Business Today 29-Jul-2018

THE GOODS AND SERVICES TAX (GST) has just completed a year, and it has been an eventful journey. It is showing signs of settling down, but it will be probably a year or more before all the glitches and annoyances that have come to the fore after the rollout are actually sorted out. It has not turned out to be the good and simple tax that Prime Minister Narendra Modi promised people, though it is also hardly the Gabbar Singh tax that Congress President Rahul Gandhi dubbed it. No one had expected the rollout of the GST to be smooth. It was after all the biggest tax system change since Independence. Too many decisions – including which product would attract what tax – were left till the last possible minute.…

THE GOVERNMENT'S decision to hike the Minimum Support Price for 14 crucial Kharif crops may be well intentioned but isn't well thought out and simply isn’t good enough. The decision affects farmers in poll-bound states - Rajasthan, Madhya Pradesh, and Chhattisgarh along with Maharashtra, Odisha, Karnataka, Uttar Pradesh, and Andhra Pradesh. Only ₹33,500 crore was provided for the additional MSP. Going by last year’s procurement figures an additional ₹11,500 crore will be needed. Presumably, procurement in an election year will only be higher. But that would require massive infrastructure upgradation to procure, transport, store and distribute. In most markets, farmers struggle to get even the MSP on almost all crops except paddy and the rabi wheat. They inevitably sell at much lower prices to private players. States, meanwhile, lack the infrastructure…

THE GOVERNMENT’S latest formula to heal a system staggering under ₹14 lakh crore debt is essentially bank driven, and comes two years after the path-breaking bankruptcy code. And it has been just a few months since the Reserve Bank of India scrapped all restructuring schemes. It had sent a clear message to rogue promoters – ‘Pay Up Or Face Liquidation’. The RBI has been pushing banks to institute bankruptcy proceedings against corporates that default. Experts contend that the new structure of an AMC is more likely to dilute the most modern bankruptcy code. The code actually has a defined plan for restructuring and resolution within 180 days. With a new AMC structure bankers will now find an easy way to push bad assets to AMC(s) and avoid provisioning. This in…

TO BAIL OUT power plants running on imported coal (Tata Power, Adani Power and Essar Power), the Gujarat government has appointed a high-powered committee. Adani's 4,620 MW plants in Mundra, and 1,320 power plant of Essar at Salaya near Jamnagar have stopped generation while Tata’s Mundra Ultra Mega Power Project is still in production despite losses. The plants ran into trouble after Indonesia changed its coal policy in 2012, and closer home the Supreme Court disallowed compensatory tariff against the increased cost of imported coal. Tata Power and Adani Power had in the past offered to sell their plants to the Gujarat government, but the state government did not take them up then. Perhaps it is time for the Centre and the state government to examine this option. Instead of…

MINING BARON Anil Agarwal’s $1 billion share buyback offer of Vedanta Resources cheered up shareholders in London as the share price shot up by 26 per cent in the morning trade to over 800 pence. The 825 pence a share delisting offer is almost 28 per cent premium to its closing price on June 29.The delisting plan translates into capital benefits to the promoters and will cut some slack to Agarwal’s firms exposed to critical scrutiny abroad. The buyback move, however, failed to spike share prices of the group’s two large companies-Vedanta Ltd (VL) and its subsidiary Hindustan Zinc (HZL) - in India. Domestic investors say the move will help only its promoters and the group doesn’t need foreign capital for acquiring assets any longer. With $5.6 billion cash reserves…

INDIA’S CAR MARKET has been growing at a healthy clip of 12-16 per cent per annum. Passenger vehicle sales in April – May this fiscal have grown at 13.28 per cent. So what explains the sudden spurt of 28 per cent in passenger car sales for the top 7 car makers in June, 2018 over June, 2017? The biggest – Maruti, grew by over 36 per cent, Tata by 54 per cent and M&M by 26 per cent. The answer lies in the low base-effect. June, 2017 sales were particularly subdued as customers deferred purchases and dealers reduced stocks due to the uncertainty over the likely impact of GST introduction from July 1, 2017. Not to forget that the impact of DeMo on car sales was still lingering since November, 2016.…