On February 15, 2024, a five-judge Constitution bench of the Supreme Court (SC), headed by the CJI declared the Modi government’s 2018 Electoral Bond Scheme (EBS) as unconstitutional. The four major considerations behind this order are:- The scheme legitimizes the use of black money in political funding; it lacks transparency and keeps identity of the donor anonymous thereby violating the constitutional right to freedom of speech and right to information (Article 19(1)(a)); it gives rise to ‘quid pro quo’ – a legal jargon for a person in the position of power granting favor in exchange for bribe; it denies equality of opportunity to the voters to exercise their freedom to vote in an effective manner (Article 14). The EBS was...
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RBI changes gear, finally
Normally, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) conducts a review once in every two months based on which the RBI makes policy announcements at the beginning of each of the following months viz. February, April, June, August, October, December. Deviating from this practice, in early May, 2022, Governor Shaktikanta Das announced changes in the important monetary policy instruments. Das increased the policy repo rate (interest rate at which the RBI lends to banks) or RR from 4 percent to 4.4 percent. He also increased the cash reserve ratio (percentage of a bank’s total deposits that it needs to maintain with the RBI as liquid cash; the bank does not earn interest on this liquid...
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Fuel tax – more cuts needed
To rein in the inflationary pressure, on May 21, 2022, Modi – government announced reduction in in the central excise duty (CED) on petrol and diesel by Rs 8 per litre and Rs 6 per litre respectively. The cuts are significant but given the magnitude of the challenge, these won’t be enough. Let us do a fact check. In May 2014 (when Modi took charge), CED on petrol was Rs 9.8 per liter and on diesel Rs 3.8 per liter. By March, 2020 (this was when Covid – 19 pandemic struck), already the government had hiked these to Rs 20 per liter on petrol and Rs 16 per liter on diesel. During 2020, it was further increased on petrol by...
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Wheat export – policy flip flop
In the backdrop of increase in international price of wheat (courtesy, Ukraine crisis) early this month, Prime Minister Narendra Modi, had exhorted that India can help meet the global requirements of food deficit countries, provided the World Trade Organisation (WTO) allows it. He also exuded confidence that this had created an opportunity for Indian farmers to increase their income. Even as stakeholders were gearing to undertake export with several of them having signed contracts, on May 13, 2022, the Director General of Foreign Trade (DGFT) put a ban on wheat export with ‘immediate’ effect. The exports under government-to-government arrangements and contracts signed prior to May 13, 2022 are exempt. The government has sought to explain the ban in terms of...
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Power sector pushed to the brink
Faced with an acute power crisis caused amongst others by sudden spurt in power demand in this season, Modi – government has fired all cylinders to tackle the most crucial of all bottlenecks in the way, namely coal which accounts for nearly 52 percent of total power generation capacity in the country. During April/May 2022, the Union Power Ministry – using powers vested in the government under Section 11 of the Electricity Act, 2003 – issued directions to (i) all imported coal-based plants (ICB) to operate and generate power to their full capacity and (ii) all generation companies (gencos) based on domestic coal to import at least 10 percent of their fuel requirements (there is a move to further raise...
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Power subsidy – Kejriwal’s volte face
Arvind Kejriwal, Chief Minister, Delhi has come up with a proposition i.e. ‘from October 1, 2022, electricity subsidy will be given only to those households who ask for it’. This is bizarre. If, the head of a State takes an in-principle decision to give subsidy to anyone who wants it, as a natural response, almost every one will say ‘Yes’. But, over 75 percent of the households (HHs) are already getting subsidy. So, why ask them? There is something more than what meets the eye. At present, HHs consuming up to 200 units per month are fully exempt from paying any charges. Their number is around 3 million. For HHs consuming between 201 – 400 units per month, the State...
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Reining in fertilizer subsidy
Fertilizer subsidy or payments made to manufacturers/importers to cover the excess of the cost of production/import and distribution over a low maximum retail price (MRP) – they are asked by the Union Government to charge from the farmers – has increased by leaps and bounds during the last three years. From an already high of Rs 83,000 crore during 2019-20, it increased to Rs 138,000 crore during 2020-21, Rs 162,000 crore during 2021-22 and could cross Rs 200,000 crore mark during 2022-23. Is there a way, this escalating trend could be reined in? Subsidy payments are made under two broad categories of fertilizers viz. (i) urea; (ii) phosphate or ‘P’ and potash or ‘K’ fertilizers – also branded as non-urea...
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PSU privatization – lock, stock and barrel
The ministry of finance (MoF) has barred public sector undertakings (PSUs) from bidding for other Central Public Sector Undertakings (CPSUs) which are on the block for privatization. The Department of Investment and Public Asset Management (DIPAM) has stated: “As a general policy, PSUs (Central/State/Joint)/State governments and Cooperative Societies controlled by the Governments are not permitted to participate in the strategic disinvestment of other PSUs as bidders unless otherwise specifically approved by the central government in public interest”. PSUs are undertakings in which the Centre/state governments or jointly with central and/or state governments have majority ownership (with shareholding of 51 percent or more) and control. If, the government decides to shed at least 51 percent, it is termed as strategic disinvestment...
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Bolstering IBC architecture – a joke
While, putting on hold its plans to implement the so-called “fresh-start process” for indebted poor people under the Insolvency and Bankruptcy Code (IBC) (it provides for debt waiver up to Rs 35,000 to the poor who don’t own houses, earn up to Rs 60,000 a year and have assets up to Rs 20,000 each), the government wants to first focus on bolstering the IBC architecture to yield quick resolution of toxic assets while preventing unscrupulous elements from gaming the system. The reference here is to the delay in completion of the corporate insolvency resolution process (CIRP) as well as low amount realized by the creditors from their non-performing assets (NPAs) – a fancy nomenclature for loans that are difficult to...
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Freebies – road to economic disaster
A few days back, Prime Minister, Narendra Modi asked senior bureaucrats to point out deficiencies in government policies. In response, some officials have zeroed in on ‘the freebies promised by winning party in state elections’. In the past, freebie – an acronym for “something given free of charge” – found a place in a corner of the manifesto of parties. In recent years, this has occupied the centre-stage and holds the key to winning elections. For instance, in February 2020, the Aam Aadmi Party (AAP) led by Arvind Kejriwal (AK) mesmerised Delhi voters by promising freebies. They returned AAP to the seat of power with a thumping majority giving it 62 out of a total of 70 assembly seats. Then, the...
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