economic survey 2015 summary

8/18/2019 Economic Survey 2015 Summary

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FISCAL SPACE

A difcult phase in Indian scal history began with Lehman crisis o 2008. The scal

decit increased by !" which was e#ually shared between reduction in re$enue

due to large indirect ta% cuts and rise in e%penditures. In the initial years &200'(

20))*" current e%penditures &public consumption* increased dramatically due torising subsidy bill &)! o +,-*" increase in pay and allowances ater the

implementation o th -ay /ommission recommendation &0.! o +,-* and social

benet entitlements lie 134+A &0.5! o +,-*.

6ence as a mid(term strategy +o$t should ocus on reducing the scal

decit to 5! and eliminating the re$enue decit as per the 731 Act. This is

essential or ensuring the credibility o the nation and also to bring India closer to its

emerging maret peers. The adherence to scal in the mid(term is necessary

because the +o$t come and go" but as a nation we need to instill condence and

certainty in the mind o in$estor and this would not be possible i we eep changing

the targets o 731 re#uently. +o$t should also re$erse the trend o re$enue decit

and mo$e towards the golden rule o 0! re$enue decit and ensuring that

borrowing is only or capital ormation.

The abo$e reduction in scal decit should come through

rationali9ation o e%penditure and switching o e%penditure rom consumption &$ia

rationali9ation o subsidies* to in$estment. This switch will be benecial in the long

run by reigning in in:ationary tendencies because in$estment will add to the

capacity and boost the supply side o economy.

Also" it is e%pected with the picing up o growth and implementation o

+;T when combined with e%penditure control will help us meet the scal target.

According to the history o growth surge in last decade" it is e%pected that ater

implementation o +;T and growth in economy" more ta% re$enue will be generatedor the go$t due to ta% buoyancy.

Why Subsidy needs to be rationalized?

Ater < decades rom Independence India is still struggling with mass po$erty. =ne

o the most important and constant measure which ha$e +o$t has resorted to ght

po$erty has been the subsidy. +o$t subsidies a range o ser$ices and commodities

or the poor lie or e%ample rice" wheat" erosene" railways" electricity" water etc.

The subsidy bill cost us around .8! o +,-. This clearly highlights despite huge

spending subsidies ha$e not wored in the way intended. Issues with subsidies>

). ;ubsidies are regressi$e in nature ? Although subsidies ha$e been planned

and disbursed or the poor to benet but they tend to benet more the rich

household than the poor. 7or e%ample according to the I17 paper" electricity

benet does not reach the people li$ing in destitution due to lac o

electricity connection in the rst place. 4$en among the household which


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ha$e connection bottom #uintile o the household use only )0! o the

subsidy whereas top #uintile uses 5

household consume more power due to their better liestyle. ;imilarly"

bottom @0! o household use only 2@! o L-+ subsidy. Another e%ample

would be the cross subsidi9ation o railway ares in India. It benets more the

rich household because bottom 80! o the household constitutes only 28! o the total originating passengers.

2. -rice ;ubsidies ,istort the 1aret which ultimately hurt the poor ? In a ree

maret economy price plays a $ery important role in the resource allocation.

A subsidy in the price aects the decision maing o the producer and

consumer resulting in misallocation o the resources and their suboptimal

usage. This ultimately dampens the aggregate producti$e and thus hurt the

poor. 7or 4%ample>

,ue to higher 1;- oered or the rice and wheat" armers resort to o$er(

culti$ation o cereals and under(culti$ation o non(1;- supported crops. This

demand and supply gap in non(1;- supported crops gi$e rise to ood in:ation

which hurt the poor most because they tend to ha$e uncertain income

streams and do not ha$e the capability to withstand in:ationary spies.

;imilarly subsidy in water leads to culti$ation o water(intensi$e crops"

irrespecti$e o the agro(ecological region" resulting in lowering o the water

table. 1arginali9ed armers without the inrastructure or irrigation are thus

hurt in the long run.

;imilarly" due to high price elasticity o the poor armer in ertili9er

consumption" ertili9er subsidy is more benecial or the ertili9er producer

and rich armer who are less elastic to the price. Also since price o ertili9er

is controlled" it oers no incenti$e to producer to supply ertili9er to remote

areas. 3emote geographical locations are already economically poor and inabsence o agricultural inputs they are bound to remain poor in perpetuity. To

correct this anomaly +o$t o India introduced reight subsidy or ertili9er

transportation but that is insufcient as railway reight rates are already $ery

high due to cross subsidi9ation. This is how multiple subsidies sometimes

interact and hurt the poor.

Indian railway passenger ares are highly cross

subsidi9ed due to which reight taris are one o the highest in the world. This

reduces the competiti$eness o the Indian manuacturing and raises the cost

o manuactured goods. Also this leads to switching o$er o reight trafc rom

railways to road transport adding to the problems lie pollution" roadcongestion" road accidents etc. This ultimately hurt the economy and mostly

the poor.5. ;tructure o subsidy is e%tremely comple% ? The implementation o subsidy is

e%tremely comple% gi$ing opportunity or corruption and maing the maret

highly inefcient. 7or e%ample" in case o ertili9er they are rm specic and

import consignment specic" sometimes based on %ed #uantity basis or

$ariable #uantity and sometimes based on ind o ertili9er.


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. Large ;cale leaage in the subsidy platorm ? 7or e%ample only ! o the

distributed erosene reaches the poor household" rest all is consumed in the

blac maret either or adulteration or petrol and diesel or as a uel in small

businesses.

Abo$e reason mae it necessary or the +o$t to rationali9e the subsidy. Therationali9ation o subsidy should not be seen as anti(poor. As already mentioned the

subsidy are regressi$e in nature and distort the maret which hurt the poor. Also

leaage in the system reduces the eecti$eness o the subsidy program. In act with

the rationali9ation o subsidy +o$t will be able to enhance its scal space which can

used in the social sector welare schemes.

Transerring the subsidies directly in

cash orm is an alternati$e to rationali9e the subsidy program. Bith the growth o IT

and communication ser$ices it has become possible or the go$ernment to

implement direct transer o subsidies. ,irect transer o subsidies oer $arious

benets lie

( /ash transer will augment the efciency o the anti(po$erty measures.

3ecent e%perimental e$idence has concluded that it boost the household

consumption and asset ownership.( y eliminating a lot o middle ofces and human administration interace it

reduces the leaage substantially and results in lot o sa$ing or the

+o$ernment.( It results in better targeting o the beneciary and eliminates ghost

beneciary.( ,irect cash transer ulll the tas o supporting the poor household without

distorting the maret and hence result in efcient utili9ation o resources.

+o$t does not intend to eliminate the subsidy but want to pro$ide the support in

another orm. The CA1 trinity ? Can ,han DoEana" Aadhar and 1obile number allows

the +o$t to oer support in a targeted and less distorti$e manner.

;cope o CA1

As o ,ecember 20)"


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and post ofce transers. India has close to '00 mio plus mobile phone users with

00 mio uni#ue subscribers. 1oreo$er 5proEects pending in the public and pri$ate due to dierent reason. The situation has

impro$ed a bit rom last year when around 8.5! o +,- worth o proEects was

stalled. An analysis o the same would gi$e us better understanding why proEects

are stalled.

=ut o 8.8 lah crore" < lah crore are in the pri$ate sector and ).8 lah

crore in the public sector. 6ence o$erwhelmingly large numbers o proEects are

stalled in the pri$ate sector. -ri$ate proEects are held up on account o poor maret

conditions and non(regulatory actors contrary to the general perception o lac o

go$ernmental clearances. Bhereas maEority o the public proEects are stalled due to

absence o regulatory clearances. In pri$ate sector mainly manuacturing and

inrastructure proEects and in public sector mainly inrastructure proEects are stuc.

1anuacturing is sti:ed due to poor macro(economic en$ironment.Bith poor growth in demand rom F;A" +reece crisis in 4F" slowing down o /hina

etc demand has decreased.

=n the other hand electricity sector proEects are hauled up due to lac o uel

and eedstoc problem. /oal India has not been able to pro$ide raw material as per

its commitment in 7uel ;upply Agreement. -roduction o coal has almost stagnated

in last 5( years.


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1ining and construction acti$ities ha$e suered on the hand o

en$ironmental clearances. 6ence each sector is suering rom dierent problem but

the distribution o stalled proEects is top hea$y. That means" clearing the top )00

proEects by $alue will address the 85! problem o the stalled proEects.

alance ;heet ;yndrome ? The stalled proEects ha$e not onlydampened the growth o economy but ha$e also se$erely stretched the balance

sheet o corporates and raised the stressed assets o public sector bans to an

alarming le$el. 6ence this creates a $icious cycle where corporates do not ha$e

enough credit to mae new in$estment and they ha$e passed on stressed assets to

bans due to which they cannot disburse urther credit leading to slowing down in

in$estment.

The balance sheet syndrome o Indian corporates has a certain Indian

characteristic to it. The high debt(e#uity ratio o the corporates is accompanies by

relati$ely high growth o (

en$ironment. Fsually in de$eloped countries debt o$erhang de$elops with

de:ationary pressure. The public sector is e%posed to pri$ate sector in the orm ---

and lending by the public sector bans. Fnlie the de$eloping countries" IndiaGs high

debt(e#uity ratio o corporates is nanced by the bans rather than the corporate

bond maret and this has led to high stressed assets and -A in bans.

Although the debt(e#uity ratio has been rising" economy has slowed

down in last @ years" wea balance sheets and higher -A" e#uity maret has been

on rise or past 5 years. This has pu99led the maret readers and only plausible

e%planation could be that in$estors e%pect signicant turnaround in the in$estment

cycle. Also they must ha$e e%pectation that +o$t will step in beore the proEects ail

as they are mostly unded by public sector bans which +o$t cannot allow to ail.

+o$t o India has drawn 2 policy lessons rom the abo$e in$estment en$ironment>

). ,ue to bloated balance sheets o corporates and high stressed assets with

the public sector bans they are in no place to mae urther in$estment.

6ence" public sector in$estment is re#uired to crowd in pri$ate sector

in$estment. +o$t has to mae this in$estment eeping in light the scal

decit target and hence there is an urgent need o rationali9ation o

go$ernment e%penditure especially subsidy.2. --- model has so ar not wored properly and hence need to be re$itali9ed. In

addition" we need to thin about the setting up o Independent 3enegotiation

/ommittee to come out with inno$ati$e solution or --- struggling with

litigation. Also we need to de$ise easy mechanism or banruptcy and e%it to

clear the ailed proEects and distribute the loss among the staeholders.

-roblem with the current --- model

1any inrastructure proEects today are nancially stressed and account or roughly

one(third o the stressed assets in bans. ans due to higher -As are no position


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to pro$ide credit and new proEects are not able to attract new bidders as seen in

6AI bids. Also pension and insurance sector are reluctant to in$est in inrastructure

due to inherent ris in the proEects. The --- proEects are struggling or a $ariety o

reason dealing with the poorly designed ramewor" namely>

). 1ore ocus on 3e$enue> 4%isting proEects ocus e%cessi$ely on the re$enueearned by the +o$t rather than the pro$ision o ser$ices or the customer.

This leads to higher payment by the user or a sub(optimal ser$ice.2. 1isallocation o 3is> The ris o the proEects are se$erely misallocated and

gi$en to the parties who are not able to manage it. 7or 4% Trafc riss are

borne by the de$eloper in the highway proEect when clearly trafc is not

under the control o de$eloper.5. Lac o 3enegotiation a$enues> There are no e%(ante structures or

renegotiation. There is no incenti$e or a bureaucrat to renegotiate a stalled

proEect in act i done it can open the doors or charges o grat against the

bureaucrat. The structure asymmetrically a$ours ailure o the proEects o$er

renegotiation.. 4%cessi$e =$erbidding> /ontractors ha$e relentlessly relied on e%cessi$e

o$erbidding to get the proEect and then e%ploit loopholes in the ramewor

through litigation at the later date to re$ise the contract.@. Limited -enalties> The source o re$enue or the proEects is mostly user

collected charges. In case o gap between the re$enue stream and proEect

cost +o$t pro$ides $iability gap unding to mae the proEect $iable. This is

pro$ided at the start o the proEect. Later e$en in the case o

underperormance or non(perormance o the proEect +o$t can only rely on

the termination o the contractor.

ew 1odel or the --- proEects>

7irstly" the proEects should continue with the combining o construction and

maintenance to incenti$i9e #uality building in the rst place. In some proEects lie

highways maintenance cost is more than the building cost and hence combinedbidding will mae the bidder to tae into account the lie cycle cost.

;econdly" ris should be transerred to only those parties who can control and

manage it. 7or e% trafc ris should not be transerred in railway or highway proEect

to operator where as in port or telecommunication proEect it can be done as due to

presence o other competitor pricing and #uality aect the demand.


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Thirdly" nancing structure should attract the pension and insurance unds because

they ha$e the capability to und long term inrastructure proEects. At the same time

+o$t should also ocus on building up the corporate bond maret.

BANKING

Status of the Banin! Se"tor in India

/urrently baning sector o India is struggling with many problems lie high

proportion o stressed assets" -As" difculty in ac#uiring resources to meet the

A;4L 5 re#uirement and the need or +o$ernance reorm &-C aya /ommittee

3eorm*. These are comparati$ely new problems but there are other problems which

ha$e e%isted or long and are related to the policy and structure o the baning

industry in India.


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7inancial 3epression> This re:ects the policy challenge aced by the Indian bans.

The Indian nancial system is aHicted with double nancial repression. =n the

assets side o the balance sheet this is caused by the ;L3 re#uirement that orces

the ban to hold go$ernment securities and priority sector lending that orces sub(

optimal allocation o nancial resources. 7inancial repression on the liability side

arises rom the high in:ation rom 200< onwards which has led to negati$e realinterest rates and hence all in household sa$ings.

;tructural -roblem> This relates to the lac o competition and ownership. Lac o

increase in presence o pri$ate sector bans shows the lac o competition in the

maret. The biggest anomaly is during the high growth phase o last decade which

was achie$ed by the pri$ate sector growth and in$estment was unded by the public

sector and the pri$ate sector bans growth was close to stagnant. ;o India

witnessed a growth led by pri$ate sector which was not unded by the pri$ate sector

bans.

6ow to deal with these problems

;L3 3eduction and its benets

;L3 has long history and has been started around in )'


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+o$t has o$er the year tried to alle$iate po$erty and achie$e inclusi$e growth

through e#uality o credit $ia priority sector lending scheme. Fnder the scheme it is

mandatory or the domestic public and pri$ate sector bans to disburse 0! o their

adEusted net ban credit in the pre(dened priority sectors lie agriculture" housing

etc. 7or oreign bans with more than 20 branches in India they ha$e to disburse

52!. Although scheme seems to be targeted approach o growth which is necessaryor inclusi$e growth but it is suering rom many problems. 7or e%ample letGs tae

the e%ample o agriculture sector>

( =$er the years credit to agriculture has increased tremendously. In act in last

)@ years it has grown 8 times in nominal terms and yet the contribution o

agriculture to +,- remains roughly same. This highlights that the allocation

o credit is not being used efciently and has not resulted in growth o

agriculture.( There has been sharp increase in the large si9e loans highlighting the act -;L

is being appropriated by the large and wealthy armers.

( The outstanding and deaulted loans against the credit made in agriculturalsector are mainly rom urban and metropolitan areas. ;o the rich armers are

deaulting more than the poor armers. Also this highlights that the loan

wai$er benets more to rich armer than the poor armer.( There has been sharp decrease in disbursement o long term credit rom


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Also healthy competition should be de$elopment between bans and the

capital maret which needs go$t policy support.. ,isinter> India needs better policies or banruptcy and easy e%it. India should

re$isit the idea o Independent 3enegotiation /ommission.

( ,ebt reco$ery tribunals are o$er(burdened and under(resourced.

( Asset 3estructuring /ompanies in which bans themsel$es ha$e signicantownership creates misaligned incenti$es.

( ;A37A4;I seems to act more against the small and medium terms

enterprises.

#o$ to %e&elo' Cor'orate Bond (aret?

). Impro$ement in Legal 7ramewor ? ;trengthening o the legal ramewor or

regulation o corporate bond maret by amendments in the rules ramed by

1inistry o /orporate Aairs" ;A37A4;I Act and Income Ta% Act.2. -romoting In$estment in the maret ? +o$t should modiy the guidelines o

in$estment or pension und and insurance und to allow them to in$est in themaret. This will pro$ide a stable and long term in$estor to the capital

maret. Also rationali9ation o the withholding ta% on 7IIs or +(;ecs and

corporate bonds will promote in$estment.5. ,eepening and di$ersication o the maret ? +o$t should allow introduction

o new products such as credit deault swaps" municipal bonds" securiti9ation

swaps etc. This will di$ersiy and deepen the marets and mae it more

stable. Also insurance companies should be allowed to participate in repo

maret to mae it more li#uid.. ;upporting Inrastructure ? ew trading platorm and ris management

system or corporate bonds including a centrali9ed database on outstanding

amount" settlement $alue and traded $olume to eliminate ragmentation oinormation.


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Railways

I17 in its Borld 4conomic 3eport has highlighted the benets o public in$estment

in inrastructure. In the short run it boosts aggregate demand and crown in the

pri$ate in$estment. In the long run" it adds to the capacity and chec the in:ation

by boosting the supply side. To boost the growth o Indian economy +o$t o India

has selected railway as one o the a$enue or public in$estment.

Issues

3ailway is closely lined with the other sectors o Indian economy lie

manuacturing" tourism" transportation etc. In$estment in railways has positi$e

spillo$er eect in terms o reduction o cost" boost agglomeration economies and

impro$e the competiti$eness o the economy.

=$er the years in$estment in railways has remained almost stagnant. The

conse#uences o the under in$estment>

( /apacity e%pansion o the railways has been se$erely hampered. In )''0

IndiaGs and /hinaGs railway networ was roughly e#ual with India ha$ing a

slightly higher co$erage. ut today /hinaGs co$erage is roughly ).@ times that

o India. IndiaGs railway e%pansion has increased marginally. ,ue to lac o

capacity addition the share o railways in +,- has allen to )! in recent

years.( Apart rom the stagnant capacity Indian railways has not been able to

impro$e on the speed o the trains and its haulage capacity. ,ue to lac o

in$estment wagon" engine and trac design has remained same o$er the

years maing India the slowest railways amongst its emerging countries

peers.( ;ub(=ptimal Fse o 3esources ( ,ue to poor networ capacity trafc

congestion is widespread on all routes. This has led transer o passenger and

reight trafc rom railways to road sector. 3ailway as mode o transport is

more cost and uel efcient and is also less polluting compared to the road

transport. 6ence this shit is a huge economic burden on the country and isleading to sub(optimal usage o resources.

( 3eduction in competiti$eness o industries ( ;ame trac networ is used by

both passenger and reight trains in India. Bith @! o the networ capacity

being used by the passenger trains" this has posed constraints on the reight

mo$ement. The outcomes ha$e been longer deli$ery time" delay and more

in$entories holding by the companies to battle uncertainty. This has reduced

the competiti$eness o our industries.


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( -oor inrastructure de$elopment ? 3ailways still ha$e age old inrastructure in

the orm old and creaing platorms" old technology wagons etc. The biggest

downall has been the upgradation o saety technology. =n account o lac

in$estment India still uses outdated saety measure and signaling system

leading to re#uent accidents causing huge economic and human loss.

6ow can railways boost growth

3ailways ha$e strong bacward linages i.e. in$estment in railway creates demand

in other sector lie manuacturing. Increasing the railway out by ) increase the

economy output by 5.5" this multiplier has been increasing o$er time and the eect

is greatest on the manuacturing sector. Thus scheme to in$est in railways is a

natural partner to J1ae in IndiaG program.

7urther there are many sectors where railway ser$ices are used as an

input and hence it has strong orward linages too. 7orward linage multiplier is

close to 2.@. This multiplier has declines o$er time but this has been due to capacity

constraint in railways caused by under(in$estment in railways.

6ow can nances be arranged or railway e%pansion

Be should tae a cue rom /hina on how they e%panded their networ in last 20

years.

( ;ignicant proportion o in$estment in /hinese 3ailways comes rom the

collaboration between the centre and the pro$incial go$ernment.( 7or specic reight proEects maEor users such as coal mines" industries etc

contribute to the de$elopment o the proEect.( A part o the reight tari is allocated to specic und which is used only or

inrastructure capital spending. This eases the pressure on scal budget or

capacity e%pansion( /hinese railway has been corporati9ed and is allowed to raise loans in /hina

and in oreign marets.


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AP(C

Bith the liberalisation o economy in )'') industrial sector was allowed to buy and

sell on their own choice but the agriculture sector has still not seen the benets o

the same. Indian armers" in many states" still ha$e to sell their produce to A-1/

licensed entities. A national maret or agricultural produce has still not emerged.

The A-1/ act was passed with the dual intention o 're&entin! e)'loitation of

far*ers by traders and maing sure they !et the ri!ht 'ri"e for their 'rodu"e.

In the early years ater independence" the armers had to deal with money lenders.

Lac o credit sources and supply alternati$es" the armer had to sell his 'rodu"e

to *oney lenders at the latterGs whims and ancies. The money lender also %ed

its selling price arbitrarily. Thus both the far*er and "onsu*ers $ere at loss.

In order to tacle this A-1/ Act was brought so as to regulate the maret or

Agricultural -roduce" mainly ruits and $egetables. Although other items were also

there. In this system e$ery state setup its A-1/ i.e. Agricultural -roduce 1areting

/ommittee. The role o it was similar to what 7/I does in ood grains. A-1/ procures

the ruits and $egetables o armers and regulates its sale in regulated marets.

This system was successul in eliminating the dependency o armers on money

lenders. ut another type o s'oil syste* de&elo'ed+ ,he *iddle*en i.e.

contractors" commission agents" suppliers" transporters etc ha$e made a mocery

o the intended process. ,he result is lar!e "artels a*on! the*. ew entrants

nd it e%tremely difcult to compete and negotiate so as sustain in this business.

Also the A-1/ sta is oten ound indulging in corrupt practices" thus neglecting this

oul system.

The pro$isions and issues with the act

)* (e*bershi' ? the act pro$ides or timely elections or the membership o the

mareting committees. ut" hardly any elections tae place" thus run mostly by

bureaucrats. 6ence red tapism and nepotism pre$ails.

2* Li"ense to traders ? to trade in the maret yards" traders ha$e to ac#uire a

license according to the act. ut" in most states the issuing o new licenses has


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come to a halt" thereby reducing competition and maing it easier or the

established traders to e%ploit armers.

5- %ouble "o**ission by traders ? the traders buy rom the armers at a low

price" maes commission there. They sell to the consumers at a high price" earn

commission there. Thus" the customer and armer are both aected.

* Politi"ization ? There has been perception that the position o head o the

maret committee at the state le$el and maret board are occupied by political

in:uential. Licensed agents enEoy close relationship with these politicians and enEoy

monopoly power and hence lead to carteli9ation.

@* (ono'oly of trader ( ,ue to the act armers are not allowed to sell their

produce in other marets lie retail chains" e%porters which are ready to oer better

prices sa$ed rom eliminating the middle man. This creates articial monopoly o

the traders and act needs reorm to remo$e the barrier entry or other players

* (ulti'le Fees ? A-1/ le$y multiple ees that are o substantial magnitude and

are non(transparent in nature. ;uch high le$el o ta%es at the entry le$el has

cascading eects on the prices o the commodity.

). /reation o alternati$e maret ? 1odel act pro$ides or direct sale o produce

through contract arming. It also permits or setting up o speciali9ed marets


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or speciali9ed products especially perishables. It pro$ides scope or setting

up o pri$ate marets in any area by producers and consumers. It en$isages

setting up o armersG and consumersG maret or direct sale o commodity to

consumers.2. The model act pro$ides or the single le$y o maret ee in a transparent way.

5. The model act pro$ides or the replacement o licensing with the registrationo agents which would acilitate agents to operate in one or more marets.

This would eliminate monopoly power enEoyed by the agents and hence

destroy cartels.

7ew Inade#uacies with the 1odel Act>

). The act still re#uires buyers paying the A-1/ charges irrespecti$e o i they

ha$e bought it rom the A-1/ mandis or not. This will pre$ent the ormation

o the national and state maret. Also the owner o pri$ate maret will need

to collect these charges on behal o A-1/ maret committees. ;ince the

pri$ate maret would be charges A-1/ ees along with the ees it needs orpro$iding the trading platorm and other ser$ices" would mae the pri$ate

maret uncompetiti$e.

Bhat alternati$e steps +o$t can tae to set up ational 1aret

). ;tate go$t should be persuaded to drop the perishables lie ruits and

$egetables to be dropped rom the A-1/ schedule o regulated commodities.2. -ri$ate marets on their own are not capable to compete with the already set

up A-1/ mandis. ;tate go$t should pro$ide policy support or setting up

inrastructure" maing land a$ailable etc.5. Although the A-1/ act o states ha$e been enacted under the ;tate List

4ntries lie Agriculture" Trade and /ommerce" yet there are many entries in

/oncurrent List lie ;upply and ,istribution o 7oodstus" Trade and

/ommerce etc under which +o$t can enact laws to acilitate national maret.


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,a) 0efor*s

GS,

Introduction o the +;T would be the biggest nancial reorm ater Independence.

y subsuming a large number o indirect ta%es into a single ta% it would mitigate

cascading or double ta%ation in a maEor way and pa$e the way or common national

maret. 7rom the consumers point o $iew it would lessen the ta% burden on goods

and rom the +o$tGs point o $iew due to transparent characteristic o +;T it wouldbe easier to administer. It also maes perect economic sense because introduction

o +;T is e%pected to spur economic growth and mae Indian goods competiti$e in

Indian and international marets.

,etails o the +;T ill

). +;T would be applicable on the supply o goods or ser$ices as opposed to the

current practice o manuacture or on sale o goods or pro$ision o ser$ices.2. +;T would be a destination based ta% as opposed to the origin based ta% i.e.

the ta% would be le$ied at the point where sale is made rather than at the

point where production is done. ThatGs why many o the manuacturing stateslie +uEarat were opposing it as it led to loss o their ta% re$enue. As a

compromise or the manuacturing states a non($atable additional ta% not

e%ceeding )! would be le$ied by the centre and retained by the origin state

on inter(state supply o goods. This would be done at least or a period o 2

years. KInter(state ta%es ha$e been the biggest source o nuisance in the ta%

structure. They ha$e created an opportunity o arbitrage or the mareters

and hence ostered wide scale corruption and ta% a$oidance and e$asion.


17/30

Introduction o +;T is e%pected to curb this to a signicant e%tent" although

the non($atable ta% o )! will still distort the maret but the incenti$e in no

enough to create an arbitrage maret.5. It will be a dual +;T where both centre and state will simultaneously le$y

ta%es on the common agreed base. &/+;T and ;+;T*. This uni#ue model has

been de$eloped eeping in mind the ederal nature o India. An integrated +;T &I+;T* would be le$ied on inter(state supply. This would be

collected by the centre to a$oid breaing o the credit chain. Import o goods

will be treated as inter(state supply and hence I+;T would be le$ied apart

rom the custom duties.@. ;tates were not ready to let go the high re$enue items and argued to eep

them out o the +;T. As a compromise" +;T would be not applicable on

alcohol. +;T on petroleum products would be applicable rom a date

recommended by the +;T council.. 4%ports would be 9ero rated.

( ,rop in the price o crude due to wea global demand and competition

generated by shale gas production in F;( ;otness in the prices o commodities especially edibles and coal( Tight monetary policy ollowed by the 3I resulting in the moderation o

demand( 3upee has been stable or last ) year compared to other emerging peers.

This has stabili9ed the import prices and hence helped in reducing the

in:ation( 1oderation in wage growth rate specically in rural areas has reduced the

demand o protein based items.( ase eect also contributed to the decline in headline in:ation.

;pecic actions taen by +o$t to tacle ood in:ation>

( 4%tra allocation o @ mio tonnes o rice to -L and A-L amilies in the state

pending the implementation o the ational 7ood ;ecurity Act and allocation

o )0 mio tonnes o wheat or the open domestic maret sale by 7/I( ;uggestion to the states to delist $egetables and ruits rom the A-1/. This

allowed ree mo$ement and sale o ruits and $egetables.


18/30

( ringing onion and potatoes under the pur$iew o the 4ssential commodities

act. This ga$e state the power to dene the stoc limit to deal with the

carteli9ation and hoarding and maing $iolation o stoc a non(bailable

oence.( 1oderation in the increase o 1;-s and also creating disincenti$e or states

gi$ing bonus on top o 1;- by 7/I not procuring grain rom those states.

;tory o Bage +rowth 3ate

=$er the years +o$t under the impression o ostering growth and supporting the

agriculture has been increasing 1;-s. Also" +=I launched 134+A to pro$ide

guaranteed rural employment. The combined eect o both the policies has been a

general rise in the wage rate. Increasing wage rate" being a critical cost o

agriculture" urther ueled the increase in 1;-. Also since cereals" $egetables and

ruits and allied sector all draw labor rom the same pool o agricultural wor orce"

this led to the increase in the price o ruits and $egetables. The high demand or

protein generated" due to rising income" led to in:ation in prices o protein basedood items. This is how wage rate aected the ood in:ation o$er last ew years.

=nly ew items lie pulses and edible escaped the trend because they can be easily

imported rom the international marets without any restrictions.

7actors dri$ing the growth o Agriculture

.+ 0ESEA0C# AN% E%1CA,I2N and E3,ENSI2N

I/A3 has been de$eloping new $arieties o crops with specic traits that ha$e

higher yield along with better nutritional #uality. ;pecial emphasis has been placed

on generating $arieties which ha$e better tolerance and can adapt to the climate

change. The paradigm shit in producti$ity can only be achie$ed through better

yield as scope o areal e%pansion is limited. Also promoting more production

through higher 1;-s i.e price(led growth is no longer possible as it has many

detrimental eects to the maret. +=I has pro$ided or establishment o e%cellence

in agricultural research and education> one in Assam and another in Charhand.

According to the ;;= sur$ey @'! o the armers do not get much technical

assistance and now(how rom go$t unded arm research institutes or e%tension

ser$ices. They ha$e to rely on local progressi$e armers" media or pri$ate

commercial agents supplying arms inputs lie ertili9ers" machinery etc. ,espite

ha$ing institutional capability o research India is struggling in e%tending those

ser$ices to rural and last mile connecti$ity.

( 4ecti$eness o the lab(to(arm can be impro$ed through application o IT"


19/30

mobile and e(platorms" participation o +=s etc.

( +o$t has announced a Misan TN to disseminate real time inormation to

armers regarding new arming techni#ues" water conser$ation" organic arming etc.

4+ (e"hanization of A!ri"ulture in India

7rom 2005 onwards there has been an upward surge in the sale o tractors

highlighting the mechani9ation o agriculture in India. It is a desirable trend as

mechani9ation impro$es the producti$ity o agriculture. The abo$e surge has mainly

to do with the rising arm incomes due to global commodity boom and higher le$el

o 1;-s pro$ided by go$t. ut these are not the only actors.

In the past decade there has been a boom in the construction" manuacturing and

ser$ices sectors also pro$iding non(arm Eobs in the urban areas. This has led to

male specic migration to the cities resulting in shortage o labor in the rural. The

eect has been a rise in the wage rate. This made sense or the armer to in$est in

mechani9ation rather than paying high wages.

Although India is in the top in ood production in the world but we ha$e on a$erage

0! mechani9ation as compared to '0! mechani9ation in de$eloped world. These

le$els $ary signicantly across states.

3eason or poor mechani9ation in India>

( India is a highly di$erse country with dierent soil and climatic 9ones"

re#uiring dierent and customi9ed arm machinery.( ;i9e o land holding in India is $ery small in India maing use machinery

un$iable.

( 1echani9ation is capital intensi$e and due to lac o a$ailability o creditmechani9ation process has been hampered. Less than 5! o the agricultural

credit :ow to mechani9ation.

+o$t o India has launched a dedicated ;ub(1ission on Agricultural 1echani9ation.

5+ C0E%I,

;teps +o$t has taen to pro$ide easy credit to armers>

). -riority ;ector Lending2. Interest ;ub$ention ;cheme ? 7armers are gi$en a reduction in interest i they

mae timely repayments o the loan5. In order to discourage distress sales +o$t has made a$ailable the benets o

interest sub$ention against the egotiable Barehouse 3eceipts or armers

who ha$e Misan /redit /ard. 7or other armers they can a$ail post(har$esting

loans against B3s.. In the case o calamity interest sub$ention o 2! will be a$ailable to the

bans on the restructured amount o loan or the rst year.


20/30

3ationali9ation o -riority ;ector Lending

+o$t has o$er the year tried to alle$iate po$erty and achie$e inclusi$e growth

through e#uality o credit $ia priority sector lending scheme. Fnder the scheme it is

mandatory or the domestic public and pri$ate sector bans to disburse 0! o their

adEusted net ban credit in the pre(dened priority sectors lie agriculture" housingetc. 7or oreign bans with more than 20 branches in India they ha$e to disburse

52!. Although scheme seems to be targeted approach o growth which is necessary

or inclusi$e growth but it is suering rom many problems. 7or e%ample letGs tae

the e%ample o agriculture sector>

( =$er the years credit to agriculture has increased tremendously. In act in last

)@ years it has grown 8 times in nominal terms and yet the contribution o

agriculture to +,- remains roughly same. This highlights that the allocation

o credit is not being used efciently and has not resulted in growth o

agriculture.

( There has been sharp increase in the large si9e loans highlighting the act -;Lis being appropriated by the large and wealthy armers.

( The outstanding and deaulted loans against the credit made in agricultural

sector are mainly rom urban and metropolitan areas. ;o the rich armers are

deaulting more than the poor armers. Also this highlights that the loan

wai$er benets more to rich armer than the poor armer.( There has been sharp decrease in disbursement o long term credit rom


21/30

dependent on import on these commodities we should promote research and

de$elop #uality seeds.

7+ FE0,ILI8E0S+o$t has notied ew In$estment -olicy 20)2 to promote and acilitate resh

in$estment in the urea sector. This en$isages to end the import dependence.

(ission for Inte!rated %e&elo'*ent of #orti"ulture

1ission or Integrated ,e$elopment o 6orticulture &1I,6* is a /entrally ;ponsored

;cheme or the holistic growth o the horticulture sector co$ering ruits" $egetables"

root O tuber crops" mushrooms" spices" :owers" aromatic plants" coconut" cashew"cocoa and bamboo. Bhile +o$ernment o India &+=I* contributes 8@! o total

outlay or de$elopmental programmes in all the states e%cept the states in orth

4ast and 6imalayas" )@! share is contributed by ;tate +o$ernments. In the case

o orth 4astern ;tates and 6imalayan ;tates" +=I contribution is )00!. ;imilarly"

or de$elopment o bamboo and programmes o ational 6orticulture oard &6*"

/oconut ,e$elopment oard &/,*" /entral Institute or 6orticulture &/I6*"

agaland and the ational Le$el Agencies &LA*" +=I contribution will be )00!.


22/30

1I,6 will ha$e the ollowing sub(schemes and area o operation>

Sl+No+

Sub S"he*e ,ar!et !rou' 9 area of o'eration

). 61 All states O FTs e%cept states in

4 and 6imalayan 3egion.2. 6146 All states in 4 and 6imalayan

3egion.

5. 1 All states O FTs. 6 All states : 1,s fo"usin! on

"o**er"ial horti"ulture@. /, All ;tates and FTs where coconut

is grown.. /I6 4 states" ocusing on 63, and

capacity building.

;pecial -ro$isions>

( 1I,6 will wor closely with ational 1ission on ;ustainable Agriculture

&1;A* towards de$elopment o 1icro(Irrigation or all horticulture crops and

protected culti$ation on armersG eld.( 1I,6 will also pro$ide technical ad$ice and administrati$e support to ;tate

+o$ernmentsP ;tate 6orticulture 1issions &;61s* or the ;aron 1ission and

other horticulture related acti$ities lie Negetable Initiati$e or Frban /lusters

&NIF/*" unded by 3ashtriya Mrishi Nias DoEana &3MND*P1;A

( The 1ission sees to achie$e holistic growth o the horticulture with an end(to(end approach" predominantly ocusing on pro$iding #uality planting

material" Integrated -est 1anagement" Integrated utrient 1anagement"

1icro Irrigation and inrastructure or post(har$est management and

mareting lie cold storage etc.

ALLIE% SEC,20S ; %AI0

a* de&elo'*ent and "onser&ation of indi!enous breeds

b* undertae breed i*'ro&e*ent 'ro!ra**e or indigenous cattle breeds so as

to impro$e the genetic maeup and increase the stocQ

c* enhan"e *il 'rodu"tion and 'rodu"ti&ityQ

d* u'!rade nondes"ri't "attle usin! elite indi!enous breeds lie +ir"

;ahiwal" 3athi" ,eoni" Tharparar" 3ed ;indhi and

e* distribute disease free hi!h !eneti" *erit bulls or natural ser$ice


23/30

Fnder this component it is proposed to establish Integrated Indi!enous Cattle

Centres or Goul Gra*s in the breedin! tra"ts of indi!enous breeds . +oul

+rams will be established in>

i* the nati$e breeding tracts and

ii* near metropolitan cities or housing the urban cattle.

+oul +ram will act as Centres for de&elo'*ent of Indi!enous Breeds and a

dependable source for su''ly of hi!h !eneti" breedin! sto" to the armers in

the breeding tract. The +oul +ram will be self>sustainin! and $ill !enerate

e"ono*i" resour"es rom sale o A2 mil" organic manure" $ermi(composting"

urine distillates" and production o electricity rom bio gas or in house consumption

and sale o animal products. The +oul +ram will also unction as state o the art in

situ trainin! "entre or 7armers" reeders and 1AIT3IGs.

((((((((((( (((((((((((((( (((((((((((((( (((((((((((((( (((((((((((((( ((((((((((((((( ((((((((((((((((

(((((((((((((( ((((((((((((((

National Li&esto" (ission

Bith the rise in wage rate in rural areas demand or protein based ood has gone up

ueling the in:ation. To ensure a sustainable growth o the sector +o$t o India has

launched a ational Li$estoc 1ission. The sector ocuses on impro$ing the

li$estoc production through #uality eed and odder" health care acilities" ris

co$erage" eecti$e e%tension and impro$ed :ow o credit.

7our sub(missions with in the L1 are>

). ;ub(1ission on Li$estoc ,e$elopment ( Includes acti$ities to address the

concerns or o$erall de$elopment o li$estoc species including poultry" other

than cattle and bualo" with a holistic approach.2. ;ub(1ission on 7eed and 7odder ,e$elopment ( ,esigned to address the

problems o scarcity o animal eed and odder resources. ;cheme would

ocus on impro$ing the production and producti$ity o eed and odder

through adoption o better technologies suited to the agro(climatic 9ones in

both arable and non(arable areas.5. ;ub(1ission on ;ill ,e$elopment" Technology Transer and 4%tension ? The

e%tension ser$ices do not ensure last mile connecti$ity and technologies

de$eloped in research institutes are not spread eecti$ely to the armers. The

mission would pro$ide a platorm or the dissemination o technology

de$eloped to the armers. It would ensure sill de$elopment o the armers

with rontline eld demonstration and direct engagement with the

researchers.


24/30

. ;ub(1ission on ;ill ,e$elopment in 4 3egion

7ew problems associated with the sector>

). Li$estoc ,iseases ( iggest impediment to growth o dairy and li$estoc

producti$ity is the large(scale pre$alence o animal diseases lie 7oot and

1outh ,isease" --3" rucellosis" A$ian In:uen9a etc" which ad$ersely aect

the producti$ity.2. -roducti$ity and reed Impro$ement? ,espite ha$ing the largest no o

li$estoc in the world and being the largest producer o mil" yield o Indian

cattle is one o the lowest in the world. +o$t o India has launched the

3ashtriya +oul 1ission in this regard.5. /old /hain Inrastructure ( ;teps are needed to reduce wastage o mil by

e%panding the cold chain inrastructure in the rural areas to collect and

preser$e mil till such time it is collected or sale or taen or processing.

Food (ana!e*ent

Shanta Ku*ar Co**ittee 0e'ort

elow is a summary o maEor recommendations o 6L/ eeping in mind how

procurement benets can reach larger number o armersQ how -,; system can be

re(oriented to gi$e better deal to economically $ulnerable consumers at a lower cost


25/30

and in a nancially sustainable mannerQ and nally how stocing and mo$ement

operations can be made more efcient and cost eecti$e in not only eeding -,;

but also in stabili9ing grain marets.

.+ 2n 'ro"ure*ent related issues( ,ransfer 'ro"ure*ent o'eration to states and should fo"us only on

de"it states (R 6L/ recommends that 7/I hand o$er all procurement

operations o wheat" paddy and rice to states that ha$e gained sufcient

e%perience in this regard and ha$e created reasonable inrastructure or

procurement. &A-" /+" 6aryana" 1-" =disha and -unEab*. 7/I will accept only

the surplus &ater deducting the needs o the states under 7;A* rom these

state go$ernments &not millers* to be mo$ed to decit states. 7/I should

mo$e on to help those states where armers suer rom distress sales at

prices much below 1;-" and which are dominated by small holdings" lie

4astern Fttar -radesh" ihar" Best engal" Assam etc. This is the belt rom

where second green re$olution is e%pected" and where 7/I needs to be pro(

acti$e pro$iding benets o 1;- and procurement to larger number oarmers" especially small and marginal ones.

( 0ationalization of 'ro"ure*ent nor*s and attra"tin! 'ri&ate se"tor

(R Three issues are critical to be streamlined to bring rationality in

procurement operations and bringing bac pri$ate sector in competition with

state agencies in grain procurement> &)* /entre should mae it clear to states

that in case o any bonus being gi$en by them on top o 1;-" /entre will not

accept grains under the central pool beyond the #uantity needed by the state

or its own -,; and =B;Q &2* the statutory le$ies including commissions"

which $ary rom less than 2 percent in +uEarat and Best engal to ).@

percent in -unEab" need to be brought down uniormly to 5 percent" or at

most percent o 1;-" and this should be included in 1;- itsel &states losing

re$enue due to this rationali9ation o le$ies can be compensated through a

di$ersication pacage or the ne%t 5(@ years*Q &5* #uality checs in

procurement ha$e to be adhered to" and anything below the specied #uality

will not be acceptable under central pool.

( Che" %istress sales and 1se NW0s (R egotiable warehouse receipt

system &B3s* should be taen up on priority and scaled up #uicly. Fnder

this system" armers can deposit their produce to the registered warehouses"and get say 80 percent ad$ance rom bans against their produce $alued at

1;-. They can sell later when they eel prices are good or them. This will

bring bac the pri$ate sector" reduce massi$ely the costs o storage to the

go$ernment" and be more compatible with a maret economy. +oI &through

7/I and Barehousing ,e$elopment 3egulatory Authority &B,3A** can

encourage building o these warehouses with better technology" and eep an

on(line trac o grain stocs with them on dailyPweely basis. In due course"


26/30

+oI can e%plore whether this system can be used to compensate the armers

in case o maret prices alling below 1;- without physically handling large

#uantities o grain.

( (odi"ation of (SP Poli"y and ali!nin! it $ith trade 'oli"y+ Pro*ote

Pulses and Edible 2il (R +oI needs to re$isit its 1;- policy. /urrently" 1;-sare announced or 25 commodities" but eecti$ely price support operates

primarily in wheat and rice and that too in selected states. This creates highly

sewed incenti$e structures in a$our o wheat and rice. Bhile country is

short o pulses and oilseeds &edible oils*" their prices oten go below 1;-

without any eecti$e price support. 7urther" trade policy wors independently

o 1;- policy" and many a times" imports o pulses come at prices much

below their 1;-. This hampers di$ersication. 6L/ recommends that pulses

and oilseeds deser$e priority and +oI must pro$ide better price support

operations or them" and do$etail their 1;- policy with trade policy so that

their landed costs are not below their 1;-.

4+ 2n P%S and NFSA related issues( 0ethin NFSA and restri"t it to states tain! ste's for "he"in!

leaa!e (R 6L/ recommends that +oI has a second loo at 7;A" its

commitments and implementation. +i$en that leaages in -,; range rom 0

to @0 percent" and in some states go as high as 0 to


27/30

practices. 6L/Ss calculations re$eal that it can sa$e the e%che#uer more than

3s 50"000 crores annually" and still gi$ing better deal to consumers. /ash

transers can be inde%ed with o$erall price le$el to protect the amount o real

income transers" gi$en in the name o lady o the house" and routed through

-rime 1inisterSs Can(,han DoEana &-1C,D* and do$etailing Aadhaar and Fni#ue

Identication &FI,* number. This will empower the consumers" plug highleaages in -,;" sa$e resources" and it can be rolled out o$er the ne%t 2(5

years.

5+ 2n sto"in! and *o&e*ent related issues( 2utsour"e Sto"in! 2'eration (R 6L/ recommends that 7/I should

outsource its stocing operations to $arious agencies such as /entral

Barehousing /orporation" ;tate Barehousing /orporation" -ri$ate ;ector

under -ri$ate 4ntrepreneur +uarantee &-4+* scheme" and e$en state

go$ernments that are building silos through pri$ate sector on state lands &asin 1adhya -radesh*. It should be done on competiti$e bidding basis" in$iting

$arious staeholders and creating competition to bring down costs o storage.( I*'ro&e and *odernize handlin! and storin! fa"ilities (R India needs

more bul handling acilities than it currently has. 1any o 7/ISs old

con$entional storages that ha$e e%isted or long number o years can be

con$erted to silos with the help o pri$ate sector and other stocing agencies.

etter mechani9ation is needed in all silos as well as con$entional storages.

/o$ered and plinth &/A-* storage should be gradually phased out with no

grain stocs remaining in /A- or more than 5 months. ;ilo bag technology

and con$entional storages where e$er possible should replace /A-.

/+ 2n Bu@er Sto"in! 2'erations and Liuidation Poli"y( 0ationalize Bu@er Sto"in! and de&elo' an institutionalized 'ro"ess

of ooadin! e)"ess bu@er sto" (R =ne o the ey challenges or 7/I has

been to carry buer stocs way in e%cess o buer stocing norms. ,uring

the last $e years" on an a$erage" buer stocs with 7/I ha$e been more

than double the buer stocing norms costing the nation thousands o crores

o rupees loss without any worthwhile purpose being ser$ed. The underlying

reasons or this situation are many" starting with e%port bans to open ended

procurement with distortions &through bonuses and high statutory le$ies*" butthe ey actor is that there is no pro(acti$e li#uidation policy. ,7-,P7/I ha$e

to wor in tandem to li#uidate stocs in =1;; or in e%port marets" whene$er

stocs go beyond the buer stoc norms. The current system is e%tremely ad(

hoc" slow and costs the nation hea$ily. A transparent li#uidation policy is the

need o hour" which should automatically ic(in when 7/I is aced with


28/30

surplus stocs than buer norms. +reater :e%ibility to 7/I with business

orientation to operate in =1;; and e%port marets is needed.

6+ 2n end to end "o*'uterization

( 6L/ recommends total end to end computeri9ation o the entire oodmanagement system" starting rom procurement rom armers" to stocing"

mo$ement and nally distribution through T-,;. It can be done on real time

basis" and some states ha$e done a commendable Eob on computeri9ing the

procurement operations. ut its do$etailing with mo$ement and distribution

in T-,; has been a wea lin" and that is where much o the di$ersions tae

place.

7+ 2n the ne$ fa"e of FCI

( The new ace o 7/I will be ain to an agency or inno$ations in 7ood1anagement ;ystem with a primary ocus to create competition in e$ery

segment o oodgrain supply chain" rom procurement to stocing to

mo$ement and nally distribution in T-,;" so that o$erall costs o the system

are substantially reduced" leaages plugged" and it ser$es larger number o

armers and consumers. In this endea$our it will mae itsel much leaner and

nimble &with scaled downPabolished 9onal ofces*" ocus on eastern states or

procurement" upgrade the entire grain supply chain towards bul handling

and end to end computeri9ation by bringing in in$estments" and technical

and managerial e%pertise rom the pri$ate sector. It will be more business

oriented with a pro(acti$e li#uidation policy to li#uidate stocs in=1;;Pe%port marets" whene$er actual buer stocs e%ceed the norms. This

would be challenging" but 6L/ hopes that 7/I can rise to this challenge and

once again play its commendable role as it did during late )'0s and early

)'


29/30

+o$t o India has taen se$eral steps to boost industrial growth &remember to mae

notes in detail under respecti$e heads*>

). 4ase o doing business

2. 1ae in India5. 4(i9 -roEect ? Fnder the proEect +o$t is setting up a +2 portal or one stop

shop or deli$ery o ser$ices to businessmen. The proEect will pro$ide ser$ices

rom the inception o$er the entire lie cycle o the business.. ;ill ,e$elopment@. ;treamlining 4n$ironment and 7orest /learances ? -rocess or online

submission o applications or en$ironment" coastal regulation 9one and

orest clearances ha$e been started. The decision maing has been

decentrali9ed to a great e%tent to the state le$el strengthening ederalism as

well as speeding up the decision maing.. Labour ;ector 3eorms

(ines and (inerals %e&elo'*ent and 0e!ulation- A"t

+o$t o India has recently amended the 113, Act to gi$e llip to the mining and

minerals sectors. ;alient eatures o the amendment are>

). Auction or 3eali9ation o 7air Nalue> 1ining 3ights will be gi$en through an

auction only by competiti$e bidding. This will ensure air $aluation o the

minerals and bring transparency in the allocation process.2. 3emo$ing ,iscretion> To remo$e discretion o e%ecuti$e mining rights will not

be renewed ater @0 years but a resh lease auction will be held.5. 3elie to -roEect Aected -eople> In order to earmar unds or the benets o

persons aected by the mining in the region a ,istrict 1ineral 7oundation will

be ormed in each aected district. 7und will be capitali9ed rom the

additional le$y charged on mining and will be decided by +oI. ut the

go$ernance structure o the oundation and usage o the unds ha$e been let


30/30

with the states to allow local participation and decentrali9ed planning and

implementation.. oost to 4%ploration> The establishment o ational 1ineral 4%ploration Trust

has been proposed or the purpose o regional and detailed e%ploration. Trust

will be unded by an additional le$y o not e%ceeding 2!.

@. 4asy Transerability to encourage pri$ate players> To promote pri$ate playersand latest technology to be used" mining rights will be allowed to be

transerred easily.. ,eterrents against illegal mining> ;tricter nes and punishment ?

imprisonment up to @ year or ne up to 3s @ lah per hectare o the area.

economic survey 2015 summary

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