📰 Reform 101
More thought is needed on the proposed regulatory body for higher education
•The provisions of the new Higher Education Commission of India (HECI) Bill drafted by the Centre have far-reaching implications for the expansion and quality of human resource development, at a time when access to skill-building and educational opportunity are vitally important. There were 864 recognised universities and 40,026 colleges in the country in 2016-17, while the gross enrolment ratio of students was only about 26%. To put this in perspective, there were only 20 universities and 500 colleges at the time of Independence. Previous attempts at system reform involving expert committees and even legislation to create a new body for higher education and research had advocated changes, with an emphasis on promoting autonomy, access, inclusion and opportunity for all. That challenging goal will fall to the HECI, the proposed successor body to the University Grants Commission. For this very reason, the Centre should give sufficient time to academia, the teaching community and society at large to submit considered opinions on the draft proposals. Among the key questions that need resolution is the future role of multiple regulatory bodies that currently exist for engineering, medicine and law; the Yash Pal Committee had recommended that they should be brought under the ambit of a single commission. There is a case to include other professional education streams as well, including architecture and nursing. The aim should be to set academic benchmarks for each stream, with sufficient autonomy to innovate on courses and encourage studies across disciplines.
•Among the more contentious issues arising out of the draft Bill is the Centre’s decision to shift grant-giving powers for higher education institutions to the Ministry of Human Resource Development or a separate body. The UGC has been doing this so far, covering a variety of functions, and whatever the flaws, it ensured a separation of funding decisions from political considerations. Maintaining a balance on allocation of funds and ensuring transparency will now depend on the proposed advisory council to the HECI. It is welcome that the States are represented on the advisory council, giving it a federal character, although it is the Centre that will have the final say in all matters, not even the apex HECI. At a broader level, higher education is challenged today by fast-paced technological changes affecting the economy and the need to create a workforce that has the requisite skills. Reform should, therefore, lead to the creation of an agency that has the intellectual corpus to help universities and colleges adapt, and the vision to plan for public funding in the emerging spheres of activity. There is a positive attempt in the draft legislation to weed out degree mills and dubious training institutions, with a provision for prosecution and imprisonment of management officials who defy the HECI. Yet, this will take political will, given that over the past three decades laissez faire expansion of higher education has been pursued purely for commercial motives.
📰 In the city of refugees
As the monsoon rains threaten to ravage the Rohingya refugee camps in Bangladesh’s Cox’s Bazar, relief workers struggle to balance the vital work of damage control with the pressing demands of inter-personal conflict resolution. Vidya Krishnan reports on the routine tragedies of life in the world’s largest ‘refugee city’
•If you travel south from Cox’s Bazar, a small port city on Bangladesh’s southeastern coast, the drive along the world’s longest natural beach seems rather pleasant. Scenic, even. But an hour into the journey and it all begins to change. The roads get narrower and muddier. The beach disappears. And looming in front, as far as the eye can see, is a vast conglomeration of human settlements that ought to be called a ‘city’ but is the opposite of one, with its own version of the normal.
•The first sign of the new ‘normal’ comes not far from the city’s entry point: a young man’s body lies in the middle of the street. There are no visible wounds on the body, but blood trickles out of the mouth. An older woman, presumably his mother, bends over him, sobbing, while a small crowd around them is engaged in heated argument.
•Not only are altercations common, but they often end in violence, say aid workers stationed at the largest refugee camp in the world. Early this month, the head majhi of Balukhali camp, 35-year-old Arif Ullah, was hacked to death by unknown assailants. In January, another camp leader, 60-year-old Yusuf Ali, was stabbed to death. Days before Ali’s death, Mohammad Yusuf, leader of the neighbouring Thaingkhali camp, was shot dead.
•The police and aid workers say a struggle for control of supplies to the camps is behind much of the violence. “We are advised not to get involved in fights within the camps. They often turn ugly and there is nothing we can do,” says a social worker who landed in Cox’s Bazar three months ago to work in the refugee camps.
The monsoon threat
•As of June 21, over 706,364 Rohingya Muslims had fled Myanmar since August 25, 2017, when the country’s army began a brutal campaign of violence against the community. The mass carnage was described by the United Nations as having all the “hallmarks of genocide”. The vast majority of the population that escaped across the border into Bangladesh were accommodated in the Kutupalong-Balukhali refugee camps in Cox’s Bazar district.
•The shelters in the camps, numbering 27 in all, are made of bamboo and tarpaulin, since conventional or permanent construction materials are not permitted for what is supposed to be a temporary living arrangement for non-citizens. According to the UN Refugee Agency, 919,000 Rohingya (including those who had arrived in earlier waves of exodus) live in these makeshift shelters built on muddy hillsides.
•The camps, spread over more than 1,100 hectares, all sprang up in a matter of six months. About 4,000 acres of green forests surrounding the Teknaf Wildlife Sanctuary and Himchari National Park were levelled to make way for this ‘refugee city’. Such rapid deforestation has meant that a city-sized habitation has come up on unstable land that slips and slides every time it rains. It doesn’t help either that it is close to the Bay of Bengal, one of the most cyclone-prone regions in the world.
•The Joint Response Plan (JRP) of the UN Refugee Agency estimates that it will need $951 million for a variety of projects necessary to make the camp-city habitable. These include supplying 16 million litres of water per day, 12,200 metric tons of food per month, and constructing 50,000 latrines and 30 sludge management facilities to process the 420,000 kg of faeces produced per day. As of June 21, it only had 22% of the required funds.
•But the top priority right now for the UN and aid agencies running the camps is to protect the refugees from the damage that the monsoons are bound to wreak. A spokesperson for Médecins Sans Frontières says the humanitarian aid organisation is preparing for a “massive cholera outbreak”, a possibility given that the hastily built latrines have begun to overflow and contaminate water wells. As of June 29, 3,859 acute watery diarrhoea cases were reported from June 14 to 24.
•The rains have already caused damage to infrastructure. Heavy rainfall earlier this month disrupted services in 12 health centres. From June 22 to 27, the 252 mm of rainfall caused havoc, especially on June 24 and 25 when the camps had to withstand not only floods but also windstorms and landslides. About 32,000 refugees had to be relocated. After having rushed to build toilets, aid agencies are now scrambling to de-sludge and decommission nearly 30,000 latrines, which are at risk of flooding. Administering a city-size population without the kind of infrastructure that a city requires is no easy task. And if security, sanitation, and primary health care — essentials that most residents of functional cities take for granted — are precious commodities here, it is not for want of trying.
•“These camps are not like an ordinary city,” says Shamimul Huq Pavel, the camp in-charge (CiC) for five of the 27 camps. He works for Bangladesh’s Refugee, Relief and Repatriation Commission (RRRC), which is responsible for running the refugee camps. Given that the Rohingya are officially ‘stateless’, the RRRC’s ambit is a combination of disaster management, foreign affairs and home affairs. The bureaucrat appointed by it, picked from the Bangladesh Civil Service, has the sole authority for all things that happen inside the 27 camps. The RRRC’s responsibilities range from dispute resolution between families to setting up basic infrastructure and relief coordination between the Bangladesh government, UN agencies and aid organisations.
•“We are building culverts, toilets, roads and hospitals even as they crumble. It’s like mopping the floor while the tap is running,” says Pavel. “The camps have four entry and exit points. Even a short spell of rain can cause vehicles to get stuck in the mud. People will have to lay new bricks on the road — literally lay a new road — if aid is to reach the refugees.” One of the four access points, the Army Road, has been closed till mid-July when brick laying is expected to be completed.
•On a drive to one of the camps, Pavel points to an overturned truck. “That’s from yesterday,” he says. “The road is so narrow that there is not enough space for people and vehicles. A woman, carrying her baby, was hit by this truck. Both died.” Tragedies of this kind have caused strife between the refugees and the host communities living in Ukhiya, the sub-district of Cox’s Bazar where the camps are located. However, daily concerns are not about hostile relations with host communities, they are about resolving conflicts.
About a slap
•As foreign nationals, the Rohingya refugees are not allowed to wander outside the camps, let alone look for a job in Bangladesh. But being forced to live in close quarters with thousands of strangers in an overcrowded, fenced-in space that offers very little by way of productive engagement, either for men and women of working age or for adolescents and children, can be complicated.
•Families fight every day over food, medicine and space, making the CiCs’ job extremely challenging. While most CiCs get one camp each to manage, three senior bureaucrats — Pavel, Mohammad Reza and A.S.M. Obaidullah — manage multiple camps. Pavel, who manages the most number of camps, is responsible for 200,000 refugees.
•On June 7, at around 11 a.m., he walks into his office, a two-room structure of bamboo and tin sheets. It has a modest wooden table, a fan, and a few windows that make the humidity a little more bearable. His team is working on a Cyclone Preparedness Programme (CPP), a critical component of which is to remedy the impact of the storm on the refugees’ bamboo-tarpaulin shelters. A few of the CPP team members are busy organising a Fire Rescue Training for the refugees. “One fire in one small corner of the camp can burn down the whole place. We are training the Rohingya men to use extinguishers,” says Arup Kshetrimayum, Pavel’s deputy.
•Pavel wants to concentrate all his energies on this task but a steady stream of refuges trickles into his room, seeking his intervention in yet another crisis in their lives. Faiza, a woman in her early twenties, has a baby in her arms, and is sobbing incessantly as she waits in the queue. When Pavel finally motions to her, she steps forward and narrates to him how the guard at the World Food Programme’s feeding centre had slapped her. “I was in the queue for my ration. He was allowing people behind me to jump the queue. When I complained, he slapped me,” she says. It’s a ‘he said, she said’ kind of dispute. Pavel, almost as a reflex from having dealt with innumerable such cases on a daily basis, instructs his CPP volunteer to go back with her, identify the guard, and bring him to the CiC office.
•As she leaves, Faiza points to her swollen cheek as evidence of the incident having occurred, and adds that she is on aroza(fast) to drive home the point that the guard had ‘sinned’ by raising his hand on someone fasting during Ramzan. But Pavel’s attention has already moved on to the next bunch of visitors — a team from Oxfam that wants permission to distribute water purifying kits in Camps 3 and 4, both of which fall under Pavel’s jurisdiction.
•Pavel signs some papers and checks a calendar on the wall to make sure that there isn’t a ‘double booking’. “We have few distribution points in the camp. If we promise the space to one aid agency, and later find out that the place was already being used for some other purpose, there would be chaos,” he explains as he turns to the next in line.
•These are a group of 30 imams. As the makeshift city takes shape, so do makeshift mosques. This is a special time for Rohingya Muslims, who for the first time in many years can observe the holy month without fear of persecution. It turns out that the imams, in white robes and skull caps, have arrived two hours early to meet the CiC, crowding the small office space. “Shut the doors and ask them to come back at 3 p.m.,” Pavel instructs his members as they break for lunch. He lights a cigarette, takes his first quick break of the day, and gets back to work.
Crimes without punishment
•A CPP volunteer enters Pavel’s room, opens a cabinet and pulls out a machete. A man had walked into Pavel’s office the day before and handed over the blood-stained weapon that he had used to hack his friend following a disagreement. The friend had suffered grievous injuries but survived. “He is in the hospital and will recover. The attacker deposited the machete here and made a confession,” says Pavel. “Yesterday was a crazy day.” The ‘machete man’ was handed over to the Bangladesh police stationed in the camps. “We have kept him under observation but legally he is free,” explains Pavel.
•Checking crime inside the refugee camps is almost impossible for the administrators. While the refugees are subject to the laws of the country they seek asylum in, the resources needed for policing the sprawling yet tightly packed camps, finding space for prisons, and managing jails and courts are hard to come by. Also, hunting for the suspects among a million refugees who are constantly on the move between the camps is not easy.
•The staff of organisations that work with refugee communities are trained to handle these situations, says Shelley Thakral, Communication Officer, World Food Programme. “We try to address situations as they happen, before they flare up,” she says. With the Government of Bangladesh, the International Organisation for Migration, the UNHCR, and over a hundred NGOs getting together for weekly meetings to ensure that communication is smooth, some issues have been settled, Thakral says. When the Rohingya had first moved, the priority was to provide information about where people could get food, clothes and medicines. Now, the messaging is about evacuation. “We tell the community about identified areas for relocation. There is a flag system to guide the way,” she says.
•But everything comes to a standstill when people fight, says Pavel, and that is why it is important to resolve conflicts inside the camps. “This is a city of people who have to share with strangers everything from a needle to a house. We have to resolve fights as soon as possible. At least we try to. Our main objectives — building bridges and roads to make sure that aid can reach the camps — will suffer if these smaller disputes are not sorted out.”
•Of course, all the CiCs would like to focus solely on building camp infrastructure. But this is not possible as everyday conflicts keep snowballing into violent fights. So, much of their time goes into dealing with quarrels over an extra ration card, a lost bangle, extramarital affairs, or a slap.
•Next in line to meet Pavel is a young woman, Zabiyah, who tells him that she had lost her family while fleeing the Myanmar army. She had subsequently found, on arriving at the camp here, that her husband had died, but after taking another wife. She now lives with her grandson in a different house in the same camp as her deceased husband’s new wife. Her problem is that there are now two families on the same ration card. A man taking on a second or third wife is quite common among Rohingya. “Because polygamy is accepted, these cases are often complicated,” explains Kshetrimayum. “The Rohingya have faced so much food insecurity that they want to get extra ration cards when families split. Sometimes families come here and separate — or tell CiCs that they have separated — so that they can get two cards. They get more food provisions that way.”
•After Zabiyah leaves, Pavel explains how he resolved her problem: “I told her to go home and get some sleep. There is enough food for every one here. No one will starve in these camps.”
•Meanwhile, the CPP volunteers come back with the guard who had allegedly slapped Faiza. She also returns with them, still crying. The guard denies having slapped her. By now it is four in the afternoon, and this dispute is in its sixth hour.
•Faiza has also added another layer to her story: When she was slapped, her nose pin came off. Among Rohingya, like in many Asian countries, a nose pin signifies that the woman is married. It is a part of traditional bridal jewellery and is considered auspicious. “My husband is not letting me back in my house because I lost my nose pin,” Faiza tells the officials.
•Pavel takes a deep breath, and pauses for a minute to consider a fair resolution. He then speaks crisply to the guard: “It’s a hot day. People have to line up for hours to wait for rations. You cannot let people jump the queue. You cannot hit people.” Then to Faiza: “You cannot hassle the guards, they have a stressful job. Hundreds of people are waiting in queues patiently. So should you.” And finally, addressing both of them about the nose pin, he says, “The guard will buy Faiza a new nose pin.”
•By 5 p.m., most officials and aid organisations are packing up to leave. They are all heading back to Cox’s Bazar city, where the vast majority of the visitors and aid workers live. As they depart each evening, law and order inside the camp deteriorates. Pavel will discover the extent of this breakdown when he returns to work the next morning. For now, the dark clouds hovering over the camps are the biggest threat.
•Pavel is nearly done wrapping up work for the day when a couple walks in. They lay a thick file of papers on his desk, and as the man begins to talk, the woman starts crying. “She has a swelling in her stomach. She is in pain but we can’t take her out of the camp for treatment,” says Tahir, the husband. Pavel scans the prescription, which reveals that the woman has Hepatitis C. He hands her some cash to get tested at a private clinic, and steps out of his office muttering, “Will figure something out by tomorrow.”
•As we drive back to Cox’s Bazar, Pavel remembers the young man we had found lying in the middle of the street. “He survived,” he says. “He was taken to the hospital on time.” And what happened to the man who had attacked him? “Nothing.”
📰 ‘Grey-listing’ nothing new: Pak.
Paris plenary decision comes despite Islamabad action plan on terror funding
•In a blow to Pakistan, the global financial watchdog Financial Action Task Force (FATF) has placed it on the ‘grey list’ for failing to curb terror financing despite Islamabad submitting a 26-point action plan and launching a concerted diplomatic effort to avert the decision, officials said on Friday.
•The decision was taken late on Thursday night at the FATF’s plenary session in Paris where Finance Minister Shamshad Akhtar represented Pakistan, according to official sources.
Not official
•However, there has been no formal announcement by the FATF so far.
•The FATF is an inter-governmental body established in 1989 to combat money laundering, terrorist financing and other related threats to the integrity of the international financial system.
•The announcement comes a day after Pakistan submitted a comprehensive 26-point action plan to the FATF to choke the funding of militants groups, including Mumbai attacks mastermind Hafiz Saeed-led JuD and its affiliates, to avoid blacklisting.
•The placement on the grey list could hurt Pakistan's economy as well as its international standing.
•Earlier in the day, Mr. Akhtar had urged the FATF to remove Pakistan from its grey list.
•As the 37-nation FATF plenary began proceedings on Pakistan’s 26-point action plan spanning over 15 months, the Pakistani delegation apprised the watchdog of steps taken to weed out money laundering and terror financing to avoid the country being placed on the grey list.
‘Nothing new’
•Commenting on the development, Foreign Office spokesman Mohammad Faisal said the decision to place Pakistan on the grey list was taken in February and there was nothing new.
•"In February 2018, during the FATF plenary session in Paris, it was agreed that Pakistan will be included in the grey list in June 2018. Therefore, what is being reported in media recently is nothing new," he said.
•Mr. Faisal said it was also agreed in February that an Action Plan would be negotiated between Pakistan and FATF members by June.
📰 Iran not just an energy supplier: Ansari
Says govt. should consider the ‘totality’ of its ties with the country while responding to U.S. demand
•Iran ensures overland connectivity between Eurasia and India and it is not just an energy supplier, former Vice-President Hamid Ansari said here on Friday.
•Mr. Ansari, who served as India’s Ambassador to Iran during the early 1990s, said the government should take into consideration the “totality” of India’s ties with Iran, while responding to U.S. President Donald Trump’s demand to cut down drastically energy imports from that country.
•“Our relationship with Iran has been built carefully and thoughtfully by all past governments as Iran for us is not just an energy supplier from the Persian Gulf region. We have to look at Iran from a different point of view. For us, Iran is a land power on the other side of Pakistan that provides us with an alternative route to Afghanistan,” said Mr. Ansari, reminding the government that Iran is a geopolitical entity in its own right.
•He pointed out that Iran has borders with a large number of countries that India could not access because of the barrier that Pakistan posed to India’s overland connectivity plans.
•The note of caution came a day after Mr. Trump’s envoy to the UN, Nikki Haley, conveyed the message that India should adhere to the November 4 deadline given by the Trump administration and drastically reduce energy imports from Iran.
•However, Mr. Ansari argued that Iran and India had many other compelling linkages that the government should not neglect.
Alternative access
•Mr. Ansari said Iran provides alternative access to Afghanistan, which was a strategic necessity for Delhi and therefore India should view this relationship with special care.
•“We have to view relations with Iran in totality and not let only one dimension like energy to define our ties. Our infrastructure-building activities in Afghanistan is done with support from Iran. Iran has the port of Chabahar where we have invested because access to Afghanistan is crucial for us,” Mr. Ansari said.
•He said India maintained relations with countries strictly on the basis of bilateral dynamics and in this context, Iran’s importance had remained undiminished over the past several decades. Mr. Ansari also said that at times, India disregarded political inclination of the government in Tehran with an eye on the overall necessity of the country for India’s strategic security. “During the war of 1971, the government of Shah was pro-Pakistan, but we maintained ties with that government and that relationship helped us address energy security,” he said.
📰 We want best healthcare at the lowest cost: Modi
Says national health policy will ensure cheaper treatment
•Prime Minister Narendra Modi laid the foundation stone for the National Centre for Ageing at the All India Institute of Medical Sciences (AIIMS) here on Friday. The 200-bed centre will be built at a cost of Rs. 300 crore.
•The Prime Minister inaugurated a 1-km motorable tunnel connecting the AIIMS main building to its trauma facility to transfer patients and their relatives, doctors, instruments and medicine. The construction of the tunnel started in 2012 and cost Rs. 40 crore.
•“We want to provide the best healthcare to our people at the lowest possible cost. We have proposed and approved more numbers of AIIMS than it was done in the past 70 years,” Mr. Modi said.
•He said the government’s vision was not limited to providing modern hospitals and medicines and hence it introduced a national health policy to ensure low-cost treatment for every citizen and to eradicate the causes of diseases.
•Mr. Modi talked about the two pillars of the Centre’s ambitious Ayushman Bharat, as part of which 1.5 lakh sub-centres are being converted into health and wellness centres to screen tuberculosis, leprosy, diabetes, hypertension and breast, oral and cervical cancers.
•He talked about the National Health Protection Scheme which aims to provide a cover of Rs. 5 lakh a family a year to 10 crore vulnerable families.
•Reiterating India’s commitment to eradicate TB by 2025, five years ahead of the global target, Mr. Modi said he had faith that the healthcare sector of the country would meet the challenge.
•He also inaugurated a 300-bed Powergrid Vishram Sadan at AIIMS, and at Safdarjung Hospital dedicated a 555-bed super-speciality block and a 500-bed emergency block to the public.
•“Over Rs. 1,300 crore was spent on the Safdarjung Hospital to make it technologically advanced,” Mr. Modi said.
•During his brief stay at the AIIMS, Mr. Modi also visited former Prime Minister Atal Bihari Vajpayee, who is undergoing treatment for a urinary tract infection.
📰 Not all Swiss bank money illegal: govt.
Can’t assume 50% rise in deposits is black money: Goyal
•Finance Minister Piyush Goyal said on Friday that the reported 50% rise in deposits by Indians in Swiss banks could not be presumed to be a case of black money parked abroad. He added that the government would start getting details on bank accounts of Indians in Switzerland from next year under a bilateral tax treaty, and strong action would be instituted against anyone found guilty.
•The Minister was responding to news reports that money parked by Indians in Swiss banks rose to CHF (Swiss Franc)1.01 billion (Rs. 7,000 crore) in 2017. The surge reversed a declining trend over three years amid a “clampdown” on suspected black money stashed overseas.
•In comparison, the total funds held by all foreign clients of Swiss banks rose only about 3%, to CHF 1.46 trillion, about Rs. 100 lakh crore in the same period, according to data released by the Swiss National Bank (SNB).
Blames Chidambaram
•Citing reports, Mr. Goyal said 40% of the deposits was the result of the liberalised remittance scheme introduced by former Finance Minister P. Chidambaram. As per the scheme, an individual could remit up to $2,50,000 per year, he said.
•Replying to reporters’ queries, Mr Goyal said, “The data that you alluded to will come to us; so how are you assuming that this is black money or this is illegal transaction?”
•“We will have all information if someone is found guilty, [and] the government will take strong action against them,” he said.
•Almost exactly a year ago, in an address to the Institute of Chartered Accountants of India (ICAI) on July 1, 2017, Mr. Modi had highlighted a record 45% drop in deposits by Indians in Swiss banks.
•Reacting to the reports, the Congress and other Opposition parties targeted Prime Minister Narendra Modi over his claims of retrieving black money stashed abroad. The JD(U), a BJP ally, also expressed “grave concern” over the surge in Indian deposits.
•Attacking Mr. Modi, Congress president Rahul Gandhi tweeted: “2014, HE said: I will bring back all the “BLACK” money in Swiss Banks & put 15 Lakhs in each Indian bank A/C. 2016, HE said: Demonetisation will cure India of “BLACK” money. 2018, HE says: 50% jump in Swiss Bank deposits by Indians, is “WHITE” money. No “BLACK” in Swiss Banks!”
‘Fell during UPA tenure’
•The Congress said such deposits had fallen during the UPA regime. “Swiss Bank deposits fell during Dr. Manmohan Singh’s time, only to rise to record levels under PM Modi. The current increase of 50.2% post demonetisation is the maximum since 2004,” the party said on Twitter. “What happened to Prime Minister Modi’s promise of eradicating corruption and bringing back black money?” asked party spokesperson R.P.N. Singh.
📰 A broken tax chain
The GST’s faulty design has prevented the economy from benefiting fully from the indirect tax regime
•A year ago, at a special midnight session in Parliament, the launch of the goods and services tax (GST) was heralded as the new freedom. A year on, what has the GST achieved? ? One should not expect instant results. There will be many short comings when a complex reform is rolled out. But the question is this: is the economy headed in the right direction?
•Arguments in favour of the GST were that it would lead to ease of doing business; make markets efficient; yield higher tax collections; and lead to lower prices. With higher tax collection, the government would be able to deliver better services. Thus, the GST was presented as a win-win situation for everyone.
From the start
•Businesses have not yet experienced ‘ease of doing business’ though some have adjusted to it. To begin with, the GST rates were fixed rather late. Industry could not fix prices well in time and difficulties grew right from day one. The IT functioning of the Goods and Service Tax Network (GSTN) has been unsatisfactory due to problems or inordinate delays in access because of the volume of traffic. Per month, a few billion returns had to be processed.
•The complexity of the system became apparent when businesses had to file one form by the 10th of the month, check the next form by the 15th and file the third form by the 20th. The form to be filed by the 15th was to be auto populated on the basis of returns filed by the suppliers to the business. If some suppliers delayed filing or did not file, one had to chase them or one could not file one’s return. This proved to be insurmountable for many. For each State one was operating in, three returns had to be processed every month. Then there was an annual return to be filed. So for each State, a business had to file 37 returns in a year. Even though it was computerised, accounting was difficult. So, even though 17 taxes were replaced by one tax made up of many parts, simplification did not follow.
•The small businesses operating under the Composition Scheme (turnover between Rs. 20 lakh and Rs. 75 lakh; later the limit was raised to Rs. 1.5 crore) had their own woes. They could not give input tax credit (ITC) and if anyone bought from them, then the buyer had to pay the tax that the small business should have paid. This was the reverse charge mechanism (RCM). These small businesses were not permitted to make inter-State sales so that their market became limited in case they were at the border of the State. Thus, not only big but also small businesses faced severe difficulties.
•Taking cognisance of these, the government made rapid changes during the year through the GST Council (the body set up to govern GST). But this only added to the confusion. Some components of the GST which were considered essential to its design were suspended or altered permanently. For example, the e-way bill (to track goods being transported) was postponed to April 2018. The RCM was suspended and may resume now. The tax rate for businesses under the Composition Scheme was brought down. Restaurants were brought under the Composition Scheme with a 5% tax rate but no ITC. For a year now, there have been reports every day of new problems cropping up and clarifications being sought from the authorities. In some cases, court cases are being filed.
•Prices have not fallen. Of course, there are many factors underlying inflation such as a rise in petroleum goods prices, the weather and so on. But the GST has contributed to inflation because services are now taxed higher, — the rate has risen to 18% from 15%. It is also true that the ITC which was supposed to lower the cost to businesses and reduce cascading effect (and thereby lower final prices) has not worked. In fact, in the case of restaurants, the ITC was withdrawn and replaced by a different scheme. The government’s concern about the misuse of the ITC prompted it to legislate the anti-profiteering clause. But it is proving hard to implement; industry is resisting it.
•Even though essential goods are exempt under the GST, as basic goods and services prices rise, all prices increase. For instance, if diesel or truck prices rise, transport costs increase. All prices rise even if they are exempt under the GST, examples being the cost of cereals and vegetables.
Tax structure
•The tax rate structure (0%, 5%, 12%, 18% and 28%) also adds to the complexity. Then there are different rates for gold and jewellery. Some petro-goods and alcohol (human consumption) are not a part of the GST. Electricity and real estate are also out of the GST. The multiplicity of tax rates and exemptions means that the cascading effect continues.
•India does not have a full GST which is applicable from raw material to the final good/service. The chain is broken in many places. This partial GST is a result of trying to fulfil many policy objectives. For instance, small businesses which cannot cope with its complexity and goods consumed by the poor are exempt. As the Finance Minister said, “A BMW and hawai chappal can’t have the same tax.”
•The GST is not bigger than the policy changes introduced in 1991 and hence not the biggest reform. It is not yielding more revenue to enable governments to spend more on services for the poor. Further, by damaging the unorganised sectors, it has set back output and employment in the economy rather than leading to a higher growth rate. These problems emanate from introducing a very complex tax in a complex economy. In brief, while there are a few gains, the economy is not headed in the right direction because of the faulty design of the GST.
📰 ‘Reserves firepower to help stem rupee’s losses’
Govt. could raise funds via FCNR deposits, bonds, says Garg
•India believes the current slide in the rupee will not be prolonged as it has adequate “firepower” of foreign exchange reserves to deal with the current volatility, a senior finance ministry official said.
•The volatility is being driven by global factors, including proposed U.S. sanctions on Iran and the mismatch in demand and supply of oil, said Subhash Chandra Garg, the economic affairs secretary in the finance ministry.
•Policy makers are also worried that the ongoing trade war between the U.S. and China could adversely impact exports from emerging markets, including India, while discouraging capital inflows — putting pressure on the rupee.The rupee is down about 7% so far this year, making it the worst performing currency in Asia. Besides using reserves, economists said the Reserve Bank of India, which raised rates in May by 25 basis points to mark the first tightening in more than four years, could raise rates again.“We could see a couple of rate hikes in the current monetary cycle,” said N. R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy.
•However, he added a further increase in the key repo rate could squeeze credit for companies as well as lead to some cuts in capital spending by the government — dragging down economic growth. “We may not be able to achieve even 7% growth this fiscal,” he said. The rupee, which fell to a record low of 69.095 per dollar before recovering to end at 68.79 on Thursday, rebounded on Friday to close at 68.46.
Adequate firepower?
•New Delhi feels that with forex reserves amounting to $410 billion as of June 15, it could deal with the current storm. “We have adequate reserves, there is adequate firepower,” Mr. Garg said.
•But reserves are already down from their record high of $426.08 billion as of April 13, prompting traders to believe a large part of this decline has been due to dollar sales by the central bank to prop up the currency.
•“The RBI seems to be instrumental in rescuing [the] rupee from its low of 69.10 to current prices,” said Pritam Kumar Patnaik, Business Head at Reliance Commodities. “We expect them to keep participating as and when the rupee falls below the 69 to a dollar level.”
•But he added: “While they can exercise control on the domestic markets, they will have little or no control on the NDF (non-deliverable forward) markets, which has been setting the trend post our market close.”
•Three-month dollar/rupee contracts were changing hands at 69.35/47 levels in the offshore NDF market.
•Mr. Garg said other tools were also available to stem the rupee’s decline. If needed, the government could raise funds through foreign currency non-repatriable (FCNR) deposits, sovereign bonds or other routes to increase reserves, he said.
•“If we assess at any stage that we need to buttress or refurbish our reserves, the options are open,” Mr. Garg said, adding “that situation has not arisen.” Compared to a crisis in 2013, the current situation was much better, mainly due to higher forex reserves, services exports and inflow of remittances by non-resident Indians, the secretary said.
•Mr. Garg, who coordinates government policy with the RBI, said the trade deficit was expected to widen in the current year, mainly due to rising crude oil prices. He said any further rise in oil prices could further widen the trade deficit and put pressure on the rupee, but the situation was not clear at this stage.
‘A storm’
•“We are not even certain what kind of a storm it is or even if it is a storm or whether it will turn out to be a storm.”
•Mr. Garg also said it was too early to say what impact the fall in the rupee would have on inflation. “Inflation situation is not worrisome at the moment. You have the facility of adjustment [of interest rates] every two months, and the Monetary Policy Committee will take an appropriate view.”
•The Centre, however, believes the economic situation will not worsen, he said, adding “I do not see any need to increase rates.”
📰 Gadkari meets top banks to seek credit for projects
Says govt. can give banks business of up to Rs. 5 lakh crore
•Road Transport and Highways Minister Nitin Gadkari on Friday met representatives from the country’s top banks and insurance companies in Mumbai, asking them to extend credit for road development projects.
•“The meeting held today [Friday] was an attempt to reach out to financial institutions asking them to extend credit for our projects. They have been reluctant to do so because of non-performing assets. We have announced 104 projects under the Hybrid Annuity Model (HAM), of which 56 have reached financial closure. The remaining projects, which were awarded in February and March, have six months to arrange funds and we are trying to expedite that process,” a senior Ministry official said, explaining the purpose of the meeting.
40% govt. funding
•The HAM is a variant of public-private partnership, which was launched by the government in January 2016. Through this model, the government bears 40% of the cost of the project and the rest comes from the developer.
‘Role in nation’s growth’
•The National Highways Authority of India collects toll on these projects and pays the developer a fixed annual fee for a specific period.
•“Our sector contributed 12% to the growth in the country and we want to further increase this. We can give banks business of up to Rs. 5 lakh crore,” Mr. Gadkari told reporters. Among the banks represented at the meet were ICICI Bank, Punjab National Bank, Union Bank of India among others.
📰 India ‘waiting and watching’ Iran issue unfold before taking a decision: Pradhan
Will do business with whoever gives us oil, gas on good terms, says Oil Minister
•India is “waiting and watching” the unfolding events surrounding the U.S.’ announcement that it will impose sanctions on any country importing oil from Iran after November 4, according to Petroleum Minister Dharmendra Pradhan.
•“We will take a decision which will serve India’s best interests,” Mr Pradhan toldThe Hindu . “We are waiting and watching on the issue.”
•Separately, in an interview, the Minister also said that India was open to doing business with any country that was willing to offer favourable terms on oil. He added that the size and growth potential of the Indian market was such that it had played a large role in convincing the OPEC countries to increase their supply by one million barrels per day, and also in mitigating some of the higher costs incurred by the ‘Asian premium’ charged by Middle Eastern countries.
•“The Asian premium issue will be resolved when it is, but in the meantime, haven’t we seen Qatar renegotiate its gas prices,” Mr. Pradhan said. “Did we not have a major role in convincing the OPEC countries to increase their production? What compelled the OPEC nations to revisit the topic of a production cut and commit to produce an additional 1 million barrels per day? The reason is India’s market strength. It’s not our claim, it can be checked in the OPEC proceedings.”
•“We are open to anybody, starting from China to the U.S.,” he added. “Whoever gives us oil and gas on good terms, we will do business with them.”
•The Minister went on to highlight the good relationship India was fostering with West Asia and how this was to India’s benefit.
Field in West Asia
•“They (the UAE) will open the bid round in 3-4 months in which India is looking at participating in partnership with a UAE company,” Mr. Pradhan said. “India’s relationship is stronger than it has ever been with countries like the UAE and Saudi Arabia. Did we ever have a producing field in the Middle East? We had in Russia, Sudan, Canada, but not where the oil is! For the first time, through a nomination route, the UAE gave it first to India and only then to Japan.”
•Speaking on petrol prices in India and whether increased production by the OPEC nations would have an effect on them, Mr. Pradhan said that there “should be an effect on prices, but slowly”.
•However, the Minister was guarded about when petroleum products would be brought under GST, saying that both the Centre and States have financial imperatives to keep the status quo taxation on fuels intact.
📰 Now, it’s PM’s word on kharif MSP
Cabinet will approve rates at 150% of input costs, Modi tells cane farmers at meeting
•The Union Cabinet will approve minimum support prices (MSP) at 150% of input costs for kharif crops at its next meeting, Prime Minister Narendra Modi assured a group of sugar cane farmers, who met him at his residence on Friday evening.
•The PM’s reassurance comes as farmers’ groups have started agitating on the lack of announcement on MSP rates, though sowing of kharif crops has begun in most parts of the country. The MSPs act as a price signal for farmers and are usually announced in early June, at the onset of the monsoon, when sowing begins.
•On Friday, the India Meteorological Department announced that the monsoon had now covered the entire country, and the Agriculture Ministry announced that the total sown area has crossed 165 lakh hectares.
Announcements soon
•The Prime Minister also assured farmers that the Fair and Remunerative Price for sugar cane for the 2018-19 season would be announced within the next two weeks, and would be set higher than the 2017-18 rate, according to an official statement. The FRP will also incentivise farmers whose crops have a sugar recovery rate higher than 9.5%, Mr. Modi said.
•More than 140 farmers from major sugar-producing States — Uttar Pradesh, Maharashtra, Karnataka, Uttarakhand and Punjab — met the Prime Minister.
•With sugar mills’ arrears to cane farmers crossing Rs. 22,000 crore, the government has approved several relief measures over the past few months, including a production subsidy, buffer stock, minimum retail price and a hike in import duties, apart from steps to increase ethanol production from cane. Mr. Modi told the farmers that more than Rs. 4,000 crore in arrears had been paid off over the past seven to 10 days as a result of these new policy measures.
Dues reduced: Paswan
•Earlier in the day, Union Minister for Food and Civil Supplies Ram Vilas Paswan told presspersons that the pending dues had been reduced by Rs. 3,000 crore, with government data showing that the total arrears stood at Rs. 19,816 crore as on June 25.
•The NITI Aayog has held several consultations with farmers’ groups earlier this week regarding the implementation of the MSP, according to a person aware of the meetings.
•According to government officials, several States expressed reservations about the three options which NITI Aayog proposed in March to ensure that the MSP was actually available on the ground. The first proposal would make States responsible for procurement, storage and disposal of crops with partial financial support from the Centre; the second would pay farmers the price difference between market rates and MSP without any crop procurement, and the third would involve procurement by private agencies and traders at MSP rates.
