The Modi Government has taken a slew of measures to double farmers’ income by 2022. However, for these efforts to succeed, State Governments must cooperate, as the real action can only take place at the ground level Prime Minister Narendra Modi’s objective to double farmers’ income by 2022 is being looked upon with scepticism. Critics argue that this will require an agricultural growth of more than 10 per cent per annum, at a time when growth in agriculture has collapsed to less than half a per cent per annum. Critics also argue that the minimum support price has risen only marginally (around four per cent) under the Modi dispensation. Both arguments are flawed. First, a number of States such as...
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FDI policy for e-commerce, just a cosmetic change
The problem lies in the government de facto shutting the door for FDI in multibrand offline retail. The department of industrial policy and promotion (DIPP)—the nodal authority for issues relating to foreign direct investment (FDI)—has notified guidelines for FDI in e-commerce. Under these, 100% FDI through the automatic route will be allowed in the ‘marketplace’ format of e-commerce retailing, but not in the ‘inventory-based’ model. Under a marketplace model, an e-commerce entity provides an IT platform on a digital and electronic network to act as a facilitator between buyer and seller. The company may provide support services to sellers in terms of warehousing, logistics, order fulfillment, call centre, payment collection and other services. Post-sales, delivery of goods to the customers...
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Good move, hasty retreat
TAX ON EPF WITHDRAWAL The 2016-17 budget proposal to tax 60% of withdrawal from EPF (employees provident fund) and other superannuation funds faced flak from all quarters forcing Finance Minister Arun Jaitley to withdraw it lock stock and barrel. How could the Narendra Modi government, which is committed to the welfare of every section of the society, contemplate such a move in the very first place? Was it really targeted against the salaried class? Was it a right step but not properly piloted? Jaitley had proposed tax on 60% of withdrawal from accumulations in EPF account (contributions plus interest accrued) from April 1, 2016. However, the money would be exempt from tax if re-invested in purchase of annuity plan. He...
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WHY THIS PRICE RISE IN NATURAL GAS?
A return to global market-based pricing of gas will hurt fertilisers and power. The Government must, therefore, reconsider its decision to raise the price of natural gas In October 2014, the Modi Government had issued guidelines to fix the price of all domestic gas based on weighted average of gas prices prevailing in four international locations. This led to consternation among producers who say that, at existing administered price ($3.82 per million British thermal unit from October 1, 2015, which will fall to $3.15 in April), production from difficult fields won’t be viable. The Government then promised to consider a ‘premium’ price for deep water blocs, ultra-deep water blocs, which present challenging geological environment. In May 2015, the Union Ministry...
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DBT for fertilisers is a hoax
Prime Minister Narendra Modi is perceived to be a crusader when it comes to plugging leakages from the subsidy distribution pipeline. Prime Minister Narendra Modi is perceived to be a crusader when it comes to plugging leakages from the subsidy distribution pipeline. He has amply demonstrated this in the case of LPG (liquefied petroleum gas), wherein the government implemented direct benefit transfer (DBT) and saved about R15,000 crore annually. However, when it comes to fertilisers, similar initiatives are conspicuous by their absence. During 2015-16, out of an allocation of R73,000 crore on fertiliser subsidy, as much as R50,300 crore was on urea. The subsidy is administered through manufacturers who are directed to sell urea at a fixed uniform maximum retail...
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Why a price stimulus for gas?
A return to global markets-based pricing will hurt the fertiliser and power sectors In his Budget speech, finance minister Arun Jaitley lamented the situation of “rising demand, near-stagnation in production and consequent rapid increase in import” in the case of gas. He argued that there was need to incentivise gas production from deep water, ultra-deep water and high-pressure-high-temperature areas. “A proposal is under consideration for new discoveries and areas which are yet to commence production, first to provide calibrated marketing freedom; and second, to do so at a pre-determined ceiling price to be discovered on the principle of landed price of alternative fuels”. Finance ministry U-turn The concern expressed in the speech is not new. The government was mindful of...
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A thing of the past
RETROSPECTIVE TAX About a fortnight ago, the income tax (I-T) department sent a reminder notice to the UK-based Vodafone Group Plc to pay Rs 14,300 crore in tax dues and threatened to seize the assets in case of non-payment. Foreign investors have taken umbrage to it. Vodafone termed this as an act completely out of sync with Prime Minister Narendra Modi’s promise “Retrospective tax is a matter of past… We are ensuring that neither this government nor future governments can open this chapter” made during India – France Business Summit in January, 2016. Others opined this is return of tax terrorism, a phrase coined in the wake of a retrospective amendment in tax laws initiated by then finance minister Pranab...
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Perception vs reality
BAD SUBSIDIES : The only way to remove fertiliser subsidy is through direct benefit transfer in place of routing subsidy through the industry. Addressing a global business summit recently, Prime Minister Narendra Modi for the first time, shared at length his thinking on subsidies. He said, “We have to eliminate bad subsidies, whether or not they are called subsidies. But, some subsidies may be necessary to protect the poor and the needy and give them a fair chance to succeed. Hence, my aim is not to eliminate subsidies but to rationalise and target them.” He continued: “I am referring to cooking gas, fertiliser and kerosene subsidies. I must confess that I am surprised by the way words are used by...
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Distorted gas allocation to fertiliser sector
Fertiliser needs gas on priority and at reasonable rates, more so non-urea fertiliser producers The Modi government is doing everything within its executive power to ensure that ‘Make in India’ succeeds. However, there is one sector, fertilisers, which has not got the attention it deserves. Even after two-and-a-half decades of reforms, this industry not only remains highly regulated with intrusive controls on production, distribution, sales and pricing, it is also excessively micromanaged. Controls on selling price at levels unrelated to cost, and subsidy accounting for an overwhelming share of manufacturers’ realisation from sale have seriously hampered the sector’s ability to survive. No fresh investment has been made in this industry for close to two decades. Discriminatory policy Even as the...
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POLICY MUDDLE IN FDI RETAIL
The Government’s unrealistic policy of barring foreign direct investment in the business-to-consumer segment has pushed e-commerce retailers to camouflage themselves as market places to access funds from abroad The Delhi High Court is hearing a plea filed by the All-India Footwear Manufacturers and Retailers Association, regarding the alleged flouting of foreign direct investment rules by e-commerce companies. In its affidavit to the court, the Department of Industrial Policy and Promotion has argued that its job is to formulate policy — not monitor implementation. The DIPP added that it has already laid down a ‘transparent’ and ‘predictable’ policy which permits 100 per cent FDI in business-to-business transactions in e-commerce, but only prohibits in the business-to-customer segment. Further, it does not recognise...
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