📰 When pharma cos. don’t pay up penalties
Weakening of pricing authority’s legal capacity among reasons cited for dismal recovery rate
•Errant pharmaceutical companies charged with overpricing were slapped penalties of Rs. 3152.46 crore in the past five years, but the government was unable to recover even half the amount since 2013-14. The amount recovered from pharma companies stands at a meagre Rs. 610.50 crore (till September 2018).
•A year-wise summary since 2013 shows that only in 2016-17 did drug price regulator, the National Pharmaceutical Pricing Authority (NPPA), make a substantial recovery where it collected Rs. 302.08 crore on a penalty of Rs. 333.97.
•Whenever companies are found overcharging consumers on the prices of medicines, demand notices are issued for the recovery of the overcharged amount, along with 15% interest thereon for violation. If the manufacturers do not deposit the demanded amount, further action is initiated against them.
•The NPPA in 2013-14 issued demand notices amounting to Rs. 406.83 crore, but recovered only Rs. 40.08; in 2014-15, it recovered Rs. 90.17 crore of Rs. 581.10; in 2015-16, recovery fell to an all-time low of Rs. 12.32 crore on a penalty of Rs. 931.63 crore. The trend continued in 2017-18, with the recovery of Rs. 148.42 crore of Rs. 704.12; and in 2018-19 (till September 18) Rs. 17.43 crore was recovered of Rs. 194.81.
•Explaining the dismal recovery rate on the violation of Drugs (Prices Control) Order (DPCO), 2013, the NPPA said: “Pharmaceutical companies have been approaching the courts of law in relation to issues mainly of overcharging and pricing etc. They are, however, free to come into review before moving to court.”
•Health activists say the NPPA may not be doing enough to deter companies from overcharging.
•“Well, sending out notices to pharma companies is not an adequate deterrent,” said Dr. Sakthivel Selvaraj, Director-Health Economics, Financing and Policy, the Public Health Foundation of India (PHFI), adding that perhaps there is a need to initiate multiple steps, including stiff penalties, for non-payment, threats to stop production, or taking them to court, etc.’’
•Malini Aisola, health researcher and co-convenor of the All India Drug Action Network, said, “The NPPA was previously able to recover overcharged amounts due to its success in the courts. “The recent downward trend in recovery coincides with the considerable weakening of the NPPA’s legal capacity, which has resulted in the putting up of poor defences in legal battles, and apathy towards filing of appeals in verdicts going against the public interests.”
Crux of the matter
•Inconsistent leadership of the NPPA, the lethargic processing of overcharged amounts, and a lack of willingness to hold companies to account for violating DPCO norms is causing the constant bleed, she said.
Much more needs to be done to improve faculty diversity on university campuses
•In the history of reservations in India, Parliament has sometimes had to resort to even constitutional amendments to overturn some court rulings that have the effect of protecting the interests of ‘general candidates’. The 77th constitutional amendment of 1995, which was recently extended to Kashmir, restored reservation in promotions as a nine-judge bench of the Supreme Court in Indra Sawhney (1992) while upholding Other Backward Classes reservation based on Mandal Commission recommendations had prohibited Scheduled Caste/Scheduled Tribe (SC/ST) reservation in promotions.
Ordinance and after
•The 81st constitutional amendment was made to overturn the Supreme Court’s decision against the ‘carrying forward’ rule, which permitted the filling of unfilled reserved seats in subsequent years. Similarly, the 85th constitutional amendment was passed in 2001 to restore consequential seniority to promotee SC/ST employees as a ‘catch-up’ rule introduced by the court in Ajit Singh (1999) was causing hardship to SC/ST employees. Last week, the Narendra Modi government promulgated an ordinance to undo the Allahabad High Court’s judgment in Vivekanand Tiwari (2017) which had relied on a number of other High Courts and a few apex court judgments such as Suresh Chandra Verma(1990), Dina Nath Shukla (1997) and K. Govindappa (2009) that had made ‘department’ rather than ‘university’ as the unit of reservation in universities.
•In Vivekanand Tiwari , an advertisement of the Banaras Hindu University (BHU) for teaching positions was challenged. The BHU, like other Central universities, was following the University Grants Commission policy of treating ‘university’ as the unit for the purposes of reservation. Due to judicial discipline, Justice Vikram Nath, who authored the judgment, did not have much of choice. But then Justice Nath himself did not seem to be a votary of reservations. In the beginning, he has said, “It is not a mandate but liberty given to the state. It is an enabling provision.” Thus, according to him, the government may not provide for reservation.
The importance of ‘shall’
•Technically speaking, he is right. But then we cannot ignore that Article 335 categorically says that “claims” of SC/STs to posts in Centre and the States ‘shall’ be taken into consideration. As opposed to ‘may’ or ‘will’, the use of the word ‘shall’, in law, means mandatory. While the judgment ended at page 29, Justice Nath devoted several additional pages to make out a case for the re-examination of the reservation policy by the government though there were no pleadings on this issue. He asked it to examine whether reservation at all is needed in university teaching posts.
•Our courts have used the differences between ‘cadre’, ‘service’ and ‘post’ to arrive at the conclusion that ‘department’ should be unit of reservation. So though lecturers, readers and professors in a university have the same scale and allowances in their respective cadres, they cannot be clubbed together. Since there is no scope for interchangeability of posts in different disciplines, each single post in a particular discipline is be counted as a separate post. On the face of it this seems to be perfectly logical. But the reality of the working of our universities is different. Every university spends lot of time in deciding reservation and tries to balance the completive interests and needs of various departments.
•Even with the ‘university’ as the unit, in over 40 Central universities we have huge under-representation of SCs and STs especially at the level of professor and associate professor. If ‘department’ was allowed to be taken as a unit, these numbers would have been far less.
•In its review petition, the government did share with the Supreme Court the BHU’s example of the adverse effect of using ‘department’ as the unit. For example, there were 1,930 faculty posts on May 12, 2017. If the BHU were to implement reservation based on using ‘university’ as the unit of reservation, 289 posts would have had to be reserved for SCs, 143 for STs and 310 for OBCs. Under the new formula of using ‘department’ as the unit, the number of reserved positions would go down to 119 for SCs, 29 for STs and 220 for OBCs.
Beginning of an end
•Implementation of the department-wise reservation policy would have had a disastrous effect on other universities as well.
•A study of 20 Central universities by the Central government has shown that reserved posts will come down from 2,662 to 1,241 in a year. The number of posts of professor would have reduced from 134 to just 4 for SCs; from 59 to zero for STs, and from 11 to zero for OBCs. But number of unreserved or general posts would have drastically increased, from 732 to 932. At the level of associate professor, for SCs it will have reduced from 264 to 48, for STs from 131 to 6, and for OBCS from 29 to 14. But here again the number of general posts would have increased from 732 to 932. In the case of assistant professor, the number of reserved posts would have reduced from 650 to 275 in STs, from 323 to 72 for SCs, and from 1,167 to 876 for OBCs. But the number of unreserved or general posts would have gone up from 2,316 to 3,233. Thus department-wise reservation was a sophisticated beginning of an end of reservation. If SC/ST candidates do not become professors, they cannot become vice-chancellors as only a professor with 10-year experience is eligible for this. In 2018, out of some 496 vice-chancellors of Central and State universities, there were just six SC, six ST and 48 OBC vice-chancellors.
•The government deserves appreciation for the ordinance, though brought in belatedly on the eve of the elections to garner Dalit votes. But we need to do more to improve diversity on our campuses with more SCs, STs, OBCs, Muslims, persons with disabilities and sexual minorities being recruited as faculty as our campuses do not reflect social diversity despite the university being a unit for reservation. Let the score on the diversity index be a major criterion in giving grants to universities.
📰 Relevance of proof matters, not means
In a 1973 order, SC said it was not concerned about how evidence is obtained
•The Supreme Court on March 6 repeatedly asked Attorney-General K.K. Venugopal, appearing for the government in the Rafale judgment review case, to state the law on admissibility of “stolen” evidence in a court.
•Mr. Venugopal has argued that the petitioners based their arguments on secret and sensitive information obtained through “unlawful/unknown sources.”
•The law, it seems, is clear. In the Pooran Mal case judgment of December 1973, a Constitution Bench held that evidence which might have been obtained through unlawful means was nevertheless admissible, if it was found relevant to the case.
•Justice K.M. Joseph, on the Bench led by Chief Justice of India Ranjan Gogoi, said India was unlike the U.S. He was apparently referring to the Pooran Mal case that discussed how obtaining of incriminating evidence by illegal seizure and search amounted to the violation of the Fifth Amendment of the U.S. Constitution. But in Pooran Mal, which stands unchallenged, the thrust is not on how the evidence is obtained, but whether it is relevant to the case. “The test to be applied, while considering whether evidence is admissible, is whether it is relevant to the matters in issue. If it is, it is admissible and the court is not concerned with how it was obtained,” the court held.
•India’s law of evidence is modelled on the English law, and courts in India and England have consistently refused to exclude relevant evidence merely on the ground that it is obtained through illegal means like a search or seizure, the Pooran Mal case verdict said. The judgment has quoted that “where the test of admissibility of evidence lies in relevancy, unless there is an express or implied prohibition in the Constitution or other law, evidence obtained as a result of illegal search or seizure is not liable to be shut out.”
•Mr. Venugopal has argued that the documents, which were published by media outlets and upon which the review petitions were based, should not be considered at all. The petitions, based on “purloined” information, should be dismissed. However, the court has countered that it can look into the documents to see whether “a great crime like corruption has been committed.”
•“Can the government seek shelter under national security and deny the court access to the information,” Justice Joseph asked Mr. Venugopal.
📰 India asks Saudi to invest in strategic oil storage
Eyes resurrecting $44-bn refinery unit
•India invited Saudi Arabia to invest in its strategic oil storage even as it looks to resurrect a $44 billion (Rs. 3.08 lakh crore) refinery project with the world’s largest oil producer after the Maharashtra government denied land at the initial site.
•Saudi Oil Minister Khalid Al Falih, on his second visit to India in three weeks, discussed with his Indian counterpart Dharmendra Pradhan the 60-million-tonne (MT)-a-year mega oil refinery-cum-petrochemical complex.
Review proposals
•“The [two] Ministers reviewed various Saudi investment proposals in the Indian oil and gas sector, including the urgent steps to be taken to expedite the implementation of the first joint venture West Coast Refinery and Petrochemical Project in Maharashtra, estimated to cost $44 billion, which will be the largest greenfield refinery in the world,” an Oil Ministry statement said on Sunday.
•The statement said: “Saudi Arabia’s participation in Indian Strategic Petroleum Reserve (SPR) programme was also discussed.”
•India has built 5.33 MT of emergency storage, enough to meet its oil needs for 9.5 days, in underground rock caverns in Mangalore and Padur in Karnataka and Visakhapatnam in Andhra Pradesh.
📰 The mysterious disappearance of tigress F03
Despite a 16 month operation to trap her, the tigress from Assam has vanished
•A Royal Bengal tigress, F03, that strayed out of north-central Assam’s Orang National Park 16 months ago, had set off one of the biggest operations in the State to trap the big cat. For more than a year, the tigress outsmarted some of the country’s best feline experts and made the Assam Forest Department spend a fortune in the effort.
•But she has virtually fallen off the radar since killing a pig in Darrang district’s Borgora Tea Estate on December 4 last year.
•Her last kill was about 3 km south-west of Borobazar’s Simlagui in the adjoining Udalguri district where she had preyed on a cow to trigger a “wild cat chase”.
•The 78.81 sq km Orang, about 110 km north-east of Guwahati, is a tiger reserve as well as a prime one-horned rhino habitat.
•“F03’s last few kills – all pigs – were in that direction, indicating she might have returned to Orang from where she had strayed out of. The park is another 3 km beyond the tea estate and across the river Dhansiri,” Madhurjya K. Sarma, Udalguri’s Divisional Forest Officer told The Hindu on Sunday.
Too old for cattle?
•F03’s first kill outside Orang was on November 11, 2017. Her strike did not cause a flutter in the area dominated by the Bodo community. Officials attributed this to an age-old belief that the big cats are occasional guests nature sends for satisfying hunger.
•A year later, around the same time Avni the tigress was gunned down in Maharashtra and angry villagers crushed an alleged man-eater under a tractor in Uttar Pradesh, F03 failed to kill a cow in a village between Borobazar and the tea estate.
•“We found the tigress could not plant her teeth on the cow and only managed to scratch her. That could have made her feel she was too old for cattle as she began preying on pigs, invariably those that were tied up,” Mr Sarma said.
•A wild tiger’s life span is an average of 20 years.
•“All we can say is that there is no sign of the tigress. It may have re-entered Orang or gone elsewhere; it is difficult to be sure,” Divisional Forest Officer of Mangaldoi Division Ramesh K. Gogoi said.
•Forest officials do not rule out the possibility of the tigress having crossed the Brahmaputra on the southern edge of Orang and taken refuge in Kaziranga National Park on the other banks. During winter, when water levels in the Brahmaputra fall, tigers, rhinos, elephants, and deer too use the sandbars to move between the wildlife preserves.
Equipment returned
•The operation to catch F03 involved an assembly line of wildlife officials, veterinarians, experts and activists from across the country. The cost of the operation has not been counted.
•Officials of the Udalguri Division have returned tranquillising drugs to national parks and global wildlife agencies besides other equipment and elephants requisitioned from national parks.
•“We returned customised animal lifting belts to Kaziranga and three elephants used in the operation to Orang. Three cages that were placed strategically for its capture are at the office of the local students’ union,” Mr. Sarma said.
•One of these cages was brought from Orang and one acquired from a legendary local hunter, Ziaur Rahman of Mazbat nearby.
•“From live goats to tree-top surveillance, we tried everything to catch F03. But she was always a step ahead of us. Maybe, she was destined not be caught except in camera-traps,” the forest officer said.
📰 Resolution, at last: on Essar Steel case
Essar Steel case has clarified many aspects of the Insolvency and Bankruptcy Code process
•The National Company Law Tribunal’s approval of ArcelorMittal’s bid for the insolvent Essar Steel Ltd. is significant for several reasons. First, the ₹42,000-crore bid will be the largest single recovery of debt under the fledgling Insolvency and Bankruptcy Code (IBC) enacted in 2016. Assuming that the original resolution plan submitted to the NCLT stands, the secured lenders will manage to recover about 85% of their dues. The 15% haircut that they will suffer should be seen against the extraordinarily high amount of over ₹49,000 crore that is due from Essar Steel. Second, the case, which took 583 days to resolve, compared to the 270 days provided under the Code, has tested several aspects of the law and set important precedents for the future. Among the aspects that have been clarified during the long resolution process for Essar Steel are the eligibility of those who have defaulted in repaying their borrowings elsewhere to bid, the time-limits for bidding and the place of unsecured, operational creditors under the resolution mechanism. Finally, this was seen as a marquee case for the IBC, given the high profile of the company and its promoters, and the amount at stake. The battle royal between multinational players to acquire the insolvent company was proof, if any were needed, of the quality and importance of the underlying asset. In the event, the successful culmination of the Essar Steel case will be a big leg-up for the insolvency resolution process that is less than three years old.
•To be sure, though the NCLT has given the go-ahead, the last word on the subject may not have been heard as the existing promoters could go in appeal against the verdict. The Code provides for an appeal to the National Company Law Appellate Tribunal and then to the Supreme Court, and it is unlikely that the promoters, who bid a much higher ₹54,389 crore, will let go without a fight. The banks, though, will be hoping that the process ends in the next couple of weeks as they would want to account for the receipts from the resolution process within this financial year. After all, only four cases (excluding Essar Steel) out of the initial list of 12 big defaulters referred by the Reserve Bank of India for resolution back in June 2017 have been successfully resolved till now. Insolvency and Bankruptcy Board of India data also point to a pile-up of cases in the various benches of the NCLT. As many as 275 companies, representing 30% of the total of 898 undergoing resolution, have exceeded the 270-day limit set for resolution under the Code. This can be partly explained by the attempt of promoters to tie down the process through appeals at every stage, but the fact is that there is a need for more benches of the NCLT to clear the pile-up. The government would do well to look into this issue.
📰 Bringing politics back in
It must not be evicted from the public sphere on issues of national security
•In the wake of the Pulwama terror attack last month, politicians and opinion makers made impassioned pleas that ‘terror attacks should not be politicised’. There was also a strong popular sentiment for disassociating politics with what happened post-Pulwama. Unsurprisingly, the demand for dialling down politics was proportional to the demands for increased militarisation. The trust in politicians was replaced with an abiding belief that the men in uniform would save the day for India. When questions were raised about the basis of the Bharatiya Janata Party’s statement that over 250 terrorists were killed in the attack on Balakot — an increasingly suspect claim —it was argued that such questioning would weaken the morale of the armed forces and help the Pakistani narrative. For a proudly and deeply democratic country such as India, this scorn for politics is both perplexing and worrying.
Politicising terrorism?
•The calls for refraining from politicising acts of terror also apply to most matters of national security. The strong belief, often convincingly articulated by leading thought leaders, that national security must be divorced from politics is so entrenched in popular narratives that any attempt at discussing national security through the lens of politics is immediately discredited: “How can someone politicise something as important as national security?”
•What is puzzling about such assertions is that most serious analysts and thoughtful politicians intuitively recognise that, at the end of the day, political solutions are the best answer to conflicts. And yet de-politicisation comes handy for the government since “do not politicise” also means “do not ask difficult questions”, a convenient way out of a tricky situation. For the general public, this results in weariness over how the political class has managed national security problems. In that sense, then, the aversion towards politics, especially in times of crisis, is essentially a function of the failure of the way in which politics and political debates are practised, not a negation of politics per se. The solution is to offer better political reasoning, and not replace political formulations with military ones, which is often seen as the easy way out.
•Popular narratives about solutions to our contemporary security problems demand the adoption of militaristic or securitised solutions as if the military has some superior capability for conflict resolution that politics doesn’t. The problem with privileging military solutions over political ones while dealing with conflict resolution is that the former use a specific set of tools, discourses and methods to resolve conflicts unlike the toolkit politics uses for conflict resolution. Consider an example. Post-Pulwama, the Government of India began a security crackdown in the Kashmir Valley and airlifted around 100 companies of paramilitary forces to enforce it, a typical and time-tested military solution to the unrest in the State of Jammu and Kashmir. A political solution would have been what the then United Progressive Alliance government adopted to deal with the widespread anger in the Valley in late 2010, wherein it sent a team of interlocutors to talk to the protesting Kashmiris. The interlocutors were able to bring about a sense of normalcy almost immediately, whereas the influx of more armed men into the Valley is unlikely to achieve that.
•Militarised methods and narratives also lead to de-politicisation, or the dismissal of normal politics from the public sphere, ushering in what could be called ‘temporary emergencies’. Here’s an example. In the immediate aftermath of the Pulwama attack, a leading Indian actress tweeted: “Anyone who lectures about non-violence and peace at this time should be painted black, put on a donkey and slapped by everyone on the streets.” Put differently, she advocated that the practice of normal politics (criticism of the establishment lies at the heart of normal politics) be suspended and be replaced by a depoliticised and securitised discourse. And that those who violate such ‘emergency’ should be punished. When such short spells of emergency are normalised, it opens the door for more permanent securitised spaces and narratives. Kashmir, more or less reeling under spells of temporary emergencies for close to three decades now, is a perfect example.
•Privileging militarisation over politicisation for conflict resolution is indeed unwise and counter-productive, an insight enshrined in the Clausewitzian dictum that war is the “continuation of politics by other means”. When divorced from their underlying political intent, militarised approaches can lead to mindless violence — something democratic societies should unconditionally resist. Military means to deal with conflicts do have their limited utility, but they must be politically guided.
‘Freedom to the military’
•Another reflection of depoliticising security matters is the tendency to argue that the armed forces should be given complete autonomy to deal with security problems. In the immediate aftermath of Pulwama, Prime Minister Narendra Modi, for instance, declared that the “armed forces have been given complete freedom to take action”, a statement that was well received by the general public. However, giving complete freedom to the military is replete with several complications, not the least of which is the indirect acknowledgement that the political class has failed to resolve the problem. For one, telling the armed forces that they are free to deal with the problem as they wish is a dangerous abdication of political responsibility which was entrusted to them through a democratic process.
•Second, ‘giving complete freedom to the military’ is an open invitation to use military solutions to deal with what are essentially political problems. Third, and even more important, ‘complete freedom’ flies in the face of political control that should be the hallmark of a mature democracy. It is one thing for the general public to nurture romantic notions about military solutions, but it is dangerous for the political class to actually enshrine that in policy guidance. Popular fetishes about military force are the stuff for feel-good fiction, not policy making.
•One direct implication of de-politicised conflict resolution is that it typically leads to more violence. Surprisingly, however, more violence doesn’t normally lead to an introspection about the utility of militaristic tools of conflict resolution — on the contrary, it further strengthens the belief in its uses. When men in uniform die, their loss becomes a rallying cry for more violence which then leads to even more casualties — the cycle goes on until political solutions are brought in. Take any militarised conflict, and you will see this point. The fact is that every death due to violence must be avoidable, and that can only happen if statesmen and women are willing to climb down from the cycle of violence. But for that to happen, there must be a decidedly political approach to conflict resolution.
Root cause theories
•There is also an entrenched popular aversion to using ‘root cause theories’ to explain conflicts around us. Not only are those attempting to explain conflicts by examining its root cases routinely shunned by impatient commentators, they are routinely viewed as apologists of non-state violence. While this antipathy towards root cause theorists is a function of depoliticised conflict narratives, it leads to further depoliticisation of conflicts. Depoliticised narratives aim to treat the symptoms, ignoring what gives rise to those symptoms — the latter is difficult, requires introspection and mending ways, while the former expects that military force can be used to end violence or resolve the problem at hand. Militarily framed responses to conflicts also deny justice since they can only be used to reinstate the state’s ‘monopoly over power’, not to provide justice to the aggrieved parties in a conflict.
•Let’s not forget that conflicts are a function of differing political values and expectations, and the only way sustainable conflict resolution can be achieved is by bringing politics back to negotiate those differences.
📰 Sukhois hobbled by lack of blast pens near LoC
Hence they could not be sent to intercept PAF jets
•The consequences of the inordinate delay in building hardened shelters, called blast pens, for the Su-30 fighter jets of the Indian Air Force in forward areas were felt during the recent aerial combat between India and Pakistan. The project was sanctioned only at the end of 2017, two decades after the jets were bought, a defence source said.
•“Owing to the bureaucratic delays, we could not develop blast pens for Su-30 MKIs near the Line of Control (LoC). The Cabinet Committee on Security (CCS) sanctioned the project only at the end of 2017,” the source said. Hence, the jets could not be forward-deployed along the LoC, and they were scrambled from behind to intercept the Pakistan Air Force (PAF) jets that tried to bomb Indian military installations, the official said, explaining why the MiG-21 jets were the first responders during the aerial combat a day after the Balakot air strikes.
•“The project will take three or four years to complete,” the official said, but declined to spell out the number of pens to be built or their cost.
•On the morning of February 27, over 20 PAF jets, including F-16s, JF-17s and a few older Mirages, briefly crossed the LoC and attempted to drop H4 glide-bombs, but were intercepted by eight MiG-21 Bison jets. Mirage-2000s and Su-30MKIs were scrambled from bases around, but MiG-21s were the closest and reached the location immediately and engaged the PAF jets. While an F-16 was shot down, the IAF lost an MiG-21.
Not factored in
•The IAF got the first batch of Su-30s from Russia in 1996 and has since contracted 272 aircraft, of which 240 have been inducted. But the construction of blast pens was not included in the original deal with Russia. So the IAF put up a proposal when Air Chief Marshal N.A.K. Browne was the IAF chief. He served as the Chief of Air Staff from August 2011 to December 2013.
Panel’s comments
•The Parliamentary Standing Committee on Defence pointed to the delay in building these shelters in a 2016 report. “Hardened shelters are not available for even the limited numbers of aircraft available with the service,” it noted.
•The blast pens protect the aircraft from strikes by enemy jets or missiles. In the 1965 war with Pakistan, the IAF lost several aircraft in the open. A repeat of this was avoided during the 1971 war.
📰 Wind loses energy as policy paralysis blows through this renewable sector
From 5,500 MW in 2016-17, capacity addition plummetted in the subsequent two years, leaving 4,000 SMEs that supply components to turbine makers, shaken
•From a euphoric 5,500 MW in 2016-17 — when wind energy companies rushed to commission their projects so as to get their foot in before certain incentives expired — capacity additions have plummeted, to 1,762 MW in 2017-18 and an estimated 1,600 MW in 2018-19.
•Notably, at the beginning of both the years, expectations were high. After 2016-17 ended with 5,500 MW, an ecstatic industry predicted 6,000 MW for 2017-18. That didn’t happen, but still, many projected a boom for 2018-19. Now, when the record is dismal again, there are some (like Tulsi Tanti, CMD of Suzlon Energy) predicting record high installations in 2019-20, while others (such as market research company Crisil) are not so optimistic. So, each year begins with high expectations and ends in dismal performance. What is happening?
•The situation would have been very different if only policymakers had thought things through and the government had been more helpful. But first, some background.
•Unlike solar, wind power plants cannot be put up anywhere but only in locations where winds blow strong. In India, there are eight States where it is economically viable to put up wind turbines —Tamil Nadu, Gujarat, Karnataka, Maharashtra, Madhya Pradesh, Rajasthan, Telangana and Andhra Pradesh.
•For about two decades, wind energy firms (called ‘developers’) would erect the turbines at chosen sites and sell power to the electricity supply companies at prices fixed (called ‘feed-in tariffs, or FiT) by the respective State electricity regulators. The developer would get the FiT for the entire power purchase agreement period, typically 25 years.
•Because only eight States constituted the ‘market’, annual fresh capacity installations used to be in the 1,500 MW — 3,000 MW corridor. Expanding the market meant that the other States also should buy wind power. This could not happen because of difficulties in putting up projects in one State and selling the electricity to another.
Centre steps in
•That was when the Centre stepped in. As soon as the BJP came to power in 2014, it fixed a target of 1,75,000 MW of capacity for renewable energy of which 1,00,000 MW would be solar, 60,000 MW wind and the rest biomass and small hydro.
•To make the 60,000 MW happen, the Government of India (through its new company, SECI), became a trader — it would buy power from the developers and sell it to the non-windy States, thus expanding the market. Developers who offered to sell at the least prices would get to sign long-term power purchase agreements; they could put up their projects anywhere, but should deliver the power at a substation. Thus began the epochal shift from fixed FiTs to market-determined tariffs.
•What also began was — trouble. The first round of auctions closed in February 2017. Due to competition, developers offered to sell electricity at prices as low as Rs. 3.46 a kWhr; in contrast, the least FiT was Rs. 4.16 in Tamil Nadu. Now, upon seeing prices fall so low, the windy States began to ask themselves, ‘why should we buy power at the costly FiT prices; why not we also conduct our own auctions to buy cheaper power?’ But they didn’t know the mechanics of the auctions and had to wait for some guidelines from the central electricity regulator. As they dithered, the ‘windy State market’ vanished. But the Centre too dragged its feet on further rounds of auctions. In 2017-18, just two auctions, for 2,000 MW, happened. The year ended on a dismal note.
•In due course, activity picked up and till now, six rounds of SECI’s, and several more of different States have happened and about 13,000 MW of capacity have been awarded. Prices dropped consistently, and fell to a low of Rs. 2.44 in the third round.
•At this stage, two other problems arose. First, to be viable at such low prices, developers flocked to the two windiest States — Gujarat and Tamil Nadu.
•All of the SECI-awarded projects (70% of all auctioned capacities) went to them, which was more than the ability of the substations to take the power.
•Second, Gujarat frowned at 5,400 MW worth of projects coming up on its soil but all the power going to the non-windy States. Would there be any lands left for its own auctions? So, it refused to give land and came out with a policy that forced developers to put up their projects in specified ‘wind parks.’ Since the parks are not necessarily the best sites for wind projects, the developers didn’t like the policy. Negotiations began, project work got delayed.
More problems
•The problems didn’t end there. As the best sites got taken, prices began to rise after from the fourth SECI round. Governments, suspecting a developers’ cartel, began imposing tariff caps — or the highest price they would accept. And they began cancelling auctions at ripe stages. Notably, the benefits of the low tariffs have never been passed on to the consumer — the electricity supply companies have pocketed the benefits.
•The industry has been asking the government to do ‘substation-wise auctions’, (‘what is the cheapest best price you can offer if your wind turbines would be connected to this particular substation?’) The government is hesitating, apparently because substation-wise auctions will result in higher price quotes.
•Of the 13,000-odd MW tendered, the deadline for completion has expired for 2,000 MW; but so far only 823 MW has come up. More auctions are set to happen. So, the question is, while there is a fat backlog and a healthy ‘order pipeline,’ will the projects come up? Mr. Tanti believes they will and says 2019-20 will see a record of 8 GW; Crisil disagrees — it projects 3,800 MW for the year. The worst sufferers in the mess are the 4,000 SMEs who supply components to turbine manufacturers and their two million employees.
