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Daily Current Affairs 03.09.2021 (A hydro onslaught the Himalayas cannot take, Lack of GST details stumps economists)

Daily Current Affairs 03.09.2021 (A hydro onslaught the Himalayas cannot take, Lack of GST details stumps economists)

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1.A hydro onslaught the Himalayas cannot take

There is rock solid scientific evidence to demand the cancellation of many upcoming and approved hydel projects

In normal circumstances, when a mistake is understood and suffered, one tends to learn from it and not repeat it. Unfortunately, this does not hold true in the case of the policymakers who are bent upon permitting projects and large-scale infrastructure in the already fragile and vulnerable Ganga-Himalayan basin. Recurrent disasters in the last decade in the State of Uttarakhand have been studied and analysed. And in every disaster, the increasing anthropogenic pressure in this area has been found to be a direct or an indirect contributor. The most recent example is the Rishi-Ganga valley disaster, in February this year which claimed over 200 lives as the river turned into a flood carrying a heavy load of silt and debris and demolishing hydropower projects along its course. While science and logic tell us to press on with conservation and protection in these sensitive areas, our Government has decided to go in the dangerous and opposite direction.

The background

The affidavit filed recently by the Ministry of Environment, Forest and Climate Change (MoEFCC in an ongoing matter in the Supreme Court of India has recommended the construction of seven partially constructed hydroelectric projects in the Uttarakhand Himalaya. This essentially goes against the core mandate of the Ministry — which is to conserve the country’s natural environment — and one of the prominent electoral promises of the Government, the rejuvenation of one of the country’s major rivers, the Ganga. After the Kedarnath tragedy of 2013, in suo motu cognisance by the Supreme Court, an expert body (EB-I) was constituted to investigate whether the “mushrooming of hydro-power projects” in the State of Uttarakhand was linked to the disaster. In its findings, EB-I said there was a “direct and indirect impact” of these dams in aggravating the disaster. Paving the way for the projects, the Ministry formed committee after committee until it got approval for these projects with some design changes.

This affidavit, dated August 17, reveals that the Government is inclined towards construction of 26 other projects, as in the recommendation of the expert body (EB-II; B.P. Das committee). The conclusions of the first expert body (EB-I), chaired by Ravi Chopra, that had flagged the incalculable environmental risks of such structures have been conveniently sidelined and overwritten by EB-II whose mandate has been to pave the way for all projects through some design change modifications. Politicians in cahoots with private developers are bent upon going ahead with such projects for short-term monetary gains despite the dire warnings of climate change threats and environmental challenges. It must be noted that the latest report of the Intergovernmental Panel on Climate Change has special significance in the context of fragile mountainous ecological regimes.

Dangerous reversal

The aforementioned affidavit submitted by the MoEFCC conceals the Ministry’s own observations and admissions given in its earlier affidavit dated May 5, 2014 which admitted that hydroelectric projects did aggravate the 2013 flood. Interestingly, the recent affidavit also conceals the minutes of the meeting and decision taken by the Prime Minister’s Office (PMO) on February 2, 2019 in this regard. The minutes of this meeting make the policy decision of there being “no new hydropower projects” on the Ganga along with the cancellation of those that have not reached at 50% of its construction. This in itself is a bizarre demarcation because on one hand there is an acceptance of the devastative impact of the dams (and the decision not to have more) while on the other, there is a push to still pursue them on an unfounded logic of money having been spent on them. Should we continue with a mistake made or make amends?

The sustainability of the dams in the long term is highly questionable as hydropower solely relies on the excess availability of water. Climate change models are clear about the cascading impacts of global warming trends on the glaciers of the Himalaya — the main source of water in the region that sustains the drainage network within the mountain chain. Temperatures across the region are projected to rise by about 1°C to 2°C on average by 2050. Retreating glaciers and the alternating phases of floods and drought will impact the seasonal flows of rivers.

The most crucial aspect is the existence of sediment hotspot paraglacial zones, which at the time of a cloud burst, contribute huge amounts of debris and silt in the river, thereby increasing the river volume and the devastation downstream. The flash floods in these Himalayan valleys do not carry water alone; they also carry a massive quantity of debris. This was pointed out by EB-II alongside its recommendation not build any projects beyond 2,000 metres or north of the MCT, or the Main Central Thrust (it is a major geological fault). The existing fully commissioned dams in the region are already indicative of the fact that these high-capital intensive ventures have negatively impacted local communities and their livelihoods. It is high time the MoEFCC formulated a written position on climate change adaptation with respect to the hydropower sector, after a thorough public discourse.

‘Risk-laden artifacts’

Amelie Huber, a political ecologist who has conducted extensive research on the hydropower development in northeast India, says that the dams in the mountainous regions that are exposed to earthquakes, floods, extreme rainfall, avalanches and landslides, are “risk-laden artifacts”. The dominantly clichéd discourses on hydropower as a renewable source of green energy promoted by the dam lobby, deliberately ignore the contentious externalities such as social displacement, ecological impacts, environmental and technological risks.

Factor of climate change

These discourses assume great significance in the Himalayan terrains as these projects exacerbate ecological vulnerability, in a region that is already in a precarious state. The intense anthropogenic activities associated with the proliferation of the hydroelectric projects in these precarious regions accelerate the intensity of flash floods, avalanches, and landslides. The additional element of climate change makes these scenarios much worse. About 15% of the great earthquakes (of magnitudes greater than 8) of the 20th century took place in the Himalaya and many of its segments are likely to see a period of intense earthquake activity in the future, as studies show. The 2015 Nepal earthquake is a case in point. Several dams were damaged in that event destroying a third of Nepal’s hydropower.

The recent events such as the Rishi Ganga tragedy and the disasters of 2012 (flashfloods), 2013 are examples of how hydroelectric projects which come in the way of high-velocity flows aggravate a disaster and should be treated as a warning against such projects in the disaster-prone Uttarakhand river valleys. The proliferation of dams is not restricted to Uttarakhand. By 2007, Sikkim had entered a contract with private public sector players for development of 5,000 MW and Arunachal Pradesh signed memoranda of understanding in 2010 for 40,000 MW. As Ms. Huber points out, “these agreements thrived on speculative investments and political brokering…. Private companies… often partner with public companies — have minimal accountability or experience in the courier and logistics, real estate, steel fabrication, and tourism sectors”.

She cites the example of the 510 MW Teesta V hydropower plant in central Sikkim, commissioned in 2008. The local communities have been complaining about the sinking of mountain slopes, drying up of springs, development of fissures and increased incidents of landslides. The construction and maintenance of an extensive network of underground tunnels carrying water to the powerhouses contribute to the failure of mountain slopes.

Several people in the Tapovan Vishnugad hydroelectric project were washed away earlier this year, while scores were buried in the debris of the 2013 floods aggravated by the Phata-Byung and Singoli-Bhatwari hydroelectric projects of the Kedarnath valley. Many lives and livelihoods were lost in the Ukhimath flash floods of 2012 where the Kali-Ganga and Madmaheshwar dams are located. The dangers of an impending earthquake or flash flood loom large over the highly vulnerable Chamoli region where Vihsnugad-Pippalkoti is based. We are already aware of the massive impact of the Tehri hydroelectric project, if an unfortunate catastrophe strikes this gigantic structure.

The river must flow free

These are the projects that have been approved by the Government with no science backing them but with several scientific truths demanding their cancellation. A preposterous amount of money is being wasted in the construction of these dams that will always function much below their efficiency, cause the loss of water and forests, and render the area fragile. By the time they are constructed, the cost of electricity generated will also be phenomenally high and would have no buyers. Considering the environmental and cultural significance of these areas, it is imperative that the Government refrains from the economically challenged rapacious construction of hydroelectric projects and declares the upper reaches of all the headstreams of the Ganga as eco-sensitive zones. It must allow the river to flow unfettered and free.

2.Lack of GST details stumps economists

‘With the data currently available for GST, no analysis is possible except to say revenues rose or fell’

GST collections have crossed ₹1 lakh crore in 11 of the last 12 months, with the government attributing the trend to a rapid economic recovery and improved compliance levels, but economists are unable to analyse these tax numbers as critical data points are no longer shared by the government.

Until December 2020, when monthly GST collections were released, the official statement from the Finance Ministry usually included details of the number of GSTR 3B returns filed by taxpayers and a State-wise break-up of revenues.

State-wise revenue trends have been shared for only four of the eight months since then — February, March, July and August. The last month for which the government shared the number of GSTR 3B returns filed was January. The return is a summary of a firm’s GST liabilities for each month.

“With the current details available for GST, there cannot be any kind of analysis except to say the revenues went up or down,” said a professor at a major Delhi-based economic research institute, requesting anonymity. GST now accounts for 65% of States’ own tax revenue, he pointed out.

The chief economist at a rating agency, who also asked not to be named, said it was difficult to tell how much of the GST kitty could be ascribed to better compliance and how much to rising economic activity.

“Continuous improvements in compliance levels are a major factor according to the government itself. Ideally, we should have the information on compliance so as to assess trends better,” the economist observed.

‘Concern for States’

Kerala’s Finance Minister K.N. Balagopal said the lack of transparency around GST data was a concern for States. “Transparency is critical even for States to know the situation on the ground. If a transparent attitude is not there… States will lose not only their rights, but they could lose financially as well if they are not able to check the situation,” he said.

In January, when GST collections hit a record of ₹1.2 lakh crore, the total GSTR 3B returns filed were 90 lakh as per the Ministry. But that number hasn’t been released ever since.

“After the sharp uptick in January, the government has stopped disclosing compliance levels, but the Finance Minister’s statement talks about a 40%+ increase in the GST tax base to 12.8 million since then,” JM Financial analysts Aishwarya Sonker, Dhananjay Sinha and Arshad Perwez wrote in a note on GST collections.

Brief Outline of the GST system

Legal Framework: The legal regime of GST includes four Central laws (the Central Goods and Services Tax (CGST) Act, Integrated Goods and Services Tax (IGST) Act, the Union Territories Goods and Services Tax (UTGST) Act and the Goods and Services (Compensation to States) Act along with twenty-four state laws, the relevant State Goods and Services Tax (SGST) Act

Policy Framework: The GST system is based on a system of multiple rates to various categories of sales (0%, 5%, 12%, 18%, 28% and additionally 0.25% for precious stones and 3% for gold).

Tax Administrative Framework: The administration of the GST is done in parallel by the Central and the State GST administrations with the powers to audit and administer shared. To support the administration of the taxpayers, a common nation-wide IT backbone called the GST Network (GSTN) has been put in place through which all tax returns are required to be filed.

Positives:

Three years after the introduction of the Goods and Services Tax (GST), the number of registered taxpayers have increased from 1.08 crore to 1.23 crore. The number of returns filed has increased steeply, and there is a significant presence of ‘informal’ entities.

Issues in GST Implementation and functioning –

The 15th Finance Commission has highlighted some challenges with the implementation of the Goods and Services Tax (GST).  These include: (i) large shortfall in collections as compared to original forecast, (ii) high volatility in collections, (iii) accumulation of large integrated GST credit, (iv) glitches in invoice and input tax matching, and (v) delay in refunds.  The Commission observed that the continuing dependence of states on compensation from the central government (21 states out of 29 states in 2018-19) for making up for the shortfall in revenue is a concern.

Stagnation in GST Tax Collection: As Chart 1 shows, the total monthly collections from State (SGST), Central (CGST), and integrated (IGST) goods and services taxes and the compensation cess first crossed Rs 1 lakh crore in April 2018. But after that, there has been stagnation in GST revenue growth.

Complexity:The GST was introduced in order to simplify the tax structure and improve the tax compliance. However, the existing GST regime has multiple rates: 0, 0.25, 1, 3, 5, 12,18 and 28%; Need to reduce the number of tax slabs.

Coverage: Some of the products such as petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel etc are outside the purview of GST and hence should be brought under the GST to boost the manufacturing sector.

Issues in collecting taxes on sales: Issues arise due the multiple rates and classification. For example, it has been reported just in the case of the business of selling paper, pamphlets are taxed at 5%, letterheads at 12%, files at 18% and hardbound registers at 28%. This multiple layering of taxes defeats the basic idea of “One nation One tax”.

Basics about GST Council

Composition:

  • Composition of GST Council is as per the 101st Constitutional Amendment Act.
  • The Union finance minister is the chairman of GST council. Other members include Minister in charge of Finance or Taxation of State as members.
  • The members of the GST Council choose one amongst themselves to be the Vice-chairman of the council for such period as they decide.
  • One half of the total number of members of GST council shall constitute the quorum at its meetings.

Decision Making:

  • Every decision of the GST Council shall be taken at a meeting, by a majority of not less than three-fourth of the weighted votes of the members present and voting of Central Government has a weightage of one-third of the total votes.
  • Votes of State Governments taken together have a weightage of two-thirds of the total votes. Thus, Central Government has an effective veto on all decisions of the GST Council.
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