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Posted on 06 October, 2018, No Comments Comments admin
The challenges thrown up by the increase in the international price of crude oil cannot be resolved by either the tweets or television bytes of some opposition leaders. The problem is serious. The oil producing nations have capped their production, thus creating a demand-supply mismatch.
The political crisis in Venezuela and Libya has adversely impacted the production in those countries. The US sanctions on Iran have increased the uncertainty towards Iran’s supplies to its buyers. The commercial supply of shale gas, which was intended to balance the high crude oil cost, is running behind schedule.
The high cost of crude oil has also impacted the currency situation. India’s macroeconomic fundamentals with regard to its fiscal deficit, inflation, foreign exchange reserves etc. are fairly stable. Tax collections are encouraging. However, a high cost of crude oil adversely impacts the Current Account Deficit. That, in turn, impacts the currency. Additionally, the hardening of the dollar has further impacted most global currencies. Both the above factors have an impact on the cost of fuel available to a citizen.
The cost of crude increased in the month of April and May. Thereafter, it softened a bit and then increased to its highest level in the past four years. The cost of oil does not move in a straight line. Depending on the global factors, it increases or decreases. A section of the media excessively reports the increase when the prices rise and blackout the reductions when prices fall. Government critics rejoiced the political consequences of the increase of the crude prices. This was evident from their comments. When the price was reduced yesterday, the critics did a volte face and argued that this is bad economics. Let me categorically assure all that there is no going back on deregulation of oil prices. Even Rahul Gandhi, whose party had inflicted a double digit inflation on India during the past five years of UPA-II, gave television bytes and released tweets advocating a price reduction.
The NDA Government has an exemplary record of fiscal prudence. We have maintained the gradual glide path since 2014 to bring down fiscal deficit. We will continue to do so.
No Government can be insensitive towards its people. In the last four Budgets, the Modi Government, to the section of small and middle tax-paying population, has consistently given some direct tax relief each year. The cumulative effect of these income-tax concessions already given is Rs.97,000 crores each year. The reduction of GST rates in the first 13 months itself with regard to 334 commodities has given a Rs.80,000 crore annual relief to the consumer. Last year, in the month of October, when the oil prices were rising, the Centre cut down its excise duty by Rs.2. We have requested the States to make a similar cut. Most of the BJP-NDA States did so. The others refused to do so. I had always maintained that in extraordinary situation, the capacity of an economy to give relief will depend on it’s fiscal strength. In view of the increase, particularly in the direct tax revenue, the Centre decided to give between central excise and the absorptions by the OMCs, a Rs.2.5 relief to the consumer. We requested the States to give a similar relief.
The Centre’s oil tax revenues remain static. The Centre charges a fixed amount. What the Centre gets as tax revenue, 42% of it is passed on to the States. The States independently charge their VAT. The average VAT rate in the country is about 29%. Thus, the States were getting 29% of the lower cost price a few months ago. They now get 29% on the increased price. The States benefit from higher oil prices. The Centre’s collection remains the same. Thus, the capacity of the States to give a Rs.2.5 benefit is within their capacity. Their extra tax collection, because of increase in oil prices, is much larger since their taxes are ad valorem. Yet we have a situation where a number of non-BJP non-NDA States have refused to pass on any benefit to the consumer. What are the people supposed to conclude? Are Rahul Gandhi and his reluctant allies only committed to tweets and television bytes when it comes to give relief to the common man? Depending on the ad valorem rate of VAT in the States and after collecting the VAT and getting 42% of the Centre revenue, 60-70% of the total oil tax goes to the States. Must not the non-BJP States be candid with the people and tell them that both in 2017 and 2018 they refused to give any relief to the people even from their higher revenues. They sent out tweets and gave television bytes but when it came to performance, they looked the other way.
Posted on 01 October, 2018, No Comments Comments admin
The Congress Party, for the last few days, has been busy spreading disinformation about the Government’s possible moves in relation to the private sector company IL&FS. The Congress is a national saboteur. It wants to sabotage India’s economy by allowing a situation in relation to a company to persist, expand and become unmanageable. It lacks statesmanship and vision.
The financial institutions’ investment in any company – ‘is it a scam’ as Rahul Gandhi and his coterie are spreading? Was it a scam in 1987 when the IL&FS was promoted with the Central Bank of India having 50.5% shares and the UTI having 30.5% shares? Was it a scam in 2005 when LIC acquired 15% stake in IL&FS and in March, 2006 when it acquired another 11.10% stake in the IL&FS? In fact, LIC further bought 19.34 lakh shares in IL&FS in 2010. Do I start calling all these investments today ‘a scam’ as per ‘the perverted Rahul Gandhi school of thinking?’ From where has he invented a proposal of Rs.91,000 crores investment likely to take place by LIC and SBI in the IL&FS? In fact, it is the section of the Congress leadership which has been urging me to enable investments in the IL&FS and save the company. A senior congress leader, Prof. K.V. Thomas, who is a former Union Minister and has been the Chairman of the Public Accounts Committee, has written to me on 20th September, 2018 making such a request. I am enclosing his letter. It demolishes every word that Rahul Gandhi and his coterie has been spreading. It may be advisable for Rahul Gandhi to get some ‘words of wisdom’ from Prof. K.V. Thomas. The Congress Party must remember that ‘the days of crony capitalism are over.’ The NDA Government deals with such challenges objectively and professionally.
Posted on 01 October, 2018, No Comments Comments admin
- An article has been reported in news media regarding write-off of loans by Public Sector Banks (PSBs). Technical write-offs are resorted by banks as per Reserve Bank of India (RBI) guidelines. However, this does not lead to any loan waiver. Recovery of loans continues rigorously by Banks. In fact the defaulting management of most Insolvent companies has been removed under the IBC.
- The Government when it came to power in 2014 inherited the problem of large scale NPAs in the banking sector. The main reason for this spurt in NPA is that gross advances of PSBs increased rapidly as a result of aggressive lending from 2008 to 2014. The total loan outstanding of PSBs, which was about Rs. 18 lakh crore till March 2008, increased to about Rs. 52 lakh crore till March 2014.
- The Government decided to ensure transparent recognition of stressed assets and NPAs which were hidden under the carpet. Asset Quality Review initiated by RBI in 2015, and subsequent transparent recognition by banks revealed high NPAs. NPAs of PSBs increased from Rs. 2.26 lakh crore in March 2014 to Rs. 8.96 lakh crore in March 2018.
- Aggressive lending coupled with laxity in credit risk appraisal and loan monitoring, wilful defaulters inter alia led to a spurt in stressed assets. Moreover, stressed account was treated as non-NPA through flexibility in loan classification, evergreening and often repeated restructuring. This means NPAs were put under the carpet disguised as stressed assets. Now even one-day default is to be reported.
- As per RBI guidelines and policy approved by Bank Boards, non-performing loans, including, inter-alia, those in respect of which full provisioning has been made on completion of four years are removed from the balance-sheet of the bank concerned by way of write-off.
- Writing-off of non-performing assets is a regular exercise conducted by banks to clean up their balance sheet, and achieving taxation efficiency. Writing off of loans is done, inter-alia, for tax benefit and capital optimisation. Borrowers of such written off loans continue to be liable for repayment. Recovery of dues takes place on ongoing basis under legal mechanisms, which include, inter-alia, the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act), and Debts Recovery Tribunals (DRTs).
- The PSBs are making concerted efforts in recovery of NPAs. It has already recovered an amount of Rs. 36,551 crore during the first quarter of financial year 2018-19 against the total recoveries of Rs. 74,562 crore in financial year 2017-18. The cash recovery targets for PSBs for financial year 2018-19 is Rs. 1,81,034 crore. NPAs has peaked and has declined by Rs. 21,000 crore during quarter ending June 2018 over March 2018.
Posted on 23 September, 2018, No Comments Comments admin
A controversy is sought to be created on the basis of a statement made by the former French President Hollande, that the Reliance Defence ‘partnership’ with Dassault Aviation was entered at the suggestion of the Indian Government. In a subsequent statement the former President has sought to suggest that Reliance Defence emerged on the scene after the agreement with the Indian Government was entered into. He has, in a subsequent statement, said that he is ‘not aware’ if Government ever lobbied for Reliance Defence and that ‘the partners chose themselves’. Truth cannot have two versions.
The French Government and M/s Dassault Aviation have categorically denied the correctness of the former President’s first statement. The French Government has stated that the decision with regard to the offset contracts of Dassault Aviation are taken by the company and not the Government. Dassault Aviation itself has suggested that they have entered into multiple contracts with several public sector and private sector companies with regard to the offset contracts and the decision is entirely theirs.
Without commenting on the correctness or otherwise of a controversy in the French media, it may be mentioned that the former French President, Hollande, is countering statement made against him with regard to a conflict of interest in his dealing with the Reliance Defence.
The accuracy of the statements made by the individuals may be questioned but circumstances never lie. This is evident from the following facts:
- There is no ‘partnership’, as suggested by the former President, with regard to the 36 Rafale aircrafts to be supplied by Dassault Aviation to the Government of India. It was a Government to Government agreement under which the complete weaponised aircrafts are to come to the Indian Air Force. No manufacturing is to be done in India. It is, therefore, erroneous for anybody to suggest that there is a ‘partnership’ in the supply of the 36 Rafale aircrafts.
- M/s. Reliance Industries Ltd., in February, 2012, had entered into an MoU with Dassault Aviation. This was reported by the PTI on 12.2.2012. This was at a stage when the contract relating to 126 Rafale aircrafts, of which 18 were to be manufactured in France and 108 in India, was at an advance stage of consideration by the UPA Government. Rahul Gandhi’s misplaced criticism could equally apply to the 2012 MoU.
- The offset contract ensures investment by the original equipment supplier i.e. Dassault Aviation, in India, in as much as they make purchases from Indian companies to the extent of fifty percent (in this case). The choice of the offset partner under the 2005 offset policy is of M/s Dassault Aviation and they have selected several public and private sector companies to make the supplies.
- The offset partner is selected entirely by the Dassault Aviation, the original equipment manufacturer, and neither the French Government and nor the Indian Government has any say in the matter.
- It is no coincidence that on 30.8.2018 Shri Rahul Gandhi had tweeted that “Globalised corruption. This #Rafale aircraft really does fly far and fast! It’s also going to drop some big bunker buster bombs in the next couple of weeks.”
The former French President’s first statement rhymes with Rahul Gandhi’s prediction.
- The Congress Party’s official handle on 31.8.2018 had carried the tweet of one of its leader “It is evident that Anil Ambani bribed President Hollande through his actor-partner to get the Dassault partnership.” For the Congress Party to allege that a former President had been bribed by an Indian business group and then use him as a primary witness, particularly when he is facing criticism for an alleged conflict of interest within his own country.
- The former French President’s first statement that the Indian business group’s name was proposed by Government of India has now been substituted by him to the effect that the suggestion he is ‘not aware’ of the Government of India ever lobbied for Reliance Defence. He further said that the ‘partners’ chose themselves (AFP Report dated 22.9.2018).
- Rahul Gandhi has made an absurd suggestion that the interest of Indian soldiers has been compromised with. By whom? The UPA which delayed the acquisition which would have added to the Military’s combat ability or the NDA which expedited the same at a lower cost.
The conclusion
One Reliance Group was a part of this deal since 2012. It dropped out of defence production. The other Reliance Group was already in defence. They are not partners in the Rafale deal. They have no contract with either Government of India or Government of France. They were not selected as one of the many offset partners by any Government. ‘The partners (Dassault and Reliance) selected themselves’ as former President Hollande now says. This contradicts his first questionable statement which the French Government and Dassault have denied. The facts contradict the same. His second statement in Montreal, Canada to AFP makes the veracity of his first statement even more questionable.
Posted on 20 September, 2018, No Comments Comments admin
I had, in my blog dated 29th August, 2018 on the Rafale deal, exposed each one of the falsehood stated by the Congress Party. The campaign of falsehood is entirely led by the Congress President. His strategy is simple – concoct a lie and repeat it as many times. This, at least, provides him some concocted material for his statements / speeches for otherwise an issueless Congress. To each of the Rafale questions raised by me, there has been no reply. In mature democracies those who rely on falsehood are considered unfit for public life. Many have been banished from political activity because they were caught lying. But this rule obviously can’t apply to a dynastic organisation like Congress Party.
If the ‘Rafale concoctions’ were the first big lie, the second one stated repeatedly is that Mr. Modi waived off rupees two lakh fifty thousand crores of fifteen industrialists. Every word of that sentence repeatedly uttered by Rahul Gandhi is false.
Firstly, these amounts were lent by the banks prior to 2014. Secondly, the UPA Government, in order to conceal these loans despite the default, kept rolling over the loans. These loans were ever-greened. Today the UPA leaders stated that when they went out of Government, the Non-Performing Assets (NPAs) were only Rs.2.5 lakh crores. The truth is that actually NPA s were hidden under the carpet. In 2015, an asset quality review was conducted by the Reserve Bank of India and as a result of AQR and subsequent transparent recognition by banks it was found that the NPAs were actually Rs.8.96 lakh crores and the real amount was being hidden. Thirdly, no effective steps were taken which could result in recovery/ reduction of the NPAs. Post 2014-15, NPAs increased not because more monies were lent but because interest was mounting up on the overdue amounts. Some of the defaulters were given a second restructuring so that the defaults could continue to be hidden. An account is a ‘performing account’ as long as the debt is being serviced by principal / interest being paid. The moment a debtor is unable to service the debt, a default occurs and on expiry of 90 days an account is declared a Non-Performing Asset. During the UPA, most of these accounts were not declared as NPAs.
The Effective Move
The only effective move which has taken place in this regard is the Insolvency and Bankruptcy Code (IBC). It has changed the debtor-creditor relationship in India. After the passage of the IBC, the creditors can move the National Company Law Tribunal (NCLT) which, upon admitting the petition, appoints resolution professionals and replaces the defaulting management. Thereafter, the creditors come out with a resolution plan where bids are invited for a potential takeover of the company, and a solvent claimant whose bid is the most attractive, is given management of the company. This results in discharge of a significant amount of debt which is paid to the banks and other creditors. In some cases, the bidders are likely to pay in foreign exchange which, in today’s context, is extremely helpful to the Indian economy. The Reserve Bank of India, in the first instalment, identified twelve major defaulters. These twelve defaulters, towards principal interest and penal interest, jointly owed about rupees three lakh crores to various banks. The banks under UPA took no steps to recover these loans. They did not prosecute a single major debtor who had siphoned off money. It is the NDA Government which through IBC, changed the debtor-creditor relationship and enabled the banks to effectively pursue the recovery. The truth, Mr. Rahul Gandhi, is that your Government allowed the banks to be looted. The loans were inadequately securitized. Your Government was in complicity. The recoveries are being done by the banks only now. By repeating a lie on several occasions, you can’t change that reality. Not a single rupee of any debtor has been waived. The defaulters are losing their companies and assets under the IBC. Some are being prosecuted. All these defaulters got their debt in the pre-2014 era. Many got their limits substantially expanded during that period. Though these defaults occurred in the pre-2014 period, the same remained hidden on the pretext of rollover, restructuring and ever-greening. I am enclosing a list of defaulters and the present position of recovery.
| No. | Name of the twelve major corporate debtors | Present status |
| 1. | Bhushan Steel Ltd. | Resolution Plan approved on 18.5.2018 |
| 2. | Essar Steel Ltd. | Resolution in final stage |
| 3. | Electrosteel Ltd. | Resolution approved |
| 4. | Jyoti Structures Ltd. | Resolution proceedings pending |
| 5. | Lanco Infrastructure | Liquidation proceedings are on |
| 6. | Jaypee Infratech Ltd. | Resolution process commenced again after Supreme Court direction |
| 7. | Era Infratech Ltd. | Resolution pending |
| 8. | Alok Industries | Resolution in final stages |
| 9. | Bhushan Power & Steel Ltd. | Resolution in final stages |
| 10. | Monnet Ispat | Resolution completed |
| 11. | ABG Shipyard Ltd. | Resolution proceedings pending |
| 12. | Amtek Auto Ltd. | Resolution completed |
You lied on the Rafale deal, you lied on the NPAs. Your temperament to concoct facts raises a legitimate question – do people whose natural preference is falsehood deserve to be a part of the public discourse. Public discourse is a serious activity. It is not a laughter challenge. It cannot be reduced to a hug, a wink or repetition of falsehood. The world’s largest democracy must seriously introspect whether public discourse should be allowed to be polluted by the falsehood of a ‘Clown Prince’.
Posted on 15 September, 2018, No Comments Comments admin
There has, in the past, been a general distrust of Government schemes. The principal reason for this is that either the benefits don’t reach the targeted or that the projected parameters are never achieved. However, there are schemes with a difference. The Swachh Bharat Abhiyan is arguably the most successful one.
Swachh Bharat Abhiyan
When the Prime Minister of India, Shri Narendra Modi, announced the Swachhata campaign in his Independence Day Speech of 2014, some believed that the scheme would be a photo-opportunity with very little progress. In the history of independent India, this is one scheme which the people of India snatched away from the Government and converted into a ‘people’s movement.’ When the scheme was announced, the rural sanitation coverage of India was 39%. The Prime Minister announced a target that India be made ‘open-defecation free’ when we celebrate 150th Birth Anniversary of Mahatma Gandhi in 2019. The symbolism was appropriate since Gandhiji had given a lot of emphasis on Swachhata. As we have completed nearly four years of the scheme, 39% rural sanitation coverage has increased to a phenomenal 92%. This was not an easy goal to achieve. This involved a behavioural change of the people. Many in the rural areas were initially reluctant.
But this ‘people’s movement’ has today transformed into a ‘women’s movement’ with rural women playing a leading role in the programme. We all knew that the dignity of women demanded the privacy of toilet. However, women of India are now stepping beyond their roles as mere beneficiaries of this programme to leaders of it today. For example, construction of toilets has always been a male bastion. In many States, however, thousands of rural women have been trained as masons and, with the assistance of Self-Help Groups, are now becoming the primary force in driving a State to be declared free from open defecation. Women becoming a bread earner through construction of toilets added to the family income.
The hygiene in the utilization of the toilet is also a preventive healthcare scheme. Global experts believe that the SBM will have saved over three lakh lives in the country by the time we become ‘open-defecation free’ in 2019. Toilets in several parts of India have been named “Izzat Ghar”. This is for the first time that the subject matter in the toilet construction campaign has taken central stage of the national agenda. It has become a subject matter of popular discussion. The Government of India has made available all the funds required for making this scheme a success. This scheme will go a long way in improving the quality of life of India’s rural population, particularly women.
With rural roads, rural electrification, rural Awas Yojana, toilets and a cooking gas connection with foodgrain provided at a modest cost, the quality of life of India’s rural poor will get a quantum jump. Additonally when the Ayushman Bharat, which provides upto Rs.5 lakhs per family per year as hospitalisation expense, is fully implemented, this will change the quality of life of India’s rural population.
Revision of Amount Paid to Anganwadi Workers and Helpers
The Central Government has announced the decision to enhance the compensation paid to the Anganwadi workers and the Asha workers. The Anganwadi workers are the mainstay of the National Nutrition Mission. There are approximately 12.9 lakh Anganwadi workers and 11.6 lakh Anganwadi helpers in position. These benefits would be available to these 24.9 lakh Anganwadi workers and their families.
The remuneration of the Anganwadi workers has been raised from Rs.3000/- to Rs.4500/- per month; the mini Anganwadi workers from Rs.2250/- has been increased to Rs.3500/-. Remuneration of Anganwadi helpers has been increased from Rs.1500/- to Rs.2250/- per month.
These workers will also get an incentive of Rs.500/- per month and Rs.250/- per month respectively on the basis of the real time monitoring of performance. The Government had earlier made a significant increase in the cost norms for both pregnant and lactating mothers and for severely malnourished children.
This has been a long term demand of the Anganwadi workers and their helpers to give them a reasonable remuneration. Governments in the past have always refrained from giving benefits to these 2.5 million workers ostensibly on revenue consideration. Notwithstanding the pressure on the Budget, the Government has given almost a 50% hike in the first go to these workers. This will go a long way in addressing the grievance of these workers.
Posted on 12 September, 2018, No Comments Comments admin
My attention has been drawn to a statement made to the media by Vijay Mallaya on having met me with an offer of settlement.
The statement is factually false in as much as it does not reflect truth. Since 2014, I have never given him any appointment to meet me and the question of his having met me does not arise. However, since he was a Member of Rajya Sabha and he occasionally attended the House, he misused that privilege on one occasion while I was walking out of the House to go to my room. He paced up to catch up with me and while walking uttered a sentence that ”I am making an offer of settlement”. Having been fully briefed about his earlier “bluff offers”, without allowing him to proceed with the conversation, I curtly told him “there was no point talking to me and he must make offers to his bankers.” I did not even receive the papers that he was holding in his hand. Besides this one sentence exchange where he misused his privilege as a Rajya Sabha Member, in order to further his commercial interest as a bank debtor, there is no question of my having ever given him an appointment to meet me.
Posted on 30 August, 2018, No Comments Comments admin
The Reserve Bank has twice released its reports stating that the demonetised Notes of `500 and `1000 have been substantially deposited in the Banks. A widely stated comment has been that just because most of the currency came back into the Banks, the object of Demonetisation has not succeeded. Was the invalidation of the Non-deposited currency the only object of demonetisation? Certainly Not. The larger purpose of demonetisation was to move INDIA from a Tax Non-compliant society to a compliant society. This necessarily involved the formalisation of the Economy and a blow to the black money. How has this been achieved?
- WHEN cash is deposited in the Banks, the anonymity about the owner of the cash disappears. The deposited cash is now identified with its owner giving rise to an inquiry, whether the amount deposited is in consonance with the depositor’s income. Accordingly, post demonetisation about 1.8 million depositors have been identified for this enquiry. Many of them are being fastened with Tax and Penalties. Mere deposit of cash in a bank does not lead to a presumption that it is Tax paid Money.
- In March 2014, the number of Income Tax returns filed was 3.8 crores. In 2017-18, this figure has grown to 6.86 crores. In the last two years, when the impact of demonetisation and other steps is analysed, the Income Tax returns have increased by 19% and 25%. This is a phenomenal increase.
- The number of New Returns filed post demonetisation increased in the past two years by 85.51 Lakhs and 1.07 crores.
- For 2018-19, advance Tax in the first quarter has increased for personal Income Tax Assesses by 44.1% and in the Corporate Tax category by 17.4%.
- The Income Tax collections have increased from the 2013-14 figure of `6.38 Lakh crores to the 2017-18 figure of `10.02 Lakh crores.
- The growth of Income Tax collections in the Pre-demonetisation two years was 6.6% and 9%. Post-demonetisation, the collections increased by 15% and 18% in the next two years. The same trend is visible in the third year.
- The GST was implemented from 1st July, 2017 i.e. Post demonetisation. In the very first year, the number of registered assesses has increased by 72.5%. The original 66.17 Lakh assesses has increased to 114.17 Lakhs.
This is the positive impact of the Demonetisation. More formalisation of the Economy, More Money in the System, Higher Tax Revenue, Higher Expenditure, Higher Growth after the first two quarters.
Posted on 29 August, 2018, No Comments Comments admin
Why these questions?
Considering the security environment around India, the highest standards of defence preparedness are required. After the Kargil experience, the Armed Forces and the Raksha Mantralaya were of the opinion that combat ability of the Indian Air Force to strike at targets needs to be radically improved. This need was first recorded by the Raksha Mantralaya in the year 2001.
Considerations of the national security demanded that the IAF has the best available aircraft with the appropriate weaponry loaded on it. In principle approval for acceptance of necessity of procurement of 126 replacement aircrafts was recorded by the Raksha Mantri way back on 1st June, 2001. After the UPA Government came into power, the Defence Acquisition Council (DAC) approved the Acceptance of Necessity (AoN) for procurement of 126 medium multi-role combat aircrafts. An aircraft without weaponry is of little use in a war. It is only a flying instrument. It adds to the combat strength of the forces only when it is loaded with the requisite weaponry, which enables it to strike targets. The UPA Government issued a request for proposal on 28th August, 2007 and found two vendors, viz., M/s Dassault Aviation and M/s EADS to be compliant to the RFP requirements. It took the UPA five more years to commence the negotiations and in January, 2012 the Contract Negotiation Committee (CNC) determined Dassault Aviation to be L1.
For reasons best known to the UPA Government, on 27th June, 2012, the deal was directed to be re-examined, which effectively meant that the entire eleven-year exercise was abandoned and the process was to be undertaken afresh. India’s squadron strength was depleting because of age. This slow and casual approach of the UPA Government seriously compromised national security requirements.
The NDA approach
On 10th April, 2015, the Government of India and the French Government issued a joint statement where India decided to procure 36 Rafale aircrafts from the French Government on terms better than the ones conveyed by Dassault in the L1 bid of 2007. The same was approved by the DAC on 13th May, 2015 and finally the agreement, after a detailed procedure, was signed on 23rd September, 2016.
The false campaign
A false campaign based on untruth has been launched by the Congress Party casting a cloud on the Inter-Governmental agreement. The principal arguments of this campaign are the following:
- The NDA Government paid higher price than what the UPA would have paid if the deal would have completed on the basis of the 2007 offer of Dassault.
- Proper procedures such as negotiations by the Contract Negotiation Committee and approval of the Cabinet Committee on Security (CCS) were not obtained.
- A private industrialist in India was favoured and the interest of public sector undertaking was compromised.
Each one of the above issues raised is based on complete falsehood. It is expected from national political parties and its responsible leaders to keep themselves informed of the basic facts before they enter a public discourse on defence transactions. The Congress Party and its leader, Shri Rahul Gandhi, are guilty on three counts:
- The UPA delayed the deal by over a decade and seriously compromised national security.
- Every fact that Shri Rahul Gandhi and the Congress Party has spoken on pricing and procedure are completely false.
- Its effort of raising these issues is to further delay a defence procurement so that India’s defence preparedness further suffers.
The questions
I have, therefore, decided to ask the following questions to the Congress Party and its President. Needless to say that if replies are received in the public space or even if there is an issue diversion and no reply is received, I would be constrained to come out with further specific facts which establish truth as a victim of Shri Rahul Gandhi and his party merely peddling his falsehoods. Needless to say that I am constrained by the secrecy clause, which exists in the Contract and whatever I ask or respond to would be constrained by that limitation. My question to Shri Rahul Gandhi and his Party are as follows:
- The UPA was a Government which suffered from a decision- making paralysis. Do you agree that the delay of over one decade was only on account of the incompetence and indecisiveness of the UPA Government?
- Did this delay seriously compromise national security? Is not the medium multi-role combat aircraft required by our forces to identify and strike at targets particularly when two of our neighbours have already enhanced their strength in this area?
- Was this delay and eventual abatement of the purchase by the UPA based on collateral considerations as had been witnessed in earlier transactions such as the purchase of the 155 mm Bofors gun?
- How is it that Shri Rahul Gandhi quoted a price of Rs.700 crores per aircraft in Delhi and Karnataka in April and May this year? In Parliament, he reduced it to Rs.520 crore per aircraft, in Raipur he increased it to Rs.540 crores; in Jaipur he used the two figures – Rs.520 crores and Rs.540 crores in the same speech. In Hyderabad, he invented a new price of Rs.526 crores. Truth has only one version, falsehood has many. Are these allegations being made without any familiarity with the facts of the Rafale purchase?
- Is Mr. Gandhi or the Congress Party aware of price comparison? Is Mr. Gandhi aware of the aircraft price, which was quoted in 2007 in the L1 bid? Is he aware that there was an escalation clause, which by 2015 when the NDA struck the price deal, would have further escalated the price? Would not the escalation clause have continued to escalate the price till each of the aircraft was supplied? Have the significant exchange rate variations between Rupee and Euro during the same period been considered?
- Is he aware of the fact that if the basic aircraft price on which UPA was to purchase the aircraft along with the escalation clause is compared at the price with the better terms on which the NDA Government signed the deal. The basic aircraft price itself is 9% cheaper under the NDA than it was under the UPA?
- Can Shri Rahul Gandhi deny that when the add-ons such as India-specific adaptations, weaponry, etc. are installed on the basic aircraft, the UPA price, which was mentioned in the 2007 L1 offer, would be at least 20% costlier than the more favourable price negotiated by the NDA?
- Can Shri Rahul Gandhi and the Congress Party deny if the total contract cost, that is, basic aircraft plus add-ons, including weaponry, etc., Indian adaptations plus future supplies and maintenance are all added, the NDA terms become far more favourable than the 2007 L1 offer?
- Can Shri Rahul Gandhi and the Congress deny that the Government of India has no contract whatsoever with any private industry in relation with the Rafale aircraft supplies? In fact, 36 of the Rafale aircraft with their Indian adaptations are going to be sent to India and there is no manufacturing of these 36 aircrafts in India.
- Any Original Equipment Manufacturer (OEM) under the offset policy of the UPA can select any number of Indian partners, both from the private sector and the public sector, for offset supplies? This has nothing to do with the Government of India and, therefore, any private industry having benefitted from the Government of India is a complete lie. Can Shri Gandhi and his Party deny this?
- Are Shri Gandhi and his Party aware of the fact that there are two ways of acquiring a defence equipment, i.e., either by competitive bidding or by an Inter-Governmental Agreement?
- Can Mr. Gandhi and his Party deny that the UPA Government in 2007 itself had shortlisted the Rafale as technically- acceptable and L1 in price competition?
- Can Shri Gandhi and his Party deny that considering the urgency of the defence requirement, the Government of India and the French Government agreed to execute the supply of 36 Rafale aircrafts at terms better than the 2007 offer of the UPA?
- Can it be denied that both the Price Negotiation Committee and the Contract Negotiation Committee negotiated for 14 months before concluding the deal?
- Can it be denied that before the deal was executed, the Cabinet Committee on Security approved the transaction?
On Delay
Unsure of facts
Role of private industries
On procedure
I am asking the above questions and I hope Shri Rahul Gandhi and the Congress Party would respond immediately.
Posted on 26 August, 2018, No Comments Comments admin
The International Monetary Fund holds bilateral discussions with its members usually every year. On the basis of the consultations with various experts and after analysing the economic data, they come out with their staff report. What political parties and their representatives normally say depends on where they stand – whether in Opposition or in Government. I am, therefore, reproducing in the words of the IMF, the summary of what they had to say about India in January-February, 2014 i.e. the last few months of the UPA Government and now in July-August, 2018. What is contained below is factual exact reproduction of the IMF report without any addition or subtraction:
2014
“KEY ISSUES
Context: The tightening of global liquidity has increased external pressures and heightened the focus on India’s macroeconomic imbalances (high inflation, large current account and fiscal deficits) and structural weaknesses (particularly supply bottlenecks in infrastructure, power and mining).
Outlook and risks: Growth is expected to slow to 4.6 percent this fiscal year, the lowest level in a decade, reflecting global developments and domestic supply constraints. Headline CPI inflation is expected to remain near double digits for the remainder of the fiscal year. The current account deficit is narrowing, driven by a significant improvement in exports, robust remittances flows, and a rapid diminution of gold imports. Nonetheless, India has very little room to adopt countercyclical policies, constrained by persistently-high inflation, and sizeable fiscal and external imbalances. Spillovers from renewed external pressures interacting with domestic vulnerabilities are the principal risks.
Key policy recommendations:
- High and persistent inflation is a key macroeconomic challenge facing India. Further increases in the policy rate will be necessary to tackle high inflation and inflation expectations.
- If external pressures from global financial market volatility resume, rupee flexibility should be the first line of defence, complimented by use of reserves, increases in short-term interest rates, actions on the fiscal front, and further easing of constraints on capital inflows.
- Further fiscal consolidation is needed. Tax and subsidy reforms will be required to durably lower fiscal imbalances.
- Enhanced financial sector supervision, better monitoring of banks’ credit quality, and improved information on corporate vulnerabilities will be needed as a basis for tackling rising corporate and financial sector strains.
- Addressing supply bottlenecks and structural challenges—particularly in the agriculture and power sectors, and in the pricing and allocation of natural resources (including coal, natural gas, and fertilizers)—will be essential to achieve faster growth, job creation and poverty reduction.”
2018
“Stability-oriented macroeconomic policies and progress on structural reforms continue to bear fruit. Following disruptions related to the November 2016 currency exchange initiative and the July 2017 goods and service tax (GST) rollout, growth slowed to 6.7 percent in FY2017/18, but a recovery is underway led by an investment pickup. Headline inflation averaged 3.6 percent in FY2017/18, a 17-year low, reflecting low food prices on a return to normal monsoon rainfall, agriculture sector reforms, subdued domestic demand, and currency appreciation. With demand recovering and rising oil prices, medium-term headline inflation has risen to 4.9 percent in May 2018, above the mid-point of the Reserve Bank of India (RBI)’s headline inflation target band of 4 percent ± 2 percent. External vulnerabilities remain contained but have risen. The current account deficit (CAD) widened to 1.9 percent of GDP in FY2017/18, on rising imports and oil prices. Gross international reserves rose to US$424.5 billion (about 8 months of prospective imports of goods and services) at the end of March 2018, but declined to US$407.8 billion in the third week of June 2018. Persistently-high household inflation expectations and large general government fiscal deficits and debt remain key macroeconomic challenges. Systemic macrofinancial risks persist, as the weak credit cycle could impair growth and the sovereign-bank nexus has created vulnerabilities.
The near-term macroeconomic outlook is broadly favorable. Growth is forecast to rise to 7.3 percent in FY2018/19 and 7.5 percent in FY2019/20, on strengthening investment and robust private consumption. Headline inflation is projected to rise to 5.2 percent in FY2018/19, as demand conditions tighten, along with the recent depreciation of the rupee and higher oil prices, housing rent allowances, and agricultural minimum support prices. The current account deficit is projected to widen further to 2.6 percent of GDP on rising oil prices and strong demand for imports, offset by a slight increase in remittances. As inflation pressures have risen, monetary policy was tightened in early June 2018. Fiscal consolidation is expected to resume in 1 Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. International Monetary Fund 700 19th Street, NW Washington, D. C. 20431 USA FY2018/19, with the FY2018/19 Union Budget deficit target of 3.3 percent of GDP (equivalent to 3.6 percent of GDP in IMF terms). Financial sector reforms have been undertaken to address the twin balance sheet problems, as well as to revive bank credit and enhance the efficiency of credit provision by accelerating the cleanup of bank and corporate balance sheets. Over the medium-term, the outlook will continue to improve with growth expected to rise to 7¾ percent, and macro-financial and structural policies are priorities to help boost inclusive growth and harness the demographic dividend.
Economic risks are tilted to the downside. On the external side, risks include a further increase in international oil prices, tighter global financial conditions, a retreat from cross-border integration including spillover risks from a global trade conflict, and rising regional geopolitical tensions. Domestic risks pertain to tax revenue shortfalls related to continued GST implementation issues and delays in addressing the twin balance sheet problems and other structural reforms.”
Comment
An analysis of what the IMF had to say in 2014 as against 2018 is very clear – high inflation, high fiscal deficit, high current account deficit, a standstill infrastructure, power sector, allocation of natural resources. We have come a long way. The last four years have seen a series of reforms, both legislative and otherwise, which have been carried at by the Government. The system have been substantially cleaned up and made more transparent. Decisiveness has led to easier decision making and made the economy stand out before several other countries. I would urge all to read these two reports, the copy of which are now publically available.