After dilution of its key provisions, the Electricity Bill, 2021, falls short of reform objectives In the draft Electricity (Amendment) Bill or EAB, 2021, proposing amendments to the Electricity Act, 2003 introduced in February last year, the Narendra Modi-led NDA Government intended to bring about two transformative reforms — de-licensing of the electricity distribution business and direct benefit transfer (DBT) of subsidy. Delicensing of the distribution business aims to bring in competition, and give the consumer power to choose suppliers (or “open access”). Even as the Union ministry of power prepares to table a Bill in the upcoming Monsoon session (2022) of Parliament, both the provisions have been dropped. Under the extant arrangements, an overwhelming share of power generated by public...
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Category: Pioneer
Hydrocarbons may give India energy freedom
Windfall tax on oil firms is justified; a robust ecosystem for hydrocarbons can give India the much-needed relief Amid disruption in the global supply chain and steep spike in the international crude prices, the Union Cabinet last week took two major decisions pertaining to the oil sector—deregulation of the sale of domestically-produced crude oil and imposing a cess or windfall tax of Rs 23,250 per tonne on crude oil and a special additional excise duty (SAED) of Rs 6 per litre, Rs 13 per litre and Rs 6 per litre on exports of petrol, diesel, and jet fuel respectively. The Covid-19 pandemic and the ongoing Russia-Ukraine war have acutely affected the global supply chains, besides giving legs to the prices...
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India faces sharp fiscal deficit slippage
International crude and fertiliser prices disturbed Government’s budget calculations; welfare expenses are adding to fiscal stress The Modi government has taken a number of measures, including tax cuts and increase in subsidy, to give protection to consumers from the steep rise in international prices of fuel, fertilisers, and food. But it could come at a huge cost in terms of impairing the Centre’s ability to achieve the fiscal deficit (FD) target of 6.4 per cent of the gross domestic product (GDP) set for the current financial year (FY). Before analysing the numbers for the current FY, let us see how things panned out during 2021-22 when India was confronted with rising international prices of the aforementioned commodities. During 2021-22, thanks...
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Control mindset hurts privatisation process
The strategic sale of BPCL couldn’t be carried out because the Government wants to regulate fuel prices After over three years of having initiated the sale of its entire 53.29 per cent shareholding in Bharat Petroleum Corporation Limited (BPCL)—a Central public sector undertaking (PSU) in the sector of refining and marketing of petroleum products—the Government has decided to put it on hold. What could be the reason behind this move? Adopted a big-bang approach to privatisation (when government sells its majority stake in a PSU and transfers control to a private entity) in the Budget for 2021-22, Finance Minister Nirmala Sitharaman had divided Central PSUs in two broad categories—i.e. strategic and non-strategic. The former is subsumed under four subgroups: atomic...
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WTO MC-12: Deft handling by India
While it was advantage developed countries all the way, India was able to avoid more harm to its interests At the World Trade Organization (WTO), even as all decisions are taken by consensus and every member country has equal voice, when it comes to actual confabulations, there are glaring inequalities. The developed countries—the US, the European Union, the UK, Australia, etc.—exercise disproportionately greater influence. They set the agenda of meetings, and get away with what they want even as developing countries are made to concur. The outcome of the just concluded 12th Ministerial Conference (MC12) at the WTO headquarters in Geneva (June 12-17) is broadly in sync with this trend seen in the past. For India, the most crucial area...
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Govt faces a dilemma over e-commerce
Any tweak in policy will upset foreign investors, while the status quo will hurt small traders Ever since Indian retail was opened to foreign direct investment (FDI)—albeit through the so-called marketplace model in 2016—foreign giants like Amazon and Walmart-owned-Flipkart have been embroiled in protracted legal battles. In a public interest litigation (PIL) filed in early 2018, the Retailers Association of India (RAI) had alleged violation of FDI norms in e-commerce. On October 31, 2018, the Enforcement Directorate (ED) had informed the Delhi High Court (DHC) that it was investigating violation of the Foreign Exchange Management Act (Fema) against Amazon, et al, but the proceedings are stuck. In another petition filed before the Competition Commission of India (CCI), the All-India Online...
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RBI hikes repo rate but more is needed
While there is no guarantee that the RR hike will tame inflation, we can’t rule out the risks to growth Normally, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) conducts a review once in every two months based on which the RBI makes policy announcements at the beginning of each of the following months viz. February, April, June, August, October, December. Deviating from this practice, in early May 2022, Governor Shaktikanta Das announced changes in the important monetary policy instruments. Das increased the policy repo rate (interest rate at which the RBI lends to banks) or RR from 4 per cent to 4.4 per cent. He also increased the cash reserve ratio (percentage of a bank’s total...
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Fuel tax cuts: Easier said than done
It would be fair to keep the fuel tax rates in a lower slab, say, 18 per cent, but the Centre and States would start wobbling at the very idea To rein in the inflationary pressure, on May 21, 2022, the Narendra Modi Government announced reduction in the central excise duty (CED) on petrol and diesel by `8 per litre and `6 per litre, respectively. The cuts are significant but, given the magnitude of the challenge, these won’t be enough. Let us do a fact check. In May 2014 (when Modi took charge), CED on petrol was `9.8 per liter and on diesel `3.8 per liter. By March, 2020 (this was when the Covid-19 pandemic struck), already the Government had...
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The policy flip-flop on wheat exports
Obtrusive controls on food supply and distribution are a major constraint on exports. They aren’t also good for India’s fiscal health In the backdrop of increase in international price of wheat (courtesy, Ukraine crisis) early this month, Prime Minister Narendra Modi, had exhorted that India can help meet the global requirements of food deficit countries, provided the World Trade Organisation (WTO) allows it. He also exuded confidence that this had created an opportunity for Indian farmers to increase their income. Even as stakeholders were gearing to undertake export with several of them having signed contracts, on May 13, 2022, the Director General of Foreign Trade (DGFT) put a ban on wheat export with ‘immediate’ effect. The exports under government-to-Government arrangements...
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Indian power sector is pushed to the brink
Among other things, free discoms from State control, allow them to set tariff for all consumers and permit private firms into the distribution business Faced with an acute power crisis caused amongst others by sudden spurt in power demand in this season, the Modi Government has fired all cylinders to tackle the most crucial of all bottlenecks in the way, namely coal which accounts for nearly 52 percent of total power generation capacity in the country. During April/May2022, the Union Power Ministry – using powers vested in the Government under Section 11 of the Electricity Act, 2003 – issued directions to (i) all imported coal-based plants (ICB) to operate and generate power to their full capacity and (ii) all generation...
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