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A month of mini crises: How different ministries spent September putting out fires

A spiralling current account deficit led the finance ministry to hike custom duties; allegations of irregularities in the Rafale fighter deal kept the defence ministry busy; and a spat with Pakistan kept the external affairs ministry at the centre of public attention.

india Updated: Sep 30, 2018 07:31 IST
HT Correspondents
HT Correspondents
Hindustan Times, New Delhi
current account deficit,finance ministry,custom duties
Union Ministers Dharmendra Pradhan, Piyush Goyal and Radha Mohan Singh during a cabinet briefing after cabinet ministers meeting, at Shastri Bhawan in New Delhi, on September 12, 2018.(HT File Photo)

The government spent a busy September, a month in which it dealt with several mini crises. A spiralling current account deficit led the finance ministry to hike custom duties; allegations of irregularities in the Rafale fighter deal kept the defence ministry busy; a spat with Pakistan kept the external affairs ministry at the centre of public attention; and the vulnerabilities of big airline companies had civil aviation bureaucrats on their toes.

But there was also progress on other fronts — from railway electrification to a government push for a model to procure crops at more remunerative prices for farmers. The biggest relief was provided by the Supreme Court upholding the constitutional validity of Aadhaar, which remains at the centre of a plethora of government schemes. Here is a snapshot of the big issues across the government:

Ministry of finance

Big Issue:

Led by the finance ministry, the government increased customs duty on 19 products including air conditioners, washing machines and refrigerators in an effort to curb their imports and narrow the current account deficit (CAD), the difference between inflow and outflow of foreign exchange. These 19 items fall under the ‘non-essential’ goods category.

Significance:

The total import bill on account of these non-essential items was Rs 86,000 crore in the last financial year. Volatile crude prices, a depreciating rupee and low exports led the CAD widen to 2.4% of gross domestic product (GDP) in the April-June quarter. The hike was part of the government’s multi-pronged strategy to control the situation.

What next:

Experts have said that adjustments are needed to monetary, fiscal policies and the exchange rate to effectively respond to the current situation of inflating CAD and a weakening rupee. So all eyes are on the Reserve Bank of India (RBI) amid expectations of an interest rate hike in October.

Ministry of external affairs

Big issue:

Some 25 hours after it accepted the offer, India last week cancelled Pakistan’s proposal of a meeting between the two countries’ foreign ministers in New York on the sidelines of the United Nations General Assembly meeting. The cancellation further strained bilateral ties. In New York, External Affairs Minister Sushma Swaraj walked out after delivering her speech at a meeting of South Asian Association of Regional Cooperation (SAARC) foreign ministers.

Significance:

India’s move and its all-out attack against Pakistan and its prime minister on the neighbour’s continued support for terrorism surprised many. Observers asked why India had accepted the talks proposal in the first instance. The cancellation of talks has ensured the neighbours will be bracing for another bout of chill in their ties. And things might not improve before Indian parliamentary elections next year.

What next:

Russian President Vladimir Putin will be in India for the annual India-Russia summit on October 4 and 5. The meeting between Prime Minister Narendra Modi and Putin is set to see the countries looking at improving the ties in many areas.

Ministry of defence

Big issue:

The multi-billion-dollar Rafale deal remained controversial because of some key developments. The recently retired Hindustan Aeronautics Limited chief, T Suvarna Raju, said HAL could have built the fighters had the government managed to close the original negotiations. Also, a French website quoted ex-French President Francois Hollande as saying that the Indian government had proposed the name of Anil Ambani’s Reliance Group as the offset partner for the deal

Significance:

The revelations came at a time when the Congress party is trying to make the deal with France an election issue. It has launched a nationwide campaign against the government, though the Centre has strongly defended the purchase. The government and the Congress have been trading charges over the Rs 59,000-crore deal almost everyday.

What next:

There are no signs of the debate over the deal fading away. The Congress is likely to step up its attack against the government in the run-up to the Parliament’s winter session. On October 3, the Air Force chief will hold a press conference, largely around the Rafale.

Ministry of Home affairs

Big issue:

The government finally announced a search committee for recommending names for the head as well as members of the anti-corruption ombudsman Lokpal. It is headed by former Supreme Court judge Ranjana Desai. The search committee will recommend names to the selection panel headed by the Prime Minister; the speaker of the Lok Sabha, chief of justice of India or an SC judge nominated by him or her, leader of the opposition in the Lok Sabha and an eminent jurist will be members. Congress party’s Mallikarjun Kharge boycotted the PM-headed selection committee meetings as he was asked to attend them as a special invitee and not as leader of opposition.

Significance:

The Anna Hazare-led movement for a Lokpal during the United Progressive Alliance (UPA) regime significantly dented the image of the Manmohan Singh-led government. Although the UPA government introduced a bill for establishing a Lokpal at the centre (and Lokayuktas at the state) and got it passed in the Parliament, the damage had been done. The Modi government, by moving forward on the Lokpal, has tried to dispel the notion that it was going slow on the creation of the anti-corruption ombudsman.

What next:

The constitution of a search committee is an important step, but India is still distant from the actual start of functioning of the Lokpal.

Ministry of agriculture

Big issue:

The government this month cleared three policy options in its attempt to ensure farmers gets federally fixed minimum support prices (MSPs).At a time of political mobilisation around rural distress, and in the run-up to elections, the government is banking heavily on these schemes to ensure relief for farmers.

Significance:

The three schemes are essentially designed to intervene in agricultural markets by way of procurement, which refers to the government’s purchase of commodities at MSPs in situations when markets fail farmers.

What next:

The test of effectiveness of these schemes will come during November when the kharif harvest will reach markets.

Ministry of electronics and information technology

Big issue:

The Supreme Court ruled on 26 Sept that the 12-digit unique ID Aadhaar is constitutional, and can be used for delivery of the government’s welfare and subsidy schemes. The SC also struck down Section 57 of the Aadhaar Act, disallowing private companies from demanding the Aadhaar number from customers.

Significance:

People will now need the Aadhaar number to avail of government entitlements such as subsidized grains from the public distribution system and employment under the rural work guarantee programme and so on. SIM cards, bank accounts and digital wallets like Paytm and PhonePe no longer need to be linked to one’s Aadhaar number.

What next:

Lawyers and companies are trying to read the judgment and understand whether private companies can make Aadhaar optional, if not mandatory.

Ministry of civil aviation

Big issue:

Big airline companies are reeling under a crisis and the recent increase in duty on the import of air turbine fuel (ATF) will add to their woes. At a time when airlines were looking for relief from the government, the hike may lead to increases in air fares and job cuts. Two major carriers, Air India and Jet Airways, have already started delaying salary payments; low-cost carriers, too, are hurting from higher crude oil prices and a depreciating rupee.

Significance:

Delays in salary payments may have an impact on employee morale and stress levels. A Jet Airways flight bound for Jaipur had to return to Mumbai in September after the crew forgot to turn on the so-called “bleed switch,” resulting in a drop in cabin pressure that caused headaches, and bleeding noses and ears among some passengers. The flight’s cockpit crew has been taken off scheduled duties pending investigation. Air India pilots are also facing action for landing at an yet to be operational runway at Male in the Maldives.

What next:

Bringing ATF under the goods and services tax (GST) has been a long-pending demand, and the civil aviation ministry has suggested that it is in touch with the finance ministry on this. With the festive season set to start soon, airlines are hoping that an increase in passenger traffic will lead to higher revenue.

Ministry of railways

Big issue:

The Cabinet has approved a proposal for electrification of 108 sections covering 13,675 route kilometers (16,540 track kilometers) at a cost of Rs 12,134.50 crore. This electrification is likely to be completed by 2021-22 and likely to save Rs 13,510 crore per annum in fuel bills.

Significance:

Indian Railway hopes that 100% electrification will eliminate detention of trains due to change in traction from diesel to electric and vice versa and will provide seamless train operations It will also Improve operational safety. A total shift to electric traction will reduce fossil fuel consumption of about 2.83 billion litres per annum. This will lead to overall saving to the extent of Rs. 13,510 crore per annum.

What next:

Indian Railways is trying to counter both accidents and delays with electrification, which it is also projecting as an opportunity to generate employment. It has claimed that the project will generate direct employment during the construction phase of about 20.4 crore man days.

Ministry of information and broadcasting

Big issue:

The ministry of information and broadcasting has issued an advisory to all television channels to refrain from using the term Dalit to denote scheduled castes. The advisory comes in the wake of a Bombay high court order in June that directed the ministry to consider asking the media to stop using ‘Dalit’.

Significance:

The advisory follows a similar direction issued by the social justice and empowerment ministry to all states and ministries to use the constitutionally sanctioned terms Scheduled Castes and Scheduled Tribes. While Dalit groups see it as an infringement of their right to address themselves using the term, denoting socially, economically and educationally exploited and politically backward communities, the government argues that only constitutionally approved terms should be used.

What next:

While broadcasters have opposed the move, the ministry has clarified that the order is only an advisory to the channels although its violations could be taken cognisance of by the court. The ministry, for its part, is only implementing the court’s orders.

Union housing and urban affairs ministry

Big issue:

The landmark real estate regulatory authority (RERA) law to check unscrupulous developers received its first big blow with the West Bengal government deciding not to notify the RERA law and its rules in the state. It has instead decided to bring its own legislation — the West Bengal Housing and Industrial Regulation Act. The Union housing and urban affairs ministry has now written to the state government to repeal its law.

Significance:

The West Bengal government’s decision will weaken the central legislation as in future more states can press for their own law. A state law will also create confusion among buyers and other stakeholders.

What next:

The ministry is rushing to finalize two key pieces of legislation – the national urban rental policy and model tenancy Act — by October. The policies will go a long way in addressing the housing shortage in the country, especially in urban centres.

First Published: Sep 30, 2018 06:58 IST