Did the PTT ruling really mean
more pipeline divestiture?
By Jon Fernquest[Introduction|Article]
[Reading Questions|Answers]
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Good arguments are being made that pipeline divestiture in the PTT case should go a lot further than it has.
The Supreme Administrative Court made a ruling in the PTT case last month
The government had the responsibility of interpreting this ruling and implementing it.
Now experts are saying that the government did not go far enough in its interpretation of the ruling.
A panel at Thammasat University yesterday questioned the government's narrow reading of the court verdict.
Under the government's interpretation, only a small portion of PTT's land-based pipeline needs to be handed back:
"PTT has agreed to transfer some 400 kilometres of land-based pipeline and equipment worth around 15 billion baht to the state to comply with the verdict. PTT would also be liable to pay future rent to the government to use the pipeline, as well as back rent dating to its privatisation in October 2001."
This 400 kilometres is only a small fraction of PTT's total pipeline;
"The land-based pipeline accounted for just a fraction of PTT's total network, which includes 1,384 kilometres of land-based pipeline, 1,369 km of underwater pipe and a 770-km distribution network."
Pipelines running underwater through the gulf of Thailand (seabed pipelines) run through areas that are not normally considered private property that private companies can own. One panelist raised the question:
"Let's say Bill Gates wants to build a home in the sea. Would he be allowed to do it? Then how is it that PTT, as a private firm, is allowed to do so?"
The argument runs that when PTT was a public company owned by the government, it had special government authority over land.
When PTT became a private company this authority was not taken away from PTT.
This special authority allows PTT to act autonomously as if it were the government, even though it is now a private company:
...river banks, waterways, highways and lakes were defined by law as national property."Under the PTT Act, the majority state-owned company appeared to have autonomous authority over land used for land and sea pipelines and drilling stations.
'PTT [when a state enterprise] had autonomous power in laying gas pipelines in areas that is considered to be public property. Why have PTT's rights over public land now become privately owned ones?'"
PTT is one of the most profitable companies in Thailand:
PTT, the largest listed company on the Stock Exchange of Thailand, is also one of the most profitable, with nine-month net profits in 2007 of 73.3 billion baht on revenues of 1.09 trillion....PTT enjoys high margins in its role as a middleman for trade in natural gas. The Electricity Generating Authority of Thailand should be able to purchase directly from producers, which would help reduce power costs by 3.5 billion baht per year...
Yet PTT is threatening that any increased costs it faces will have to be passed on to consumers.
This may not be the case though because a new National Energy Policy Board was set up by the interim government to regulate monopoly situations just like this. Some argue that price ceilings will be needed:
...the government should impose price ceilings on PTT to prevent the company from passing on rental fees to consumers....PTT could exercise its monopolistic power and pass the [cost] burden to consumers no matter how the government re-allocates the assets, so long as it sticks to the existing approach of pipeline utility costs...
...the National Energy Policy Board had the authority to settle the issue. The Finance Ministry, which controls 52% of PTT, earlier this week asked the cabinet for a two-week delay in finalising lease rates for the pipeline network to be transferred to the state.
PTT, which has indicated that lease rates are estimated to be at least 5% of annual pipeline revenues, has warned that setting excessively high rates could result in higher power charges as costs are passed on to power consumers.
(Source: Bangkok Post, 09-01-08, temp-link)
Vocabulary:
divestiture - getting rid of something, having something you own taken away from you
made a ruling - make a decision in a legal case that both sides have to follow
interpreting - deciding exactly what something means (when the exact meaning is not clear)
implementing - making something that is only an idea or a plan into something that actually works
a panel - a small group of people who discuss a problem or issue in front of an audience
a narrow reading - does not apply broadly, to many things
a court verdict - the decision made by a court on how a legal case should be settled
land-based - on land (not in the sea)
comply with - follow a rule or law
back rent - money now owed for renting land in the past
privatisation - the process of making a public government owned company publicly owned
x accounted for y% of z - x is y% of z
distribution - the process of sending a product from the factory to the people who consume it
autonomy (noun) - being able to make your own decisions, govern yourself rather than be governed by others
autonomous - adjective form of "autonomy"
autonomously - adverb form of "autonomy"
a majority - most of a group, over 50%
autonomous authority - control and have authority over your affairs (rather than others having authority over you)
a listed company - a company whose stock is traded on a stock exchange
costs passed on to consumers - when the costs of production of a product rise, the cost of the product rises also (Note that is not always the case, sometimes a company is forced to "absorb" these increased costs themselves with reduced profitability)
price ceilings - a law that limits how high sellers can raise their prices
impose - force something on someone
monopolistic power - the power of setting the price of a good when the seller is the only one producing that good
a burden - something difficult to do (that people would not normally do without being forced)
allocate - divide a set of things up and give them to different people
re-allocates the assets - take assets away from the current owner and give them to new owners
