With elections underway, even as different political parties compete with each other to promise more subsidies, there is trouble brewing for India at World Trade Organization [WTO] – the multilateral body which binds member countries to a common set of rules with regard to trade in goods and services with ‘fairness’ and ‘non-discrimination’ as the underlying principles. In May, 2018, in a hard hitting submission made to WTO Committee on Agriculture [CoA], the United States had lambasted India for indulging in substantial under-reporting of its market price support [MPS] program for wheat and paddy farmers alleging that the sops given by government far exceed the permissible limit. This was a counter to the latter’s notification to WTO in March, 2018....
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Power producers at risk, courtesy ailing discoms
As per reports, power plants with investment of over Rs 300,000 crore are in jeopardy as the state electricity boards [SEBs]/power distribution companies [PDCs] have not yet paid dues of about Rs 60,000 crore for the electricity purchase made by them. The concern is understandable as with so much money locked up in receivables, it is nearly impossible for the generators to run their plants. The situation is particularly critical for independent power producers [IPPs] who account for half of the dues and run the risk of turning into non-performing assets [NPAs]. The current scenario is a continuation of a trend seen for decades whereby SEBs/PDCs – faced with substantial shortfall in their revenue from sale of electricity to consumers...
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Congress’ NYAY scheme – recipe for fiscal disaster
Prior to Modi taking charge in 2014, the grand old party viz. Congress which ruled the country for over five decades, had institutionalized the culture of giving subsidies/doles, loan waivers, free power, job guarantee [in rural areas] and so on. It had also achieved the dubious distinction of institutionalizing corruption and leakages from the budget earmarked for welfare schemes. With a major slice of funds pilfered on the way and not reaching the intended beneficiaries, majority of the poor remained in a state of poverty and deprivation. This also left little money for undertaking development projects by the state. So, the economy was caught in a vicious trap of doles-corruption-slow growth with no space whatsoever for increasing job opportunities and...
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PSBs turnaround – make it sustainable
After incurring losses for four consecutive years [2015-16 to 2018-19], public sector banks [PSBs] are expected to post profits in the range of Rs 23,000 – 37,000 crore during 2019-20. Their gross non-performing assets [GNPAs] are slated to decline from 10.3% as on March 2019 to 8.1 – 8.4% by March 2020. The net NPAs [NNPAs] are projected to go down from 5.3-5.4% to 3.5-3.6% during the same period. Four years ago when the NPAs started showing an unprecedented increase compelling the banks to make provision in the balance sheet – as prescribed by the banking regulator viz. Reserve Bank of India [RBI] – and resultant losses, no one would have ever thought that the turnaround would come so soon. Yet,...
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Angel tax – no blanket exemption please
The tax assessment notices issued by the Income-Tax [IT] department to thousands of start-ups [acronym for companies which turn ‘innovative idea’ in to attractive business venture] and tax demands raised on hundreds of them has led to widespread consternation. The iSPIRT, a think-tank for the Indian software products industry, estimates that over 38% of the start-ups in the country — 39,000 at last count — have received one or more ‘angel tax’ notices during 2018 leading to a drop of 21% year-on-year in critical capital infusion in these entities at the seed stage. It has sought immediate intervention by Prime Minister, Modi to halt these tax notices. The government has responded by quashing all tax assessment notices. As regards, cases where...
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Fertilizer reforms – Modi’s report card
The term of the Modi – government will come to an end in a little over two months from now. It is time to take stock of what it has done to the fertilizer sector which was suffering from several policy weaknesses at the time it took charge and there was great deal of expectation that it would kick off major reform. The four major areas which needed focused attention were (i) control on all critical aspects hampering initiatives by manufacturers to reduce cost, improve efficiency and innovate; (ii) imbalance in fertilizer use affecting crop yield, soil health, environment and sustainability of agriculture; (iii) shortfall in supply of gas, feedstock/fuel in production and high price; (iv) increasing subsidy and its...
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Tale of two obnoxious levies
From the day 1, implementation of the Goods and Services Tax [GST] [it was launched on July 1, 2017] has been plagued by several anomalies. The GST Council – the all powerful body to decide the tax architecture and rates on various items – deserves to be complimented for showing much needed resilience in attending to the anomalies as and when brought to its attention by various stakeholders. However, instead of taking a proactive stance, anticipating problems and nipping them in the bud, most of its actions have been in reactive mode. As a result, it continues to grapple with unending problems. Two such contentious issues are (i) including the TCS [tax collected at source] amount – levied under the...
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Surgical strike on money launderers
For generations, corrupt politicians and bureaucrats [both integral part of the ruling establishment] and dubious industrialists and businessmen have indulged in generation of ‘black money’ – euphemism for the money that goes ‘unaccounted’. In a quid pro quo, corrupt politicians and bureaucrats take bribe in lieu of granting favor to industrialists and businessmen in project approvals and enabling them escape payment of tax on their income and wealth. The former also siphon-off funds meant for disbursement to the poor under welfare schemes. The bribe money, embezzled/misappropriated funds and cash going off the taxman’s radar constitute ‘unaccounted’ or black money. Apart from investing in conventional modes such as gold, jewellary, real estate etc or stashing abroad, money launderers have also sought...
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‘Dole-deal’ versus ‘fair deal’
Addressing the India Today Conclave on March 3, 2019, prime minister, N Modi lambasted the erstwhile UPA – dispensation as a regime that believed in ‘doles’ and ‘deals’ whereas his government believes in ‘empowerment’ and ‘fair deal’. Elaborating on the charge, he opined that under Congress – led/supported governments in the past, even as little was done to empower the poor and augment their incomes, there was proliferation of doles – an acronym for subsidy or any other form of state support – financial or non-financial. A major slice of these doles never reached the intended beneficiaries [as the then, prime minister, Rajiv Gandhi opined ‘of the Rupee 1 that leaves Delhi, 85 paise disappears on the way’]. Moreover, the...
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Dual-class share structure – a flawed idea
An advocacy group IndiaTech representing some of the most high profile entrepreneurs have made a submission to the ministry of corporate affairs [MCA] and the markets regulator Securities Exchange Board of India [SEBI] for allowing a dual-class share structure with differential voting rights for founder-promoters of start-ups to encourage country’s most valuable companies to get listed on the domestic stock exchanges instead of overseas exchanges such as Nasdaq and New York Stock Exchange [NYSE]. At present, the Companies Act [2013] permits firms having consistent track record of distributable profits for three years to issue shares with differential voting rights [DVR] subject to a cap of 26% of the total share capital. The lobby group wants the MCA to dispense with...
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