In the Economic Survey (2016-17) presented in Parliament on January 31, 2017, Chief Economic Advisor Arvind Subramanian advocated Universal Basic Income (UBI) instead of a plethora of subsidies given under extant dispensation. But the idea found no mention in Finance Minister Arun Jaitley’s Budget for 2017-18, presented on February 1, 2017. Meanwhile, in an interview given to a group of economic editors on February 1, Jaitley opined that “UBI is an idea whose time should come, but politics of this country is not mature yet for its implementation.” He could have taken the idea on board at least on a trial basis, but avoided it. So, what are the constraints? What will be the opportune time? Will it come at...
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News & Media
RAISING ISSUES WITH GAS PRICING POLICY
The Government needs to re-look at the current pricing scheme for CBM production as it is not reaping returns. It must, instead, stick to extant formula-based guidelines The Cabinet Committee on Economic Affairs (CCEA) has approved marketing and pricing freedom to contractors/producers of coal-bed methane (CBM), or natural gas from coal seams, to sell it at arms length price in the domestic market. To discover arms length price, a contractor has to now follow a fully transparent and competitive bidding process from amongst users “with the objective that the best possible price is realised for the gas without any restrictive commercial practices”. This decision has come in response to a scenario, whereby producers such as, Reliance Industries Limited (RIL) and...
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FDI in retail – a flawed idea
In the Union Budget for 2016-17, the Finance Minister had announced 100% foreign direct investment (FDI) in retail food. This was subject to the retailer selling only food procured from farmers in India and processed locally. However, guidelines in this regard are yet to be notified. Meanwhile, the Government is reportedly considering a proposal to allow 100% FDI in all goods “manufactured domestically”. The policy will be applicable to both offline (brick-and-mortar retailers) and online (e-commerce companies). The idea is flawed. At the outset, a few words on the existing policy dispensation on the FDI in retail. For this purpose, retail is classified in two broad categories, viz, single-brand retail (SBR) and multi-brand retail (MBR). In the SBR, 100% FDI...
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POPULIST MEASURES CAN DERAIL GROWTH
In the just-concluded Assembly election in Uttar Pradesh, Prime Minister Narendra Modi promised to waive loans for all small and marginal farmers and to extend fresh credit at zero interest rate. He also vowed to clear all outstanding arrears of sugarcane farmers and ensure that they get paid on the 14th day from the date of delivering cane. His party was also not averse to offering other freebies viz reducing electricity tariff, smart phone/lap top etc, to match the offer by its opponents. Modi is known for his unique philosophy of shunning doles and instead, empowering the poor. Towards this end, the Prime Minister has taken several measures for the financial inclusion of the farmers (eg the opening of 270...
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Was Modi’s demonetisation a flop show?
When the demonetisation of Rs1,000 and Rs 500 notes was announced by Prime Minister Narendra Modi on November 8, 2016, the expectation was that about Rs 350,000 – 400,000 lakh crore out of a total Rs 15,44,000 lakh crore (embedded in these notes) would not come to banks. This was taken to mean tremendous success of this policy decision. On the one hand this would tantamount to sternest punishment to hoarders of black money (via junking all of their illegal wealth – accumulated over the years – to a worthless piece of paper) and on the other this would give a bonanza to the Reserve Bank of India by way of extinguishing its liabilities to the extent of amount not...
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Royalty liability: milching of ONGC, OIL ends
In an unprecedented move, the government has exonerated its undertakings in the oil sector — Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) from a potential liability of about Rs 22,000 crore in royalty dues to Gujarat and Assam governments. ONGC had to pay Gujarat Rs 8,392 crore and Assam Rs 1,404 crore in royalties for the period April 1, 2008 and January 2014. Together with interest Rs 2,868 crore, the total liability was Rs 12,664 crore. OIL had to pay to Assam Rs 4,902 crore in royalty dues plus Rs 4,355 crore in interest adding to Rs 9257 crore. The Union government has settled this pending liability of ONGC and OIL by paying the royalty amount...
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‘PEACE CLAUSE’ THAT BRINGS PROSPERITY
New Delhi should engage proactively with the WTO to ensure that issues of concern to developing countries, primarily related to agriculture, are addressed Roberto Azevedo, Director General of World Trade Organisation (WTO), who was recently in Delhi to explore and understand India’s perspective on issues for taking up in the 11th WTO ministerial scheduled for December 11-14, 2017, stated that “one has to be patient for a permanent solution and asked not to undermine the efficacy of the peace clause”. Azevedo’s exhortation is unmindful of the vulnerabilities of developing countries inherent in the ‘peace clause’. When, the provision itself stands on a slippery foundation, there is impatience. At the 9th ministerial in Bali (December, 2013), developed countries had agreed to...
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GST architecture is only getting worse
Union Finance Minister Arun Jaitley and chairman, GST (Goods and Services Tax) Council must be credited with spearheading requisite efforts like draft of all related laws — Central GST (CGST), state GST (SGST), integrated GST (IGST), legislation on compensation to states for loss of revenue, delineation/apportionment of powers for administering the tax, determination of rate structure etc in a time-bound manner to ensure that this revolutionary tax reform is kicked off from April 1, 2017. The pace at which the GST Council was progressing, it was almost certain that the government would meet the deadline. But, the announcement by Prime Minister Narendra Modi on November 8, 2016 to demonetise Rs 1,000 and Rs 500 currency notes came as a spoke...
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DOLES TO ELECTRICITY BOARDS DAMAGING
States must bring an end to ‘competitive populism’ and discipline loss-making power boards. They should check their monopoly over power distribution The Union Government has set up a committee to look into restructuring tariff to reduce the burden on industrial units, by making domestic and commercial consumers of electricity pay more (most States categorise those consuming more than 800 units a month as large domestic consumers). The committee will work on classifying consumers in two to three categories and sub-categories to bring transparency in power billing. What is the trigger? At the outset, it is important to know as to (i) why industrial consumers are currently paying more, and (ii) what is the justification for seeking reduction in tariff applicable...
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Will DBT work?
The version of DBT being tried in pilot districts is flawed. It will provide no proper assessment of the scheme’s effectiveness. Alluding to the direct benefit transfer (DBT) of fertiliser subsidy, in budget speech for 2016-17, Finance Minister Arun Jaitley had stated: “We have already introduced DBT in LPG. Based on this successful experience, we propose to introduce DBT on pilot basis for fertiliser in a few districts in the country with a view to improving quality of service delivery to the farmers.” The focus on the DBT has its link to a revelation made in Economic Survey (2015-16). It stated that “24% of the fertiliser subsidy is spent on inefficient producers, 41% is diverted to non-agricultural uses and 24%...
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