A report by the Comptroller and Auditor General [CAG] tabled in Parliament on March 10, 2017 brings out that in recent years, there has been a sharp increase in the Union excise duty collections, a predominant share of this accounted for by increase in excise revenue on petroleum products. During 2013-14, total excise collection was Rs 169,000 crore of which contribution of petroleum products [POL] was Rs 87,880 crores or 52%. During 2015-16, even as overall excise revenue increased to Rs 287,000 crore, contribution of POL went up to Rs 198,030 crores or 69% of the total [with sin products like tobacco accounting for another 10%, these two categories alone make up 80%]. During this period, there was massive increase...
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Tata-DoCoMo deal – RBI must not condone violation
It is not always the case that regulatory authorities and policy makers mess up things affecting ease of doing business and vitiating investment climate. Quite often, it is none other than the businessmen and industrialists themselves who vitiate the environment by exploiting loopholes in the system or blatantly violating the extant laws while taking decisions and conducting business. There could not be a better example than the dispute between Japanese telecom major NTT DoCoMo and Tata Teleservices [TTSL] – a Tata group company which is currently pending adjudication by Delhi High Court [DHC]. Briefly, facts of the case are as under:- In November 2009, NTT-DoCoMo had acquired 26.5% stake in TTSL for about Rs 12,740 crore [at Rs 117 per...
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Energy sector reforms – face political hurdle
The government’s premier think-tank Niti [National Institute for Transforming India] Aayog has firmed up the National Energy Policy [NEP] and the first draft will soon be made public. An overarching objective of NEP is to bring about comprehensive energy sector reforms that could free up sectors such as coal, electricity and fertilizers of subsidies and price controls and help produce more power and make generation projects commercially viable for private companies. It lays out a clear roadmap for lowering subsidies on fertilizers and power by aligning their prices to the market. The policy also seeks to improve the financial condition of power distribution companies [PDCs], which are presently bogged down by huge debt to make the sector profitable – in...
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IPR concerns – India should shed its intransigence
The 2017 Trade Policy Agenda unveiled by Trump administration on March 2 pushes for a stricter regime for intellectual property rights and patents. While, agreeing that India’s reforms on IPR are encouraging, the document says “India’s new National Intellectual Property Rights Policy [NIPRP] should protect US innovations”. Specifically, US concerns are articulated in recent observations of Patrick Kilbride, Executive Director (International IP) of US Chamber of Commerce’s Global Intellectual Property Centre (GIPC). He has lamented that IP-intensive American firms continue to face severe challenges in the Indian market concerning Section 3[d] of the Indian Patents Act and compulsory licensing [CL]. The GIPC, in its annual IPR report, has ranked India in the bottom three for having a weak IPR and...
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Tackling NPAs – deep surgery needed
The non-performing assets [NPAs] or bad loans [as these are known in common parlance] in the banking system are threatening to cross the Rs 700,000 crores – this is 100% more since the asset quality review [AQR] was ordered by Reserve Bank of India [RBI] two years ago. For an economy that has been on a high growth trajectory since 2014-15, NPAs of banks has been identified as a major structural problem that poses risk in the medium-term even by International Monetary Fund [IMF]. To address it, RBI deputy governor, Viral Acharya has come up with a two-pronged strategy. First, for assets which are capable of generating cash flow in short-run, these may be transferred to a private asset management...
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Milching of ONGC/OIL halts
In an unprecedented move rarely seen in the financial history of independent India, the government has exonerated its undertakings in the oil sector viz. Oil and Natural Gas Corporation [ONGC] and Oil India Limited [OIL] from a potential liability of about Rs 22,000 crore in royalty dues to states of Gujarat and Assam. ONGC had to pay Gujarat Rs 8,392 crore and Assam Rs 1,404 crore in royalties for the period between April 1, 2008 and January 2014. Together with interest Rs 2,868 crore, total liability was Rs 12,664 crores. OIL had to pay to Assam government Rs 4,902 crore in royalty dues plus Rs 4,355 crore in interest adding to Rs 9257 crore. Union government has settled this pending...
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Sun-set for P-notes, sun-rise for clean money
A major challenge facing Modi – government in its fight against black money is so called ‘rounding tripping’ of Indian black money. The euphemism refers to money that leaves the country, often routed to non-resident Indians [NRIs] and making its way back to India in the form of foreign direct investment [FDI]. Until a few years ago, the extant policy and regulatory environment hugely facilitated ‘rounding tripping’. Thus, there was little regulatory oversight on money leaving and there were tax haven jurisdictions ever ready to attract it. The shell companies [albeit owned by persons to whom the money belonged] set up in those jurisdictions would then, invest in India fully leveraging benevolent tax treaties between India and those countries. Under...
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Demonetization – a masterstroke against the corrupt
Following the historic announcement by Modi on November 8, 2016 on demonetization of 500/1000 rupee notes, under the 50 days window given to holders to part with them, an ex-official of Indian Forest Service [IFS], Odisha deposited Rs 1.48 crores. The bank transmitted this information to the income tax department who on juxtaposing with his I-T return for previous years found that this could not be supported by his disclosed source of income. The information was uploaded on department’s website. Concurrently, a discreet e-mail was sent to the official requesting him to visit the site and provide a suitable explanation if any, for the discrepancy. But, the official did not even bother to visit the site. This led I-T officials...
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FDI in retail for ‘local goods only’ – a flawed idea
In the budget for 2016-17, finance minister, Arun Jaitely had announced 100% foreign direct investment [FDI] in food retail. However, this is subject to the condition that the retailer will sell only food procured from farmers in India and processed locally. Even as the guidelines in this regard are yet to be notified, meanwhile as per reports, the government is considering a proposal to allow 100% FDI in all goods ‘manufactured domestically’. The policy will be applicable to both offline [brick-and-mortar retailers] and online [e-commerce companies]. The idea is seriously flawed. To put things in perspective, let us capture the broad contours of existing policy dispensation in regard to FDI in retail. For this purpose, retail is classified in two...
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Competitive populism can derail growth
Last year, Congress Vice President, Rahul Gandhi took an extensive tour of Uttar Pradesh [UP] visiting tens of thousands farmers households in the run up to assembly elections in February/March 2017 [currently underway]. During the visits, he issued a certificate [call it ‘promissory note’] to every farmer promising waiver of his/her farm loan if voted to power in the state. As the election process got kicked off early this month, he reiterated the commitment in all his speeches ad infinitum. Additionally, he has promised cut in electricity tariff by 50% and increase in price offered to farmers for their agricultural produce. In this, he is joined by Akhilesh Yadav, National President, Samajwadi Party [SP] contesting election in alliance with Congress....
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