The Government should look at ways for pruning subsidy. Indeed, there is an unprecedented scope for it The Union Government has extended the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) for a further period of six months till September 30, 2022. Having already spent over Rs 260,000 crore during the first five phases (the scheme has been in operation since April 2020, the fifth phase ended on March 31, 2022), it will need another Rs 80,000 crore during April – September, 2022. Is the extension justified? In March 2020, the Finance Minister Nirmala Sitharaman had announced the Scheme to mitigate the hardship suffered by people due to a major disruption in economic activity and resultant loss of jobs and income...
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Category: Pioneer
Reining in fertilizer subsidy in India
From an already high of Rs 83,000 crore during 2019-20, the subsidy could cross Rs 200,000 crore during 2022-23. Fertilizer subsidy or payments made to manufacturers or importers to cover the excess of the cost of production/import and distribution over a low maximum retail price (MRP) – they are asked by the Union Government to charge from the farmers -has increased by leaps and bounds during the last three years. From an already high of Rs 83,000 crore during 2019-20, it increased to Rs 138,000 crore during 2020-21, Rs 162,000 crore during 2021-22 and could cross Rs 200,000 crore mark during 2022-23. Is there a way this escalating trend could be reined in? Subsidy payments are made under two broad...
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PSU privatisation: lock, stock and barrel
The Government should also unshackle the process of strategic disinvestment from bureaucratic red-tape The ministry of finance has barred public sector undertakings from bidding for other Central Public Sector Undertakings which are on the block for privatisation. The Department of Investment and Public Asset Management has stated: “As a general policy, PSUs (Central/ State/ Joint)/State Governments and Cooperative Societies controlled by the Governments are not permitted to participate in the strategic disinvestment of other PSUs as bidders unless otherwise specifically approved by the Central Government in public interest”. PSUs are undertakings in which the Centre/State Governments or jointly with central and/or State Governments have majority ownership (with shareholding of 51 percent or more) and control. If, the Government decides to...
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Bolstering IBC architecture – a joke
After withdrawal of RBI powers to navigate NPA accounts for resolution under IBC, and removing banks’ compulsion to go to NCLT, the IBC process is dysfunctional While, putting on hold its plans to implement the so-called “fresh-start process” for indebted poor people under the (IBC) Insolvency and Bankruptcy Code (it provides for debt waiver up to Rs 35,000 to the poor who don’t own houses, earn up to Rs 60,000 a year and have assets up to Rs 20,000 each),the Government wants to first focus on bolstering the IBC architecture to yield quick resolution of toxic assets while preventing unscrupulous elements from gaming the system. The reference here is to the delay in completion of the corporate insolvency resolution process...
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Poll freebies: Road to economic disaster
Assured of financial help to meet most of their basic needs ‘perpetually’, the freebies cult is changing the mindset of people and making them complacent A few days back, Prime Minister Narendra Modi asked senior bureaucrats to point out deficiencies in government policies. In response, some officials have zeroed in on ‘the freebies promised by winning party in state elections’. In the past, freebie – an acronym for “something given free of charge” – found a place in a corner of the manifesto of parties. In recent years, this has occupied the centre-stage and holds the key to winning elections. For instance, in February 2020, the Aam Aadmi Party (AAP) led by Arvind Kejriwal mesmerised Delhi voters by promising freebies....
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GST: Should States’ compensation stay?
The worst phase of pandemic over, GST collections are expected to touch record highs and both the Centre and States can expect to perform better Less than three months from now June 30, 2022 will be an important milestone under the national Goods and Services Tax (GST) regime that was launched on July 1, 2017. In the follow-up to The Constitution (One Hundred and First Amendment) Act, 2016, that introduced the GST, the Union Government had also introduced The GST Compensation Act, 2017. It provides for compensation to the States for five years (2017-18 to 2021-22) for the loss of revenue to be calculated as the difference between their actual collection (including transfer of their share in indirect tax collected...
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Tax buoyancy is a good omen
Efforts to boost tax revenue will come to naught if expenses, particularly on ‘welfare schemes’, are allowed to grow in an unsustainable manner For years, the tax receipts of the Union Government have consistently fallen short of the target set in the respective year which together with the expenditure exceeding the target has led to fiscal slippage – a glamorous term for the fiscal deficit (FD). Against this dismal record in the past, 2021-22 will have the unique distinction of the tax collections – both direct and indirect – exceeding the target. The total direct tax collection net of refund as on March 16, 2022 stood at around Rs 1363,000 crore which is higher the budget estimate (BE) of Rs...
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Time to revisit the three farm laws
When farmers get dozens of options to sell, plain common sense says that they are bound to get a good deal in every respect, including a good selling price While, staying the implementation of the three contentious farm laws, the Supreme Court (SC) had set up a Committee to recommend the way forward. The committee submitted its report on March 19, 2021. Even as the SC action on the report was pending, on November 19, 2021 Prime Minister Narendra Modi announced repeal of the laws even while maintaining that these laws are beneficial to small and marginal farmers who are in a majority. Now, in a startling revelation, Anil Ghanwat, a member of the committee has revealed that around 85.7...
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Gas shock: India’s vulnerabilities
The Govt should maintain a reserve of gas equal to a percentage of annual use which can be used as buffer to meet demand at affordable price during crises The Ukraine war has exposed the vulnerabilities in India’s gas supply systems. Our demand for natural gas (NG) is around 54.6 billion cubic meter (bcm) of which nearly 50 percent is met from import as liquefied natural gas or LNG. Russia is the world’s second-largest producer of NG with a share of 10 percent. In total world export of gas, its contribution is even higher at 25 percent. Most of Russian gas goes to the European Union (EU) countries with the latter drawing 40 percent of their total NG supplies from...
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Whether to resurrect LPG subsidy or not
The Govt should focus on reducing price (sans subsidy) by cutting import dependence, fostering competition by involving private entities and bringing it under GST The recent spurt in the price of LPG in the wake of Ukraine crisis has triggered a demand for resurrection of subsidy which the Narendra Modi government had stopped depositing in beneficiary’s accounts since June, 2020. Is the demand justified? By definition, subsidy on purchase of any given product is subvention or financial assistance provided by the state to a certain class of persons who cannot afford to pay the market-based or cost-plus price from their limited income. In case of LPG, the current price of a 14.2 kg cylinder is around Rs 2000 (in Delhi)....
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