[Editorial Analysis] No sugarcoating

Mains Paper 3: Economy
Prelims level: production-linked incentives scheme
Mains level: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

Context:

• Any programme, however well-conceived, is only as good as its implementation.

• This maxim applies not just to the recent production-linked incentives (PLI) scheme, whose basic intent, timing and design cannot be faulted.

• Aim of the PLI scheme was to attract manufacturing investments in sectors where India already enjoys or has potential comparative advantage. The design was to provide up to 6% payment on incremental sales.

Example of sugar mills:

• The real test lies in what is happening to existing schemes.

• This newspaper has reported on incentives given to sugar mills for exports notified last September.

• The “lump sum assistance” of Rs 10,448 per tonne led to a record 5.65 million tonnes (mt) being shipped out during 2019-20 (October-September).
• That should have meant payments of over Rs 5,900 crore, whereas the industry claims receipt of hardly Rs 900 crore.

• The same goes for a 4-mt sugar buffer created in August 2019, wherein the Centre was to bear the entire interest and storage cost of this stock held in mills for a year.

• As against the original outlay of Rs 1,674 crore, only about Rs 300 crore has been released so far.

Policy credibility:

• If money isn’t paid against obligations based on which business decisions are taken — in this case, by sugar mills — it raises larger questions on policy credibility.

• The same investors who would normally consider the PLI an attractive scheme can very well ask: What if the promised incentives don’t come?

• True, this has been an extraordinary year of COVID-induced economic dislocations resulting in government revenues taking a beating.

• Forget the sugar industry, the Centre hasn’t been able to pay even states their legitimate goods and services tax compensation dues.

• But the problem of government — both the Centre and states — not paying fully and on time isn’t new.

• Arrears against food and fertiliser subsidies alone amounted to nearly Rs 3,00,000 crore at the start of this fiscal, with state utilities’ outstanding dues to power producers estimated at Rs 1,25,000 crore.

Clearing overdues:

• Now that government finances are on the mend, the focus should be on clearing overdue payments as much as on unveiling fresh spending programmes.

• Last week’s announcement of wiping out all fertiliser subsidy arrears at one go was a welcome step.

• If non-repayment of debt is treated as sovereign default, the same logic ought to be used for not honouring other commitments — at least those made on paper.

Conclusion:

• There is no better stimulus for the economy today than the government ensuring liquidity, through proper and timely discharge of its dues.

Prelims Questions:

Q.1) With reference to the Indus Suture Zone (ISZ), consider the following statements:

1. The suture zone of the Himalayas or the Indus Suture Zone (ISZ) in the Ladakh region where Indian and Asian Plates are joined has been found to be tectonically active.

2. Himalaya were known to be made up of north dipping thrusts like the Main Central Thrust (MCT), the Main Boundary Thrust (MBT), and the Main Frontal Thrust (MFT).

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: C

Mains Questions:

Q.1) What is the production linked incentive scheme for sugar mills? Discuss.

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