The HINDU Notes – 27th June

 Cabinet to consider proposal for outright sale of Air India

Cabinet to consider proposal for outright sale of Air India

•The Union Cabinet will soon decide the fate of the state-owned carrier Air India by deliberating on three options to divest the government’s majority stake and consider the creation of a special purpose vehicle (SPV) to get rid of a major portion of its more than ₹50,000-crore debt.

•The three options on the table are a full 100% sell-off, a 74% stake sale or retaining a 49% share in the airline, as per the note prepared by the Department of Investment and Public Asset Management (DIPAM) for the Cabinet's consideration, officials aware of the development said.

Between ministries

•“The note for the Cabinet has given three options for divesting stakes in Air India. The final decision rests with the Union Cabinet which is expected to take a decision soon,” an official source said.

•Finance Minister Arun Jaitley had said last month that the government was looking to privatise the national carrier.

•While the Central government think-tank NITI Aayog and the Finance Ministry are in favour of an outright sale of the ailing airline, the Civil Aviation Ministry is keen that the government continues to remain a stakeholder in the national carrier after handing over the management to the private sector.

•The Cabinet will also consider a proposal to clear up Air India’s liabilities by forming a Special Purpose Vehicle (SPV), which will house a portion of its non-aircraft debt along with its subsidiaries and real estate assets.

Loans and assets

•“A major portion of the working capital loan, subsidiaries and prime properties owned by Air India is proposed to be housed in an SPV,” the official said.

•According to the plan, of the airline's over ₹30,000 crore total working capital loan, ₹25,000 crore will be earmarked for the SPV. Air India has a total debt of around ₹52,000 crore which comprises of ₹22,000 crore as aircraft loan and the remaining as working capital loan.

•“The income garnered through sale of assets and subsidiaries will be sufficient to meet the liability of the working capital loan of the SPV,” the official said.

Partial lease

•Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG advised that the Centre should lease Air India’s assets to an SPV “while keeping the assets and liabilities in the books of the Air India; 74-100% equity of the SPV can be sold to the highest bidder from the private sector.”

•“An alternate structure wherein an SPV takes over the liabilities, subsidiaries and real estate assets of Air India is also possible. This may require a detailed analysis of the legalities involved and concurrence of lenders,” Mr. Dubey said.

•Air India has four wholly-owned subsidiaries which include its MRO unit Air India Engineering Services Ltd (AIESL), ground handling arm Air India Transport Services Ltd, Airline Allied Services Ltd which operates Alliance Air, and Air India Charters Limited which operates Air India Express. The Hotel Corporation of India (which owns Centaur Hotels) is another subsidiary while it has a joint venture AISATS.

•Some of its prime real estate properties include a building at Nariman Point and another at the old airport in Santa Cruz in Mumbai, freehold land in Chennai’s Anna Salai, an office in Baba Kharak Singh Marg in Connaught Place in New Delhi and freehold land and buildings in Hyderabad. However, the airline has mortgaged some of these as security with banks for availing loans.

 Indian and Chinese troops face off

PLA soldiers cross the border and destroy bunkers in a remote area in Sikkim

•Tension mounted in a remote area of Sikkim after a scuffle broke out between personnel of the Indian Army and the Chinese People’s Liberation Army (PLA), with the latter damaging bunkers on the Indian side of the border.

•The incident occurred in the first week of June near the Lalten post in the Doka La general area in Sikkim after a face-off between the two forces, which triggered tension along the India-China frontier, official sources said.

•After the scuffle, the PLA entered Indian territory and damaged two make-shift bunkers of the Army, the sources said.

Flag meeting

•To defuse the tension, the Army twice asked the Chinese to join a flag meeting, which however, was turned down. The Chinese finally agreed to a meeting on June 20. During the meeting, the Chinese informed their Indian counterparts that pilgrims on the Kailash Mansarovar Yatra would not be allowed to cross into Tibet, the sources said.

•The pilgrims were kept waiting till June 23 after which they returned to Gangtok, in Sikkim, the only region where the border between India and China is demarcated. According to sources, the Chinese said a bridge on the yatra route had collapsed and hence the pilgrims could not cross into Tibet. The Sikkim route to Mansarovar was opened only in 2015.

2008 incident

•It is not the first time that such a transgression has happened at Doka La, on the Sikkim-Bhutan-Tibet tri-junction. In November 2008, Chinese forces had again in November 2008 destroyed makeshift Indian bunkers.

 At 399 ppm, India matches the world in atmospheric carbon dioxide levels

Satellite data show concentrations highest over Uttar Pradesh and Madhya Pradesh and lower over South India

•The first-ever picture of atmospheric carbon dioxide concentration over India shows that it is way above the safety mark and in line with what has been observed in other parts of the world.

•Since the 1950s, scientists have been measuring the concentration of CO2 in the atmosphere at observatories such as Mauna Loa in Hawaii and since the 1990s, using satellite images.

Beyond 350 molecules

•It’s generally been agreed that for every million gas molecules in the atmosphere, anything beyond 350 carbon dioxide molecules, is considered unsafe. These concentrations are likely to trap enough heat to trigger extreme climate events the world over and it would become progressively harder, and costlier, to suck out the excessive CO2. In 2015, the global average was 400 ppm, according to reports from Mauna Loa. In India, that year, according to a report published in the latest issue of Current Science, the average CO2 level was 399 parts per million (ppm).

•However, at Cape Rama, a coastal station in Goa, where CO2 levels have been monitored for over a decade, the level shot up to 408 ppm. The findings, based on readings from the Orbiting Carbon Observatory-2 (OCO-2) — a NASA satellite to monitor the environment — reveal that pockets of Madhya Pradesh, Uttar Pradesh and Himachal Pradesh saw CO2 concentrations hover much higher between 405 ppm and 410 ppm.

•Southern India and the western coast saw concentrations between 395 ppm and 400 ppm while the central and northern regions registered between 400 and 405 ppm.

Multiple causes

•“... It is difficult to precisely attribute the causes for such higher values; however, there could be a few possible reasons like lack of a CO2 sink, point sources like forest fires or biomass burning or an urban source, and gaseous transport from neighbouring regions based on prevailing weather conditions,” say authors Abha Chhabra and Ankit Gohel in their paper. The scientists are affiliated with the Space Applications Centre of ISRO. Generally, CO2 levels increase slightly during winter due to reduced vegetation but for this study, the observations were made from March to July in 2015.

 When ‘America First’ meets ‘Make in India’

Talks after Modi and Trump meet have a huge ground to cover

•While much weight is being put on the “personal chemistry” between Prime Minister Narendra Modi and U.S. President Donald Trump, they only have about 20 minutes in their schedule for one-on-one discussions. Officials say a number of issues will come up during the delegation-level talks, which will run for an hour.

•Chief among them is charting India-U.S. Strategic Partnership ahead, including talks on the last two of the three “foundational agreements” the U.S. wants India to sign. The two sides are expected to discuss three conflict regions of Afghanistan, IS-held Syria and Iraq as well as tensions in the South China Sea.

•The discussion on Afghanistan is significant as it comes a few weeks ahead of Washington’s revised “Af-Pak” policy. India would like the U.S. to cut military aid to Pakistan, the External Affairs Ministry spokesperson said last week, and to increase its resources to bolster the Ghani government against the Taliban.

Trade issues

•Both sides have many trade issues to discuss. Whereas the U.S. is mainly concerned about high tariffs and patent protection in India, India is worried about the possible cuts in visas and jobs for Indians.

•Mr. Trump’s “America First” policy could be in conflict with Mr. Modi’s “Make in India” in terms of where the jobs will be created.

•Several manufacturers such as Lockheed Martin are pitching their plan for F-16 fighter jet assembly lines in India as a possible middle ground.

•The most imminent defence deal could be for 22 Predator drones to be bought off the shelf from U.S. company General Atomics for a cost of reportedly $2-3 billion.

•Meanwhile, there has been little movement on the NPCIL-Westinghouse deal for nuclear reactors, touted as the first commercial contract from the India-U.S. civil nuclear cooperation agreement after Westinghouse filed for bankruptcy earlier this year.

More meetings ahead

•However, officials point out that this is the first of several meetings this year, as both leaders will meet at the G-20 in Germany in a fortnight, and Mr. Modi may return to the U.S. for a longer visit in September during the U.N. General Assembly session.

•“We may leave thorny issues such as climate change, NSG and immigration, among others, to a future date,” said a senior official, indicating that this was a “no-frills” visit, for talks expected to set the course for India-U.S. ties the next few years.

 Mexico, India to hold disarmament meet

India and Mexico have been in consultation on India’s bid for the Nuclear Suppliers Group (NSG) membership.

•India and Mexico have agreed to hold an important conference on regional and global disarmament.

•The meeting would be headed by the Joint Secretary of the disarmament division of the Ministry of External Affairs (MEA) from the Indian side. It was taken up during the seventh meeting of the Mexico-India Joint Commission (JCM) and the fourth round of Foreign Office Consultations held on June 23 in Mexico City.

•“Both sides expressed their continued commitment to strengthen global non-proliferation efforts,” said a statement issued by the Embassy of Mexico after multilateral consultations, co-chaired by Secretary (East) of the MEA Preeti Saran and Ambassador Miguel Ruiz Cabanas.

•India and Mexico have been in consultation on India’s bid for the Nuclear Suppliers Group (NSG) membership.

NSG bid

•President Enrique Pena Nieto had declared Mexico’s support for India’s entry to the Group during Prime Minister Narendra Modi’s June 2016 visit to the country.

•The special disarmament meeting is likely to build on the time-tested India-Mexico collaboration on disarmament starting from the 1980s when both countries led the Group of Six, an anti-proliferation group of six countries that tried to contain cold war nuclear rivalry between the U.S. and the USSR.

•The latest consultations are aimed at upgrading the Privileged Partnership formed in 2007 to a strategic level as agreed upon during Modi-Nieto meeting of 2016.

 P.N. Bhagwati's legacy: a controversial inheritance

P.N. Bhagwati was India’s most influential judge — it’s time his legacy is revisited

•Justice P.N. Bhagwati, who died recently, at 95, is perhaps the most influential judge independent India has had. What Indira Gandhi is to Indian politics, Justice Bhagwati is to the Indian judiciary: their legacies have endured, having engineered a populist democratisation based on radical rhetoric, but at very heavy costs to the institutions themselves.

•One can see strong resonances of Mrs Gandhi’s style in the Modi government’s mode of functioning in their all or nothing friend or enemy view of politics, with complete disregard for the autonomy of institutions. Similarly, with contemporary standards of judicial behaviour, pronouncements pandering to the lowest common denominator — calling for the cow to be declared the national animal, imposing the national anthem on cinema-goers and imposing thoughtless prohibition near national highways — while simultaneously displaying pusillanimity in institutionally vital cases against the Central government such as Aadhaar, the Money Bill and the Delhi government cases. The very condition of possibility of such playing fast and loose with the law are Justice Bhagwati’s landmark interventions.

Charting a way to power

•Just as nationalism has now emerged as the currency of contemporary judicial populism, socialist rhetoric was his path to power. He was appointed to the Supreme Court in 1973 at the height of Mrs Gandhi’s ideological onslaught on the judiciary, with her call for a ‘committed judiciary’. The Kesavananda Bharati judgment had recently been delivered, in which the Supreme Court had dared to stand up to Mrs Gandhi and had declared the Constitution’s basic structure as un-amendable even by her brute parliamentary majority. In the aftermath of this judgment she superseded the three senior-most majority judges leading to their resignations, and appointed Bhagwati and Krishna Iyer to the Supreme Court.

•Two key points deployed in Mrs Gandhi’s mid-1970s attack on the judiciary were the inaccessibility of the legal system and its alien British form. The responses were also twofold: the expansion of legal aid and the injection of indigeneity in legal institutions, respectively. Legal aid was even declared part of the Emergency’s flagship Twenty Point Programme. The two recent judicial appointees, Justices Krishna Iyer and Bhagwati, enthusiastically responded and penned successive reports proposing ‘nyaya panchayats’ as the silver bullet solution to both the problems. The challenge of democratising access to courts could have been met through an expansion of legal aid. Instead the solution was seen as creating parallel informal institutions, diluting judicial procedure by short-circuiting basic principles of adjudication. These visions of paternalistic deprofessionalised indigenous justice provided the basis for future developments such as Lok Adalats at the lowest level, tribunalisation at the intermediate level and Public Interest Litigation (PIL) at the highest level of the judiciary. For the part they played in this process, Professor Upendra Baxi later wrote that the two judges “remain vulnerable to the charge of acts as legitimators of the emergency regime”.

Moving to extremes

•Justice Bhagwati soon proved his loyalty to the Emergency regime much more directly: as part of the majority in ADM Jabalpur vs Shivkant Shukla, which upheld the constitutionality of the draconian Maintenance of Internal Security Act (MISA), and declared that even the right to habeas corpus would not survive during the Emergency. Justice Bhagwati was justly targeted for his role during the Emergency after the 1977 elections. He soon moved to the other extreme, and proved his loyalty to the Janata government by upholding its use of Article 356 against Congress-led Legislative Assemblies, a decision with disastrous consequences for Indian federalism. He did another somersault after Mrs Gandhi returned to power in 1980. He was the only judge in the Minerva Mills case to uphold her Emergency era amendment immunising any statute implementing a directive principle from judicial review for violating Articles 14 and 19, thus giving primacy to directive principles over fundamental rights. Accordingly, a statute implementing prohibition, or prohibiting cow slaughter, or introducing uniform civil code, or pursuing ‘socialism’ would be immune to judicial challenge for violating the rights to equality and freedom. If this sounds rather familiar, it is because the Indian judiciary has implicitly followed the logic of Justice Bhagwati’s dissenting opinion in recent years. In the Judges’ Transfer case, he went on to explicitly support the appointment of judges based on their ideological predilections, i.e., court packing for a ‘committed judiciary’. When the constitutionality of the National Security Act, 1980, Mrs Gandhi’s successor statute to MISA, was challenged, he got another chance to somewhat undo the notoriety of the Habeas Corpus case, but he upheld this law as well. In spite of such an appalling record on civil liberties and such open servility to regimes in power, how did Justice Bhagwati acquire such a heroic reputation?

Behind the PIL

•Much of Justice Bhagwati’s fame rests on his role in pioneering the PIL. In fact, PIL letter petitions would initially be personally addressed to him, rather than the court. This enabled him to sidestep the then Chief Justice’s role in allocating cases, also leading to allegations of soliciting petitions. More enduringly, instead of grounding the PIL in rules and principles, his view of legal procedure as the enemy of justice meant that all aspects of procedure in PIL cases were diluted, removing all checks on judicial arbitrariness and making it a juggernaut annihilating all procedure. The dilution of locus standi could have been grounded in some notion of ‘representation standing’. In its absence, most PILs are filed by citizens unconnected to any issue. In the Bandhua Mukti Morcha case, he diluted evidentiary standards in PIL cases to an extent that proved catastrophic in the long run. He also was the first judge to openly legislate in a PIL relating to inter-country adoptions, creating another dangerous precedent.

•Justice Bhagwati is also famous for his judicial improvisations. Based on the idea that ‘arbitrariness is the antithesis of inequality’, he introduced a new test to examine violations of ‘Right to Equality’. This test is however completely illogical, as constitutional scholar H.M. Seervai demonstrated. Even more famous is his pioneering ‘right to life jurisprudence’ in the Maneka Gandhi case. A negative right against the state’s illegal deprivation of any individual’s life or personal liberty has since been interpreted as a positive right to life, making it a receptacle for all manner of socio-economic rights. The only right it now seems to exclude is the literal mandate of Article 21. Another instance of careless improvisation is his unnecessary innovation of ‘absolute liability’ as a principle of liability in cases of injury caused by inherently hazardous industries. Needlessly trying to remove the few exceptions that the time-honoured principle of strict liability allowed, once again Justice Bhagwati was set on winning the tournament of competitive radicalism that his vision of judgeship entailed, regardless of institutional costs. This has been his most enduring legacy as a role model for future judges: to think of their judicial role instrumentally as social activists and not mere jurists. A certain looseness of legal language entered Indian appellate judgments and radical rhetoric became the path to power for Indian judges. The value of careful judicial prose declined as fidelity to law no longer mattered, what mattered was the show of ideological commitment.

 Qatar crisis: mending the rift

The international community must push for a resolution of the Qatar crisis

•The fact that Saudi Arabia, Egypt, Bahrain and the United Arab Emirates have handed over a list of demands to the Qatari regime should, on the face of it, indicate some progress in the impasse created after they cut ties with Qatar. The list has not been officially released, but is reported to include demands that Qatar snap all but trade ties with Iran, end military cooperation with Turkey and shut down the Al Jazeera news network. It may be that many of the demands are only meant to be bargaining counters — even U.S. Secretary of State Rex Tillerson, who has been running the backroom negotiation along with the Emir of Kuwait, said they are “very difficult for Qatar to meet”. In any case, such demands on the list may be more understandable if these countries complied with them as well. For example, in asking Qatar to disown ties with al-Qaeda and the Islamic State, Saudi Arabia, Bahrain and the UAE cannot ignore their own role in building up Sunni extremist groups across West Asia, sometimes in partnership with Qatar. The UAE has a thriving business relationship with Iran. And while the Saudi-led bloc may object to “negative narratives” and the platform given to their dissidents on Al Jazeera and the other news outlets named, it is unlikely that they will lean too much on the internationally recognised news networks to close shop. The bulk of the demands, however, focusses on asking Qatar to enforce its own commitments from the 2014 Riyadh declaration of the Gulf Cooperation Council (GCC) on ceasing support to extremist and terrorist groups. This indicates that a path is being cleared for a resolution to the current crisis. The next few days will be crucial in ensuring the outcome.

•There are implications of this crisis that India and the international community cannot afford to ignore. While the action against Qatar is mainly political and nowhere close to the Saudi-led action on Yemen, where more than 10,000 people have already been killed, in both cases the muscle power of the regional bullies has been allowed to prevail over a weaker nation. The treatment of Qatar could well become the playbook for future diplomacy, which would lead to a further weakening of the international order, the rule of law and the UN system of conflict resolution. There are also signs that this may be the precursor to a larger conflict with Iran. This is a troubling scenario for the world, and for India in particular with its commitment to build connectivity and shore up oil reserves. The impact of any conflict in the Gulf cannot be over-estimated, given India’s dependence on oil supplies and remittances from some eight million Indians based there. For New Delhi to continue to be as sanguine about the Qatar crisis as it appeared to be a few weeks ago, when External Affairs Minister Sushma Swaraj called it an “internal matter” of the GCC, is no longer an option.

 Who’s afraid of neutrinos?

The India-based Neutrino Observatory would greatly advance scientific research

•Which one of us would not have applauded Galileo in January of 1610 when he trained his telescope for the first time on Jupiter and observed four dots alongside it? Within days he noticed that the dots seemed to be going around Jupiter... they were its four largest moons!

•Today, very large telescopes send us iconic images of distant galaxies and of faint remnants of the light produced by the Big Bang. The light from the moons of Jupiter was always falling on earth. It took a telescope to detect it because it was so feeble and could not be seen with the naked eye. Interesting things, telescopes. They observe something that is already there. They do not produce what they observe.

Just like light

•There are two other things that, like light, can travel great distances in the universe, and therefore can be usefully observed. The first of these are gravitational waves. Predicted by Einstein’s famous theory, these waves travel at the speed of light and are produced when very heavy objects such as black holes collide. Gravitational waves were first detected in September 2015 by the Laser Interferometer Gravitational-Wave Observatory (LIGO). As the waves passed, LIGO measured that they expanded and contracted the earth a tiny bit for a fraction of a second. The measurement told us that the colliding black holes were 30 times the mass of the sun, 1.3 billion light years away, and during the collision, the mass of three suns just vanished to produce the energy of the gravity wave that spread across the universe. However, LIGO did not produce the waves that it observed.

•They were produced by cataclysmic events, and we wouldn’t want to be anywhere near them, but observing them through LIGO is like receiving a postcard from that collapsing, tragic part of the universe that even light cannot escape from.

•The only other particles that can zip through the universe at speeds very close to that of light are called neutrinos. The biggest nuclear reactor that most life on earth derives energy from is the sun. Like all nuclear reactors, in addition to giving out energy (heat and light), the sun also emits neutrinos. We have all seen sunlight. Can we also observe the billions of neutrinos the sun emits every second?

•In the mid-1960s, when solar neutrinos were observed through the first neutrino telescopes, it quietly unleashed one of the biggest revolutions in our knowledge of the laws of physics that govern the universe. Raymond Davis and John Bahcall detected that only half the neutrinos that the sun was emitting towards the earth were actually reaching us.

•The reason? As they travelled the distance from the sun to the earth, the neutrinos were changing from electron-neutrino type that the sun was emitting to muon-neutrino type, and thus escaping detection. All the laws and forces of nature that we know of, other than gravitation, are described by what physicists call the Standard Model. It predicted that neutrinos, which come under three types or flavours — tau-neutrino, electron-neutrino and muon-neutrino — would not oscillate from one flavour to another. The discovery that they do meant that the Standard Model or the basic laws of physics had to be further modified. Thus, through the neutrino detectors we are actually observing the fundamental laws of physics at the cutting edge.

•The proposed India-based Neutrino Observatory (INO) aims to observe muon neutrinos that are continuously produced in the atmosphere when cosmic rays strike the earth. Since every type of matter particle has an anti-matter partner particle associated with it, there are also anti-neutrinos that the INO can observe. Anti-neutrinos also come in three flavours and can oscillate from one to the other. An important question in the mystery of trying to piece together the laws of physics is: do anti-neutrinos oscillate or flip their flavours at exactly the same rate as neutrinos do, or are there slight differences in their rates? In other words, do laws of physics treat matter and anti-matter exactly the same way as far as the neutrinos are concerned or do they treat them differently?

•While the INO will not by itself provide an answer to this question, its measurements will — by determining the order of the neutrino masses and thereby help other neutrino experiments that are already under way or being built in other parts of the world. The INO, by observing the rates at which neutrinos and anti-neutrinos oscillate, will make a substantial contribution to the quest to unravel the secrets of the ultimate laws of physics.

Nothing to fear

•Unfortunately, some activists and political parties in Tamil Nadu have made baseless allegations that the INO, which is just like a telescope, causes radioactivity and have compared it with the dangers of having a nuclear power plant or radioactive material in the neighbourhood. This cannot be true since the neutrinos, whether they are naturally occurring in the atmosphere or from the sun, or are emitted by far away man made nuclear reactors and sent in beams of neutrinos with few GeV energy, are very feeble and weakly interacting particles that we can’t even see or feel without the help of an observatory. Beams of neutrinos are being sent to the NOvA neutrino detector in the U.S. and to the T2K neutrino detector in Japan every day. Moreover, being the lightest matter particles, the neutrinos do not decay into any other particles, as everything else is heavier — so they are not like uranium which decays radioactively into smaller atoms. All the INO would do is to provide the lens to observe neutrinos as they are too feeble or faint to be detected by the naked eye. It does not create a radiation hazard or put us in harm’s way. While we should ensure that the tunnel is dug with proper environmental safeguards and the project has various clearances, raising the spectacle of radiation hazards and comparing it with nuclear or thermal power plants is spreading false fears and is unscientific.

 GST, an old new tax

The new GST regime is a work in progress, it must be fixed urgently

•Sixteen years in the making, India is finally set to roll out the Goods and Services Tax (GST) from July 1. Prime Minister Narendra Modi will inaugurate the new indirect tax at the stroke of midnight in Parliament, taking a leaf out of Jawaharlal Nehru’s book. “A moment comes, which comes but rarely in history, when we step out from the old to new,” Nehru had said while ringing in India’s independence. The two events are obviously not comparable — nonetheless, the GST’s introduction could have been a rare transition, but is not.

•The GST, to be collected on everything from matchboxes to gold, will touch everyone. A modern tax system should be fair, uncomplicated, transparent and easy to administer. It must yield revenues sufficient to cover the cost of government services and public goods. India’s GST does not pass these tests convincingly. It is too complex. We must collect it at fewer and lower rates, and on more items.

•The GST has been fixed for more than 1,200 categories of goods and services consumed in the country at 0.25%, 3%, 5%, 12%, 18% and 28%, along with cesses to be imposed additionally in some cases. The present taxation system has not been given the boot yet. Electricity, real estate and alcohol will remain in it, exempt from the GST. Petroleum products will be in both systems, old and new, but with zero-rate GST. Over half the items will be taxed at 18% or 28% GST, the steepest rates in the multi-rate structure. This skew violates the basic principle of revenue collection: the lower the taxation rate, the higher the compliance. An opportunity is lost to collect more tax revenues, while at the same time, taking a little load off the consumer’s pocket.

•More than sound economic, or political, logic, the GST seems driven by the deciding authorities’ discretion. The GST rate for gold, a luxury good, is lower than that for matchboxes. The tax incidence is the same in the GST on environment-friendly hybrid vehicles and fossil fuel-guzzling SUVs. In the extant system, the effective rate for guzzlers is significantly higher than that for hybrids. This ‘carbon tax’ on SUVs, popular with politicians, is being withdrawn.

•The GST will be imposed at 18% on soaps and washing soaps, but at 28% on detergents. Some moviegoers will pay 18% GST and, others, on the same movie, 28%, depending on the price of cinema ticket — not exactly the promised ‘One nation, one tax’.

Click here for the full list of GST rates for goods

Click here for the full list of GST Compensation Cess Rates for different supplies

Status quo wins

•The GST, as it’s being rolled out, is an outcome of a political process in which 29 States and seven Union Territories agreed to give up their right to impose sales tax on goods (VAT) and the Centre gave up its right to impose excise and services taxes. In the amended federal arrangement, they will each receive a share of the GST collected nationally. Instead of every State imposing a tax, they will sit together and decide what that tax rate should be. Individually, States see this as an erosion of their financial autonomy, even if Union Finance Minister Arun Jaitley, the chief architect of the consensus, described it as, “the states and Centre pooling their powers and sovereignty”.

•The constitutional guarantee that the Centre will fully reimburse the transitional losses did not fully address the States’ insecurities. The States insisted on keeping the GST’s rate structure as close as possible to the old system. A GST regime resembling the old tax system cannot be a low, single-rate GST. The options narrowing to a delayed or an imperfect GST, the Centre chose to defer to the States’ collective opinion. The result: far from simple or neat, the new indirect tax is a multitude of rates, cesses and exemptions.

•So, politicians, not tax experts, devised the GST. The GST Council, made up of Ministers from State and Central governments, scrambled elements from the current indirect taxation system into the GST, tinging the new with the old, guided by old habits, not healthy appetite for reform.

•“Status quo has strong appeal in real life,” Prime Minister Manmohan Singh had said of the resistance to 1991’s economic reforms. Chief Economic Advisor Arvind Subramanian’s summation of the process that delivered the GST suggests that decades later, attitudes have not changed: “On the GST, the political pressures from the States to keep rates low and simple were minimal. The general desire is for the structure to mimic the complicated status quo. There was insufficient concern for the implied consequences for efficiency and simplification.”

•The lingering imperfections, and disregard for economic principles, will limit the GST’s transformational potential. Small firms, unlike industry chambers and lobbies, are not vocal, and therefore not easily heard. They are concerned about the number of man hours the new reporting requirements will extort. These should be taken on board. The GST Council must show sensitivity to transitional challenges. A hotline among its members, as an instantaneous problem-solving mechanism, may smoothen the transition. Increasing simplicity and reducing the complexities remains a promise made, not kept.

 HPCL joins talks for Russian oilfields

ONGC Videsh-led consortium is negotiating acquisition of a stake in Rosneft’s Arctic Vankor Cluster

•State-owned Hindustan Petroleum Corporation (HPCL) has joined the Indian consortium negotiating the acquisition of a 49% stake in Russia’s Vankor Cluster oilfields in the Arctic region.

•Originally, ONGC Videsh Ltd., the overseas investment arm of state-owned Oil and Natural Gas Corporation (ONGC), signed an MoU to explore buying a stake in Suzunskoye, Tagulskoye and Lodochnoye fields — collectively known as Vankor Cluster.

•Later, Indian Oil Corporation (IOC), Oil India (OIL) and Bharat PetroResources (BPRL), a unit of Bharat Petroleum Corporation, came in using the influence of the oil ministry.

•Now, HPCL has shown interest and has joined the talks, sources privy to the development said.

•Rosneft, Russia’s national oil company that owns the fields, wants to retain a majority stake and is keen to sell only up to 49% stake.

•Sources said OVL is keen to take the largest share of 20-26% as the project had originally come to it and others joined in later.

•If OVL takes 26% stake, OIL-IOC-BPRL-HPCL may have 23.9%, they said.

•Vankorneft, a subsidiary of Rosneft, is developing the Vankor oil and gas condensate field, situated in the northern part of eastern Siberia.

•In 2013, Vankorneft was chosen as an operator on development of new fields of Vankor Cluster located close to the Vankor field. The reserves of Suzunskoye field exceed 56 million tonnes of oil and condensate and 35 billion cubic metres of gas.

•Last year, OVL first acquired 15% in Russia’s second-biggest oil field of Vankor for $1.27 billion and then bought another 11% for $930 million. The 26% stake would give OVL 7.31 million tonnes of oil.

•The consortium of OIL-IOC-BPRL acquired 23.9% stake in the field at a cost of $2.02 billion, giving them 6.56 million tonnes of oil. Rosneft continues to hold the remaining 50.1% shares of JSC Vankorneft. The field has recoverable reserves of 2.5 billion barrels.

Adding acreage

•Besides, the OIL-IOC-BPRL consortium has taken another 29.9% stake in a separate Taas-Yuryakh oil field in East Siberia for $1.12 billion. The investments have taken the total outlay in Russia this year to $5.46 billion.

•These investments will give India 15.18 mt of oil equivalent. These compare to $28.48 billion investment by Indian companies overseas in the past 50 years, leading to about 10 million tonnes of oil equivalent.

•While Vankor produces about 4,42,000 barrels of oil per day (bpd) — that is, 4% of Russian crude oil production — Taas produces about 21,000 barrels per day of oil, and a peak of 1,00,000 bpd is expected by 2021.