During an interactive session at the Bloomberg Global Business Forum in September, Prime Minister Narendra Modi faced a dilemma on the issue of clean energy versus coal-based power. Even as Modi reiterated his commitment to rapidly promote the use of renewable energy solar, wind, bio-mass, small hydro (India has more than doubled its original goal of having power capacity on renewable from 175 GW by 2022 to 450 GW by 2030)— he was confronted by the Bloomberg CEO Michael Bloomberg on what plans he had with regard to use of coal which has been the biggest polluter (India has the third-largest reserves of coal in the world and currently, about 54% of generation capacity is based on its use). Fully conscious...
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News & Media
Fuelling new partnerships
India must broaden its vision of oil security which should go beyond increasing indigenous production, to cover arrangements with other nations for assured supplies of crude and gas Despite loud talk by successive Governments about increasing domestic production of oil and gas to make India self-sufficient in energy, we are producing less than 20 per cent of our requirement. The balance, over 80 per cent, continues to be imported. This heightens our vulnerability to a point whereby the slightest disruption in any of the major sources of imports (be it imposition of sanctions by the US against Iran or an attack on oil installations in Saudi Arabia) creates major ripples that have the potential to destabilise the country’s economy. The problem...
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India’s fertiliser policy flawed, policymakers still stuck to the 1970s/80s
These anomalies have cropped up because our policymakers are still stuck to the 1970s/80s thinking, geared towards increasing fertiliser usage The huge arbitrage opportunity thereby created makes the temptation to divert too strong to resist and this can’t be reined in merely by neem coating; no administration, howsoever alert, can monitor a mammoth 600 million bags of urea. The Modi government is in its sixth year, but a coherent policy continues to elude the fertiliser sector. To get a sense of how the central government is approaching the sector, and where the sector is headed, let us look at some crucial pronouncements by the prime minister. First, in the 38th edition of his “Mann ki Baat” radio address to the...
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Booster for corporate India
Much will depend on how the surplus in the hands of companies resulting from tax cuts is apportioned among them and equally importantly, how it is spent In a flurry of announcements made on September 20, 2019 (also described in media circles as a third Union Budget in less than three months), Finance Minister Nirmala Sitharaman handed out a bonanza to the Indian corporate sector. The most pleasing announcement pertains to the steep reduction in the rate of corporate tax for new entities incorporated from October 1, 2019 in the manufacturing sector, that start production before March 31, 2023 from the existing 25 per cent to 15 per cent. After subsuming surcharge and cess, the effective incidence of tax will be lowered...
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Priority accorded, but infra investment hits slow lane
In her maiden budget presented to Parliament on July 5, 2019, Finance Minister Nirmala Sitharaman laid a roadmap for catapulting the Indian economy to $5 trillion by 2024-25. The most crucial component of this roadmap is the investment in infrastructure to the tune of a mammoth Rs 100,00,000 crore or $1.4 trillion. In the follow-through, in an interactive session with the media on August 24, 2019, she announced setting up of a high-level inter-ministerial committee to work out a detailed action plan. During its first term also, the Narendra Modi government gave overriding importance to building infrastructure. Indeed, it achieved a fair amount of success with a cumulative investment of about Rs 20,00,000 crore and commensurate output in terms of roads and highways built. This was commendable...
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GST math gone haywire
The Centre and States must introspect as to why despite the regime being in place for over two years, the desired buoyancy in tax revenue has not been achieved A major reason for the delay in taking up the Constitutional Amendment Bill for enactment of the Goods and Services Tax (GST) was the reluctance of the then United Progressive Alliance (UPA) Government at the Centre to agree to the demand of the States. The latter wanted compensation of the loss of revenue that would arise with its launch vis-à-vis the revenue they would get under the subsisting dispensation of excise duty, sales tax or value-added tax plus a host of other local taxes. This hesitancy came although the concept was first introduced...
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Powerless, cosmetic moves
Given the extant tariff policy and Power Purchase Agreements, the Centre’s plans to reform PPAs to provide power at competitive prices and make discoms viable fall far short The Union Government has set up a committee to reform Power Purchase Agreements (PPAs) to ensure power availability at competitive prices and make distribution companies (discoms) viable. A PPA is a contract between a generation company (genco) and discom which lays down the terms of electricity purchase by the latter from the former, including the tariff, which is subject to approval by the State Electricity Regulatory Commission (SERC). The Cabinet is also considering a new tariff policy which will inter alia require discoms to pay a surcharge to the genco for delayed payment, which...
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Much ado about surplus
The tussle over surfeit transfer has clipped the Centre’s wings as in future, being bound to the Economic Capital Framework, RBI will continue to keep a tight leash on funds On the face of it, the Reserve Bank of India’s (RBI) decision to transfer a whopping surplus of Rs 176,000 crore to the Government of India (GOI) for its accounting year July 2018-June 2019 gives the impression that the latter has got a bonanza. While, some argue that the Centre has “stolen” a humungous amount from India’s apex bank, which manages the currency and payment systems as also the borrowings of the Centre and States, others aver that this is easy money which the Centre will use for bridging its fiscal deficit....
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Promote self-sufficiency
The big bang reforms proposed by the Government for the oil and gas sector are laudable but without a stable and predictable policy environment in place, they can’t make much headway The Union Government is considering far-reaching reforms in the gas sector. These include the setting up of a local gas trading platform to facilitate price discovery, stripping the power sector off its priority status by withdrawing priority allocation of natural gas and hiving off the transportation unit of the Gas Authority of India Limited (GAIL), a public sector undertaking (PSU) which currently holds an overwhelming 75 per cent share of the gas transmission network. The stated objective of these reforms is to enable energy firms to invest in exploration and...
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Why DBT of fertiliser subsidy won’t happen anytime soon
A panel under Niti Aayog member Ramesh Chand has recommended direct benefit transfer [DBT] of fertilizer subsidy with the stated objective to “dis-incentivize farmers from excessive use, ensure delivery to the end-user and reduce outgo on subsidy.” The intent is to launch the scheme in three-four months DBT for fertilizer has been on the radar of policymakers for three decades. In July 1991, vowing to eliminate fertilizer subsidy in three years — under pressure from the International Monetary Fund and World Bank — the government had increased prices of all fertilizers by 40%. However, fearing political backlash, the hike was restricted to 30%, with a proviso that small and marginal farmers will be exempt from it. The Centre gave money...
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