Addressing the company’s annual general meeting on August 12, 2019, Chairman, Reliance Industries Limited (RIL), Mukesh Ambani had announced a road-map for Reliance to become a net debt-free company before March 31, 2021. That was the time when, the telecom industry was passing through an unprecedented crisis with most of the companies having huge debt in their books and not generating adequate cash flows for servicing the loans (Reliance Jio – the telecommunication unit of the conglomerate – was the lone exception). The crisis was aggravated by an order of the Supreme Court (SC) on October 24, 2019 directing telecom companies to pay ‘unpaid’ dues towards license fee and spectrum usage charges [SUC]. The order was the culmination of a...
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Category: Infrastructure
Much ado about nothing
Faced with a steep decline in its revenue and increase in expenditure commitment, the Modi Government has opted for a package which is dependent on loans After a long wait of about seven weeks, since the nationwide lockdown began on March 25, Prime Minister Narendra Modi announced the ‘Atmanirbhar Bharat Abhiyan’, a special package of Rs 20,00,000 crore, about 10 per cent of the Gross Domestic Product (GDP), to revive the economy. Finance Minister Nirmala Sitharaman unveiled the details in five tranches during press conferences held between May 13 and 17. The package aims at giving relief to all strata of society impacted by the sudden stoppage of economic activities viz. farmers, workers, migrant labourers, micro, small and medium enterprises (MSMEs), vendors,...
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Stimulus package – much ado about nothing
After a long wait of about 7 weeks since the nation-wide lockdown on March 24, 2020, Prime Minister, Narendra Modi announced on May 12, 2020 ‘Atmanirbhar Bharat Abhiyan’, a special economic and comprehensive package of Rs 2000,000 crore, about 10% of gross domestic product [GDP], to revive the economy. The finance minister, Nirmala Sitharaman unveiled the details in 5 tranches during press conferences held on May 13 – 17, 2020. The package aims at giving relief to all strata of the society impacted by sudden stoppage of economic activities viz. farmers, workers, migrant labor, micro, small and medium enterprises [MSMEs], vendors, small merchants, self-employed, middle class etc. Given its mega size, an immediate question that comes to mind is whether...
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Mass movement of migrant labor – a Himalayan Blunder
Announcing the lockdown on March 24, 2020, Prime Minister, Narendra Modi offered the mantra of ‘social distancing’ [put simply, this requires maintaining a minimum distance between two persons] to prevent Covid – 19 pandemic from spreading. Accordingly, all activities involving assembly and movement of persons in group were brought to a grinding halt. Amongst others, these included complete ban on inter-state and intra-state movement of persons. The announcement came under flak from critics who argued that people should have been given time to prepare themselves; this included letting migrant labor working in urban agglomerations [UAs] such as Delhi, Mumbai etc move to their native place. The government’s decision was perfectly in order. Had it given time and allowed people to...
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Telecom industry on the brink; Trai, banks need to play proper role
In an order delivered on October 24, 2019, the Supreme Court (SC) directed the telecom service providers (TSPs) to pay ‘unpaid’ dues towards license fee and spectrum usage charges (SUC) to the department of telecommunication (DoT). In doing so, the SC accepted DoT’s interpretation that adjusted gross revenue (AGR) (license fee and SUC is charged as a percentage of AGR) includes – apart from telecom services revenue – revenue from non-telecom services such as rent, profit on the sale of fixed assets, dividend, interest etc. Given the inherent character of the order with focus on including revenue from non-telecom services as well, it requires even companies such as Gas Authority of India Limited etc (they had taken licenses for setting up their...
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Telecom industry on the brink
Bringing to a climax more than a decade old court battle between department of telecommunication [DoT] and telecom service providers, in an unprecedented judgment, on October 24, 2019, the Supreme Court [SC] ordered the latter to pay ‘unpaid’ dues towards license fee and spectrum usage charges [SUC]. The unpaid dues [call these additional liabilities] arose consequent to the SC accepting the DoT interpretation that adjusted gross revenue [AGR] [license fee and SUC is charged as percentage of AGR] includes – apart from telecom services revenue – revenue from non-telecom services viz. rent, profit on sale of fixed assets, dividend, interest etc. The additional liability on private telecom service providers is a whopping about Rs 147,000 crore for the period 2006-07 to 2016-17...
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Freebies – road to fiscal disaster
In the just concluded elections in Delhi, the electorate has returned Arvind Kejriwal [AK] to the coveted position of Chief Minister with a thumping majority [Aam Aadmi Party (AAP) won 62 out of a total of 70 assembly seats even as its dominant rival BJP secured a mere 8; the third main contestant in the fray Congress got none]. Kejriwal claims that this is a vindication of the ‘development model’ pursued by him during the last 5 years since February 2015. He vows to pursue this in Delhi during the next 5 years and has crafted plans to leverage it for establishing the footprint of AAP in other states. What precisely is the model? Will the states be able to...
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Aspirational India – long on vision but short on resources
The Union Budget for 2020-21 presented to the Parliament by the Finance Minister, Nirmala Sitharaman on February 1, 2020, confirms apprehension that the actual fiscal deficit [FD] for 2019-20 would exceed the budget estimate [BE] by a significant margin. Sitharaman puts it at 3.8% of GDP [gross domestic product] against the target of 3.3%. However, she has justified this deviation in terms of the recommendation of the NK Singh committee on review of the Fiscal Responsibility and Budget Management [FRBM] Act [2003] which permits breach of the target in case of “far reaching structural reforms with unanticipated fiscal implications”. For 2020-21, the finance minister has provided for FD of 3.5% as against 3.0% as stipulated under the FRBM Act. Here...
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Long on vision, short on means
The credibility of the fiscal consolidation glide path has been dented which is also reflected in the Sensex falling by over 1,000 points after the Budget announcements The Union Budget for 2020-21 presented to the Parliament by Finance Minister (FM) Nirmala Sitharaman on February 1 confirms apprehensions that the actual fiscal deficit (FD) for 2019-20 would exceed the Budget Estimate (BE) by a significant margin. Sitharaman puts it at 3.8 per cent of the GDP against the target of 3.3 per cent. However, she has justified this deviation in terms of the recommendation of the NK Singh Committee on review of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 which permits breach of the target in case of “far-reaching structural reforms...
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Can invisible hand work?
Seen from an economist’s perspective, the Economic Survey looks eloquent. But execution could run into a logjam as politicians are prone to controlling the consumer The Economic Survey for 2019-20 has been prepared by the Chief Economic Advisor, Dr K Subramanian, keeping the ambitious target of achieving the $ 5 trillion economy status by 2024-25, set by Prime Minister Narendra Modi, at its centre. The rigorous analysis (a lot of it involves running of “regression equations” — a euphemism in econometric analysis to bring out correlation between various economic parameters) done by the CEA has to be seen in the backdrop of deceleration in the GDP (gross domestic product) growth to its 11-year-low of five per cent during the current year (first...
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