A mixed bag for Parliament in '14

Every year, parliament witness one or two events which leave a bad impression. It was this year, too. However, this doesn't eclipse the highs of 2014.

The first session in February but the last for the Congress-led United Progressive Alliance (UPA) government, remained unfruitful as expected. Seven Bills were passed and another 10 introduced in both Houses.

"The Session saw extensive disruptions over the issue of separate statehood for Telangana and the plight of Tamil fishermen. It ended on a low note, with an MP using pepper spray in the Lok Sabha to protest the introduction of The Andhra Pradesh Reorganisation Bill, 2014. Seventeen MPs were suspended by the Speaker for grave disorder," said PRS Legislative Research, a non-profit organisation.

The 15th Lok Sabha completed its five-year term in June. It left 128 Bills pending, the highest at the end of any Lok Sabha. Of these, 68 lapsed and another 60 Bills, also pending in the Rajya Sabha (where Bills never lapse, as it is a permanent House), have been forwarded to the 16th Lok Sabha.

The new or 16th Lok Sabha following an emphatic victory of the Narendra Modi-led National Democratic Alliance (NDA) saw some serious transaction of business. The productivity in both Houses during the Budget session (July-August) was quite high. Five Bills were passed and another 14 introduced in both Houses.

"It lost a significant time to disruptions during the winter session over the issue of reported religious conversions and was able to work for 59 per cent of its scheduled time in the Rajya Sabha," said PRS. In the Lok Sabha, though, it was high productivity.

Around 40 Bills were introduced this year. These included the Constitution 122nd Amendment (Goods and Services Tax) Bill, The Electricity (Amendment) Bill, The Juvenile Justice (Care and Protection of Children) Bill, The Factories (Amendment) Bill and The Rights of Persons with Disabilities Bill.

"Eight ordinances were promulgated. Two of these were by the UPA government and six by the current NDAgovernment. These included the Coal Mines (Special Provisions) Ordinance, promulgated twice, the Telecom Regulatory Authority of India (Amendment) Ordinance, and the Insurance Laws (Amendment) Ordinance," stated PRS.

The new Lok Sabha saw the highest percentage till date of women (11) and the largest number of members (47 per cent) over the age of 55, and a small decrease in members with at least a graduate degree (75 per cent).

"The single largest profession of MPs elected was agriculture (27 per cent).

Also, 314 Lok Sabha members (58 per cent) were elected for the first time, the highest in three decades.

Issues that dominated and disturbed the house included the monsoon, price rise, atrocities against women and children, communal violence, unaccounted money, natural calamities, agrarian crisis, religious conversions and the national rural jobs guarantee scheme.

Boost farm income, not production

Small and marginal farmers - the bulk of the Indian farm community - have not gained much from agricultural development, as has been highlighted by various surveys and reports from committees and commissions. The latest confirmation comes from the National Sample Survey Organisation (NSSO) through the 70th round of data gathered in 2012-13. The data indicate that these farmers remain poor, handicapped in terms of access to technology and institutional credit, and deprived of remunerative prices.

The data presented in the latest NSSO report on "the situation of agricultural households in India" put the average monthly income of Indian farmers at just around Rs 6,500. This is little different from what was estimated nearly a decade ago by the National Commission on Farmers, headed by the noted farm expert M S Swaminathan. At this level, farmers are worse off than even the lowest-paid employees in the government or organised sector.

Indeed, farming itself is not sufficient to ensure that small and marginal farmers earn a living. For over half marginal land-owning families it is wages earned through other employment that is the principal source of income. And for about a quarter of others, income from rearing livestock is a significant component of total income.

Clearly, the recent and prolonged spell of high prices for farm commodities may have kept food inflation in double digits, but it has not sufficiently benefitted farmers. This is partly explained by the wide disparity in prices paid by consumers and those received by producers.

What is even clearer is that the government's procurement and minimum support price (MSP) mechanism has failed to ensure remunerative prices to the growers. A far too low awareness aboutMSP - and lower realisation of these prices - among farmers could be one reason. Barring a small section of rice and wheat producers, most farmers are unable to sell their produce to government procurement agencies at MSP. Even for rice, according to NSSO numbers, only 13.5 per cent of paddy sellers got the MSP in the past two seasons. Little wonder, therefore, that farmers find it hard to survive with returns from crops alone.

Worryingly, the survey found that of over half of all the farmers are heavily indebted. As much as 40 per cent of their finance still comes from informal sources, despite an increase in the flow of institutional credit to agriculture in recent years. Usurious moneylenders, too, account for a 26 per cent share of the total agricultural credit.

A significant feature of farm indebtedness is that it is much higher in agriculturally progressive areas than in relatively backward ones. The NSSO reckons it at 93 per cent in Andhra Pradesh and 82.5 per cent in Tamil Nadu, as against 37 per cent in Chhattisgarh and 17.5 per cent in Assam.

Most farmers are unaware of the existing agricultural insurance schemes that can help them hedge their production and income risks. Over 95 per cent paddy farmers and 99 per cent wheat growers did not buy any insurance cover for their crops in the last two seasons.

The survey indicates that about 59 per cent of farmers do not get much technical assistance and know-how from government-funded farm research institutes or extension services. So, they have to rely on progressive farmers, media and private commercial agents such as dealers of farm inputs like seeds, fertilisers and pesticides, for technical information.

The NSSO conclusions broadly bear out the findings of an earlier countrywide survey of the "state of Indian farmers" conducted by the Centre for Study of Developing Societies (CSDS) and sponsored by the Bharat Krishak Samaj. That survey had found that farm incomes generally fell short of the livelihood needs of farm households, forcing a sizeable section of them to supplement their earnings by doing non-farm work. Nearly 67 per cent women had maintained that agricultural income was woefully insufficient to cover their household expenditure.

It is, therefore, imperative that government policies should aim at boosting farm income, not farm production alone. This can be done by facilitating cost reduction through higher productivity, and better returns through fair and transparent marketing.

Survey places Delhi's CP as sixth most expensive office location

Delhi’s Central Business District (CBD) of Connaught Place has been ranked as the sixth most expensive prime office market in the world with occupancy costs at $158 per sq ft.
 

According to CBRE’s semi-annual Global Prime Office Occupancy Costs survey, London’s West End remained the world’s highest-priced office market with occupancy cost at $274 per sqft followed by Hong Kong Central with $251 per sq ft and Beijing’s Finance Street at 198 per sqft.
 

But Asia continued to dominate the world’s most expensive office locations, accounting for three of the top five markets, the survey said.
 

Anshuman Magazine, Chairman & MD, CBRE South Asia said, “Although New Delhi’s Connaught Place moved up two places to the sixth spot on the global top 10 rankings over Q1 2014, annual occupancy costs here remained stable because of Rupee appreciation since the first quarter. The Capital has seen a strong leasing environment amid limited availability and shortage of new corporate real estate spaces. Office occupiers from the financial services and media sectors dominated commercial space transactions during the year.” 

Survey places Delhi's CP as sixth most expensive office location

Delhi’s Central Business District (CBD) of Connaught Place has been ranked as the sixth most expensive prime office market in the world with occupancy costs at $158 per sq ft.
 

According to CBRE’s semi-annual Global Prime Office Occupancy Costs survey, London’s West End remained the world’s highest-priced office market with occupancy cost at $274 per sqft followed by Hong Kong Central with $251 per sq ft and Beijing’s Finance Street at 198 per sqft.
 

But Asia continued to dominate the world’s most expensive office locations, accounting for three of the top five markets, the survey said.
 

Anshuman Magazine, Chairman & MD, CBRE South Asia said, “Although New Delhi’s Connaught Place moved up two places to the sixth spot on the global top 10 rankings over Q1 2014, annual occupancy costs here remained stable because of Rupee appreciation since the first quarter. The Capital has seen a strong leasing environment amid limited availability and shortage of new corporate real estate spaces. Office occupiers from the financial services and media sectors dominated commercial space transactions during the year.” 

Opportunity to tax ,Fiscal targets should be met not just by spending cut

It is increasingly clear that the government is making heroic attempts at what is now called "expenditure compression". A much-discussed recent Reuters report quoted Union health ministry officials as saying that the finance ministry had asked them to slash expenditure by as much as 20 per cent - in spite of the fact that India's public health expenditure is already low. Indeed this cut will come even as the government promises universal health coverage; how the two can be managed simultaneously will be a challenge for the government.

In the past few years, the question of "expenditure compression" has been looked at purely from the perspective of the overall fiscal deficit target sought to be achieved, instead of paying attention to the quality of the expenditure reduction needed to achieve the budgeted goal. In many cases, it is not real expenditure that is being compressed. Plan budgets for many ministries, especially social-sector ministries, often come under scrutiny whenever the need for expenditure compression arises; and then, to achieve fiscal targets, this expenditure is not incurred. Meanwhile, many other payments are artificially postponed to the next financial year. In other words, only "essential" non-Plan expenditure like salaries survives. But this is not, naturally, a sustainable path for fiscal deficit reduction. The government has decided that it must stick to its fiscal deficit target of 4.1 per cent of gross domestic product this year. However, it must not lose sight of the logic behind this: that it must demonstrate to the world its willingness to live within its means. "Expenditure compression" that ignores reality, or that cuts only investment and not salaries, will not do that.

Part of the problem is that it is expenditure compression alone that is being tried. The government is particularly in a hole because it is Rs 70,000 crore short of revenue - according to its recent estimates presented before Parliament - thanks to over-optimistic forecasts and a slow economic recovery. The answer to this should be to look at the revenue side, not just expenditure. For example, there is no reason why the continually falling price of petroleum products should not result in higher taxes on fuel. If the Centre does not take advantage of falling prices to raise taxes, then the states will, as indeed some of them have already done. The government has underlined the fact that inflation has gone down, and so the Reserve Bank of India has "headroom" to cut rates. But, equally, lower inflation gives the government "headroom" to further raise taxes on fuel. Excise duty on some products has been raised by small margins and there is no reason why the government should not look at this option once again. Indeed the government's action on raising sufficient resources appears to have been inadequate. The target for selling of government-owned companies and shares was over Rs 60,000 crore this financial year. But an infinitesimal amount of that has been raised, although the stock markets have been at all-time highs.

Govt approves ordinance to ease land acquisition

With many infrastructure projects stuck for want of various clearances, the Union Cabinet on Monday paved the way for easing the land acquisition Act for public-private-partnership (PPP) and rural infrastructure projects.

It approved an ordinance to make amendments to the Right to Fair Compensation and Transparency in Land Acquisi-tion, Rehabilitation and Resettlement Act, 2013, put in place by the United Progressive Alliance government. The ordinance does away with the requirement of written consent from 70 per cent of landowners for PPP projects in the infrastructure and social infrastructure sectors. Also, social impact assessment won't be required for such projects.

IN OVERDRIVE

Consent clause, social impact assessment and livelihood requirement to be abolished for PPP projects, affordable housing, industrial corridors, rural infrastructure and defence installations Modification in retrospective clause, which stipulates annulment of acquisition if compensation isn’t paid or possession isn’t taken No clarity on change in definition of ‘affected families’ Compensation requirements to be applicable for the remaining 12 central Acts, which the land law seeks to subsume

PPP projects account for 60 per cent of the Rs 18 lakh crore worth of stalled projects.

In terms of social impact assessment and consent of landowners, exemption has also been granted for projects pertaining to national security, as well as for affordable housing projects and industrial corridors.

However, no change has been made in the clause relating to compensation for the land acquired.

An official statement issued after the Cabinet meeting said due the prolonged process of land acquisition, neither did farmers benefit nor were projects completed on time.

Prime Minister Narendra Modi tweeted the changes would hasten processing, without compromising on compensation and relief and rehabilitation measures for farmers.

"Through this ordinance, we have tried to achieve a balance - farmers or others continue to get the higher compensation envisaged in the original Act, while procedures are relaxed for five purposes to meet the developmental needs of the country," Finance Minister Arun Jaitley said after a Cabinet meeting.

In the past few weeks, this is the third major reform initiated by the government through the ordinance route. Earlier, it had promulgated ordinances on raising the cap on foreign equity in private insurers, as well as on e-auction of coal blocks.

The retrospective clause, which stipulates land-acquisition proceedings will lapse in case compensation is not paid or physical possession is not taken within a mandatory timeframe of five years, has also been relaxed. According to the amendment, the clause will now be applicable after 10 years.

"Some procedural changes have also been made in the definition of land acquired by 'companies'; it has been widened to include 'entities'," said a senior official.

The Confederation of Indian Industry said it had always advocated the need for a simple and transparent land acquisition framework, which was commercially viable for industry. A section in the current law provides for amending 13 pieces of central legislation by January 1, 2015, to bring its rehabilitation, resettlement and compensation clauses in sync with the Act. "The compensation applicable under the land Act will also include these pieces of legislation," Jaitley said. The 13 Acts include the Coal Bearing Areas Acquisition and Development Act, 1957, the National Highways Act, 1956, the Land Acquisition (Mines) Act, 1885, the Railways Act and the Electricity Act.

The statement said the original Land Act had kept compensation out of the purview of these 13 acts, which led to denial of compensation to a large percentage of farmers and affected families.

It is unclear whether an amendment has been made in the definition of 'affected family'. Currently, the term includes all those whose livelihoods are affected for three years prior to the acquisition of land. In their discussions with the Union government, states governments had unanimously agreed the land Act hindered economic growth. The Act, which replaced the Land Acquisition Act, 1894, has also drawn criticism from industry.

Amendment to do away with requirement of social impact assessment, consent of 70% landowners for PPP projects in infrastructure

Jaitley hints at tax regime of global standards

As the Union finance ministry begins preparing the Budget for 2015-16, Finance Minister Arun Jaitley on Monday hinted at putting in place a globally compatible tax regime to revive themanufacturing sector.

He also nudged the Reserve Bank of India (RBI) to cut the policy rate. The high cost of capital, he said, was the most important factor in the slowing of manufacturing growth in the recent past.  

Jaitley indicated the easing of entry norms for manufacturing as an idea being mulled. He said there had to be a shared vision between the Centre and states, political parties, regulators and allied institutions to put India back on a growth track.

“Our regime has to be competitive. People purchase goods; they don’t like to purchase taxes along. Unless our taxation regime is internationally compatible, the cost of our products is going to be more. Competition is going to be international. Am I going to provide them a tax  regime which is compatible to what they get across  the world?” he said in an inaugural address at a meeting on the government’s Make in India initiative.

The workshop had discussions with Cabinet ministers, secretaries, industry representatives of 25 identified sectors of the Make in India campaign, state representatives to  provide feedback on areas of concern and the way ahead.

Tax regime
Jaitley recalled his first Budget had introduced advance ruling mechanisms (on taxation) for domestic investors as well.

“Even before they (investors) spend the first rupee or the first dollar, they are conscious of the fact as to what the tax administration is and what  the tax liability is in India,” he said.

He rapped the predecessor government for retrospective tax amendments which became “a defining moment against India globally.” Uncertainty over the tax administration had scared investors away. “Has it not resulted in a closedown of plants which were comparable to global competitors?”

It may be recalled that Vodafone is embroiled in a tax dispute with the government after the latter amended the Income Tax Act with retrospective effect. Nokia shut its factory near Chennai last month over tax issues. Jaitley said entry points into the manufacturing sector had to be eased. “Our initial barriers have to be lowered and perhaps even removed. If we keep the doors closed, investments won’t come in.”

He promised more reforms to bring an upturn in the sector, saying only radical steps could do so. He indicated more of changes in labour laws and in the power sector. And, emphasised the need to have a skilled workforce among youth.

Signals for RBI
He identified cost of capital as a single factor which had slowed manufacturing. Though he did not directly name RBI, it is a fact that the central bank has consistently refused the finance ministry’s expressed desire to a lower policy rate.

He said there was a need to ensure liquidity in the markets. “We need to ensure capital is available, we need to ensure that for those sectors which are starving, we are in a position to provide adequate capital.”

He said the success of the scheduled meet of bankers with Prime Minister Narendra Modi later this week and the Make In India campaign would give a fillip to manufacturing.

Investor issues
On the ease of doing business, Jaitley asked, “What is it that has happened in the past few years that added to the complication of doing business (in India)?” He said project implementation “across ministries, across states, across regulatory mechanisms requires to be expedited”. Calling for a shared national vision to boost growth, Jaitley said: “It is not merely between political parties. It is not merely between Centre and state governments. It it is also between various other institutions, which have become altars of governance.”

He regretted that “judicial institutions, besides administering justice, in some areas have also become an organ of governance itself”. Jaitley said India’s economic growth would be “much better” in 2015-16. “The past two years witnessed an economic slowdown. This year might be somewhat better, and next year will be much better.”

The government expects growth in gross domestic product to be 5.5 per cent in 2014-15, up from 4.7 per cent the year before.