Air India Disinvestment | LSTV

Union Cabinet recently approved the disinvestment plan for Air India and its five subsidiaries. It is seen as one of the boldest reforms by the Government till date. It is being hoped that the decision will attract a positive response and will revive Air India which is otherwise ailing under a burden of huge debt and inefficiency.

Background

  • India is supposed to displace UK as the third largest aviation market by 2026 according to IATA. India’s air passengers will grow to 442 million by 2035 and Air India surrendered profitable routes to private carriers.
  • Air India’s market share today is around 14% while the debt is Rs 55,000 crore approximately. Air India is surviving on a bailout package of Rs 30,000 crore spread over 10 years. Bailout package was announced by UPA Government in 2012. NDA Government has continued with the annual equity infusion in Air India.

Need of disinvestment

The carrier has already been surviving on a bailout package. Last month, the NITI Aayog in its report had recommended the disinvestment of Air India therefore, the decision is very much in sync with NITI Aayog’s view. This decision does convey to the investors that India is serious about reforms and will not throw good money into something not working out well.

Solution adopted by Government

  • Civil Aviation Ministry was exploring all possible options for the ailing state run airline but no other options were found feasible, hence the Government decided to create a Group of Ministers tasked to deliberate upon the disinvestment process. The group is named as Air India- Specific Alternative Mechanism and it will be headed by the Finance Minister. The panel will decide on the extent of divestment and mode of carrying it out.
  • NITI Aayog is looking into the disinvestment issue, including a possible strategic sale.

Significance

Government money can be much better utilized to fund important social and infrastructure programmes that are actually in need of capital every year.

Factors to consider while disinvestment

  • To get the best return out of disinvestment, the Government needs to allow both domestic and foreign buyers to bid freely for stakes. For this to happen, the government will have to streamline its FDI policy so that foreign investors can buy a stake in Air India.
  • The Civil Aviation Ministry has also made a case for the sale of non-core assets first to pay off existing creditors, so that the airline becomes more attractive to private buyers.
  • The Government might also separately go for strategic disinvestment of Air India’s three profit-making subsidiaries – (MRO subsidiary) Air India Engineering Services Limited, (Ground handling subsidiary) Air India Transport Services Limited, and Air India Charters Limited.
  • The Ministerial group is also considering hiving off Air India’s assets and a portion of its non-aircraft debt to a special purpose vehicle (SPV) as a first step in this direction. It is also to be seen howthis disinvestment impacts UDAN.

Conclusion

The need of the hour is a good evaluation of Air India’s balance sheet and a practical plan to make the public-sector carrier attractive to any prospective buyer, whether foreign or domestic.

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Ban on Beacon – Lal Batti | LSTV

Recently, the NDA Government has done away with the beacon lights – Lal Batti for VIPs (from May 1st,2017). The Cabinet decision is in sync with the Prime Minister Narendra Modi’s view of abolishing the VIP culture of red beacon lights and sirens. Supreme Court in many occasions in the last 7 years has actively directed several governments to check this unnecessary practice.

Lal Batti | What does the order say?

Five categories of officials including the President, the Vice President, the Chief Justice of India, the Lok Sabha Speaker and the Prime Minister will also not be allowed to use red beacons after the decision is implemented along with other Union Ministers, Chief Ministers and their respective Cabinet ministers, bureaucrats and judges of the High Court and other subordinate courts. However, the blue beacons will be allowed to operated albeit on emergency vehicles.

Lal Batti | Background

  • In 2013, the Hon’ble Supreme Court termed the use of beacons by government officials and ministers as ridiculous and labelled it as synonymous of power while clarifying that only Constitutional authorities should be allowed to use it.
  • The first debate on the flashing and non-flashing variety of red and blue beacon lights was started by the Supreme Court in 2010. It continued to direct the concerned authorities regarding the use and misuse of beacon lights by the constitutional and non-constitutional authorities, respectively.
  • In 2013, the Supreme Court prepared a restricted list for the use of red beacons for those who hold a Constitutional Similarly, blue lights were allowed for emergency and ambulance services. Henceforth, the State governments were asked to frame guidelines to implement the court order. But the implementation as we know, remained incomplete and merely on the paper.

Lal Batti | Impact on VIP Culture

The usage of red beacon (both flashing and non-flashing variety) was a baggage of colonial past. In India, the beacon turned into a symbol of VIP racism and public servants used it to signal their aristocratic status in the society to which they serve. It was the legacy of a feudal mentality of those serving the colonial Government who treated the native people as slaves.

In modern democratic era, vehicles with beacon lights have turned irrelevant, rather offensive to the society. We have often seen that even junior politicians and officials misuse the beacons to show off their political strength, especially in smaller towns and rural areas. Therefore, this recent decision could be regarded as a welcome step by the Government in order to terminate the VIP culture by reducing the gap between the ruler and the subjects.

Lal Batti Ban | Advantages

  • In continuance of the feudal mentality, the abuse of beacons made ourroads less convenient and more dangerous for the common people. There have been multiple cases of road mishaps due to the speed of these VIP cars. But now, every person will be on the same page, or every person will be a VIP (as per the Prime Minister) J
  • In India, one of the biggest cause of traffic jams were these beacon-fitted vehicles where the occupants of these vehicles forced the common people on road to wait for them while they pass the road. Fortunately, this matter will come to an end.
  • As the real people who need protection from beacon lights are those who need emergency services or perform emergency services like fire brigade, ambulance and police. The rest of the VIP racism costs direct and indirect costs to the public exchequer and it is often seen that this patronage is extended to many politicians with criminal background.

Lal Batti Ban |Principle of equality

Rule 108 of Central Motor Vehicles Rules, 1989 deals with use of red, white and blue lights on vehicles. Rule 108-1 (III) says that the Centre and the states can specify dignitaries who can use such beacons on their (official) vehicles. It is a central rule that is being abolished from the rule book by this recent cabinet decision.

By removing this provision, the Government has moved forward towards equality. It will discomfort a minority of people with feudal leverages but it will surely delight the majority of people who will find a sense of relief out of the abolishment of this VIP racism.

Lal Batti | Conclusion

Prime Minister Narendra Modi has been attributing himself as the ‘Pradhan Sevak’ of India. This move portrays the sentiment that every Indian is a VIP. The strong political shown by the government through this step will surely bring a change in our society and hopefully in our feudal mindset of colonial era.

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India's Oil Strategy | LSTV

India’s Oil Strategy is mainly dependent on the Oil Needs of the country. India depends on imports to meet 80% of its oil needs largely from OPEC’s production. India’s energy import bill is close to 150 billion dollars and may double by 2030. According to International Energy Agency, India’s demand for oil is also expected to expand to 10 million barrels per day by 2040 that means India may become the fastest growing crude oil consumers in the world in the next 23 years.

India’s Oil Strategy| Background

It was in 2003 that India started development on a strategic crude oil reserve. Later Indian Strategic Petroleum Reserves Ltd (ISPRL) to serve as the controlling government agency for the strategic reserve. It has facilities located at Mangalore, Padur and Visakhapatnam (total capacity of nearly 5.3MMT). These are the natural cavern or concrete tanks. Crude oil from the reserves are to be released by an empowered committee constituted by the government, in the event of any supply disruptions from abroad.

India’s Oil Strategy | Government initiatives

  • Development of small oil and gas field is crucial for Prime Minister Narendra Modi’s plan to reduce oil imports by as much as 10% by 2022 and thereby, making further reduction of such imports to half by 2030.
  • The Union Cabinet has approved awarding 31 newly discovered small oil and gas fields in its first auction in 6 years. The idea is to entrust more of these blocks to new entrants in order to boost local production.
  • According to the Director General of hydrocarbons, the awarded blocks will boost India’s oil output by as much as 15000 barrels of oil per day and gas production by 2 million standard cubic metres a day.
  • During his budget speech this year, the Finance Minister said that the Government wants to create an integrated public sector oil major as part of the PSE reforms in order to match the performance of international and domestic private sector oil and gas companies. The merger if done will make it a bigger and broader asset base. This will attract more investment. It will give the oil sector the financial muscle to take up huge capacities of drilling and storage which is very important as India has very little storage capacity. Piping capacities within the country is also less. This will also help to curb the oil volatility in terms of pricing and availability. ONGC is a producer, MRPL is a refiner, HPCL has good marketing strategies therefore, if they are merged together, there will be an integrated supply chain. Companies functioning in bits and pieces will not be able to compete globally

India’s Oil Strategy |  Focus on two issues

  • Issue of Energy Security – China’s domestic demand may grow by 0.4 million barrels a day this year and by 0.2 to 0.3 million barrels a day next year. Therefore, China on one hand has taken advantage of the fall in international oil prices and went ahead with the massive stock piling plan, India on the other hand has not done much to improve its oil storage capacity due to political indifference. US also invested hugely in oil resources. Since India buys oil from international market at the last minute at the time of crisis, it further adds to volatility in prices. Tank farms for storage of oil near ports might be beneficial because it will lead to quick storage and will not take years to create those storages. A good connectivity to major consuming centres through pipelines is also required for both strategic and commercial storage.
  • Issue of merger of oil companies – India is not geologically endowed with oil resources to meet its requirements. There is no method of development at present that is independent of energy sector. Skill, technology and resources are required to match with the global competition. Indian companies as compared to global companies of US, Russia, China, Saudi Arabia etc are very small. Therefore, merger is important.

India’s Oil Strategy | Conclusion

Countries like USA, Japan, China have already built up large strategic reserves. In contrast, India is lagging behind due to delays in funding, land acquisition and other bureaucratic delays. IEA has predicted that by 2020, India could well be the largest oil importer, increasing the country’s vulnerability to threats of physical supply disruptions and to sharp price fluctuations. In such a scenario it becomes urgent on part of India to utilise the fast diminishing low oil cost window lest it becomes too late even to redeem cost spent on building these reserves. India needs to have its own energy security and storage system. Apart from oil, India also needs to look into its gas reserves because it is the eco-friendliest source of energy among fossil fuels.

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National Women Parliament | LSTV

Andhra Pradesh Legislative Assembly organised India’s first National Women Parliament Conference at Amravati, the new capital of Andhra. The theme of the Conference was Empowering Women-Strengthening Democracy.

National Women Parliament | Objective

  • The prime objective of National Women Parliament is to eradicate discrimination against women, to create equal opportunities to them and connect around 10,000 higher secondary school girls with eminent women personalities of India and overseas.
  • The vision of this Parliament is to provide a politically neutral platform to women belonging to diverse backgrounds to share their knowledge and research in the area of social, economic and political empowerment of women.
  • It is to make young girls realize their potential and to enable them to take leadership roles in all sectors of life while sensitizing the society about issues like malnutrition among women and children, sexual harassment and sanitation among others.

National Women Parliament | Highlights

  • The National Women’s Parliament will declare Amravati Declaration for women empowerment in the country which will become a benchmark for all the states which have to implement those guidelines for women empowerment.
  • Despite India being a vibrant and inclusive democracy, there exists a large gap between expectation and delivery. Women still do not have power to exercise their choice in life due to the patriarchal dominance in the society.
  • National Women’s Parliament is a welcome step because it tries to address issues related to women through face to face discussions. If Amravati Declaration is adopted by states in future, women might be able to assert their rights to some extent.

National Women Parliament | Amravati Declaration

Amravati Declaration aspires to build the consensus over the following issues –

  • A structured and vibrant network of women representatives and aspiring girl student leaders across the nation.
  • Increased access of girl students to women leaders who have made their mark in various walks of life.
  • Generation of new ideas, concepts, theories and ideologies pertaining to women empowerment.
  • Helping to ignite and strengthening the sense of social responsibility among women of India.
  • Documentation of the views of experts and experienced speakers on women empowerment which can be used for policy making process.

National Women Parliament | Conclusion

A favourable society and favourable political circumstances are important to a certain extent in order to make these steps being taken for women successful. A representation in Parliament does not assure that the glass ceiling will be broken. Women also have an onus upon themselves to exploit the opportunities they get at higher positions.  A participatory governance which is inclusive of all sections of society needs both representation and societal transformation through participatory decision making at individual level itself.

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Steel Sector – Issues & Reforms | LSTV

The steel sector and allied industries employ 6 lakh people directly and 13 lakhs indirectly in India. It is valued at over 100 billion dollars and contributes around 2% of the GDP of the country. India has become the third largest producer of steel with 89 million tonnes of production overtaking US in 2015 after China and Japan.

However, the steel sector in India faces major issues and seeks structural reforms. What reforms can be accommodated to bring India at the forefront of steel production in the world?

Steel Sector | Background

  • When there was a decline in global consumption of steel largely in steel producing nations like China, Japan, US, Russia in 2015, India saw a growth of 4.5% in comparison with the previous year.
  • With the economy largely focusing on growth of infrastructure and construction sector, the consumption and demand of steel is set to grow.
  • Until 2 years ago India was also the third largest consumer of finished steel in the world.
  • The country has been importing total finished steel every year since 2007-08 with the exception of 2013. Besides this, India also remains world’s largest producer of direct reduced iron or sponge iron.
  • The sector has been adversely impacted by global steel glut which led to predatory pricing and a surge in steel imports in recent years. This has also led to flooding of domestic market with cheap import from China, Korea and Japan impacting sales and profits.
  • To address majority of these concerns and create a globally competitive steel industry, the Government has come up with a new steel policy.

Steel Sector | Reasons for decline

  • Some of the raw materials in abundance are suddenly in short supplies like the Goa Iron Ore Mines were shut down by the Supreme Court order, Karnataka mines are facing huge problems and in Odisha there are capacity constraints on mine production imposed.
  • Demand for steel in India has been good in the past few years but the effect of demonetization is still not known. Real estate, construction and cars are one of the major consumers of steel and these sectors are affected by demonetization. Revival in these sectors will take some time.
  • External factors are operating at various layers and various sectors. The demand of steel is down globally due to which in China that is the largest producer, the steel companies are in great trouble. Some of them are closing down and selling off. Some of them are also selling at a discounted and distressed price due to which Indian steel makers are finding it difficult to sell in the same nations where China is undercutting them.
  • China is also undercutting imports and exports to India because of which the domestic steel producers find it difficult to sell even domestically at a good price.
  • Though anti-dumping duty is imposed still the Indian industries are not as competitive as Chinese imports. A country as a part of global economy where steel is a decontrolled sector; these problems do arise and have to be negotiated.

Steel Sector | Reforms suggested

  • India can be a net exporter of steel of all kinds if there is better research and development.
  • Government should look at policy issues while implementation and day to day issues should be looked up by an independent regulator covering all the inputs and outputs of steel industry.
  • It has to strategize its raw materials like iron ore and coke carefully with steel production units. These two materials constitute about 75% of the cost of total steel production.
  • India produces metallurgical coke but the quality of it is poor and has high ash content not suitable to the technology deployed. Setting up of washeries by organizations by Coal India is a must which should be done. The washeries can be easily subsidized to be set up rather than importing coke.
  • The export of iron-ore should be penalised in the form of duties and anti-dumping duties should be further employed to regulate indiscriminate imports of the finished product i.e. the steel.
  • Government should encourage private participation in its ‘Housing for All’ and other flagship schemes such as railway track expansion to raise the domestic demand for steel.