Hon’ble Shri Duvvuri Subbarao
Reserve Bank of
I am a common man – not an economist. I am conveying a serious grudge that general public is carrying against your policy of increasing the interest rate 13 times by a total of 3.5%. From a reasonable 5% you gradually increased to 8.5% - an increase of 70%. You reduced the interest first time by 0.5% but reports have started appearing in the Press that you again propose to increase the interest rate to tame the inflation. Alarmed by such report, this letter to you, Sir.
I appreciate that you had a people-friendly noble aim in your mind of bringing down the inflation but the step was taken unilaterally not taking into account other factors. Sir, at the elementary level in college it was taught to us that Inflation is caused by shortage of goods and excess supply of money in the economy; and that the situation can be controlled by increasing the rate of interest. However, the actual situation in our country is different. It is not the shortage of goods, it is the artificial shortage created by Profiteers. Even the uninformed common men is aware of this fact. Under such circumstances how the policy of increasing interest could bring the prices down. The action was required at Government level which it failed to do inspite of having given several assurance in the Parliament.
Several events can be quoted to support this situation:
i) CAG report that fraudulently licences were issued to Big Businessmen for import of Pulses. They not only caused a loss to the exchequer of over Rs. 1000 crores, but also formed a cartel and jacked up the prices of pulses to Rs. 100/- per kg by creating artificial shortage.
ii) Economic Times report dated 30.3.2012
‘SPECULATION, HOARDING DRIVING UP PRICES
‘Futures Trade in Select Farm Items under Govt. Lens
Over100% price rise in 3 months jolts commodity market regulator into action
iii) DNA report dated 24.4.2012
Dairy farmers boil over diluted milk
Allege firms buy milk cheap but sell at huge profits
Maharashtra Govt. decision to do away with APMCs as they are instrumental in substantial increase in agricultural products prices
When your step of increasing interest rates proved to be counter-productive, it did not tame the inflation but slowed down the economy and brought down the GDP growth significantly, you defensively gave a statement that you relied on Government data which was not reliable.
Sir, not only the GDP growth has slowed down but the cost of funds to Government on its massive sovereign debt has increased by about Rs. 1.50 Lakh Crores. As the Government has no resources, it has raised further loan to meet its interest burden. The profits of Corporates has gone down and the Government has suffered Income tax revenue from them. Prices have increased due to increased cost of production causing suffering to general public.
Under such circumstances I request you to please issue a detailed press release explaining the logic behind jacking up the interest rates. Otherwise, I am afraid you shall go down in the history as a run of the mill Bureaucrat who caused enormous loss to the economy of the country due to his obstinacy and theoretical approach.
I hope you will kindly take this frank expression of public grievance in the right spirit. It is an opportunity to you to clear your concept.
We have repeatedly made it clear that the income from Real Assets of the country are shabbily termed as ‘Non-tax Revenue’ in the Budget. No importance is given to this Real source of income of the country. It will be interesting to note whether our Parliamentarians raise any question on this aspect of budget in the ongoing session of Parliament for passing the budget.
Non-tax revenue in the Union Budget has been categorized under nine heads”
Rs in Crore
Dividends n Profits
As is obvious from the above main income comes from Economic Services – 47.77%, followed by Dividend and Profits – 30.47% and a distant third 11.68% from Interest Receipts. Income from other six categories is only 10.07%. Revenue from Railways, said to be the largest network in the world, is 0.00. Detailed Budget figures can be seen at our site: http://tax-freeregimeinindia.blogspot.in/2012/04/non-tax-revenue-what-country-earns-from.html
We shall now start analyzing income under each head and the scope for increase. We may repeat that against the total income Rs. 1,64,614 Crores from the Real Assets of the country, we shall be paying an amount of Rs. 3,19,759 crores as interest on sovereign debt. In plain words the Government has taken so much loan (Rs. 45 Lac crores ) that the income from Real Assets can not pay even half of it. What kind of Government we are supporting! God Bless
Tax and Debt Free India
Friends We calculated that the county needs to raise an additional revenue of Rs. 2.72 lac crores to reduce taxes by 5% per annum (47,500 Crores) and sovereign debt (Rs. 2.25 lac crores) by 5%. From now onwards we shall start an exercise to explore the various means that can generate this amount every year.
One big source of generating additional amount in bulk is the Indians’ illegal Money stashed abroad. This money comprises of (a) Bribe money deposited by Politicians and Bureaucrats, and (b) black money deposited by rich people on which they did not pay the taxes. While there is no authentic knowledge of the quantum of such money but the most authoritative amount can be considered that declared by the serving Director of CBI Mr. A.P. Singh, whose estimate is $ 500 Billion Rs. 25 lac crores)
"It is estimated that around 500 billion dollars of illegal money belonging to Indians is deposited in tax havens abroad. Largest depositors in Swiss Banks are also reported to be Indians," CBI director A P Singh said speaking at the inauguration of first interpol global programme on anti-corruption and asset recovery…”
It is quite embarrassing to state that the Government is not at all serious about bringing this huge amount into the exchequer as would be abundantly clear from the following declaration in the Budget 2012-13 proposal. The Hon’ble Finance Minister stated regarding black money:
Proposal to lay a White Paper on Black Money in current session of Parliament.”
Source Budget Proposal
He has made his intention very clear – His only plan is to lay a White Paper on Black money; he has no plan to recover it. Any conscientious person would have made a commitment that all out efforts are being made to bring this huge money into the country and a provision of at least 10% of this money amounting to Rs. 2.50 lac crores would be brought into the exchequer in the current year.
So, our first request to the Government is to make serious, time bound effort to bring this money into the exchequer. This amount should be used to repay the Sovereign debt. Next, we shall explore other venues of raising additional revenue.
Please comment – do you agree or not?
Tax and Debt Free India
Friends We calculated that the country needs to raise an additional revenue of Rs. 2.72 lac crores to reduce taxes by 5% per annum (47,500 Crores) and sovereign debt (Rs. 2.25 lac crores) by 5%. Starting our exercise to explore the various means that can generate this amount every year we found that a conscientious Government can generate an amount of Rs. 2.50 lac crores (Total Rs. 25 lac crores) from Illegal money stashed abroad. Today we explore the second important source - Communication Services; As per Budget document –
“– Communication services.
“6.06. Receipts under 'Other Communication Services' mainly relate to the licence fees from telecom operators, receipts on account of spectrum usage charges and auction of Broadband Wireless Access (BWA) spectrum currently in use by Central PSUs; receipts from spectrum held in excess of 6.2 MHz and receipts from auction of spectrum available with Government including spectrum to be vacated by 122 licences, in view of the order of Hon'ble Supreme Court. Department of Telecom collects recurring licence fees from various telecom operators licensed by it. It also collects one time Entry fees from new operators. The main service categories include Cellular Mobile Service, Basic Service, Unified Access Service, V-SAT Services, International and National Long Distance Services, Infrastructure Providers, Internet Services, Public Mobile Radio Trunk Service and Captive Mobile Radio Trunk Service. Barring a few services, the Licence Fee is collected based on percentage share of the operators Adjusted Gross Revenue (AGR) and includes a component of Universal Access Levy. The AGR in turn is influenced by factors like tariff, customer base, competition, etc. The collection from licence fee depends on the rate of licence fee, tariff and growth of the telecom service sector in the country. Spectrum charges are levied by the Department on the Service Providers, for usage of spectrum and are calculated either as a percentage of their Adjusted Gross Revenue depending upon the quantum of spectrum assigned for their network (for CMTS, Basic, UAS and Commercial VSAT Service Providers) or at flat rates or on the basis of formulae (for others). “
From Communication Services the Government earned Rs. 1.20 lac crores in FY 2010-11, only Rs. 0.16 lac crores in 2011-12(RBE) and has estimated an income of Rs. 0.58 lac crores (35% of total Non-tax Revenue) in the current year 2012-13. Thus, it is an important source of revenue from the Real Assets of the country.
Sadly, it has now become well-known how the Government doles out this valuable asset to Big Business for a pittance – courtesy exposure of 2G scam. The Supreme Court declared allotment of spectrum as "unconstitutional and arbitrary" and quashed all the 122 licenses issued in 2008 during tenure of A. Raja (then minister for communications & IT) the main accuse in the 2G scam case. The court further said that A. Raja "wanted to favour some companies at the cost of the public exchequer" and "virtually gifted away important national asset".
Amazingly, the government is unaware of the real value of this Asset as is clear from the value assessed by various authorities: Rs. 1.76 lac Crores by CAG, Rs. 30,984.55 crore by CBI, Telecom Regulatory Authority of India claimed that the Govt. has actually gained 3,000 crore, and no loss theory by present Telecom Minister Mr. Kapil Sibal. Another bombshell, TRAI now estimates the value of this asset at Rs. 7 lac crores for 10 years (Rs. 70,000 Crore per annum)..
It appears there is a systematic plan by Govt not to bring real value of this asset into the exchequer. Firstly, they filed a petition in the Supreme Court that the re-auction can not be held before 400 days; when the Hon’ble Supreme Court rejected their plea and asked them to complete the re-auction before August 2012, the GOM is proposing such conditions that there is no optimum recovery of the value of this asset – TRAI recommended easy annual payment terms, but the GOM recommending one time down payment of the entire amount. Obviously many operators would opt out for being unable to raise such colossal amount at one go. The real value of this asset would come into the exchequer only if Government acts honestly and sincerely.
Out of our requirement to raise additional 2.72 lac crores, we can safely assume an additional income of Rs. 50,000 crores from this source. Thus generation from repatriation of illegal money stashed abroad – Rs. 2.50 lac crores, and Rs. 0.50 lacs from Communication Services, we get an additional Rs. 3.00 lac crores, already exceeding our target. We shall continue our exercise to assess income from other venues at the disposal of the Government.
What a Government we have elected, patently dishonest, proving right the joke doing rounds – ‘Don’t steal, Government does not like competition’. !