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Thursday, March 15, 2012

Insights from the Economic Survey 2011–12-Energy, Infrastructure, Communications,Sustainable Development and Climate Change

The newspaper editions of tomorrow and dayafter will be filled with analysis and insights as people try to decipher the numbers and read the tea leaves, for both the Economic Survey and the Union Budget. However, this blogpost aims to capture the nuggets mentioned in the 14 chapters of the budget(which I did read today!), and does not claim to be exhaustive given the huge data overload! Anyways, here goes for Chapter 11 and 12 (normal text is from the survey, bold text is mine) which can be read at these links
  1. Aviation debt burden:-The airline industry in India suffers from huge debt burden - close to US $ 20 billion (estimated for 2011-12). Half of this debt is aircraft related and the rest is for working capital loans/ payments to airport operators and fuel companies..the working group on Aviation formed in Dec11 recommended..fare structure should be reviewed by airlines so as to cover the
    cost of their operations. The Working Group also decided that an economic regulatory framework may be formulated with regard to excessive/predatory pricing by 31 May 2012.
  2. Essence is that Coal India sucks! Also, the remark about pricing policy coming when TCI threatened to sue GOI, is interesting. Coal India Limited (CIL) dominates the domestic coal scenario. Its near monopolistic position has often resulted in supply bottlenecks,delays in development of new coal fields and, i n a d e q u a t e   emp h a s i s   o n   c o s t   r e d u c t i o n s   a t operational levels. Coal pricing is also a crucial issue. CIL being the dominant producer of coal in the country has to adopt pricing policy which is transparent, credible, and based on global norms. There is perhaps need to introduce competition in this sector..the power of e-auction is evident from the facts that  During April-December 2011, CIL offered 39.0 MT and sold 33.5
    MT of coal through e-auction. The average price was 74 per cent above the notified price. Similarly during April-December 2011, SCCL offered and sold 4.1 MT of coal through e-auction, with average sale price being 113 per cent more than the notified price during the same period.
  3. Despite land issues etc, private sector still managed to add promised capacity in power but the public sector faltered...
  4. Forest cover has been preserved and has grown in past20yrs as per satellite data! . India is one of the few developing countries where forest cover has increased over the last 20 years and continues to increase, although a slight dip is reported in the latest data for 2011
  5. Even adjusting for PPP incomes and relative energy abundance, our diesel prices are too low-Other things being equal, countries that export oil (such as the Middle Eastern ones) or are relatively diversified, energy- abundant countries (such as Canada and the United States) can afford to keep domestic prices lower than energy-insecure countries (such as India). The evidence shows that just such a predicted relationship indeed holds. But even accounting for this, diesel prices were already 20 per cent below predicted levels for India in 2010; the divergence has since doubled as global oil prices have surged 45 per cent (from US$ 80/barrel Brent prices in 2010 to US$ 120 currently), while domestic price adjustments have not followed

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