The price cut especially for non-ujjwala beneficiaries was avoidable. It will serve no purpose and will be a drain on already strained oil companies For several decades, it has been a common practice for governments to make decisions based on political expediency ignoring economic considerations. The incumbent Modi – dispensation has tried to change this practice but he too has fallen back to business as usual. One such area is the LPG subsidy. On August 29, 2023, the Union Cabinet approved a reduction in the price of domestic cooking gas by Rs 200 per cylinder (14.2 kg) effective from August 30, 2023. De jure, the price of LPG is deregulated. How could the government decide on it? The reason is...
More Comments are closed
Articles
‘Indigenous’ fertilisers must be explored
The government must pursue indigenous sources of fertiliser raw materials to minimise India’s vulnerabilities on imports The enactment of two laws viz. The Mines and Minerals (Development and Regulation) Amendment Act, 2023 and the Offshore Areas Mineral (Development and Regulation) Amendment Act, 2023 in the just concluded monsoon session of the parliament bodes well for the Indian fertilizer sector. While the first law paves the way for the auction of critical mineral potash (besides lithium and graphite) blocks for exploration and processing in India, the second provides a fixed 50-year production lease for offshore minerals. Potash or ‘K’ is amongst the three major plant nutrients (the other two being Nitrogen or ‘N’ and Phosphate or ‘P’) needed for increasing production...
More Comments are closed
Off-budget borrowings are unhealthy in nature
The Union Government wants to ‘pre-pay’ the remaining off-budget borrowings of Rs 170,000 crore over a reasonable period of time Off-budget borrowings or extra-budgetary resources (EBRs) – as these are called in budget parlance — are those borrowings that are raised by public sector undertakings (PSUs) and other agencies of the government such as Food Corporation of India (FCI), Housing and Urban Development Corporation (Hudco), Power Finance Corporation (PFC), NABARD etc to fund its schemes for which repayment of entire principal and interest is done from the Union Budget. The Centre had EBRs close to Rs 670,000 crore by the end of 2020-21. If all obligations about such borrowings are met by the Union government then why does it not...
More Comments are closed
Rethinking Universal Basic Income and subsidies
There is a compelling case for disbanding all existing forms of support and replace them by what may be termed as ‘Unconditional Basic Income’ or the UBI system. During an interaction organised by the Confederation of Indian Industry (CII) last month, Chief Economic Advisor V Anantha Nageswaran dismissed the idea of Universal Basic Income (UBI) in India. He expressed concerns that UBI might create create ground for “perverse incentives,” discouraging people from actively seeking income-generating opportunities. As a result, he believes that UBI should not be priority in the near future. Drawing comparisons with developed countries, the current CEA highlights that these nations have limited room for increasing economic growth and creating income generating opportunities. Consequently, their governments have established social...
More Comments are closed
The scourge of freebies is taking a heavy toll
Freebies are denuding the budgets of many states. This practice must go before states’ coffers run dry Delivering his Independence Day address, Delhi Chief Minister Arvind Kejriwal promised 200 units of electricity a month for ‘free’ to the entire 1.4 billion people of India saying this will cost Rs 150,000 crore per annum. He went on to add ‘When Modi – government can waive Rs 150,000 crore worth of loans given to four top industrialists of the country, why can’t it provide free electricity to the people which would cost it the same amount? In Delhi, Kejriwal is already giving free electricity to all households (HHs) consuming 200 units a month and a flat subsidy of Rs 800 to HHs...
More Comments are closed
Discoms show signs of ‘turn around’
According to PRAAPTI (Payment Ratification and Analysis in Power Procurement for Transparency in Invoicing of generators) – a portal maintained by the Ministry of Power (MoP) – , the legacy dues of power generating companies (gencos) from distribution companies or discoms in short came down from Rs 1,20,540 crore in June 2022 to Rs 61,025 crore in July 2023. If, we include dues of transmission companies (transcos) and traders also, then total dues of all those involved in electricity supply chain decreased from Rs 1,39,747 crore to Rs 69,957 crore during the same period. The MoP has attributed this drastic improvement in clearance of dues by discoms to implementation of late payment surcharge (LPS) and related matters Rules, 2022 as...
More Comments are closed
NPAs down but pain points still remain
As per the information given by the Ministry of Finance (MoF) in Parliament, during the last nine years, scheduled commercial banks (SCBs) have undertaken an aggregate recovery of Rs 10,16,617 crore of loans that had gone bad or non-performing assets (NPAs) as these are called in banking parlance. In reply to a question given in the lower house, Minister of state for finance Bhagwat Karad informed that “Comprehensive measures have been taken by the Government and RBI to recover and to reduce NPAs, including those pertaining to corporate companies”. These include the 2016 Insolvency and Bankruptcy Code (IBC), and the establishment of the National Asset Reconstruction Company Limited (NARCL), among other measures. At banks’ level, the efforts involve early recognition...
More Comments are closed
Agri-trade: Hamstrung by state laws
To boost inter-mandi and inter-state trade in agricultural commodities, a high-level Expert Committee set up by the Ministry of Agriculture & Farmers Welfare has recommended creation of specialized Market Yard of National Importance (MNI) which could complement e-NAM (electronic National Agriculture Market). It has proposed creation of MNIs for selected commodities in six states. According to the committee, “MNI could be construed as a specialized extension of e-NAM”. At the outset, it is important to understand what is e-NAM? What is it that e-NAM hasn’t been able to achieve? How can MNI make up and fill the void? Launched in April 2016, e-NAM is an online trading platform for agriculture produce aiming to help farmers, traders, and buyers with online trading and...
More Comments are closed
More reforms are needed to attract serious investment in oil & gas
Measures taken by the government recently will remove some impediments holding back investment in exploration and production. Pricing and marketing of produce also need to be unshackled Despite offering an attractive policy environment under the New Exploration and Licensing Policy (NELP) and the Hydrocarbon Exploration and Licensing Policy (HELP), also known as the Open Acreage Licensing Policy (OALP), exploration and production (E&P) of oil and gas hasn’t picked up on the required scale. A major bottleneck has been regulatory hurdles which the government is now trying to address. Three important measures have been implemented by the Union government in recent times to remove regulatory and procedural hurdles faced by E&P companies. One, 0.67 million sq km sedimentary basin lying offshore,...
More Comments are closed
Scrap priority sector lending
PSL is a legacy of the socialist era. It creates distortion in credit flows, keeps bank officials busy with target fulfillment and is prone to blatant misuse Lenders, especially foreign banks have decided to undertake a comprehensive analysis of “sustainable finance” under the aegis of the Indian Banks’ Association (IBA) to make out a case for granting priority-sector lending (PSL) status to such financing for consideration by the Reserve Bank of India (RBI). Globally, “sustainable finance” is broadly defined as any form of financial product/service that promotes environmental, social and governance purposes while contributing to the achievement of relevant targets adopted by countries under frameworks, including the Paris Agreement on climate and the Sustainable Development Goals (SDGs) set by the...
More Comments are closed