Narendra Modi govt fastracks reforms in insurance, coal, pharma sectors

[Lord ZeN]

Moving at rapid pace, the Union Cabinet today approved key insurance and coal sector reforms which were stuck in Parliament logjam and also liberalised foreign investment policy in the medical devices sector.

A day after the conclusion of the Winter session of Parliament, the Cabinet approved promulgation of the Ordinance on Insurance Bill, re-promulgation of the Coal Ordinance and allowing up to 100 per cent FDI in medical devices in the pharmaceutical sector under the automatic route.

Briefing reporters, Finance Minister Arun Jaitley expressed the hope that hiking of the foreign investment cap in the insurance sector to 49 per cent, which has been pending since 2008, will result in capital inflow of USD 6-8 billion.

“The Ordinance demonstrates the firm commitment and determination of this government to reforms. It also announces to the rest of the world including investors that this country can no longer wait even if one of the houses of Parliament waits indefinitely to take up its agenda,” he said.

The Insurance Laws Amendment Bill, 2008 could not be taken up for discussion in Parliament despite being approved by the Select Committee of the Upper House because of the uproar over the conversion and other issues.

The Coal Mines (Special Provisions) Bill, 2014 has already been approved by the Lok Sabha during the session but could make no progress in the upper House.

The re-promulgation of ordinance on coal will facilitate e-auction of coal blocks for private companies for captive use and allot mines directly to state and central PSUs.

Liberalising of the FDI policy for the medical device segment in the pharmaceutical sector is expected to help attract more investments and boost the domestic manufacturing.

Jaitley said the insurance amendment Bill has been pending in Parliament for a “very long time” although it was approved by the Standing Committee as well as the Select Committee of the Rajya Sabha.

“Even though the Select committee by majority has recommended the Bill for adoption, the same was not permitted to be taken up for discussions because of disturbances in the Rajya Sabha.

“The government therefore decided to recommend to the President the promulgation of the insurance amendment laws. The Ordinance is exactly and verbatim of the recommendations of Select Committee,” the Minister said.

There are 52 insurance companies, of which 24 are in the life insurance business and 28 in general insurance segment. The total capital deployed in the private life insurance sector is close to Rs 35,000 crore. With FDI at 26 per cent, foreign equity is close to Rs 8,700 crore.

Talking about re-issuance of coal ordinance, the Finance Minister said the Lok Sabha has cleared the bill, but the Rajya Sabha could not take it up for discussion.

“Along with the methodology for coal block auction for power sector and other sectors, the guidelines too have been cleared by the Cabinet. With the re-promulgation, the unfinished process of allocation of coal blocks will resume again,” he said.

The move came against the backdrop of the Supreme Court in September quashing allocation of 204 coal blocks to various companies since 1993.

The re-promulgation of the Ordinance will enable the Coal Ministry to go ahead with its decision to give a total 101 mines, including 65 through auction, in the first phase.

On FDI policy liberalisation in the pharma sector where 100 per cent foreign investment is permitted, Jaitley said within the same category, a distinct new sub category has been carved out with regard to medical devices.

“In this age of super specialisation, if medicines and pharma are one aspect, in which India has attained a certain amount of core competence, we still have not achieved that in medical devices, particularly, which are to be installed in human body for the purpose of treatment,” he added.

Medical devices include instrument, apparatus, appliance, implant, material or other article.

Narendra Modi govt fastracks reforms in insurance, coal, pharma sectors | The Financial Express

 

[OrionHunter]

The re-promulgation of ordinance on coal will facilitate e-auction of coal blocks for private companies for captive use and allot mines directly to state and central PSUs.

E-auction of coal would add a whopping Rs 1,60,000 crores to the Center's kitty!

 

[IndoCarib]

Taking the ordinance route to approve the bills shows Modi govt is serious about reforms. This should get the economy up and running. The GST bill if approved will be a game changer. Ache Din are really coming for Indian economy and the common people of India. JAI HO !

 

[Judge]

Taking the ordinance route to approve the bills shows Modi govt is serious about reforms. This should get the economy up and running. The GST bill if approved will be a game changer. Ache Din are really coming for Indian economy and the common people of India. JAI HO !

If the same logjam in Rajya Sabha continues, then these ordinances will expire.

The problem will still remain the same - ache din will not come if Rajya Sabha does not approve bills.
GST for example also needs RS to ratify it.

 

[The Great One]

Taking the ordinance route to approve the bills shows Modi govt is serious about reforms. This should get the economy up and running. The GST bill if approved will be a game changer. Ache Din are really coming for Indian economy and the common people of India. JAI HO !

GST is no longer the bill it was touted to be. It has been significantly watered down (rather, watered up LOL) all in the course of negotiations with States.

 

[Lord ZeN]

If the same logjam in Rajya Sabha continues, then these ordinances will expire.

The problem will still remain the same - ache din will not come if Rajya Sabha does not approve bills.
GST for example also needs RS to ratify it.

In that case bills can be passed by calling a joint Parliamentary session by which BJP & allies can get a majority.

 

[IndoCarib]

If the same logjam in Rajya Sabha continues, then these ordinances will expire.

The problem will still remain the same - ache din will not come if Rajya Sabha does not approve bills.
GST for example also needs RS to ratify it.

If that is case the fate of these bills will be in limbo. BJP is unlikely to get majority in RS in the near future.

 

[Echo_419]

If that is case the fate of these bills will be in limbo. BJP is unlikely to get majority in RS in the near future.

Why they are winning state after state Getting a majority in RS should be easy y 2016 & then there is always CBI

 

[anonymus]

If the same logjam in Rajya Sabha continues, then these ordinances will expire.

The problem will still remain the same - ache din will not come if Rajya Sabha does not approve bills.
GST for example also needs RS to ratify it.

No, if one house passes the Bill ; The other house could (A) Amend the bill (B)Reject the bill (C) Accept the bill (D)do nothing.

In case of Money bills, these bills could originate only in Lok Sabha, and Rajya Sabha could only suggest amendments within 14 days. If this bill is not passes by Rajya Sabha in 14 days, it is deemed as Passed. If amendments are suggested by Rajya Sabha, Lok Sabha could accept those amendments or reject them. Rajya Sabha could not Reject this kind of Bill.


In case of Financial Bills or Ordinary bills, Rajya Sabha could do any of A,B,C,orD. If Rajya Sabha or Lok Sabha rejects ,or amends a bill and those amendment are not accepted by the house in which that bill originated, Government either has to drop that bill or call Joint session; BUT if other house do nothing ie noting of A,B,or C; for six months, a deadlock is deemed to have occured. Rajya Sabha, by not working, could do nothing except delay reforms by 6 months.



In case of Constitutional amendment, that bill has to be passed by both houses separately. There is no Joint session for Constitutional amendment.

Taking the ordinance route to approve the bills shows Modi govt is serious about reforms. This should get the economy up and running. The GST bill if approved will be a game changer. Ache Din are really coming for Indian economy and the common people of India. JAI HO !

GST's passage is tricky as it is a constitutional amendment requiring special majority. It need passing by 50% of total strength of both Rajya Sabha and Lok Sabha separately and passage in state assemblies of at least 50% states.

Modi would not be able pass it without Congress's support before 2018, and could not cobble up numbers., even with AIADMK,TRS,and PDP/NC's support, in Rajya Sabha before 2016.

 

[Echo_419]

In that case bills can be passed by calling a joint Parliamentary session by which BJP & allies can get a majority.

Govt will get a majority in RS to & then there is CBI

GST is no longer the bill it was touted to be. It has been significantly watered down (rather, watered up LOL) all in the course of negotiations with States.

Can you list out the things which have been changed

 

[anonymus]

Why they are winning state after state Getting a majority in RS should be easy y 2016 & then there is always CBI

Rajya Sabha member's tenure is for 6 years with 1/3 member retiring every two years. NDA would achieve majority in Rajya sabha only by 2018 when it's current victories would showing up in upper house.

 

[Echo_419]

Rajya Sabha member's tenure is for 6 years with 1/3 member retiring every two years. NDA would achieve majority in Rajya sabha only by 2018 when it's current victories would showing up in upper house.

Fook
Perhaps then they could use the CBI to sqeeze opposition & did you just say if rajaya sabja does nothing on the bills passed by Lokh Sabha then they will be deemed as passed

 

[The Great One]

Can you list out the things which have been changed

This should help. But firstly understand that the main purpose of GST was to replace VAT/CST/Service Tax and bring a single tax with a uniform rate (with minor exceptions).


The best of goods & services:
GST being negotiated has too many exclusions, we must build consensus on a flawless version

If there is one policy reform on which there is consensus, it is the Goods and Services Tax (GST). Yet, as negotiations between the Centre and states reshape this important reform, continuous reassessment is warranted.

If we were to implement the flawless GST as originally recommended by the task force of the 13th Finance Commission (TFC), the gains would be immense. The latter had recommended that India replace myriad central and state indirect taxes by a single uniform value added tax on substantially all goods and services. With the combined indirect tax revenue of the Centre and states a tad below 11%, allowing for a handful of exceptions, the TFC taskforce had pegged the uniform GST rate at 12%.

Taxation at this rate would mean that the taxpayer would not have to pay an unusually high tax on any single commodity or service. The burden will be spread evenly across different goods and services consumed. The single rate would also eliminate production inefficiencies since it would tax value added at each stage of production at the same rate.

As a byproduct, since the GST would be collected at the point of sale rather than production, it will serve to unify India into a single market. There would no more be need to erect border check posts to collect taxes on goods produced in one jurisdiction but sold in another.

Unfortunately, it is now increasingly clear that we are not heading towards a flawless GST. Both states and the Centre have lists of goods and services that they appear determined to exclude from the tax base. State lists differ from one another and also from that of the Centre.

Almost all states want such important sources of indirect tax revenue as petroleum and alcohol excluded from the GST base. Besides food items, education and health services are also likely to be excluded wholly or partially. Then there are exclusions based on the turnover of a company. The Centre does not tax companies with a turnover less than Rs 15 million while the exemption thresholds across states range from Rs 5 lakh to Rs 6 million.

So significant are the proposed exclusions that a recent sub-panel set up by state governments estimated that revenue-neutral GST rates would be 12.77% for the Centre and 13.91% for the states. Together, these rates would sum to 26.68%, more than twice the 12% rate that the TFC task force had recommended. Admittedly, the 26.68% rate is the highest of all estimates of revenue-neutral rates offered to-date. Nonetheless, the estimates have been uniformly significantly above the 12% mark.

If excluded items and companies render the GST tax base small and, thus, require the revenue-neutral GST rate to be excessively high, the benefits of the new system would barely justify its costs. A shift to the new system would impose significant transition costs since all states and the Centre would need to move to a common GST infrastructure that would require all taxpaying companies to file their returns and deposit taxes electronically.

GST has also been a source of “attention diversion cost”. The inordinate amount of time spent negotiating it has meant that other reforms have been neglected or delayed.

Above all GST, even when implemented in its flawless form, imposes a major cost on the system by compromising our federal structure of governance. In a true federal system, states and local administrations get to choose the level of spending on public goods and services and are, therefore, accorded powers of taxation. In so far as GST substantially transfers the power to tax to the Centre, it restricts the ability of the states to determine the level of spending on public goods and services locally.

This analysis has two implications for the current approach to policymaking. First, the finance ministry should guard against putting substantially all its eggs in the GST basket. Given the vast exclusions, high GST rate and evasions the high rate would attract, this is not going to be the game-changer reform that was once considered.

There are other reforms India needs that would bring more and certain benefits and would require far less effort and political capital. For instance, in the short run, greater focus on ending the uncertainty associated with taxation, reforming the land acquisition Act and cleaning up the balance sheets of public sector banks would carry significantly higher and more certain returns to the government’s efforts.

Second, if building consensus for a broad GST base takes longer, spending the extra time would be well worth the wait. Indeed, the government may consider a two-step process of implementation.

In the first step, it may implement a fully functional central GST with as wide a base as possible. This would complete an important component of GST without disruption at the level of states. It would also go a long way towards demonstrating to states the Centre’s commitment to GST and its feasibility. In the second step, the Centre can extend GST to states.

This approach would have the added advantage of giving the Centre an opportunity to build and test the robustness of GST infrastructure. After all, a flawless GST also requires a flawless information technology infrastructure.

 

[anonymus]

Fook
Perhaps then they could use the CBI to sqeeze opposition

Even that would be difficult.

Next year situation is going to get worst for NDA as most of the member selected would be from UP. In UP, BSP MP's ,with whom NDA could have reached an understanding, would be replaced by SP's who are declared Enemy of BJP.

Can you list out the things which have been changed

Passing of GST bill is important, not the form in which it is passed.

Once a constitutional amendment of Art 269 has been inserted, further changes could be brought by a simple money bill ,or Ordinary bill. Only exception would be those taxes which are not included in GST could not be included except by route of constitutional amendment. Terms and conditions of GST could be changed easily. This is the reason why states are not so eager to let GST happen.

 

[IndoCarib]

So if they want to push reform bills before 2018, they have to unleash the CBI on the opposition I support that !