Discuss the merits of government’s decision to bar taxpayers earning more than Rs 10 lakh per annum from availing of subsidy on LPG cylinder sales. (200 Words)

Government has finally changed its status quo of voluntary “Give it up” slogan to mandatory debarring citizens who have income above 10 lakh per annum to avail LPG subsidy. This is said to be a major step to restructure the overall method of subsidy. 
Few merits are:
1) Beginning of progressive structure for subsidies.
2) Fund saved can be used for other basic necessities of life like Health, Agriculture whose share in Budget has been low.
3) Would lead to lesser consumption of LPG & subsequently lesser wastage in households devoid of subsidy.
4) Nearly all LPG is through imports, CAD can be expected to go further low.
5) Misuse of subsidized cylinders to be stopped.
6) Will make the government to think on other subsidies which may also be removed like electricity, etc.

Apart from this, Government should take more steps to reduce the reliance on LPG & switch to cleaner forms of fuels whose funds can be taken from the cash subsidy saved in the new scheme. Creating a team for R&D should now be the immediate step by Government as the LPG prices are not expected to stay low in years to come, and with the growth of GDP along with depreciation of rupee, 10lpa income slab might not be sufficient in years to come.

Critically analyse the merits and demerits of Facebook’s “Free Basics” service offer in India. (200 Words)

Free basics is an initiative by Facebook where certain Internet services will be provided free of cost to everyone. In India, reliance Telecom has partnered with Facebook where Facebook will act as a gatekeeper and Reliance will be the service provider.

Demerits of Free basics:
-Free basics covers selected websites and ignores other websites and content providers. Thus it goes against principle of net neutrality.
-In the long run free basics can be misused for price manipulation for providing same services which once used to be free.
- It also helps one particular service provider, for example Reliance telecom will use it for promoting its services thus discriminating other service providers like BSNL, Aircel, Airtel etc.
-The nexus between "service providers" and "content providers" might be misused for anti-state propaganda.

Merits:
-Its not neutral internet if majority doesn't have access to it.Free basics will work on this principle.
-India is a large country where basic internet services are still to be made available to millions and especially to the rural India.Hence free basics will make an inclusive internet regime. This ultimately will lead to people empowerment.
-Recently GoI launched Digital India program. Free basics will help in making this programme effective by providing last mile connectivity.

Thus the debate boils down to "access" vs "neutrality". In absence of " access to internet " there is a lack of "internet inclusiveness" where as violating net neutrality will ultimately create a "digital caste system". Given India's current digital ambitions free basics certainly augments the government work,besides being pro-poor. However it goes wrong on many commercial and regulatory fronts. Hence first a strict regulatory regime, periodic government scrutiny over contents being provided and having a say over the websites selection should precede before allowing any such initiative.

Criticas argue that there are many different ways by which internet can be made available to vast majority of unconnected people in developing countries rather than opting for Facebook’s Free Basics offer. Discuss. (200 Words)

The different ways other than the zero rating apps which can make internet accessible for all are-

1.Some amount of data should be provided free of cost or at discounted rates and the companies paying for it should get only a 'brought to you by' attribution.This model is being practiced in many African countries and Middle Eastern countries.

2.People watch ads in order to get access to other websites.Mozilla is working with Grameenphone in Bangladesh where users get 20 MB data free after watching short ads.

3.When financially well off people recharge their internet account, they can be asked to donate small amounts of money (Rs 1 to Rs 10) for providing internet services to the poor.

4.Donating money towards free internet access for the poor should be encouraged as a part of CSR initiative of the telecom companies.

5.Effective utilization of the Universal Service Obligation Fund which has been lying unutilized as indicated in the recent CAG report.

6.Even modification in the zero rating schemes like delinking free internet access from specific content and limit it by volume or time.

7.Increasing competition and countering monopolies will automatically reduce the cost of access to internet and even the poor will be able to afford it.

Increasing the income of people through higher economic growth is a long term solution to make internet accessible to all.

In India, electricity and telecom sectors provide a contrasting picture when it comes to profitability and debt management. Examine why telecom sector has done well in India and what electricity sector can learn from telecom’s experience. (200 Words)

India's telecom and electricity sector provide glaring contrasts: the former has succeeded the latter in terms of both profitibility and debt management. This comes as a surprise since telcommunication was introduced much later than electricity sector.

The possible reasons can be:
1.About 90% services in telephony are prepaid which saves it from unpaid services.
2.Most of the undertakings in telephony is done by private investors. Unlike public investments,these are hasty and involve less procedures.
3.Ease of infrastructure sharing.
4.Injection of new services from time to time,such as WiFI and Wimax.
5.Multifarious services such as health,education etc depend on telecommunication for their progress

Power sector can succeed by learning from telephony in following ways:-
1.Use of prepaid electricity cards to ensure that no electricity units go unpaid
2.Better debt management,achieving targetted total susbsidy by P&Q susbsidies
3.Compulsory metering to measure each and every unit used.
4.Ensuring that genuine competitors are available in market for power distribution.
5.DISCOMS can be encouraged to take up projects by settling tariff-cost issues.
6.Greater use of electricity in fields of infrastructure,telephony which can expand its base
Power sector can be one of the biggest benefactor of revenue to the economy. Such a sector should not be waded away due to solvable anomalies.

As India is becoming a major destination for start-ups, sectors like e-commerce or mobile payments are attracting strong interest among entrepreneurs and investors whereas health, clean-tech, agriculture and education sectors are neglected. Examine why and also suggest what type of start-ups can contribute in these sectors. (200 Words)

The second decade of second millennium is turning out to be an era of technology startups.

These startups can contribute immensely to sectors such as health-care, agriculture and education sectors owing to the link than technology can create between them as explicated by the following:

--These sectors are least developed in terms of technology. Startups can fill the gaps
-- Sectors such as education have huge scope and are multidimensional. A tech startup can enter into tasks such as providing MOOC projects to digitizing the education curriculum

-- Sectors such as health-care have tremendous money involved and the startups can burgeon using the same
-- The government is providing the incentives in the form of facilities and concessions for startups to jump into such sectors

Following are the type of startups that can contribute:
-- Aggregator apps in healthcare that can bring doctors or hospitals on the same platform for customers
-- Systems that can digitize the education curriculum saving time and paper of the various stakeholders
-- Platforms that disseminate information of various aspects including seeds, fertilizers etc. to the farmers
-- Companies that can partially automate the cleaning process of municipalities hashing all the data on an online platform
Technology startups along with government incentives will no doubt pave the path to a better future for India in all respects.

Write a note on the objectives of and sources of funds for National Investment and Infrastructure Fund. (200 Words)

National Investment and Infrastructure fund is a fund created by the Government of India for enhancing infrastructure financing in the country.

 The primary objective of NIIF is to maximize economic impact mainly through infrastructure development in commercially viable projects, both greenfield and brownfield, including stalled projects. It could also consider other nationally important projects, for example, in manufacturing, if commercially viable.

Other objectives may include:

-- Overseas ties and materializing Make in India scheme as it attracts foreign investors
-- Service provisions to the investors
-- Structuring and framing the investment models and their monitoring
-- Advisory objective to provide guidance to infrastructure projects

NIIF is not a single entity, it may contain more than one fund set up as Alternate Investment Funds. Following are the sources of this fund:

-- Government can provide upto 20000 crore per annum into these funds making 49% share of the total corpus
-- Sovereign/ quasi-sovereign/multilateral/bilateral investors
-- Cash-rich Central Public Sector Enterprises
-- Domestic pension and provident funds, National Small Savings Fund

Recently the Vijay Kelkar Committee on public-private partnership (PPP) has made many recommendations to review and revive PPP model in India. Discuss its important recommendations. (200 Words)

The Vijay Kelkar committee was constituted to review the PPP model and make recommendation to revive the sector,as the PPP model has not been able to perform as expected to various constraints .The following recommendation were given by the committee

Institutional Capacity
--It was recommended to establish 3P India as to support PPP activities as was announced in the Budget 2014-15
--To establish Infrastructure PPP Adjucation Tribunal and Infrastructure PPP Project Review Committee to settle disputes and review projects respectively

Models for PPP
--It has rejected the Swiss Challenge model for PPP projects because of lack of transparency.
--The one size fits all approach of the Model Concession Agreement should be replaced with sector specific models

Government Responsibility
--It requires the government to come with PPP Policy with backing from Parliament.
--The Prevention of Corruption Act must be amended to differentiate between genuine errors and corruption

Other recommendation
--Small projects should not be built with PPP
--Issue Zero Coupon Bonds for easy credit availability.
--Public sector should not be given PPP projects and private sector must be encouraged.
--PPP model should be introduced in other sectors as well

Thus if India needs to transform from a low income country to a high income country without being trapped in the middle income zone it need to reform the PPP for faster growth.

A tax hell on earth

A few weeks ago, Prime Minister Narendra Modi expressed his displeasure with India’s tax administration and asked the Central Board of Direct Taxes to deal with public grievances. Later, the finance minister spoke strongly in support of the income tax (IT) department and stated, surprisingly, that India’s tax regime was not confrontational. It is indeed difficult to reconcile these contradictory statements.
The finance minister went on to state that India was not a “tax haven” and reminded corporate India that “legitimate tax demands” could not be termed as tax terrorism. Nobody, anywhere in the world, can indeed complain against a legitimate tax demand. But what has made India a tax hell is outrageous tax demands, which have made this country a laughing stock in international tax circles.
The retrospective amendments after Vodafone and the persistent abuse of transfer pricing provisions seriously reduced the inflow of foreign direct investment (FDI). And the recent onslaught against foreign institutional investors (FIIs) will seriously cripple the inflow of funds from these institutions. The erstwhile finance minister (and current president) thought that by retrospectively nullifying Vodafone, it would collect more than Rs10,000 crore by taxing overseas’ transfer of shares. Three years later, it has collected nothing, but simultaneously lost perhaps thrice that amount in FDI.

The latest demand of more than Rs 40,000 crore from the FIIs is seriously flawed and will have disastrous consequences. These demands will certainly get embroiled in litigation for years, with negligible tax collection. Once again, our tax department will admirably succeed in repelling foreign investment and making India as unattractive as possible.The impact of Vodafone was evident on the FIIs as well. Net investments of Rs 1,68,000 crore dropped to Rs 51,000 crore after the Vodafone retrospective amendment. In the financial year 2014-15, thanks to the Modi wave, FIIs have made a net investment of Rs 2,80,000 crore, which is the highest ever this country has seen.
Without question, the gargantuan demand of minimum alternate tax (MAT) against FIIs is yet another example of Indian tax terrorism. In the first place, it is impossible to believe that the IT department would have allowed “legitimate” tax dues of Rs 40,000 crore from FIIs to have escaped assessment for almost two decades. In the same breath, it is equally absurd to suggest that, despite tax audits, FIIs merrily evaded taxes of this magnitude for several years.
Now, MAT is intended to apply to domestic companies that pay little or no tax because of the special incentives that the Income Tax Act itself grants. Indeed, MAT is itself a mild form of tax terrorism as this example illustrates: investments of thousands of crores were made into special economic zones (SEZs) on the promise that profits would be tax-free. SEZs were actually meant to be “tax havens” because all taxes were exempt. But because SEZ units pay zero-tax, the government asked them to pay MAT at 18.5 per cent. A promised tax haven was “legitimately” converted into a mini tax hell.
Most of the FIIs are not Indian companies. They are, however, governed by the Sebi (Foreign Institutional Investors) Regulations, 1995, which require an FII to have a bank account and a custodian. Most FIIs do not have any branch or office in India. Also, from 1995, FIIs have never been treated as domestic companies or as companies governed by the Companies Act, 1956. So, what happened in 2015?
Welcome to the wonderland of the Indian IT department. As the Sebi regulations of 1995 require certain statutory compliances like opening a bank account in India, the tax department now contends that all FIIs are deemed to have a “place of business” in India under Section 591 of the Companies Act, 1956. Consequently, the FIIs are treated on par with domestic companies and liable to pay MAT.
If Infosys or Tata Motors opens a bank account or even has an agent in London, will it be treated as a British company? If an Indian investment company is required to operate a bank account in London because of the UK’s securities regulations, will it become an English company? The entire MAT demand of Rs 40,000 crore is being made by reopening assessments on the foundation of the laughable legal premise that complying with Sebi regulations results in FIIs having a place of business in India. If this was the correct legal position, what was the IT department doing for the last two decades? Indeed, FIIs have paid taxes on their long-term/ short-term capital gains, dividends and interest income — and India has never been a tax haven for the FIIs.
The finance minister and revenue secretary have justified these demands on the ground that a decision of the Authority for Advance Ruling (AAR) was in favour of the Revenue. Therefore, while the FIIs are protected for the future, nothing can be done for the past years.
This is simply not true. In three decisions of the AAR, it was held that the foreign companies are not liable to pay income tax unless they have a permanent establishment in India (Timken, Fidelity and Royal Bank of Canada). In Fidelity, it was also specifically held that an FII, appointing a custodian in compliance with Sebi regulations, did not attract MAT. The two cases in favour of the Revenue are Castleton Investments and ZD, which simply gave a contrary ruling in total disregard for the earlier decisions. What is even worse is that in both Castleton and ZD, the Revenue actually agreed that MAT did not apply to foreign companies. Despite this concession, the AAR strangely went on to hold that foreign companies are liable to MAT in these two cases. Further, the demand against FIIs is not on the basis of the two erroneous AAR rulings but on the ground that FIIs have a “place of business” in India — a point on which the law is decidedly against the Revenue.
If these absurd demands are sought to be justified, India’s financial future is fraught with danger. After a decade, we have a PM who wants to dream big. But all his dreams are guaranteed to be shattered by our tax administration that makes our investment climate highly toxic. Our tax laws and administration destroyed FDI a few years ago. Unrepentant, they will now wreck FIIs too. It requires a steep and arduous climb to make India a haven for investments. But the descent into hell only requires a few absurdly aggressive tax demands