Pipeline charge dispute to be settled
in final cabinet meeting today
By Jon Fernquest |
Corporate executives have a responsibility to act in the interests of their shareholders. (See Economist glossary on shareholder value)
So the current dispute over how much PTT has to pay to use the pipeline it's giving back to the government, could be expected.
Finance Minister Chalongphob is an economist by profession. He insists that PTT pay the true market or economic cost for use of the pipeline. This could also be expected. Chalongphob insisted that a commercial rate of 5% to 20% be paid:
"PTT is a profit-oriented company and can absorb the costs...PTT should also accept the rate otherwise we face a long suspension of its shares if we need to hire financial advisers to study the issue."
PTT president Prasert Bunsumpun asserted that the rate should be set at 2% and that a 5% rate was too high. The Energy Minister suggested that 2.5% was a good compromise. PTT was held to its guns:
"If the Finance Ministry really wants us to pay 5% or more, then it is inevitable that the costs will be passed on to gas buyers."
Since PTT prices will soon be regulated by an independent regulatory body, passing on costs does not really seem "inevitable." (See article)
PTT will also have to pay six years of back-dated rent for the pipelines extending back to October 2001 when it was first privatised. Since PTT has invested in the pipeline since then, these investments will be deducted from the rent due.
It is projected that 30% of PTT's pipelines will transferred back to the state. It has not been determined yet who will pay the tax liabilities of over 10 billion baht involved in the pipeline transfer.
The cabinet of the interim Surayud government meets for the last time today. The details of the asset transfer will be finalised. It has been suggested that the standard rate that the Treasury Department charges for the use of public land should be used. The company Airports of Thailand pays 5% for the use of Suvarnabhumi airport and 2% for provincial airports. PTT wants the same 2% rate that EGAT gets for the use of hydroelectric dams.
The most important thing, of course, is that the dispute be resolved in a timely manner so that PTT's stock can resume trading at SET where it accounts for a large share of SET's total market capitalisation.
Consumer rights advocates (also known as activists and NGOs), of course, will file more complaints, to target the specific wrong-doers, or rent-seekers, in the initial privatisation and also to seek transparency if the cabinet resolution on the pipeline transfer issued today is not transparent.
Vocabulary:
act in the interests of x - do things to help x
market or economic cost - what it would cost if you bought it in a market with people competitively bidding for it
profit-oriented - their purpose or reason for being is to make a profit
absorb the costs - combine the costs with other operating costs, so that they need not show up in the price of the final product they are used in
suspension of its shares - the stock shares of the company are prohibited from being sold in the stock market temporarily
held to its guns - would not change or compromise
costs will be passed on to - the company raises the price of the product by the amount of the new cost
independent regulatory body - a group of people separate from the government that makes rules that govern an industry
inevitable - will happen in the future, for sure
back-dated rent - rent from the past you have to pay
hydroelectric dams - dams on rivers that generate electricity (See Wikipedia on hydroelectricity)
dispute be resolved in a timely manner - solving the problem and making agreement without great delays and loss of time
resume - begin doing something again, something that has been stopped
x accounts for %y of z - x is %y of z
market capitalisation - the market value of a company’s stock shares (See Economist glossary)
consumer advocates - people working for the interests of consumers, to help consumers ("advocate" is a little softer and more formal than "activist" which sounds a little revolutionary)
activists - people acting to bring about social or political change through a public campaign
NGOs - Non-Governmental Organsations, nvolved in development-related projects defending or rpomoting certain causes, they operate without the participation or representation of any government (See Wikipedia)
rent-seekers - trying to make more money without producing more for customers, influencing government decision to favour your business (See Economist glossary)
transparency - when details are visible to the public (not hiding details that perhaps the public would not approve of)
a resolution - a formal decision made by a vote at a meeting
a cabinet resolution - a resolution made by the Prime Minister's cabinet or advisers
