Thursday, May 20, 2021

An Interesting One Time Settlement(OTS) with IDBI Bank

There are some common practices in banking and finance. One such practice is, if you borrow money from a bank then you need to pay it back with interest. If you fail to pay, then bank will take appropriate actions to recover the money. Well, this is for common people. In the case of agriculture loans; based on government directives banks may write off the loans fully or partially. 

There are a separate set of rules for corporate sector called 'Insolvency and Bankruptcy Code (IBC) 2016'. This allows creditors to recover the money in case of default using insolvency proceedings. Under IBC, creditors may not get the whole amount. This however provides a meaningful resolution to the problem. IBC doesn't allow defaulting promotors to acquire the company under insolvency proceedings and there is a good reason for that.

What happened in this specific case is, lenders led by IDBI bank (49% owned by LIC) initiated bankruptcy proceedings against Siva Industries in 2019 for an amount in the tune of 5,000 crores. International Asset Reconstruction Company holds - 22%, IDBI Bank - 17%,  Union Bank of India (UBI) - 12% of the admitted debt. Other lenders are LIC, SBI, Yes Bank, and Bank of India. Well, company's liquidation value seems to be well below 5000 crores. 

Banks later agreed to a one-time settlement (OTS) offer from Siva Industries’s promoters (part of Aircel founder C Sivasankaran’s group). Under this settlement, banks will get 10% of their money. IDBI says, this amount is better than that of the company's liquidation value and agreed to a one-time settlement. By the way, OTS is not against the law. Even if insolvency proceedings don't allow defaulting promoters to acquire their company; bankers can still do a one-time settlement with lenders if enough of them agree. Under this Siva group will get their company back and can come out of the liquidation process. All are happy, right? 

Well no. Banks may get more money compared to the liquidation process; but they forget the fact that it is the same promoter who actually owes that much to them. Its like your company take a loan of 5000 crores from a bank, company default on payments, the bank took over the company, after some time you pay 500 crores (10%) to the bank and take control of your company. This can act as a template for any promotor to come out of insolvency proceedings in the future. If one bank can accept it and one promoter can get their company bank then what stops others from trying? After all, it's not against the existing law!!! 

The sole loser here is the Indian banking system, which losses money on deal after deal. Their NPA rates are going to create new records. Regulators should intervene and make sure to close all the loopholes in the law. OTS should not end up as an easy way for promotors to default, don't pay, and still retain the ownership of the company.  

Sajeev

US Recognising Armenian Genocide - More to do with Turkey than to do with Armenia

Russian soldiers pictured in the former Armenian village of Sheykhalan -1915. Photo courtesy: Wikipedia
A
rmenian genocide happened during World War I; more than a century back - in 1915. In those days, Middle-East was under Ottoman rule. Russian Empire was part of Allied Powers while Ottomans were part of Central Powers. During the war, Ottomans took their army to conquer Caucasus from Russia. They fought agaisnt Russian Caucasus army in the harsh winter conditions. We already know what happened to, two other powerful armies which tried to fight against Russia in Russia in winter. Well, Ottomans lost more than 60,000 men and retreated. While retreating Ottoman army destroyed Armenian villages (there were some massacres as well). Ottomans blamed Armenians for their defeat, stating that they sided with Russians. By the way, imperial Russian army had a contingent of Armenians, made up of Armenians lived in Russian empire.

Ottoman empire passed a temporary law called - Tehcir Law, and thus started the genocide. Armenians who were living in the front line areas (remember WW1 was still going on) were killed and others were deported. Able bodied males were killed; women and children were forced to death marches to remote Syrian desert. Deprived of food and water those people were robbed, raped and massacred en-route. Number of deaths during the deportation is estimated to be in between 800,000 to 1.5 million. 

Armenian Genocide Map. Courtesy: Wikipedia


For a very long time Armenians demanded the wholesale ethnic clensing to be declared as genocide. US was reluctanct to do that. There were multiple reason for that. Turkey is an ally and one of the biggest NATO member; in fact US uses Turkish bases in various operations. Turkey also has considerable influence in Middle Easten wars; especially in Syria. For Europeans, Turkey holds the flood gate of refugees to Europe. Another mass refugee flow to Europe might destablize the relations between EU nations. 

Over a period of time all that got changed. Turkey under Erdogan is more autocratic. Despite US warnings, Turkey went ahead and bought s-400 missile defence systems. Integrating Russian hardware and software with NATO equipments was a nighmare for US. Later US excluded Turkey from F-35 fighter program, citing the same reason. Turkish intervention in Libya which was followed by Libya-Turkey maritime deal didnt go down well with another NATO partner Greece. US and Turkey also found themselves at opposite ends in Syrian civil war. During this time, Turkish economy was crashed and islamization reached a new level. 

It is at this time, US president declared the killing of more than a million Armenians as a genocide. US recognition hardly has any weightage in internation law. However timing is interesting; for a long time, US didn't recognize the tragic event as genocide (despite requests from Armenians), but it did when the relation with Turkey reached an all time law. Another proof that in international politics, countries always act based on their self interest. 

Sajeev

PS: Last year(2021) Armenia fought a war with Azerbaijan over disputed territory of Nagorno-Karabakh. It lasted for 44 days, from 2020 September 27 to 2020 November 10. This was one of the most brutal wars of 21st century. Drone led warfare by Azerbaijan crushed Armenian military. Any idea who provided those drones? a good protion of that was from Turkey - Bayraktar TB2 UCAVs!!!

Tuesday, May 18, 2021

An unexpected cabinet - Kerala 2021 elections

When the new Kerala cabinet was announced; there was one question in the air - where is K.K.Shailaja? the famous health minister of the previous government.

People expected her to be returned as the health minister. Her leadership during the Nipah outbreak and later on Covid times were exemplary and well appreciated. In fact, she got the largest majority in the last assembly election. Her majority of 60963 is greater than the second-highest majority (the chief minister himself) by more than 10000 votes. There were rumors that she became more famous than the CM itself and she may be axed. Probably people never expected that she will be axed. In the new dispensation, she will be CPI(M)'s whip in the Assembly.  

It is good to give opportunities to different people. At the same time, one should be rewarded for their work; if people reward her then what is the problem for the leadership in digesting it? 

In India, there are always demands for young people to become ministers and occupy other important administrative positions. Unfortunately, what people often overlook is, in this vast over populous country, it will take a lifetime of work to climb from grass-roots politics to reach the highest echelons of Delhi. By this time, most of them will be old. If people are coming up with rules like - ministers cannot be old, or one can only have one term etc. then it actually shut the door in front of many people. Most often those who reach the highest positions in power at a very young age will be son\daughter of existing political heavyweights. Do we really want to reward them in the name of young leadership?

Hence before coming with arbitrary rules of including or excluding people in the ministry people think twice. 

Sajeev

PS: In the new Kerala cabinet except Chief minister, all are new. One can always ask, why not a new chief minister also?

Saturday, May 8, 2021

Another life extension for Moore's law!!!

There is a law (a prediction actually) in electronics, which everyone knew will break one day; because it's impossible to stay on the explosive growth trajectory predicted by that law. Surprisingly, this law still has life and kicking. Some of you may already figure out that prediction by now; yes, it's the famous Moore's law (prediction by the co-founder of Fairchild Semiconductor and Intel). He, in 1965 stated that the number of components in an integrated circuit will double every year; he also projected that this state of growth will continue for at least another decade. In 1975, he revised the forecasting of doubling-in to every two years.

There is a wonderful animation about Moore's law over decades here. @datagrapha



Now, the new inventions by IBM researchers at Albany gave another life for that law. As per IBM, with new methodology, it's possible to pack two-thirds of components more than what was previously possible. Translating this to common language; it says - using this process a smartphone can run 45% faster at the same time consuming only 1/4 energy. Currently, chip makes uses a design called FinNET - where electrons flow vertically. IBM took this to next level, by stacking one nanosheet over another one. New process called '2 nanometer' is three generations ahead of current technology. Since IBM don't have a chip-making facility now, this might be licensed to Intel or some other companies. It may take some more years for these chips to power our phones and other electronics equipments.

This time it may take some time for Samsung and TSMC (from Taiwan) to catch up. 

Wonderful news at the time of Covid.  

Sajeev. 

References

Tuesday, May 4, 2021

Australia bans their own citizens from coming back!!!

Three days ago, the Australian health ministry stated, "From Monday, anyone who has been in India within 14 days of their intended arrival date in Australia will be banned from entering the country. Failing to comply with the new ruling could result in a five-year jail sentence, an A$66,000 (£37,000) fine, or both. The decision will be reviewed on 15 May, the health ministry said." - BBC

As Covid is surging in India and the death count records new highs every day; it is expected that countries will ban travel to and from India. United States, United Kingdom, Canada, Germany, France, and New Zealand, etc. already imposed restrictions. 

What makes Australia different from others is, they banned their own citizen's from coming back!!! On top of that, they made it a criminal offense!!! 

Passport

Isn't our passport supposed to come to our aid during emergencies? Isn't it the responsibility of Australia to look after their citizens and bring them home wherever possible? What more interesting (or I would say ironic) is, when Australia made it difficult for their own citizens to come back (not only from India); tennis stars (for Australian open) and celebrities (Hollywood stars) were able to visit the country very easily.


Most other countries will come to the help of their ordinary citizens when they are overseas and in danger. Even poor India rescued her citizens after Iraq's invasion of Kuwait in 1990 (airlifted more than 110 thousand people by operating 488 flights). Rescued her citizens and that of neighboring nations from Lebanon in 2006; from Libya in 2011. Even during the Covid pandemic, Indian naval ships were bringing people back. 

For far-away island nations like Australia, closing the borders easier. It will make the people who are already inside safe. 

The problem is, in a globalized world people travel to other countries to visit their relatives or to work/study. It is not very uncommon to see father and mother are citizens of a country and their son/daughter (their spouse) are citizens of a different country. People do visit their relatives in other countries. If they want to come back to their home country (whose passport they hold) it is the responsibility of that country to help them. 

If they cannot help its fine; at least do not make it criminal to come back. Countries like Australia, which has a lot of resources at their disposal, can build quarantine facilities for those who come back. 

Sajeev

References:

Sunday, May 2, 2021

United States ideologies on abortion is also affecting US healthcare aid overseas

Copper IntraUterine Device. Photo Courtesy: Wikipedia

The United States is one of the – probably the largest – source of non-military and healthcare aid for many countries. US aid agencies spends a lot of money on non-glamorous areas like healthcare, women, and child welfare etc. This amount is crucial for many NGOs and other agencies which are working in those counties; where either their own government do not have the capability or have other priorities.

As a donor nation, US imposes conditions on how the recipients are spending the money. That is expected. It is the right of donor nations to make sure that their money was spent on what it meant for.  The problem comes when donor nations impose their ideology on those conditions. In this case, US conservative ideologies on abortion is creating problems in donor nations. 

One such policy known as Mexico City Policy,

"…required foreign non-governmental organizations (NGOs) to certify that they would not “perform or actively promote abortion as a method of family planning” using funds from any source (including non-U.S. funds) as a condition of receiving U.S. government global family planning funding. President Trump reinstated the policy but also significantly expanded it to encompass the vast majority of U.S. bilateral global health assistance."

  • providing advice and information about and offering referral for abortion – where legal – as part of the full range of family planning options,
  • promoting changes in a country’s laws or policies related to abortion as a method of family planning (i.e., engaging in lobbying), and
  • conducting public information campaigns about abortion as a method of family planning.”

When Biden came to power, he repealed the policy. However, a lot of restrictions are still there. One such rule is known as Helms Amendment (enacted in 1973),

“still forbids U.S. foreign aid from going toward “abortion as a method of family planning” or to entities that “motivate or coerce any person to practice abortion.” The policy intends to prevent U.S. taxpayer money from being used to perform abortions overseas, but in practice, it also stops organizations from providing related services, including counseling and… post-abortion care.

“According to Asma Balal, the country director for the Marie Stopes Society Pakistan, in the past, the organization couldn’t use U.S. Agency for International Development (USAID) money to procure misoprostol or manual vacuum aspiration kits for treating women seeking treatment for botched abortions. “Post-abortion care is a lifesaving service. But we were not even allowed to provide that,” Balal said.” - Foreign Policy

In a lot of third-world countries, women often do not have access to modern contraception mechanisms or family planning methods. Hence many of them ended up having unwanted pregnancies. When income is less and has a lot of mouths to feed, the only way to end an unwanted pregnancy is abortion. If these women do not have access to safe abortion facilities, then they may turn to unsafe ones which may even take their life. 

If the US could set aside their ideologies from these aids; then it would certainly make life easier for a lot of women in third world counties. 

Mexico City policy, in the last five decades, was repealed by every Democratic administration and brought back by every Republican administration. The last administration, in fact, expanded the scope. Hence there is a chance that the next Republican administration will bring it back.

NGOs that receive money cannot work in that way – four years on and four years off. Funds available during democratic administration and missing during republican administration. What more, the conditions like “using funds from any source (including non-U.S. funds)” creates a lot of problems for them. 

My request to US Congress and administration (current and future) is to repeal Helms Amendment and Mexico policy permanently. One can place restrictions like, selective abortion of girls after determining the gender etc. which are truly against humanity; but do not put restrictions that affect women from third world countries - who hardly have any access to family planning, contraception measures, and post-abortion care.

Sajeev. 

Is RT-PCR test highly overpriced in Kerala?

Photo courtesy - https://www.worldometers.info/coronavirus/


When I enquired about pricing of RT-PCR test at a lab in one of the famous hospitals in northern Kerala (2021 Feb), they told it will cost 1700/test. Couple of months before that, one of my colleagues did the same test in Rajasthan at 800; recently another one did the test in Bangalore at 800.

Price of RT-PCR test varies significantly across India. Lately, a lot of states capped the price somewhere in between 800-1000. Let us see the rates at some places.



Apollo Diagnostics and most private labs in Bangalore offers the test at 800. If its home collection, then the price is slightly higher. At first Karnataka state government capped the test at 1200; later it was reduced to 800. RT-PCR test at 800, TrueNat at1250, CBNAAT at2400, Rapid antigen at 400, and Rapid antibody at 500 from 2020 December.

Maharashtra, on April 1, the government cut the prices of RT-PCR tests for the sixth time. New rates are 500 for submission of samples at the collection center; 600 for the same test at a COVID Care Centre or a quarantine center; 800 to collect the swab from home – The Mint.

Delhi, last November, government fixed the price at 800. For home collection price was fixed at 1200.
In Uttar Pradesh, RT-PCR test at government hospitals is fixed at 600. In 2021 September, government reduced the cost of RT-PCR test in all laboratories from 2500 to 1600. Currently, price of RT-PCR tests has been fixed at 700 in all the private hospitals. Private labs can charge 900 if the sample is collected from home.

In Gujarat, on April 19, government reduced the charges from 800 to 700. For home collection rate were reduced from 1100 to 900.

Odisha, in 2020 August, government had slashed RT-PCR test price to 1200 from 2200. In 2020 December maximum price that can be charged by private laboratories were further reduced to 400. 

Uttarakhand government on last November revised RT-PCR price cap in government and private laboratories to 850 and 900, respectively.

Telangana government slashed the prices of RT-PCR tests in private labs from 2200 to 850. For collecting a sample from home, it is 1200.

Kerala

Kerala government earlier (last year) fixed the price at 4500; then it was reduced to 2750. Rate was further reduced to 2100 in September last year. Later government tried to reduce it to 1500. This time private labs took the government to Kerala high court and price was fixed at 1700 (private labs demanded 2000/test in the court)

What I do not understand is, when price was slashed in other states by respective state governments, private labs were not shut down or stopped testing. For e.g., in Karnataka, for many months the rate is 800/test. Numerous private labs are still doing the testing. As you understand these labs are not charities. They will not continue with testing, if they are making losses. Remember, SpiceJet is offering tests for public at 499. How this is possible? It is true that there are different types of test and cost for conducting the tests may vary from place to place. 

How come private labs in many states are doing tests at 500 or 800; and in Kerala they are charging 1700 or above? Equipment’s will be coming under GST, which cost the same (there may be slight differences) across India. There are no state specific changes required for equipment used in RT-PCR. Similarly, its no that in Kerala only 2-3 people have covid and hence required testing. Hence the volume argument also does not stay. It is possible that salary and other expenditure may be higher in Kerala; but will it result in double charges?

Labs in Kerala argue that, reagent cost around 300-600. Then PPE, extraction of protein, home collection, sanitation expenses etc. costs more. In addition to that, labs need specialists in pathology and microbiology. They also need to store positive sample at minus 80 degree Celsius. Hs to pay the power bill also. They also cite, huge capital expenditure for PCR machines (10-19 lakh) and RNA extraction machine (6-10 lakh). But the same cost might be there in Bangalore, Mumbai, or Delhi. Its not that only the labs in Kerala must pay the power bill.

As per reports, some lab officials concede that, they are making 30-40% profits at 1700 INR/ test excluding capital expenditure. 


“There are 96 wells (small depressions) in a plate kept in the PCR machine. “Ideally, only one sample should be kept in a well. But labs mix two to 10 samples in one well and run the test,” he said. If there is no positive, the labs save around Rs 400. But if one well throws up a positive result, they will have to do an independent test on all the 10 samples. “Some labs will ignore such results and declare all as negative or do antigen tests on the 10 samples to save money,” he said. An antigen test kit costs only Rs 100.” - New Indian Express

If the cost is less than half in other states; then why these tests cost 1700 until recently in Kerala? Why they resist recent price reduction?

Sajeev

Election Commission Failed Indians during Covid times

It is a known fact that, Covid loves crowds. Any large gathering can soon become a super-spreader event. At the time of Covid, even one of them is disastrous. So, what would you say, if election commission of India (ECI), let numerous those events to happen?

In April 2021, assembly elections were conducted in 4 Indian states and 1 union territory. Out of that, Kerala, Puducherry, Tamil Nadu elections were conducted in one go (April 6); Assam elections were completed in 3 phases (March 27 to April 6); West Bengal elections were conducted in 8 phases (Mar 27 to April 29)!!! 

In election campaigning, there were hardly any Covid protocols observed on the ground. Thousands of people attended rallies - without maintaining distance or wearing masks and there were numerous rallies. In West Bengal, elections were one month-long; Covid protocols were hardly existing in that time frame. During and after the elections Covid cases in India started breaking the records every day. I am not saying election are the only reason for that; but it contributed significantly. 

COVID-19 Numbers





As a matter of fact, if you look into the Covid curves of other states; you may see the same pattern. Non-observance of covid protocols and low vaccination rates affected everywhere. But that doesn't reduce the role of elections in the surging Covid case load. 

It is the responsibility of the election commission to provide the rules, guidelines, and framework for these elections. ECI entirely failed in factoring in Covid to these events. It is not that this institution was helpless. ECI is a very powerful institution under the Indian constitution. 

Some of those powers which are relevant in this case are,   
  • Register and deregister any political party or entity.
  • Enforce the ‘Model Code of Conduct’ for election campaigns and ensures its implementation.
  • Appoint officers as election observers and expenditure observers from different departments of the Civil Services.
Question is, 
  • Did the commission act in any meaningful way to force the state governments and responsible administrative officers to act when Covid protocols were violated in the campaign? 
  • Why they allow mass rallies? 
  • What was the reason to conduct a month-long election in West Bengal? Couldn’t it be reduced to two or three phases instead of making it a long festival?
If such an important administrative organ fails to conduct elections in a responsible manner; then how can the government tell its citizens that a marriage/festival cannot be attended by more than 50 or 100 people; and should follow strict Covid protocols. Government is losing moral authority here. 

Current elections are over and Covid numbers are going above the roof. This should act as a ready reckoner to other institutions and people. Remember, Covid virus likes crowds and loves recklessness.

Sajeev

Kumbh mela - Could have been avoidable in COVID era

COVID - Photo Courtesy Wikipedia
Covid was known to strike back; we all saw the waxing and waning of the disease in Europe and North America. Best health systems available anywhere in the world were struggling to catch up with the devastation. Couple of months to 2021, even when the cases were declining in India; we did not have any Covid killer medicines which offer 100% cure. Even with the medicines we had, the vaccination percentage was far less than anything to be called meaningful. Variants – some of which were immune to existing vaccines like were propping up here and there. 

In the middle of all this, India government declared victory against covid. Without any doubt went slow in vaccinations. Restrictions were largely gone, and everything was almost back to normal. What more, federal government and state government of Uttarakhand went ahead with Kumbh mela in Haridwar. Not just government of Uttarakhand; most state governments across northern Indian planes let their people to go there and attend the holy festival. Indian railways even organized 25 special trains for the movement of pilgrims. 

Kumbh Mela

For those who are not aware about Kumbh mela; this is not just any gathering, but the largest gathering of people in a single place anywhere in the world. There are ardh (half) kumbh mela (in every 6 years) and purna kumbh mela. There is no event in the world, with which we can even compare the numbers. During Purna Kumbh mela time, that area temporarily become the largest city in the world leaving Tokyo far behind. This event happens once in every 12 years - synchronized with one complete revolution of Brihaspati (planet Jupiter) around Sun. (Maha Kumbh happens in every 144 years – after 12 purna kumbh melas).

For a long time, we knew Covid can spread; it can spread very fast from people to people. At such dangerous times, government could have made the festival symbolic. People may miss one but will be healthy enough to attend another one. But no Government did not do anything to make it just symbolic. In fact, they worked the other way and published large ads on the newspapers inviting people to attend Kumbh. Declared the event as clean and safe. Remember this is not a one-day event but spread across multiple weeks. 

See couple of statement from administrators,

“I invite all devotees across the world to come to Haridwar and take a holy dip in the Ganga during Mahakumbh. Nobody will be stopped in the name of Covid-19 as we are sure the faith in God will overcome the fear of the virus,” Rawat said. Rawat mentioned here is the Uthrakhad (Haridwar is in Uttarakhand state) chief minister.

"Union education minister Ramesh Pokhriyal Nishank, who was present with Rawat, said, “In times of the pandemic, Mahakumbh would be the biggest public congregation in the world while following the Covid-19 guidelines.”

Hindustan Times reported that, "According to the data of the Kumbh Mela Force, over 9.1 million pilgrims arrived in Haridwar to take the holy dip in Ganga from January 14 to April 27. The highest gathering of 3.5 million pilgrims was reported for Somvati Amavasya holy dip on April 12. On March 11, when Maha Shivratri was celebrated, 3.2 million pilgrims arrived for the Kumbh bath. As many as 1.3 million pilgrims gathered in Haridwar for another bath on Mesh Sankranti-Baisakhi (April 14)." - Hindustan times April 29, 2021


When governments let such large group of people to gather at a place; then they hardly follow any protocols. Covid protocols do not stand a chance. People go from all over northern India to attend Kumbh in Haridwar and then come back to their home states. There were hardly any protocols for that. 
What more CM Rawat, even told "I invite all devotees across the world to come to Haridwar and take a holy dip in the Ganga during Mahakumbh. Nobody will be stopped in the name of Covid-19 as we are sure the faith in God will overcome the fear of the virus,” Rawat said. - HT

Now we know what is happening across India; from bring almost covid free country, now India is surging ahead in Covid Numbers. Soon she will replace the US as the country with the largest number of cases and probably even in death count. Accusations are already there that, India is severely underreporting the number of deaths by classifying Covid deaths as something else.

If we look at numbers coming from our next-door neighbor – China – hardly anyone believes any of those; no matter whether it is related to economy, or any other statistics. India should not try to go in that direction. If system is hiding the death toll (I am not saying it is, but various reports come out indicates that), we should stop it. Always publish what is right. Otherwise, it is only matter of time, when rest of the world comes with their own estimations.

It is time to avoid other huge gatherings - religious or otherwise. Most important of all, do not declare premature victory; and live as if everything is over. 

Sajeev

PS: Note that, this time Kumbh mela was reduced to a month and scaled-down in the middle.

Wednesday, March 10, 2021

Time to add 'Access to Internet' as a fundamental right under Article 19



In Nirmal district of Indian state of Telangana, a bike accident between two people from two different communities resulted in communal violence. Police enforced section 144 of CrPC to control the situation. 

Nowadays not much is required to start a riot. What worries me here is, as per news reports, administration disconnected internet services in those areas during riot. This became a habit for government(s) - immediately disconnect the internet services whenever something goes wrong. In these days, internet is next only to food, dress, house, and electricity. It is very critical for living. From the functioning of ATM, attending online classes, work from home(WFH), ordering items online; for almost everything internet is essential. Government(s) should not disconnect the internet like that. Agree that people may spread the news(which might result in further violence) using the same system. But, it's the responsibility of the state to prevent riots without blocking something so fundamental to living. 

It's time to think about a constitutional amendment to add 'fair access to the Internet' under Article 19.

Sajeev

Monday, March 8, 2021

Kochi - Koottanad - Bangalore - Mangalore (KKBMPL) gas pipeline: A new(delayed!!!) dawn in South India's gas future

Terminal at Kochi
W
hen state owned Petronet LNG commissioned a regasification terminal at Kochi, there was hope that homes and industrial sites from Kochi to Mangalore and Koottanad to Bangalore will receive piped gas; atleast in the cities through which the pipeline goes; days of cylinder gas are numbered etc.

However, it took more than 7 long years to complete the main pipeline itself. Finally at the beginning of this year, Kochi-Koottanad-Mangalore line was commissioned. Work is in progress on Kootanad- Palakkad-Krishnagiri-Bangalore stretch. Pipeline itself is 1,104 km long, developed and operated by GAIL. This pipeline passes through Kerala, Karnataka, Tamilnadu and Puducherry. 

Though late, it looks like a great achievement. However the devil is in the details. Kochi LNG terminal was commissioned in sep 2013 with a capacity of 5mmtpa(million metric tonne per annum). It took a very long time to build associated pipeline network. Main reasons were, opposition from people on safety grounds; land price disputes; and to get the right of way. Political leadership was also not able to bring any solution to the table. So the issues continued. Meanwhile, the estimated cost for pipeline jumped from  2915 crore to 5750 crore. Remember the terminal itself costed 4200 crore only. 

Terminal at Kochi

Not only that, in the absense of pipeline network, there aren't many customers. LNG terminal's utilization is just 10-20%. Can you imgine a plant running at such abnormally low utilization for 8 long years? Even after commission of Mangalore line max-utilization will be around 25-30% only!!!

Meanwhile, Dahej terminal which launched with 5mmtpa capacity in 2004 doubled its capacity to 10mmtpa in 2009. Added 5mmtpa more in next 7 years. Then 2.5mmtpa in two years after that. Now Dahej's total capacity stands at 17.5mmtpa. From 2013 to 2018, in 5 year time span Dahej handled 1000 cargos. How much Kochi handled? around 45. Out of that, 18 were for reload and 2 were for bunkering. Hence effectively 25!!!

Today pipeline supplies 3.8mn m3 of gas everyday in Kochi.

The delay is criminal; its not that state government got nothing from the project. Kerala government will get significant amount of money as taxes (approximately 1000 crore a year). 

If this project was completed 5 years back, then LNG termial utilization might have been very high by this time. Who knows; Petronet may even double its capacity. Kochi had a chance to become a major gas hub of India. 

There were some dealys due to completing technically challenging 540m stretch which crosses Chandravati River in Kasarkode district of Kerala. Here pipeline goes upto 8m in river bed. However here the river flows through a valley and elevation difference can be as high as 150m. Which made the construction difficult.

Hope that state governments will learn something from these long delays, and the money it costed to the exchequer. 1) Missing tax revenue, 2) Utilization losses at Petronet LNG terminal 3) Delayed gas network construction across south India 

Engaging with people and derive a political solution for the problems in time is one of the reason why people elect their representatives. Why its not happening with the required urgency? Its something which all political parties in Kerala should think. 

Sajeev

Thursday, March 4, 2021

Haryana - Breaking something which is working (The Haryana State Employment of Local Candidates Bill – 2020 aka Reservation in Private sector)

DLF Cyber City (courtesy: Wikipedia)
G
urgaon/Gurugram is one of the largest IT hubs in India. Located just 30km away from New Delhi, this city is part of the National Capital Region. The rise of Gurugram started when Maruthi Suzuki opened their plant there. A couple of decades later GE came. This was followed by DLF acquiring large swaths of land and building a modern city. Numerous companies came and set up their base or operations there. Proximity to the national capital, helped a lot in its growth.

You might be thinking why I am talking about Gurugram when the title states 'The Haryana State Employment of Local Candidates Bill'. Well, let us come to that, 

As per the 'Haryana State Employment of Local Candidates Bill',

a) 75% of jobs in the private sector, which offers a salary of less than 50,000 rupees/month, is reserved for people from the state.
b) 10% of that quota should be filled from the district where company is located.
c) Reservation is initially for a period of 10 years.
d) The rule is applicable to all companies, partnership firms, societies, trusts, limited liability partnership firms, and any person employing 10 or more people.
e) Objective is also to discourage, migrants seeking low-paid jobs.
f) Private establishments can claim exemptions if candidates of desired skills are not available. This is subjected to evaluation by a government officer.
g) Companies must register all employees who earn less than 50,000/month on a designated portal within 3 months of the bill coming into effect. 
h) Employer cannot hire a new person if this registration is not completed.  
i) Failure to provide 75% of new employment to local candidates will attract a fine between 50,000 to 2,00,000 rupees. An additional penalty of 1,000 rupees till they comply.

First, this law might not even be constitutional.

Second, Haryana and her industrial sector functioned just fine without these laws. Every state needs to reduce the unemployability rate but by generating more jobs and skilling the people; not by forcing private companies to work as government companies. Tomorrow other states can also restrict private jobs to their own domiciles; which is very much against the concept of India as a single country. Already ever-increasing percentage of reservations are depriving people of the opportunity in the government sector. The reservation was originally meant for SC and ST, who did indeed deserve that. However, nowadays every group that can assemble a bunch of people to show strength (and bring a region to stand still) demands reservation, and political parties gave in for their demand. 

A lot of people earn less than 50,000 a month. This covers most of the industrial, SME workforce. If a person likes to start an establishment of 100 people, which may make good profit using cheap migrant labour (partially) must employ 75 locals with higher wages. Probably that person might drop that idea; and we may import that item from China.  

This law also brings back the inspector raj. A government employee must certify that the company is compliant or people with the required skills are not available. This decision-making power is equivalent of giving those government servants an ATM machine. Inspector raj and license raj broke India and collapsed our economy in the past. We need to reduce the overbearing power of the government not to boost it. 

When I mentioned Gurugram, I also mentioned a lot of companies. Maruthi Suzuki was then owned by the Government of India and Suzuki Corp of Japan. GE is a US-based multinational.  Owners of DLF are from Uttar Pradesh. Other prominent companies in Gurugram Cargill India, Coca Cola, Honda, Oracle, Ericson, Pepsi, Google, Nestle, Hindustan Unilever, Reckitt Benckiser, Panasonic, Samsung, Accenture, Deloitte, KPMG, IBM, EY, Escorts Group, Hero Moto Corp, Alcatel, Sony, Whirlpool India, Bharti Telecom etc are from outside and generated a lot of opportunities for locals and provided a lot of revenue for state government. Remember a good percentage of Haryana’s revenue comes from Gurugram.

Politics

In the politically charged climate of the area, where farmer agitation is still going on this is a kind of offer to placate the people. This way government can take the easy way out; don’t have to worry about how to generate new jobs, but to take away the jobs which are already created by someone using their hard work. 75% reservation was the political promise of Jannayak Janta Party (a member of ruling BJP alliance). 

The irony of the fact is, in 2008 one of the founders of JJP, Ajay Singh Chautala (former MP and father of current Deputy Chief Minister of Haryana), and 53 others were charged in connection with the appointment of 3206 junior basic teachers in Haryana during 1999 and 2000. He and his father, Om Prakash Chautala (former Chief Minister of Haryana) was sentenced to 10 years imprisonment by a New Delhi court. The verdict was later upheld by Delhi High Court and the Supreme Court.

Reservation is a double-edged sword. It's good when applied in the right quantity for uplifting the scheduled tribes and those people who are at the bottom of the Indian social ladder and suffer just because they are born. However, providing reservations to groups, which forces the government hand for that by bringing the state to a standstill or providing it as a way to win elections has a long-term impact. Once provided, it’s not easy to take it back. 

Ironically, India is one of those rare countries where people fight for inclusion in the backward category. Bringing reservation to the private sector is not just immoral but criminal. They are already struggling under the Indian system which works extremely slow and where contract enforcement is a miracle. The state should do something for locals by generating jobs and opportunities; not by pushing people from other states away. Always remember, a huge number of companies operating in Haryana and providing jobs to locals are not from Haryana. Also, a lot of people from Haryana are working in other states and other countries. 

Sajeev

References

Crisis in Eastern Europe Named Nord Stream-2

Installation of PIG traps at the construction site in Lubmin

Ukraine is the gateway of Russian gas exports to Europe. Even after commissioning NordStream (the first one) a good quantity of Russian gas to Europe passed through Ukraine and other Baltic states. In 2017, Russia transported 93bcm gas via Ukraine. This is more than 48% of the total Russian gas supply to Europe. Remember, Russia supplies around 40% of Europe’s gas demand.

This created a set of circumstances that maintained balance in eastern Europe. Russia can’t cut off supply to Ukraine without cutting off its supply to Western Europe as well. Since Europe is a huge customer, its economically disastrous for Russia to cut supplies to the EU. If that happens, probably shale gas from other side of the Atlantic might fill that gap; which eventually creates more problems for Russia in the long term. After all, no one wants an unreliable supplier. Note that, Russia did cut off supply twice in this line (in 2006 and 2009). World was a bit different then.

This arrangement ensured Ukraine’s energy security. As per the deal signed at the end of 2019, Russia will pay 7bn USD over 5 years to Ukraine for gas transit rights. Ukraine’s GDP is 142bn USD (2020 estimates). Hence, transit fees are important for Ukraine. Since Ukraine controls the supply to EU, they will also get their supply.

As long as Ukraine holds the key to gas supply for Europe; Russia can’t simply turn off the gas to punish Ukraine and force them to agree on any deal which Russia wanted. It is here Nordstream 2 comes into the picture. This pipeline starts from the Russian mainland, passthrough seabed, and falls on Germany - bypassing Ukraine and other Baltic states. Once Nord Stream 2 is completed, Russian dependency on Eastern European countries will reduce considerably. After all, once the gas reached Germany it can be supplied to any western European country.

Original Nordstream (owned by Russian supergiant Gazprom) from Vyborg in Russia to Greifswald in Germany also passes through the Baltic Sea. This 1222 km long pipeline, has a maximum discharge capacity of 55 billion m3/a. The first line of this pipeline was commissioned in 2011 and the second line in 2012. Following this NordStream II project was started in 2018-19 before US sanctions on Russia kicked in.

Connecting pipe sections above water
Connecting pipe sections above water

Germany

From Germany's side, she needs a lot of gas. After the Fukushima disaster, Germany accelerated the shutdown of nuclear power plants. However, renewable energy is not able to replace fossil fuels completely. Germany wants to go ahead with the project. 

United States

At Washington, the previous administration under Trump and the current administration under Biden are not in favour of it. The threat of sanctions is in the air on companies that are working on the project. This already forced some companies to back out from NordStream 2. US stands to gain if Germany dropped the project. In that case US shale gas will get a larger market and Europe will invest in building LNG terminals across its shores.

Eastern Europe and Ukraine 

Eastern European countries fear that the pipeline will increase European dependency on Russia for energy. 

At this point, looks like that project might go through

Commissioning equipment at the Russian landfall


What this means to Eastern Europe and Ukraine?

1, they will be under the mercy of Russia for energy security. These countries can switch to US shale or gas from the middle east. Both are costlier and require additional investments in infrastructure.
2, Loss of huge transit fees for Ukraine.
3, Ukraine will also lose its leverage in Brussels, and the EU may not care much about Russian advances in old soviet states or how the Russian state deals with protesters.
4, Russia will gain more leverage over the EU.
5, Europe’s dependency on cheap Russian gas will increase and any further sanctions on Russia by the US (which blocks the sale of oil/gas) may not go down well in Brussels. 
6, US shale may never be able to beat Russian gas in terms of price. Once the pipeline is available, then western Europe might not invest more in building LNG terminals and other infrastructure required for shale gas import.

Sajeev

Wednesday, January 13, 2021

Happy New Year - 2021

It is after a while I am writing something; not that I did not get time to write in the last few months. My enthusiasm to write was significantly down. What to write was another question. I thought about educational bills, farm bills, new industrial labor codes, my last Gujrat trip, the India-China standoff in the high Himalayas, and of course COVID-19. There were a lot of topics, but someway it was hard to finish anything. I started with many of them and dropped it in the middle. 

Then came the possibility of restarting everything in 2021. The attraction of new year resolutions was hard to resist. It was my habit for last 15 years to do the ritual of new year resolutions. It is not that I followed through all those resolutions; I was not. I might have implemented 70% of resolutions in two out of those 15 years; for the rest, it may be anywhere around 2-10%. I am not sad about it, at least the ritual resulted in some progress. 

I no longer think the first day of a year is some significant date in life that will change everything; it is not. It is just another date in the calendar. Of course, there may be some internal resistance for not breaking the pledges took on January 1 on January itself. 

In any case, wish a happy new year to all the readers. In case you took any new year resolutions like me, then best wishes for your success. Do not worry if it fails, life gives numerous chances to everyone to reset and restart. 

Sajeev