The Hindu Business Line : Subsidise sustainable energy

Government intervention and policy structure are necessary to develop the correct ‘pull’ in the alternative energy space, urges a new book. “Fiscal incentives by way of rationalised import duties, concession in various taxes and direct subsidies can be used,” suggest Amitav Mallik, Nitant Mate, and Devayani Bhave in Renewable Energy Technologies: Special focus on distributed power generation ( www.academicfoundation.com ).

The authors are of the view that the subsidy — which should be just enough to bridge the gap between the cost of the product and the value of the same envisaged by the buyer — should disappear over a defined period, rather than become ‘sustainable’!

The policies should ideally allow innovation and have inherent flexibility. “The mechanism to give subsidies could be any — investment subsidies, fiscal incentives based on electricity generation or even quota system.”

One of the examples in the book is about the promotion of solar energy in the US. “The Bush administration has declared 15 per cent tax credit for purchase of solar energy equipment and it will be mandatory for utility companies to generate 10 per cent of their energy from renewable sources.”

Useful takeaways.

Anti-dumping intensity metric

India has faced a disproportionate incidence of AD (anti-dumping) investigations in industrial country markets, rues an essay by Veena Jha and Swapna Nair, included in South Asia in the WTO, edited by Saman Kelegama ( www.sagepublications.com ).

The authors cite an AD intensity metric, based on the number of cases per dollar of imports. They state that although the filing intensity by traditional users, such as the US and the EU, has come down, the number of activities on targeted sectors such as textiles has gone up.

However, “If the intensity index is calculated on the number of actions by share of world exports, India experiences the highest intensity. Thus, AD has negative effects on India’s exports without a comparative positive effect on its competitors’ exports.”

Tracing trade history, Jha and Nair find that India was not a traditional user of AD measures in the pre-reform period, as high tariffs and QRs (quantitative restrictions) obviated the need for other means of protecting the domestic industries.

Among sectors, the textile industry is one of the most targeted, the essay informs. Fearing, therefore, potential AD threat, exporters tend to price their products higher, and thus use their competitive advantage sub-optimally.

“This could also be termed as the chilling effect of ‘threat’ of AD investigations. In addition, retailers may be reluctant to stock products from firms which are under AD investigations.”

Recommended addition to the global business professional’s shelf.
State development through tax sops

One of the chapters in No Minister: Memoirs of a Civil Servant by Mahesh Prasad ( www.macmillanindia.com) is about how Uttar Pradesh steamed ahead with its industrial policy, during Narayan Datt Tiwari’s time, by offering sales tax benefits to new industrial units in the State. But the move to offer tax sops was not without its opponents, such a s the Secretary of the Institutional Finance and Sales Tax Department.

“I counter-argued that he was counting his chickens before they were hatched. No sales tax will accrue if the unit was not set up in the State,” narrates Prasad. “The State needed industrial investment to generate employment and to pull it out of backwardness.”

The loss of sales tax to the State was purely notional, the author argues. “Moreover, once the investment took place in the State, the State would collect all the revenue after the exemption expired. The State would also benefit from downstream activity…”

Engaging style.

D. MURALI
BookPeek.blogspot.com

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