India is the only bright spot with a high growth rate of around 7.5% in an otherwise turbulent world with major economies either decelerating or remaining flat. But, there is a dark spot on Indian economic landscape which if not removed urgently, could prove to be a major drag. This pertains to increase in non-performing assets [NPAs] of banks to unsustainable level. Currently, NPAs [loans which do not yield return] of Indian banks are about Rs 400,000 crores. Including restructured assets [bad loans made to look like normal assets by relaxing terms], the total stressed assets are Rs 800,000 crores or 11.25% of gross advances. For public sector banks [PSBs] alone, this is much higher at 14%. The problem has...
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Gas pricing – has Modi succumbed to pressure tactics?
On March 10, 2016, the cabinet committee on economic affairs [CCEA] approved a policy to incentivize gas production from deep water, ultra-deep water and high-pressure-high-temperature areas. For such areas, which are yet to commence commercial production as on January 1, 2016 and for all future discoveries in such areas, the producers will be allowed marketing freedom including pricing freedom. This would be subject to a ceiling price based landed price of alternative fuels. The ceiling price will be determined as the lowest of the (i) landed price of imported fuel oil [FO]; (ii) landed price of imported LNG [liquefied natural gas] and (iii) weighted average imported landed price of substitute fuels viz., coal, FO and naphtha with weights of 30%,...
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Do gas producers need Jaitely’s stimulus?
In his budget speech for 2016-17, finance minister, Arun Jaitely lamented the situation of “rising demand, near-stagnation in production and consequent rapid increase in import” and argued that there was need to incentivize gas production from deep water, ultra-deep water and high-pressure-high-temperature areas. “A proposal is under consideration for new discoveries and areas which are yet to commence production, first to provide calibrated marketing freedom; and second, to do so at a pre-determined ceiling price to be discovered on the principle of landed price of alternative fuels”. The concern expressed in the speech is not new. The government was mindful of this in October, 2014 when it notified guidelines to fix price of all domestic gas based on weighted average...
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DBT for fertilizers – a hoax
Prime minister, Modi is perceived to be a crusader when it comes to plugging leakages from the subsidy distribution pipeline. He has amply demonstrated this in case of LPG [liquefied petroleum gas] wherein, the government implemented direct benefit transfer [DBT] and saved about Rs 15,000 crores annually. But, when it comes to fertilizers, similar initiatives are conspicuous by absence. During 2015-16, out of an allocation of Rs 73,000 crores on fertilizer subsidy, Rs 50,300 crores was on urea. The subsidy is administered through manufacturers who are directed to sell urea at fixed uniform maximum retail price [MRP] and get reimbursement for excess of their unit- specific production cost over MRP under new pricing scheme [NPS]. Imported urea too is subsidized...
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2016-17 – budget that helps poor earn decent living
The Union Budget for 2016-17 presented the finance minister, Arun Jaitely on February 29, 2016 carries the imprint of prime minister Modi’s unflinching and genuine commitment to ameliorate the conditions of millions of poor – engaged in farming and other occupations – by creating all right conditions to enable them do productive work and earn good income. Driven by latter’s pledge to double farmers income by 2022 [75th year of Independence], the former has unveiled a plethora of initiatives/steps to bring about a structural transformation in the way farming is conducted and agricultural produce is marketed. Boost to farmers income & rural employment The measures that will enhance farmer’s capability to increase yield include a mammoth capital spend of Rs...
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Prabhu puts Indian Railways on fast track
Prior to Modi taking charge 20 months ago, successive political establishments have used Indian Railways to pander to their respective constituencies [play vote bank politics] making grandiose announcements on new trains and reducing passenger fares. They showed unconscionable apathy towards the impact of such largesse on the finances of this behemoth and its ability to deliver on quality services to users and expanding its asset base for meeting requirements of growth. The net result of this cumulative populism has been increasing operating ratio [proportion of revenue used on expenses] touching close to 100 in some years and measly sums left for investment in maintenance, augmentation, modernization and safety of assets. The governments of the day also denied it requisite budgetary...
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Is India running out of gas?
The news of gas supply from the high profile Reliance Industries Limited (RIL) operated KG-DWN-98/3 field off Andhra coast (better known as KG-D6) drying up by 2020 has come as a shocker for energy deficient India that imports 80% of its oil and nearly 40% of its gas requirements for running fertilizers, power plants, households etc and is aspiring to move rapidly towards building indigenous production capability. Prior to 2000, domestic gas supplies were coming primarily from major gas finds in the Bombay High and South Bassein area in west offshore discovered in late 70s with total production of around 75 million standard cubic meter [mmscmd]. A second bout of major discoveries came around the turn of present century. This...
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PM Fasal Bima Yojana – intent laudable, what about execution?
Modi – government has been under persistent attack for its obsession with promoting the manufacturing sector [under its flagship “Make in India”] but neglecting agriculture on which nearly 2/3rd of people depend for their livelihood. Critics have also lambasted it for alleged takeover of their land under the Land Acquisition [Amendment] Act 2015 to promote industrial development at their cost. However, to demonstrate that it cares for the farmers, the government has launched the Pradhan Mantri Phasal Bima Yojna [PMPBY] which it claims will bring about a drastic improvement in their economic conditions. Under PMPBY, the government’s intent is to compensate every farmer for the crop loss [due to a variety of factors such as natural calamities, hailstorms, unseasonal rains...
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I-T reminder to Vodafone – Is tax terrorism back?
The income tax [I-T] department has sent a reminder notice to UK-based Vodafone Group Plc to pay Rs 14,300 crores in tax dues and threatened to seize the assets in case of non-payment. The revenue secretary, Hasmukh Adhia has described the notice as routine exercise of sending collection notices to all those whose dues are not stayed by any court. The party can always approach assessing office with a request to stay the demand as per the law. In case, the assessing officer does not agree, party can go to the next higher authority and get a stay. Despite the clarification, foreign investors have taken umbrage to the notice and even opined that this is the return of tax terrorism,...
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GST – better wait than have a defective architecture
Dr Bibek Debroy, member, NitiAyog has cautioned against any haste in passing the Constitutional Amendment Bill on Goods and Services Tax (GST). This may sound a bit unusual when all stakeholders are anxiously waiting for its early passage and any delay will be viewed by all and sundry as set-back to the reforms. But, the manner in which even some of the foundational features of a good GST are being diluted, he may well have a point. First, let us look at Congress proposal to have the GST rate embedded in the Act. This is bizzare! The rate may have to be altered at any point of time depending resource requirements vis-a-vis tax receipts. Hence, there has to be room...
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