Hi Friends,

Even as I launch this today ( my 80th Birthday ), I realize that there is yet so much to say and do.

There is just no time to look back, no time to wonder,"Will anyone read these pages?"

With regards,
Hemen Parekh
27 June 2013

Thursday, 15 December 2016

One Up on Donald Trump ?



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 ,needing less and less workers

    

*  With Solar Power tariff expected to drop to a mere 4 CENTS PER KWH ( Rs

   2.8 ),electric energy required to power those ROBOTS , is getting dirt cheap !

   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 massive unemployment in the US Oil / Gas industry ( no way , Mr Trump can stop this )
  

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.in/2016/11/automation-is-inescapable.html  }



    {  http://myblogepage.blogspot.in/2016/07/unlimited-power-and-round-clock.html  }



    {  http://myblogepage.blogspot.in/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 year ( as against Chinese adding 14 GW per year )
   

   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 per  Kwh from Rs 7.6 to under Rs 4.0 !
   

   Last week , Amplus won the bid for the 500 MW rooftop grid connected scheme by quoting as low as Rs 3.0 per Kwh !
  

 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, tolBusinessLine 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 % ?


This is entirely possible ! Read my blog : FROM  GREED  TO  GREAT 

{  http://myblogepage.blogspot.in/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 force , each year )



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.in/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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