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Fertilizer DBT – stymied by lobbies

It’s budget time. After two years of splurge, the finance minister, Nirmala Sitharaman has alluded to returning to fiscal consolidation. A major area meriting attention is fertilizer subsidy which jumped from Rs 80,000 crore during 2019-20 to Rs 134,000 crore during 2020-21 and is likely to be Rs 140,000 crore during 2021-22. Fertilizer subsidy arises because the Union Government wants manufacturers/imports to sell fertilizers to farmers at a low maximum retail price (MRP), unrelated to the cost of production/import and distribution, which is much higher. In case of urea, it exercises mandatory control on MRP and reimburses the manufacturers for the excess of cost over it as subsidy on a ‘unit-specific’ basis under the new pricing scheme (NPS). In case...
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Unshackle disinvestment

Even as the current financial comes to an end in just about two months, the Government has so far realized less than Rs 10,000 crore as proceeds of disinvestment from Central Public Sector Undertakings (CPSUs) against a target of Rs 175,000 crore set by the Finance Minister Nirmala Sitharaman in the Union Budget for 2021-22. Even after adding around Rs 100,000 crore being the expected proceeds from sale of its 10 percent shares in Life Insurance Corporation of India or LIC (on the premise that it goes through before the year-end), then also, there will be a whopping shortfall of Rs 65,000 crore. This is not new. It is a continuation of a trend seen during the previous six years under...
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FDI in retail – conundrum

In 2020, the Department of Consumer Affairs (DoCA), in the Ministry of Consumer Affairs, Food and Public Distribution had issued the Consumer Protection (e-commerce) Rules, under Section 101of the Consumer Protection Act, 2019. The rules require all e-commerce entities that are not established in India, but intending to operate here: (i) register with the Department for Promotion of Industry and Internal Trade (DPIIT) in the Commerce Ministry; (ii) bar affiliated entities from selling on e-commerce platform and restricting ‘flash sales’(the discounts or promotions that ecommerce firms offer for a short duration); (iii) disallow seller from using the name or brand associated with that of marketplace e-commerce entity for promotion of goods. Within a year, the government has proposed certain amendments...
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Shun ‘accommodative’ policy stance

In its bi-monthly Monetary Policy Committee’s (MPC) review announced by Governor Shaktikanta Das on December 8, 2021, the Reserve Bank of India (RBI) has kept the policy repo rate or RR ( interest rate at which it lends money to banks) unchanged at 4 percent. It has also kept reverse repo rate or RRR (interest rate on the surplus cash kept by the banks with it) unchanged at 3.35 percent. Besides, it has  retained an ‘accommodative’ policy stance as long as necessary. This is the ninth consecutive time that both the policy rates have remained unchanged since August 2020. Justifying the decision, Das observed “given the slack in the economy and the ongoing catching-up of activity, especially of private consumption,...
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Fiscal splurge continues unabated

Even as the Finance Minister Nirmala Sitharaman prepares for the next budget, it is time to take stock of the fiscal scenario. During 2019-20, the revised estimate (RE) of fiscal deficit (FD) was 3.8 percent of GDP against the budget estimate (BE) of 3.3 percent. In her speech on the Union Budget for 2020-21, she had justified this in terms of the recommendation of the NK Singh Committee on review of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 which permits breach of the target in case of “far-reaching structural reforms with unanticipated fiscal implications.” For 2020-21, she had set FD at 3.5 percent as against 3.0 percent as stipulated under the FRBM Act. Here also, she had justified...
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Fertilizers – all is not well

Inaugurating the revival project – annual production capacity of 1.27 million ton (MT) neem coated urea – of the Hindustan Urvarak & Rasayan, a public sector joint venture of Coal India Ltd (CIL), NTPC, Indian Oil Corporation (IOC) and FCIL – at Gorakhpur (Uttar Pradesh) on December 7, 2021, Prime Minister, Narendra Modi made the following four observations:- (i) despite steep increase in international price of fertilizers during the current year, the Government has ensured that the farmers don’t have to pay more. (ii) 100 percent neem coating has helped in reining in diversion of urea to non-agricultural/industrial uses; (iii) Gorakhpur along with four other revival projects currently under implementation will add 6 million tons (MT) to existing annual urea...
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Farm laws – Modi’s volte face

On November 19, 2021, announcing his Government’s decision to repeal the contentious three farm laws viz. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 and The Essential Commodities (Amendment) Act, 2020, Prime Minister, Narendra Modi apologized for not being able to convince the nation about the benefits that these laws would bring to a section of the farmers. Are these laws so complex as to become incomprehensible to the farmer? The “Situation Assessment of Agricultural Households and Land and Livestock Holdings of Households in Rural India”, SAS in short, released by the National Statistical Office (NSO), covering the period July 2018 to June...
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Cut in fuel taxes – not an unmixed blessing

On November 3, 2021, the Union Government notified reduction in central excise duty (CED) by Rs 5 per liter on petrol and Rs 10 per liter on diesel. Seen in isolation, these cuts may appear to be significant. However, when viewed in the backdrop of the unprecedented increase affected by Modi – Government ever since it assumed office, this is small. In May 2014, the CED on petrol was Rs 9.8 per liter whereas on diesel it was Rs 3.8 per liter. As on November 2, 2021, it was Rs 33 per liter on petrol – a cumulative increase of Rs 23.2 per liter. On diesel, it was Rs 32 per liter – higher by Rs 28.2 per liter. The...
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Fuel crisis – a wake-up call

During 2014-15, Coal India Limited (CIL) – a public sector undertaking (PSU) – had produced 494 million tons (MT). This was a record 32 MT higher than during 2013-14 and higher than a cumulative increase of 31 MT in the previous 4 years. In 2015, this prompted Modi to set a target of 1500 MT for 2019-20. Of this, 1000 MT was to come from CIL and remaining 500 MT from private firms. During 2019-20, India produced around 730 MT with CIL contributing 685 MT. Forget the target, the production fell much short of the demand leading to 300 MT import in that year. In 2020-21, domestic output declined to 716 MT courtesy, Covid. During the current year, even as...
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Air India sale – better late than never

On June 28, 2017, the then Finance Minister, Arun Jaitely had announced the ‘in-principle’ decision of the Union Cabinet for strategic divestment of Air India (AI) and five of its subsidiaries. Over 50 months thereafter, on September 8, 2021, the Government has informed about it decision to privatize AI and its 100 percent subsidiary namely Air India Express Limited (AIEL) and its 51 percent share in Air India Air Transport Services Limited (AIATSL). The iconic Maharaja – as the airlines is nicknamed – has gone back to the hangar of Tata Group almost 68 years after the company was nationalized in 1953. The AI privatization saga reveals four major pitfalls. First, the move has been half hearted from the day one. This...
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