Power supply: Prabhu panel for state-specific models
The central government’s advisory group on power distribution reforms favors state-specific plans, instead of one model for the country. It has also pushed debt recovery, rate rationalization and addressing of distribution losses, which, in some states, are 45-80 per cent.
The Prabhu panel has already given reports on the coal sector and thermal power projects. It has asked the Union ministry of power, Power Finance Corporation and Rural Electrification Corporation to work out state-specific action plans.
According to panel, distribution reforms meant loss reduction, improving the reliability of supply and rate rationalizing. He said five states — Andhra Pradesh, Rajasthan, Madhya Pradesh, Tamil Nadu and Haryana — constituted 80 per cent of the total annual loss (of Rs 80,000 crore as on date)
Panel suggests eight mines be allocated to power sector
A government panel has recommended the Coal Ministry may consider allocating eight mines to the power sector under government dispensation route, amid Power Minister Piyush Goyal promising 24x7 power to all. The eight coal blocks are in the states like West Bengal, Odisha and Maharashtra, a source close to the development said.
The coal blocks includes, Burapahar mine in Ib valley of Odisha, Palasbani East and Dip side of Palasbani East mines in Talcher coalfields of Odisha, Kapasdanga-Bharkata mine in Birbhum coalfields of West Bengal and Hiwardhara-Sinwadona mine in Wardha valley coalfields in Maharashtra, source said.
Goyal had 8th September said the government is committed to bring about a transformative change in the power sector and ensure 24X7 power for all homes, industrial and commercial establishments and adequate power for all. He also said the government is striving to ensure adequate coal for power plants by targeting production of 1 billion tonnes by 2019.
The coal-based electricity generation from in the past three months grew by 21% over the corresponding period of last year. The coal production also grew by 9% in the last month as compared to August in 2013. The government is also consider auctioning 8 captive coal mines which have reserves of 1,773 million tones.
The Supreme Court had earlier held that all coal blocks since 1993 have been allocated illegally and arbitrarily, bringing uncertainty to the fate of 218 block allocations.
Jalan Panel suggests levy of user charges on govt services
The Union Government has asked Bimal Jalan headed Expenditure Management Commission to suggest an effective strategy for meeting reasonable proportion of expenditure on services through user charges. It has also asked the Jalan Panel to review the fiscal responsibility and budget management (FRBM) rules to suggest improvements for enforcing better fiscal discipline.
Also, the newly set up commission will have to review the major areas of Central Government expenditure and suggest ways for creating fiscal space required to meet developmental expenditure needs. This has to be done without comprising the commitment to fiscal discipline, the terms of reference of the Commission said.
Bimal Jalan, who has been conferred with the status of a Union Cabinet Minister, has been asked to design a framework to improve the operational efficiency of expenditures through focus on utilisation, targets and outcomes. The Jalan panel has also been asked to suggest measures to achieve reduction in financial costs through better cash management system.
Besides asking the Commission to suggest greater use of IT tools for expenditure management, the panel has also been asked to recommend improved financial reporting systems in terms of accounting and budgeting etc. The Commission, which will be headquartered in New Delhi, will have to submit an interim report before Budget 2015-16.
State Bank launches new travel card
State Bank of India (SBI) and MasterCard, on 8th September, announced the launch of Multi-Currency Foreign Travel Card through 100 selected branches of Mumbai, Delhi, Chennai and Bangalore circles.
The card, which is available in retail and corporate variants, will help consumers pay in dollar, pound settling, Euro and Singapore dollar initially and eventually be made available in all major currencies.
Centre set to revise GDP measurement next year
The Centre will soon revise the way it measures the gross domestic product to reflect under-represented and informal economic sectors, two government sources said, in an initiative that is expected to show the economy is larger than previously thought.
The government usually revises the method of calculating national accounts and other macro data every five years, bringing in a newer base year and adjusting for changes in the economy.
The Ministry now takes 2004-05 as the base. India’s informal economy and service sector accounts for over three-fifths of its $1.8 trillion economy. But precise data are unavailable for these segments, and the government relies on surveys and samples to calculate their growth. This is combined with actual output numbers for mainstream industry to produce the GDP data.
In March, 2010, when the government last revised the national accounts, annual economic growth estimates were upwardly adjusted by 0.8 to 1.7 percentage points for four years, allowing the previous government to take credit for the country’s highest-ever stretch of economic growth.
What is GDP?
The gross domestic product (GDP) is one the primary indicators used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a specific time period - you can think of it as the size of the economy. Usually, GDP is expressed as a comparison to the previous quarter or year.
Measuring GDP is complicated (which is why we leave it to the economists), but at its most basic, the calculation can be done in one of two ways: either by adding up what everyone earned in a year (income approach), or by adding up what everyone spent (expenditure method). Logically, both measures should arrive at roughly the same total.
The income approach, which is sometimes referred to as GDP(I), is calculated by adding up total compensation to employees, gross profits for incorporated and non incorporated firms, and taxes less any subsidies. The expenditure method is the more common approach and is calculated by adding total consumption, investment, government spending and net exports.
Upper age limit set for MDs and CEOs of Private Banks
The Reserve Bank of India (RBI) has allowed managing directors and chief executive officers of private banks (and any other whole-time director on the board) to hold office till the age of 70 (and not beyond). The move will erase doubts on the eligibility of Aditya Puri (HDFC Bank’s MD) and Romesh Sobti (IndusInd Bank’s MD and CEO) for re-appointments.
So far, a maximum age of 70 was stipulated for appointment or re-appointment of part-time directors in banks. For whole-time directors, including the MD and CEO, no maximum age was specified and decisions were taken case by case. The P J Nayak committee proposed a maximum age of 65 for bank CEOs.
Cabinet mooted disinvestment
The Union Cabinet on 10th September cleared a dilution of the government's stake in Oil and Natural Gas Corporation (ONGC), Coal India Ltd (CIL) and NHPC Ltd. At current market valuations, the amount of its holdings the Centre wants to offload in these companies could fetch it as much as Rs 45,796 crore - more than the Budget target of raising Rs 39,925 crore through disinvestment in public-sector undertakings.
The Cabinet Committee on Economic Affairs approved selling 10 per cent of the government's stake in CIL, five per cent in ONGC and 11.38 per cent in NHPC. By Wednesday's market value, these are worth Rs 23,613 crore, Rs 19,048 crore and Rs 3,135 crore, respectively.
The Centre's fiscal deficit in the first four months of the financial year has already exceeded 60 per cent of Budget estimates for full year. The stake sales are likely to help the government meet the Budget target of reining in fiscal deficit at 4.1 per cent of gross domestic product in 2014-15.
In addition to state-run companies, the government also plans to sell its residual stake in Hindustan Zinc and Balco which is expected to fetch Rs 15,000 crore. Also, Specified Undertaking of Unit Trust of India could bring the exchequer another Rs 6,500 crore. These together take the total disinvestment target for 2014-15 to Rs 58,425 crore - 269 per cent higher than the previous year's actual proceeds of Rs 15,819 crore.
The Cabinet had earlier given its approval to sale of five per cent stake in Steel Authority of India Ltd which might raise another Rs 1,700 crore. The steel company is likely to be the first state-run company to go for disinvestment later this month. All of these issues are likely to tap the market through the offer-for-sale (OFS) route, which is considered more convenient and less time-consuming than follow-on offerings.
What is disinvestment?
Disinvestment means to sell off certain assets such as a manufacturing plant, a division or subsidiary, or product line. Disinvestment is sometimes described as the opposite of capital expenditures. Some people use the term divestiture, or to divest when discussing disinvestment.
Government adopted the 'Disinvestment Policy'. This was identified as an active tool to reduce the burden of financing the PSUs. The following main objectives of disinvestment were outlined:
? To reduce the financial burden on the Government
? To improve public finances
? To introduce, competition and market discipline
? To fund growth
? To encourage wider share of ownership
? To depoliticise non-essential services
The importance of disinvestment lies in utilisation of funds for:
? Financing the increasing fiscal deficit
? Financing large-scale infrastructure development
? For investing in the economy to encourage spending
? For social programs like health and education
Disinvestment also assumes significance due to the prevalence of an increasingly competitive environment, which makes it difficult for many PSUs to operate profitably. This leads to a rapid erosion of value of the public assets making it critical to disinvest early to realize a high value.
India notified WTO of $56-bn farm support
India spent $56.1 billion on support for farmers in 2010-2011, it said in Report submitted to World Trade Organization (WTO) on 10th September, a document that will be pored over for evidence that it breached agreed limits on agricultural subsidies. The United States and other WTO members have strongly criticized saying India is almost a decade behind with notifications on farm support and for vetoing a WTO agreement; as it wanted more attention paid to its demand to be allowed to store food grains to ensure food security.
Overseas investments by India Inc. down 49% in August
Overseas direct investments by Indian firms declined 49% year-on-year to USD 1.25 billion in last month, as per RBI data. Investments abroad had amounted to USD 2.47 billion in August 2013. As for month-on-month, in July this year the Indian companies had spent USD 1.12 billion in overseas markets. The investments were a mix of issuance of guarantees (USD 742.80 million), loans (USD 303.48 million) and of equity (USD 207.39 million).
NABARD launches Rs. 5,000-cr fund
The National Bank of Agriculture and Rural Development (NABARD) on 11th September launched a Rs 5,000-crore rural credit fund aimed at increasing long-term credit in agriculture. Under the facility, first announced in the budget by Finance Minister Arun Jaitley, NABARD will be refinancing agricultural term loans extended by the cooperative banks and regions rural banks (RRB) to agriculturists.
The ultimate aim of the scheme will be to make credit for investment purposes cheaper and through that, motivate those engaged in agricultural activities to invest more. NABARD will provide refinance to the cooperatives and RRBs at an interest of 7.85 per cent with a repayment period of five years so that the borrowers can benefit.
NABARD
National Bank for Agriculture and Rural Development (NABARD) is the apex agricultural development bank in India headquartered in Mumbai and branches are all over the country. The Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development (CRAFICARD), set up by the Reserve Bank of India (RBI) under the Chairmanship of Shri B. Sivaraman, conceived and recommended the establishment of the National Bank for Agriculture and Rural Development (NABARD). It was established on 12 July 1982 by a special act by the parliament and its main focus was to uplift rural India by increasing the credit flow for elevation of agriculture & rural non farm sector
India 14th among 22 Asia-Pacific economies
India ranked 14th on a list of 24 economies on Creative Productivity Index, being launched on 12th September by the Asian Development Bank and Economist Intelligence Unit. The report carrying the ADB-EIU index said regulatory hurdles, red tape and corruption provide little incentive for the private sector to invest in innovation in India. The index is designed to give policymakers a tool to measure progress in fostering creativity and innovation in 22 Asia-Pacific economies (plus those of the US and Finland, for comparison purposes).
? It measures the innovative and creative capacity of economies by relating creative inputs to outputs.
? On the input side, creative productivity is measured on three dimensions - the capacity to innovate, incentives to innovate and how conducive the environment is for innovation.
? The output side measures innovations by considering both conventional indicators such as the number of patents filed, as well as a broader set of measures on knowledge creation.
? While India is ranked lower on the input side at 15, compared to its overall rank, it has a relatively better score at 13 on the output side. This implies India is able to get a bit better of an output compared to its inputs.
? A commentary carried with the index says despite recent productivity gains, India still lags in terms of output, with a low score on agricultural productivity, showing the need for rural innovations.
? On the input side, India lags in the knowledge-skill base, showing the need for further investments in physical infrastructure and human capital, the report said.
? India is in 21st place for both competition and human capital. For human capital, the country scores well for the number of top-500 global universities but the overall ranking is dragged down by its low scores for rate of urbanization, mean years of schooling, and technical and vocational enrolment of students in secondary school.
? Nevertheless, on the whole, India has a solid pool of skilled, English-speaking graduates. This will continue to aid in expansion of the services sector, such as in information communication and technology. Elsewhere, larger productivity gains are needed in the agricultural sector.
? Though the country was ranked sixth in the index for ease of labor turnover, our labor laws are overlapping and cumbersome, and employers face difficulties in making workers redundant, the report said. Companies with more than 100 employees, for instance, are obliged to obtain government authorization to lay off workers or to close unprofitable business units.
? The report said, nevertheless, most of India's labour laws apply only to the (less productive) organized sector, which does not include small-scale manufacturing and services, agriculture and most construction work.
? It said establishment of the National Innovation Council in 2010 had shifted the policy focus towards "a decade of innovation" but India lagged emerging countries such as China.
Recently, India's position had slipped 11 notches to 71 in the Global Competitiveness Index of the World Economic Forum for 2014-15, compared to a year earlier. And, India came 134th among 189 countries ranked by the World Bank on the ease of doing business, for 2014.
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