Companies & Sectors
11 states to feel the pinch of UDAY scheme
The Ujwal Discom Assurance Yojana (UDAY) launched by the union government is unlikely to have a destabilising effect on fiscal consolidation at an aggregate level, says India Ratings and Research (Ind-Ra). However, some of the states, that have joined the scheme and a few, which have been incurring high distribution losses, but have not joined in, will feel the pinch, the ratings agency added.
Ind-Ra says its estimate shows that the aggregate fiscal deficit of states at 3.2% of gross domestic product (GDP) in FY17 is expected to be marginally better than the 3.4% recorded in FY16 (revised estimates (RE)). The aggregate impact of UDAY on the fiscal deficits of the 13 states that have joined UDAY till-date will be 0.47% of the gross domestic product (GDP) in FY17.
"However, state finances of select states namely Andhra Pradesh, Haryana, Jharkhand, Punjab, Rajasthan and Uttar Pradesh will come under pressure. Five states incurring high distribution losses that have yet not joined the UDAY scheme are Telangana, Madhya Pradesh, Maharashtra, Tamil Nadu and West Bengal. Our analysis shows that once they do, state finances of even Telangana, Madhya Pradesh and Tamil Nadu will come under stress," it added.
Ind-Ra notes that despite marginally better fiscal performance, states at the aggregate level are likely to miss the fiscal deficit target of 2.8% of GDP in FY17 by a wide margin. Similarly, despite showing an improvement over FY16 (RE), the combined revenue account of the states will miss the budgetary target of FY17. However, the ratings agency does not foresee any risk to the aggregate debt sustainability of the states in the medium term.
The ratings agency says, only 12 out of 23 states will be able to take the advantage of the window for additional borrowings in FY17 provided by the 14th Finance Commission (14FC). Among these 12 states, two fulfilled the criterion of interest and revenues being below 10% in the preceding year, four fulfilled the criterion of debt and state's gross domestic product (GSDP) less than 25% in the preceding year and six states fulfilled both these criteria in the preceding year. Thus, the states that fulfilled only one criterion became eligible for an additional borrowing of 0.25% of GSDP and the states that fulfilled both criteria became eligible for an additional borrowing of 0.50% of GSDP over and above the annual limit of 3.0% of GSDP.
The aggregate capex of state governments (FY16: 10.64% of GDP) is nearly double the capex of the central government (FY16: 5.41%).
Ind-Ra, however, says that it believes that the capex of state and central governments together can play only a limited role in reviving the capex cycle as an overwhelming proportion of the total capex (FY16: 83.96% of GSDP) in the economy comes from the private sector, including central and state public sector undertakings and households. 
Aggregate capital expenditure by states in FY16 grew 50.5% compared to 20.9% by the central government. In fact, growth in the aggregate capital expenditure of states has been consistently higher than the central government's since 1990s and the actual aggregate capital expenditure of the states has been higher than the capital expenditure of the central government since FY06, the ratings agency said.
Ind-Ra says it believes that the impact of the pay revision of state government employees, in line with the recommendations of the Seventh Central Pay Commission, will be felt only in FY18. Estimates from the ratings agency show that the likely impact of the recommendations of the Seventh Central Pay Commission on state government finances will be Rs1.58 lakh crore in FY18 (0.95% of GDP).
UDAY, Bond Market and Operational Improvement Plan
The bond market was nervous on the supply of state bonds of such high magnitude and apprehensions were raised that it would push up bond yields at the time of issuance of UDAY bonds. However, after a clarification by RBI that these will be off-market transactions and privately placed, issuance of UDAY bonds did not affect the bond market much. Initially, these bonds were allocated only to the banks who had lent money to distribution companies (discoms). However, now other investors such as mutual funds, insurance companies etc., are also investing in these bonds.
Operational improvement under UDAY is hypothesised to be achieved mainly by efficiency improvement, especially by a reduction in AT&C loss (Annexe B). As proposed tariff hikes are limited, a major challenge will be to reduce AT&C losses to 15% by FY20. Gujarat discoms already have AT&C losses below 15% of net input energy (FY15: 14.64%). Ind-Ra opines in view the amount of AT&C losses it will not be very difficult for Punjab (FY15: 16.66%) and Uttarakhand (FY15: 18.64%) discoms to achieve the AT&C loss reduction target. However, it will be difficult for the discoms of Jammu and Kashmir (the state still has a power department - FY15: 61.30%), Uttar Pradesh (34.22%), north Bihar (41.76%), south Bihar (45.53%), Jharkhand (39.87%), Haryana (29.58%), Ajmer (26.80%), Jaipur (32.00%) and Jodhpur (25.00%) to reduce AT&C losses to 15% by FY20.
The operational improvement plan of the three new states joining UDAY in FY17 (Andhra Pradesh, Goa and Karnataka) is not available. However, based on the AT&C loss for the latest available year, it appears AT&C loss reduction to 15% by FY20 will not be a challenge for Andhra Pradesh (FY16: 10.29%) and Goa (FY14: 10.72%), however, it will be difficult for Karnataka (FY14: 22.02%).
Source: Ministry of Power



Landlords Must Lord it Over their Properties
The rights and duties of a landlord were the subject of a recent conference. One of the owners discussed the probability of leasing out his property in a building. In his rush for earning a goodly sum, he insisted that he could not be held liable for any activities that his lessee indulged in. Most of the conferees agreed with him. This author did not.
As with all idioms, parables and sayings, each one has an equal and opposite version. Equally emphatic. Is not a man’s home his castle? Can he not do whatever he likes with it? Including that final and supreme right of ownership; destruction? 
On the other hand, can the castle owner, by his actions, blithely disturb the peace of others? Especially that of his neighbours’? A right, in conflict with a duty, becomes the topic of the day.
In a classic case, Lawrence vs Coventry, the Supreme Court in the UK held that, to be liable for a nuisance committed by its tenant, a landlord a) must have authorised the nuisance through active involvement, or b) while knowing of the probability of a nuisance (being caused). 
The howling dog and the abusive licensee, in Cocking vs Eacott, is a more recent case. It, too, was judged in England, in appeal. It decided whether a licensor was liable for a nuisance committed by her daughter, a licensee. Especially when the mother was put on notice.
You be the judge. 
Would you hold either owner responsible, or not? Also, ask what would make the difference; knowledge, complaints or reasonable doubt, or the lack of these.
In both judgements, the courts were clear on one thing. Nuisance must be stopped. Liability rests with the nuisance creator, for sure. But it also rests with the owner, if he has knowledge of the nuisance, if he should have foreseen the possibility, or if he were actively involved. In other words, it is the owner’s vicarious responsibility to ensure civil and legal use of his property. If a man’s home is his castle, so is the neighbour’s home the latter’s castle. 
Much as it may disturb many readers who feel that they are entitled to income from their property, no matter what, no man is an island. Each of us owes a duty, and a duty of care, to others in society. Therefore, liability may arise out of connivance, encouragement, by consideration, misplaced ideology, Nelson’s eye, negligence, carelessness, spite, aiding, abetting or any other excuse. But the sins of the tenant must visit upon the owner and pay he must, if possible with the former in tow.
The simple test for this would be thus. Primary responsibility lies with the person whose name appears on the 7/12 extract or any other title paper.
Could this apply to cooperative housing societies (CHSs)? Would the management be a party to the suit? In our opinion, yes. No matter what one means by ‘ownership flat’, the property belongs to the CHS. The members are shareholders, enjoying the fruits thereof. It is then the CHS’s duty to maintain peace and harmony, deter and stop illegal activities, and hold the ‘owner’ of the flat to answer.
One could well ask why it is so. Take a case in a state that bans liquor. A secluded house may make a nice speakeasy. The owner lets it out. Good returns; therefore, he asks no questions. Even if he did inquire, he may pretend not to know. The place is raided. As is common, the bootlegger escapes. What are the authorities supposed to do? Close the case? Say that the occupants could not be apprehended? The same story every time? We come back to our favourite maxim; ‘If there is a malady, there has to be a remedy’. The law was broken; so all, including the owner, have to pay.
The case laws on nuisance form an interesting body of judgements in what is called ‘The Law on Torts’. It was finely developed in the UK, over generations and now the American lawyers have made it into their own Las Vegas. India is catching up and rightfully so. So, if you own property, remember that with great ownership comes greater responsibility. 



Ralph Rau

6 months ago

It is unfortunate though that we have this new Nationalist government which makes the Hindutva racial supremacy its official hallmark. Hindus, Buddhists, Muslims, Christians, Sikhs - we are all plagued by same HUMAN frailties - hunger, jealousy, greed, lust, fear of death.
We have so much in common, other than a tribal belief that we are racially or religiously superior.
Its a survival instinct where we live in growing circles of selfishness. Look after yourself first, then your family, then your that order.


7 months ago

The mute point is not the law of the land but the people born and brought up over there ! One thing that strikes me when I holiday abroad is the inherent respect for and adherence to it that the westerners have ! We "Bharatwasi" have to learn a lot from them. Even the most educated as well as rich "Bharatiyas" take pride in flouting the laws in India that is Bharat !


Bapoo Malcolm

In Reply to PRAKASH D. BASRUR 7 months ago

Am sure you must have heard of our "Sanskruti". How we are born and put on this earth just to teach morals and morality to the rest of humanity. We, the chosen people, selected to point fingers at others, denounce everything 'forin', tell the world how we invented the aeroplane; initiated plastic surgery, in fact everything that the other countries wrongly take credit for. We do not break laws, all laws. We are individual saints, displaying our democratic independence, where lying is no longer an art form. It is our way of life. Haven't you heard of our "Sanskruti"?

Ralph Rau

In Reply to Bapoo Malcolm 6 months ago

But Mr Malcolm we all have our deficiencies. Of course it is not ideal that our homes are clean while our streets are filthy.
At a deeper level we have our prejudices against our fellow man as evidenced by the caste system. But the most powerful democracy has extreme racism against Blacks and now thanks to Trump, against Latinos.
Our slums are a good indication of our Sanskruti. In the midst of extreme poverty. They experience such low levels of crime compared to equivalent slums in Johannesburg, Rio De Janeiro or "inner-city" areas in the USofA. Thank goodness for gun-control.
We do need to figure out how to end the endemic monetary (if not moral) corruption at all levels starting from the lowest level clerk and lowest level policeman. The minimum salary of Rs 18000 per latest pay commission is a hopeful start.

CloudAround: Music Streaming from the Cloud

CloudAround is an app which helps stream your favourite music from anywhere in the Cloud. No account or commitment required. You can sync all of your cloud music in minutes. CloudAround supports Google Drive, MegaCloud, Dropbox, Box, Microsoft Skydrive, SugarSync, Amazon S3, Rackspace Cloud Files, as well as playing all music stored on your device. Multiple accounts are supported in the paid version which is attractively priced. Just download the app and give it access to your Google drive or any of the Cloud accounts where your music is stored. It will automatically identify the music files and you have a roaming juke box in your hands! Currently, only MP3 and M4a files are played; but other formats are going to be included very soon. So get ready to enjoy your own personal music collection anytime anywhere!


We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)