Category: Deccan Herald

Legalising MSP will prove to be anti-farmer

Out of about 150 million farmers, a mere 8% of them get to sell their produce to the state agencies In the continuing stalemate over the three farm laws, the biggest sore point is the insistence of the agitating farmers that the MSP (minimum support price) should be legally guaranteed. At present, the Centre notifies MSP for 23 farm items. The Food Corporation of India (FCI) and other state agencies buy paddy and wheat, besides a few other items such as coarse cereals and pulses, at the MSP. These are meant for feeding the public distribution system (PDS) and giving food to beneficiaries at heavily subsidised prices under the National Food Security Act (NFSA). Out of about 150 million farmers,...
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Urea imbroglio: Govt must deal with policy flaw

For decades, successive governments have grappled with large-scale diversion, hoarding and black marketing of urea – a widely used fertilizer that constitutes nearly half of India’s total fertilizer consumption. The scale of diversion could be as high as 30%. Taking annual subsidy on urea to be about Rs 50,000–55,000 crore, this would mean that Rs 15,000–16,500 crore of taxpayers’ money is being guzzled by dubious operators. During the last five years or so, the Narendra Modi government has taken several steps to address it. Let us see how these have fared and assess what needs to be done to make a dent. At the outset, let us capture a few basics about the pricing and subsidy policy. To make urea...
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GST: More than three years on, several problems remain

Billed as a ‘transformative’ reform, the Goods and Services Tax (GST) is now more than three years old. It is time to take stock. GST is a single nationwide tax that subsumes within it more than a dozen taxes of the pre-GST era, namely central excise duty (CED), service tax, sales tax/value added tax (VAT) besides a host of local taxes such as octroi, purchase tax, turnover tax, etc. The old regime was afflicted with several anomalies. First, each state was free to impose as many taxes and fix the rate for each item as it wished. This not only resulted in multiplicity of taxes but also vast variation in the rate across states. For instance, on natural gas, VAT...
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Uniform transport tariff for gas – a flawed idea

Speaking at the launch of the nation’s maiden online gas trading platform by Indian Gas Exchange (IGX), petroleum minister Dharmendra Pradhan alluded to “a new pipeline tariff policy that will replace existing practice of seven different pipeline operators charging separate rates and customers away from gas source paying more than those nearer to source.” Petroleum and Natural Gas Regulatory Board (PNGRB) Chairman DK Saraf was even more specific when he spoke of a “single rate across pipelines so as to make the price of fuel uniform for customers across the country.” According to the minister, “the new policy will help bring down the cost of natural gas, make it affordable in every part of the country and  facilitate development of...
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Power sector in crisis, reforms a mirage

The special economic and comprehensive package ‘Atmanirbhar Bharat Abhiyan’, unveiled by Finance Minister Nirmala Sitharaman in five tranches during May 13 – 17, 2020, has two components that have a crucial bearing on the fledgling power distribution companies – commonly known as discoms. The discoms – mostly owned and controlled by state governments – procure power from independent power producers [IPPs] and public sector undertakings [PSUs] such as the National Thermal Power Corporation [NTPC] besides their own generating stations and sell to consumers. The first component provides for special loan of Rs 90,000 crore from Rural Electrification Corporation [REC] and Power Finance Corporation [PFC] to discoms to enable them to clear their dues to IPPs and PSUs. But there are...
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Hoping for a coronavirus-induced fertilizer reforms

Even as Prime Minister Narendra Modi has declared his intent to use Covid–19 as an opportunity to implement big bang reforms, the government is silent on fertilizers – a sector that has been crying for reforms for far too long. To put things in perspective, let us take a look at some basic facts on existing policies. Prior to the 1990s, both urea –main source of nitrogen (N)–and phosphate (P) and potash (K) fertilizers such as di-ammonium phosphate (DAP) and a whole range of complex fertilizers containing N, P&K in different proportion etc, fell under pricing and distribution controls. The maximum retail price (MRP) of each fertilizer was controlled at a low level and excess of cost of production and...
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Post-COVID, farmers will be in distress, revamp APMC laws

Amidst a nationwide lockdown announced on March 24, 2020 to contain the spread of the coronavirus disease, even as an overwhelming share of the economic activity has come to a grinding halt, agriculture too has suffered a major jolt. The crisis has come at a time when Rabi crop (October 2019 – March 2020) mostly winter staple wheat, is ready for harvest. While on one hand-harvesting operation have suffered due to shortage of labour (courtesy, sudden stoppage of all modes of transport and workers getting stuck where they were), on the other, farmers are unable to move harvested crop to the market. According to an estimate, already they have suffered the loss of about Rs 15,000 crore (due to crashing...
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Coronavirus scar to haunt economy for long

In a span of less than a week, there have been three sets of official announcements enumerating the measures to alleviate the problems faced by industries, businesses and workers due to the economic disruption caused by COVID-19. The first two were made by Finance Minister Nirmala Sitharaman on March 24 and 26 and the third by the RBI Governor Shaktikanta Das on March 27. On March, the FM announced reliefs for industries and businesses which are largely ‘procedural’. These include extending the date for filing returns [income-tax, GST, customs, excise and statutory filings under Companies Act], reducing interest chargeable on delayed payments, exemption from penalty, increasing threshold of filing under the Insolvency and Bankruptcy Code [IBC] etc. The firms have...
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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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Amnesty schemes cannot help fill the void in tax collection

While presenting the Budget for 2019-20, Finance Minister Nirmala Sitharaman had set gross tax receipts (GTR) target of about Rs 24.6 lakh crore. In the Budget for 2020-21, the revised estimate [RE] for 2019-20 at Rs 21.6 lakh crore is short by a whopping Rs 3 lakh crore. In direct taxes alone, the shortfall is Rs 1.6 lakh crore, the RE being Rs 11.7 lakh crore against the budget estimate [BE] of Rs 13.3 lakh crore. For 2020-21, the FM has set the GTR target of Rs 24.23 lakh crore – an increase of Rs 2.63 lakh crore over the RE for 2019-20. The direct tax target is Rs 13.19 lakh crore, an increase of Rs 1.49 lakh crore over the...
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