The reports of the district administration ordering auction of the land of several farmers in Rajasthan to recover from them the dues of public sector banks (PSBs) are shocking. The land is the only asset that a farmer especially small and marginal has and if it is taken away, this will lead to permanent incapacitation impairing his/her ability to earn a livelihood all through his/her life time. The dues had piled up because the farmers did not pay back as during the campaign in the run up Assembly elections in the State (2018), the then President, Indian National Congress (INC), Rahul Gandhi had promised loan waiver and that too within ten days of the INC-led Government taking charge. But, it...
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Sun-set on LPG subsidy
From June, 2020, the Union Government stopped depositing LPG (liquefied petroleum gas) subsidy in the accounts of eligible beneficiaries and the position continues till date. Even as the budget for 2021-22 has provided for Rs 14,000 crore under this head (down from Rs 36,000 crore during 2020-21), it is unlikely that any payments will be made during the current year. What has prompted this move? Was it orchestrated but put into effect only now? To understand, let us reflect on some basic facts. Since January 1, 2015, Modi – Government has been running a scheme for direct benefit transfer (DBT) of LPG. Nicknamed PAHAL (Pratyaksha Hastaantarit Laabh), under it, three major oil marketing PSUs viz. Indian Oil Corporation Limited (IOCL),...
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NPAs – the inevitable monster
According to a statement by the Minister of State for Finance, Bhagwat K Karad in the Parliament, non-performing assets (NPAs) or bad loans of banks declined from a high of around Rs 1036,000 crore as on March 31, 2018 to Rs 896,000 crore on March 31, 2020 and further down to Rs 834,000 crore on March 31, 2021. For comparison purpose, the choice of March 31, 2018 has special significance. Under the erstwhile UPA – dispensation particularly during its second consecutive tenure 2009-2014, banks recklessly gave loans to corporate houses/businesses without assessing the viability of the projects and conducting due diligence. The ability of the concerned projects/businesses to generate required cash to service the loans was in doubt from the...
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Tackling fiscal slippages – any takers
For several years, Modi – Government has faced high fiscal deficit (FD) – excess of its total expenditure over total revenue. While, an unusually high FD of 9.5% of gross domestic product (GDP) during 2020-21 as per revised estimate (RE) is attributed to the devastating effect of Corona pandemic on economic activity, even during the earlier years viz. 2017-18/2018-19/2019-20 which were free from such an aberration, the FD was in the 5.5% – 6% range (these numbers capture the effect of off-budget liabilities unlike the official figures which don’t) – significantly higher than the targets set for the years. This in turn, is because in respect of both the expenditure and the revenue, the government of the day never lived...
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Banning old vehicles – a retrograde order
On March 18, 2021, Union Minister for road, transport and highways Nitin Gadkari announced a ‘voluntary’ vehicle scrappage policy to (i) mitigate vehicular pollution and (ii) more than double the turnover of Indian automobile industry from the present Rs 450,000 crore to Rs 1000,000 crore in a few years. At present, there are 5100,000 vehicles which are older than 20 years, 3400,000 vehicles more than 15 years old but < 20 years and 1700,000 > 15 years, but without renewed fitness certificate. The policy architecture is founded on two pillars viz. incentivize their scrapping and dis-incentivize hanging on to them. The owner going for scrap will get 4-6% of ex-showroom price of the new vehicle as compensation; 5% discount on...
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Dealing with ‘ration mafia’
Arvind Kejriwal, Chief Minister (CM), National Capital Territory (NCT) of Delhi has justified its much trumpeted scheme for door-step delivery of ration on the ground that this will help reining in what he describes as ‘ration mafia’ while ensuring that every grain of the subsidized food actually reaches the person (read: the poor) for whom it is intended. Who is this ‘ration mafia’? How does it plunder the subsidized food? Can the scheme prevent it? To get to the bottom of it, we need to see as to how the existing system of distributing food to the beneficiaries works. Under the National Food Security Act (NFSA) (2013), the Union Government directs the Food Corporation of India (FCI) and other state...
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India gets poorer, investors richer
The Corona pandemic may have brought about sharp deceleration in India’s economic growth – the sharpest ever during the last 4 decades or so – but has yielded a bonanza for the investors. The wealth of investors in the stock market as represented by the market capitalization of Indian equities (market value of shares multiplied by their number) almost doubled from around Rs 113 trillion (a trillion equals 100,000 crore) as on March 31, 2020 to Rs 226 trillion as on March 31, 2021. In contrast, India’s GDP at current prices declined from Rs 203 trillion during 2019-20 to Rs 197 trillion during 2020-21. As a result, the market capitalization to GDP ratio almost doubled from 56% during 2019-20 to...
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P&K fertilizers – subsidy conundrum
A major factor fueling resentment among farmers is the spiraling prices of fertilizers which are critical inputs used in the production of agricultural products. The maximum retail price (MRP) of urea – the predominant source of nitrogen or ‘N’ nutrient supply – is controlled by the Centre at a low level un-related to the cost of production and distribution which is higher (the excess amount is reimbursed to the manufacturers via the subsidy on a ‘unit-specific’ basis under the new pricing scheme or NPS in short). This price has remained unchanged (today’s price is the same as in 2002) even as all cost escalations are absorbed by increasing the subsidy. However, the worry is with regard to another category of...
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‘Person in control’ in lieu of ‘promoter’
Paving the way for a major change in the way the promoters and over 4,700 listed corporate function in the country, in a consultation paper, the Securities and Exchange Board of India (SEBI) has proposed doing away with the concept of promoters and moving to ‘person in control’ (a three-year transition is recommended for the switch over); It has also suggested doing away with the current definition of promoter group with a view to rationalize the disclosure burden and bring it in line with post-issue disclosure requirement. The other proposals include (i) reducing the minimum lock-in period (the time period an investor can hold on to the shares) post an initial public offer (IPO) for promoters’ share of minimum 20%...
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Fight against Covid – patent waiver alone won’t help
Amidst exponential increase in demand for vaccination, Indian policy makers are looking for all possible options to ramp up supplies. A major hindrance in the way is the intellectual property rights (IPRs) associated with new drugs which are mostly discovered and developed by multinational pharmaceutical companies. For instance, Covishield (it accounts for about 90% of doses administered in India so far) was discovered and developed by Astra-Zeneca in collaboration with Oxford University; a license for its manufacture has been given to Pune based Serum Institute of India (SII). The most crucial of these rights – incorporated in the TRIPs (trade related intellectual property rights) Agreement of the World Trade Organization (WTO) that came into force in 1995 requiring compliance by...
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