6 . bl . think DELHI businessline. WEDNESDAY - APRIL 17 - 2024 WEDNESDAY - APRIL 17, 2024 A AMARENDER REDDY TULSI LINGAREDDY Capital move Grey areas in amended Mauritius pact need clarification he signing of the protocol between India and Mauritius to amend the double taxation avoidance agreement is a step in the right direction. It signals India’s continued commitment to checking tax evasion or avoidance. Countries have lost billions of dollars over the years due to treaty shopping and tax evading arrangements in low-tax jurisdictions. T As one of the active participants in framing OECD’s BEPS (Base Erosion and Profit Shifting) guidelines to combat these practices, India needs to make these changes to the treaty to adhere to the minimum standards laid down by the guidelines. Indian authorities have already been gradually withdrawing the benefits derived from the Indo-Mauritian treaty. Between 1982 and 2016, foreign portfolio and direct investments routed through Mauritius did not face any capital gains tax since the treaty allowed taxation at the point of origin; and rate of capital gains tax in Mauritius is zero. But the amendment made in 2016 laid down that investments in shares made after April 1, 2017, will be taxed in India, thus removing the benefit for prospective investors. Two changes are being proposed to the treaty now. One, the preamble of the agreement is being amended to state that both governments intend to eliminate double taxation and check tax evasion. Two, a Principal Purpose Test (PPT) has been included in the agreement. Under this, the benefit of the treaty can be denied if it is established that the main objective of the arrangement or the transaction is to benefit from the treaty. Thus far, tax residency certificate (TRC) issued by the Mauritian government was sufficient to enable an entity to prove its residency status. But the amended treaty will give powers to the income tax authorities to look past the TRC. While foreign portfolio investors appear concerned about these changes, which can lead to higher scrutiny from tax authorities, this is probably a good time to tighten these laws. The stock market is at elevated levels and domestic demand is robust enough to absorb selling by foreign investors. Also, the changes to the DTAA in 2016 have already reduced flows from Mauritius into Indian stock markets, and through foreign direct investment. The amendments will come into force only after they are notified by authorities in both countries. Indian tax authorities should clarify on some of the issues flagged by stakeholders, before the changes are notified. The proposed article 27B appears to be anomalous. It says that if an entity enters into a transaction in line with the original object of the convention, which is to promote investment, the benefit can still be availed. This could negate the objective of inserting the PPT, which is to check tax evasion and treaty shopping. Tax authorities should also clear the air over applicability of the amended agreement on transactions initiated prior to its date of enforcement. Retrospective taxation will erode India’s credibility as an investment destination. FROM THE VIEWSROOM. Pharma’s bitter pill PT Jyothi Datta T he disquiet in the pharmaceutical industry is palpable, having come under intense scrutiny in the last one month over payments made by some of its representatives to political parties. Hospitals, vaccine companies and drug-makers have bought electoral bonds, as revealed by the Election Commission’s list. Nothing illegal about that, say industry-insiders, defending their right to support the electoral process or political parties. But that’s not how it appears, from the outside. As they say, even Caesar’s wife must be above suspicion. The reason that funding of political parties leaves many feeling squeamish, is because of the possibilities it throws up for quid pro quo. The paying drug-makers, for example, included some who were facing tax-related scrutiny or were under investigation for some other reason. The question being asked by public health workers is also that of conflict-of-interest. Will political representatives taking funds from companies be free of bias when drawing-up policy to regulate pharma companies on quality or price control, for example? Globally, the pharma lobby's reputation is seen to be a little better than oil and big tobacco, that hover at the bottom of popularity charts. Back home though, industry-voices point to the role of domestic pharma companies in keeping the steady supply of affordable medicine going — in the country and for patients across the world. And there’s no taking away from that. The discomfort, however, comes from the revelation that payments were made into a powerful political system — when there is a crying need for affordable hospitals, medicines and diagnostic services for those from poor economic backgrounds and the middle class. In fact, healthcare companies list a multitude of reasons explaining difficulties in reducing the cost of drugs or treatments for patients. That however did not seem to stop them from funding political parties. And that, makes it a bitter pill to swallow. I ndia has been facing a problem of persistent shortage in pulses production. And this has worsened with the significant fall in output during the 2023-24 crop year to about 234 lakh tonnes from around 260 lakh tonnes in 2022-23 and 273 lakh tonnes in 2021-22, per the second advance estimates released by the Department of Agriculture and Farmers’ Welfare on February 29, 2024. As a result, inflation in the ‘pulses and products’ group has gained momentum, accelerating to over 20 per cent in December 2023 from about 13 per cent in August 2023. It has, however, moderated slightly to about 17 per cent in March 2024 with augmented supplies through imports, fresh market arrivals and imposition of stock limits. Also, all the major pulses witnessed a drop in cultivation — moong (green gram) registered a steep fall of over 40 per cent in acreage and about 60 per cent in output, followed by urad (black gram) with around 20 per cent fall in acreage and output — in 2023-24 compared to that in the previous year primarily due to deficit rainfall in major producing States. Although the acreage under chana and tur witnessed a fall of 2.6 per cent and 0.6 per cent, respectively, their output remained nearly the same as that in the previous year. Interestingly, the rise in prices of tur has been much steeper, at 30-40 per cent, than of moong and urad, at 10-14 per cent, during the past six months or so. This was plausibly driven by speculation and hoarding. Any significant rise in the prices of pulses, which are a cheap source of protein and an essential part of the Indian menu, would affect the poor the most, depriving them of a balanced diet. Unlike major cereals, the domestic production of pulses — despite a significant increase during the past decade to about 234 lakh tonnes in 2023-24 from about 171 lakh tonnes in 2014-15 — continues to lag demand. As a result, India has remained dependent on pulses imports — averaging 25 lakh tonnes per annum during the last five years — to meet domestic consumption demand. However, with the drastic reduction in domestic output, the imports of pulses are expected to have risen steeply in 2023-24. Commerce Ministry data show aggregate imports of pulses Pulses need a production boost TAKING STOCK. Essential for the nutritional security of the poor, the output must be stepped up through use of high-yielding varieties and better post-harvest management increased by about 60 per cent to 32.5 lakh tonnes during April-January 2023-24 from about 20.3 lakh tonnes in the corresponding period of last year. LIMITED IMPORT SOURCES Unlike oilseeds, the scope for augmenting supplies of pulses through imports in the short-term is limited as India is the largest producer as well as consumer of pulses in the world. Myanmar has been the traditional source of imports for tur, moong and urad, while for peas it is Canada and Australia. However, some of the African countries, including Tanzania, Mozambique, Malawi and Kenya, have become sources of imports in recent years. Further, the prices in these exporting countries can be influenced by the shortages in India and may become much costlier than the The persistent deficit in domestic production and the consequent rise in prices are making pulses unaffordable for the poor. domestically produced pulses. Hence, it is essential to reduce the dependency on imports and increase the domestic production through appropriate long-term strategies. The per capita availability of pulses has declined steadily from about 25 kg in 1961 to 16 kg in 2021 due to sluggish growth in production since the 1960s. There has been a significant shift in cropping pattern from cereal-pulse to cereal-cereal, particularly in irrigated areas across the country. The extent of area irrigated for sugarcane, wheat and rice stood at 96 per cent, 95 per cent and 65 per cent, respectively, while that of pulses is only about 23 per cent, according to the Department of Economics and Statistics, Ministry of Agriculture. As a result, the yields and output of pulses have remained low. Hence, there is an urgent need to expand pulses production through development and cultivation of high-yielding varieties and technologies. In addition, it is essential to enhance post-harvest management and direct market linkages to ensure remunerative prices for farmers. Pulses are an indispensable part of the Indian food basket both among the rich and the poor alike. But the persistent deficit in domestic production and the consequent rise in prices are making them unaffordable for the poor. While a number of steps have been taken by the government to augment open market supplies in the short-term with imports and limitations on stock-holding, it is imperative to raise production in the long-run. Immediate steps must be taken to promote pulses cultivation in fertile and irrigated areas, providing input incentives and assured remunerative prices. Further, cultivation of pulses can promote sustainable agriculture by enriching soil fertility and conserving water, with minimal irrigation and short crop duration. Towards this, the agricultural extension system needs to create awareness among the farmers regarding the positive externalities of pulses cultivation. Reddy is Joint Director, School of Crop Health Policy Support Research, ICAR-National Institute of Biotic Stress Management, Raipur, and Lingareddy is Senior Economist, Financial Markets, Sustainable Finance and Agriculture, Mumbai. Views are personal Online voting, an idea that holds promise It is but a natural progression of the technological success of UPI, online tax returns and stock trading, among others S Natarajan D igital India arrived in 1982 with the deployment of Electronic Voting Machines (EVMs). In the last two decades extensive automation/ digitisation has been implemented in several customer/consumer facing services like banking, e-commerce, tax returns, stock trading, mutual fund transactions and many more. Unified Payment Interface (UPI) which powers the interbank transactions through mobile, as also mobile electronic wallets like Paytm, PhonePe, etc., is a unique first-of-its-kind network in the world. UPI represents not only the digital progress but is also testimony to the robust and secure network that enables delivery of all these services. So ‘online voting’ is a natural progression. Online voting, in simple terms, should be similar to submitting an ‘online feedback’ survey. Customer receives a web link on the smartphone which opens a webpage and the customer marks and submits. But casting a vote is governed by law at every stage. How can the online process meet the requirements under election rules? Nominations: Presently, candidate nominations and related documents are filed physically before Election Commission (EC) officials. This should be changed over to online filing with applicable identity and validation checks. Considering the success of e-filing platforms under income tax, corporate laws and GST this changeover should not pose challenges. Polling booths: The existing field infrastructure of polling booths, EVMs, duty personnel, security and logistics will no longer be required once the voting becomes online. So the role of presiding officers and other EC officials on poll duty may have to be redefined to align to virtual monitoring/supervision. Limited count of election booths may still be needed due to slower adoption of new system as also for those who specifically opt for EVM voting. Voter list: New voter registration process should continue as at present wherein Aadhaar is submitted as proof of ID. The change required is Aadhaar and voter ID should be linked so that the ID of the voter can be verified electronically through Aadhaar database and the registered mobile. While for the new voter registrations this process will be seamless, for the existing voters the linkage and confirmations thereof by the voter has to be a separate initiative by government, if required with feasible regulatory changes. Since the voting will be online and ID validation will be MANY PLUSES. Voting online through mobile, a voter can cast his vote from anywhere in the world on the date of polling. Voting: On the polling date every voter should receive on his/her registered mobile by SMS a web link to the voting site. A voter on clicking the link should receive one OTP that will provide access to the voting page. After selecting the candidate and SUBMIT action a second OTP should be input to confirm/save the vote cast. So the voter will receive the second OTP SMS with an appropriate text (i.e., name and symbol of candidate chosen) of the vote cast. These two steps will correspond to the current process of physical identification of voter and verification of vote cast with Voter Verification Paper Audit Trail (VVPAT). As per voting rules, physical record of VVPAT is required to be maintained. So that should be ensured in the online process by printing centrally the second confirmation SMS at select locations. System controls should be built in to ensure OTP for access is delivered only once to an Aadhaar holder and the voting is recorded only once for every access. So a second voting by a voter is prevented. Preset system reports for voting recorded should be generated and results declared as per election calendar. ‘Secrecy of vote’ clause is fundamental to election process. So restricted access to system data and segregation of database of voters from voting records should be put in place. Also, data trails like mobile number and OTP should be deleted from system records on completion of voting. The bigger risk is with respect to the Aadhaar holders who are not alive and not updated on the voter rolls. Checks should be put in place to validate, before elections, with verified Aadhaar database of institutions like LIC, Government, EPF as also conduct door-to-door surveys to update the voter list. The writer is a chartered accountant. LETTERS TO EDITOR Send your letters by email to [email protected] or by post to ‘Letters to the Editor’, The Hindu Business Line, Kasturi Buildings, 859-860, Anna Salai, Chennai 600002. Aircraft manufacture For manufacturing a commercial passenger aircraft in India, we are four decades behind established players. Add to this the feverish pace of technology growth in its every aspect. To attain highest standards of safety and fuel efficiency, even as costs need to be optimised, we need to have the wherewithal in research and testing. None of these is transferable from other players. Capital costs are enormous and the gestation period for attaining scale for profits and to plough back for growing demand for infra, is very high. It takes close to $25-30 billion to develop just one new commercial version. The industry is dependent on just three major engine manufacturers. Demand for them is growing exponentially. And yet, new entrants have been struggling to establish even a modest market. R Narayanan Navi Mumbai BJP manifesto Apropos the editorial ‘Staying the course’ (April 16), the BJP manifesto looks attractive and doable. In the last two terms of the NDA, there is no denying the fact that road and rail infra witnessed remarkable improvements. Digital technology has reached even rural areas, and has helped in improving businesses. The progress on the renewable energy front has been noteworthy. However, there are murmurs on the failure of the NDA in addressing the chronic unemployment problem. There is no mention in the manifesto on filling the vacancies at government offices and creation of more jobs to meet the aspirations of the lower middle class job seekers. The manifesto is also silent on the welfare measures for senior citizens whose number is increasing year by year. RV Baskaran water and other needs of cities. By de-silting and deepening of existing reservoirs around cities and doing water harvesting more vigorously, the urban requirements can be taken care of to a major extent. M Raghuraman get rid of such hazardous material is through technological innovations, as civic sense is at its nadir. Rajiv Magal Chennai Mumbai Monsoon effect PET recycling This has reference to ‘IMD predicts above-normal monsoon’ (April 16). The estimated rainfall augurs well for economic activity and sectors like automobiles, whose fortunes depend on the performance of agriculture. However, much depends on the geographical spread of the monsoon. In spite of good monsoon, some areas may be hit by drought. Rainwater flowing through rivers should be stored and canalised for agriculture and not for drinking ‘RSWM recycles PET bottles to produce polyester yarn’ (April 16) is a welcome step to mitigate plastic pollution, which is increasing on a daily basis. However, in addition to recycling of PET bottles, which are not single-use plastics, priority must be given to recycling single-use plastics that are strewn all over and get buried deep into the soil. Since civic authorities have failed to contain unscientific disposal of single-use plastics, the only way is to This is with reference to ‘90% of companies plan to boost investments in key digital tech areas in 2024: Nasscom report’, (April 16, 2024). The landscape of digital transformation is broadening, with digital spending proving resilient in the face of economic headwinds. AI has shot to the top of the executive agenda. GenAI has ushered in a new world of business opportunities and executives are eager to capitalise on them. Maximising GenAI’s potential is essential to boost productivity. P Sundara Pandian Published by Nirmala Lakshman and Printed by S. Ramanujam at HT Media Ltd. Plot No. 8, Udyog Vihar, Greater Noida Distt. Gautam Budh Nagar, U.P. 201306, on behalf of THG PUBLISHING PVT LTD., Chennai-600002. Editor: Raghuvir Srinivasan (Editor responsible for selection of news under the PRB Act). CM YK RAJEEV BHATT Halekere Village, Karnataka Digital tech Virudhunagar, TN ISSN 0971 - 7528 . . . . . . . . ND-NDE