Irrespective of their size or industry sector, all businesses are structured to result in concentration of income in the hands of their owners Even as industries and businesses — both domestic and foreign-owned large corporations — expect the government to formulate policies and take fiscal measures to stimulate aggregate demand to put the Indian economy on an ‘accelerated’ and ‘sustained’ growth trajectory. A key question that needs serious introspection is: What are they doing in pursuit of this overarching goal? An analysis of the financials of India’s largest companies — those comprising the BSE 500 index — with focus on revenue, profits and dividend payouts, over the past five financial years (FY) gives us some clues. The profits of corporations...
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Category: Deccan Herald
All price support systems are unviable
Whether it is MSP-based regime or DPPS, both are open-ended, susceptible to ever-increasing subsidy burden, and vulnerable to charge of violation under the WTO Two recent statements by the top brass give a clue as to how the Modi government intends to deal with pricing of farmers’ produce. First, addressing a conference on ‘Getting Agricultural Markets Right’ (July 6), Niti Aayog member Ramesh Chand proposed the adoption of deficiency price payment system (DPPS) as an alternative to the existing system of minimum support price (MSP). Next, the Union Agriculture Minister ruled out a legal guarantee for MSP. Under the existing system, agencies of the government, such as the Food Corporation of India (FCI), buy agri-produce, such as wheat, rice/paddy, coarse...
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Fuel crisis: Government must shed adhocism
Currently, E&P firms are allowed to sell their crude at parity with its international price To deal with the fuel crisis, recently the Modi government has deregulated sale of domestically-produced crude oil; and imposed a cess, or windfall tax, of Rs 23,250 per tonne on crude oil and a special additional excise duty (SAED) of Rs 6 per litre. and Rs 13 per litre on exports of petrol and diesel respectively. On July 20, the SAED on petrol was removed and on diesel was cut to Rs 11 per litre. On on one hand, it expects exploration and production (E&P) companies like Oil India Limited (OIL), Oil and Natural Gas Corporation (ONGC), and Cairn Oil and Gas to increase the...
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MC12: Advantage developed countries
War against Covid-19 has to embrace all the three critical dimensions: testing, tracking, and treatment At the recent 12th Ministerial Conference (MC12) at the World Trade Organisation (WTO) headquarters in Geneva (June 12-17), it was advantage developed countries – the US, the European Union, the UK, Australia etc., — all the way. The Indian delegation led by Commerce Minister Piyush Goyal occupied the centre-stage steering negotiations in all key areas but the outcome was not in their favour. First, India went to MC12 demanding a Trade-Related Aspects of Intellectual Property Rights (TRIPS) Waiver for all Covid-related therapeutics and diagnostics, besides vaccines. Against this, the MC-12 granted a patent waiver (albeit ‘temporary’ and ‘limited’) only for Covid-19 vaccines which will allow India to authorise...
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Power subsidy: Arvind Kejriwal’s volte-face
To promote competition, private firms should be allowed in the distribution business Arvind Kejriwal, chief minister of Delhi, has come up with a proposition: ‘From October 1, 2022, electricity subsidy will be given only to those households who ask for it’. This is bizzare. If the head of a state takes an in-principle decision to give subsidy to anyone who wanted it, as a natural response, almost everyone will say ‘Yes’. But, over 75% of the households are already enjoying a subsidy. So, why ask them? There is something more than what meets the eye. At present, households (HHs) consuming up to 200 units per month are fully exempt from paying any charges. Their number is around three million. For...
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Strengthening IBC framework, really?
Faced with ballooning NPAs, the Modi government enacted the IBC in 2016 While putting on hold its plans to implement the so-called “fresh-start process” for indebted poor people under the Insolvency and Bankruptcy Code (IBC), the government wants to first focus on bolstering the IBC architecture to yield quick resolution of toxic assets. The reference here is to the delay in completion of the corporate insolvency resolution process (CIRP) as well as the low amount realised by creditors from their non-performing assets (NPAs) — a fancy nomenclature for bad loans. Let us capture a few basics. Faced with ballooning NPAs, the Modi government enacted the IBC in 2016. This legislation overrides all other subsisting laws and gives a strong handle...
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India’s ambitious wheat export plan could come under WTO lens
Amidst the Ukraine crisis, supplies of wheat from Russia and Ukraine have been disrupted, leading to a steep increase in its international price. In this backdrop, sitting on plenty of wheat stock, Prime Minister Narendra Modi has exhorted that India can help meet the global requirements, provided the World Trade Organisation (WTO) allows it. The caveat merits serious consideration. India runs a mammoth programme of public stockholding (PSH) for food security purposes. Under it, agencies of the government like the Food Corporation of India (FCI) buy agri-produce such as wheat, rice/paddy, coarse cereals, from farmers at the minimum support price (MSP) and distribute at a heavily subsidised price of Rs 1/2/3 per kg through a network of fair price shops...
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Fertiliser fears come to fore due to war
The crisis in Ukraine following the invasion by Russia has exposed the chinks in the Indian fertiliser industry. Despite predictions by successive governments during the last four decades that India would become self-reliant on the fertiliser front and putting in place policies aimed at achieving the goal, the country remains preponderantly dependent on imports for meeting the requirements of its farmers. The three most popular fertilisers used by farmers are urea, di-ammonium phosphate (DAP) and muriate of potash (MOP), which are the major sources of nitrogen, phosphate and potash respectively. Natural gas is the raw material/feedstock/fuel used for the manufacture of urea whereas phosphoric acid and ammonia are the prime raw materials (RMs) needed for making DAP. In the case...
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Fertiliser subsidy: Political will missing
In the Union Budget for 2022-23, the Modi government has allocated Rs 1,05,000 crore for fertiliser subsidy, which is Rs 35,000 crore less than the revised estimate (RE) for 2021-22 at Rs 1,40,000 crore. Fertiliser subsidy arises because the Centre wants manufacturers/imports to sell fertilisers to farmers at a low maximum retail price (MRP), unrelated to the cost of supply, which is much higher. In the case of urea, the difference is reimbursed to the manufacturers as a subsidy on a ‘unit-specific’ basis. In the case of phosphatic and potassic (P&K) fertilisers, it fixes ‘uniform’ subsidy on a per-nutrient basis for all manufacturers and importers. The three basic factors impacting subsidy are MRP, per unit cost of supply and the...
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Delinking seller from marketplace
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 101 of the Consumer Protection Act, 2019. The rules lay down the conditions with which e-commerce firms should comply. Amongst others, these bar affiliated entities from selling on e-commerce platforms and restrict ‘flash sales’ (discounts or promotions they offer for a short duration) and disallow the seller from using the name or brand associated with that of the marketplace e-commerce entity for the promotion of goods. Within a year, the government has proposed certain amendments to these rules in the form of Consumer Protection (e-commerce) (Amendment) Rules, 2021. These amendments include restricting business-to-business, or...
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