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ECONOMY W ATCH

M ay- June 2012

ECONOMY W ATCH

HIGHLIGHTS

Explaining FICCI 12 point agenda to revive economic growth


Government should eschew the temptations of a premature welfare state and announce an immediate moratorium on any additional expenses on doles Expedite the implementation of the Goods and Services Tax (GST) Ease the monetary policy Do not pass the Land Acquisition Bill in its current form Provide fiscal stimulus for investments across sectors Push through with FDI policy reforms in areas where action is possible outside the ambit of Parliament multi-brand retail, civil aviation etc Extend the price decontrol mechanism to diesel and other oil products Take steps to energize the coal sector by fostering competition Strengthen frameworks for raising funds for infrastructure financing in the economy through instruments like Municipal Bonds etc Pursue the objective of food security through productivity increase and agriculture marketing reforms Fast-track implementation of critical policies and projects like National Manufacturing Policy, National Electronics Policy, PCPIR etc Address the issue of repatriation of black money to immediately mitigate the BOP situation by entering into global revenue sharing agreements

Economic Affairs and Research Division, FICCI Dr. Soumya Kanti Ghosh: soumya.ghosh@ficci.com (with inputs from Nibedita Saha & Sakshi Arora)

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THEME WATCH: FICCIS TWELVE POINT ACTION AGENDA FOR STIMULATING ECONOMIC GROWTH
Emphasizing the need for a unified approach for tackling economic crisis, FICCI has recently unveiled a twelve point agenda for stimulating economic growth. In principle, FICCI believes that the current economic problems are largely a result of domestic factors like delays and uncertainity over key economic legislations, lack of fiscal consolidation, monetary tightening, project delays on account of factors including stalled environmental clearances, problems in land acquisition coupled with a prolonged pause in reforms and an atmosphere of unwillingness in decision making in bureaucracy. It may be noted that FICCIs twelve point action program to address the crisis situation are the following 1. Government should eschew the temptations of a premature welfare state and announce an immediate moratorium on any additional expenses on doles 2. Expedite the implementation of the Goods and Services Tax (GST). 3. Ease the monetary policy 4. Do not pass the Land Acquisition Bill in its current form 5. Provide fiscal stimulus for investments across sectors 6. Push through with FDI policy reforms in areas where action is possible outside the ambit of Parliament multi-brand retail, civil aviation etc. 7. Extend the price decontrol mechanism to diesel and other oil products. 8. Take steps to energize the coal sector by fostering competition. 9. Strengthen frameworks for raising funds for infrastructure financing in the economy through instruments like Municipal Bonds etc 10. Pursue the objective of food security through productivity increase and agriculture marketing reforms 11. Fast-track implementation of critical policies and projects like National Manufacturing Policy, National Electronics Policy, PCPIR etc. 12. Address the issue of repatriation of black money to immediately mitigate the 2 BOP situation by entering into global revenue sharing agreements In this context, it is essential to elaborate on some of the above points briefly so as to have a better understanding of the immediate steps that needs to be taken to prevent the economy from slipping into recession and stimulating growth at the same point of time. FOCUS: EXPEDITE GOODS AND SERVICE TAX IMPLEMENTATION: ONE TAX ONE NATION India is going to witness its biggest indirect tax reform ever through introduction of Goods and Services Tax (GST). This reform, with the help th of 115 Constitutional Amendment Act, attempts to consolidate the indirect tax structure in India alongside broadening the tax base by capturing value addition in the distributive trade and anticipated augmentation in compliance. Presently the indirect tax structure in India necessitates multiple taxes and thereby involves a number of compliance requirements. The indirect taxes in the country can be broadly classified as- Central Government taxes, State taxes and taxes levied by Local Governments. Some taxes are levied and collected by same government but some others are levied and collected by different governments. In addition, tax rates are not also uniform across the country leading to mere additional complexities for the tax compliers. After missing three previous dates, the Central Government aims newly targeted timeline to introduce GST in India. India being a federal country and powers of taxation being clearly defined in the constitution, every state is sovereign in levying and collecting diverse state taxes beside the Centre having their own constitutional rights to gather taxes. Existing indirect taxes in India can be listed down as the following matrix. GST is a composite tax on goods and services. It is effectively a tax on value accumulation at every stage and a supplier at each stage is allowed to set-off through a tax credit

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mechanism. GST is going to be a consumption based levy and destination principle would be germane in usual course. It is anticipated that GST will be charged on the price actually paid or payable for supply of goods and services. Table 1: Pre-GST Indirect Tax Structure in India
Taxes Basic Customs Duty (BCD) @ generic rate of 10% Additional Customs Duty (ACD) or Countervailing Duty (CVD) in place of Excise Duty @ generic rate of 10.3% Special Additional Customs Duty (SACD) in place of VAT @ 4% Cess levied as a percentage of aggregate duties of customs @ 3% Central Excise Duty @ generic rate of 10.3% Additional Excise Duties Service Tax @ 12.36% Central Sales Tax (CST) @ 2% CENVAT Central Sales Tax @ 2% State Value Added Tax (State VAT) varies between 4% to 15% Luxury Tax @ 15% to 30% Taxes on lottery, betting and gambling State Cesses and Surcharges related to supply of goods and services Entry Tax varies between 0% to 15% Purchase Tax Entertainment Tax @ 15% to 45% Entertainment Tax levied by the Local Bodies Octroi varies between 0% to 7% Source:FICCI Research
State Levies Local Levies

the value addition at each stage. VAT not only opened up the mode to reduce burden of multiple taxation but also held back unhealthy competition among the states concerning sales tax rates. Even after these achievements, there were several shortcomings in the CENVAT as well as in the state-level VAT structure. It is important to note that GST is not going to be simple summation of VAT and service tax. GST is expected to lead to revenue gain for the government through broadening of tax base and improvement in tax compliance. Anticipated post-GST indirect taxes in India can be listed down as the following matrix. Table 2: Post-GST indirect tax structure envisaged in India
Municipal/ State Central local govt Govt Govt

Levy

Collection

Customs Duty

Central Govt. Levies

NA

NA

Taxes Basic customs duty (BCD) Central GST or CGST State GST or SGST Entertainment Tax levied by the local bodies Octroi

Levy

Collection

Excise Duty

Source:FICCI Research

Although, GST aims at the consolidation of different indirect taxes under an overarching legislation, the effectual tax burden may augment for industries in certain sections, leading reduction for industries in certain others. In the post-GST regime, input credits in the supply chain are expected to be made faultlessly thereby leading to elimination or reduction of cascading effect of taxes to certain extent. As a result, reduction in the general price level is predictable. Proposed Structure GST is proposed to be introduced in India in the form of dual structure. Dual GST structure is planned to have defined functions and responsibilities for the centre and the states. It is clear that there is going to be two componentsone levied by the centre or known as central GST (CGST) and the other levied by the states or known by State GST (SGST). The Empowered Committee recommended the imposition of GST on the basis of negative list and for little exclusion if needed. Both the CGST and SGST are supposed to operate over

As one of the major ground works to introduce GST in India, value added tax (VAT) was brought into the system to replace pre-existing central excise duty and multi-point sales taxation at the states. Principle of VAT is to tax goods on

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common and an identical base. As per the recommendations, CGST and SGST are going to be applicable to all dealings of goods and services made against consideration excluding the exempted goods and services plus the transactions below the agreed threshold limits. Concessional GST rate for necessary goods and goods of basic importance alongside special rate for precious metals are also being discussed and proposed. It is assumed that GST is proposed to be introduced with a rate of 16% (CGST @8% and SGST @8%). In case the supply of goods or services destined to be exported out of India, then the transaction would be taxed at zero rates. In other words, the exporter will be allowed to export the goods or services without charging any tax. Prerequisites As obvious, prologue of GST requires constitutional amendment proposing to allow the Centre to levy taxes beyond the manufacturing stage. To be introduced in the state level, it is mandatory that states should be given the power to levy tax on all services which was until now been merely with the centre. With its introduction, GST is also proposed to confiscate CST as it bears no set off respite and acts as a twist in the VAT system. A sound IT platform across the country is needed to put together central and state indirect taxes administration. This common IT structure, discussed as GST Network (GSTN) will allow tax compliers across the states to use their PAN, as the tax recognition number for payment of all indirect taxes. Some other basic prerequisites includebasic framework of GST law be common for all States, all States should implement GST together, single registration and identification for assessee both under CGST and SGST, electronic filing of statutory forms and payments, procedural simplification for registering and filing of returns, Harmonized System of Nomenclature (HSN code) forming the basis of product categorization for both CGST and SGST etc. International Experience Till now more than 135 countries have adopted the GST/ VAT system successfully. Its neutrality principle towards international trade ended it as the favorite substitute to customs duties in the background of liberalization. There exist many divergences in the approach through which VAT/ GST are executed around the world. In those countries where VAT/ GST have been adopted over the years it on average accounts for twenty percent of total tax revenue. Few countries like Canada, Australia, New Zealand and Singapore name their tax systems as GST based. As understood, India being a federal country is going to follow the GST model pursued in Canada although execution of the GST in Canada followed a centralized form contrasting to the model of dual GST anticipated in India. Different experiences in GST implementation can be summarized in the following table. Table 3: Different implementation
Australia Rejected at election 1993. Accepted at election 1999. 2000 10%

experiences
Canada Imposed without election and through appointment of senators. 1991 15%

in

GST

New Zealand Imposed without election. 1986- 1989 Initially 10% then 12.5% US$ 20,000

Parliamentary Process

Year of Introduction Rates Threshold requirement for registration

US$ 50,000 Food, Education, Health, Financial supplies Introduced during sustained economic growth period Revenue exceeded expectations Slight improvement since introduction Limited observed change in underground economy size

US$ 50,000

Exemptions

Financial supplies, Owner-occupied housing Introduced in midst of major recession, criticized as compounding problems Revenue exceeded expectations

Limited

Effect on economic growth

Introduced at the end of recession, subsequent upswing Revenue exceeded expectations

Revenue Effects

Effect on Current Account

Rapid Dramatic immediate Improvement improvement, since introduction longer term of GST, NAFTA stabilization Large observed increase, particularly in construction industry Some observed increase

Effect on Underground Economy

Source: An Empirical Note on the Comparative Macroeconomic Effects of the GST in Australia, Canada and New Zealand, University of New England School of Economics, 2004

Effect on Indias GDP FICCI estimates that the proposed GST structure, which will be replacing almost all the indirect taxes levied on goods and services by the Indian Central and State governments, is estimated to increase the potential GDP by at

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least 1%. Table 4: Proportion increase in GDP postGST: A Simulation
dy/dt dy/dt (25% tax) (14% tax) c'Y c'(1-t) 1-c'(1-t) dy/dt Change in dy/dt Proportion increase in Y (current prices) GDP deflator Proportion increase in Y (constant prices) 0.25029 0.14 4745005 4745005 0.451695 0.52 0.548305 0.48 8653945 9847340 1193395 13.79% 10% 3.79% dy/dt dy/dt dy/dt dy/dt (16% (14.5% (15% tax) (15.5% tax) tax) tax) 0.145 0.15 0.155 0.16 4745005 4745005 4745005 4745005 0.52 0.51 0.51 0.51 0.48 0.49 0.49 0.49 9786159 9725733 9666049 9607094 1132214 1071788 13.08% 10% 3.08% 12.38% 10% 2.38% 1012104 11.70% 10% 1.70% 953149 11.01% 10% 1.01%

been built on fertile land such as Manchester, London, Munich, Shanghai, etc since industrial production produces products many times more than the product produced by agricultural production. The draft bill also does not allow for free market transactions between willing buyers and willing sellers, which would come in the way of developers obtaining land for industrial activity on a voluntary basis at a market competitive rate. The act also does not place any limit on the total compensation package to be offered or number of claimants. International Scenario The American Land Development Code grants extensive land acquisition powers to local governments to accomplish any purpose consistent with the planning policies of the government. The code also attempts to resolve issues on the valuation of the land to be acquired under eminent domain as it allows the landowner to inflate his land price by producing evidence. Unlike the new bill drafted in India, the American Land Development code does not make the price of the land to be acquired four times in case of rural areas at once, thereby increasing the fixed costs of industrialization. The Korean Land Development Corporation has six ways of acquiring land and it allows the landowner to negotiate with the price of land except in case of Eminent Domain wherein it provides the land owners with benefits of tax privileges. There should also be a similar platform wherein landowners can bargain with business houses and the government with the land price in India, since the compensation package discussed in the draft bill to be sanctioned in December, 2011 may hit the reality sector. The Thailand National Housing Authority sets the maximum price it will pay for acquiring the land. The limits of the price are decided keeping in mind various economic, social and developmental factors. In Ecuador the land acquisition mechanism is carried out mostly with voluntary purchase and sale transactions.

Source: RBI & FICCI Research Note: c=marginal propensity to consume, t=post GST tax rate, dy/dt=change in GDP due to a change in the existing tax rate

A quick glance at Table 5 reveals that a uniform GST rate of 16% would lead to a 1% increase in GDP. However, one small assumption that is worth mentioning is that the present tax rate is approximately 25%. Also, any tax rate within the range 16% to 14% would lead to an increase of GDP by as much as 3.7%. FOCUS: LAND ACQUISITION, REHABILITATION AND RESETTLEMENT BILL The National Land Acquisition and Rehabilitation and Resettlement Bill are going to replace the Land acquisition act of 1894 which had prevailed till date. FICCI believes that the current Land Acquisition Bill should not be passed in current form. Independent estimates reveal that the imposition of this bill would push up project costs by around 40%. In principle, as per the bill, the land buyers will have to pay four times the market price in rural areas and twice the market price in urban areas. The bill further prohibits the acquisition of fertile agricultural land beyond 5% per district in India, which would have a negative impact on industrialization. As argued by Amartya Sen prohibiting the use of fertile agricultural land for industries is ultimately self-defeating. It has been seen that all major industrial zones have

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FOCUS: PUSH THROUGH WITH POLICY REFORMS AND FAST TRACK IMPLEMENTATION OF CRITICAL POLICIES FICCI believes that the Government of India can immediately push through policy reforms in areas outside the ambit of the Parliament (FDI in retail, aviation etc). Interestingly, a FICCI analysis suggests that as on January, 2012 as many as 26 bills were pending in the parliament (of which 6 were related to Governance, 9 were related to Education and 11 were related to financial sector. We urge the Government to push through these bills quickly. Table 5: Anti-Corruption Bills pending in the parliament
Serial # 1 2 Anti-corruption The Lokpal and Lokayuktas Bill, 2011 Whistle Blowers Protection Bill, 2011 The Right of Citizens for Time Bound Delivery of Goods and Services and Redressal of their Grievances Bill, 2011 The Judicial Standards and Accountability Bill, 2010 The Prevention of Bribery of Foreign Public Officials and Officials of Public International Organizations Bill, 2011 The Benami Transactions (Prohibition) Bill, 2011 Status as on Jan, 2012 Passed by LS & are now before the RS

Table 6: Education Bills pending in the parliament


Education The Educational Tribunals Bill, 2010 The Institutes of Technology (Amendment) Bill, 2010 The National Institutes of Technology (Amendment) Bill, 2011 The Indian Institute of Information Technology, Design and Manufacturing, Kancheepuram Bill, 2011 The Prohibition of Unfair Practices in Technical Educational Institutions, Medical Educational Institutions and University Bill, 2010 The Central Educational Institutions (Reservation in Admission) (Amendment) Bill, 2010 The National Accreditation Regulatory Authority for Higher Educational Institutions Bill, 2010 The Higher Education and Research Bill, 2011 The National Academic Depository (Amendment) Bill, 2011 Source: FICCI Research Under consideration of Standing Committee Reported by Standing Committee Passed in the LS but pending before the RS Status as on Jan, 2012

Under consideration of Standing Committee

Source: FICCI Research

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Table 7: Finance & Business Bills pending
Finance & Business The Direct Taxes Code Bill, 2010 The Companies Bill, 2011 The Mines and Minerals (Development and Regulation) Bill, 2011 The Prevention of Money Laundering (Amendment) Bill, 2011 The Indian Trusts (Amendment) Bill, 2009 The Pension Fund Regulatory and Development Authority Bill, 2011 The Forward Contracts (Regulation) (Amendment) Bill, 2010 The Coal Mines (Nationalization) (Amendment) Bill, 2000 The Mines (Amendment) Bill, 2011 The Insurances Laws (Amendment) Bill, 2008 The Securities and Exchange Board of India (Amendment)Bill, 2009
Source: FICCI Research

Status as on Jan, 2012

FOCUS: PROVIDING FISCAL STIMULUS ACROSS SECTORS LIKE ABOLISHING MAT ON INFRASTRUCTURE ETC The concept of MAT was introduced originally under section 115J by the Finance Act, 1987 with effect from 1988-89 and was reintroduced with a few changes under section 115JA with effect from 1997-98 and under Section 115JB with effect from April 2001. MAT was introduced to bring Zero Tax companies under the income tax net. As per MAT, if the income- tax payable computed is less than MAT liability, then the tax payable for that year equals MAT liability. Provision of MAT is however not applicable to: Income from business of developing, maintaining, and operating certain infrastructure facilities Income from units in specified zones or specified backward districts Income of certain loss-making companies Export profits

Under consideration of the Standing Committee

Reported by Standing Committee

Interestingly, in order to widen the tax base, the government has proposed to impose 18.5% Alternate Minimum Tax (AMT), a variant of MAT on sole proprietorship and partnership firms. Figure 1: MAT rate in India over the years

Additionally, FICCI believes that special stress must be laid on policies like National Manufacturing Policy and National Electronics Policy which has the potential of creating 28 to 100 million jobs in the coming decade. Such policies are particularly welcome as they will be providing gainful employment to the growing young Indian population. India needs to create substantial amount of job by the year 2025 so as to reap the benefit of the demographic dividend. It is believed that a chunk of such employment opportunities would be generated from the manufacturing and IT sector.

Source: FICCI Research

Why MAT may be not desirable MAT creates industrial disparity as capital intensive industries viz Iron & Steel, Cement etc have to pay more than software industry. Thus it will reduce investments in Infrastructure.

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By not allowing credit of tax paid by way of minimum alternate tax, this tax is in the nature of wealth tax It will clearly be an additional burden to loss making companies In case of long gestation projects, this type of tax will further increase the cost of projects and might even make the projects unviable. It will result in double taxation. This will affect the financing of less reputed companies as they are not able to procure finance directly. revenue loss to Government as due to intense competition and competitive bidding process followed by the Government for allotment of these projects, developers will transfer most of the benefits to the Government in terms of higher royalty or upfront premium in case of ports, road and airport projects or lower tariffs to consumers in power projects. FOCUS: FAST TRACK IMPLEMENTATION OF CRITCAL PROJECTS Delay of public sector projects is a common phenomenon in India, with time and cost overruns have become a phenomenon associated with most of the public sector projects This chronic problem with the public sector units in India generally arise due to design errors, unexpected site conditions, increases in project scope, weather conditions and other changes. FICCI believes that fast track implementation of such stalled projects (primarily in excess of Rs 150 crore) are critical in the Government endeavour of promoting growth in the current scenario. Figure 2: Sector wise projects as a % of Total projects:

MAT & Infrastructure The introduction of MAT on the infrastructure companies have raised concerns In effect, the levy of MAT on infrastructure companies not only nullifies the very objective of tax holiday, but also results in cash outflow during the initial period. For example, the concept of MAT runs against the tax holiday granted to infrastructure under Section 80 IA of the IT Act. Also, infrastructure projects are normally fixed duration projects after which assets need to be transferred to the Government free of cost. Hence, developers have limited period for the recovery of their investment, considering the losses in initial years due to lower capacity utilization. It is important that the Government provides fiscal incentive in terms of tax holiday to enable developers to recover money in later years. Revenue for developers in most of the infrastructure projects are either regulated or there are intense competition among different players so developers have limited pricing power to increase prices for generating higher profit on their investment. Considering the requirement of good quality infrastructure for the growth of the economy, it is essential that infrastructure projects remain profitable for the private sector. Profit generated by infrastructure projects would be further invested by infrastructure developers for the creation of infrastructure facilities and if they incur losses, it will inhibit private sector investment in the infrastructure sector which is dire need of the economy. Contrary to popular perception, fiscal incentive provided by the Government will not result in net

Source: MOSPI & FICCI Research

Sector wise analysis depicts that the highest number of projects currently under monitor / delayed are in Railways and the Transport sector, with the Power sector also containing a considerable share in total projects. Sector wise analysis As per the 315th Flash Report on Central

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Sector Projects for projects worth 150 Crores and above dated January 2012, the total cost overrun incurred by the Central Government was approximately 17% above the original cost (Figure 3). Figure 3: Analysis of cost overrun over original estimated costs (figures in Rs Crores)
200500 150500 100500 50500
115.0 95.0 75.0 55.0 35.0 15.0 -5.0

Figure 4: Region wise analysis of cost overrun (figures in Rs Crores)

Telecommunicatio

Road Transport &

500

Urban Development

Water Resources

Atomic Energy

Petrochemicals

Petroleum

Fertilisers

Steel

Shipping & Ports

Civil Aviation

Power

Coal

Railways

Source: MOSPI & FICCI Research

Latest Approved

Anticipated Cost

Cost Overrun (%)

Source: MOSPI & FICCI Research

As figure 3 reveals, cost overrun is the highest in the Railways and Water Resources sector. The high cost overrun in projects under the Railways may be attributable to hold-ups in obtaining environmental clearances, stringent land acquisition process, lack of coordination between states and other law and order problems. The cost overrun was the least in case of the Telecommunications and Fertilizer sector. Regional Analysis A region wise study indicates that South, East and West India had the most number of projects under monitor with South India alone having around 100 projects worth more than 150 crores. Additionally, projects in North East of India suffer the highest cost overrun with respect to original sanctioned costs with cost overrun as much as 58%. Multi state projects have the least cost overrun among all regions with the cost overrun being as low as 4.2% of original costs.

We also estimated the cost overrun per project on a region wise basis. The results clearly show that in North India cost overrun per project as high as Rs 470 crores. Table 8: Cost Overrun per Project-Region wise: Cost Overrun per Project Region No of Projects (Crores) North 66 470.3 North East 50 458.6 Central 49 71.0 East 99 196.0 South 100 238.0 West 94 157.5 Multi State 97 54.2 Total 555 217.5
Source: MOSPI & FICCI Research

To summarise, there is an urgent need to fast track these stalled projects on a priority basis. The overall picture does not portray a healthy picture for the infrastructural sector at this point of time and it may be prudent ideas to kick start the process of reforms by expediting the clearances for stalled projects on a case-to-case basis.

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FOCUS: FOSTERING COMPETITION IN THE COAL SECTOR The availability of coal has become a major concern. This is hurting industry and taking a direct toll on power generation and manufacturing. Coal India still retains its monopoly position in coal production. Indias coal reserve is estimated to be over 280 billion tones. However, coal exploration has been unsatisfactory. Coal production is estimated at th th CAGR of 5.6% between 11 & 12 Plan in the business as usual scenario and 7.8% under an optimistic scenario. Coal based generation is th expected to rise at 9.8% CAGR by end of 12 plan. The table below provides company wise coal production. Table 9: Company wise Coal production (in million tonnes) As per an independent research, India, who is rd considered to be the 3 largest coal producer next to the US, has a coal mining productivity of th 0.58 tonnes per year which is 1/10 of the US. This is a serious concern and needs to be immediately addressed as domestic and imported coal prices are on a rise which, in turn, is jeopardizing the economics of the power sector. With the latest Fuel Supply Agreement, the impact on coal imports is likely to go up. FICCI believes that the Government must consider introduction of commercial mining with participation of private coal production / coal mining companies. Selection of private participants by competitive bidding should be encouraged. Also, the Coal Mines (Nationalization) Act, 1973, should be amended to facilitate progressive phasing in of commercial mining and de-linking coal mining from designated end-use. This apart, measures such as expediting the proposal on competitive bidding of coal blocks and developing rational guidelines, capacity Building in coal companies to undertake underground mining with advanced techniques and in-built safety measures to tap future reserves, adherence to the Ultra Mega Power Project for development of coal blocks and appropriate pricing policy for surplus coal mined at captive units need to be taken so as to energize the coal sector. It is believed that a graduated and controlled breakup of the Coal India Limited will both create competition and ease the fiscal situation. Also, coal supply to power companies should be as per the New Coal Distribution Policy 2007. FOCUS: REPATRIATION OF BLACK MONEY: MITIGATING THE BOP The White Paper brought out by the Government on the issue of Black Money alludes to a scheme whereby some Governments between themselves have entered into special administrative agreements for revenue sharing. As part of these agreements, the Government would get a share of taxes on assets held by their residents abroad without disclosing identity. FICCI believes that the government should urgently hold discussions on this subject and arrive at a methodology in a time bound manner to enter into similar agreements.

Actual 2009-10 Target Achievement Growth Company upto Dec (Actual upto 2010-11 (%) (%) 2010 Dec 2009) CIL 460.5 299.52 65.04 295.51 1.36 SCCL 46 36.33 78.98 36.55 -0.6 Others 65.87 33.56 50.94 33.6 -0.12 Total 572.37 369.41 64.54 365.66 1.02
Source: Ministry of Coal

In the context of coal availability, there has been a massive shortage of domestic coal leading to large scale domestic coal deficit in the power sector. The important reasons for such a shortfall are due to: a. Dispatch of coal by CIL has been almost flat for the past 2-3 years (refer to the table below) b. Demand for indigenous coal registered a CAGR of 7.47%, whereas Supply registered a CAGR of only 5.83% c. Dependence of Imported coal has increased from 6% to 13% in the past 3 years Table 10: Company wise Dispatch (in million tonnes) April-Dec(2010) April-Dec (2009)

Company CIL SCCL

AAP Target 338.42 42.672

Actual 310.06 44.952

Achievement (%) 91.6 105.3

Actual 301.09 44.692

% Growth 2.98% 0.58%

Source: Ministry of Coal

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As per estimates, the total black money stashed abroad is approximately Rs 45 lakh crores which is about 50% of Indias GDP, and is 9 times the size of Indias fiscal deficit. It is estimated, even if 10% of such black money is brought back to the system, India can generate a fiscal surplus. To ensure the growing menace of black money is curtailed in the future, it is suggested that tax incentives should be given for encouraging use of debit, and credit cards as these lead to audit trails. Also, one of the four different pillars in its strategy to curb the growing amount of black money, has been the introduction of the proposed GST which FICCI has been propagating.

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