All developing countries with preponderance of poor would like to ensure availability of medicines at affordable prices even if these happen to be product of new discoveries entailing much higher cost of supply. Discovery and development of new medicines involve huge effort in terms of both time and money to demonstrate their safety and efficacy through R&D and clinical trials conducted as per stringent regulatory requirements. The cost involved in carrying out these efforts have increased substantially due to escalating cost of materials & manpower and high failure rate on one hand and ever increasing bar of regulatory standards on the other. For a new medicine, this may be well over US$ 1 billion. An innovator company has a fundamental...
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Price of meddling with Government banks
Every year, Government of India (GOI) infuses tens of thousands of crores in to public sector banks (PSBs) (Rs 14,000 crores during current year 2013-14) to shore up their capital to meet prudential norms and help them meet requirements of growing business. With ready and fairly cheap access to public funds especially by way of savings and current accounts, banking is potentially a profitable business. This is even after one considers the social obligations on banks to serve remote and backward areas. Yet, profitability of PSBs is much below expectations. PSBs (24 in all where majority ownership is with GOI) together account for about 3/4th of total banking business in India. Yet, their market capitalization (number of shares multiplied by...
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Populism is back with a big bang
Close on the heels of AAP government in Delhi announcing a 50% cut in power tariff on supplies to residents consuming up to 400 kwh (units) per month, other states have followed suit. While, Haryana has notified similar cut, Maharashtra has slashed tariff by up to 20% for consumption by residents up to 300 units per month. On supplies to farmers wherein rates were already low at Rs 1-1.5 per unit, tariff has been reduced by a further 50%. The claims by these governments that the decisions will not affect their respective budgets are baseless and un-substantiated. In Delhi, Mr Arvind Kejriwal had proclaimed that funds to support 50% cut in power tariff – across the board – would be...
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FDI in retail – Delhi Government’s volte face
AAP Government in Delhi has addressed a letter to Ministry of Commerce, Department of Industrial Policy & Promotion (DIPP) – nodal point for foreign direct investment (FDI) related issues – saying that it will not permit FDI in multi-brand retail. FDI in multi-brand retail has been on reforms agenda of UPA Government for several years now. Due to intense opposition from various quarters, it was forced to take a vote in Parliament which approved in November 2012 subject to foreign investor taking prior permission of concerned state. Delhi is one of the 9 Congress-ruled states including AP, Rajasthan (prior to Assembly elections held in November, 2013), Maharashtra etc which decided to go along. In this backdrop, decision of AAP Government...
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Banking transaction tax – a bizarre idea
Mr Nitin Gadkari, former President, Bharatiya Janata Party (BJP) – principal national opposition party – has mooted an idea of banking transaction tax (BTT) in substitution of all extant taxes – direct and indirect except customs duty. Mr Gadkari exudes confidence that BTT to be levied @ 2% of the value of each transaction will generate far more revenue than the amount Government currently gets from all taxes put together. This will substantially improve fiscal position, he argues. All payments in excess of Rs 2000/- will have to be made through cheques or electronic transfers. Further, all currency notes of Rs 500/- and Rs 1000/- denominations will cease to exist. The implicit logic is that cash payments up to Rs...
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Sacrificing Coal India (CIL) at fiscal altar
Following a ‘subtle’ diktat from powers that be, the Board of Coal India Limited (CIL) has approved an ‘interim’ dividend of Rs 18,300 crores out of which Rs 16,485 crores will accrue to central Government. Together with dividend distribution tax (DDT) of Rs 3100 crores, the Government would have garnered close to Rs 20,000 crores during current fiscal 2013-14 by way of interim dividend alone. Originally, the Government was contemplating to divest 10% of its shares in CIL to mobilize Rs 20,000 crores which represents 50% of total proceeds from divestment of PSU shares at Rs 40,000 crores. This was scaled down to 5% in view of mounting resistance from various quarters. Intended to generate around Rs 9000 crores, even...
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Milching PSUs for Government profligacy
Faced with huge shortfall in tax revenue and expenditure (especially subsidies) going out of bound, Government is frantically looking for resources to rein in deficit within 4.8% of GDP or Rs 540,000 crores for the current year i.e., 2013-14. It has opened battle lines on several fronts. The steps under serious consideration include a substantial compression in plan expenditure, postponement of subsidy payments and cut in Government procurement etc. Another item on the centre stage is proceeds from dis-investment of Government’s shares in public sector undertakings (PSUs). While, preparing the budget, it had estimated these proceeds to be Rs 40,000 crores. It had also taken credit of Rs 14,000 crores from sale of its residual holding in BALCO & HZL....
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Intellectual property (IP) protection – key to sustainable healthcare
A spate of actions of Indian stakeholders viz., industry, Government and the judiciary in the pharmaceutical space during the last five years or so, smack of a sense of fear bordering on possibility of Indian Industry being swallowed by MNCs. The trigger for inculcation of fear especially in the mind of Commerce Ministry [the nodal point for formulation of policy in regard to foreign direct investment and protection of intellectual property (IPR)] is a number of acquisitions of Indian pharmacy companies by MNCs in last few years. The Ministry is obsessed with a flawed notion that large-scale investment and acquisition of controlling stake by MNCs in existing companies would lead to their ‘dropping’ from their portfolio of production essential medicines...
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Can agriculture absorb ‘jobless’ from outside?
Mocking at the UPA much touted agenda of so called ‘inclusive’ development, in recent years, there has been shrinkage in employment in the non-agriculture sector and prospects for the future are not encouraging either. Agriculture any way has received a huge drubbing during the last decade of UPA regime. During 2004-05 to 2011-12, there was an unprecedented reduction in the labour force employed in agriculture from 268 million to 231 million i.e. a decline of 37 million. This was largely due to a rapid GDP growth of 8.3% per annum – mostly led by growth in services especially construction. The increase in employment outside agriculture during this period was 52 million (50% of this addition was in construction sector alone)...
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2014 elections – Does AAP pose a challenge to BJP?
The emergence of Aam Aadmi Party (AAP) on national scene, installation of a Government in National Capital Region (NCR) of Delhi led by Arvind Kejriwal and AAP’s decision to contest ensuing General elections has shaken the entire political landscape. It is being widely perceived that AAP poses a serious threat to both the national parties viz., Congress and BJP besides carrying with it a distinct possibility of running down in fact, submerging in the Tsunami a plethora of regional outfits like BSP and SP. The fuel for this wave in favour of AAP comes from a huge sense of disgruntlement of public cutting across all sections of society with the extant political establishment that gets identified with inefficiency, nepotism, corruption...
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