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DAILY CURRENT EVENTS CIVILS360

AUGUST 21, 2017

Automation threatens the jobs in India

  • Automation threatens 69% of the jobs in India, while it’s 77% in China, according to a World Bank research.
  • Indeed, India’s IT services industry is set to lose 6.4 lakh low-skilled positions to automation by 2021, according to U.S.-based HfS Research. It said this was mainly because there were a large number of non-customer facing roles at the low-skill level in countries like India, with a significant amount of “back office” processing and IT support work likely to be automated and consolidated across a smaller number of workers.
  • According to online professional training company Simplilearn, the era of digitisation and automation will create newer career choices for IT professionals. The new job roles that will dominate the IT workforce are within digital domains such as big data, artificial intelligence, Internet of Things (IoT), cloud computing and cybersecurity, according to the report “How Automation is Changing Work Choices: The Future of IT Jobs in India” released this month by Simplilearn.

Drones, robots

  • The impact of automation is not just limited to the country’s information technology industry but other areas as well such as agriculture.
  • Tata Group is exploring use of automation to improve the lives of the workforce and bring in efficiency. Piyush Mishra, technology leader — food security, Tata Services, said that the group was working on a precision agriculture technology where an unmanned aerial vehicle or a drone can be used for aerial spraying on farms.
  • Companies like Skylark Drones, a Bengaluru-based startup is providing its unmanned aerial vehicles to enterprises for services such as land surveying, power line inspection and monitoring of construction, pipelines and crop health.

‘SBI, PNB account for 40% of bad loans’

  • The country’s largest lender State Bank of India accounts for over 27% of the total amount owed to public sector banks by wilful defaulters. As many as 1,762 wilful defaulters owed Rs. 25,104 crore to SBI as on March 31, putting pressure on its balance sheet.
  • Punjab National Bank (PNB) is next on the list with 1,120 wilful defaulters having outstanding non-performing assets of Rs. 12,278 crore. Together these two banks account for Rs. 37,382 crore or 40% of the total outstanding loans.

Zip past toll barriers

What is FASTag?

  • It is a device that uses Radio Frequency Identification (RFID) technology for making toll payments directly from the prepaid account linked to it.
  • It is affixed on the windscreen of your vehicle and enables you to drive through toll plazas without waiting as you would for a cash transaction. The tag has a validity of 5 years and after purchase, it only needs to be recharged or topped up. The service is applicable to all kinds of vehicles but use of the service is currently voluntary.

How is it beneficial?

  • It helps quicken your passage through toll barriers and helps avoid use of cash. Long queues of vehicles waiting while cumbersome cash transactions happen at the counter can be avoided. Here, it helps reduce use of fuel and pollution due to high waiting-times at the barrier.
  • It can also help the government identify the quantum of road use and types of vehicles passing through, aiding budgets for road widening and other infrastructure expenses. Theoretically, it could help increase accruals to the government as some operators managing toll plazas have, in the past, have been suspected of under reporting their revenues.

Data show new tax regime widely adopted

  • The key to the successful implementation of the GST was through a consultative forum which worked towards consensus among States with diverse interests in a federal structure. The goal of GST, which is ‘one nation, one tax, one market,’ a shot-in-the-arm for the country’s ease-of-doing-business initiatives, is laudable.
  • Disruptions are inevitable in the short term, but in the long term, GST is likely to achieve improvements in the system efficiency, simplification and rationalisation of taxes, and the shift of business activity from the unorganised to the organised segment. The resultant widening of tax base, along with traceability of transactions, is bound to add to the exchequer despite reduction in tax burden on the consumption of common goods.

Uniform interface, a first

  • GSTN or the GST Network, cutting through traditional silos, has established for the first time a uniform interface for the taxpayer and a common and shared IT (information technology) infrastructure between the Centre and the States.
  • A complex exercise involving the integration of the entire indirect tax ecosystem, the tax regime has brought all the tax administrations (Centre, State and Union Territories) to the same level of IT maturity with uniform formats and interfaces for taxpayers and external stakeholders. Commendable and unprecedented handholding has been seen, with the taxman engaging in conversation with enterprises, chambers of commerce and industry bodies such as the CII, right through the transition, and more continually through social media responses.
  • The legacy image of the revenue officer or taxman is gradually shifting from being intimidatingly adversarial to being a persuasive guide and facilitator.
  • However, to reap the advantages of GST, concerns of business enterprises and industry sectors would need to be addressed. To name a few, the healthcare industry has sought that services be zero-rated rather than exempt so that providers can avail of input tax credit; hybrid vehicle manufacturers ask for 28% without cess; power distribution projects under various government programmes, earlier quoted inclusive of taxes as applicable then, are now subject to higher costs, and so these should be brought aligned to previous rates; and urgent intervention of the GST Council is requested towards huge losses to be suffered by units located in the exemption areas on account of non-availability of credit of excise duty which is inbuilt in the manufacturing cost of the opening stock of goods in the GST regime.

Will promoters block the path?

  • There is widespread apprehension that company promoters who have led, or will lead, their firms to bankruptcy may try to manipulate the system to retain control directly or indirectly.
  • The concern has risen among experts even as as the provisions of the Insolvency and Bankruptcy Code (IBC) have kicked in. The Centre had brought in the IBC to resolve India’s significant non-performing assets (NPA) problem. The RBI had said that 12 large NPA accounts be recommended to the the National Company Law Tribunal under the IBC.
  • Forensic consultants also said lenders, aided by the resolution mechanism, must go after promoters to recover as much monies as possible, including through unmasking of corporate veils, searching for assets globally and establishing proof of funds diversion and initiating criminal proceedings to create deterrence.
  • Forensic audits are being undertaken to establish any fund diversion and identification of benami properties of promoters in India and abroad, confirm investigators involved in the process. Efforts are also underway to trace fund transfers through shell companies.
  • This comes at a time when wilful defaulters reportedly have dues worth Rs. 92,376 crore, which is about an eighth of the total Rs. 8 lakh crore NPA.
  • While firms may have genuinely run into problems due to market conditions, there are also wilful defaulters. There are also defaulters who try to take advantage of the current situation and slow recovery environment to get away without repaying banks. Since the Indian business environment is typically promoter-driven, it will not be easy to achieve resolution without involving him/her in some way, said industry watchers and consultants.
  • As more cases are being referred to National Company Law Tribunal (NCLT), some questions that have been raised include: will Insolvency Resolution Professionals (IRP) remain independent and not be influenced by promoters; should the promoter be allowed to go scot free; and, should he/she be roped in by the IRP to ensure business continuity.

‘Fine balance needed’

  • “A fine balance needs to be worked out,” said a professional involved in the process.
  • “A number of these ambitious borrowings were led by promoters who may have misjudged the market and hence borrowed too much and defaulted wilfully. At the end of the day, the promoters were running the company and if they have today led to the poor environment, then they have to be held accountable,”
  • In case of fraud where promoters have siphoned off money, consultants suggested strong action, including a jail term. In case of genuine distress and mismanagement, the cases must be dealt with separately.
  • As the (NPA resolution) process has gained momentum, banks have hired the services of investigators to get complete details on all the assets held by the promoters in case of personal guarantees or assets of the companies, affiliates and related parties in other cases. The process also includes lifting the corporate veil whereby an offshore entity can be located. This, they said, would help give the complete picture of the promoters’ assets.
  • The challenge, consultants said, was to find out assets which were not attached or known. In many instances, the assets are outside the country and under others’ names. “How do we create deterrence that sets an example so that promoters do not turn hostile and don’t manipulate the system?” asked a consultant.
  • Similarly the independence of the Insolvency Resolution Professional is very important. Confirming the apprehension, a Crisil-Assocham report said, “The challenges include inter-credit conflicts, and the ability of large corporates to delay the recovery process.”

Personal guarantees

  • He said promoters could be made responsible to the extent that they had given personal guarantees. If it was established that the promoter, who was also managing the affairs of the company, had wilfully taken action to harm the company for personal benefit, then, potentially, action could be taken against such promoters, he said.
  • He said the promoter had the responsibility to support the resolution process. “Management turning hostile was the biggest challenge in one or two cases. Earlier, we did not have any strong resolution mechanism. The law will take time to settle down,” he said.