The UPA government is under attack after two scathing reports from the C-A-G. One report concerns India’s energy sector and its biggest firm, RIL. The other, is about Air India’s troubles. CAG’s report on energy says RIL broke the terms of the production sharing contract for the lucrative KG D6 basin. Among them, it says the company didn’t relinquish some of the area from D6 it was supposed to. And it blames the petroleum ministry and hydrocarbons regulator DGH for letting the violations take place. The report also called for the creation of a more independent regulator in place of the DGH. Currently companies have to share their revenues from oil or gas wells with the government. But that only happens after the well operator recovers its costs. CAG says that reduces the incentive to cut down the capital expenditure.
Meanwhile another CAG report out on Thursday has blamed former aviation minister Praful Patel for state-run Air India’s many troubles. For starters, it says Patel advocated the unsuccessful merger of Air India and Indian Airlines. It also blames Patel for making Air India place orders for large numbers of unneeded aircraft and for granting several foreign carriers flying rights they didn’t need.
Switching to the economy, new figures suggest the government will not be able to meet its own target for the year-end fiscal deficit. India’s fiscal deficit increased to 1.8% of GDP in the first quarter. In the year-ago period it was just 0.6% of GDP. The government’s target for the fiscal deficit by March of next year is 4.6%. But a lot of factors are stacked against it, including the likelihood of steep oil import bills through the year.
The outlook for India’s IT industry has become considerably weaker. On Monday Citigroup and Goldman Sachs cut down their estimates for the entire sector in India. They reduced their price targets for the company stocks citing poor conditions in the US and Europe. Citigroup has slashed price targets for the four biggest IT firms by a range of 11.9% to 19.6%. And Goldman cut targets for seven firms by 9.8% to 30%.
The government introduced the much-awaited land acquisition bill in Parliament on Wednesday. Two days earlier the union cabinet had given the reworked bill its approval. The National Land Acquisition and Rehabilitation & Resettlement Bill seeks to protect the interests of landowners and those who make a living off the land. It also lays down the conditions under which the authorities can acquire land for so-called public purpose. The new bill has been drafted by the rural development ministry under Jairam Ramesh. Its other provisions include a retrospective effect clause, and allowing for acquisition of multi-crop irrigated land under some circumstances. It has also cut the compensation levels for rural land from six times the original market value to just four times.