The government has initiated discussions to ‘lift price restrictions on domestically produced natural gas’. However, it intends to do it ‘gradually’. It wants to continue with regulated gas pricing for at least three more years. However, during the interregnum, producers will be given freedom to sell a portion of the total output under ‘negotiated pricing deals’ with their customers. Will it help? Under the guidelines in vogue since November 1, 2014, for all of domestic supplies from fields given under new exploration and licensing policy [NELP] as also blocks given on ‘nomination’ to Oil Natural Gas Corporation [ONGC] and Oil India Limited [OIL] under pre-NELP, the price [call it normal price] is a weighted average of prices at 4 international...
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Telecom industry – heading towards monopoly
Vodafone Idea Limited [VIL] – a joint venture [JV] between UK based multinational Vodafone and Kumar Mangalam Birla owned Idea Cellular – and Bharti Airtel have reported a staggering loss of Rs 51,000 crore and Rs 23,000 crore respectively for the second quarter of current financial year ending September 30, 2019. This is primarily due to a recent order of the Supreme Court [SC] directing telecom companies to pay ‘unpaid’ dues to the Government of India [GOI] towards license fee and spectrum usage charges [SUC]. The order is the culmination of a long-drawn court battle between the department of telecommunication [DoT] and service providers with the former insisting that for determining the license fee and SUC charged as a percentage of adjusted...
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E-commerce majors – punish only if they break rule-book
The Confederation of All India Traders [CAIT] [it represents millions of small traders who are not only a major source of employment but also is a constituency which Modi – dispensation can’t afford to ignore from a political perspective] has complained to the government that global e-commerce majors viz. Amazon, Flipkart are giving huge discounts, selling exclusive brands [including their own] and controlling inventory of sellers etc – all of which is prohibited under the extant policy on foreign direct investment [FDI]. Promising action, the minister for commerce and industry, Piyush Goyal has already ordered collection of data on their financials, business model and operating practices. Meanwhile, it is necessary to analyze whether the FDI rules are really being flouted....
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Slowdown in growth – who is the culprit
The deceleration in GDP growth which commenced in the second quarter of the last financial year [FY] has continued during the current year even as the growth during the first quarter ending June 30, 2019 has plummeted to a record low of 5%. Moreover, there appears to be no sign of reversal even as the Reserve Bank of India [RBI] – in its latest [October 4, 2019] monetary policy review – has projected growth of just 6% for 2019-20 – down from its previous estimate [August, 2019 policy review] of 6.9% . Analysts have propounded several theories from purely cyclical to decline being of a ‘structural’ nature to doomsayers predicting that Indian economy is heading for a prolonged recession. The...
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Why subsidy reforms are not taking off
At present, tens of millions persons [including undeserving] are getting a variety of subsidies from the government. These cost hundreds of thousand crore seriously impairing its ability to maintain fiscal deficit [excess of total expenditure over total revenue] within the target range mandated by the Fiscal Responsibility and Budget Management [FRBM] Act. The manner of administering these subsidies is marked by ‘ad-hocism’ and ‘arbitrariness’. It leads to mis-allocation of resources, promotes inefficiency in production, distribution and use, encourages misuse of funds, makes way for controls through the backdoor, enables bureaucrats to meddle in the affairs of the industry and creates fertile ground for nepotism and corruption. Even as Modi – government has vowed to make India a US$ 5 trillion...
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Oil sector – is it ready for competition
Last year, the union minister of petroleum and natural gas [MPNG], Dharmendra Pradhan had set up an expert committee under Dr Kirit Parikh to “look at various issues related to implementation of existing guidelines for grant of marketing authorization of market fuels – petrol, diesel and aviation turbine fuel [ATF], identity entry barriers, if any, for expansion of retail outlets for private marketing companies and recommend easing of fuel retailing licensing rules ”. This was in the backdrop of persistent demand from various stakeholders for relaxing extant norms for granting authorization for marketing of oil products with a view to get more private players into retailing so as to increase competition, reduce price, improve services and give more choice to...
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E-commerce norms – violations continue unabated
The global e-commerce majors have been in the news, yet again, for violating norms for foreign direct investment [FDI]. The Confederation of All India Traders [CAIT] has complained to the government that Amazon, Flipkart are giving huge discounts, selling exclusive brands [including their own] and controlling inventory of sellers etc – all of which is prohibited under FDI policy. Under the guidelines on FDI in e-commerce [issued in 2016-17, Press Note 3], 100% FDI is permitted in the ‘market-place’. The market-place is a platform where sellers and buyers meet to conduct sale and purchase transactions even as the owner of market-place [read: e-commerce company] merely acts as a facilitator. It can provide services such as book orders, raise invoice, arrange...
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PSUs – privatization and controls can’t go hand-in-hand
In her budget presented on July 5, 2019, the finance minister, Nirmala Sitharaman announced disinvestment of governments’ shareholding in public sector undertakings [PSUs] to a level below 51% on a ‘case-by-case’ basis. The cabinet committee on economic affairs [CCEA] is expected to approve this policy any time soon. The 51% threshold is very crucial as shareholding at this level or above enables the government to have majority ownership and control over the undertaking. If, the holding is reduced to below 51%, this will lead to relinquishment of majority ownership and control, or privatization in plain words. This will be transformative – a bold reform indeed. But, hold your breath, there is a caveat appended to it. In the budget speech, Sitharaman...
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RCEP – shed protectionist mindset
The Regional Comprehensive Economic Partnership [RCEP] is a conglomeration of 10 members of the Association of South East Asian Nations [ASEAN] viz. Malaysia, Indonesia, Thailand, Vietnam, Singapore, Philippines, Myanmar, Brunei, Laos and Cambodia plus 6 others viz. Australia, New Zealand, Japan, South Korea, China and India. If, it materializes [29 negotiation rounds have already been held since start in 2012], this will be a giant group covering a population of 3.6 billion or 50% of the world and GDP [gross domestic product] at US$ 25 trillion or nearly one-third of the global. During the Summit of ASEAN held in Singapore last year [November 11-15, 2018], prime minister, Narendra Modi had called for early conclusion of the process so that the...
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Sagging GST collection – time to wield the stick
The finance minister, Nirmala Sitharaman has constituted a high level committee consisting of the representatives of the centre and states to study the reasons as to why tax collections under GST [Goods and Services Tax] have been slack and suggest measures to boost. The GST was launched on July 1, 2017. While, it may not be realistic to expect the desired buoyancy during the first year [as it takes time for the system to stabilize], during 2018-19, in all fairness, one would have expected the tax collection to pick up. But, the year ended up with big disappointment as the actual collection for the union government [it includes CGST (central GST), compensation cess and undistributed portion of IGST (integrated GST)]...
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