Recently, finance minister, Arun Jaitely in a veiled statement raised a question mark over the desirability of the government continuing to run Air India [AI] with a meager 14% share when private sector occupies an overwhelming 86% of the space. The statement lends credence to a possibility that the recommendation of Niti Aayog for privatization of AI could be taken on board. But, the ministry of civil aviation does not appear to be too enthusiastic about privatization. It has mooted bringing in a ‘strategic’ partner even while retaining majority control. It believes that the government on its own, is capable of turning around if only the airline is unshackled from its huge debt [currently, over Rs 50,000 crores]. Within a...
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Exporters’ woes under GST
Even as the President, Pranab Mukherjee is all set to flag off the most revolutionary financial reform ever undertaken during the post-independence era viz. the Goods and Services Tax [GST] on July 1, 2017, it will have to put up with the nuances of a baggage that got deeply entrenched under the existing system of taxation namely a plethora of exemptions and concessions. Under the extant system, Indian industry had to pay multiple taxes viz. excise duty, countervailing duty [CVD], special additional duty [SAD], central sales tax [CST], value added tax [VAT] and a host of other local taxes such as entry tax, purchase tax, turnover tax etc. Apart from rates varying from state-to-state [high in some 20% plus], this...
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Gas business – what prompts RIL-BP take a re-look?
One-and-a-half decade ago, Reliance Industries Limited [RIL] had created history by announcing the biggest ever gas discovery in Krishna Godavari [KG] basin off the Andhra Pradesh coast with an estimated in-place reserve of 12 trillion cubic feet [tcf]. It started producing from its most prolific bloc KG-DWN-98/3 in 2009 with a promise to deliver 80 million standard cubic meter per day [mmscmd]. After reaching 69 mmscmd in March 2010, production started declining and the trend never got reversed. Currently, it produces only 7 mmscmd which is not even 1/10th of the promised quantity. The precipitous decline in production has remained shrouded in mystery even as the operator is entangled in four arbitration cases with Union Government over various aspects of...
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Farmers need empowerment, not write-offs
When, prime minister, Modi during his high octane campaign in the run up to assembly elections in Uttar Pradesh [UP] promised loan waiver for farmers [albeit small and marginal/poor] in the state, he might not even have contemplated that state-after-states would be confronted with similar demands. In retrospect, this is precisely what has dawned on the political establishments particularly in states ruled by BJP viz. Maharashtra, Madhya Pradesh, Haryana etc. The irony is that whereas, BJP had voluntarily made a commitment in a poll bound state, the demand for loan waiver has surged even in states where it was not a poll promise. Those states have been coerced in to granting waivers using the modus operandi of protests and demonstrations....
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Telecomm industry – in ‘self-massacre’ mode
Arundhati Bhattacharya chairperson, State Bank of India [SBI] – India’s largest bank – has sounded alarm bells over troubles facing the telecommunication industry due to “highly unsustainable levels” of debt of mobile companies. The industry’s debt to the banking sector is estimated at Rs 400,000 crores. In a letter to telecom secretary, Aruna Sundararajan, Bhattacharya stated “the stress in the sector has reached highly unsustainable levels after the entry of new players and launch of free services, which led to erosion of EBITDA [earnings before interest, taxes, depreciation and amortization] of telecom service providers.” The gravity can be gauged by looking at following numbers. The total annual cash outflow of industry is Rs 178,000 crores which includes interest payments: Rs...
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RBI has no interest in growth
In the second bi-monthly monetary policy review for the current year announced on June 7, 2017, the Reserve Bank of India [RBI] has kept the policy rate [rate at which apex bank lends money to commercial banks] unchanged at 6.25%. This has caused consternation among stakeholders including from the government. The chief economic adviser [CEA], Dr Arvind Subramanian has gone that far to lambast the apex bank for erring in projecting inflation disproportionately on the higher side. The inflation rate as measured by consumer price index [CPI] is used by RBI as benchmark for deciding the policy rate. The prime reason for the disappointment is that the Monetary Policy Committee [MPC] which decides the rate has refused to factor in...
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Fertilizer reforms – time for big bang
An official from the department of fertilizers is reported to have said that by putting 45 kg of urea in a bag, it is possible to achieve 10% saving in consumption. His logic is that farmer calculates requirements on per acre basis. He needs 90 kg which can be met with 2 bags of 45 kg each against current practice of using two bags of 50 kg each. Are we to infer that until hitherto, 10% urea was going waste as he was forced to buy 100 kg – against need of 90 kg – and that loss will now be prevented with use of 45 kg bag? How come such an innovative idea did not strike policy makers earlier?...
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Leverage WTO GPA for ‘Make In India’
Recently, minister for power, coal, new and renewable energy, Piyush Goyal commented “when foreign countries such as China, USA do not allow Indian companies to bid for power projects in their jurisdiction, why should we allow their companies to participate in setting up of similar projects in India”. The minister was venting out his frustration over companies from those countries denting the prospects of our flagship program ‘Make In India’ by supplying plant and machinery thereby scuttling growth of indigenous industry. He was also lamenting at our own policy which gives a level playing field to global vendors while tendering for government procurement. In India, the procedures of government procurement, as outlined in India’s General Financial Rules [GFR], provide for...
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Gas – stop this obsession with higher price
Once again, Oil and Natural Gas Corporation [ONGC] – a Government of India [GOI] undertaking in the upstream oil and gas segment which accounts for over 70% of indigenous gas production of 80 million standard cubic meter per day [mmscmd] – has raised a hue and cry over the existing guidelines for pricing of natural gas. ONGC Chairman, Dinesh K Sarraf has argued that current natural gas price being significantly lower than the cost of production, for any company it does not make economic or commercial sense to invest in new fields or augmenting production from existing ones through fresh investment. He has requested ministry of petroleum and natural gas [MPNG] to review the existing domestic gas pricing formula and...
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Bad loans – is write-off same as waiver?
During debate in the last session of parliament, Sitaram Yechury [CPM] and other members alleged that while, the government had no qualms in waiving loans worth hundreds of thousand crores given to industrialists/corporate, it showed little inclination to extend the same relief to farmers who are unable to pay back loans for no fault of theirs [courtesy, drought/poor rainfall or untimely rains]. The treasury benches responded saying loans given to corporate are not waived; instead they are written-off. To a layman, write-off and waiver would appear to convey the same meaning i.e. in both, lender decides not to recover the amount from the borrower. Yet, Reserve Bank of India [RBI] and finance ministry would want us to believe that write-off...
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