The increasing losses of power distribution companies [discoms] – firms which procure electricity from the generators and distribute to the consumers – have once again started haunting the states and union government alike. In 2015, the union government had orchestrated a financial restructuring package [FRP] under which over 75% of the outstanding debt about Rs 400,000 crore of discoms was taken over by state governments whereas for the balance 25%, they were allowed to issue bonds – backed by sovereign guarantee – to raise funds at concessional interest rate. The FRP was intended to enable discoms start on a clean slate, reduce losses and eventually eliminate them. During 2016-17 and 2017-18, they did show significant reduction but during 2018-19, this...
More No comments
Blog
Growth remains slack, despite booster doses
The downward revision in the GDP [gross domestic product] estimate for current year by the Reserve Bank of India [RBI] in its latest monetary policy review from the previous estimate of 6.9% [that itself was a significant reduction from the original 7.4%] to 6.1% now confirms the lingering fear of substantial deceleration in the economic activity that started from the second quarter of last year. When, the GDP growth declined to a six year low of 5% during the first quarter of current year, the expectation was that the growth momentum would pick during the 3rd and 4th quarter with the banking regulator projecting growth rate of 6.6% and 7.4% respectively. Now, if RBI itself is forecasting 6.1% for the...
More No comments
PSU privatization – will Modi crack the whip?
The ‘strategic disinvestment’ is an acronym used to denote transfer of a sizeable portion of ownership and management control of the state in a public sector undertaking [PSU] to an investor [call him ‘strategic’ investor] by selling commensurate shares. In a transformative sense, the government could reduce its holding to below 51% so as to lead to relinquishment of its majority ownership and control, or privatization in plain words. The governments, the world over, have used this as an instrument to vacate areas of economic activity where they believe the state ought not to be involved in the very first place or after having operated for a certain period, currently feel it is no longer necessary. It is also used...
More No comments
Strategic partnerships for oil security
Despite loud talk for decades by successive governments for increasing domestic production of oil and gas to make India self-sufficient in energy, we are producing less than 20% of our requirement – balance over 80% continues to be imported. This heightens our vulnerability to a point whereby a slight disruption in any of major source of our imports [be it imposition of sanctions by USA against Iran or attack on oil installations in Saudi Arabia] creates ripples and causes a major destabilizing effect on the Indian economy. The problem is not with lack of resources [India has 26 Sedimentary Basins covering an area of 3.14 million sq. km.] but lack of a conducive policy environment besides cumbersome regulatory processes which...
More No comments
Boost renewable but not at the cost of existing non-renewable assets
During an interactive session at Bloomberg Global Business Forum [GBF] on September 25, 2019 coinciding with the United Nations General Assembly [UNGA], Prime Minister, N Modi faced a dilemma on the issue of clean energy versus coal based power. Even as Modi reiterated his commitment to rapidly promote use of renewable energy viz. solar, wind, bio-mass, small hydro [India has more than doubled its original goal of having 175,000 mega watt (MW) of power capacity on renewable to 450,000 MW; it is also the founder of International Solar Alliance (ISA) jointly with France with 121 countries having already joined the ISA], he was confronted by CEO, Bloomberg on what plans he has with regard to use of coal [India has...
More No comments
FM’s booster dose for corporate India
In a flurry of announcements made on September 20, 2019 [also described in media circles as a third budget in less than three months], the finance minister, Nirmala Sitharaman handed out a bonanza to the Indian corporate sector. The most pleasing announcement pertains to steep reduction in the rate of corporate tax for new entities incorporated from October 1, 2019 in manufacturing sector and start production by March 31, 2023 from existing 25% to 15%. After subsuming surcharge and cess, the effective incidence of tax will be lowered from existing 29.15% to 17.01% – a drop of 12%. Such companies won’t have to pay minimum alternate tax [MAT] [levied on book profit of firms which have no taxable profit courtesy,...
More No comments
Agri-credit not going where it should
Successive governments have show-cased loans from scheduled commercial banks [SCBs], state cooperative banks [SCBs], district cooperative banks [DCBs] and regional rural banks [RRBs] [also referred to as institutional loans] to farmers at concessional rate of interest as demonstration of their commitment to help them increase their income from agricultural and allied operations. Modi – government has often proclaimed this as one of the potent instrument of doubling farmers’ income by 2022. The total amount of agricultural credit increased from about Rs 915,000 crore during 2015-16 to Rs 1065,000 crore during 2016-17 and further to Rs 1170,000 crore during 2017-18. As per directives of the Reserve Bank of India [RBI], farmers get short-term crop loans up to Rs 300,000 at subsidized...
More No comments
GST math goes haywire
One of the reasons for inordinate delay in taking up the constitutional amendment bill for enactment of the Goods and Services Tax [GST] was the reluctance of the then UPA – government at the centre to agree to the demand of the states for compensation of the loss of revenue that would arise with its launch vis-à-vis the revenue they would get under the subsisting dispensation of excise duty, sales tax or value added tax [VAT] plus a host of other local taxes. Modi – government by agreeing to this demand achieved a fair degree of success in building consensus among all the states. Within two years of taking charge in 2014, it was able to steer through the constitutional...
More No comments
Fertilizers – disjointed policies, contrary signals
Modi – government is running in its sixth year [five years of the first term and first of Modi 2.0]; we are yet to see a coherent announcement on reforms in the fertilizer sector forget giving a ‘stable’ and ‘predictable’ policy badly needed to give a clear-cut signal to various stakeholders for taking decisions with regard to investment, innovation, imports, logistics and use etc. All that we see is exhortation from the Prime Minister himself made in bits and pieces from the public platform. Let us pick up some of most crucial ones. First, in the 38th edition of “Mann ki Baat” delivered on November 26, 2017, Modi exhorted farmers to take a pledge for reducing consumption of urea [the...
More No comments
Reforming agri-markets – a hoax
An inter-ministerial panel for rural and agriculture sectors has identified trade barriers within the mandi system [mandi is state-run market yards known as agricultural produce marketing committees (APMCs)] that continue to hurt traders dealing in food commodities, which, in turn, affects farmers. The panel cites this as a major factor responsible for lower farm income. Arguing that farmers need freer access to markets for selling their produce , it has recommended removal of the inter-state mandi tax [levy collected from traders when agri-products are sold from one state to another] and replacing it by a single pan-India mandi tax. It has also mooted a pan-India licence valid across all mandis [a total of 585 in 16 states and two union territories]. The panel...
More No comments