The states' race to spend

Indian states are preparing for a Rs 1.9 lakh crore tax windfall this fiscal year. It's an unexpectedly generous bounty from New Delhi, and not many of the 29 sub-national governments know exactly how to spend the funds. Eventually, though, a healthy cheque-writing contest will begin, giving a durable boost to the broader economy.

The states' collective share of taxes collected by the Union government has gone up to 42 per cent starting this month, according to a new formula for fiscal transfer. Previously it was 32 per cent. The difference works out to Rs 1.9 lakh crore this fiscal year alone. In addition, municipalities and villages will get Rs 2.85 lakh crore more from New Delhi over five years. The net gain is smaller. While New Delhi is empowering states to spend more on their own priorities, it is also scaling back support to some federally sponsored welfare programmes where the Centre gives money to states but with strict conditions on how it is to be used.

Nevertheless, states will still have an extra Rs 1.39 lakh crore of spending power this year. And this doesn't even include the funds some of them will soon start receiving from recently auctioned coal blocks. Indian states will spend 60 per cent more this year than the federal government, according to Credit Suisse. Just five years ago, that gap was six per cent.

Considering that the Constitution makes the states responsible for executive action in everything from power and irrigation to education and healthcare, the shift is overdue. It's also healthy. A 2013 central bank study found state expenditure to have a far bigger beneficial impact on growth than spending by the Union government, which is much more likely than states to use borrowed funds to make payments. But borrowing by the government tends to push up interest rates and reduce private investment and consumption. The net benefit for the economy is, thus, smaller when New Delhi is in charge of most spending decisions.

Restoring the federal balance in resource-sharing is, therefore, one of the more important achievements of Prime Minister Narendra Modi's government, which completes its first year in office next month. Giving states a fatter wallet is also necessary because they are about to forgo most consumption taxes from April 2016, when India introduces its central goods and services tax. That switch, which will help to usher in a seamless, nationwide market, requires a quid pro quo.

By passing more tax collection to states, Mr Modi has also opened up the possibility for a much-needed fiscal boost to gross domestic product (GDP). It would have been almost impossible to dispense a large fiscal stimulus using the Union government's Budget. The central authorities can only ratchet up spending on rail, roads, defence, telecommunications and banking. Mr Modi has already announced large increases in rail and road investment. Telecom firms are now mostly private, and state-dominated banking needs less government involvement, not more. Supporting large defence-related investment is still problematic because of technology gaps. India's recent order for 36 Rafale fighter jets came after years of trying to persuade France's Dassault to manufacture in India. Those negotiations went nowhere, and the armed forces suffered from having to make do with obsolete, inadequate equipment. The Union government's ability to prime the fiscal pump is also limited by its chronic and large deficit.

By comparison, states are more prudent and can easily do more with the money they will now get from New Delhi. To see how greater spending by India's sub-national governments could be an important catalyst for private investment, consider the possibility that they spend a part of the windfall on capitalising their bankrupt electricity boards. It's an urgent priority. These state-run electricity buyers lost an estimated Rs 31,600 crore last year, most of it in just six states. All of them pay far higher interest rates than the national average. If an equity infusion could halve the Rs 24,000 crore in annual interest that these six utilities currently pay, almost two-fifths of the commercial losses of India's power business would disappear. That, in turn, would make new power plants by private investors more viable.

Fiscal devolution could also lift public investment. Credit Suisse equity strategist Neelkanth Mishra cites the example of a Rs 2,527-crore state-funded project to pump river water to arid regions of Gujarat using pipelines. Currently, the water flows via canals, and is exposed to theft and evaporation losses. Not only will 29 per cent of the state's population benefit from more assured water supply, the young girls who spend large parts of the day fetching water for their families would be able to go to school instead.

Projects like these are still the exception. Credit Suisse's analysis of recently announced state Budgets in India shows that most of the spending plans are heavily tilted toward paying salaries and pensions of teachers, policemen and health workers. States are bracing themselves for the wage shock that's going to hit them after government workers get their once-in-a-decade pay boost from January 2016.

That could end up disturbing Mr Modi's calculations. If states shy away from making new capital investments, the economy won't receive the full advantage from the prime minister's bet on "cooperative federalism". That would add to pessimism about Mr Modi not being the pro-business messiah that corporate India had hoped for. Earnings are still lacklustre, investment impulse is still weak and real interest rates are still too high. Rural incomes have been hurt by Mr Modi's anti-inflation campaign, which has sharply squeezed the prices the government pays for crops. Foreign investors, meanwhile, are upset over tax bills on past profits from buying and selling Indian shares. The opposition Congress party is trying to make a political comeback by mobilising farmers against acquisition of agricultural land for large infrastructure projects.

Mr Modi can only hope that the fiscal transfer to states ends up stimulating more than government servants' wages, and that sub-national executives line up enough shovel-ready projects to give growth a push. The sooner the states join the race to write cheques, the better it will be for both India's economy and its prime minister's reformist credentials.

Silence on core #legalreforms

These are trying times for the apex judiciary. The National Judicial Appointment Commission is set to replace the collegium of judges, which had so far kept out the executive from the selection process. The law is under challenge before a constitution bench and till the validity of the new mechanism is upheld, the appointments of judges of the high courts will hang fire. It will aggravate the situation as there are already hundreds of vacancies in the 24 high courts. Arrears of cases are mounting. The recent conference of chief justices of high courts and chief ministers has not come up with even a small step to hold back the dismal trend.

The Supreme Court had publicised a detailed agenda of the conference held earlier this month, but after the meeting there was little information about the discussions that took place or the resolutions passed on core issues. What has fallen out in drips refers to the long list of demands to hike judges' salaries, perks and retirement benefits apart from better facilities at tourist and pilgrim centres.

Another bit of information from behind the curtains that has slipped out also avoids the main issues. It is said that the conference has re-issued the 1999 "in-house" procedures for taking "suitable remedial action" against judges accused of misconduct and impropriety. This is again a self-serving measure as several judges are facing sexual harassment and corruption charges.

The agenda consisted of some vital issues that concerned the functioning of the courts, like setting up committees to study and remedy swelling arrears, uniformity and clarity in the data about them, financial independence for the judiciary, strengthening computerisation and implementation of the National Court Management System. Some other important issues, among 24 listed, referred to filling up of high court vacancies, uniform procedure for appointment of district judges, strengthening of the alternative disputes resolution mechanism and building court infrastructure.

However, what happened in the closed-door meeting lasting three days is still a matter of conjecture. This is true to the opaque nature of the judiciary, which earlier resisted disclosure of their income. The public is justified in concluding that no decision worthwhile has been taken on the crucial questions.

A lay person is bound to ask why the court is not taking the easy step by clearing the arrears of cases chronologically. There are cases two decades old and forgotten by the registry and the petitioners. In a recent case involving the Rs 630-crore penalty imposed on DLF Ltd, the presiding judge wondered why the registry put it up for early hearing. They asked, when people are rotting in jail for years, how can a corporate appeal of last year be taken up so soon?

The court has taken judicial notice of this phenomenon. As early as in 1987, in the case of D Navinchandra vs Union of India (1987), the then chief justice wrote: "My conscience protests to me that when thousands of remediless wrongs await in the queue for this court's intervention and solution for justice, petitions at the behest of diamond exporters and dry fruit exporters where large sums are involved should be admitted and disposed of by this court at such quick speed."

Another phenomenon that would mystify a visitor is the adjournments granted so easily, most often to suit the convenience of the lawyers. Again, in the words of the Supreme Court itself, "it is distressing to note that despite a series of judgments of this court, the habit of granting adjournment, really an ailment, continues. How long shall we say, "Awake! Arise!" (Vinod Kumar vs State of Punjab).

Yet another glaring practice that would baffle a visitor is the apparently interminable arguments taking the precious time of the court. Strolley-loads of old judgments are brought to the court by all sides and they are read in the droning voice of the aged counsel. It is said that the US Supreme Court allows only half an hour for each side and the Common Law countries draw up a tight schedule for arguments. Any reasonable person, if admitted to the august judicial conference just concluded in Delhi, could have given some common sense advice as jotted down above to improve the working of the court.

The final push to end extreme #poverty

For global development, 2015 is the most important year in recent memory. In July, world leaders will gather in Addis Ababa to discuss how to finance development priorities in the years ahead. In September, heads of state meet at the United Nations to establish the Sustainable Development Goals - a group of targets and goals set for 2030. And in December, countries again will gather in Paris to work out an agreement on climate change.

This year has also seen the emergence of a major new player in development - the Asian Infrastructure Investment Bankled by China, with more than 50 countries and regions signing on as members. With the right environment, labour and procurement standards, the Asian Infrastructure Investment Bank - and the New Development Bank, established by theBRICS countries - can become great new forces in the economic development of poor countries and emerging markets.

We hope these new institutions will join the world's multilateral development banks and our private sector partners on a shared mission to promote economic growth that helps the poorest. The decisions we make this year, and the alliances we form in the years ahead, will help determine whether we have a chance to end extreme poverty by 2030, the central goal of the World Bank Group.

The good news is that the world has made substantial progress already. Over the past 25 years, we've gone from nearly two billion people living in extreme poverty to fewer than one billion. But that means we still have nearly one billion people living on less than $1.25 a day.

We know it's possible to end extreme poverty in the next 15 years, in part because of this past success, and because we have learned from years of experience about what has worked and what has not. As a result, our advice to governments has evolved over time. Our strategy to end extreme poverty can be summed up in just three words: Grow, invest, and insure.

First, the world economy needs to grow faster, and grow more sustainably. It needs to grow in a way that ensures that the poor receive a greater share of the benefits of that growth. We can reach the end of extreme poverty only if we mark a path toward a more robust and inclusive growth that is unparalleled in modern times.

The World Bank Group will continue to support governments and make investments in a broad variety of areas in the fight against extreme poverty. In most of the developing world, though, efforts to end extreme poverty will require us to focus on boosting agricultural productivity.

Helping farmers improve yields requires increasing access to better seeds, water, electricity and markets. According to one study in Bangladesh, six years after constructing 3,000 km of roads to connect communities to markets, household incomes increased by an average of 74 per cent.

That's the growth part of the strategy. The second part of the strategy is to invest - and by that, I mean investing in people, especially through education and health.

The opportunity to get children off to the right start happens just once. Investments made in children early in life bring far greater returns than those made later on. Poor nutrition and disease can have life-long implications for mental and physical health, educational achievement and adult earnings.

The final part of the strategy is to insure. This means that governments must provide social safety nets as well as build systems to protect against disasters and the rapid spread of disease.

Ebola revealed the shortcomings of international and national systems to prevent, detect, and respond to infectious disease outbreaks. Ebola also taught us that the poor are likely to suffer the most from pandemics. The World Bank Group has been working with partners on a new concept that would provide much needed rapid response financing in the face of an outbreak, where countries would receive rapid disbursements of funding, which would, in turn, help contain outbreaks, save lives and protect economies.

We know that ending extreme poverty will be extraordinarily difficult - in fact, the closer we get to our goal, the more difficult it will be.

Governments of the world must seize this moment. Our private sector partners must step up. The World Bank Group, our multilateral development bank partners, and our new partners on the horizon, must all seize this moment. We must now collaborate with real conviction and distinguish our generation as the one that ended poverty.

We are the first generation in human history that can end extreme poverty. This is our great challenge, and our great opportunity. The final push must begin right now.

Issuance of #MNIC

The Citizenship Act, 1955 provides the Central Government to compulsorily register every citizen of India and issue Multipurpose National Identity Card (MNIC) to him. It has been decided that National Population Register (#NPR) should be completed and taken to its logical conclusion, which is the creation of National Register of Indian Citizen (NRIC) and National Identity Cards would be issued to Citizens by verification of citizenship status of every usual resident in the NPR. The proposals for the same are under consideration of the Government.

The process of social vetting by Gram Sabha and Ward Committees is one of the steps in the creation of National Population Register (NPR) in the country. The first step involves the collection of information on specific characteristics of all usual residents by Government servants duly designated for this purpose. The second step involves the creation of a digitised database of each resident. Next, photographs, 10 finger prints and IRIS of all usual residents who are of age 5 years and above is collected with reference to the digitised database and in the presence of designated Government servants. After this, the database is sent to the UIDAI for de-duplication and generation of Aadhaar numbers. This ensures that the database does not contain any duplicates. Following this, the details are printed out in the form of Local Register of Usual Residents and displayed in the local areas for scrutiny by the public and invitation of claims and objections for a period of 21 days. All claims and objections are to be heard by the local officials designated for this purpose. There is also provision of appeal to higher level officials. Thus, the claims and objections would be looked into by revenue officials like Patwari or Talati who have been designated as the Local Registrars, Tehsildars, who are designated as Sub-district Registrars and the Collectors/ DMs who are designated as District Registrars. Simultaneously, the LRUR is also placed before the Gram Sabhas and Ward Committees for vetting. Instructions have also been issued that the lists should be scrutinized by the local police and revenue officials. The LRURs duly authenticated and de-duplicated when aggregated at the National level forms the National Population Register. This process has been evolved after extensive consultation and discussion with all stake holders including the State Governments. Thus, the process involved in creation of NPR is comprehensive and includes verification at several stages.

The National Population Register (NPR) is a Register of Usual Residents. It would contain citizens as well as non-citizens. The objective of creating a NPR is to net all usual residents of the country at a given point of time. This would serve as the mother database for creating the National Register of Indian Citizens (NRIC) by verifying the citizenship status of each and every resident. 

Mega #FoodParks

Mega #FoodParks

The Ministry has announced selection of 17 new Mega Food Parks against the vacancies caused due to withdrawal or cancellation of the projects selected earlier. Out of these 17 (Seventeen) new Mega Food Parks, 7 (Seven) projects have been approved for State Government Agencies from 6 (Six) States and 10 (Ten) projects have been approved for private promoters. The financial assistance for setting up Mega Food Parks is provided @ 50% of eligible project cost in general areas and @ 75% of eligible project cost in NE Region and difficult areas (Hilly States and ITDP areas) subject to maximum of Rs. 50 crore per project. The total estimated proposed project cost of these 17 projects is Rs. 2333 crore out of which the Government grant is likely to be around Rs. 850 crore and promoters’ contribution as equity and loan is around Rs. 1483 crore.

Mega Food Parks aim at creating modern infrastructure for development of food processing sector which helps in reduction in wastage of perishables, value addition to the agricultural produce, providing better price to farmers and creation of employment opportunities especially in rural areas. Mega Food Parks function on a cluster based approach based on a hub and spokes model. Infrastructure is created for primary processing and storage near the farm in the form of Primary Processing Centres (PPCs) and Collection Centres (CCs) located in production areas. These PPCs and CCs act as aggregation and storage points to feed raw material to the processing units located in the Central Processing Centre (CPC). Common facilities and enabling infrastructure like modern warehousing, cold storage, IQF, sorting, grading, packaging, pulping, ripening chambers and tetra packaging units, roads, electricity, water, ETP facilities etc. are created at CPC for food processing units to be set up in the Park.

The Government has sanctioned setting up of 42 (Forty Two) Mega Food Parks for creation of modern infrastructure for food processing industries in the country. Out of these, 21 (Twenty One) Parks have been accorded Final Approval by the Ministry and are at various stages of implementation. Four Mega Food Parks at Haridwar (Uttarkhand), Chittoor (Andhra Pradesh), Fazilka (Punjab) and Tumkur (Karnataka) have become operational. The other projects, which have been accorded In-principle approval, are in the process of meeting the conditions of final approval as per the scheme guidelines. 

#ClimateChange a Challenge, not Business Opportunity

Climate Change a Challenge, not Business Opportunity: Javadekar

Environment Minister attends Major Economies Forum meeting

Minister of State for Environment, Forest and Climate Change, Shri Prakash Javadekar has said that climate change is a challenge and not a business opportunity. Speaking at the Major Economies Forum meeting that took place in Washington D.C on April 19-20, 2015, Shri Javadekar said that the developed world should not profit from disaster. Reiterating India’s commitment for a fair and equitable agreement at Paris this year, the Minister said that we have to work like ants to build the Earth.

Following is the text of Shri Javadekar’s speech at the Major Economies Forum:

“India is committed to walk along the road to Paris, hand-in-hand with others for a fair and equitable agreement this year. But it would not join bullying tactics and will not allow yet another Copenhagen in Paris. The days of bulldozing have gone and now we have to work like ants to build the Earth together.

Paris will succeed only if we restrict to ensure that every country present their INDCs and that they get implemented. For compliance, the developed world must fulfil it's financial commitment. It will also have to ensure that at the very least, critical technologies are available at affordable cost. The developed world should not profit from disaster. Climate change is a challenge and not business opportunity.

India has already initiated a very ambitious action plan for renewable energy and India will walk energy efficiency path effectively. Our emission intensity is getting reduced as per our planning. Even the IPCC Emission Gap Report has certified that India is on the dot in the implementation.

The cycle of INDCs should be 10 years and drivers for updating should be science, as it evolves, and technologies, as they develop. There is a need for large- scale behavioral change Programmes to be undertaken. All countries need to ensure that fuel consumption does not increase in the period when petrol prices are lower.

We should discuss ideas like decarbonisation, long term goals on forums like Major Economies Forum. But we should not bring on table any new idea/item for Paris at this late hour. Let us not try to put new targets which will not be sustainable.

India wants that each party should consider adjustments on the basis of historical responsibilities and equitable sharing of global atmospheric resources and carbon space in the context of imperatives of poverty eradication, universal energy access and sustainable development for developing countries. India also expects that there needs to be urgent and immediate ambitious actions in the pre- 2020 period, and it must not be delayed by developed countries. Any delays threaten the credibility of their ambition and commitment to combat climate change.

Let us ensure that all countries submit their INDCs and ensure and create an ambience whereby they will be implemented. That is the sure formula for success in Paris.” 

New #UreaPolicy (NUP) – 2015 is under consideration of the Government.

New #UreaPolicy (NUP) – 2015 is under consideration of the Government.

No Brownfield/Greenfield Investment in the Fertilizer sector has taken place since 1999. The availability of gas has been one of the major limiting factor to the growth of urea industry in the country. Presently, the availability of domestic natural gas is not even sufficient to meet the demand of existing gas based urea units in the country. Due to shortage of domestic gas, many FO/LSHS/Naphtha based urea plants which have converted to gas recently, are meeting its requirement of gas by using Regasified Liquefied Natural Gas (RLNG).

New Urea Policy (NUP) – 2015 is under the consideration of the Government. There is no proposal to increase MRP of Urea. The MRP of urea is statutorily fixed by the Government of India and at present it is Rs. 5360 per MT (exclusive of the central excise duty for domestically produced urea and countervailing duty for imported urea (which is 1% at present) and state VAT which differs from state to state). With respect to Neem Coated Urea, it has been decided to restrict the extra 5% of MRP to be charged by the companies for future to the extent of 5% of the existing MRP of urea only i.e. Rs.5360 per MT.

There is no proposal of free supply of fertilizers to help dry land farmers to survive under various circumstances.