Petrol pricing

Why in news?

In Indian cities the retail prices of petrol and diesel have risen to new high.

What is the status of increasing petroleum prices?

• The hike in petrol and diesel prices are attributed to the steadily increasing price of international crude oil.
• The share of Petrol and diesel out of total indirect tax revenues increased significantly after international crude oil prices started declining from the middle of 2014.
• The Union states took advantage of the lower prices to increase excise duty and sales tax on petrol and diesel, respectively.now,there is demand for rolling back these duties as the crude oil prices have begun rising.
• However, conceding the roll back can be disastrous for the fiscal situation of the Union and the states.

What factors determine the fuel costs?

• Market factors -The price is determined by the movement of crude oil price (the main raw material), the rupee/dollar exchange rate and demand-supply situation in the market.
• Excise duty-There was a series of excise duty hikes in the second half of 2015 and the initial months of 2016 on both petrol and diesel to help shore up finances.
• This has helped the Centre realise higher central excise duties will fetch higher revenues.
• Oil companies - Oil companies have the pricing freedom and Government has no business interfering in the day-to-day affairs of the companies.

What are the issues with current system of pricing?

• Daily pricing of petrol and diesel linked with market was introduced in keeping with international practices.
• This current system of pricing is based on trade parity, assuming 80 per cent of petrol and diesel is imported and 20 per cent is exported.
• 
  
• At many instance companies buy crude oil at high price and they sell it for low price due to market trends, to match this losses they hike the prices.this system is no longer relevant as the country does not import any of these products and this system confers undue benefits to private sector refiners on their sales of petrol and diesel in the domestic market.

What measures can be taken to resolve this issue?

• The only way there can be a reduction of taxes on petroleum products is by including them in the GST regime.
• This is difficult to be implemented in the short run considering the undue shock to the revenues to the Centre and States.
• Hence, it would be more relevant to allow oil refiners to price their products based on their costs of refining, a reasonable rate of return and marketing overheads.
• This will introduce an element of competition among different oil refiners and allow more efficient and transparent price discovery for these products.

ICDS

INTEGRATED CHILD DEVELOPMENT SERVICES (ICDS) SCHEME

Children in the age group 0-6 years constitute around 158 million of the population of India (2011 census). These Children are the future human resource of the country. Ministry of Women and Child Development is implementing various schemes for welfare, development and protection of children.     Launched on 2nd October, 1975, the Integrated Child Development Services (ICDS) Scheme is one of the flagship programmes of the Government of India and represents one of the world’s largest and unique programmes for early childhood care and development. It is the foremost symbol of country’s commitment to its children and nursing mothers, as a response to the challenge of providing pre-school non-formal education on one hand and breaking the vicious cycle of malnutrition, morbidity, reduced learning capacity and mortality on the other. The beneficiaries under the Scheme are children in the age group of 0-6 years, pregnant women and lactating mothers. Objectives of the Scheme are: to improve the nutritional and health status of children in the age-group 0-6 years; to lay the foundation for proper psychological, physical and social development of the child; to reduce the incidence of mortality, morbidity, malnutrition and school dropout; to achieve effective co-ordination of policy and implementation amongst the various departments to promote child development; and to enhance the capability of the mother to look after the normal health and nutritional needs of the child through proper nutrition and health education.

Services under ICDS The ICDS Scheme offers a package of six services, viz. Supplementary Nutrition Pre-school non-formal education Nutrition & health education Immunization Health check-up and Referral services           The last three services are related to health and are provided by Ministry/Department of Health and Family Welfare through NRHM & Health system. The perception of providing a package of services is based primarily on the consideration that the overall impact will be much larger if the different services develop in an integrated manner as the efficacy of a particular service depends upon the support it receives from the related services.         For better governance in the delivery of the Scheme, convergence is, therefore, one of the key features of the ICDS Scheme. This convergence is in-built in the Scheme which provides a platform in the form of Anganwadi Centres for providing all services under the Scheme.

The delivery of services to the beneficiaries is as follows: Services Target Group Service provided by (i) Supplementary Nutrition  Children below 6 years, Pregnant & Lactating Mothers (P&LM) Anganwadi Worker and Anganwadi Helper [MWCD] (ii) Immunization* Children below 6 years, Pregnant & Lactating Mothers (P&LM) ANM/MO [Health system, MHFW] (iii) Health Check-up* Children below 6 years, Pregnant & Lactating Mothers (P&LM) ANM/MO/AWW [Health system, MHFW] (iv) Referral Services Children below 6 years, Pregnant & Lactating Mothers (P&LM) AWW/ANM/MO [Health system, MHFW] (v) Pre-School Education Children 3-6 years AWW [MWCD] (vi) Nutrition & Health Education Women (15-45 years) AWW/ANM/MO [Health system, MHFW & MWCD] * AWW assists ANM in identifying the target group.

Funding Pattern          Prior to 2005-06, providing of supplementary nutrition was the responsibility of the States and administrative cost was provided by the Government of India as 100% central assistance. The nutrition costs were meagre and coverage of the programme in all villages/habitations was also limited and not universal. Since many States were not providing adequate supplementary nutrition in view of resource constraints, it was decided in 2005-06 to support the States/UTs up to 50% of the financial norms or to support 50% of expenditure incurred by them on supplementary nutrition, whichever is less. Since 2009-10, Government of India has modified the sharing pattern of the ICDS Scheme between the Centre and States. The sharing pattern of supplementary nutrition in respect of North-Eastern States between Centre and States has been changed from 50:50 to 90:10 ratios. In respect of other States/UTs, the existing sharing pattern in respect of supplementary nutrition is 50:50. The existing cost sharing ratio for other components is 90:10 except the new components approved under Strengthening & Restructuring for which it is 75:25 (90:10 for NER).

Eca,cea

• CEA works under FinMin and advises govt on purely economic matters.
  Niti Ayog advises on economic as well as other policy matters too.
  From vision magazines I understood, EAC collates information received from all the other sources and gives one best solution to the PM. It can suggest its own solutions too.
• CEA- under FM, advices on financial matters, Eco Survey - basically just an advisor- a post to write and enjoy.

  Niti aayog- main work - strengthening federalism- also decides future policies ( such things are not decided by other 2 agencies) gives guidelines for better governance. It has become backbone of governance policy making. Also makes long term policies.
  EAC- its latest- work under PMO - ears n eyes on PM in financial matters. Since there were lot of issues where PMO needed its own body who has knowledge of Economy and PM can also hav independent thinking different from FM.

• CEA- under FM, advices on financial matters, Eco Survey - basically just an advisor- a post to write and enjoy.
  Niti aayog- main work - strengthening federalism- also decides future policies ( such things are not decided by other 2 agencies) gives guidelines for better governance. It has become backbone of governance policy making. Also makes long term policies.
  EAC- its latest- work under PMO - ears n eyes on PM in financial matters. Since there were lot of issues where PMO needed its own body who has knowledge of Economy and PM can also hav independent thinking different from FM.
  

  • CEA works under FinMin and advises govt on purely economic matters.
    Niti Ayog advises on economic as well as other policy matters too.
    From vision magazines I understood, EAC collates information received from all the other sources and gives one best solution to the PM. It can suggest its own solutions too.

The Gross Value Added (GVA) and Gross Domestic Product (GDP) give a picture of economic activity from producers (supply side) and consumers (demand side) perspectives respectively. Both GDP and GVA are independent measures. One from demand side and other from supply side.

• GDP or Gross domestic product of a country is the final value of goods and services for a given period, while gross value added is a metric capturing the value generated by subtracting the input costs.
• GVA or Gross value added is a productivity metric that measures the contribution to an economy, producer, sector or region. Gross value added provides a dollar value for the amount of goods and services that have been produced, less the cost of all inputs and raw materials that are directly attributable to that production.

1. GVA provides better measure of economic activity. Because GDP can record a sharp increase just on the account of increased tax collections due to better compliance/coverage and not necessarily due to increase in output.
2. GVA is a better reflection of the productivity of the producers as it excludes the indirect taxes which could distort the production process. However, it can also be argued that GVA is distorted due to presence of subsidies.
3. A sector-wise breakdown provided by the GVA measure can better help the policymakers to decide which sectors need incentives/ stimulus or vice versa.

Both of the measures need not match and there could be a sharp divergence due to presence of Net Indirect Taxes ( NIT= indirect taxes-subsidies) which are accounted in GDP calculations (GDP is sum of GVA and NIT).

There has been differences among economists regarding usefulness of these 2 metrics, and the recent change in methodology of GDP calculation has again stoked debates. Some of the observations are:

1. GDP is more suitable when we went an overview of economy and for comparison purposes, while GVA is more suitable for fishing sectoral performances
2. GDP could be increased by inflators pressures while GVA is relatively insulated from it.
3. GVA can give insights about the structural bottlenecks of economy.

Thus, both metrics have their own utility and economists need to apply their judgement in ascertaining suitability on case to case basis.

GVA carries significance as a better indicator of real economic activity, reflective of productivity/ competitiveness and useful in sector specific policymaking. GDP remains a key measure to make cross country analysis and comparing the incomes of different economies.

After the global financial crisis of 2008 countries shifted towards GDP as indicator and india towards GDP at factor cost. Develop countries calculate GDP at market price because of lower tax rates. However, india shifted to GDP at market price or GVA for growth estimation in 2015 as to comply global practices. Since a decade india's indirect tax collection is growing and subsidies share going down so to account for this increase to be felt in growth prospects india drifted towards GVA.

As-> GVA=GDP+tax-subsidy, thus increasing the value of goods and services produced.

New GDP estimation was made to account for new products to be added like smart phones etc. and change the base year or constant year to more of current year to account for inflationary tendencies i.e from 2004-05 to 2011-12 which in whole brought a wave of positivity in market which is required for igniting investment and growth prospects

Deen Dayal Upadhyaya Antyodaya Yojana

Deen Dayal Upadhyaya Antyodaya Yojana or DAY is a new scheme of the Modi Government to replace the National Rural Livelihood Mission (Ajeevika) and National Urban Livelihood Mission implemented by Ministry of Rural Development and Ministry of Housing and Urban Poverty Alleviation respectively.

Contents

• National Rural Livelihoods Mission
• Background
• Objectives
• Salient Features of DAY-NRLM

National Rural Livelihoods Mission

The UPA government had launched the National Rural Livelihoods Mission (NRLM) or Aajeevika in 2011 by revamping the earlier Swarnajayanti Gram Swarozgar Yojana (SGSY). This scheme is currently implemented by the Rural Development Ministry and has been renamed as Deen Dayal Antyodaya Yojana (DAY) after integration of both NULM and NRHM by NDA Government.

Background

Successive governments in India have launched schemes to provide self-employment capability to the poor and marginal people. One such scheme was the Swarnjayanti Gram Swarozgar Yojana launched which aimed to promote formation of Self Help Groups in villages and make them capable of self-employment by providing entrepreneurial capacities. But that scheme did not work well because individual SGSs did not survive in want of credit, skills and lack of forwards and backward linkages. However, in some states where the federations of SHGs were formed, the scheme was quite successful. So, it was learnt that when a group of SHGs is formed, each SHG will work closely with members of other groups in their own village and also with members of other blocks and district. This will be a bigger collective group, organizing all the rural poor in a state under one programme.  This is how SGSY was modified in a mission mode to NRLM programme.

Objectives

The objective of NRLM is to organize the rural poor, particularly women into Self Help Groups (SHGs), and continuously nurture and support them till they attain appreciable increase in incomes over a period of time and improve their quality of life and come out of abject poverty. NRLM seeks to reach out to all rural poor women, estimated at 8.0 to 10.0 crores in a phased manner, over a period of ten years.

Salient Features of DAY-NRLM

• NRLM is partially supported by World Bank.
• SHGs and their federations are provided Revolving Fund and Community Investment Fund, which adds to their corpus funds.
• Members are provided loans for both consumption expenditure and taking up livelihoods activities from this corpus and are charged a small interest on the repayments.
• NRLM supports the financial inclusion of the SHG members from rural poor households through bank linkage and also works with the Banking sector to ensure credit flow to the SHGs.
• SHGs borrow from banks at 7 per cent against the average 10.90 per cent to 13 per cent rates charged by banks. The difference is the interest subvention provided through NRLM. Earlier, in 150 selected districts, an additional interest subvention of 3 per cent was provided to all women SHGs on prompt repayment of loans. Now this has been extended to 100 more districts.(Total 250 districts).
• To continue strengthening of livelihoods, a new livelihoods vertical, Start up Village Entrepreneurship Programme (SVEP) has been launched by my Government. The programme aims at helping the poor to set up enterprises and provided support till the enterprises stabilize. In all these endeavors the role of micro financing in livelihood needs to be given continued attention.

Mahila Kisan Sashkitikaran Pariyojna(MKSP) is one of the components of NRLM. It seeks to strengthen the existing agriculture based livelihoods of the poor and participation of women in agriculture and improve productivity

Poverty line

Q. Who decides Poverty line?

Planning commission

Q. How does it decide poverty line?

• Monthly per capita Expenditure.
• Suresh Tendulkar designed its Formula.

Q. Who provides the data of monthly Expenditure?

• NSSO- National sample survey organization
• under Ministry of Statistics and Programme Implementation

Tendulkar’s poverty line

Area	Monthly Expenditure per person (Rs.)
Rural	816
Urban	1000

According to Tendulkar formula, poverty has declined, as seen in following graph:

MUGUP THE VALUE OF TOTAL POORS (%WISE) & IN CRORES

No. of Poors in India (Tendulkar Method)

Tendulkar	2004	2011
Poor %	37.2	21.9
Poor Cr.	41	27

Time for stupid census ranking:

State wise (Ref. Economic Survey 2013 page 238)

Highest rural poverty	Lowest poverty
tie: Odisha, MP Bihar Assam	Kerala (7.1%) Himachal (8.1%) Punjab (8.3)%
highest rural unemployment	highest urban unemployment
Kerala Assam Bihar WB ….lowest in Gujarat (3/1000)	Bihar WB Andhra Haryana ….lowest in Gujarat (34/1000)

Tendu Leopard vs Ranga Khush

Earlier Committees: Alagh ’77, Lakdawala ’89

Committees	Tendulkar	C.Rangarajan
Set up by	Planning commission	Planning commission
Set up in	2005	2012, May
Submitted report	2009	2014, July
Poverty estimation method	Monthly per CAPITA Expenditure.	Monthly Expenditure of family of five.

Urban Poverty line

Urban poverty line (Rs)	Tendulkar	C.Rangarajan
per day per person	33	46.90=~47
per person per month	1000*	1407
per family of five, per month	5000	7035

*this is their official recommendation. Rest numbers are “derived”.

Rural Poverty line

Rural poverty line (Rs)	Tendulkar	C.Rangarajan
per day per person	27	32
per person per month	816*	972
per family of five, per month	4080	4860*

*these are the official numbers recommended by them. Remaining figures are derived.

Why Ranga NAA-KHUSH (unhappy)?

Q. Why is Ranga unhappy with journalists and politicians? Inform “the nation” in 200 words.

VILLAIN RANGA (JOGINDAR) IS ALSO UNHAPPY BECAUSE MAINSTREAM BOLLYWOOD DIRECTORS ALSO RELEASING VULGAR MOVIES & ITEM-SONGS, THEREBY AFFECTING HIS “SUSTAINABLE LIVELIHOOD”

• C. Rangarajan has received lot of negative publicity because:
  • He kept poverty line to be ridiculously low – Rs.32 for rural and Rs.47 for Urban.
  • Therefore He is insensitive towards the poor.
• But Ranga never gave those daily numbers. He had given combined poverty line for a family of five members- Rs.7035 (Urban), which is a plausible number. After all, if you live in a family of five, then some costs will get reduced per head (e.g. rent, lightbill, LPG etc.)
• Besides, if a family spending >7000 per month = their income would be definitely above 7000. So in reality, Ranga has not “insulted” the poor. Infact, He has tried to cover more poor under BPL & Sarkaari schemes.
• Media has derived those “insensitive” daily Expenditure figures (Rs.33, Rs.47) by dividing the monthly Expenditure of five people, then further dividing that number by 30.
• If you objectively convert Ranga’s poverty line into purchasing power parity (PPP), it’s $2.44 per person, per day. And that figure even higher than World bank estimate. In other words, Ranga included more poor in BPL, than even World bank would!
• Thus, journalists and politicians have misinterpreted the poverty line issue- just like they misinterpreted Anti-CSAT movement to be against those 8 easy English MCQs above Decision Making section!

How is 100 million poors increased?

Since Ranga raised poverty line, obviously more people would become “below poverty line”.

WHY DOES HINDU KEEP SAYING 100 MILLION POORS ADDED?

Poverty in India: Year 2011

Formula	# of BPL in crores
Tendu	27
Ranga	37
difference	10 crore = 100 million BPL increased.

anyways moving on

Calorie Expenditure

Tendulkar	C.Rangarajan
only calorific value in Expenditure	Calorie +Protein + fat. Explained below

In the Indian economy books writing during Adam Smith’s time, you’d have read poverty line = “2400 calorie in Rural areas and 2100 calorie in Urban areas.” That was Lakdawalla Committee (1989-1993).

Calorie	Lakda	Ranga
Rural	2400	2155
Urban	2100	2090

Observe that Ranga reduced the calorie requirement- why?

• Because ICMR study report said so. Besides, over the years use of machinery and vehicles has increased, so today’s generation doesn’t require that much “calorie”. Besides, laborers can get extra energy by chewing calorie-free “Gutkha”.

Ranga also included Expenditure on protein & fats

gms / day	Rural	Urban
Protein	48	50
fats	28	26

Coming back to Original topic:

Tendulkar	C.Rangarajan
Only counts Expenditure on food, health, education, clothing.	food + nonfood items such as education, healthcare, clothing, transport (conveyance), rent. + non-food items that meet nutritional requirements.
—	Urban poverty increased on faster rate (40%) than rural poverty (19%) This is obvious, because Ranga included non-food items like rent, education etc. These items/services are more expensive in cities than in villages.
—	Ranga recommends that at any given point of time, bottom 35% rural junta always be considered poor bottom 25% urban junta always be considered poor.
—	Poverty ratios should be disengaged from entitlements under Government schemes. e.g. cheap foodgrain quota under Food Security Act should not be based on BPL-ness, but social-caste census.

Engel’s law & MPCE

Monthly per capita Expenditure: NSSO 68thRound (2011-12)

area	Average MPCE	Highest in	% food Expenditure
Urban	Rs.2399	Haryana	38.5%
Rural	Rs.1278	Kerala	48.6%

• This indicates rural-urban disparity. Cityfolks have more money to spend than Villagers.
• Engel’s law says: when income rises, % of overall income spent on food item decreases.
• We can see this happening in urban areas. City folks spending ~39% while villagers spending ~49% of their income on food.
• Among states: Kerala spends the least money on

Centrally sponsored schemes (CSS)

In June 2013, UPA-II revamped CSS

BEFORE	AFTER
137 schemes	66 (list given in PRSIndia LINK)
States did not have any freedom to spend money on their discretion.	10% flexifunds
Some of the schemes directly gave money to NGOs and project implementation agencies like DRDA.	Entire money will be transferred to Consolidated fund of the state Government. From there, everyone will get money
—	For every new scheme, states will have to contribution some money themselves. explained below:

The Union: state contribution ratio will be as following…

Area	Union	States
Special category states (JK, NE, Himachal & Uttarakhand)	90	10
other states	75	25

CSS classification

As per Economic Survey, we can classify all Sarkaari schemes, into following categories. And I’ve covered the schemes into the same format in my ch13 summary subparts.

1. Poverty removal: we are here (MNREGA, Urban and Rural livelihood missions)
2. Health, women and child
3. Education & skill
4. weaker section: welfare, protection
5. Social security
6. infrastructure: rural & urban

Mrunl 2013