13th April

Home truth

The article talks about the effect of interest rates on the housing market in India which is being continuously affected adversely but anybody hardly noticing the real problem.

While prices and affordability is getting the limelight in the housing market debate, nobody has noticed that it is the interest rates which are unbearably high which is resulting into dampening sentiments. With increasing interest rates, borrowers have only two choices in hand; either to increase the tenure of EMIs which can well extend beyond their work life or to increase the amount per EMI itself which can be as much as 30%. While banks are reluctant to pass on the benefits of tight monetary policy by RBI to borrowers, the so-called floating interest rates are virtually fixed at very high levels. Even the fixed rates are set very high in present scenario. 

What is needed is transparent regime in floating rates. While banks lend with respect to PLR, there is no need to change the PLR as the cost of funds decreases since banks can very well lend below PLR. In fact there should be a provision in banks to offer fairly priced long term fixed rate loans. Financial institutions should also be encouraged to offer swap option for the borrowers who don’t want to take the risk of floating rate loans. 

Sahabhagi

The article talks about the importance of execution of the process of the goal of inclusive growth and governance, the political parties often talk about. 

While process is often forgotten and goals remain, it is necessary that the intended beneficiaries of the goal achieved should also take part in formulating and implementing the government measures. This would not only improve the designing and implementation of solutions with the knowledge of ground realities but would also bring about a transformation in the participants to an unimaginable extent by connecting them with the rest of the society. This would also bring about a new level of cohesiveness within the society and help it to become a single unified community. As far as the conflict of interests are concerned like that of between contractor-politician nexus with the beneficiary, which till date use to haunt every single govt process, greater participation will ensure exorcizing such illegitimate conflict of interests.

Finally, this is what exactly the purpose of Times Foundation initiative, Sahabhagi, is through greater participation from all the sections of the society, political parties and voluntary organizations. 

Bidding for Oil

The article welcomes the introduction of more transparency by the govt in the process of bidding for E&P sites in the Indian waters but complains that the weightage on various bidding parameters needs revision to improve the transparency.

While the govt invites bids for the eighth round of bids for 70 E&P (exploration and production) sites in oil & gas, the process is also on for 10 blocks of E&P of coal-bed methane. The policy seems to be paying rich dividends given that already $10b has been committed in the previous rounds. While the oil and gas production is set to double, thanks to KG basin, there is significant hydrocarbon left in other areas like Barmer, Rajasthan. The coming round has blocks of Andamans as well. While the move to declare weightage of various bidding parameters like “works programme” and “fiscal package” is welcome to improve transparency, there is, at the same time, a need to revise these parameters since the present weightage does not conform to the level of risks involved in the E&P business which is more capital intensive and expertise based. For example, 50% weightage to “works programme” in non-deep offshore oil & gas blocks and 25% for the same in deep offshore oil & gas blocks is not only irrational but would also keep away the potential investors. Early commitment on “works programme” would also compound risks for bidders. 

It is important to note that such policies may entail the risk of losing the experts and specialists in the bidding process. Thus there is a need of more flexibility for sure in this process.