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Doling Out Freebies… At Whose Cost?

Government employees are all set to get a huge bonus in the form of a hike in their Dearness Allowance. Equated with the basic pay, this move will strain out the already tight government finances. Add to this, its recent move where it hiked the allowability of number of subsidized LPG cylinders to 12 from nine which has already created an addition subsidy burden of close to Rs 5000 crore on it and you know where it is all headed. This vote bank economic agenda will continue to occupy the centre stage at least for the next couple of months. in fact the hurry in which the government is pursuing this agenda is pathetic. 

You will reportedly witness a slew of more such voter friendly announcements including a new minimum wage, an assured minimum pension and higher salary ceilings for several employment benefits such as gratuity, provident fund, bonus and healthcare. Some of these may even come out before you get hold of this copy. 

All of these will only add up to the exchequer’s burden without bringing in any good for the people at large. There is no point in doling out perquisites which have no connect whatsoever with the long term prosperity of the economy. Our Wise Finance Minister surely knows this, but the compulsions of an election are any time much heavier than the burden of fiscal management. 

Creating Waves In The Air

The Government commenced the procedure for auctioning of airwaves in the lucrative 900 Mhz and 1800 Mhz band. In this auction, eight companies will be bidding for 46Mhz of the 900Mhz band and 385 Mhz of the 1800Mhz band of spectrum. If reports are to be believed, the government received bids to the tune of Rs 40000 crore on the first day as 900 Mhz spectrum of Delhi, Mumbai and Kolkata is on sale, which are considered to be the most profitable markets of the country. Airwaves which have been with Bharti Airtel and Vodafone for the past 20 years are scheduled to open up on expiry of the contract in November this year. The entry of Mukesh Ambani group company Reliance Jio is all set to change the scenario of the telecom sector preceding which aggressive bidding has taken place in these auctions. Both Bharti and Vodafone are trying very hard to protect their “home turf”, while other players include Tata Teleservices, Idea, Uninor, Reliance Communications and Aircel.

This auction could result in a windfall for the government, which is expected to raise more than Rs 50000 crore from it. The 900Mhz band spectrum auctioned for Mumbai has received a huge price of Rs 473.24 crore followed very closely by Delhi at Rs 428.92 crore. Kolkata’s price remained at Rs 173.16 crore, way ahead of their reserve price. As far as the 1800 Mhz band is concerned, bidding is still underway in 22 circles across the country. 

Green Shoots Of Growth In The Core

At last some revival is being noticed in the performance of the core sectors. Steel manufacturers have seen an improvement in sales, which spells cheer on the growth front and a big relief for companies per se. Steel Authority of India Limited (SAIL), India’s largest steel producer clocked sales of 1.14 million tons (MT) in January, up 10% compared to the same month last year. The cumulative sales for the April 2013-January 2014 stood at 9.84 MT as against 9.09 MT achieved in the corresponding period last year. This is mainly backed by a surge of 47% in steel exports. “The uptrend in the first month of 2014 is a firm indicator of the times to come. We are confident of maintaining the momentum in sales growth.” said C S Verma, Chairman, SAIL. Overall, the effort made by the company to produce tailor-made steel to meet customer requirements is what has helped it improve its performance. 

3 More Cylinders for Rs 5000 Crore

All those worried about cooking at a higher cost can breath easy. The government has finally approved three additional cylinders taking the total number of subsidized cylinders to 12 from the earlier nine. It does not really matter that the cost of these 3 additional cylinders will add up to a whopping Rs 5000 crore for the exchequer considering that we are in an election year. After all, freebies are what the electorate considers more valuable than the quality of governance at times. 

Project Clearance On A Fast Track

The Finance Ministry has approved projects worth of Rs 2778.72 crore under the Public Private Partnership (PPP) model. The Government of India’s Empowered Institution (EI) has granted its final approval to one road project of the Ministry of Road Transport & Highways under the viability gap funding Scheme. In its 52nd meeting, chaired by secretary, Department of Economic Affairs, EI has also accorded an in–principle approval to five other road sector projects. These include three projects in Maharashtra, one in Karnataka and a RoB project of the Government of Madhya Pradesh. As per the finance ministry communiqué the estimated cost of the approved projects is Rs. 2778.72 crore. So finally the government machinery seems to be moving fast to ensure that growth gets back. We will know very soon. Who inaugurates these roads once completed will be worth watching though.