Recently, Yogi – government in Uttar Pradesh [UP] cancelled a number of power purchase agreements [PPAs] that were signed in the past by state electricity boards [SEBs]/power distribution companies [PDCs] with independent power producers [IPPs] under MOUs [memorandum of understanding] route. The reason given was that cost of purchasing power under these agreements was substantially higher [in some cases even double] than the average cost of purchase @ Rs 4 per unit. In view of surplus availability of power in the state, the government hopes to lower overall cost even while meeting all its requirements. In turn, this will help reduce losses of SEBs/PDCs in the state. The galloping loss of SEBs/PDCs [as on September, 2015, their accumulated loss stood...
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ONGC-HPCL deal – milching in garb of merger
The Cabinet Committee on Economic Affairs [CCEA] has taken an in-principle decision to divest 51% of Union Government’s shareholding in Hindustan Petroleum Corporation Limited [HPCL] – a downstream central public sector undertaking [PSU] – in favor of Oil and Natural Gas Corporation [ONGC] – a PSU in upstream segment. A group of ministers [GOM] under finance minister, Arun Jaitely has been set up to work out the modalities. The merger is expected to be completed within the current year. The decision is a follow-up of the announcement by Jaitley in his budget speech for 2017-18 to create 2 or 3 integrated oil and gas companies by merging existing PSUs which can compete with energy majors in the private sector –...
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PMFBY – no panacea for farmers’ woes
Farmers in India are constantly under the threat of drought and other natural calamities such as floods, hailstorms, pest attacks etc leading to unprecedented loss of crop output. Unable to pay back loans [taken for growing crop and personal consumption needs], tens of thousands of them commit suicide every year. During a recent hearing, the Supreme Court [SC] reprimanded the union government for its slow and inadequate action in dealing with the problem. But, the latter put up a strong defense citing launch of Pradhan Mantri Fasal Bima Yojna [PMFBY] though Attorney General, KK Venugopal [who argued on its behalf] opined it will take time for the impact to be felt on ground. Under PMFBY, a farmer is compensated for the crop...
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FDI in retail – go for ‘holistic’ reforms
In budget for 2016-17, the finance minister had announced 100% foreign direct investment [FDI] in food retail subject to retailer selling only food procured from farmers in India and processed locally. After wait for more than a year, the government has now approved an application of Amazon.in for 100% FDI in food retail chain – both on-line sales [e-commerce] and offline [brick-and-mortar]. While, this may signal big boost to reform and liberalization in regard to FDI in retail, the cobweb of policy maze seems to be getting murkier. At the outset, a few words on how the policy dispensation has unfolded over the last decade or so. For the purpose of FDI, the government has classified retail in two broad...
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‘Branded Generics’ – an Indian innovation to fleece patients
During recent meetings of Modi with Trump, a sore point from the US side was its concern over alleged unsatisfactory record of India in regard protection of intellectual property rights [IPRs] in the area of patent, copyright, trademark and data protection etc. Earlier, the 2017 Trade Policy Agenda unveiled by Trump administration on March 2, 2017 pushed for a stricter regime for IPRs and patents. While, agreeing that India’s reforms on IPR are encouraging, it said “India’s new National Intellectual Property Rights Policy [NIPRP] should protect US innovations”. India’s defense is based primarily on the flexibilities available to developing countries under WTO agreement on TRIPs [trade related intellectual property rights] to ensure availability of drugs to patients [majority of them...
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NPAs legacy – offshoot of bureaucrat-borrower-politician nexus
In a brief prepared for the G-20 meeting at Hamburg, the International Monetary Fund [IMF] turned the spotlight on vulnerabilities of the Indian banking sector caused primarily by unsustainable level of non-performing assets [NPAs]. As on December 31, 2016, gross NPAs were about Rs 676,000 crores – 90% of these with public sector banks [PSBs]. The figure will be close to Rs 1000,000 crores if one includes the bad loans given a lease of life via ‘restructuring’ – a euphemism for relaxing payment terms. The problem had been festering for quite some time under United Progressive Alliance [UPA] and assumed monstrous proportions during its second term [2009-2014]. This remained camouflaged until such time the Reserve Bank of India [RBI] initiated...
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Fertilizers – ‘controls’ trigger one more exit
Last year, Tata Chemicals Limited [TCL] sold its urea business viz. plant in Babrala, Uttar Pradesh with 700,000 tons ammonia and 1.2 million ton urea capacity to Yara Fertilizers India Private Limited [YFIL] – Indian arm of Norway’s Yara lnternational ASA – for a sum of Rs 2670 crores. This was a distress sale fetching the company only 2/3rd of the money so far invested. Then, it had also alluded to selling its complex fertilizer business [including plant at Haldia]. Keeping their promise, the Tatas are in advanced negotiations with Indian-born Indonesian billionaire Sri Prakash Lohia of Indorama Corporation to sell the Haldia unit – on a slump sale basis for Rs 600-800 crore. The sale will include the plant...
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Making dodgers pay tax – will CAs help Modi?
Addressing a gathering to celebrate the Foundation Day of the Institute of Chartered Accountants of India [ICAI] on July 1, 2017 which coincided with the launch of the most revolutionary reform viz. GST [Goods and Services Tax] of post-independence India, prime minister, Modi shared some startling numbers. Saying chartered accountants [CAs] best understand the language of numbers, he opined “while, there are crores of Indians going on foreign trips every year, crores having luxurious/high end cars and crores of palatial homes/farm houses, yet there are a meager 32 lakh persons declaring their annual income above Rs 10 lakh”. 32 lakh persons declaring income above Rs 10 lakh are mostly from salaried class and include only a fringe of those living...
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GST – gas in, what about others?
Prior to the launch of most revolutionary reform post-independence viz. Goods and Services Tax [GST] on July 1, 2017, finance minister, Arun Jaitely had alluded to the GST Council – all powerful body mandated to decide on tax rates, inclusions/exclusions, exemptions etc – taking up for consideration inclusion of natural gas within the ambit of GST. The idea was to do it in the 18th meeting just before the launch but it appears to have been deferred. Keeping in mind Jaitely’s assurance that Council is open to making changes to accommodate genuine concerns, hopefully, this should happen sooner than later. It is important to understand as to why it must happen without slightest of delay. But, first, a few words...
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Reforming subsidy regime – what makes Modi helpless?
Three years at the helm, prime minister, Modi has been in absolute command at delivering on good governance, dismantling archaic laws, streamlining processes, simplifying procedures, cutting bureaucratic red-tape, reforming institutions, using technology for ‘transparency’ in decisions and above all not letting an iota of corruption happen in any department. These far reaching changes will have a ‘profound’ and ‘sustainable’ impact on the way government does business with stakeholders from all sections of the society. However, virtual absence of policy reforms especially in key sensitive areas such as fertilizers, food, power and oil which also happen to be resource guzzlers continues to be a matter of serious concern. These sectors suffer from structural weaknesses which will not go away merely by...
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