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BW Businessworld

Running On Empty

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FLIP SIDE: Balance sheets of oil companies will improve thanks to the price hike (AP) The hike in petrol and diesel prices reverses the price cut announced in January this year. While this was widely anticipated, critics are making every effort to embarrass the government. From an economic point of view, the hike will do several things. One, it will reduce the amount of off-balance sheet government borrowing through oil bonds, and reduce the fertiliser subsidy as well. Two, with wholesale price inflation being negative, the impact on the public — through higher transportation costs — is expected to be manageable. Three, it will help the government convey the impression that it is serious about tackling the huge fiscal deficit. Finally, it gives the government room for manoeuvre on any envisaged expenditures on social welfare programmes. This budget is expected to benefit the aam aadmi, and that includes funding programmes such as the National Rural Employment Guarantee Scheme. The government-owned oil companies will also benefit from reduced pressures on their balance sheets. But the overall impact is less than desirable. The prices of kerosene and liquefied petroleum gas (LPG) — the staple fuels of the poor and urban middle class — have not been touched, and these account for the most significant part of fuel subsidies. Plus, it will not be long before inflation kicks in; already, there has been a revival of demand for several commodities, whose prices have begun to head upwards again. Unless the government introduces serious price reforms in the budget, it will be perceived as just another cosmetic measure, or another wasted opportunity. STRICTLY BUSINESS Tokyo-based Hitachi, which posted a loss of $8.1 billion for the last fiscal, is banking on batteries for hybrid cars to catapult it back to profitability. It will provide lithium-ion batteries, which power hybrid cars, to General Motors from next year. For this, Hitachi will increase its production of the batteries from 40,000 cells a month to three million a month. Click here to view 'Madoff In A League Of His Own' EDUCATION A New Course Adding another regulator to the education system may not work NEW IDEAS: Yash Pal (right) recommended a super regulator for the education sector (ABP) Government-appointed committees have one thing in common — they invariably advocate the setting up of a new body to tidy things up. On 24 June, the Yash Pal Committee proposed the setting up of “a regulatory mechanism, which is overarching, transparent and accountable”. This means setting up of an overall authority for higher education, which will subsume all other regulatory bodies. The R.C. Bhargava Committee on Indian Institutes of Management (IIMs) — which submitted its report to the government in September 2008 —had also suggested the setting up of a pan-IIM committee to improve coordination between the IIMs and the government. Bhargava’s proposal of an overarching IIM committee was panned as adding another layer of bureaucracy. Yash Pal’s suggestion, too, may end up doing just that if the various councils — All India Council of Technical Education, Distance Education Council and University Grants Commission, et al — are not dismantled and replaced with a single body. That, many feel, is unlikely to happen. What is more likely to happen is that all the councils will continue to exist, although under a different name, in a new avatar. Shalini S. Sharma NUCLEAR POWER Who Will Fix The Price? Even as the first tranche of imported nuclear fuel is set to be used for the Rajasthan atomic power station, there is already a turf battle underway on who should regulate the tariffs. The power ministry wants these plants to be regulated by the electricity regulatory commissions; but the department of atomic energy (DAE) says nuclear power is too complicated to be handled by general electricity authorities. The nuclear power business is expected to grow from the present 4,000 MW. Nuclear power plants fall under the purview of the DAE, which fixes the tariff of nuclear power stations in consultation with the Central Electricity Authority. “You can’t have unregulated power in the grid,” says a senior official. But DAE thinks otherwise. The nuclear programme in India is evolving through a series of sequential reactor as well as fuel-cycle technology development stages, DAE officials say. Kandula Subramaniam SEA DRIVE: The Bandra-Worli sea link, inaugurated on 30 June, is five years behind schedule and was executed with a cost overrun of Rs 1,300 crore. The partly constructed freeway, which ends at Mumbai’s southern tip of Nariman Point, exits at Worli on a narrow ramp. For the motorist, this is a nightmare after a 4 minute, 5.6-km dreamrun from Bandra. (Pic by Satheesh Nair) (Businessworld Issue Dated 7-13 July 2009)