Congress loves Aam Aadmi Party.

 “Why does the Congress Love the Aam Aadmi Party? Is it to retain their houses in Delhi even if they lose the 2014 elections?

Various opinion polls are indicating that in 2014 Lok Sabha elections , the Congress will have its worst electoral defeat in the last 65 years. All the present Congress MPs  are a worried lot about not only losing their hefty perks as MP but also losing the palatial  bungalows and attendant priviliges in Lutyen’s Delhi. Most Congress MPs are used to having bungalows in Lutyen’s Delhi not only during their tenure as MP but also retain them after losing their seat in Parliament. Some privileged MPs even have more than one bungalow –one as MP and another one in the name of their parents for whom  ‘Memorials’ have been built for political reasons. A shining example is Lok Sabha Speaker Meira Kumar. She is holding two bungalows, one as Speaker of Lok Sabha and the second one for Memorial of her father Babu Jag Jiwan Ram. It is unknown how many such houses are being used by the Gandhi family, but at least four are common knowledge.

  Well! Congress has found out a solution in Aam Aadmi Party. The AAP MPs  as a principle will not  occupy big bungalows. Some MPs may not take any Government accommodation at all.

This stand of Aam Aadmi party has been very much appreciated by many Congress MPs as it helps them in retaining their bungalows, if not re-elected. Many Congress MPs are impressing upon the high Command to support Aam Aadmi Party in Lok Sabha elections and support Mr. Arvind Kejriwal as next Prime Minister,if Rahul Gandhi does not succeed.

The BJP is really worried that the Congress MPs have outwitted them in the bungalow retention strategy. The BJP Think Tank  is busy in announcing a counter strategy!! 

We will see Mr. Arvind Kejriwal as next Prime Minister of India.He has already hinted during oath ceremony on 28th December,2013--पांच साल मे भारत  फिर से सोने की चिड़िआ बन जायेगी। 

This is possible only if Aam Aadmi Party rules at the centre.

Our best wishes to the Party for its next journey.

Aam Aadmi Party and 700 litres Free water in Delhi

Aam Aadmi Party is making headlines with its stunning debut by winning 28 of the 70 seats in Delhi  within one year of its birth as a political party.  Mr. Arvind Kejriwal, has become the youngest Chief Minister of Delhi at the age of 45, on 28^th December, 2013  with the outside support of Congress as the party was short of 8 seats of absolute majority.

The AAP's acceptance of Congress support for forming the Government has  not found favour  with all Delhiwalas,  as the party has all throughout been maintaining a position of “Neither taking nor giving the support to BJP and Congress”. The party leadership has explained that there is no tie –up or Alliance with the Congress. It decided to form Government due to overwhelming demand by the people of Delhi as expressed by the people in various public meetings or “Jan Sabhas” and via email and SMSs.

It is very unlikely that the Aam Aadmi Party will last more than 6 months. In all likelihood, Congress will withdraw its support at the first available opportunity. However, the  party believes that it should make best use of the available time and introduce its star programs included in the manifesto—Jan Lok Pal Bill(within 2 weeks) ,700 litres free water supply within 24 hours, reduction in power tariff by 50% within 4 months etc.etc.

There is no perceived  problem in making the announcement for free water within 24 hours as it requires just an administrative order. The Aam Aadmi Party believes that free water supply will not have any adverse impact on the finances of the Government. It will be able to generate enough funds by controlling rampant corruption in the Jal Board, breaking the back of the water Mafia, better maintenance of pipelines with  reduced leakages, and controlling wasteful expenditures.

We fully support the Aam Aadmi Party initiative in all its efforts in controlling corruption. Only time will tell whether the party is able to convert its plans into reality,and its assessment of supplying free water from the funds generated through reduced corruption is proved correct. We are quite confident that Aam Aadmi Party Government under the able leadership of Mr. Kejriwal will be able to improve the situation, but it could take years, due to the worst bureaucracy in the world.

We have several concerns and in this article, we are raising the issue of Free Water.

Is Aam Aadmi Party right in giving 700 litres free water per house hold per day? Is it really a healthy practice or a vote catching gimmick ?

 According to Aam Aadmi Party leaders, this was included in party’s manifesto as it believes that it is the right of every citizen to have water for living and it is also supported by WHO. We agree, but the issue is”Should it be free?”

According to some reports, only 72% of Delhi population is getting safe drinking water. Should the priority  be to make available water  to 100% of the population or to make it free? Will supply of free water not increase wastage and thus increase scarcity? According to Aam Aadmi Party, there is no actual shortage of water in Delhi. The Water mafia is causing artificial shortage and the party will deal strongly to break their back. We do not think that it is so simple and can be achieved so easily in a short duration of time.

We accept Aam Aadmi Party’s contention that the cost of water can be brought down considerably, but it is certain that it cannot be Zero. It would mean party will make water free for small consumers (less than 700 litres water per day per household) at the cost of consumers with higher usage. This measure is a populist one  and may lead to misuse of the systems and lead to corruption.

Will it not lead to?

(a)  Increased corruption as consumers with higher usage could   adopt unscrupulous practices to get into the category of smaller consumers—unauthorized hidden connection, taking additional connection on the pretext that more than one family is staying in the premises etc.etc.

(b)  Increase wastage by those whose present consumption is less than 700 liters a day.

Still bigger issue is “Whether it is a desirable and ethical?”

It is well known that “Free” stuff is given:

(a)  As a Gift

(b)  As a Bribe

(c)  To beggars

(   

(a)  If it is a gift from Aam Aadmi Party, then common wisdom suggests that the Party must be expecting something in return(Vote and support of a certain section of society). Since the Gift is being funded with Tax Payers money, it is a matter of concern.

(b)  If it is a bribe to get Votes/Support, then “Where is the party’s mission of “Corruption Free India”?

©   If it is given on the consideration that the small consumers cannot afford “Water” then the party is treating them as “Beggars’”.  Is party trying to make Delhi and hence India full of beggars, the same way other political  parties have started a class war as their vote-bank policy by offering freebies to certain class of people and then very well to do people are also scrambling to join that class through bogus certificates leading to rampant corruption.

It is true that Aam Aadmi party policy of 700 litres water per household per day is much better than the freebies offers of Congress,BJP and many other regional parties and will lead to much less increase in corruption compared to others.It may also be true that Aam Aadmi Party would not have got stunning victory in Delhi elections without such policies as it was competing with the worst crooks of Indian politics. सच  तो  यह  है  कि  सी धी  ऊँगली से घी नहीं निकलता। 

I hope that Aam Aadmi Party will review its policies and modify once the party is able to bring the desired changes in the country,reduce disparity between the rich and the poor and country becomes a better place to live with much less corruption.

Spiraling Natural Gas Prices in India –Are They Justified or another SCAM?

  

On 19^th December, 2013 the Govt. of India ratified the decision, announced earlier on 27^th June, 2013  to increase the price of natural gas for domestic producers from $4.2 / MMBTU to $8.4 / MMBTU effective April, 2014.

The rationale behind such a decision is beyond understanding. The 100% increase in price of natural gas will certainly negatively impact the Power and Fertilizer sector as well as the general public but would give windfall benefits to Reliance. In fact, even the earlier increase in price of gas from $2.34/MMBTU to $4.2/ MMBTU in October, 2007 by the Empowered Group of Ministers headed by the then External Affiars Minister Mr.Pranab Mukherjee  is equally puzzling and not justified.

 Pricing Methodologies for Natural Gas:

There are different methodologies to price NG. The most acceptable and prevalent are listed below:

·    Gas-on Gas competition (GOG): By interplay of demand and supply-Gas on Gas completion.

·     By regulation

(a)   Determined or approved by a regulatory authority or Ministry at a level to cover the “cost of service” including the recovery of investment and some reasonable rate of return (RCS).

(b)  The price set below the cost of production to give state subsidy to the people of the country (RBC).

© The price is set on an irregular basis on political/social considerations to raise revenue or cost of production (RSP).

·    Oil Price Escalation: The price is linked, usually to a base price and then an escalation clause to competing fuel (OPE).

According to a 2010 survey conducted by the sub-group of The Strategy, Economics and Regulation Committee (PGCB) of International Gas Union(IGU) and presented in the World Gas Conference in Kuala Lumpur in June,2012,most preferred method to sell (contract) Natural Gas  in indigenously producing countries like India is  through Gas on Gas competition(42%) and the next best method is through Regulatory Authority to cover” cost of service”, including recovery of investment and some reasonable rate of return (18%)

In India, Natural Gas is produced indigenously. Therefore, pricing of NG should be based on Gas to Gas (GOG) competition, if feasible, which is followed for 42% production, worldwide.

Gas on Gas Competition (GOG):

This methodology was used in 2004, when NTPC invited international bids for supply of Natural Gas and RIL bid was accepted. It is well documented, though the agreement never saw the light of the day. The fact is:

 Reliance gave a bid for supply of 12 MMSCMD Natural Gas ex KGD6 @$2.34/MMBTU for 17 years, commencing in 2007.

The NG price discovered in this case was at Arm’s length sales in the region as required under Production Sharing Contract(PSC) .There is and was no reason to ignore this price. In all fairness, it should be applicable until 2024 (17 years period from 2007). However, the Government of India under UPA rejected it on the pretext that the price discovery is not at Arm’s length. 

We do not see any justification in Government’s stand in not treating this price at Arm’s length.

 Fixation of NG price at $4.2 MMBTU in October, 2007

The Government of India rejected the price discovered through RIL bid as mentioned above on the pretext that the price is not at Arm’s length sales. Reliance was asked to discover Arm’s length price by seeking bids from the market. In May, 2007, RIL asked price bids from 10 Indian companies-5 from the power and 5 from the fertilizer sector.

The bidders were asked to quote:

In a unique formula given by Reliance:

NG price in INR /MMBTU= 112.5+C+ ER (OP-25)^0.15

Where C was to be positive integer and the only component to be quoted by bidders.

ER is exchange rate for the previous year

OP is Brent crude oil price with a cap of $65/bbl

Comments:

(a)  It is very much doubtful if this formula is used anywhere else in the world.

(b)  The pricing was linked to Brent crude oil. The basis of linking the price to Brent crude is beyond our comprehension. Brent crude oil is not a competing fuel for power generation or fertilizer production.  . For power generation coal is used for nearly 60% power generation in India and not Oil.

(c)  Why base price was pegged to $2.5/MMBTU (Rs.112.5 at conversion rate at that time)? Is it based on NTPC bid of $2.34/MMBTU or arbitrarily?

(d)  Criteria for selecting these 10 companies are not known.

The price proposal was accepted by Empowered Group of Ministers in spite of opposition by the Cabinet Secretary, Govt. of India and Principal Advisor (Energy), Planning Commission.

Why price of $4.2/MMTU is not at Arm’s length and should not have been accepted?(1)  The formula given by RIL meant that there cannot be any offer below $4.64/MMBTU at prevailing Brent Crude oil price>$65/bbl as the condition of the bid was to quote C as positive integer. Even if someone quotes the lowest number “1”, price according to the formula would be $4.64/MMBTU.

(2)  What is the basis of pre-fixing the price at $4.64/MMBTU?

(3) When RIL asked bid from selected 10 companies based on a unique formula in May, 2007, RIL had already committed almost 40MMSCMD gas(12 MMSCMD to NTPC and 28MMSCMD to RNRL. Both the cases were sub- judice. Under such circumstances, the market perceived that 40MMSCMD gas is already allocated and bids are being sought for the balance available quantities. Thus, the bidders were made to perceive the market very tight.

(4)  A large number of Power and Fertilizer projects were approved/constructed on the basis of envisaged gas availability from KGD6,leading to increased demand and thus, tightening of the market.

               Revision in NG price from $4.2/MMBTU to $8.4/MMBTU effective April,2014

.  

In May, 2012 Government of India appointed a committee under the Chairmanship of Dr. C Rangarajan, Chairman, and Economic Advisory Council to the Prime Minister to recommend the price as price fixed in October, 2007 at $4.2/MMBTU was valid until March 2014.

The Rangarajan Committee submitted its report to the GoI in December 2012,

Recommending the pricing formula on the basis of  the average of the prices of imported LNG into India and the weighted

Average of gas prices in North America, Europe and Japan, as follows:

PAV = {PIAV + PWAV} / 2

PAV = Sales price for domestic natural gas sales in India

PIAV = Netback price of Indian LNG term imports (excluding spot imports)

PWAV = Weighted average of prevailing gas prices in global markets, based on:

(a)Henry Hub gas price in U.S. and total volumes consumed in North America

(b)National Balancing Point gas price in U.K. and total volume consumed in Europe and Eurasia

© Netback price of Japanese LNG imports and total volume imported by Japan

The pricing formula will be effective on April 1, 2014 for a period of five years, with the price to be revised quarterly using the approved formula. The price for each quarter will be calculated based on the 12 month trailing average price with a lag of one quarter (i.e., the price for April to June 2014 will be calculated based on the averages for the 12 months ended December 31, 2013).

Using the approved price formula, the price effective for April 1, 2014 is estimated at around $8.40/MMBTU, double the price of $4.20/MMbtu for current gas sales from the D6 Block.

The pricing terms of the Petronet contracts are expected to result in further increases in the gas prices in future quarters, assuming current pricing levels of JCC,U.S. Henry Hub, U.K. National Balancing Point and Japan LNG imports.

 Comments:

The question arises “How was this price arrived at?”

(1)  Is it based at arm’s length sales in the region as stipulated in PSC?

(2)  What is the relationship of imported LNG price with indigenously produced NG?

(3)  What is the relationship of Henry hub, NBP and JCC prices with the NG produced in India?(4)  Why” unique formula” adopted in 2007became redundant and not  considered valid by the same experts and the UPA Government ,who preferred the formula over the Arm’s length price detected through NTPC through International competitive bidding.

(5)  Is it  true that the” Unique formula” of 2007 was dumped as it was giving NG price of  $4.45/MMBTU, even after considering current price of Brent of Us$110/bbl  without any cap as against RIL wish for a price of $14.2/MMBTU

It appears to be a typical case where price of NG from KGD6 was first decided and then a committee was set up to justify the price by using some data irrespective of any rationale.

Gas Price fixation by the UPA  Government of India is another Scam in the making to benefit Reliance at the cost of Aam Aadmi . Let us not forget that only PSC is binding and everything else is blinding.

Author of this article is an Oil Expert               

Aam Aadmi Party(AAP) & Government in Delhi

Recent Assembly elections in Delhi have thrown hung assembly with BJP as the largest single party with 32 MLAs-4 short of absolute majority. BJP has declined to form the government as it could not get the support of 4 additional MLAs required for the majority.AAP has always been maintaining a stand that it will neither take nor give support of Congress or BJP.

Interestingly, Congress on its own sent a letter to Lt. Governor of Delhi, offering unconditional support to AAP though in the media congress leaders have clarified that it is not unconditional but outside. AAP sent a letter to congress, seeking their position on 18 issues---Lokpal Bill, full statehood to Delhi,700 free water per household,50% reduction in electricity rates,500 new government schools ,new government hospitals etc.etc….

In response,  Delhi Congress has stated in a public statement that 16 issues are administrative, will support full statehood for Delhi and Lokpal Bill for Delhi will be supported if its provisions are in line with the central Lokpal Bill. In nutshell, the response is only for Support for Statehood of Delhi.  Incidentally, this decision is in the hands of central Government and nothing to do with congress legislatures of Delhi.

On the basis of this response and earlier stand of AAP of not taking or giving support to Congress or BJP,AAP was expected to inform the Lt.Governor of Delhi about their inability to form the Government. Instead, AAP have sought public opinion, presumably due to eagerness of some of its newly elected leaders to enjoy the fruit of power.

Some important issues are arising:

(1)    What was the objective of writing letter to Congress, when AAP is keen to consider the option of forming the Government even after receiving virtually negative response?

(2)    Why AAP decided to enter into correspondence with other political parties when their stand was “neither to take or give support”? 

LOKPAL Bill 2011

The Lokpal Bill 2011 has been passed by both the houses of parliament on 17/18 December 2013 merely 45 years after the first bill was introduced in 1968. All major political parties and new team of Anna are beating drums to announce their victory for Corruption Free India. This bill is being said to be the turning point for bringing transparency in the governance of the country. It appears that now the day is not very far when India will be  ranked along with  some Scandinavian countries like Denmark, Finland, Sweden  and other high ranking countries  like New Zealand , Singapore, Canada etc in Transparency Index.

I am excited to see India as a great respected nation during my life time. I hope my dream comes true and my children and future generations will be able to breathe in the fresh, corruption free air and no longer have the dream to settle in other countries.

I was so excited that I started day dreaming for a corruption free India! However, after the initial excitement passed away, I started wondering why the lawmakers took nearly half a century to pass this bill? Were they not concerned and upset when India was ranked among one of the most corrupt nation in the world?  Today it is being called a “landmark” bill. If so, why did it not get the attention that it deserved during the last 5 decades? Are our Lawmakers really interested in making India a corruption free country or is it another election gimmick? Have they really taken care of all the factors which breed corruption so that this Bill really works in the right direction?

As I started analyzing the bill, all my enthusiasm and euphoria evaporated. I started wondering what we have got after half a century — a farcical Bill which is quite likely to give employment to some people who are highly connected to the politicians, so that they can be manipulated to rule in their favor, as the politicians are a class known for breeding corruption in the country. How can one reasonably expect the Lokpal, primarily selected and appointed by the political class, to stand up to and give verdicts against the very people who are responsible for his/her elevation to this position? Not only this, the Bill also ensures that the premier national investigating agency continues to remain under the control of the same political class.

 So now we have a LOKPAL BILL to celebrate—to fool the public at large that our Government and politicians are bent upon curbing corruption!! The real truth is that the same political class responsible for unprecedented corruption will continue to be in the driving seat to ensure that everything continues to work as per their sweet will with no change for the better.

If our Government and politicians are really interested in eradicating corruption, why did they not consider the following inclusions in the Bill?

 (1)The appointment of Lokpal  should be made transparent  and governed by a panel  of distinguished  apolitical personalities from different walks of life, and excluding the agencies/class perceived to be corrupt or having vested interests like politicians, bureaucrats, police, investigating agencies like CBI etc against whom the Bill may be most likely invoked.

(2) Free Investigating agency-CBI from the clutches of the ruling party as has already been asked by Supreme Court.

The Lokpal Bill in the present form is an instrument only to fool the people of India. Can we not learn something from RTI act, which is hardly effective for similar reasons?

It is the high time that we start curbing the absolute power and misuse of office by our political class. Have we forgotten: Absolute power corrupts absolutely? Indian politicians are the best (or the worst?) example.