https://t.me/pdf4exams https://www.estore33.com/ https://t.

me/TheHindu_Zone_official

>
OPINION 9
STAY INFORMED THROUGH THE DAY @ WWW.BUSINESS-STANDARD.COM.

Volume XXII Number 212

CHART 1: PRICES — INDIAN CRUDE OIL
MUMBAI | THURSDAY, 7 JUNE 2018

All options open

Petrol & diesel pricing BASKET VS PETROL (DELHI)

78
90
80
Retail petrol price (~) in Delhi 67
70
Repo rate increase signals RBI’s intent We need to do a rethink if arbitrary levies, which effectively double
60
fuel prices, bring about a net improvement in public welfare

T
aken in isolation, the unanimous decision of the Monetary Policy
50
Committee (MPC) to increase the benchmark repo rate by 25 basis
hy do we pay so much for petrol and on the benefits of lower taxes and prices to 40

W
points 1 the first increase in more than four years — may not make
diesel in India? Essentially, because of users is: 64 47
a significant difference. But it is a welcome move even if just to sig- 30
taxes and levies. The government seems  To restrict inflation by keeping input costs low, Price of crude ($)
nal the intent of the Reserve Bank of India (RBI) at a time when most observers 20
to treat containing the fiscal deficit as the highest which is presumably important in terms of lower
expected the central bank to keep the repo rate unchanged and come up with priority, with other public interest criteria being financing, input and transportation costs for the
Nov ‘14 Jun ‘17
[Data extrapolated where not available]
a policy statement that was more hawkish in its tone than the one announced less important. Let’s explore this assumption to see economy. Sources: https://thelogicalindian.com/story-feed/awareness/fuel-taxes-the-
in April. On Wednesday, after three days of deliberations, the MPC surprised if it is reasonable. The question is, what is the net  To boost consumer demand, thereby also con- populist-big-bang-reform/, http://ppac.org.in/content/149_1_pricespetroleum.
aspx/www.mypetrolprice.com

there too as it maintained a “neutral” stance. On the face of it, this may be con- effect on public welfare from arbitrary costs/levies tributing to growth.
fusing and indeed contradictory, but as Governor Urjit Patel stated, it means that effectively double the price of fuel, compared Perhaps there needs to be a rethink from the
the RBI wants to keep all its options open. The key variable to watch out for
with the benefits. ground up — an ab initio approach to define crit- CHART 2: IMPACT OF RISING PRICES
Rising petroleum prices in India are causing ical objectives in the public interest. Should high-
is inflation and the central bank will do all that it takes to keep that within the significant distress, both at the macro level in er taxes be imposed on inputs such as transporta- ON IMPORTING NATIONS
targeted band. terms of slowing growth as well as tion fuel in the absence of public
Since its last policy statement in April, the RBI noted that one of its central in living conditions for most peo- transport alternatives? Are there Rise in oil price
worries had come true: The Indian basket of crude oil prices saw a 12 per cent ple, excepting those at the highest other effective ways of curtailing
jump from $66 a barrel to $74 a barrel within no time. Crude oil was not the only income levels. This is primarily pollution and excessive con- Increase in value of
because of India’s dependence on sumption (apart from the neces-
commodity that rose and, together with upheaval in global financial markets, imported fuels without commen- sary and systematic development
led to a firming up of input cost pressures. Domestically — and the RBI clearly surate strength in exports. of public transport), while retain- Producers Consumers
outlined its concern on this point — the worrisome aspect was the compositional Additional factors are: The value ing the enabling aspects of inputs
of the rupee against the dollar, such as transportation? Price of goods and Diminished real
shift in the drivers of inflation. Consumer price index-based inflation, exclud- services raised
and the effect of the extent of tax- A study of the energy cost purchasing power
ing food and fuel, rose sharply by 80 bps since March. Not surprisingly, the RBI’s
es on petrol and diesel on living share of GDP in the US from 1950 Restraints on personnel
household survey in May reported a sharp spike in inflation expectations, both expenses and investments Reduced savings
conditions. to 2013 found that expensive
over the three-month and one-year horizons. The policy statement flagged To recap briefly, when the SHYAM PONAPPA energy was a drag on the econo- Restraints on the purchase
several other factors that could threaten to push up inflation. Hardening of wages price of crude dropped from 2014, my.1 If the cost share was higher Reduced profits of goods and services
and input costs and the impact of implementation of house rental allowance by the government increased taxes than a threshold (above 4 per cent
various state governments are some key upside risks. All this has resulted in the nine times through January 2016. But when prices of GDP for the US data), the economy was likely to
RBI revising its inflation projections for the current financial year. For the sec- rose thereafter, taxes were not reduced. This has do less well. In India, petrol and diesel costs as a
Source: https://eneken.ieej.or.jp/data/4338.pdf
resulted in exorbitant retail prices, and much high- percentage of GDP are far higher than in many
ond half of the year, which is closer to the next general elections, the projection
er government revenues. Chart 1 shows the price other countries. While retail petrol is priced about
has gone up from 4.4 per cent earlier to 4.7 per cent now. of India’s crude basket in dollars per barrel, and the same in India, China and Brazil (see
Another way to read the RBI’s decision is the confidence it has on the petrol prices in rupees per litre. http://www.mytravelcost.com/petrol-prices/), a litre CHART 3: PETROL & DIESEL PRICES (~)
robustness of economic recovery in the country. “The MPC notes that domes- For every additional rupee in tax, the of petrol is nearly 20 per cent of daily per capita IN BENGALURU
tic economic activity has exhibited sustained revival in recent quarters and the government gets ~130 billion more revenue (as GDP in India, whereas in Brazil and China, it is
Petrol Diesel
output gap has almost closed. Investment activity, in particular, is recovering reported by PTI) while according to the Economic only a fifth of that, at about 4 per cent.
Survey 2017-18, for every $10 per barrel increase in From a completely different perspective, con- Apr 14,’18 75.86 67.08
well…” stated the policy statement. That explains the aggression on inflation
crude prices, GDP growth is reduced by 0.2-0.3 sider how keen political parties and candidates May 14,’18 76.04 67.31
control. The main concern is the government’s decision on minimum support per cent. It was estimated to be more than double are in election mode to appease or cajole voters.
prices (MSPs). With farm unrest still sustaining despite bumper production, it that by the Institute of Energy Economics, Japan, This happened in the run-up to the Karnataka May 15,’18 76.20 67.53
is likely that the government may opt for considerably higher MSPs, which will in May 2012. Assembly elections in April. Local newspapers ran May 16,’18 76.35 67.75
push up inflation both directly, via food inflation, and indirectly, via fiscal slip- Chart 2 shows the effects of rising oil prices on headlines about petrol and diesel prices held May 17,’18 76.58 67.97
page that may follow. The RBI’s “neutral” stance thus signals both a carrot and importing nations. Both producers and consumers steady for nearly three weeks until May 14 despite
suffer the ill effects of rising oil prices. In India’s rising international prices. Only then were prices May 18,’18 76.83 68.23
a stick for the government. If budgetary targets are missed and private sector
present circumstances, these negative effects need allowed to soar (Chart 3). May 19,’18 77.14 68.47
investment recovery is crowded out, there will be consequences in the shape to be set off against the positive effect of contain- Since keeping fuel prices in check is recognised
of further rate hikes. May 20,’18 77.48 68.73
ing the deficit to some extent, which will presum- as a palliative for elections, what could be the rea-
ably temper inflation and so on. son for avoiding a decrease in taxes and levies
This set of factors reduces nominal GDP ($2.65 when the price of crude rises? Presumably, concern integral solutions such as association with
Improve market linkage trillion in 2017) by an estimated 0.2 to 0.3 per cent
at least ($5.3-7.95 billion, or if it is indeed nearer 0.7
about the deficit. Perhaps what needs to be
thought through is the benefits of reducing input
pumped storage power where possible.
Above all, rational pricing of inputs by reducing
per cent, by $18.55 billion). Another set of factors costs to increase collections from higher growth. taxes is a desirable beginning that can be acted on
Reducing farm distress requires more than MSP hike is the rationale that people who use vehicles must The management and use of petroleum for immediately.
pay high taxes for these reasons: energy is one dimension of our multifaceted

T
he ongoing 10-day farmers’ strike involving blockage of vegetable and  As a disincentive to restrict the use of petroleum requirements that has to be addressed. Other nec- shyamponappa@gmail.com
milk supplies to the cities and the mixed response to it from farmers as products, to control pollution as well as the level essary dimensions include emphasis on the devel- 1. Michael Aucott and Charles Hall:
well as the central and state governments lends itself to two critical inter- of imports. opment of renewable fuels such as cellulosic www.mdpi.com/1996-1073/7/10/6558/pdf
pretations — both of which are fairly disquieting. First, it is yet anoth-  As a source of revenue for other beneficial ethanol for transportation2, of electric batteries 2. Kirit Parekh:
er manifestation of the lingering unease in rural areas due to low incomes and heavy public use. for vehicular use, and apart from transportation, http://indianexpress.com/article/opinion/columns/fuel-
On the other hand, the rationale for passing of solar power generation, and for large plants, for-thought-petrol-price-hike-tax-two-wheelers-5204001
indebtedness that has remained unaddressed or partially addressed. Not much
headway has been made in fulfiling even the promises made to farmers in the
recent past. These include the Centre’s pledge to fix minimum support prices

Why are auditors silent?

(MSPs) at 50 per cent above the paid-out costs and doubling farmers’ income.
Several state governments, too, have vowed to remit farm loans, but the modali-
ties of doing so are yet to be worked out. Such nonchalance has political costs.
Second, the farmers’ bodies spearheading the stir have erred in choosing market
boycott as the mode of protest. Doing so hurts the economic interests not just of uditors seem to be finally taking their role the extreme step of resigning and are duty-bound accounting standards and that its statements pres-
consumers but also producers, apart from causing needless wastage of perishables.
The politicisation of the agitation, too, is fairly apparent as it has been
timed to coincide with the anniversary, which fell on Wednesday, of the last year’s
A seriously. Look at their new-found aggres- to give detailed explanation to shareholders about
sion: According to data provided by Prime the exact reasons.
Database, in just five months of this calendar year, What makes it even more intriguing is that
ent the true and fair view of the state of the affairs
of the company. There was not a word on the spe-
cific charges made by the auditor.
farmers’ stir in Mandsaur, Madhya Pradesh, where six farmers were killed in as many as 32 firms have resigned as auditors of Deloitte has been the auditors for Manpasand for It’s clear from the responses that the boards of
companies mid-term. The number in the past one several years and none of its previous reports came both the companies have taken a serious matter like
police firing. It has been reported that farmers and milk producers are being
month alone was 15. That’s a big with any qualification. That’s all auditor resignation lightly, reflecting poor corpo-
forcibly prevented from reaching mandis and are being made to throw away their change from the numbers in the the more reason for Deloitte to rate governance. This is completely against the spir-
produce on the roads. Most farmers can ill-afford to forgo regular income, how- earlier years. come out in the open about it of the Companies Act and the October 2017 report
ever little it may be. That may, in fact, explain why the impact of the agitation In the past couple of weeks, what went wrong suddenly. of the Uday Kotak-led committee on corporate gov-
has remained confined only to some parts of a few states. The events have three companies saw their audi- After all, shareholders have lost ernance, which has been accepted by Sebi. The com-
dented the unity of farmers, with several farm unions distancing themselves tors resign abruptly just ahead of money and can’t be kept clue- mittee said, “For the sake of greater transparency, the
the quarterly results. While less about the circumstances committee believes it is important for companies to
from this stir. It has also allowed political parties to exploit the situation to their
Deloitte quit Manpasand under which the auditors have disclose the reasons for the resignation of its audit
advantage without providing any benefit to farmers. Beverages, Price Waterhouse resigned. Besides, the incoming firm. Moreover, audit firms, too, must be encouraged
Nevertheless, the truth that cannot be disregarded is that the profitability (PW) resigned from Atlanta and auditor ought to know the to truthfully disclose the reasons.”
of agriculture has been severely eroded. Inflation-adjusted data on gross domes- Vakrangee within days of each nature of the information that It’s good that the auditing community is trying
tic product, released by the Central Statistics Office last week, clearly shows that other. The reason for the decision was withheld by the company. hard to shake off the reputation issues it faced
the rate of price increase in the industrial and services sectors has far exceeded was almost identical: The failure POWERPOINT Detailed disclosure is nothing ever since the Satyam issue emerged. The biggest
of managements in providing but good governance. push to their change of approach came from the
that in the farm sector. This means farmers’ consumption expenses on goods and
adequate relevant information on SHYAMAL MAJUMDAR The excuse of client-confi- prime minister (PM) who, at an ICAI meeting,
services are rising faster than their earnings from farm produce, thus, gradual- time. Shares of all these compa- dentiality and code of conduct asked why it took the institute years to take puni-
ly worsening their economic status. The system of procurement-based market nies have since then taken a huge does not wash, as auditors are tive action when 1,400-plus cases were pending
support has failed, except in a few crops such as wheat and rice, and that, too, hit, reflecting the nervousness of investors. Since required to give detailed information under the against auditors who helped tax evaders. The PM’s
in a handful of states. Its extension to all the 23 crops for which MSPs are April 27, the day PW stopped Vakrangee’s auditing revised Companies Act. It’s true that the Institute of statement followed the revised Companies Act,
announced seems impractical for want of needed infrastructure for procure- job, the stock price has lost more than two-thirds of Chartered Accountants of India does not yet have a which imposed bigger liabilities on errant audi-
its value. The Manpasand stock is down more than framework for such information (it needs to take a tors; the Sebi action against PW in the Satyam case
ment, transportation and storage of the purchased stocks.
half since Deloitte resigned. hard look at this aspect), but that can hardly be a and the Cabinet green signal to the proposal to
Novel ways and means would, therefore, need to be conceived to ensure While auditors have come in for a lot of praise shield for auditors from withholding material infor- set up the National Financial Reporting Authority
remunerative prices to farmers. One way could be to minimise the number of inter- for their proactive stand against what they per- mation. (NFRA), intended to serve as an independent reg-
mediaries in agricultural marketing through direct linkages between producers and ceive to be dodgy practices followed by companies, The response from the companies is equally ulator for the auditing profession. The Companies
end-users, including retailers. Besides, farmers need to be encouraged to form there is still a long way to go. Consider the poor dis- strange. Manpasand, for example, lost the auditor Act also now allows for class-action suits, and
cooperatives or producers’ companies to undertake purchases and sales at the best- closure of information by the auditors. While PW it had since it did an initial public offer in 2015, and there is greater scrutiny from the Reserve Bank of
has cared to give some details about its concerns yet it described the event as a “minor hiccup”. It India, following a spate of bad loans.
negotiated prices. Creation of employment opportunities in the rural non-farm sec- related to Vakrangee’s bullion and jewellery busi- also flatly denied all the charges in its brief state- Whatever be the reasons, now that auditors
tor can let farmers supplement their earnings. Unless well-advised income-boost- nesses, Deloitte has shared nothing except a brief ment. Vakrangee was no better. Terming the res- have taken the first step, it may not be a bad idea
ing measures are taken expeditiously, the rural unrest is unlikely to abate. statement saying the company did not give “sig- ignation of its auditor as an “old event” in its to take care of the disclosure requirements as well.
nificant information” relating to some of its busi- response to the stock exchanges, the company After all, ordinary shareholders should not be at
nesses. This is strange as the auditors have taken merely said it is fully compliant with the Ind-AS the receiving end — always.

Degrees of legitimacy what is a hurried job. At one place, while

BOOK REVIEW
ARCHIS MOHAN
When former president Pranab
Mukherjee accepted the Rashtriya
Swayamsevak Sangh (RSS) invitation to
address their cadres in Nagpur on
Thursday evening, he told them there
was no question of his visiting or offer-
ing a floral tribute at the memorial of
RSS founder Keshav Baliram Hedgewar
located there.
RSS 360°, by Ratan Sharda, mostly
known for his frequent participation in
raucous television debates, offers a hint
why the RSS still insisted that the for-
mer president address their cadres.
It would also tell you that the RSS
leadership is unlikely to have any bones
to pick with the contents of Mr
Mukherjee’s speech — even if he were to
be harsh on them.
The RSS, despite its recent success-
es at helping its political arm, the
Bharatiya Janata Party (BJP), control
the reins of the government at the
Centre and most states, continues its
search for legitimacy from the coun-
try’s intelligentsia.
Mr Sharda’s book and the invitation
to Mr Mukherjee, a veteran Congress
leader and a Bengali bhadralok, to
address a key RSS event are part of this
larger objective to reinvent the RSS as a
force devoted towards social good,
rather than an organisation of stick-
wielding, potbellied men who indulge
in rudimentary drills in the mornings
and in poisoning the minds and hearts
of Hindus against Muslims and
Christians during elections.
Mr Sharda, helped by a long, lauda-
tory foreword by Madhu Kishwar, has
accomplished his objective although in
praising The Indian Express’ role during
Emergency, Mr Sharda identifies
G D Goenka as its founder-editor.
The initial part of the book compris-
es Mr Sharda’s experiences from the
Emergency of 1975-76, which should
help resolve some of his legitimacy
issues within the Sangh Parivar, and
burnish his credentials as a Johnny-
come-lately RSS spokesperson.
Then there are copious details of the
social work by Sangh Parivar and
its affiliated outfits, and on the internal
functioning of the RSS. The book has
been marketed as an insider’s view.
But to those well versed with Sangh
Parivar literature, the book is mostly a
translation in accessible English of RSS
propaganda material brought out
by its publishing arm, Suruchi
Prakashan, in Hindi.
The real agenda of the book is obvi-
ously to somehow legitimise, in the face
of significant evidence that proves oth-
erwise, the RSS’ role during the inde-
pendence movement. It also attempts to
distance RSS from persistent allegations
that it was involved in the assassina-
tion of Mahatma Gandhi and its cadres
distributed sweets at the news.
In some detail, and since this in
the eyes of the RSS washed its sin of not
participating in the freedom movement,
Mr Sharda details the state persecution
of its cadres during Emergency years.
In fact, a persecution complex pervades
RSS 360°.
Mr Sharda writes at length how near-
ly everyone has wronged the Hindus,
and the RSS — Muslim invaders in
medieval India who demolished tem-
ples, Christian missionaries converting
Hindus, the “alien ideology” of com-
munism and communist academics
who have “rewritten history”, the
Congress party that imprisoned the RSS
cadres during Emergency, and the
socialists who “used the RSS”.
Mr Sharda also claims that the RSS
has been the standard-bearer of Hindu
traditions. Typically, the RSS in recent
years has tried to appropriate the work
done by others to preserve and popu-
larise yoga and other indigenous knowl-
edge systems.
The truth is that the RSS, besotted
with Adolf Hitler and Benito Mussolini,
has modelled itself on early 20th
century militias when Gandhians and
others worked on looking at history
from non-Marxist and non-British
perspectives, and successive Congress
governments in independent
India took steps to preserve and popu-
larise Indian crafts, culture and
knowledge systems.
Obviously, Mr Sharda’s book has no
references to the controversial aspects
of second RSS chief M S Golwalkar’s
views on caste and religion or how the
RSS not only opposed the Hindu Code
Bill but still believes the proper place for
Hindu women is inside the four walls of
their homes.
Its consistent chest-beating about
real and imagined atrocities perpetrat-
ed on Hindus doesn’t allow the RSS to
appreciate the social reform movements
within Hinduism, the early 19th centu-
ry renaissance, the unique characteris-
tics of Indian Islam and the contribu-
tions of men like Rabindranath Tagore,
Jawaharlal Nehru, B R Ambedkar and
others that helped India avoid the fate
of so many of former colonies.
The RSS, and supporters like Mr
Sharda, have something in common
with Pakistan’s founder Muhammad Ali
Jinnah and Pakistan’s Islamists. In 1940,
Jinnah said Islam was in danger, or
“Islam khatre mein hai”. Islamists, 70
years later and after achieving a theo-
cratic Pakistani state, continue to shout
that slogan.
For the RSS, after four years of the
Narendra Modi government, Hindus
continue to be perennially in danger.
Unfortunately, many Hindus do not see
what turning away from modernity and
towards a woolly-headed idea of a glo-
rious past did to our neighbour. Mr
Sharda should be congratulated for
doing his bit towards constructing a
Hindu Pakistan. Hopefully, Mr
Mukherjee will speak to the RSS cadres
of the inclusive nationalism of Tagore,
and the dangers of pursuing the path
shown by Golwalkar and Jinnah.
RSS 360°: DEMYSTIFYING
RASHTRIYA SWAMAYSEVAK SANGH
Ratan Sharda
Bloomsbury
299 pages; ~499