Waiting to exhale, then get going

The snap and crackle generated by legislative Assembly elections in five states was electrifying

Writing in a blog for the Vivekananda International Foundation, the chairman of Prasar Bharati, A Surya Prakash, has some advice for Prime Minister Narendra Modi. The context was demonetisation. Prakash praised the PM for out-of-the-box thinking but declared that execution of his plans needed a different type of bureaucracy.
 
“Since Mr Modi is given to questioning the efficacy of existing practices, he could look at the possibility of opening the doors of government to management specialists hired specifically to manage national programmes. This can happen if he can end the stuffiness of the Indian bureaucracy, which has the reputation of resisting ‘outsiders’ and killing their creativity,” Prakash suggested. He rued the dominance in government of the thinking that “those who do not have a ‘batch’, a ‘service’ and a ‘year’ to refer to have no business being in government!”
 
Prakash said: “This will have to change. The new India that Mr Modi wishes to build will need a new administrative machinery. Given the Indian reality – a good percentage of the people still below the poverty line and still not literate; an aspirational middle class that wants a quick transition to the better life; and well-meaning governments both at the Centre and in many states which want well-crafted schemes to reach the right beneficiaries, without huge transmission losses, the new structure will have to be a proper blend of bureaucrats who have grappled with problems at the grassroots and management specialists from outside government, who are not weighed down by bureaucratic baggage. In other words, it will have to be a combination of the old and the new, the traditional and the radical.”
 
Deciding on heads
 
Now that elections are over, a bureaucratic reshuffle seem on the cards. Possibly even along the lines suggested by Prakash. Several senior positions are becoming vacant. The term of the Chief Election Commissioner ends in June, a prize appointment. The Comptroller and Auditor General  will also complete his term in June. Cabinet Secretary P K Sinha took over on June 13, 2015, for a two-year term. By about April, the government will have to begin thinking about whether to extend his term or appoint a successor. The senior most in the 1981 batch of the IAS is Anjuly Chib Duggal, secretary, financial services; however, she is to retire on September 1. By becoming cabinet secretary, she will get an extension immediately. On the other hand, can the finance ministry really let her leave?
 
Economic affairs secretary Shaktikanta Das got a three-month extension on January 23. He has to be replaced in April. Finance Secretary Ashok Lavasa retires in October and is also in the running for cabinet secretary. Several other secretaries are due to retire, including the power secretary.
 

The Centre will have concrete numbers to justify the ban on 86 per cent of cash by value that existed before November 8, and will be empowered to go after those who continue to evade taxes

Treasury
 
Much of the government’s immediate agenda relates to the finance ministry. The Prime Minister’s continued drive against unaccounted wealth will continue on two fronts. On March 31, last day of the 2016-17 financial year (and of the Pradhan Mantri Garib Kalyan Yojana), the Central Board of Direct Taxes is expected to have at its disposal the amount of money returned during demonetisation which was previously undeclared or unaccounted for. Hence, the Centre will have concrete numbers to justify the ban on 86 per cent of cash by value that existed before November 8, and will be empowered to go after those who continue to evade taxes. As the Assembly election has been cited as a referendum on demonetisation, it stands to reason that the PM will signal that tax evaders who are big fish be reeled in, to give heft to the idea that the exercise was aimed at curbing corruption and was successful in doing so. Investors who listened to Finance Minister Arun Jaitley’s speeches in London paid special attention to his vow that those who had not paid taxes in India will have no option but to bow before the law.
 
Then, there are the proposals to cleanse political funding, announced by Jaitley in his 2017-18 Budget speech, the centerpiece of which are electoral bonds. These may only be purchased by donors through accounted wealth and be redeemed by political parties only in accounts declared to the Election Commission. The fine print will be cleared in the Finance Bill later this month.
 
The government is also expected to go big on divestment and privatisation of state-owned companies, profitable or loss-making. The combined divestment target for 2017-18 is the highest ever at Rs 72,500 crore. Of this, Rs 46,500 is expected from minority stake sales and buybacks, the easy bit. By all indications, after two years of planning and delays, the Centre is expected to either sell a large number of loss making units or merge these with profit making companies. Such an exercise is expected to fetch the exchequer Rs 15,000 crore. The Centre has already lined up a number of unlisted public sector units (PSUs) from the construction, railways and insurance sectors, either for listing in the exchanges or outright sale of its entire stake. Listing of five state-owned general insurers is expected to fetch Rs 11,000 crore in 2017-18. There are also mergers and acquisitions planned among PSUs in similar sectors, especially oil and gas. All this is expected to be announced, now that the elections are over.
 

On infra, the Modi govt will enter a third straight year of record public capital spending, at a time when the private sector suffers from stressed balance sheets and high bad assets

Toxic assets in the banking system will also be addressed. It is considering the setting up of a state-backed ‘bad bank’ or asset management company and strengthening the existing asset restructuring companies to deal with the Rs 6 lakh crore worth of non-performing assets.
 
Foreign investment
 
The policy architecture governing foreign investment also needs to be reviewed, now that the Foreign Investment Promotion Board (FIPB) has been dismantled, the rationale being that most foreign direct investment (FDI) is now on the automatic approval trajectory. Only an estimated six or seven per cent of all sectors are under the approval route.
 
Commerce and industry minister Nirmala Sitharaman had hinted that in the absence of  FIPB, departmental regulators might suffice to decide. Industrial promotion secretary Ramesh Abhishek believes administrative departments could also be considered for taking the final call.
 
With growth in FDI in important sectors, overall foreign inflow rose by 30 per cent to $21.6 billion during the first half of 2016-17. FDI in the country grew by 29 per cent to $40 billion in 2015-16 from the previous financial year.
 
On infrastructure, the Modi government will enter a third straight year of record public capital spending, at a time when the private sector suffers from stressed balance sheets and high levels of bad assets. The biggest bugbear in the segment is the dispute with private road builders which want to exit but find they are unable to. Changes in the Arbitration and Conciliation Act to deal with public-private partnership disputes are likely to be announced soon.
 
Transport
 
The government is also planning to go big on integrated end-to-end transportation and multi-modal logistics solutions, for integrating railways, roads, shipping and air traffic. Budgeted capital spending for the coming financial year is Rs 3.1 lakh crore, about 11 per cent higher than the revised estimates for 2016-17.
 
Highway projects worth a little over Rs 2 lakh crore in Uttar Pradesh and Punjab, announced last year but stuck in the election whirligig, will move ahead. These projects were announced in September 2016. A string of expressways were announced by minister Nitin Gadkari, including Delhi-Amritsar-Katra to cater for pilgrims visiting Punjab and the Vaishno Devi shrine in J&K. The Kanpur–Lucknow expressway also figures in the priority list. To come up at a cost of Rs 1,500 crore, it would reduce the current travel time between the two cities to 35 minutes, from an hour. Some of the other projects in the priority list are Vadodara-Mumbai, Chennai-Bengaluru and Ahmedabad-Dholera (proposed smart industrial city in Gujarat).   
 
GST
 
On the goods and services tax (GST), the government will hit the ground running. The government will take Cabinet approval for the GST and compensation Bills after the GST Council meeting on March 16, which will take a call on the Union Territory GST (UTGST) Bill. After Cabinet approval, the Central GST (CGST), Integrated GST (IGST) and UTGST, as well as compensation Bills, will be introduced in the second half of the Budget session. The Council will also take up the State GST (SGST) Bill in the March 16 meeting but these will be introduced in the respective state assemblies.
 
The Council meeting on March 4 had already cleared the CGST and IGST Bills. Before that, it had cleared the compensation Bill. With this, hope has arisen that GST might be introduced from July. After approval of the Bills by Parliament and the respective state assemblies, rules will be prepared. Side by side, a committee of officers, chaired by revenue secretary Hasmukh Adhia, will take up the task of fitment of GST rates to various items.
 
The GST Council has already cleared four slabs — five, 12, 18 and 28 per cent — and a cess over the peak rate on demerit and luxury goods such as tobacco, aerated drinks and big cars.
 
Agriculture
 
Agriculture is also expected to figure prominently in the government’s agenda. Officials said there are three major areas in which work would start in full flow immediately after the polls. These include the three ‘model’ legislations the Centre is planning to recommend, to reform farm marketing laws, facilitate contract farming and also land lease.
 
Funds from Union Budget 2017-18 are expected to start flowing in from April 1 (because the presentation and passage date was advanced), to enable proper planning and execution of programmes and schemes.
 
The model draft Agriculture Produce Markting Committee law has been floated for stakeholder consultation, which ends on March 15. Then, will be vetted and could be sent for Cabinet approval.
 
A committee has already been formed under the NITI Aayog for framing a model law on contract farming. A model land lease law has already been prepared and is now being discussed with states.
 
The Centre will also move on the Seeds Bill, which provides for regulating seed and plant material, liberalise imports and protect farmers’ rights in this regard, plus an enabling provision for genetically modified crops.
 
It is also expected to quicken the distribution of soil health cards, which otherwise could miss the target of 140 million to be issued by 2017, by investing more funds on setting up of testing labs in states.
 
Coverage under the Pradhan Mantri Fasal Bima Yojana will also be enhanced from the existing 30 per cent of the cropped area to over 40 per cent in 2017-18. Completing of pending irrigation projects will see attention.
 
Digitisation and Aadhaar seeding of ration cards and the cashless drive in ration shops for food will get a push.
 
Coal for power
 

The coal linkage auction should help in reviving close to 30,000 Mw of power generation capacity. linkages are to be awarded to designated state-owned power distribution companies

The coal linkage policy, stuck for a year, might see revival. Deferred by the Union Cabinet thrice now, the latest being last week, the draft policy has been facing suspense for long. Coal linkages are to be awarded to designated state-owned power distribution companies. These in turn will assign these linkages to state/central generation companies. The coal linkage auction should help in reviving close to 30,000 Mw of power generation capacity. Earlier, the coal and power ministry were in knots over how the linkages would be awarded. A decision on the policy was dropped from a Cabinet meeting in July last year for further consultation.
 
The coal ministry later decided on the bidding route to award linkages to state utilities under the UDAY scheme for power distribution sector revival. Coal linkage auction would reduce the cost of fuel for these utilities.