On June 2, 2020, Trump administration announced probe into digital services taxes that have been either adopted or are under consideration by its trading partners viz. Austria, Brazil, the Czech Republic, the European Union [EU], India, Indonesia, Italy, Spain, Turkey, and U.K. This is the so-called Section 301 investigation by the United States Trade Representative [USTR] to determine whether levies on electronic commerce [or ‘Google tax’ in short] discriminate against American tech giants like Apple, Google, Amazon etc. This could lead to the US imposing tariffs on exports from these countries. Earlier, USTR had launched and completed section 301 probe into France’s digital services tax regime [France levies Google tax @ 3% on digital transactions of firms that have annual local...
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Moratorium – no guarantee for interest waiver
On March 27, 2020, the Reserve Bank of India [RBI] governor, Shaktikanta Das announced a comprehensive action plan to resuscitate the economy devastated by the Corona virus. Apart from measures to inject liquidity in the financial system, increase in availability of credit and reduce the cost of capital, the plan sought to ease the stress of loan repayments on businesses and individuals. Amongst others, this includes 3-month moratorium on payment of installments in respect of all term loans outstanding on March 31, 2020. Even as the lockdown continued much longer than it was initially envisaged [there were three extensions after the first phase announced by Prime Minister, Modi on March 24, 2020] on May 22, 2020, the governor announced extension...
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Pesticide ban – industry’s negative stance is untenable
The decision of the union government to ban 27 commonly-used pesticides in all three main categories viz. insecticides, fungicides and weedicides in India has led to consternation among various stakeholders particularly a certain section of the industry. To understand the issue and its implications, let us put a few facts in order. The manufacturing, import, sale, distribution and use of pesticides is regulated under the Insecticides Act [1968] with a view to prevent risk to human beings or animals, and for matters connected therewith. The Registration Committee [RC] – set up under the Act – registers every pesticide after scrutinizing the formula, verifying claims of efficacy and safety to human beings and animals and specifying the precautions against poisoning and...
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Oil and gas – don’t fiddle with formula-based pricing
India depends on imports for about 83% of its crude oil and 50% of gas requirement. Considering the huge quantities involved, the price at which these products are imported has a potent effect on the health of the economy by impacting the twin deficits viz. current account deficit [CAD] and the fiscal deficit [FD] and other related parameters such as inflation, interest rate, borrowing cost etc. Therefore, all stakeholders including the government – both Centre and states – always pray for reduction in their prices. The steep reduction price of crude from over US$ 70 per barrel at the start of 2020 to around US$ 35 per barrel currently [on April 22, it even went below US$ 20 per barrel] and...
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Agri-market reforms – the big bang
Heralding a new chapter in agricultural market reforms in India, on May 15, 2020, the finance minister, Nirmala Sitharaman made three major announcements under ‘Atmanirbhar Bharat Abhiyan’. (i) enact a central legislation to enable direct purchase of specified commodities – under Entry 42 of the Union List and Entry 33 of the Concurrent List – from the farmers outside the designated APMCs [Agricultural Produce Market Committee]; (ii) enact a Central law on ‘contract farming’ to provide a legal framework for farmers to engage with processors, aggregators, large retailers and exporters in a ‘fair’ and ‘transparent’ manner; (iii) amend the Essential Commodities Act [ECA] [1954] to take off pulses, cereals, edible oil, oil seeds, onions and potatoes from the purview of...
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Power reforms – chasing a mirage
The special economic and comprehensive package ‘Atmanirbhar Bharat Abhiyan’, unveiled by the finance minister, Nirmala Sitharaman in 5 tranches during May 13 – 17, 2020, has two components that have a crucial bearing on the fledgling power distribution companies – commonly known as discoms. The discoms – mostly owned and controlled by state governments – procure power from independent power producers [IPPs] and public sector undertakings [PSUs] viz. National Thermal Power Corporation [NTPC] besides their own generating stations and sell to consumers. The first component under the first tranche provides for a special loan of Rs 90,000 crore from Rural Electrification Corporation [REC], Power Finance Corporation [PFC] to discoms to enable the latter clear their dues to IPPs and PSUs....
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Stimulus package – much ado about nothing
After a long wait of about 7 weeks since the nation-wide lockdown on March 24, 2020, Prime Minister, Narendra Modi announced on May 12, 2020 ‘Atmanirbhar Bharat Abhiyan’, a special economic and comprehensive package of Rs 2000,000 crore, about 10% of gross domestic product [GDP], to revive the economy. The finance minister, Nirmala Sitharaman unveiled the details in 5 tranches during press conferences held on May 13 – 17, 2020. The package aims at giving relief to all strata of the society impacted by sudden stoppage of economic activities viz. farmers, workers, migrant labor, micro, small and medium enterprises [MSMEs], vendors, small merchants, self-employed, middle class etc. Given its mega size, an immediate question that comes to mind is whether...
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Fertilizer reforms – Corona connection
Amidst all the bad news on the economic front under a prolonged lockdown, the meteorological department has come out with some good news for fertilizers – the most crucial agricultural input that help in increasing crop yield. The department has predicted normal monsoon with the country as a whole receiving 100 per cent of the long period average (LPA) of 88 centimetre rainfall. This together with substantial increase in cash in the hands of farmers [record procurement of wheat by government agencies viz. Food Corporation of India et al at the minimum support price (MSP) alone has given them about Rs 40,000 crore; direct income support of Rs 2000/- each to about 9 crore farmers under PM KISAN yielding Rs 18,000 crore...
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Hike in oil duties – a retrograde move
In the wake of widespread destruction of demand triggered by Covid – 19, the international price of crude has plummeted to a low of about US$ 20 per barrel despite a historic agreement between OPEC and non-OPEC suppliers on April 10, 2020 to cut production by 10 million barrels per day [mbpd] – as demand destruction [about 29 mbpd] far exceeds the cut in supply resulting a huge glut. De jure, the prices of petrol and diesel are deregulated [this was done: petrol in June 2010 and diesel in October 2014]. The oil marketing companies are expected to adjust the price in line with movement in their international price. Now, that the international price of crude has declined [albeit steeply],...
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Mass movement of migrant labor – a Himalayan Blunder
Announcing the lockdown on March 24, 2020, Prime Minister, Narendra Modi offered the mantra of ‘social distancing’ [put simply, this requires maintaining a minimum distance between two persons] to prevent Covid – 19 pandemic from spreading. Accordingly, all activities involving assembly and movement of persons in group were brought to a grinding halt. Amongst others, these included complete ban on inter-state and intra-state movement of persons. The announcement came under flak from critics who argued that people should have been given time to prepare themselves; this included letting migrant labor working in urban agglomerations [UAs] such as Delhi, Mumbai etc move to their native place. The government’s decision was perfectly in order. Had it given time and allowed people to...
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