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The government is exploring various options that could form part of its proposed policy on electric mobility to popularize the use of these vehicles and promote their local manufacturing, according to a senior official involved in decision-making.

One of the ways it is looking at is immediate registration of the vehicle and waiver of the registration fee. It is also working on framing policy for a national intelligent transportation system in the country.

A Cabinet note for inter-ministerial discussion on the proposed guidelines in the policy has been circulated by Niti Aayog, the official said.

“The proposed policy envisages that the vehicle buyer will get a registered vehicle immediately from the time he gets the possession,” he said. The same process currently takes two to four days.

The policy is also likely to suggest waiver of registration fees. Registration fee is a state subject and not part of Goods and Services Tax. Expectedly, it varies from state to state. It is usually levied as a percentage of the ex-showroom price of the vehicle. Diesel vehicles attract a higher registration charge for two reasons -- their factory price is anyway higher and the states otherwise also charge a higher percentage of registration charge on them.

Typically, petrol cars costing below a certain threshold attract the least registration tax. The rates can vary from 4% to 15%.

In line with the government’s ‘Make in India’ policy and to encourage local manufacturing of electric vehicles and development of ancillary industry, the government may also tax royalty payments by Indian companies to their foreign partners.

Asked if the tax on royalty payments wasn’t going to discourage technology transfer and ensure that critical components like the battery continued to be imported, the official replied in the negative.

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A tale from the court of Chandragupta:

Chess was invented in India around 1,500 years ago. Apparently, the king in whose court chess was invented was very pleased with the inventor for devising such a strategically rich game.

The king, who in some versions of this fable is Chandragupta – commanded the inventor to ask for whatever he felt like.

The inventor’s request was simple, “Please give me a grain of rice in the first square of the chessboard, two grains on the second square, and eight in the third square and so on.”

Believing the request to be a trivial one, the king immediately asked his ministers to fulfill the request. To their horror, as they started filling up the squares, the ministers realized that the request wasn’t as easy to fulfill as it looked at first blush.

For the 20th square of the chessboard alone they needed over 1 million grains of rice. For the 30th square alone, they needed over 1 billion grains of rice.

But even then they thought they had the situation under control. It wasn’t until they entered the second half of the chessboard that they realized that they could not fulfill the request.

Whilst for the 32nd square, they needed 4.3 billion grains of rice, for the 33rd square (i.e. the first square of the second half of the chessboard), they needed 8.6 billion grains.

And then in each successive square, this amount doubled. By the time they got to the 64th square, they needed 18 million trillion grains of rice; i.e. a mountain of rice as high as Mount Everest.

Exhibit 1: The grains of rice increase exponentially as we go into the second half of the chessboard

The humiliated king had the inventor beheaded. However, the more interesting takeaway is the power of exponential effects – what looks like a harmless dynamic, to begin with -- can and over time, gather momentum and become monstrously powerful.

As we approach the business end of India’s five-year election cycle, we too seem to have entered the second half of the chessboard.

Prime Minister Modi’s resets

After the NDA assumed office in May 2014, in March 2015 my colleagues at Ambit wrote, “India’s strongman, Prime Minister Narendra Modi, is likely to engineer three critical resets over the next four years, namely:

(1) Shift India’s savings landscape away from physical assets towards the formal financial system,

(2) Disrupt the model of crony capitalism, and

(3) Redefine India’s subsidy mechanism”.

Once we understood the scale of Modi’s resets, we maintained a cautious stance regarding economic growth as we believed that the resets would make it difficult for capex (and hence jobs and hence consumption) to take off.

GDP growth in India has now declined for six straight quarters. Worrying developments in the second half of the chessboard

Prime Minister Modi’s resets are interplaying to create a major disruption in the Indian economy as exponential effects kick-in adversely.

Example#1: Land prices & home loans: The NDA Government passed the Benami

Transactions Act (which prohibits Benami transactions and provides for confiscating benami properties) in August 2016.

Then from October 2016, the Government made it illegal to transact in cash for transactions above Rs200000. This was then followed by demonetization in November 2016.

The combined impact of these interventions was to bring the market for rural land transactions to a standstill in the early months of CY17.

From the middle of CY17, this freeze in the land market started impacting home loan providers. Why?

Because these home loan providers perhaps unknowingly were giving loans which were being used to buy rural land, in the hope that the land would be flipped in a couple of years. With flipping having come to a standstill, these loans are now becoming NPAs.

As the promoter of a listed company in Tamil Nadu told me last month, “Even if I halve the price of my rural landholdings, there are no buyers.” The MD of a listed bank in southern India told me last month that “Wherever I have land as collateral, it has become very hard to encash that collateral.”

Example#2: RERA (Real Estate Regulatory Act) & home loans:

The NDA Government passed RERA in March 2016 and the Act came into effect on May 1, 2017. Within five months of the Act being implemented in Maharashtra, residential property under construction has got delayed further.

According to a report by property consultancy Knight Frank India, several residential projects that were to be handed over to buyers this year have witnessed an extension of delivery timelines.

The findings of the report indicate that more than 50 percent of the residential units registered with RERA have extended their time period for completion by over a year, and 30% will have an extended deadline of more than two years.

The report further stated: “The timelines for 57% of the registered units that are under construction have been revised by more than a year. Among them, for 24% of the 107,875 registered units, the completion deadline has been pushed to between a year and 18 months while 19% will be delayed by between 2-4 years and the remaining 10% would not get completed before four years.”

In a note dated August 24, Ambit’s Banks team had highlighted that “Home buyers in delayed projects in NCR are considering stopping EMIs and a prominent builder in Pune has stopped paying EMIs to lenders under the subvention scheme.

We believe that unless project completion is ensured by the Government or a third party, the probability of default remains high given low borrower equity. Our guesstimate indicates that the overall system gross NPAs in home loans could increase by 70-170bps if 30-70% of the borrowers default.

Moreover, loss given defaults can also be higher than expectations if haircuts exceed 30% for homeowners (likely due to inventory glut and declining prices in NCR).”

If the effects highlighted in italics above play out and mortgage lenders’ NPAs continue rising as sharply as they have done in the past six months, it won’t be long before lenders’ cost of funding begins to rise (see exhibits below).

They will then, in all likelihood, start passing those costs on to borrowers which will exacerbate the credit quality issues.

Exhibit 2: Average gross NPLs of HFCs increased significantly in 1QFY18

Example 3: The attack on black money & jobs in the age of automation:

The Indian Government spends as little as 3.3 percent of GDP on education (compared to 5.1% for Malaysia, 5.8% for Thailand, and 4.1% for Indonesia). Unsurprisingly, when most Indians enter the job market, they possess very little by way of skill.

To compound the problem, the age of automation is upon us – as pointed out in October 2016 by the World Bank President, 69% of the jobs which are currently done in India will be automated or mechanised over the next 20 years.

Now, over and above these two forces comes a third force – the attack on tax evading companies. I reckon India’s tax evading companies end up accounting for 80% of its jobs (source: National Sample Survey Organisation).

It is almost certain that the overwhelming majority of India’s job growth in the past decade has come from India’s informal sector (since the key drivers of the formal sector – IT, Financial Services, manufacturing – have moved increasingly towards automation

– for details see my 20th February note).

Tax evasion gives these companies a cost advantage of 10-30% (of revenues) relative to the organised sector. The crackdown on black money and tax evasion are hitting India’s SME sector and causing job losses.

How can I be so sure? Because I am seeing the NREGA spend numbers rocket from Rs 360 billion in FY15 to well over Rs 700 billion in FY17.

Conclusion

A combination of India’s longstanding shortcomings (especially its inability to train and educate its people), worldwide changes in the ability of machines to replace workers in factories, and Prime Minister Modi’s resets (especially his multi-faceted crackdown

on black money) is creating serious pain for the Indian economy.

This is leading to an economic slowdown which looks likely to accelerate as the after-effects interplay with each other. The slowdown is resulting in job losses – especially blue-collar job losses – and a broad-based deterioration in the land and real estate

markets.

Investors who ignore these effects and continue to pile into expensive Indian stocks (even as earnings estimates are continuously pulled back) are treading on water.

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The Goa Petrol Pump Owners Association (GPPOA) has decided to join the nationwide protest call given by United Petroleum Front on October 13 but has said "emergency services would be spared from the strike."

The petrol pumps across the state will remain closed on October 13 as a part of the strike call give by United Petroleum Front.

"We will be supporting the strike by shutting down all the petrol pumps in the state," GPPOA president Paresh Joshi told PTI today.

The ambulances, which come under emergency services, would be provided the fuel that day also, he said.

The United Petroleum Front (UPF) had last week announced nationwide strike of dealers on October 13 to press for various demands, including better margins and inclusion of petroleum products in the Goods and Services Tax (GST). PTI RPS .

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The Gujarat government has decided to reduce the value added tax (VAT) on petrol and diesel by 4 per cent, state Chief Minister Vijay Rupani said today.

The reduction in tax comes just before Diwali in the state, where the Assembly polls are due around the year-end.

"After the central government's instructions, Gujarat has decided to reduce VAT on petrol and diesel by 4 per cent from today mid-night," Rupani said at a press meet here.

With this rate cut, the price of petrol will come down by Rs 2.93 and that of diesel by Rs 2.72 in the state, he said.

The effective price of petrol in Gujarat from mid-night today will be Rs 66.53 per litre and that of diesel Rs 60.77 per litre, the chief minister added.

Because of this move, the state government will suffer a loss of Rs 2,316 crore annually.

"But we have taken this decision in the interest of people," Rupani said.

The lowering of tax in the poll-bound Gujarat follows Union Finance Minister Arun Jaitley recently writing to all state governments nudging them to reduce taxes on petrol and diesel.

The Centre had recently brought down excise duty on petrol and diesel by Rs 2 per litre.

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Despite the hue and cry about demonetisation, it is now becoming obvious that two sectors are overjoyed.  They see demonetisation having boosted their fortunes. One is the road toll sector. The other, obviously, is the financial intermediation sector. These are two sectors that are thrilled about demonetisation.

Just last year, the total toll collected through the e-payment route was under 1 percent.  But today it has soared to 35 percent.  That is truly an incredible jump.  And this is despite the fact that the number of toll stations in the country has been growing (see table), with the maximum number being located in Rajasthan.  States like Uttaranchal, Delhi and Meghalaya have the smallest numbers.

That is the good news on the road toll front.  But there is a seamier side as well.

First, the RFID facility could have been in place at least three months earlier. Second, the government appears unwilling to make RFID compulsory for all.

True, this is not evident from the statements made by the government. Undoubtedly, its intentions were always laudable. Consider this.  In order  “to remove traffic bottle neck at toll plazas and ensure seamless movement of vehicles and hassle-free collection of toll, the Government has implemented a nationwide Electronic Toll Collection based on passive Radio Frequency Identification (RFID) conforming to EPC Gen-2, ISO 18000-6C standards.  It provides for electronic collection of toll through FASTags.”

Electronic Fee Collection (EFC) was rolled out across the country on 25th April, 2016.  Initially, the introduction of RFID got delayed. Unknown to many, even by November 2016, the technology had not been given the go-ahead because the government was still grappling with the manner in which the exemption list should be incorporated into the billing software.

The list of exemptions was so huge (see table), that getting these exemptions included in the software – with suitable modifications for each state – was obviously going to create headaches for the programmers.

Then the inevitable happened.  Possibly a push from the Prime Minister’s Office (PMO), or the pains caused by demonetisation, and the epayment route got cleared.  The exemption list remained in place but had to be executed manually.  For many common people, demonetisation compelled them to opt for epayment.  As a result, arguments about who is exempted and who is not continue to take place at toll stations.  And when arguments begin, common drivers of non-exempted vehicles too get held up.

On the technology side, there are few problems. Three banks – IDFC, ICICI and HDFC – have begun accepting billing against RFID  tag entries.  All that a vehicle owner has to do is to stick his RFID card on his vehicle’s windshield. The toll gate cameras would zoom in, capture the required data and debit the required amount to the vehicle owner’s account, and the vehicle would pass through without stopping.  The debit is made through NHAI’s own servers, connected to the toll plazas.  The NHAI servers then send the payment request to the banks, and the pre-authorisation enables the money transfer.

Today, most toll plazas accept payments through credit/debit cards and PayTM as well.

It is the technology that has helped toll collections to scale up so dramatically. By May 2016, only 3,133 FASTags had been given out. But the number went up to 178,266  by December 22, 2016. Fees collected from FASTags was just Rs 0.71 crore in May 2016. This rose to Rs 47.02 crore by 22 December, 2016.

Collection of fees through electronic means was just about 5 percent of total toll collections in October-November 2016. This rose to about 11 percent by mid-December. By end-September 2017, they are believed to have crossed the 35 percent mark.

By November 2016, there were 394 toll plazas on various National Highways across the country. Data on how much money is collected by toll is not easily available, but some websites give the figure as over Rs 6,700 crore through toll fee in 2015-16. So much for transparency!

According to the statement that Union Minister Nitin Gadkari made before the Lok Sabha on July 27, 2017, “the total transaction count since January 2017 to June 2017 under e-mode stands at 6.11 crore (61 million) and the revenue collected under e-mode for the same period is Rs 1,665 crore. Depending upon the feasibility at fee plazas, all existing lanes are proposed to be FASTag-enabled by converting the fee lanes to Hybrid EFC lanes with all the payment options including cash, smart card and FASTag.”

But the seamier side of exempted categories remains unresolved.

This is surprising.  All the government has to do is to ensure that each exempted person is given an RFID card. The government’s own database links persons to the RFID number, and the debit is made to the respective department. All RFID cards would then get debited to the respective accounts.  If a refund has to be made, it can be done centrally – electronically.

Why make toll operators get into disputes about who should be allowed through the toll gates without paying toll fees?  In fact, this would be the same as the Aadhaar system.  Except that the exempted category does not have to go through an identity check.  He has only to keep his RFID card attached to his vehicle’s windshield.

In fact, toll operators have horror stories about officials complaining and even getting into fisticuffs with tollgate operators, when they try travelling through the gates in their private (not official) cars.  The RFID card could solve this problem. Let the vehicle owner drive the private car with the required RFID card attached to the windshield.  Suddenly, the movement of traffic becomes smooth.  All privileged travel is recorded for future study.

However, it appears that despite all the talk about transparency, the government does not want the privileged to be tracked. Is it because privileged exempted passage is being misused by some? Then, isn’t the RFID route the best way to monitor such misuse? After all, if Aadhaar is mandatory for the farmers and the underprivileged, why can’t the FRID be so for the exempted categories? The privileged should certainly not be allowed free travel, without such travel being recorded.

Tracking the number of toll-free rides by the privileged would actually allow the government to tabulate the number of times a person had used or misused the exemption facility.

In fact, every exemption is that much money lost to the toll operator.  The toll operator also loses in another way.  The time taken to clear a vehicle through physical verification, whether for exemption or not, is a lot longer than through the epayment route. When there is a pileup, the toll operator has to deploy more people to handle the traffic congestion. What is even more vexatious is that this slows down the movement of other people – who are invariably the non-privileged taxpayers of the country.

So, will the government live up to its promise of transparency? Will it make RFID-based payments compulsory at all toll stations – irrespective of whether the driver or vehicle belongs to the exempted category or not.  This would make toll operators happier, the government richer, and the rest of the drivers on India’s roads that much more comfortable.

That would truly be made-in-India, not unmake-in-India.

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Premier magazine Forbes has come out with the 2017 Forbes India Rich List, with the wealth of Indian tycoons growing a combined 26 percent even as the broader economy exhibited signs of a slowdown.

This was partially because the stock market continued to rise amid hopes that an economic turnaround will be under way soon.

Reliance Industries chief Mukesh Ambani topped the list of India's richest for the tenth year in a row with a net worth if USD 38 billion.

"Ambani added USD 15.3 billion to his net worth this year, making him the biggest dollar gainer on the list and one of Asia’s top five richest," Forbes said. "Improved refining margins and his telecom unit Reliance Jio’s thundering success in notching up 130 million subscribers since its 2016 launch boosted shares of his Reliance Industries."

Another big gainer was wtech mogul Azim Premji with a net worth of USD 19 billion. He jumps two places to No 2 this year after adding USD 4 billion to his wealth.

"The gain is partly due to increased revenue and profit at his privately held consumer-goods business Wipro Enterprises, which makes everything from soaps to lightbulbs," the magazine said.

The Hinduja brothers (No. 3, USD 18.4 billion) added USD 3.2 billion to their net worth.

More than four-fifths of those who kept their spot on the list from last year saw their wealth rise, with 27 listees adding USD 1 billion or more to their net worths. Among them is Kumar Birla (No. 8, USD 12.6 billion) of Aditya Birla Group, who oversaw the merger between his telecom company Idea Cellular with Vodafone India. Auto parts tycoon Vivek Chaand Sehgal (No. 23, USD 5.85 billion), added USD 2.25 billion to his wealth after his Motherson Sumi Systems acquired Finnish truck-parts maker PKC Group for USD 620 million in March.

"The richest newcomer is cookies-and-airline tycoon Nusli Wadia (No. 25, USD 5.6 billion). Among the five other new entrants to the list are Dinesh Nandwana (No. 88, USD 1.72 billion) of e-governance services firm Vakrangee; Vijay Shekhar Sharma (No. 99, USD 1.47 billion) of fast-rising mobile wallet Paytm; and Rana Kapoor (No. 100, USD 1.46 billion) of Yes Bank, India’s fifth-largest bank in the private sector," Forbes said.

Veteran investor Radhakishan Damani, boosted by the listing of his supermarket chain D-Mart in March, returned to the list at No. 12 with a net worth of USD 9.3 billion. Other returnees are Future Group’s Kishore Biyani (No. 55, USD 2.75 billion) and siblings Murli Dhar and Bimal Gyanchandani (No. 75, USD 1.96 billion).

The top 10 richest in India are:

1) Mukesh Ambani; USUSD 38 billion

2) Azim Premji; USD 19 billion

3) Hinduja brothers; USD 18.4 billion

4) Lakshmi Mittal; USD 16.5 billion

5) Pallonji Mistry; USD 16 billion

6) Godrej family; USD 14.2 billion

7) Shiv Nadar; USD 13.6 billion

8) Kumar Birla; USD 12.6 billion

9) Dilip Shanghvi; USD 12.1 billion

10) Gautam Adani; USD 11 billion

The complete list is available at www.forbes.com/india and www.forbesindia.com. The list can also be found in the October issue of Forbes Asia and in the Forbes India issue, which will be available on newsstands from November 3.

Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.

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State Bank of India (SBI), country’s largest bank, revises its one-year retail fixed deposit rates up to Rs 1 crore to 6.50 percent, down by 25 basis points (bps).

Revision in interest rates on retail domestic term deposits (below Rs 1 crore) with effect from 01.10.2017, SBI said on its website.

Senior citizens will get an interest rate of 7 percent, down from 7.25 percent.

From October 1, SBI also reduced its base rate to 8.95 percent p.a. (from 9 percent) while its MCLR or marginal cost based lending rate continued to be at 8 percent on one-year tenure loans.

Currently, SBI and most other banks including HDFC and ICICI Bank are offering home loans starting from 8.35 percent for women borrowers and 8.40 percent for the rest.

This comes as a precursor to the key interest rate decision on Wednesday and the Reserve Bank of India is widely expected to keep the repo rate unchanged at 6 percent.

SBI’s decision to reduce rates also comes just in three months as the rates were previously revised in July.

SBI, which accounts for more than a fifth of India’s banking assets, had revised its interest rates by 15 bps lower to 6.75 percent.

The interest rate payable to SBI Staff and SBI pensioners will be 1.00 percent above the applicable rate. The rate applicable to all Senior Citizens and SBI Pensioners of age 60 years and above will be 0.50 percent above the rate payable for all tenors to resident Indian senior citizens i.e. SBI resident Indian Senior Citizen Pensioners will get both the benefits of Staff (1 percent) and resident Indian Senior Citizens (0.50 percent).