Speaking at the launch of the nation’s maiden online gas trading platform by Indian Gas Exchange (IGX), petroleum minister Dharmendra Pradhan alluded to “a new pipeline tariff policy that will replace existing practice of seven different pipeline operators charging separate rates and customers away from gas source paying more than those nearer to source.” Petroleum and Natural Gas Regulatory Board (PNGRB) Chairman DK Saraf was even more specific when he spoke of a “single rate across pipelines so as to make the price of fuel uniform for customers across the country.” According to the minister, “the new policy will help bring down the cost of natural gas, make it affordable in every part of the country and facilitate development of...
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Powerless power sector
The much-touted power reforms have not taken off as netas remain in election mode. As a result, industries continue to pay high tariff and discoms continue to report losses Under the Atmanirbhar Bharat Abhiyan scheme unveiled in May, Finance Minister Nirmala Sitharaman had promised a special loan of Rs 90,000 crore to fledgling power distribution companies (discoms) to enable them to clear their dues to independent power producers (IPPs) and generators in the public sector viz. National Thermal Power Corporation (NTPC) and so on, subject to their implementing certain reforms. The Government is now keen on hiking the loan amount to Rs 1,25,000 crore and relaxing reform conditions. This is not the first time that discoms are in dire financial...
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A ‘bad bank’ is a bad idea
With the Govt having recapitalised PSBs with Rs 2,65,000 crore in the last three financial years alone, it makes no sense to pump in more of the taxpayers’ money into NPAs Even as the efforts made by the Narendra Modi Government — including an asset quality review (AQR) by the Reserve Bank of India (RBI), enactment of the Insolvency and Bankruptcy Code (IBC), amendment of the Banking Regulation Act (BRA) and massive capital infusion in public sector banks (PSBs) — were beginning to yield results in terms of reduction in non-performing assets (NPAs), the crisis triggered by Covid-19 has turned the clock back. According to a report by India Ratings and Research (Ind-Ra), the impact of the pandemic and the associated policy...
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The case for a 15% tax rate for India Inc
A uniform tax rate of 15% (17.1% with add-ons) will, among other things, minimise tax litigation that arises largely due to multiple interpretations of a plethora of exemptions and deductions in tax legislation. Besides that, exemptions/incentives make the Indian law cumbersome to a point whereby it makes any prospective investor scary. A major factor affecting India’s ability to attract foreign investment for long has been the high rate of corporate tax. In 2018-19, the rate of tax on domestic companies was 30%. Including surcharge and cess, the total tax incidence is 34.9%. This made India an outlier as the corporate tax rate in other countries is much lower; for example, the US (21%), the OECD average (21.4%), China (25%), Vietnam...
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FDI through front door
The Govt must allow 100 per cent FDI in retail as this will level the playing field for all, eliminate discretion of bureaucrats whose writ is all-pervasive and help small traders On April 22, the California-based US internet giant, Facebook, announced its decision to buy 9.99 per cent stake in Jio Platforms Limited (JPL) paying more than Rs 43,450 crore. JPL is a 100 per cent subsidiary of Reliance Industries Limited (RIL) and has in its fold a wide spectrum of businesses such as wireless broadband, home broadband, enterprise broadband, narrowband, internet-of-things businesses, a bouquet of digital applications, e-commerce and so on. This was followed by a flurry of investments with big names such as General Atlantic, Silver Lake, Qualcomm, Intel,...
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Future mortgaged for food
Tax collections are far from adequate to pay for free food and the Govt is borrowing heavily to make up for the shortfall, thereby imposing an unsustainable burden on the future generation of taxpayers To shield millions of poor from the devastation caused by the Covid-19, Finance Minister Nirmala Sitharaman had announced that the Government would give five kg of rice or wheat per person per month for “free” to around 80 crore people through the Public Distribution System (PDS) for three months. It would also give for “free” one kg of pulses per household for three months. This was in addition to five kg of cereals per person per month that 80 crore beneficiaries are already getting at a heavily-subsidised price...
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SC will have to solve the telco mess
A cue is available from the stance taken by SC itself in case of unpaid dues from public sector undertakings (PSUs) such as Gas Authority of India (GAIL), etc. The licence fee and SUC is charged as a percentage of service provider’s adjusted gross revenue (AGR)—8% and 3-5% respectively. During the last three years or so, the telecom industry has been enduring an unprecedented crisis, with most of the companies having huge debt in their books and not generating adequate cash flows for servicing the loans. The crisis was aggravated by an order of the Supreme Court (SC) on October 24, 2019, directing telecom firms to pay ‘unpaid’ dues towards licence fee and spectrum usage charges (SUC). The licence fee...
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Fuel prices are burning
We have an abhorrent situation whereby taxes alone account for about two-third of the price at the pump. The high fuel price contributes to high inflation and higher costs of fertilisers and food During the last three weeks of June, the oil marketing public sector undertakings (PSUs), namely the Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL), increased the retail prices of petrol and diesel continuously almost daily. The cumulative hike works out to about Rs 9 per litre of petrol and Rs 11 per litre in case of diesel. As a result, the current price of both the fuels in Delhi is Rs 80.5 per litre. In April/May, petrol was selling at Rs...
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Power sector in crisis, reforms a mirage
The special economic and comprehensive package ‘Atmanirbhar Bharat Abhiyan’, unveiled by Finance Minister Nirmala Sitharaman in five tranches during May 13 – 17, 2020, has two components that have a crucial bearing on the fledgling power distribution companies – commonly known as discoms. The discoms – mostly owned and controlled by state governments – procure power from independent power producers [IPPs] and public sector undertakings [PSUs] such as the National Thermal Power Corporation [NTPC] besides their own generating stations and sell to consumers. The first component provides for special loan of Rs 90,000 crore from Rural Electrification Corporation [REC] and Power Finance Corporation [PFC] to discoms to enable them to clear their dues to IPPs and PSUs. But there are...
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The GST indemnity riddle
Even as States expect full and timely compensation for the shortfall in their tax revenue, vis-à-vis a given benchmark, the Union Govt has been making short payment and that too after a time lag The dwindling tax revenue of both the Centre and States since the financial year (FY) 2019-20 has led to a piquant situation. Even as States expect “full” and “timely” compensation for the shortfall in their tax revenue (their own collection plus the amount received as their share in indirect tax collected by the Centre as per the Finance Commission’s devolution formula) vis-à-vis a given benchmark, the Union Government has been making short payments and that too, after a time lag. The compensation to States is intertwined...
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