Category: Deccan Herald

Anti-profiteering Authority: an unworkable mechanism

In mid-November, the Union Cabinet approved setting up of a National Anti-profiteering Authority (NAA) under the Goods and Services Tax (GST) so as to ensure that the benefit of lower taxes reaches consumers. If a consumer feels that the reduction in the incidence of tax under GST is not being passed on, she can register a complaint with the authority. The anti-profiteering mechanism provides for setting up of a ‘screening committee’ at the state-level and a ‘standing committee’ at the national level. The complaints will be first sent to ‘screening/standing committee’, depending on whether it is of local nature or of national import. If the complaint has merit, the respective committee would refer the case for further investigation to the...
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Subsidy reforms: even Modi won’t take that risk

Recently, Delhi Chief Minister Arvind Kejriwal vehemently opposed the hike in fares for travel by Metro Rail and offered to share the financial burden equally with the Union government to ensure that commuters are not affected. About three years ago, he had decided to give heavily subsidised power to households consuming up to 400 units a month. Then, too, he vowed to bear its financial burden out of the state budget. Kejriwal is not alone in giving subsidies using taxpayers’ money. During the last five decades of governance – be it at the Centre or in the states – successive political establishments have built a super-structure of subsidies, such as on fertilisers, food, kerosene, LPG, irrigation, power, credit, seeds, etc....
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NPAs: is the axe going to fall on the common man?

Under the erstwhile UPA dispensation, particularly during its second term, 2009-2014, public sector banks [PSBs] gave loans recklessly to corporate houses without assessing the viability of projects and conducting due diligence. Tens of thousands of crores were pumped into power, steel, telecommunications, textiles and infrastructure. In many cases, the ability of the projects or businesses to generate cash to service the loans was in doubt from day one. There was an element of ‘inevitability’ in such loans becoming non-performing assets (NPA). Indeed, these did become NPAs but were not recognised in the balance sheet as such. In 2015, the Reserve Bank of India, under its former governor Raghuram Rajan, ordered an asset quality review (AQR) of all banks to identify...
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FDI in food retail: To draw in investors, do away with restrictions

Every year, farmers are forced to sell their produce, especially perishable items such as fruits and vegetables, at throwaway prices, causing loss of income and even suicides. A major bottleneck that forces them to do so is the lack of infrastructure for handling and storage of these items, which results in the loss of output worth Rs 1 lakh crore annually, a fact that Prime Minister Narendra Modi alluded to while addressing a conclave of young CEOs]. The problem has been festering for decades despite both the Union government and states recognising the dire need for setting up the infrastructure and umpteen committees making recommendations in this regard. Even domestic private companies have hardly taken any initiative despite being allowed...
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Don’t switch-on DBT for power without reforms

Recently, during an interaction with a leading economic daily, Union power secretary Ajay Kumar Bhalla gave an indication of the government’s intent to launch direct benefit transfer (DBT) to disburse power subsidy. Alluding to a clutch of pilot projects for DBT-Power to be launched soon, he exuded confidence that this will help curb wasteful electricity consumption, limit subsidies to the really needy, stem losses of state electricity boards (SEBs) and power distribution companies (PDCs) and reduce tariff for industries. The move is prompted by the claimed success of DBT for giving LPG subsidy and similar initiatives in fertilisers and food grains. Has the idea yielded the desired outcome in LPG? What is the current status in other areas? Is it...
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‘Branded generics’, where patients are fleeced

The 2017 Trade Policy Agenda unveiled by the Trump administration on March 2, 2017 pushed for a stricter regime for intellectual property rights (IPRs) and patents. While agreeing that India’s reforms on IPR are encouraging, it said “India’s new National Intellectual Property Rights Policy [NIPRP] should protect US innovations”. India’s defence is based primarily on the flexibilities available to the developing countries under WTO agreement on Trips [trade-related intellectual property rights] to ensure availability of drugs to patients [majority of them are poor] at ‘affordable’ prices. If the concern for the poor is so overwhelming, then the government must ensure that on ground zero, patients should get medicines at prices they can afford. Are they really getting? The manufacturers of...
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Exporters’ trail of woes continues under GST

Some relief is offered via input credit. But a seamless tax credit chain is inevitable in a regime of taxes coming under different jurisdictions On the midnight of June 30, 2017, the government flagged off the most revolutionary economic reform, viz. the Goods and Services Tax (GST), ever undertaken post-independence. Even as expectations run high, the GST Council is having a tough time dealing with a plethora of exemptions particularly in the export sector — a baggage that got deeply entrenched under the existing system of taxation. Under the extant system, the Indian industry had to pay multiple taxes such as Excise Duty, Countervailing Duty (CVD), Special Additional Duty (SAD), Central Sales Tax (CST), Value Added Tax (VAT), and a...
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Self-sufficiency in fertilisers or building castles in air?

Union Minister for Chemicals and Fertilisers Ananth Kumar has announced the government’s decision to revive five closed plants of Fertiliser Corporation of India (FCIL) and Hindustan Fertiliser Corporation Limited (HFCL). They are: Talcher (Odisha), Ramagundum (Telangana), Sindri (Jharkhand), Barauni (Bihar) and Gorakhpur (Uttar Pradesh). To be commissioned by 2020-21, their revival is expected to add 7.5 million tonnes (mt) of urea capacity. The minister has also exuded confidence that the decision for mandatory neem coating of urea (2015) will result in 10% improvement in the efficiency of fertiliser use. Taking urea consumption of about 33 mt annually, this will save about 3.3 mt. He also referred to steps for increasing utilisation of the existing capacity. This has led to increase...
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New visa regime to hit growth, competitiveness of US firms

A senior official of the Trump administration has lambasted three leading Indian information technology companies — Tata Consultancy Services (TCS), Infosys and Cognizant Technologies — for resorting to ‘trickery’ for allegedly grabbing most of H1-B visas issued by the US Citizenship and Immigration Services (USCIS). The H1-B visas are issued to foreigners who have ‘theoretical’ and ‘technical’ expertise in specialised areas to work in local (read American) companies for a temporary period. The US issues 85,000 such visas every year — 65,000 hired from abroad and 20,000 from those enrolled in the US universities/colleges. Due to the heavy demand, the USCIS which runs the programme, receives several times more applications than it can grant and uses an electronic lottery to...
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Disband subsidy delivery mechanism, switch over to UBI

In the Economic Survey (2016-17) presented in Parliament on January 31, 2017, Chief Economic Advisor Arvind Subramanian advocated Universal Basic Income (UBI) instead of a plethora of subsidies given under extant dispensation. But the idea found no mention in Finance Minister Arun Jaitley’s Budget for 2017-18, presented on February 1, 2017. Meanwhile, in an interview given to a group of economic editors on February 1, Jaitley opined that “UBI is an idea whose time should come, but politics of this country is not mature yet for its implementation.” He could have taken the idea on board at least on a trial basis, but avoided it. So, what are the constraints? What will be the opportune time? Will it come at...
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