policywatch - cuts centre for competition, … prabhu s ambitious effort to...

PolicyWatchPolicyWatchVolume 17, No. 1 January-March 2016

Covering developmentson policy responses,policy implementationand policy distortionson a quarterly basis.Comments are welcome.

UDAY is a Game Changer:Piyush Goyal .................... 7

Modi Moves to Plug India�sBiggest Data Hole� Sandrine Rastello andBibhudatta Pradhan ........13

Vijay Mallya�s USL ExitAWakeup Call forIndependentDirectors� Devina Sengupta andSachin Dav ..................... 14

CCI Finds Reasons toProbeMahyco-Monsanto� Shreeja Sen andSayantan Bera .................22

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Printed by: Jaipur Printers P. Ltd., M.I. Road, Jaipur 302 001, India.

�The reformer has enemies inall those who profit by the oldorder and only lukewarmdefenders in all those whowould profit by the new�.Machiavelli in The Prince

H IGHL IGHTS

I N S I D E T H I S I S S U E

NewAviation Policy ............... 3

Boosting CashlessPayments .............................. 6

M&AActivity Shrinks ............. 10

Corruption DelaysStartups ............................... 12

Separate PovertyIndicators ............................ 16

Focus on �Values� ............... 18

The Telecom OverhaulAcouple of months back came the government�s �eureka� moment when

it agreed on spectrum sharing and trading between telecom operators.The Department of Telecommunications (DoT) is planning a massivespectrum auction in June 2016 and has even gone beyond, urging theInternational Telecommunications Union (ITU) to identify additional usablespectrum bands for 3G and 4G services.

For mobile serviceswith persistent issues ofcall drops, poor Internetand bad reception, theoperators had always putthe blame on spectrumscarcity. Not any more!Additional spectrum atauction, and an option toshare/trade spectrum, islikely to optimisespectrum utilisation and,

in the process, raise the quality of service (QoS) for mobile services.Some government enterprises, sitting on the bulk of unutilised spectrum,

have started pondering over its release to help addressing the spectrumscarcity. The Ministry of Defence is thus expected to release 150 Mhz ofspectrum in the second quarter of 2016.

India has 10 mobile operators with Reliance Jio joining soon. Freecompetition is considered beneficial for consumers, but in the case of mobileservices it might not be so.With 11 players competing for a limited resources,each will get an inadequate spectrum, resulting in poor services.

With another big spectrum auction on the horizon, the operators arecaught in a dilemma to share/trade spectrum or to buy spectrum in thecoming auction. The spectrum on auction, valued around M5 lakh crore,might land a devastating blow to the already-indebted telecom operators.How the operatorswould dealwith this, while combating the stiff competition,would be intriguing.

All sharing/trading deals would earn the government one percent of thedeal value, which becomes the buyer�s liability and two-fold earning for thegovernment. Intimating the government 45-day beforehand on deals andrestricting operators holding more than 25 percent of spectrum in a circleand 50 percent in specific band again amounts to over-regulation.

Another factor that needs to be addressed is the harmonisation of spectrum.Featuring on ITU�s global agenda, harmonisation means uniform allocationof radio frequency bands across entire regions and not just individualcountries. This would minimise radio interference along borders, facilitateinternational roaming and reduce the cost of mobile devices.

Spectrum and infrastructure were claimed to be the biggest culprits forcall drops. Now that one has been eliminated and the other is being addressed,services should definitely improve soon. If that does not happen, the telecomoperators should be warned that consumers� faith will dwindle.

www.static.indianexpress.com

2 January-March 2016 PolicyWatch

COMMUNICATION

I N F R A S T R U C T U R E

devices,mobile and fixed line phones,with each other to send and receivecalls, call forwarding etc. on any ofthese devices. BSNL has announcedthat it will install 21,000 additionalmobile towers across country formobile network upgradation.

(ET, 17.03.16)

Market Access PolicyDomestic telecom equipment

makers are seeking inclusion ofprivate telecom operators under thegovernment�s Preferential MarketAccess (PMA) policy, indicating thatthe move will help push sales.PMA policy mandates all state

departments, organisations andagencies to procure at least 30 percentof their equipment from domesticmarket.Domesticmanufacturers complain

that they have not been able toincreasemarket access despite havingcheaper products. They claim thatsome government-run organisationsare reluctant to buy their portfolio,forcing their production facilities gounderutilised. To try and level theplaying field, they want PMA policyto be extended to private operatorsas well. (ET, 16.03.15)

Employable HumanResourcesThe Department of

Telecommunication (DoT), hasrecently asked all telecom serviceproviders to train students acrossindustrial training institutes (ITIs) inline with the industry�s operationalrequirements.Students will be trained, typically,

to handle the gamut of technical workrelating to rollout andmaintenance ofmobile networks.TheDoT directive stems from the

priority being accorded by theNarendra Modi government ininvolving the private sector forrevamping technical institutes, suchas ITIs for skill building anddeveloping employable humanresources for key industry sectors,including telecoms. (ET, 16.03.16)

Drive Test for Call DropsRavi Shankar Prasad along with

Telecom Secretary and BSNLChairman and Managing Director

(CMD)will conduct adrive test inDelhito directly monitor call drops.TRAI conducted a drive test of call

drops, in December-January periodand found most of the telecomoperators, including state-runMahanagarTelephoneNigamLimited.(MTNL), failed random drive tests tocheck quality of their network andservices as part of its efforts to rein incall dropmenace.In Indore, the telecom regulator

found 2G network ofAirtel,Vodafone,RComCodeDivisionMultipleAccess(CDMA) and Tata CDMA compliedwith call drop norms while othersfailed. (ET, 17.03.16)

Pushing Internet ServicesTheDoT is chalking out a strategy

to promote internet services,especially in small towns and areas,through state-run BSNL to bridge thedigital divide. This will be in line withgovernment�s vision of �Digital India�.Internet services would cover

access to the net via mobile phonesas well as through broadband �wireline � connections. The plan couldbe to offer internet services free forfirst twomonths or free internet usageduring night, though with a specifieddata limit to get people onto internetboat.BSNL is setting upWi-Fi hotspots

in partnerships with other players.This would give users free access tothe internet for the first 30 minutes,after which they would have to buyvouchers. (BS, 09.02.16)

Policy for Digital LockersIn an another move to promote the

�Digital India� initiative in India, RaviShankar Prasad said that thegovernment is working on a draftpolicy on �digital lockers�.Digital lockers are cloud-based

spaces in government cloud that couldbe used by both government andprivate users. Prasad said that arounda million digital lockers have beenopened, and 1.5 million documentshave been uploaded to these cloud-based lockers.�We are already having

consultation on draft policy on digitallockers and rules for participation ofprivate players�, Prasad stated.

(BS, 31.01.16)

Radio RatingAgenda

Broadcasting regulator TelecomRegulatory Authority of India

(TRAI) has initiated a consultationprocess for creation of credible radioaudience measurement frameworkthat is conducive, growth-orientedand protects the interests of thestakeholders.

TRAI intends to ensure a forward-looking, transparent and credibleradio rating framework with a�minimal regulatory intervention� inthe rating process.

Advertisement revenue of theradio broadcasting sector is directlylinked to listenership of radiochannels. Advertisers and advertisingagencies require audiencemeasurement, which indicates thepopularity of a channel or aprogramme, it added. (ET, 15.03.16)

Landlines via MobilesBharat Sanchar Nigam Limited

(BSNL) has unveiled an app throughwhich its customers travelling abroadwill be able to connect their landlinesthrough mobile and make callsthrough them without attractingInternational SubscriberDialing (ISD)charges.The Fixed Mobile Telephony

service, to be operational from April02, 2016will however, attractmonthlycharges. Under this technology,BSNL has plans to introduce ShortMessage Service (SMS) facility onlandline phones.BSNL�s another facility � fixed

mobile convergence will enablecustomers to connect up to four

www.bgr.in

3January-March 2016 PolicyWatch

TRANSPORT


Scrapping Old VehiclesIn the union budget of 2016, the

governmentmight announce cash andtax benefits to owners of old vehiclesif they scrap and replace themandmayalso double the fleet of publictransport buses to check pollution,sources stated. This is one of theproposals given by Road, TransportandHighwaysMinister Nitin Gadkarito Union Finance Minister ArunJaitley.�The Road, Transport and

Highways Ministry has requested atleast 50 percent rebate in excise dutyto people who, on purchase of newvehicles, give their old vehicles inexchange for scrapping�, a seniorMinistry official said. This will be apart of the proposed �end of life� policyfor old vehicles. (TH, 18.01.16)

Road Rationing PlanShould Delhi�s current odd-even

car plying formula be introduced inMumbai? The ruling partners in thestate government, the BharatiyaJanata Party (BJP) and Shiv Sena areyet to decide. Sena legislator PratapSarnaik has given a petition to theChief Minister to do what Delhi hasbut BJP said that no hasty step shouldbe taken in this direction.The government was examining

the Delhi experiment, said FinanceMinister SudhirMungantiwar.He saidthat theywere open to accepting ideasfromelsewhere. �The results ofDelhi�sexperiment will take time to show. Ifsuccessful, we will considerimplementing it inMumbai�.

(BS,07.01.16)

BoostingWater TransportThe union government is working

on a strategy to increase themovement of goods and passengersthroughwaterways by nearly five-foldfrom a mere 3.5 percent at present to15 percent by 2019. The share is 30 to40 percent in countries, such as China,South Korea, United Kingdom,Germany and France, Union Shippingand TransportMinister Nitin Gadkarihas indicated.Gadkari said that development of

coastal shipping and inland

waterways was a priority for theNational Defence Alliance (NDA)government. He said thatdevelopment of waterways wouldreduce the logistics cost, enablingIndia to effectively compete in theinternational market. (TH, 14.01.16)

Upgradation of HighwaysKicking off the biggest highways

upgradation, the Road Ministry hasasked all state governments to sendlist of state highways that could bescaled up to national highways.The Ministry has set aside

M15,000 crore from its budgetaryallocation to undertake highwayexpansion and capacity enhancementprojects, such as increasing thenumber of lanes and providingwayside amenities along withstandardising the existing network.The government has set a target ofupgrading 50,000 km of existing roadlength into national highways.�Projects that are found viable

traffic-wise will be taken up on publicprivate partnership (PPP) basis aswell,including the recently conceivedhybrid annuity model�, a seniorTransport Ministry official stated.

(ET, 23.03.16)

Accrual Accounting LaunchedIndian Railways will introduce

accrual accounting at its rail coachfactory in Kapurthala starting March15, 2016. This may seem like a smallstep for Indian Railways, but it is

actually part of an ambitious agendato make the department, the biggestone run by the federal government,more financially accountable.Accrual accounting is an

accounting method that measures theperformance and position of acompany by recognising economicevents regardless of when cashtransactions occur. The experiment atKapurthala is part of RailwayMinisterSuresh Prabhu�s ambitious effort torun Indian Railways like a company.

(Mint, 15.03.16)

Free from 5/20 RuleThe contentious 5/20 rule that

restricts Indian airlines from flyingabroad till it fulfills certain criteria islikely to be scrapped as thegovernment has proposed directincentives to airlines promotingregional connectivity in its newaviation policy.New airlines like Vistara and

AirAsia have been pushing forscrapping it, while older airlines likeJet, IndiGo, SpiceJet, etc. aredefending it. According to the 5/20rule, an Indian airline cannot flyabroad unless it has operated in Indiafor five years, or it has an operationalfleet of 20 aircraft.Though Civil Aviation Minister

Ashok Gajapathi Raju refused toreveal the government�s stand on therule, sources claim that thegovernment has decided to scrap thepolicy. (DC, 15.03.16)

New Aviation PolicyThe Civil Aviation

Ministry expects toimplement the aviationpolicy by the beginning ofthe following fiscal year,after theCabinet approvesit at the end of the month.Union Civil AviationSecretary Rajiv NayanChoubey said he expectsthe much-delayedaviation policy to be cleared by the Cabinet by the end of March 2016.

�The implementation will begin from 01 April�, he said, adding, �Wewish it takes less time but it is largely because of the comments received bydiverse stakeholders (in response to the draft document)�. The aviation policywas first presented in November 2014 and then revised in October 2015and put up for public comments. (Mint, 03.03.16)

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OIL & GAS


Ethanol Blending PolicyTheGovernment of Indiawill soon

come out with a new policy to furtherpromote ethanol bending with petrol.This will be in line with theGovernment�s plan to increase thelevel ofmandatory blending of ethanolwith petrol to 10 percent from thecurrent level of 5 percent.So far, oil companies have been

unable to meet the target of 5 percenttill now mainly because ofunavailability of sufficient ethanol andissues related to its pricing. In orderto resolve a part of these issues, thenewpolicywill include awider sourceof ethanol including bio-wastes otherthan its current main source � sugar.

(FE, 14.01.16)

Online Payment FacilityThe government plans to

introduce the online payment facilityfor Liquefied Petroleum Gas (LPG)refill by the end of 2016. TheMinisterof State (Independent Charge) forPetroleum and Natural Gas,Dharmendra Pradhan, described theyear 2016 as the year of the LPGconsumer.The government of India has set

the target of supplying LPG to 70percent of the households by 2018.At present, there are around 27 crorehouseholds in India, of which 16.5crore have activeLPGconnection. Thegovernment has added 1.35 crore newLPG consumers in 2015. A24x7All-

India helpline � 096 has already beeninitiated for consumers to receiveprompt help in case of LPG leaks.

(TH, 02.01.16)

DBT for Kerosene SubsidyFrom April 01, 2016, the

governmentwill roll outDirectBenefitTransfer (DBT) for kerosene. Underthe scheme, which is aimed atcurtailing subsidy outgo, the userswill buy the cooking fuel at marketprice and will get financial supportdirectly in their bank accounts. Thecash subsidy will be equivalent to thedifference between current PublicDistribution System (PDS) price ofaboutM12 per litre and market rateofM43 per litre.The schemewill be rolled out in 26

districts across eight states �Chhattisgarh, Haryana, Jharkhand,Maharashtra, Punjab, HimachalPradesh, Rajasthan and MadhyaPradesh. The states will be given 75percent of subsidy savings during thefirst two years, 50 percent in the thirdand 25 percent in the fourth year.

(FE, 02.01.16)

New Price FormulaThe government has announced

the new gas price formula applicablefor discoveries in difficult areasincluding high pressure-hightemperature fields, deep-water andultra-deep water blocks. As per thenew formula, gas price will be cappedat the lowest of the imported cost offuel oil and landed price of liquefied

Give up LPG SubsidyThe �Giveitup� campaign

of the Government ofIndia has led to thegovernment saving M4166crore in the petroleumsubsidy, as the number ofconsumers leavingliquefied petroleum gas(LPG) subsidy reached8.22mn after one year of itslaunch.

Each of the 8.2mn families has surrendered an annual LPG subsidy worthM5,000 on average. However, for the government, this has resulted in thesavings equivalent to one-ninth of the allocation for Mahatma GandhiNational Rural Employment Guarantee Scheme (MNREGS). Each consumeris entitled to 12 subsidised cylinders in a year, above which the requirementis met at the market price. (BS, 09.03.16)

natural gas (LNG)orweighted averageof imported price of fuel oil, naphthaand coal.The new price will also be

applicable to existing discoveries,where commercial production has notcommenced as on January 01, 2016,provided the concerned contractorswithdraw any on-going litigation onprices. Based on the average price inthe first nine months of 2015-16, theprice is likely to be around US$8 permillionBritish thermal units (mmbtu).

(FE, 21.03.16)

Uniform Licensing PolicyThe central government has

formulated the new HydrocarbonExplorationLicensing Policy (HELP),which will provide a uniform licencefor exploration and development of allkinds of hydrocarbons from an area.The uniform licencewill enable the

contractor to explore conventional aswell as non-conventional oil and gasresources including coal-bedmethane(CBM), shale gas/oil, tight gas and gashydrates under a single license.HELP also includes an open

acreage policy that allows contractorsto choose the areas from the datacentre and then bid. It will beadministered by revenue-sharingmodel, and will give marketing andpricing freedom for production ofcrude oil and natural gas.

(TH, 10.03.16)

Natural Gas Price CutThe government is likely to cut

natural gas prices soon by 17 percenttoUS$3.15permillionBritishThermalUnit from current US$3.82.As per thenew gas pricing formula approved bythe NDA-government in October2014, gas prices are to be revisedevery six months and the next changeis due onApril 01, 2016. OilMinistryis likely to announce anytime arevised price of aboutUS$3.15permmBtu for the period April 01, 2016 toSeptember 30, 2016, sources said.As per the formula, rates are to be

determined on a semi-annual basis andcalculated based on a volumeweighted average of rates in gassurplus nations of theUS, Canada andRussia, based on the 12-month trailingaverage price with a lag of threemonths. (DNA, 30.03.16)

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POWER


New Tariff PolicyThe amendments to the National

Tariff Policy for electricity, as approvedby the Cabinet, aims at achieving the4E�s � Electricity for all, Efficiency toensure affordable tariffs, Environmentfor a sustainable future and Ease ofdoing business to attract investmentsand ensure financial viability.It tightens the norms followed by

electricity regulators while settingtariffs by requiring them to�necessarily� be guided by the newpolicy. With an aim to promoterenewable energy, it revises the solarspecific renewable purchaseobligation target to 8 percent by 2022and makes a provision regardingrenewable generation obligation fornew coal/lignite-based thermal plants.It also allows increase in fuel cost onaccount of import to be included inthe tariff structure. (IE, 20.01.16)

Focus on HydropowerThe Ministry of Power has set up

a 10-member panel chaired byAshwinB Pandya, former Chairman of theCentral Water Commission, to adviceon framing a new hydropower policythat will help turn around stalledprojects and attract fresh investmentsinto the sector. The panel will suggestpolicymeasures on technical, financial,environmental and commercial aspectsof the hydropower sector.The government wants to fix the

glitches in the hydropower sector,where many projects are delayed andfacing cost overruns, and make thissector more attractive to investors asit would help in achieving thecountry�s commitment at the Parisclimate conference. At present,hydropower accounts for only15 percent of India�s 284GWcapacity.

(Mint, 15.02.16)

Record Low Solar TariffsSolar tariffs in India touched a new

low as Fortum India, which won a bidfor a 70 MW project to be set up inthe state of Rajasthan, quoted a priceof 4.34/kWh to supply power toNational Thermal Power Corporation(NTPC). The e-reverse auction wasconducted by NTPC for six projectsof 70 MW each in Rajasthan.

While the bid raised hope of solarenergy becoming a viable alternate tothermal power evenwithout subsidies,some industry experts flaggedconcerns about financial prudency ofsuch lower tariffs. The powerdevelopers are of the belief that as theeconomy of scale improves, theproject cost of solar is expected tocome down further. (ToI, 20.01.16)

Solar Off Grid Policy UnveiledMaharashtra has unveiled a new

solar off-grid policy that seeks topromote rooftop solar powergeneration and provide subsidy topublic and private entities to generateelectricity from this renewable source.It aims to save at least 500 MW ofenergy in the coming five years.Under the policy, the government

will provide 100 percent subsidy togovernment and semi-governmentoffices for setting up solar powerunits, while 15 percent subsidy willbe provided for private sector entities.The urban civic bodies and

sanctioning authorities have beenasked to changeDevelopment Controlrules to ensure that constructionpermission is given to only thosebuildings, which give undertaking toset up solar water heater panels.

(BS, 25.03.16)

Haryana�s New Solar PolicyHaryana has launched a revised

solar power policy in order to betteralign its plans with the CentralGovernment�s enhanced solar target

of 100GW.Thenewpolicy has a targetto add 4 GW of solar to the existinginstalled capacity of the state by 2022.In order to attract private sector

investments, the policy provides forexemptionof solar power projects fromelectricity duty and cross-subsidycharge. It also sets aside 800 MW ofthe total planned capacity for projectsof 1-2 MW capacity each, toencourage small-scale projectdevelopers. Such projects will alsoreceive additional incentives in termsof higher tariffs. The government hasalso streamlined the process ofobtaining approvals to set up solarrooftops. (IE, 09.03.16)

Ash Policy UtilisationThe Government of Maharashtra

is currently working on an ashutilisation policy to ensure better useof ash generated by coal-basedthermal power plants and reduceenvironmental pollution. The policytargets to increase the ash utilisationrate to 100 percent from the current58 percent.The use of ash in making bricks

and tiles, apart from other innovativeuses would be a part of this policy. Itwill enable the state-owned powergeneration utility to export fine qualityash and also help channelising it tocement plants, helping it gain anadditional source of revenue.The State Government expects to

gainaroundM1500crore fromexportingash to countries in the Middle Eastand Singapore. (DNA, 14.03.16)

Coal Linkage Policy SoonThe Ministry of Power plans to finalise the policy on coal linkages for

power sector in the following two-three months. At present, coal isprovided topowerproducers onan �as is where is� principle orthrough e-auction. However,since power producers havelong-termpurchase agreements,they need an assured minimumfuel supply for a long-term tobe able to quote a price.

The previous fuel supplyagreement framework hadcovered 78,000 MW to becommercially operational by March 31, 2015, post which there has been nopolicy announcement. Given that the absence of a coal linkage policy hasbeen causing uncertainty in the market, the power producers have appealedto the Centre to release a coal linkage policy soon. (DNA, 17.03.16)


F I N A N C I A L S E C T O R

Better Fiscal ManagementThe government�s fiscal

management in the current financialyear has been better than the previousyears with expenditure being spreadout as opposed to the usual bunchingup towards the end of the year,according to Controller General ofAccounts (CGA), M J Joseph.The normal trend in government

expenditure over the years shows thatexpenditures increase in the past twoquarters of the financial year, mainlyQ4. But in 2016, even up to the six-month period, expenditure was moreor less 48-50 percent of the budgetedamount.Another factor that is helping the

government bettermanage its financesis the increasing push towards e-payments, with the Direct BenefitTransfer scheme taking centre-stage.

(TH, 13.02.16)

Reform or PerishSending a stern message to states

to pursue reforms, Finance MinisterArun Jaitley said that either theyshould �reform or perish� as investorsdo not like an environment of policyparalysis or uncertainty.Jaitley further added that Haryana

has geographical advantage of beingclose to the national capital, andhence, can attract more investments.Highlighting the importance ofinvestment as the starting point ofeconomic activity,which thereby leadsto creation of jobs, Jaitley said

investments will suffer if decisionmaking is slow.Predictability of policy,the overall attitude of the government,ethics and integrity have to be highon the agenda of state governments,otherwise the investments will suffer.

(IE, 08.03.16)

Focus onConsolidationThe government has said that it

has started the third phase of reformsin state-run banks,whichwill look intoall aspects, including consolidation,through the second edition of GyanSangam.The Minister of State for Finance

Jayant Sinha said that the FinanceMinistry was working very closelywith the Reserve Bank of India (RBI)on the asset quality review, and thatstressed assets have stabilised andpresently the government has a clearsense of what it means for the balancesheet of banks. FinanceMinisterArunJaitely had indicated that a roadmapfor consolidation of Public SectorBanks (PSBs) will be spelt out.

(ET, 05.03 16)

Tax Policy CouncilThe government said that it has

created a Tax Policy Research Unit(TPRU) andTax Policy Council to bechaired by the union FinanceMinisterwith nine other. The TPRU willcomprise officers fromboth theCentralBoard of Direct Taxes (CBDT) andCentral Board of Excise and Customs(CBEC) as well as economists,

statisticians, operational researchers,legal experts, said an official release.The TPRU will be a multi-

disciplinary body with the objectivesof carrying out studies on varioustopics of fiscal and tax policiesreferred to it by CBDT and CBEC. Itwill provide independent analysis,prepare and disseminate policy papersand background papers on various taxpolicy issues. (TH, 03.02.16)

Replicating UID SchemeThe World Bank said that India�s

move to roll out unique identificationnumber or Aadhaar to its citizens isworthy of replication by othercountries as an example of technologyleading to economic transformation.The report, which explores the impactof Internet and digital technologies ondevelopment noted that while digitaltechnologies have spread rapidly,dividends from them have beenlagging.It also cited examples, such as that

of EastAfrica,where 40 percent adultspay utility bills throughmobile phonesand China, where 8 millionentrepreneurs use an e-commerceplatform to export goods to 120countries and stated that thesesuccess stories should be replicatedacross the world. (Mint, 14.01.16)

SEBI Orders DisgorgementCracking the whip in the HDFC

Mutual Fund front-running case,capital markets regulator Securitiesand Exchange Board of India (SEBI)has ordered its former equity dealerNilesh Kapadia, his wife KalpanaKapadia and five other connectedpersons to disgorgeM3.35 croreworthof illegal gains made by them.The order follows an investigation

by the SEBI into the matter of front-running by certain entities, wherein itfound that Kapadia had passed oninformation and instructions to hiswife and others before placing theorders for HDFCAsset ManagementCompany (AMC).Front-running refers to an

unethical practice of someone tradingin shares on the basis of advanceinformation at a market intermediarybefore the trades are conducted bythat entity. (ToI, 18.01.16)

Boosting Cashless PaymentsTheUnionCabinet has approvedmeasures topromotepayments through

cards and other electronic means to check tax evasion and transitiontowards a cashlesseconomy.

�Several short-term(to be implementedwithin a year) andmedium-term measures(to be implementedwithin two years) havebeen approved forimplementation by thegovernment ministries/departments/organisations�, the government mentioned in a statement.

The statement declared that the essential steps for promotion ofelectronic payments include withdrawal of surcharge, service charge,convenience fee on cards and digital payments currently imposed by thevarious departments. (Mint, 25.02.16)

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How is UDAY a Game Changer forthe Power Sector?Never before in the history of India

has such a comprehensive power sectorreform, which has the potential tocompletely transform the sector into avibrant, efficient and well-oiled statemachinery, been undertaken. I call itcomprehensive because of its salientfeatures. One, it covers the entire valuechain in the power sector from fuel, togeneration, transmission, renewables,distribution and consumers. It has a very vast canvasdetermined through a bottom-up approach.UDAYwill also bring down the cost in the entire eco-

system of power, coal, and renewable energy byabout M1.8 tn every year by 2019 against a business-as-usual scenario. This will make distribution companiesfinancially much better without stressing the consumerwith tariff increases.

Is the government monetising efficiency whenyou say energy saved is energy generated?Yes the government is doing so. Energy saved is

actually 1.33 times energy generated, considering the 20-25 percent (transmission) losses at present. We also cutdown carbon emissions by saving electricity. UDAYoffersboth financial and operational gains for distributors andstates. Under the scheme, the cost of servicing discomdebt comes down from about 12 percent to about 8 percentfor three-fourth of the loans taken over by the state, andto about 9 percent on the remaining loans for which state-guaranteed discom bonds will be issued. The savingscould be about M33,000 crore a year (discoms had anoutstanding debt of M4.3tn as on September 30, 2015).Further, we have allowed swapping of coal between

less efficient thermal plants and more efficient ones.Allocating coal linkage to a generating company, ratherthan to a specific plant gives companies the freedom touse the fuel in the most efficient way.

You are leveraging India�s market base to createscale that creates efficiency and savings.Yes I am doing so. It will create globally competitive

companies from India. global scale producers in India thatwill serve global customers. This is a way of making inIndia without enforcing it.

Have you quantified the employment generationpotential of the overall reforms in the sector?There is an indirect employment generation potential

of about 2.5million jobs from the impact of all themeasuresthat we are taking as part of UDAY. Our solar energyprogramme alone has the potential of generating one

� Edited excerpts of an exclusive interview of Piyush Goyal published inMint on March 21, 2016P.S. Please see our article on this topic at http://goo.gl/MNTXkm

million jobs. Also, the emphasis on usingdomestic coal will add more jobs in themining sector.

How are states managing to keeppolitics out of UDAY?States are the architects of UDAY, not

the central government. In fact, the financialimpact on central government because ofthis scheme is zero. When Uttar Pradeshsigned up for UDAY, Chief MinisterAkhilesh Yadav sent me a text message

saying that he was happy to adopt the scheme as he wantedits benefits to reach the people of the state. The Bihargovernment too, days after the 2015 state polls, adoptedthe scheme. One of the successful ideas implemented bystates and adopted in UDAY is to mobilise publicparticipation in containing power theft.

How are you addressing fuel shortage of gas-based power plants? We do not have enoughdomestic gas supplies.About 24 gigawatt of gas-based power capacity was

lying idle earlier.We are now auctioning imported liquefiednatural gas (LNG) so that they are able to utilise a part oftheir capacity, which will enable them to service their debtand service the grid. We have been able to revive about11,000MWof capacity because of previous two rounds ofLNG auction. We need to find long-term solutions for ourdomestic gas short supply. One way is to have verticalintegration of the global gas supply chain in which anoverseas gas well owner puts up a regasification terminalin India, gas transportation pipelines, a gas power plant,and a transmission network.

Is the national power grid operational?On December 29, 2015, and on three days in January

this year, we did not have congestion in the transmissionnetwork. Generally, even if we are able to sync the grid to asingle frequency, there will be pieces of the grid whichwillface congestion and prevent accessing the desired levelof power by customers. By removing congestion, we areable to have the same price for electricity across the country.

Several successful bidders at the coal auctionsclaim that they cannot mine commercially at therates they committed?Coal block auctions through competitive bidswere very

transparent. I trust that all bidders came to the auctionwith their eyes open. The government has demonstratedwhat a public sector company can do in achieving efficiencyand scale. It is for the businesses to make sure that theymeasure up to the commitments they made to their stakeholders and to the people, at large.

UDAY is a Game Changer: Piyush Goyal



Execution Will Be the Big ChallengeG Raghuram*

First of all, I have been following the earlier bold initiativeof opening up container services to the private sector

under a public-private partnership (PPP)mode; the proposalbegan to totter due to commodity, terminal access and tariffrestrictions. The latest budget provides a whiff of fresh airthrough this statement: �Container sector would be openedto all traffic barring coal and specified mineral ores andpark loads would be permitted during the non-peak season.All existing terminals/sheds would be granted access tocontainer traffic, where considered feasible�.

Secondly, there are eight objectives clearly laid out to beachieved by 2020. Of these, five have clear measurablegoals (though punctuality still comes with the qualifier�almost�)! The remaining three are creditable in themselvesthough have been repeatedly, for many years, discussedas good things to do. 1) Reserved accommodation on trainsbeing available on demand, 2) Time-tabled freight trainswith credible service commitments, 3)High-end technologyto significantly improve safety record, 4) Elimination of allunmanned level crossings, 5) Punctuality increased toalmost 95 percent, 6) Increased average speed of freighttrains to 50 kmph and mail/express trains to 80 kmph,7) Semi high-speed trains running along the goldenquadrilateral, and 8) Zero direct discharge of humanwaste.

Further, the mission of developing at least 100 sidingson a private participation mode is long overdue and

welcome. This brings in the bread and butter for IndianRailways. Even now, there are concerns in parity of chargeswhen trains access a private freight terminal versus therailways� own terminal.

* Professor, Public Systems Group, at the Indian Institute of Management, Ahmedabad. This feature has been abridged froman article published inMint on February 26, 2016

In addition, the focus on station redevelopment throughPPPs is a good step and has been talked about for over adecade. The problem has been with the bidding processand agreements. As of now, seven stations are listed onthe Indian Railway Stations Development Corporationwebsite, of which three have some documentation. Theproposal for redeveloping 400+ stations is to be attemptedthrough the Swiss Challenge route, in which any entitycan bid to improve upon a project proposed by a rival.

Moreover, there has been a reiteration of emphasis on theRail DevelopmentAuthority. This provides for the much-needed independent regulator, enabling separation ofpolicy making and regulation.We only hope that it wouldhave the necessary scope, powers and independence.

There has been explicit recognition of the need fororganisational restructuring: �A departmental

orientation, absence of cross-functional collaboration andlack of business focus have held back Bhartiya Rail fromrealising the commanding heights that it is capable ofachieving. The solution to this lies in reorienting theworking of the organisation towards a common corporateobjective�.

Besides, the Indian Railway University has once againbeenmentioned. This would require a Bill, if it is expectedto function like the Indian Maritime University and theNational Aviation University. Continuing the focus onresearch, the announcements related to SRESTHA(Special Railway Establishment for Strategic TechnologyandHolisticAdvancement) and SUTRA(Special Unit forTransportation Research and Analytics) are welcome.Four research centres announced in the previous budgethave already been established.

Thus it appears that both 2015-16 and 2016-17 will befinancially surplus years, in spite of the economic

downturn and the charges due to the Pay Commissionrecommendations. In this context, reduced provisioningfor depreciation, savings in working expenses and the120-day advance booking to generate earlier revenuesare questionable.

Overall, while policy directions and financials arewelcomein a budget, a great amount of detail on amenities is reallyout of place.

The railway budget presented by RailwayMinister Suresh Prabhu points the nationaltransporter in the right direction. The challengewould be more in the execution of his budgetproposals

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Rising Cost of Land a Major Roadblock inNational Highway Expansion

Rajat Arora*

* Reporter with The Economic Times. This article was published in The Economic Times on March 28, 2016.

Land acquisition cost for national highway projectshas shot up sharply in the current financial year on

account of the new land acquisition law that came intoforce in 2015, dealing a blow to the government�sambitious plan to crisscross the country with top qualityroads. The government paid M1.35 crore per hectare in2014-15, which has gone up 65 percent toM2.22 crore perhectare in the current financial year. About 1.5 hectare ofland is needed to build one kilometre of a four-lanehighway.

In order to address the rising vehiclecongestion in the country, UnionMinisterNitin Gadkari has recentlyannounced that the national highwaycover will be increased from the current96,000 km to 2 lakh km. He said that aformula has been devised based onvehicular traffic movement, according towhich four-lane, six-lane and expresshighways will be developed. TheMinister said, �At present, we have96,000 km national highways or 52 lakhkm road length in the country. As muchas 40 percent of the traffic moves on these 2 percentnational highways and as a result, five lakh accidentstake place�, the Minister said.

The road transport and Highways Ministry has seenan increase of 30 percent in total cost of highway

construction in the current financial year on account ofhigh land prices and increased labour costs.

�Earlier, land accounted for 10-15 percent of the totalproject cost. It has now gone up to 40 percent�, said a

senior official at the Ministry. The Ministry expects theland cost to be around M2.5 crore per hectare on anaverage in the following financial year. Under the newland acquisition law, the government has to pay twice theprice of land in urban areas and four times the price ofland in rural areas.

In 2014-15, the government acquired 6,500 hectare forhighway projects and paid around M9,000 crore incompensation. This year, thegovernment has acquired 9,000 hectarefor M20,000 crore. The target of landacquisition for the following year isexpected to be 12,000 hectare.

�That much increase in land costcertainly acts as a stress point foravailable budget for highway sector.However, these lucrative prices removethe resistance of farmers and othersellers, who get much better value oftheir land�, said Vinayak Chatterjee,Chairman at Feedback infra.

For building a greenfield twolane national highway,the government spends aroundM10 crore a km, which

includes the land and construction cost. For a four-lanehighway, the cost comes out to M16 crore per km.

The National Highways Authority of India is the landacquiring agency inmost states except in hill states, wherethe National Highways and Infrastructure DevelopmentCorporation does land acquisition for highways.

Under the new landacquisition law, thegovernment has topay twice the priceof land in urbanareas and fourtimes the price ofland in rural areas


T R A D E & E C O N O M I C S

Retail Trade PolicyTo accelerate investments in

underdeveloped regions of state andretain its leading position in retail tradein country, Maharashtra has given in-principal approval to a new policy.The policy, states that retail traderswould be excluded from provisions ofstocking limits under the EssentialCommoditiesAct.Traders would be exempted from

Agriculture Produce MarketingCommittee (APMC) regulations, sothat the farmers can sell their producedirectly to the retailers.An official from the industries

department said that up to 50 percentadditional Floor Space Index (FSI) fordevelopment of retail and shoppingcentre would be admissible over thebase FSI, subject to payment of fullapplicable premium according toprevailing ready-reckoner rates.

(BL, 20.01.16)

New Textile PolicyThe government will announce

new textile policy, which is expectedto be based on vision document byAjay Shankar committee in July 2014,by the end of April. The documentenvisaged textile and garment exportsworth US$300bn by 2024-25,compared to US$41bn in past fiscal.It favoured a structural

transformation whereby countrywould ship out only finished productsand not rawmaterials. The document

also forecasted textile and garmentsales in the domestic market to rise toUS$350bn by 2024-25, againstUS$100bn at present.The TextileMinistry had initiated

the process of reviewing the NationalTextile Policy, 2000, and an expertcommittee was constituted to makefresh recommendations. (FE, 18.02.16)

BusinessRegister DataThe government has launched a

mammoth enumeration exercise tocollect data on all the businessenterprises for the National BusinessRegister, a move aimed atstrengthening assessment ofeconomic activity.The Business Register will list

establishments at district-levelcovering seven Acts and authorities,including the FactoriesAct, the Shopsand Commercial EstablishmentsAct,the Companies Act, the SocietiesRegistration Act, the CooperativeSocieties Act, the Khadi and VillageIndustries Board and the Directorateof Industries.The idea is to develop an

electronic database of all suchinformation, which will give a boostto Prime Minister Narendra Modi�s�Digital India� campaign and alsopromote Khadi. (ET, 28.03.16)

Call for Reducing SubsidiesThe economic survey for 2015-16

has called for reducing subsidies for

well-off, estimating that aroundM1 lakh crore is flowing as subsidiesfor six commodities, such as cookinggas, railways alongwith small savingsschemes.The survey said there are a fair

amount of government interventionsthat help the relatively better-off insociety. The survey has alsosuggested that the governmentshould move in a phased manner tothe exempt-exempt-tax (EET)methodof taxation of small savings, especiallyfor PPF, which is in exempt-exempt-exempt (EEE) category. (IE, 26.02.16)

Largest Arms ImporterIndia continues to remain world�s

largest arms importer, accounting for14 percent of global imports in the2011-2015, in another indicator ofcountry�s enduring failure to build astrong Domestic Defence-Industrialbase (DIB).The latest data on international

arms transfers released by StockholmInternational Peace Research Institute(SIPRI), shows India�s arms importsremain three times greater than itsrivals China and Pakistan. Its biggestsuppliers are Russia, the US, Israeland France. After India, China rankssecond with 4.7 percent, followed byAustralia (3.6 percent), Pakistan(3.3percent),Vietnam(2.9percent) andSouth Korea (2.6 percent).SIPRI reiterated the well-

acknowledged fact that �a majorreason for the high-level of imports isthat the Indian arms industry has sofar largely failed to producecompetitive indigenously-designedweapons�. (ToI, 23.02.16)

India Third-largest EconomyAccording to a report by Centre

for Economics Business andResearch(CEBR),Chinawill overtake the US asthe largest economy in world in 2029with the US slipping to second placeand India close behind at third.India�s projected Gross Domestic

Product (GDP) in 2030 wasUS$10,133bn, behind America�sUS$32,996bn and China at top with aprojected GDP of US$34,338bn.However, Indiawill become the largesteconomy in Commonwealth in 2019when its economy overtakes theBritish economy. (BL, 01.01.16)

M&A Activity ShrinksM&A activity in India has fallen to a two-year low, according to a

Thomson Reuters report. The value of M&A deals involving Indiancompanies stood at US$35.1bn in2015, a 4.8 percent fall comparedto 2014.

The average M&A deal sizewitnessed a drop during FY15.Average transaction size of dealsduring 2015 was US$70mn �compared to US$77.6mn during2014. Total cross-border M&Aincreased 73.1 percent toUS$23.2bin compared to 2014.Outbound M&A activity grew 112.3 percent in value from comparativeperiod in 2015.

Private equity-backed M&As accounted for 32.7 percent, the industrialssector accounted for 15.9 percent while Energy and Power, Financials andRetail sector accounted for 12.3 percent, 11.7 percent and 11.6 percent ofIndia�s domestic M&A activity, respectively. (FE, 05.01.16)

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Flaws

Outlook for India

The Strengths

Growth to rise to 7.9 % in 2017-18 from7.5 % in 2015-2016

India well positioned to withstand near-term volatility in global financial markets

This is due to strengthening domestic business cycle and supportive policy environment

Infra Improvements and rise in investment to off-set impact of US monetary policytightening

Urban spending to benefit from recent public sector wage hikes

Progress in the reforms not assured asruling party has no control over UpperHouse

Slow Progress on land reforms could addto investment delay

Failure to pass GST could hampergovernment�s ability to ramp up infraspending

Sub-Par-Monsoons across India pose arisk to growth in near term

High NPAs could hit pick-up in investment

T R A D E & E C O N O M I C S

India Brightest Spot on Map

The World Bank (WB) expectsIndia�s growth to pick up to

7.8 percent in the following financialyear, projecting it to be the fastestgrowing economy in theworld for thefollowing three years by a distance,riding on stronger domestic policyreforms.

India is expected to notch near8 percent growth in the subsequentyears as theworld economy also picksup pace to 2.9 percent growth in 2016compared to a modest 2.4 percent inthe just concluded year. �South Asiawill be a bright spot, reflectingimproved conditions in India�, theWBsaid in its flagship �Global EconomicProspects� released recently.

The report pegs growth in the currentyear at 7.3 percent, same as of 2015year while raising concerns overlegislative reforms. �In India, progressin reforms is not assured as the upperhouse of Parliament, which the rulingparty does not control, has the powerto block the government�s legislativeagenda�, the report revealed, addingthat the government has madeprogress in key areas, such as energyand in November announced majorreforms to liberalise Foreign Directinvestment (FDI) in several sectors.

According to the report, weakgrowth among major emerging

markets will weigh on global growthin 2016, but economic activity shouldstill pick upmodestly to a 2.9 percentpace, from 2.4 percent in 2015, asadvanced economies gain speed.Recognising that the simultaneousweakness in most major emergingmarkets is a concern for achieving thegoals of poverty reduction and sharedprosperity, the report warned that thespillovers from major emergingmarkets will constrain growth indeveloping countries and pose athreat to hard-won gains in raisingpeople out of poverty.

�More than 40 percentof the world�s poor livein the developingcountries where growthslowed in 2015�, saidWB Group PresidentJim Yong Kim.�Developing countriesshould focus onbuilding resilience to aweaker economicenvironment andshielding the mostvulnerable. The benefits from reforms to governance and business conditionsare potentially large and could help offset the effects of slow growth in largereconomies�.

According to the report, developing economies are forecast to expand by4.8 percent in 2016, less than expected earlier but up from a post-crisis low

of 4.3 percent by the end of 2015. �Growth is projected to slow further in China,while Russia andBrazil are expected to remain in recession in 2016. The recentlynegotiated Trans-Pacific Partnership could provide a welcome boost to trade�,it revealed.

�There is greater divergence in performance among emerging economies.Compared to sixmonths ago, risks have increased, particularly those associatedwith the possibility of a disorderly slowdown in a major emerging economy�,said WB Group Vice President and Chief Economist Kaushik Basu. �Acombination of fiscal and central bank policies can be helpful in mitigatingthese risks and supporting growth.

* This feature has been abridged from an article published in The Economic Times on January 07, 2016


R E P O R T D E S K

Growing Billionaire ListIndia has witnessed over four

times or 330 percent jump in numberof billionaires over the past 10 yearsas against 68 percent rise notedglobally, said Knight Frank GlobalWealth report 2016. The trend isexpected to continue with number ofIndian billionaires doubling over thefollowing decade,while global numbercould rise by 44 percent.Ultra-high net-worth individuals

(UNHIs), have also grown by 340percent to 6,020 during this period, asagainst global average of 61 percentto 187,468. Among Indian cities,Mumbai leads the pack followed byNewDelhi. The strength and diversityof the Indian economy will continueto provide entrepreneurial and wealthgrowth opportunities said NicholasHolt,HeadofResearch forAsiaPacific,Knight Frank.

(ET, 03.03.16 & TH, 25.02.16)

Fall in Demographic DividendA part of India�s touted

demographic dividend � thepopulation below age 15 years � hasdecreased in the past 10 years.Our standard of living � householdswith clean water, electricity, etc. hasshown a rise during the same period,in 11 states covered by thelatest National Family HealthSurvey (NFHS-4).Sikkim topped the list of states

showing a decrease of populationaged below 15 years, to 23.1 percentin 2015-16 from 30.7 percent in 2005-06 and Madhya Pradesh was next.

Uttarakhandwas the only state, whichshowed significant improvement in allfive parameters of living standards.These comprised households withimproved sanitation facilities, a cleancooking fuel source, electricityconnection, clean drinking watersource and using iodised salt.

(BS, 21.01.16)

India to Move to BS VIIn a major step to curb vehicular

pollution, India will leapfrog directlyfromEuro IVemissionnorms forpetroland diesel to Euro VI standards andthe oil Public Sector Undertaking(PSUs) will invest M28,750 crore forthe transition.A decision was taken at an inter-

ministerialmeeting to advance the dateby four years to April 01, 2020 forimplementation of Bharat Stage VI(equivalent toEuroVI norms followedglobally) for supply of cleaner autofuel, by altogether skipping the Euro+V grade norms.India currently has Bharat

Stage-III, equivalent of Euro-IIIspecifications, across the country andBS-IV in major cities. BS-IV will besupplied in most big cities by April2016 and all over the country fromApril 2017. (IE, 06.01.16)

Average Asset HoldingThe average asset holding of the

bottom 10 percent of urban Indianhouseholds is around M291, revealsnew data from the National SampleSurvey Office (NSSO). Mosthouseholds reported owning some

kind of physical or financial assets,the survey, conducted in 2012-13shows.The bottom 10 percent (in terms

of total assets) of rural householdshad assets worth M25,071 on anaverage, largely as a result of the valueof land,while the figure for their urbancounterparts was justM291, implyingthat the urban poor hardly own anyassets. Haryana and Punjab had thehighest average assets per householdin rural areas, while Maharashtra andKerala were on top in urban areas.

(TH, 30.01.16)

Pollution Causing DeathsMore than 5.5 million people

worldwide die prematurely every yeardue to household and outdoor airpollution, and India andChina togetheraccount for 55 percent of these deaths,new research has found. About1.6million people died of air pollutionin China and 1.4 million died in Indiain 2013, the researchers revealed.The international team of

researchers from India, China, Canadaand the US estimated that despiteefforts to limit future emissions, thenumber of deaths linked to airpollutionwill climb over the followingtwo decades unless more aggressivetargets are set. In India, a majorcontributor to poor air quality is thepractice of burning wood, dung andsimilar sources of biomass for cookingand heating. (ToI, 14.02.16)

Corruption Ranking ImprovedIndia moved up to the 76th rank on

the Corruption Performance Index(CPI) released by global watchdogTransparency International (TI) intheir 2015 report, gaining nine placesover the previous year.The CPI scores and ranks

countries/territories based on howcorrupt a country�s public sector isperceived to be, and it showed thatIndia was ranked 76 out of a total of168 countries and had a score of 38on the CPI out of a possible 100. In2014 and2013, India�s rankwas85 and94 respectively.For a third year running, Denmark

was perceived as the cleanest countrywith a score of 91. The CPI has a scaleofzero to100andcountries scoringzeroare the most corrupt. (DNA, 28.01.16)

Corruption Delays Startups

Corruption and delays are preventing the growthof entrepreneurship in India, according to a

new survey undertaken by social media network,LocalCircles. About 35,000 unique people votedin the survey.

It showed nearly 60 percent of the citizens feltthese bottlenecks were some of the biggest hurdlesto growth of entrepreneurship in the country whileonly 14 percent felt funding to be the mainimpediment.

Around 98 percent of the respondents said thestart-up India mission should go beyond digital/technology startups and enable entrepreneurship atthe grassroot-level. Asked if the Central or Stategovernments can be effective and efficient fundingbodies for startup projects, 58 percent of the peopleresponded positively. (TH, 06.01.16)


R E P O R T D E S K

The biggest hole in India�s economic data is starting toshrink. PrimeMinister NarendraModi�s government

plans to publish a revamped quarterly employment surveyin July to better assess howmany jobs are created inAsia�sthird-largest economy, ShankarAggarwal, top bureaucratin the Ministry of Labour and Employment, said. Thesample for the report will increase fivefold to about 10,000respondents and include 18 sectors of activity, up fromeight now, he added.

�Our data will be much more authentic�, Aggarwal said.The new report will give both the economists and thepolicy makers a more reliable tool to assess whether theworld�s fastest-growingmajor economy is adding enoughjobs for its burgeoning youth, a key Modi campaignpromise. While the survey�s usual six-month lag fails toaddress India�s lack of real-time employment data, thebroader scope adds to recent efforts to modernise thecountry�s policy arsenal with revised GDP calculationsand an inflation target.

�If the sample size of this database is increased, certainlynot only me, but other people will also start taking thesedata seriously� saidDevendraKumar Pant, chief economistat India Ratings and Research Pvt., the local unit of FitchRatings. �The volatility will reduce, the fluctuations willsmoothen out � so the more, the merrier�.

The improved reportwould complement a planned high-frequency jobless rate from the Centre forMonitoring

IndianEconomyPvt., a private research company.Togetherthey would help central bank Governor Raghuram Rajanpredict whether the economy is close to overheating ashe tries to hit a 5 percent inflation target by March 2017.Rajan has said he would add employment to the mix ofindicators he uses to guide interest rates if there was agood series.

In its current form, the employmentsurvey shows a labour market that istrudging along rather than booming.The eight industries covered added acombined 134,000 positions in thequarter through September from theprevious three months, according tothe report published month. That isless than in the corresponding periodsof 2013 and 2014.

Most of the jobs came from non-exporters, with only 31,000 positions

Modi Moves to Plug India�sBiggest Data Hole

Sandrine Rastello* and Bibhudatta Pradhan**

added by businesses that sell goods overseas. Exportshave dropped for 15 straight months. �Demand has gonedown all over the world, so India is also a part of that�,Aggarwal said. �However, as compared with othercountries, India is in the best position.�At the same time,a global survey of hiring expectations byManpowerGroupInc. ranks India as the most active labour market among asampling of 42 countries,while an index by local jobs portalnaukri.com shows an 18 percent increase in hiring activityin February from a year earlier.

The initial labour survey was started in the wake of theglobal financial crisis.While the sectors include leather,

automobiles and metals, not all are equally represented.The textile and handloom sector, for instance, accountedformore than 40 percent of the 1,932 respondents in the lastreport.While seven federal agencies publish labour-relatedreports, none are timely enough to seriously affect policy.Widespread informal employment also makes it tough tomeasure workers. And even with 10,000 respondents, thesample will pale in comparison with roughly 146,000participants in the US non-farm payroll survey.

* Economy Reporter (Bloomberg News)** Economy Reporter (Bloomberg LP)Senior Assistant Editor with The Hindu. This article was published in The Hindu on April 01, 2015


C O R P O R A T E G O V E R N A N C E

Thedramatic exit of former promoterVijayMallya fromUnitedSpirits Limited(USL) is a wakeup call for independent Directors in Indian companies and

could prove a catalyst for many corporate governance related storylines in thecountry in coming years, industry trackers have indicated.

Independent Directors, who until recently were considered glorified yes mento the promoter, could see a lot of pressure in the coming days to maintain theprecedent set in the USL case as well as added responsibilities of independentDirectors under the Companies Act, 2013 and other corporate governanceregulations. However, corporate governance experts said many companiescontinue to exploit loopholes in the laws and ensure independent Directorsmostly play along with the promoters.

Even in the case of USL, where independent Directors did finally crack thewhip on Mallya, they said it was too little, too late. �Independent Directorshave failed in the case of USL. They did not take the right precautions duringtheir ongoing transactions with Kingfisher�, said Mohandas Pai, former CFOand HR head of software major Infosys.

Pai said USL episode signals it is high time companies and independentDirectors took their roles more seriously. �This is a wakeup call for India

Inc, to have the right independent Directors and auditors specially looking intorelated party transactions. Also firms should decide to pay the independentdirectors more to get the right quality�, opined Pai.

Independent Directors have often come under scrutiny whenever there havebeen controversies in India Inc, and there have been questions on how muchindependence these Directors actually have. There are signs of change though.Independent Directors have become more worries in recent months, mainlydue to the CompaniesAct dishing out some regulations around the liability ofthe Directors and even capped their remuneration.

The independentDirectors are expected in any case to exercise their independentjudgement in decisionmaking at all times, be intellectually honest while doingso, voice their opinion freely in the board meetings, and bring to bear upon

Vijay Mallya�s USL ExitA Wakeup Call for Independent Directors

Devina Sengupta* and Sachin Dav**

* Associated with The Economic Times** Special Correspondent with The Economic Times� This feature has been abridged from an article published in The Economic Times on February 29, 2016.

their knowledge and experience in theBoard discussions for the benefit ofthe company and shareholders.

Industry trackers mentioned that inthe followingsix months manyindependent Directors could resignfrom their roles due to increasedliabilities and a cap on remuneration.The worry is that they could even bejailed in case of a corporategovernance issue in the companythey hold the positions.

USL could just be one off caseespecially in the context of Indiancompanies where independentDirectors did take a stand. However,we have begun the transition andmoving ahead in both expectationsand liabilities of the Directors. saidAmit Tandon, Managing Director atAdvisory firm, Institutional InvestorAdvisory Services India Ltd. (IiAS).

While some industry experts havecriticised these regulations �

under the current regulationsindependent Directors could fall in totrouble even in something asunrelated as company�s chequebouncing or irregularities in thepollution norms � others felt some sortof frameworkwas required,mainly dueto the way independent Directorsoperate in most of the companies.

A reputed independent Director saidthe whole process in which theindependent Directors are selected inIndia is flawed. �The meetings arenothing short of sham, where thepromoter dishes out what he wants,and independent Directors just agreeto do it. The independent Directorswould getmillions as fees and in somecompanies these positions were filledwith relatives or friends�, he said.

Mallya�s exit could provea catalyst for manycorporate governancerelated storylines in thecountry in coming years,industry trackers believe

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G O V E R N A N C E & R E F O R M S

PrimeMinisterNarendraModi saidthat India should craft policiesthat canmake a positive contributionto the rest of the world in anincreasingly inter-connected world.�The distinction between domesticaffairs and foreign affairs isincreasingly losing relevance. For acountry in the modern day, it is notsufficient that its economic policiesshould only address its domesticpriorities�,Modi believes. In the pastfour quarters, India has been thefastest growing major economy inthe world, Modi added.

�In 2014-15, India contributed 7.4percent of global GDP in purchasingpower terms. But it contributed 12.5percent of global growth. Thus, itscontribution to growth is 68 percenthigher than its share of the globaleconomy. Foreign Direct Investment(FDI) in India has increased 39percent in the past 18 months, at atime when global FDI has fallen�,Modi indicated.

But the Prime Minister elucidated that India�scommitment for a better world goes beyond

economics and it was for this reason that at the COP(Conference of the Parties) 21 Summit in Paris, Indiamadefar-reaching commitments for cutting carbon emission.�We are committed to reduce the emission intensity ofour GDP by 33 percent by 2030 even while growing at afast pace. For a country, which is already at a very lowbase of per capita emission, this is a very ambitioustarget�, Modi said. �We have committed that by 2030, 40percent of our electric power capacity will be from non-fossil fuel.

We have also committed to building an additional carbonsink of over 2.5 billion tonnes of carbon dioxideequivalent. This will be done by creating additional forestcover by 2030. This commitment is from a country with avery low per capita land availability�, added Modi.

Calling for a rethink on what constitutes subsidies, Modistatedwhile all benefits to poor and farmers are considered

* Business Jounalist with Mint. This feature has been abridged from articles published inMint on January 30, 2016

Policies Need to Make PositiveContribution to Rest of the World

Asit Ranjan Mishra*

�subsidy�, economists often term thebenefits given to industry incentiveor subvention. �We must askourselves whether this difference inlanguage also reflects a difference inour attitude. Why is it that subsidiesgoing to the well-off are portrayed ina positive manner�? he asked.

Modi clarified he was notarguing all subsidies were

good. �My point is there cannot beany ideological position on suchmatters. We have to be pragmatic.We have to eliminate bad subsidies,whether or not they are calledsubsidies. But some subsidies maybe necessary to protect the poor andthe needy and give them a fairchance to succeed. Hence, my aim isnot to eliminate subsidies but torationalise and target them�, headded.

Expanding on subsidy reforms,Modi said his government hadstarted pilot projects in 33 districtswhere kerosenewill be sold atmarket

price. �The difference between market price and thesubsidised price will be transferred directly to the bankaccounts of those who are poor. This will eliminateduplicate, non-eligible and bogus consumers. We havedecided 75 percent of savings from this will be passed onto the states. Thereby, we have encouraged stategovernments to implement this in all districts�, he added.

He said just by eliminating double counting andineligible beneficiaries, a reduction of 12 percent in

pension payouts had been achieved. Modi said that hisgovernment is taking steps to repeal unnecessary lawsas they obstruct people and businesses. �We began theexercise of identifying unnecessary laws and repealingthem. 1,827 central laws have been identified for repeal.Out of these, 125 have already been repealed. Bills forrepealing another 758 have been passed by the Lok Sabhaand are awaiting the approval of the upper House�, headded.

The distinction betweendomestic affairs and foreignaffairs is increasingly losingrelevance. For a country inthe modern day, it is notsufficient that its economic

policies should onlyaddress its domestic

priorities�, Modi believes


G O V E R N A N C E & R E F O R M S

Job Potential in ProposalsThe government has decided that allMinistries will now

have to reflect the �Employment Generation Potential� ofeach proposal they put up before the Cabinet or a CabinetCommittee for approval.�In view of the fact that employment generation in

various sectors is vital for country�s socio-economicdevelopment, this aspect has to be an important criterionfor any project/scheme appraisal�, stated the SpecialSecretary�s letter, adding that �it has, therefore, been decidedthat henceforth all the notes for Cabinet and its Committeesshould separately and clearly reflect the EmploymentGeneration Potential of each proposal�.Besides, the government has also modified the

handbook on preparation of notes for Cabinet/CabinetCommittees accordingly. (IE, 20.01.16)

Mooting Security AuthorityThe Labour Ministry has mooted the idea of forming a

National Social Security Authority, Chaired by PrimeMinister Narendra Modi, and a separate Social SecurityDepartment within the Ministry to provide social securityto the entire population in a bid to prop up the government�spro-worker credentials, according to a concept note.�The functions of the authority should be mainly to

formulate the National Policy on Social Security and to co-ordinate the central and state-level programmes and toensure the objectives of the policy are achieved within thetime frame prescribed�, according to the note. It proposes afour-tier system to cover the entire population of thecountry, including both formal and informal sector workers,through a common Social Security Code. (TH, 19.02.16)

Separate Poverty Indicators

The issue of one poverty number continues to absorbthe NITI Aayog, and indications are that its task force

on elimination of poverty will suggest having separateindicators fordifferent socialschemes, suchas health andhousing.

The UrbanP o v e r t yA l l ev i a t i onMinistry iscarrying out acensus, whichwill throw upa number for

the urban poor. Calculation on rural poverty is based onthe 2011 Socio Economic and Caste Census of the RuralDevelopment Ministry.

The Ministry has reportedly classified 31.26 percentof rural households as poor based on four of sevenindicators. The Rangarajan Committee, a technical expertgroup set up by the United Progressive Alliance (UPA)Government in 2012, had classified 30.95 percent of ruralIndians as poor in 2011-12. (BL, 03.01.16)

C A G N E W S

Low Tax RevenueThe tax revenue of Madhya Pradesh (MP)

government was much below its expectations whileexpenditure went beyond its estimate in 2014-15, as perthe Comptroller and Auditor General (CAG) report forMP for 2014-15. The state had estimated tax revenuerealisation at M66,479 crore but it fell short by M29,912crore, according to the report.The state government�s expenditure, however, shot

up byM446.28 crore from its estimate, it said. The growingvolume of debt has resulted in increasing liability forservicing the debt, the report underlines. The prioritygiven to expenditure on social sector and on educationand health sectors inMPwas �not adequate� during 2014-15when comparedwith general category states� average,it stated. (ToI, 20.03.16)

Telcos Cheating Govt.TheCAGhasclaimed that sixmajor telecomcompanies

� Reliance Communications, Tata,Airtel, Vodafone, Ideaand Aircel � have allegedly understated gross revenueof over M46,000 crore for a period between 2006-07 and2009-10 and denied the government its share of income,which has been estimated at more than M12,400 crore.Different from its earlier report on the 2G spectrum,

where computation of the losses were presumptive basedon policy flaws, the CAG, at present, has calculated thelosses on inspections of the books of accounts of thesetelecom firms and on actual earnings. (ToI, 09.03.16)

Punjab in Debt TrapThe CAG of India has said that Punjab is headed

towards a debt trap as the government is utilising 70percent of its current borrowings for repayment of itsearlier borrowings and the remainder for expenditure onother projects. The state has to repay more than 50percent (M43,581 crore) of its debt in the following sevenyears.It said, 34 projects, scheduled to be completed

between 2008 and 2014-15, were still incomplete. CAGhasmentioned �off-set� borrowings �M2,025.67 crore forAtta-Dal scheme and M2,000-crore loan raised bymortgaging properties by Punjab Urban DevelopmentAuthority (PUDA) in 2012-13 � that skewed the finances.

(ToI, 15.03.16)

CAGRapsVTUVisvesvaraya Technological University (VTU) has

been rapped byCAG for glaring lapses in ensuring qualityof education in engineering colleges. Though it ismandatory for affiliated colleges to get accreditation fromthe National Assessment and Accreditation Council(NAAC) aswell asNational Board ofAccreditation,manycolleges are yet to secure it.TheCAG reportmentioned that, �VTUdid not ensure

minimum standards prescribed by AICTE in respect ofcolleges affiliated to it as the colleges had deficienciesin teaching faculty, library, laboratory facilities, etc.,which indicated poormonitoring byVTU�. (IE, 24.03.16)


P A R L I A M E N T A R Y R O U N D U P

Series of disruptions in IndianParliament and in state assemblies

over the past few years have raisedserious concerns over the democraticset-up in India. Regular adjournmentof sessions has hindered legislationsand other productive work.With everysuch instance of stalling democraticproceedings, the taxpayer�s hard-earned money goes down the drain.

India borrowed its parliamentarystructure from the UK but it did notadopt a valuable part of it � the ShadowCabinet system. This system could bean effective solution to the persistentproblem of our not-so-maturedemocracy. The ShadowCabinet (alsocalled the Shadow Front Bench) isintegral to the Westminster System. Itis composed of a senior group ofopposition leaders where eachmembershadows or marks a Minister of theruling Cabinet. The shadowCabinet isled by the Leader of the Opposition (orthe leader of other smaller oppositionparties) and represents an alternativecabinet to the ruling one.

The Shadow Minister for defence,for instance, would track the

policies and issues related to theDefence Ministry. S/he would be theofficial spokesperson for theopposition over defence issues.Similarly, all major Ministries can betrackedmore effectively.

It is mainly the shadow Cabinet�sresponsibility to criticise thegovernment and its policies. It alsodecides whether amendments to thelegislation are needed. This helps inhaving serious debates in Parliamentwith Shadow Ministers taking on thereal Ministers and effectively holdingthem accountable for their actions andpolicies. The Shadow Ministers areelected through ballot in the BritishLabour Party and theAustralian LabourParty,with theLeader of theOpposition

allocating the portfolios. In other parties, they are nominated by the Leader ofthe Opposition.

Putting a face from the Oppositionon each of the Ministries also

demonstrates the opposition parties�commitment to the people.Membersof a shadow cabinet are often, butnot always, appointedminister whentheir party comes to power. In absenceof the Shadow Cabinet, attention ofthe opposition often gets divertedfrom main issues. Hence, the verypurpose of having an opposition islost. Uttara Sahastrabuddhe,professor atMumbaiUniversity, said,�Having assigned roles wouldensure that issues are followed upby the opposition leaders with morecommitment. Thus the propaganda ofthe government can effectively becountered�. The skills of theopposition leaders would also continue to evolve when they would focus onspecific Ministries. This would help when their party comes to power as theywould be effective in their roles as ministers in the government.

Congress leaderMilind Deora seconds the proposition. �As amain oppositionparty, the Congress can adopt the system, unofficially. We already haveshadow twitter handles to track eachMinistry�. He points out that the countrieswhich follow the Westminster system have two or three party system whilecoalition governments are common in India. �Still, this does not limit theprospects of a shadow Cabinet here�, said Deora, adding that the systemwould ultimately help our democracy and the country to evolve gradually.

The media, which often ends up portraying the government�s version, wouldthen present opposite views as well, said a political scientist, who believesthat the ShadowCabinet might eventually lead to a two-party system in India.

Parliament Will Benefitfrom a Shadow Cabinet

Kanchan Srivastava*

It is mainly the shadowCabinet�s responsibilityto criticise thegovernment and itspolicies. It also decideswhether amendments tothe legislation areneeded. This helps inhaving serious debates inParliament with ShadowMinisters taking on thereal Ministers andeffectively holding themaccountable for theiractions and policies

* Principal Correspondent at Daily News and Analysis (DNA, Mumbai). This feature has been abridged from an articlepublished in DNA on January 26, 2016.


E X P E R T C O R N E R

Pushing Public ExpenditureIndia needs to step up public spending on

social infrastructure and rural areas to boostdomestic demand to overcome the slump inconsumer spending worldwide, said FinanceMinisterArun Jaitley.Concerns have been raised about keeping

the public spending tap open in the absence of privateinvestment andwhat that could do to the fiscal deficit.Accordingto the FinanceMinister, India still manages faster growth but itis important to see how do we improve our growth rate a littlefaster. �India needs to invest a lotmore in infrastructure, increasepublic spending in social infrastructure and raise spending inrural sectors like irrigation and rural roads. This spending bringsimmediate results�, said the Finance Minister. (ET, 09.01.16)

India Showing Economc GrowthIndia may become the world�s largest economy in the

following 25-30 years, said SoftBank Chairman and CEO,Masayoshi Son. Son said that he strongly believes that the 21stcentury belongs to India as its people are smart, young, speakEnglish and are IT-proficient. However, the country needs toresolve issues related to infrastructure and slow mobilebroadband speeds, he said.SoftBank has invested in Indian e-commerce and technology

firms, such as Snapdeal, Ola Cabs, Housing.com and OYORooms. However, he said that the two things that lacking inIndia are mobile broadband infrastructure whose connectivityis too slow and expensive and the second is electricity.

(TH, 17.01.16)

Complain, Rebel and DemandAsking citizens to continue to �complain, demand and rebel�,

President Pranab Mukherjee said the nation must recognisethat doing this was a virtue of democracy. Mukherjee said thecountry must guard against �violence, intolerance andunreason�.�There will be, amongst us, occasional doubters and baiters.

Let us continue to complain, to demand, to rebel�..withinvestments in infrastructure, manufacturing, health, education,science and technology, we are positioning ourselves well forachieving a higher growth rate whichwill in the following 10 to15 years help us eliminate poverty�, Mukherjee added.

(ToI, 26.01.16)

Reacting to Social SplittingHow a country deals with its social divisions plays a major

role in the trajectory of its economic development, stated theChief EconomicAdvisor,Arvind Subramanian.The CEA presented Singapore as a good example where

social conflict was effectively addressed to enable economicdevelopment.�We think of Lee Kuan Yew as having provided great

administration, a great civil service but I think one of the criticalthings he did which goes unrecognised is that essentially amassive social engineering project was unleashed, which peopledo not realise by way of forcing communities to live togetherand their children to go to the same school. This has had apowerful impact in reducing conflict in Singapore society��,Subramanian added. (IE, 04.03.16)

E D U C A T I O N S E C T O R

Focus on Child HealthThe Centre has conveyed to the Supreme Court

that the issue of eradication of alcohol and drug abuseby the students would be included in thegovernment�s proposedNewEducation Policy (NEP).An experts committee for evolution of the NEP

on its earlier meeting had taken a decision that thetheme relating to eradication of alcohol and drugabuse by the students will be included forconsideration in the policy. It also sought to createspecialised systems and practices to enable andpromote rehabilitation among children. (DNA, 15.02.16)

EducationCess in FY 2015-16The Government recently said it has collected

M20,165 crore through education cess in the first tenmonths of the current fiscal. Of this, M14,509 crorewas collected under direct taxes and M5,656 croreunder indirect taxes, Minister of State for FinanceJayant Sinha said.Through the education cess, the government had

collectedM35,986 crore in 2014-15,M33,902 crore in2013-14 andM30,642 crore in 2012-13.Education cesswas introduced to fulfil the commitment of thegovernment to provide and finance universalisedquality basic, secondary and higher education. Theprimary education cess was introduced in 2004-05,while the secondary and higher secondary educationcess was introduced in Budget 2007-08. (BW 07.05.16)

Focus on �Values�According to theHumanResourceDevelopment

(HRD) Ministry, India will have its firsteducation policy to be focussed on values. Valueeducation will form a major part of our syllabus,Subramanian, Chairman of drafting Committeesaid. According to him, earlier values were taughtby our families, but now that no longer happensso it is required to teach our children through formaleducation.

However, value education has always beencontroversial since critics point out that it can beused for political purposes. The government in rouetto drafting the new education policy claimsconsultations have been held over one year with15,000 students, 2,400 common citizens, all statesand most districts. Critics point out the key to theconsultations is to make them transparent.

(NDTV, 13.01.16)


H E A L T H S E C T O R

Plan to End MalariaAccording to government

sources, a plan to stop indigenoustransmission of malaria by 2030 willbe released soon. TheNationalVector-Borne Disease Control Programme(NVBDCP) is working on the strategyframework for the period 2016-30 toeliminate the disease that affected 1million and killed 270 across India in2015.New strategy focusses more on

community participation along withgovernment efforts. Malariaelimination, a target set out by WorldHealth Organisation (WHO), isdefined as the reduction to zeromalariacases in a defined geographical area.This target can be reached aftercarrying out four phases of aprogramme: control, pre-elimination,elimination and prevention ofreintroduction. (Mint, 15.01.16)

Fatal Climate ChangeClimate change could kill over

130,000people in India in2050becauseof changes in diet and bodyweightfrom reduced crop productivity,according to a study in the Britishmedical journal The Lancet.Carried out by researchers from the

University of Oxford, the studyevaluates the impact of climate changeon diet composition and bodyweight,and estimates the number of deathscaused by this in 155 nations in 2050.The study said that if global

emissions remain unchanged, theprojected improvement in foodavailability could come downby abouta third by 2050, and lead to averageper person reductions in foodavailability of 3.2 percent, 4 percent infruit and vegetable intake and0.7 percent in red meat consumption.

(Mint, 04.03.16)

Low Life ExpectancyEmphasising on the need for

increasing investment in healthcare inIndia, World Health Organisation�s(WHO) India representative HenkBekedam lamented that life expectancyin the country is only 66 years.Even in Bangladesh life

expectancy is 71 and in China even in1970s it was 68. The reason is lowinvestment in health. India�s

investment is just over one percentof GDP. In China, it has risen to 3.5percent while Brazil, a Brazil RussiaIndia China South Africa (BRICS)country, invests 5 percent of its GDPin health. Experts have called forinvestingmore in healthcare tomatchIndia�s economic growth, and toensure that all citizens are coveredunder social health insurance.

(IE, 04.03.16)

Leaping over the WorldIndia has a great opportunity to

innovate and create new healthcaresystems that are also affordable,Andrew Witty, CEO ofGlaxoSmithKline said. �Year 2016 is aleap year and India can leap over therest of the world�, Witty added.Globally the healthcare industry

has achieved a lot in extending lifeexpectancy but it has not succeededin improving the quality of life.�Vaccination has been the singlebiggest driver of life expectancy in thepast century�, Witty said. GSKcurrently makes and sells a third ofits products in India. That brings inonly 1 percent of its revenue. Indiacan be the home for innovation foraffordable healthcare. (ET, 30.01.16)

S-VI Standard CrucialThe Centre has recently

announced that India will leapfrogfrom the Bharat Stage (BS) IVemission norms that are presently inforce, to the BS VI norms by 2020.

While vehicle manufacturers havebeen asked to gear up tomeet the newdeadline, oil companies will also haveto prepare for BSVI-compliant fuel.This move promises relief from

pollution caused by diesel fumes forIndian cities. Introduced in the year2000, the Bharat norms are emissioncontrol standards to keep a check onair pollution.Global automakers are betting big

on India as vehicle penetration is stilllow here as compared to developedcountries. (Mint, 08.01.16)

Health Coverage BlockedIndia faces serious challenges in

implementing universal healthcoverage policies because of a�serious knowledge gap� amongpolicy makers and a �generalunwillingness for change�, said,Rakesh Srivastava a former Director-General ofHealth Services.Accordingto him, health priority-setting exercisein India was based on consultationwith experts and not evidence.The government spending on

health system currently is 1.04 percentof the GDP, while the national healthpolicy aims at taking it up to 2.5percent by the end of the 12th Five-Year Plan. Under the SustainableDevelopmentGoals (SDGs), India hassigned up to revamp the country�sweak health system to keep pace withthe global movement towardsuniversal health coverage.

(TH, 31.01.16)

Mapping Health FacilitiesFor the first time, the government will map health facilities, doctors and

specialists available in all districts of the country. The health geo-mappingproject has already been completed in four districts chosen as a pilot. TheBill and Melinda GatesFoundation is partnering theproject.

Lack of authentic data onhealthcare resources has longbeen one of the biggestimpediments to healthplanning in India. It isuniversally acknowledgedthat doctors and healthfacilities are far more easilyavailable in urban than inrural areasbut therehasneverbeen an attempt in the past to quantify the gap in density and to planaccordingly. (IE, 05.01.16)

www.google.com


H E A L T H S E C T O R

Policy Shame: Sick, Rare and IgnoredShilpi Bhattacharya*

Rare diseases are a diverse set of over 7,000 differentconditions that afflict an estimated one in 20

Indians and 350mn people worldwide. Rare diseases areoften congenital, chronic, debilitating and fatal. Asignificant proportion of rare diseases occur in children,many of whom do not survive beyond the age of five.Most rare diseases have no cure or treatment and forthousands of rare diseases, there is no ongoing researcheffort to develop a treatment.The rarity of such diseases and the complexity of

associated symptoms � many rare diseases breachtraditional disciplinary boundaries ofmedical specialities� result in frequent misdiagnosis, and, more worryingly,damaging treatments. Even when there is a diagnosis,treatment options are justnot available, or are far tooexpensive; this situationwillcontinue without adequategovernment intervention.For example, in 2014,

Mohammed Khan, thenseven years old, wasdiagnosed with Gaucher�sdisease, a hereditary diseaseinwhich themetabolismandstorage of fats is abnormal.It results in bone fragility,neurological disturbance,anaemia, and enlargement of the liver and spleen. Withno means to pay for his medication and faced with littlehelp from the government, his parents petitioned theDelhiHigh Court. The Delhi government was directed tomaketreatments accessible to himUnderArticle 21 of the Constitution, the Indian state

guarantees equitable and non-discriminatory access tohealth care to all as part of each citizen�s right to life.Yet,the draft National Health Policy, 2015,makes nomentionat all of rare or genetic diseases.

A priority in the WestAs opposed to India, in many part of the western

world the rare diseases consider a priority forgovernment. TheEuropeanCommission has declared rarediseases to be a public health priority and more than 19European countries have adopted rare disease strategiesin the past few years. The US was the first to give policypreference to rare diseases through the enactment of theOrphan DrugAct (ODA) in 1983. These drugs are called�orphan� because under normal market conditions, the

* Associated with World Without GNE Myopathy (India). This feature has been abridged from an article published in The Hinduon March 06, 2016.

pharmaceutical industry has little interest in developingand marketing products intended for only a small numberof patients. ODA is said to have facilitated pharmaceuticalinterest in rare diseases in the US with approximately 400such drugs being developed after 1983; it was around 10between 1973 and 1983. An Indian rare disease policyshould ideally make it financially attractive for the privatesector to evince interest in rare diseases while being carefulnot to allow pharma companies to exploit any incentivesgiven to them.Tackling rare diseases requires planned effort, which

must be guided by an overarching national rare diseasepolicy to facilitate coordination between patients,scientists, doctors, regulators and the pharma industry. In

this, India woefully trailsmany countries. It does notas yet define and cataloguerare diseases, a prerequisitefor any concerted policyresponse.The objectives of such a

policy will best beimplemented through theestablishment of a nationalrare disease organisation,which could act as a nodalauthority to increasecapacity building in rare

diseases. For instance, certain hospitals can be givenresources to develop expertise in a set of related rarediseases. This organisation could serve as a repository ofinformation to assist doctors and patients looking forexpertise in particular rare diseases.To address this neglected area of health care, the

Karnataka government is planning to frame a policy basedon recommendations submitted by the Vision Group forBio-technology, comprising industry heads and academicleaders. The recommendations include screeningnewborns for early intervention and specialist clinics toacquire knowledge through research and interaction withpatients.If the Indian government is serious about its

commitment to realise the rights of its citizens to universaland equitable health care, it cannot ignore rare diseases.Some State governments, such as Delhi, have establisheda panel to tackle rare diseases. However, any State-levelintervention must be guided by a comprehensive nationalpolicy to ensure that the entire rare disease-aflictedcommunity benefits.

If the Indian government is serious about its commitment to realise the rights of itscitizens to universal and equitable health care, it cannot ignore rare diseases. The Draft

National Health Policy, 2015 makes no mention of them.

www.google.com


C O M P E T I T I O N I N S I G H T S

Sun Pharma Gets CCI NodSun Pharma has received approval

from competition watchdogCompetition Commission of India(CCI) to sell theRanbaxyLaboratories�two divisions in the central nervoussystem (CNS) segment in India toStrides Shasun forM165 crore.The CCI approved this proposed

transaction, and passed an orderunder the Competition Act, 2002facilitating the transaction. Aswitnessed in 2014, Sun Pharma andStrides Shasun had arranged a pactrelated to two divisions of Ranbaxy;namely �Solus� and �Solus Care�.Sun Pharma acquired Ranbaxy

Laboratories in 2014 for US$ 4bn. Itwould be imperative with CCIapproved proposal that, all othernecessary regulatory approvals havealso been obtained. (ET, 22.01.16)

RCom-SSTLAcqusitionThe CCI has given its nod toAnil-

Ambani owned RelianceCommunications� (RCom) acquisitionof Russian conglomerate Sistema�sIndian telecom unit, Sistema ShyamTeleservices (SSTL) that operatesunder the MTS brand.SSTL offers mobile telephony

services under the MTS brand acrossnine telecom circles in the country.The deal will give RCom access tospectrum or airwaves in the 850megahertz (MHz) band that can beused for 4G services, which it plans tostart by the end of 2016. Also, it willbe able to extend the validity of itslicence by 12 years in eight highrevenue-generating telecom circles ofDelhi, UP (West), Kolkata, WestBengal, Gujarat, Tamil Nadu,Karnataka and Kerala. (FE, 23.02.16)

Stake Sale Gets a NodThe CCI has given approval to

Jain IrrigationSystems (JISL) inMarch2016, for selling its stake and foodsubsidiary (JFFFL) worthM792 croreto agri-business funding firmMandalaCapital.In the first stage, JFFFL is expected

to raise M396 crore fromMandala byissuing preferential equity shares andcompulsorily convertible debentures(CCDs). In the second stage, JainIrrigation Systems Ltd. (JISL) wouldraise M396 crore by making

preferential issue of CCDs with 5percent annual coupon toMandala fora subscription amount ofM285.1 crore.The CCDs will be converted into

ordinary equity shares of JISL within18 months from the date of allotmentof share at M80 per piece or at suchhigher price as determined inaccordance with the applicable SEBInorms. (ET, 07.03.16)

CCI Rejects ComplaintThe CCI rejected a complaint of

unfair business practicesmade againstAsian Paints with regard to paintingservices provided for a house inKolkata.Rejecting the complaint, CCI

cleared that no additional material orevidences with the regulator has beensubmitted so as contravene theprovisions of Sections 3 and 4 of theAct. It was alleged that Asian Paintsabused its dominant market positionby not providing appropriate paintingservices, as promised through variousadvertisements.This is the second time the fair

trade regulator is dismissing the sameallegations made by the samecomplainant against the company.

(ET, 27.01.16)

SRF-DuPont Deal ClearedThe CCI has cleared the proposed

transaction off the diverisified firmSRF Ltd. to acquire US-basedDuPont�s pharmaceutical propellantbusiness under Dymel brand.The all-cash deal was valued at

US$20mn when both sides made the

announcement in December 2014. Inthis regard, SRF entered into a pactwith DuPont De Nemours andCompany (US). SRF is intomanufacturing of chemical-basedindustrial intermediates,whileDuPontis a global group primarily focussedon agriculture and nutrition, advancedmaterials and bio-based industrials.As per the filing, DuPont would

supply SRF the product from itsfacility till SRF�s facility is approved.The consideration for the transactionis US$20mn payable in cash.

(ET, 06.03.16)

Maruti Complaint RejectedThe CCI rejected a complaint of

anti-competitive practices madeagainst the country�s largest carmanufacturer, Maruti Suzuki. It wasalleged that Maruti Suzuki abused itsdominantmarket position by imposingunfair conditions for transporting itsvehicles through car carrier trucks(CCTs).According to CCI, the company

may need services of CCTs of aparticular description in the sense thatCCT uses a particular type of VTS(Vehicle Tracking System). For thecase, the CCI considered �market fortransportation of light vehicles inIndia through CCTs� as the relevantmarket.The company was also alleged by

the complainant that it manufacturesand sells more cars in the NationalCapital Region (NCR) as compared toother states. (ET, 15.01.16)

CCI Penalties StayedCompetition Appellate

Tribunal stayed penaltiestotaling M106 crore imposed byCCI on leading carriers IndiGo andSpiceJet for alleged cartelisation infixing fuel surcharge on air cargo.

Penalties of M63.74 crore andM42.48 crore were imposed onboth InterGlobe Aviation andSpiceJet. Tribunal�s decision wasfollowed by appeals filed by these two airlines against CCI�s order, passedin November 2015.

Express Industry Council of India alleged that five airlines were indulgedin anti-competitive practices. Besides Indigo and SpiceJet, the CCI had alsopenalised JetAirways accused for fixing and revising fuel surcharge in transportcargo. (TH, 09.02.16)

www.financialexpress.com


C O M P E T I T I O N I N S I G H T

India�s antitrust regulator, CCI has decided to probeallegations that Mahyco-Monsanto Biotech India Pvt.Ltd (MMBL) was resorting to anti-competitive practices inthe genetically modified (GM) cotton seedmarket.MMBL,a joint venture between Mahyco Seeds Ltd and MonsantoCo., a global technology provider of GM seeds, licences itspatented Bollgard II Bt cotton seed technology to 49 seedcompanies in India, in exchange for a trait or royalty fee.The investigation will be completed within 60 days. Theinvestigation will be carried out by the Director General ofthe CCI, the regulator said in a February 10 order madepublic.

The Mahyco-Monsanto Biotech India Pvt. Ltd. (MMBL)hybrid seed industry is at approximately US$2bn, andgrowing at around ten to 15 percent per year. The domesticstakeholders claim to have paid over M5,000 crore toMonsanto in the form of royalty. The CCI took a justifiedstand in calling out the investigation, �fit� on prima faciegrounds of violation of Section 3(k) and 4 of theCompetitionAct 2002, accusing Monsanto with anti-competitivepractices and abuse of dominance. The seed giant MMBLrefused to diminish the royalty patents and returned theexcess royalties, which they paid from2010. Such ameasuremoved the Union Agriculture Minister to voice domesticstakeholders to CCI.

Section 3 of theAct refers to anti-competitive agreementsand Section 4 deals with abuse of dominant position.

The investigation will be completed within 60 days.

�The �order� is only a prima facie opinion and merelyrecommends an investigation. It is not a reflection of anyfinal conclusions. It must also be noted that a member ofthe CCI has found no merit in the complaints filed with theCCI and has exonerated MMB�, an MMBL spokespersonsaid. In the CCI�s seven-member panel, one member put upa dissent note, saying that he did not find any reason toorder a probe.

CCI Finds Reasons toProbe Mahyco-Monsanto

Shreeja Sen and Sayantan Bera*

In its main order, the CCI noted thatMMBL�s agreementswith its licencees were �stringent and unfair�. It saidMMBL can terminate its agreements with the licenceesat any time if laws were passed to regulate trait fees.Such terms discouraged licencees from going tocompetitors of MMBL and restricted development ofalternative technologies. However, The CCI clarified thatthe order was only a preliminary finding.

Tohave a backdrop, InNovember 2015, theAgricultureMinistry asked theCCI to look into allegedmonopoly

practices by MMBL. Seed companies, includingNuziveedu Seeds Ltd. (NSL), and its subsidiaries Prabhatand Pravardhan, also appealed to the Commission for aninvestigation.

The Ministry moved the CCI after several farmers�organisations and lobby group National SeedAssociation of India (NSAI) alleged that MMBL wascharging high trait fees or royalty for its patentedBollgardII technology, which protects cotton plants from pinkbollworm, a pest.

In November 2015, the Agriculture Ministry asked theCCI to look into alleged monopoly practices byMMBL.Seed companies, includingNuziveedu Seeds Ltd. (NSL),and its subsidiaries Prabhat and Pravardhan, alsoappealed to the Commission for an investigation.

The Ministry moved the CCI after several farmers�organisations and lobby group NSAI alleged that

MMBL was charging high trait fees or royalty for itspatented Bollgard II technology, which protects cottonplants from pink bollworm, a pest.

The CCI�s February 10, 2016 order also allowedstakeholders like the NSAI to place its submissions tothe Director General. �Wewill provide valuable inputs tothe Commission for a fruitful investigation�, said KalyanGoswami, Executive Director of NSAI. �We are sure thatvery soon this will bring an end to monopoly practicesthat led to difficulties for the Indian seed industry andfarmers�, he added.

The regulator recorded submissions from the Ministryand the NSL that MMBL�s technology was used in morethan 99 percentof the area under Bt cotton cultivation inthe country. The price control committee was set up lastmonth and is mandated to determine seed prices and traitfees by March 31, 2016 in time for the sowing of thekharif crop.

* Journalists with Mint. This feature has been abridged from an article published inMint on February 28, 2016

www.livemint.com


S P E C I A L A R T I C L E

�In Washington on his first visit as Prime Minister, Narendra Modi said thathe saw no motivation behind why India had kept on remaining a poor nation.India has each motivation to be an exceptionally rich nation. Some of our pooreststates are so rich in characteristic magnificence, normal assets and old landmarksthat interest in tourism framework alone would bring impossible riches�. It wasfrom this Congress Cabinet that we got Mahatma Gandhi National RuralEmployment Guarantee Act (MGNREGA) and the Food Security Bill and theBharatiya Janata Party (BJP) was unfair enough to not just help pass these lawsbut to even praise them. This was imprudent BJP Chief Ministers, includingNarendraModi, pointing out the flaws in centralisedwelfare schemes. So it is trulypuzzling that as Prime Minister he should now have changed his tune.

The Finance Minister Arun Jaitley said that there is no evidence on the groundthat this elaborate form of dole has reduced poverty or created real jobs in ruralIndia. And real evidence that if the thousands of crore rupees that have beenpoured into this scheme had been spent on improving rural schools, hospitals androads, the money would have been much better spent. Another centrally plannedidea that emanated from the National Advisory Council was that of giving morethan seventy percent of India�s citizens entitlement to cheap food grain under thefood security law that is soon to come into effect.

It happens that when the law was being discussed in Parliament in 2013, mytravels tookme to a small village in Rajasthan, where I had a conversation aboutit with a local official. Did he think it was a good idea, I asked, and this was hisresponse, �We have not got enough storage space for the grain that we are alreadybeing sent, sowhere arewe going to storemore supplies�Modi�s idea of governanceis different to those who ruined India with their Five-Year Plan.

The idea behind the law was an altruistic attempt to alter the shameful fact thatevery other Indian child is malnourished. But the reality is that malnourishment isusually due to not getting the right food. For instance, street children in Mumbaiare malnourished because most of them have never had a glass of milk or eatengreen vegetables. The one thing they do get to eat every day is rice and bread. �Itis the time to consider that why has the Prime Minister forgotten that he wasamong those who once opposed these laws�?

The other aspect which the government seems to have forgotten is�cooperative federalism�, so instead of dealing with Chief Ministers, Prime

Minister has started having regular video-conferences with their Chief Secretaries.This is not cooperative federalism, it is direct interference in federalism, and theconsequences are unlikely to be good for Indian democracy. It is also yet anothersign that Modi is a central planner, and this is very worrying because if we haveanother decade of central planning, we can say with certainty that those dreams ofprosperity that seemed so achievable during his election campaign will remaindreams.

This is because central planners are incapable of creating real jobs, and real jobsare what young Indians need more than anything else. They do not need 100 daysof fake employment a year of the kind thatMGNREGAbequeaths them, because inthe end what this mostly does is alleviate their poverty, not end it. �If Modicontinues to adopt policies reminiscent of Indira Gandhi�s gareebi hatao(eradicating poverty) days, he will end up betraying the mandate he was given. Itwas a mandate for prosperity and jobs, not poverty alleviation and dole�.

IsModi�s Idea of GovernanceDifferent to ThoseWho Ruined India with Five Year Plans?

Tavleen Singh*

* Leading Columnist associatedwith The Indian Express.This special article has beenabridged from an articlepublished im The IndianExpress on February 07, 2016

If Modi continues to

adopt policies

reminiscent of Indira

Gandhi�s �gareebi

hatao� days, he will

end up betraying the

mandate he was given

SOURCESBL: The Hindu Business Line, BS: Business Standard, BW: Business World, DC: Deccan Chronicle, ET: The Economic Times, FE: The Financial Express, FP: First Post,IE: The Indian Express; IINL:India Infoline News Service;MW:Minning Weekly; NDTV: New Delhi Television Limited, TH: The Hindu Business Line, ToI: Times of India

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Complete reproduction without alteration of the content, partial or as a whole, is permitted for non-commercial,personal and academic purposes without a prior permission provided such reproduction includes full citationof the article, an acknowledgement of the copyright and link to the article on the website.

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P U B L I C A T I O N S

ResearchReport

Impact of Current Market Dynamics on Paddy andWheat Farmers in Muzaffarpur, Bihar

The methodology for this study was conceptualised by CUTS under the project,�Competition Reforms in Key Markets for Enhancing Social and Economic Welfare in

Developing Countries�, referred to as the CREW project. The need for this study emergedfrom the findings of the Diagnostic Country Report of the CREW project in India � whichcovered two states, Bihar and Rajasthan. From the assessment undertaken in Bihar it wasclear that productivity gains were not accompanied with benefits for the farmingcommunity, especially small farmers. This study specifically looks at the weaknesses inoutput markets in paddy and wheat sectors, in Muzaffarpur district in Bihar, to identifyreasons for the above. The objective is to understand the implications of some of therecent agricultural reforms and market dynamics on the small and marginal farmers and relevant stakeholders.

http://www.cuts-ccier.org/crew/pdf/Impact_of_Current_Market_Dynamics_on_Paddy_and_Wheat_Farmers_in_Muzaffarpur-Bihar.pdf

Briefing Papers

Concerns with Respect to Payments Banks in India

Payments banks are first set of differentiated banks, aimed at providing deposit, payments and remittance servicesto low income groups, and other non-risk sharing simple financial services. The Reserve Bank of India (RBI) had

issued operational guidelines for payment banks in November 2014 (RBI guidelines) and provided clarificationsthereon in January 2015 (RBI clarifications). The successful applicants are required to comply with relevant conditionsunder RBI guidelines and respective in-principle approval within 18 months. This has triggered analysis of RBIguidelines and clarifications in greater detail, amongst relevant stakeholders. TheBriefing Paper highlights competitionand regulatory concerns with respect to structure and operation payments banks, on the basis of review of existingliterature and guidelines.

Regulatory Impact Assessment: Hydro Sector in India

Before introducing a law, the government neglects to anticipate the consequences of actions in the future, due towhich laws often tend to fail to meet the desired objectives. Hence, Regulatory Impact Assessment (RIA)

comes as a facilitating tool to estimate costs and benefits before the decision is taken. It is one of the ways ofcontinuous learning as it can build in innovation standards within the process. This Briefing Paper discusses CUTScase study on hydro sector in Himachal Pradesh where it has intricately explained various steps involved in RIA. Inaddition, by identifying the problem and undertaking thorough cost and benefit analysis, best alternative is selectedfor adoption.

http://www.cuts-ccier.org/Publications.htmwww.cuts-ccier.org/pdf/Briefing_Paper_Concerns_with_Respect_to_Payments_Banks_in_India.pdf

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