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Subject: Economics

  • [pib] Soil Health Card Scheme

     

    The Soil Health Card Scheme has completed 5 years since its launch.

    Soil Health Card Scheme

    • Soil Health Card (SHC) is a Government of India’s scheme promoted by the Department of Agriculture & Co-operation under the Ministry of Agriculture and Farmers’ Welfare.
    • It is being implemented through the Department of Agriculture of all the State and Union Territory Governments.
    • A SHC is meant to give each farmer soil nutrient status of his/her holding and advice him/her on the dosage of fertilizers and also the needed soil amendments, that s/he should apply to maintain soil health in the long run.
    • The scheme was launched by PM on 19.02.2015 at Suratgarh, Rajasthan.

    Details on the SHC

    • SHC is a printed report that a farmer will be handed over for each of his holdings.
    • It contains the status of his soil with respect to 12 parameters, namely N,P,K (Macro-nutrients) ; S (Secondary- nutrient) ; Zn, Fe, Cu, Mn, Bo (Micro – nutrients) ; and pH, EC, OC (Physical parameters).
    • Based on this, the SHC also indicate fertilizer recommendations and soil amendment required for the farm.
    • It provides two sets of fertilizer recommendations for six crops including recommendations of organic manures. Farmers can also get recommendations for additional crops on demand.

    Other details

    • The State Government will collect samples through the staff of their Department of Agriculture or through the staff of an outsourced agency.
    • The State Government may also involve the students of local Agriculture / Science Colleges.
    • It will be made available once in a cycle of 3 years, which will indicate the status of soil health of a farmer’s holding for that particular period.
    • The SHC given in the next cycle of 3 years will be able to record the changes in the soil health for that subsequent period.
    • Soil samples will be drawn in a grid of 2.5 ha in irrigated area and 10 ha in rain- fed area with the help of GPS tools and revenue maps.

     Why needed such scheme?

    • Soil testing is developed to promote soil test based on nutrient management.
    • Soil testing reduces cultivation cost by application of right quantity of fertilizer.
    • It ensures additional income to farmers by increase in yields and it also promotes sustainable farming.

  • National Groundwater Management Improvement Programme

    The Government of India and the World Bank have signed a $450 million loan agreement to support the national programme to arrest the country’s depleting groundwater levels and strengthen groundwater institutions.

    About the Programme

    • The World Bank-supported programme will be implemented in the states of Gujarat, Maharashtra, Haryana, Karnataka, Rajasthan, Madhya Pradesh, and Uttar Pradesh and cover 78 districts.
    • These states span both the hard rock aquifers of peninsular India and the alluvial aquifers of the Indo-Gangetic plains.
    • They were selected based on several criteria, including degree of groundwater exploitation and degradation, established legal and regulatory instruments, institutional readiness, and experience in implementing initiatives related to groundwater management.
    • This programme will contribute to rural livelihoods and in the context of climatic shifts, build resilience of the rural economy.

    Objectives

    The programme will, among others, enhance the recharge of aquifers and introduce water conservation practices; promote activities related to water harvesting, water management, and crop alignment; create an institutional structure for sustainable groundwater management; and equip communities and stakeholders to sustainably manage groundwater.

    Particulars of the programme

    • The programme will introduce a bottom-up planning process for community-driven development of water budgets and Water Security Plans (WSPs).
    • Water budgets will assess surface and groundwater conditions (both quantity and quality) and identify current and future needs.
    • The WSP, on the other hand, will focus on improving groundwater quantity and incentivize selected states to implement the actions proposed.
    • Such community-led management measures will make users aware of consumption patterns and pave the way for economic measures that reduce groundwater consumption.
    • Crop management and diversification will be the other focus areas.

  • Let’s think afresh about how to govern India’s gig workforce

     Context

    The gig economy plays to employment patterns in India, where most of the workforce is engaged in “informal” jobs in the “unorganized” sector.

    Employment pattern in India

    • Non-contractual employment: A recent study of employment patterns over a 13-year period ended 2017 for the Prime Minister’s Economic Advisory Council finds that non-contractual employment grew by 68 million over the period.
      • And “has been a hero of employment generation growing by about 5% annually“.
      • There were 145 million people in non-contractual employment in 2017-18.
      • Professionals constituted the most rapidly growing occupations, with older, better educated and skilled witnessing higher growth.
    • Unorganised sector growing at much higher rate than organised sector: The study also found that unorganized sector employment grew by 65 million between 2004 and 2017, compared to only 27 million new jobs in the organized sector.
      • What does the asymmetric rate suggests? It suggests that businesses are finding it more convenient to sustain themselves when they are below the radar of the government.
    • Potential for growth of gig economy: As technology and business models take the gig economy across the country and implant it more deeply into the Indian economy, we can expect to see a lot more people find employment through online marketplaces and technology platforms.

    Regulation of labour laws and expanding the tax base

    • Social Security Code: In December, the government introduced legislation in Parliament that seeks to consolidate a number of labour laws into a Social Security Code.
      • Who will be covered in the code? The new statute encompasses self-employed professionals, freelancers and platform workers, such as those employed by taxi aggregators and food delivery companies.
    • Widening the tax base: The tax person is not far behind.
      • Recent reports suggest that revenue officials are leaning on platforms and aggregators to get gig workers registered with the goods and services tax (GST) network.
      • Need to reflect on how to govern the gig workforce? While it is just as well that the government is attempting to rationalize labour regulations and expand the country’s tax base, it is important to step back and reflect on how the gig workforce ought to be governed.

    The new approach to classification of jobs: Income and volatility

    • Classification on the basis of two fundamental characteristics: If we discard the mental model that has long classified jobs as formal and informal, and look at work afresh, we observe that jobs vary along with two fundamental characteristics:
      • The level of income they generate and-
      • The volatility of this income.
      • Example: A security guard at a company might earn a few thousand rupees a month, but with the assurance of a regular monthly paycheque.
    • More informative way: Instead of the old binary formulation of informal versus formal jobs, it is more informative to see jobs being distributed on a spectrum depending on how much they pay and how volatile the income flows they provide are.
      • Wherever a job lies in this spectrum, the objective of public policy ought to be to ensure a “trimurti”.

    Ensuring Trimurti

    • Frist-Providing dignified working conditions: Promoting dignified working conditions include-
      • Ensuring fairness.
      • Respect.
      • Safety.
      • Protection against exploitation and-
      • Arrangements for retirement.
      • Need to ensure the obligation from employers: This means that even as labour laws are rationalized to eliminate outdated and hard-coded regulations, it is necessary to ensure that all employers retain an obligation to promote the dignity of all their employees.
    • Second-Need to lower the barriers: Real wages grow not because the government imposes minimum wages, but when productivity rises.
      • Productivity growth occurs when barriers to trade, investment and travel are lowered.
      • A closed economy cannot be a successful gig economy.
    • Finally-A re-imagined social security system: A re-imagined social security system for the 21st century must tap government, corporate and social contributions for insurance and retirement accounts.
      • Such a multi-contribution system is possible today and the proposed Social Security Code is an opportunity to put in place such a future-proof framework.

    How to handle the dispute arising out of the gig economy

    • Start online dispute resolution system: The gig economy is perhaps the best place for India to start its first online automated dispute resolution system.
      • You can’t govern the 21st-century economy with 18th-century technology.

    Conclusion

    While ensuring the application of the labour code to the gig economy and bringing them in the tax net the government also ensure the conducive environment for the gig economy to flourish and contribute significantly in the growth of the country.

     

     

  • A crisis deferred

    Context

    Union budget missed the opportunity to undertake reforms in the grain management system and food security act.

    The massive reduction in food subsidy and its implications

    • Subsidy slashed by 75,552 crores: The revised estimates (RE) for food subsidy for 2019-20 have been slashed by a whopping Rs 75,552 crore -from the budgeted estimate (BE) of Rs 1,84,220 crore to Rs 1,08,668 crore (RE).
      • For the next fiscal year, the budget estimate has been kept at Rs 1,15,570 crore.
    • No major reforms in grain management system: One wonders whether any major reforms have been undertaken in the grain management system or in the National Food Security Act such that this massive reduction in budget estimates is feasible. But no such reforms are undertaken.
      • The Food Corporation of India (FCI) has been asked to borrow more from myriad sources, but most importantly from the National Small Savings Fund (NSSF).
      • An item that should have been in the budget, is now getting reflected as outstanding dues of FCI.
    • Implications of the move–postponing of the crisis:  In order to gauge how much is the effective food subsidy in the country, the budget numbers are becoming totally irrelevant.
      • One needs to add the actual subsidy numbers reflected in the budget to the outstanding dues of FCI.
      • Effective food subsidy: If one adds the due, the effective food subsidy turns out to be Rs 3,57,688 crore.
      • By not provisioning for it fully in the budget, and not undertaking any reforms in the foodgrain management system or the NFSA, the government is only postponing the crisis.

    Need to bring down the coverage: The Economic Survey

    • Bringing down the coverage at 20 %: While the Economic Survey clearly states that the coverage under NFSA needs to be revisited, and brought down to say 20 per cent of the population.
      • The budget did not bite this bullet.
      • Cost of procurement to go up: The expected cost of rice to FCI in 2020-21 is going to be about Rs 37/kg, and for wheat it will be Rs 27/kg.
      • The issue price, that covers 67 per cent of the population, is just Rs 3/kg and Rs 2/kg respectively.

    Excessive stock with the FCI

    • Actual stock in excess of buffer stocks: Compared to a buffer stock norm of 4 million tonnes, actual stocks with FCI (including unmilled paddy) were 3.5 times higher.
      • It speaks of a colossal waste of scarce resources, especially when tax revenues have been sluggish.
    • Stocks likely to increase further: Given that Skymet has predicted that the coming wheat crop is going to be one of the best in many years-the stocks is likely to touch 113 million tonnes.
      • With procurement prices being above global prices, the chances of wheat exports are bleak unless there is a subsidy for exports.
      • And that will be challenged in the WTO.
      • The FCI may run out of stock capacity: So, one should expect a piling up of grains stocks with a record procurement of wheat.
      • FCI may run out of storage capacity. Stock levels may touch 85-90 million tonnes, or even more, by July 1, 2020.

    Fundamental questions

    • First: Is the government ignorant of the impending crisis of plenty?
    • Second: Does it realise that the policy of procurement prices (50 per cent above cost A2+FL), without looking at the demand side, is likely to create more troubles for the government?
    • Third: Does the government have any plan to reform the public distribution system under NFSA?

    Way forward

    • Reforms in foodgrain management: Reforms in foodgrain management have to start with reforming the PDS system.
      • With moving gradually moving away from grains to cash transfers.
      • Think over implementing the Shanta Kumar Committee reports recommendations.
    • Stop open-ended procurement in Punjab-Haryana belt: The policy of procurement prices, with open-ended procurement in the Punjab-Haryana belt, is doing more damage by depleting the water table and not letting crop diversification take place.
      • This is very unfortunate as the “dead loss” in grain management runs to more than Rs 1,00,000 crore.
    • Rationalise the fertiliser subsidy: The other part related to this is the fertiliser subsidy, which is largely used in wheat and rice.
      • The budget estimates for 2020-21 show a reduction in the subsidy, while dues of the fertiliser industry keep on piling.
      • The fertiliser industry estimates that by April 2020, the dues will be roughly Rs 60,000 crore.
      • Demoralised fertiliser industry: While FCI has been asked to borrow, the fertiliser industry does not have that type of window.
      • It is feeling totally demoralised.
      • No private player wants to come and invest in this sector.

    Conclusion

    Instead of postponing the crisis by compelling the FCI to borrow, the government need to reform the foodgrain management system, rationalise the fertiliser subsidy and limit the coverage under the NFSA.

  • Why have LPG prices seen a sharp rise?

     

    Recently, LPG prices, which are revised on a monthly basis, went up yet again.

    What influences LPG prices in India?

    • Domestic prices of liquefied petroleum gas (LPG) are based on a formula — the import parity price (IPP), which is based on international LPG prices.
    • Saudi Aramco’s LPG price acts as the benchmark for the IPP and includes the free-on-board price, ocean freight, customs duties, port dues and the like.
    • This dollar-denominated figure is converted into rupees before local costs — such as local freight, bottling charges, marketing costs, margins for oil marketing firms and dealer commissions and the GST — are added.
    • This helps the government arrive at the retail selling price for LPG.
    • The government resets the LPG price every month, the decision being influenced by international prices and how the rupee has behaved against the dollar in the immediately preceding weeks.

    Who will the price rise affect?

    • The price increase will affect retail consumers who have given up the subsidy.
    • The government has said that for those who avail subsidy, the increase would be mostly absorbed by the rise in subsidy.
    • The Centre said the price of an unsubsidized cylinder would increase from ₹714 to ₹858.50 in Delhi, for example, and that the subsidy offered would go up from ₹153.86 to ₹291.48.
    • Of the 27.76 crore retail consumers, 26.12 crore consumers avail LPG subsidy. Likewise, for Ujjwala consumers, the subsidy would go up from ₹174.86 to ₹312.48 per cylinder.

    Does this help the government move to an open pricing regime?

    • Prior to the latest round of the price increase, the government had raised LPG cylinder prices by ₹62, starting from August 2019.
    • Compare this with the increase of ₹82 that had taken place over five years to mid-2019, indicating a penchant for increasingly lesser subsidy.
    • In the latest round, though, the Centre has sought to absorb much of the increase for those availing subsidy.
    • It looks like the most recent increase has been beyond its control and it is hence raising the subsidy levels to protect consumers, given that the economy is reeling from lack of consumer spending.

    What is the outlook?

    • With international crude prices on the downtrend, it is plausible the LPG prices too would see a slump.
    • Aramco has lowered its propane price for February to $505 per metric tonne.
    • Assuming we receive no surprises from the rupee-dollar tango, a softening of LPG prices in the domestic context may be expected.

    What are the implications for the broader economy?

    • At a time when consumer demand, in general, for goods and services in the country has slumped, more cash in the hands of the retail consumer may have helped spur demand.
    • It is ironic that the government has had to raise LPG prices now.
    • This sucks away even more disposable income from those consumers who pay market rates for LPG. As a result, household budgets are bound to go up, especially for those not availing the subsidy.
    • The increase in LPG price could spur headline inflation even further. As it is, the consumer price index inflation has seen a rise over the past few months.

  • Corporate Model of Indian Railways

     

    The Kashi Mahakal Express is the country’s third ‘corporate’ train after the two Tejas Express trains between Delhi-Lucknow and Mumbai-Ahmedabad started over the past few months.

    A new model

    • This is a new model being actively pushed by Indian Railways- to ‘outsource’ the running of regular passengers’ trains to its PSU, the Indian Railway Catering and Tourism Corporation (IRCTC).
    • This has been dubbed an ‘experiment’ as a natural extension of this model is to lease out 100 routes to private players to run 150 trains, something that is in the works.

    How does the model work?

    • In this model, the corporation takes all the decisions of running the service– fare, food, onboard facilities, housekeeping, complaints etc.
    • Indian Railways is free from these encumbrances and gets to earn from IRCTC a pre-decided amount, being the owner of the network. This amount has three components- haulage, lease and custody.
    • The haulage charge IRCTC is paying for the Tejas trains is in the range of Rs 800 per kilometer.
    • This includes use of the fixed infrastructure like tracks, signalling, driver, station staff, traction and pretty much everything needed to physically move the rake.

    Finances

    • On top of that IRCTC has to pay the lease charges on the rake as Indian Railways coaches are leased to its financing arm, the Indian Railway Finance Corporation (IRFC).
    • Added to that there is a per-day custody charge, of keeping the rake safe and sound while it is in the custody of the PSU.
    • Roughly each of these components works out to be around Rs 2 lakh per day for the New Delhi-Lucknow Tejas rake.
    • In other words, IRCTC has to pay Indian Railways a sum total of these three charges, roughly Rs 14 lakh for the Lucknow Tejas runs in a day (up and down) and then factor in a profit over and above this.
    • This money is payable even if the occupancy is below expectation and the train is not doing good business.

    What powers does IRCTC have?

    • Being a corporate entity with a Board of Directors and investors, IRCTC insists that the coaches it gets from Railways are new and not in a run-down condition, as is seen in many trains.
    • The quality of the coaches has a direct bearing on its business.
    • In this model, IRCTC has full flexibility to decide the service parameters and even alter them without having to go to Railway ministry or its policies.
    • To that end, the business of running trains can be run with the independence needed to run a business with profit motive.
    • This, policymakers believe creates the environment for enhanced service quality and user experience for the passengers.
    • IRCTC gets the freedom to decide even the number of stoppages it wants to afford on a route, depending on the needs of its business model.

    What is Indian Railways’ benefit from this model?

    • The bright side for Indian Railways is that it doesn’t have to suffer the losses associated with running these trains thanks to under-recovery of cost due to low fares and its own hefty overheads.
    • The lease on its coaches is also taken care of.

    Is this the same model for private train operators?

    • The model in which private train operators are sought to be engaged is different wherein along with haulage of Rs 668 per kilometer the operator needs to agree to revenue sharing with Railways.
    • The company willing to share the highest percentage of revenue will win the contract.
    • Private players may not need to pay lease and custody charges as it is expected that they will bring in their own rolling stock.
    • All this is because over the next five years, after the two dedicated freight corridors are operationalised and a lion’s share of freight trains move to the corridors, a lot of capacity will free up in the conventional railway lines for more passenger trains to run to cater to the demand.
    • The government wants private players and maybe also its own PSU, along with Indian Railways, to share the load of pumping in more trains into the system.

  • How countries play the tariff game

     Context

    It is important to have a stable tariff policy which would help to link effectively to global value chains.

    Why countries levy tariff?

    • The tariff is a tax levied on an imported good at the border.
    • Countries use tariffs to-
      • Provide easy market access or restrict them to protect domestic industry.
      • It also serves the purpose of revenue collection and-
      • To achieve some strategic objectives by giving/denying tariff concessions to countries.

    Harmonised System in international trade

    • What is it? Goods are classified at 2, 4, 6, 8 digits and some countries have even up to 10 digits, depending upon the level of trade potential of a country.
    • WCO’s system of codes: The classification of these codes is streamlined under an international coding system called ‘Harmonized System’ (HS) under World Customs Organization (WCO) to which 138 countries are contracting parties and about 200 customs authorities are signatories.
    • India’s national tariff lines are about 11,000 at HS 8-digit.

    Historic background of the tariffs

    • Colonial-era: During the colonial era tariffs were heavily used to protect the domestic industry, enjoy unbridled access to the colonized markets and raise tariffs against competitors.
    • Adam Smith’s advocacy of free trade: Adam Smith in 18th Century challenged this idea of regimented trade with his advocacy of free trade that was convincingly brought out in his seminal work ‘Wealth of Nations’.
    • Theory of comparative advantage: Further, in the 19th Century, David Ricardo, building on this concept, propagated the ‘theory of comparative advantage’.
      • The theory proposes that nations should remain focused on their specific areas of competence and allowed to trade freely with other countries.
      • This theory is against import substitution and considers raising tariffs as a drag on economic growth.
    • What proponents of high tariff said? Proponents of high tariffs assert that-
      • Developed countries dominated global markets for decades with high tariffs, developing countries should continue to enjoy differential tariff treatment until they catch up with the rest.

    How countries calibrate tariffs?

    • Each country calibrates its tariffs taking into account its-
      • Domestic production.
      • Demand and
      • Sensitivities.
    • Typically, tariff structures of a manufacturing country reveal a pattern:
      • Low tariffs on raw materials and intermediate goods in the range of 0-5%.
      • Slightly higher tariffs for finished goods in the range of 7-10%.
      • Higher tariffs for agriculture products at above 15%, sometimes up to bound rates as allowed under WTO.
      • As agriculture lines are politically sensitive, most countries zealously guard them with high tariffs.

    Export-import linkage and effects of high tariffs

    • How tariffs could harm export competitiveness: Availability of cheaper raw materials and intermediate products support making of competitively priced finished goods for export markets.
      • The challenge for an entrepreneur is to find these cheaper inputs.
      • If these inputs are not available domestically at competitive rates, they look to source them from outside.
      • But as high tariffs act as barriers to sourcing cheaper inputs, they undermine export competitiveness of a product.
    • Implications for MSMEs
      • For MSMEs (micro, small and medium enterprises), this dependency linkage is even more critical, without which they might close down their operations under threat of persistent losses or low returns.
      • Impact on jobs and economy: This would have consequential impact on jobs, income and consumer choices in an economy.
    • Inefficiency and corruption at entry points: High tariffs could breed inefficiency and corruption at the entry points as it leaves much scope for discretion at the hands of officials, circumvention through under/over-invoicing and violation of rules of origin.
    • Impairing demand: Overtime, high tariffs run the risks of impairing demand and paralyzing domestic manufacturing.
    • Maintaining judicious balance: Leveraging tariffs for benchmarking domestic prices is not an uncommon practice in any country.
      • But maintaining a judicious balance between the interests of primary producers and user industries is imperative, given that there exists an intimate link between imports and exports.

    India and Global Value Chain (GVC)

    • 80% trade through More than 80% of the global trade runs through Global Value Chains (GVCs) which have evolved extensively in various regions of the world.
      • Low tariffs help GVCs to thrive, essentially for the purpose of sourcing and accessing foreign markets.
    • Why stable tariff policy is important for India?
      • For India to emerge as a global hub for “networked products” and make every district an ‘export hub’ for a specific item, as envisaged in this year’s Budget, it is important to have a stable and predictable tariff policy which would help to link effectively to GVCs.
      • For investors: From an investor’s point of view a stable tariff policy is a huge motivation.

    Free-trade agreements and hope of getting market access

    • Market access: The assumption that tariff concessions under bilateral free trade agreements (FTAs) would help get market access is misplaced.
      • Why the assumption is misplaced? In reality, this may not happen as same concessions can be offered by a country to other trading partners in a trade arrangement or throw open to all countries on an MFN (most favoured nation) basis.
      • Inverted duties situation: Gradual tariff liberalization is a natural progression and failing to do so could result in a situation of inverted duties where finished products end up being cheaper than raw materials and intermediate goods
      • Thus, calling for tariff correction in course of time.

    Revenue Generation through tariffs

    • Why it is not a good idea? The domestic consumers ultimately end up absorbing import duties as they get passed onto products they consume.
    • Taxing own people: This is akin to taxing one’s own people in an indirect way by making them pay more for a product than in other markets.
    • Revenue generation from enhanced activities: For these reasons, the idea of revenue collection from import duties is losing steam, and instead, revenue generation from enhanced economic activity is gaining wider acceptance as a dynamic process.

    Conclusion

    Increasing tariffs on the import can end up hurting the economy than benefitting it in the long run, so the government must reconsider the policy of tariff increase.

     

  • Fine-tuning GST

    Context

    Even as the 31-month-old GST evolves, the debate on its success rages on. Many have argued that GST is losing its sheen and needs a complete overhaul while others contend that the new tax system is on course and the trials and tribulations were not unexpected.

    Analysis of GST collection

    • 39% increase over the average of the base year 2015-16: The average monthly GST collection for the period August 2017 to January 2020 stands at Rs 97,188 crore which is an impressive 39 per cent increase over the average monthly collection of subsumed taxes in the base year 2015-16, at around Rs 70,000 crore.
    • The average growth rate of 9.7% per year: This is an average growth rate of 9.7 per cent over the almost 4-year period post-2015-16 and a compounded growth rate of 8.55 per cent.
      • Though less than 14% but not insignificant: This compounded growth rate is not insignificant even though it is just about 0.61 times the very ambitious 14 per cent rate of growth promised to the states before GST rollout.
    • Perception of infectiveness due to ambitious 14% promise: The average growth rate of the collection in 18 non-special category states (accounting for the bulk of the revenue) during the 3-year period immediately preceding GST stood at around 8.9 per cent.
      • Thus, if the perception about the effectiveness of GST has not been very encouraging, it is only in the context of the very ambitious 14 per cent compounded annual growth rate promised to the states.

    Reasons for tepid growth in GST collections

    • The overall economic situation in the country: The revenue performance of GST during the current fiscal year is not out of sync with the overall economic situation in the country.
      • The growth rate in tax yield at 4.69 %: Accordingly, during the 10-month period ending January 2020, the growth rate in tax yield was 4.69 per cent.
      • The relatively tepid growth was primarily due to a negative growth of 4.03 per cent in September-October 2019.
      • After the dip in September-October 2019, GST collections rebounded and this is a reminder that one need not write GST off in a hurry.
    • Complacency in the states due to 14% promise: Complacency in the states on account of assured 14 per cent growth cannot be ruled out.
      • States were jolted with the delay in compensation for August-September 2019 and resorted to vigorous monitoring of compliance and action against toxic and unverified credits, circular trading and tax evasion which had resulted in unmatched credit claims of around Rs 50,000 crore.

    Two suggestions as corrective measures

    • The GST Council deliberated on the recent trends in revenue collection and was cognizant of the need for corrective measures. Two options were suggested. One was the “big bang” approach-
    • Big Bang approach: It involves an overhaul of-
      • The legal framework.
      • Processes and systems and-
      • Re-writing GST almost de novo.
    • A steady-state approach: A “steady-state” approach involved-
      • Incremental reforms.
      • Solving problems as they arise.
      • Plugging loopholes.
      • Improving the compliance environment through increased monitoring with better tools.
    • The Council chose the second approach and the signs are already showing.

    The steps taken-

    • Red flag reports: The GSTN has developed red flag reports based on GSTR-1, auto-generated GSTR-2A, GSTR-3B and the national e-way bill system.
      • These reports identify non-filers so that action can be taken against active taxpayers who defaulted in filing returns.
      • Till November 2019, around 6 lakh dealers had defaulted in furnishing one or more returns from July 2017 involving estimated tax liabilities of around Rs 25,000 crore.
      • Increase in the filing: An SOP has been developed for proceeding against such return defaulters and this has helped increase the percentage of filing which has contributed to revenue.
    • Making Aadhaar mandatory: To further the ease of doing business, it was decided to grant registration without physical verification and a system of deemed registration was put in place.
      • Spot verification has unearthed non-existent dealers and led to the cancellation of around 1 million entities.
      • It has now been decided to mandate Aadhaar authentication for taking new registration and thereafter the existing registered taxpayer population would have to undergo Aadhaar authentication in a phased manner.
    • Use of analytical tools: Advanced analytic tools are being used to unravel complex networks of firms created just for generating credit and these analyses are being strengthened through machine learning and AI.
      • An all-India offence/enforcement database is being built.
    • System of data exchange with other agencies: In order to identify dealers posing a “hazard” to revenue and do a 360-degree profile of risky taxpayers, a system of regular data exchange with banks, CBDT, ED, RoC and other agencies is being put in place.
      • Fraudsters will find it almost impossible to game the system.
      • The new return system set to roll from April 1 is expected to curb incidences of unmatched turnovers and utilisation of un-validated.
    • System of e-invoicing: In order to validate and improve the quality and fidelity of invoice reporting and return filing, a system of e-invoicing is proposed to be implemented in a phased manner beginning April 1.
      • This will begin with taxpayers with turnovers exceeding Rs 500 crore and will auto-populate e-way bill generation and filing of Anx-1 in the new return system apart from validating credit flow from taxpayers.

    Conclusion

    These measures will effect qualitative improvement to the compliance eco-system which will not only lead to an improvement in the collection but will also make life easier for taxpayers and tax authorities alike.

  • Adjusted Gross Revenue (AGR)

    The Supreme Court came down heavily on the Department of Telecommunications (DoT) for issuing a notification that asked for no coercive action against telecom companies even though they had not paid the adjusted gross revenue (AGR) dues by the stipulated deadline.

    What is AGR?

    • Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).
    • It is divided into spectrum usage charges and licensing fees.

    What does SC order on AGR mean?

    • The order by the top court means that the telecom companies will have to immediately clear the pending AGR dues, which amount to nearly Rs 1.47 lakh crore.
    • Vodafone Idea, which has to pay up nearly Rs 53,000 crore, faces the prospect of shutting down business.
    • Bharti Airtel, which faces a payout of more than Rs 21,000 crore, could also be in trouble for not paying the AGR dues on time.
    • Other than the telcos, non-telecom companies could also be facing huge payouts individually, which amount to total of Rs 3 lakh crore.

    What exactly did the government notification say?

    • The Licensing Finance Policy Wing of the DoT last month directed all government departments to not take any action against telecom operators if they failed to clear AGR-related dues as per the Supreme Court’s order.
    • The order came as a huge relief for operators — mainly Bharti Airtel and Vodafone Idea — that would have otherwise faced possible contempt action for not paying dues by the deadline that ran out on that same day.

    No more relief to telecoms

    • Bharti Airtel and Vodafone Idea together owe the telecom department Rs 88,624 crore.
    • Prior to the DoT order restraining coercive action, the companies had told the government that they would wait for the outcome of the Supreme Court hearing.
    • Reliance Jio paid up its dues of Rs 195 crore on January 23.
    • As things have turned out, however, the companies have got no relief from the Supreme Court.

    What is the background of SC’s AGR order?

    • On October 24, 2019, the court had agreed with DoT’s definition of AGR, and said the companies must pay all dues along with interest and penalty.
    • Bharti Airtel and Vodafone Idea had tried to persuade DoT to relax the deadline and, after failing, moved the court seeking a review of its judgment.
    • The court dismissed the review petition in mid-January, and also did not extend the deadline for paying AGR dues.
    • It had, however, agreed to hear the companies’ modification plea.

    Where does the government stand in this situation?

    • The payout by telecom and non-telecom companies is likely to lead to windfall gains for the central government, which could help it close some of the fiscal deficit gap for the current financial.
    • At the same time, however, the government will be under pressure to ensure that the telecom market does not turn into a duopoly if Vodafone Idea does indeed decide to shut shop.
    • It will also have to manage the payouts to be done by non-telecom companies as most of them, such as Oil India, Power Grid, Gail, and Delhi Metro Rail Corporation are public sector units.

    What does this situation mean for customers and lenders?

    • If Vodafone Idea does exit, an Airtel-Jio duopoly will be created, which could lead to bigger bills, considering it was the cutthroat competition in the sector that made mobile telephony and Internet almost universally affordable.
    • The AGR issue has triggered panic in the banking industry, given that the telecom sector is highly leveraged.
    • Vodafone Idea alone has a debt of Rs 2.2 lakh crore that it has used to expand infrastructure and fund spectrum payments over the years.
    • The mutual fund industry has an exposure of around Rs 4,000 crore to Vodafone Idea.

    Assist this newscard with:

    https://www.civilsdaily.com/news/explained-adjusted-gross-revenue-agr-in-telecom-sector/

  • [pib] Nagpur Orange

     

    The first consignment of Nagpur oranges was flagged off to Dubai from Vashi, Navi Mumbai.

    Nagpur Orange

    • Nagpur orange is rustic and pockmarked exterior which is sweet and has juicy pulp.
    • It gives the city of Nagpur its pseudonym Orange City.
    • It oranges blossom during the Monsoon season and are ready to be harvested from the month of December.
    • The Geographical Indication was accorded to the Nagpur Orange by the registrar of GIs in India and is effective as of April 2014.

    The best breed

    • Nagpur mandarin in one of the best mandarins in the world. Production of this fruit crop in the central and western part of India is increasing every year.
    • Mrig crop (monsoon blossom), which matures in February – March, has great potential for export since arrivals of mandarin fruit in international market are less during this period.
    • In the whole region only one variety of Nagpur Mandarin is grown.