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HomeIndia TakesKEY POLICY DECISIONS BY MONTH-END

KEY POLICY DECISIONS BY MONTH-END

inNEW DELHI: Having proved himself as a ‘rock star’ abroad and a vote-getting machine at home, Prime Minister Narendra Modi is now going to do what people are telling him to do: Take policy decisions that cannot be put off any longer.

 

The first of these is a Cabinet reshuffle likely by the end of this month – after Diwali. A brace of decisions on economic policy, including diesel pricing, disinvestment and gas pricing, will follow personnel changes carried out on Thursday.

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A top Bharatiya Janata Party (BJP) source explained it was important to change the faces before changing policy. “Already people are saying that our government is doing what the previous government left undone. One way of clearing the air is to change the people who were identified with the previous government: Then the policy rollout will also have a stamp of novelty,” he said. More changes in the department of banking and decisions on crucial appointments like the central vigilance commissioner and a new cabinet secretary are also likely.

 

The contours of a Cabinet reshuffle have not even been discussed yet but the gaps are obvious. Expecting victory in Haryana and Maharashtra, the party will want to accommodate people from these two states. Rajasthan is grossly under-represented.

 

The new interlocutor between the BJP and Rashtriya Swayamsevak Sangh (RSS), Krishna Gopal, is likely to take over on October 23. This will have its own impact on government-party relations. The role of MPs and the organisation in running the government is currently restricted. Gopal will address this skewed relationship. In the next few months, a new power dynamic in the BJP should be evident.

 

The party is confident the setback of the by-elections, where the BJP lost significantly, will be irrelevant once the Haryana and Maharashtra results are out. The two men who finally decided to dump allies and go it alone in the state polls – Narendra Modi and Amit Shah – are likely to gain enormously in credibility and clout if the elections go the way they had planned. This will add heft to policy decision that will follow.

(Source: Business Standard, October 17, 2014)

 

CHANGES IN KEY NORTH BLOCK POSITIONS SIGNAL GOVT’S REFORMS INTENT

 

NEW DELHI: In an indication of the Narendra Modi government’s plan to quickly embark on the relatively difficult structural changes in the economy it has been fighting shy of, the finance ministry saw two key changes on Thursday at the top level, while a larger reshuffle also saw change at the helm of bureaucracy in the crucial coal ministry. While finance secretary Arvind Mayaram was replaced as the top official at the economic affairs department by his 1978 batchmate of the Indian Administrative Service Rajiv Mehrishi, who currently is the chief secretary of Rajasthan and a former fertiliser secretary, US-based economist of Indian origin Arvind Subramanian was named the chief economic adviser, a post that was lying vacant since Raghuram Rajan vacated it to become Reserve Bank of India governor on October 1 last year.

 

Anil Swarup, a 1981-batch IAS officer of Uttar Pradesh cadre, will be the new coal secretary. Swarup, who will take over from incumbent SK Srivastava who retires on October 31, will have to preside over the process of reallocation of coal blocks cancelled by the Supreme Court and address the question of the country’s stagnant coal production.

 

Subramanian, who took charge on Thursday, told reporters that he was “hopeful of on the Indian economy” and that macroeconomic stability and creating the conditions for investment would be his priorities. Known for his “strongly pro-growth” stance, the development economist, who is currently senior fellow at the Peterson Institute for International Economics in Washington, had worked closely with Rajan when both were at the International Monetary Fund (IMF).

 

The announcements came as the stage was cleared for the government after polls for the Maharashtra and Haryana assemblies concluded on Wednesday. The top reform items on the table include deregulation of the price of diesel (the over-recovery on the fuel, the price of which was increased on a monthly basis since January 2013, is over R3.50 per litre right now), fast-tracking the implementation of the goods and services tax (GST) and making some industry-friendly changes in the Land Acquisition Act.

 

Mayaram, who belongs to the Rajasthan cadre as does Mehrishi, will take over as tourism secretary in place of Parvez Dewan on his retirement at the end of the month. Mayaram was appointed by the previous UPA government and has a full year’s service left before he retires on October 31, 2015. Mehrishi retires in August-end and will have just about 10 months as economic affairs secretary. Expenditure secretary Ratan P Watal, a 1978-batch IAS officer from Andhra Pradesh, is now the senior-most among secretaries in the finance ministry and is, therefore, likely to be tipped the finance secretary.

 

Mehrishi, who will take over from Mayaram in North Block on November 1, spearheaded the overhaul in Rajasthan of archaic labour laws, for which the Vasundhara Raje government has received praise. The labour reforms, for which the President’s nod is still awaited, include amendments to the Industrial Disputes Act to raise the threshold workforce limit from 100 to 300 workers for a company to compulsorily seek government approval to slash jobs or close a unit. The rule change assumes importance in the wake of the government’s ambitious plan to ramp up manufacturing capacity through initiatives such as industrial corridors and SEZs to accelerate economic growth to over 8-9% in coming years.

 

Mehrishi is no stranger to New Delhi’s power corridors either. He has served stints as secretary in the ministry of overseas affairs under the UPA government. He has held senior bureaucratic roles in the agriculture, law and corporate affairs ministries, the latter two under current finance minister Arun Jaitley during the previous NDA government in 1999-2004.

 

Mayaram became economic affairs secretary on August 1, 2012, the very day P Chidambaram started his third stint as finance minister. He led the DEA and subsequently as finance secretary anchored the entire bureaucracy in the ministry through two full Budgets and one interim Budget, and through the rupee crash in July-August 2013, in the aftermath of the US Fed tapering.

 

He also headed the committee that rationalised the definitions of FII and FDI, and suggested further easing of FDI limits in defence, telecom, insurance and media, among others. Between 2005 and 2008, Mayaram was a joint secretary during Chidambaram’s second tenure as finance minister. He was in charge of the infrastructure division and was one of the key people behind formulating the public-private partnership (PPP) policy.

 

Subramanian has written on a number of issues including the emerging giants India and China, global trade and development, multilateral institutions, aid, oil markets, Africa, and the World Trade Organisation. “I want to say that I am absolutely honoured to be appointed to this post. This is a time of great dynamism in the Indian economy, and we have a government that has the mandate to bring about change,” he told reporters.

(Source: The Financial Express, October 17, 2014)

 

EASIER NODS AS GOVT HACKS THROUGH FOREST OF RED TAPE

 

NEW DELHI: The Modi regime has made as many as 30 interventions in India’s green clearances regime resulting in significant and, from the standpoint of industry, positive changes.

 

Some of the notable changes include allowing project promoters to attend expert panel hearings for forest clearances, freeing industry from exorbitant project specific corporate social responsibility (CSR) spends mandated by expert advisory committees and making it easier to identify land for projects as well as compensatory afforestation.

 

“The Prime Minister’s Office has been driving efforts to make it easier to do business in India and has paid special attention to the roadblocks in environmental clearances that figure high on the list of investor woes,” said a senior government official.

 

“Following consultations with ministry officials, stakeholders and industry, about 30 corrective steps have already been notified while a dozen-odd can be expected in coming weeks,” the government official said.

 

For India Inc, one of the most significant respites is that the forest and environmental appraisal committees have been told to stop including conditions prescribing that as much as 5 per cent of the project cost should be invested in CSR activities over and above any relief and rehabilitation costs they may have incurred. With the new companies law also prescribing that 2 per cent of net profits be spent on CSR, industry had been red-flagging the CSR diktats of environmental panels as a case of double taxation.

 

“All environmental and forest appraisal panels have been told not to recommend such CSR spends as a condition for granting approvals, in a letter sent last week by the environment ministry,” said a senior official aware of the move.

 

Forest advisory panels have also been asked to allow project promoters to present their case while projects are appraised, without making their presence mandatory for granting clearance.

 

In a major relief for existing investments in coastal areas, the environment ministry clarified on October 7 that projects which have got clearance under the 1991 coastal zone regulations need not procure a fresh approval under the new regulations on the issue introduced in 2011. A lack of clarity on this front during the UPA rule had made investors doubtful about their ability to continue operations approved under the 1991 norms.

 

While fresh applications for environmental clearances have been put on an online platform, more powers have been assigned to state-level impact assessment authorities. Guidelines have been issued for quickening clearances to projects that are okayed by state governments by introducing a new category of projects that don’t require public hearings and environmental impact assessment reports.

 

Both central and state-level environmental impact assessment panels have been advised to look at project proposals comprehensively and seek information from the promoter ‘in one go’ instead of revisiting issues while appraising the project.

 

In some cases, the inter-linkages between forest and environmental clearances have been freed up. For instance, linear projects such as pipelines and transmission investments no longer need to get a first-stage forest clearance (FC) before getting an environmental clearance (EC).

 

Similarly, ultra mega power projects can now hope for an EC without having to obtain a stage-I FC and EC for the coal mine linked to them. The rigid sequencing requirements for these clearances are a major cause for project delays, said officials.

 

For highway expansion projects, EC conditions have been eased so that a fresh clearance is only needed in cases where more than 100 km of roads are being widened and the right of way in question is more than 40 metres from the existing road.

 

 

Mining projects that have already obtained an environmental clearance no longer need to apply for a fresh EC while renewing the leases of their mines. To boost coal production, public hearings have been dispensed with in case of coal mine expansions up to 5 million tonnes per annum if the coal is transported via a rail line or a conveyor belt.

 

An official memo issued on October 7 by the environment ministry also clarified that activities within a port don’t require separate clearances under the environmental and coastal zone regulations if the port had mentioned such operations in its master plan and has received the requisite clearances.

 

The environment ministry has also decided to work with states to create land banks for compensatory afforestation, since many projects involving forest land are unable to get off the ground due to inability to find non-forest land for afforestation. The ministry is holding a meeting on October 24 with the forest conservators of 10 states that receive maximum FC proposals to discuss progress in creating such a land bank in each state.

 

At the same time, the ministry earlier this month told states to spare project developers from the need to submit land deeds for compensatory afforestation upfront.

(Source: The Economic Times, October 17, 2014)

 

SPECTRUM SALE AT BASE PRICE TO ADD RS 50,000 CRORE TO EXCHEQUER

 

NEW DELHI: The next round of spectrum auction, in February 2015, will add at least Rs 50,000 crore to the exchequer if the government manages to sell all that is available at the base price suggested by the Telecom Regulatory Authority of India.

 

This means, the department of telecommunications (DoT) will garner 78.6 per cent more than it had estimated in the Budget target from this sale for the current financial year. The earning projection has jumped up for two reasons — DoT will auction more of airwaves if it follows Trai’s suggestions and the regulator has recommended an increase of 10 per cent in the base price of the 1800-MHz band.

 

As companies get the option to pay a third of the final bid amount in the first year, in deferred payment, sale of all available spectrum at the Trai reserve price will add Rs 16,710 crore to the exchequer (a third of Rs 50,132 crore) in 2014-15. The Budget target was Rs 9,355 crore.

 

Also, Trai has suggested sale of additional spectrum for commercial use across bands.

 

Cellular operators whose licences will be due for renewal in 2015-16 together hold 172-MHz of airwaves in the 900-MHz band and 26 MHz in the 1800-MHz band. After Trai’s suggestions, DoT will be able to auction 204.04 MHz airwaves in the 900-MHz band, and 150.2 MHz in the 1800-MHz band. Availability in 900-MHz increased as the regulator has suggested 1.2 MHz in the 900-MHz band  be taken back from Bharat Sanchar Nigam Ltd (BSNL) in all circles where licences will expire in 2015-16, except in Punjab. In return, BSNL should be allotted 1.2 MHz in the 1800-MHz band in each circle, subject to some conditions.

 

DoT had included sale of 800-MHz spectrum in its Budget estimates. The projected earning of Rs 16,710 crore only covers only sale of available spectrum in the 1800-MHz and 900-MHz bands.

 

The successful auction in February 2014 generated a total bid value of Rs 61,162 crore, by selling 46 MHz of airwaves in the 900-MHz band and 307 MHz spectrum in the 1,800 -Hz band.

 

Trai, which suggested a base price in 1800 MHz at Rs 2,138 crore for one MHz across 20 service areas, has recommended raising reserve prices in odd circles, and not in the metro circles where teledensity is high. The regulator has suggested the highest increase of base price for the Jammu & Kashmir circle, at 310 per cent from the latest winning price in the previous auction. It also suggested a 134 per cent increase in reserve price for the Rajasthan zone, followed by 57 per cent in the Northeast, 51 per cent in Uttar Pradesh (East), 50 per cent in Himachal Pradesh, 44 per cent in Kerala, Bihar and Odisha, 37 per cent in Madhya Pradesh, 31.4 per cent in Punjab and 18.5 per cent in Haryana.

 

Trai has suggested a reserve price of the 900 MHz band spectrum at Rs 3,004 crore for one MHz in 18 circles. This excludes Delhi, Mumbai, Kolkata (where auction has already been conducted) and Jammu & Kashmir (where none is available in this band).

 

The government’s income will increase manifold once it finalises the auction of 2100 MHz spectrum (3G band) for commercial use. Adoption of the extended GSM band, as suggested by Trai, by taking spectrum out of the 800 MHz band, will do likewise.

 

Rajan Mathew, director general, Cellular Operators Association of India, said: “The regulator has recognised the need for additional spectrum for commercial use, including the 2100 MHz band and the EGSM band. The proposal to free-up additional spectrum across bands for commercial use would be helpful for the industry. On the pricing front, we’ll have to take a closer look.”

(Source: Business Standard, October 17, 2014)

 

RBI IN TALKS WITH GOVT OVER A FINANCIAL RESOLUTION AUTHORITY

 

HYDERABAD: Reserve Bank of India (RBI) Governor Raghuram Rajan has said the central bank is in talks with the Centre to set up a financial resolution authority (FRA).

 

“We really need a financial resolution authority so that we can close financial institutions in trouble, without necessarily merging those and taking the losses. We need to clean institutions…while resurrecting those functioning well. FRA will be the entity that will do it,” Rajan said in an hour-long interaction with students of the Indian School of Business here on Thursday.

 

He added RBI was also in discussions with the government about the monetary policy framework, in terms of making the objectives of the central bank more expressive. “One objective could be a specific level of inflation to which it can move. Another could be financial stability. The third objective could be growth. Also, what will be discussed is how to determine this process,” he said.

 

After taking charge of the central bank in September last year, Rajan had set up a committee under Deputy Governor Urjit Patel to review India’s monetary policy framework. Among other things, the panel suggested a shift to a rule-based monetary policy from the current discretionary monetary policy. It also suggested an inflation-targeting framework.

 

The government wants to announce the roll-out of the new monetary policy framework during the announcement of the 2015-16 Union Budget.

 

The RBI governor also said economic growth was picking up. He envisaged six per cent growth rate in the “final half of this year and next year and, hopefully, seven (per cent) a year after”. He added to sustain this growth and raise it, “we have to think of how we reform the system of fundamentals”.

 

Between September last year and January this year, RBI had raised the repo rate thrice to tackle inflation. The central bank has, however, maintained status quo in the rate in the past four policy reviews.

 

“We are trying to build the credibility of RBI and the government to keep inflation low. We are establishing we care about inflation and we keep it low; trust us. This allows us to promote growth,” he said.

 

He spoke of the need to restructure human resources within the central bank, adding there was broad consensus among the top management on the restructuring.

 

The restructuring process was started last week, with RBI increasing the number new executive directors and segregating regulatory and supervisory departments. The appointment of a fifth deputy governor as chief operating officer (COO), which has faced opposition from the government, is also a part of the exercise.

 

While the central bank primarily looks after five areas — supervision, regulation, market, monetary policy and general services — the proposed COO will be in charge of general services. For this, there has to be a fifth deputy governor. But the RBI Act stipulates only four.

 

“We have to change the Act. We are working with the government. Let’s see if it works,” Rajan said.

 

Prime Minister Narendra Modi had an ambitious agenda for India and expectations of him were very high, Rajan said, adding the government seemed to be focusing on improving the framework for doing business. “You need to make it easy for business to grow. That means finance; that means regulations; and that means skilled labour. I think the government is working on all these. If we can do this and scale up the whole thing, I don’t see why we cannot, over time, reach double-digit (growth rate).”

 

Emphasising the need to “put distress assets back on track”, Rajan spoke of the need to open the licensing process to establish new asset reconstruction companies.

(Source: Business Standard, October 17, 2014)

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