News & Events
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1. Missing link in power sector reform
The budget rolled out a revamped, reforms-based and results-linked power distribution scheme, with an outlay of over Rs 3 lakh crore, over the next five years. The new scheme would provide assistance to the distribution companies, or discoms, for infrastructure creation. However, while prepaid smart meters would make perfect sense to stamp out routine revenue leakage and outright theft, opting for feeder separation for agricultural and non-agricultural connections nationally may not be such a good idea. Such hiving-off may have made sense back in the 1990s, but the availability of reliable inexpensive digital meters makes feeder separation quite redundant.
Also, currently, with large solar power capacity functional and slated to be 60 GW next year, what’s surely required is better integration of renewable energy into the electricity grid and not so much differentiation between farm and non-farm usage. That will call for capacity creation in grid operations and storage of power. Smart, prepaid metering would allow targeting of subsidy, on par with direct benefit transfers (DBT) strongly endorsed by the Finance Commission, and, hence, put paid to needless politicisation of power tariffs. Reckless giveaways and gross, unbudgeted subsidies in power are totally unwarranted and have, indeed, precipitated a severe crisis in the vexed power sector.
Discoms do need to step up metering of individual household units in a residential building that hosts multiple households as tenants but has a single meter for the building as a whole. Lack of metering should not deny the poor the subsidy meant for them. The move to upgrade systems should reduce ohmic losses in distribution with better transformers, series capacitors and automatic voltage boosters.
2. Making the Budget work in practice
In an interview to this newspaper, Finance Minister Nirmala Sitharaman said the budget’s focus was a stimulus that would ‘make a difference to the economy’. The Centre’s expenditure, budgeted at 15.6% of the GDP for 2021-22, is high, compared to 13.5% of the GDP in the recent past (except in 2020-21 when expenditure amounted to 17.7% of the GDP due to the fall in growth and surge in spending). The 34% jump in the allocation for capital expenditure to revive investment makes eminent sense. The focus now must be to execute the big spending that has been budgeted to get the economy back on track. Completing investment in projects that are ready to take-off should be a priority. The Centre’s revenue projections are not overambitious, efficient tax administration can easily overachieve the targets.
Concerns raised over the budget proposal to set up a bad bank to relieve banks of their burden of bad loans are misplaced. To ease the flow of credit to fuel recovery, banks must be freed from their bad loans. True, these loans are more complex than housing mortgages and will take time and expertise to resolve, either by sale or by liquidation under the Insolvency and Bankruptcy Code. That is why these must be placed in the custody of patient capital. As non-performing assets would have to be sold at a steep discount to the original loan value, bankers must be shielded from criminalisation of their actions. However, the notion that the bad bank cannot be owned by banks, as they cannot simultaneously be sellers of bad debt and its buyers, as equity holders of an entity that buys the debt, has no merit. The first-ever bad bank was set up in 1988 by Mellon Bank of Pittsburgh to relieve it of bad loans. If the bad bank buys assets cheaper than normal, and its profits are larger than normal, these would go back to the banks themselves.
Reform to lower the government’s stake in some PSBs below 50% will improve the health of banks, in terms of capitalisation and functional efficiency. Also, rationalising GST rates would be a sound move.
3.Avoid turbulence: Reopen domestic air travel to market pricing
The lockdown announced last March to combat the pandemic led to substantial collateral damage. Among the worst hit was the aviation industry which was forced to shut down. Therefore, when flying resumed two months later with restrictions, the government stepped in to help by fixing different price bands depending on the duration of flights. In other words, the minimum and maximum fares were fixed. It was an imperfect arrangement but the context justified government intervention in the most fundamental aspect of a market economy.
In a market transaction, the price is the most essential feature. It is the signal which affects the present and also future allocation of resources. Therefore, direct government intervention in a market economy through restrictions on price movement is a gross distortion. Yet, almost nine months after domestic aviation resumed, the government has decided to continue with price bands. Not just that, it has also increased the minimum and maximum tariffs, presumably to account for higher fuel prices. In terms of optics, this is similar to the MSP mechanism. The extension of price bands is an unwise move. We are at a stage when the pandemic-related controls by the government have to end.
The price bands are seen to be helping out companies with weak financials, but they bring no efficiency gains and are at the cost of the consumer. The experience in many countries, including India, shows that minimum support prices are addictive. Consequently, there is always lobbying to persist with them. But fast-paced return to normalcy needs to be accompanied by a withdrawal of the extraordinary government interventions, whose Covid-related justification does not hold any longer. Withdraw the price bands in aviation and let market competition take its course. This is what minimum government, maximum governance is about.
4.Question of consent: In rape accusation following promise of marriage
A Punjab man who had sexual relations with an Australia-based woman but later broke his promise of marriage prompting the woman to file a rape case highlights a grey area in the law. The Jat Sikh man claimed his family objected to her Dalit status. Rejected anticipatory bail by high court, the man agreed to marriage and secured conditional bail from Supreme Court, provided he didn’t renege on his promise a second time.
The relationship – from love, rape charges and bail through to marital bliss – swings between extremes like a B grade melodrama. But notice too the oddity of a serious charge like rape getting trivialised. Rape constitutes an extreme violation of the human body and will, which no justice system can condone, where the perpetrator must face exemplary punishment, for the physical and mental trauma unleashed on the survivor/ victim.
There is one conversation in India, not marginal, that blames rape on the victim and even her lifestyle. Another commentary claims that many rape cases aren’t per se sexual assault and penetration against a woman’s will. Tagging sexual relations on the false promise of marriage as rape feeds the latter discourse. But here’s reality: NFHS-4 survey showed a whopping 6% Indian women experiencing sexual violence but only 10% of them seeking help. Relationships often sour; not every affair culminates in marriage. Calling a failed relationship rape – as an afterthought – infantilises the Indian woman strangely. Calling it rape is also unfair to victims of sexual violence.
5. Sitharaman counters Rahul Gandhi’s ‘Hum do, Hamare do’ with MNREGA data
The pandemic did not deter the government to take up reforms which will ensure sustained growth of the economy of the country, finance minister Nirmala Sitharaman said on Saturday in her reply to the discussion on the Union Budget in the Lok Sabha.
Giving back to Congress leader Rahul Gandhi’s ‘Hum do, Hamare do’ which Gandhi had raised in the Lok Sabha to attack the government over farm laws. “Years ago there was a family planning slogan — hum do, hamare do (We two and ours two), but just like Corona has returned in another form, this slogan too has made a comeback. Today, four people run the country — hum do, hamare do,” Gandhi had said, without taking any name.
Nirmala Sitharaman used the same slogan and said though Congress comes up with “very good schemes”, it lacks the will of using those schemes properly as those schemes turn into devices to only favour “cronies” and “hum do hamare do”.
“Take the credit of giving birth to MNREGA. But also take credit for mismanaging it, for giving money to ghost workers,” Sitharaman said.
Addressing Thiruvananthapuram MP Shashi Tharoor, Sitharaman said, “Kerala invited one crony to develop a port — no bidding, just invitation. Because Kerala has no damad, Damad is here. Damads get land in states which are governed by some parties – Rajasthan, Haryana once upon a time”
“The budget combines stimulus with reforms and has an element to provide impetus to make India one of the top economies of the world in the coming decades. The budget took a courageous approach,” the finance minister said.
Attacking the tradition of India’s post-Independence ‘licence quota raj’ Sitharaman said, “This budget draws on the experience of Prime Minister when he was the chief minister of Gujarat. He saw how licence raj constricted India’s economy.”
Since Jan Sangh days, respecting India’s entrepreneur skill and India’s taxpayers has been followed, Nirmala Sitharaman said amid resistance from opposition leaders that the reference to Jan Sangh was irrelevant. “It is relevant as it was the precursor of the BJP,” Sitharaman said.