NHAI projects worth Rs 13,000 crore hit roadblock On account of inadequate government support NHAI projects worth Rs. 13,000 crore (up to 1,055 km) under fifth phase of the National Highway Development Project (NHDP) are facing roadblock. The government has halved the portion of grant accorded to private partners from 20% to 10% under NHDP-V. Under NHDP-III a grant of 40% was given to private players. Our view is that one of the major failures of the outgoing UPA government has been the National Highway Development programme (NHDP). The government even managed to reverse some of the gains made by the previous government. The total completion rate of the NHDP stands at a shameful 28% overall or 9,165 km out of the proposed 31,755 km. Even progress of already awarded projects is slow; mainly owing to delays in environmental clearance, land acquisition, litigations, etc. Ensuring NHAI works autonomously in real sense would be the first task for the incoming government in order to improve the efficiency of the current programme. POWER Power ministry trips open access plan The Ministry of Power (MoP)’s bid to keep control over electricity allocation is the latest hurdle in the Planning Commission’s attempt to kick-start open access. The MoP has discretion in the allocation of 15% of total power produced by generating utilities owned by the Centre. The MoP has opposed a planning commission’s recommendation to sale a part of 15% through open access. Our view is that this is a sheer excuse given by the MoP to stall competition in this sector. Without the introduction of open access the state monopsony in the market for electricity will not be broken. Private capital will be chary about entering an industry dominated by a politically opportunistic, contractually unreliable and fickle, and financially suspect, state-owned monopsonist. Refusal to sell a part of the electricity produced by the central entities in the open market and only through a quota mechanism can be and should be challenged as anti-competitive behaviour as this is tantamount to refusal to deal FINANCE Government may leash pay of financial top dogs The government is planning to cap the salaries of executives working for institutions such as credit rating agencies, stock exchanges and clearing corporations. The move is aimed at removing unrealistic target linked incentives to the executives. The reason is unrealistic incentives may encourage the executives to maximize profit through unethical means that could lead to Wall Street like crash. These institutions have a gatekeeping role and enjoy some sort of monopoly, so cannot have incentive structure similar to purely commercial enterprises. Our view is that capping of salaries by the government be it the executives working for institutions such as credit rating agencies, stock exchanges and clearing corporations or for other companies is a bad idea and is tantamount to a price control with no welfare arguments. This seems to be a knee jerk reaction to a crisis. The only people who should determine the salaries of the CEOs is the Board of Directors who represent the shareholders. Thus, the government should concentrate its efforts on implementing laws that improve corporate governance. Stringent laws and their implementation will ensure that there is no collusion among the Board of Directors and the management and the Board of Directors is competent and answerable to the shareholders. However, if the government is bailing out a company out of a crisis then as a “shareholder” it can impose salary caps.

1. Indicus Analytics, An Economics Research Firm
http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/
Policy News
&
Views
Volume 1, Issue 5, April 2009
HIGHWAYS
NHAI projects worth Rs 13,000 crore hit roadblock
On account of inadequate government support NHAI
projects worth Rs. 13,000 crore (up to 1,055 km) under
fifth phase of the National Highway Development Project
(NHDP) are facing roadblock. The government has halved
the portion of grant accorded to private partners from
20% to 10% under NHDP-V. Under NHDP-III a grant of
40% was given to private players.
Our view is that one of the major failures of the
outgoing UPA government has been the National
Highway Development programme (NHDP). The
government even managed to reverse some of the
gains made by the previous government. The total
http://www.indicus.net/Newsletter/Policy_News_Views.aspx

2. Indicus Analytics, An Economics Research Firm
http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/
completion rate of the NHDP stands at a shameful
28% overall or 9,165 km out of the proposed
31,755 km. Even progress of already awarded
projects is slow; mainly owing to delays in
environmental clearance, land acquisition,
litigations, etc. Ensuring NHAI works autonomously
in real sense would be the first task for the
incoming government in order to improve the
efficiency of the current programme.
Read More ...
POWER
Power ministry trips open access plan
The Ministry of Power (MoP)’s bid to keep control over
electricity allocation is the latest hurdle in the Planning
Commission’s attempt to kick-start open access. The MoP
has discretion in the allocation of 15% of total power
produced by generating utilities owned by the Centre. The
MoP has opposed a planning commission’s
recommendation to sale a part of 15% through open
access.
Our view is that this is a sheer excuse given by the
MoP to stall competition in this sector. Without the
introduction of open access the state monopsony in
the market for electricity will not be broken. Private
capital will be chary about entering an industry
dominated by a politically opportunistic,
contractually unreliable and fickle, and financially
suspect, state-owned monopsonist. Refusal to sell a
part of the electricity produced by the central
entities in the open market and only through a
http://www.indicus.net/Newsletter/Policy_News_Views.aspx

3. Indicus Analytics, An Economics Research Firm
http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/
quota mechanism can be and should be challenged
as anti-competitive behaviour as this is tantamount
to refusal to deal
Read More ...
FINANCE
Government may leash pay of financial top dogs
The government is planning to cap the salaries of
executives working for institutions such as credit rating
agencies, stock exchanges and clearing corporations. The
move is aimed at removing unrealistic target linked
incentives to the executives. The reason is unrealistic
incentives may encourage the executives to maximize
profit through unethical means that could lead to Wall
Street like crash. These institutions have a gatekeeping
role and enjoy some sort of monopoly, so cannot have
incentive structure similar to purely commercial
enterprises.
Our view is that capping of salaries by the
government be it the executives working for
institutions such as credit rating agencies, stock
exchanges and clearing corporations or for other
companies is a bad idea and is tantamount to a
price control with no welfare arguments. This seems
to be a knee jerk reaction to a crisis. The only
people who should determine the salaries of the
CEOs is the Board of Directors who represent the
shareholders. Thus, the government should
concentrate its efforts on implementing laws that
improve corporate governance. Stringent laws and
their implementation will ensure that there is no
collusion among the Board of Directors and the
management and the Board of Directors is
competent and answerable to the shareholders.
However, if the government is bailing out a
http://www.indicus.net/Newsletter/Policy_News_Views.aspx

4. Indicus Analytics, An Economics Research Firm
http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/
company out of a crisis then as a “shareholder” it
can impose salary caps.
TELECOM
TRAI recommends separation of USOF from DoT
Observing that Universal Service Obligation Fund (USOF)
subsidy has not spurred investment in the rural telecom
space, sector regulator Telecom Regulatory Authority of
India (TRAI) today recommended separation of fund from
the purview of Department of Telecom (DoT) to make
effective use of the finances available.
It has been almost 7 years since the USOF got a
statutory status however the performance of the
fund when it comes to financing roll out has been
abysmally poor. India has the distinction of the
second largest USOF however only 34 % of the 4
billion USD so far collected has been disbursed. One
of the reasons may be the lack of independent
functioning of the USF administrator which lies
under the purview of the DoT. Our view is that while
an autonomous body may improve the performance
of the fund as far as the design of projects and
disbursement goes but the fund has lost its
relevance in view of the changing technology and
market innovations. Thus, first separate the fund
administrator from the DoT, reduce the
contributions to the fund to about 1-2% of AGR,
currently it is at 5 % , disburse the collected funds
for infrastructure creation as soon as possible and
last let the fund provide subsidy to any service
provider who sets up infrastructure in the rural
areas. It is important that the fund is minimalist and
does not distort the market incentives for service
expansion.
Read More ...
http://www.indicus.net/Newsletter/Policy_News_Views.aspx

5. Indicus Analytics, An Economics Research Firm
http://indicus.net/Research/Home/Research%20Area/Policy%20and%20Institutional%20Analysis/
Edited by: Payal Malik
31st March 2009
MORE NEWS
Companies shed green projects as carbon loses
credit
Indian companies are shelving green projects that would
have earned them carbon credits under the Clean
Development Mechanism (CDM) following a 50% fall in
the prices of Carbon Emission Reduction (CER) credits due
to the global downturn.
Fertiliser firms ask Centre to buy back Rs 20,000
crore of subsidy bonds
Fertiliser firms are urging the government to buy back the
bonds they were given as part of subsidy. The chief of
India’s fertiliser industry association said that companies
are unable to sell these bonds worth Rs 20,000 crore,
leaving them with few options to tide over the current
cash crunch.
Bigger Bench to decode electricity tribunal powers
A constitution Bench of the Supreme Court will consider
whether the Appellate Tribunal for Electricity has the
jurisdiction to deal with the validity of regulations framed
by the Central Electricity Regulatory Commission.
States pip NHAI in PPP road projects
Companies find the terms in the bidding documents for
state projects much more attractive. National highway
projects under the public-private partnership (PPP)
scheme have found few takers, but state highway projects
under the same route are getting record response in
Gujarat, Andhra Pradesh, Karnataka and Haryana.
http://www.indicus.net/Newsletter/Policy_News_Views.aspx

6. Indicus Analytics, An Economics Research Firm
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Government withdraws licence fee cut for telcos
The government has called off its decision to slash the
licence fee for telecom operators with large network
presence by up to a third from April 1, following
opposition from the finance ministry, giving a Rs 2,000-
crore blow to the industry.
Government looks to its own to fill CCI vacancies
The government will soon begin to search for officers who
have specialised in law, economics and investigation from
within its ranks to send them on deputation in the
Competition Commission of India (CCI). The government
has sanctioned the appointment of nearly 100
professionals, of which 38 positions are to be filled with
serving government officers.
Government mulls alternative set-up for handling
misleading ads
Worried that a legal bulwark against misleading
advertisements may be lacking after the MRTPC is wound
up, the government is contemplating an alternative
mechanism to address the issue. As the Competition
Commission, which succeeds the Monopolies and
Restrictive Trade Practices Act, has no powers to
investigate cases of misleading advertisements.
Delay in big-bang infrastructure projects costs
another bomb
Delay in execution of 116 infrastructure projects has seen
about Rs 38,000 crore jump in their original cost
estimates. As on January 1, 2009, the cost escalation has
gone up by 41% from Rs 91,841 crore to Rs 1,29,560
crore.
TRAI: Government stalling unrestricted telephony
Telecom regulatory authority of India (Trai) said that the
government is stalling unrestricted internet telephony in
the country and accused the government for not
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7. Indicus Analytics, An Economics Research Firm
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addressing the issue of lifting curbs on internet telephony.
The telecom regulator has been advocating unrestricted
internet telephony since last year, but without success.
Further Trai stated that the government has recently
cleared entry of mobile virtual network operators (MVNOs)
without putting norms in place.
CERC wants state authorities to function
independently for smooth open access
Power sector regulator Central Electricity Regulatory
Commission (CERC) has taken strong exception to the
State Load Despatch Centres (SLDC) denying open access
in inter-state power transmission. CERC has called for
total functional independence of these statutory
authorities to ensure smooth functioning of the open
access system in the country.
Forum of Regulators for selecting transmission
companies
The Forum of Regulators (FoR), a forum of State
Electricity Regulatory Commissions (SERCs), has
recommended that state governments phase out the
single-buyer model and put in place a system that offers a
choice of selecting transmission companies that wheel out
power from the generators.
PSUs to feed state-run banks
The government has extended by a year an order asking
profitable state-run entities to park their surplus funds
with public sector banks to ensure that the financial
institutions have enough cash at a reasonable cost, which
they can lend at the present reduced rate of interest.
Companies get nod to hedge carbon credits, freight
deals abroad
The Reserve Bank of India (RBI) has allowed Indian
companies to hedge carbon credits and freight contracts
on overseas exchanges, a move that will help them cope
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8. Indicus Analytics, An Economics Research Firm
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with the intense volatility in global markets. With this,
carbon credits and freight have been recognised as
commodities by the RBI, and will join the ranks of metals,
bullion, energy and agricultural produce, which are
already permitted to be hedged abroad.
DoT: Difficult to start 3G auctions before polls
The global auction for 3G spectrum is likely to be taken up
by the next government with the telecom department said
that it is difficult to start the auction process before the
general elections commence in mid-April 2009.
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