Effective Implementation of Healthcare Delivery Schemes

In March 2012, the Cabinet, inter-alia, approved continuation of National Rural Health Mission (NRHM) for a period of five years, from 01.04.2012 to 31.03.2017 (i.e. co-terminus with the 12th Five Year Plan). Currently, NRHM is a Sub- Mission of National Health Mission (NHM) with National Urban Health Mission (NUHM) being the other Sub-Mission. Government of India had adopted a strategy of co-location of AYUSH facilities at Primary Health Centres (PHCs), Community Health Centres (CHCs) and District Hospitals (DHs), thus enabling choice for different systems of medicine from a single platform. As of now, 15726 AYUSH facilities are co-located at various healthcare facilities including PHCs, CHCs and Districts Hospitals. 21361 AYUSH doctors and 6289 AYUSH paramedics are engaged under NRHM. Necessary support for training, drugs & equipment, IEC etc. is provided under the NRHM and National Ayush Mission. ASHA is the first port of call in the community especially for marginalized sections of the population, with a focus on women and children. The majority of states have in place an active training and support system for the ASHA to ensure continuing training, on site field mentoring, and performance monitoring. More than 8.96 lakh ASHAs are in place across the country and serve as facilitators, mobilizers and providers of community level care. The Government of India is committed to reduce the high Out of Pocket (OOP) expenditure inter-alia by providing free drugs in public health facilities. Government of India introduced an incentive to the extent of 5 % of the state’s Resource Envelope under NHM for those states that implement free essential drugs scheme for all patients accessing public health facilities. Further, substantial funding for free drugs is being provided to states that implement the National Health Mission - Free Drug Service Initiative. Mobile Medical Units (MMUs) are used to provide primary healthcare services in hard to reach areas. To increase visibility, awareness and accountability, all MMUs supported under the NHM have been repositioned as “National Mobile Medical Unit” with universal design.

The GM bogey

The decision to disallow experimentation in genetically modified (GM) crops by various states is questionable. However, it reportedly got a fillip from the T.S.R. Subramanian Committee report to review environment-related laws. Subramanian apparently contended that European countries also don’t allow field trials of GM crops. The report is, indeed, a useful document. It makes a plea, for example, for a new set of policies for compensatory afforestation. It does not, however, discuss the issue of GM crops, or the research on them. So if Subramanian did say something on the issue, it should be seen as a side comment rather than the committee’s view.

It is true that the US and China are bullish on GM crops. Europe was strictly against them. But the Lisbon Protocol was a step towards a more nuanced formulation. India has been in the middle. Its legislation on producers’ rights and environmental clearance by the empowered committee on a case-by-case basis is unique. These legislative formulations of the mid-1990s were based on expert committees, including one led by M.S. Swaminathan. But in a fast-developing field, frequent reviews are needed. Even the European position now is different from what it was then. But until further review, the existing legislation stands.

GM cotton was the target of various Gandhian and obscurantist lobbies in the 1990s. The movement against Navbharat Seeds is a good example. Sanat Mehta argued, and I supported him, that the cost of this would be high for farmers in western India and Andhra Pradesh. We created a system in which millions of farmers were criminals and the most preferred seeds were sold illegally. Navbharat seeds were sold at Rs 450 per kg; the Monsanto variety at a premium price of Rs 1,250. Legal systems that were created as safety controls were used to look into productivity, cost and other commercial issues. But isn’t the market supposed to conduct economic tests?

There was also no thought about the relationships between user groups (co-ops, farmers groups etc), small technology companies (India’s strong suit) and multinationals. It is another matter that later, agreements between local seed producers and MNCs were fortunately allowed. After that, we became a major factor in the global cotton trade. Indeed, cotton has powered the growth of Gujarat’s agriculture in the last decade. Another major experiment, which had a bearing on the food security of the poorest, took place in Gujarat. The Adivasi areas of Panchmahals, Banaskantha and Sabarkantha have the highest levels of nutritional deficiency in the state. Studies by the Indira Gandhi Institute of Development Research show that poverty in these areas is as high as in the Bimaru states, despite government claims to the contrary. GM seeds have

-made a huge difference to maize production, a staple of the Adivasis. The average yields in the region were around 1.5 quintal per hectare. Small farmers would regularly starve. GM maize was originally developed by Monsanto but a field study by N.M. Sadguru Water and Development Foundation, Dahod, showed that, funded by the state government, the Gujarat Agricultural University had also done good work in the area and their GM variant had a higher yield compared to the MNC one. Some extraordinary civil servants started Project Sunshine — Adivasi farmers were encouraged to use GM seeds produced by Gujarat Agricultural University scientists and private companies. NGOs like the Vivekananda Trust and the N.M. Sadguru Foundation participated in the process. These facts are well known to senior political leaders from the state, particularly those who have a farming background. Yet, an aggressive NGO was able to put a stick in the wheel. The maize success story has been repeated in north Bihar, where it is grown both as a food staple and poultry feed. A major crop group that needs a big yield push in India is pulses. The average yield is around one tonne per hectare. Our agricultural universities have developed seeds that could produce 1.5 tonne per hectare. But BT seeds aim to do around 2.5 tonne per hectare. The Indian Council of Agricultural Research has considerable expertise in this area. But its scientists get terribly disillusioned when they get negative signals from the establishment. There are new technologies, using which a seed-development process that used to take seven to eight years can be completed in less than four. Improving the yield of pulses to two tonne per hectare is essential to overcome the nutrition and food-inflation barrier. When all these facts are mentioned, obscurantists bring up some exceptional cases of traditional varieties. But this is a non sequitur. Let’s talk about the average farmer under average conditions. Grains like rice and wheat do not cause food inflation. Pulses, vegetables, fruit and milk do. If an anti-technology and anti-science mindset spreads, we will have to pay for it dearly. 

I am Sanskrit

I am Sanskrit: the language of the gods. But like gods, I am now more an object over which “ignorant armies clash by night”. I carry a heavy load. I am burdened with every sin. For some, I am everything that was wrong with India. I am exclusion, obscurantism, esotericism and dead knowledge. I am burdened, by others, with the weight of redemption. I am the source of all unity and insight, all knowledge and eternal light. But for both sides, I am more an icon than an object of understanding: for one, an icon for blanket indictment, for another, an icon for obscure yearnings.

They fight over my origins. Some say I was the language of invaders, imperiously subordinating everything around it. Others cite me as the example of a whole civilisation that spread across Asia, without the force of arms. They fight over my death. Some autopsies pronounced me dead by the 18th century. They say I died of internal corrosion: a slow insidious loss of faith in the knowledge systems I represented. It was an easy fate for a language that refused to be the language of the masses. Some say I was the victim of political murder: the great empires killed me, dismantling the structures that sustained me. But in all fairness, this has to be said: I somehow felt safer under the patronage of the Mughals, or even the British, than I do at the hands of my benevolent defenders in democratic India. Some refuse to pronounce me dead. I have been put on life support. Whether this will revive me or prolong my agony, I don’t know.

Some think I am still living, though I have assumed more ghostly forms. They argue that the vernaculars did not displace me. Rather, the inner life of most vernaculars builds on my legacy. Even when they transcend me, they cannot escape my imprint. Even in opposition, I am an aesthetic reference. I don’t live as a language. I live as philology. But anyone who understands these matters will understand that philology should not be underestimated. I don’t live as philosophy. I live as liturgy. And this liturgy, even if not fully understood, defines the faith of millions. The abstract idea of India fears me. But I still remain the hidden meaning of every nook and corner of the geography of India. Not just ancient, but even India’s medieval and modern past is not fully accessible without me. I remain the substratum beneath all controversies over the past. I am the ghost that refuses to go away.

I was the marker of caste and the oppression that came with it. I am feared as the symbol of division. Sanskrit is a code for merely Hindu, at the exclusion of all else. Some say I can be a point of connection: I was an instrument of caste but can also be the source of its subversion. And did not poor Dara Shikoh think that I could illuminate the meaning of the Quran? True, some ignorant progressives have denied all that I can offer. But my tragedy is that I have to fear my supporters more than my attackers. If there is a big idea running, in different forms, through my texts, it is this: the gradual displacement of the “I”, full of ahamkara (egoism), by the realisation of a deeper self. Yet, my political supporters wield me as an instrument of collective narcissism, a shrill assertion of pride. My priestly custodians, spread over the centuries in temples and maths, often with huge endowments, suffocated me in orthodoxy. They limited my reach. Contrary to what my opponents believed, I was not fixed in eternal verities. I was used for innovation: from the mathematics of the Namboodiris to the brilliant innovations in logic in places now long forgotten, like Nabadwip. But somehow, the image and social association with orthodoxy persisted, no doubt helped by the institutions supposed to nurture me. I did not lack support in independent India. There are dozens of university departments whose cumulative achievement has been to convince everyone that I am truly dead. Their scholarship and engagement with new forms of knowledge was killed by a deadening mediocrity. I was taught for three years and in most schools in ways that did not enhance linguistic competence or open up the doors of knowledge. Many of my supporters, with their small hearts and conspiratorial minds, would rather blame others than introspect. For them, I am a weapon to cut open wounds, not a source of knowledge. If I am dead, do I want a rebirth? If I am a ghostly shadow, do I want to become visible again? I am not sure. I would feel so out of place in this India. William Jones said I am a language of precision. What will I do in a culture that has lost the art of fine distinctions? I am the language of logic and form. What will I do in a culture where public argument is nothing but the flouting of logic? I am a language where the purpose of language is language itself. What will I do in a culture where everything is instrumental? I am the language of refined eroticism. What will I do in a culture where my supporters would unleash the tides of repression? I am the classic language of double meanings. What will I do in a culture where people cannot even hold one meaning in their head? I am the language of the classic pun. What will I do in a culture that is humourless? I am the language of itihasa. What will I do in a culture where all history is merely politics by other means? I am the language of refined aestheticism. What will I do in a culture where aesthetics is confined to museums or kitsch? The meaning of my name, they say, is perfection. What will I do in a culture where excellence is seen as an instrument of domination? I am the language of the gods. What will I do in a world where gods have been banished by godmen? I am the language of liberation, the gateway to being itself. What will I do in a culture that seeks bondage and refuses self-knowledge? Jaroslav Pelikan once wrote, “Tradition is the living thought of the dead, traditionalism is the dead thought of the living.” Now that I am caught between -isms, I doubt myself. I have become more a reflection of the dead thought of the living than the living thought of the dead. 

Stem cells hold new hope for baldness

New procedures are being evolved in different therapies and surgical methods to extend the benefits of stem cell research and its applications to the needy people with better and effective results. “This has not only revolutionised bio-technology sector as a whole but also contributed immensely to the therapeutic procedures in a variety of areas. Cosmetology is no exception to this and people are deriving lot of benefit out of this,” said cosmetologist Dr. G. Radhika Reddy.

Addressing an awareness meeting held at their newly established Angels Advanced Clinic at Ramalingapuram here on Sunday, Dr. Reddy said the biggest advantage with the Stem cells cause a healthy multiplication of cells in a specific part of the body where it would be introduced. This had indeed become a boon for the public seeking natural relief from various illnesses including skin and hair related disorders. In the case of chronic problem of hair loss, Dr. Radhika said that the stem cell would be injected into the scalp in the form of a liquid.

It would reactivate the weakened hair roots leading to re-growth and new growth of hair.

Making India Inc. accountable

It is not the responsibility of the government alone to act in order to curb corruption; corporate firms need to be proactive as well in checking fraudulent financial practices

The winter session of Parliament witnessed a noisy debate on the black money controversy. Governments of all hues have disappointed the Indian janata on the issue of black money and the failure is often associated with a perceived nexus between politicians and big business, weak laws and poor enforcement. At the G20 summit in Brisbane, Prime Minister Narendra Modi had made statements regarding getting international cooperation to bring the unaccounted wealth of Indian individuals and organisations back from global tax havens, but back home these have not inspired much confidence.

A recent report from the Organisation for Economic Cooperation and Development (OECD) hints at multinational companies using internal loans and complex financial structures as a strategy for tax evasion. The OECD report raises several concerns relating to the erosion of the tax base in countries due to multinational companies adopting such practices.

The Global Financial Integrity Report, released in December 2013, shows that 60 per cent of black money generated in developing countries such as India happens because of corporate tax evasion. In this report, India figures among the six Asian countries that are in the top 15 exporters of illicit capital, mostly due to trade-based money laundering. The report further says real GDP growth is significantly related to driving the flow of illicit money.

What that means is that greater economic growth and greater international trade is only likely to increase illicit capital flows out of the country. A 2012 White Paper on Black Money brought out by the Finance Ministry had observed that in India, more than 60 per cent of global trade is carried out by associated enterprises of multinational enterprises, with shifting of taxable income from high-tax to low-tax jurisdictions in these enterprises being a favoured method for minimising tax liability.

While the current discourse has largely focussed on the question of bringing back illicit money that has already been transferred discreetly to Swiss banks, there is also need for concentrating attention closer home and looking at ways to strengthen vigil mechanisms that will ensure the accountability of corporate firms in India.

The Switzerland envoy’s comments that India must show proof of fraud before seeking information on black money stashed in Swiss banks point to the absence of a healthy monitoring mechanism to curb fraudulent financial transactions at home

Supply side of corruption

Corruption, which includes concerns pertaining to black money, has a supply side to it as well. The moment we take cognisance of this, it would become evident why checking corruption at the source is crucial for addressing present concerns. It is not the responsibility of the government alone to act in order to curb corruption; corporate firms need to be proactive as well in checking such practices.

The 2014 Global Fraud Survey conducted by Ernst & Young’s (EY) Fraud Investigation and Dispute Services (FIDS) wing shows that “unethical behaviour” persists among Indian businesses with practices to win/retain businesses ranging from offering entertainment, making cash payments, giving personal gifts and misstating company’s financial performance. A whopping 71 per cent of participants in the survey said at least one of these practices for winning/retaining businesses was “justified” in India. Further, to the question whether bribery/corruption happens widely in businesses in India, 68 per cent of the participants answered in the affirmative. The report further shows that 71 per cent of Indian participants had not received any anti-corruption training and 53 per cent also reported the absence of whistle-blowing hotlines for monitoring compliance with anti-corruption laws in India. In another 2014 survey by EY FIDS on the compliance with the whistle-blowing framework provided under the Companies Act, 2013, only 13 per cent of the respondents indicated that their whistle-blowing frameworks were fully compliant with what was required by law.

The survey also stated that only 22 per cent of the respondents had implemented the framework because they considered the structured mechanism integral to their business operations. The principal respondents of this survey comprised senior executives in business functions, including internal audit and legal compliance, representing Indian enterprises with domestic operations as well as Indian subsidiaries of MNCs.

Arpinder Singh, Partner and National Leader at EY FIDS, who oversaw the surveys, said, “While many organisations had a whistle-blower policy in place, half of the respondents offered only one channel for reporting of complaints — which is more a ‘tick in the box’ approach than actually reaping the real benefits of a whistle-blowing framework. This shows that while organisations are taking the initial steps to be compliant, they still have a long way to go in establishing a robust whistle-blowing framework.”

What we can infer from this is there is not enough incentive for reporting of financial malpractice among Indian enterprises at present. Since its revision, the Companies Act 2013 has introduced a provision for mandatory vigil mechanism to monitor fraudulent practices, and also ensured the appointment of independent directors, who must “ascertain and ensure” that the company has an “adequate and functional” vigil mechanism and that the interests of the person using this mechanism are protected.

Whistle-blowing frameworks within companies cannot be an answer for addressing ongoing black money-related concerns since the matter largely falls within the realm of banking and taxation. But they help in pressuring companies to comply with anti-fraud mechanisms mandated by law.

Speaking from a Companies Act perspective, Mr. Singh said that specific revisions as well as additional guidance focussed on vulnerable industries such as gems and jewellery, real estate, NGOs, etc., which are currently unregulated from an anti-money laundering perspective, call for strengthening compliance to the monitoring framework. Having a reporting mechanism to an independent body such as the Financial Intelligence Unit (FIU), under the Ministry of Finance, could also be considered as a good starting point, he added.

Lessons from the U.S.

The anti-fraud mechanisms available in the United States have saved millions of dollars of losses to the government there. These offer valuable lessons for India. Andrew Beato, chair, False Claims Act and Whistleblower Practice Group at Stein Mitchell Muse Cipollone & Beato LLP, said the False Claims Act in the U.S. allows citizens to report instances of abuse of public money for personal gain. “For every dollar that the U.S. government invests in implementing this law, they earn back 20 dollars,” he said. To cover tax frauds, the U.S. Internal Revenue Service runs a separate whistle-blower programme. He cited the example of Bradley Birkenfeld, the whistle-blower in the tax evasion case involving Swiss global financial services company UBS AG in which cross-border fraud by American citizens to the tune of $780 million was exposed. The IRS whistle-blower programme helped Mr. Birkenfeld win $104 million from the tax authorities in return for his services. Mr. Beato, who had represented the case of the Ranbaxy whistle-blower Dinesh Thakur in the U.S. courts, said that the absence of a comparable mechanism in India to safely report corporate fraud compelled Indian citizens to turn to the U.S. to report such practices.

In an interview published in The Hindu on December 3, Switzerland’s envoy to India Linus von Castelmur had remarked that India must show proof of fraud before seeking information from them on the illegal wealth of Indians held in their banks. The envoy’s comments draw attention to the perils of not having a healthy monitoring mechanism to curb fraudulent financial transactions in India. The hard lesson for India remains that curbing financial fraud, like charity, has to begin at home.

Understanding inflation targeting

Inflation targeting re-emphasises the primacy of price stability as the objective of monetary policy. Given the rigidities in the economy and lags in policy impact, it must be operated with flexibility

Inflation targeting is back in the news and this is welcome. I have always held the view that the dominant objective of monetary policy is the maintenance of price stability. Inflation targeting gives precision to the concept of price stability.

In any monetary policy framework, a key ingredient is an enunciation of its objectives. This aspect has assumed increased significance in the context of the stress being laid on the autonomy of central banks. Autonomy goes with accountability, and accountability in turn requires a clear statement of goals.

The case of price stability as the major objective of economic policy rests on the assumption that volatility in prices creates uncertainties in decision-making. Rising prices adversely affect savings while making speculative investments more attractive. These apart, there is a crucial social dimension, particularly in developing countries. Inflation adversely affects those who have no hedges against it, and this includes all poorer sections of the community. This is indeed a very strong argument in favour of the maintenance of price stability in emerging economies.

“Apart from monetary policy, regulation of the financial system, particularly the banking system, is entrusted to central banks in most countries. There has to be close coordination between these two functions.”

Price stability and growth

A crucial question that arises in this context is whether the pursuit of the objective of price stability by monetary authorities undermines the ability of the economy to attain other objectives such as growth. In short, the question is whether there is a trade-off between inflation and growth. There is a general consensus that over the medium and the long term, there is no such trade-off and an environment of low inflation is most conducive to faster economic growth. However, there could be such a possibility in the short term. By injecting greater demand and thereby generating higher inflation, higher growth may be achieved. However, to sustain this growth, the authorities may have to generate higher and higher inflation. This will end up as a self-defeating exercise.

What then is the tolerable level of inflation? At very low levels of inflation, there may not be any adverse consequences on the economy. However, in every economy, given its structure, there is always a certain level of inflation beyond which costs of inflation begin to rise steeply. It is this inflation threshold which can provide guidance to policymakers. Interestingly, the Chakravarty Committee, of which I was a member, regarded the acceptable rise in prices as 4 per cent. Several studies in the Indian context have estimated that the threshold level of inflation may be around 6 per cent.

Other objectives

Questions have been raised about the robustness of such models. Even large econometric models are not in a position to capture all the costs of inflation. This order of inflation is however higher than what developed countries normally aim for. This will have some implications for the exchange rate of the currency and Current Account Deficit. In the Indian context, it is best to work towards an average of 4 per cent and take strong action if it touches 6 per cent. This will amount to inflation targeting with a band, as recommended by the Urjit Patel Committee. Such a commitment will also dampen inflation expectations.

Does the focus on inflation targeting by monetary authorities mean a neglect of other objectives such as growth and financial stability? Hardly so. What inflation targeting demands is that when inflation exceeds the threshold level, the primary focus of monetary policy must be to bring it back to the desired level. It is sometimes claimed that the financial crisis of 2008 in the United States and western Europe sounded the death knell for inflation targeting. There is continuing debate on whether the crisis was precipitated by monetary policy failure or regulatory failure. Countries like Canada and Australia, which were committed to inflation targeting, were not caught in the crisis.

Central banks have multiple functions. Apart from monetary policy, regulation of the financial system, particularly the banking system, is entrusted to central banks in most countries. There has to be close coordination between these two functions. For the crisis itself, regulatory lapses have to take major responsibility while monetary policy in these countries might at best have played a facilitating role. The low interest rate regime which prevailed because of low inflation could have created an environment favourable for high risk-taking. A rise in asset prices should have alerted the monetary authorities and they should have taken appropriate action. Inflation targeting does not preclude other objectives from the purview of monetary authorities so long as inflation remains within the comfort zone. The control of inflation becomes its exclusive concern only when inflation crosses the acceptable level.

Can it be done?

Can the Reserve Bank of India (RBI) or for that matter any central bank effectively implement an inflation mandate? Do they have enough instruments to achieve the goal? The ability of the central banks to control inflation when such inflation stems from excess demand is normally conceded. It is when inflation is triggered by supply shocks that some doubts are raised. Such supply shocks are most common in countries like India where agricultural production is subject to the vagaries of nature. Even when inflation is triggered by food inflation, monetary policy and fiscal policy have a role to play. If food inflation lasts long, it gets generalised. Wages rise leading to a general cost push inflation. If head line inflation exceeds the acceptable level, monetary policy must act at least to ensure that the return on financial assets is positive in real terms. In a situation of supply shocks, it may take longer for monetary policy to bring down inflation. The recent experience with inflation in our country is a good example of this. That is why the inflation mandate must provide for a range and a time frame for adjustment which should not be too short. Nevertheless, monetary policy must act irrespective of what triggered inflation. Obviously, supply side management is needed in situations of supply stock and that should be the responsibility of the government.

Institutional framework

The appropriate institutional framework for implementing the inflation mandate also raises certain questions. The first issue is on who should determine the acceptable level of inflation. In most countries which have adopted inflation targeting, the target is set by the government or Parliament. This appears to be appropriate in as much as the acceptable level of inflation is not purely an economic issue. However, once a mandate is prescribed by the government or Parliament, the monetary authority should be left with full autonomy to use whatever instruments that are available to it to implement the mandate.

The second issue relates to an appropriate price index which should be used to monitor inflation. In India, we have monitored inflation by mostly looking at the wholesale price index. That was because of the easy availability of this index. Until recently, we have had no composite retail price index. Since the objective of inflation targeting is to minimise the impact of price rise on people, the appropriate index will be retail inflation.

The third issue relates to institutional arrangements within the monetary authority to take policy decisions consistent with an inflation mandate. In several countries, a technical monetary policy committee is constituted with members drawn from the central bank, from the government and from outside experts. My preference would be to constitute a committee of the board of the RBI to do this. This is what was done when the Board for Financial Supervision was set up. While constituting the central board of the RBI, this aspect of the work of the bank must also be kept in view.

Inflation targeting re-emphasises the primacy of price stability as the objective of monetary policy. Given the rigidities in the economy and the lags in policy impact, it must be operated with flexibility.

FM dangles Rs 13k-cr carrot to clear GST bottlenecks

Finance Minister Arun Jaitley, who is meeting state finance ministers on Thursday to garner support for the Constitution Amendment Bill for a goods & services tax (GST), is likely to immediately dole out about Rs 13,000 crore in Central Sales Tax (CST) compensation to states.

The minister, even as he is walking the tightrope to contain the government’s fiscal deficit, might propose to clear about a third of states’ Rs 34,000-crore CST dues in the first supplementary demand for grants, to be tabled in the current Parliament session, officials said.

The empowered committee of state finance ministers is to discuss the draft Constitution Amendment Bill for implementation of GST at their meeting on Thursday. Later that day, Jaitley will meet the state FMs and try to reach a broad understanding on crucial issues. That will be against the backdrop of Prime Minister Narendra Modi’s Sunday meeting with chief ministers where he emphasised the need for states’ greater role in the proposed body to replace the Planning Commission.

“We have shared the draft Constitution Amendment Bill with the empowered committee. The matter will be handled at the political level now,” said a finance ministry official who did not wish to be named.

Among the states earlier opposed to the proposed GST regime, Madhya Pradesh and Gujarat have relented since a Modi-led government took charge at the Centre in May this year. In two other major states, Maharashtra and Haryana, Modi’s Bharatiya Janata Party has replaced the Congress at the helm of governments after the recent Assembly polls there. Tamil Nadu was a dissenting state but it is expected to mellow down after the Centre recently gave relief to J Jayalalithaa, chief of the ruling All-India Anna Dravida Munnetra Kazhagam there, in an old income-tax case.

Though consuming states will benefit from a destination-based tax, West Bengal might still not extend its support to the Bill easily, given the recent war of words between Mamata Banerjee, that state’s chief minister, and BJP President Amit Shah. It is important for the government to have the Trinamool Congress on its side, as the BJP-led ruling coalition does not have the required number of members to get the Bill passed in the Rajya Sabha.

“States will press their demand to keep fuel outside the ambit of GST. The Centre’s suggestion on keeping petroleum products zero-rated under GST will not work. If petroleum is subsumed, states cannot get CST on inter-state movement. Integrated GST gives revenue to the consuming state, while CST gives it to the originating state,” said a state government official.

ALL ON BOARD?

Among states that were opposing GST earlier, Madhya Pradesh and Gujarat have relented since a Modi-led govt came to power at the Centre in May this year In Maharashtra and Haryana, BJP has replaced Congress at the helm of the state govts after recent polls Tamil Nadu, another dissenting state, might change stance after the Centre recently gave relief to AIADMK chief J Jayalalithaa in an old income-tax case Bengal could still not extend its support to the Bill easily, given the recent war of words between Chief Minister Mamata Banerjee and BJP President Amit Shah It is important for the govt to have Banerjee’s Trinamool Congress on board, as NDA does not have the required numbers to get the Bill passed in the Rajya Sabha

Though the Centre seems firm on its decision to subsume petroleum and entry taxes in GST, with a provision for first tranche of CST compensation, Jaitley is likely to assure states the Centre will compensate them for three years’ losses under GST as well, even without a provision for that in the Constitution.

After the previous two finance ministers refused to release CST compensation till states extended their cooperation on GST, Jaitley promised to clear the dues over a period of three years.

The central government wants to table the Bill in the current Parliament session, so that GST can be implemented from April 2016. The Bill is important for the government, especially at a time when industry is beginning to complain about the lack of crucial reforms even six months after the change of power at the Centre.

“If they do not present the Constitution Amendment Bill in this session, GST will not happen,” said Harishanker Subramaniam, partner, EY. He, however, added it was equally important to bring out a GST with minimum exemptions. So, petroleum products, property, entry taxes and even alcohol should be subsumed in a GST.

As a robust information technology (IT) infrastructure would be the backbone of GST, as highlighted by the prime minister several times, the finance ministry has also started assessing IT preparedness of states. Revenue Secretary Shaktikanta Das is planning a meeting on the issue on Wednesday