At the Trade Policy Review (TPR) meeting held at WTO (World Trade Organisation) in Geneva (January, 2021), the Indian delegation led by the commerce secretary, A Wadhawan insisted that (i) permanent solution for public stockholding to serve the food security objective; (ii) special safeguard measures (SSMs) to prevent import surges and (iii) elimination of unfair farm subsidy entitlements of some members should be taken up first on priority for any farm deal that may be worked out at the 12th WTO Ministerial Conference (MC 12) scheduled to be held from November 29, 2021. Ever since the launch of Doha Development Round (DDR) (2001) (as the title suggests, this was meant primarily to address the issues of concern to the developing...
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High fuel prices – who is the culprit
Faced with skyrocketing prices of petrol and diesel (in some states such as Rajasthan, petrol has hit the psychological Rs 100 per litre mark) even as the Prime Minister, Narendra Modi has lamented at the erstwhile UPA – regime for not doing enough to increase domestic production (currently, India imports nearly 85% of its crude oil consumption) making India perennially vulnerable to rising international price, the minister for petroleum and natural gas, Dharmendra Pradhan has urged oil exporting countries to exercise restrain while fixing the price of crude oil. The arguments of both are not convincing. Pricing of oil products being linked to international price (even domestic refineries are paid for their supplies on this basis), even if the share...
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Bailing out banks – through backdoor
In the Union Budget for 2021-22, the Finance Minister, Nirmala Sitharaman has proposed setting up of a bad bank. Crafted as an asset reconstruction company (ARC), it will bundle up all the non-performing assets (NPAs) of banks, buy these at a negotiated (albeit discounted) price and sell them to investors such as alternate investment funds (AIFs) etc by putting a turnaround plan in place. An asset management company (AMC) will work on the details. The banks plan to transfer nearly Rs 200,000 crore of bad loans to the ARC. In return, the ARC will provide 15% upfront cash to banks, and issue security receipts (SRs) for the remaining 85%, to be guaranteed by the Government. The ARC will require a capital infusion of...
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Privatization – An uphill task
Under a big bang approach to privatization announced in the Union Budget for 2021-22, the Finance Minister, Nirmala Sitharaman has divided the Central Public Sector Undertakings (CPSUs) in two broad categories viz. “strategic” and “non-strategic”. Whereas, the former is broken up into 4 sub-groups viz. atomic energy, space and defense; transport and telecommunications; power, petroleum, coal and other minerals; banking, insurance and financial services, the latter includes all other sectors such as hotel and tourist services, industrial and consumer goods, trading and marketing and so on. As per the plan, all PSUs in non-strategic sector will be privatized. All loss making enterprises in this category will be closed. In the strategic sector too, the Government will be open to privatization...
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Gas pricing – make a clear choice
The state-owned Oil and Natural Gas Corporation (ONGC) is forming a new wholly-owned subsidiary company with the objective of sourcing, marketing and trading of natural gas, liquefied natural gas (LNG) business, gas to power business and so on. The company is already into exploration and production of gas (besides crude oil) which it sells to a variety of users viz. fertilizers, power, chemicals and petrochemicals, CNG, gas for household consumption etc. What has prompted it to set up a separate company solely for the purpose of trading and marketing of gas? It is not a simple case of business restructuring; instead it is an attempt to circumvent control on price of gas imposed by the Union Government. To see how...
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Food subsidy – fudging stops, what about reining in
In the Union Budget for 2021-22, the Finance Minister, Nirmala Sitharaman has given a pleasant surprise. This has to do with the Government’s decision to discontinue with the decades old practice of so-called “off-budget liabilities”. A technique used by successive regimes in the past, this is a fancy nomenclature to denote transfer of certain expenses incurred by the Union Government to the books of its agencies tasked with the implementation of its welfare schemes. This helps the former show lower expenses on its own books thereby helping it bring down fiscal deficit to the desired level. A typical case relates to the Food Corporation of India (FCI) through which it administers its mammoth program of delivering food subsidy. Under the...
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Trade policy – India needs to open up
In a report on developments in India’s trade policy on the occasion of the seventh Trade Policy Review of India during January 6 – 8, 2021, World Trade Organization (WTO) has noted “export restrictions and import prohibitions imposed by India seem to be in contradiction with its main trade policy goal, of increasing its share of global exports from 2% in 2015 to 3.5% by 2020”. Four areas which have come under WTO focus are (i) high import tariff and frequent changes thereof, minimum import prices and other import restrictions; (ii) export taxes, export restrictions/licensing; (iii) frequent use of anti-dumping measures; (iv) high subsidies and need to reduce these to free up resources for investment particularly in development of the infrastructure....
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To avoid cartelization – allow FDI in retail
Based on complaints submitted by the Confederation of All India Traders (CAIT) to the Union Commerce Minister Piyush Goyal in the recent past for blatant violation of FDI (foreign direct investment) Policy and Foreign Exchange Management Act (FEMA), 1999 by Amazon and Walmart-owned-Flipkart, the Department for Promotion of Industries and Internal Trade (DPIIT) of the Ministry of Commerce has written letters in December, 2020 to the Reserve Bank of India (RBI) and the Enforcement Directorate (ED) asking them to take necessary action against these global e-commerce giants. This communication from the DPIIT may not enthuse when viewed in the backdrop of numerous such representations made in the past by CAIT as also other associations of small traders and businesses such...
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Agri – reforms stymied, course correction needed
In an unprecedented order delivered on January 12, 2021, the Supreme Court (SC) has stayed the implementation of the three laws on agricultural marketing reforms enacted by the Modi – Government in September, 2020. The top court normally intervenes if a law passed by the Parliament is either beyond its legislative competence or is unconstitutional in as much as it violates the basic structure of the constitution. In the instant case, none of these reasons apply. In fact, the SC has not yet examined the constitutionality or otherwise of the laws (a petition in this regard is already pending with it). Then, what has prompted the court to take recourse to such an extraordinary step. Tens of thousands farmers –...
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Equalization levy – India must not backtrack
On June 2, 2020, the Trump administration had announced the “Section 301 investigation” under the US Trade Act, 1974 into digital services taxes (DST) that have been either adopted or were under consideration by its trading partners viz. Austria, Brazil, the Czech Republic, the European Union (EU), India, Indonesia, Italy, Spain, Turkey and the UK. Conducted by the United States Trade Representative (USTR), the objective of the probe was to determine whether levies on electronic commerce discriminate against US technological giants like Apple, Google, Amazon and so on. On January 6, 2021, the USTR released its findings on the probe and concluded that India’s 2% DST is discriminatory and restricts US commerce. It has raised three aspects which it alleges,...
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