1. It's estimated that there are some 30 Cr (or 300 million) smart meter tenders under various stages across the discoms in India. In fact, the four UP discoms have tenders for 25 million with a combined bid value of Rs 25000 Cr. The Ministry of Power is aggressively promoting the installation of smart meters, going to the extent of even defining consumer meters in the Metering Guidelines 2019 as smart meters.
The questions that needs to be raised are the following. How likely is that smart meters will help achieve the objective of distribution loss reduction? Do we need to replace all consumer meters with smart meters or just those of high consumption connections? Can we not prioritise smart meter installation based on some value for money assessment? Does the country have the supply side to meet this flush of demand? What's the experience in the country with its limited smart meter installations? Will regulators allow the higher cost of smart meters to be capitalised into the tariffs? Or will the discoms/governments have to bear the cost (the GoI subsidy under the RDSS scheme is limited to Rs 900-1500 per meter, whereas the cost will be in the Rs 8000-10000 range)? Do the discoms have the financial strength and states have the fiscal space to assume more obligations in addition to their already onerous power sector debt burdens? Will the several risks from the emerging Totex model of smart meter installation be acceptable to market participants? Is it a good model for intermediaries to be the smart meter contractors instead of the original equipment makers?
2. The FT reports that the European Parliament is set to approve in late March a deforestation law that would ban imports of products linked to deforestation, including cattle, cocoa, coffee, palm oil, soya, wood, and rubber. The law requires importers to collect and share precise geographical information on the location of production and certify that their goods have not been produced on land deforested after end of 2020. This has generated strong rebuke from the world's largest oil palm makers, Indonesia and Malaysia, who feel that this would target their exports into EU.
This decision by EU has to be seen in the backdrop of EU decision to take Indonesia to the WTO's defunct Dispute Settlement Board (DSB) on the latter's nickel ore export ban. It also comes just after the EU introduced the world's first carbon border tax.
Now this is clearly a non-tariff barrier whose fairness is questionable. How fair is for wealthy European countries, whose stock and flow of green house gas emissions, to prohibit genuine and long-standing economic activities by countries whose stock and flow from these activities are much smaller than those from several other mainstream economic activities of the same European countries? Would the US tolerate similar non-tariff barriers by others on exports of shale gas, or Europe on exports of a new found deposits of rare earths? In general, how fair is it for a country to insist on others internalising all costs of their economic activities, while turning a blind eye to its own legacy of massive stock and flow of social costs from its economic activities?
The legislation appears even more unfair given the considerable progress made by both countries in recent times in controlling deforestation.
In Indonesia, the amount of forest converted to oil palm plantations in 2020 was more than 90 per cent lower than the peak in 2012 but production volumes have jumped 72 per cent, according to Helen Bellfield, deputy director of supply chain transparency group Trase. Compared to the soyabean and beef industries in Latin America, “the Indonesian palm oil sector is much more transparent and at a high level of commitment”, she said.
Of the Rs 10 trillion of capital expenditure proposed in 2023-24, more than half is channelled through them by way of the Centre’s budgetary support to their equity and a tiny portion through loans... Unfortunately, this has led to a corresponding decline in the share of the PSUs’ own contribution to their total capital outlay on projects. In 2021-22, PSUs would contribute about 64 per cent of their total capital outlay with resources mobilised by them through internal generation of funds or borrowing. But this share plummeted to 52 per cent in 2022-23 and will now go down further to 49 per cent in 2023-24. In other words, PSUs are increasingly becoming more dependent on the Centre to meet their capital expenditure requirements. This is not a healthy sign...In 2023-24, Indian Railways would be helped by Rs 2.4 trillion of capital support from the Centre, but its overall capital expenditure is just about Rs 2.93 trillion, which means that its own contribution to its capital projects will decline to 18 per cent, down from 38 per cent in each of the previous two years. Not surprisingly, the Indian Railways’ operating ratio, a benchmark of its financial efficiency, is languishing at 98 and the extra budgetary resources it raises would decline from Rs 82,000 crore in 2022-23 to just about Rs 17,000 crore in 2023-24... But the larger point is that the healthy rise in the Centre’s capital expenditure should not hide the worrying decline in the public sector’s own contribution to its capital outlay and, therefore, its lack of accountability in ensuring a decent return on such investment.
In recent years two important sources of central government capital expenditures, NHAI and Railways, has been assumed by the government directly. In other words, the financing of these entities have been assumed on the Budget. So it's only natural that the funds mobilisation and expenditures of these entities be considered when comparing the earlier and current Budget expenditures on Capex. What are the trends of capital expenditure of the Union Government, NHAI, and Railways over the last ten years?
Given that while capital expenditure has risen from an average of 1.7% of GDP in 2008-09 to 2019-20 to 3.3% of GDP in 2023-24, taxes as a share of GDP has remained in the 10-11% range, it's evident that any increase in share of Capex comes at the cost of revenue expenditure. While the shift in quality of Capex is good, it's also important to ensure that the shift happens due to shift away from the wrong types of revenue expenditures.
4. On the La Affaire Adani, given the volume of evidence floating around it's hard not to believe that the Mauritian entities are related parties and therefore the float of effective non-promoter shares is much smaller than 25%. It then stands to reason that the likelihood of stock manipulation is very high. The evidence is so overwhelming as to raise the question as to why we are even debating this.
This in the WSJ, this and this in the Forbes, and this in FT are good articles exposing the related party nature of the off-shore entities. The evidence is clinching. Aswath Damodaran has a detailed post.
This FT article looks at the Group's exposure sectors. This graphic captures the locations of its infrastructure assets with value greater than Rs 1 bn ($12 million).
Three observations. One, do we need any more evidence that this House was built on debt? Interestingly, all the storied Wall Street investment banks may have done more than their Indian public sector counterparts in propping up this House of Debt? Where did their due diligence and risk management divisions go when these entities helped the Group companies raise over $10 bn in foreign bond offerings and $10.5 bn capital to buyout Holcim? Two,, why did it require a little-known entity like Hindenberg to do the ground-work required to expose this widely suspected thing? Where are the investigative journalists in India? One John Hyatt in the Forbes seems to have done more investigative work than all the Indian journalists put together. Three, what are regulators going to do about the issue of detecting related parties in off-shore shareholdings of Indian companies, many of which have limited float?
This is an interesting snippet, one more reason to doubt the veracity of EGS investing
Wall Street only began to really warm up to Adanis when he sought financing for Adani Green Energy, the conglomerate’s renewable energy subsidiary, according to Tim Buckley, a former investment banker at Citigroup and director at Australia-based Climate Energy Finance, who has been studying the Adani Group for over a decade. Money raised by Adani Green Energy or Adani Ports may “just get transferred to Adani Power and Adani Enterprises, and then goes towards building more coal fired power plants or more coal mines,” Buckley says.
5. John Gapper on "drip pricing" or the gradual addition of one little item after another at a price which is not big enough to make us ditch the deal altogether.
Concert ticket prices are less transparent in the US, where Ticketmaster and other concert sites often conceal the fees, which can add 30 per cent to face value, until fans make it to the online checkout... Similarly, it is clearly irritating for consumers to book a US hotel at one price and find its mandatory “resort fee” tacked on to the checkout bill, but it is a worthwhile gambit for the hotels themselves.One study found that customers lowered their online ratings by only a small percentage when stiffed in this manner: too little to make hotels change their ways... The ticket platform StubHub experimented in 2015 with both all-in pricing and delaying fees until checkout, and found that its revenues were 20 per cent higher with the latter. Virtue does not pay unless the other competitors in an industry are equally virtuous.
6. FT on the outsized influence Russia wields in Africa using a combination of propaganda (including involving the Orthodox Church), arms sales and supply of mercenaries to fight rebels (led by the Wagner Group of oligarch Yevgeny Prigozhin), and mining activities. This low-cost strategy has yielded very big results - in March 2022, 25 African countries either abstained or refrained from voting in a UN resolution to condemn Russia's Ukraine invasion. The article points to the its fullest form in Central African Republic in particular, where the Wagner Group even owns and operates gold mines, and in the Sahel area in general where jihadist insurgencies and coups are commonplace.
7. The problem of rolling power blackouts in South Africa is the latest example of relying on government monopolies in power generation. The scandals and inefficiencies ravaged generation monopoly Eskom has had to impose cuts of upto 10 hours everyday to prevent collapse of the grid due to ageing coal plants. The government is now scrambling to open up the sector to private participation, which will naturally take time to bear fruits.
8. Barcelona is facing a problem of corporate exits in the aftermath of its 2017 referendum to leave Spain.
Since the referendum, which was ultimately declared illegal by Spain’s top court, more than 8,200 companies have shifted their head offices from Catalonia to other parts of Spain. Half of them set up in Barcelona’s great rival Madrid. In the tumultuous days immediately after the vote those rushing to depart included CaixaBank and Sabadell, two of Spain’s four biggest lenders; Naturgy, one of the country’s three biggest utilities; Cellnex, Europe’s biggest owner of mobile phone towers; and Grupo Planeta, one of Europe’s biggest book publishers... Apple and Microsoft AI centres, Amazon and Google offices, Siemens and Bayer innovation centres, PepsiCo and SAP digital hubs. Cisco intends to set up a chip design centre and Intel plans to open a joint lab with the Barcelona Supercomputing Center. Total foreign investment figures, however, put things in a different light. Although Catalonia has attracted €6bn-€9bn of outside capital in each of the past few years, those figures are down sharply from more than €16bn in 2016, according to industry ministry data. The Madrid region, by contrast, notched up an investment record of €98bn in 2018.
The city has been facing a feeling of relative decline in recent years after its spectacular rise since the 1992 Olympics,
Many residents who want to love the city lament that something is going wrong, whether they detect it in street robberies, litter-strewn avenues and clogged traffic, or a lack of new infrastructure and cultural attractions. In a survey published by the city government in December, two-thirds of residents said Barcelona’s condition had worsened in the past year. They identified its biggest problem as insecurity... That does not mean Barcelona has lost its inbuilt advantages: it has a Mediterranean climate, sandy beaches and skiable mountains nearby; it is blessed by the architecture of rugged medieval palaces and Antoni GaudÃ’s idiosyncratic modernisme; its heritage of mouthwatering Catalan cuisine and surrealist art lives on. But by its own standards it is flagging.
The city has been grappling the challenge of balancing between being a tourist haven and the requirements of its local residents,
The city’s present mayor, Ada Colau, a leftwing former activist running for re-election this year, had by then been in office for six years. Her vision was of a greener and more inclusive city, which meant reining in the “chaos” of mass tourism and property speculation. But to business people she had cemented a reputation as an enemy of enterprise and growth... For Colau, the Barcelona on the wrong track was the one she inherited when she became mayor. One of her key achievements, she says, has been the taming of “capitalism run amok” under her predecessor, Xavier Trias. “We are no longer in a city that is only betting on real estate speculation, full of cars and pollution, with tourism out of control,” she says. “We’ve restored order and are betting on economic diversification.” Colau sees tech as a way to reduce dependence on tourism...She has curbed Airbnb-style apartments and prioritised the construction of public housing, citing the use of recycled shipping containers to create a building of 42 “top quality” homes. But real estate investors loath her requirement that 30 per cent of any new private residential projects be public housing too, saying it’s a blunt tool that deters private capital. Her emblematic environmental initiative is the creation of “superblocks” — pedestrianised islands of greenery and seating at the heart of once-busy intersections, where through traffic is deterred if not banned. Residents love the resulting tranquility, but there is fierce debate over whether the congestion has simply been shifted to neighbouring streets.
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