Citizens' Issues
PowerHouse: How to build energy powered and sustainable houses for poor
PowerHouse, a concept of renewable energy powered houses is a project supported by CSVI. The project aims to design and enable a solution to conceptualise sustainable homes for the rural poor
 
CRISP Social Ventures India (CSVI), the on-ground extension of the Chevening Rolls Royce Science & Innovation Leadership Programme (CRISP), has launched PowerHouse, a global collaborative mission to design and enable a solution to conceptualise sustainable houses for the rural poor.  
 
"Owing to the lack of sufficient facilities, the shortage of housing and the difficulty in obtaining funds to purchase a house, the concept of renewable energy powered houses was established”, CSVI said in a release. By ensuring that the house is affordable and funding is not very difficult to arrange, Powerhouse will ensure upliftment and a better standard of living for the occupants on a sustainable basis. What exactly is powerhouse? According to its website, "Powerhouse is a global collaborative mission to design not only a house, but even the process of enabling such a solution to the potential end users. Renewable sources of power can be harnessed to develop a standardised solution, becoming an integral part of the house. Think solar, think wind...think beyond. Powerhouse will be a house, which will not only produce its own power, but will be able to generate excess power. Powerhouse will do at least three things economically. First and second, it will make money for their inhabitants as they sell back the excess power to the grid and the income pays for part of the mortgages taken to buy the homes. Third, the inhabitants will be involved in building the easy-to-erect homes, and earning thereof".
 
Details of the project are available here:  http://www.power-house.in/
 
At least 78 million people are homeless in India despite the country growing in global economic stature. There is a shortage of 18.78 million houses in the country, because of which, they either sleep in the open or by the roadside, railway platforms and under flyovers.
 
At present, the mission is working at finding a solution by getting the best of minds together at the drawing board stage. 
 
"Housing has never been looked upon as something which needs a holistic solution," CSVI, said, "policy experts, engineers, renewable energy experts, architects, bankers; all will have to sit together at the drawing board stage. It may sound a bit utopian at this stage, but that is the goal. It will address problems by 'designing a process' and not by 'designing a house', as has been the practice.” 
 
CRISP has called for expression of interests from experts and corporate groups who will work on a collaborative basis. 
 
The need to join hands is explained as follows: 
"In India, and across the globe, homes have traditionally been designed by architects and erected by contractors. All other improvements, like say installing a solar panel, are usually standalone activities, resulting in a lack of accurate integration with other services, leading to inefficient outputs. The poor in India cannot afford architect-designed homes, and thus live in poor quality, self-imagined and built habitats, with no or limited access to good hygiene, clean water and power. So what if experts designed once, and houses were mass produced; say like cars? The poor is more concerned about a reliable roof above their head, rather than a customised designer house. A collaborative team of architects, engineers, renewable energy experts, policy makers, financiers and others working together from the drawing board stage can design the process required for such mass produced “net positive” homes. It is believed that this collaborative approach, versus the ‘design in silos’ approach, will help develop a holistic, modular, standardised housing solution for the poor in India; and in the process becoming an economic development engine.
 
According to CRISP, these projects will be initiated across India where people can then buy well designed homes, capable of generating surplus power, just as they would by a car from a showroom. However, there will be regional variations to encompass regional characteristics. Standardisation is the key, as this will lower costs, and it will bring in efficiency and quality control. Also, research has shown that the homeless and the poor in India accept standardised solutions as long as it is a 'pucka ghar'. In the beginning, these houses will be set up in states, which have introduced the concept of net-metering where one can sell back excess power back to the grid.
 
The house owner will also be a part of CRISP’s co-operative mission. He/ she will earn (and that earning pays off the mortgage) by selling the excess power that the house will generate, the owner will also have an additional revenue stream by 'building for his neighbours'. It will be easy to build the house, where skills can be easily learned. This will also uplift people and communities socially and economically. This will be real economic growth from the grassroots level; a bottom up approach, which is the need of the hour. Note that these homes will be self-powered through renewable sources of power. The excess power will be sold back to the grid, which will be earnings for the occupants. This is possible due to the introduction of net metering in a few states across in India. 
 
The actual cost will be known once a prototype is built. However, there will be a mortgage linked to the house, and mortgage payments linked to earnings from the sale of excess power. So the house comes virtually free to the owner. CRISP is working with agencies like the National Housing Bank from the beginning. Mortgage norms can be made easier such that the poor can have easy access to them. New schemes like the Jan Dhan Yojana are steps in the right direction, as it brings the larger population into the formal sector.
 
The Chevening Rolls-Royce Science and Innovation Leadership Programme (CRISP) is conducted by the Oxford University, UK and supported by Rolls Royce, the British High Commission in India and the Foreign & Commonwealth Office in UK. Furthering its goal towards making India economically advanced and self-reliant, the program's alumni in India, along with support groups from Oxford and elsewhere, have established 'CRISP Social Ventures India' (CSVI).
 
CSVI undertakes mentoring and incubation activities for social entrepreneurs in India.
 

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Athens' debt-to-GDP ratio could soar to 200 percent: IMF
Unless proper action is taken the Greek debt-to-GDP ratio could soar to 200 percent in the next two years, the IMF had warned European leaders ahead of last Sunday's negotiations with the embattled nation.
 
"Greece's debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far," the International Monetary Fund said in a memorandum sent to the creditors last week, the Financial Times reported on Tuesday.
 
The Europeans, above all Germany, have adamantly opposed a debt "haircut" or reduction in principal, and debt relief is not part of the accord signed by the creditors and Greece early Monday.
 
The pact requires Athens to undertake further austerity in a nation already struggling with growing poverty and unemployment of nearly 26 percent.
 
The IMF declined to respond when EFE asked for comment about the story in the Financial Times.
 
The memo was drafted barely two weeks after the IMF said in a published document that the ratio of Greek debt-to-gross domestic product would peak at 177 percent in 2017 before beginning to decline.
 
While the earlier study forecast the ratio would drop to 142 percent by 2022, last week's memo cited a figure of 170 percent seven years out.
 
Greece's debt-to-GDP ratio was 127 percent at the outset of the crisis in 2010. Since then, creditor-mandated austerity policies have coincided with an economic contraction of 20 percent.
 
Possible solutions suggested in the IMF memo include a "very dramatic extension" of the repayment schedule, entailing a "grace period" that would effectively exempt Greece from paying interest or principle on Eurozone loans until 2053.
 
The Financial Times pointed out that IMF rules bar the fund from contributing to a bailout of a country whose debt is "deemed unsustainable".
 
In light of those rules and the findings outlined in the memo, IMF participation in the third Greek rescue may be doubtful, the newspaper said.
 
German Chancellor Angela Merkel insisted on continuing IMF involvement in Greece as a condition for the latest bailout, according to the Financial Times.

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What the Modi government can do to reduce the use of cash
By encouraging electronic transactions to reduce the use of cash, the Modi government is treating the symptoms and not the disease
 
The Prime Minister’s Office had recently put out on its website a draft proposal for facilitating electronic transactions in the country and had invited comments and views from the public. The Finance Minister in his budget speech in February this year had proposed to introduce several measures that will incentivise credit/debit card transactions and dis-incentivise cash transactions with a view, inter-alia, to curb flow of black money in the economy. The detailed proposal of the government and the incentives proposed have been covered by Moneylife on 23 June 2015 (Read: Government proposes tax benefits for credit, debit card payments)
 
The incentives proposed by the government only treat the symptoms and not the cause:
The measures suggested in the draft proposal to popularise e-transactions include reducing the charges levied by banks, merchant establishments, utility companies, government departments etc. for using the card for effecting payments and offering tax benefits for those using the cards or making electronic payments through the internet or mobile phones etc. The incentives proposed will only treat the symptoms and not the cause. However much you incentivise for usage of cards and e-transactions, it will not eliminate the temptations for using cash unless you remove the cause for using cash in your day-to-day transactions. There are two important areas where people use cash in preference to cards or electronic payments and they are explained here with simple solutions to minimise cash transaction and increase e-transactions in the country.  
 

1.  Why do retail traders prefer cash in day-to-day transactions? 

When you go to buy any item of daily use in the market, most of the small traders, ask you to pay by cash. This is mainly due to fact that they do not have the support systems to keep records, write accounts, file returns and comply with all other formalities required to be completed as per the indirect tax rules. Today they have an obligation to collect sales tax or value added tax and then follow elaborate procedures for compliance of all regulatory requirements. Hence, it is easier for them to accept cash and file returns on the basis of total cash collected rather than through cards, which involves additional work of matching the receipts with bank accounts etc. Besides, accepting a card is fraught with risk of loss of revenue, if the banks disallow any transaction due to fraudulent use of cards etc. 
 
What is the solution? The best solution is to take away that obligation of collecting taxes from the last seller/ retailer and impose that obligation on the manufacturer or the wholesaler, who alone should be made responsible for payment of sales tax for all the goods sold to the retailer or semi-retailer. This will encourage all in the retail chain to issue cash bills to the buyers and accept payment by debit or credit cards, if they are protected against credit or debit card frauds as well. This will not only reduce use of cash but also considerably improve revenue for the state. Besides, it will also reduce the work of small traders having to file sales tax returns and the govt. having to chase innumerable traders who do not pay to the exchequer the sales tax collected by them. These changes will simply bring more revenue into government treasury, while making life easy for a large number of retail traders in our country.
 

2. Why should immovable property deals have cash component?

The second most important area of use of cash is in transactions involving immovable properties. With the tightening of income tax rules, a lot of improvement has taken place and most of the institutions, corporate and law abiding citizens insist upon full payment in all transactions while buying immoveable properties. But there is always an inducement to pay a part of the amount in cash for every property transferred from one person to another. This is because there is an obligation to pay stamp duty and registration charges levied on the basis of the value declared in the sale deed with a minimum of the guidance value periodically fixed by the government. Due to this obligation, there is a temptation to declare the transaction value as low as possible near the guidance value, and make all extra payments agreed by means of cash, thereby saving on the stamp duty payable. 
 
What is the solution? 
a) Firstly, the best solution is to declare and fix guidance value for all properties in the country, city and ward-wise, town-wise and village-wise every year and all property transactions should bear stamp duty and registration charges at these rates fixed by the government irrespective of the value declared in the sale deed. By fixing the property price for payment of stamp duty, there will be no temptation for the buyer to declare a lower value than what is actually paid to the seller. The government can revise the guidance value on the 1st April ever year or link the revision to inflation or the Realty index, thereby ensuring automatic increase in guidance value year after year. If this is done, the buyer would insist upon full declaration of the price paid by him in the property deed, and avoid paying any part in cash, as it will not require him to pay stamp duty higher than the guidance value, whatever is the agreed or declared price for the property. 
 
b) Secondly, to encourage the seller also to accept full payment by cheque, the best solution is to completely overhaul the system of capital gains tax on all immoveable property transactions. Instead of the present complex system of computing capital gains tax on sale of immovable properties, the government must introduce a new system of levying property transaction tax (PPT) and do away with capital gains tax on immovable properties altogether. This is similar to securities transaction tax (STT) collected on all stock market transactions presently in force and working very well for the last several years. The PPT can be collected on all property transfers at the time of registration of property itself by the registrar at a nominal percentage on the registered value of the property and exempt all such deals from the capital gains tax totally. The government can also abolish the system of TDS on property transactions introduced since last year. This will encourage the seller also to receive full payment by cheque and do away with the cash component in property deal altogether.
 
If this suggestion is implemented, it will have triple advantages for the government. Firstly, the government will get revenue much more than what it collects by way of capital gains tax, as under the present system, most of it is avoided legally or otherwise by various means as the entire system is messy, cumbersome and full of loopholes. Secondly, use of cash on all property deals will be totally avoided, as it will not get any additional benefit either to the buyer or the seller. Thirdly, the need for deducting tax (TDS) by the seller will be totally eliminated thereby simplifying the entire tax collection system and the tax authorities will not have to go after the tax deductors, if they fail to remit the TDS to the government.
 
The above suggestions can be fine-tuned and improved depending upon the need to make them simple, smooth and easy for implementation without loss of revenue to the government. 
 
By treating the basic cause and not the symptoms for cash usage as mentioned above, coupled with the incentives proposed, the objectives outlined in the scheme will not only be met, but life will also be much smoother and less troublesome for the large majority of our people in the country. And this will be a step in the direction of “minimum government and maximum governance” enunciated by our Prime Minister. 
 
(The author is a financial analyst, writing for Moneylife under the pen-name ‘Gurpur’.)
 

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COMMENTS

Srivathsan

1 year ago

reduction of cash transactions. introduce cashless transactions at electricity payment counters,insurance counters, telephone counters,petrol and diesel, fertilizer, seed pesticides, all shops registered under sales tax, all shops having trade licence in urban areas and this will greatly improve habits and reduce cash transactions.

Srivathsan

1 year ago

Reduction of cash transaction is a very good move.There will be certain resistance and protests and negative remarks for any change.We suggest the following areas of transaction be made CASH free( only cheque,draft, debit card credit card or fund transfer,ECS etc.
Electricity payment ,telephone bills, mobile and land line,insurance,petrol pumps for petrol and diesel,govt taxes,and make it mandatory to have swipe card machine in all commercial establishments registered under Sales tax or corporation,trade licence and suitable incentive for both giver and taker of funds through card sytem

manoharlalsharma

2 years ago

What the Modi government can do to reduce the use of cash /is only doing as precedent Governments done to collect the AADHAR NO and suit NOTICE 4 INCOME-TAX so please do not PRAY to CASHLESS transactions.

Yogesh Tiwari

2 years ago

I strongly disagree with the author on the analysis and solution to reduce cash transaction in immovable property. Firstly the premise that cash transactions are done solely to avoid Stamp Duty applies only to the buyer of the property. Only he has an incentive to report less on the agreement to reduce Stamp Duty expense. However, the biggest culprit are the builders who ask for as high as 50% transaction in cash because they want this unreported cash with them in order to bribe the officials for getting all the clearances and certificates. Even if the Stamp Duty is totally removed, I can bet that the cash component of buying a flat or house from builder will not go away.

nginx

2 years ago

The government wants its piece of pie from everything. We pay tax on our income, then we also pay tax on our expenditures. Its like we are getting taxed twice over and if calculated, I am sure those in the 30% tax bracket are actually giving away 50% of their money as tax every month.

If we buy a land/house we pay a mirage of taxes. If we eat in restaurants, we pay through the nose in taxes alone. If we purchase some goods, we pay sales tax. If we import something, the ridiculous customs duty will leave you penniless. Even a simple IMPS transaction has a Rs.5 charge + Service tax associated with it. Banks charge 2% to retailers for every card transaction. Where does the list of charges end?

Frankly cash based transactions will & should continue for as long as the government continues with its various scams designed to loot public money and hoard them in Swiss banks.

Parimal Shah

2 years ago

If you charge 14% service tax on credit card payment when due, what ever nominal incentive is given is taken away by a a greater amount as service tax.
If we want less cash and more card payments then service tax on banking service and credit cards should be discontinued.
-Parimal

Shirish Sadanand Shanbhag

2 years ago

As far as real estate is concerned, any rules that any Government may do, they will greatly remain on paper, more and more black money in Real Estate transactions will continue for ever, which we see from the year, 1990.

Nikhil Vadia

2 years ago

Most of the above things are already done. Property capital values are changed almost every year.

MRP based taxation is already tried and has failed. VAT collection at only one point is against the idea of GST.

Manish Soni

2 years ago

What about abolition of Benami registration of immovable properties - a major source of cash transactions and corruption?

TIHARwale

2 years ago

Property transaction tax will eliminate registering value below guidance value also and another important thing will be if income tax or transaction tax tax rate is pegged to a maximum of 10%

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