INDIAN ECONOMY: OVERVIEW, GROWTH & DEVELOPMENT
IL&FS board asks SFIO, ED To Probe 14 IFIN Directors
With fresh revelations of fraud, the government-appointed Board of Infrastructure Leasing & Financial Services Ltd (IL&FS) has approached the Serious Fraud Investigation Office (SFIO) and Enforcement Directorate (ED) to initiate criminal proceedings against 14 former directors of IL&FS Financial Services Ltd (IFIN). The action comes almost a week after the forensic audit report by accounting firm Grant Thornton LLP.
“The report by Grant Thornton LLP clearly establishes money laundering. The Board has already informed the Ministry of Corporate Affairs, SFIO and the ED to initiate criminal proceedings against the culprits, with an enclosed copy of the report,” a senior IL&FS official privy to the development told. The report submitted on February 27 highlighted multiple irregularities in the operations of IFIN, one being that loans were provided to firms, in which an existing director of one of the IL&FS group companies was the promoter.
ONGC bags maximum oil and gas fields
Oil and Natural Gas Corporation on Thursday won five out of the 23 discovered oil and gas fields that were auctioned in the second round of discovered small field (DSF). The state-owned explorer has signed a contract for the prolific Chinnewala Tibba gas field, which it had discovered around 15 years ago, but was taken away and auctioned by the government. This gas field in Rajasthan was also the most-contested field in DSF-II with as many as 17 bids being put in. The 23 fields, made up of some 57 discoveries by ONGC and OIL India Limited (OIL), hold 190 million tonnes of oil and oil-equivalent gas resources, said an official of the Directorate General of Hydrocarbons at the contract-signing ceremony on Thursday. On the occasion, Petroleum Minister Dharmendra Pradhan said DSF bid rounds are aimed at raising domestic production to cut dependence on imported oil.
“Maximising production is our top priority now,” he said. While ONGC and OIL could not monetise the discoveries auctioned in the DSF round mainly because they being financially unviable on prevalent fiscal terms, DSF round winners will get complete pricing and marketing freedom that will make the finds economically viable. Pradhan said ONGC was asked to largely stay away from DSF-I round last year, but was given freedom to bid in DSF-II and he was happy that the company walked away with the most number of fields.
Cabinet clears Rs 31,600 cr proposals for investment
With an aim to revive the stressed power sector and encourage hydropower sector, the government on Thursday approved investment proposals worth over Rs 31,600 crore in four power projects. These projects, including coal-based thermal plants and hydro power, are likely to be operational by 2023-24. The Cabinet Committee of External Affairs (CCEA) has approved investment of Rs 10,439.09 crore for the 2×660 MW Buxar Thermal Power Project in Bihar. The plant, which is expected to improve deficit power scenario in the eastern region, will be set up by SJVN Thermal Private Ltd, a wholly owned subsidiary of SJVN, a mini-ratna CPSU. The meeting, chaired by Prime Minister Narendra Modi, also cleared investment proposal for a 2×660 MW Khurja Super Thermal Power Plant in Bulandshahr entailing an investment of Rs 11,089.42 crore and Amelia coal mine in Singrauli district of Madhya Pradesh at a cost of Rs 1,587.16 crore. Power Minister RK Singh said that the Cabinet also approved recommendations of a group of ministers relating to stressed power projects. These recommendations included grant of coal linkage for short-term PPAs, allowing existing coal linkage to be used in case of termination of PPAs due to payment default by distribution companies and procurement of bulk power by a modal agency against pre-declared linkages.
Sugar sector to get Rs 12,900 crore soft loans
In a major boost to the sugar industry, the Union Cabinet on Thursday announced an additional soft loan of Rs 12,900 crore to sugar mills for the creation of ethanol capacity and another Rs 2,600 crore to molasses-based standalone distilleries. The decision was taken at the Cabinet Committee on Economic Affairs (CCEA) meeting chaired by Prime Minister Narendra Modi.
“To augment ethanol capacity, the government has approved additional funds. These additional funds will be in two tranches — Rs 2,790 crore and Rs 565 crore,” Finance Minister Arun Jaitley told reporters after the Cabinet meeting. He added that these funds are part of the government’s support for the stress in the sugar sector. “They (mills) have some stress and outstanding dues. The government is trying to augment the income of mills,” Jaitley explained. In June 2018, the government had announced a soft loan of Rs 4,400 crore and provided an interest subvention of Rs 1,332 crore to mills over a period of five years, including a moratorium of one year to augment ethanol output. As per industry estimates, sugarcane dues have crossed Rs 20,000 crore till February of this marketing year.
Direct tax collection to fall short by Rs 70,000 crore
Despite the aggressive tax collection drive and downward revision of tax targets in the interim budget, the government’s direct tax revenue is expected to fall short by Rs 70,000 crore. This, coupled with disappointing GST numbers, may lead to a higher-than-projected fiscal deficit, officials fear. According to Finance Ministry officials, direct tax revenue so far is at Rs 8.4 lakh crore. Although collection is expected to peak in the last few days, the revenue department is skeptical on whether it can reach the “ambitious target”. “The direct tax collection had been good… However, the target was very ambitious. We expect that it will fall short by Rs 70,000 crore. If GST numbers do not see big improvement, which seem unlikely, even the revised fiscal deficit target is difficult to meet,” a senior official in the ministry told. We had reported on February that post the final revision, fiscal deficit may go up by another 0.1 per cent on account of slippages in tax collection and any deviation from divestment target. How this pans out will become clearer when the next government presents its budget in July. Officials also note that direct tax revenue growth is 12.2 per cent so far, as against the revised full year goal of 19.8 per cent growth. “We expect Rs 1.5 lakh crore advance tax payments by companies in Q4,” said an official source.
GST tweak increases working capital burden for dealers: FADA
The Federation of Automobile Dealers Associations (F A D A) on Thursday said that the recent amendment made by the government in Section 49 of CGST (Central GST) Act, by introducing new section 49A, will lead to an unwarranted blow for the auto retail sector. According to the retail association, the amendment will impact the method of tax payment and therefore, have major impact on the cash flow of auto retail industry while discharging its tax liabilities. The amendment, which comes into effect from February 1, 2019, will see the IGST (Integrated GST) credit to be first utilised and only when such credit is exhausted will credit of CGST and SGST (State GST), if any, be utilised against output tax liability. A majority of auto dealers purchase vehicles from OEMs on IGST and sell it to the end customers on SGST which they will not be able to set off by utilising the existing credits as according to the new law the IGST has to be used first for setting off tax liability, followed by CGST and the remaining for SGST. According to the FADA statement, the amendment will create an additional requirement of working capital to around Rs 1 crore for four-wheeler dealers and Rs 50 lakh for two-wheeler dealers on a monthly basis (estimated) for 15,000 auto dealerships across the country.
India and israel should collaborate to define new norms of digital world
India and Israel should strengthen their partnership to define the digital world’s new norms, the president of a leading trade association of Indian IT companies has said. NASSCOM President Debjani Ghosh said that collaboration, being integral to the DNA of India and Israel, has inspired innovation. “My trip to Israel has convinced me that innovation is not something that you do. Innovation is about how you think. I think there is a huge difference there. There is a huge difference between what we see in Israel and what we see pretty much elsewhere in the world,” Ghosh said after interacting with the leading Israeli IT companies as part of the India-Israel Innovation Week. Touching upon the history of Israel’s establishment, she noted that for the “immigrant society assembled from various parts of the world, collaboration was very much in the DNA which inspired innovation”. Ghosh noted that the Indian IT sector was blessed with some extremely visionary leaders who believed that the country had the potential to do something big to become a powerhouse in the IT sector.
‘Reasonable petroleum pricing good for economy’
India as a country should strive for a reasonable petroleum pricing which would incentivise both consumers and investors, said B Ashok, MD, Ratnagiri Refinery & Petrochemicals. He was delivering the inaugural lecture at the 38th Annual National Management Convention 2019 organised by Kerala Management Association on Thursday.
“Low oil prices mean low investments, especially in the high-risk upstream sector. Under investment in the industry due to low prices has consequential long-term supply impact, while high prices impact demand and can potentially lead to deceleration of economic activities,” said Ashok. He said India economic growth of 7-8 per cent can be limited without energy security. Critical challenges before the nation with respect to attaining energy security are growing energy bills, addressing energy security with affordability, tackling local & environmental issues. A unique model focussing on multiple sources of energy generation and different sources of mobility and improving energy efficiency was highlighted as the way forward to meet the country’s energy needs.
Finance ministry stares at direct tax revenue shortfall by Rs 70,000 crore
The government may be staring at higher-than-projected deficit for the current fiscal with country’s direct tax revenue expected to fall short by Rs 60,000 to 70,000 crore over the revised target of Rs 12 lakh crore for FY19, officials privy to the numbers said. Direct tax revenue has totalled to Rs 8.4 lakh crore so far this fiscal and it is doubted if the target could be reached in the next three weeks even though collections pick up in the last few months of the fiscal. The Finance Ministry officials said that the direct tax revenue growth is at 12.2 per cent so far as against revised full year aim of 19.8 per cent. “We expect Rs 1.5 Lakh crore advance tax payments by companies in fourth quarter. There will also be late income tax filers with penalty before the end of the fiscal,” said an official source. However, another source added that the direct tax shortfall is going to be over Rs 1 lakh crore and the government should not have revised the target upwards just buoyed by last fiscal’s precedent. Over estimation of revenues is a soft path taken without looking at hard numbers projections, the source said. The Finance Ministry will also receive direct tax revenue from property tax, estate tax, gift tax, capital gains tax. But the prominent will be the income tax and the corporate tax . The Centre had mopped up Rs 7.88 lakh crore in direct tax during April-January 2019. As per the Budget documents, the government has revised its direct tax collection target to Rs 12 lakh crore in revised estimate from earlier budgeted level of Rs 11.5 lakh crore.