Until the Rome summit of the G20 in late October, discussions are underway on what can be done to undo the damage of COVID through global partnerships. Previous experience with the 2008 global crisis was that the G20 offered a consolidated cross-country fiscal stimulus to pull the world economy back from the brink, but then lost coherence and required each country to discontinue the stimulus on its own. left for The taper tantrum in 2013 was the result of the G-20’s indifference to the need for continued concerted action. I don’t see any agreed-upon route on how to handle the taper issue going forward now. The G-20 serves the individual interests of the major countries, pretending to include its other members, including progressively elevating them to the presidency of the club.
That Covid has resulted in a more unequal world than it is commonly known. Even as corporates across the world have profited from a drastic reduction in their wages and salary bills, the opening of workplaces has led to a shocking new corporate initiative to further squeeze employees. Those who choose to work from home will receive an adjusted salary according to their “geographical” meaning that if they relocate to places where the cost of living is lower, they will be paid less accordingly. Certainly, this violates the principle of equal pay for equal pay. The work, but more importantly, takes away a new opportunity for peripheral regions to see a resurgence of prosperity as people choose to move there. Will the G-20 really face this battle with major corporate entities like Microsoft?
In India, it hasn’t originated yet, but we need to make sure it doesn’t happen. We want the corporate employees to find out at the district or tehsil headquarters if they feel they can work from there. This could serve as an important trigger to improve access inequalities, which existed pre-Covid and make post-Covid outcomes more unequal than they otherwise would have been.
Inequality in access to whom? The road-electricity-water trio was provided by the public (streets) to the public, though to the exclusion and rival (electricity and water). Access to roads has been largely eliminated by the rural roads programme, although the rejection of the provision of the Fifteenth Finance Commission (XVFC) for the maintenance of rural roads is likely to result in a serious deterioration in the quality of rural roads by 2026. Is. Even the state highway is in terrible shape today, although there are significant inter-state differences.
Water access was severely pre-Covid, though it is not a rural-urban divide. This is the ancient division between drought prone and well watered areas. These access disparities have determined the transmission rate in the country’s fight against COVID.
As far as electricity is concerned, regional disparities between metropolitan centers and cities and settlements on the periphery persist. The market for battery-generated electricity remains strong in smaller cities and towns. It is meaningless to talk of a spatial balance in economic recovery from Covid without making another serious attack on the power sector reforms.
Electricity falls under the jurisdiction of the states, which retain their right to levy duty on electricity even after the constitutional amendment to bring in the GST. This taxation authority, by general logic, should have provided a clear incentive for states to promote metered consumption and a progressive rate structure, so as to boost state fiscal revenues. Alas, things don’t go that way. The need to please voters and donors has left electricity tariff structure and availability hopelessly chaotic and unchanging.
XVFC addressed the dire need for power sector reforms by recommending additional borrowing by states of half a percent of annual Gross State Domestic Product (GSDP) for four years, including the current financial year, subject to certain entry conditions. (Article 293(3) of the Constitution is subject to the state’s borrowing power for approval by the Centre). The additional borrowing was intended to enable state governments to take on accumulated debt, which has prevented disbursement companies from repaying loans (where they have not defaulted). As a result of poor tariff structure and metering, distribution companies are continuously incurring losses.
The XVFC Entry Terms were designed to assess improvement intent based on measurable indicators such as reduction in technical and commercial losses, and greater transparency in formal accounts, over certain defined periods in the immediate past.
The actual notification of entry conditions by the Finance Ministry calls for a graded undertaking by the states to handle the current year’s losses of distribution companies by 100% after 2025-26. As a requirement, this is merely a tightening of the XVFC terms and does not really violate their spirit, but making a commitment beyond the extended borrowing period is difficult, and not enforceable in any case. The deadline is December 15, so we don’t know how many states will apply.
A new overlapping Revamped Reforms Based and Result Linked Distribution Sector Scheme from the Center will fund distribution companies directly with a deadline of October 31. It provides central funding of about half a percent of GDP, complements XVFC provision, and is in line with the XVFC horizon. A joint team of ministries of finance and power should link the two funding channels for maximum effectiveness.
Indira Rajaraman is an economist
Don’t miss a story! Stay connected and informed with Mint.
download
Our App Now!!
.