Covering developments on policy responses, policy implementation and policy distortions on a quarterly basis. PPoolicyWatchlicyWatch Comments are welcome. Volume 17, No. 1 January-March 2016 The Telecom Overhaul couple of months back came the government’s ‘eureka’ moment when Ait agreed on spectrum sharing and trading between telecom operators. The Department of Telecommunications (DoT) is planning a massive spectrum auction in June 2016 and has even gone beyond, urging the International Telecommunications Union (ITU) to identify additional usable spectrum bands for 3G and 4G services. INSIDE THIS ISSUE For mobile services New Aviation Policy ...... 3 with persistent issues of call drops, poor Internet Boosting Cashless and bad reception, the Payments...... 6 operators had always put M&A Activity Shrinks ...... 10 the blame on spectrum scarcity. Not any more! Corruption Delays Additional spectrum at Startups...... 12 auction, and an option to Separate Poverty share/trade spectrum, is

Indicators ...... 16 www.static.indianexpress.com likely to optimise spectrum utilisation and, Focus on ‘Values’ ...... 18 in the process, raise the quality of service (QoS) for mobile services. Some government enterprises, sitting on the bulk of unutilised spectrum, HIGHLIGHTS have started pondering over its release to help addressing the spectrum UDAY is a Game Changer: scarcity. The Ministry of Defence is thus expected to release 150 Mhz of Piyush Goyal ...... 7 spectrum in the second quarter of 2016. India has 10 mobile operators with Reliance Jio joining soon. Free Modi Moves to Plug India’s competition is considered beneficial for consumers, but in the case of mobile Biggest Data Hole services it might not be so. With 11 players competing for a limited resources, – Sandrine Rastello and each will get an inadequate spectrum, resulting in poor services. Bibhudatta Pradhan ...... 13 With another big spectrum auction on the horizon, the operators are caught in a dilemma to share/trade spectrum or to buy spectrum in the Vijay Mallya’s USL Exit coming auction. The spectrum on auction, valued around M5 lakh crore, A Wakeup Call for might land a devastating blow to the already-indebted telecom operators. Independent Directors How the operators would deal with this, while combating the stiff competition, – Devina Sengupta and would be intriguing. Sachin Dav ...... 14 All sharing/trading deals would earn the government one percent of the deal value, which becomes the buyer’s liability and two-fold earning for the CCI Finds Reasons to government. Intimating the government 45-day beforehand on deals and Probe Mahyco-Monsanto restricting operators holding more than 25 percent of spectrum in a circle – Shreeja Sen and and 50 percent in specific band again amounts to over-regulation. Sayantan Bera ...... 22 Another factor that needs to be addressed is the harmonisation of spectrum. Featuring on ITU’s global agenda, harmonisation means uniform allocation of radio frequency bands across entire regions and not just individual “The reformer has enemies in countries. This would minimise radio interference along borders, facilitate all those who profit by the old international roaming and reduce the cost of mobile devices. order and only lukewarm Spectrum and infrastructure were claimed to be the biggest culprits for defenders in all those who call drops. Now that one has been eliminated and the other is being addressed, would profit by the new”. services should definitely improve soon. If that does not happen, the telecom Machiavelli in The Prince operators should be warned that consumers’ faith will dwindle.

Published by Consumer Unity & Trust Society (CUTS), D-217, Bhaskar Marg, Bani Park, Jaipur 302 016, India Phone: 91.141.228 2821, Fax: 91.141.228 2485 Email: [email protected], Website: www.cuts-ccier.org Printed by: Jaipur Printers P. Ltd., M.I. Road, Jaipur 302 001, India. INFRASTRUCTURE devices, mobile and fixed line phones, (CMD) will conduct a drive test in Delhi COMMUNICATION with each other to send and receive to directly monitor call drops. calls, call forwarding etc. on any of TRAI conducted a drive test of call Radio Rating these devices. BSNL has announced drops, in December-January period that it will install 21,000 additional and found most of the telecom Agenda mobile towers across country for operators, including state-run roadcasting regulator Telecom mobile network upgradation. Mahanagar Telephone Nigam Limited. BRegulatory Authority of India (ET, 17.03.16) (MTNL), failed random drive tests to (TRAI) has initiated a consultation check quality of their network and process for creation of credible radio Market Access Policy services as part of its efforts to rein in audience measurement framework Domestic telecom equipment call drop menace. that is conducive, growth-oriented makers are seeking inclusion of In Indore, the telecom regulator and protects the interests of the private telecom operators under the found 2G network ofAirtel, Vodafone, stakeholders. government’s Preferential Market RCom Code Division MultipleAccess Access (PMA) policy, indicating that (CDMA) and Tata CDMA complied the move will help push sales. with call drop norms while others PMA policy mandates all state failed. (ET, 17.03.16) departments, organisations and agencies to procure at least 30 percent Pushing Internet Services of their equipment from domestic www.bgr.in The DoT is chalking out a strategy market. to promote internet services, Domestic manufacturers complain especially in small towns and areas, that they have not been able to through state-run BSNL to bridge the increase market access despite having digital divide. This will be in line with cheaper products. They claim that government’s vision of ‘Digital India’. some government-run organisations Internet services would cover TRAI intends to ensure a forward- are reluctant to buy their portfolio, access to the net via mobile phones looking, transparent and credible forcing their production facilities go as well as through broadband – radio rating framework with a underutilised. To try and level the wireline – connections. The plan could ‘minimal regulatory intervention’ in playing field, they want PMA policy be to offer internet services free for the rating process. to be extended to private operators first two months or free internet usage Advertisement revenue of the as well. (ET, 16.03.15) during night, though with a specified radio broadcasting sector is directly data limit to get people onto internet linked to listenership of radio Employable Human Resources boat. channels. Advertisers and advertising The Department of BSNL is setting up Wi-Fi hotspots agencies require audience Telecommunication (DoT), has in partnerships with other players. measurement, which indicates the recently asked all telecom service This would give users free access to popularity of a channel or a providers to train students across the internet for the first 30 minutes, programme, it added. (ET, 15.03.16) industrial training institutes (ITIs) in after which they would have to buy line with the industry’s operational vouchers. (BS, 09.02.16) Landlines via Mobiles requirements. Bharat Sanchar Nigam Limited Students will be trained, typically, Policy for Digital Lockers (BSNL) has unveiled an app through to handle the gamut of technical work In an another move to promote the which its customers travelling abroad relating to rollout and maintenance of ‘Digital India’ initiative in India, Ravi will be able to connect their landlines mobile networks. Shankar Prasad said that the through mobile and make calls The DoT directive stems from the government is working on a draft through them without attracting priority being accorded by the policy on ‘digital lockers’. International Subscriber Dialing (ISD) Narendra Modi government in Digital lockers are cloud-based charges. involving the private sector for spaces in government cloud that could The Fixed Mobile Telephony revamping technical institutes, such be used by both government and service, to be operational from April as ITIs for skill building and private users. Prasad said that around 02, 2016 will however, attract monthly developing employable human a million digital lockers have been charges. Under this technology, resources for key industry sectors, opened, and 1.5 million documents BSNL has plans to introduce Short including telecoms. (ET, 16.03.16) have been uploaded to these cloud- Message Service (SMS) facility on based lockers. landline phones. Drive Test for Call Drops “We are already having BSNL’s another facility – fixed Ravi Shankar Prasad along with consultation on draft policy on digital mobile convergence will enable Telecom Secretary and BSNL lockers and rules for participation of customers to connect up to four Chairman and Managing Director private players”, Prasad stated. (BS, 31.01.16)

2 January-March 2016 PolicyWatch INFRASTRUCTURE TRANSPORT waterways was a priority for the actually part of an ambitious agenda National Defence Alliance (NDA) to make the department, the biggest Scrapping Old Vehicles government. He said that one run by the federal government, In the union budget of 2016, the development of waterways would more financially accountable. government might announce cash and reduce the logistics cost, enabling Accrual accounting is an tax benefits to owners of old vehicles India to effectively compete in the accounting method that measures the if they scrap and replace them and may international market. (TH, 14.01.16) performance and position of a also double the fleet of public company by recognising economic transport buses to check pollution, Upgradation of Highways events regardless of when cash sources stated. This is one of the Kicking off the biggest highways transactions occur. The experiment at proposals given by Road, Transport upgradation, the Road Ministry has Kapurthala is part of Railway Minister and Highways Minister Nitin Gadkari asked all state governments to send Suresh Prabhu’s ambitious effort to to Union Finance Minister Arun list of state highways that could be run Indian Railways like a company. Jaitley. scaled up to national highways. (Mint, 15.03.16) “The Road, Transport and The Ministry has set aside Highways Ministry has requested at M15,000 crore from its budgetary Free from 5/20 Rule least 50 percent rebate in excise duty allocation to undertake highway The contentious 5/20 rule that to people who, on purchase of new expansion and capacity enhancement restricts Indian airlines from flying vehicles, give their old vehicles in projects, such as increasing the abroad till it fulfills certain criteria is exchange for scrapping”, a senior number of lanes and providing likely to be scrapped as the Ministry official said. This will be a wayside amenities along with government has proposed direct part of the proposed ‘end of life’ policy standardising the existing network. incentives to airlines promoting for old vehicles. (TH, 18.01.16) The government has set a target of regional connectivity in its new upgrading 50,000 km of existing road aviation policy. Road Rationing Plan length into national highways. New airlines like Vistara and Should Delhi’s current odd-even “Projects that are found viable AirAsia have been pushing for car plying formula be introduced in traffic-wise will be taken up on public scrapping it, while older airlines like Mumbai? The ruling partners in the private partnership (PPP) basis as well, Jet, IndiGo, SpiceJet, etc. are state government, the Bharatiya including the recently conceived defending it. According to the 5/20 Janata Party (BJP) and Shiv Sena are hybrid annuity model”, a senior rule, an Indian airline cannot fly yet to decide. Sena legislator Pratap Transport Ministry official stated. abroad unless it has operated in India Sarnaik has given a petition to the (ET, 23.03.16) for five years, or it has an operational Chief Minister to do what Delhi has fleet of 20 aircraft. but BJP said that no hasty step should Accrual Accounting Launched Though Civil Aviation Minister be taken in this direction. Indian Railways will introduce Ashok Gajapathi Raju refused to The government was examining accrual accounting at its rail coach reveal the government’s stand on the the Delhi experiment, said Finance factory in Kapurthala starting March rule, sources claim that the Minister Sudhir Mungantiwar. He said 15, 2016. This may seem like a small government has decided to scrap the that they were open to accepting ideas step for Indian Railways, but it is policy. (DC, 15.03.16) from elsewhere. “The results of Delhi’s experiment will take time to show. If successful, we will consider New Aviation Policy implementing it in Mumbai”. he Civil Aviation (BS,07.01.16) T Ministry expects to implement the aviation Boosting Water Transport policy by the beginning of The union government is working the following fiscal year, on a strategy to increase the after the Cabinet approves movement of goods and passengers it at the end of the month. www.google.com through waterways by nearly five-fold Union Civil Aviation from a mere 3.5 percent at present to Secretary Rajiv Nayan 15 percent by 2019. The share is 30 to Choubey said he expects 40 percent in countries, such as China, the much-delayed South Korea, United Kingdom, aviation policy to be cleared by the Cabinet by the end of March 2016. Germany and France, Union Shipping “The implementation will begin from 01 April”, he said, adding, “We and Transport Minister Nitin Gadkari wish it takes less time but it is largely because of the comments received by has indicated. diverse stakeholders (in response to the draft document)”. The aviation policy Gadkari said that development of was first presented in November 2014 and then revised in October 2015 coastal shipping and inland and put up for public comments. (Mint, 03.03.16)

January-March 2016 PolicyWatch 3 INFRASTRUCTURE

OIL & GAS India helpline – 096 has already been natural gas (LNG) or weighted average initiated for consumers to receive of imported price of fuel oil, naphtha Ethanol Blending Policy prompt help in case of LPG leaks. and coal. The Government of India will soon (TH, 02.01.16) The new price will also be come out with a new policy to further applicable to existing discoveries, promote ethanol bending with petrol. DBT for Kerosene Subsidy where commercial production has not This will be in line with the From April 01, 2016, the commenced as on January 01, 2016, Government’s plan to increase the government will roll out Direct Benefit provided the concerned contractors level of mandatory blending of ethanol Transfer (DBT) for kerosene. Under withdraw any on-going litigation on with petrol to 10 percent from the the scheme, which is aimed at prices. Based on the average price in current level of 5 percent. curtailing subsidy outgo, the users the first nine months of 2015-16, the So far, oil companies have been will buy the cooking fuel at market price is likely to be around US$8 per unable to meet the target of 5 percent price and will get financial support million British thermal units (mmbtu). till now mainly because of directly in their bank accounts. The (FE, 21.03.16) unavailability of sufficient ethanol and cash subsidy will be equivalent to the issues related to its pricing. In order difference between current Public Uniform Licensing Policy to resolve a part of these issues, the Distribution System (PDS) price of The central government has new policy will include a wider source aboutM12 per litre and market rate formulated the new Hydrocarbon of ethanol including bio-wastes other ofM43 per litre. Exploration Licensing Policy (HELP), than its current main source – sugar. The scheme will be rolled out in 26 which will provide a uniform licence (FE, 14.01.16) districts across eight states – for exploration and development of all Chhattisgarh, Haryana, Jharkhand, kinds of hydrocarbons from an area. Online Payment Facility Maharashtra, Punjab, Himachal The uniform licence will enable the The government plans to Pradesh, Rajasthan and Madhya contractor to explore conventional as introduce the online payment facility Pradesh. The states will be given 75 well as non-conventional oil and gas for Liquefied Petroleum Gas (LPG) percent of subsidy savings during the resources including coal-bed methane refill by the end of 2016. The Minister first two years, 50 percent in the third (CBM), shale gas/oil, tight gas and gas of State (Independent Charge) for and 25 percent in the fourth year. hydrates under a single license. Petroleum and Natural Gas, (FE, 02.01.16) HELP also includes an open Dharmendra Pradhan, described the acreage policy that allows contractors year 2016 as the year of the LPG New Price Formula to choose the areas from the data consumer. The government has announced centre and then bid. It will be The government of India has set the new gas price formula applicable administered by revenue-sharing the target of supplying LPG to 70 for discoveries in difficult areas model, and will give marketing and percent of the households by 2018. including high pressure-high pricing freedom for production of At present, there are around 27 crore temperature fields, deep-water and crude oil and natural gas. households in India, of which 16.5 ultra-deep water blocks. As per the (TH, 10.03.16) crore have active LPG connection. The new formula, gas price will be capped government has added 1.35 crore new at the lowest of the imported cost of Natural Gas Price Cut LPG consumers in 2015. A 24x7 All- fuel oil and landed price of liquefied The government is likely to cut natural gas prices soon by 17 percent to US$3.15 per million British Thermal Give up LPG Subsidy Unit from current US$3.82.As per the he ‘Giveitup’ campaign new gas pricing formula approved by Tof the Government of the NDA-government in October India has led to the 2014, gas prices are to be revised government saving M4166 every six months and the next change crore in the petroleum is due onApril 01, 2016. Oil Ministry subsidy, as the number of is likely to announce anytime a consumers leaving www.google.com revised price of about US$3.15 per mm liquefied petroleum gas Btu for the period April 01, 2016 to (LPG) subsidy reached September 30, 2016, sources said. 8.22mn after one year of its As per the formula, rates are to be launch. determined on a semi-annual basis and Each of the 8.2mn families has surrendered an annual LPG subsidy worth calculated based on a volume M5,000 on average. However, for the government, this has resulted in the weighted average of rates in gas savings equivalent to one-ninth of the allocation for Mahatma Gandhi surplus nations of the US, Canada and National Rural Employment Guarantee Scheme (MNREGS). Each consumer Russia, based on the 12-month trailing is entitled to 12 subsidised cylinders in a year, above which the requirement average price with a lag of three is met at the market price. (BS, 09.03.16) months. (DNA, 30.03.16) 4 January-March 2016 PolicyWatch INFRASTRUCTURE POWER Coal Linkage Policy Soon New Tariff Policy he Ministry of Power plans to finalise the policy on coal linkages for The amendments to the National Tpower sector in the following two-three months. At present, coal is Tariff Policy for electricity, as approved provided to power producers on by the Cabinet, aims at achieving the an ‘as is where is’ principle or 4E’s – Electricity for all, Efficiency to through e-auction. However, ensure affordable tariffs, Environment since power producers have for a sustainable future and Ease of long-term purchase agreements, doing business to attract investments they need an assured minimum and ensure financial viability. fuel supply for a long-term to It tightens the norms followed by be able to quote a price. electricity regulators while setting The previous fuel supply tariffs by requiring them to agreement framework had ‘necessarily’ be guided by the new covered 78,000 MW to be policy. With an aim to promote commercially operational by March 31, 2015, post which there has been no renewable energy, it revises the solar policy announcement. Given that the absence of a coal linkage policy has specific renewable purchase been causing uncertainty in the market, the power producers have appealed obligation target to 8 percent by 2022 to the Centre to release a coal linkage policy soon. (DNA, 17.03.16) and makes a provision regarding renewable generation obligation for While the bid raised hope of solar of 100 GW.The new policy has a target new coal/lignite-based thermal plants. energy becoming a viable alternate to to add 4 GW of solar to the existing It also allows increase in fuel cost on thermal power even without subsidies, installed capacity of the state by 2022. account of import to be included in some industry experts flagged In order to attract private sector the tariff structure. (IE, 20.01.16) concerns about financial prudency of investments, the policy provides for such lower tariffs. The power exemption of solar power projects from Focus on Hydropower developers are of the belief that as the electricity duty and cross-subsidy The Ministry of Power has set up economy of scale improves, the charge. It also sets aside 800 MW of a 10-member panel chaired byAshwin project cost of solar is expected to the total planned capacity for projects B Pandya, former Chairman of the come down further. (ToI, 20.01.16) of 1-2 MW capacity each, to Central Water Commission, to advice encourage small-scale project on framing a new hydropower policy Solar Off Grid Policy Unveiled developers. Such projects will also that will help turn around stalled Maharashtra has unveiled a new receive additional incentives in terms projects and attract fresh investments solar off-grid policy that seeks to of higher tariffs. The government has into the sector. The panel will suggest promote rooftop solar power also streamlined the process of policy measures on technical, financial, generation and provide subsidy to obtaining approvals to set up solar environmental and commercial aspects public and private entities to generate rooftops. (IE, 09.03.16) of the hydropower sector. electricity from this renewable source. The government wants to fix the It aims to save at least 500 MW of Ash Policy Utilisation glitches in the hydropower sector, energy in the coming five years. The Government of Maharashtra where many projects are delayed and Under the policy, the government is currently working on an ash facing cost overruns, and make this will provide 100 percent subsidy to utilisation policy to ensure better use sector more attractive to investors as government and semi-government of ash generated by coal-based it would help in achieving the offices for setting up solar power thermal power plants and reduce country’s commitment at the Paris units, while 15 percent subsidy will environmental pollution. The policy climate conference. At present, be provided for private sector entities. targets to increase the ash utilisation hydropower accounts for only The urban civic bodies and rate to 100 percent from the current 15 percent of India’s 284 GW capacity. sanctioning authorities have been 58 percent. (Mint, 15.02.16) asked to change Development Control The use of ash in making bricks rules to ensure that construction and tiles, apart from other innovative Record Low Solar Tariffs permission is given to only those uses would be a part of this policy. It Solar tariffs in India touched a new buildings, which give undertaking to will enable the state-owned power low as Fortum India, which won a bid set up solar water heater panels. generation utility to export fine quality for a 70 MW project to be set up in (BS, 25.03.16) ash and also help channelising it to the state of Rajasthan, quoted a price cement plants, helping it gain an of 4.34/kWh to supply power to Haryana’s New Solar Policy additional source of revenue. National Thermal Power Corporation Haryana has launched a revised The State Government expects to (NTPC). The e-reverse auction was solar power policy in order to better gain around M1500 crore from exporting conducted by NTPC for six projects align its plans with the Central ash to countries in the Middle East of 70 MW each in Rajasthan. Government’s enhanced solar target and Singapore. (DNA, 14.03.16) January-March 2016 PolicyWatch 5 FINANCIAL SECTOR Better Fiscal Management investments will suffer if decision statisticians, operational researchers, The government’s fiscal making is slow. Predictability of policy, legal experts, said an official release. management in the current financial the overall attitude of the government, The TPRU will be a multi- year has been better than the previous ethics and integrity have to be high disciplinary body with the objectives years with expenditure being spread on the agenda of state governments, of carrying out studies on various out as opposed to the usual bunching otherwise the investments will suffer. topics of fiscal and tax policies up towards the end of the year, (IE, 08.03.16) referred to it by CBDT and CBEC. It according to Controller General of will provide independent analysis, Accounts (CGA), M J Joseph. Focus on Consolidation prepare and disseminate policy papers The normal trend in government The government has said that it and background papers on various tax expenditure over the years shows that has started the third phase of reforms policy issues. (TH, 03.02.16) expenditures increase in the past two in state-run banks, which will look into quarters of the financial year, mainly all aspects, including consolidation, Replicating UID Scheme Q4. But in 2016, even up to the six- through the second edition of Gyan The World Bank said that India’s month period, expenditure was more Sangam. move to roll out unique identification or less 48-50 percent of the budgeted The Minister of State for Finance number or Aadhaar to its citizens is amount. Jayant Sinha said that the Finance worthy of replication by other Another factor that is helping the Ministry was working very closely countries as an example of technology government better manage its finances with the Reserve Bank of India (RBI) leading to economic transformation. is the increasing push towards e- on the asset quality review, and that The report, which explores the impact payments, with the Direct Benefit stressed assets have stabilised and of Internet and digital technologies on Transfer scheme taking centre-stage. presently the government has a clear development noted that while digital (TH, 13.02.16) sense of what it means for the balance technologies have spread rapidly, sheet of banks. Finance MinisterArun dividends from them have been Reform or Perish Jaitely had indicated that a roadmap lagging. Sending a stern message to states for consolidation of Public Sector It also cited examples, such as that to pursue reforms, Finance Minister Banks (PSBs) will be spelt out. of EastAfrica, where 40 percent adults Arun Jaitley said that either they (ET, 05.03 16) pay utility bills through mobile phones should ‘reform or perish’ as investors and China, where 8 million do not like an environment of policy Tax Policy Council entrepreneurs use an e-commerce paralysis or uncertainty. The government said that it has platform to export goods to 120 Jaitley further added that Haryana created a Tax Policy Research Unit countries and stated that these has geographical advantage of being (TPRU) and Tax Policy Council to be success stories should be replicated close to the national capital, and chaired by the union Finance Minister across the world. (Mint, 14.01.16) hence, can attract more investments. with nine other. The TPRU will Highlighting the importance of comprise officers from both the Central SEBI Orders Disgorgement investment as the starting point of Board of Direct Taxes (CBDT) and Cracking the whip in the HDFC economic activity, which thereby leads Central Board of Excise and Customs Mutual Fund front-running case, to creation of jobs, Jaitley said (CBEC) as well as economists, capital markets regulator Securities and Exchange Board of India (SEBI) Boosting Cashless Payments has ordered its former equity dealer Nilesh Kapadia, his wife Kalpana he Union Cabinet has approved measures to promote payments through Kapadia and five other connected cards and other electronic means to check tax evasion and transition T persons to disgorge M3.35 crore worth towards a cashless of illegal gains made by them. economy. The order follows an investigation “Several short-term by the SEBI into the matter of front- (to be implemented running by certain entities, wherein it within a year) and found that Kapadia had passed on medium-term measures information and instructions to his (to be implemented www.google.com wife and others before placing the within two years) have orders for HDFC Asset Management been approved for Company (AMC). implementation by the Front-running refers to an government ministries/ unethical practice of someone trading departments/organisations”, the government mentioned in a statement. in shares on the basis of advance The statement declared that the essential steps for promotion of information at a market intermediary electronic payments include withdrawal of surcharge, service charge, before the trades are conducted by convenience fee on cards and digital payments currently imposed by the that entity. (ToI, 18.01.16) various departments. (Mint, 25.02.16)

6 January-March 2016 PolicyWatch INFRASTRUCTURE UDAY is a Game Changer: Piyush Goyal How is UDAY a Game Changer for million jobs. Also, the emphasis on using the Power Sector? domestic coal will add more jobs in the Never before in the history of India mining sector. has such a comprehensive power sector reform, which has the potential to How are states managing to keep completely transform the sector into a politics out of UDAY? vibrant, efficient and well-oiled state States are the architects of UDAY, not machinery, been undertaken. I call it the central government. In fact, the financial comprehensive because of its salient impact on central government because of features. One, it covers the entire value this scheme is zero. When Uttar Pradesh chain in the power sector from fuel, to signed up for UDAY, Chief Minister generation, transmission, renewables, Akhilesh Yadav sent me a text message distribution and consumers. It has a very vast canvas saying that he was happy to adopt the scheme as he wanted determined through a bottom-up approach. its benefits to reach the people of the state. The Bihar UDAYwill also bring down the cost in the entire eco- government too, days after the 2015 state polls, adopted system of power, coal, and renewable energy by the scheme. One of the successful ideas implemented by about M1.8 tn every year by 2019 against a business-as- states and adopted in UDAY is to mobilise public usual scenario. This will make distribution companies participation in containing power theft. financially much better without stressing the consumer with tariff increases. How are you addressing fuel shortage of gas- based power plants? We do not have enough Is the government monetising efficiency when domestic gas supplies. you say energy saved is energy generated? About 24 gigawatt of gas-based power capacity was Yes the government is doing so. Energy saved is lying idle earlier. We are now auctioning imported liquefied actually 1.33 times energy generated, considering the 20- natural gas (LNG) so that they are able to utilise a part of 25 percent (transmission) losses at present. We also cut their capacity, which will enable them to service their debt down carbon emissions by saving electricity. UDAYoffers and service the grid. We have been able to revive about both financial and operational gains for distributors and 11,000 MW of capacity because of previous two rounds of states. Under the scheme, the cost of servicing discom LNG auction. We need to find long-term solutions for our debt comes down from about 12 percent to about 8 percent domestic gas short supply. One way is to have vertical for three-fourth of the loans taken over by the state, and integration of the global gas supply chain in which an to about 9 percent on the remaining loans for which state- overseas gas well owner puts up a regasification terminal guaranteed discom bonds will be issued. The savings in India, gas transportation pipelines, a gas power plant, could be about M33,000 crore a year (discoms had an and a transmission network. outstanding debt of M4.3tn as on September 30, 2015). Further, we have allowed swapping of coal between Is the national power grid operational? less efficient thermal plants and more efficient ones. On December 29, 2015, and on three days in January Allocating coal linkage to a generating company, rather this year, we did not have congestion in the transmission than to a specific plant gives companies the freedom to network. Generally, even if we are able to sync the grid to a use the fuel in the most efficient way. single frequency, there will be pieces of the grid which will face congestion and prevent accessing the desired level You are leveraging India’s market base to create of power by customers. By removing congestion, we are scale that creates efficiency and savings. able to have the same price for electricity across the country. Yes I am doing so. It will create globally competitive companies from India. global scale producers in India that Several successful bidders at the coal auctions will serve global customers. This is a way of making in claim that they cannot mine commercially at the India without enforcing it. rates they committed? Coal block auctions through competitive bids were very Have you quantified the employment generation transparent. I trust that all bidders came to the auction potential of the overall reforms in the sector? with their eyes open. The government has demonstrated There is an indirect employment generation potential what a public sector company can do in achieving efficiency of about 2.5 million jobs from the impact of all the measures and scale. It is for the businesses to make sure that they that we are taking as part of UDAY. Our solar energy measure up to the commitments they made to their stake programme alone has the potential of generating one holders and to the people, at large.

– Edited excerpts of an exclusive interview of Piyush Goyal published in Mint on March 21, 2016 P.S. Please see our article on this topic at http://goo.gl/MNTXkm

January-March 2016 PolicyWatch 7 INFRASTRUCTURE Execution Will Be the Big Challenge G Raghuram*

In addition, the focus on station redevelopment through PPPs is a good step and has been talked about for over a decade. The problem has been with the bidding process and agreements. As of now, seven stations are listed on the Indian Railway Stations Development Corporation website, of which three have some documentation. The proposal for redeveloping 400+ stations is to be attempted through the Swiss Challenge route, in which any entity can bid to improve upon a project proposed by a rival.

Moreover, there has been a reiteration of emphasis on the

http://m.dailyhunt.in Rail DevelopmentAuthority. This provides for the much- needed independent regulator, enabling separation of The railway budget presented by Railway policy making and regulation. We only hope that it would Minister Suresh Prabhu points the national have the necessary scope, powers and independence. transporter in the right direction. The challenge would be more in the execution of his budget proposals here has been explicit recognition of the need for Torganisational restructuring: “A departmental orientation, absence of cross-functional collaboration and irst of all, I have been following the earlier bold initiative lack of business focus have held back Bhartiya Rail from of opening up container services to the private sector F realising the commanding heights that it is capable of under a public-private partnership (PPP) mode; the proposal began to totter due to commodity, terminal access and tariff achieving. The solution to this lies in reorienting the restrictions. The latest budget provides a whiff of fresh air working of the organisation towards a common corporate through this statement: “Container sector would be opened objective”. to all traffic barring coal and specified mineral ores and park loads would be permitted during the non-peak season. Besides, the Indian Railway University has once again All existing terminals/sheds would be granted access to been mentioned. This would require a Bill, if it is expected container traffic, where considered feasible”. to function like the Indian Maritime University and the National Aviation University. Continuing the focus on Secondly, there are eight objectives clearly laid out to be research, the announcements related to SRESTHA achieved by 2020. Of these, five have clear measurable (Special Railway Establishment for Strategic Technology goals (though punctuality still comes with the qualifier and Holistic Advancement) and SUTRA(Special Unit for ‘almost’)! The remaining three are creditable in themselves Transportation Research and Analytics) are welcome. though have been repeatedly, for many years, discussed Four research centres announced in the previous budget as good things to do. 1) Reserved accommodation on trains have already been established. being available on demand, 2) Time-tabled freight trains with credible service commitments, 3) High-end technology hus it appears that both 2015-16 and 2016-17 will be to significantly improve safety record, 4) Elimination of all Tfinancially surplus years, in spite of the economic unmanned level crossings, 5) Punctuality increased to downturn and the charges due to the Pay Commission almost 95 percent, 6) Increased average speed of freight recommendations. In this context, reduced provisioning trains to 50 kmph and mail/express trains to 80 kmph, for depreciation, savings in working expenses and the 7) Semi high-speed trains running along the golden 120-day advance booking to generate earlier revenues quadrilateral, and 8) Zero direct discharge of human waste. are questionable. urther, the mission of developing at least 100 sidings Overall, while policy directions and financials are welcome Fon a private participation mode is long overdue and welcome. This brings in the bread and butter for Indian in a budget, a great amount of detail on amenities is really Railways. Even now, there are concerns in parity of charges out of place. when trains access a private freight terminal versus the railways’ own terminal.

* Professor, Public Systems Group, at the Indian Institute of Management, Ahmedabad. This feature has been abridged from an article published in Mint on February 26, 2016

8 January-March 2016 PolicyWatch INFRASTRUCTURE Rising Cost of Land a Major Roadblock in National Highway Expansion Rajat Arora*

and acquisition cost for national highway projects senior official at the Ministry. The Ministry expects the Lhas shot up sharply in the current financial year on land cost to be around M2.5 crore per hectare on an account of the new land acquisition law that came into average in the following financial year. Under the new force in 2015, dealing a blow to the government’s land acquisition law, the government has to pay twice the ambitious plan to crisscross the country with top quality price of land in urban areas and four times the price of roads. The government paid M1.35 crore per hectare in land in rural areas. 2014-15, which has gone up 65 percent to M2.22 crore per hectare in the current financial year. About 1.5 hectare of n 2014-15, the government acquired 6,500 hectare for land is needed to build one kilometre of a four-lane Ihighway projects and paid around M9,000 crore in highway. compensation. This year, the government has acquired 9,000 hectare In order to address the rising vehicle Under the new land for M20,000 crore. The target of land congestion in the country, Union Minister acquisition for the following year is Nitin Gadkari has recently acquisition law, the expected to be 12,000 hectare. announced that the national highway government has to cover will be increased from the current pay twice the price “That much increase in land cost 96,000 km to 2 lakh km. He said that a certainly acts as a stress point for formula has been devised based on of land in urban available budget for highway sector. vehicular traffic movement, according to areas and four However, these lucrative prices remove which four-lane, six-lane and express times the price of the resistance of farmers and other highways will be developed. The sellers, who get much better value of land in rural areas Minister said, “At present, we have their land”, said Vinayak Chatterjee, 96,000 km national highways or 52 lakh Chairman at Feedback infra. km road length in the country. As much as 40 percent of the traffic moves on these 2 percent or building a greenfield twolane national highway, national highways and as a result, five lakh accidents Fthe government spends around M10 crore a km, which take place”, the Minister said. includes the land and construction cost. For a four-lane highway, the cost comes out to M16 crore per km. he road transport and Highways Ministry has seen Tan increase of 30 percent in total cost of highway The National Highways Authority of India is the land construction in the current financial year on account of acquiring agency in most states except in hill states, where high land prices and increased labour costs. the National Highways and Infrastructure Development Corporation does land acquisition for highways. “Earlier, land accounted for 10-15 percent of the total project cost. It has now gone up to 40 percent”, said a

* Reporter with The Economic Times. This article was published in The Economic Times on March 28, 2016.

January-March 2016 PolicyWatch 9 TRADE & ECONOMICS well-off, estimating that around M&A Activity Shrinks M1 lakh crore is flowing as subsidies &A activity in India has fallen to a two-year low, according to a for six commodities, such as cooking MThomson Reuters report. The value of M&A deals involving Indian gas, railways along with small savings companies stood at US$35.1bn in schemes. 2015, a 4.8 percent fall compared The survey said there are a fair to 2014. amount of government interventions The average M&A deal size that help the relatively better-off in witnessed a drop during FY15. society. The survey has also Average transaction size of deals suggested that the government during 2015 was US$70mn – www.google.com should move in a phased manner to compared to US$77.6mn during the exempt-exempt-tax (EET) method 2014. Total cross-border M&A of taxation of small savings, especially increased 73.1 percent to for PPF, which is in exempt-exempt- US$23.2bin compared to 2014. exempt (EEE) category. (IE, 26.02.16) Outbound M&A activity grew 112.3 percent in value from comparative period in 2015. Largest Arms Importer Private equity-backed M&As accounted for 32.7 percent, the industrials India continues to remain world’s sector accounted for 15.9 percent while Energy and Power, Financials and largest arms importer, accounting for Retail sector accounted for 12.3 percent, 11.7 percent and 11.6 percent of 14 percent of global imports in the India’s domestic M&A activity, respectively. (FE, 05.01.16) 2011-2015, in another indicator of country’s enduring failure to build a Retail Trade Policy also forecasted textile and garment strong Domestic Defence-Industrial To accelerate investments in sales in the domestic market to rise to base (DIB). underdeveloped regions of state and US$350bn by 2024-25, against The latest data on international retain its leading position in retail trade US$100bn at present. arms transfers released by Stockholm in country, Maharashtra has given in- The Textile Ministry had initiated International Peace Research Institute principal approval to a new policy. the process of reviewing the National (SIPRI), shows India’s arms imports The policy, states that retail traders Textile Policy, 2000, and an expert remain three times greater than its would be excluded from provisions of committee was constituted to make rivals China and Pakistan. Its biggest stocking limits under the Essential fresh recommendations. (FE, 18.02.16) suppliers are Russia, the US, Israel CommoditiesAct. and France. After India, China ranks Traders would be exempted from Business Register Data second with 4.7 percent, followed by Agriculture Produce Marketing The government has launched a Australia (3.6 percent), Pakistan Committee (APMC) regulations, so mammoth enumeration exercise to (3.3 percent), Vietnam (2.9 percent) and that the farmers can sell their produce collect data on all the business South Korea (2.6 percent). directly to the retailers. enterprises for the National Business SIPRI reiterated the well- An official from the industries Register, a move aimed at acknowledged fact that “a major department said that up to 50 percent strengthening assessment of reason for the high-level of imports is additional Floor Space Index (FSI) for economic activity. that the Indian arms industry has so development of retail and shopping The Business Register will list far largely failed to produce centre would be admissible over the establishments at district-level competitive indigenously-designed base FSI, subject to payment of full covering seven Acts and authorities, weapons”. (ToI, 23.02.16) applicable premium according to including the FactoriesAct, the Shops prevailing ready-reckoner rates. and Commercial EstablishmentsAct, India Third-largest Economy (BL, 20.01.16) the Companies Act, the Societies According to a report by Centre Registration Act, the Cooperative for Economics Business and Research New Textile Policy Societies Act, the Khadi and Village (CEBR), China will overtake the US as The government will announce Industries Board and the Directorate the largest economy in world in 2029 new textile policy, which is expected of Industries. with the US slipping to second place to be based on vision document by The idea is to develop an and India close behind at third. Ajay Shankar committee in July 2014, electronic database of all such India’s projected Gross Domestic by the end of April. The document information, which will give a boost Product (GDP) in 2030 was envisaged textile and garment exports to Prime Minister Narendra Modi’s US$10,133bn, behind America’s worth US$300bn by 2024-25, ‘Digital India’ campaign and also US$32,996bn and China at top with a compared to US$41bn in past fiscal. promote Khadi. (ET, 28.03.16) projected GDP of US$34,338bn. It favoured a structural However, India will become the largest transformation whereby country Call for Reducing Subsidies economy in Commonwealth in 2019 would ship out only finished products The economic survey for 2015-16 when its economy overtakes the and not raw materials. The document has called for reducing subsidies for British economy. (BL, 01.01.16)

10 January-March 2016 PolicyWatch TRADE & ECONOMICS India Brightest Spot on Map

he World Bank (WB) expects Outlook for India TIndia’s growth to pick up to 7.8 percent in the following financial The Strengths year, projecting it to be the fastest growing economy in the world for the Growth to rise to 7.9 % in 2017-18 from India well positioned to withstand near- following three years by a distance, 7.5 % in 2015-2016 term volatility in global financial markets riding on stronger domestic policy reforms. This is due to strengthening domestic business cycle and supportive policy environment Infra Improvements and rise in investment to off-set impact of US monetary policy India is expected to notch near tightening 8 percent growth in the subsequent Urban spending to benefit from recent public sector wage hikes years as the world economy also picks up pace to 2.9 percent growth in 2016 Flaws compared to a modest 2.4 percent in Progress in the reforms not assured as Slow Progress on land reforms could add the just concluded year. “South Asia ruling party has no control over Upper to investment delay will be a bright spot, reflecting House improved conditions in India”, the WB Failure to pass GST could hamper Sub-Par-Monsoons across India pose a said in its flagship ‘Global Economic government’s ability to ramp up infra risk to growth in near term Prospects’ released recently. spending

The report pegs growth in the current High NPAs could hit pick-up in investment year at 7.3 percent, same as of 2015 year while raising concerns over “More than 40 percent legislative reforms. “In India, progress of the world’s poor live in reforms is not assured as the upper in the developing house of Parliament, which the ruling countries where growth party does not control, has the power slowed in 2015”, said to block the government’s legislative WB Group President agenda”, the report revealed, adding Jim Yong Kim. that the government has made “Developing countries progress in key areas, such as energy should focus on and in November announced major building resilience to a reforms to liberalise Foreign Direct weaker economic investment (FDI) in several sectors. environment and shielding the most ccording to the report, weak vulnerable. The benefits from reforms to governance and business conditions Agrowth among major emerging are potentially large and could help offset the effects of slow growth in larger markets will weigh on global growth economies”. in 2016, but economic activity should still pick up modestly to a 2.9 percent ccording to the report, developing economies are forecast to expand by pace, from 2.4 percent in 2015, as A4.8 percent in 2016, less than expected earlier but up from a post-crisis low of 4.3 percent by the end of 2015. “Growth is projected to slow further in China, advanced economies gain speed. while Russia and Brazil are expected to remain in recession in 2016. The recently Recognising that the simultaneous negotiated Trans-Pacific Partnership could provide a welcome boost to trade”, weakness in most major emerging it revealed. markets is a concern for achieving the goals of poverty reduction and shared “There is greater divergence in performance among emerging economies. prosperity, the report warned that the Compared to six months ago, risks have increased, particularly those associated spillovers from major emerging with the possibility of a disorderly slowdown in a major emerging economy”, markets will constrain growth in said WB Group Vice President and Chief Economist Kaushik Basu. “A developing countries and pose a combination of fiscal and central bank policies can be helpful in mitigating threat to hard-won gains in raising these risks and supporting growth. people out of poverty.

* This feature has been abridged from an article published in The Economic Times on January 07, 2016

January-March 2016 PolicyWatch 11 REPORT DESK Growing Billionaire List Uttarakhand was the only state, which kind of physical or financial assets, India has witnessed over four showed significant improvement in all the survey, conducted in 2012-13 times or 330 percent jump in number five parameters of living standards. shows. of billionaires over the past 10 years These comprised households with The bottom 10 percent (in terms as against 68 percent rise noted improved sanitation facilities, a clean of total assets) of rural households globally, said Knight Frank Global cooking fuel source, electricity had assets worth M25,071 on an Wealth report 2016. The trend is connection, clean drinking water average, largely as a result of the value expected to continue with number of source and using iodised salt. of land, while the figure for their urban Indian billionaires doubling over the (BS, 21.01.16) counterparts was justM291, implying following decade, while global number that the urban poor hardly own any could rise by 44 percent. India to Move to BS VI assets. Haryana and Punjab had the Ultra-high net-worth individuals In a major step to curb vehicular highest average assets per household (UNHIs), have also grown by 340 pollution, India will leapfrog directly in rural areas, while Maharashtra and percent to 6,020 during this period, as from Euro IV emission norms for petrol Kerala were on top in urban areas. against global average of 61 percent and diesel to Euro VI standards and (TH, 30.01.16) to 187,468. Among Indian cities, the oil Public Sector Undertaking Mumbai leads the pack followed by (PSUs) will invest M28,750 crore for Pollution Causing Deaths New Delhi. The strength and diversity the transition. More than 5.5 million people of the Indian economy will continue A decision was taken at an inter- worldwide die prematurely every year to provide entrepreneurial and wealth ministerial meeting to advance the date due to household and outdoor air growth opportunities said Nicholas by four years to April 01, 2020 for pollution, and India and China together Holt, Head of Research forAsia Pacific, implementation of Bharat Stage VI account for 55 percent of these deaths, Knight Frank. (equivalent to Euro VI norms followed new research has found. About (ET, 03.03.16 & TH, 25.02.16) globally) for supply of cleaner auto 1.6 million people died of air pollution fuel, by altogether skipping the Euro+ in China and 1.4 million died in India Fall in Demographic Dividend V grade norms. in 2013, the researchers revealed. A part of India’s touted India currently has Bharat The international team of demographic dividend – the Stage-III, equivalent of Euro-III researchers from India, China, Canada population below age 15 years – has specifications, across the country and and the US estimated that despite decreased in the past 10 years. BS-IV in major cities. BS-IV will be efforts to limit future emissions, the supplied in most big cities by April Our standard of living – households number of deaths linked to air 2016 and all over the country from with clean water, electricity, etc. has pollution will climb over the following April 2017. (IE, 06.01.16) shown a rise during the same period, two decades unless more aggressive in 11 states covered by the targets are set. In India, a major Average Asset Holding latest National Family Health contributor to poor air quality is the The average asset holding of the Survey (NFHS-4). practice of burning wood, dung and bottom 10 percent of urban Indian Sikkim topped the list of states similar sources of biomass for cooking households is around M291, reveals showing a decrease of population and heating. (ToI, 14.02.16) aged below 15 years, to 23.1 percent new data from the National Sample Survey Office (NSSO). Most in 2015-16 from 30.7 percent in 2005- Corruption Ranking Improved households reported owning some 06 and Madhya Pradesh was next. India moved up to the 76th rank on the Corruption Performance Index Corruption Delays Startups (CPI) released by global watchdog orruption and delays are preventing the growth Transparency International (TI) in Cof entrepreneurship in India, according to a their 2015 report, gaining nine places new survey undertaken by social media network, over the previous year. LocalCircles. About 35,000 unique people voted The CPI scores and ranks in the survey. countries/territories based on how It showed nearly 60 percent of the citizens felt corrupt a country’s public sector is these bottlenecks were some of the biggest hurdles perceived to be, and it showed that to growth of entrepreneurship in the country while India was ranked 76 out of a total of only 14 percent felt funding to be the main 168 countries and had a score of 38 impediment. on the CPI out of a possible 100. In Around 98 percent of the respondents said the 2014 and 2013, India’s rank was 85 and start-up India mission should go beyond digital/ 94 respectively. technology startups and enable entrepreneurship at For a third year running, Denmark the grassroot-level. Asked if the Central or State was perceived as the cleanest country governments can be effective and efficient funding with a score of 91. The CPI has a scale bodies for startup projects, 58 percent of the people of zero to 100 and countries scoring zero responded positively. (TH, 06.01.16) are the most corrupt. (DNA, 28.01.16) 12 January-March 2016 PolicyWatch REPORT DESK Modi Moves to Plug India’s Biggest Data Hole Sandrine Rastello* and Bibhudatta Pradhan** he biggest hole in India’s economic data is starting to Tshrink. Prime Minister Narendra Modi’s government plans to publish a revamped quarterly employment survey in July to better assess how many jobs are created inAsia’s third-largest economy, Shankar Aggarwal, top bureaucrat in the Ministry of Labour and Employment, said. The sample for the report will increase fivefold to about 10,000 respondents and include 18 sectors of activity, up from eight now, he added.

“Our data will be much more authentic”, Aggarwal said. The new report will give both the economists and the policy makers a more reliable tool to assess whether the world’s fastest-growing major economy is adding enough jobs for its burgeoning youth, a key Modi campaign promise. While the survey’s usual six-month lag fails to added by businesses that sell goods overseas. Exports address India’s lack of real-time employment data, the have dropped for 15 straight months. “Demand has gone broader scope adds to recent efforts to modernise the down all over the world, so India is also a part of that”, country’s policy arsenal with revised GDP calculations Aggarwal said. “However, as compared with other and an inflation target. countries, India is in the best position.” At the same time, a global survey of hiring expectations by ManpowerGroup “If the sample size of this database is increased, certainly Inc. ranks India as the most active labour market among a not only me, but other people will also start taking these sampling of 42 countries, while an index by local jobs portal data seriously” said Devendra Kumar Pant, chief economist naukri.com shows an 18 percent increase in hiring activity at India Ratings and Research Pvt., the local unit of Fitch in February from a year earlier. Ratings. “The volatility will reduce, the fluctuations will smoothen out – so the more, the merrier”. he initial labour survey was started in the wake of the Tglobal financial crisis. While the sectors include leather, he improved report would complement a planned high- automobiles and metals, not all are equally represented. Tfrequency jobless rate from the Centre for Monitoring The textile and handloom sector, for instance, accounted Indian Economy Pvt., a private research company. Together for more than 40 percent of the 1,932 respondents in the last they would help central bank Governor Raghuram Rajan report. While seven federal agencies publish labour-related predict whether the economy is close to overheating as reports, none are timely enough to seriously affect policy. he tries to hit a 5 percent inflation target by March 2017. Widespread informal employment also makes it tough to Rajan has said he would add employment to the mix of measure workers. And even with 10,000 respondents, the indicators he uses to guide interest rates if there was a sample will pale in comparison with roughly 146,000 good series. participants in the US non-farm payroll survey. In its current form, the employment survey shows a labour market that is trudging along rather than booming. The eight industries covered added a combined 134,000 positions in the quarter through September from the previous three months, according to the report published month. That is less than in the corresponding periods of 2013 and 2014.

Most of the jobs came from non- exporters, with only 31,000 positions

* Economy Reporter (Bloomberg News) ** Economy Reporter (Bloomberg LP) Senior Assistant Editor with The Hindu. This article was published in The Hindu on April 01, 2015 January-March 2016 PolicyWatch 13 CORPORATE GOVERNANCE Vijay Mallya’s USL Exit A Wakeup Call for Independent Directors Devina Sengupta* and Sachin Dav** he dramatic exit of former promoter Vijay Mallya from United Spirits Limited their knowledge and experience in the T(USL) is a wakeup call for independent Directors in Indian companies and Board discussions for the benefit of could prove a catalyst for many corporate governance related storylines in the the company and shareholders. country in coming years, industry trackers have indicated. ndustry trackers mentioned that in Independent Directors, who until recently were considered glorified yes men Ithe followingsix months many to the promoter, could see a lot of pressure in the coming days to maintain the independent Directors could resign precedent set in the USL case as well as added responsibilities of independent from their roles due to increased Directors under the Companies Act, 2013 and other corporate governance liabilities and a cap on remuneration. regulations. However, corporate governance experts said many companies The worry is that they could even be continue to exploit loopholes in the laws and ensure independent Directors jailed in case of a corporate mostly play along with the promoters. governance issue in the company they hold the positions. Even in the case of USL, where independent Directors did finally crack the whip on Mallya, they said it was too little, too late. “Independent Directors USL could just be one off case have failed in the case of USL. They did not take the right precautions during especially in the context of Indian their ongoing transactions with Kingfisher”, said Mohandas Pai, former CFO companies where independent and HR head of software major Infosys. Directors did take a stand. However, we have begun the transition and moving ahead in both expectations and liabilities of the Directors. said Amit Tandon, Managing Director at Advisory firm, Institutional Investor Advisory Services India Ltd. (IiAS).

Mallya’s exit could prove hile some industry experts have a catalyst for many Wcriticised these regulations – corporate governance under the current regulations independent Directors could fall in to related storylines in the www.google.com country in coming years, trouble even in something as unrelated as company’s cheque industry trackers believe bouncing or irregularities in the pollution norms – others felt some sort of framework was required, mainly due ai said USL episode signals it is high time companies and independent to the way independent Directors PDirectors took their roles more seriously. “This is a wakeup call for India operate in most of the companies. Inc, to have the right independent Directors and auditors specially looking into related party transactions. Also firms should decide to pay the independent A reputed independent Director said directors more to get the right quality”, opined Pai. the whole process in which the independent Directors are selected in Independent Directors have often come under scrutiny whenever there have India is flawed. “The meetings are been controversies in India Inc, and there have been questions on how much nothing short of sham, where the independence these Directors actually have. There are signs of change though. promoter dishes out what he wants, Independent Directors have become more worries in recent months, mainly and independent Directors just agree due to the Companies Act dishing out some regulations around the liability of to do it. The independent Directors the Directors and even capped their remuneration. would get millions as fees and in some companies these positions were filled The independent Directors are expected in any case to exercise their independent with relatives or friends”, he said. judgement in decision making at all times, be intellectually honest while doing so, voice their opinion freely in the board meetings, and bring to bear upon

* Associated with The Economic Times ** Special Correspondent with The Economic Times – This feature has been abridged from an article published in The Economic Times on February 29, 2016.

14 January-March 2016 PolicyWatch GOVERNANCE & REFORMS Policies Need to Make Positive Contribution to Rest of the World Asit Ranjan Mishra*

rime Minister Narendra Modi said ‘subsidy’, economists often term the Pthat India should craft policies benefits given to industry incentive that can make a positive contribution or subvention. “We must ask to the rest of the world in an ourselves whether this difference in increasingly inter-connected world. language also reflects a difference in “The distinction between domestic our attitude. Why is it that subsidies affairs and foreign affairs is going to the well-off are portrayed in increasingly losing relevance. For a a positive manner”? he asked. country in the modern day, it is not sufficient that its economic policies odi clarified he was not should only address its domestic Marguing all subsidies were priorities”, Modi believes. In the past good. “My point is there cannot be four quarters, India has been the any ideological position on such fastest growing major economy in matters. We have to be pragmatic. the world, Modi added. The distinction between We have to eliminate bad subsidies, domestic affairs and foreign whether or not they are called “In 2014-15, India contributed 7.4 subsidies. But some subsidies may percent of global GDP in purchasing affairs is increasingly losing be necessary to protect the poor and power terms. But it contributed 12.5 relevance. For a country in the needy and give them a fair percent of global growth. Thus, its the modern day, it is not chance to succeed. Hence, my aim is contribution to growth is 68 percent not to eliminate subsidies but to sufficient that its economic higher than its share of the global rationalise and target them”, he economy. Foreign Direct Investment policies should only added. (FDI) in India has increased 39 address its domestic percent in the past 18 months, at a priorities”, Modi believes Expanding on subsidy reforms, time when global FDI has fallen”, Modi said his government had Modi indicated. started pilot projects in 33 districts where kerosene will be sold at market ut the Prime Minister elucidated that India’s price. “The difference between market price and the Bcommitment for a better world goes beyond subsidised price will be transferred directly to the bank economics and it was for this reason that at the COP accounts of those who are poor. This will eliminate (Conference of the Parties) 21 Summit in Paris, India made duplicate, non-eligible and bogus consumers. We have far-reaching commitments for cutting carbon emission. decided 75 percent of savings from this will be passed on “We are committed to reduce the emission intensity of to the states. Thereby, we have encouraged state our GDP by 33 percent by 2030 even while growing at a governments to implement this in all districts”, he added. fast pace. For a country, which is already at a very low base of per capita emission, this is a very ambitious e said just by eliminating double counting and target”, Modi said. “We have committed that by 2030, 40 Hineligible beneficiaries, a reduction of 12 percent in percent of our electric power capacity will be from non- pension payouts had been achieved. Modi said that his fossil fuel. government is taking steps to repeal unnecessary laws as they obstruct people and businesses. “We began the We have also committed to building an additional carbon exercise of identifying unnecessary laws and repealing sink of over 2.5 billion tonnes of carbon dioxide them. 1,827 central laws have been identified for repeal. equivalent. This will be done by creating additional forest Out of these, 125 have already been repealed. Bills for cover by 2030. This commitment is from a country with a repealing another 758 have been passed by the Lok Sabha very low per capita land availability”, added Modi. and are awaiting the approval of the upper House”, he added. Calling for a rethink on what constitutes subsidies, Modi stated while all benefits to poor and farmers are considered

* Business Jounalist with Mint. This feature has been abridged from articles published in Mint on January 30, 2016

January-March 2016 PolicyWatch 15 GOVERNANCE & REFORMS CAG NEWS Job Potential in Proposals Low Tax Revenue The government has decided that all Ministries will now The tax revenue of Madhya Pradesh (MP) have to reflect the ‘Employment Generation Potential’ of government was much below its expectations while each proposal they put up before the Cabinet or a Cabinet expenditure went beyond its estimate in 2014-15, as per Committee for approval. the Comptroller and Auditor General (CAG) report for “In view of the fact that employment generation in MP for 2014-15. The state had estimated tax revenue various sectors is vital for country’s socio-economic realisation at M66,479 crore but it fell short by M29,912 development, this aspect has to be an important criterion crore, according to the report. for any project/scheme appraisal”, stated the Special The state government’s expenditure, however, shot Secretary’s letter, adding that “it has, therefore, been decided up by M446.28 crore from its estimate, it said. The growing that henceforth all the notes for Cabinet and its Committees volume of debt has resulted in increasing liability for should separately and clearly reflect the Employment servicing the debt, the report underlines. The priority Generation Potential of each proposal”. given to expenditure on social sector and on education Besides, the government has also modified the and health sectors in MP was ‘not adequate’ during 2014- handbook on preparation of notes for Cabinet/Cabinet 15 when compared with general category states’ average, Committees accordingly. (IE, 20.01.16) it stated. (ToI, 20.03.16)

Mooting Security Authority Telcos Cheating Govt. The Labour Ministry has mooted the idea of forming a The CAG has claimed that six major telecom companies National Social Security Authority, Chaired by Prime – Reliance Communications, Tata,Airtel, Vodafone,Idea Minister Narendra Modi, and a separate Social Security and Aircel – have allegedly understated gross revenue Department within the Ministry to provide social security of over M46,000 crore for a period between 2006-07 and to the entire population in a bid to prop up the government’s 2009-10 and denied the government its share of income, pro-worker credentials, according to a concept note. which has been estimated at more than M12,400 crore. “The functions of the authority should be mainly to Different from its earlier report on the 2G spectrum, formulate the National Policy on Social Security and to co- where computation of the losses were presumptive based ordinate the central and state-level programmes and to on policy flaws, the CAG, at present, has calculated the ensure the objectives of the policy are achieved within the losses on inspections of the books of accounts of these time frame prescribed”, according to the note. It proposes a telecom firms and on actual earnings. (ToI, 09.03.16) four-tier system to cover the entire population of the country, including both formal and informal sector workers, Punjab in Debt Trap through a common Social Security Code. (TH, 19.02.16) The CAG of India has said that Punjab is headed towards a debt trap as the government is utilising 70 percent of its current borrowings for repayment of its Separate Poverty Indicators earlier borrowings and the remainder for expenditure on he issue of one poverty number continues to absorb other projects. The state has to repay more than 50 Tthe NITI Aayog, and indications are that its task force percent (M43,581 crore) of its debt in the following seven on elimination of poverty will suggest having separate years. indicators for It said, 34 projects, scheduled to be completed different social between 2008 and 2014-15, were still incomplete. CAG schemes, such has mentioned ‘off-set’ borrowings – M2,025.67 crore for as health and Atta-Dal scheme and M2,000-crore loan raised by housing. mortgaging properties by Punjab Urban Development The Urban Authority (PUDA) in 2012-13 – that skewed the finances. Poverty (ToI, 15.03.16) Alleviation Ministry is CAG Raps VTU carrying out a Visvesvaraya Technological University (VTU) has census, which been rapped by CAG for glaring lapses in ensuring quality will throw up of education in engineering colleges. Though it is a number for mandatory for affiliated colleges to get accreditation from the urban poor. Calculation on rural poverty is based on the National Assessment and Accreditation Council the 2011 Socio Economic and Caste Census of the Rural (NAAC) as well as National Board ofAccreditation, many Development Ministry. colleges are yet to secure it. The Ministry has reportedly classified 31.26 percent The CAG report mentioned that, “VTU did not ensure of rural households as poor based on four of seven minimum standards prescribed by AICTE in respect of indicators. The Rangarajan Committee, a technical expert colleges affiliated to it as the colleges had deficiencies group set up by the United Progressive Alliance (UPA) in teaching faculty, library, laboratory facilities, etc., Government in 2012, had classified 30.95 percent of rural which indicated poor monitoring by VTU”. (IE, 24.03.16) Indians as poor in 2011-12. (BL, 03.01.16) 16 January-March 2016 PolicyWatch PARLIAMENTARY ROUND UP Parliament Will Benefit from a Shadow Cabinet Kanchan Srivastava* eries of disruptions in Indian SParliament and in state assemblies over the past few years have raised serious concerns over the democratic set-up in India. Regular adjournment of sessions has hindered legislations and other productive work. With every such instance of stalling democratic proceedings, the taxpayer’s hard- earned money goes down the drain.

India borrowed its parliamentary structure from the UK but it did not adopt a valuable part of it – the Shadow Cabinet system. This system could be allocating the portfolios. In other parties, they are nominated by the Leader of an effective solution to the persistent the Opposition. problem of our not-so-mature democracy. The Shadow Cabinet (also utting a face from the Opposition It is mainly the shadow called the Shadow Front Bench) is Pon each of the Ministries also integral to the Westminster System. It demonstrates the opposition parties’ Cabinet’s responsibility is composed of a senior group of commitment to the people. Members to criticise the opposition leaders where each member of a shadow cabinet are often, but government and its shadows or marks a Minister of the not always, appointed minister when policies. It also decides ruling Cabinet. The shadow Cabinet is their party comes to power. In absence whether amendments to led by the Leader of the Opposition (or of the Shadow Cabinet, attention of the legislation are the leader of other smaller opposition the opposition often gets diverted needed. This helps in from main issues. Hence, the very parties) and represents an alternative having serious debates in cabinet to the ruling one. purpose of having an opposition is lost. Uttara Sahastrabuddhe, Parliament with Shadow he Shadow Minister for defence, professor at Mumbai University, said, Ministers taking on the Tfor instance, would track the “Having assigned roles would real Ministers and policies and issues related to the ensure that issues are followed up effectively holding them Defence Ministry. S/he would be the by the opposition leaders with more accountable for their official spokesperson for the commitment. Thus the propaganda of actions and policies opposition over defence issues. the government can effectively be Similarly, all major Ministries can be countered”. The skills of the tracked more effectively. opposition leaders would also continue to evolve when they would focus on specific Ministries. This would help when their party comes to power as they It is mainly the shadow Cabinet’s would be effective in their roles as ministers in the government. responsibility to criticise the government and its policies. It also Congress leader Milind Deora seconds the proposition. “As a main opposition decides whether amendments to the party, the Congress can adopt the system, unofficially. We already have legislation are needed. This helps in shadow twitter handles to track each Ministry”. He points out that the countries having serious debates in Parliament which follow the Westminster system have two or three party system while with Shadow Ministers taking on the coalition governments are common in India. “Still, this does not limit the real Ministers and effectively holding prospects of a shadow Cabinet here”, said Deora, adding that the system them accountable for their actions and would ultimately help our democracy and the country to evolve gradually. policies. The Shadow Ministers are elected through ballot in the British The media, which often ends up portraying the government’s version, would Labour Party and theAustralian Labour then present opposite views as well, said a political scientist, who believes Party, with the Leader of the Opposition that the Shadow Cabinet might eventually lead to a two-party system in India.

* Principal Correspondent at Daily News and Analysis (DNA, Mumbai). This feature has been abridged from an article published in DNA on January 26, 2016.

January-March 2016 PolicyWatch 17 EXPERT CORNER EDUCATION SECTOR Pushing Public Expenditure Focus on Child Health India needs to step up public spending on The Centre has conveyed to the Supreme Court social infrastructure and rural areas to boost that the issue of eradication of alcohol and drug abuse domestic demand to overcome the slump in by the students would be included in the consumer spending worldwide, said Finance government’s proposed New Education Policy (NEP). Minister Arun Jaitley. An experts committee for evolution of the NEP Concerns have been raised about keeping on its earlier meeting had taken a decision that the the public spending tap open in the absence of private theme relating to eradication of alcohol and drug investment and what that could do to the fiscal deficit.According abuse by the students will be included for to the Finance Minister, India still manages faster growth but it consideration in the policy. It also sought to create is important to see how do we improve our growth rate a little specialised systems and practices to enable and faster. “India needs to invest a lot more in infrastructure, increase promote rehabilitation among children. (DNA, 15.02.16) public spending in social infrastructure and raise spending in rural sectors like irrigation and rural roads. This spending brings Education Cess in FY 2015-16 immediate results”, said the Finance Minister. (ET, 09.01.16) The Government recently said it has collected M20,165 crore through education cess in the first ten India Showing Economc Growth months of the current fiscal. Of this, M14,509 crore India may become the world’s largest economy in the was collected under direct taxes and M5,656 crore following 25-30 years, said SoftBank Chairman and CEO, under indirect taxes, Minister of State for Finance Masayoshi Son. Son said that he strongly believes that the 21st Jayant Sinha said. century belongs to India as its people are smart, young, speak Through the education cess, the government had English and are IT-proficient. However, the country needs to collected M35,986 crore in 2014-15, M33,902 crore in resolve issues related to infrastructure and slow mobile 2013-14 and M30,642 crore in 2012-13. Education cess broadband speeds, he said. was introduced to fulfil the commitment of the SoftBank has invested in Indian e-commerce and technology government to provide and finance universalised firms, such as Snapdeal, Ola Cabs, Housing.com and OYO quality basic, secondary and higher education. The Rooms. However, he said that the two things that lacking in primary education cess was introduced in 2004-05, India are mobile broadband infrastructure whose connectivity while the secondary and higher secondary education is too slow and expensive and the second is electricity. cess was introduced in Budget 2007-08. (BW 07.05.16) (TH, 17.01.16)

Complain, Rebel and Demand Focus on ‘Values’ Asking citizens to continue to ‘complain, demand and rebel’, ccording to the Human Resource Development President Pranab Mukherjee said the nation must recognise A(HRD) Ministry, India will have its first that doing this was a virtue of democracy. Mukherjee said the education policy to be focussed on values. Value country must guard against ‘violence, intolerance and education will form a major part of our syllabus, unreason’. Subramanian, Chairman of drafting Committee “There will be, amongst us, occasional doubters and baiters. said. According to him, earlier values were taught Let us continue to complain, to demand, to rebel…..with by our families, but now that no longer happens investments in infrastructure, manufacturing, health, education, so it is required to teach our children through formal science and technology, we are positioning ourselves well for education. achieving a higher growth rate which will in the following 10 to 15 years help us eliminate poverty“, Mukherjee added. (ToI, 26.01.16)

Reacting to Social Splitting How a country deals with its social divisions plays a major role in the trajectory of its economic development, stated the Chief EconomicAdvisor,Arvind Subramanian. The CEA presented Singapore as a good example where social conflict was effectively addressed to enable economic development. However, value education has always been “We think of Lee Kuan Yew as having provided great controversial since critics point out that it can be administration, a great civil service but I think one of the critical used for political purposes. The government in rouet things he did which goes unrecognised is that essentially a to drafting the new education policy claims massive social engineering project was unleashed, which people consultations have been held over one year with do not realise by way of forcing communities to live together 15,000 students, 2,400 common citizens, all states and their children to go to the same school. This has had a and most districts. Critics point out the key to the powerful impact in reducing conflict in Singapore society’’, consultations is to make them transparent. Subramanian added. (IE, 04.03.16) (NDTV, 13.01.16) 18 January-March 2016 PolicyWatch HEALTH SECTOR Plan to End Malaria Mapping Health Facilities According to government or the first time, the government will map health facilities, doctors and sources, a plan to stop indigenous specialists available in all districts of the country. The health geo-mapping transmission of malaria by 2030 will F project has already been completed in four districts chosen as a pilot. The be released soon. The National Vector- Bill and Melinda Gates Borne Disease Control Programme Foundation is partnering the (NVBDCP) is working on the strategy project. framework for the period 2016-30 to Lack of authentic data on eliminate the disease that affected 1 healthcare resources has long million and killed 270 across India in been one of the biggest 2015. impediments to health New strategy focusses more on planning in India. It is community participation along with

universally acknowledged www.google.com government efforts. Malaria that doctors and health elimination, a target set out by World facilities are far more easily Health Organisation (WHO), is available in urban than in defined as the reduction to zero malaria rural areas but there has never cases in a defined geographical area. been an attempt in the past to quantify the gap in density and to plan This target can be reached after accordingly. (IE, 05.01.16) carrying out four phases of a programme: control, pre-elimination, investment is just over one percent While vehicle manufacturers have elimination and prevention of of GDP. In China, it has risen to 3.5 been asked to gear up to meet the new reintroduction. (Mint, 15.01.16) percent while Brazil, a Brazil Russia deadline, oil companies will also have India China South Africa (BRICS) to prepare for BS VI-compliant fuel. Fatal Climate Change country, invests 5 percent of its GDP This move promises relief from Climate change could kill over in health. Experts have called for pollution caused by diesel fumes for 130,000 people in India in 2050 because investing more in healthcare to match Indian cities. Introduced in the year of changes in diet and bodyweight India’s economic growth, and to 2000, the Bharat norms are emission from reduced crop productivity, ensure that all citizens are covered control standards to keep a check on according to a study in the British under social health insurance. air pollution. medical journal The Lancet. (IE, 04.03.16) Global automakers are betting big Carried out by researchers from the on India as vehicle penetration is still University of Oxford, the study Leaping over the World low here as compared to developed evaluates the impact of climate change India has a great opportunity to countries. (Mint, 08.01.16) on diet composition and bodyweight, innovate and create new healthcare and estimates the number of deaths systems that are also affordable, Health Coverage Blocked caused by this in 155 nations in 2050. Andrew Witty, CEO of India faces serious challenges in The study said that if global GlaxoSmithKline said. “Year 2016 is a implementing universal health emissions remain unchanged, the leap year and India can leap over the coverage policies because of a projected improvement in food rest of the world”, Witty added. ‘serious knowledge gap’ among availability could come down by about Globally the healthcare industry policy makers and a ‘general a third by 2050, and lead to average has achieved a lot in extending life unwillingness for change’, said, per person reductions in food expectancy but it has not succeeded Rakesh Srivastava a former Director- availability of 3.2 percent, 4 percent in in improving the quality of life. General of Health Services.According fruit and vegetable intake and “Vaccination has been the single to him, health priority-setting exercise 0.7 percent in red meat consumption. biggest driver of life expectancy in the in India was based on consultation (Mint, 04.03.16) past century”, Witty said. GSK with experts and not evidence. currently makes and sells a third of The government spending on Low Life Expectancy its products in India. That brings in health system currently is 1.04 percent Emphasising on the need for only 1 percent of its revenue. India of the GDP, while the national health increasing investment in healthcare in can be the home for innovation for policy aims at taking it up to 2.5 India, World Health Organisation’s affordable healthcare. (ET, 30.01.16) percent by the end of the 12th Five- (WHO) India representative Henk Year Plan. Under the Sustainable Bekedam lamented that life expectancy S-VI Standard Crucial Development Goals (SDGs), India has in the country is only 66 years. The Centre has recently signed up to revamp the country’s Even in Bangladesh life announced that India will leapfrog weak health system to keep pace with expectancy is 71 and in China even in from the Bharat Stage (BS) IV the global movement towards 1970s it was 68. The reason is low emission norms that are presently in universal health coverage. investment in health. India’s force, to the BS VI norms by 2020. (TH, 31.01.16)

January-March 2016 PolicyWatch 19 HEALTH SECTOR Policy Shame: Sick, Rare and Ignored Shilpi Bhattacharya*

If the Indian government is serious about its commitment to realise the rights of its citizens to universal and equitable health care, it cannot ignore rare diseases. The Draft National Health Policy, 2015 makes no mention of them.

are diseases are a diverse set of over 7,000 different pharmaceutical industry has little interest in developing Rconditions that afflict an estimated one in 20 and marketing products intended for only a small number Indians and 350mn people worldwide. Rare diseases are of patients. ODA is said to have facilitated pharmaceutical often congenital, chronic, debilitating and fatal. A interest in rare diseases in the US with approximately 400 significant proportion of rare diseases occur in children, such drugs being developed after 1983; it was around 10 many of whom do not survive beyond the age of five. between 1973 and 1983. An Indian rare disease policy Most rare diseases have no cure or treatment and for should ideally make it financially attractive for the private thousands of rare diseases, there is no ongoing research sector to evince interest in rare diseases while being careful effort to develop a treatment. not to allow pharma companies to exploit any incentives The rarity of such diseases and the complexity of given to them. associated symptoms – many rare diseases breach Tackling rare diseases requires planned effort, which traditional disciplinary boundaries of medical specialities must be guided by an overarching national rare disease – result in frequent misdiagnosis, and, more worryingly, policy to facilitate coordination between patients, damaging treatments. Even when there is a diagnosis, scientists, doctors, regulators and the pharma industry. In treatment options are just this, India woefully trails not available, or are far too many countries. It does not expensive; this situation will as yet define and catalogue continue without adequate rare diseases, a prerequisite government intervention. for any concerted policy For example, in 2014, response. www.google.com Mohammed Khan, then The objectives of such a seven years old, was policy will best be diagnosed with Gaucher’s implemented through the disease, a hereditary disease establishment of a national in which the metabolism and rare disease organisation, storage of fats is abnormal. which could act as a nodal It results in bone fragility, authority to increase neurological disturbance, capacity building in rare anaemia, and enlargement of the liver and spleen. With diseases. For instance, certain hospitals can be given no means to pay for his medication and faced with little resources to develop expertise in a set of related rare help from the government, his parents petitioned the Delhi diseases. This organisation could serve as a repository of High Court. The Delhi government was directed to make information to assist doctors and patients looking for treatments accessible to him expertise in particular rare diseases. Under Article 21 of the Constitution, the Indian state To address this neglected area of health care, the guarantees equitable and non-discriminatory access to Karnataka government is planning to frame a policy based health care to all as part of each citizen’s right to life. Yet, on recommendations submitted by the Vision Group for the draft National Health Policy, 2015, makes no mention Bio-technology, comprising industry heads and academic at all of rare or genetic diseases. leaders. The recommendations include screening newborns for early intervention and specialist clinics to A priority in the West acquire knowledge through research and interaction with As opposed to India, in many part of the western patients. world the rare diseases consider a priority for If the Indian government is serious about its government. The European Commission has declared rare commitment to realise the rights of its citizens to universal diseases to be a public health priority and more than 19 and equitable health care, it cannot ignore rare diseases. European countries have adopted rare disease strategies Some State governments, such as Delhi, have established in the past few years. The US was the first to give policy a panel to tackle rare diseases. However, any State-level preference to rare diseases through the enactment of the intervention must be guided by a comprehensive national Orphan Drug Act (ODA) in 1983. These drugs are called policy to ensure that the entire rare disease-aflicted ‘orphan’ because under normal market conditions, the community benefits.

* Associated with World Without GNE Myopathy (India). This feature has been abridged from an article published in The Hindu on March 06, 2016.

20 January-March 2016 PolicyWatch COMPETITION INSIGHTS Sun Pharma Gets CCI Nod preferential issue of CCDs with 5 announcement in December 2014. In Sun Pharma has received approval percent annual coupon to Mandala for this regard, SRF entered into a pact from competition watchdog a subscription amount of M285.1 crore. with DuPont De Nemours and Competition Commission of India The CCDs will be converted into Company (US). SRF is into (CCI) to sell the Ranbaxy Laboratories’ ordinary equity shares of JISL within manufacturing of chemical-based two divisions in the central nervous 18 months from the date of allotment industrial intermediates, while DuPont system (CNS) segment in India to of share at M80 per piece or at such is a global group primarily focussed Strides Shasun for M165 crore. higher price as determined in on agriculture and nutrition, advanced The CCI approved this proposed accordance with the applicable SEBI materials and bio-based industrials. transaction, and passed an order norms. (ET, 07.03.16) As per the filing, DuPont would under the Competition Act, 2002 supply SRF the product from its facilitating the transaction. As CCI Rejects Complaint facility till SRF’s facility is approved. witnessed in 2014, Sun Pharma and The CCI rejected a complaint of The consideration for the transaction Strides Shasun had arranged a pact unfair business practices made against is US$20mn payable in cash. related to two divisions of Ranbaxy; Asian Paints with regard to painting (ET, 06.03.16) namely ‘Solus’ and ‘Solus Care’. services provided for a house in Sun Pharma acquired Ranbaxy Kolkata. Maruti Complaint Rejected Laboratories in 2014 for US$ 4bn. It Rejecting the complaint, CCI The CCI rejected a complaint of would be imperative with CCI cleared that no additional material or anti-competitive practices made approved proposal that, all other evidences with the regulator has been against the country’s largest car necessary regulatory approvals have submitted so as contravene the manufacturer, Maruti Suzuki. It was also been obtained. (ET, 22.01.16) provisions of Sections 3 and 4 of the alleged that Maruti Suzuki abused its Act. It was alleged that Asian Paints dominant market position by imposing RCom-SSTL Acqusition abused its dominant market position unfair conditions for transporting its The CCI has given its nod toAnil- by not providing appropriate painting vehicles through car carrier trucks Ambani owned Reliance services, as promised through various (CCTs). Communications’ (RCom) acquisition advertisements. According to CCI, the company of Russian conglomerate Sistema’s This is the second time the fair may need services of CCTs of a Indian telecom unit, Sistema Shyam trade regulator is dismissing the same particular description in the sense that Teleservices (SSTL) that operates allegations made by the same CCT uses a particular type of VTS under the MTS brand. complainant against the company. (Vehicle Tracking System). For the SSTL offers mobile telephony (ET, 27.01.16) case, the CCI considered ‘market for services under the MTS brand across transportation of light vehicles in nine telecom circles in the country. SRF-DuPont Deal Cleared India through CCTs’ as the relevant The deal will give RCom access to The CCI has cleared the proposed market. spectrum or airwaves in the 850 transaction off the diverisified firm The company was also alleged by megahertz (MHz) band that can be SRF Ltd. to acquire US-based the complainant that it manufactures used for 4G services, which it plans to DuPont’s pharmaceutical propellant and sells more cars in the National start by the end of 2016. Also, it will business under Dymel brand. Capital Region (NCR) as compared to be able to extend the validity of its The all-cash deal was valued at other states. (ET, 15.01.16) licence by 12 years in eight high US$20mn when both sides made the revenue-generating telecom circles of Delhi, UP (West), Kolkata, West Bengal, Gujarat, Tamil Nadu, CCI Penalties Stayed Karnataka and Kerala. (FE, 23.02.16) ompetition Appellate C Tribunal stayed penalties Stake Sale Gets a Nod totaling M106 crore imposed by CCI on leading carriers IndiGo and The CCI has given approval to www.financialexpress.com Jain Irrigation Systems (JISL) in March SpiceJet for alleged cartelisation in 2016, for selling its stake and food fixing fuel surcharge on air cargo. subsidiary (JFFFL) worth M792 crore Penalties of M63.74 crore and to agri-business funding firm Mandala M42.48 crore were imposed on Capital. both InterGlobe Aviation and In the first stage, JFFFL is expected SpiceJet. Tribunal’s decision was to raise M396 crore from Mandala by followed by appeals filed by these two airlines against CCI’s order, passed issuing preferential equity shares and in November 2015. compulsorily convertible debentures Express Industry Council of India alleged that five airlines were indulged (CCDs). In the second stage, Jain in anti-competitive practices. Besides Indigo and SpiceJet, the CCI had also Irrigation Systems Ltd. (JISL) would penalised Jet Airways accused for fixing and revising fuel surcharge in transport raise M396 crore by making cargo. (TH, 09.02.16) January-March 2016 PolicyWatch 21 COMPETITION INSIGHT CCI Finds Reasons to Probe Mahyco-Monsanto Shreeja Sen and Sayantan Bera* In its main order, the CCI noted that MMBL’s agreements with its licencees were ‘stringent and unfair’. It said MMBL can terminate its agreements with the licencees at any time if laws were passed to regulate trait fees. Such terms discouraged licencees from going to competitors of MMBL and restricted development of alternative technologies. However, The CCI clarified that the order was only a preliminary finding.

o have a backdrop, In November 2015, theAgriculture

www.livemint.com TMinistry asked the CCI to look into alleged monopoly practices by MMBL. Seed companies, including ndia’s antitrust regulator, CCI has decided to probe Nuziveedu Seeds Ltd. (NSL), and its subsidiaries Prabhat Iallegations that Mahyco-Monsanto Biotech India Pvt. and Pravardhan, also appealed to the Commission for an Ltd (MMBL) was resorting to anti-competitive practices in investigation. the genetically modified (GM) cotton seed market. MMBL, a joint venture between Mahyco Seeds Ltd and Monsanto The Ministry moved the CCI after several farmers’ Co., a global technology provider of GM seeds, licences its organisations and lobby group National Seed patented Bollgard II Bt cotton seed technology to 49 seed Association of India (NSAI) alleged that MMBL was companies in India, in exchange for a trait or royalty fee. charging high trait fees or royalty for its patented Bollgard The investigation will be completed within 60 days. The II technology, which protects cotton plants from pink investigation will be carried out by the Director General of bollworm, a pest. the CCI, the regulator said in a February 10 order made public. In November 2015, the Agriculture Ministry asked the CCI to look into alleged monopoly practices by MMBL. The Mahyco-Monsanto Biotech India Pvt. Ltd. (MMBL) Seed companies, including Nuziveedu Seeds Ltd. (NSL), hybrid seed industry is at approximately US$2bn, and and its subsidiaries Prabhat and Pravardhan, also growing at around ten to 15 percent per year. The domestic appealed to the Commission for an investigation. stakeholders claim to have paid over M5,000 crore to Monsanto in the form of royalty. The CCI took a justified he Ministry moved the CCI after several farmers’ stand in calling out the investigation, ‘fit’ on prima facie Torganisations and lobby group NSAI alleged that grounds of violation of Section 3(k) and 4 of the Competition MMBL was charging high trait fees or royalty for its Act 2002, accusing Monsanto with anti-competitive patented Bollgard II technology, which protects cotton practices and abuse of dominance. The seed giant MMBL plants from pink bollworm, a pest. refused to diminish the royalty patents and returned the excess royalties, which they paid from 2010. Such a measure The CCI’s February 10, 2016 order also allowed moved the Union Agriculture Minister to voice domestic stakeholders like the NSAI to place its submissions to stakeholders to CCI. the Director General. “We will provide valuable inputs to the Commission for a fruitful investigation”, said Kalyan ection 3 of theAct refers to anti-competitive agreements Goswami, Executive Director of NSAI. “We are sure that Sand Section 4 deals with abuse of dominant position. very soon this will bring an end to monopoly practices The investigation will be completed within 60 days. that led to difficulties for the Indian seed industry and farmers”, he added. “The ‘order’ is only a prima facie opinion and merely recommends an investigation. It is not a reflection of any The regulator recorded submissions from the Ministry final conclusions. It must also be noted that a member of and the NSL that MMBL’s technology was used in more the CCI has found no merit in the complaints filed with the than 99 percentof the area under Bt cotton cultivation in CCI and has exonerated MMB”, an MMBL spokesperson the country. The price control committee was set up last said. In the CCI’s seven-member panel, one member put up month and is mandated to determine seed prices and trait a dissent note, saying that he did not find any reason to fees by March 31, 2016 in time for the sowing of the order a probe. kharif crop.

* Journalists with Mint. This feature has been abridged from an article published in Mint on February 28, 2016

22 January-March 2016 PolicyWatch SPECIAL ARTICLE Is Modi’s Idea of Governance Different to Those Who Ruined India with Five Year Plans? Tavleen Singh*

“ n Washington on his first visit as Prime Minister, Narendra Modi said that Ihe saw no motivation behind why India had kept on remaining a poor nation. India has each motivation to be an exceptionally rich nation. Some of our poorest states are so rich in characteristic magnificence, normal assets and old landmarks that interest in tourism framework alone would bring impossible riches”. It was from this Congress Cabinet that we got Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and the Food Security Bill and the Bharatiya Janata Party (BJP) was unfair enough to not just help pass these laws but to even praise them. This was imprudent BJP Chief Ministers, including Narendra Modi, pointing out the flaws in centralised welfare schemes. So it is truly puzzling that as Prime Minister he should now have changed his tune.

The Finance Minister Arun Jaitley said that there is no evidence on the ground that this elaborate form of dole has reduced poverty or created real jobs in rural If Modi continues to India. And real evidence that if the thousands of crore rupees that have been adopt policies poured into this scheme had been spent on improving rural schools, hospitals and roads, the money would have been much better spent. Another centrally planned reminiscent of Indira idea that emanated from the National Advisory Council was that of giving more than seventy percent of India’s citizens entitlement to cheap food grain under the Gandhi’s ‘gareebi food security law that is soon to come into effect. hatao’ days, he will

t happens that when the law was being discussed in Parliament in 2013, my end up betraying the Itravels took me to a small village in Rajasthan, where I had a conversation about it with a local official. Did he think it was a good idea, I asked, and this was his mandate he was given response, ‘We have not got enough storage space for the grain that we are already being sent, so where are we going to store more supplies’Modi’s idea of governance is different to those who ruined India with their Five-Year Plan.

The idea behind the law was an altruistic attempt to alter the shameful fact that every other Indian child is malnourished. But the reality is that malnourishment is usually due to not getting the right food. For instance, street children in Mumbai are malnourished because most of them have never had a glass of milk or eaten green vegetables. The one thing they do get to eat every day is rice and bread. “It is the time to consider that why has the Prime Minister forgotten that he was among those who once opposed these laws”?

he other aspect which the government seems to have forgotten is T‘cooperative federalism’, so instead of dealing with Chief Ministers, Prime Minister has started having regular video-conferences with their Chief Secretaries. This is not cooperative federalism, it is direct interference in federalism, and the consequences are unlikely to be good for Indian democracy. It is also yet another sign that Modi is a central planner, and this is very worrying because if we have another decade of central planning, we can say with certainty that those dreams of prosperity that seemed so achievable during his election campaign will remain dreams.

This is because central planners are incapable of creating real jobs, and real jobs are what young Indians need more than anything else. They do not need 100 days * Leading Columnist associated of fake employment a year of the kind that MGNREGA bequeaths them, because in with The Indian Express. the end what this mostly does is alleviate their poverty, not end it. “If Modi This special article has been continues to adopt policies reminiscent of Indira Gandhi’s gareebi hatao abridged from an article (eradicating poverty) days, he will end up betraying the mandate he was given. It published im The Indian was a mandate for prosperity and jobs, not poverty alleviation and dole”. Express on February 07, 2016

January-March 2016 PolicyWatch 23 PUBLICATIONS

Research Report Impact of Current Market Dynamics on Paddy and Wheat Farmers in Muzaffarpur, Bihar he methodology for this study was conceptualised by CUTS under the project, T‘Competition Reforms in Key Markets for Enhancing Social and Economic Welfare in Developing Countries’, referred to as the CREW project. The need for this study emerged from the findings of the Diagnostic Country Report of the CREW project in India – which covered two states, Bihar and Rajasthan. From the assessment undertaken in Bihar it was clear that productivity gains were not accompanied with benefits for the farming community, especially small farmers. This study specifically looks at the weaknesses in output markets in paddy and wheat sectors, in Muzaffarpur district in Bihar, to identify reasons for the above. The objective is to understand the implications of some of the recent agricultural reforms and market dynamics on the small and marginal farmers and relevant stakeholders. http://www.cuts-ccier.org/crew/pdf/Impact_of_Current_Market_Dynamics_on_Paddy_and_Wheat_Farmers_in_Muzaffarpur- Bihar.pdf

Briefing Papers Concerns with Respect to Payments Banks in India ayments banks are first set of differentiated banks, aimed at providing deposit, payments and remittance services Pto low income groups, and other non-risk sharing simple financial services. The Reserve Bank of India (RBI) had issued operational guidelines for payment banks in November 2014 (RBI guidelines) and provided clarifications thereon in January 2015 (RBI clarifications). The successful applicants are required to comply with relevant conditions under RBI guidelines and respective in-principle approval within 18 months. This has triggered analysis of RBI guidelines and clarifications in greater detail, amongst relevant stakeholders. The Briefing Paper highlights competition and regulatory concerns with respect to structure and operation payments banks, on the basis of review of existing literature and guidelines. Regulatory Impact Assessment: Hydro Sector in India efore introducing a law, the government neglects to anticipate the consequences of actions in the future, due to Bwhich laws often tend to fail to meet the desired objectives. Hence, Regulatory Impact Assessment (RIA) comes as a facilitating tool to estimate costs and benefits before the decision is taken. It is one of the ways of continuous learning as it can build in innovation standards within the process. This Briefing Paper discusses CUTS case study on hydro sector in Himachal Pradesh where it has intricately explained various steps involved in RIA. In addition, by identifying the problem and undertaking thorough cost and benefit analysis, best alternative is selected for adoption. http://www.cuts-ccier.org/Publications.htm www.cuts-ccier.org/pdf/Briefing_Paper_Concerns_with_Respect_to_Payments_Banks_in_India.pdf

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