The Modi Government should be applauded for bringing in key changes, but action is missing in vital areas such as fertilisers, food, power and kerosene. There is a need for reforms in these sectors which are loaded with subsidies Prime Minister Narendra Modi should be applauded for bringing in governance reforms, liberalising foreign direct investment and increasing ease of doing business, but action is missing in vital areas such as fertilisers, food, power and kerosene. These areas are in dire need of big bang reforms. Inefficiency, cost padding/gold plating, pilferage/leakages and corruption are rampant in these sectors, leading to the ballooning of subsidies and associated difficulties, in adhering to fiscal discipline. An expenditure management commission, headed by former Reserve Bank...
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News & Media
Continue rate cut
ECONOMIC GROWTH : Having made a good head start (though belated), the RBI must not stop as there is potential for another 50-75 basis points reduction Prior to the fourth bi-monthly monetary policy review on September 29, RBI Governor Raghuram Rajan had come under unprecedented pressure to cut the policy repo rate [interest rate at which the apex bank lends money to commercial banks] to help government’s efforts in giving a fillip to the economy and putting it on a higher growth trajectory. Almost all stakeholders – industry and commerce, investors, experts/ economists – were unanimous in demanding a cut. While refraining from taking any position [lest this be misconstrued as interference in RBI’s autonomy], the government had nonetheless given...
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Add 100% FDI to the cart
Allowing 100% FDI in e-tail will make it easier for tax authorities to bring e-com firms under the tax net. In 2012, the UPA had permitted 51% FDI in multi-brand retail (MBR) with riders. The riders included sourcing 30% of requirements from small enterprises, a minimum investment of $100 million, besides giving full leeway to states on whether to grant permission or not. The policy was as bad as saying ‘no’ to FDI in MBR. The Modi government has continued with that policy decision. Finding that the direct route of entering MBR was choked, foreign investors have been looking for opportunities to make inroads. They found one in e-commerce where business was growing leaps and bounds. How did they manage...
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Root cause of inaction in fertiliser reforms
Unless the government accepts a higher MRP for urea, nutrient imbalance cannot be addressed Four major pronouncements on fertiliser reforms need close scrutiny. First, the Prime Minister promised that every farmer would have a soil health card (SHC) to know how much nutrient is needed for a good yield and to keep the soil healthy. What if the results of the soil analysis encapsulated on the SHC require application of more phosphate (P) and potash (K) but the fertilisers carrying these nutrients, other complex fertilisers and so on are too expensive? The pricing consideration Currently, the MRP of dia-ammonium phosphate (DAP, the primary source of P) is four times the price of urea (the main source of nitrogen), whereas muriate...
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Cut theft and freebies to stem power losses
The Centre must deduct the discoms’ losses from the devolution of taxes to the erring states On September 12, 2015, the chief secretaries of states whose state electricity boards (SEBs)—that carry out power distribution—met Union power minister Piyush Goyal with a demand for a fresh bailout package to deal with the SEBs’ accumulated debt of over R3 lakh crore. Goyal took a bold stand by turning down the request. SEBs have already got two bailout packages—R40,000 crore in 2002 and around R2 lakh in 2012. These were given on the promise that SEBs will adjust tariff to plug gaps between revenue and the cost of electricity, besides reducing transmission and distribution (T&D) losses. But, they have failed on both fronts and...
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Don’t override judicial process
Any apprehension that judicial process would take time is ill-founded. The matter is slated for hearing by the SC this month itself. While, presenting the budget for 2015-16, Union Finance Minister Arun Jaitley had announced the government’s decision not to levy minimum alternate tax [MAT] on capital gains made by foreign portfolio investors [FPIs] from investment in securities from April 1, 2015. In his speech, he had proposed to rationalise MAT provisions for FPIs whereby profits corresponding to their income from capital gains on transactions in securities, which are taxed at a lower rate, would not be subject to MAT. Since the exemption was intended to be applicable only prospectively from financial year 2015-16, the income tax department served show -cause...
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REGULATE ELECTRICITY SUPPLY SYSTEM
The malady afflicting the power sector in Delhi is suggestive of a deeper mess in the country and calls for prompt action During his first shot as the Chief Minister of Delhi, Mr Arvind Kejriwal promised that he would slash power tariff by 50 per cent. He did so, primarily on his conviction that the power distribution companies indulged in financial irregularities, leading to inflated cost of procurement and distribution, which were approved by a pliable Delhi Electricity Regulatory Commission. A clear indication of how the DERC played to its masters tune (under the Sheila Dikshit Government) can be gauged from the fact that former DERC chairman approved 23 per cent reduction in tariff in 2010. After he was removed,...
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Uniform fertilizer subsidy policy must for DBT
The subsidy regime, covering both subsidy rates and payment terms, for P&K fertilisers should be brought in sync with urea The discriminatory policy treatment impairs the ability of industry to supply P&K fertilisers to farmers at affordable prices, which will aggravate imbalance in fertiliser use. This makes a mockery of Prime Minister Narendra Modi’s vision behind giving farmers a Soil Health Card so that they apply fertilisers as per soil needs. On May 13, the government released press notes on the approval of the comprehensive New Urea Policy 2015 and the nutrient-based subsidy rates for phosphate and potash fertilisers for FY16. A key announcement was: “Movement plan for P&K fertilisers has also been freed to reduce monopoly of a few...
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Gas policy: Don’t drag courts into executive domain
The Union government has received a notice from the Supreme Court (SC) on a petition filed by Independent Gas-based Power Producers Association (IGPPA) seeking priority in allocation of gas produced from the Reliance Industries Limited (RIL) operated Krishna – Godavari (KG) basin. The IGPPA has contended that the gas allocated from the KG basin was not allotted to them on priority basis but was given to fertilizer units. The Federation of Farmers Associations (FFA) has also filed a PIL in SC backing the IGPPA demand. Earlier, in its order delivered in January, 2015, the Andhra Pradesh High Court (APHC) had refused to interfere with the government policy decision on the issue, saying the Centre has powers to fix priorities as...
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Food subsidies still haunt India at WTO
But they needn’t, if India sticks to the view that the benchmark price for measuring extent of support is too low and outdated India is concerned over the delay in reaching a ‘permanent solution’ to the problem of dealing with food procurement subsidies. The WTO members are thrashing out a work programme for the 10th Ministerial to be held in Nairobi this December. Under Agreement on Agriculture (AoA), developing countries can give agricultural subsidies or aggregate measurement support (AMS) up to 10 per cent of the value of agricultural production. AMS has two components viz., (i) ‘product-specific’ or the excess of price paid to farmers over international price or ERP (external reference price) multiplied by quantum of produce; (ii) ‘non-product...
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