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Arriving at consensus over key reforms?

Arriving at consensus over key reforms?
West Bengal Chief Minister Mamata Banerjee’s political tiff with the Bharatiya Janata Party ( BJP ) may garner all the attention in the State, but that may not necessarily derail the Modi government’s desire to pass two major pending bills – land acquisition and Goods and Services Tax (GST) – in the next Parliament session; as both are to the economic advantage of her state. The bills will substantially add to the state’s revenues once they are enacted.

 Mamata Banerjee and her Trinamool Congress (TMC) party are reportedly believed to be happy about the much-needed funds the State government would receive towards settlement of people. This transfer of funds would take place after the exchange of pieces of land at the Indo-Bangladesh enclaves located near Chhit Mahal, between India and Bangladesh. The bill related to this has been passed in the last session of Parliament. It must also be noted that the TMC supported the bill. Post its passage Banerjee is likely to accompany Prime Minister Narendra Modi to Bangladesh to meet the Bangladeshi Premier Sheikh Hashina. This visit would also celebrate the smooth conclusion of this recent foreign policy success between the two neighbouring countries. Banerjee was with Modi during the latter’s first visit of West Bengal as prime minister. The deal, along with the Teesta water sharing agreement with Bangladesh, did not progress under the UPA regime, since Banerjee refused to bow to the diktats of former Prime Minister Manmohan Singh.

West Bengal also stands to gain substantially, along with the state of Orissa and other coal-bearing states under the government’s proposed new coal block auction and royalty sharing formulae. The Supreme Court in its Order dated 24th September, 2014 cancelled the earlier allotment of 204 coal blocks, as they were granted in an illegal and an arbitrary manner.  It further stated that there was no transparency and no objective criteria for the evaluation of its respective comparative merits. This was a tricky situation for the Indian economy as thousands of <g data-gr-id="59">mega watts</g> of power capacity and millions of tonnes of steel and cement production directly depended upon the coal from these mines. There were calls for urgent action on the government’s part to ensure that core sectors of the economy were not impacted.

As coal mines had never been auctioned in the country, the procedural challenges were huge. Moreover there were no internationally available precedents of any large scale auction of mineral wealth.  Despite such immense odds, the government with its stated commitment to transparency and perhaps with an implicit desire to consult all concerned stakeholders invited suggestions from the wider public on the approach to be adopted for the auction by putting the draft Tender Document on the Ministry’s website.  As a result of this hundreds of e-mails and thousands of suggestions and observations were received. The government subsequently initiated the process of auction on 25th December, 2014 by inviting registration from bidders through a public notice in newspapers.  An urgent time-bound schedule of the auction was also made public. A second round of auctions were also initiated on 7th January, 2015, which offered 23 mines for auction to the power (including captive power), cement and iron and steel sectors.

The entire auction and allotment process had been conducted in a fairly objective and transparent manner.  The Delhi High Court has also commented, “What has convinced us is the fact that the auction process has worked out well. The process by itself does not appear to be arbitrary or irrational. There is, of course, no allegation that the auction process is designed to favour any particular bidder”. The level of transparency can be gauged from the fact that the entire auction process was shown live and accessible to everyone on the internet.  In fact lakhs of people viewed the entire bidding process on their <g data-gr-id="61">smart phones</g>, tablets and other <g data-gr-id="60">internet enabled</g> devices. The auction process of the coal mines has been widely acknowledged to be a success, which has not only ensured that there is no disruption in the economy, especially in the wake of the order of the Supreme Court, but has also raised the bar. The proceeds from the auction and the allotment of 67 coal blocks have touched ` 3.35 lakh crores over the life of the mine.

The union government’s policy on co-operative federalism clearly seems to have started paying back rich dividends despite the siege mentality adopted by opposition parties in their respective states. There are indications that apart from trying to constructively engage the Congress and its allies, the NDA government is also reportedly in back-room negotiations with chief ministers such as Mamata Banerjee,  J Jayalalithaa, Navin Patnaik and regional satraps such as Sharad Pawar and the so-called Janata Parivar parties to mop up support for both GST and the land bill. The Goods and Services Tax, which will require a constitutional amendment, needs to be ratified by at least half the number of states in the Union of India to become a law.

Incidentally, Uttar Pradesh, West Bengal, Tamil Nadu and Odisha are among the biggest beneficiaries of the government- approved recommendations of the 14th Finance Commission: under which the Centre will start transferring a much bigger share of central taxes to states — by almost 62 percent of Union government tax collection, says the Chief Economic Advisor, Dr. Arvind Subramanian. “We are moving away from rigid centralised planning, forcing a ‘one-size-fits-all’ approach on states,” Prime Minister Narendra Modi had said in a letter to State chief ministers in which he communicated the government’s acceptance of the commission’s recommendations. As per the recommendation of the commission, the total devolution to the states in Financial Year 2016 will be Rs 5.26 lakh crore against the previous Rs 3.48 lakh crore in Financial Year 2015. “This is the largest ever change in percentage of devolution. In the past, when finance commissions have recommended an increase, it has been in the range of 1-2 percent,” Finance Minister Arun Jaitley had said. It also made additional provisions for revenue deficit states.

The GST will bring about the most important tax reform that the country’s tax regime needs. It will benefit all the stakeholders concerned and substantially boost the country’s economic growth. The land bill too is directed at stimulating economic growth and could lead to a massive spike in employment levels in the rural India as it is designed to intertwine the whole country with top class infrastructure, enabling dispersal of industry to from urban location to rural setups and making the idea of cooperative federalism really work to the benefit of states and the people.  

 
Nantoo Banerjee

Nantoo Banerjee

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