Govt faces cash crunch on tax refunds

NEW DELHI: The government is facing a temporary cash crunch on account of tax refunds of nearly Rs 45,000 crore during April and May, prompting it to resort to short-term borrowing.

While tax refund is an annual affair, the use of electronic return filing and processing has resulted in faster refund of excess income. Corporation tax payment has resulted in the process getting expedited and a lot of bunched payments taking place in the first two months. In April alone, the tax refunds are estimated at Rs 30,000 crore to Rs 32,000 crore and another Rs 10,000 crore to Rs 15,000 crore would be added next month.

During the days of paper returns, a taxpayer's details had to be punched manually. This was then tallied and refunds, if any, were processed. Now, with electronic filing the entire information is available and instructions to banks for electronic refunds are also faster.

The finance ministry, officials said, did not anticipate this kind of a problem when the annual borrowings were planned. Typically the government issues bonds which mature in, say, five, 10 or 15 years to raise resources and fund spending. In addition, it gets funds by way of taxes but this typically starts flowing in from June. It also uses short-term instruments such as treasury bills that have tenure of up to 362 days to meet its cash requirement. In case of an emergency, there is a new instrument – cash management bills – that mature in less than 91 days.

Officials said that the overall government borrowing will stay at over Rs 4 lakh crore despite the fact that the Centre has used cash management bills to raise Rs 26,000 crore from the market. And if the fund crunch remains more such fund raising will take place.

The government's borrowings from RBI also shot up 54% to Rs 48,400 crore on April 22. "We are keeping a watch on the situation. We will take a call if there is a need beyond May for any short-term borrowing. This is a temporary cash flow issue and we will stick to our fiscal deficit target set in the budget," a senior government official said when asked whether the government will issue more cash management bills beyond May.

Now, officials say that from next year the government is expected to tweak the borrowing programme to tide over such unexpected situations. "We will have to see how we devise the borrowing because the Direct Tax Code is expected to be in place and we will have to see the extent of refunds if at all they arise. If there is a need we will frontload the borrowing programme," another official said.

toi

SC refuses to interfere in Lokpal bill drafting committee

NEW DELHI: The Supreme Court has refused to interfere in the constitution of the joint committee for drafting of the Lokpal Bill to fight corruption, saying the petitions were "premature".

A bench headed by Chief Justice S H Kapadia adjourned the hearing on three public interest litigations (PILs) to mid-July despite being told that the committee would complete its work by June 30.

The bench said, "The petitions are premature and can't be taken as the Lokpal Bill was yet to be passed."

"It is still not the law," the bench, also comprising justices K S Radhakrishnan and Swatanter Kumar said.

The bench dealt with the three petitions separately and passed identical orders for hearing them in July.

While dealing with one of the petitions, the bench said, "Some of the averments in the petition are untenable in law."

The petitioners including some public-spirited individuals and advocates had challenged the notification issued by the government relating to the constitution of the committee for drafting of the Lokpal Bill.

"We will go strictly by the law," the bench said while adjourning the matter.

The PILs have stated that the Lokpal cannot act as a watchdog over the judiciary as it would be unconstitutional.

Among the petitions listed before the bench is one by Mahan Dal, which claims to be a political party in Haryana. It has submitted that a bill of vital national importance cannot be drafted in haste or under pressure from Anna Hazare and others as it would set a bad precedent.

"Whether a decision affecting the whole of the nation can be taken so suddenly without having a public debate on such a national issue of great public importance?

"Whether the government could take an action under the threat or pressure from one of the citizens of the country and whether this would not create a bad precedent for future?

"Ultimately the government succumbed to the pressure of Anna Hazare and hurriedly came out with a resolution on April 8 2011," counsel R K Kapoor had said in the petition.

The PIL alleged that the composition of the joint drafting committee was totally partisan, arbitrary and against national interest.

The members of the committee include Union ministers Pranab Mukherjee, P Chidambaram, M Veerappa Moily, Kapil Sibal and Salman Khursheed.

The civil society representatives are Hazare, Justice (retd) N Santosh Hegde, senior lawyer Shanti Bhushan and his advocate-son Prashant Bhushan and RTI activist Arvind Kejriwal.

"Enactment of Lokpal would be against the spirit of Article 50 of the Constitution of India. It will wipe out the separation of the judiciary from the executive.

"A decision affecting the whole nation cannot be taken so suddenly without having a public debate on such a national issue of great public importance. The government cannot take action under threat or pressure from one of the citizens of the country and such succumbing to pressure tactics would create a bad precedent for future," the petitioner had said.

It said ideally the joint drafting committee should be expanded and finalised after seeking public opinion to include diverse interests like women, minorities, media, academics etc. and other known public figures of un-biased and non-partisan persons.

The second petition filed by individual Kaushal Kishore Shukla, through counsel Jitender Singh, had sought induction of the Leader of the Opposition in the drafting panel.

The third PIL was filed by advocate Manoharlal Sharma who not only challenged the notification but also sought a CBI inquiry into alleged illegal activities of Shanti Bhushan and Prashant Bhushan.

toi

Air India ultimatum to pilots: Resume work by 5pm today

NEW DELHI: With the Air India pilots' stir entering its third day affecting thousands of travellers, the airline on Friday issued an "ultimatum" to its pilots asking them to resume work by this evening even as the Delhi high court refused to stay a management order derecognising their union.

While Indian Commercial Pilots Association (ICPA) leaders said an "ultimatum" was issued by the HR department, company officials said, "We are following the court directions (given yesterday). Through an internal memo, we have asked all pilots whether they can be rostered for duty from 5pm today."

The development came after a substantial number of around 300 executive pilots joined the 800-odd members of the ICPA, which is spearheading the strike.

In another development, the Delhi high court refused to stay the Air India management order derecognising the ICPA. Refusing to accede to ICPA's plea to revoke its derecognition, Justice S Murlidhar issued notice to Air India Ltd and sought its response on the plea by the pilots' body by July 16, the next date of hearing.

Justice Geeta Mittal of the high court had on Wednesday asked the pilots to call off their agitation and resume work in "larger public interest." The court had warned that property of ICPA will be attached if they did not return to work immediately.

A S Bhinder, president of the ICPA which is demanding pay parity among other issues, told reporters that the agitators would resume duty only after the management "makes concrete and time-bound commitments on our demands."

These including a higher fixed component in their salary, a CBI probe into alleged mismanagement and removal of CMD Arvind Jadhav holding him solely responsible for the "financial mess".

"We want the management to resolve the issues within a specific time-frame. Besides, all those the sacked or suspended should be taken back, our offices de-sealed and derecognition of ICPA revoked," he said. The management has terminated the services of seven pilots and suspended six others.

Executive pilots also joined the agitation yesterday and started reporting sick, leading the management to send doctors to their homes. Over 100 senior pilots have so far reported sick, according to ICPA sources.

The cash-strapped carrier is losing Rs four crore per day due to the strike. However, the sources said, this figure might be more as the airline has liabilities towards payment of instalments of new and leased aircraft and the salary of its employees.

With both pilots and management refusing to budge from their stated positions, passengers continued to bear the brunt of the agitation. Most of the flyers have cancelled their tickets on Air India while others were being accommodated in other airlines.

"Under the contingency plan, we are operating 50 flights across the network today," an Air India official said.

From Delhi, the airline is operating just 10 flights and almost an equal number from Mumbai to other metro cities.

Yesterday, the management initiated contempt of court proceedings against the pilots in the Delhi high court but the pilots remained unfazed.

Also, the conciliation talks between the management and the agitating pilots also ended in failure as both were not ready to budge from their position.

Thousands of passengers remained stranded at various airports with Air India operating only 50 of its regular 320 flights today.

Besides combining several flights, the airline is operating Boeing 747 jumbo service on Mumbai-Dubai-Delhi- Mumbai sector.

With both pilots and management refusing to budge from their stated positions, thousands of passengers continued to bear the brunt of the agitation. Most of the flyers have cancelled their tickets on Air India while some others were being accommodated on other airlines.

According to estimates, the cash-strapped national carrier is losing Rs four crore per day due to the strike. However, sources said, this figure might be more as the airline has liabilities towards payment of instalments of new and leased aircraft and the salary of its employees.

Yesterday, the management initiated contempt of court proceedings against the pilots in the Delhi High Court but the pilots remained unfazed. The court has warned that property of their trade union ICPA will be attached if they did not return to work immediately.

toi