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 14,2024

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The UN special rapporteur for Palestine has slammed Israel’s parliament for passing a law authorizing the detention of Palestinian children, who are “tormented often beyond the breaking point” in Israeli custody.

Francesca Albanese, the UN special rapporteur on the rights situation in the Occupied Palestinian Territory, in a Thursday post on X, characterized the experiences of Palestinian minors in Israeli detention as extreme and often inhumane.

The UN expert highlighted the grave impact of this policy, noting that up to 700 Palestinian minors are taken into custody each year, a practice she described as part of an unlawful occupation that views these children as potential threats.

Albanese said Palestinian minors in Israeli custody are “tormented often beyond the breaking point” and that “generations of Palestinians will carry the scars and trauma from the Israeli mass incarceration system.”

She further criticized the international community for its inaction, suggesting that ongoing diplomatic efforts, which often rely on the idea of resuming negotiations for peace, have contributed to normalizing such human rights violations against Palestinian children and the broader population.

The comments by Albanese came in response to Israel’s parliament (Knesset) passing a law on November 7 that authorizes the detention of Palestinian children under the age of 14 for “terrorism or terrorist activities.”

Under the legislation, a temporary five-year measure, once the individuals turn 14, they will be transferred to adult prison to continue serving their sentences.

Additionally, the law allows for a three-year clause that enables courts to incarcerate minors in adult prisons for up to 10 days if they are considered dangerous. Courts have the authority to extend this duration if necessary, according to the Knesset.

The legislation underscores a shift in the treatment of minors and raises alarms among human rights advocates regarding the legal and ethical ramifications of detaining children and the conditions under which they may be held.

Thousands of Palestinians, including hundreds of children and women, are currently in Israeli jails—around one-third without charge or trial. Also, an unknown number are arbitrarily held following a wave of arrests in the wake of the regime's genocidal war on Gaza.

Since the onset of the Gaza war, the Israeli regime, under the supervision of extremist minister Itamar Ben-Gvir, has turned prisons and detention centers into “death chambers,” the ministry of detainees and ex-detainees’ affairs in Gaza says.

Violence, extreme hunger, humiliation, and other forms of abuse of Palestinian prisoners have been normalized across Israel’s jail system, reports indicate.

Over 270 Palestinian minors are being detained by Israeli authorities, in violation of UN resolutions and international treaties that forbid the incarceration of children, as reported by Palestinian rights organizations.

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News Network
November 21,2024

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Shares of Adani Group companies lost about $28 billion in market value in morning trade on Thursday after US prosecutors charged the billionaire chairman of the Indian conglomerate in an alleged bribery and fraud scheme.

Gautam Adani's flagship company Adani Enterprises tumbled 23 per cent, while Adani Ports, Adani Total Gas, Adani Green, Adani Power, Adani Wilmar and Adani Energy Solutions, ACC , Ambuja Cements and NDTV fell between 20 per cent and 90 per cent.

Adani group's 10 listed stocks had a total market capitalisation of about $141 billion at 0534 GMT, compared to $169.08 billion on Tuesday.

US authorities said Adani and seven other defendants, including his nephew Sagar Adani, agreed to pay about $265 million in bribes to Indian government officials to obtain contracts expected to yield $2 billion of profit over 20 years, and develop India's largest solar power plant project.

Adani Green in a statement on Thursday said the US Justice Department had issued a criminal indictment against board members Gautam Adani and Sagar Adani and the Securities and Exchange Commission had issued a civil complaint against them.

The US Justice Department also included Adani Green board member Vneet Jaain in the criminal indictment, it said.

Adani Green's units had decided not to proceed with the proposed US dollar denominated bond offerings due to developments, it added.

"Investors will shy away from Adani Group stocks ... and that's what this sharp selling is signifying," said Saurabh Jain, assistant vice president of retail equities research at SMC Global Securities.

"This could hurt the credibility of the group and maybe borrowing costs will rise," he said.

The indictment comes nearly two years after US shortseller Hindenburg Research alleged that Adani had improperly used tax havens and was involved in stock manipulation, allegations the conglomerate denied.

Also in early Asian trading on Thursday, Adani dollar bonds slumped, with prices down 3c-5c on bonds for Adani Ports and Special Economic Zone. The falls were the largest since the Adani Group came under a short-seller attack in February 2023.

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News Network
November 26,2024

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Former minister and ex-MLC C M Ibrahim claimed that he still heads the original JD(S) and asked former prime minister and party supremo H D Deve Gowda to cut ties with the BJP, so that the party can be strengthened again. He also said options are being explored to either strengthen the JD(S) or to float a new regional party.

He was speaking to media persons, in Mysuru, on Monday, after meeting JD(S) MLA and former minister G T Deve Gowda, who has expressed his displeasure that he has been sidelined in the party and the party leaders have indicated his retirement from politics.

He stated, “If Deve Gowda had joined the Congress, during the last Assembly election, he would have been a minister now. We retained him in the JD(S), to strengthen the party. Now, efforts are being made to strangulate Deve Gowda’s political career. I have discussed all matters with Deve Gowda. In two days, I will start a Karnataka state tour and meet some leaders. After that, I will meet Deve Gowda again, and then decide on the further course of action.”

Ibrahim said, “The original JD(S) is ours. I am still its state president. All documents and accounts are in our name. Even now, if Deve Gowda leaves BJP’s company and returns, we will build the JD(S) again”.

“Union Minister H D Kumaraswamy should mend his ways and stop making JD(S) into a family-owned company. The JD(S)’s situation has become hopeless. Its love for the BJP is over. He should understand this,” he said.

“When I was with Kumaraswamy, he spent just Rs 4 crore in Channapatna and won by 20,000 votes. Now, without me, he spent Rs 150 crore and still lost by 25,000 votes. Without Muslims’ support, the JD(S) cannot win a single seat. Now, it is proved that 19 MLAs of the JD(S) won in 2023, because of Muslims,” he added.

Speaking on other options available, Ibrahim said, “We have not yet decided to go with the Congress. We are only considering to establish a third front. Whether it is founding a new regional party, forming a third front, or strengthening the JD(S), will be decided shortly.”

Earlier during the day, before meeting Deve Gowda, Ibrahim had said, that 12 to 13 JD(S) MLAs were dissatisfied with the party, but like Deve Gowda, were enduring pain.

“Now, I have started the task of uniting them. I as the JD(S) state president, it is my responsibility to address our MLAs’ grievances. At present, the JD(S) is on fire and all JD(S) MLAs want to protect their respective constituency. Hence, they have started speaking one by one,” he said.

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