Finance Minister Nirmala Sitharaman’s Budget confirms the apprehension that the actual fiscal deficit for 2019-20 would exceed the budget estimate (BE) by a significant margin. Sitharaman put it at 3.8% of GDP against the targeted 3.3%. She justified this saying that the recommendation of the NK Singh committee on review of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, permitting breaching of the target in case of “far reaching structural reforms with unanticipated fiscal implications.” For 2020-21, she has put BE at 3.5% against the 3% required under the FRBM Act and offered the same explanation for this deviation, too. Despite the significant slippage (every 0.1% variation translates to extra borrowings of close to Rs 20,000 crore), the government’s...
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Category: Deccan Herald
Will SC uphold minority shareholders’ rights in Tata Sons case at Bombay House?
In a landmark judgment last month, the National Company Law Appellate Tribunal [NCLAT] held as illegal the decision of Tata Sons Limited [TSL] in its board meeting on October 24, 2016 to remove Cyrus Mistry from his position as chairman of TSL as also from the boards of three group companies — Tata Consultancy Services [TCS], Tata Motors Ltd [TML], Tata Steel Ltd [TSL]. The NCLAT directed immediate reinstatement of Mistry. The tribunal also held illegal the decision of TSL shareholders at the AGM in September 2017 to convert TSL from extant ‘public limited company’ status to a ‘private limited company’ and change its name from TSL to Tata Sons Private Limited [TSPL] by amending the Articles of Association [AoA]. On January...
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Allow 100% FDI in online, offline retail in all sectors
The Confederation of All India Traders (an umbrella organisation of small traders and businesses), has complained to the government that global e-commerce majors – Amazon and Flipkart – are giving huge discounts, selling exclusive brands and controlling inventory of sellers etc. All these are prohibited under the extant policy on foreign direct investment (FDI). Promising action, Minister for Commerce and Industry Piyush Goyal has ordered collection of data on their financials, business model and operating practices. This is not a new development. Ever since the guidelines permitting 100% FDI in the ‘market-place’ model of e-commerce were issued in early 2016 (Press Note 3), complaints of violations had been pouring in even as the then minister Suresh Prabhu promised action. The...
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Is the oil sector ready for competition?
Last year, Petroleum Minister Dharmendra Pradhan had set up an expert committee under Kirit Parikh to “look at various issues related to implementation of existing guidelines for grant of marketing authorization of market fuels —petrol, diesel and aviation turbine fuel (ATF), identify entry barriers, if any, for expansion of retail outlets for private marketing companies and recommend easing of fuel retailing licensing rules.” On October 23, the government announced major changes in the licensing rules. These include dispensing with the requirement of minimum investment of Rs 2,000 crore in oil or gas infrastructure — in hydrocarbon exploration and production, refining, import terminals, transportation, etc. Henceforth, “the applicant needs to have minimum net-worth of Rs 250 crore and commit to invest...
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PM’s renewable pitch ignores existing power capacity
During an interactive session at the Bloomberg Global Business Forum in September, Prime Minister Narendra Modi faced a dilemma on the issue of clean energy versus coal-based power. Even as Modi reiterated his commitment to rapidly promote the use of renewable energy solar, wind, bio-mass, small hydro (India has more than doubled its original goal of having power capacity on renewable from 175 GW by 2022 to 450 GW by 2030)— he was confronted by the Bloomberg CEO Michael Bloomberg on what plans he had with regard to use of coal which has been the biggest polluter (India has the third-largest reserves of coal in the world and currently, about 54% of generation capacity is based on its use). Fully conscious...
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Priority accorded, but infra investment hits slow lane
In her maiden budget presented to Parliament on July 5, 2019, Finance Minister Nirmala Sitharaman laid a roadmap for catapulting the Indian economy to $5 trillion by 2024-25. The most crucial component of this roadmap is the investment in infrastructure to the tune of a mammoth Rs 100,00,000 crore or $1.4 trillion. In the follow-through, in an interactive session with the media on August 24, 2019, she announced setting up of a high-level inter-ministerial committee to work out a detailed action plan. During its first term also, the Narendra Modi government gave overriding importance to building infrastructure. Indeed, it achieved a fair amount of success with a cumulative investment of about Rs 20,00,000 crore and commensurate output in terms of roads and highways built. This was commendable...
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Why DBT of fertiliser subsidy won’t happen anytime soon
A panel under Niti Aayog member Ramesh Chand has recommended direct benefit transfer [DBT] of fertilizer subsidy with the stated objective to “dis-incentivize farmers from excessive use, ensure delivery to the end-user and reduce outgo on subsidy.” The intent is to launch the scheme in three-four months DBT for fertilizer has been on the radar of policymakers for three decades. In July 1991, vowing to eliminate fertilizer subsidy in three years — under pressure from the International Monetary Fund and World Bank — the government had increased prices of all fertilizers by 40%. However, fearing political backlash, the hike was restricted to 30%, with a proviso that small and marginal farmers will be exempt from it. The Centre gave money...
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How sugar turns bitter for the consumer…
The Cabinet Committee on Economic Affairs (CCEA) has approved a proposal of the food ministry for creation of four million tons of sugar buffer stock between August 1, 2019 and July 31, 2020. The government will spend Rs 1,674 crore towards the cost of carrying the stock. The amount will be directly credited into farmers’ accounts on behalf of sugar mills against their cane price dues. It has also decided to keep the Fair and Remunerative Price (FRP) of sugarcane unchanged at Rs 275 per quintal. FRP is the minimum price which mills have to pay farmers to buy sugarcane – the raw material for making sugar. The price is applicable to sugarcane purchases made during the sugar marketing year...
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Disinvestment: half-truths and clever babudom so far
Union Finance Minister Nirmala Sitharaman has set an ambitious target of Rs 1.05 lakh crore as proceeds of disinvestment of government shares in public sector undertakings (PSUs). She has also proposed aggressive pursuit of ‘strategic’ disinvestment by reducing government’s shareholding in PSUs to below 51% on a case-by-case basis. The route to garnering one-third of this target, or Rs 35,000 crore, has been set. This includes proceeds from divestment of Air India, which could not go through last year, courtesy the government’s decision then to retain 24% shareholding with itself (besides other riders such as a three-year lock-in period on disposition of shares by the acquirer) which discouraged prospective bidders. Strategic disinvestment involves transfer of a sizeable portion of ownership and...
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A subsidy policy hamstrung by a desire to contain it
The government has approved transportation of fertilisers through coastal shipping and inland waterways. This is a welcome move as it offers the possibility of significant reduction in freight cost, besides lesser time in reaching the material to consumption points and being environment friendly as well. It has also approved freight subsidy to manufacturers on the cost incurred on movement of fertilisers via this mode. In case of single mode or multi-modal transportation, which includes coastal shipping, ‘the freight subsidy will be restricted to railway charges or the actual freight incurred, whichever is less’. Further, ‘only movement of subsidised indigenous fertilisers, viz., urea and phosphate and potash fertilisers – through coastal shipping/inland waterways will be eligible for payment of freight subsidy...
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