Ben Bernanke introduced a first round of quantitative easing during the worst of the financial crisis, as global markets tumbled and liquidity was sucked out of the system. Quantitativeeasing is an unorthodox application of monetary policy by which a central bank, in this case the Federal Reserve, loosens monetary policy further after having dropped the Federal Funds rate to the zero range. This is done by purchasing longer-term assets, such as 10 year Treasury bonds, in order to push down interest rates further down the yield curve. Quantitative easing, or QE, came into prominence after Japan attempted to prop up its economy after a massive financial and economic crash during the 1990s. Japan entered what is commonly referred to as the "Lost Decade," where not even QE managed to boost output substantially.
How QE affects the world economy.
For understanding this we need to understand the long term bond structure (Govt Bond).
A bond has 3 things:
1-Face value:
2-Coupan Rate:
3-Maturity period :
In the market if any financial institution purchases the bonds it will purchase in Market price. Market price may be more than Face value or equal to face value or less than face value. For clearly understood this let take a look on this example:
* Suppose a bond has: face value-100 Rs or USD, Coupon Rate -10% and maturity period is 5 year.
* If any Financial institute or person buy this bond at market price let say 105 Rs than the yield will be (110-105)/105 = 4.8%
* And If any Financial institute or person buy this bond at market price let say 95 Rs than the yield will be (110-95)/95 = 16%
So it is clear from this example that lowers the market price higher the yield and more the fund will go to for buying bond. But What fed Bank did that it buy the bonds of 80 Billion USD per month so Supply of bond reduced in the market which leads to higher market value and financial institute or person may decide not invest on bond, invest in other things like share market. So the double fund (fund of financial institute and fund by Central Bank) is channelized in different share market in the world. And growth rate increases which was not sustainable.
Recently US fed bank decide for tapering of QE, so supply of bond in the market is increases and yield will also increase. So the persons or financial institutions started to invest on bonds so it leads to capital flight from different share market in the world. This leads to depreciate of currency now a days happening in many developing countries.
This is a single country analysis which affects the global economy. When more developed countries involved in QE than the picture is more worse.
Detailed Analysis
When zero rates of interest have failed to stimulate developed economies (mainly G-4 economy: Japan, USA, Eurozone, UK) , the developed countries have resorted to large-scale asset purchases by their central banks, such as corporate bonds or mortgage backed securities, to pump more money into the banking system.The aim is toextendcredit to business and industry andencourageconsumption.
In the immediate aftermath of the global financial and economic crisis in 2008, when there was a danger of financial collapse, both advanced as well as emerging economies adopted stimulus packages, to revive demand, maintain trade flows and avoid large-scale unemployment. During the crisis phase of 2008/09, QE played an important role in crisis management, helping advanced and emerging economies alike.
However, while emerging economies have weathered the crisis and seen a revival of growth, the G4 continue to experience economic stagnation, depressed markets and large-scale unemployment. Their response has been to persist with even larger doses of QE as a means of propping up demand, encouragingbanks toexpand and boostingstock valuations.
* Before the crisis, the U.S. held 700 to 800 billiondollars of Treasury notes. The current level is 2.054 trillion dollars. In the latest round, QE-3, the U.S. Federal Bank is committed to the purchase of 40 billion dollars of mortgage-backed securities per month as long as unemployment remains above 6.5 percent.
* The European Central Bank (ECB) has pumped 489 billion euros of liquidityintothe eurozone since the crisis, while in the United Kingdom QE has reached the level of 375 billion pounds.
* Most recently, the Bank of Japan has decided to pump 1.4 trillion dollars in the next two years into its economy, aiming at a two-percent inflation rate by doubling the money supply.
The assets of the G4 central banks have expanded from a figure of 11-12 percent of theirgross domestic product (GDP)to the current unprecedented level of 23 percent. These assets were 3.5 trillion dollars in 2007 before the crisis. They are now nine trillion dollars and rising. This is the scale of liquidity expansion we are dealing with.
Since interest rates in the G4 remain at zero and their economies remain stagnant, it is inevitable that there will be significant capital outflows to emerging and other developing economies, in quest of higher risk-adjusted returns.This massive and continuing surge of capital outflows to emerging and other developing economies is having a major impact. Corporations, which have a sound credit rating, are taking on more debt, and increasing their foreign exchange exposure, attracted by low borrowing costs.
Their vulnerability to future interest rate changes in the developed world and exchange rate volatility will increase. Such inflows put upward pressure on exchange rates, stimulate credit expansion, and causeinflationary pressures, which pose a major challenge to policy-makers in the developing world.
Most of the capital inflows are in the nature of portfolio investments, which are prone to sudden and volatile movement and puts emerging economies at greater risk. The volatility one has witnessed in the Indian stock market is a case in point. In general, we may conclude that the overall impact of these capital flows is expansionary and distortionary.
There has been considerable criticism of the G4s unconventional monetary policies from the emerging economies, including theBRICS(Brazil, Russia, India, China and South Africa).
The magnitude of QE has had unintended consequences beyond the borders of the G4, especially because their currencies are not only fully convertible but, together, constitute the pillars of the global financial system.
The U.S. dollar is the worlds leading reserve currency, and the euro, the British pound and the Japanese yen together constitute the basket of currencies the International Monetary Fund (IMF) uses to value its Special Drawing Rights. Thus, the nature of the G4 currencies and their significant role in the global financial market ensures that QE undertaken by them has a global impact on economies across ourglobalisedand interconnected world.
It is necessary, therefore, for the G4 to act with great responsibility and to work together with the emerging economies, to minimise the adverse effects of their QE policies. It would be particularly important to forge a consensus on how to handle the potential financial turmoil and disruptionthatmay afflictdeveloping economies once the QE is sought to be retired and interest rates once again become positive in the G4. The sudden and large-scale reversal of capital flows is a likely scenariothatwould need to be anticipated and managed.
The Asian financial crisis of 1997/98 was, in part, triggered by an earlier version of QE pursued by Japan in the aftermath of the bursting of its property and asset bubble in the early1990s. Then, too, the large inflow of low-cost yen loans led to the asset price bubbles, inflationary pressures and currency instability in the Asian economies. They paid a heavy price in the bargain.
A larger, more pervasive crisis may await the emerging and developing economies unless there is a much more coordinated and careful handling of the risks that are already building up. The G20 had also this issue at the top of its agenda.
Sandeep Kumar Omre
Showing posts with label Japan. Show all posts
Showing posts with label Japan. Show all posts
Monday, January 13, 2014
Every single atom in the universe carries an unimaginably powerful
Every single atom in the universe carries an unimaginably powerful battery within its heart, called the nucleus. This form of energy, often called Type-1 fuel, is hundreds of thousands, if not million, times more powerful than the conventional Type-0 fuels, which are basically dead plants and animals existing in the form of coal, petroleum, natural gas and other forms of fossil fuel.
* Terminology -
Nuclear fission splitting of atoms to produce energy in the form of heat. Uranium a naturally occurring radioactive metal - only element in which fission (splitting off nucleus) can take place easily, setting off a chain reaction or a self-sustained splitting of atoms. The atoms of Uranium are the largest and the heaviest known on earth so its nucleus is unstable. Besides uranium, plutonium can undergo fission.
Fertile material composed of atoms which do not undergo induced fission themselves but fissile material can be generated from them by irradiation in a nuclear reactor. E.g. U- 238 gives plutonium 239, TH- 232 gives U-233, and U-234 gives U-235.
Criticality When the chain reaction takes place for the first time in a nuclear electricity reactor, it means the reactor has reached its first criticality.
Moderator used to slowdown neutrons surrounding the fuel core of the reactor, e.g. Light water, heavy water (D2O)
Pressurised Heavy Water reactor (PWHR) fuel used is natural uranium. Heavy water is both coolant and reactor and is kept under high pressure. Natural Uranium has 2 kinds of isotopes - 99.3 % U-238 and 0.7 % U-235. Former is not fissile.
LWR Light water is used eg. Kundankulam
Enriched Uranium when non fissile material is removed from natural uranium. It is achieved by a series of chemical and physical processes in centrifuges. In India it is done at Rare Materials plant, Mysore.
* Nuclear Energy on the Globe -
Today - 29 countries operating 441 nuclear power plants, with a total capacity of about 375 GW (e). The industry now has more than 14,000 reactor-years of experience. Sixty more units, with a total target capacity of 58.6 GW under construction.
After Fukushima countries commit to reduce would reduce nuclear energy dependence
Country From To
France 7850(in quick time)
Japan40 0 (by 2040)
Germany 180 (by 2022)
Can Japan really turn off its nuclear power?
i. Japan got around 30% of its electricity from nuclear power before Fukushima, and was planning to raise that to 50%. Now Japan, a resource-poor nation will be importing 96% of its energy from overseas, mainly fossil fuels. This is expensive, not to speak of ruining all environmental standards.
ii. Almost all of Japan's oil and gas is sourced from West Asia, and all of those super tankers traverse the difficult waters of Straits of Hormuz, South and East China Seas having geo-strategic limitations given trust-deficit with China.
iii. Japan is not an overt nuclear weapons state, but it's famously known as being a screwdriver's turn away from being one. It could become a costly security mistake.
Germany's alternatives are a little better. Moving to fossil fuels will hit at the heart of the green movement which wants Germany to slash its carbon emissions by 2020 to 40% below 1990 levels. Germany already leads in solar panels and wind turbines. But wind turbines are deterrent to wildlife conservationists; they want turbines offshore thus expensive. One needs around 2,000 giant turbines, covering over 350 square miles to generate equivalent power as a 1,154 MW nuclear reactor.
While some other countries are progressing with nuclear power. The UAE plans to build four nuclear power plants of a total 5,600 MW at $20 billion, the first of which will roll out in 2017. South Korea won this contract from under the noses of the market leader, France.
* Nuclear Advantages
* A nuclear power plant can give you steady, uninterrupted, predictable power unlike many renewable sources. The sun isn't shining all the time and neither is the wind blowing at optimum generating speeds.
* Both solar and wind power are great for domestic use, but not industrial use.
* Cost of a nuclear power plant incorporates the cost of waste and decommissioning. Unlike fossil fuels - cost in terms of human and environmental damage is incalculable.
* The Kyshtym accident in fuel reprocessing in 1957, the relatively smaller Three Mile Island meltdown (United States), the much bigger Chernobyl accident (USSR, 1986) and the recent Japanese incident at Fukushima. The first accident was purely due to underdeveloped technology, and much of the blame for the next two disasters is attributed to human error. So fear of nuclear power plant being fundamentally prone to disasters is unfounded.
* Regulations also had to with the initial nuclear plant set-up. It was only in December 2010 that the old requirement that reactors should not be constructed above active faults was replaced with faults.
* Nuclear Power in India
India's nuclear power plants, mostly set up during the sanction years, provide only 3% of the energy mix. After the historic Indo-US nuclear deal 2008, the first two plants at Kundankulam - established with Russian assistance.
In India, where coal mining is dirty business, land acquisition is a problem and imported energy is hopelessly expensive and uncertain, we should not turn our back on nuclear power. Yes, there are costs and risks, but so is fracking for shale gas, tar sands, heck, even oil and natural gas.
* Nuclear fuel of the future: Thorium
* Thorium is far more abundant, by about 4 times, than the traditional nuclear fuel, Uranium, and occurs in a far purer form.
* IAEA Report (2005) - India might have the largest reserves of Thorium in the world, with over 6, 50,000 tonnes.
* Through U-233 that could be produced from it releases 8 times the amount of energy per unit mass compared to natural U.
* In waste generation also, it has a relative advantage over Uranium.
* Thorium di oxide is much more stable the Uranium di oxide
* Higher thermal conductivity so in case of explosion heat energy will quickly flow out and prevent meltdown.
* Melting point is 500 degrees higher so in case of accident heat energy will flow out quickly and prevent meltdown.
Two reasons it has not been developed
* First one needs to produce U-233 from Th, and for this, reactors based on the naturally available nuclear fuel material, Uranium-235, are required.
* Recovery of U-233 by large-scale reprocessing of irradiated thorium poses certain practical hurdles.
* Likely presence of hard gamma emitting Uranium-232 during this reprocessing. But according to experts, all these can be overcome technologically.
* Thorium cannot be weaponised and world powers built nuclear energy plants after they built the weapon.
* Nuclear Liability
2010 Nuclear Liability act - Section 17 -
* a contractual right of recourse
* Operator would have the ability to reclaim any compensation it may pay, from a supplier, if the product supplied has patent or latent defects or the service provided is substandard
* Recourse where the nuclear incident arose out of an act or omission by the supplier with an intent to cause damage
17b not consistent with international norms pertaining to nuclear liability?
Department of Atomic Energy has tried to inject realism by defining the duration of the risk to be the product liability period or five years, whichever is less, and a cap on the risk being the value of the contract. Long-standing suppliers of DAE and NPCIL are unhappy to go along even with these caps, as they feel that carrying large contingent liabilities on their books hurts their credit ratings. They, therefore, prefer to move to non-nuclear activities, even though they have acquired valuable nuclear expertise on work done earlier.
Attorney General - since under 17a right to recourse is contractual nuclear liability to supplier it may or may not apply depending upon the contract signed.
Arguments for 17b
* India had a history of Bhopal gas tragedy so it needs to design laws taking the possibility of such incidents into account.
* a, b and c need to be looked at separately. For eg. c will always remain valid irrespective of a. So b has to be separated from the contractual right to recourse.
* In case of accident the damages would be paid by tax payers hence public interest is involved. SC says - statutory right in favour of a party can be waived by such party as long as no public interest or public policy is adversely affected.
* Attorneys Generals might be a legal opinion but parliaments law is public policy and a contract - unlawful if against public policy.
Against 17(b)-
* When India built its first nuclear reactor in Tarapur, indemnity protection was handled by the government. Agreement signed first with GE (US), and then Atomic Energy of Canada Ltd. (AECL) led to nuclear power plants in Rajasthan. India did learn a great deal by this collaboration.
* Even where a plant has been supplied by a single entity under a turnkey contract, many vendors, often running into thousands, would have supplied many components.
* During operation, the operator incorporates many changes and modifications to improve the reliability, ease of operation and efficiency. They may or may not have been done in full consultation with the original suppliers of equipment.
* Moreover, nuclear power plants operate for 50 years or longer; our first two Tarapur reactors have in fact completed 43 years.
* Practice in nuclear reactors across the globe In the above mentioned 441 reactors operating in 29 countries the world over without exception - nuclear liability goes to the operator. The operator, depending on the political system prevailing in the country, covers the risk to the extent possible by insurance. The government of the country takes up the liability beyond the insurance limit; it may also define an upper limit to its own liability, through legislation. Under the Convention on Supplementary Compensation, a multilateral convention, participating states can also share the liability risk to a defined extent.
E.g. U.S government assumed liability beyond the insurable limit up to another limit set under the Price-Anderson Act, passed by the U.S Congress. The limit set under the Price-Anderson Act has been increased progressively from time to time.
VII. Present Scenario -
After 2008, when India signed nuclear cooperation agreements with the U.S, France and Russia and others not even one contract for the import of reactors has been signed to date. With France, discussions have covered technical and safety issues, and commercial discussions are in progress now. In the case of the U.S., the discussions are still on technical and safety issues.
Only with Russia agreement signed in 2008 for Units 3 and 4 at Kudankulam - extension of the agreement covering Units 1 and 2. Prices have been derived for Units 3 and 4 using the earlier price as a basis. The loan agreement also is based on the earlier pattern. Russia does not want the civil nuclear liability law to apply to the proposed units 3 and 4. India has not applied the law to units 1 and 2 (being challenged in the SC) because they were constructed under an agreement that predated the 2010 civil liability law. But India is against exempting units 3 and 4 because this will be seen as discriminating against companies from the U.S. and France.
The 2008 agreement provides that India would extend indemnity protection for Units 3 and 4, on the same lines as Units 1 and 2. If India wants the Units 3 and 4 agreements to comply with its 2010 liability legislation - danger that the entire 2008 agreement may be reopened. Legal experts opinion - Polluter Pays is not true for thermal and other energy as who pays for the CO2 they release?
by Suraj Gupta
1. Sources: Frontline
The Hindu (some op-ed and editorials)
The Economic times
* Terminology -
Nuclear fission splitting of atoms to produce energy in the form of heat. Uranium a naturally occurring radioactive metal - only element in which fission (splitting off nucleus) can take place easily, setting off a chain reaction or a self-sustained splitting of atoms. The atoms of Uranium are the largest and the heaviest known on earth so its nucleus is unstable. Besides uranium, plutonium can undergo fission.
Fertile material composed of atoms which do not undergo induced fission themselves but fissile material can be generated from them by irradiation in a nuclear reactor. E.g. U- 238 gives plutonium 239, TH- 232 gives U-233, and U-234 gives U-235.
Criticality When the chain reaction takes place for the first time in a nuclear electricity reactor, it means the reactor has reached its first criticality.
Moderator used to slowdown neutrons surrounding the fuel core of the reactor, e.g. Light water, heavy water (D2O)
Pressurised Heavy Water reactor (PWHR) fuel used is natural uranium. Heavy water is both coolant and reactor and is kept under high pressure. Natural Uranium has 2 kinds of isotopes - 99.3 % U-238 and 0.7 % U-235. Former is not fissile.
LWR Light water is used eg. Kundankulam
Enriched Uranium when non fissile material is removed from natural uranium. It is achieved by a series of chemical and physical processes in centrifuges. In India it is done at Rare Materials plant, Mysore.
* Nuclear Energy on the Globe -
Today - 29 countries operating 441 nuclear power plants, with a total capacity of about 375 GW (e). The industry now has more than 14,000 reactor-years of experience. Sixty more units, with a total target capacity of 58.6 GW under construction.
After Fukushima countries commit to reduce would reduce nuclear energy dependence
Country From To
France 7850(in quick time)
Japan40 0 (by 2040)
Germany 180 (by 2022)
Can Japan really turn off its nuclear power?
i. Japan got around 30% of its electricity from nuclear power before Fukushima, and was planning to raise that to 50%. Now Japan, a resource-poor nation will be importing 96% of its energy from overseas, mainly fossil fuels. This is expensive, not to speak of ruining all environmental standards.
ii. Almost all of Japan's oil and gas is sourced from West Asia, and all of those super tankers traverse the difficult waters of Straits of Hormuz, South and East China Seas having geo-strategic limitations given trust-deficit with China.
iii. Japan is not an overt nuclear weapons state, but it's famously known as being a screwdriver's turn away from being one. It could become a costly security mistake.
Germany's alternatives are a little better. Moving to fossil fuels will hit at the heart of the green movement which wants Germany to slash its carbon emissions by 2020 to 40% below 1990 levels. Germany already leads in solar panels and wind turbines. But wind turbines are deterrent to wildlife conservationists; they want turbines offshore thus expensive. One needs around 2,000 giant turbines, covering over 350 square miles to generate equivalent power as a 1,154 MW nuclear reactor.
While some other countries are progressing with nuclear power. The UAE plans to build four nuclear power plants of a total 5,600 MW at $20 billion, the first of which will roll out in 2017. South Korea won this contract from under the noses of the market leader, France.
* Nuclear Advantages
* A nuclear power plant can give you steady, uninterrupted, predictable power unlike many renewable sources. The sun isn't shining all the time and neither is the wind blowing at optimum generating speeds.
* Both solar and wind power are great for domestic use, but not industrial use.
* Cost of a nuclear power plant incorporates the cost of waste and decommissioning. Unlike fossil fuels - cost in terms of human and environmental damage is incalculable.
* The Kyshtym accident in fuel reprocessing in 1957, the relatively smaller Three Mile Island meltdown (United States), the much bigger Chernobyl accident (USSR, 1986) and the recent Japanese incident at Fukushima. The first accident was purely due to underdeveloped technology, and much of the blame for the next two disasters is attributed to human error. So fear of nuclear power plant being fundamentally prone to disasters is unfounded.
* Regulations also had to with the initial nuclear plant set-up. It was only in December 2010 that the old requirement that reactors should not be constructed above active faults was replaced with faults.
* Nuclear Power in India
India's nuclear power plants, mostly set up during the sanction years, provide only 3% of the energy mix. After the historic Indo-US nuclear deal 2008, the first two plants at Kundankulam - established with Russian assistance.
In India, where coal mining is dirty business, land acquisition is a problem and imported energy is hopelessly expensive and uncertain, we should not turn our back on nuclear power. Yes, there are costs and risks, but so is fracking for shale gas, tar sands, heck, even oil and natural gas.
* Nuclear fuel of the future: Thorium
* Thorium is far more abundant, by about 4 times, than the traditional nuclear fuel, Uranium, and occurs in a far purer form.
* IAEA Report (2005) - India might have the largest reserves of Thorium in the world, with over 6, 50,000 tonnes.
* Through U-233 that could be produced from it releases 8 times the amount of energy per unit mass compared to natural U.
* In waste generation also, it has a relative advantage over Uranium.
* Thorium di oxide is much more stable the Uranium di oxide
* Higher thermal conductivity so in case of explosion heat energy will quickly flow out and prevent meltdown.
* Melting point is 500 degrees higher so in case of accident heat energy will flow out quickly and prevent meltdown.
Two reasons it has not been developed
* First one needs to produce U-233 from Th, and for this, reactors based on the naturally available nuclear fuel material, Uranium-235, are required.
* Recovery of U-233 by large-scale reprocessing of irradiated thorium poses certain practical hurdles.
* Likely presence of hard gamma emitting Uranium-232 during this reprocessing. But according to experts, all these can be overcome technologically.
* Thorium cannot be weaponised and world powers built nuclear energy plants after they built the weapon.
* Nuclear Liability
2010 Nuclear Liability act - Section 17 -
* a contractual right of recourse
* Operator would have the ability to reclaim any compensation it may pay, from a supplier, if the product supplied has patent or latent defects or the service provided is substandard
* Recourse where the nuclear incident arose out of an act or omission by the supplier with an intent to cause damage
17b not consistent with international norms pertaining to nuclear liability?
Department of Atomic Energy has tried to inject realism by defining the duration of the risk to be the product liability period or five years, whichever is less, and a cap on the risk being the value of the contract. Long-standing suppliers of DAE and NPCIL are unhappy to go along even with these caps, as they feel that carrying large contingent liabilities on their books hurts their credit ratings. They, therefore, prefer to move to non-nuclear activities, even though they have acquired valuable nuclear expertise on work done earlier.
Attorney General - since under 17a right to recourse is contractual nuclear liability to supplier it may or may not apply depending upon the contract signed.
Arguments for 17b
* India had a history of Bhopal gas tragedy so it needs to design laws taking the possibility of such incidents into account.
* a, b and c need to be looked at separately. For eg. c will always remain valid irrespective of a. So b has to be separated from the contractual right to recourse.
* In case of accident the damages would be paid by tax payers hence public interest is involved. SC says - statutory right in favour of a party can be waived by such party as long as no public interest or public policy is adversely affected.
* Attorneys Generals might be a legal opinion but parliaments law is public policy and a contract - unlawful if against public policy.
Against 17(b)-
* When India built its first nuclear reactor in Tarapur, indemnity protection was handled by the government. Agreement signed first with GE (US), and then Atomic Energy of Canada Ltd. (AECL) led to nuclear power plants in Rajasthan. India did learn a great deal by this collaboration.
* Even where a plant has been supplied by a single entity under a turnkey contract, many vendors, often running into thousands, would have supplied many components.
* During operation, the operator incorporates many changes and modifications to improve the reliability, ease of operation and efficiency. They may or may not have been done in full consultation with the original suppliers of equipment.
* Moreover, nuclear power plants operate for 50 years or longer; our first two Tarapur reactors have in fact completed 43 years.
* Practice in nuclear reactors across the globe In the above mentioned 441 reactors operating in 29 countries the world over without exception - nuclear liability goes to the operator. The operator, depending on the political system prevailing in the country, covers the risk to the extent possible by insurance. The government of the country takes up the liability beyond the insurance limit; it may also define an upper limit to its own liability, through legislation. Under the Convention on Supplementary Compensation, a multilateral convention, participating states can also share the liability risk to a defined extent.
E.g. U.S government assumed liability beyond the insurable limit up to another limit set under the Price-Anderson Act, passed by the U.S Congress. The limit set under the Price-Anderson Act has been increased progressively from time to time.
VII. Present Scenario -
After 2008, when India signed nuclear cooperation agreements with the U.S, France and Russia and others not even one contract for the import of reactors has been signed to date. With France, discussions have covered technical and safety issues, and commercial discussions are in progress now. In the case of the U.S., the discussions are still on technical and safety issues.
Only with Russia agreement signed in 2008 for Units 3 and 4 at Kudankulam - extension of the agreement covering Units 1 and 2. Prices have been derived for Units 3 and 4 using the earlier price as a basis. The loan agreement also is based on the earlier pattern. Russia does not want the civil nuclear liability law to apply to the proposed units 3 and 4. India has not applied the law to units 1 and 2 (being challenged in the SC) because they were constructed under an agreement that predated the 2010 civil liability law. But India is against exempting units 3 and 4 because this will be seen as discriminating against companies from the U.S. and France.
The 2008 agreement provides that India would extend indemnity protection for Units 3 and 4, on the same lines as Units 1 and 2. If India wants the Units 3 and 4 agreements to comply with its 2010 liability legislation - danger that the entire 2008 agreement may be reopened. Legal experts opinion - Polluter Pays is not true for thermal and other energy as who pays for the CO2 they release?
by Suraj Gupta
1. Sources: Frontline
The Hindu (some op-ed and editorials)
The Economic times
Infrastructure
Infrastructure
Infrastructure: Energy, Ports, Roads, Airports, Railways etc.
Infrastructure is the basic facilities needed for the functioning of a community or society. In other words, it is the basic physical or organizational structures needed for the operation of a society or enterprises. The 12th 5YP envisaged the investment requirement in infrastructure to the tune of $1trillion, with 47% of this fund coming from the private sector.
1. Physical infrastructure:
* Energy: coal, oil and natural gas, hydro, nuclear and renewable.
* Transport: roadway, railway, airway and waterway.
* Communication: telecom and postal services.
* Urban: transport housing and civic amenities.
2. Social infrastructure: (I will not cover this part)
* Education
* Health
Energy: India will produce 71% of its energy needs domestically by 2016-17, and 69% by 2021-22. The remaining will be met through import.
Integrated energy policy (IEP) 2031-32
Sector2003-04 (%)2031-32 (%)Power generation 2012 (%), total-2,14,000MW
Coal5142-6557 (1, 20,000MW)
Oil3628-330.6 (1,190MW)
Natural gas97-129 (18,900MW)
Hydro23-418.5 (39,3240)
Nuclear15-62.02 (4780)
Renewable5-712.5 (28,000MW)
Coal: Indias reserve as on March, 2012 was 293.5billion tones (40% proven and some 40bn tons proven) & Domestic production-540million tons in 2011-12 (import-100mn tons) need to increased to 795mn tons by 2016-17; even then there will be import need of 185mn tons.
* IEP says present potential to last for 40years.
* Mines & Mineral (development and regulation) bill 2011 for simple and transparent mechanism for granting of mining lease or prospecting license through competitive bidding; Coal forecasting, private participation and captive mining for merchant uses.
* Pricing change from useful heat value (UHV) to Gross Calorific Value (GCV) in 20012 (grade I-VII: 15% ash & moisture content) - mainly Bituminous coal. Need to invest in super-critical boiler technology.
* Liquefaction of coal: gasification to liquefaction (Sasol process in S. Africa and Fischer Tropsch process in Germany).
Oil & Natural Gas: 73% import dependent, 90% import by 2031-32. Indias Refining Capacity 215mmt in 2013, exporting 60.84mmt of petroleum products worth $50bn (20 refineries: 17 public & 3 Pvt.).
Steps taken by the govt.:
* New Exploration Licensing Policy (NELP), 1999- 177 oil & N. Gas discoveries in 39 NELP blocks.
* Deregulation of prices: petrol, diesel-dual pricing, L.P.G- 9 cylinders/year, kerosene-direct cash transfer through ADHAAR, underway; import parity pricing system underway.
* Pipeline Network (16 crude pipelines- 106MMT).
* Vision 2015: Piped Natural Gas by re-gasification of Liquefied Natural Gas to 200 cities.
* Rajiv Gandhi Gramin LPG Vitaran Yojana, 2009- 75% population by 2015 -5.5cr new connections
* Rangarajan formula on gas pricing: KG-D6 gas price to go up to $8.4mbtu from $4.2mbtu by April 2014.
* International effort: India-Oman (1100km) undersea pipeline, Turkmenistan-Afghanistan-Pakistan-India (TAPI-1700km) pipeline to transport 3billion cubic feet of natural gas per day.
* Lost opportunities: Iran-Pakistan-India (IPI) pipeline and India-Bangladesh-Myanmar natural gas pipeline.
(Sweden has declared that they will have nothing to do with oil by 2050).
Hydro: potential of around 1, 45,000MW: environmental, and relief and rehabilitation issues. (157 projects-57,672MW, 38-mega dam with 320MW capacity, 12% free to Arunachal Pradesh).
Nuclear: 20 power plant running 4780MW, two at Kudankulam (2000MW) yet to connect to grid, five under construction (3300MW)
* Target-20,000MW by 2022 and 63,000MW by 2032.
* Signed Civil Nuclear Energy Treaty with 9 countries (US, Canada, Russia, France, Kazakhstan, Mongolia, S. Korea, Argentina and Namibia).
Major Issue: Safety and Environment (Sweden, Germany and Japan will discard Nuclear Energy by 2040).
Other sources:
Coal Bed Methane (CBM): 4th largest proven reserved. 33 exploration block- Assam, Gujarat, Andhra Pradesh, Chhattisgarh, M.P, T.N, Odisha, Rajasthan Production started 0.28mmscmd (million metric standard cubic meters per day).
Gas/Chathrate Hydrates: Methane Gas trapped inside ice in coastal sea, ocean sediments, polar seabed, and permafrost (around 300mt deep in temperate region and nearer in polar region).
Shale Gas: 2012 draft policy for the exploration and exploitation: Shale Gas in India: look before you leap. It is being considered by a group of ministers. India is believed to have technically recoverable resources of 96 trillion cubic feet (tcf) of wet shale gas.
* Ministry of Petroleum and Natural Gas (MoPNG) has identified 6 basins as potentially shale gas bearing: Cambay, Assam-Arakan, Gondwana, Krishna-Godavaari, Kaveri and the Indo-Gangetic basin. MoPNG has signed a MoU with the Deptt.of states USA.
* US geological survey: India has recoverable resources of 6.1 trillion cubic feet (tcf) in 3 of the 26 sedimentary basins.
* ONGC: 34 tcf in Damodar basin alone with 8tcf recoverable (47tcf- total conventional reserves)
* Procedure: hydro-fraction or fracking- horizontal drilling by injecting a mixture of water, chemicals (guar gum), and sand into the well at very high pressures (8000psi-pounds per square inch) to create a no. of fissures in the rock to release the gas. It requires minimum land area of 80-160 acres and 3-4 million gallons per well (11,000 15, 000 cubic mts of water).
* TERI- india will be a water stressed country by 2030, so the result might not be as dynamic as in the US.
* India-waterportal.org: next 15-20 years, consumption of water will increase by 50%, supply by 5-10%; resulting in to the scarcity of water.
* Possibility of contamination of aquifer (both surface and sub-surface) from hydro-fracturing fluid disposal.
Nuclear Fusion: ITER-international thermonuclear experimental reactor, Cadarache, France; started in 2005-07 to be completed by 2018. It has 7 member countries: Japan, China, India, S. Korea, US, Russia and EU. 50MW input power to produce 500MW output.
Renewable Energy: Potential 89,760MW, present installed capacity-28,000MW & plan to double renewable energy generation by 2017.
Small Hydro: less than 25MW, 3496MW installed with potential of 15,000MW.
1. Bio-fuel: 5% (earlier 10%) blending target, Brazil-25%.
* Bio-diesel (mono alkyl esters of long chain fatty acid): jatropha, karanj, Mahua, Soyabean oil
* Ethanol (water soluble alcohol30% oxygen): Bagasse (2239/5000MW), Corn, Sorghum, Potatoes, Wheat, Sugarcane.
2. Solar: Photo Voltaic (363MW) and thermal (800MW) - 1000MW by 2013
* JN National Solar Mission 20,000MW grid connection by 2022.
* Major issue: Gallium, Arsenic, Selenium, Indium and Tellurium getting depleted.
Wind: more than 18,000MW in operation, and total capacity of 49,130MW.
* Rare Earth Elements (REE) use in magnets in Wind Mills is available mainly in China.
Tidal and Wave Energy: ocean currents are the store house of infinite energy. West coast of India is the most favorable region for harnessing this energy.
Geothermal Energy: when the Magma from the interior of earth comes out on the surface, tremendous heat is released. This heat energy can successfully be tapped and converted to electrical energy. Also the hot water that gushes out through the geyser wells is used in the generation of thermal energy. Himalayan region has major potential.
Bio-energy/ Biomass: energy derived from biological products which include agricultural residues, municipal, industrial and other wastes (1200MW/17,000MW).
Waste to Energy (WtE) incineration Okhla 16MW has taken off but yet to connect to Grid, Ghazipur- 10MW, Narela-Bawana 36MW
Ministry of New and Renewable Energys (MNRE) flagship program on energy recovery from urban and industrial waste, announced in May 2011 aimed to generate 84MW of power from waste by providing subsidies upto Rs 10cr to developers.
Negative effect of WtE incineration:
1. WHO: Dioxins are one of the dirty Dozen a group of dangerous chemicals known as persistent organic pollutants (POPs) - potential of causing cancer.
Central Pollution Control Board and Chennai based Non-profit org. Global Alliance for Incinerator Alternatives (GAIA) revealed life threatening levels of particulates and toxic chemicals including Dioxins which is 30-40 times above permissible level in Okhla, Delhi. Those who live close to incinerator since 2009 are experiencing incidences of cancer and low birth weight.
1. The United States environmental protection agency (USEPA) recognizes incinerators emit 2.5 times more carbon dioxide per MW than coal fired power plants.
2. Cost twice the cost of Nuclear Energy, and incinerator relies heavily on govt. fiscal and financial incentives.
3. US largest WtE company, Covanta, recently announced its plan to conclude operations in the U.K., whereas, the Municipal Corporation of Hyderabad announced its plan to construct Indias largest incinerator using Covantas technology. Europe is committed to ending the land-filling and incineration of recyclable waste by 2020. Aiming instead to implement a resource-efficiency strategy that will boost a circular economy; where, all waste is treated as a resource rather than requiring expensive infrastructure to dispose of it.
(Sustainable waste management option; prevent, reuse and recycle).
Alternative: Plasma Gasification of municipal waste.
* Yoshii, Japan 24tonne per day running for decade released less than 1% to that of incineration plants.
* 200 municipal solid waste gasification plants under construction or in operation globally.
* India: Pune & Nagpur, 68 tons each/day commercial plants employing this technology have been disposing of medical and other hazardous wastes.
* British Airway partner Solena (US based bio-fuel co.) to set up plants that will gasify 1300 tons/day of Londons solid waste to use as ATF.
Challenges in power sector: total installed capacity-2, 14, 000MW; Industrial sector-45%, domestic-22%, agriculture-17% and commercial-8.9%); Transmission & Distribution Loss (India-24%, world average-15%, US & EU-4%, China-7%), Power theft (20,000cr annual loss), under pricing and subsidies. The overall power shortage-8.6% and peak shortage of -9%.
Power sector reform:
1. Power discipline: unbundle by amending states electricity act (central electricity act, 2003 amended)
2. Merchant sale of electricity
3. Integrated energy policy 2031-32
4. 1% cut in consumption Rs1000cr saving in the economy.
Initiatives taken in Power Sector:
* 4UMPP, coal-based of 4000MW: Sasan-MP, Mundra-Gujarat: three units of 800MW commissioned in 2012, Krishnapatnam-A.P, TilaiyaJharkhand.
* Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), 2005: rural electrification program to provide free connection (202lakh achieved by 2012) to BPL household.
* National Grid: inter-regional transmission capacity of 27,750MW connected to Northern, western, eastern and NE region in a synchronous mode operating at the same frequency and same mode with southern region.
* Open Access: buyer to choose supplier & vice-versa at the interstate level is now fully functional, facilitative framework created through the central electricity regulatory commission (CERC), 2008.
* Bachat Lamp Yojana (BLY) Scheme: Replacement of incandescent bulb by CFL (in the long run by LED).
* 11th plan target-62,374MW, achievement: 54,964MW. 12th plan target: 88,537MW.
Other initiatives in energy sector:
* National Energy Fund: 0.1% Cess of turnover in energy products for companies worth Rs100cr.
* National Mission for Enhanced Energy Emission (NMEEE): to save 23 million ton oil equivalent in 5 years.
* Energy Conservation building Code
Energy Security: it means having access to the requisite volumes of energy at affordable prices, i.e., supply must be impervious to disruptions and sufficient quantity must be available in time from variety of sources.
Communication:
1. Telecom: 2nd largest telephone network after China.
National Telecom Policy 2012:
* To secure affordable, reliable and high quality telecom and broadband services across the country.
* One nation-one license across services area.
* One-nation full mobile no. portability and work towards free roaming
* Rural Tele-density from 39- 70% by 2017 and 100% by 2020 (total telephone in 2012-951 connections with 96.7% wireless, urban tele-density-169%, overall- 78.66%)
* Telecom, broadband connectivity as basic necessity and work towards right to broadband.
* Affordable and reliable broadband on demand by 2015 (175mn-2017, 600mn-2020 from 2mbps to 100mbps)
Present status: TRAI begged the total no. of internet subscribers in India as of March 31, 2013 at 164.81 million and broadband penetration-1%; 12mn, 7/8 access internet through mobile, expected to cross 165mn by March 2014. However, comScore put the no. of internet users in India at 74 million. Net users spend the most time on Facebook, followed by LinkedIn and twitter. While the most unique visitors sites is Google, and the most popular site for news is Yahoo.
Broadband policy 2004: 22.8mn internet subscribers including 13.7mn broadband by 2012.
* Substantial transition to new IPv6 by 2020
National Optic Fiber Network (NOFN)-2.5lakh broadband connections to gram panchayat for e-health, e-education, e-governance, funded under universal service obligation fund (USOF)-7310 towers set up by 2012. USOF has also signed an agreement with the BSNL to provide rural wire-line broadband connectivity with a speed of 512Kbps.
Village Public Telephones Scheme has covered 97% of villages.
Two years after the Department of Telecom (DoT) decided to set up a telecom equipment testing lab at the Indian Institute of Science (IISc), Bangalore to address security issues, foreign vendors have now refused to share their design details with the premier academic institute as it could hurt their business interests. This sudden turn of events will now further delay the setting up of a full-fledged Telecom Testing and Security Certification Centre (TTSCC), which should have become fully operational by April 2013. It will also hurt Indias preparedness towards creating the Telecom Security Directorate as mandated by the National Security Council. TTSCC could be established under the DoT.
1. Postal Services: Amongst the largest network in the world in terms of area covered and people served. It has broadly 4 service areas:
2. Communication services letters, post cards
3. Transportation: Parcel logistic post
4. Financial: saving banks, life insurance
5. Premium value added services: speed post, business post, retail post
Project Arrow launched in 2008: IT driven project to modernize the Post Offices to become part of core banking solution and real time banking services, better mail delivery, remittances, insurance, saving, Speed Post-One India One Rate Scheme for just Rs.39 for any consignment weighing up to 50gms (Leasing out land, develop shopping complexes in postal departmental land, etc. are the other initiatives).
Transport: Road, Railways, Waterways and Airways.
Civil Aviation: 15 international airports out of the total 187 airports (manage by the Airport Authority of India, set up in 1994). Construction of airports through PPP: IGI T3 Delhi, Hyderabad, Bangalore and Greater Mumbai and Completely Pvt.-Kolkata & Chennai.
* Operators: 15 scheduled operators including 2 regional and 2 cargos, around 419 aircrafts (Directorate General of Civil Aviation).
* 9th largest in the world with 18% CAGR: 142 million passengers (14mn international) - 5% of travelling population, 1.6 million tons of air cargo.
* Worldwide Revenue-$671bn in 2012, just 1% profit, 2013-1.6% (10.6bn), need 7 to 8% profit to cover capital cost.
19111st flight: Allahabad to Naini, 1947 four service providers
1953Nationalized: Domestic-Indian Airlines & Air India International: merged in 2007-70% completed.
1992Open Sky Policy for Cargo
2003Kingfisher (operation operation from 2005-2012: loss making)
2007Jet Airways-Air Sahara; KFA- Air Deccan; merged.
Issues: Aviation Industry - $20bn debt.
* Strict Entry Rules: At least 5 fleet- Rs 50cr, next 2 fleet-2cr paid up capital, International Route: 5years experienced plus 20 fleet, 10% capacity in route II to be employed in route I (need to fly non-profitable route), Route preferences to national carrier (Paris-exclusive for Air India).
* High Excise duty on ATF: 4-40%, costing 45% operating cost (33% world average). Monopolies of the 4 state own suppliers. Import will save 25-30% of the ATF cost.
* Forged Pilot license: 14, and substandard pilot training schools.
* Air India Problems: Rs 5000-7000cr annual losses and 42,000cr since 2006. Retirement age 60years; large expatriate pilots recruited with 40% higher salary. Ordered 50 Boeing (27 Dreamliner 787) & 40 Airbus aircrafts; 6 Boeing 787 delivered on Jan2013 which constitute 4% of AIs total capacity (Delhi-Paris, Frankfurt, 3 domestic and 1 Standby). Indian Pilots Guild-AI employees (440)-Boeing; Indian Commercial Pilots Association-IA employees (700)-Airbus; strike for parity of pay.
* Dreamliner Boeing 787: 210-290 passengers, 16,000km non-stop, 20% more fuel efficient. But due to overheating of brakes, A/C problems, electrical fires, cracked cockpit window, battery malfunction50 dreamliners were grounded globally.
Steps taken:
* Air India: Rs 30,000cr ($6bn) debt restructuring plan.
* DGCA: to phase out Expatriate pilots in 9 months.
* Direct import of ATF & FDI up to 49%: (Jet Airways-Etihad (24%), Air Asia India, Spice Jet- Emirates/ Tiger Airways, Indigo- Qatar Airways).
* Unbundled services: check-in baggage above 15Kg, preferential seats, meals/snacks, carriage of sporting equipment and musical instruments will bear extra charges.
Railways: Introduced in 1853 between Bombay & Thane: 34Km.
* Freight: 1.025billion metric tons in 2012-13 (china, US & Russia), 2011-12: 969mmt. Earnings: 30% passenger tickets and 70% freight.
* Budget 2013-14: Rs 63,363cr (Revenue-Rs.57, 863cr, 2.3% of GDP): 16 zones.
ZonesHQEarnings: passenger %Goods %Total %
NorthernN. Delhi15911
CentralMumbai CST14810
Southern centralSecunderabad8.38.88.7
Northern centralAllahabad6.78.78.1
Broad gauge1.676mt74%
Meter gauge1mt21%
Narrow gauge0.762mt4%
Major Issues:
* Cross-subsidy: Garibh rath/student concession/passand freight charges & upper class ticket set high.
* Competition from other modes of transport: Road-4-6 lane, expressway & golden quadrilateral & waterway- coastal shipping, pipelines, and cheap airplanes.
Steps required:
* Gauge conversion
* Doubling of existing single lanes
* Electrification
* Pvt. Participation in wagon & coach manufacture
* Running Duranto express-long distance train.
Steps initiated:
1. Dedicated Freight Corridor (DFC):
Eastern DFC 1839 Km: Dankuni, Kolkata-Ludhiana, Punjab (target-2017, WB-66% funding)
Western DFC 1499Km: JNPT Mumbai- Dadri/Rewari, Delhi-UP (target-2016, Japan International Cooperation Agency-77% funding).
1. Adarsh Station: drinking ware, waiting rooms, dormitories (60/980 stations)
2. Anbhumati Coaches: Latest modern milieu
3. Computerized unreserved ticketing system
4. Kisan Vision Project: Cold storage, temperature controlled perishable cargo centers through PPP
5. Linke Holfmann Bush (LHB): Better riding comfort, speed, longer life, amenities, controlled discharge toilet: implemented in 14 Rajdhanis, 12 Shadabdis, and 11 AC Duranto Coaches.
6. Bio-toilets: 8 trains running with 436 bio-toilets, DRDO to complete it by 2016-17.
7. GPS system & RFID (radio frequency identification device) technology for tracking railway trains.
8. Onboard fire-detection & fire fighting equiptment.
Feasibility study underway:
1. DFC: East-West (Kolkata-Mumbai), North-South (Delhi-Chennai), East Corridor (Kharagpur-Vijayawada), South Corridor (Goa-Chennai), and Chennai-Bangalore freight corridor.
2. High Speed Rail Corridors: 160-200Km/hr; High Speed National Rail Authority (NHSRA) Constituted.
* Delhi-Chandigarh-Amritsar
* Pune-Mumbai-Ahmedabad
* Hyderabad-Chennai
* Chennai-Ernakulum
* Howrah-Haldia
* Delhi-Patna
4. Biometric VCD: Drivers Vigilance Telemetry Control System.
Small wrist-watch like device to monitor drivers posture, pulse, etc. constantly. If the driver consumed alcohol and is half asleep in the cabin, station manager would get alarmed and automatically stop the train. Russia has been using for Loco-pilots (train pilots)
1. Train Collision Avoidance System (TCAS): Combination of GPS & Radio Frequency
Applies brakes without pilots and avoid collision of human errors, rain, fog, sabotage
(Anti-Collision Device-Raksha Kavach was invented by Rajaram Bojji and patented by Konkan Railway Corporation Ltd).
IR requires Rs.16, 000cr to implement all these steps.
Kakodkar Committee Railway Safety 1lakhcr
Sam Pitroda Committee on modernization of IR 5.6lakhcr
IR Vision 2020: Annual outlay of Rs 1.4lakhcr is required over a decade with estimated annual gross budgetary support of Rs.50, 000cr by the central govt. need to fix the 15,000 unmanned level crossings which is responsible for 40% of the accident in 2011, in the next 5yrs.
Water Ways: Shipping-95% of Indias trade volume and 68% in terms of value.
Seaports: 13 major ports accounted for 74% of the cargo transport (12 govt. & 1 corporate owned-Ennore port), 187 notified intermediate and minor ports. Two new major port being proposed: Sagar in W.B & in A.P to add 100million tones of capacity.
Commodity transport in terms of volume: POL (petroleum, oil & lubricants)> Container Cargo> Other Cargo> Coal.
Inland Waterways:
NW1: Allahabad-Haldia: 1620Km, 1986
NW2: Sadiya- Dhubri: 891Km, 1988
NW3: Kottapuram-Kollam: 205Km, 1991
NW4: Kakinada-Pondicherry: 1095Km, nov.2008
NW5: Talcher-Dhamra(Brahmani river): 623Km, nov.2008
NW6: Lakhipur-Bhanga (River Barak)-target; 1st phase 2016-17 & 2nd phase 2018-19: 121Km, 2013
Road: NH-2% of the total roads NH/Expressways-70,000Km, State Highway-1,54,522Km: National Highway Authority of India (NHAI)
National Highway Development Project (NHDP);
2. Golden quadrilateral: 5846 completed
3. NS-EW: 7142/6053
4. NHDP phase III-VII: 39809/5959
5. Port connectivity: 380/368
6. SARDP-NE: 388/49
7. Other NHs: 1390/964
8. NH34: 5.5/
Total 55,460/19,239 completed till December 2012.
New Initiatives:
* Engineering Procurement & Construction (EPC): contact for far flung areas not viable under BOT (toll). 100% govt. funding-to reduces cost and time overrun.
* Introduction of Radio Frequency Identification (FRID)
* Less than 5hectare areas not to insist on environment clearance by MoEF.
* Select highway projects to private players under Operate, Maintain and Transfer (OMT).
Urban Infrastructure:
JNNURM (65mission cities) was launched for 7yrs, but it has been extended till April 2014. Its sub-components under the Unban Infrastructure and Governance (UIG) include: Urban renewal, water supply, sanitation, sewerage and solid waste management, urban transport, development of heritage areas, and preservation of water bodies. It has also emphasized on 3 key mandatory pro-poor to enhance the capacity of urban local bodies:
1. Internal earmarking within local body budgets for basic services to the urban poor.
2. Earmarking at least 20-25% of developed land in all housing projects (both pvt. & public) for the economically weaker sections/low income groups.
3. Implementation of seven-point charter for provisioning of 7 basic entitlements/services.
The Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT): a sub-component of the JNNURM for development of infrastructure facilities in all towns and cities other than the 65 Mission Cities covered under its UIG sub-mission. So far it has covered 672 towns and cities under UIDSSMT.
Urban Transport: under JNNURM, proposal for Bus Rapid Transit System (BRTS) have been approved in Ahmedabad, Bhopal, Indore, Jaipur, Pune-Pimpri-Chinchwad, Rajkot, Kolkata, Surat, Vijayawada and Vishakapatnam. Purchase of 15,260 bus have been approved and till nov.2012, more than 12,620 modern intelligent transport system (ITS)-enables low-floor and semi-low-floor buses have been delivered to the states/cities.
Metro Rail Projects: NCR-3rd phase 103.5Km started, Bangalore-42.3Km by dec.2013, Kolkata-14.67Km by 2015, Chennai-46.5Km by 2015, Kochi-25.6Km, Mumbai-42.94Km, Hyderabad-71.16Km and Jaipur-7Km.
Achievements of the govt. in Infrastructure sector in the last few years:
1. Special purpose Vehicle (SPV)
India Infrastructure Finance Company (IIFCL) set up in 2006 for long term projects by providing up to 20% of the project cost both through direct lending to project companies and by refinancing banks and financial institutions. It raised fund both from domestic and international market on the strength of govt.s guarantees. At the end of 12th plan it will become a catalyst for mobilizing resources for financing infrastructure by providing guarantees for bonds issued by private infrastructure companies rather than expanding its direct lending operations. This would enable mobilization of insurance and pension funds, external debt, and household savings.
Infrastructure Debt Fund (IDF): tax free bonds up to Rs.50, 000cr- 1st IDF NBFC set up by ICICI, BoB, CITI, and LIC.
Rural Infrastructure Development Fund (RIDF): RIDF-XIX in 2013-14 to Rs.20, 000cr for warehouse, god-own, cold storage, silos
Viability Gap Funding (VGF): 20% cost to be borne by the govt. with a corpus of Rs.2000cr; 13 new projects qualified under VGF-cold chains and post harvest storage, education, health, and skill development, NIMZ, oil/gas/LNG storage facility, irrigation, telecom, infrastructure in agri. Market
PPP: toll, annuity, VGF, Negative grantBOT-expressway, BOO-Mobile tower, BOOT- highway, DBOT (design built operate transfer), DBFO (design built fund operate), BLT (built lease transfer)
WB report- India received almost half of Pvt. Participation in Infrastructure (PPI) since 2006, in developing countries, and 98% of the total regional investment with a total investment of $20.7 billion in 2011. By end dec.-2012, there were 900 PPP projects in infrastructure sector.
Challenges:
* Resources requirement: 47% pvt.; FDI- decline in inflow in the last few years due to regulatory uncertainties, slower growth, and delays in acquisition of land; Long term resources-Banking, Insurance, Pension
* Pricing: subsidy, under-pricing, cross-subsidization
* PPP model: sufficient?
* Govt. inefficient spender
* Dovetailing- Planning Commission
* Apolitical
## ONGC acquisition of Crude oil asset abroad: (Indian companies investment commitment to date in overseas market-$100billion, actual investment-$25billion)
Overseas oil assets dont constitute energy security-neither ONGC Videsh Limited (OVL) nor its Chinese counterpart actually brings any significant quantities of oil from any of its overseas assets. Most of OVLs overseas oil production is sold in the local or international markets and the company is compensated in cash payments. Gazprom was nominated the sole export agency for gas exports from Sakhalin. As for gas, OVL does not bring to India even a molecule of gas produced in its own fields in Sakhalin, Vietnam or Myanmar. China fares better in this regard, primarily because it has had the foresight to build transnational gas pipelines. Even in the case of producing fields, equity participation is subject to certain contractual terms with the host government. Sharing equity with other partners as in a consortium or joint venture is also subjected to the terms of the consortium or joint venture agreement or the operating agreement between parties.
August: OVL acquired 10% stake in Mozambique gas field from Anadarko Petroleum Corp of US. It also acquired in June, along with OIL, 10% stake in the same block from Videocon Group, and 2 blocks each in Columbia and Bangladesh.
Types of participation:
Production sharing agreements-usually has an express provision with the host government wherein the foreign investor can take his share of production in kind (ownership of the mineral vests with the host government, except in the U.S. impose Domestic Market Obligations where the operator is required to sell part or all the production to the local market). Sometimes, the domestic market has prior claim and only surpluses can be exported. Certainly OVL can exercise its option to take its profit shareex anteand bring the oil or gas to India wherever it is able to do so.
Service contracts- envisage only a pre-determined fee, not a share in production,
* If the circumstances allow it, OVL can swap its equity oil with other buyers, for example; it can swap Sakhalin/Venezuelan oil with Japan and divert oil bound for Japan from the Persian Gulf region to our ports.
* When international prices of crude/gas reign high, a risk-free asset whose production/development costs are reasonable can make an excellent investment option, provided we have not paid a higher-than-competitive price for acquiring the asset.
References: Indian Economy by Dutt & Sundaram and Ramesh Singh, India year book, Economic Survey, The Hindu, Times of India, Yojan and, Union Budget.
Ringthing Hongchui
Infrastructure: Energy, Ports, Roads, Airports, Railways etc.
Infrastructure is the basic facilities needed for the functioning of a community or society. In other words, it is the basic physical or organizational structures needed for the operation of a society or enterprises. The 12th 5YP envisaged the investment requirement in infrastructure to the tune of $1trillion, with 47% of this fund coming from the private sector.
1. Physical infrastructure:
* Energy: coal, oil and natural gas, hydro, nuclear and renewable.
* Transport: roadway, railway, airway and waterway.
* Communication: telecom and postal services.
* Urban: transport housing and civic amenities.
2. Social infrastructure: (I will not cover this part)
* Education
* Health
Energy: India will produce 71% of its energy needs domestically by 2016-17, and 69% by 2021-22. The remaining will be met through import.
Integrated energy policy (IEP) 2031-32
Sector2003-04 (%)2031-32 (%)Power generation 2012 (%), total-2,14,000MW
Coal5142-6557 (1, 20,000MW)
Oil3628-330.6 (1,190MW)
Natural gas97-129 (18,900MW)
Hydro23-418.5 (39,3240)
Nuclear15-62.02 (4780)
Renewable5-712.5 (28,000MW)
Coal: Indias reserve as on March, 2012 was 293.5billion tones (40% proven and some 40bn tons proven) & Domestic production-540million tons in 2011-12 (import-100mn tons) need to increased to 795mn tons by 2016-17; even then there will be import need of 185mn tons.
* IEP says present potential to last for 40years.
* Mines & Mineral (development and regulation) bill 2011 for simple and transparent mechanism for granting of mining lease or prospecting license through competitive bidding; Coal forecasting, private participation and captive mining for merchant uses.
* Pricing change from useful heat value (UHV) to Gross Calorific Value (GCV) in 20012 (grade I-VII: 15% ash & moisture content) - mainly Bituminous coal. Need to invest in super-critical boiler technology.
* Liquefaction of coal: gasification to liquefaction (Sasol process in S. Africa and Fischer Tropsch process in Germany).
Oil & Natural Gas: 73% import dependent, 90% import by 2031-32. Indias Refining Capacity 215mmt in 2013, exporting 60.84mmt of petroleum products worth $50bn (20 refineries: 17 public & 3 Pvt.).
Steps taken by the govt.:
* New Exploration Licensing Policy (NELP), 1999- 177 oil & N. Gas discoveries in 39 NELP blocks.
* Deregulation of prices: petrol, diesel-dual pricing, L.P.G- 9 cylinders/year, kerosene-direct cash transfer through ADHAAR, underway; import parity pricing system underway.
* Pipeline Network (16 crude pipelines- 106MMT).
* Vision 2015: Piped Natural Gas by re-gasification of Liquefied Natural Gas to 200 cities.
* Rajiv Gandhi Gramin LPG Vitaran Yojana, 2009- 75% population by 2015 -5.5cr new connections
* Rangarajan formula on gas pricing: KG-D6 gas price to go up to $8.4mbtu from $4.2mbtu by April 2014.
* International effort: India-Oman (1100km) undersea pipeline, Turkmenistan-Afghanistan-Pakistan-India (TAPI-1700km) pipeline to transport 3billion cubic feet of natural gas per day.
* Lost opportunities: Iran-Pakistan-India (IPI) pipeline and India-Bangladesh-Myanmar natural gas pipeline.
(Sweden has declared that they will have nothing to do with oil by 2050).
Hydro: potential of around 1, 45,000MW: environmental, and relief and rehabilitation issues. (157 projects-57,672MW, 38-mega dam with 320MW capacity, 12% free to Arunachal Pradesh).
Nuclear: 20 power plant running 4780MW, two at Kudankulam (2000MW) yet to connect to grid, five under construction (3300MW)
* Target-20,000MW by 2022 and 63,000MW by 2032.
* Signed Civil Nuclear Energy Treaty with 9 countries (US, Canada, Russia, France, Kazakhstan, Mongolia, S. Korea, Argentina and Namibia).
Major Issue: Safety and Environment (Sweden, Germany and Japan will discard Nuclear Energy by 2040).
Other sources:
Coal Bed Methane (CBM): 4th largest proven reserved. 33 exploration block- Assam, Gujarat, Andhra Pradesh, Chhattisgarh, M.P, T.N, Odisha, Rajasthan Production started 0.28mmscmd (million metric standard cubic meters per day).
Gas/Chathrate Hydrates: Methane Gas trapped inside ice in coastal sea, ocean sediments, polar seabed, and permafrost (around 300mt deep in temperate region and nearer in polar region).
Shale Gas: 2012 draft policy for the exploration and exploitation: Shale Gas in India: look before you leap. It is being considered by a group of ministers. India is believed to have technically recoverable resources of 96 trillion cubic feet (tcf) of wet shale gas.
* Ministry of Petroleum and Natural Gas (MoPNG) has identified 6 basins as potentially shale gas bearing: Cambay, Assam-Arakan, Gondwana, Krishna-Godavaari, Kaveri and the Indo-Gangetic basin. MoPNG has signed a MoU with the Deptt.of states USA.
* US geological survey: India has recoverable resources of 6.1 trillion cubic feet (tcf) in 3 of the 26 sedimentary basins.
* ONGC: 34 tcf in Damodar basin alone with 8tcf recoverable (47tcf- total conventional reserves)
* Procedure: hydro-fraction or fracking- horizontal drilling by injecting a mixture of water, chemicals (guar gum), and sand into the well at very high pressures (8000psi-pounds per square inch) to create a no. of fissures in the rock to release the gas. It requires minimum land area of 80-160 acres and 3-4 million gallons per well (11,000 15, 000 cubic mts of water).
* TERI- india will be a water stressed country by 2030, so the result might not be as dynamic as in the US.
* India-waterportal.org: next 15-20 years, consumption of water will increase by 50%, supply by 5-10%; resulting in to the scarcity of water.
* Possibility of contamination of aquifer (both surface and sub-surface) from hydro-fracturing fluid disposal.
Nuclear Fusion: ITER-international thermonuclear experimental reactor, Cadarache, France; started in 2005-07 to be completed by 2018. It has 7 member countries: Japan, China, India, S. Korea, US, Russia and EU. 50MW input power to produce 500MW output.
Renewable Energy: Potential 89,760MW, present installed capacity-28,000MW & plan to double renewable energy generation by 2017.
Small Hydro: less than 25MW, 3496MW installed with potential of 15,000MW.
1. Bio-fuel: 5% (earlier 10%) blending target, Brazil-25%.
* Bio-diesel (mono alkyl esters of long chain fatty acid): jatropha, karanj, Mahua, Soyabean oil
* Ethanol (water soluble alcohol30% oxygen): Bagasse (2239/5000MW), Corn, Sorghum, Potatoes, Wheat, Sugarcane.
2. Solar: Photo Voltaic (363MW) and thermal (800MW) - 1000MW by 2013
* JN National Solar Mission 20,000MW grid connection by 2022.
* Major issue: Gallium, Arsenic, Selenium, Indium and Tellurium getting depleted.
Wind: more than 18,000MW in operation, and total capacity of 49,130MW.
* Rare Earth Elements (REE) use in magnets in Wind Mills is available mainly in China.
Tidal and Wave Energy: ocean currents are the store house of infinite energy. West coast of India is the most favorable region for harnessing this energy.
Geothermal Energy: when the Magma from the interior of earth comes out on the surface, tremendous heat is released. This heat energy can successfully be tapped and converted to electrical energy. Also the hot water that gushes out through the geyser wells is used in the generation of thermal energy. Himalayan region has major potential.
Bio-energy/ Biomass: energy derived from biological products which include agricultural residues, municipal, industrial and other wastes (1200MW/17,000MW).
Waste to Energy (WtE) incineration Okhla 16MW has taken off but yet to connect to Grid, Ghazipur- 10MW, Narela-Bawana 36MW
Ministry of New and Renewable Energys (MNRE) flagship program on energy recovery from urban and industrial waste, announced in May 2011 aimed to generate 84MW of power from waste by providing subsidies upto Rs 10cr to developers.
Negative effect of WtE incineration:
1. WHO: Dioxins are one of the dirty Dozen a group of dangerous chemicals known as persistent organic pollutants (POPs) - potential of causing cancer.
Central Pollution Control Board and Chennai based Non-profit org. Global Alliance for Incinerator Alternatives (GAIA) revealed life threatening levels of particulates and toxic chemicals including Dioxins which is 30-40 times above permissible level in Okhla, Delhi. Those who live close to incinerator since 2009 are experiencing incidences of cancer and low birth weight.
1. The United States environmental protection agency (USEPA) recognizes incinerators emit 2.5 times more carbon dioxide per MW than coal fired power plants.
2. Cost twice the cost of Nuclear Energy, and incinerator relies heavily on govt. fiscal and financial incentives.
3. US largest WtE company, Covanta, recently announced its plan to conclude operations in the U.K., whereas, the Municipal Corporation of Hyderabad announced its plan to construct Indias largest incinerator using Covantas technology. Europe is committed to ending the land-filling and incineration of recyclable waste by 2020. Aiming instead to implement a resource-efficiency strategy that will boost a circular economy; where, all waste is treated as a resource rather than requiring expensive infrastructure to dispose of it.
(Sustainable waste management option; prevent, reuse and recycle).
Alternative: Plasma Gasification of municipal waste.
* Yoshii, Japan 24tonne per day running for decade released less than 1% to that of incineration plants.
* 200 municipal solid waste gasification plants under construction or in operation globally.
* India: Pune & Nagpur, 68 tons each/day commercial plants employing this technology have been disposing of medical and other hazardous wastes.
* British Airway partner Solena (US based bio-fuel co.) to set up plants that will gasify 1300 tons/day of Londons solid waste to use as ATF.
Challenges in power sector: total installed capacity-2, 14, 000MW; Industrial sector-45%, domestic-22%, agriculture-17% and commercial-8.9%); Transmission & Distribution Loss (India-24%, world average-15%, US & EU-4%, China-7%), Power theft (20,000cr annual loss), under pricing and subsidies. The overall power shortage-8.6% and peak shortage of -9%.
Power sector reform:
1. Power discipline: unbundle by amending states electricity act (central electricity act, 2003 amended)
2. Merchant sale of electricity
3. Integrated energy policy 2031-32
4. 1% cut in consumption Rs1000cr saving in the economy.
Initiatives taken in Power Sector:
* 4UMPP, coal-based of 4000MW: Sasan-MP, Mundra-Gujarat: three units of 800MW commissioned in 2012, Krishnapatnam-A.P, TilaiyaJharkhand.
* Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), 2005: rural electrification program to provide free connection (202lakh achieved by 2012) to BPL household.
* National Grid: inter-regional transmission capacity of 27,750MW connected to Northern, western, eastern and NE region in a synchronous mode operating at the same frequency and same mode with southern region.
* Open Access: buyer to choose supplier & vice-versa at the interstate level is now fully functional, facilitative framework created through the central electricity regulatory commission (CERC), 2008.
* Bachat Lamp Yojana (BLY) Scheme: Replacement of incandescent bulb by CFL (in the long run by LED).
* 11th plan target-62,374MW, achievement: 54,964MW. 12th plan target: 88,537MW.
Other initiatives in energy sector:
* National Energy Fund: 0.1% Cess of turnover in energy products for companies worth Rs100cr.
* National Mission for Enhanced Energy Emission (NMEEE): to save 23 million ton oil equivalent in 5 years.
* Energy Conservation building Code
Energy Security: it means having access to the requisite volumes of energy at affordable prices, i.e., supply must be impervious to disruptions and sufficient quantity must be available in time from variety of sources.
Communication:
1. Telecom: 2nd largest telephone network after China.
National Telecom Policy 2012:
* To secure affordable, reliable and high quality telecom and broadband services across the country.
* One nation-one license across services area.
* One-nation full mobile no. portability and work towards free roaming
* Rural Tele-density from 39- 70% by 2017 and 100% by 2020 (total telephone in 2012-951 connections with 96.7% wireless, urban tele-density-169%, overall- 78.66%)
* Telecom, broadband connectivity as basic necessity and work towards right to broadband.
* Affordable and reliable broadband on demand by 2015 (175mn-2017, 600mn-2020 from 2mbps to 100mbps)
Present status: TRAI begged the total no. of internet subscribers in India as of March 31, 2013 at 164.81 million and broadband penetration-1%; 12mn, 7/8 access internet through mobile, expected to cross 165mn by March 2014. However, comScore put the no. of internet users in India at 74 million. Net users spend the most time on Facebook, followed by LinkedIn and twitter. While the most unique visitors sites is Google, and the most popular site for news is Yahoo.
Broadband policy 2004: 22.8mn internet subscribers including 13.7mn broadband by 2012.
* Substantial transition to new IPv6 by 2020
National Optic Fiber Network (NOFN)-2.5lakh broadband connections to gram panchayat for e-health, e-education, e-governance, funded under universal service obligation fund (USOF)-7310 towers set up by 2012. USOF has also signed an agreement with the BSNL to provide rural wire-line broadband connectivity with a speed of 512Kbps.
Village Public Telephones Scheme has covered 97% of villages.
Two years after the Department of Telecom (DoT) decided to set up a telecom equipment testing lab at the Indian Institute of Science (IISc), Bangalore to address security issues, foreign vendors have now refused to share their design details with the premier academic institute as it could hurt their business interests. This sudden turn of events will now further delay the setting up of a full-fledged Telecom Testing and Security Certification Centre (TTSCC), which should have become fully operational by April 2013. It will also hurt Indias preparedness towards creating the Telecom Security Directorate as mandated by the National Security Council. TTSCC could be established under the DoT.
1. Postal Services: Amongst the largest network in the world in terms of area covered and people served. It has broadly 4 service areas:
2. Communication services letters, post cards
3. Transportation: Parcel logistic post
4. Financial: saving banks, life insurance
5. Premium value added services: speed post, business post, retail post
Project Arrow launched in 2008: IT driven project to modernize the Post Offices to become part of core banking solution and real time banking services, better mail delivery, remittances, insurance, saving, Speed Post-One India One Rate Scheme for just Rs.39 for any consignment weighing up to 50gms (Leasing out land, develop shopping complexes in postal departmental land, etc. are the other initiatives).
Transport: Road, Railways, Waterways and Airways.
Civil Aviation: 15 international airports out of the total 187 airports (manage by the Airport Authority of India, set up in 1994). Construction of airports through PPP: IGI T3 Delhi, Hyderabad, Bangalore and Greater Mumbai and Completely Pvt.-Kolkata & Chennai.
* Operators: 15 scheduled operators including 2 regional and 2 cargos, around 419 aircrafts (Directorate General of Civil Aviation).
* 9th largest in the world with 18% CAGR: 142 million passengers (14mn international) - 5% of travelling population, 1.6 million tons of air cargo.
* Worldwide Revenue-$671bn in 2012, just 1% profit, 2013-1.6% (10.6bn), need 7 to 8% profit to cover capital cost.
19111st flight: Allahabad to Naini, 1947 four service providers
1953Nationalized: Domestic-Indian Airlines & Air India International: merged in 2007-70% completed.
1992Open Sky Policy for Cargo
2003Kingfisher (operation operation from 2005-2012: loss making)
2007Jet Airways-Air Sahara; KFA- Air Deccan; merged.
Issues: Aviation Industry - $20bn debt.
* Strict Entry Rules: At least 5 fleet- Rs 50cr, next 2 fleet-2cr paid up capital, International Route: 5years experienced plus 20 fleet, 10% capacity in route II to be employed in route I (need to fly non-profitable route), Route preferences to national carrier (Paris-exclusive for Air India).
* High Excise duty on ATF: 4-40%, costing 45% operating cost (33% world average). Monopolies of the 4 state own suppliers. Import will save 25-30% of the ATF cost.
* Forged Pilot license: 14, and substandard pilot training schools.
* Air India Problems: Rs 5000-7000cr annual losses and 42,000cr since 2006. Retirement age 60years; large expatriate pilots recruited with 40% higher salary. Ordered 50 Boeing (27 Dreamliner 787) & 40 Airbus aircrafts; 6 Boeing 787 delivered on Jan2013 which constitute 4% of AIs total capacity (Delhi-Paris, Frankfurt, 3 domestic and 1 Standby). Indian Pilots Guild-AI employees (440)-Boeing; Indian Commercial Pilots Association-IA employees (700)-Airbus; strike for parity of pay.
* Dreamliner Boeing 787: 210-290 passengers, 16,000km non-stop, 20% more fuel efficient. But due to overheating of brakes, A/C problems, electrical fires, cracked cockpit window, battery malfunction50 dreamliners were grounded globally.
Steps taken:
* Air India: Rs 30,000cr ($6bn) debt restructuring plan.
* DGCA: to phase out Expatriate pilots in 9 months.
* Direct import of ATF & FDI up to 49%: (Jet Airways-Etihad (24%), Air Asia India, Spice Jet- Emirates/ Tiger Airways, Indigo- Qatar Airways).
* Unbundled services: check-in baggage above 15Kg, preferential seats, meals/snacks, carriage of sporting equipment and musical instruments will bear extra charges.
Railways: Introduced in 1853 between Bombay & Thane: 34Km.
* Freight: 1.025billion metric tons in 2012-13 (china, US & Russia), 2011-12: 969mmt. Earnings: 30% passenger tickets and 70% freight.
* Budget 2013-14: Rs 63,363cr (Revenue-Rs.57, 863cr, 2.3% of GDP): 16 zones.
ZonesHQEarnings: passenger %Goods %Total %
NorthernN. Delhi15911
CentralMumbai CST14810
Southern centralSecunderabad8.38.88.7
Northern centralAllahabad6.78.78.1
Broad gauge1.676mt74%
Meter gauge1mt21%
Narrow gauge0.762mt4%
Major Issues:
* Cross-subsidy: Garibh rath/student concession/passand freight charges & upper class ticket set high.
* Competition from other modes of transport: Road-4-6 lane, expressway & golden quadrilateral & waterway- coastal shipping, pipelines, and cheap airplanes.
Steps required:
* Gauge conversion
* Doubling of existing single lanes
* Electrification
* Pvt. Participation in wagon & coach manufacture
* Running Duranto express-long distance train.
Steps initiated:
1. Dedicated Freight Corridor (DFC):
Eastern DFC 1839 Km: Dankuni, Kolkata-Ludhiana, Punjab (target-2017, WB-66% funding)
Western DFC 1499Km: JNPT Mumbai- Dadri/Rewari, Delhi-UP (target-2016, Japan International Cooperation Agency-77% funding).
1. Adarsh Station: drinking ware, waiting rooms, dormitories (60/980 stations)
2. Anbhumati Coaches: Latest modern milieu
3. Computerized unreserved ticketing system
4. Kisan Vision Project: Cold storage, temperature controlled perishable cargo centers through PPP
5. Linke Holfmann Bush (LHB): Better riding comfort, speed, longer life, amenities, controlled discharge toilet: implemented in 14 Rajdhanis, 12 Shadabdis, and 11 AC Duranto Coaches.
6. Bio-toilets: 8 trains running with 436 bio-toilets, DRDO to complete it by 2016-17.
7. GPS system & RFID (radio frequency identification device) technology for tracking railway trains.
8. Onboard fire-detection & fire fighting equiptment.
Feasibility study underway:
1. DFC: East-West (Kolkata-Mumbai), North-South (Delhi-Chennai), East Corridor (Kharagpur-Vijayawada), South Corridor (Goa-Chennai), and Chennai-Bangalore freight corridor.
2. High Speed Rail Corridors: 160-200Km/hr; High Speed National Rail Authority (NHSRA) Constituted.
* Delhi-Chandigarh-Amritsar
* Pune-Mumbai-Ahmedabad
* Hyderabad-Chennai
* Chennai-Ernakulum
* Howrah-Haldia
* Delhi-Patna
4. Biometric VCD: Drivers Vigilance Telemetry Control System.
Small wrist-watch like device to monitor drivers posture, pulse, etc. constantly. If the driver consumed alcohol and is half asleep in the cabin, station manager would get alarmed and automatically stop the train. Russia has been using for Loco-pilots (train pilots)
1. Train Collision Avoidance System (TCAS): Combination of GPS & Radio Frequency
Applies brakes without pilots and avoid collision of human errors, rain, fog, sabotage
(Anti-Collision Device-Raksha Kavach was invented by Rajaram Bojji and patented by Konkan Railway Corporation Ltd).
IR requires Rs.16, 000cr to implement all these steps.
Kakodkar Committee Railway Safety 1lakhcr
Sam Pitroda Committee on modernization of IR 5.6lakhcr
IR Vision 2020: Annual outlay of Rs 1.4lakhcr is required over a decade with estimated annual gross budgetary support of Rs.50, 000cr by the central govt. need to fix the 15,000 unmanned level crossings which is responsible for 40% of the accident in 2011, in the next 5yrs.
Water Ways: Shipping-95% of Indias trade volume and 68% in terms of value.
Seaports: 13 major ports accounted for 74% of the cargo transport (12 govt. & 1 corporate owned-Ennore port), 187 notified intermediate and minor ports. Two new major port being proposed: Sagar in W.B & in A.P to add 100million tones of capacity.
Commodity transport in terms of volume: POL (petroleum, oil & lubricants)> Container Cargo> Other Cargo> Coal.
Inland Waterways:
NW1: Allahabad-Haldia: 1620Km, 1986
NW2: Sadiya- Dhubri: 891Km, 1988
NW3: Kottapuram-Kollam: 205Km, 1991
NW4: Kakinada-Pondicherry: 1095Km, nov.2008
NW5: Talcher-Dhamra(Brahmani river): 623Km, nov.2008
NW6: Lakhipur-Bhanga (River Barak)-target; 1st phase 2016-17 & 2nd phase 2018-19: 121Km, 2013
Road: NH-2% of the total roads NH/Expressways-70,000Km, State Highway-1,54,522Km: National Highway Authority of India (NHAI)
National Highway Development Project (NHDP);
2. Golden quadrilateral: 5846 completed
3. NS-EW: 7142/6053
4. NHDP phase III-VII: 39809/5959
5. Port connectivity: 380/368
6. SARDP-NE: 388/49
7. Other NHs: 1390/964
8. NH34: 5.5/
Total 55,460/19,239 completed till December 2012.
New Initiatives:
* Engineering Procurement & Construction (EPC): contact for far flung areas not viable under BOT (toll). 100% govt. funding-to reduces cost and time overrun.
* Introduction of Radio Frequency Identification (FRID)
* Less than 5hectare areas not to insist on environment clearance by MoEF.
* Select highway projects to private players under Operate, Maintain and Transfer (OMT).
Urban Infrastructure:
JNNURM (65mission cities) was launched for 7yrs, but it has been extended till April 2014. Its sub-components under the Unban Infrastructure and Governance (UIG) include: Urban renewal, water supply, sanitation, sewerage and solid waste management, urban transport, development of heritage areas, and preservation of water bodies. It has also emphasized on 3 key mandatory pro-poor to enhance the capacity of urban local bodies:
1. Internal earmarking within local body budgets for basic services to the urban poor.
2. Earmarking at least 20-25% of developed land in all housing projects (both pvt. & public) for the economically weaker sections/low income groups.
3. Implementation of seven-point charter for provisioning of 7 basic entitlements/services.
The Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT): a sub-component of the JNNURM for development of infrastructure facilities in all towns and cities other than the 65 Mission Cities covered under its UIG sub-mission. So far it has covered 672 towns and cities under UIDSSMT.
Urban Transport: under JNNURM, proposal for Bus Rapid Transit System (BRTS) have been approved in Ahmedabad, Bhopal, Indore, Jaipur, Pune-Pimpri-Chinchwad, Rajkot, Kolkata, Surat, Vijayawada and Vishakapatnam. Purchase of 15,260 bus have been approved and till nov.2012, more than 12,620 modern intelligent transport system (ITS)-enables low-floor and semi-low-floor buses have been delivered to the states/cities.
Metro Rail Projects: NCR-3rd phase 103.5Km started, Bangalore-42.3Km by dec.2013, Kolkata-14.67Km by 2015, Chennai-46.5Km by 2015, Kochi-25.6Km, Mumbai-42.94Km, Hyderabad-71.16Km and Jaipur-7Km.
Achievements of the govt. in Infrastructure sector in the last few years:
1. Special purpose Vehicle (SPV)
India Infrastructure Finance Company (IIFCL) set up in 2006 for long term projects by providing up to 20% of the project cost both through direct lending to project companies and by refinancing banks and financial institutions. It raised fund both from domestic and international market on the strength of govt.s guarantees. At the end of 12th plan it will become a catalyst for mobilizing resources for financing infrastructure by providing guarantees for bonds issued by private infrastructure companies rather than expanding its direct lending operations. This would enable mobilization of insurance and pension funds, external debt, and household savings.
Infrastructure Debt Fund (IDF): tax free bonds up to Rs.50, 000cr- 1st IDF NBFC set up by ICICI, BoB, CITI, and LIC.
Rural Infrastructure Development Fund (RIDF): RIDF-XIX in 2013-14 to Rs.20, 000cr for warehouse, god-own, cold storage, silos
Viability Gap Funding (VGF): 20% cost to be borne by the govt. with a corpus of Rs.2000cr; 13 new projects qualified under VGF-cold chains and post harvest storage, education, health, and skill development, NIMZ, oil/gas/LNG storage facility, irrigation, telecom, infrastructure in agri. Market
PPP: toll, annuity, VGF, Negative grantBOT-expressway, BOO-Mobile tower, BOOT- highway, DBOT (design built operate transfer), DBFO (design built fund operate), BLT (built lease transfer)
WB report- India received almost half of Pvt. Participation in Infrastructure (PPI) since 2006, in developing countries, and 98% of the total regional investment with a total investment of $20.7 billion in 2011. By end dec.-2012, there were 900 PPP projects in infrastructure sector.
Challenges:
* Resources requirement: 47% pvt.; FDI- decline in inflow in the last few years due to regulatory uncertainties, slower growth, and delays in acquisition of land; Long term resources-Banking, Insurance, Pension
* Pricing: subsidy, under-pricing, cross-subsidization
* PPP model: sufficient?
* Govt. inefficient spender
* Dovetailing- Planning Commission
* Apolitical
## ONGC acquisition of Crude oil asset abroad: (Indian companies investment commitment to date in overseas market-$100billion, actual investment-$25billion)
Overseas oil assets dont constitute energy security-neither ONGC Videsh Limited (OVL) nor its Chinese counterpart actually brings any significant quantities of oil from any of its overseas assets. Most of OVLs overseas oil production is sold in the local or international markets and the company is compensated in cash payments. Gazprom was nominated the sole export agency for gas exports from Sakhalin. As for gas, OVL does not bring to India even a molecule of gas produced in its own fields in Sakhalin, Vietnam or Myanmar. China fares better in this regard, primarily because it has had the foresight to build transnational gas pipelines. Even in the case of producing fields, equity participation is subject to certain contractual terms with the host government. Sharing equity with other partners as in a consortium or joint venture is also subjected to the terms of the consortium or joint venture agreement or the operating agreement between parties.
August: OVL acquired 10% stake in Mozambique gas field from Anadarko Petroleum Corp of US. It also acquired in June, along with OIL, 10% stake in the same block from Videocon Group, and 2 blocks each in Columbia and Bangladesh.
Types of participation:
Production sharing agreements-usually has an express provision with the host government wherein the foreign investor can take his share of production in kind (ownership of the mineral vests with the host government, except in the U.S. impose Domestic Market Obligations where the operator is required to sell part or all the production to the local market). Sometimes, the domestic market has prior claim and only surpluses can be exported. Certainly OVL can exercise its option to take its profit shareex anteand bring the oil or gas to India wherever it is able to do so.
Service contracts- envisage only a pre-determined fee, not a share in production,
* If the circumstances allow it, OVL can swap its equity oil with other buyers, for example; it can swap Sakhalin/Venezuelan oil with Japan and divert oil bound for Japan from the Persian Gulf region to our ports.
* When international prices of crude/gas reign high, a risk-free asset whose production/development costs are reasonable can make an excellent investment option, provided we have not paid a higher-than-competitive price for acquiring the asset.
References: Indian Economy by Dutt & Sundaram and Ramesh Singh, India year book, Economic Survey, The Hindu, Times of India, Yojan and, Union Budget.
Ringthing Hongchui
Air defense identification zone not just about the island
Air defense identification zone not just about the island
Recently China made a controversial effort announcing an air identification zone (ADIZ) in the East China Sea. It invited strong criticism from USA, Japan, and Thailand and even from India. Here we are dealing with various issues concerning with this issue.
What is an ADIZ?
Technically it is a section of international airspace over which the country has the right to identify any aircraft enters that region to protect from foreign threat. It is not a jurisdictional law, but only a customary law.
What happens in such a space?
After proclaiming the zone, the country would use radar to detect the threat and use radio to know who and why the suspicious act was occurred? It has the right to launch an aircraft for observation if it is needed. Anyway the country has no any authority to launch a direct attack on this site unless there is no a direct threat.
What the problem with Chinas identification zone?
1-The Chinas ADIZ overlaps the ADIZ which was created by the US after world war II and it was transferred to Japan.
2- Japan sees the problem as a direct invasion to their sovereign right on the land.
3- This is first time in history that a country proclaims its air defence zone on a previously proclaimed area.
4-it takes the risk of a future war between the stakeholders.
5- Air defense zone consists over Diaoyu/Senkaku islands .
What is so significant about Diaoyu/Senkaku islands.?
The former is named by Chinese, while the second is named by the people of japan. It is a history problem and the result of japans colonialism over china twice in history. at last in 1895 it was annexed to Japan. So it is a sensitive area.
What is behind the sudden action of China?
1. The policy decision making in china over the foreign issue is very opaque. so always it invites criticism from various parts of the world.
2. China attempts to redefine the sovereignty issues. (speculative theories)
3. Japans air defense zone also extends to Chinese territory for about 130 kilometers.
4. It is not rather an issue of island. But it is of larger maritime security issue.
5. It is the result of internal political pressure from china. It will affect the role issue of new president.
The stand point of India in this matter
1. It was a sudden reaction from Chinese authority and it disrespects the sovereignty issue of Japan.
2. China may not be aware of the strong criticism it may invite. Thats why they converted their words from emergency defence measures to just want notification
3. China uses the international institutions to achieve their goal.
4. The ADIZ itself is not the problem. But the action of china is the problem.
5. It would be a creditable evidence for India on the factor of China Threat.
by Shahid T Komath
Ref: www.thehindu.com/opinion/lead/not-just-about-the-islands/article5441185.ece
Recently China made a controversial effort announcing an air identification zone (ADIZ) in the East China Sea. It invited strong criticism from USA, Japan, and Thailand and even from India. Here we are dealing with various issues concerning with this issue.
What is an ADIZ?
Technically it is a section of international airspace over which the country has the right to identify any aircraft enters that region to protect from foreign threat. It is not a jurisdictional law, but only a customary law.
What happens in such a space?
After proclaiming the zone, the country would use radar to detect the threat and use radio to know who and why the suspicious act was occurred? It has the right to launch an aircraft for observation if it is needed. Anyway the country has no any authority to launch a direct attack on this site unless there is no a direct threat.
What the problem with Chinas identification zone?
1-The Chinas ADIZ overlaps the ADIZ which was created by the US after world war II and it was transferred to Japan.
2- Japan sees the problem as a direct invasion to their sovereign right on the land.
3- This is first time in history that a country proclaims its air defence zone on a previously proclaimed area.
4-it takes the risk of a future war between the stakeholders.
5- Air defense zone consists over Diaoyu/Senkaku islands .
What is so significant about Diaoyu/Senkaku islands.?
The former is named by Chinese, while the second is named by the people of japan. It is a history problem and the result of japans colonialism over china twice in history. at last in 1895 it was annexed to Japan. So it is a sensitive area.
What is behind the sudden action of China?
1. The policy decision making in china over the foreign issue is very opaque. so always it invites criticism from various parts of the world.
2. China attempts to redefine the sovereignty issues. (speculative theories)
3. Japans air defense zone also extends to Chinese territory for about 130 kilometers.
4. It is not rather an issue of island. But it is of larger maritime security issue.
5. It is the result of internal political pressure from china. It will affect the role issue of new president.
The stand point of India in this matter
1. It was a sudden reaction from Chinese authority and it disrespects the sovereignty issue of Japan.
2. China may not be aware of the strong criticism it may invite. Thats why they converted their words from emergency defence measures to just want notification
3. China uses the international institutions to achieve their goal.
4. The ADIZ itself is not the problem. But the action of china is the problem.
5. It would be a creditable evidence for India on the factor of China Threat.
by Shahid T Komath
Ref: www.thehindu.com/opinion/lead/not-just-about-the-islands/article5441185.ece
AIR DEFENCE IDENTIFICATION ZONE
What is ADIZ?
An ADIZ is a publicly defined international airspace extending beyond national territory in which unidentified aircrafts can be interrogated. It is mainly to protect a country from any security threat, but other benefits are reduce mid-air collisions, combat drug flows, facilitate search and rescue operations etc.
There is no International Agreement about ADIZs and it is not Jurisdictional.
Origin
During cold war US declared first ADIZs to reduce the risk of a surprise attack from Soviets. Today US has 5 ADIZs. Other countries who have ADIZs are India, Pakistan, Japan, South Korea, UK and now China.
Effect of an ADIZ
Any aircraft before entering any such zone has to notify the concerned authorities beforehand about their flight plan and follow instructions from their ATC. In an event of not declaring flight plan beforehand a country can take actions against the aircraft if they think it as a security threat.
Chinas ADIZ (see map)
Every country has ADIZ then why the fuss about China--
Firstly, ADIZ is mainly for security threat. China has no such threat. There are tensions in the region but no country is ready to strike the heart of the global economy. In fact declaring an ADIZ has increased more tensions in the region and fears about Chinas long term plans.
Secondly, Chinas ADIZ overlaps with Japans already declared ADIZ and two islands administered by Japan (which China claims to be their own) and with South Koreas reef known as leodo.
China thinks that ADIZ will strengthen its claim over the disputed islands. But the problem is even if countries confirm the ADIZ, an ADIZ is nor jurisdictional and China cannot claim authority over the islands.
Dispute over the Islands
Japan has held the islands since late 19th century but since 1970s China has also claimed them. China claims these islands were annexed by Japan during colonial settlements and should be returned to China.
Effect of Chinas ADIZ
As soon as China declared ADIZ on November 23, two Japanese airlines shared their flight plans with them. US, Japan, South Korea declared they do not follow the zone. US immediately sent two fighter planes B-52 bombers through the zone. Later Japan and South Korea also sent their military planes through the zone without informing the Chinese authorities. But US has asked its passenger planes to adhere to zone and share their flight plans with China. Australian airlines also adhere to the zone.
To understand the matters further here is the map
Now South Korea has decided to increase its KADIZ (see map) which will overlap with both China and Japans zones. Now China is okay with this expansion and is not refuting the expansion. Why? Firstly, this will strengthen Chinas ADIZ claims. SK is ally with the US and if US doesnt object to the expansion this will give China a possible reason in favour of its ADIZ.
Secondly, China has nothing to do with SK and its main strategic rival is Japan. With the SK expansion Japan is mute on it where in fact KADIZ overlaps more with Japan than China. This can also strengthen Chinas ADIZ claims. China is moving very strategically and trying to claim its dominance in East China Sea.
Possible Solution to disputed Islands
One solution could be for Japan to sell the islands to Taiwan. Since Taiwan and China officially agree there is only one China. So China could say that the islands are under Chinese Sovereignty and Japan could say that they didnt give in to Chinas demands.
Name Nitin Dahiya
References:-
The Economist, The Hindu
www.thediplomat.com ,
www.foreignaffairs.com
An ADIZ is a publicly defined international airspace extending beyond national territory in which unidentified aircrafts can be interrogated. It is mainly to protect a country from any security threat, but other benefits are reduce mid-air collisions, combat drug flows, facilitate search and rescue operations etc.
There is no International Agreement about ADIZs and it is not Jurisdictional.
Origin
During cold war US declared first ADIZs to reduce the risk of a surprise attack from Soviets. Today US has 5 ADIZs. Other countries who have ADIZs are India, Pakistan, Japan, South Korea, UK and now China.
Effect of an ADIZ
Any aircraft before entering any such zone has to notify the concerned authorities beforehand about their flight plan and follow instructions from their ATC. In an event of not declaring flight plan beforehand a country can take actions against the aircraft if they think it as a security threat.
Chinas ADIZ (see map)
Every country has ADIZ then why the fuss about China--
Firstly, ADIZ is mainly for security threat. China has no such threat. There are tensions in the region but no country is ready to strike the heart of the global economy. In fact declaring an ADIZ has increased more tensions in the region and fears about Chinas long term plans.
Secondly, Chinas ADIZ overlaps with Japans already declared ADIZ and two islands administered by Japan (which China claims to be their own) and with South Koreas reef known as leodo.
China thinks that ADIZ will strengthen its claim over the disputed islands. But the problem is even if countries confirm the ADIZ, an ADIZ is nor jurisdictional and China cannot claim authority over the islands.
Dispute over the Islands
Japan has held the islands since late 19th century but since 1970s China has also claimed them. China claims these islands were annexed by Japan during colonial settlements and should be returned to China.
Effect of Chinas ADIZ
As soon as China declared ADIZ on November 23, two Japanese airlines shared their flight plans with them. US, Japan, South Korea declared they do not follow the zone. US immediately sent two fighter planes B-52 bombers through the zone. Later Japan and South Korea also sent their military planes through the zone without informing the Chinese authorities. But US has asked its passenger planes to adhere to zone and share their flight plans with China. Australian airlines also adhere to the zone.
To understand the matters further here is the map
Now South Korea has decided to increase its KADIZ (see map) which will overlap with both China and Japans zones. Now China is okay with this expansion and is not refuting the expansion. Why? Firstly, this will strengthen Chinas ADIZ claims. SK is ally with the US and if US doesnt object to the expansion this will give China a possible reason in favour of its ADIZ.
Secondly, China has nothing to do with SK and its main strategic rival is Japan. With the SK expansion Japan is mute on it where in fact KADIZ overlaps more with Japan than China. This can also strengthen Chinas ADIZ claims. China is moving very strategically and trying to claim its dominance in East China Sea.
Possible Solution to disputed Islands
One solution could be for Japan to sell the islands to Taiwan. Since Taiwan and China officially agree there is only one China. So China could say that the islands are under Chinese Sovereignty and Japan could say that they didnt give in to Chinas demands.
Name Nitin Dahiya
References:-
The Economist, The Hindu
www.thediplomat.com ,
www.foreignaffairs.com
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