QUICKLY Moody’s says Budget numbers are Air …...2019/12/31  · services. In no event can the...

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................CH-X CM YK CHENNAI 4 BusinessLine WEDNESDAY FEBRUARY 5 2020 NEWS QUICKLY 6,900 cases of online banking frauds New Delhi, February 4 Nearly 6,900 cases of online banking frauds were registered in the country in 2017-18, the Lok Sabha was informed on Tuesday. Minister of State for Home G Kishan Reddy said with the rapid increase in use of cyber space, the number of cyber crimes is also increasing. Reddy said in order to prevent online frauds and protect users, the Ministry of Home Affairs has taken several steps, including formation of an Inter-Ministerial Committee on Phone Fraud PTI 7,591 MW RE capacity in April-Dec New Delhi, February 4 India has commissioned renewable energy (RE) projects totalling 7,591.99 MW during April-December, 2019-20, Parliament was informed on Tuesday. Another 34,160 MW capacity is under implementation, Renewable Energy Minister RK Singh said while replying to a question during Question Hour in the Rajya Sabha. The RE capacity addition in 2019-20 is expected to exceed the capacity addition achieved in 2018-19 which stood at 8,532.22 MW, he said. Singh further said most of the RE projects are being implemented by private sector developers selected through a transparent competitive bidding process. PTI RK Singh BusinessLine Disclaimer: Readers are requested to verify & make appropriate enquiries to satisfy themselves about the veracity of an advertisement before responding to any published in this newspaper. THG PUBLISHING PVT LTD., the Publisher & Owner of this newspaper, does not vouch for the authenticity of any advertisement or advertiser or for any of the advertiser’s products and/or services. In no event can the Owner, Publisher, Printer, Editor, Director/s, Employees of this newspaper/company be held responsible/liable in any manner whatsoever for any claims and/or damages for advertisements in this newspaper. PRESS TRUST OF INDIA New Delhi, February 4 Moody’s Investors Service on Tuesday said economic growth projections made by Finance Minister Nirmala Sitharaman in her Budget for 2020-21 appear ambitious given the structural and cyclical challenges facing the Indian economy. The Budget expects nominal GDP growth of 10 per cent in 2020-21, followed by 12.6 per cent and 12.8 per cent in FY2022 and 2023. But, Moody’s saw GDP growth rising to around 8.7 per cent in the next financial year be- ginning April 1 from about 7.5 per cent in the current fiscal. Stating that the growth out- look will remain weak, it has put real GDP growth during the cur- rent fiscal ending March 31 at 4.9 per cent, slightly below the gov- ernment’s forecast of 5 per cent. For the next fiscal, it estimated real GDP growth of 5.5 per cent, lower than 6-6.5 per cent projec- ted by the government’s Eco- nomic Survey. “Growth has remained relat- ively weak as a prolonged de- leveraging cycle and ongoing stress among non-banking fin- ancial institutions (NBFIs), which has constrained the finan- cial system’s overall provision of credit, weigh on consumption and investment,” it said in a de- tailed commentary on the Budget. Cut in forecast For the next 2020-21 fiscal, it lowered real GDP growth fore- casts to 5.5 per cent from 6.3 per cent previous estimate. And for the following fiscal, it put the real GDP growth at 6 per cent from 6.7 per cent projected earlier. “The significant slowdown in financial sector credit growth from NBFI liquidity constraints and asset quality issues among public sector banks has exacer- bated prolonged weakness in private investment and a mater- ial decline in consumption, due in part to financial stress among rural households and weak job creation,” Moody’s said. The nominal GDP growth, it said, has also declined signific- antly. Following 11.2 per cent ex- pansion in 2018-19, the govern- ment had forecast 12 per cent nominal GDP growth in its July 2019 budget for the current fiscal. However, according to the gov- ernment’s first advance estimate of GDP last month, nominal GDP growth is likely fell to a much lower rate of around 7.5 per cent for full 2019-20. “These forecasts (made the Budget) appear ambitious given the combination of structural and cyclical chal- lenges that the Indian eco- nomy faces,” it said. Moody’s said the govern- ment will face challenges in achieving its deficit target for the fiscal year ending March 2021, amid persistent struc- tural and cyclical headwinds to growth. Moody’s says Budget numbers are ambitious, pegs FY20 growth at 4.9% Lowers FY21 growth projection to 5.5% from 6.3% Growth pangs /ISTOCKPHOTO W X “The significant slowdown in financial sector credit growth from NBFI liquidity constraints and asset quality issues among public sector banks has exacerbated prolonged weakness in private investment” ASHWINI PHADNIS New Delhi, February 4 The proposed divestment of Air India Transport Services Limited (AITSL) , the ground handling subsidiary of Air India, has been cancelled. Sources said now new fin- ancial data is available on the basis of which fresh bids can be called. This divestment being called off will not affect the ongoing sell-off of Air India and Air India Express. AITSL is fully owned subsidiary of Air India Ltd, which was formed in 2013 with the aim of providing unified ground handling services (Ramp, Passenger, Baggage, Cargo Handling and Cabin Cleaning) under the brand name ‘Air India Airport Services’. Seeking clarity Earlier, companies inter- ested in bidding for AITSL had sought clarity on a number of issues including the prospects of AITSL’s Air India business post the di- vestment of Air India and whether the new owner will be given a free hand to deal with its current employees. There were also issues over how long the new company, post disinvest- ment, will continue getting grandfather rights that AITSLcurrently enjoys. Grandfather rights allows AITSL to carry on business in perpetuity at various air- ports around the country. AITSL currently provides ground handling services at 80 airports. Apart from handling the flights of Air India Ltd and its subsidiary companies, ground handling is also provided for 37 foreign scheduled airlines, three domestic scheduled air- lines, four regional airlines, 12 seasonal charter airlines, 23 foreign airlines availing perishable cargo handling. Air India Transport Services divestment plan grounded MEENAKSHI VERMA AMBWANI AMITI SEN New Delhi, February 4 The Centre is looking at strik- ing a delicate balance in its ef- forts to check misuse of Free Trade Agreements (FTA) by un- scrupulous importers and en- suring that their use by legit- imate businesses is not discouraged. “A task force could be set up under the Department of Rev- enue Intelligence with mem- bers from other Departments including Commerce and In- dustry. It will examine in detail what measures can be put in place to check fraudulent im- ports while not making the provisions so onerous that they act as a deterrent to genu- ine people from using the FTA route,” an official familiar with the matter told BusinessLine. Finance Minister Nirmala Sitharaman, in her Budget speech, had pointed out that undue claims of FTA benefits were posing a threat to do- mestic industry and the gov- ernment would take measures to clamp down on imports such as reviewing rules of ori- gin (ROO) requirements. ROO determine whether enough value addition took place in the FTA partner coun- try for the import to qualify as originating from there. It is sometimes flouted by import- ers to wrongly claim that a par- ticular import is originating from an FTA partner country so as to pocket the benefits. The Customs Department, reportedly, is looking at retro- spectively verifying costing data, value-addition compli- ance of imports and certific- ates of origin up to a period of five years from the date of import. The government is also likely to look at the ROO provi- sions in some of the existing trade pacts, for instance the one signed with Bangladesh, and take a call on whether they need to be further strengthened, the official said. TV industry concerns The TV industry has been one of the key sectors that has been raising concerns about misuse of FTAs . The Ministry of Electronics and Information Technology had last year informed the Lok Sabha that the value of import of televisions from Vietnam (which is part of the India- ASEAN FTA) saw a 37-fold in- crease to ₹2,317 crore in 2018-19, compared to ₹62 crore in 2017- 18. Overall, televisions worth ₹7,224 crore were imported in 2018-19 and China, Vietnam, Malaysia, Hong Kong and Taiwan were among the top five countries for such im- ports, according to the govern- ment data. “This kind of scrutiny is much needed as some players have been misusing FTAs to im- port finished LED TVs. There have been incidents, where certain players have imported products with an origin of cer- tificate that does not accur- ately reflect the country where these products have been actu- ally manufactured,” said Avneet Singh Marwah, CEO, Su- per Plastronics Pvt Ltd (SPPL), that sells Kodak and Thomson- branded televisions in the country. He added that rather than investing in domestic manu- facturing these players rely heavily on imported finished TV sets from FTA countries. However, an effort will also be made to ensure that any move to check FTA misuse does not end up penalising genuine users of the trade pacts and act as a disincentive for trading under the pacts. “At present, FTA usage in In- dia is already very low because the industry prefers to export and import through the nor- mal route to avoid getting into the hassles of providing docu- ments. The government needs to see that greater scrutiny of imports does not lead to dis- couraging genuine users of the FTA route,” the official said. DRI-led team plans measures to check misuse of FTAs without affecting genuine players In line with Budget proposals, move also to re-work ‘Rules of Origin’ provisions W X The Customs Department, reportedly, is looking at retrospectively verifying costing data, value- addition compliance of imports and certificates of origin up to a period of five years from the date of import. SURABHI Mumbai, February 4 Is the Budget being too ambi- tious with its tax collection tar- gets, especially amid the eco- nomic slowdown and the cut in corporate tax rates? The tax targets seem to have raised eyebrows among analysts. Even a cursory look at previous Budgets shows that the actual collections in at least the last two years have been lower than the estimates. This could mean more reliance on non-tax revenues, such as dis- investment proceeds, for main- taining the fiscal deficit at thetar- geted at 3.5 per cent of GDP for FY21. Gross tax revenue Budget 2020-21 has pegged the gross tax revenue (GTR) at ₹24,23,020 crore, which is slightly lower than the ₹24,61,194.93-crore Budget Estim- ate (BE) for 2019-20. However, it marks a near 12 per cent increase over the Revised Estimate (RE) of ₹21,63,423 crore for this fiscal. “GTR has been pegged at ₹21,63,423 crore in RE 2019-20, which reflects a decrease of ₹2,97,772 crore from BE 2019-20. The reasons for this shortfall are the reductions in corporate tax,” the Budget document said. In 2019-20, the document notes, GTR slowed down due to lesser-than-anticipated GST col- lections and a reduction in cor- porate tax rates. GDP growth is es- timated to recover to 6-6.5 per cent in 2020-21 from the estim- ated 5 per cent this fiscal. In 2018-19 as well, the actual GTR receipts, at ₹20,80,465.43 crore, were lower than what was anticipated in the BE and RE. In 2018-19, GTR in the BE was ₹22,71,241.56 crore while in the RE, it was pegged at ₹22,48,175.2 crore. Similarly, in 2017-18, the ac- tual GTR at ₹19,19,008.71 crore was lower than the RE of ₹19,46,119.15 crore. Analysts have also pointed out that the nominal GDP growth of 10 per cent assumed in this Budget could have downside risks, given the subdued environ- ment both domestically and ex- ternally. CRISIL has forecast nom- inal GDP growth at 9.5 per cent next fiscal. “As opposed to a gross tax rev- enue buoyancy of 0.5 achieved in fiscal 2020, the government has budgeted a buoyancy of 1.2 for FY21 (also higher than the last 10- year average of 1.0), which could be challenging to achieve in an environment of subdued growth,” CRISIL noted. A research note by Abheek Barua, Chief Eco- nomist, HDFC Bank, also noted that given the muted growth en- vironment, the assumptions on tax collections for next fiscal look somewhat stretched. And the GTR projections seem optimistic given the current growth slow- down. “Direct tax collections are budgeted to grow 12 per cent in 2020-21, compared to 4 per cent this fiscal This is despite the ₹4,000-crore loss in revenue ex- pected from the reduction in in- come-tax cuts,” the report said. It also pointed out that the Budget has pegged GST collec- tions at ₹6.9-lakh crore. “Our cal- culations show that a monthly run rate of ₹1.06-lakh crore is re- quired to meet the target,” it ad- ded. Meanwhile, the proceeds from PSU disinvestments, includ- ing that of LIC, is pegged at ₹2.1- lakh crore next fiscal, as com- pared to the RE of ₹65,000 crore this fiscal. Tax collection targets: Has the Budget set the bar too high? PRATIM RANJAN BOSE Guwahati February 4 The Budget proposal to re- place all conventional electri- city meters by smart prepaid metres in the next three years, has created a huge flut- ter in the country’s finan- cially weak electricity distri- bution sector, catering roughly to 21.4 crore (99.99 per cent) households. At the current price of ap- proximately ₹7,500 a smart prepaid metre, this move would require ₹1,60,500 crore. Assuming the mass procurement will bring down the average cost of a meters to ₹3,000; Discoms will still require over ₹64,000 crore in the next three years. Colossal waste Raising such huge funds from the market is very diffi- cult for majority of the Dis- coms , which are already fin- ancially stressed. The Discoms’ financial woes are impacting the gen- eration segment too. As in November 2019, the generation sector had out- standing payment dues of ₹81,000 crore from the Dis- coms. States such as Ra- jasthan, which have under- gone debt-restructuring under the UDAY scheme, re- ported 80 per cent rise in out- standing in 2019 (January to December). Since the residential seg- ment consumes lesser elec- tricity, this move will neither benefit the consumers nor the Discoms. In West Bengal not more than 15 per cent of the 1.5 crore subscribers consume over 300 units a month. This section along with commer- cial and industrial users cross subsidise the rest of the 85 per cent residential subscribers. Finance Minister Nirmala Sitharaman in her Budget said, “The Ministry intends to promote ‘smart’ metering. I urge all the States and Union Territories to replace conven- tional energy meters by pre- paid smart meters in the next 3 years. Also, this would give consumers the freedom to choose the supplier and rate as per their requirements”. Analysts, Discom officials and State electricity regulat- ors feel that the Finance Min- ister is mixing up issues. First, there is a case for switching from the conven- tional meters to regular pre- paid at an extra cost of ₹500- 1,200 each. This will cost the distribution sector ₹15,000 crore. The manufacturers of smart meters can be nudged to bring down the price. The exercise will benefit Discoms as a large chunk of subscribers pay so little that often it doesn’t cover the cost of distributing and collect- ing monthly bills. The whole process can be eliminated in the case of pre-paid meters. Target premium segment Smart meters is a welcome step in the premium house- hold segment and mostly to the electricity guzzling com- mercial and industrial sector. This segment pays hefty elec- tricity bills and will be in fa- vour of better meters to save on costs. Smart meters generate quality data on consump- tion. Introduction of such meters, particularly in the commercial segment (that includes retail showrooms, malls etc) and industry, will help DISCOMS to understand the demand patterns better. But what about smart pre- paid? Since the Discoms are already milking this section for the benefit of vast major- ity, Can it now be forced to pay in advance? Choice of supplier It is not clear, why the Minis- ter took up this issue. Theor- etically large industrial con- sumers already have the option of open access mech- anism. In reality, however, most Discoms barely allow good customers to migrate and put in place artificial hurdles. A policy on supply sector franchise is under prepara- tion where the wire will be owned by an agency, prob- ably Discoms, and con- sumers will have the right to chose their suppliers. But this too is not for bulk con- sumers, who either enjoy cross-subsidy or do not bring any surplus revenue to the Discom. This is because portability of suppliers may come at a cost and a majority of con- sumers will find it financially unviable. Smart prepaid meters: A case of misplaced priorities? The Budget proposal on smart prepaid meters is neither likely to benefit consumers nor Discoms, say analysts

Transcript of QUICKLY Moody’s says Budget numbers are Air …...2019/12/31  · services. In no event can the...

Page 1: QUICKLY Moody’s says Budget numbers are Air …...2019/12/31  · services. In no event can the Owner, Publisher, Printer, Editor, Director/s, Employees of this newspaper/company

................CH-XCMYK

CHENNAI

4 BusinessLine WEDNESDAY • FEBRUARY 5 • 2020NEWS

QUICKLY

6,900 cases of online banking frauds New Delhi, February 4

Nearly 6,900 cases of online banking frauds

were registered in the country in 2017-18, the

Lok Sabha was informed on Tuesday. Minister

of State for Home G Kishan Reddy said with

the rapid increase in use of cyber space, the

number of cyber crimes is also increasing.

Reddy said in order to prevent online frauds

and protect users, the Ministry of Home Affairs

has taken several steps, including formation

of an Inter-Ministerial Committee on Phone

Fraud PTI

7,591 MW RE capacity in April-Dec New Delhi, February 4

India has commissioned

renewable energy (RE)

projects totalling

7,591.99 MW during

April-December, 2019-20,

Parliament was informed

on Tuesday. Another

34,160 MW capacity is

under implementation,

Renewable Energy

Minister RK Singh said while replying to a

question during Question Hour in the Rajya

Sabha. The RE capacity addition in 2019-20 is

expected to exceed the capacity addition

achieved in 2018-19 which stood at 8,532.22

MW, he said. Singh further said most of the RE

projects are being implemented by private

sector developers selected through a

transparent competitive bidding process. PTI

RK Singh

BusinessLineDisclaimer: Readers are requested to verify &

make appropriate enquiries to satisfy themselves

about the veracity of an advertisement before

responding to any published in this newspaper.

THG PUBLISHING PVT LTD., the Publisher & Owner of

this newspaper, does not vouch for the

authenticity of any advertisement or advertiser or

for any of the advertiser’s products and/or

services. In no event can the Owner, Publisher,

Printer, Editor, Director/s, Employees of this

newspaper/company be held responsible/liable in

any manner whatsoever for any claims and/or

damages for advertisements in this newspaper.

PRESS TRUST OF INDIA

New Delhi, February 4

Moody’s  Investors  Service  onTuesday  said  economic  growthprojections  made  by  FinanceMinister Nirmala Sitharaman inher  Budget  for  2020­21  appearambitious  given  the  structuraland  cyclical  challenges  facingthe Indian economy.

The  Budget  expects  nominalGDP  growth  of  10  per  cent  in2020­21, followed by 12.6 per centand  12.8  per  cent  in  FY2022  and2023.  But,  Moody’s  saw  GDPgrowth  rising  to  around  8.7  percent in the next fi��nancial year be­ginning  April  1  from  about  7.5per cent in the current fi��scal.

Stating  that  the  growth  out­look will remain weak, it has putreal GDP growth during the cur­rent fi��scal ending March 31 at 4.9per cent, slightly below the gov­

ernment’s forecast of 5 per cent.For  the  next  fi��scal,  it  estimatedreal GDP growth of 5.5 per cent,lower than 6­6.5 per cent projec­ted  by  the  government’s  Eco­nomic Survey.

“Growth  has  remained  relat­ively  weak  as  a  prolonged  de­leveraging  cycle  and  ongoingstress  among  non­banking  fi��n­ancial  institutions  (NBFIs),which has constrained the fi��nan­cial system’s overall provision ofcredit,  weigh  on  consumptionand investment,”  it said in a de­tailed  commentary  on  theBudget.

Cut in forecastFor  the  next  2020­21  fi��scal,  itlowered  real  GDP  growth  fore­casts to 5.5 per cent from 6.3 percent  previous  estimate.  And  forthe  following  fi��scal,  it  put  thereal  GDP  growth  at  6  per  centfrom  6.7  per  cent  projectedearlier.

“The  signifi��cant  slowdown  infi��nancial  sector  credit  growth

from  NBFI  liquidity  constraintsand  asset  quality  issues  amongpublic  sector  banks  has  exacer­bated  prolonged  weakness  inprivate investment and a mater­ial decline in consumption, duein part to fi��nancial stress amongrural  households  and  weak  jobcreation,” Moody’s said.

The  nominal  GDP  growth,  itsaid,  has  also  declined  signifi��c­antly.  Following  11.2  per  cent  ex­pansion  in  2018­19,  the  govern­ment  had  forecast  12  per  centnominal  GDP  growth  in  its  July2019  budget  for  the  currentfi��scal.

However, according to the gov­ernment’s fi��rst advance estimate

of  GDP  last  month,  nominalGDP  growth  is  likely  fell  to  amuch lower rate of around 7.5per cent for full 2019­20.

“These  forecasts  (made  theBudget)  appear  ambitiousgiven  the  combination  ofstructural  and  cyclical  chal­lenges  that  the  Indian  eco­nomy faces,” it said.

Moody’s  said  the  govern­ment  will  face  challenges  inachieving  its  defi��cit  target  forthe  fi��scal  year  ending  March2021,  amid  persistent  struc­tural and cyclical headwinds togrowth.

Moody’s says Budget numbers areambitious, pegs FY20 growth at 4.9%Lowers FY21 growth

projection to

5.5% from 6.3%

Growth pangs /ISTOCKPHOTO

WX“The significant slowdown

in financial sector credit

growth from NBFI

liquidity constraints and

asset quality issues among

public sector banks has

exacerbated prolonged

weakness in private

investment”

ASHWINI PHADNIS

New Delhi, February 4

The proposed divestment ofAir  India  Transport  ServicesLimited (AITSL) , the groundhandling  subsidiary  of  AirIndia,  has  been  cancelled.

Sources said now new fi��n­ancial  data  is  available  onthe  basis  of  which  freshbids  can  be  called. 

This  divestment  beingcalled off�� will not aff��ect theongoing sell­off�� of Air Indiaand  Air  India  Express. 

AITSL  is  a  fully  ownedsubsidiary  of  Air  India  Ltd,which  was  formed  in  2013with  the  aim  of  providingunifi��ed  ground  handlingservices  (Ramp,  Passenger,Baggage,  Cargo  Handlingand  Cabin  Cleaning)  underthe  brand  name  ‘Air  IndiaAirport  Services’.

Seeking clarityEarlier,  companies  inter­ested  in  bidding  for  AITSLhad  sought  clarity  on  anumber of  issues including

the  prospects  of  AITSL’s  AirIndia  business  post  the  di­vestment  of  Air  India  andwhether  the  new  ownerwill  be  given  a  free  hand  todeal  with  its  currentemployees.

There  were  also  issuesover  how  long  the  newcompany,  post  disinvest­ment,  will  continue  gettinggrandfather  rights  thatAITSLcurrently  enjoys. 

Grandfather rights allowsAITSL  to  carry  on  businessin  perpetuity  at  various  air­ports  around  the  country.

AITSL  currently  providesground  handling  servicesat  80  airports. 

Apart  from  handling  thefl��ights  of  Air  India  Ltd  andits  subsidiary  companies,ground  handling  is  alsoprovided  for  37  foreignscheduled  airlines,  threedomestic  scheduled  air­lines,  four regional airlines,12  seasonal  charter  airlines,23  foreign  airlines  availingperishable  cargo  handling.

Air India Transport Servicesdivestment plan grounded

MEENAKSHI VERMA AMBWANIAMITI SEN

New Delhi, February 4

The  Centre  is  looking  at  strik­ing a delicate balance in its ef­forts  to  check  misuse  of  FreeTrade Agreements (FTA) by un­scrupulous importers and en­suring  that  their  use  by  legit­imate  businesses  is  notdiscouraged.

“A task force could be set upunder the Department of Rev­enue  Intelligence  with  mem­bers  from  other  Departmentsincluding  Commerce  and  In­dustry. It will examine in detailwhat  measures  can  be  put  inplace  to  check  fraudulent  im­ports  while  not  making  theprovisions  so  onerous  thatthey act as a deterrent to genu­ine people from using the FTAroute,” an offi��cial familiar withthe matter told BusinessLine.

Finance  Minister  NirmalaSitharaman,  in  her  Budgetspeech,  had  pointed  out  thatundue  claims  of  FTA  benefi��tswere  posing  a  threat  to  do­mestic  industry  and  the  gov­ernment would take measuresto  clamp  down  on  importssuch as reviewing rules of ori­gin (ROO) requirements.

ROO  determine  whetherenough  value  addition  tookplace in the FTA partner coun­try for the import to qualify asoriginating  from  there.  It  issometimes fl��outed by import­ers to wrongly claim that a par­ticular  import  is  originatingfrom an FTA partner country soas to pocket the benefi��ts.

The  Customs  Department,reportedly, is looking at retro­spectively  verifying  costingdata,  value­addition  compli­ance  of  imports  and  certifi��c­

ates of origin up to a period offi��ve  years  from  the  date  ofimport.

The  government  is  alsolikely to look at the ROO provi­sions  in  some  of  the  existingtrade  pacts,  for  instance  theone  signed  with  Bangladesh,and take a call on whether theyneed  to  be  furtherstrengthened, the offi��cial said.

TV industry concernsThe TV industry has been oneof the key sectors that has beenraising concerns about misuseof FTAs .

The  Ministry  of  Electronicsand  Information  Technologyhad last year informed the LokSabha that the value of importof  televisions  from  Vietnam(which  is  part  of  the  India­ASEAN  FTA)  saw  a  37­fold  in­crease to ₹��2,317 crore in 2018­19,compared to ₹��62 crore in 2017­18. 

Overall,  televisions  worth₹��7,224 crore were imported in

2018­19  and  China,  Vietnam,Malaysia,  Hong  Kong  andTaiwan  were  among  the  topfi��ve  countries  for  such  im­ports, according to the govern­ment data. 

“This  kind  of  scrutiny  ismuch needed as some playershave been misusing FTAs to im­port  fi��nished  LED  TVs.  Therehave  been  incidents,  wherecertain players have importedproducts with an origin of cer­tifi��cate  that  does  not  accur­ately refl��ect the country wherethese products have been actu­

ally  manufactured,”  saidAvneet Singh Marwah, CEO, Su­per  Plastronics  Pvt  Ltd  (SPPL),that sells Kodak and Thomson­branded  televisions  in  thecountry. 

He  added  that  rather  thaninvesting  in  domestic  manu­facturing  these  players  relyheavily  on  imported  fi��nishedTV sets from FTA countries. 

However,  an  eff��ort  will  alsobe  made  to  ensure  that  anymove to check FTA misuse doesnot end up penalising genuineusers of the trade pacts and actas  a  disincentive  for  tradingunder the pacts.

“At present, FTA usage in In­dia is already very low becausethe industry prefers to exportand  import  through  the  nor­mal route to avoid getting intothe hassles of providing docu­ments. The government needsto see that greater scrutiny ofimports  does  not  lead  to  dis­couraging  genuine  users  ofthe FTA route,” the offi��cial said.

DRI-led team plans measures to check misuseof FTAs without affecting genuine playersIn line with Budget proposals, move also

to re-work ‘Rules of Origin’ provisions

WXThe Customs

Department, reportedly,

is looking at

retrospectively verifying

costing data, value-

addition compliance of

imports and certificates

of origin up to a period

of five years from the

date of import.

SURABHI

Mumbai, February 4

Is  the  Budget  being  too  ambi­tious  with  its  tax  collection  tar­gets,  especially  amid  the  eco­nomic slowdown and the cut incorporate tax rates?

The  tax  targets  seem  to  haveraised eyebrows amonganalysts.Even  a  cursory  look  at  previousBudgets  shows  that  the  actualcollections in at least the last twoyears  have  been  lower  than  theestimates. 

This could mean more relianceon non­tax revenues, such as dis­investment  proceeds,  for  main­taining the fi��scal defi��cit at the tar­geted at 3.5 per cent of  GDP forFY21.

Gross tax revenueBudget  2020­21  has  pegged  thegross  tax  revenue  (GTR)  at₹��24,23,020  crore,  which  isslightly  lower  than  the₹��24,61,194.93­crore Budget Estim­ate  (BE)  for  2019­20.  However,  itmarks a near 12 per cent increaseover the Revised Estimate (RE) of₹��21,63,423 crore for this fi��scal.

“GTR  has  been  pegged  at₹��21,63,423  crore  in  RE  2019­20,which  refl��ects  a  decrease  of₹��2,97,772 crore from BE 2019­20.The reasons for this shortfall arethe reductions in corporate tax,”the Budget document said. 

In  2019­20,  the  documentnotes, GTR slowed down due tolesser­than­anticipated  GST  col­lections and  a reduction in cor­porate tax rates. GDP growth is es­timated  to  recover  to  6­6.5  percent  in  2020­21  from  the  estim­ated 5 per cent this fi��scal.

In  2018­19  as  well,  the  actual

GTR  receipts,  at  ₹��20,80,465.43crore, were lower than what wasanticipated in the BE and RE. In2018­19,  GTR  in  the  BE  was₹��22,71,241.56  crore  while  in  theRE, it was pegged at ₹��22,48,175.2crore. Similarly, in 2017­18, the ac­tual  GTR  at  ₹��19,19,008.71  crorewas  lower  than  the  RE  of₹��19,46,119.15 crore.

Analysts have also pointed outthat the nominal GDP growth of10  per  cent  assumed  in  thisBudget  could  have  downsiderisks, given the subdued environ­ment both domestically and ex­ternally. CRISIL has forecast nom­inal GDP growth at 9.5 per centnext fi��scal. 

“As opposed to a gross tax rev­enue buoyancy of 0.5 achieved infi��scal 2020, the government hasbudgeted  a  buoyancy  of  1.2  forFY21 (also higher than the last 10­year average of 1.0), which couldbe  challenging  to  achieve  in  anenvironment  of  subduedgrowth,” CRISIL noted. A researchnote by Abheek Barua, Chief Eco­nomist,  HDFC  Bank,  also  notedthat given the muted growth en­vironment,  the  assumptions  on

tax collections for next fi��scal looksomewhat  stretched.  And  theGTR projections seem optimisticgiven  the  current  growth  slow­down. “Direct tax collections arebudgeted to grow 12 per cent in2020­21, compared to 4 per centthis  fi��scal  This  is  despite  the₹��4,000­crore loss in revenue ex­pected from the reduction in in­come­tax cuts,” the report said.

It  also  pointed  out  that  theBudget  has  pegged  GST  collec­tions at ₹��6.9­lakh crore. “Our cal­culations  show  that  a  monthlyrun rate of ₹��1.06­lakh crore is re­quired to meet the target,” it ad­ded.  Meanwhile,  the  proceedsfrom PSU disinvestments, includ­ing that of LIC, is pegged at ₹��2.1­lakh  crore  next  fi��scal,  as  com­pared to the RE of ₹��65,000 crorethis fi��scal.

Tax collection targets: Has theBudget set the bar too high?

PRATIM RANJAN BOSE

Guwahati February 4

The  Budget  proposal  to  re­place all conventional electri­city meters by smart prepaidmetres  in  the  next  threeyears, has created a huge fl��ut­ter  in  the  country’s  fi��nan­cially  weak  electricity  distri­bution  sector,  cateringroughly  to  21.4  crore  (99.99per cent) households.

At  the  current  price  of  ap­proximately  ₹��7,500  a  smartprepaid  metre,  this  movewould  require  ₹��1,60,500crore.  Assuming  the  massprocurement  will  bringdown  the  average  cost  of  ameters  to ₹��3,000;  Discomswill  still  require  over₹��64,000  crore  in  the  nextthree years.

Colossal wasteRaising  such  huge  fundsfrom the market is very diffi��­cult  for  majority  of  the  Dis­coms , which are already fi��n­ancially stressed. 

The  Discoms’  fi��nancialwoes  are  impacting  the  gen­eration segment too.

As  in  November  2019,  thegeneration  sector  had  out­standing  payment  dues  of₹��81,000  crore  from  the  Dis­coms.  States  such  as  Ra­jasthan,  which  have  under­gone  debt­restructuringunder  the  UDAY  scheme,  re­ported 80 per cent rise in out­standing  in  2019  (January  toDecember).

Since  the  residential  seg­ment  consumes  lesser  elec­tricity, this move will neitherbenefi��t  the  consumers  northe Discoms. 

In  West  Bengal  not  morethan  15  per  cent  of  the  1.5crore  subscribers  consumeover 300 units a month. Thissection  along  with  commer­cial  and  industrial  users

cross subsidise the rest of the85  per  cent  residentialsubscribers.

Finance  Minister  NirmalaSitharaman  in  her  Budgetsaid, “The Ministry intends topromote  ‘smart’  metering.  Iurge all the States and UnionTerritories to replace conven­tional  energy  meters  by  pre­paid smart meters in the next3 years. Also,  this would giveconsumers  the  freedom  tochoose the supplier and rateas per their requirements”.

Analysts,  Discom  offi��cialsand  State  electricity  regulat­ors feel that the Finance Min­ister is mixing up issues.

First,  there  is  a  case  forswitching  from  the  conven­tional  meters  to  regular  pre­paid at an extra cost of ₹��500­1,200  each.  This  will  cost  thedistribution  sector  ₹��15,000crore.  The  manufacturers  ofsmart meters can be nudgedto bring down the price.

The  exercise  will  benefi��tDiscoms  as  a  large  chunk  ofsubscribers  pay  so  little  thatoften it doesn’t cover the costof  distributing  and  collect­ing monthly bills. The wholeprocess can be eliminated inthe case of pre­paid meters.

Target premium segmentSmart  meters  is  a  welcomestep  in  the  premium  house­hold  segment  and  mostly  tothe  electricity  guzzling  com­mercial and industrial sector.This segment pays hefty elec­tricity  bills  and  will  be  in  fa­vour of better meters to saveon costs.

Smart  meters  generatequality  data  on  consump­tion.  Introduction  of  suchmeters,  particularly  in  thecommercial  segment  (thatincludes  retail  showrooms,malls  etc)  and  industry,  willhelp DISCOMS to understand

the demand patterns better. But what about smart pre­

paid?  Since  the  Discoms  arealready  milking  this  sectionfor the benefi��t of vast major­ity,  Can  it  now  be  forced  topay in advance?

Choice of supplierIt is not clear, why the Minis­ter took up this issue. Theor­etically  large  industrial  con­

sumers  already  have  theoption  of  open  access  mech­anism.  In  reality,  however,most  Discoms  barely  allowgood  customers  to  migrateand  put  in  place  artifi��cialhurdles.

A policy  on  supply  sectorfranchise  is  under  prepara­tion  where  the  wire  will  beowned  by  an  agency,  prob­ably  Discoms,  and  con­

sumers will have the right tochose  their  suppliers.  Butthis  too  is  not  for  bulk  con­sumers,  who  either  enjoycross­subsidy or do not bringany  surplus  revenue  to  theDiscom.

This  is  because  portabilityof  suppliers  may  come  at  acost  and  a  majority  of  con­sumers will fi��nd it fi��nanciallyunviable.

Smart prepaid meters: A case of misplaced priorities? The Budget proposal on smart prepaid

meters is neither likely to benefit

consumers nor Discoms, say analysts

Page 2: QUICKLY Moody’s says Budget numbers are Air …...2019/12/31  · services. In no event can the Owner, Publisher, Printer, Editor, Director/s, Employees of this newspaper/company

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