Nirmala Sitharaman says covid-19 an 'act of god’, may result in contraction of economy

News Network
August 27, 2020
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Nirmala Sitharaman

New Delhi, Aug 27: Amid a chorus by non-NDA ruled states for compensation of GST revenue shortfall, the Centre on Thursday presented two options to states under which they can borrow from the market to make up for the estimated deficit of Rs 2.35 lakh crore this fiscal.

At the end of a five-hour long meeting of the GST Council, Finance Minister Nirmala Sitharaman said there was no proposal to raise tax rates to make up for the shortfall that has been compounded by the COVID-19 pandemic.

Citing a legal opinion from the Attorney General, she ruled out the Centre making good the shortfall from either its coffers or borrowing against its balance sheet.

The deficit can be made good by states borrowing using a special window, she said, adding this loan can be repaid after five years from the collection of GST cess.

If states agree to either of the options, it would effectively mean that cess would continue beyond five years of the GST rollout.

In 2017, all states agreed to subsume their local taxes such as VAT into the new, nationwide Goods and Services Tax (GST) in return for the Centre promising to make good any loss of revenue in the first five years.

But with the economy slowing down, Rs 70,000 crore shortfall was seen in the last fiscal and this year it is estimated to widen to Rs 2.35 lakh crore.

Revenue Secretary Ajay Bhushan Pandey said out of this amount, only about Rs 97,000 crore is attributable to the implementation of GST, while the rest in on account of the coronavirus pandemic hitting the economy.

Pandey, who is also the finance secretary, said while GST collections have been impacted by the pandemic this year, there was a shortfall of Rs 70,000 crore in 2019-20 (April 2019 to March 2020) which was made good from the surplus of previous two years.

When GST was implemented in 2017, the Centre had promised to compensate states for any revenue loss for five years from a pool created by levying cess over and above the GST on luxury and sin goods.

This cess pool generated a surplus in the first two years but witnessed a deficit in FY20 as well as the current fiscal.

Detailing the options presented to the states, Sitharaman said the Centre, in consultation with the RBI, will provide a special window to states to borrow Rs 97,000 crore at a reasonable rate of interest. This money can be repaid after five years from the collection of cess.

The other option is that the states borrow the entire GST compensation gap of Rs 2,35,000 crore through the special window.

The states have seven working days to decide which option they want, she added.

Sitharaman said “the interest from borrowing would be repaid from the cess collected in the years beyond the first five years of GST implementation.”

“There will be no additional burden on the states,” she said, adding the states have been asked to borrow through the RBI to ensure they do not rush for the borrowing and there is no hardening of bond yields.

The minister said the GST Council decided that the borrowing arrangement would be for the current fiscal and a review would be done at the beginning of the next financial year.

“We very clearly said in both the options... that we shall facilitate talking to the Reserve Bank and getting it at a G-Sec proportionate number of years linked rate for all the states so that each state does not have to go running for the loan and face different situations and in the process the bond yields (turn) higher.

“So we said we will facilitate it, but the borrowing can be done in the name of the states and all states roughly can get the same rate of interest,” Sitharaman said.

A detailed note on the two options would be shared with the states and they would give their views on it in seven working days.

The minister said as soon as an arrangement is agreed upon by the GST Council, the Centre will clear the pending bi-monthly compensation. The compensation amount due for April-July period stands at Rs 1.50 lakh crore.

“This year we are facing an extraordinary situation... we are facing an act of God which might even result in a contraction of the economy, to what percent I am not getting into that.

“Therefore, we said that portion (of compensation) which strictly is hardwired in the (GST) Act, we will arrange, give it to you...,” Sitharaman said.

She said both the options hinge upon the fact that borrowing will be done by the states.

“We explained why it would be preferable for the states to borrow and not the Centre and also we said if states are going to borrow, instead of crowding out people, we will facilitate the process through central bank,” she said.

The Centre had released over Rs 1.65 lakh crore in 2019-20 as GST compensation. However, the amount of cess collected during 2019-20 was Rs 95,444 crore. The balance of about Rs 70,000 crore was paid from the excess cess collected in 2017-18 and 2018-19.

The compensation payout amount was Rs 69,275 crore in 2018-19 and Rs 41,146 crore in 2017-18.

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News Network
November 26,2024

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Bengaluru: The Janata Dal (Secular) is grappling with its most tumultuous political crisis yet, with speculation rife about imminent defections among its lawmakers. This storm comes in the aftermath of party scion Nikhil Kumaraswamy's humiliating defeat in the Channapatna bypoll—his third consecutive electoral loss after setbacks in Mandya (2019) and Ramanagara (2023). With the regional party’s Assembly tally shrinking to 18 from 19, questions are being raised about its survival.

The murmurs of rebellion were amplified on Monday when Health Minister Dinesh Gundu Rao and Congress MLA CP Yogeshwar openly hinted at possible desertions within the JD(S) ranks. Yogeshwar, newly elected from Channapatna, declared he could orchestrate a migration of JD(S) MLAs to Congress. “I’ll meet them at the Belagavi session. Within a month, they’ll be in Congress,” he confidently stated during a televised interview. Yogeshwar has a history of engineering defections, having played a pivotal role in the collapse of the JD(S)-Congress coalition government in 2019 during his stint with the BJP.

Dinesh Gundu Rao, not mincing words, slammed the JD(S) leadership for fostering "self-serving politics," criticizing the HD Deve Gowda family for failing to nurture party talent. “There’s no trust. Their MLAs will seek survival—either in BJP or Congress,” he remarked.

Meanwhile, the expelled JD(S) state president CM Ibrahim added fuel to the fire by claiming that 12-13 MLAs are "disillusioned" with the current leadership. Speculations around senior JD(S) leader GT Deve Gowda joining Congress have also intensified. DK Shivakumar, Karnataka’s Deputy CM and Congress president, described GT Deve Gowda as a “valuable leader” who might be frustrated with the party’s internal dynamics.

While Congress leaders seem eager to poach JD(S) legislators, the BJP is not far behind in targeting the floundering party. The situation signals a decisive moment for the JD(S), as its survival now hinges on how it manages this brewing storm of discontent.

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News Network
November 23,2024

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Bengaluru: In a boost to the ruling Congress in Karnataka, the party on Saturday swept the by-polls to three Assembly segments, causing a major setback to the BJP-JD(S) alliance in the state.

The Congress has retained Sandur, the seat considered to be its strong hold, and has also bagged Shiggaon and Channapatna segments, which were earlier held by BJP and JD(S) respectively.

The November 13 by-polls to Sandur, Shiggaon and Channapatna Assembly segments had witnessed a fierce fight between the ruling Congress and a combative BJP-JD(S) alliance.

The by-polls to Sandur, Shiggaon and Channapatna were necessitated as the seats fell vacant following the election of their respective representatives -- E Tukaram of Congress, former CM Basavaraj Bommai of BJP, and Union Minister Kumaraswamy of JD(S) to Lok Sabha in May elections.

The by-polls witnessed a straight fight between the ruling Congress and BJP in Sandur and Shiggaon segments, while in Channapatna, JD(S) which is part of the NDA alliance took on the grand old party.

Congress' C P Yogeeshwara won the Channapatna segment, defeating JD(S) candidate and Kumaraswamy's son Nikhil Kumaraswamy, by a margin of 25,413 votes.

Former CM Basavaraj Bommai's son Bharath Bommai of BJP faced defeat against Congress' Yasir Ahmed Khan Pathan in Shiggaon Assembly segment by a margin of 13,448 votes.

In Sandur, Congress candidate E Annapoorna, the wife of Bellary MP E Tukaram, won the seat vacated by her husband, by a margin of 9,649 votes.

Congress' win in the by-poll is seen as an endorsement of both Chief Minister Siddaramaiah and his deputy D K Shivakumar's leadership, and the government's programmes, especially the five guarantee schemes.

Nikhil Kumaraswamy and Bharath Bommai, the third generation of Gowda and Bommai family respectively, who contested this bypolls, have lost. Their fathers and grandfathers had served as Karnataka's Chief Ministers in the past.

While for Bharath Bommai this was his electoral debut, for Nikhil it was his third electoral loss.

Among the three segments, Channapatna was considered to be a high profile battle, where the contest was between C P Yogeeshwara and actor-turned-politician Nikhil Kumaraswamy.

A five-time MLA from the segment and a former Minister, Yogeeshwara had joined the Congress after quitting BJP ahead of nomination.

There were plans to field Yogeeshwara on a JD(S) ticket, but he was not interested in it, and instead wanted Kumaraswamy to support him as BJP candidate. This was not acceptable to Kumaraswamy and his party, following which Yogeeshwara jumped ship.

However, Kumaraswamy had subsequently said he had agreed to Yogeeshwara contesting from BJP, and despite that he jumped ship to Congress, under the influence of Deputy Chief Minister D K Shivakumar and his brother and former MP D K Suresh.

Nikhil had faced defeat in 2019 Lok Sabha and 2023 Assembly polls. It is seen as a setback for Kumaraswamy too, as he could not ensure son's win from the Channapatna, the seat he had twice represented in the past.

Congress' win is crucial for Shivakumar, who is also the state Congress chief and his brother Suresh to strengthen their position in their home district of Ramanagara, a Vokkaliga heartland.

In Shiggaon, BJP's Bharath Bommai, son of Basavaraj Bommai lost against Congress' Yasir Ahmed Khan Pathan, who had faced defeat against the former Chief Minister in the 2023 Assembly polls.

Initially, former MLA Syed Azeempeer Khadri, a Congress' ticket aspirant, had raised a banner of revolt in Shiggaon, by filing his nomination as an independent, but later withdrew after intervention by party leadership.

In Sandur, Bellary MP Tukaram's wife E Annapurna of Congress won from the seat vacated by her husband, against BJP ST Morcha president Bangaru Hanumanthu, who is considered close to party leader and former mining barron G Janardhan Reddy.

Sandur is a Congress' bastion, and Tukaram had represented it four times.

Congress winning the by-polls is seen as "crucial" for Chief Minister Siddaramaiah to assert himself , amid demands for his resignation following charges against him in the MUDA site allotment case.

There were also behind-the-scenes political activities within the ruling Congress earlier this year, with a few ministers in his Cabinet holding closed door meetings, fueling speculation about leadership change. But such activities came to a halt following instructions from the party high command.

It is equally important for Shivakumar, who has not shied away from openly expressing his Chief Ministerial ambitions, amid speculations over "rotational Chief Minister formula," according to which he will become CM after two-and-half years (in this govt's five years tenure), but they have not been officially confirmed by the party.

The defeat in this by-poll is seen as a setback for state BJP President Vijayendra, who has been facing intense criticism and opposition from a section within the party, who have raised a banner of revolt against his leadership accusing him and his father, veteran leader B S Yediyurappa of "adjustment politics".

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News Network
November 21,2024

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After the US prosecutors charged Gautam Adani with bribery and fraud, Congress reiterated its call for a Joint Parliamentary Committee (JPC) probe into the transactions of the Adani group, and hit out at Prime Minister Narendra Modi, alleging an "internal nexus" between him and "his favourite businessman."

Senior Congress leader Jairam Ramesh said the indictment of Gautam Adani and others by the US Securities and Exchange Commission validates his party’s call for a Joint Parliamentary Committee investigation.

The Congress has been pushing for the probe since January 2023, raising concerns over alleged irregularities involving Adani and his business dealings, said Ramesh.

Ramesh referred to the party’s “Hum Adani ke Hain” series, where 100 questions were raised about the alleged scams and the links between Prime Minister Narendra Modi and Gautam Adani.
He noted that the questions remain unanswered, reiterating the need for accountability in the matter.

The US prosecutors have charged Adani with deceiving investors by concealing information about his firm's solar energy project in India, which allegedly involved bribery.

Adani has been charged with securities fraud and conspiracy, according to an indictment unsealed on Wednesday. The case focusses on an agreement between Adani Green Energy Ltd. and another organisation to supply 12 gigawatts of solar power to the Indian government.

'BETRAYAL OF INDIAN INVESTORS'

Congress leader Pawan Khera described the allegations against Gautam Adani and his conglomerate as a “betrayal of Indian investors.”

Taking to X, Khera outlined the US charges, including claims that Adani’s group bribed Indian government officials between 2020 and 2024 to secure contracts. Citing media reports, he also pointed out that Gautam Adani personally met a government official to advance the scheme.

Khera referred to a March 2024 incident where the Adani Group allegedly misled the Bombay Stock Exchange and the National Stock Exchange, calling it a “grave violation of investor trust.”

He further highlighted a March 2023 FBI raid on the premises of Sagar Adani, Gautam Adani’s nephew, where electronic devices were seized as part of the investigation.

'SEBI NOT ABLE TO PROVE ANY CHARGES AGAINST ADANI'

Shiv Sena (UBT) leader Priyanka Chaturvedi criticised central probe agencies following US charges against Gautam Adani and others in an alleged bribery case linked to solar energy contracts.

Chaturvedi raised concerns about corporate governance and regulatory oversight in the country. “They talk about corporate governance, responsibility, and accountability. The industrialists should be asked to follow the rules and regulations, but even the agencies were defending him. The SEBI has not yet been able to prove charges against him,” she said, pointing to what she viewed as failures in ensuring accountability.

'BROUGHT DISREPUTE TO INDIA'

On US charges against Gautam Adani, AAP leader Sanjay Singh called for a probe against the industrialist. He said that the probe should be conducted by an investigation agency under the Supreme Court.

"Adani Group has brought disrepute to India. This is a very serious matter. The PM of India should come forward and answer this. All the pending matters against Adani should be probed by an investigation agency under Supreme Court monitoring, and all the corruption done by him, within and outside the country, should come out before the country and action should be taken against him," he said.

BJP DFENDS

BJP IT cell chief Amit Malviya responded sharply to the Opposition’s criticism regarding allegations involving Adani Green Energy and US-based Azure Power. He pointed out that the charges in the indictment are only allegations and emphasised, “The defendants are presumed innocent unless and until proven guilty.”

Malviya argued that the crux of the case concerns agreements to supply 12 GW of power to the Solar Energy Corporation of India (SECI), contingent on SECI securing power purchase agreements with state electricity distribution companies (SDCs).

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