BUY OIL FIELDS or IMPORT OIl?

This question has come to fore after ONGC's overseas arm, ONGC Videsh (OVL), purchased 8.4% of the giant Kashagan oil field in Kazakhstan for $5 billion in a deal which is for the span of 25 years. Located in the north Caspian Sea, this is the world's largest oil discovery since 1968, with reserves estimated to be as high as 30 billion barrels.  Let’s look at some other major countries for comparison. China prefers acquiring assets; Japan opts buying oil, instead. India opts for both. So now lets look at both cases. With crude prices at $100 per barrel, OVL will recover the full value of its investment in a little more than six years. If prices fall, it will take longer. Thus this deal might not be good in near term. This Kashagan oil field is estimated to have very high capacity and output capacity of 3mn barrels/day. Keeping this factor it looks quite a lucrative deal in long term but, if it turns out to be a disaster similar to its $2-billion deal to buy Russia's Imperial Energy it would dent the comapny and the country very badly as OVL has exhausted all its reserves in this deal. But the Kashagan deal is unlikely to suffer the same fate because of its huge estimated capacity. One more fear was that it might be difficult to transport this oil to India but this fear is warded off as this output can be swapped with any other seller worldwide. Thus this recent buying spree may be good to secure energy sources for the country and meet its long-term production goals. The other side of discussion i.e. importing oil cannot be declined this easily. Experience shows that functional oil markets offer security, with some reserves thrown in and oil markets functioned even during the two Gulf wars. It is completely the government’s policies whether it wants to stick to importing or go for buying fields. So is it right to buy fields or import oil?

BE THE STREAM AND NOT THE ROCK

Last week, in each of my three classes, we were covering some extremely difficult material.   The students came to class well prepared for the most part.   They did a good job of analyzing and discussing the issues.   They came up with reasonable solutions.    They were certainly not perfect but they demonstrated a solid understanding of some truly complicated concepts.   I was proud of them.   They had come a long way.

We are now down to the last few days of the semester.   I was extremely happy to see such a good effort here near the end.   Even a grump like me had to be pleased.   Virtually every student in class had demonstrated a real improvement since we began back in August.   They not only knew more financial accounting but, just as importantly to me, they knew more about how to be good students.  

At times like these, I am always reminded of a quote that I heard a number of years ago, one that I think is terribly relevant to teaching:   "In the confrontation between the stream and the rock, the stream always wins--not through strength but by perseverance."   Every semester I set out to be the stream.

In other words, no matter how frustrated I get with my students during the semester, if I keep my long-term goals in mind and if I pound on the students day in and day out to get to that goal, I WILL WIN.   I will simply wear down their resistance and teach them how to do what I want them to do.  

As long as I keep them moving toward the goals, we will get there. 

Okay, I never have a 100 percent success rate.   If a student sets out to fail, there is not much I can do about that.   However, most students really do not want to fail.   They would actually like to learn the material (at least at some level) and make a decent grade.  

To me, then, the only real question is whether I will get them to do what I want them to do so that they will learn the material and get that decent grade.

And the answer is:   "In the confrontation between the stream and the rock, the stream always wins--not through strength but by perseverance."

I am convinced, when the students walk in on the first day of the semester, that I am the stream and they are the rocks and I will get them to learn what I think they need to know because I am going to stay focused on my long term goals.   To be a good teacher you need that extreme level of perseverance (or maybe “infinite patience” is a better way to put it).   Perseverance is a great help in becoming a good teacher.  

If you have read my blog previously, you know that I always have two long-term goals right from the beginning of each semester:

--On the last day of class, I want my students to say “I never knew I could work so hard, I never knew I could learn so much, I never knew I could think so deeply, and it was actually fun.”

--On the last day of class, I want my students to say “I understand this material so well that I can solve problems without needing the teacher.”  

I think those are educational goals worth achieving.   They make people better.   However, your goals may be radically different than mine.   That is absolutely fine.   I just feel like these two goals work best for me.   You need to determine what goals work best for you.

I also have facilitating goals that I use to help the class get to my long-term goals.  

--Every day, I want my students to come to class adequately prepared based on specific assignments that I have given them previously.   If they are not prepared, I am upset with them.

--Every day, I want my students to participate by analyzing new situations I pose in class.   I want their knowledge to always be pushing into new and unknown territory.  

--Every day, I want my students to go beyond memorization to achieve a level of understanding that allows them to solve questions and problems at a deeper level.

--After class, I want my students to organize the material that has been covered that day to help them come to a more concrete level of knowledge.   I don’t want them to quit when they just have “jello knowledge” but to keep working until they have a solid understanding.   Most student leave class with a squishy level of knowledge (jello knowledge) that requires more thought, work, and organization before it is truly solid.  

Does it work?   At first, of course not.   But, that’s normal; that is no reason to give up.  If I keep pushing them and guiding them and working on their mistakes, they gradually improve.   Learning is a slow, methodical process.   My only concern is whether I can get them to my goals by the last day of the semester.   And I have a strong belief that "In the confrontation between the stream and the rock, the stream always wins--not through strength but by perseverance."   Keep pushing and they will make it.  

Always!

India Inc.'s Dilemma

The recent news regarding the latest tussle between the insurance regulator IRDA and the finance ministry shows some signs of desperation on the side of the ministry to meet the disinvestment target. The finance ministry expects to raise Rs. 30,000 crore through the sale of government stakes in state owned companies.However this target seems to be far from being achieved.
The main reason for this type of disinvestment is the rising fiscal deficit which has to be reduced if India does not want to be in trouble.

 The recent 2G auctions have also left the government concerned about meeting the target of reducing the fiscal deficit to 5.3% of India's GDP. The estimated revenues from the auction were Rs.40,000 crore however the auctions were able to raise only Rs.9,400 crore.

With this two problems in front of GoI it is obvious for them to get worried and hence they do not want to take any risks. So they have now decided to allow LIC , India's largest insurer to invest in buying stakes of listed companies up to 25% (up from 10% previously). This decision might be a bane because it might increase LIC's exposure to risk and thus investor's money might be at risk. So IRDA is opposing this.

Whether this decision is useful or like the other two trials this too will prove to be a flop for GoI is a question which is yet to be answered.

Parth Pandya
SIMSREE Finance Forum

East versus West -- No Pain, No Gain

A few days ago, this blog moved over 65,500 page views since its inception.   It is amazing how often I receive emails from teachers (around the world) who start out by saying “A friend of mine who teaches at my school told me about your blog.”  

Consequently, I like to stop now and then and say Thanks!!! to everyone who passes along a good word about this blog.   If not for you, I would be writing all this stuff to myself.   Whether you agree or disagree, I really appreciate your passing along the blog entries.

**

One of the things that I try to do in my classes is talk with my students about my teaching philosophy.  I want them to understand that I do not do things randomly.   I try to have a reason for what I do and I want that reason to be logical.   I think students appreciate being brought into the conversation about their own education.   I think they are more likely to do what the teacher asks if they understand that there is a reason.  

To use an overused cliché, I want my teaching to be transparent.

Here’s an email that I sent out to my students today.   It is probably pretty obvious that I do become frustrated at times by students who simply will not try.   For some reason, they have come to the conclusion that trying is not a necessary part of learning.  Or, that trying is some type of bad omen.  

I want them to look at trying in a different light.   Here's what I wrote them.

 

To: Accounting Students

From: JH

http://www.npr.org/blogs/health/2012/11/12/164793058/struggle-for-smarts-how-eastern-and-western-cultures-tackle-learning

A friend of mine sent me the link above from an NPR show that was aired this morning about education. As people who have been students virtually your entire lives, I thought you might find this essay interesting. It could make you question whether you have been educated by the best possible philosophy. And, it might also help you understand my style of teaching a bit better.

Basically, this article stresses a philosophy that learning is greatly improved by struggle (a word that we rarely associate with education in the US).

In fact, here is the quote that I found most interesting.

“In Eastern cultures, Stigler says, it's just assumed that struggle is a predictable part of the learning process. Everyone is expected to struggle in the process of learning, and so struggling becomes a chance to show that you, the student, have what it takes emotionally to resolve the problem by persisting through that struggle”

“To show that you, the student, have what it takes emotionally to resolve the problem by persisting through that struggle” – interesting concept for education. The author is apparently talking about something more than taking notes and memorizing formulas.

I think we all realize that in sports there are many sayings that stress the importance of struggle: “No pain, no gain” being probably the best known. I don’t think I’ve ever met a single athlete who didn’t subscribe to that philosophy whole heartedly. Whenever you see a championship athlete (in the Olympics, for example, or on the football field), it is simply assumed that the person has spent countless hours in rigorous training in order to become that good.  

However, we don’t exhibit the same attitude toward our best students. We rarely talk about the countless hours it takes to become a championship student. Instead, we tend to dismiss the difficult work that is necessary because “oh, he/she is just smart.”

For some reason, our education system doesn’t put much emphasis on the struggle that is necessary for deep learning. In fact, any visible sign of a struggle to learn material is often viewed as a weakness (“he/she is really not cut out for this stuff”). Is learning that takes place quickly any more beneficial than learning that occurs after considerable effort?

I believe the reason we don’t stress the need to struggle to learn is that we don’t challenge our students enough (and then we are often unhappy that they don’t turn out better prepared). From kindergarten forward, the “struggle” to learn is not often much of a struggle. After enough years, you come to believe that struggle is not really a necessary component of learning.

Oh, do I disagree with that. I want you to struggle. To repeat, I want you to struggle. Every single day. I want you to have to put up a fight. I want to make this stuff hard enough that you have to struggle to do well. I think it is good for you and it makes the learning so much more a part of your being.

If I could make learning easy for you, I would not do it.

In truth, I think about 70 percent of you are putting up the fight that I want. I am very pleased (most days) with about 70 percent of you. The other 30 percent have a tendency to give “lazy answers” that often seem to say “I didn’t feel like struggling with this material so here’s a throw away answer so that you’ll let me slide.”

My goal in this email is not to convert you to my thinking. I’m more interested in making you aware that lazy answers don’t do you any good.

My real goal here is to make one point: Champion athletes struggle mightily to get better. Champion students must do the same thing. There is no shame in having to put up a fight to learn this stuff. In fact, that’s how it ought to be.

US Elections and India

Last Wednesday the world got a very important news - Mr. Barack Obama being re-elected as the president of the United States of America. However it is such a news that would not leave even a single country in the world unaffected. For India there were mixed feelings.

For the India IT industry this news is considered to be somewhat bad  because of the stricter visa rules that would make it difficult for Indian IT industry to send their people to the U.S. where lie the majority of its customers. 

However if we look at the global economic scenario this news is not bad at all. The world is well known by the phrase "fiscal cliff" by now. Mr. Obama is believed to take a softer stand with respect to tax reforms and reducing the fiscal spending of the U.S. thus benefiting the growth f both the U.S. and the world economy and hence the Indian economy as we will see more FIIs investing heavily in growing markets like India. By December this year the decision regarding the fiscal cliff is expected to come making things much more clear.

On the other hand India must take care that the internal policies must not act as a hindrance to the investments. There are several reforms which await the winter of the parliamentary session for their approval. So there is one more reason to wait for this December.

Parth Pandya

SIMSREE Finance Forum

JOE'S TOP TEN LIST

Joe’s Top Ten List

This past Thursday, I had the great good fortune to lead a 3 ½ hour discussion of teaching at the New Faculty Seminar put on by the Virginia Community College System.   The VCCS had about 150 folks there who had joined their teaching ranks in the last year or so.   We spent our time together chatting about how to become a better college teacher.

Whenever I lead this type of discussion, I always like to give the participants something at the end that will keep the thought process moving forward even after we have parted.   Here is what I typed on Wednesday night and then distributed to these folks after our time together on Thursday.

**

One of my favorite class assignments is to ask my students to read a chapter and pick the top 5 or 10 things they found important in the material.   I think that does a lot for them.   It forces them to think more deeply about the subject as they read.   It also requires them to make an evaluation, something that is not often done in education.   What part of this material was really most important?   They have to do some thinking and make some judgments.

Then, I will give them my countdown of what I thought were the most important parts of the reading.   My challenge to them is to compare my list to their list and figure out why mine had some differences (or justify why their list was actually better).   So, on November 1, we are going to spend 3 ½ hours together talking about becoming a better teacher.   Before you get too far away from this session, sit down and make a list of the most important things we discuss.   Then, pick your top 10 and rank them.   I want you to really consider what was most significant factor in your goal of becoming a better teacher.  

I have made my list below.   Compare your list to my list and see what you think.   In fact, if you go out tonight with other folks from the session, pick a group top 10.   It would be a worthwhile exercise, a great step toward being a better teacher on Monday when you return to your home school.   If you think my list is messed up in some way, let me know.   You can always send me an email at Jhoyle@richmond.eduand explain why my judgment is a bit faulty (I’m getting old – I have an excuse).  

I don’t know exactly what we will get covered on Thursday but this is based on my best guess as of Wednesday.

NUMBER 12(Okay, I lied about a Top Ten list.   I just couldn’t get the number down below twelve.)    REMEMBER THAT WE ALL NEED MOTIVATION AND INSPIRATION.   I gave you a quote from Pat Conroy’s The Prince of Tides as a celebration of teaching.   Occasionally, it is easy to get down and depressed when we teach.   Students never quite do what we want them to do.   I don’t think you should ignore your own need for inspiration.   Talk with other teachers about their best days in class.   Or, keep a list of student evaluations that talk about how much you have helped them.   Read those now and then to remind yourself of why you got into this business.

NUMBER 11.   NEVER QUIT THINKING ABOUT YOUR TEACHING.    As our quote from Fortune magazine said, when learning a new skill, most people get good at first and then stop improving.   However, a few continue to get better and go on to greatness.   I’m convinced you will stop growing when you stop thinking about your classes and how you can make things go better.   I’m also convinced that when you have a bad day or a “bad” class that a good response is to sit quietly and just think what is happening and how you can turn things around.  

NUMBER 10.   BE AMBITIOUS.    The best teachers have a fire burning in their belly that pushes them to be great.   If you are satisfied with average, you’ll never be more than average.   The world needs better teachers.   The world needs for you to be a better teacher.   Make that a passion in your life.

NUMBER 9.    DON’T FORGET THE 50-50 RULE.   Almost every teacher talks too much.   Students prefer to sit and be passive and spoon fed.   Don’t let them pull that trick.   Make them talk.   If you talk, the class quickly becomes a conveyance of “stuff” with student thinking going out the window.   The goal should always be that you never do more than half of the talking in any class.   Above that, the quality of learning goes down.

NUMBER 8.   ARE YOU A FOOTBALL COACH OR A SCOUT LEADER?   There are two ways to motivate students.   You either push them or encourage them.   Great teachers are one or the other.   You cannot ignore student motivation.   Figure out how you are most comfortable providing that motivation.

NUMBER 7.   KNOW WHAT YOU WANT ON YOUR TOMBSTONE.    I obviously like the idea that I am judged by my students to be “the scariest prof” but also “the most caring.”    That is how I would like to be remembered.    Once I realized that, it has influenced my teaching.   I didn’t want to be remembered as “most boring” or “most confusing” or “funniest.”   I really want to push my students as hard as I can (enough to scare them or, at least, keep them on their toes) but also have them realize that I was doing it solely because I cared about them.   I want that student response.   Ask yourself what you would like for students to write on your tombstone.   It will influence the way you teach.

NUMBER 6.   A MEANS EXCELLENT.   I think grade inflation has had a horrible impact on college education.   Students have come to believe that they deserve a good grade just for breathing and don’t deserve to fail no matter how poorly they do.   If that is the teacher’s attitude, there is no reason at all for a student to work very hard or think very deeply.   I know it can make you feel like a tyrant but if you really care about the students, you want them to learn.   Set a high (but fair) standard and let them know that standard right from the start.

NUMBER 5.   PREPARATION FOR CLASS IS A REAL KEY FOR LEARNING.   If you can get your students to walk in to class well prepared each day, everything goes so much better.  If they are not prepared, all they can really do is sit and take notes and fall back on memorization.   Always think about how you can improve their level of class preparation.   That alone will create a much better class and learning environment.

NUMBER 4.   AFTER THE SEMESTER, ASK YOUR STUDENTS TO TELL YOU HOW THEY MADE AN A.   This allows you to pat your best students on the back.   They will love you for that.   It also helps you evaluate how you are doing in each class.   And, you can use these written responses to guide your next group of students.   One of the best ways to improve a new class is to let them know what it takes to do well.  Getting previous students to explain “the secrets” of how they made an A puts out the message loud and clear to the next group.

NUMBER 3.   THE WAY YOU TEST IS THE WAY THEY WILL LEARN.   If you ask test questions that focus on memorization, your students will do no more than memorize.   If you want them to think deeper, you have to ask questions that will require that depth of knowledge.   Try open book tests; you’ll write better questions and the students will be forced to think at a deeper level.

NUMBER 2.   BE SURE TO KNOW YOUR FLY-ON-THE-WALL PHILOSOPHY.   What you want to hear from your students on the last day of class should guide everything you do for the entire semester.   Don’t worry so much about any one day; worry about getting them to achieve your goals by the final day.   Figure out what you want your students to say about the experience on the last class and then use that to help you to design and focus each assignment.

NUMBER 1.   BY NOVEMBER 1, 2013, SHOOT TO BE 5 PERCENT BETTER AS A TEACHER.   To become great, you must continue to improve.   No one gets great overnight.   Set a reasonable goal and then work to make sure you feel you have achieved that goal over the next year.   You can’t measure it but you’ll know if it happens.   That’s the first step toward greatness.

Auction - The only way of allocating Natural Resorces to Private Firms?

The article is written by Khushal Shah and Chetan Dhawan from SIMSREE in the Arthneeti Article Writing Competition (September 2012)

 

Dr Manmohan Singh is standing at a very precarious position today. The Comptroller and Auditor General of India, in his recent report, has pulled up the government for financial wrong doing due to its policy of allocating captive coal blocks to private companies without a competitive bidding procedure. Dr Singh has justified his stance by arguing that the CAG has gone wrong with its numbers and that it is the government prerogative to decide on policy regarding allocation of natural resources. Has Dr Singh erred in handing out coal blocks for free and subsequently justifying the government’s decision?

To answer this let us first look at how the allocation of natural resources started in India. The Mines and Mineral Development and Regulation Act was enacted in 1957 when we hardly had any information about the extent of our natural resources. Also, there was very limited private investment. Under such a scenario, the government promoted first-cum-first-serve scheme whereby any willing investor was given the lease and the license to extract the minerals.The reason for implementation of the scheme being that ultimately the method of allocation of natural resources including airwaves, coal, minerals, oil and gas, forest land, to name a few, should also take into account public interest which includes within its ambit the larger economic perspective and not merely financial gain. However the recent revelations by the CAG accusing the government of causing a notional loss of lakhs of crores of rupees to the national exchequer and the prima facie reports by the CBI accusing several government ministers of nepotism indicating collusion between corporates and bureaucrats call into question the feasibility of a first cum first served allocation policy for any natural resource.

            Today, we are faced with such a low level of public trust that the auction process is seen as the 'best' way to ensure adherence to transparency and openness in resource allocation and maximising revenues to the government. Even the apex court, following 2G spectrum revelations, commented that ‘If scarce natural resources were to be alienated by the state, then the ‘only’ legal method was a transparent public auction’. So why is it that an ‘auction’ is perceived to be the only best possible method?

            To answer this, let us first see how resource allocation under auctions takes place. Generally in this scheme government comes up with a ‘Base Price’, which is the minimum price at which the government expects to sell the resource. The bidders are then expected to bid above the base price based on their perceived value of the resource. The bidding goes on till only one highest bidder remains. Now the resource is allocated to the bidder at this discovered highest price.Since the entire process is transparent,chances of collusion and corruption reduce drastically, securing the best possible price for the government.Perhaps, we can take a clue from the recently conducted 3G auctions which took place by means of an online auction. The bidding went on till the highest bid was realized. The process ensured transparency during the entire process by means of specially designed secure software. Clearly, an auction is a way to determine market demand and price. But why fixate on auctions as the only way to ensure market orientation, transparency and efficiency in the allocation and pricing of natural resources in India?

While auctions could be a ‘preferred’ option since they bring about transparency and secure the best possible price, revenue enhancement cannot be the only consideration while allocating natural resources.The disposal and distribution of natural resources has to be made in accordance with the sector specific requirement of each natural resource. The method of distribution of natural resource has to take into account the nature of natural resource and economic policy underlying the effective utilisation of such resource. There are various other factors such as national inclusion, service affordability, final product pricing, rural penetration etc that have to be taken into consideration to arrive at informed and reasoned decision of the methodology of allocating natural resources.           

Apart from these there are certain problems which the government might have to overcome before it can enforce the auction policy for all natural resource.First, the Centre has to convert this policy to law by way of amending Section 11(2) of the 1957 Act to auction natural resources like minerals, which is time-consumingFor example, the government tried to amend the Act to introduce auctions for allotment of coal blocks in 2004, but has not yet finalised its modus operandi.Secondly, the past experiences of some State Government for allocating leases by competitive bidding have not been encouraging. In 1991, Odisha suddenly realised that mining gemstones by the State-owned Orissa Mining Corporation was not remunerative and decided to auction gem-rich blocks by competitive bidding through Orissa Mining Corporation.The State Government identified 12 such blocks for aquamarine and sapphire in Bolangir and Kalahandi districts for a reserve price of Rs 20 lakh. Out of 12, the State Government could auction only five blocks for Rs 22 lakh. Thirdly, the Supreme Court in its order of February 2 this year observed that while allocating natural resources through auctions, the doctrine of public interest within the framework of the Constitutional rights of the people has to be adhered to, which is not possible if the government adopts only auction route for allocation of all natural resources. For example, if we auction fish resources of the Bay of Bengal, the Japanese trawler companies may bid the highest price, but the livelihood of the east-coast fishermen will be in jeopardy. Fourthly, it is observed that the cost of buying at a high price from an auction is more often than not passed on to the final consumer. For example the recent auction of third generation airwaves did fetch the government a huge sum, but the services have not found widespread acceptance among the general public because the companies, in order to recover the bid price, had to price these services at a higher price. Compare this to the allocation of 2G spectrum. It is widely believed that while the awarding of 2G spectrum on a so-called first-come-first-served basis in 2008 may have caused massive losses to the exchequer, the consumers, nevertheless, benefited from call rates dropping due to the entry of new mobile operators and very low call rates.

Another alternative for allocation of natural resources which can be beneficial to both the government and the companies can be a royalty based mechanism. A royalty based mechanism is similar to a tax based on assessed value of a property.The royalty should be tied to the market prices, rather than a fixed amount. A royalty based mechanism would enable the government to charge royalty at the current market price, rather than at the beginning when the resources are allocated. It would ensure continuous supply of revenue to the government. Since the royalty is associated with the actual market price, it would ensure higher revenue generation for the government. The time period for revising the royalty value should not be kept very long. Although the royalty based mechanism is prevalent in India, the royalty amount is fixed and revised every three years, which is a very long period considering the fluctuations in the prices.

            Considering the diverse needs of the country, it would be very difficult to pin point on a specific policy as the best alternative, given that the main aim of the government is to bring in transparency and safeguard the resources belonging to the country. Auctions are meant to allocate scarce resources in a transparent manner. In case the government wants to deviate from market based pricing, driven by overriding public concern, then the rationale behind policy making must be clearly manifested. In the larger public interest, if prices of end products need to be kept at a threshold, then the good or service should be subsidised at the consumer end rather than at the input end. Ensuring that benefit given at the input end to corporates will be passed on to the consumer is very difficult.The best choice would be the one which would ensure sustainability, effectiveness and transparency in the utilisation of the scarce natural resources.