The Janata Party president also urged the PM to impress upon his ministers to desist from becoming “advocates for the deal” that has no substantial or long-term economic benefit for India
Janata Party president Dr Subramanian Swamy has asked prime minister Manmohan Singh to suspend the bilateral agreement signed between India and Abu Dhabi.
“From the timing of it (bilateral agreement) and from a close reading of the minute note of P Chidambaram (finance minister) after the meeting convened by him as directed by you appears prima facie to be linked to the Jet-Etihad deal,” Dr Swamy said in a letter sent to the PM.
Urging Dr Singh to impress upon union ministers to desist from becoming advocates (for Jet-Etihad deal), the Janata Party president said, this deal has no substantial or long-term economic benefit for India.
According to Dr Swamy, there are two reasons to suspend the bilateral agreement...
1. The Constitutional Bench judgment of the Supreme Court constituted on a reference made by the UPA government regarding the mode of allocation of natural resources such as spectrum, held that if it is for commercial exploitation, then auction is a preferred mode of allocation unless compelling reasons are adduced for the contrary view. In this case, India allocated without any substantive reason to prefer a bilateral agreement allotment of air space. But this is untenable since the opinion tendered by the Constitutional Bench to the union government earlier this year, the government is bound to allocate airspace to civil aviation on the basis of auction or to the highest bidder and not otherwise.
2. Second, the Standing Committee of Parliament's recommendation and the Inter-Ministerial Group (IMG) views cannot be disregard in a cavalier manner which is what the group of four ministers did in their meeting of 22 April 2013 convened on the directions from the PM. Hence their decision is arbitrary, unreasonable, illegal and malafide in over-ruling these powerful recommendations without adequate consultation. It will not stand in a challenge in the court.
The deal between Naresh Goyal-led Jet Airways and Etihad Airways, the national airline of the United Arab Emirates (UAE), and the signing of the bilateral between India and Abu Dhabi comprises chain of events taking place one after another. The “smooth and automatic” flow of events makes one wonder whether these incidents were mere coincidence or part of collusion.
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A few days ago, crude oil price quoted on the MCX surpassed the all-time high price of Rs6,333, made in July 2008. How? The culprit is a weak rupee which has made oil as expensive as it was when international oil price was about 50% higher. At that time in 2008 the world was in the grip of the fear of a runaway rise in the price of oil. Global oil prices went parabolic as speculators and large institutions pushed up the price backed by the idea that the world was running out of oil. “Peak oil” theory was a rage. Oil hit an all-time high of $147 in July. Goldman Sachs had announced that the $200 barrier could be hit any time and even the president of the OPEC (Organization of Petroleum Exporting Countries) had warned of oil reaching $200 a barrel.
Well, we are not hearing much of the peak oil theory any more. That is because crude oil is just around $103 now, rising recently after trading around $95 for a long time. But if you look at the Indian imported oil price, you would wonder whether we are re-living the worry of peak oil.
The rupee has been weak for a long time but has cascaded down in the last two months, pushing up oil prices in rupee terms to all-time highs. While the rupee has depreciated against the US dollar by over 12% since the beginning of May to an all-time low of Rs61.21, over the same period price of crude oil has moved up 29% from Rs4,936 per barrel (bbl) to Rs6,389/Bbl as on 8 July 2013. In dollar terms the price of crude oil is up by just 8% from $95.61 in May 2013 to $103.
Crude oil in dollar and rupee terms moved almost in sync from the beginning of 2007 up to September 2011. Then, the decline of the rupee started and there was the expanding gap between the price of crude oil in dollars and in rupees. From around Rs45/$ in September 2011 the rupee declined by 15% to Rs53/$. While the crude oil price in dollar terms moved up by 17%, its price in rupee jumped by 29%. After a slight strengthening of the rupee, over the next couple of months, the rupee continued its downward trend. Since the beginning of this year, the price of crude oil has climbed up by 24% in rupee terms and a much lower 11% in dollar terms. The rupee has depreciated by almost 10% over this period.
So, India is again paying the same price of oil when there was an oil bubble. The hope for a stronger rupee seems bleak given the weak economic fundamentals, costlier imports, high inflation and record high current account deficit (CAD).
The rupee has been weak because the Indian economy has become weak and uncompetitive under the Congress-led UPA government and too dependent on foreign portfolio inflows into stock and bond markets to fund the current account deficit. And now, the foreigners are exiting the bond market, putting pressure on the rupee. In June 2013 foreign institutional investors (FII) pulled out Rs22,000 crore from the debt market. This is a staggering amount, because as much as 12% of total FII investment in the Indian debt market flew out in a span of 21 days.
The government has been trying to gain the confidence of investors saying that the drop in the currency is a temporary phenomenon and most emerging countries are affected. Finance minister P Chidambaram is in the US to drive foreign direct investment especially in the infrastructure sector. We have seen this happen in the past, would foreign investor bite again? Please read Deformed Reforms of the UPA government.
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