With reforms in fertilisers and food stuck in a groove, it is but natural that the government is shirking from paying subsidy arrears Hamstrung by its inability to achieve target for divestment proceeds from public sector undertakings (PSUs) and lower-than-expected collection from direct tax revenues, the government has resorted to hard posturing with regard to release of subsidy payments under major heads—fertilisers and food. As far as fertilisers are concerned, against a budget allocation of R73,000 crore for the current year, the requirement is expected to be around R80,000 crore. Even as the ministry of finance is likely to provide for additional R7,000 crore, it is in no mood to release arrears of about R30,000 crore from previous year. The...
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Category: The Financial Express
Drug licensing must recognise patents
Once patent-linkage gets embedded in our law, cheap drugs won’t get market entry Nearly 30 months back, US drug multinational Merck Sharp & Dohme (MSD) had petitioned the Delhi High Court to restrain Indian firm Glenmark Pharmaceuticals from manufacturing and selling its anti-diabetes drugs viz., Zita and Zita-Met, which violated MSD’s patents. The drugs contain sitagliptin, for which MSD holds a patent in India. Though Glenmark claimed that it had used sitagliptin phosphate, on which MSD held no patent, the court remained unimpressed with the Indian pharma company’s attempt to paint the two compounds as fundamentally distinct. In its October 7 judgment, the High Court restrained Glenmark “by permanent injunction” from making, using, selling, distributing, advertising, exporting, offering for sale or dealing...
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Add 100% FDI to the cart
Allowing 100% FDI in e-tail will make it easier for tax authorities to bring e-com firms under the tax net. In 2012, the UPA had permitted 51% FDI in multi-brand retail (MBR) with riders. The riders included sourcing 30% of requirements from small enterprises, a minimum investment of $100 million, besides giving full leeway to states on whether to grant permission or not. The policy was as bad as saying ‘no’ to FDI in MBR. The Modi government has continued with that policy decision. Finding that the direct route of entering MBR was choked, foreign investors have been looking for opportunities to make inroads. They found one in e-commerce where business was growing leaps and bounds. How did they manage...
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Cut theft and freebies to stem power losses
The Centre must deduct the discoms’ losses from the devolution of taxes to the erring states On September 12, 2015, the chief secretaries of states whose state electricity boards (SEBs)—that carry out power distribution—met Union power minister Piyush Goyal with a demand for a fresh bailout package to deal with the SEBs’ accumulated debt of over R3 lakh crore. Goyal took a bold stand by turning down the request. SEBs have already got two bailout packages—R40,000 crore in 2002 and around R2 lakh in 2012. These were given on the promise that SEBs will adjust tariff to plug gaps between revenue and the cost of electricity, besides reducing transmission and distribution (T&D) losses. But, they have failed on both fronts and...
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Uniform fertilizer subsidy policy must for DBT
The subsidy regime, covering both subsidy rates and payment terms, for P&K fertilisers should be brought in sync with urea The discriminatory policy treatment impairs the ability of industry to supply P&K fertilisers to farmers at affordable prices, which will aggravate imbalance in fertiliser use. This makes a mockery of Prime Minister Narendra Modi’s vision behind giving farmers a Soil Health Card so that they apply fertilisers as per soil needs. On May 13, the government released press notes on the approval of the comprehensive New Urea Policy 2015 and the nutrient-based subsidy rates for phosphate and potash fertilisers for FY16. A key announcement was: “Movement plan for P&K fertilisers has also been freed to reduce monopoly of a few...
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Go for course correction in urea pricing
The real reason for diversion of urea to industrial use, smuggling, black marketing and its excessive use is its ridiculously low selling price. On May 13, the government approved the Comprehensive New Urea Policy, which seeks to promote energy-efficiency, maximise indigenous urea production, and reduce subsidy burden on the budget. At present, under the New Pricing Scheme (NPS), in use since 2003, each of the 30 urea manufacturing units gets a retention price (or ex-factory price) based on the production cost specific to it. Since all of them are required to sell urea at ‘uniform’ controlled price which is lower, the difference is reimbursed as subsidy. NPS was designed as a group-based uniform pricing scheme, whereby each unit in a...
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Switch to accrual-based accounting for subsidies
In his maiden Budget, finance minister Arun Jaitley had announced the setting up of an Expenditure Management Commission (EMC) to recommend a roadmap for rationalising and phasing out the major subsidies. As a follow-up, on September 4, the government constituted the EMC with former RBI Governor Bimal Jalan as the chairman. The EMC’s mandate puts under the scanner the government’s spending on all its programmes and schemes, all its procurement (from defence to office items) besides the methodology for counting receipts and expenditure. It is expected to recommend measures for utilisation of allocated funds in the most cost-effective manner. Jaitley has said that the recommendations the EMC made in its interim report will form the basis for subsidy reforms—with emphasis...
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Fertiliser self-sufficiency is a pipe dream
For nearly four decades successive governments have vowed to achieve self-sufficiency in the production of fertilisers, yet this goal has eluded them so far, barring for a brief while in the early 1990s. Will things be different under Modi? Immediately after the current government took charge, fertiliser minister Ananth Kumar reiterated the need to reinvigorate the sick plants of the Fertiliser Corporation of India (FCIL) and Brahmaputra Valley Fertiliser Corporation of India (BVFCL)—earlier known as HFCL—both central PSUs. Both have been incurring losses for decades. Indeed, some plants—Ramagundum and Talcher (FCIL) and Haldia (BVFCL)—were babies born sick. These PSUs have been on the ventilator for ages with the Centre pumping in thousands of crores of rupees to keep them alive....
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What is holding back direct fertiliser subsidy transfer?
SUMMARY Direct transfer of subsidy to farmers holds the key to countering all ills afflicting the fertiliser sector Direct transfer of subsidy to farmers holds the key to countering all ills afflicting the fertiliser sector in India. Successive governments have talked about it and yet none has ventured to implement this. What has held them back? The idea was first mooted nearly four decades ago when, in March 1976, faced with increasing prices of complex phosphate fertilisers—then, there were no controls and manufacturers were free to fix price—the government introduced a flat subsidy at the rate of R1,250 per tonne phosphate nutrient (P2O5). The initial plan was to give the money directly to farmers so that the effective price (net...
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India’s case at WTO may fail to sail
Even as India rejects the US contention of failing to protect IP rights, passing the TRIPS test might be tough In the recently released Special 301 report on trade and industry practices, the US Trade Representative (USTR) has stopped short of putting India on its Priority Foreign Country (PFC) list. Under Special 301, USTR tracks the intellectual property (IP) rights record of countries and lists them according to the strength of their IP environment. If, on review, it identifies substantial deterioration in any country’s IP regime, it gets downgraded to PFC status which carries with it trade and economic sanctions. India may have escaped being listed as such for now, but the Damocles sword hangs over the country as the...
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