Financial burden to implement the national food security law has clearly become a major burden for the Government Recently, the Supreme Court in a petition has directed the Union Government to increase coverage under the National Food Security Act, 2013, (NFSA) so that “more and more needy persons and citizens get the benefit”. Under the NFSA, the Centre directs the Food Corporation of India (FCI) and other state agencies to procure food from the farmer at MSP (minimum support price) and organize its distribution to a population of around 820 million people (50 per cent in urban areas and 75 per cent in rural parts) through a network of fair price shops (FPS) at the subsidized price (call it ‘issue...
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Businesses can’t have the cake and eat it too
Record corporate profits, dividend payouts point out to their unwillingness to help boost economy’s strengths Even as the industries and businesses (large corporations, domestic and foreign-owned included) expect the government to formulate policies and take fiscal measures to stimulate aggregate demand to put the Indian economy on an ‘accelerated and sustained’ growth trajectory, it’s worth asking what exactly they themselves are doing in pursuit of this overarching goal? An analysis of the financials of India’s largest companies—those comprising the BSE 500 index (the index covers every sector; besides it includes public sector undertakings (PSUs), as well as overseas subsidiaries of Indian-owned private-sector businesses, hence captures a broad trend)—shows focus on revenue, profits and dividend payouts, which represent a slice of...
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All price support systems are unviable
Whether it is MSP-based regime or DPPS, both are open-ended, susceptible to ever-increasing subsidy burden, and vulnerable to charge of violation under the WTO Two recent statements by the top brass give a clue as to how the Modi government intends to deal with pricing of farmers’ produce. First, addressing a conference on ‘Getting Agricultural Markets Right’ (July 6), Niti Aayog member Ramesh Chand proposed the adoption of deficiency price payment system (DPPS) as an alternative to the existing system of minimum support price (MSP). Next, the Union Agriculture Minister ruled out a legal guarantee for MSP. Under the existing system, agencies of the government, such as the Food Corporation of India (FCI), buy agri-produce, such as wheat, rice/paddy, coarse...
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Eliminating freebies: Who will bell the cat?
Freebies are a recipe for financial bankruptcy; the only way to avoid it is to prohibit political parties from promising them Hearing a public interest litigation (PIL), filed by advocate Ashwani Dubey, seeking directions against ‘freebies’—a euphemism for benefits distributed by political parties using public money for garnering votes—on August 3, 2022, the bench of Chief Justice of India NV Ramana and Justices Krishna Murari and Hima Kohli sought suggestions from all stakeholders. The stakeholders include beneficiaries and the people who are opposing these freebies, besides the government as well as organisations such as Niti Aayog, Finance Commission, RBI and Opposition parties, etc. The suggestions have been sought on the composition of a committee which can go into the issue...
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Saving fertiliser subsidy with DBT
The Government should stop routing subsidies through manufacturers and give these as direct benefit transfer Splurge in fertiliser subsidy in the last three years is giving jitters to policy makers, especially the Union finance ministry, which has to foot the bills. Fertiliser subsidy amounts to payments made to manufacturers or importers to cover the excess of the cost of production/import and distribution over a low maximum retail price (MRP, the price asked by the Union Government to charge from the farmers). These payments are under two broad categories viz. (i) urea, main source of nitrogen or ‘N’ supply; (ii) phosphate or ‘P’ and potash or ‘K’ fertilizers – commonly known as non-urea fertilizers – popular fertilizer in this category being...
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GST compensation can’t be perpetual; States must be prudent
The disruption caused by the pandemic is a thing of the past as tax collection rebounded during 2021-22 In its 47th meeting, the GST (Goods and Services Tax) Council held on June 28/29, 2022, at least a dozen finance ministers and other ministers of the states demanded that compensation for losses due to implementation of the GST should be extended. In the follow up to the unveiling of the GST by the Modi government, ‘The Constitution (One Hundred and First Amendment) Act, 2016’, that introduced the GST from July 1, 2017, the Union government also introduced ‘The GST Compensation Act, 2017’. It provides for compensation to the States for five years (2017-18 to 2021-22) for the loss of revenue. The...
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Financial discipline a must for states
The Centre has to crack the whip on growing trend of states going for excessive borrowings else it could lead to a major financial crisis In recent years, indiscriminate borrowings by entities of the state governments, leveraging guarantees, has raised alarm bells. In June, 2022, the Reserve Bank of India (RBI) lambasted banks, mostly public sector banks (PSBs), for lending to such entities based on the escrow of the states’ future revenue streams or using collectorates and courts as security. The RBI sought a review of such lending practices by the bank boards and reported compliance by September, 2022. The Union Finance ministry was more emphatic, seeking an end to the practice. The warning is a follow up to a...
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Let free market discover the price!
Deficiency price payment may be way forward as agri market forces are better placed to judge the value of agri products Addressing a conference on ‘Getting Agricultural Markets Right’ (July 6, 2022), Ramesh Chand, who is a Member of the Niti Aayog, proposed the adoption of deficiency price payment system (DPPS) as an alternative to the existing dispensation of procurement of crops from the farmers at minimum support prices (MSPs). What is the problem with the MSP-based regime? How will DPPS help in alleviating it? Under the existing system, agencies of the government like the Food Corporation of India (FCI) buy agri-produces such as wheat, rice/paddy, coarse cereals, from farmers at the MSP and distribute at a subsidized price of...
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Fuel crisis: Government must shed adhocism
Currently, E&P firms are allowed to sell their crude at parity with its international price To deal with the fuel crisis, recently the Modi government has deregulated sale of domestically-produced crude oil; and imposed a cess, or windfall tax, of Rs 23,250 per tonne on crude oil and a special additional excise duty (SAED) of Rs 6 per litre. and Rs 13 per litre on exports of petrol and diesel respectively. On July 20, the SAED on petrol was removed and on diesel was cut to Rs 11 per litre. On on one hand, it expects exploration and production (E&P) companies like Oil India Limited (OIL), Oil and Natural Gas Corporation (ONGC), and Cairn Oil and Gas to increase the...
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Electricity Bill: Where is the spark?
After dilution of its key provisions, the Electricity Bill, 2021, falls short of reform objectives In the draft Electricity (Amendment) Bill or EAB, 2021, proposing amendments to the Electricity Act, 2003 introduced in February last year, the Narendra Modi-led NDA Government intended to bring about two transformative reforms — de-licensing of the electricity distribution business and direct benefit transfer (DBT) of subsidy. Delicensing of the distribution business aims to bring in competition, and give the consumer power to choose suppliers (or “open access”). Even as the Union ministry of power prepares to table a Bill in the upcoming Monsoon session (2022) of Parliament, both the provisions have been dropped. Under the extant arrangements, an overwhelming share of power generated by public...
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