📰 Bhutan PM says China must maintain status quo on Doklam
No side should do anything near the trijunction point unilaterally, he says
•Calling for China to maintain status quo in the Doklam region, Bhutan’s Prime Minister Lotay Tshering said “no side” should do anything near the trijunction point between India, China and Bhutan “unilaterally”.
•In an exclusive interview to The Hindu, and the first public comments by the Bhutanese leader on the Doklam issue which had seen a near conflict between the Indian and Chinese armies in 2017, he said that as long as status quo was maintained, “there will be peace and tranquillity in the region.”
•Mr. Tshering was reacting to a question about the recent reports of an unprecedented build-up of military infrastructure on the Chinese side of the Doklam plateau that has been part of a boundary dispute between Bhutan and China.
•He said the boundary talks between the two sides had made good progress, however, with 25 rounds completed. Asked whether the talks could lead to diplomatic ties being established, he reiterated Bhutan’s policy of not establishing ties with any permanent member of the UN Security Council.
•Mr. Tshering also called on India and Pakistan to work together for the growth of South Asia and said it was “too early” to call the SAARC unviable. His comments follow calls by Sri Lanka’s President Maithripala Sirisena and Nepal’s Prime Minister K. P. Sharma Oli to revive the SAARC, which hasn’t held a summit since 2014 due to the tensions between India and Pakistan.
Let’s work for nation’s progress, Prime Minister Narendra Modi tells leaders of Opposition
•Prime Minister Narendra Modi on Sunday invited heads of all parties in Parliament to a meeting on June 19 to discuss ‘one nation, one election’.
•Ahead of the first session of the 17th Lok Sabha, Mr. Modi addressed leaders of Opposition at an all-party meet where he asked them to introspect and urged Parliament to “reflect upon a new way of thinking along with new faces who have entered the august House”.
•“We are for the people, we cannot win hearts by disrupting the functioning of Parliament. All parties must keep political differences aside and commit themselves to tirelessly work in the direction of nation’s progress,” he was quoted as saying by Parliamentary Affairs Minister Pralhad Joshi.
•The June 19 meeting had also been called to discuss celebrations of 75 years of Independence in 2022 and 150 years of Mahatma Gandhi’s birth anniversary this year, Mr. Joshi said.
•The Prime Minister will also be hosting a dinner for all parliamentarians on June 20.
•Though the Opposition seems in disarray, Leader of the Opposition in the Rajya Sabha Ghulam Nabi Azad said they would continue with their ideological fight.
•“We have told the government that we will help pass all the bills that are in the interest of the people and the country,” he said without indicating its stand on the triple talaq ordinance that makes instant divorce or talaq-e-biddat a criminal offence.
•Along with triple talaq, there are 10 ordinances that need to be converted into law within six weeks of Parliament session that gets under way on Monday and will continue until July 26.
•Another ordinance is on extending President’s Rule in Jammu and Kashmir. “If the government can conduct Lok Sabha polls peacefully, there is no reason why Assembly elections can’t be held. It’s because the government; the result won’t be in their favour and that’s why they want to rule through Central rule,” alleged Mr. Azad.
•After the first three days of oath taking, President Ram Nath Kovind will address a joint sitting of Parliament on June 20 and on July 5, the government will announce the Budget for 2019-2020.
•The Opposition raised issues like unemployment, farmers’ distress, drought, press freedom, women’s safety and price rise among others.
•Trinamool’s Sudip Bandopadhyay raised the issue of threat to federal structure and constant interference in the working of a State government while his colleague Derek O’Brien demanded the immediate passage of the women’s reservation bill and the excessive use of the ordinance route.
•“Unfortunately, in the 16th Lok Sabha it was blatantly overused. Highest percentage of ordinances in 70 years,” Mr. O’Brien said.
•The Trinamool also raised electoral reforms including state funding of elections and paper ballots.
•Communist Party of India leader D. Raja talked about how Mr. Modi saluted the Constitution while starting his second term and mentioned the need to protect the “constitutional values of secularism and pluralism”.
•Defence Minister Rajnath Singh, Mr. Joshi and his deputies represented the government side.
•Other prominent Opposition leaders who took part included DMK’s TR Baalu, Congress lawmakers Anand Sharma, Adhir Ranjan Choudhary, K Suresh, National Conference leader Farooq Abdullah, Supriya Sule of NCP and Pinaki Misra among others.
📰 Qualifying for Leader of the Opposition
The Lok Sabha Speaker should consider the leader of the largest pre-poll alliance
•After the election of the Lok Sabha Speaker, the question of a formally recognised Opposition party and Leader of the Opposition (LoP) of the Lok Sabha under the Salary and Allowances of Leaders of Opposition in Parliament Act, 1977, will arise. The Act extends to LoPs in the Lok Sabha and the Rajya Sabha the same official status, allowances and perks that are admissible to Cabinet Ministers. In the case of the Lok Sabha, however, this is subject to recognition of the leader by the Speaker. In the 16th Lok Sabha, the largest party in the Opposition, the Congress, had 44 seats. After careful consideration, it was decided not to recognise the party’s leader as LoP. Now, the matter needs to be revisited in the context of the 17th Lok Sabha.
•The election to the 17th Lok Sabha was the most fiercely and bitterly fought one in the history of the Republic. The decisive victory of the ruling alliance and its leadership has been widely welcomed as being in the best interests of the polity and the people. Above everything, the nation needs a stable government and a strong leader capable of taking firm decisions to ensure security, development and good governance within the rule of law. However, for the success and survival of democracy, an effective Opposition is also a categorical imperative. It is said that if no Opposition exists, one may have to be created. Also, if there is no Opposition outside, there is every danger that it may grow within.
Leaders of Opposition over time
•Historically, the first officially designated Opposition party in Parliament emerged from the break up of the all-dominant Congress party in power. In 1969, when Indira Gandhi was the Prime Minister, the Congress split to form the Indian National Congress (Requisitionists) and the Indian National Congress (Organisation). The Leader of INC(O), Ram Subhag Singh, became the first person to be formally recognised as LoP in the Lok Sabha.
•In the 6th Lok Sabha, the Congress sat in the Opposition. Following splits in the Congress as well as the Janata Party, Yashwantrao B. Chavan, C.M. Stephen and Jagjivan Ram were successive LoPs.
•Until 1977, there were no emoluments and perks attached to the position of LoP. There is no provision in the Constitution or even in the Lok Sabha Rules of Procedure in regard to the recognition of the LoP. Right from the first Lok Sabha, the practice has been to recognise the leader of the largest party in Opposition as the LoP provided that party has a strength that is enough to constitute the quorum for a sitting of the House, or one-tenth of the total membership of the House — at present that comes to 55 members. From the 9th to the 15th Lok Sabhas, since the requirement of having a minimum strength of 55 members was fulfilled, the Lok Sabha had duly recognised Opposition parties and LoPs, including Rajiv Gandhi, L.K. Advani, Atal Bihari Vajpayee, P.V. Narasimha Rao, Sharad Pawar, Sonia Gandhi and Sushma Swaraj.
•The 1977 Act defines LoP as that member of the House who is the “Leader in that House of the party in opposition to the Government having the greatest numerical strength and recognised as such by the Chairman of the Council of States or the Speaker of the House of the People, as the case may be.” The Speaker’s decisions in this regard have so far been determined by Direction 121(c) which laid down one of the conditions for recognition of party or group as having “at least a strength equal to the quorum fixed to constitute a sitting of the House, that is one-tenth of the total number of members of the House”. The Leaders and Chief Whips of Recognised Parties and Groups in Parliament (Facilities) Act, 1998 also refers to a recognised party in the Lok Sabha as a party that has not less than 55 members.
•In the recently concluded election to the Lok Sabha, the Opposition was decimated, but thankfully not obliterated. In fact, the largest party in Opposition, the Congress, has improved its position from 44 in 2014 to 52 now. It is short of only three members to reach the magical number of 55. Given the level at which ground-level politics has been operating in recent decades, it should not be difficult for the Congress leadership to augment its party strength by three members. At the same time, the ruling dispensation is expected to show magnanimity at this hour of its splendid victory, and the new occupant of the office of Speaker, realising the importance of an effective and respected Opposition in a democracy, may reconsider the content of Direction 121(c) suitably.
The Speaker’s discretion
•Since there is no constitutional provision, the 1977 law does not provide for the requirement of 55 members as an essential pre-requisite. As it all depends on the Speaker’s directions and discretion, it may be hoped that rightful action will be taken. The simple way out is to substitute ‘pre-poll alliance’ for ‘party’ or say ‘party or pre-poll alliance’. In any case, pre-poll alliances are a fact of our political life and are already being extended credibility and legitimacy in the matter of the President and Governors deciding on who to call first for forming the government in cases where no party secures a clear majority support in the House.
•Incidentally, what is decided in the matter of recognition of the LoP, and in treating pre-poll alliances at par with parties, may hold tremendous potential for the growth of a sound two- or three-party (or alliance) system. It could end the present system, a preposterous one, of more than 2,000 parties being registered with the Election Commission. If and when the much-awaited law for political parties is enacted, it may provide for candidates of an alliance contesting on a common symbol and an agreed common minimum programme with only national alliances or parties contesting for the Lok Sabha. These aspects, however, call for separate in-depth analysis, consideration and debate.
📰 A different tent: on SCO summit
The Shanghai Cooperation Organisation is becoming vital to India’s Eurasia policy
•Terrorism, regional cooperation and the future of Afghanistan were major themes at the Shanghai Cooperation Organisation’s Heads of State summit in Bishkek. The grouping, led by Russia and China, which includes Afghanistan and the Central Asian states of Uzbekistan, Kazakhstan, Tajikistan and Kyrgyzstan, inducted India and Pakistan in 2017, and has become an important forum for India’s Eurasian neighbourhood. In a world riven by geopolitical contestations, SCO membership provides India a vital counter to some of the other groupings it is a part of, balancing out its stated policy of pursuing “multi-alignments”. It is a platform also for alignments on issues such as energy security, connectivity and trade. With India indicating that it sees little use for SAARC, the SCO provides the only multilateral platform for it to deal in close proximity with Pakistan and Afghanistan. While the failure of Prime Minister Narendra Modi and his Pakistani counterpart Imran Khan to hold substantive talks at the summit was marked, the occasion provided a setting for them to exchange what India called the “usual pleasantries” at the least. Beyond the summit, the two countries are committed to engaging at several other levels, including the SCO Regional Anti-Terrorist Structure. Pakistan leads the effort to coordinate between the SCO and the UN Office on Drugs and Crime. In a paragraph on Afghanistan and the SCO-Afghanistan contact group, the Bishkek declaration stressed on an inclusive peace process led by “Afghans themselves”. SCO countries committed to strengthening economic cooperation and supporting the World Trade Organisation structure, while building more people-to-people ties, tourism and cultural bonds within the grouping.
•It is significant to see that where the group has failed to find consensus, such as on India’s opposition to China’s Belt and Road Initiative, the declaration has mentioned only the other countries in a paragraph praising the project. On the sidelines, Mr. Modi held bilateral meetings with Chinese President Xi Jinping and Russian President Vladimir Putin. This month, Mr. Modi will meet U.S. President Donald Trump on the sidelines of the G-20 summit in Osaka. While the current India-U.S. trade impasse and plans for Indo-Pacific military cooperation will take centrestage there, it is likely that the U.S.’s specific demands on curbing defence deals with Russia, including on the S-400 anti-missile system, and denying access to Chinese telecom major Huawei for India’s 5G network bids will also come up. India’s strategy of balancing and straddling the competing interests of these emerging blocs will be tested. But the SCO collective and the bilateral meetings in Bishkek are an important indicator early in the Modi government’s second tenure of the foreign policy arc it is attempting.
📰 G20 agrees to tackle ocean plastic waste
Environment and energy ministers of the Group of 20 major economies met this weekend in Karuizawa, northwest of Tokyo, ahead of the G20 summit in Osaka, western Japan, on June 28-29.
•Group of 20 environment ministers agreed on Sunday to adopt a new implementation framework for actions to tackle the issue of marine plastic waste on a global scale, the Japanese government said after hosting the two-day ministerial meeting.
•Environment and energy ministers of the Group of 20 major economies met this weekend in Karuizawa, northwest of Tokyo, ahead of the G20 summit in Osaka, western Japan, on June 28-29.
•One of the top issues was ocean plastic waste as images of plastic debris-strewn beaches and dead animals with stomachs full of plastic have sparked outrage, with many countries banning plastic bags outright.
•Japanese Prime Minister Shinzo Abe has said he wants his country to lead the world in reducing marine plastic trash, including developing biodegradables and other innovations.
•The new framework is aimed at facilitating further concrete action on marine waste, though on a voluntary basis, after the G20 Hamburg Summit in Germany adopted the “G20 action plan on marine litter” in 2017.
•Under the new framework, G20 members will promote a comprehensive life-cycle approach to prevent and reduce plastic litter discharge to the oceans through various measures and international cooperation.
•They will also share best practices, promote innovation and boost scientific monitoring and analytical methodologies.
•“I'm glad that we, including emerging countries and developing countries, were able to form a broad international framework,” Yoshiaki Harada, Japan's environment minister, told a news conference.
•Japan plans to host the first meeting under the new framework this autumn when officials of environment ministers in the G20 countries are due to meet for the G20 Resource Efficiency Dialogue.
📰 This will be a tough budget to balance
Finance Minister Nirmala Sitharaman has the unenviable task of pushing growth, while maintaining fiscal discipline
•Over the next 20 days, two major policy events will take place — the Budget and a GST Council meeting — that will reveal the government’s intent and vision for the next five years. While there are a number of issues that it can take up at both these events, there are three main problems that are relatively more noteworthy.
•The first is the issue of private investment and how, despite the government’s best efforts so far, it has not recovered enough to shoulder its share of the burden as a prime driver of economic growth. The second issue is the fiscal deficit and whether the government is artificially hamstringing itself by curtailing public expenditure in order to meet an arbitrary target. In other words, can the government afford to shift the target meaningfully to, say, 4% from the current 3.4%?
•The third important policy element is whether the government can afford to reduce GST rates even further and whether there are any more steps it can take to widen the tax net. The first two issues are to be addressed in the Union Budget, while the third is the exclusive domain of the GST Council. However, in all three, it has only limited options.
Private performance
•The consensus view among economists seems to be that the government has pretty much done all it can in terms of creating the right environment for the private sector to grow. Policy measures such the Insolvency and Bankruptcy Code, the ‘Make in India’ initiative, power sector reforms, easing of FDI norms, and the concerted effort to improve the ease of doing business are all considered welcome steps.
•“All of these provide a better environment for the private sector to work in,” Madan Sabnavis, chief economist at Care Ratings said. “One can’t practically expect the government to come up with anything more in most of these areas.”
•In the Budget, however, there are a few steps the government can take that can make it more attractive for the private sector to invest.
•“On the expenditure side, if it continues spending what it has been on capital expenditure, it will definitely have a positive impact on the private sector,” Mr. Sabnavis added. “For example, if the government spends on roads, it automatically creates demand for cement and steel, which is produced by the private sector. Similarly, if the government spends on power infrastructure.”
•However, the caveat here is that this positive impact on the private sector will not be felt in the very short term. That is, capital expenditure undertaken in this financial year will only begin to boost the private sector in the next financial year.
•“The other thing the government can do in the Budget is giving certain kinds of tax concessions,” Mr. Sabnavis added. “For example, if you’re talking about the corporate tax rate, which was to be lowered to 25% from 30%, they have done it only for the smaller companies. They have said they would do it for the rest of the companies over a period of time, but there have not been any steps taken.”
•Here, too, while there is no guarantee that reducing corporate tax rate will definitely lead to increased investments, it is definitely seen as a good first step.
Fiscally constrained
•So, if increased capital expenditure and reduced corporate tax collections are the major way private sector investment can be encouraged, then the natural extension of that argument should be that the government give itself some more flexibility when it comes to the fiscal deficit. While this might seem logical, the government’s own actions have rendered this option nearly impractical.
•“The central government is relying quite heavily on the public sector for its own infrastructure expansion programme,” D.K. Srivastava, chief policy advisor at EY India, explained. “Last year, the increment in government debt was considerably higher than the fiscal deficit. The difference is about 1% of GDP, which are all extra budgetary resources. These constitute liabilities of the government, but are not included in the fiscal deficit calculations.”
•“On the revenue side, a lot of the expenditure on food subsidies is being picked up by the Food Corporation of India (FCI), which has borrowed from the National Small Savings Fund on behalf of the government,” Mr. Srivastava added. “And so, when FCI has to service that debt, the government will have to come to rescue. So, these are all government liabilities that are just gathering up.”
•In other words, since tax revenues either through direct taxes or indirect taxes did not meet their targets last year and don’t look like they will this year, the only way the government can increase its expenditure is by borrowing more. However, by committing to repay debt taken on by the public sector on its behalf, the government has tied its hands in this regard as well.
•The only practical option before the government is for a favourable recommendation by the Bimal Jalan committee on the quantum of the Reserve Bank of India’s reserves that can be transferred to the Centre.
•“The information is that if you estimate how much of reserves the RBI has got based on its past profits, then that comes to about 28% of its total assets and the global norm is 14%,” Mr. Srivastava said. “It looks like there is room available for it to transfer the excess to the government. That should close some of the shortfall in tax revenues that happened in 2018-19.”
Boosting consumption
•There is another engine of economic growth, which, while firing strongly so far, has now begun to show signs of weakness — private consumption expenditure. Individuals, driven by static salaries but increasing costs, have begun to defer purchases and this can be seen in a number of metrics that have slowed down, such as car sales. Boosting personal consumption can also go a long way in reviving the private sector.
•One way to encourage individuals to spend more is to increase the amount of money in their pockets. That is, reduce the tax burden. There is some talk in the Finance Ministry about reducing GST rates and addressing the revenue shortfall by widening the tax net. The view among tax experts is that the tax rates currently are already significantly lower than those in the pre-GST era. And, while the impact of a cut in rates affects revenues immediately, the positive impact of trying to increase tax compliance is felt with a delay.
•“While the existing GST rates for products are generally lower or at par with the rates prevailing prior to the introduction of GST, there could be some cases where there is scope for further reductions, keeping in mind the revenue implications,” M.S. Mani, Partner at Deloitte India said.
•“While rate reductions would lead to an expansion of the tax base in the medium term, it needs to be noted that collections go down immediately while the compliance and expansion of the tax base happens over a period of time,” Mr. Mani added.
•“In the next one year or so, the government could look at collapsing the 12% and 18% categories into a 15-16% single category,” Pratik Jain, partner and national leader of Indirect Tax at PwC India, said. “While there is scope for expanding the tax base by plugging the tax leakages, that is a process and cannot happen immediately.”
📰 Sugar industry needs a shot of insulin
Current year expected to end with a high closing stock of 14.5 MT; industry urges government to facilitate higher exports
•It is one of the unprecedented years for the sugar industry in the country, as the sugar season of 2018-2019 is expected to end in September with a high closing stock of nearly 14.5 million tonnes. Though sugar production in the next season might be lower compared with the current one, the focus of the industry and the government will largely be on reducing the inventory.
•The estimated sugar production this year (October 2018 to September 2019) is 32.9 million tonnes as against the domestic consumption of 26 million tonnes. Exports are likely to be three million tonnes, according to data available with the Indian Sugar Mills’ Association (ISMA). The government had targetted five million tonnes for export.
•Sugar exports will have to continue next year too and the government should facilitate higher exports, say industry sources.
•With deficit rains, sugar production may drop next season in Maharashtra and north Karnataka.
•Even if there is a decline next year, the association expects the total production to be higher than the consumption. The 2019-2020 season will commence with an opening stock of 14.62 million tonnes, one of the highest. As sugar will start flowing into the market in the new season only from mid-November, it is better to retain two months’ stock (about five million tonnes). So, about seven million tonnes should be exported next season and the government should come out with a policy for this in July 2019. Only then, the mills can plan and go ahead with contracts, says Abinash Verma, Director General of ISMA.
International price
•International price for sugar (white sugar) in the current season is nearly Rs. 10 a kg less compared to the domestic price. In an effort to encourage exports and to make it attractive, the government had not only fixed mill-wise export quota, but also linked some of the subsidy schemes to exports.
•Yet, almost 35% of the industry did not participate for various reasons such as lack of adequate production or stringent conditions to avail the subsidy.
•As such, the industry has suggested to the government to make the export quota as an industry-wide quota, rather than mill-specific, and to modify the subsidy schemes, so that they are WTO-compatible. “There are mills that are unable to meet the export quota and some mills that want to export more than the quota. So, the government should leave it open,” says Mr. Verma.
•On the international front, next season, a deficit of nearly four million tonnes is expected. But its impact on the price will be known only later. If the norms are relaxed for the subsidy schemes, more mills will get into exports. There will be no delay in getting the subsidy and the cash flow will improve for the mills. In March this year, the cane arrears pending for farmers was expected to be almost Rs. 30,000 crore. This should be lesser now. “The policies of the government should attempt to solve both problems — cane price payment and sugar inventory,” according to ISMA.
•Industry sources point out that the production cost works out to Rs. 34 a kg, while the minimum selling price in the domestic market fixed by the government is Rs. 31 a kg. Apart from revising the minimum selling price upward to Rs. 35 a kg, it should come out with a revenue-sharing formula for cane price. If India should export sugar, it should be competitive.
•In Tamil Nadu, the industry points out that the support schemes of the Central Government are all oriented to surplus production States. The mills in Tamil Nadu, numbering about 40, face a peculiar situation of low capacity utilisation (35%) due to reduction in cane production. The mills cannot export sugar as the production (8.5 lakh tonnes) is not adequate even to meet the domestic needs of the State (18 lakh tonnes).
•Tamil Nadu was the third or fourth largest producer of sugar in the country five years ago, with an annual production of 23 lakh tonnes. Now, it is just one-third of that. “We have created capacities and invested substantially. Tamil Nadu mills should be exempted from the mandatory exports and the norms for subsidy schemes should be relaxed to benefit the mills in the State,” says Palani G. Periasamy, chairman of the South India Sugar Mills’ Association.
