the working ofthe council.The council, called Kaya Kalp,

was formed by Union RailwayMinister Suresh Prabhu to help thenational carrier innovate and reinventits practices. Tata said that it wouldbe useful to showcase improvements,even in small increments, in variousaspects, such as equipment,processes, procedures and consumeracceptance. (Mint, 14.05.15)

Govt Plans Bharat MalaThe Government is proposing to build about 5,000 km of road network

all along the borders and coastal areas, under a new scheme to be called�Bharat Mala�. If former Prime Minister Atal Bihari Vajpayee�s scheme ofbuilding Golden Quadrilateral gave a fillip to the highway construction inthe country.

The new plan willconnect all untouched areasin the hinterland to pushdevelopment and economicactivities. Construction of thehuge network would need atleast M50,000 crore, RoadMinistry sources stated.

Officials said the project would be part of �work plan� the Road TransportMinistry will submit to Narendra Modi on infrastructure sector in the currentfinancial year. (ToI, 30.04.15)

www.indianexpress.com

Bharat MalaBharat Mala


OIL & GAS


Urge for LPG SubsidyThe Ministry of Petroleum and

NaturalGas urged liquefied petroleumgas (LPG) consumers to give up theirLPG subsidy and join the �GiveItUP�movement. The ambitious programmeannounced by Prime MinisterNarendra Modi has seen 290,000consumers give up their subsidy, sofar.When the subsidy is given up, the

money thus saved will be used for theupliftment of the poor in the country,which will be the reason for joy andsatisfaction and go a long way inreplacing traditional fuel with LPG inrural areas.On giving up the LPG subsidy, the

customer�s name will be added to thescroll of honour on the relevant OilCompany�s website with their priorpermission, as recognition to theircontribution. (BS, 04.04.15)

Gas Price: No ArbitrationReliance Industries Limited (RIL)

had sought arbitration in May 2012after the Government disallowedaboutUS$1bn in costs, as the gas flowtapered. The company also soughtarbitration, over deferred gas pricinginMay 2014.

TheGovernment filed an affidavitin the Supreme Court stating that asper Government guidelines issued inOctober 2014, its differenceswithRIL,over pricing of natural gas from KG-D6 blockwere not open to arbitration.A bench headed by Ranjan Gogoi setthe date of hearing on May 01, 2015and the case would be heard in detailthen.In the case related to the Panna-

Mukta-Tapti oil and gas fields beforethe bench headed byDipakMisra, theGovernment has sought a change inthe foreign arbitrator appointed byRIL, alleging incompetent to hold thepost. (BS, 14.04.15)

Energy Major Bid RejectedThe Government has rejected the

application of UK-based energymajor,BPExploration for fuel retailingbusiness. This is because the firmdoes not meet the requisite criteriato obtain a fuel retailing licence inIndia.To get the marketing rights for

transportation fuels, namely petrol,diesel and ATF, applicant must meetthe requirements as per clause 3 ofmarketing resolution of March 08,2002. The requirements inter alia,include investment or proposedinvestment of M2,000 crore in

Nod for Hydrogen PlantIndian Oil Corporation Ltd (IOCL) has received permission from Petroleum

and Explosives Safety Organisation (PESO), under Department of IndustrialPolicy and Promotion, to set up hydrogen manufacturing and dispensing

facilities in its R&DCentre at Faridabad,Haryana.

PESO has issued alicence for dispensingof hydrogen CNGblend as fuel to IOCLat their R&D Centre fortheir own use fordemonstrationpurpose;�in principal� approvalhas also been issued for

dispensing hydrogen to vehicles for demonstration and data acquisitionpurpose. Licences has also issued to set up bio-gas based and coal bedmethane-based natural gas filling plants to encourage alternate fuels in thecountry.

PESO has issued 14 licenses and 7 approvals for filling and storage ofcompressed bio-gas in cylinders. Furthermore, 7 licenses have been issuedfor dispensing of coal bed methane-based natural gas as a fuel in automotivevehicles. (BS, 11.05.15)

exploration or production, refining,pipeline or terminals.However, the Directorate General

of Hydrocarbons has reported thatBP�s share of expenditure wasUS$508mnbetweenFY12-14.Of this,capital expenditure component isUS$171mn operational expenditure isUS$337mn. (FE, 21.04.15)

Auto Fuel VisionA Parliamentary panel has asked

theMinistry of Petroleum andNaturalGas to set up a high level inter-ministerial group to deal with thevariouspolicy issues in implementationand assess the benefits that arise outof the implementation of the auto fuelvision and policy 2025.The Standing Committee on

PetroleumandNaturalGas in its reporttabled in the Lok Sabha expectsMinistry to play amore proactive rolein leading the coordination amongvarious stakeholders.TheCommittee has recommended

that the Ministry should chalk out anaction plan at the earliest. It has alsoasked the Ministry to adhere to thetimelines of the auto fuel policy forhaving BS/IV quality fuels across thecountry by 2017 andBS-IV by 2020.

(BL, 08.05.15)

Auction of Oil & Gas BlocksThe next round of auction of oil

and gas (O&G) blocks, under the newexploration licensing policy ( NELP)wouldbeheldby theendof2015-16FY,according to Petroleum and NaturalGas Minister Dharmendra Pradhan.The Minister also said that theGovernment is mulling to introduce�open acreage� system and also plansto change the formula for productionsharing agreement.�In this financial year, only 10th

round of auction will be held. We aretalking to stakeholders.We are talkingto international experts and we areobserving the different models of theworld (for the NELP-X round)�,Pradhan indicated.NELP-IX auction was conducted

in 2012. Pradhan said that theGovernment is contemplating tomakethree major changes in the auctioningsystem that includes abolishing blockauctioning by bringing �open acreage�system. (ToI, 26.06.15)

www.i.aliimg.com


POWER


Kickstarting Energy PlanThe Centre Government is

considering starting its plan to builda 100,000 MW solar energy capacityby 2022 through award of 10,000MWprojects in the coming three months.The plan includes close to 6,000

MW of capacity to be set up byNational Thermal Power Corporation(NTPC) alone, 2,500 MW by SolarEnergy Corporation, around 2,500MW in Madhya Pradesh and the restas solar energy parks in several otherstates.India�s current solar capacity is

3,382 MW and the amountcommissioned under the solarmissionis 1,112 MW. Besides, states are alsoawarding projects. Madhya Pradesh(MP) leads with 2,500MW.Others toissue tenders soon are Telangana,Tamil Nadu and Andhra Pradesh.Rajasthan is studying a model forharnessing solar power on a large-scale in desert areas. (BS, 20.04.15)

Integrated Energy PolicyThe National Institution for

Transforming India (NITI) Aayogwould soon come out with an energypolicy to meet the country�s growingenergy demand and has begunconsultations with the concernedMinistries to draw a blueprint in thisregard.TheAayog�sViceChairmanArvind

Panagariya said that the proposedenergy policy would focus on anintegrated approach in harnessing thepotential of power generation throughsolar, wind, gas and coal to meet thecountry�s energy demand.The country needs to rapidly

expand its energy market, as one-fourth of its people are still withoutelectricity. India is set to become thefastest growing economy in theworld.We need to take away the subsidiesfrom rich people and use that moneyto provide clean energy to poorpeople. (IE, 14.04.15)

Unbundling ElectricityThe forum of power regulators led

by the Central Electricity RegulatoryCommission might soon finalise acomprehensive roll-out plan for

unbundling the power sector thatwould give the consumer the abilityto choose his power supplier.As per the scheme, being worked

out, a new intermediary company,between the power generator on theone end and the distribution andnetwork operator and the supplylicensees on the other, could beproposed.The rollout plan, which was

presented before the regulators, couldbe finalised in few days before it isplaced before the ParliamentaryStandingCommittee on Energy. Sincepower is a state subject, the roll-outwould happen separately for eachstate. (HT, 22.06.15)

Loss Due to NegligenceThe Comptroller and Auditor

General (CAG) in its latest reportrevealed that negligence related tofactors, such as non-performanceleading to forfeiture of bank guarantee,machines lying idle and so on piledup losses amounting to a total ofM874crore to the state-owned powergenerator Mahagenco. It bearsmentioning here that the companyspent M1,818 crore on repairs andmaintenance over the same period, butpoor planning rendered the effortuseless.Over 85 percent of the monetary

loss is attributed to outages at the

plants and consequent loss of powergeneration. The audit found out thatMahagenco failed to carry out annualand capital overhaul, which must beconducted every five years. Between2010-11 and 2013-14, out of 61 unitsplanned for annual overhaul, only 29units were taken up. Besides, among14 units slated for a five-year overhaul,only seven were attended to.

(DNA, 15.04.15)

Consumers Voice for TariffConsumer Education and

Research Society haswritten to PowerMinister, Piyush Goyal that stategovernments must be prevented frominterfering with the functions of theState Electricity RegulatoryCommission (SERC).A copy of the letter was also sent

to Gujarat Power Minister, SaurabhPatel, objecting State Government�srecent directive to Gujarat ElectricityRegulatoryCommission (GERC) tonotforce government-owned distributioncompanies to install meters forconsumers in the agriculture sectorand not to increase tariff for meteredagriculture consumers.The proposed amendments to

Electricity Act 2003, seek to correctthe anomaly of interference bymakingit mandatory for the state governmentto appoint retired High Court judgesas the Chairman of the Commission

(FE, 16.04.15)

Untapped Green EnergyThe Ministry for New and Renewable Energy�s Annual Report 2014-2015

revealed that India has 900 GW of commercially exploitable sources ofrenewable energy if 3 percent of the country�s wasteland is made available.The renewable sources of energy include windand solar power, biomass andwaste-to-energyapart from small hydro power plants.

A state-wise list of renewableenergy potential has been drawnup by the National Institute ofWind Energy, National Instituteof Solar Energy, Indian Instituteof Science for and the AlternateHydro Energy Centre.

Despite huge potential, onlyaround 34 GW of renewablegeneration capacity has been installed inthecountry. Though theGovernmenthas a targetof having 175 GW of renewable energy generationby 2020, capacity addition in 2014-15 has been slow. (BL, 16.04.15)

www.energynext.in


F I N A N C I A L S E C T O R

Regulators Penalty ChallengedIn a first, the SecuritiesAppellate

Tribunal (SAT) admitted a petitionfiled by insurance company StateBank of India (SBI) Life againstInsurance Regulatory andDevelopment Authority of India(IRDAI).SAT has been so far hearing

appeals against orders passed by thecapitalmarkets regulator SEBI, but thenew insurance laws have madeprovision for the Tribunal to hearcases against insurance sectorregulator IRDAI as well.SBI Life is seeking relief against

an IRDAI order asking it to refundM275 crore to its policy holders whohad bought its Dhanraksha Pluspolicy in the past. The company filedthe petition under Section 110 (A) ofthe new Insurance Act.

(TH, 05.05.15)

49 Percent FDI Cap in PensionThe Government has notified an

increase in the cap on foreign directinvestment (FDI) in the pensionsector from 26 to 49 percent, pavingthe way for more foreign funds toenter the national pension system.The increase in FDI cap for pensionis in sync with the recent passage ofthe InsuranceLaws (Amendment) Billin Parliament, which allows a higher,49 percent foreign investment limit inthe insurance sector.The cap on foreign investment is

composite and includes FDI, foreignportfolio investments (FPI) andinvestments from NRIs. The Pension

Fund Regulatory and DevelopmentAuthority (PFRDA), 2013, pegs FDIin the pension sector at 26 percent orsuch percentage as approved for theinsurance sector, whichever is higher.

(BL, 27.04.15)

No Multi-brand RetailInsisting that the Bhartiya Janta

Party (BJP) has not changed its standCommerce Minister NirmalaSitharaman said thatFDI inmulti-brandretail could not go in direct route, asthe Cabinet will not allow it. TheGovernment has no plans to reviewthe document nor to cancel thedecision.The BJP, which has a strong

support base of small traders, hadvehemently opposed the UnitedProgressive Alliance (UPA)Government�s move to allow 51percent FDI in the multi-brand retailsector. Sitharaman said, �The positionwas taken by the UPA Governmentthrough an executive order�.BJP spokesperson G V L

Narasimha Rao stated that theGovernment would not change thepolicy because it would affect theinvestment atmosphere as investorswanted to see continuity in policy.

(FE, 15.05.15)

Modi�s Financial InclusionThe National Democratic

Alliance�s (NDA�s) approach tofinancial inclusion differsfundamentally from that of the UPAon three counts. It is better designedto cater to the needs of savers, while

FDI Norms RelaxedThe Government has decided to liberalise FDI

norms for Non Residents of India (NRIs) andoverseas citizens of India (OCI) with the aim toincrease capital flows into the country. A decisionin this regard was taken by the Cabinet Committeeon Economic Affairs, headed by Prime MinisterNarendra Modi.

As per the DIPP�s proposal any investmentmade by NRIs. OCIs and person of Indian origin(PIOs) from their rupee account in India, will notbe treated as foreign investment. The non-repatriableNRI fundswould be treated as domesticinvestments. The Government wants to channelisethe funds of NRIs, who now have set up large businesses abroad, by treating non-repatriable investments byNRIs as domestic investment. (ToI, 21.05.15)

www.financialexpress.com

avoiding an undue burden on theexchequer, whereas the UPA,focussed too much, on coaxing smallsavers into equities through differentschemes.The recent one-step know your

customer (KYC), attractive pricing andassured benefits to boot. No doubt,the freebies and low costs haveplayed their role in making peoplequeue up for these plans. Theseschemes leverage economies of scaleby pooling risks for thousands ofsubscribers.Moreover, to avoid an unfair

burden, the issuers of these plansshould be allowed to tweak their futurepremiums and pricing, based on theirexperiencewith customer transactionsand claims. (BL, 16.05.15)

Cutting Interest RatesArun Jaitely has stated that he

hopes that the banks will soon cut theinterest rates in the coming few daysand weeks to pass on the benefits ofrate cut byRBI aftermeeting the headsof public sector banks.Jaitley said, �Discussed with

banks passing on RBI�s rate cut toconsumers, as also stalled projects,credit growth, education and housingloans�, after his consultation withbankers to discuss health of banks androadmap for reducing stressed andnon-performing assets.TheMinister also said that though

the Non-PerformingAssets for bankshave come down to 5.2 percent as onMarch 31, 2015 but added that onefiscal does not necessarily indicate ata pattern. (BT, 12.06.15)



What is the department of telecommunications�view on net neutrality?

As far as the core principles of net neutrality areconcerned, telecom operators cannot slow down or speedup any content. Neither can they throttle content.However, there aremany dimensions to this. There are lotof issues like traffic management, disaster managementand medical applications. Machine-to-machinecommunications is on the horizon. We are working onwhat has to be done without giving a free hand to telecomplayers to slow down content.

What are your views on over-the-topmessagingservices?

Whenever you use the Internet, you pay data charges.Telecom companies have invested in their networks andthey are earning revenue from data consumption. Voiceover Internet telephony is one concern. The over-the-top messaging revenue model is completely different.There are only a few successful players, not many knowhowmany have failed �Orkut disappeared after Facebookarrived. The successful ones have to earn revenue fromadvertisements.

TRAI data shows all telecom companies meetquality norms. What are your comments in thisregard?

On an objective basis, which TRAI is monitoring, thedata shows only some operators, and that too in smallareas, not meeting quality norms. On an average, all theparameters on quality of service are beingmet by telecomcompanies.

However, there is a public perception that call drop ratesare high and the perception is not without reason. Ithappened because of growth in data services. The

Telecom CompaniesCannot Throttle Content

� Excerpts from an Interview of Telecom Secretary Rakesh Garg by Mansi Taneja, Special Correspondent of Business Standard.This was published in Business Standard on May 06, 2015

Technology is disruptive, indicates Telecom SecretaryRakesh Garg on fear among telecom operators of�Whats App�, �Skype� and �Viber� cannibalising theirrevenue. In an interview, Garg said that over-the-topmessaging companies have been around as long asmobile phones and telecom companies will earn fromincreased data usage

infrastructure is not able to handle the capacity. Telecomcompanies have to add more towers and redesign theirsystems to handle the traffic.

Telecom companies are saying messaging appsshould be brought under licensing?

There are regulations for them under the InformationTechnology Act. Content is regulated and calls can beintercepted through them. A decision will be taken basedon reports of the department of telecommunications andthe Telecom Regulatory Authority of India whether theyneed to be brought under a licensing framework.

Are any new bands of spectrum being identifiedfor auction?

Our principle is that whatever spectrum we can lay ourhands on should be auctioned as fast as possible. As oftoday, we do not have any spectrum left. We auctionedeverything in March.

The defence forces are expected to releasemorespectrumin 2015. Will auctions happen after ayear?

We are looking at the 700 MHz band, but the ecosystemhas to be developed before we auction. We will decide onthe right time for auction. It is not good to auction spectrummuch in advance.

When will BSNL and MTNL be revived?

We are taking all possible steps to make them financiallyviable. We have agreed to take some of their spectrumbackandwill takeon their pension liabilities.Alot of financialincentives are being given to them.



Domestic airlines in India seemintent on digging their own

grave. With oil prices slowlyinching up and fares headingsouth, airline losses are likely tomount. It is almost as if thepresent accumulated losses arenot quite enough.

According to data compiled byCleartrip, average fares in 2015are almost 15 percent lower thanthe same time in 2014. Someroutes show a sharper drop (seechart).

Samyukth Sridharan, Presidentand Chief Operating Officer,

Cleartrip, said that the lower farespartly reflect the lower fuel pricesbut also partially additionalcapacity on certain routes andincreased competition as a result.

He declined to comment on whatthe issue of break-evenmeans forspecific airlines since their break-evens varysignificantly.

The launch of two new carriers,AirAsia andVistara, hasled to additional capacity, even as Spicejet stabilises itsoperations. IndiGo has also been steadily adding routesand capacity. On the Delhi-Mumbai route, for instance,the newcomerVistara has already added five daily flights.

Not only are fares lower, there seems little differencebetween full service airline fares and low cost airline

fares, with the former beating the latter with lower fareson many days. This clearly means even more troubleand higher losses since the costs of full service carrier(FSC)�s are higher.

In general (this varies for each carrier), for a low fareairline to make some money or at least break-even, thenet fare on the Delhi-Mumbai route needs to be M4000and the gross fare aroundM5200 (this includes taxes andother charges), with a 70-80 percent load factor. Thisgoes up to M6000 net fare and M7200 gross for FSCs.

But as things stand, the fares for the route are aroundM4500, all inclusive, withAir India offering rates as lowasM3750 (oneway) on somedays.Vistara and Jet airwaysrange betweenM4500-5500.

Low Fares Leave Airlines StrandedAnjuli Bhargava*

Analysts argue that thisstrategy seems a trifle short-

sighted, especially in the case ofVistara. The airline claims to befull service and offers a superiorquality service but charges thesame fares. �If you are anOberoi,you could not charge the pricesof Ashoka Yatri Niwas as price isan integral part of your brand. Ifpassengers get accustomed topaying a certain price for yourproduct, when you raise it withoutany change in the product, theywill question why�, argues anindustry analyst. The thoughtthat arises in any normalcustomers� mind is that if she hasto pay somuch, shemight as welltry something else.

A senior industry sourceillustrates his point with anexample. �I see a lot of ladiescarrying Louis Vuitton bagswhere the brand is prominently

displayed. What is the message? That I am not just anyone.I can afford this. If they (Louis Vuitton) drop prices andeveryone can afford it, they will lose half their customerbase�. He said that Vistara is running the risk of making theclassic mistake of devaluing their own brand by chargingwhat the �commoners� do.

In response to a query on why the airline was offering thesame fares as others while offering a premium service,VistaraChief Executive officer PheeTeikYeoh said, �Pricingis a function of demand and supply. It is therefore dynamicand keeps changing. Our pricing strategy has beendisciplined, and determined by the unique value propositionwe offer�. He also said that since he sells economy, premiumeconomy and business class seats, the economics is differentfrom the low fare airlines.

If the fares being charged spell trouble for full service airlines,they could spell even more trouble for newly-started lowfare airlines like Air Asia India. Unless they offer far, farlower prices on routes likeDelhi-Mumbai �which they claimthey will be starting soon � why will anyone take the lowcost carrier (LCC) flight when they are getting a full serviceairline for M4000-4500? They will have to charge far lowerfares consistently to convince passengers that it makessense to take the low fare offering. And they will have toadd frequencies as quickly as possible since a lot of thistravel is for business and therefore timings matter.

* Contributor at Business Standard. This article was published in Business Standard on May 07, 2015

While low fares spell good newsfor travellers in the short run,

airlines need to have a closer lookat their pricing policy in order to

avoid disaster



Itmight be hard to believe in a country where blackoutsare still the norm in large parts. Enough power isavailable in the system but there are no takers for asubstantial portion of it.

PowerMinister PiyushGoyal onApril 30, 2015 conveyedto the Parliament that most parts of the country havesurplus power. �The sad part is that the states are notacquiring or buying power to be able to give theirresidents uninterrupted power supply�, he conveyed tothe Lok Sabha. OnApril 29, 2015 he found that there wasso much surplus power at 3.30 PM that the national gridmonitoring station indicated power was available at �zerorupee per unit�.

There were no takers for 100mn units of electricity,equivalent to 1,500MWof coal-fired and 2,500MW

gas-based capacity, from state-run generation utilityNational Thermal Power Corporation (NTPC) thataccounts for nearly a fifth of the installed capacity in thecountry.

Similarly, a look at the data from Indian Energy Exchangeshows there were more bids for selling power than forbuying in April. In the complicated power tradingbusiness, this might not be seen as an empirical proof.But, this is certainly a strong indicator of the trend. Forthe poor financial health of the state Discoms is largelyto blame, there are other factors, such as fuel prices,difficulty in bill collection, etc. that prevent utilities fromprocuring power. This has led to a fall in demand in theface of rising capacity.

�Usually, it is costly power that goes a begging. Usually,utilities with weak bill collection system prefer to shedload than buying. They find it more viable to pay the`fixed charge� in the tariff than to suffer loss due toinability to recover the cost of additional power�, oneNTPC executive stated.

Simultaneously, generation capacity has been growingsteadily and power generation topped the trillionunit-marks in 2014-2015 at 1,048.4bn. This marks 8.4percent growth over previous year. Most utilities buypower through long-term contracts. The fixed, or capacity,charge makes up 30 percent or less of the contractedtariff. The aversion could be understood better in case of

Enough Power Availablebut Buyers Still Missing

� This feature has been abridged from an article by Sanjay Dutta and Sidhartha. This was published in Times of India onMay 11, 2015

gas-fired plants. These plants are idling because supplyof cheap domestic gas has been snapped due to shortage.

Since utilities booked the capacity of these plants ondomestic gas-based tariff, they are unwilling to considerrunning themwith imported fuel as the cost would double.

Coal-fired plants too face somewhat similar situation.Many of them have to import to make up for shortfall indomestic supplies. This raises fuel and transport costs.

Many utilities are also turning to power exchange totake advantage of falling rates as inter-region

connectivity and transmission network�s carryingcapacity improves. Then there are heavily deficit states,such as Tamil Nadu and Kerala that pay M8.5 per unit tobuy power from the exchange. �If there was betterconnectivity with the south, our unbought 100mn unitswould have been lapped up by these states�, the NTPCexecutive said.

Analysts have a different viewpoint. �Actually, losses ofthe Discoms are rising at a slower pace after therestructuring that took place a few years ago. Theslowdown in the economy has to do with a bit of the fallin demand�, said Sudip Sural, Senior Director at ratingsand research firm, Crisil.

Central Electricity Authority data shows that powerplants were spinning at an average 63 percent of their

capacity, down from 78 percent three years ago. The idlinggas-fired plants may have much to do with this, sincegeneration capacity has been going up steadily duringthis period.

www.grabbaggraphics.com

Many utilities are turning to power exchange to take advantage of falling rates asinter-region connectivity and transmission network�s carrying capacity improves


T R A D E & E C O N O M I C S

New Textile PolicyWhile inaugurating the 4th

International Exhibition � Technotex2015, Union Minister SantoshGangwar stated that a new textilepolicy is on the anvil and it will laythe roadmap for the sector for thefollowing 15 years.TheMinister said that there would

be a lot of opportunities in the textilesindustry and that Technotex wouldprove a milestone. �This year, India�stechnical textile business is close toM1crore. In contrast, the internationalmarket stands at M17 lakh crore�, hesaid adding that it is a �sunrise�sector.Furthermore, the Minister also

said that development of cottongrowing areas where farmers havebeen committing suicide is a priorityfor the Government. (Mint, 03.07.15)

Roll Out a National Retail PolicyChief Executive Officer of

RetailersAssociation of India (RAI),KumarRajagopalan at theCoimbatoreRetail Summit 2015 stated that RAI iscalling for a national policy on theretail trade. �Retail has currentlyestimated at over US$560bn. But apolicy for retail is still not in place. Itis still under the Shops andEstablishmentAct�.Asked what the association was

looking for, he said, �It shouldaddress the retail space (business).Currently, there is no single windowclearance for those wanting to start aretail establishment. They have to get50 different clearances, such as for

power, shop floor, business licenceetc., and have to deal with multiplecheck points and taxes��. (BL, 23.04.15)

PSUs Lined Up for Stake SaleThe Government has short-listed

about a dozen public sectorundertakings (PSUs) for stake salethis fiscal and the Department ofDisinvestment (DoD) has floated acabinet note seeking approval for thesame.TheGovernment has the potential

to raise more than M21,000 crore atcurrent market price. Names includeNational Thermal Power Corporation(NTPC), Neyveli Lignite, BharatElectronics Ltd. (BEL), NationalAluminium (Nalco), HindustanCopper, MMTC, Engineers India,Rashtriya Chemicals Fertilizers(RCF), ITDC,National Fertilisers andState Trading Corporation (STC).In addition, the Government has

stake sales planned in Indian Oil(IOC), NMDC, Bharat HeavyElectricals (BHEL), Oil and NaturalGas (ONGC), and Power Finance(PFC) that are ready to be launched.These companies could help raiseanotherM32,000 crore. (FE, 14.07.15)

New Urea PolicyThe Union Cabinet chaired by

Prime Minister Narendra Modi hasapproved the urea policy for a periodof four years (2015 to 2019) and it aimsto increase the domestic productionby 2mn tonnes and reduce its subsidybill by overM4,800 crore annually.

Briefing the media, UnionFertiliserMinisterAnanthKumar saidfor the following four years (till 2019)maximum retail price of urea willremain the same atM268 per bag of 50kg, excluding local taxes. For neem-coated urea farmerswould have to payan additional M14 per bag.Besides, the Government has also

decided to continue the existingsubsidy rates for Phosphatic andPotassic (P&K) fertilisers (22 gradesincluding Diammonium Phosphate(DAP), Single Super Phosphate(SSP), Muriate of Potash (MOP),etc.) under the Nutrient BasedSubsidy (NBS) policy in 2015.

(BL, 13.05.15)

Air Pollution NormsEven as the Modi Government is

working to ensure that themechanisms for curbing pollution areput in place, the cement industry hasbeen slow to implement air pollutionnorms.Less than 5 percent of the plants

have taken steps to comply with theair pollution norms, notified by theMinistry of Environment and Forest(MoEF) in2014.Asofnow,194cementplants have to fully comply with thenotification by June 30, 2016.The MoEF had asked all 194

cement plants in the country toreduce their particulate matteremission by a third. Similarly, sulphurdioxide and nitrogen dioxideemissions are also to be reduced.

(BL, 15.04.15)

OECD:BetterGrowthProspectsThe Organisation for Economic Co-operation and

Development (OECD), a grouping of mostly developednations, reports that India�s economic growth continued to firmup, even as growth was easing in the neighbouring China.

The projection comeon a daywhen the country�s credit ratingoutlook has been upgraded to �positive� by global rating agencyMoody�s Investors Service.

The think tank�s assessment is based on its Composite LeadingIndicators (CLIs) that are designed to anticipate turning points ineconomic activity relative to trend.

�CLIs� signal growth easing in China and Canada, albeit fromrelatively high levels. In Brazil and Russia, CLIs point to a lossin growth momentum, while in India, the CLI continues to

indicate firming growth�, OECD indicated in a statement. (ToI, 09.04.15)

www.timesofindia.indiatimes.com/


T R A D E & E C O N O M I C S

The Truth behindIndia�s New GDP Numbers

Pramit Bhattacharya*

It is an open secret that India�s new gross domesticproduct (GDP) series has flummoxedmost observers ofthe Indian economy.ReserveBank of India (RBI)GovernorRaghuram Rajan and the Chief Economic Adviser to theFinance Ministry Arvind Subramanian have publiclyexpressed scepticism about the new growth numbers.

As in the case of other sectors of the economy, theestimates of the private corporate sector are based on thereport of a sub-committee, which examined the newmethodology to estimate output. But the version of thesub-committee report published by civil societyorganisation (CSO) in the previous month differsdramatically from the original report finalised by the sub-committee in September 2014, according to arecent Economic and Political Weekly article byR Nagaraj, an independentmember of the sub-committeeand a professor at the IndiraGandhi Institute ofDevelopmentResearch inMumbai.

In the earlier series, theestimates for the privatecorporate sector were based ona sample survey of companiesconducted by RBI. This sampleconsisted of only a fewthousand companies, and hencethe estimates were blown up (or multiplied) in proportionto the coverage of the paid up capital of the samplecompanies to the total number of companies registeredwith theMinistry of CompanyAffairs (MCA).

Subsequently,MCAtightened norms on filing returns andinitiated e-filing of company returns, which had led to animproved database of companies, the MCA-21 database.Given the limitations of the earlier data, the sub-committeeon private corporate data revisions suggested that theMCA-21 database be used to generate national accountestimates relating to the private corporate sector, sincethat database included the returns of all workingcompanies. The estimates generatedwere lower than thosearrived at by blowing the RBI sample. But the freshestimates were accepted since they were deemed morereliable, and the problemswith blowing up the RBI samplewere widely acknowledged.

However, after the sub-committee finalised its report,the advisory committee suggested a change in

methodology. It suggested that the MCA-21 basedestimates be blown up again, in proportion to the coverage

of the paid-up capital of the companies in the database inthe total universe of �active� registered companies. �Active�companies were defined as those that filed returns at leastonce in the past three years. �Active� companies numbernearly 900,000 while theMCA-21 database includes dataon 520,000 companies, which account for 85 percent ofthe paid-up capital of the universe of �active� companies.The new estimates arrived at blowing up the MCA-21database were significantly higher than those obtainedby blowing up the RBI sample estimates.

The crux of the problem is that nobody knows the truenumber of firms in India, or the precise ratio of fake

firms to the total number of firms, and how that ratio variesover time. The sub-committee had considered the 520,000companies in the database to be the true size of the

corporate universe in India butthe advisory committee had laterdisagreed.

Given the wide changes in thefinal results this change inmethodology has produced, it isimportant for CSO to release thecomplete and validated version ofthe MCA-21 database as well asthe detailed steps it followed inthe estimation of the GDPnumbers. Only then will it be

possible for independent analysts, unaffiliated with theCSO, to verify the authenticity of the published numbers.It is possible that the changesmade by CSO are defensiblebut it should at least release the details behind thesechanges and open up its databases in an accessible format,given that it is a publicly funded organisation.

This is important for three reasons. Firstly, given thenew controversy, over the estimation methodology,

the onus on proving the veracity of the new series lieswith the CSO.

Secondly, the newGDPnumbers fail basic smell tests.AsNagaraj points out in his article, revisions in theGDP seriesusually lead to a small change in the levels (absolutemagnitudes) of the estimates, even at current prices.

Finally, given the surprising growth numbers, many globalinvestors have begun comparing the state of officialstatistics in India to that of China. It is important to correctthat perception. The CSO needs to act fast to restorecredibility of official statistics unless it wants to win theLGNobel prize for 2015.

* Managing Editor, Mint. This article was published inMint on April 02, 2015

www.livem

int.com


R E P O R T D E S K

Changes in India�s Rich ListThe list of India�s billionaires has

seen a major shuffle in the last five toseven years, the most notable changebeing Sun Pharma�s Dilip ShanghvipippingMukeshAmbani as the richestIndian. The list has seen manyadditions and deletions. Shanghvi�spersonal wealth has risen fromUS$1.27bn in March 2005 toUS$23.12bn currently.Meanwhile, Mukesh Ambani�s

wealth has declined fromUS$35bn toUS$22bn as Reliance Industries�shares have underperformed thebenchmark indices for almost sevenyears. The most notable additions inthe group have been of GautamAdaniandUdayKotak.AnilAmbani, DLF�sK P Singh and GMR Graph (a globalinfrastructure developer) GM Raohave lost wealth in the previous fewyears. (ET, 20.04.15)

89th in WEF�s Global IndexIndia has slipped six places to rank

89th on a global Networked ReadinessIndex, showing a �widespread�weakness in its potential to leverageinformation and communicationstechnologies for social and economicgains.While Singapore has replaced

Finland on the top of the 143-nationlist, prepared by theWorld EconomicForum (WEF), it has called forimprovement in India�s business andinnovation environment,infrastructure and skills availability.Singapore is followed by Finland.However, India has been ranked

on the top globally on a sub-index forcompetition and affordability. Overall,India was ranked 83rd in the previousyear, and even better at 68th positionin 2013.Moreover,WEF indicated thatIndia�s weakness is widespread,falling in the bottom half of seven ofthe 10 pillars of the index. (ET, 16.04.15)

101 Rank in Well BeingOut of 133 countries rated on

indicators of well-being, such ashealth, water and sanitation, personalsafety, access to opportunity, tolerance,inclusion, personal freedomand choiceIndia has secured the 101th place.This is lower than India�s rank, of

93, for GDP per capita income. EvenNepal and Bangladesh rank higherthan India on the Social Progress Index(SPI) ratings. Norway has bagged thefirst rank; the US is at the 16th place.On the parameter �Tolerance and

Inclusion� India ranks 128th and is atthe 120th place on �health andwellness�, said the Economist andExecutive Director of the SocialProgressive Index (SPI), MichaelGreen. (TH, 09.04.15)

India Tops in RemittanceIndia has again topped the

remittance chart for 2014, pulling inUS$ 70.38bn from its global migrantworkforce. China follows withUS$64.14bn, andPhilippines,Mexico,and Nigeria trail at a distance.In fact, remittances worldwide

plateaued a bit in 2013-2014 becauseof tough economic conditions incountries where migrants head to, butthings are expected to look up in 2015and beyond. India itself held steady,

with remittance increasing onlymarginally fromUS$69.97 in 2013 toUS$70.38 in 2014. Still, the US$70bnwindfall constituted a healthy 3.7percent of the country�s nearly US$2tnGDP.Because remittances are more

stable than other capital flows theycould greatly enhance the recipientcountry�s sovereign credit rating.

(ToI, 14.04.15)

Rise in Premature DeathsAir pollution in the country has

lead to a six-fold jump in prematuredeaths in the previous decade,revealed a standing committee reportby the Environment Ministry. Thereport, quoting the Global Burdenof Diseases 2013 study, said thatbetween the year 2000 and 2010, thenumber of premature deaths in thecountry increased from 1,00,000 to6,20,000.The study, conducted by the

Institute for Health Metrics andEvaluation (IHME) at the Universityof Washington, tracks deaths andillness from all causes in a decade.Another study conducted by

scientists at Indian Institute ofTechnology Roorkee, HumphreySchool of Public Affairs, Institute ofMinnesota and University ofColorado concluded that totalmortalitywent up from11,394 in 2000to 18,229 in 2010. (DNA, 16.05.15)

India: Not a Happy CountryPeople from countries as diverse

as Bhutan and Pakistan are muchhappier than Indians, according to theWorld Happiness Report 2015. Indiais perhaps one of the unhappiestcountries in theworld. It ranks 117 outof the 158 countries surveyed for thereport.In the South Asian region, the

country fares better than Nepal (121strank), Myanmar (129th), Sri Lanka(132nd) andAfghanistan (153rd).The study considers six variables

� per capita GDP, healthy lifeexpectancy, social support, freedom,generosity and the absence ofcorruption � to reach the score givenon a scale 0 to 10, where 0 representsthe worst possible life. The topcountry in the list is Switzerland.

(Mint, 25.04.15)

5th in ProducingE-Wastes

India is the fifth biggest producerof e-waste in the world, discarding

1.7mn tonnes (Mt) of electronic andelectrical equipment in 2014, a UNreport has indicated warning that thevolume of global e-waste is likely torise sharply by 21 percent in thefollowing three years.

The �Global E-Waste Monitor2014�, compiled by the UN thinktank United Nations University(UNU), said at 32 percent, the USand China produced the most E-Waste overall in 2014. India camein fifth, behind the US, China, Japanand Germany, the report said.

Most E-Waste in the world in2014 was generated in Asia at 16Mt or 3.7kg per inhabitant. The topthree Asian nations with the highestE-Waste generation in absolutequantities are China, Japan andIndia. (ToI, 20.04.15)

www.delhigreens.com


R E P O R T D E S K

Prime Minister Narendra Modi has launched anational air quality index (NAQI) that will rate the

quality of air people are breathing in 10 cities in real time.

The index will cover Delhi, Agra, Kanpur, Lucknow,Varanasi, Faridabad,Ahmedabad, Chennai, Bengaluru andHyderabad. The index will be later expanded to 46 morecities having a population ofmore than onemillion, besides20 state capitals.

Concerns have been raised regarding air pollution in Indiancities. A recent report by the World Health Organisation(WHO) said that of the 20most polluted cities in theworld,13 are in India, with Delhi at the top.

�The air quality index may prove to be a major impetus toimproving air quality in urban areas, as itwill improvepublicawareness in cities to take steps for air pollutionmitigation�, EnvironmentMinister Prakash Javadekar said.

However, introduction of the index was marred byglitches.Of the 10 cities, the index forAgra, Faridabad

and Ahmedabad could not be calculated as they had�insufficient data�.

While some cities have multiple air-monitoring stations,some have only one. The Environment Ministry plans tohave an average of four stations in every city covered bythe index.

There were several monitoring stations that were notworking properly and giving insufficient data. Of the fourstations in Delhi, one was not working.

�Monitoring stations at several cities were showinginsufficient data. To roll this out, they have to ensure themonitoring stations are maintained properly. It�s a hugemonitoring infrastructure issue. They would have to putin place good-quality controls. There needs to be afocussed effort.Monitoring infrastructure will be a criticalissue�, said Anumita Roychowdhury, Executive Director(research and advocacy) at Delhi-based Centre for Scienceand Environment (CSE), an environmental non-governmental organisation. She expressed concern that ifmonitoring stations does not work, the plan could fail.

Meanwhile, Modi, who inaugurated a two-daynational conference of environment and Forest

Ministers of the state governments andUnionTerritories inNewDelhiwhere the indexwas launched, said his 10month-old Government is focussing on clean energy in a big way,citing its emphasis on solar, wind and biomass energy.

Highlighting India�s tradition of living in harmony withnature,Modi said India should lead the global fight against

Air Quality Index Marred by Glitches

climate change, regretting that the country is often seenas a hurdle.

�People of India have been the protectors and devoteesof nature.We need to project this fact properly, so that theworld realises that India could not questioned in thisregard. Indians have always conserved nature, and eventoday, have among the lowest per-capita carbon emission,globally�, saidModi.

�We want to reduce carbon emissions�but unless webring a change in our lifestyle, we will not be able to savethe environment�, said Modi.

�Instead of being forced to follow parameters laid downby others, India should lead theworld in the fight againstclimate change�, the PrimeMinister added.He also releaseda standard �Terms of Reference for Environment ImpactAnalysis� prepared by the Environment Ministry.

The standard Terms of Reference (ToRs) are expected tocut delays by at least one year in projects getting greenclearances. Javadekar called it a step that would contributeto ease of doing business. Modi has also asked urbanbodies across India to focus on solid waste managementwith programmes to generate wealth fromwaste.

� This feature has been abridged from an article by Mayank Aggarwal, Journalist, Mint. This was published inMint onApril 07, 2015

Day 1 ReadingsAir Quality Index Possible Health Impacts1-50 Minimal ImpactGood51-100 Minor breathing discomfort to sensitive peopleSatisfactory101-200 Breathing discomfort to the people with lungs,Moderate asthma and heart diseases201-300 Breathing discomfort to people on prolongedPoor exposure301-400 Respiratory illness on prolonged exposureVery Poor401-500 Effects healthy people and serious impacts toSevere those with existing diseases

www.healthable.org


C O R P O R A T E G O V E R N A N C E

Do you think that the quality of boards havechanged since the credit crisis?Absolutely, I think the change was taking place

anyway. If I go back to 1992, that was the first year whenwe talked about corporate governance, we had a numberof collapses in 2002, including Enron and the dotcoms.These collapses let us look at corporate governance

closely. Then in 2008, we had a very serious globalfinancial crisis and a lot of pressure was built oncompanies to make some changes in their corporategovernance. The Companies Act in India is the result oflegislation to improve corporate governance. This is oneof the first major changes that India has had in over 50years.Then you have also got SEBI circulars, which are an

attempt to deal with governance issues as a result of theglobal financial crisis.

Regulation is puttingmore responsibility on theDirectors � is it fair? Are they remuneratedproperly for it?It is a responsible job. If somebody does not do his

job, then he should be either dismissed. IndependentDirectors should accept those responsibilities, and if theyfeel they are not able to do that, then they should not beon the board.We are expecting independent Directors to put more

time on the job. So, we are expecting that when theChairman of a board invites independent Directors to jointhe board, there should be an estimate of howmany daysthey are going towork per year in the letter of appointment.They are presently taking more liabilities, so there is a

Corporate Governance Will Lead toBetter Managed Organisations

risk that they could be fined or thrown in jail and there is arisk to their reputation. Therefore, we should pay themprofessional amounts of money.

India is often perceived to be a country with lowercorporate governance standards. Do you think itis rewarding for an Indian firm to follow thesestandards?There is this global perception. In 2013-14 global

competitiveness statistics of the World Economic Forumindicate that out of 148 countries, India was 65th � presentlyit is 94th. In a year, it has fallen from 65th to 94th in the worldconcerning the effectiveness of the boards.Thus India is not necessarily getting worse in terms of

the board, but other countries are improving rapidly oncorporate governance.This is what theCompaniesAct 2013and the SEBI circular aim to do � to improve theeffectiveness of the boards as India is slipping down thecorporate governance league table. So, while globalinvestors are looking at India because of its size, it is soimportant that corporate governance standards should beimproved.Corporate governance will lead to better managed

organisations. That will reward shareholders, communityand so on. It also means that companies following bettercorporate governance standards would get lesser scandals,and if they get one, they should be able to manage it better.

There is a rush to hire women on Indian boards.Does gender diversity help the boards?Diversity in general is good. So, like in Tunisia, they are

doing it on age grounds � so 30 percent of the board shouldbe under 40, and 30 percent should be under 40 and 60.Different countries are doing different things and they aredoing it in a different way and at different speeds. Here inIndia we are talking about one woman on every board �that is a huge step forward on diversity.

Which side of the debate are you on � theChairman-CEO role split?I firmly believe in the split. It�s a different job, as

managing a board meeting is different from implementingwithin the organisation, and secondly, it is a conflict ofinterest. The Chief Executive, who has written all theresolution and papers, should then go and chair themeetingand start off with claiming what a wonderful paper this is.That is not an independent Chairman and no

independent Directors would be able to deal properly withsuch a situation. AChairman is a people�s person, while aCEO is focussed on the results. It is fundamentally adifferent job.Agood CEO does not make a good Chairmanand vice versa.

� Edited excerpts from a wide-ranging Interview of Chris Pierce, CEO, Global Governance Services, an authority on corporategovernance taken by Reporter Sachin Dave. This was published in Economic Times on April 01, 2015

�While India is hoping to attract FDI, globalinvestors are still cautious when it comesto taking a call on the country, mainly dueto its corporate governance issues�, statesChris Pierce

www.virtualmentoring.net


G O V E R N A N C E & R E F O R M S

The most important developments in India have beenSubhas Chandra Bose�s death in March, Rahul

Gandhi�s disappearance, Prashant Bhushan andYogendraYadav�s departure fromAamAadmi Party (AAP), and thelike. These are emphatically not important, especiallyBose�s death, which is interesting only to right-winglunatics who are obsessed with Congress-bashing, hatersof the Nehru-Gandhi family, historians who have nothingmuch to do and some Bose family members.

What are the key issues that we should beworrying about?On top of the list should be health, education, tax reforms,simplifying government rules, communalism and Chinapolicy.

Health and education are intrinsically important.Asocietythat does not provide universal healthcare and universalprimary education is morally repugnant in this day andage. In the modern world, there is simply no excuse.Morality apart, no economy can post sustained rates ofeconomic growth if it does not have a healthy, educatedpopulation.

NarendraModi�s Government, for all its developmenttalk, increased health expenditures by amere 2 percent

in the 2015-16 budget, when public health spending inIndia is already one of the lowest in the world. On keyindicators, India is already at the bottom of the globalleague tables on health, worse than its South Asianneighbours and surpassed only byAfrica�s poorest at thebottom of the rankings.

Education did even worse than health. Whereas defenceexpenditure rose by 7.5 percent, Modi and Arun Jaitleymanaged to reduce expenditure on education, particularlyschool education. They increased allocations for highereducation when money is not really the problem with ouruniversities. And their plans to open more All IndiaInstitute ofMedical Sciences (AIIMS) hospitals and IndianInstitute of Technology (IITs) are laughable when there isnot enough trained talent to fill these institutions. Themost basic function of a state, beyond providing law andorder and security from other countries, is extracting taxesto pay for social welfare. India continues to do abysmallyhere. Less than 3 percent of Indians pay income tax. TheGovernment simply has to find a way to monitor salariesin the farming and informal sectors where there is no taxcollection worth the name.

The PrimeMinister NarendraModi has underlined theneed to simplify government rules. There have been

248 reports on how to simplify our laws. Most recently,the Law Commission recommended that 261 statutesshould be re-examined, and 72 of these repealed right away.

* An Indian Academic Analyst. This article was published in Times of India on April 25, 2015

An Agenda for Modi GovernmentKanti Bajpai*

Most of the 72 statutes date from the 19th century. TheIndian Constitution is the longest in the world with 444articles � it needs to be simplified too. Then there arethousands of petty rules that weigh ordinary Indians downat every turn. Reducing the rules is not the only challenge.Writing them in ordinary language, so that citizens canactually comprehend them is vital.

If India is not to become Pakistan, Syria, Iraq or Ukraine,we need to make sure that religious and ethnic minoritiesare protected and respected. In one year of Modi�s rule,the two biggest minorities, Muslims and Christians, havebeen under constant, if petty, attack. The Prime Minister,who speaks with suchforce and verve inpublic, has lost hisvoice on communalism,to the point that evenIndian businesses areworried. It�s not just thePrimeMinister, whoweknow cannot utter thewords �secularism� and�communalism�.Whereare all the civil societygroups that mobiliseagainst corruption and for farmers � why are they so silenton communal politics?

Finally, the PrimeMinister is going to China in amonth.He knowsChina better than any Indian PrimeMinister,

having been there four times and having met Xi Jinpingfive times. India needs a breakthroughwith China, after 34years of border talks. It is time for some bold steps, likeRajiv Gandhi took in 1988 to restore normal diplomaticand social ties. Can the PrimeMinister not propose a partialsettlement in those border areas where there is nocontroversy, joint patrolling in the contested parts of theborderwith a view to jointmanagement, and special accessfor Chinese pilgrims to the Tawangmonastery as part of afinal settlement?

Republic day is not about what we did notget, it is more about what we did get

Instead of inanematters centre mustfocus on weightyissues like health,education and thecountry needs abreakthrough withChina after 34 yearsof border talks


G O V E R N A N C E & R E F O R M S

Child Labour Ban MulledThe Government has moved a proposal for complete ban on

child labour up to 14 years with the caveat that employment willonly be allowed in family enterprises after school hours even aschild rights activists have opposed the move.The Labour Ministry has sought the Cabinet approval for an

amendment to the Child Labour ProhibitionAct, which will allowchildren under-14 to work in select family enterprises if it does nothamper their education. Children between 14 and 18 years will notbe allowed to work in hazardous industries.The legislation proposes no penalty for parents for the first

offence but repeat offenders might be subject to fine withimprisonment. However, the employer would be liable forpunishment even for the first offence. (ToI, 08.05.15)

Wider Self-attestation NetAs many as 24 States and Union Territories and 50 Central

Ministries have abolished, or are at working towards doing awaywith affidavits in favour of self-attestation, after the Centre pushedStates in 2014 to do so.Modi Government had written to all states in 2014 requesting

them to review the requirement of affidavits for availing publicservices and urged them to replace them with self-attestation in aphased and time boundmanner. He said that the CentralMinistriesare also taking action to do away with the need for affidavits.The services in which attestation has been abolished largely

relate to birth/death certificates, government jobs, SC/STcertificates and admissions, according to a report. (ET, 08.05.15)

CAGPulls DoT for LossIn a scathing indictment of the Department

ofTelecommunications (DoT), the ComptrollerandAuditor General of India (CAG) has foundthat various policy and procedural lapses onits part led to telecom operators getting anundue advantage of around M24,000 crore.The report said DoT, by allowing telecom

companies to share spectrum, through intra-circle roaming agreements, and without anyadditional charge, had caused them a benefitofM9,604 crore.In 2010, DoT held the first auction of

spectrum, raising as much as M1.06tn from thesale of airwaves in 2100megahertz (MHz) and2300Mhz bands. The report said that despitethe Telecom Regulatory Authority of India�srecommendations, DoT did not auction800MHz spectrum, which resulted in non-realisation of upfront charges amounting toM9,626 crore and undue favour to CodeDivision MultipleAccess (CDMA) licensees.

(Mint, 09.05.15)

Iron Freight Evasion ScamAn iron ore freight evasion scam led to a

loss of M29,236 crore for Indian Railwaysbetween 2008 and 2013, CAG has said.In a report, the auditor said that the revenue

loss had resulted frommanipulations in the dualfreight policy, under which the railways chargesless for transporting iron ore for domestic useand more, almost three times, for transportingthe commodity for export.The dual rate policywas aimed at capitalising

on the increasing global iron ore prices in 2008.The CAG�s findings are based on a review ofrecords from 87 loading points across sevenrailway zones and 180 unloading points across15 zones. (BS, 08.05.15 & Mint, 09.05.15)

Jio InfocommBenifitsA report by the CAG has indicated that the

Mukesh Ambani has promoted Reliance JioInfocomm got undue advantage of M3,367.29crore after the DoT allowed the company tooffer voice services by using broadbandwireless access spectrum (BWA).Reliance Industries in 2010 acquired Infotel

Broadband, which had won pan-Indian BWAspectrum in auctions to be used for 4G services.�Reliance Jio InfocommLimited (formerly,

M/s Infotel)... paid UL entry fee of M15 croreand additional migration fee of M1,658 crore inAugust 2013. This migration, allowed at pricesdiscovered in 2001, resulted in undue advantageof M3,367.29 crore to M/s Reliance JioInfocomm�, CAG stated in a report.

(BS, 08.05.15)

C A G N E W S

Curbing Human Trafficking

The Narendra Modi led NDA Government is all set to finalisea national body to combat human trafficking that would be

controlled by the Ministry of Home Affairs (MHA) and willtake away the monopoly of the Central Bureau of Investigation(CBI), which acts as a nodal agency.

The proposal opposed by CBI, was mooted, after theGovernment realised that there is no effort by the cops to identifyandnab theorganised gangsof traffickers involved in cross bordertrafficking with Bangladesh and Nepal.

The Home Ministry officials said that the national bodywill not only take up the investigations of high profile cases butwill also work out a mechanism to enhance the relief andrehabilitation operations being run by the Ministry of Womenand Child Development. (ET, 30.05.15)

www.nalv.com


P A R L I A M E N T A R Y R O U N D U P

Waterways Bill to be TabledThe Union Minister for Road

Transport and Highways, NitinGadkari said that the proposed bill toconvert 101 rivers across the countryinto inland waterways will be tabledin the Parliament on May 05. TheGovernment has so far declared fiveriver stretches as waterways.He said that the Government is

aiming to reduce traffic burden fromroads and promote transportationwhere transportation cost is barely 30paise a km in comparison to M1by railways and M1.5 a km throughroads.Inland waterways comprising

rivers, lakes, canals, creeks,backwaters etc. extend to about 14,500km in the country. However, potentialof this mode of transport has not beenfully exploited. The Government hasdecided to launch PrimeMinister JalMarg Yojna and projects for settingup dry and satellite ports, besidesconverting riverways into waterways.

(IE, 01.05.15)

Ministry to Push BillsTo improve ease of doing business

and boost the �Make in India�programme, Labour Ministry willpush three bills for Cabinet approvalincluding the ones on small factories,provident fund and prohibition ofChild Labour.On the Child Labour (Prohibition

and Regulation) Amendment Bill,provides that any child below 14years of age will not be employed inan organised sector. The SmallFactories (Regulation of EmploymentandConditions of Services) Bill seeksto regulate small industries whileproviding for ease of doing business.The Ministry is seeking

comprehensive amendments to theEmployees� Provident Funds (EPFs)and Miscellaneous Provisions Act,1952 to provide workers an optionbetween EPF scheme run byretirement fund body Employees�Provident Funds Organisation(EPFO) and New Pension Scheme(NPS). (ToI, 27.04.15)

Right to Privacy BillsThe Government has stated that

the details of the Right to PrivacyBill are yet to be finalised. The

construed as criminal misconduct andpossession of disproportionate assetswill be considered proof of such illicitenrichment. Penal provisions arebeing enhanced from a minimum sixmonths to three years and frommaximum five years to seven years.

(BL, 29.04.15)

Draft Financial CodeModiGovernment will be seeking

approval for the proposed IndianFinancial Code that would replace 60-odd archaic laws to herald a regime ofprinciple-based, as opposed tosector-specific regulation, in thefinancial sector in the winter sessionof Parliament.The Draft Code is being fine-

tuned on the basis of comments ofstakeholders and would be put upagain in the public domain aroundmid-2015 before the final version isplaced before the Parliament inNovember-December.The draft Code seeks to move

away from the current sector-wiseregulation to a systemwhere the RBIwould deal with monetary policy andregulate banking and paymentsystem while a Unified FinancialAgency subsumes existing regulators� SEBI, Insurance Regulatory andDevelopment Authority (IRDA),Pension Fund Regulatory andDevelopment Authority (PFRDA)and FMC � to regulate the rest of thefinancial markets. (FE, 20.04.15)

Government was quizzed on whetherintelligence agencies had asked to bekept out of the bill�s purview.Intelligence agencies have

reportedly sought a blanket exemptionfrom the ambit of the Right to PrivacyBill, 2014, a proposed law, whichimposes heavy costs and punishmentfor intrusion into a citizen�s privacy.The Government was asked if it

endorses the existing rider thatrequires intelligence agencies tointrude on one�s privacy only in theinterest of national sovereignty,security and integrity. The draft Bill,reports state, exempts security andintelligence agencies from its ambit ifthey could prove that their actions ofintruding on a citizen�s privacy werein national interest. (ToI, 08.05.15)

Prevention of Corruption ActWith two objectives in mind,

Union Cabinet has approved officialamendments to Prevention ofCorruption Act. Firstly, there is achange in the system to initiate actionagainst retired bureaucrats fordecisions taken during their tenureand, secondly, the act of corruptionwill presently be at par with a heinouscrime.The amendmentswill help remove

sense of fear among bureaucrats intaking decisions, while there will bemore stringent provisions againstcorrupt persons. Intentionalenrichment by public servants will be

Afforestation Fund BillThe Union Cabinet has cleared the

Compensatory Afforestation Fund Bill2015, which will facilitate the distributionof around M38,000 crore among all states toencourage them to plant forests. The Bill willbe introduced in Parliament during theongoing session.

The Bill aims to provide an institutionalmechanism, both at the centre and in states and UnionTerritories, to ensure quick, efficient and transparentutilisation of money collected in lieu of forest land divertedfor non�forest purposes, such as industrial projects. Thisbill is expected to mitigate the impact of such diversionby encouraging afforestation projects.

It envisages the establishment of a nationalCompensatory Afforestation Fund (CAF) and state CAFsto credit amounts collected by state governments and Union Territoryadministrations to compensate for the loss of forest land to non-forestprojects. (Mint, 30.04.15)

www.cdn.dow

ntoearth.org


E X P E R T C O R N E R

Meagre Funds for WaterRural Development Minister

Birender Singh has agreed with theoverall sense of the Lok Sabha thatfunds earmarked for the DrinkingWater and Sanitation Ministry werenot enough but expressed optimismabout raising the funds from othersources.He said, �I also subscribe to what

our friends from all corners have saidwith one voice that the budgetestimates are not up to expectations.That is what they feel. I am hearingthat the standing committee has alsocome out with the same view�.Drinking water�s allocation is

M2,611 crore for 2015-16, down fromM9,250 crore in 2014-15 (revisedestimates), while sanitation�s M2,625crore is slightly lower than previousyear�s M2,850 crore (revisedestimates). (IE, 23.04.15)

Govt. Highlights ProgressCountering criticism of NDA

Government�s first year in office,Modihighlighted his Government�sachievements and maintained thatIndia�s economy is on its way to highgrowth.Modi mentioned that the future

focus of his Government would be onwomen, farmers, the urban poor andon employment. He added, �Whateverwe have started, needs to be takenforward and into the villages andmunicipal area�.

From enhancing India�s globalperception to focus on pro-poormeasures, Modi said that hisGovernment has been in news like,creation of jobs, stance on land bill,cleaning the lobby of lobbies andnational investment fund as well.

(ET, 26.05.15)

Welfare Fund ConcernsIn two letters written to Finance

MinisterArun Jaitley, theWomen andChild Minister Maneka Gandhi hasflagged the problems that could resultbecause of the slashing of the welfarefund allocations.Maneka pointed out a shortfall of

M10,900 crore for the IntegratedChildDevelopment Services (ICDS) thatcaters to the nutritional needs ofnearly 10 crore women and children.Overall, she mentioned an additionalrequirement of overM13,000 crore forher Ministry.While in a second letter, she said

that her Ministry came up with a newNational Nutritional Mission (NNM)Programme. The scheme requiredM28,000 crore, over five years but onlyM100 crore were provided in thebudget. (BS, 20.05.15)

CMIE: Good Growth AheadMaheshVyas,Managing Director

and Chief Executive Officer of theCentre for Monitoring the IndianEconomy (CMIE) stated that FY2015was a reasonably good year for theinfrastructure sector, stated.

Stress onSkill Expertise

Former PresidentAPJAbdul Kalamhas advocated a �complete�

change of the higher educationframework in the country andstressed on skill development tocome up with a work force to meetfuture challenges.

Kalam further said, �Twocertificates should be given tostudents. In schools, one skillcertificate and one educationcertificate and in college, degree anddiploma on the expertise acquired.In schools from class 9 to 12, 25percent of the time has to be allottedfor skill development programme�.

(NDTV, 29.05.15)

Process Lacks TransparencyThe Central Government�s process of

formulating India�s new Education Policy is not�transparent� and �inclusive�, according to socialactivistAmbarishRai. Rai, National Convenor ofthe Right to Education Forum, a network of10,000 grassroot organisations working in 18states said, �We appreciate the initiative torevamp the education policy but we do notsupport the way it is being done. The process isnot transparent�.Human Resource Development Minister

Smriti Irani stated that the new education policywill be formulated in consultationwith the states.While the Government launched the

exhaustive exercise earlier in 2015 for holdingconsultations aimed at the drafting a newnationaleducation policy and invited suggestions anddiscussions towards that end, Rai saidconsultations are yet to take place. (BS, 29.06.15)

E D U C A T I O N S E C T O R

www.2-bp.blogspot.com

Further, he said that theGovernment has been successful inexecuting policies to revive the sectorand according to him, it is not practicalto expect rapid implementation of roadprojects, especially in a countrywherethere are issues, such as landacquisition.In the past one year, Vyas said

stated that there has been a significantimprovement in coal production andthermal power generation. Withbottlenecks getting cleared, goingahead, he expects to see double digitgrowth in the infrastructure sector.

(moneycontrol.com, 19.05.15)

Saffronisation of EducationHuman Resource Development Minister Smriti Irani smashed

back at allegations of �saffronisation� of education and said�everything Indian� should be valued and we should not shy away

from our �inherent strength� speaking in aconference organised by �HinduEducation Board�.

She also referred to the criticismfaced by MathematicsProfessor at PrincetonUniversity, ManjulBhargava, for learningthe concept of mathsthrough Sanskrit poems.�He is accused in

television shows ofsaffronisation of mathematics. This is only possible in India thatyou have an ancient method of Maths, which is explored andapplauded across the world, that becomes saffron back in India�,she said. (IE, 09.06.15)


H E A L T H S E C T O R

LaggingbehindonWHOTargetsIndia met only four of ten health

targets underMilleniumDevelopmentGoals (MDG), and has made noprogress on another four, accordingtoWorld Health Organisation (WHO)report in 2015.Globally, life expectancy at birth

has increased by six years for bothmen and women since 1990, while inIndia life expectancy grew by eightyears. While India has sharplyreduced its infant mortality between2000 and 2013, it still contributes forthe most infant deaths globally.Life expectancy in India grew by

eight years between 1990 and 2013.While India has sharply reduced itsinfant mortality between 2000 and2013, it still contributes for the mostinfant death globally. Non-communicable diseases are the topkillers, followed by communicablediseases and injuries. (TH, 15.05.15)

Urge for Cheap DrugsA resolution passed by working

committeemeeting of IndianMedicalAssociation (IMA) is likely to havedirect benefit of making drugs moreaccessible and affordable. It wasresolved that all IMAmembers shouldprescribe drugs with chemical orgeneric name and the name of thepharmaceutical company.It also urged the members to

prescribe drugs rationally, and to findthe cheapest version of the drugwhileensuring that the quality is retained.For instance, 1 gmvial ofMeropenem,an injectable, broad-spectrumantibiotic to treat infections, is sold atprice fromM592 toM2800. It remainsto be seen if this move, along with theCentre�s Jan Aushadhi schemeoutlets to sell generic medicines, canfinally make access to generics easierin India. (TH, 14.04.15)

Big Openings in IndiaThe healthcare sector of India was

estimated to beUS$75bn during fiscalyear 2012-13 and it is projected toreach US$300bn by 2020.Within thehealthcare industry, the life science,bio-technology, pharmaceutical anddiagnostics play an important roles inattracting foreign players to India.

India is already an extremelyattractive market opportunity forglobalmedical devicemanufacturers:70 percent of India�s medical devicesand equipment are outsourced fromother countries, particularly from theUS Medical device companies.Importantly for theUS companies,

India�s medical devices industry in2015will be opened up to 100 percentFDI. The decision to change theinvestment route should have aninstant impact on the shares ofdomestic Indian medical devicemanufacturers. (Forbes, 09.06.15)

Impact of Urea PolicyNo hike in urea price for next four

years under the Government�s newpolicy might help nitrogenousfertilizer remain the king among thefertilizers. Themovemight further fuelits excessive use eventually leadingto soil degradation, groundwater andair pollution. This could have seriousimpact on overall productivity andhuman health.Excessive use of Urea is noticed

in states having strong irrigationnetwork like Punjab, Haryana,western Uttar Pradesh and AndhraPradesh but there have always beendeep concern about its excessive useelsewhere too.Urea sells at M5,360 per tonne,

Delivered at place (DAP) costs about

M24,000 and grades of NPK fertilizercost aboutM22,000. The skewed ratioin favour of nitrogenous fertilizer inthe overall fertilizer basket has alwaysbeen resisted by the experts due toits long � term adverse effect on soiland environment. (ToI, 15.05.15)

NATHEALTH�TFHCMoUNATHEALTH signed a

Memorandum of Understanding(MoU) with The Task Force HealthCare (TFHC)WorkingGroup India inpresence of the PrimeMinister of TheNetherlands, Mark Rutte. Thiscollaboration is intended to improvehealthcare, life sciences andhealthcare sector in both countriesthrough strong cooperation betweenthe two organisations and itsmembers. The presentMoUwill comeinto effect from the date of signingand will remain effective for threeyears.Anjan Bose, Secretary General,

NATHEALTH, said �Our keyobjective of signing the MoU is topromote cooperation and exchange ofinformation, knowledge and expertisebetween NATHEALTH andTFHC inthe field of life sciences and health,on the basis of equality, reciprocityand mutual benefit, taking intoaccount the applicable laws and legalprovisions in each country�.(www.healthcareexecutive.in, 10.06.15)

Maggi: Safety Norms ViolatedWith the Central Food Safety regulator ordering withdrawal of nine

approved variants of Maggi, the Health Ministry said that it is of the�confirmed� opinion that the product failed to adhere to safety norms andassured that no compromise will be done on food safety.

Union HealthMinister J P Naddasaid that his Ministryhad received thereports from all thestates and afterassessing them it hascome to theconclusion that thenine variants ofMaggi should berecalled.

Coming down heavily on Swiss giant Nestle, the Central Food Safetyregulator Food Safety and Standards Authority of India (FSSAI) has earlierordered recall of all nine approved variants of Maggi instant noodles fromthe market, terming them �unsafe and hazardous� for human consumption.

(ToI, 05.06.15)

www.new

sx.com


H E A L T H S E C T O R

India�s Health and BiopharmaSector Deserves More Attention

ThePharmaceutical industry in India is the world�s third-largest in terms ofvolume and stands 14th in the terms of value.According to Department of

Pharmaceuticals, Ministry of Chemicals and Fertilizers, the total turnover ofIndia�s pharmaceuticals industry between 2008 and September 2009 wasUS$1.04bn.While the domesticmarket is worthUS$12.26bn as of 2012, and isexpected to reach US$49bn by 2020.

During the long US-India BioPharma and Healthcare Summit, top industryleaders, experts and academicians hoped that the new Indian Government willbring in �predictable, transparent and pragmatic regulatory policies� whichwould positively change the Indian BioPharma and Healthcare Innovationlandscape.

Noting a regulatory environment, which is more �enabling than restrictive� isrequired for innovation, a position paper prepared by Price waterhouse coopersreleased at the summit organised by the USA-India Chamber of Commerce(USAIC) said.

�The Indian Government should explore programmes and incentives forencouraging non-traditional organisations to partner with it, academia

and pharmaceutical companies to enable and accelerate drug development�, itadded. India is well positioned to establish a significant oncology presencewith respect to life cycle management, the report said.

In his message to the conference the Union Science and Technology MinisterHarsh Vardhan said that the success rates are low for new drug discovery anddevelopment, especially from the perspective of modern science. He statedthat the exorbitant cost of drug development and also the highly competitivenature of the domain leave little room for aggressive innovation. Thus there isa need to find newer and innovativeways to overcome the prevailing situations.

�The exorbitant cost of drug development and also the highly competitivenature of the domain leave little room for aggressive innovation. We need to

� This feature has been abridged from a news item. This was published in Deccan Herald on June 12, 2015

find newer and innovative ways toovercome the prevailing situation�,Vardhan said.

Participating in one of the paneldiscussions, KiranMazumdar � Shaw,Chairman and Managing Director ofBiocon Limited, said oncology is ahuge challenge for India.

But this is one area where Indiacan play a big role and help in

reducing the cost of treatment andmedicine, she said. �Oncology is onearea where patients (in India) are verykeen to be part of the drug trial.Enrolment rate for cancer drug ismuchhigher in India than in other parts ofthe world. This is one area wherepatients want to try a new drug�, sheadded.

Themajor theme for discussing 2015�sSummitwas oncology, cardiovascularand metabolic disease andneurodegenerative diseases. �Healthand innovative BioPharma have notreceived the attention they deservein India�, saidUSAICPresidentKarunRishi.

In his message to the summit, theUnion Health Minister J P Naddacalled for �out-of-the-box thinking� forinnovation in healthcare.

According to the Price waterhouseCoopers report prepared for USAIC,Indian pharma companies are notputting sufficient capital at risk todevelop breakthrough products norare they investing heavily in noveltherapeutics.

www.biopharma-pr.com

India�s Health and Biopharma sector deserves better attention from thegovernment to help realise its full potential and provide much cheaper healthcare and medicine to millions of patients, leading Biopharma industry expertsand academicians have said


C O M P E T I T I O N I N S I G H T

CCI: E-filing ofM&AsThe Competition Commission of

India (CCI) has launched an e-governance project to facilitateelectronic filing of cases requiring itsapproval, including the merger andacquisition proposals.Ashok Chawlasaid that the regulator has taken anumber of initiatives for speedy andefficient disposal of cases.Anjuli Chib Duggal, Secretary in

Ministry of CorporateAffairs said thatthe CCI has implemented a mandateof sustaining competitive markets.There are some future challenges thatCCI needs to tackle, includingcontinuous access to reliable andrelevant research.Referring to the role of regulation,

Narayan Murthy advocated for swiftand fearless regulatory decisions. Hesaid that competition and regulationare the two mechanisms, which canensure that the �InvisibleHand�worksto the advantage of the society.

(ET, 20.05.15)

Holcim Lafarge Deal ClearedThe CCI has cleared the proposed

merger of Lafarge and Holcim, fourmonths ahead of the planned move.With this approval, the two cementgiantswill have to sell capacitiesworth5mn tonne in India�s eastern parts.The package of asset divestments,

which the two companies agreedincludes two plants of Lafarge Indiain the eastern market.India is an importantmarket for the

future Lafarge-Holcim Group with abalanced portfolio in cement,aggregates and ready-mix concrete.The combined group will have acement capacity of around 68mntonnes in India. Its business alsoincludes ready-mix concrete, asphalt,and associated services. Currently,India is world�s second largest cementmarket with a total installed capacityof about 380mn tonne. (BT, 02.04.15)

CCI ApprovesMergersThe CCI has cleared the proposed

merger between the US companiesMeadWestvaco Corp and Rock-TennCompany. Rock-Tenn is intopackaging solutions whereasMeadWestvaco provides specialitychemicals for automotive and otherindustries.

Rock-Tenn is involved in sales ofmerchandising displays andcorrugated boxes in the country. InIndia, MeadWestvaco is engaged inthe business of corrugated packagingfor consumer goods, householdappliance and pharmaceuticals,among others. It has two subsidiaries:MeadWestvaco India Pvt Ltd andMeadWestvaco India PaperboardPackaging Pvt. Ltd.Under the multi-layered deal,

MeadWestvaco would be mergedwith MeadWestvacoMerger Sub andthe latter would be a limited liabilitycompany of Rome Milan Holdings.Post combination, MeadWestvacoshareholders would have 50.1 percentstake and those of Rock-Tenn wouldown 49.9 percent shareholding inRome Milan Holdings. (ToI, 19.04.15)

CCI ProposesAmendmentsThe CCI has proposed

amendments to its procedural normswhile seeking approval formergers andacquisitions. Amendments have beenproposed to various aspects of theseregulations, including those related totime taken for forming a prima-facieopinion about a combination, partiesseeking confidentiality of informationdocuments.According to the draft

amendments itwould formprima facieopinion onwhether a �combination islikely to cause or has caused anappreciable adverse effect oncompetitionwithin the relevantmarket

in India, within 30 working days ofreceipt of the said notice�.Besides, in two major rulings

related to Sun Pharma�s acquisition ofRanbaxy Laboratories and themergerof Holcim and Lafarge, the regulatordirected divesture of certain assets,after seeking public comments on therespective deals, to address anti-competitive concerns. (ToI, 09.04.15)

Re-sale Price SettingRe-sale price arrangements

between manufacturers anddistributors are under CCI scanner.Under this arrangement, a re-seller (aretailer or a distributor) could not sella product at a price lower than thatset by the manufacturer.It protects the profit margins of

both themanufacturer and the re-selleroften to the detriment of the consumer.Such arrangements are usuallyfrowned upon by competitionregulators as these mechanisms tendto support themanufacturer or retailercartels.Many manufacturers set a

minimumprice for e-retailers to ensurethat their products do not get caughtin the massive discounting resortedto by the e-commerce giants,especially those following theinventory based, and not themarketplace, model. In the past sixyears, the competition watchdog,which has looked into some 600 cases,has levied penalties ofM13,000 crore.

(TH, 08.05.15)

Fine on GlaxoSmithKlineThe CCI has held GlaxoSmithKline (GSK) and Sanofi liable for violation

of the provisions of the Competition Act and levied penalty to the extentof three percent of the turnover both on GSK and Sanofi (aggregating toM60.49 and M3.04 crorerespectively).

It has imposed penalty forcollusive bidding in supply of ameningitis vaccine to theGovernment for Haj piligrims.GlaxoSmithKline Pharmaceuticalssaid it would review the order andconsider all options, includingfiling an appeal.

In a separate filing to the BSE,Sanofi India said the penalty has been imposed on �Sanofi Pasteur IndiaPvt. Ltd, which is an unlisted company and a 100 percent subsidiary ofSanofi SA, France�, it noted. On the BSE at present, shares of GSK closedmarginally down at M3,178.05 and that of Sanofi India declined over onepercent to end at M3,315.90. (ToI, 08.06.15)


C O M P E T I T I O N I N S I G H T

There is unfinished part of reform of the oil industry,which is setting the national oil companies free and

unleashing competition between them on the one hand,and with private retailers, such as Reliance Industries,Essar and Shell, on the other.

Periodic price adjustments in tandem, such as the onelast week when petrol and diesel prices were increasedby significant margins would be seen as cartelisationbehaviour if Indian Oil Corporation (IOC), BharatPetroleum Corporation Limited (BPCL) and HindustanPetroleum Corporation Limited (HPCL) were privateplayers and not governmentcompanies. The three togetheraccount for 98 percent of themarketfor transportation fuels anddominate their private peers.

The CCI noticed the cartel-likeactions and even conducted an

investigation of their collusivebehaviour a couple of years ago.But the oil companies went to courtarguing that the CompetitionCommission of India had nojurisdiction over them as they hadtheir own regulator, the Petroleumand Natural Gas Regulatory Board(PNGRB). The CCI Chairperson,Ashok Chawla was quoted a fewmonths ago saying that he believedthat the act of the three Public SectorUndertakings (PSUs)adjusting prices in tandemwas anti-competitive.And yet,CCI has been unable to make much progress in reiningthem in, not entirely due to the court case but also thefact that the Government owns these companies.

The practice of coordinated price adjustments is acontinuation of the pre-deregulation era when theGovernment set fuel prices for the national oil companies.In today�s deregulated era there is really no reason whythe PSUs should coordinate pricing action. They havetheir own cost structures and margins dictated by theirrefining capacities, distribution network, retail outlets,staff strength and other items of cost.

For instance, IOC has 10 refineries that process a totalof 66mn tonnes of crude oil per annum. It has close to

24,000 retail outlets across the country and it registered anegative gross refiningmargin in the first nine months of2014-15. In comparison, BPCL has a refining capacity of22mn tonnes at its two refineries plus another 9mn tonnesin two joint ventures (JVs) and a little over 12,000 retail

Smash the PSU Oil CartelRaghuvir Srinivasan*

outlets. It has a gross refining margin of US$2.08/barrel.HPCL owns two refineries that process a total of 15mntonne of crude oil per annum apart from a JV with 9mntonne capacity, and about 13,000 pumps all over thecountry. The company had a gross refining margin ofUS$1.04/barrel in the first nine months of 2014-15. Theseare a comparison of just the main parameters; a detailedstudy would show many more differences.

TheGovernment appears comfortablewith the arrangementthough because it suits its own interests. Look at the wayexcise duties were raised on three occasions in November

and December when oil pricescrashed to their lowest in recenttimes. TheGovernment appropriatedfor itself the gains that would haveotherwise been passed on toconsumers.

This does not mean the governmentshould not allow competitive forcesto blossom in fuel retailing. RelianceIndustries, Essar Oil and Shell hadannounced grand plans for fuelretailing and they even opened acouple of thousand outlets togetherabout a decade ago. But they closeddown almost all of them, unable tocompete with the PSUs, which soldfuel at subsidised prices. The pictureis different quite different at present.

Subsidies, at least in transportation fuels, have beenwithdrawn and retail prices are linked to the market.

Importantly, oil prices, despite the run-up in the previousfewweeks, are still low. This is the best time to completethe unfinished reforms in the downstream petroleumindustry, which is setting the PSUmajors � IOC, BPCLandHPCL � free of government control and encouraging themto compete with each other and with the private players.The Government needs to play an active part in fosteringcompetition because the three PSUs dominate the marketvis-à-vis the private players.With some of these companieslined up for possible divestment of government stake, anymove to reform themwill only add to their market value.

In the developed countries, retail prices vary from companyto company and pump to pump based on location, costs,demand and other such factors. It is not unusual to seeprices vary between fuel pumps in the same localitybelonging to different companies. That is the kind ofcompetition we need to see in India.

* Associate Editor, The Hindu Business Line. This article was published in The Hindu Business Line on May 04, 2015

www.thehindubusinessline.com


S P E C I A L A R T I C L E

The Prime Minister�s Jan DhanYojana (PMJDY)with itsmassive

outreach of 15.3 crore households,each blessed with a bank account tothe record time of eight months, hasevoked euphoria. With theannouncement of Jan Suraksha,there has been a beeline to bankingcounters to get the formalitieschecked out for possible inclusioninto insurance and pension schemes,normally considered costly andcomplex. Leveraging the strength ofbanking connectivity, theGovernment is determined to offersocial security cover using the largenetwork of public sector insurancefirms and pension aggregators.

Avoiding the trapThe dormancy of bank accounts is apersistent worry, with noticeably poorfootfalls and lack of velocity intransactions through RuPay, whichis Indian version of debit cards.Insurance and pension services arenot one-off activities, they are long-term business ideas.

Many banks, being part of the pointventure with insurance companies orhaving having entered bankassurance relationships withcompanies, have been distributingproducts of their choice to theircaptive clients, a process, whichoften leads to poor awareness ondetails. There is the danger of JanSuraksha also failing into this trap.With still over 55.75 percent JanDhanaccounts left with zero balance, thepractical aspect of this initiativeneeds to be studied, since JanSuraksha is a paid service. It wouldbe a hard sell for the 9.17 croreaccounts opened in rural areas, giventhe poor awareness on social securitybenefits, including insurance.

Deeper penetrationOne larger question that cropsup in such mass social security

Still too Many Left without Cover

� This Special Feature has been abridged from an article by R Devaprakash, a retired Principal and Professor of mechanicalengineering. This was published in The Hindu Business Line, on May 12, 2015

programmes is whether such aproposition is tenable from actuarialand business considerations. Whenthe claims ratio increases, there arebound to be price pressures, leadingto exclusion. Jan Suraksha does notoffer a level playing held for clientsof banks, with public sector banksbeing in the vanguard.

Leaving the private insurers in thislarger game plan of offering socialsecurity to all is not a good idea. Itdoes not give the required space toprivate companies and puts pressureon public insurers.With two productsapplying different age restrictions wemight see a considerable section ofthe population getting excluded.

Making it voluntaryThe Jan Dhan Yojna has tagged inlife and accident policies therefore itwould be superfluous to have add-on insurance cover for the sameclients. This is something banks andinsurers should be sensitive to, andas a way out, they could make clientsvoluntarily opt for insurance ratherthan force it down their throats.

With the announcement of Jan Suraksha, there has been abeeline to banking counters to get the formalities checkedout for possible inclusion into insurance and pensionschemes, normally considered costly and complex

Unclaimedmoneywith life companiesalone touched a staggering M4,866crore at the end of 2012-13; this is asource of worry for the Government.The main reasons for this aredependents being unaware of theexistence of insurance policy, changein address, and delayed settlement, allof which point to the age-old problemof less interaction between the insuredand insurer. With banks reportingM3652.64 crore unclaimed deposits(more than 10 years old) as ofDecember 2012. It is feared thismightfurther add to the woes; neverthelessbanks have to work hard to makeaccounts operative by financiallyengaging with the community.

With insurance penetration limping ata paltry 3.9 percent of GDP, there ishope that Jan Suraksha will boostthe penetration of insurance servicesand open up pension to theunorganised sector. However, thereis every likelihood of the creamy layertaking the early bird advantage,leaving the deserving outside thesocial safety net for some more time.

www.thehindu.com

SOURCESBL: The Hindu Business Line, BS: Business Standard, BT: Business Today;DNA: Daily NewsAnalysis, ET: The Economic Times, EPN: Express Pharma News;

FE: The Financial Express, HT: The Hindustan Times; IE: Indian Express;MW:Mining Weekly; NDTV: New Delhi Television Limited, TH: The Hindu; ToI: Times of India

The news/stories in this Newsletter are compressed from several newspapers. The sources given are to beused as a reference for further information and do not indicate the literal transcript of a particular news/story.

Complete reproduction without alteration of the content, partial or as a whole, is permitted for non-commercial,personal and academic purposes without a prior permission provided such reproduction includes full citationof the article, an acknowledgement of the copyright and link to the article on the website.

We put a lot of time and effort in taking out thisnewsletter and it would mean a lot to us if we could

know how far this effort is paying off in terms of utility tothe readers. Please take a few seconds and suggest waysfor improvement on:� Content� Number of pages devoted to news stories� Usefulness as an information base� Readability (colour, illustrations & layout)W

ewanttohear

from

you� Please e-mail your

commentsand suggestions [email protected]

P U B L I C A T I O N S

ReguLetter

The April-June 2015 issue of ReguLetter encapsulates �Advocating Competition in thePharmaceutical Sector� in its cover story which states that the Inter-governmentalGroup of Experts (IGE) meeting on Competition Policy organised by United Nations

Conference on Trade and Development (UNCTAD) in Geneva in July 2015 dedicated aroundtable session on �The Role of Competition in the Pharmaceutical Sector and itsBenefits for Consumers�. The deliberation highlighted that the pharmaceutical sectormakes a valuable contribution in improving the public health by developing, producing,distributing and marketing the pharmaceutical products.

A special feature by John M Connor states that five of the world�s biggest banks,JPMorgan Chase, Citi, Barclays, the Royal Bank of Scotland, and UBS, have agreed topay US$5.6bn in fines for manipulating the foreign exchange market. This comes at theend of a 19-month investigation by the US Department of Justice.

Another article by Shawn Donnan opines that once a target for multinational companies eager to invest andreap the benefits of their rapid growth, emerging economies are becoming rivals to the US and Europe as a sourceof investment.

This newsletter can be accessed at: www.cuts-ccier.org/reguletter.htm

Trade Buzz

Trade Buzz is a quarterly e-newsletter of the South Asian Association ofRegional Cooperation (SAARC) Trade Promotion Network Secretariat and

is jointly produced with CUTS International. SAARC TPN is a network onbusiness associations of South Asian countries. It is an initiative of the FederalMinistry of Economic Cooperation and Development (BMZ), Germany andthe German Cooperation Agency (GIZ).

www.cuts-citee.org/pdf/Trade_Buzz-Apr-Jul2015.pdf

BRICS-TERNewsletter

BRICS Trade & Economics Research Network (BRICS TERN) has beenestablished as a platform of non-governmental groups from among Brazil,

Russia, India, China and South Africa. Its purpose is to assist the on-goingcooperation between and among the BRICS countries with network-based policyresearch and advocacy on contemporary developmental issues.http://cuts-international.org/BRICS-TERN/pdf/TERNewsletter-BRICS-TERN_Apr-June2015.pdf

Documents

PolicyWatch - CUTS CCIER Plans Bharat Mala ... 4 April-June 2015 PolicyWatch OIL & GAS INFRASTRUCTURE UrgeforLPGSubsidy The Ministry of Petroleum and NaturalGasurgedliquefiedpetroleum