1. Taxing Drama (Retrospective Taxation)
It allows a country to pass a rule on taxing certain products, items or services and deals and charge companies from a time behind the date on which the law is passed.
- Countries use this route to correct any anomalies in their taxation policies that have, in the past, allowed companies to take advantage of such loopholes.
- Apart from India, many countries including the USA, the UK, the Netherlands, Canada, Belgium, Australia and Italy have retrospectively taxed companies.
Issues:
- It is against the principle of tax certainty and damage India’s reputation as an attractive destination.
- India has recently suffered various humiliations in international arbitration while challenging tax demands made under the retrospective clause. Eg: Cairn was awarded damages of more than $1.2 billion in December by the Permanent Court of Arbitration at The Hague in the retro tax case.
2. Towards low emissions growth
- Many developing countries made net-zero pledges at COP26 in Glasgow, they face enormous developmental challenges in their attempts to grow in a climate-constrained world.
- India will have to move to an investment-led and manufacturing-intensive growth model to help lift millions out of poverty, create job opportunities for another 300 million expected, and create entirely new cities and infrastructure to accommodate and connect an increasingly urban population. All of this requires a lot of energy.
Problems:
- While India has provided high level of policy support to deploy renewable energy, its industrial policy efforts to increase the domestic manufacturing of renewable energy technology components have been affected by policy incoherence, high costs and complex laws.
- China has created more jobs in manufacturing solar and wind components for exports than domestic deployment. India could have retained some of those jobs if it were strategic in promoting new technologies.
- India’s R&D investments in emerging green technologies are non-existent.
- India’s techno-industrial policy strategy is not strategically aligned to RD&D, manufacturing of new technologies.
- The cost of renewable electricity from hydrogen specifically, is the major problem.
Way forward:
- Policies to develop local innovation capabilities should be linked with global production networks to create the most job opportunities.
- Developing new technologies like lithium battery, green hydrogen, carbon capture and storage technologies to decarbonise India’s hard-to-abate transport and industry sectors. Eg: Hydrogen Energy Mission, Vehicle Scrappage Policy etc.
- The production-linked incentives (PLIs) under ‘Aatmanirbhar Bharat’ are a step in the right direction for localising clean energy manufacturing activities.
- India also needs to nurture private entrepreneurship and experimentation in clean energy technologies rather than be indifferent to it. Eg: For the first time there is private financing of ₹18,000 crore for 20,000 buses and innovative financing with Public Private Partnerships which would revolutionise the way public transport systems and buses function in India.
- India has a very liberal foreign investment policy for renewables allowing 100% Foreign Direct Investment (FDI) through the automatic route in the sector.
- Rules are being framed for a ‘green tariff’ policy that will help electricity Distribution Companies (Discoms) supply electricity generated from clean energy projects at a cheaper rate, Viability gap funding for off shore wind farms etc.
Conclusion:
- India needs an overarching green industrialisation strategy that combines laws, policy instruments, and new or reformed implementing institutions to steer its decentralised economic activities to become climate-friendly and resilient.
Leave a Comment