A likely recommendation of Telecommunication Regulatory Authority of India [TRAI] rejecting differential pricing for data services and zero rating – a practice where internet service providers [ISPs] do not charge customers on data for select applications that they use [this was implemented by Airtel last year but forced to abandon following public outcry] – or ‘free basics’ another nomenclature for zero rating [started by Facebook about an year ago under its earlier incarnation Internet.org] has caused much consternation amongst telecom service providers [TSPs] and social networking platforms. In what could ruffle many feathers, Facebook chose the medium of a ‘discussion paper’ floated by TRAI inviting comments from public to launch a high voltage publicity campaign in support of its ‘free...
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Bad subsidies – perception vs reality
Addressing the ET Global Business Summit, prime minister, Modi for the first time ever, shared at length his thinking on subsidies. The relevant excerpts are reproduced below:- “We have to eliminate bad subsidies, whether or not they are called subsidies. But, some subsidies may be necessary to protect the poor and the needy and give them a fair chance to succeed. Hence, my aim is not to eliminate subsidies but to rationalize and target them. I have been referring to cooking gas, fertilizer and kerosene subsidies. I must confess that I am surprised by the way words are used by experts on this matter. When a benefit is given to farmers or to the poor, experts and government officers normally...
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India’s growth narrative – hits Rajan’s speed breaker
While, presenting the budget for 2015-16, finance minister, Arun Jaitely had taken a conscious decision to deviate from the fiscal consolidation road-map drawn by his predecessor and reiterated by him in budget for 2014-15. Accordingly, he fixed the fiscal deficit target as 3.9% of GDP as against 3.6% as per the road-map. The rationale behind this decision was to give a big boost to public investment in infrastructure viz., roads, highways, rails, power, port, airport etc in the backdrop of sluggish investment by the private sector [groaning under heavy debt and low margins]. The idea was to resurrect growth and push it in to double digit orbit. For 2016-17, in view of industry clamoring for continued boost in public spending...
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Low commodity prices – good omen for stronger India
Only about 18 months ago, there was an all round mood of despondency due to skyrocketing international price of crude oil and gas for which India depends heavily on imports for its energy requirements. This was the single most important factor responsible for high current account deficit [CAD], pressure on the Rupee and the inflationary effect on the economy. The scenario on the subsidy front was equally grim. Oil and gas being key ingredients in production of fertilizers and petroleum products [POL], this also led to ballooning subsidy in the face of control on retail prices of latter at low level. During 2013-14, fertilizers and POL subsidies alone were around Rs 240,000 crores putting huge stress on the budget and...
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Direct transfer of fertilizer subsidy – 12 commandments
Direct benefit transfer [DBT] of fertilizer subsidy offers huge benefits viz., rational allocation of resources, reduction of imbalance in NPK use, prevention of pilferage/black-marketing and saving in subsidy. Even as Modi – government is committed to introduce DBT, it would do well to seriously consider following 12 commandments:- (i) It must be made abundantly clear to all stakeholders that the day DBT is introduced, the present system of routing subsidy through fertilizer manufacturers will go. The new pricing scheme [NPS] for urea under which they are paid subsidy will be dismantled. Likewise, the nutrient based scheme [NBS] under which manufacturers of P&K fertilizers are paid subsidy will have to go. (ii) All manufacturers of urea and P&K fertilizers will sell...
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PSU divestment – judiciary should keep away
Thanks to a decade of mis-governance and policy inaction under the erstwhile UPA dispensation, the judiciary has made deep inroads in to the executive domain. The most recent manifestation of this interference is the order of the Supreme Court [SC] to the Government of India [GOI] not to sell its residual stake in Hindustan Zinc Limited [HZL]. In 2002, GOI had sold 26% shares in HZL to a Vedanta Group company Sterlite Opportunities & Ventures. In the following year, it parted with another 18.92% under a ‘call option’ available to latter. A further 25.5% was offloaded [but not before a long-drawn arbitration battle between then UPA-regime and Vedanta over legality of ‘call and put’ options] taking total divestment to 70.5%....
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Power consumers – relief stalled by court
In the race to provide power at affordable rates, Modi – government has taken several initiatives. These include increase in supply of cheaper domestic coal, rationalization in coal linkages [giving more to energy efficient generation plants], strengthening of transmission and distribution [T&D] systems, financial restructuring to reduce interest burden, enabling gas based power plants to access gas at cheaper rates [via pooling of imported LNG with domestic gas], incentive to states for reducing theft etc. However, there is one area where there is unprecedented scope for reducing cost of power supply and yet, it has not got the desired attention and even where the ruling establishment takes considerable interest and wants to act with alacrity, the efforts are frustrated by...
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Fertilizer Industry in India – on the brink
Emboldened by the success of direct benefit transfer [DBT] in LPG and having announced DBT for kerosene subsidy in 26 districts to begin with from April 1, 2016, the government is currently examining various possibilities for taking similar initiatives in fertilizers [besides food]. Subsidy syndrome While, these efforts are welcome, it needs to take stock of the present state of fertilizer industry in India as its health is a pre-requisite for ensuring un-interrupted supply of fertilizers to farmers at affordable price. In a pre-budget meeting with finance minister, Arun Jaitely, the Fertiliser Association of India [FAI] told him that at present, manufacturers have outstanding subsidy dues of Rs 45,000 crores. It urged the government to clear these in three installments....
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PSUs dividend – an order ingrained in archaic mindset
Faced with a massive shortfall in resource mobilization from disinvestment of shares in central public sector undertakings [PSUs] [Rs 40,000 crores] and proceeds from direct taxes [Rs 50,000 crores], Modi – government has issued a diktat to all PSUs to help it avoid slippage in fiscal deficit target of 3.9% of GDP set in the budget for the current year. It has directed them to give a minimum dividend of 30% of profit after tax [PAT] or 30% of government equity whichever is higher. PSUs having substantial free reserves and capability to make good profits on a sustained basis are required to give special dividend and issue bonus shares. As regards their capital expenditure needs, it goads them to increase...
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Modi’s economic diplomacy – yields rich dividend
The die-hard critics of Prime Minister, Modi especially his political adversaries have dismissed his incessant foreign visits as mere “pleasure trips” bringing hardly any relief to the common man though some of them reluctantly acknowledge his role in raising India’s stature in the comity of world nations. They cannot see any other benefit as they are just not willing to see. But, for someone who is not wearing colored glasses, the unprecedented economic benefits these have brought to India are pretty evident. One of the major gains of economic diplomacy unique to his style relates to re-negotiation of a long-term gas purchase deal with Qatar that was terribly dis-advantageous to India. To better understand what it means to us, let...
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