The anger of agitating farmers over the three farm bills enacted in September, 2020 refuses to subside. Despite a categorical assurance by the Prime Minister, Narendra Modi that the MSP (minimum support price) will continue and that the government was prepared to give this in writing, they are unfazed. Their leaders are insisting that all sales of agricultural produce including those outside APMC (Agricultural Produce Market Committee) mandis – now permitted under the Central law viz. Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 – should be made at MSP and that this must be provided for in the Act. At present, the Centre notifies MSP for 23 agri-items, however, this MSP has no legal sanction. The Food...
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On road to recovery
The growth of real Gross Domestic Product (GDP) had already started sliding from the third quarter of FY 2018-19 and continued all through the FY 2019-20 culminating in a low of 3% during its last quarter ending March 31, 2020. During the whole of 2019-20, the growth plummeted to a decade low of 4.2% down from an average of 7.5% recorded in the previous 5 years i.e. 2014-15 to 2018-19. A nation-wide lockdown announced by the Prime Minister, Narendra Modi on March 24, 2020 dwelt a body blow by bringing most of the economic activities to a grinding halt. As a result, there was precipitous decline in GDP growth by 24% during the first quarter of current FY ending June...
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Electricity distribution reforms – a hoax
Amidst the cacophony of farmers’ protest over the enactment of three farm laws by Modi – government (they don’t want to settle for anything short of their repeal), a demand that went unnoticed relates to doing away with an amendment to the Electricity Act (2003) that requires farmers to pay tariff for electricity supply at the un-subsidized rate even as the concerned state provides for direct cash/benefit transfer (or DBT as it is known in common parlance) of subsidy to their bank account. Reportedly, the Centre has accepted this demand. What it means is that the Centre will continue with the existing dispensation of supplying power at subsidized rates to farmers (in some states, it is even free of charge)....
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Don’t squeeze PSUs for fiscal gains
Vide a letter addressed to the central public sector enterprises (CPSEs) the department of investment and public asset management (Dipam) under Ministry of Finance has asked (i) enterprises which pay relatively higher dividend (100% or Rs 10/- on a share of Rs 10/-) may consider paying interim dividend every quarter after declaration of quarterly results; (ii) enterprises which pay less than 100% may consider paying interim dividend usually on half-yearly basis; (iii) those which can’t pay as per the prescribed ‘minimum’ should pay interim dividend during October/November each year based on projected profit after tax (PAT) following second quarter (July – September) results. All CPSEs should consider paying at least 90% of projected annual dividend, in one or more installments, as...
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Don’t kill the goose that lays the golden egg
In a bid to accommodate the concerns of agitating farmers over the three farm bills enacted by Modi – government in September, 2020, the Union Minister for Agriculture & Farmers Welfare, Narendra S Tomar has given positive signal on following points:- (i) require every trader transacting with the farmers to register (under the extant law, the former only needs to have PAN number); (ii) in the event of dispute, allow farmer to go to higher courts (the present law provides for dispute resolution at magistrate’s level); (iii) strengthen the APMC (Agricultural Produce Market Committee) by imposing levies at ‘uniform’ rate on purchase at APMC and non-APMC platforms – transactions at the latter are permitted following enactment of the Central law...
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Banking reforms – can borrower also be a lender
An Internal Working Group (IWG) set up by the Reserve Bank of India (RBI) has made far reaching recommendations in regard to ownership guidelines and governance structures of private sector banks. These include inter alia (i) allowing their promoters hold 26% equity stake in steady state or after 15 years (up from existing norm of 15%) from the start when it should be a minimum of 40% of the equity for the first five years; (ii) take a sympathetic review of whether industrial houses should be allowed to own banks if they meet the fit and proper criterion; (iii) allow non-bank finance companies (NBFCs) with assets of > Rs 50,000 crore, and in operation for over 10 years, to convert...
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Food distribution – stem the rot
During the past seven years or so, the government has weeded out close to 44 million bogus ration cards with 17 million junked in Uttar Pradesh (UP) alone (other states where substantial number of bogus ration cards have been weeded out include West Bengal 7 million, Maharashtra 4 million besides Karnataka, Rajasthan and Telangana where more than a million each have been eliminated). This has happened mostly under Modi – government. It successfully used the IT infrastructure (digitization, seeding of ration cards with Aadhar and installation of electronic PoS machine at retail shops). Currently, there are 230 million ration cards (815 million individual beneficiaries). The weeded out bogus cards or 44 million is about 20%. This is creditable especially when...
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Fertilizer DBT – miles away
Under the “Stimulus – III” unveiled on November 12, 2020, the union finance minister, Nirmala Sitharaman made an unprecedented announcement of releasing an additional Rs 65,000 crore towards fertilizers subsidy over and above Rs 71,000 crore allocated in the budget for 2020-21. For an industry used to not getting thousands of crores in subsidy dues year-after-year for several decades in the past, this has come as a big bonanza in as much as the amount will help in clearing almost all of their pending dues. But, the Fertilizer Association of India (FAI) – an umbrella organization of fertilizer manufacturers – is reading a lot more into this decision. It is seeing this as a precursor to structural reforms in this...
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Urea imbroglio – deal with policy flaw
For decades, successive governments have grappled with large-scale diversion, hoarding and black marketing of urea – a widely used fertilizer that constitutes nearly half of India’s total fertilizer consumption. According to an estimate, the scale of diversion and black marketing could be as high as 30%. Taking annual subsidy on urea to be about Rs 45,000 – 50,000 crore, this would mean that Rs 13,500 – 15,000 crore of tax payers’ money is being guzzled by dubious operators in the urea supply chain. For long, this problem was swept under the carpet until such time, prime minister Narendra Modi brought it to the centre-stage within an year of his assuming office in May 2014. During the last 5 years or so, his...
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Fiscal deficit – Shun range-bound target
Modi – government is reviewing the Fiscal Responsibility and Budget Management (FRBM) Act in the light of the economic crisis caused by the Covid-19 pandemic and adopt a flexible, range-bound fiscal deficit (FD) target instead of a fixed number. The issue was discussed at the Economic Advisory Council (EAC) of the 15th Finance Commission (XVFC) on September 4, 2020, wherein the chairman, NK Singh cited similar practice followed by the Reserve Bank of India’s (RBI) with +/- 2% inflation target while deciding its monetary policy. The immediate prompt for this is sharp contraction in GDP (gross domestic product) by about 24% in the first quarter of current financial year and corresponding steep reduction in tax collections even as the expenditure...
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