IASToppers-Current-Affairs-Analysis-25th-Feb-2016
Current Affairs Analysis

25th February 2016 Current Affairs Analysis

By IT's Current Affairs Analysis Team
February 25, 2016

Contents

Economy

  • Pilferage remains a problem for LPG subsidy scheme
  • Cabinet nod to incentivise cashless transactions
  • Agreement between India and Maldives for avoidance of double taxation of income from International air transport
  • Make public names of wilful defaulters: panel

International Relations

  • 150 Million USD credit for Chabahar Port Development
  • India And UK Institutions Sign Agreements for Collaboration in Crop Sciences


Economy


Pilferage remains a problem for LPG subsidy scheme

 

According to a recent study, while the direct benefit transfer scheme (DBT) for LPG subsidy has resulted in considerable savings for the government, pilferage still remains a problem.

Details of the study:

The survey covered over 100 LPG distributors and 6,000 consumers in Uttarakhand, Bihar and Uttar Pradesh.

  • Despite being a well-designed system accruing big savings for the government, the study discovered that cylinders continue to be diverted to the commercial market.
  • It was found that families, irrespective of income levels and family size consume 9.5-10.5 cylinders per year leaving 2-3 unutilised, subsidised cylinders per household. Experts call this as the ‘March problem’.
  • It found that customers in the surveyed states said that they were approached by distributors to book the unused cylinders at the end of the financial year, in March. Once these extra cylinders are booked, the report found, the distributor sells them at market rates while the families receive the subsidy amount in their accounts in the following month.

Financial implications:

  • The study shows that around Rs.1,800 crore-Rs.3,000 crore (based on a usage of 9.5-10.5 cylinders) out of the total amount transferred under PAHAL (as the LPG subsidy scheme is called) is being pilfered, assuming that only half the eligible population across all states indulged in such activities.
  • That works out to 6-10.5% of the total LPG subsidy payments through this scheme. The actual figure could be more.
  • Government data shows that it has given out Rs.28,713 crore under the PAHAL scheme against a budgeted amount of Rs.21,140 crore.

Solution:

  • A per-cylinder approach to the subsidy payments could remove the incidence of pilferage.
  • At the moment, the government gives a standard subsidy amount regardless of whether it is for the first cylinder consumed or the twelfth. The report recommends a graded approach where the first few cylinders used receive a high subsidy amount while the 10, 11 and 12 cylinders receive no subsidy at all. Using this method, the overall subsidy received by the families for cylinders used will remain the same.

[Ref: Hindu]

 

Cabinet nod to incentivise cashless transactions

 

The Union Cabinet has given its approval for introduction of steps for promotion of cashless payments (transactions) through cards and digital means.

Approved steps:

In this regard, various short and medium term measures have been approved for implementation by the Government Departments, Ministries and Organisations.

  • Rationalisation of the merchant discount rate (MDR) on card transactions and telecom service charges for digital financial transactions to promote mobile banking.
  • Mandatory card-based or electronic payments beyond a prescribed threshold.
  • The withdrawal of any additional charge currently imposed on card or digital payments by various government entities.
  • The introduction of the required infrastructure for digital payments in all government offices.

Significance of this move:

Promotion of payments through cards and digital means will be

  • Instrumental in reducing tax avoidance,
  • Migration of Government payments and collections to cashless mode,
  • Discourage transactions in cash by providing access to financial payment services to the citizens to conduct transactions through card/ digital means and
  • Shifting payment ecosystem from cash dominated to non-cash/less cash payments.

With this decision, the government has completed its promise for such measures made in the previous Budget.

[Ref: Hindu]

 

Agreement between India and Maldives for avoidance of double taxation of income from International air transport

 

The Union Cabinet has given its approval for signing of an Agreement between India and Maldives for the avoidance of double taxation of income from international air transport. 

Details:

  • The Agreement provides for relief from double taxation for airline enterprises of India and Maldives by way of exemption of income derived by the enterprise of India from the operation of aircraft in international traffic, from Maldivian tax and vice-versa.
  • Under the agreement, profits from the operation of aircraft in international traffic will be taxed in one country alone.Accordingly the taxing right is conferred upon the country to which the enterprise belongs.
  • The Agreement will provide tax certainty for airline enterprises of India and Maldives. 
  • The Agreement further provides for Mutual Agreement Procedure for resolving any difficulties or doubts arising as to the interpretation or application of the Agreement. 

[Ref: PIB]

 

Make public names of wilful defaulters: panel

 

The Standing Committee on Finance has recommended that state-owned banks make public the names of their respective top 30 stressed accounts involving wilful defaulters.

Rationale:

According to the committee, this will act as a deterrent and enable banks to withstand pressure and interference from various quarters in dealing with the promoters for recoveries or sanctioning further loans.

Important recommendations:

  • The committee has asked the government to amend the RBI Act and other laws and guidelines to pave the way for PSUs to make the names of wilful defaulters public.
  • The committee also recommended that specially-tasked committees be mandated to continually monitor the status of large loan portfolios and submit periodical reports to government and Parliament on the findings.
  • Since diversion of funds by promoters to unrelated businesses and poor pre-sanction due-diligence have been cited as key reasons for bank loans turning toxic, the committee said it was of the view that forensic audits should be made mandatory for specific class of borrowers.

Present scenario:

  • Total credit off-take of public sector banks as on December 2014 stood at Rs. 60,60,699 crore and as on September 2015, the net NPAs were Rs. 2,05,024 crore, according to the report.
  • Wilful defaulters owe PSU banks a total of Rs.64,335 crore or 21% of total non-performing assets, (NPA).
  • The gross NPAs were Rs. 3,69,990 crore. Certain estimates indicate that the gross NPAs could reach Rs. 4 lakh crore by the end of this fiscal year.
  • The sharpest increase in NPAs in the banking industry was observed in mid size corporates (Rs.25 crore—Rs.100 crore exposure to commercial entities) as they rose to 9.7% in September 2015 from 6.4% in March 2014.
  • Retail loans also saw an industry-wise reduction to 4.7% from 8.8%.
  • Taking the gross NPAs and the restructured advances together, the stress on public sector banks is 13.03% to total advances as on December 2014 and 8.71% as on September 2015.
  • Also alarming is stressed category. As on September 2015, nearly Rs. 6.8 lakh crore worth of bank loans were in the ‘stressed category’ as against Rs.5.91 lakh crore in the previous year.

[Ref: Hindu]

 

International Relations

 

150 Million USD credit for Chabahar Port Development

 

The Union Cabinet has given its approval to the proposal of the Ministry of Shipping for provision and operationalization of credit of 150 million USD from EXIM Bank for development of Chabahar Port in Iran. 

Background:

An MoU was signed between India and Iran in 2015 by Ministry of Shipping, Road Transport & Highways and his Iranian counterpart.

  • As per the MoU, India is to equip and operate two berths in Chabahar Port Phase-I with capital investment of USD 85.21 million and annual revenue expenditure of USD 22.95 million on a ten year lease.
  • Ownership of equipment will be transferred to Iranian side on completion of 10 year period or for an extended period, based on mutual agreement.
  • The Iranian side had requested for provision of a credit of USD 150 million in accordance with the MoU.
  • As per the MoU, operation of two berths will commence within a period of maximum 18 months after the signing of the Contract. 
  • The two berths will be operated by the India Ports Global Private Limited, a Company promoted by the Jawaharlal Nehru Port Trust and Kandla Port Trust – two major ports working under the Ministry of Shipping. 

Future course of action:

  • The Union Cabinet has now authorized the Ministers of Finance, External Affairs and Shipping to approve the final contract with Iran and for resolution of any issue arising in implementation of the project. 
  • The Union Cabinet has also authorized the Ministry of Shipping to form a Company in Iran for implementing the Chabahar Port Development Project and related activities. 

Significance of Chabahar port for India:

  • Chabahar Port lies outside the Persian Gulf in Iran and will help in expanding maritime commerce in the region.
  • India is negotiating this project to facilitate the growing trade and investment with Iran and other countries in the region, notably Afghanistan and also to provide opportunities to Indian companies to penetrate and enhance their footprint in the region. 

[Ref: PIB]

 

India And UK Institutions Sign Agreements for Collaboration in Crop Sciences

 

Department of Biotechnology, Ministry of Science and Technology and a consortium of top UK research institutions recently signed Memorandum of Understanding for establishment of a joint India-UK collaboration programme in crop science.

Details:

  • The aim of the agreementis to enhance collaborative research, promote knowledge exchange, and support capacity building to develop resilience in food security.
  • This collaboration will create opportunities for leading experts in the UK and India to come together to tackle global challenges in the areas of food security, crop science and biotechnology.
  • The agreement foresees joint projects focusing on the fundamental science underpinning yield enhancement, disease resistance and drought resistance; research into crop re-breeding; and the translation of fundamental research into sustainable agriculture practice.
  • It also contemplates the establishment of a joint Indo-UK Plant Science Centre in India.

[Ref: PIB]

 

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