Enough time given, GST from July 1: FM
Says Kerala, J&K will lose benefits
•Brushing aside reservations from sections of industry as well as States such as West Bengal about the level of preparedness for the switch to the Goods and Services Tax (GST), Union Finance Minister Arun Jaitley said on Tuesday that the new indirect tax system would be kicked off on July 1 as the government had given enough time for people to be prepared for the transition.
•He also warned that consumers and producers in Kerala and Jammu and Kashmir, which are yet to ratify the State GST law to facilitate the implementation of the GST under their jurisdiction, would lose out on the benefits of a single national tax.
•“We have for the last six months been saying that the rollout will be on July 1. Nobody had any business not being ready,” Mr. Jaitley said.
•“The readiness will be determined when you have to file the first return, which we have extended to September 15 [from August 10]. So two-and-a-half months more are there to get ready. And if he is still not ready, then I am afraid he doesn’t want to be ready,” he pointed out.
•While 65 lakh out of 80 lakh assessees in the current indirect tax system have already registered themselves for the GST, the Finance Minister said in jest that the five people who had problems in registering were vocal about it on Twitter.
Special status of J&K
•“Almost all States have cleared the State GST laws, except Kerala and J & K… I am told Kerala will consider it this week, while Jammu and Kashmir is going through the process and they will have to do it separately because of the State’s special status,” he said.
•The government has decided to hold a special programme in Parliament’s Central Hall close to the midnight of June 30.
First indigenously built floating dock launched
•The Indian Navy’s first indigenously built floating dock (FDN-2), developed by Larsen & Toubro Ltd. (L&T), was launched at L&T’s shipyard in Kattupalli on Tuesday.
•The floating dock is 185 metres long and 40 metres wide and will enable docking of all kinds of vessels, including Naval ships and submarines (excepting aircraft carriers and tankers) of up to 8,000 tonnes displacement, with draughts of up to seven metres, during both day and night.
•The Navy already has one floating dock; this would be its second such facility, Vice Admiral D.M. Deshpande, Controller of Warship Production and Acquisition, Indian Navy, told reporters after his wife, Anjali Deshpande, launched the dock. FDN-2 will be based in the Andaman and Nicobar Islands and will enhance the Navy’s technical repair infrastructure.
•“We already have a floating dry dock there. We are looking at expansion in Port Blair, and therefore the number of assets in terms of ships and submarines operating from there, as well as for the ships which are based there. This (FDN-2) adds much more capability and flexibilty to undertake repair and maintenance works,” Mr. Deshpande said. FDN-2 was designed and built by L&T at a cost of Rs. 468 crore.
•This is L&T’s first Naval order. “It will be delivered in two to three months at Port Blair,” said B. Kannan, head of shipbuilding, L&T. “It was 100% designed in-house. It’s a big utility vessel with special functions. We will do trials at sea both at Kattupalli and Port Blair,” he said.
Cholesterol-cutting vaccine shows promise
Early-phase trials checking if antigen, positive in mice, works in humans
•A cholesterol-lowering vaccine has shown promise in mice, said researchers on Tuesday who announced they had started early-phase trials to see if it also works in humans.
•Such a treatment could offer a welcome alternative to statins, the main pharmaceutical choice today for lowering cholesterol in people at high risk of heart attack or stroke.
•The vaccine, dubbed AT04A, reduced cholesterol levels in trial mice by half, and reversed damage done to blood vessels due to plaque build-up by more than 60%, researchers said in a statement.
Fatty diet
•The mice were given the vaccine after they were fed a fatty diet to resemble the high-cholesterol intake of a human Western-style diet.
•“Levels of cholesterol were reduced in a consistent and long-lasting way,” said study co-author Guenther Staffler of the AFFiRis biotech. This resulted in “a reduction of fatty deposits in the arteries and atherosclerotic damage, and reduced arterial wall inflammation.” Atherosclerosis occurs when a waxy compound lines blood vessel walls, limiting blood flow and potentially triggering dangerous blood clots.
•Statins have been used for about 30 years to bring down “bad” LDL cholesterol blamed for such deposits. But conflicting reports on statins’ benefits and harms have made headlines in recent years, prompting some people prescribed the drugs to stop taking them.
The pre-GST grand sale
Why companies are scrambling to clear old stock ahead of GST implementation
•Ever since the Goods and Services Tax Council began releasing the rates on various items in May, companies ranging from e-commerce platforms and car manufacturers to apparel retailers and phone manufacturers have been bombarding registered customers and other recipients with messages, emails, and phone calls, offering attractive discounts valid till June 30, a day before the GST kicks in.
•But why are they doing this? It surely can’t be that they are celebrating the roll-out of the new indirect tax regime. By all accounts, most companies are quaking, fearing the huge increase in compliance costs and paperwork that GST will bring.
Multiple reasons
•There are multiple reasons why companies are looking to get rid of their stock before July 1, including expectations of change in future prices, stringency of government laws, and tax complexity.
•If companies, like luxury carmakers for example, feel that the prices of their products will go down in the new tax regime, then they have two reasons to get rid of their current stock. The first reason is economic.
•They’ll craft their discounts in such a way that even the discounted price is higher than the likely price of the car post-July 1. Most experts feel that the cost of a luxury car — to be taxed at 28% plus a 15% cess — will come down by about 1.5-4.5% under the GST. That works out to Rs. 75,000-Rs. 2,25,000 on a Rs. 50 lakh car.
•The other reason companies fearing a price reduction are getting rid of their stock now is because they fear government action against profiteering — that is, benefiting from a reduction in tax rates that have not been passed on to customers. The penalties are strict, including a fine and a possible cancellation of the company’s registration. So, companies are doubly eager to avoid such a scenario.
•Some companies may see the prices of their products go up. This, they expect, will bring its own share of problems. At a time when consumer demand is tepid at best, thanks to slowing economic growth, poor wage growth, and demonetisation, even a small increase in price is likely to encourage consumers to defer their purchases. And so Flipkart, Amazon, and all the other e-commerce companies are pushing huge discounts to attract customers.
•The stock clearance sale could also have been prompted by a lack of clarity on what will happen to the old stock — products that were bought before the GST but need to be sold after its implementation. Government rules make this a complex question — the fate of their stock will depend on whether the company was a registered taxpayer before the GST, and whether it is a first-stage dealer, second-stage dealer, or importer. To avoid these hassles, companies are trying to get rid of all their stock and face the GST with a clean slate.
Bringing GM to the table
Promoters of GM food need to reach out to consumers in a transparent, engaging manner
•On May 11, 2017, the Genetic Engineering Appraisal Committee (GEAC) — the scientific committee of the Ministry of Environment, Forests and Climate Change — that regulates genetically modified (GM) crops in India — had cleared GM mustard for commercial production. Anti-GM groups immediately opposed the decision and appealed to the Minister for Environment, who gives the final clearance, not to accept the GEAC’s recommendation.
Issues at core of opposition
•The question of whether India should allow commercial production of GM crops has been one of the more enduring public policy debates over the last decade-and-a-half. After the approval of Bt cotton in 2002, the attempt to bring Bt Brinjal into commercial production faced serious resistance in 2010. After the GEAC approved Bt brinjal for commercial production, the then Environment Minister, Jairam Ramesh, placed a moratorium after undertaking extensive public consultation. Proponents of GM crops, including Noble laureates, insist that opposition to GM crops is driven by irrational fears of harm to human health and having an environmental impact and accuse opposing environmental groups of misrepresenting facts. Such arguments, however, are unlikely to convince the opponents of GM crops. While the debate is complex, involving a wide range of scientific, socio-economic, and political factors, it is important to understand two related issues that are fundamental to the opposition: invoking the precautionary principle for regulatory decision-making and a lack of trust in government and industry that promotes and benefits from GM technologies.
•One of the principal reasons for opposition to GM crops is the potential for serious, irreversible damage to human health and the environment. This is especially relevant in the context of crops such as Bt brinjal which involve direct consumption by humans, unlike Bt cotton. The widespread havoc that chemical pesticides and fertilizers have caused since the Green Revolution only adds credence to these concerns. While GM supporters claim that there is little scientific evidence of adverse impacts so far, GM opponents cite the need for longer term assessment of adverse impacts and more concrete evidence of no adverse effects. Implicitly, GM opponents are invoking the precautionary principle, which is a widely incorporated one in several international agreements and treaties on the environment. In the context of technologies such as GM crops, where there is significant scientific uncertainty over their safety, the precautionary principle suggests that we wait until a broader scientific consensus is achieved. For example, regulations in Europe, where GM crops face similar opposition, explicitly invoke the precautionary principle as the basis for deciding whether GM foods should be allowed.
Lack of transparency
•The lack of transparency in the regulatory process further amplifies apprehensions stemming from a precautionary approach. All the safety tests for regulatory approvals are typically conducted by the same party that applies for commercialisation of GM crops — whether it is Mahyco on Bt brinjal or Delhi University on GM mustard. This conflict of interest was made worse by the refusal of GEAC (in both cases) to publicly release the safety testing data submitted for regulatory approval until GM opponents filed a Right to Information petition. This tendency to operate in secrecy has not only created a serious distrust of the government and the promoters of GM crops but is also fuelling the conflict. Extensive research on public acceptance of GM foods in the European context identifies trust in regulatory agencies and industry as being a critical factor in public willingness to accept GM technology.
•In a well-articulated decision letter at the time of rejecting Bt brinjal, the then Environment Minister, Jairam Ramesh, outlined the need for the GEAC “to draw up a fresh protocol for the specific tests that will have to be conducted in order to generate public confidence”. The GM mustard case does not provide much evidence that anything has changed since the moratorium on Bt brinjal.
•If there is a genuine case to be made to allow GM crops to improve yields and address India’s food security, GM supporters might want to start cultivating an environment of openness and transparency to allay genuine fears instead of dismissing GM opponents as being “irrational”. On its part, the government should adopt a participatory approach to bring together all stakeholders to develop regulatory protocols that restore trust in the process. The burden of proof lies with the promoters of GM technology to persuade consumers, farmers and activists that among various alternatives available for sustainable food production — e.g., organic farming, use of biopesticides — GM technology is at least a serious option that we should embrace.
‘Resolution process to increase capital requirement for banks’
With bankruptcy law, it is time we take the process to a logical conclusion
•Banks may require more capital for higher provisioning requirements to resolve stressed assets. However, it is not prudent to expect the Centre to bear the entire burden of capital infusion, says S.S.Mundra , Deputy Governor, Reserve Bank of India in an interview. Edited excerpts:
•With the RBI asking banks to refer 12 large defaulters to the National Company Law Tribunal (NCLT), can we expect that the recognition of stressed assets is complete for now?
•Recognition also involves diagnosis. So, in any meaningful resolution, there has to be recognition. Recognition started right from the asset quality review in late 2015. Also, it is not that resolution has started just now.
•Several initiatives were taken which are the building blocks of recognition, right from setting up a data repository, introducing the JLF [joint lenders forum] mechanism then giving various options like S4A, SDR, 5/25 — these were the building blocks for resolution. Now, all these have culminated into an ordinance. And [the] good part is ordinance is timed with the IBC [Insolvency and Bankruptcy Code]. Two years back there were so many resolution tools but there was no bankruptcy law in the country. Now that we have a bankruptcy law, it is time we take the resolution process to a logical conclusion.
•Of the top 500 cases taken up by the RBI’s Internal Advisory Committee, there are 488 cases that banks need to resolve in 6 months. Banks have sought relaxation in debt recast norms. Will the RBI look into it?
•There is a whole wish list from the banking system. If you look at the wish list, some of them may be categorised as seeking the relaxations while some of them can be seen as modifications. My broad sense is that since the structure has been in the making for sometime, the room for such relaxation which only means buying more time, I don’t think this is a feasible idea. Yes, there may be merit for some modifications which are more tuned with reality and ground situation. The regulation side of RBI is looking into those issues.
Do you think 6 months is a reasonable time to resolve 488 accounts?
•When you look at 488 as one bunch, it looks big. But if you go down in the 500 list of NPAs, and when you reach the 500th NPA, ticket size would be Rs. 150 or Rs. 170 crore — something which is not too big, which may be handled even from a zonal or regional office of a bank. For 488, when distributed across a number of banks where the lead bank would be different, so each bank is required to deal with some cases, it will not be too large.
RBI has said the 12 accounts which are being referred to NCLT constitute 25% of the system’s gross NPA. What is the proportion of NPAs in the 500 accounts?
•Though I have not calculated the figure, it would a substantial proportion.
•By solving the 500 accounts, a substantial amount of system NPAs — which is about Rs. 7 lakh crore — will be resolved. It is clear that once these 500 cases are taken care of, it takes care of a large percentage of stressed assets. Whatever is remaining, it is normal in the system at any given point of time.
Do you think the government should increase capital allocation in public sector banks?
•This resolution framework, whichever way you look at it, it will entail capital. Once you complete the process, there will be provisioning requirement which may not come out of the current profitability of banks. So [at the] end of the day, it will all entail capital requirement. But to expect that the government will only be the provider of this capital is not a right way to think.
•At the same time, all this capital will come without government support is also not the right thing to assume.
•The key point is all the available options will be required to be explored. You can get some capital from the government, you can raise some capital from the market, you try to get out of the non-core investment, you also try to dispose of some non-core assets, etc. It will be a combination and each bank will have to work out its own strategy.
As on September 30, 2016, the gross NPA ratio of the system was 9.1% while the stressed asset ratio was 12.3%. What is the position as at March end?
•If you look at March 31, the gross NPAs of the system was 9.51% or so, while for public sector banks it is 12.3%. Stressed asset for banking system will be 12% and for the public sector it will be 15% plus.
By solving 500 accounts, a substantial amount of system NPAs will be resolved
