US President-Elect , Donald Trump has proposed to
reduce US Corporate Income Tax from 35 % to 15 %
He hopes that this will work as an incentive for US
Companies operating abroad to resettle their manufacturing operations back to
USA , thereby creating jobs in USA
Earlier , the then British Chancellor of Exchequer ,
George Osborne, too had proposed to ,
reduce UK Corporate Income Tax from 30 % to 15 % , in order to counter the thinking of
many foreign companies planning to pull out of UK after BREXIT, resulting in
job losses
Now , even if this Corporate Tax
reduction does bring , some overseas manufacturing operations of American
Companies back home ( to take advantage of lower taxes to increase profits ) ,
that may not result in increased jobs !
Here is why :
* More and more
American Companies are resorting to ever-greater
AUTOMATION
,
* With Solar
Power tariff expected to drop to a mere 4 CENTS PER KWH (
Rs
2.8 ),
Nor do robots unionize / demand higher wages / go on
strike or get tired after 8 hours !
* Increase in
generation of cheap ( at exponential rate ) Solar Power
will generate
Just as every company is trying its best to reduce
manufacturing costs, in order to become a " LOW COST
COMPANY " ( in relation to its Competitors ) , so does every COUNTRY
also try to turn itself into a " LOW COST ECONOMY
"
How can India become such a " LOW COST ECONOMY " ?
I have given some suggestion in this regard in my blogs
:
{ http://myblogepage.blogspot.com/2016/11/automation-is-inescapable.html }
{ http://myblogepage.blogspot.com/2016/07/unlimited-power-and-round-clock.html }
{ http://myblogepage.blogspot.com/2016/09/sun-is-solution.html }
To the list of measures that I suggested in these blogs
, add the following :
Reduce the " COST
of ENERGY " by accelerating generation of Solar
Power
We must meet
our target of generating 100 GW of Solar Power
by 2022 , ie : 15 GW per
We just cannot
compete with others by using Oil at $ 50 per barrel !
Over the past
2 years , Solar Power Plants being set up in India have dropped their prices
Last week ,
Amplus won the bid for the 500 MW rooftop grid connected scheme by
This is just a
beginning of a SOLAR POWER REVOLUTION in the
making !
On 29 Nov 2016 , news papers reported :
" The cost of solar power has dipped well below the ₹3-mark, if software major Infosys is any example.
The company has 6.6 MW of ground mounted solar capacity (and
another 600 kW on the roofs) at its Hyderabad facility. The cost of generation
of electricity, averaged over 20 years, works out to ₹2.85, Infosys’ Executive
Vice-President, U Ramadas Kamath, told BusinessLine recently.
"
Now imagine what it could do for the Indian Economy ,
if solar power were to be made available to homes/commercial establishments /
industries, at 29 PAISE PER KWH ?
If we were to believe Techno-Guru , Tony Seba ( author of " Clean Disruption
" ) , this will happen by 2030 !
In his book , he writes :
" Solar panel costs have dropped from $ 100/W in
1970 to $ 0.65 / W in 2013....Every time industry capacity doubles, costs drop
by 22 percent ....
Furthermore, as soon as 2015, two-thirds of Americans
will be able to buy unsubsidized solar power at rates cheaper than what they
currently pay for their utilities
Panel costs are so low they are not the main cost
factor in residential and commercial solar power plants. More than solar
panels, so-called soft costs now account for a higher percentage of total
installation costs . Soft costs include, the cost of permits, regulations,
taxes, interconnection fees , inspection and installation
Globally , solar PV installed capacity has grown from
just 1.4 GW in 2000 to 141 GW in 2013 .. a compounded annual growth rate of 43
percent
Should solar PV continue to grow at 43 percent annual clip, the solar capacity
installed base will be 56.7 TW by 2030
Should solar continue on its exponential trajectory,
the energy infrastructure will be 100 percent solar by 2030
The cost of fuel ( the
Sun ) is zero . The ongoing costs of operations and maintenance ( O&M ) are
close to zero
CONSEQUENTLY, THE COST OF
BORROWING THE CAPITAL ( THE INTEREST RATE ) CONSTITUTES MOST OF WHAT A
SOLAR USER PAYS FOR SOLAR ENERGY
For Lancaster ( a county in USA ) , the cost of Solar
Power ( cents per kwh ) was 7 cents at
interest rate of 10 % ( on capital employed ) .
It dropped to 3.5
cents per kwh , when interest rate dropped to 1
% "
SO , IT IS CLEAR THAT THE " TRICK
" LIES IN BRINGING DOWN THE INTEREST RATE FOR SOLAR POWER PLANTS, TO 1 % OR LESS !
Including Japan , Australia , Canada ,
Eurozone , S Korea , Sweden , UK and USA
, many countries have managed to keep their Central Bank interest rates , at 0 %
- 1 %
At least for SOLAR POWER PLANT ( SPVs ) , can we bring down the
interest rate to 0 % ?
{ http://myblogepage.blogspot.com/2015/10/from-greed-to-great.html }
But our PARALLEL
GOAL ( parallel to making India , a LOW COST
ECONOMY ) , is to :
* INCREASE EMPLOYMENT ( to take care of 12 million
people getting added to our work
By itself , a mere " Reduction
in Corporate Tax " , is unlikely to motivate Companies to hire more
persons ( what Donald Trump , is planning )
But they will hire more if that REDUCTION in Corporate
Tax , is directly linked to the number of persons they employ
That is :
THE MORE THE NUMBER OF PERSONS THAT A
COMPANY EMPLOYS , THE LESSER THE ( INCREMENTAL ) CORPORATE TAX IT PAYS !
A frame work of how this DEPENDANCY
( of tax on employment ) can be implemented , is explained in my blog :
{ http://myblogepage.blogspot.com/2016/08/incentivizing-employment.html }
Call it , " Killing Two Birds With One Stone
"
Doing better than Donald Trump is no big deal , if
there is political will !
-----------------------------------------------------------------------------------------
16 Dec 2016
www.hemenparekh.in / blogs
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