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Tata Sons has acknowledged its interest in Jet Airways, confirming persistent speculation about such a move but also said that no proposal has been made so far. However, aviation experts have begun talking about the benefits of market consolidation if the deal fructifies in the near future.

Remember, Jet has been facing several headwinds such as failure to honour some of its payment commitments, consistently losing market share, delaying employee salaries amid rising debt and promoter Naresh Goyal’s reluctance to lose control of the airline he founded. 
 
India is one of the fastest growing aviation markets in the world but the industry is also quite fragmented. The biggest airline by passengers, IndiGo, holds sway over more than 40% of the market and the remaining about 60% of passengers are divided unequally between six more players. Then, there are low-cost airlines and those which offer the full-service experience.

There is a fierce competition for every single passenger among all the seven airlines, which means there is little difference in pricing between the full-service carriers (FSCs and the low-cost carriers (LCCs).

As a result, the market as a whole lacks pricing power, thus driving down fares constantly. All this hyper competition is happening given that the cost structure of the Indian market has been one of the highest for airlines in the world.

India taxes jet fuel heavily and with prices of Brent crude shooting up all through this fiscal along with the rupee witnessing wild fluctuations, airlines’ finances are in a mess.

This is the scenario - high costs, little pricing power and too many airlines - in which a possible consolidation through the Tatas’ acquisition of Jet is being talked of. If we leave the mechanics of this deal aside for a moment, this is possibly the best news for India’s bleeding aviation market in a long time. Aviation experts for long have been talking of space for just 3-4 strong airlines and consolidation being the need of the hour.

So this proposal for Jet will help all the remaining players. Why market consolidation is important can also be gauged from these numbers: According to brokerage Edelweiss, passenger growth has been largely one-sided with growth at Indigo, Jet Airways and SpiceJet in the September quarter at 30%, 3.3% and 4% year-on-year, respectively, versus industry growth of 19%. So, not only does one airline already holds a disproportionately large share of the market, but it is also cornering a huge share of the incremental passengers flying within the country.

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Global aviation consultancy CAPA said that “current discussions around consolidation in Indian aviation if executed, would be positive for the industry. Our long-held position is market cannot sustain three FSCs. May trigger further moves.”

CAPA had warned earlier about clear headwinds from higher costs and lower yields this fiscal. It had also said that with the exception of IndiGo, none of the airlines “have the balance sheets to comfortably withstand the damaging combination of higher unit costs and lower yields. FSCs are feeling the pressure most acutely. LCCs are somewhat less vulnerable due to cash generated from their relatively higher volumes of advance sales, and from the incentives on sale-and-leaseback transactions.”

Not only is consolidation good for the aviation industry as a whole, but it will also lessen longer-term structural challenges for the sector. Specific to Jet Airways, the airline is in a precarious position with an urgent cash requirement and the Tatas’ deal may be its best chance of survival.

Jet is an FSC (competing with Air India and Vistara) and FSCs could together lose $1.75-2 billion this fiscal. FSCs have a high-cost structure compared to LCCs and an uncompetitive cost base with yields remaining under intense pressure for many successive quarters means the need for consolidation is even urgent than for the LCCs.

Any buyout of Jet has some benefits for the Tatas too. 
 
This article was published in DNA as '<a href="https://www.dnaindia.com/business/report-mas-can-revive-india-s-bleeding-airline-industry-2687333">M&amp;As can revive India's bleeding airline industry'</a>

Tata Sons&nbsp;has&nbsp;acknowledged its interest in Jet Airways, confirming persistent speculation about such a move but also said that no proposal has been made so far.&nbsp;

&nbsp;


Aviation in India: As Tata, Jet Airways talk way forward, this is how to revive aviation sector

New Delhi: Is India creating adequate jobs? The fact is that there is no single conclusive data set that can show whether enough jobs have been created vis-a-vis job seekers, how many jobs have been created in the formal and informal sectors of the economy and whether the required rate of formalisation of jobs has been achieved.

In short, a severe lack of data and multiplicity of numbers based on different criteria has obfuscated the issue quite comprehensively. Besides, a majority of jobs in India are found in the informal sector and tracking this sector is quite hard.

The government had earlier this year discontinued its quarterly employment survey which tracked eight labour-intensive sectors that was seen as a lead indicator of the overall employment situation in the country. It is now putting out figures from the EPFO (payroll) data, which some experts have questioned. New subscribers of EPFO do not necessarily mean new jobs in India, they say, and this data at best shows the creation of formal jobs. So those ceasing to subscribe to EPFO depict employees who move away from formal jobs but the data still gives us little idea of job creation in the informal sector.

It is in this context that the latest numbers put out by CMIE should be seen. The CMIE numbers show that unemployment rate was the highest in two years this October at 6.9%, labour participation was the lowest since January 2016 at 42.4% and only 39.5% of the adult population was employed last month.

Mahesh Vyas, MD &amp; CEO, said while releasing the October data that “the small improvement in labour statistics seen in September turned out to be short-lived. October statistics point to a continuation of the deterioration in labour markets seen earlier... The estimated number of persons employed during October 2018 at 397 million was 2.4% lower than the 407 million persons employed in October 2017. This is a sharp year-on-year fall in employment.”

Just before demonetisation was announced in 2016, the number of unemployed Indians was about 40 million. Vyas said people did not lose jobs because of demonetisation but jobs did not increase and the unemployed, who were actively looking for jobs, gave up hopes of finding them. “These people stopped reporting that they were looking for jobs anymore. Statistically speaking, they exited the labour markets. Now, they have started coming back to the labour markets. The count of the unemployed that fell to 14 million by July 2017 is now back to nearly 30 million,” Vyas said.

This return of job seekers to the labour markets indicates possibly a return of hope, although there still isn’t any sign of a significant pick up in jobs on offer.

Anywhere between 10-12 million new job seekers are getting added every year in India, and while opinions and data vary on whether incremental jobs are being created as the economy grows, there is no doubt that all these new job aspirants do not find employment.

Rituparna Chakraborty, EVP at Teamlease, told DNA Money that payroll data shows India is creating more incremental formal jobs than earlier but these are not near enough for everyone entering the workforce each year.

“We need 10-12 million new jobs every year, we are not creating that many but we have improved,” she said.

Chakraborty also noted the multiplicity of data points available, saying “There are too many versions of (labour) data so no view on one data point is possible. EPFO payroll data should ideally be read together with CMIE data. The EPFO numbers are lead indicators of job formalisation (they do not tell us about informal jobs).”

Meanwhile, Madan Sabnavis, chief economist at Care Ratings, said the corporate sector showed slightly lower growth of 3.8% in job creation in FY18 compared to 4.2% in FY17.

“Definitely the growth in jobs in organised sector is not keeping pace with GDP growth. We have not seen much topline growth in the corporate sector in the last two years. Surplus capacity in the industry is representative of this phenomenon. Therefore the demand for labour has come down.”

This article was first published in DNA Money: <a href="https://www.dnaindia.com/business/report-why-govt-needs-to-create-more-informal-jobs-2685037">Why govt needsto create more informal jobs</a>

&nbsp;

According to Care Ratings, corporate sector showed lower growth of 3.8% in job creation in FY18 compared to 4.2% in FY17. Here is why government needs to create more informal jobs.&nbsp; &nbsp; &nbsp;


Jobs is the answer for India, but where will they come from? Solution here

The below-par goods and services tax (GST) revenue collection reported by the government for the first six months of the current fiscal may put its carefully calculated fiscal math at risk. The total gross GST revenue collected in September was Rs 94,442 crore and the total during the April to September period was Rs 577,970 crore. When compared with the target of Rs one lakh crore in GST revenue each month, it becomes clear that the shortfall in the first six months in gross revenue is over Rs 22,000 crore. Of course, the government expects some of the shortfall to be made up through higher purchases during the festive season which commences this month. And it has also reiterated that the fiscal deficit target and other milestones for this fiscal (FY19) would be adhered to. But analysts continue to be concerned over the country's fiscal health.

Analysts at brokerage firm IIFL said in a note that GST collections have been weaker than budgeted in the first half of this fiscal, and excluding cess they averaged Rs 88,300 crore per month against the required rate of Rs 100,000 crore.

"While both central and state GST collections are below par, the shortfall is significantly higher for the union government. Also, given the current market conditions, it would be challenging to meet the target of non-debt capital receipts of Rs 92,200 crore. Reducing revenue expenditure would be difficult as fuel subsidy burden is expected to be higher than the budget estimates and curbs on capital expenditure would have a modest impact on the overall spending, which accounts for only about 12% of overall expenditure. Although the government has cut its borrowing plan by Rs 70,000 crore recently, it may need to revise this up sharply if the deficit is higher than estimates," IIFL analysts said.

Further, analysts believe that higher government borrowings may be needed, perhaps closer to the end of the current fiscal year.

But while briefing the media after the latest meeting of the GST Council last week, finance minister Arun Jaitley spoke of the positive trends seen in GST collections this fiscal and also reiterated the government's commitment to remain committed towards the fiscal target. He did not speak of the annual gross GST revenue target for the current fiscal.

Jaitley spoke of the encouraging trend in the deficit in revenue earned by states, which the Centre has to neutralise to zero by the fifth year. This has fallen from 16% in 2017-18 to 13% this year and could be lower still by the fiscal end. He counted out states where revenue was higher than anticipated: Mizoram, Arunachal, Nagaland, Sikkim and Andhra Pradesh. Then, states, where the revenue collection has been marginally lower, are Telangana, Maharashtra, UP, TN, Assam, WB and Rajasthan. Those where the revenue collection has been slightly higher than the target were Gujarat, Haryana, Meghalaya, MP, Jharkhand, Kerala, Tripura and Delhi.

The IIFL analysts said that shortfall in GST collections for Centre is significantly larger than for states. They said the Centre's budget estimates require a monthly collection rate of Rs 54,500 crore but "collections have averaged only Rs 41,500 crore in the first half of this fiscal. This collection rate needs to accelerate sharply to Rs 67,500 crore in the second half for achieving the budget estimates," the analysts added.

So why has there been a month on month shortfall in overall gross GST revenues? Sachin Menon, partner and national head (indirect tax) at KPMG, said that the shortfall can be attributed to multiple reasons such as a series of reductions in GST rates on several goods/services, especially the pruning of the list of articles attracting the 28% rate, lack of compliance by taxpayers, carried forward input credits etc. "The gap between the number of GST registered taxpayers and GST returns filed could be the testimony of non-compliance by taxpayers," he said.

Jaitley mentioned in his briefing that the number of taxpayers registered for GST has increased from 74,61,214 in July 2017 to 94,70,281 in July this year and also spoke of improving tax compliance under the GST regime.

But despite the good news from rising collections in some states and increasing compliance, a negative impact on the fiscal situation due to lower than expected overall GST revenues can still not be ruled out. Bipin Sapra, partner (indirect tax) at EY told DNA Money that "any shortfall in revenues, coupled with the pressure to reduce customs and VAT on petroleum products will further strain the fiscal situation. While expenditure cuts do remain a strong measure to maintain fiscal discipline, better monitoring of GST revenues and a simpler compliance mechanism will augment revenues."

The government's target this fiscal is to reduce the deficit to 3.3% of GDP from 3.53% in the last fiscal. This translates to a fiscal deficit target of Rs 6.24 lakh crore in the current year.

REVENUE CHALLENGE

Rs 5,77,970 cr Total GST mop-up during April to September

Rs 1L cr GST revenue target for each month

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Rs 94,442 cr GST revenue collected in September

Source: DNA Money

The below-par goods and services tax (GST) revenue collection reported by the government for the first six months of the current fiscal may put its carefully calculated fiscal math at risk.


GST collection may put Modi govt's fiscal math at risk; check out revenue challenge

The government has once again increased the minimum support price (MSP) for key rabi crops, including paddy and mustard, just ahead of polls in states where these two crops are primarily grown. Rajasthan and Madhya Pradesh are slated to go for assembly elections this winter. The government’s own calculations show this latest round of hikes will provide a bounty to farmers, far beyond the promise of a price which is 50% over input costs.

Were the MSP hikes timed to assuage farmers from the northern belt, who had marched in large numbers on October 2 to highlight numerous issues plaguing their farms? This seems unlikely. For one, Cabinet decisions are usually not taken in a day and the MSP decision was taken just a day after the farmers’ agitation was quelled. Two, the agitating farmers have been seeking many more sops besides MSP hikes, so this announcement is unlikely to take the spark out of the agitation just yet.

According to the decision of the Cabinet Committee on Economic Affairs (CCEA), MSP of wheat has been raised by Rs 105 per quintal, safflower by Rs 845 per quintal, barley by Rs 30 per quintal, masur (lentil) by Rs 225 per quintal, gram by Rs 220 per quintal and rapeseed and mustard by Rs 200 per quintal each.

An official statement said the new prices include “all paid out costs such as those incurred on account of hired human labour, bullock labour/machine labour, rent paid for leased in land, expenses incurred on use of material inputs like seeds, fertilisers, manures, irrigation charges, depreciation on implements and farm buildings, interest on working capital, diesel/electricity for operation of pump sets etc, miscellaneous expenses and imputed value of family labour.”

But Sudhir Panwar, farmer leader and president of Kisan Jagriti Manch, told DNA Money that the new MSPs have not taken into account the increase in all input costs which is why the hikes are merely 2.1% to 6.1% (except for safflower). “In its election manifesto, the BJP had spoken of giving 50% over the comprehensive cost or C2. But what they are giving now is not C2. How will the farmer earn when all input costs are not covered?”

The Committee on Agricultural Costs and Prices (CACP) uses A2 and C2 to denote different costs. A2 includes all expenses paid by farmers such as seeds, fertiliser, manure, chemicals, hired humans, bullocks, irrigation, maintenance cost, etc. It also includes imputed cost of own seed, manure, bullock and machine labour, rent paid for leased land, depreciation of assets and interest on working capital. C2 is calculated by adding to A2, imputed cost of farmers’ own family labour, interest on fixed capital and rental value of own rent.

Analysts from brokerage firm Ambit also pointed out the futility of the latest round of MSP hikes in tackling farmers’ distress. They said for many crops, the MSP increase is lower than the rise in production cost. The MSP of mustard was increased by Rs 200 a quintal, 5% more than 2017-18, to Rs 4,200, while that of chana was increased by Rs 220 a quintal, or by 5%, to Rs 4,620 a quintal. That of masur (red lentil) was raised by Rs 225 a quintal, 5.3% more, and for safflower, it was raised by Rs 845 a quintal, 20.6% more. Barley’s MSP has been raised by Rs 30 a quintal, 2.1% more to Rs 1,440 a quintal.

The agitating farmers, while turning back from the Delhi border and vowing to continue their agitation, are still demanding lower petrol and electricity bills, implementation of the MSP mechanism in line with the Swaminathan Committee’s recommendation of 50% over C2. Also, they are demanding full waiver of all crop loans, changes in Kisan Credit Card norms and directing the National Green Tribunal to lift the ban on the use of diesel vehicles over 10 years old in the National Capital Region, which would affect farmers who use tractors. The government has assured farmers that several of these demands would be addressed and has formed a panel under MoS Agriculture, Gajendra Singh Shekhawat. Will the farmers’ protests stop now?

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Analysts at brokerage Edelweiss noted that the most important crop for MSP purposes is wheat. And that recently, global wheat prices have shot up as the rupee has simultaneously weakened, thus pushing domestic prices higher.

Source: DNA Money

The government has once again increased the minimum support price (MSP) for key rabi crops, including paddy and mustard, just ahead of polls in states where these two crops are primarily grown.


Not high enough? Modi govt hikes minimum support price (MSP) for key rabi crops, but farmers may not be too happy

The government’s decision to raise import duty on 19 items may be merely a case of good optics since it will have a negligible effect on lowering overall imports. It is also unlikely to have any sizeable impact on India’s current account deficit (CAD), which has been widening this fiscal amid global oil price spike and the rupee’s continuous decline. For one, the items whose import will now cost more account for just about 3% of the country’s total merchandise imports. So while raising duties may crimp imports by consumer durable makers and others, it is not certain whether demand will be curbed. China accounts for the largest share in India’s import basket at about 16% and the items which have seen additional import duty account for just about 5% of imports from China. So the latest move is obviously unlikely to help India in reducing its trade deficit with China or lower the overall CAD.

Soumya Kanti Ghosh, the group chief economic advisor to SBI, said, “The total value of imports of these items in FY18 was about Rs 86,000 crore (3% of merchandise imports) and the higher tariffs could help the domestic industry. However, it depends on the price elasticity of demand and domestic capacity. The impact of these measures is minuscule on the imports so it will not help a lot in reducing CAD. As the rupee movement is influenced by CAD, the move may not help much in propping up the rupee. When we look at imports from China, the components add up to roughly around 5% of China’s imports. So Chinese imports may not be impacted much directly. However, these measures send a signal that the government is ready to defend its external metrics.”

The items on which import duties have been raised include air conditioners, washing machines below 10 kg, refrigerators, compressors, speakers, footwear, non-industrial diamonds, semi-processed, half cut and broken diamonds, lab-grown diamonds, cut and polished coloured gemstones; bath, shower, sink of plastic. As per DGFT data, the total value of exports in the first quarter of this fiscal was $82,471.77 million ($72,212.33 million), up 14.21%. The total value of imports in the same quarter was $1,27,409.20 million ($1,12,263.10 million), up 13.49%. So the trade deficit during April-June has increased as compared to the Q1 of last fiscal. Analysts at brokerage Antique have said that at prevailing levels of import growth (18.1% in this fiscal to date), the CAD to GDP estimate for FY19 is at 3.1% against 1.9% for FY18.

With such an alarming projected rise in CAD, will the government take more measures to calm the rupee and reduce the trade imbalance? D K Srivastava, chief policy advisor at EY told DNA Money that the recent import duty hikes may be considered as the first in many subsequent rounds of interventions expected of the government. “We are waiting for the RBI to take a call on policy rates. If rates are increased, this would neutralise the increase in US Fed rates (which have triggered the movement of the US dollar away from emerging markets and therefore holds the potential to further weaken the rupee).

If RBI increases rates, it will help arrest further weakening of the rupee.

Srivastava suggested two other measures which will have an impact in improving CAD in the medium term: A rethink over export promotion measures and indirect subsidisation of exports such as infrastructure sops, without falling foul of WTO norms.

As per DGFT data, during Q1, petroleum crude accounted for the largest share in India’s import basket at 22.24% or well over a fifth. Gold was at 6.63%, petroleum products at 5.01% and telecom instruments at 4%). So why is the government not announcing measures to curb imports of petroleum crude or gold, two items which together account for almost 30% of India’s imports? Well, for the first, we need to reduce our dependence on imported crude by promoting alternate fuel-powered mobility options - which is a long-term move - since India is largely dependent on imported crude for domestic consumption. As for the second, perhaps additional duty on gold imports might come after the festive season is over. Already, there have been fears over any additional duty on gold sparking a surge in smuggling.

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Meanwhile, the DGFT data further shows that the highest growth of 54.95% was registered in imports of petroleum crude in Q1, followed by petroleum products (40.65%), iron and steel (30.37%), organic chemicals (21.65%) and coal, coke and briquettes etc (21.30%). It is clear that more measures are needed for bringing the runway CAD under control and to arrest the falling rupee.

The government’s decision to raise import duty on 19 items may be merely a case of good optics since it will have a negligible effect on lowering overall imports.


Modi govt's import duty hike on 19 items has no bite? 

Will the merger of Bank of Baroda, Dena Bank and Vijaya Bank lead to a healthier big bank and help tackle those non-performing assets (NPAs) any better? Views are mixed on the outcome of this merger.

First concern is of employee integration. Analysts at brokerage IDFC pointed towards the employee integration and likely discovery of higher NPAs of Dena Bank after the merger while downgrading Bank of Baroda (BoB). “We believe integrating three banks with three different cultures is not going to be an easy task. Also, BoB’s NPL recognition policies are stricter than other banks. As such, we believe BoB will recognise more NPLs, especially from Dena’s books post-merger.&nbsp;

Dena has a large MSME portfolio at 15% of loans with a high NPL ratio of 20% plus. Every merger of state-owned banks in the past has led to a significantly higher recognition of NPLs post-merger. It happened for the recent merger of SBI with its associates too,” said IDFC report.

C H Venkatachalam, general secretary of the All Indian Bank Employees’ Association told DNA Money, “We want the expansion of banks, not consolidation”, adding that the government narrative that banks will become stronger through merger has no evidence. “Look at SBI. One year later, it is not any stronger. For the first time after the merger, it has reported a loss, bad loans are going up, no benefit has come to anybody, customers are leaving and business is down. The only problems facing banks are bad loans and not all small banks are doing badly. The government should concentrate on recovering bad loans and overnight, banks will become strong.”

With these three banks, the government seems to be working on a strategy of ‘Anchor Bank (BoB) + Good Bank (Vijaya Bank) + Stressed Bank (Dena Bank)’. Analysts at Motilal Oswal said that BoB and Vijaya Bank have reported an improvement in their earnings while Dena is under the RBI’s prompt corrective action (PCA) framework and has been restrained from further lending. Dena Bank has a GNPA/NNPA ratio of 22.7%/11.0%, while Vijaya has a significantly lower GNPA/NNPA ratio of 6.2%/4.1%.&nbsp;

This compares with the 12.5%/5.4% GNPA/NNPA ratio for BoB. The analysts said that the merged entity will not be weaker than the individual banks. The idea is that a large bank and a strong smaller bank will together support a weaker one.

One of the key decisions which would impact the success of this merger is the continuation of BoB CEO P S Jayakumar, who could efficiently oversee a long and rather painful integration of people, branches, software and processes. Unless the government extends his term, the whole process could face additional glitches. IDFC said BoB’s new business strategy will receive a setback if the CEO does not continue. The productivity of both Vijaya and Dena is anyway lower than BoB’s in terms of loans and deposits per employee.

The quantum of recapitalisation support from the government to the merged entity and the timeline for the process is not clear. According to an analysis by Jefferies, almost every fifth BoB branch and every third of Dena Bank is in Gujarat. Every fourth of BoB is in Uttar Pradesh and every eighth in Rajasthan. For Vijaya, a fourth is in Karnataka.

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The merged entity would have a third of its branches spread over Gujarat and UP and under 10% each in Maharashtra and Karnataka.

Source: DNA Money

First concern is of employee integration. Analysts at brokerage IDFC pointed towards the employee integration and likely discovery of higher NPAs of Dena Bank after the merger while downgrading Bank of Baroda (BoB).


Bank of Baroda, Dena Bank, Vijaya Bank merger decoded; see if it will actually succeed

​The government launched the Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) last week in an attempt to provide further benefit to farmers growing pulses and oilseeds from the higher minimum support prices (MSPs) that were announced earlier. The new scheme will be a mix of three mini schemes: direct procurement from farmers (price support scheme or PSS), reimbursing them for losses incurred when wholesale market prices fall below the announced MSP (price deficiency payment scheme or PDPS) and a pilot project for procurement by private traders at MSP for the government.

The procurement support scheme follows a significant increase in the MSP for kharif crops including paddy and pulses announced earlier, in line with Prime Minister Narendra Modi’s promise of doubling farmers’ incomes by 2022.&nbsp;

The government had claimed that the new rates represented the steepest ever increase in MSP since the country gained Independence. The hikes were aimed at offering farmers a 150% return on their input costs on each crop and input costs that include heads such as household labour. In some cases, the government offered well above the promised 50% over input cost price, in one case it offered over 90% of the input cost price.

The latest round of increases came after a brief lull: MSPs witnessed double-digit growth over agriculture years 2009-2013 but then moderated for various agricultural products in recent years, according to analysts with Crisil. “While the average annual growth between agriculture years 2009 and 2013 was 19.3%, it was only 3.6% between 2014 and 2017. AY 2018 has seen a slight uptick, with the average MSP hike for kharif crops at 6.3%, compared with 4.9% in 2017. But overall, limited support from the floor price has further depressed market prices,” Crisil had said.

But announcing higher MSP does not automatically lead to an increase in farmers’ incomes. The penetration of the MSP system is just 5-6% so that an overwhelming 94-95% of the farmers remain out of the MSP net anyway.

In this scenario, where MSP itself is immaterial to a majority of farmers, how does PM-AASHA help them? Even for those farmers who manage to sell at MSPs, unless their produce is procured by the government at that price, the entire effort is wasted. Hence, the emphasis on widening procurement is a must. This is where the new scheme comes in. Especially, the pilot proposed for private parties to conduct procurement of oilseeds for the government should ensure better procurement in those states where oilseed production is considerable.

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An official statement said that for oilseeds, the pilot district selected by the state will cover one or more crop of oilseeds for which MSP is notified. Since this is akin to PSS, involving physical procurement of the notified commodity, it shall substitute PSS/PDPS in the pilot districts.

The selected private agency shall procure the commodity at MSP in the notified markets during the notified period from the registered farmers in consonance with the PPSS Guidelines, whenever the prices in the market fall below the notified MSP and whenever authorised by the state/UT government to enter the market and maximum service charges up to 15% of the notified MSP will be payable.

Good monsoon rains this year have meant excess production of some oilseed crops and if extra measures are not announced, then the market dynamics could hurt farmers.

But farmer representatives are far from happy. Sudhir Panwar, president of Kisan Jagriti Manch, told DNA Money “Not much is new in the policy, existing schemes are being repackaged. PDPS is nothing but the ‘Bhavantar Bhugtan Yojana’ scheme which is already being implemented in MP.”

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“The market intervention scheme also exists with NAFED. What is new is the pilot the government has announced where private players will purchase oil seeds and get a commission,” he said.

Source: DNA Money

The government had claimed that the new rates represented the steepest ever increase in MSP since the country gained Independence. The hikes were aimed at offering farmers a 150% return on their input costs on each crop and input costs that include heads such as household labour. In some cases, the government offered well above the promised 50% over input cost price, in one case it offered over 90% of the input cost price.


PM-AASHA: New scheme is repackaged, will not benefit much   

Indian Railways is used to milking freight to increase its earnings, but significantly, this time passengers have pulled off a big surprise.

Suburban passengers and coal transportation are the two bright spots that have boosted the earnings for Indian Railways (IRs) till now this fiscal. There has been a reversal in the trend of declining passenger earnings, seen in the first quarter of this fiscal, for Indian Railways.&nbsp;

Latest data suggests a surge in suburban passenger numbers, which has helped the country’s largest transporter post not just a modest increase in overall passenger traffic but also in total earnings from passengers.&nbsp;

The news on the freight segment is good as well, with an incremental 25 million tonne of freight being loaded on to the wagons between April 1 and August 20 this year (the latest period for which data is available with the IR). Of course, coal continues to save the Indian Railways the blushes in the freight segment, with a 15% surge in loading year-on-year.

In all, the Indian Railways have posted an almost 8% increase in total earnings between April and August 20, at Rs 68,912.58 crore (Rs 63,933.55 crore). This translates to almost Rs 32 crore in incremental earnings on an average each day of this fiscal till August 20 compared to the same period last year.

A member traffic in the Railway Board, Girish Pillai, told DNA Money that “there has been a 25 million tonnne increase in freight carriage this fiscal. This is not a small increase in loading and earnings are going up too. An increasing number of total passengers are also travelling in the Indian Railways but the earnings increase from passengers is not commensurate with the increase seen from freight.”

When asked if the Indian Railways will be able to meet its annual targets for freight and passenger earnings this year, Pillai said “There is no shortage of demand on either freight or passenger side. Capacity is also there and then we keep innovating in freight (to make more capacity available)”.

Let us first look at passenger numbers. In the first quarter, unending train delays and rampant cancellations had impacted passenger numbers as well as earnings. The number of passengers taking a train to their destination, instead of a bus or a flight, had declined due to around 78% rise in the number of train trips getting cancelled besides significant delays due to an aggressive maintenance schedule undertaken, thus shutting down train movement for long periods of time.&nbsp;

Gross passenger earnings had declined by 1.37% to Rs 1,221.31 crore (Rs 1,238.28 crore) or by close to Rs 19 lakh on an average every single day during the first quarter. The number of passengers booked on an originating basis too declined from 2087.1 million to 2088.54 million or almost a 16,000 daily decline. 
But obviously, the situation has improved during July and the first 20 days of August.&nbsp;

Data for April-August 20 shows a surge of almost 2.5% in suburban passengers and a decline of over 2% in non-suburban passengers, thereby taking the total number of passengers marginally up by about 12 million at 3,269.25 million (3257.4 million). And earnings from passengers have shown an almost 3% increase to Rs 19,801.52 crore (19,261.88 crore).

As for freight, the incremental loads have led to an over 10% increase in earnings at Rs 45,913.94 crore (41,662.56 crore). Remember, the IRs posted record freight loading in FY18 and of the total earnings jump of Rs 10,000 crore last fiscal, Rs 8,000 crore came from the robust growth in freight. It is in this context that the increased freight loading is being seen each month of this fiscal.

Why improved freight earnings are crucial to the Indian Railway’s survival is obvious from this statistic: freight earnings account for almost 65 paise of every rupee earned and are used to subsidise passenger earnings. So in effect, improved freight earnings are a life saver for the Indian Railways, which is anyway expected to report a historical worst operating ratio of close to 98% this fiscal.&nbsp;

Operating ratio is a metric which explains what the IR has to spend to earn each rupee - 98% means it has to spend 98 paise to earn that rupee. Huge pension and pay commission payments and little growth in passenger earnings are the two main reasons for the worsening operating ratio of the Indian Railways. So, IR’s finances may need a further boost, even after the good show on the freight front and expectations that passenger earnings will improve in the coming quarters.&nbsp;

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Total earnings target for this fiscal is Rs 2 lakh crore, up from about Rs 1.78 lakh crore registered in 2017-18. This means Indian Railways will have to generate an incremental revenue of Rs 22,000 crore this fiscal over the last period.

Source: DNA Money

Suburban passengers and coal transportation are the two bright spots that have boosted the earnings for Indian Railways (IRs) till now this fiscal. There has been a reversal in the trend of declining passenger earnings, seen in the first quarter of this fiscal, for Indian Railways.&nbsp;


Good news! Passengers give Indian Railways big surprise

The country's booming domestic aviation market presents a strange contradiction. Passenger traffic has been growing in double-digits for 50 months now, making India one of the fastest growing markets. But the airlines are still struggling to make money as the country has one of the lowest airfares in the world coupled with one of the highest cost frameworks.

Each carrier competes with other to attract passengers, many times at fares which are below cost, sacrificing the profits.

Minister of State for Civil Aviation Jayant Sinha said that airfares in India are about Rs 4 per kilometre, less than what it costs to travel in an autorickshaw. He said the government is working on a revival package for the industry, the contours of which should certainly involve offering a lower cost environment for all stakeholders.&nbsp;

The Ministry of Civil Aviation, along with the Ministry of Petroleum, has repeatedly petitioned the GST Council for bringing aviation turbine fuel (ATF) under the goods and services tax (GST) so that input tax credit for the fuel is made available. But this request has not been accepted till date. The logic is, if ATF is brought under GST, auto fuels (petrol and diesel) should also be included and the Council currently doesn't have unanimity over this issue.

Fuel accounts for around 40-45% of the operational cost of an airline and in India, jet fuel attracts very high taxation. This makes the operational environment for airlines all the more challenging now when global crude prices are moving north.&nbsp;

Besides, the rupee's depreciation is also compounding the airlines' woes. In five months, the rupee has weakened by over 12% to almost 72 against the US dollar and crude prices have surged by over 50% in a year to around $80 per barrel.

The worst hit are full-service airlines like Jet Airways and Air India, whose cost structures are higher compared to the low-cost carriers (LCCs) such as IndiGo, SpiceJet and GoAir. The first quarter results for the listed airlines show how difficult the situation is.&nbsp;

Jet Airways posted a loss of Rs 1,323 crore on a total income of Rs 6,066.91 crore amid deepening concern of the airline slipping into a precarious financial position. IndiGo's net profit fell 97% to Rs 28 crore from Rs 811 crore a year earlier. Aviation consultancy CAPA has forecast $1.65 -1.90 billion loss for India's airline industry in the financial year 2019, up from its previous estimate of $430-460 million, on rising fuel prices.

That India is a tough place to do business for airlines has also been underlined by Alexandre de Juniac, director general of the International Air Transport Association (IATA). "While it is easy to find Indian passengers who want to fly, it's very difficult for airlines to make money in this market. India's social and economic development needs airlines to be able to profitably accommodate the growing demand. We must address infrastructure constraints that limit growth and government policies that deviate from global standards and drive up the cost of connectivity," Juniac said

IATA has sought zero rate GST for international travel, providing full input tax credit for the domestic uplift of jet fuel and reducing excise duty on this fuel. It has also pointed to continuing infrastructure roadblocks, saying the Navi Mumbai airport, for example, should become operational at the earliest.&nbsp;

India's busiest metro airports are choked and though capacity addition plans are underway, they are behind the demand curve. Civil aviation minister Suresh Prabhu has announced a plan to build 100 new airports with an investment of $60 billion in the next 10-15 years.

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Alongside high costs, rock-bottom fares are hitting airlines' profitability. IndiGo has announced a sale for a million seats spread over the peak festive flying season and into the lean season, at less than a 1,000 rupees.&nbsp;

Jet Airways is offering 2.5 million seats at discounted fares and the other airlines have also launched their own versions of a sale. Such unsustainable fares have put pressure on the yields, or earnings from each passenger.&nbsp;

IndiGo's yields have remained stagnant now for nine straight quarters. Jet Airways has seen yields decline successively in each of the last eight quarters while SpiceJet has also seen stagnant yields during the period.

"Indian airlines need a level playing field. Give us the same cost structure, same cost base that is enjoyed by airlines across the world and then let us compete with the foreign carriers," SpiceJet CMD Ajay Singh said. 
The airline was planning low-cost long-haul operations, which have now been put on the back burner, likely due to cost escalation.

Not only unbelievable fares, airlines have also been adding capacity faster than demand – the combined order book till now is close to 1,050 aircraft. With capacity outstripping demand, costs spiralling and inability to raise fares, India's airlines will continue to fight a losing battle. Unless, of course, the government steps in with tax sops for jet fuel and eases other input costs, and airlines are brave enough to start raising fares.

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HARD LANDING 
$1.9b India’s airline industry likely to post losses this fiscal on rising fuel prices 
Rs 1,323crJet Airways posted losses in Q1 as financials continue to worsen 
97% Drop in IndiGo’s profit to Rs 28 crore from Rs 811 crore a year ago

Source: DNA Money

Minister of State for Civil Aviation Jayant Sinha said that airfares in India are about Rs 4 per kilometre, less than what it costs to travel in an autorickshaw. He said the government is working on a revival package for the industry, the contours of which should certainly involve offering a lower cost environment for all stakeholders.&nbsp;


Aviation in India: Jet Airways, Air India, IndiGo, SpiceJet to GoAir, carriers face crisis times

The beta testing of what is being touted as the world’s largest health insurance scheme, Ayushman Bharat (also known as ModiCare), has begun. This scheme envisages an annual cover of Rs 5 lakh for 10 crore families which accounts for almost 40% of Indians. Or seen another way, the universe for this health insurance scheme is equivalent to the combined population of USA, Canada and Mexico.&nbsp;

The scheme is cashless and portable, which means when people covered by it migrate for work within India, they need not have to worry about inclusion. It has also pre-determined who all will get covered so that the beneficiaries do not have to get themselves registered at all. The scheme is set to be launched on September 25, or in another 40 days, but its all-India launch may happen later as critical infrastructure is still not in place.

Ayushman Bharat CEO Indu Bhushan told DNA Money that a full rollout will be challenging in this time period. He said that 29 states are on board with the scheme, with Maharashtra becoming the latest to come on board. At the national level, all guidelines covering the scheme are in place and the IT backbone is also ready.&nbsp;

Under Ayushman Bharat, states have been given flexibility with regard to coverage universe, cost and whether to adopt the insurance model or not. The Ayushman Bharat scheme would provide significant business opportunities for healthcare professionals including insurance companies and TPAs, Bhushan said, adding package rates have been determined based on a thorough analysis and the scheme is designed to control fraud and abuse.

So, how successful will this scheme be in covering the healthcare spends of the poor? For one, the pre-identification of beneficiaries using the 2011 socio-economic caste census data itself may present a problem since the data is already seven years old.&nbsp;

According to analysts at brokerage Philip Capital, “Many states, as well as advisors, have raised their voice against this, as the economic status of a large number of families is bound to have changed over these years. The parameters adopted by the Odisha government alone estimates that close to 900,000 people could be left out of the scheme because of this.”

Second, some state governments have opted to remain out of the scheme or have not signed up as yet despite the funding by Centre and states designed to happen in a 60:40 ratio. But prominent ones like Delhi, Odisha and Tamil Nadu are yet to come on board. There are two issues here: some of these states are wary of the political fallout of endorsing a scheme so closely identified with the prime minister himself and some others have existing health cover schemes which cover number of beneficiaries than Ayushman Bharat proposes to cover.&nbsp;

Take, for example, Odisha, which has launched the Biju Swasthya Kalyan Yojana this Independence Day, offering health coverage to about 70 lakh people instead of opting for the Central scheme which would have covered a lesser number of people.

Maharashtra had been reluctant to come on board earlier since it already runs the ‘Mahatma Jyotiba Phule Jan Arogya Yojana’ covering 2.2 crore families when Ayushman Bharat is offering a cover for only 83 lakh families. But now, the state has agreed to join in.

Third, the current healthcare infrastructure is just not equipped to handle the numbers under Ayushman Bharat. As per the National Health Profile, 2018, we only have 23,582 government hospitals having 7.1 lakh beds - the Ayushman pilot will initially involve only government hospitals as private hospitals continue to be wary of package rates being offered under the scheme. So about 7 lakh beds from government hospitals for a universe of 50 crore people is surely a gaping hole in the required infrastructure. Bhushan said that more beds will be needed for covering the entire Ayushman Bharat universe of 10 crore families.

Besides, Crisil analysts said in a note that around 55% of the country’s households do not use or are unable to use government health facilities because of perceived poor quality of care. Rahul Prithiani, director, Crisil Research, pointed out that “As for market opportunity for private healthcare companies, the scheme is too big to ignore. For private hospital chains, there is material promise in expanding into Tier II and Tier III cities over the next 2-3 years. But till implementation creases get ironed out, private players are unlikely to go the whole hog.”

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Ayushman Bharat is a laudable initiative, But to succeed, it needs lots of groundwork before making the intended impact. Unless state governments and the Centre work together and until funding remains a constraint, these objectives may be difficult to achieve.

Source: DNA Money

Ayushman Bharat CEO Indu Bhushan told DNA Money that a full rollout will be challenging in this time period. He said that 29 states are on board with the scheme, with Maharashtra becoming the latest to come on board. At the national level, all guidelines covering the scheme are in place and the IT backbone is also ready.&nbsp;


Ayushman Bharat laudable, but to succeed, scheme needs lots of groundwork

The implementation of what has been touted as the boldest tax reform since independence, the Goods and Services Tax (GST), has not been all that smooth. The GST regime has been facing many bumps, such as inadequate collections compared to the target set out initially, non-compliance by stakeholders and frequent changes in slabs leading to a revenue shortfall. According to recent reports, the government will take a ‘pause’ in further rate cuts. This has come even when the shortfall each month between the target and actual collection has begun narrowing since the beginning of fiscal 2019.

Remember, the GST Council recently lowered rates on close to 100 products including smaller TVs, refrigerators and washing machines, sanitary napkins and handicraft products. Since the GST regime was first implemented in July last year, rates on 384 products have been reduced but not a single product has seen any rate hike. Lowering rates obviously reduces overall GST collections, at least in the short term.

A Facebook post by Arun Jaitley, who oversaw the implementation of the GST regime, points out how a large number of items, which were earlier in the highest 28% slab, have been gradually brought to lower tax slabs. Jaitley said the 28% tax slab is being phased out as the bulk of the remaining items in this category are only “luxury items or sin goods.” Other items outside the luxury sin goods category are cement, air-conditioners, large screen televisions and a handful of others. “Hopefully, with further expansion of revenues, these few items may also witness a change of category,” he said.

Revenue expansion under GST is happening albeit slowly. However, unnamed government officials were quoted as saying that a “worrying” shortfall in collections has pushed the government to pause further rate cuts. As per data presented last month, provisional collections in the first quarter of this fiscal under GST stood at Rs 2.92 lakh crore against a monthly target of Rs 1-1.2 lakh crore. That works out to a shortfall of close to Rs 40,000 crore in three months or close to Rs 13,000 crore each month.

Between August 2017 and March this year, the total collections stood at Rs 7,19,078 crore or an average of Rs 89,885 crore. It is obvious that though the shortfall continues, it has been narrowing.

Sachin Menon, partner and national head (Indirect Tax) at KPMG told DNA Money that last month GST collections stood at Rs 96,000 crore, short of the monthly target by just Rs 4000 crore. “As compliance improves, such minor deficiencies will disappear”. Menon also said that it made sense to “wait and watch the trend before the next rate cut”.

So why do GST collections continue to fall short of the target? 
Non-compliance could one reason. This reply in Lok Sabha as on June 30 this year shows that 1,205 cases of GST evasion were reported by central tax authorities across the country and the total amount detected was Rs 3,026.55 crore.

Besides, as Jaitley says in his post, tariff rationalisation depends on the expansion of the revenue base. “In the pre-GST regime, India had a complicated, inefficient, multiple indirect tax system where each assessee could be levied up to 17 different taxes,” said Jaitley.

Abhishek Jain, tax partner at EY, says “A gradual uptick in GST revenue collections this year has encouraged the government to further rationalise the GST rates. Hope this leads to buoyancy in the economy and the GST revenue collections remain robust”.

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The net revenue loss to the government on account of the reduction of tax on goods and services has been about Rs 70,000 crore till now, Jaitley goes on to say. And since state governments have been guaranteed a 14% increase over their pre-GST revenues for the first five years, this burden has entirely been borne by the Centre. So, is it any wonder that the Centre is now seeking a pause in a further reduction in GST rates? Remember, wider the gap between the target and actual collections under GST, the more difficult it will become for the Centre to remain committed to its fiscal deficit target of 3.3% of GDP for this fiscal.

Source: DNA Money

Remember, the GST Council recently lowered rates on close to 100 products including smaller TVs, refrigerators and washing machines, sanitary napkins and handicraft products. Since the GST regime was first implemented in July last year, rates on 384 products have been reduced but not a single product has seen any rate hike. Lowering rates obviously reduces overall GST collections, at least in the short term.


GST rate-cut pause to stay; here is reason why

With the Comptroller and Auditor General (CAG) joining the chorus against the Indian Railways’ (IR’s) flexi fare scheme, perhaps it is time to consider the auditor’s second suggestion that there be an all-round fare “rationalisation” to boost the finances of IR. How else can the country’s largest transporter bridge the gap between actual earnings and the target set out at the beginning of the fiscal? Especially under the current cross-subsidisation model where freight earnings already subsidise passenger revenue. If incremental revenue from flexi fares also falls, the precarious financial condition of IR could likely worsen this fiscal.

Under the flexi scheme (which is in force in only premium trains, affecting less than 1% of the travelling public), fares rise by 10% on every slab of 10% seats filling up, but only to maximum 1.5 times the base fare. In a report tabled in Parliament last week, the CAG said that the current flexi scheme be tweaked to arrest the decline of passengers and that IR should consider rationalising fares across all types of trains. The CAG said there were 6.75 lakh fewer travellers between September 9, 2016, and July 31, 2017, year-on-year due to flexi fares but it also had to admit that earnings of the IR got a boost, with additional Rs 552 crore coming in during this period. An IR official said incremental earnings from flexi scheme would be over Rs 1,200 crore in 2017-18.

In its report, the CAG has suggested that IR should a) review and fine-tune the scheme to increase passengers b) consider reviewing the fare structure on the basis of demand and occupancy in different routes c) explore the possibility of rationalising the fare structure across all types of trains d) instead of allotting 90% seats/berths under flexi fare scheme, at least 50% seats/berths should be allotted for normal fare.

There has been enough pressure already on the railways to drop flexi fares, with MPs and train travellers continuing with their stiff opposition. So should the IR then follow CAG’s second suggestion and take steps to increase fares across-the-board? The cost of carrying passengers has been increasing each year with no simultaneous increase in fares. It is well known that freight earnings continue to subsidise passenger earnings and in the absence of political will to raise passenger fares in an election year whatever the CAG might say - flexi-fares are really the only option to generate additional revenue. The IR official quoted earlier said that loss on account of passenger fares (Railways’ social obligation cost) for 2017-18 was over Rs 38,000 crore (from Rs 36,286.33 crore in 2015-16). IR spends 81 paise per passenger per km but gets only 48 paise through fares, a subsidy of almost 40%.

Flexi fares are crucial in the IR’s scheme of things since its earnings target for 2018-19 is a steep Rs 2 lakh crore, up from about Rs 1.78 lakh crore achieved in 2017-18. This means it must generate an additional about Rs 22,000 crore this fiscal. Passenger revenue has been traditionally falling short of target and even if it were possible to generate Rs 10,000 crore additionally by loading more freight, achieving the overall revenue target still looks tough. In such a scenario, why would the IR ignore the additional Rs 1,200 crore that may come through flexi fares?

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Besides, as a transport sector expert points out, some other measures could also be taken to improve its earnings. One is capping the passenger subsidy. He said if the current 40% subsidy is lowered to, say, 35%, there will be several crore rupees worth of earnings boost for the IR, far more than flexi earnings. Again, can this be done in an election year is the question, since raising fares is a touchy topic at the best of times.

IR officials say the flexi scheme is here to stay and as a relief, reduction in some Shatabdi fares is already being done. Fares have been slashed by about 30% on the Mysore-Bangalore section of the Shatabdi which goes up to Chennai and train occupancy has improved. Similarly, on the Ajmer-Jaipur leg of the Delhi-Ajmer Shatabdi, only one in three seats were being filled and here again fares were slashed by a third.

There is a popular misconception that the flexi fare scheme is like the surge pricing in airlines. The IR does not increase fares based on how many people are trying to book a ticket. Also, it does not increase fares in most cases during festivals and seasonal rush, and there is a ceiling up to which it will raise fares. Besides, the IR offers multiple fares and time options for passengers.

(Source: DNA Money)

With the Comptroller and Auditor General (CAG) joining the chorus against the Indian Railways’ (IR’s)&nbsp;flexi&nbsp;fare scheme, perhaps it is time to consider the auditor’s second suggestion that there be an&nbsp;all-round&nbsp;fare “rationalisation” to boost the finances of IR.&nbsp;


Will Indian Railways tweak flexi fare scheme?

The number of passengers taking a train to their destination, instead of a bus or a flight, continued to decline this fiscal on the back of increased cases of train cancellations by Indian Railways.&nbsp;To put this in perspective, there has been an almost 78% rise in the number of train trips cancelled during April-June this year compared to the same period in 2017. Besides, there have been significant train delays too, as the aggressive maintenance schedule undertaken by the Indian Railways (IR) necessarily shut down train movement for long periods of time.&nbsp;

The increased rate of cancellations and delays have put off passengers and their numbers as well, as earnings from this segment declined in the June quarter.&nbsp;However, government officials say the situation is likely to improve now, as the IR has decided to award mega maintenance blocks on Sundays and publicise train re-scheduling due to these blocks. They say the overall punctuality of trains has improved significantly in June over May and should improve further - which could well mean disappointed passengers would return to take trains instead of using other means of transport.&nbsp;

Remember, fares have not been increased in years and the flexi-fare scheme (where fares rise as every 10% seat get filled) has also been tweaked to reduce fares on certain premium train journeys.

“We experienced a temporary blip in passenger earnings in June quarter. The situation is bound to improve as mega blocks (the time when no train movement is allowed on the tracks due to maintenance work) have been shifted to Sundays and are being done with coordination among various Railway zones. Train punctuality has already begun to improve. Going forward, the number of passengers as well as earnings from the passenger business will increase,” a senior government official said, requesting anonymity.

This official also pointed out that the FY19 passenger earnings target of IR at Rs 52,000 crore will likely be met and it was quite early to despair over the “slight” decline in passenger numbers. An overwhelming 93% of the country’s train passengers travel unreserved. The remaining about 7% account for almost two-thirds of the IR’s total passenger earnings.

As per data from the railways, gross earnings from passengers declined by 1.37% to Rs 1,221.31 crore in Q1 from Rs 1,238.28 crore in the same period of the previous year. This works out to a decline of close to Rs 19 lakh on an average every single day of the quarter. The number of passengers booked on an originating basis too declined but by a lower margin of 0.07% from 2087.1 million to 2088.54 million. In other words, IR saw almost a 16,000 daily decline in passengers on board its nationwide network of trains in the April-June period.

But record freight haulage has ensured that the overall earnings of the country’s biggest transporter showed growth during the first quarter. Remember, freight earnings account for almost 65 paise of every rupee earned by the IR and are used to subsidise passenger earnings. So in effect, improved freight earnings are a life saver for the railways, which is expected to report a historical worst operating ratio of close to 98% this fiscal.&nbsp;

Operating ratio is a metric which explains what the IR has to spend to earn each rupee; it has to spend 98 paise to earn that rupee. Huge pension and pay commission payments besides lacklustre earnings from passengers are the two main reasons for the worsening operating ratio of the railways.

For the June quarter, the IR transported 299.4 million tonne (MT) of freight against 281.17 MT in the corresponding period last fiscal, an increase of over 18 million tonne. Earnings from freight grew to Rs 30,139.96 crore (Rs 27657.66 crore), an increase of Rs 2,482.3 crore. In other words, the incremental year-on-year earnings from freight during Q1 were over Rs 27 crore each day on an average. Quite clearly, the good show on freight has spared IR the blushes in the first three months of this fiscal.

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Railways finances need a boost even after the good show on the freight front and expectations that passenger earnings will improve in the coming quarters. The total earnings’ target for 2018-19 is Rs 2 lakh crore, up from about Rs 1.78 lakh crore registered in 2017-18. This means railways will have to generate an additional revenue of Rs 22,000 crore this fiscal. It is eyeing about Rs 10,000 crore additional earnings from freight, and another Rs 1,000 crore from the flexi fare scheme. But this still leaves a gap of Rs 10,000 crore shortfall in the earnings’ target.

Source: DNA Money 
&nbsp;

The increased rate of cancellations and delays have put off passengers and their numbers as well, as earnings from this segment declined in the June quarter.&nbsp;However, government officials say the situation is likely to improve now, as the IR has decided to award mega maintenance blocks on Sundays and publicise train re-scheduling due to these blocks.&nbsp;


Indian Railways passenger revenue falls; whopping 78% rise in cancellations

When looking at the Ease of Doing Business (EODB) rankings for states, two things need to be kept in mind. One, state governments promise a number of reforms but some of these remain only on paper and this is now getting captured via the industry feedback option used in this year’s rankings. Two, Maharashtra and Delhi remain the top contenders for foreign direct investment (FDI) in India, never mind their EODB rankings being well below the toppers Andhra Pradesh and Telangana. EODB rankings are a reminder to laggard states to pull up their socks, but manufacturers take investment decisions after considering several other parameters like a ready market for their products, office location, land availability etc.

In the latest round of EODB rankings by the Department of Industrial Policy and Promotion (DIPP) and the World Bank, Andhra Pradesh (AP) has once again received top honours with a combined score of 98.42%. And Telangana is marginally lower at 98.33%.

Maharashtra, the topmost FDI destination - it accounted for almost a third of the total FDI coming into India in the last 18 years - had a combined score of 92.71% and ranked 13th on the EODB list, behind Jharkhand, Gujarat, Chhattisgarh and Rajasthan. Delhi, the second most popular destination for FDI (it accounted for a fifth of the total FDI inflows between 2000 and 2018) was ranked at 23rd position out of total 34 state rankings. Haryana (98.07%), Jharkhand (97.99%), Gujarat (97.96%) and Chhattisgarh (97.36%) follow the two southern states in the EODB rankings.

So, what did AP do right for the second year in a row to top the EODB rankings? Speaking to DNA Money, AP’s state planning commission vice chairman Kutumb Rao said the state had, last year, launched an initiative called “AP Public Service Guarantee Act 2017” which guarantees a time-bound dispensation of more than 60 services. These include providing electricity connections, environmental clearances etc. in the promised time or else the defaulting officer is penalised through salary deductions. Rao said more than 99% applications for starting a business are cleared in the stipulated time in his state.

A closer look at two scorecards - reforms and feedback - shows why some states surprise on the EODB rankings. Maharashtra has a reasonably good scorecard of 97.29% in reforms - the initiatives it says it has taken to improve EODB. But when it comes to industry feedback (whether the reforms were actually implemented), it scored just 50.29%. For Delhi, the discrepancy between actual and paper reforms is even more glaring: 33.99% on paper but just 6.4% through industry feedback. Is it any wonder then that the FDI poster boys are behind others in EODB rankings?

AP scored 99.73% on reforms and 86.5% on feedback while for Telangana the corresponding figures were 100% and 83.95%, respectively.

All the North Eastern states and Chandigarh had a zero on feedback rating; Delhi was just above Kerala which had a dismal 1.97% feedback rating. Tamil Nadu, an otherwise highly industrialised state, had a reform reading of 95.93% but a feedback reading of only 43.9%.

Apart from the discrepancy in reforms and their actual implementation, some states suffer from another inherent disadvantage. Madan Sabnavis, chief economist at Care Ratings, said new states have an advantage as far as EODB rankings are concerned.

“New states start from scratch and can introduce transparent policies, have online systems for execution. Larger states with legacy issues have to go in for transformation and would hence take more time to comply with all the points on the list. Similarly, states which do not have certain systems can start afresh with these compliances. For example, anything digital will also mean that all old records have to be transferred simultaneously, which will take time for larger states that have to undergo a major transformation. A new state has to start afresh and would naturally start off with the digital superstructure in place, hence AP and Telangana scored. Same would hold for Jharkhand, which though old is still a virtual post reform state.”

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It is thus fair to say that the EODB rankings do not necessarily mean there will be high investments in states which top this chart, the rankings are mere enablers. For example, Bihar and Jharkhand get investments for mining irrespective of the environment as these are mineral-rich states. Maharashtra has the best infrastructure for ancillaries, ports, roads, power and would draw high investment, regardless of its EODB rank. Same holds true for Gujarat and Tamil Nadu.

EODB rankings help bring in investments to a state when there is a toss between two states, but that does not happen often. In any case, the government’s decision to use only the feedback method to do future rankings is welcome, since it will ensure only those reforms which are actually implemented by each state are recognised while calculating rankings from next year.

The latest EODB rankings come days before the World Bank’s annual Ease of Doing Business report, 2017. Last year, India jumped 30 places to settle at the 100th rank.

Source: DNA Money

When looking at the Ease of Doing Business (EODB) rankings for states, two things need to be kept in mind. One, state governments promise a number of reforms but some of these remain only on paper and this is now getting captured via the industry feedback option used in this year’s rankings.&nbsp;

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Sindhu Bhattacharya