7th Central Pay Commission

The 7th Central Pay Commission has retained rate of annual increment at 3 percent. The 7th CPC has also recommended withholding of annual increments in the case of those employees who are not able to meet the benchmark either for MACP or a regular promotion within the first 20 years of their service. These recommendations have been accepted by the Government.

The 7th CPC has observed that it is essential to have a linkage between Departmental Results Framework Documents (RFD) and Annual Appraisal Performance Report (APAR) and has suggested the following modification in the existing APAR system for determining Performance Related Pay:

(i) Alignment of Objectives: The Ministry’s Vision/Mission needs to be translated into a set of strategic objectives for each department and these objectives need to be cascaded by the Department Head to his subordinates and subsequently down the chain.

(ii) Prioritizing Objectives, Assigning Success Indicators and their Weights: Objectives reflected in the APAR should be prioritized and assigned weights along with success indictors or Key Performance Indicators. The Commission recommended 60 percent weight on work output and 40 percent weight on personal attributes, instead of existing 60 percent weight on personal attributes and only 40 percent weight to work output.

(iii) No Ex-ante Agreement: The indicators in the APAR of an officer/staff will need to be discussed and set with the supervisor at the beginning of the year.

(iv) Timelines: The timelines for RFD may be synchronized with the preparation of the APAR so that the targets set under RFD get reflected in individual APARs in a seamless manner.

(v) Online APAR System: The Commission recommended introduction of online APARs system for all Central Government officers/employees.

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Exchange rate of the Indian rupee

The exchange rate of the Indian rupee has generally witnessed an appreciation trend against the US dollar in the recent period, notwithstanding intermittent bouts of volatility witnessed especially during November-December 2016 on the back of the US presidential election results and Fed rate hike (Table below):

Monthly Average Rs/$ Exchange Rate

Month	Average Rupee/dollar Exchange rate
Apr-16	66.47
May-16	66.91
Jun-16	67.30
Jul-16	67.21
Aug-16	66.94
Sep-16	66.74
Oct-16	66.75
Nov-16	67.63
Dec-16	67.90
Jan-17	68.08
Feb-17	67.08
Mar-2017* [* Up to March 27, 2017]	66.04

Since February 2017, the rupee has appreciatedwith significant capital inflows, both portfolio and FDI. Net FII flows picked up significantly since February 2017 after turning negative during the period October 2016-January 2017. FDI inflows also continued to be robust during 2016-17 (April-January).

Positive sentiment generated by good growth prospects of the Indian economy, sound macroeconomic fundamentals with low inflation, low current account deficit, adequate forex reserves, etc. are driving capital inflows contributing to the strengthening of the rupee.

The exchange rate of the rupee is market determined. The Reserve Bank of India (RBI) intervenes in the domestic foreign exchange market to manage excessive volatility and maintain orderly conditions without having any fixed target or band for the exchange rate. The Government and the RBI are continuously monitoring the evolving situation on the exchange rate front and will take appropriate steps as and when required.

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Central Board of Direct Taxes (CBDT’s) APA Program crosses the 150 Milestone

The Central Board of Direct Taxes (CBDT) has entered into 9 Advance Pricing Agreements (APAs) during the last two days of the current financial year. All the 9 Agreements entered into are Unilateral APAs. With this, the total number of APAs entered into by the CBDT has reached 152. This includes 11 Bilateral APAs and 141 Unilateral APAs. In Financial Year 2016-17, a total of 88 APAs (8 Bilateral APAs and 80 Unilateral APAs) were entered into. The APAs signed in financial year 2016-17 include Agreements with some technological behemoths having major operations in India in the IT sector.

The 9 APAs entered into during the last two days of the current Financial Year pertain to various sectors of the economy like Information Technology, Aviation, Oil & Gas, Automobiles, Electricals & Electronics, etc. The international transactions covered in these agreements include Receipt of Intra-Group Services, Provision of IT Enabled Services, Provision of Software Development Services, Provision of Engineering Design Services, Provision of Marketing Support Services, Import of Traded Goods, Payment of Interest on ECB, Receipt of Interest, Receipt of Guarantee Fee, Receipt of License Fee, Export of Goods, Receipt of Technical Support Services, Provision of Business Support Services, etc.

The APA Scheme was introduced in the Income-tax Act in 2012 and the “Rollback” provisions were introduced in 2014. The scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance. Since its inception, the APA scheme has been well-accepted by taxpayers and that has resulted in more than 800 applications (both Unilateral and Bilateral) being filed so far in five years.

The signing of 88 APAs in a single year (F.Y 2016-17) is a significant achievement of the CBDT and its Officers. The progress of the APA Scheme strengthens the Government’s resolve of fostering a non-adversarial tax regime. The Indian APA programme has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner.

No. of Advance Pricing Agreements signed by CBDT
S. No	Financial Year	Unilateral APAs	Bilateral APAs	Total
1	2013-14	5	0	5
2	2014-15	3	1	4
3	2015-16	53	2	55
4	2016-17	80	8	88
Total		141	11	152

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JAPAN’s Official Development Assistance (ODA) Loan of RS. 21,590 Crore to India for Financial Year 2016-17

The Joint Statement dated September 1, 2014 of the two Prime Ministers’ of India and Japan mentions the intention of Government of Japan to realize 3.5 trillion Yen of publicand private investment and financing from Japan, including Official Development Assistance (ODA), to India in five years, to finance appropriatepublic and private projects of mutual interest. 50% of 3.5 trillion Yen i.e. 1.75 trillion Yen is expected to be in the form of ODA loan for five years from 2015-16 onwards.

The Government of Japan has committed JICA Official Development Assistance loan for an amount of Yen 371.345 billion (=Rs.21,590 crore approx.) under FY 2016-2017 loan package. The Notes in this regard were exchanged here today between Mr. S. Selvakumar, Joint Secretary, Department of Economic Affairs, Government of India and H.E. Mr. Kenji Hiramatsu, Ambassador of Japan to India.Total commitment of JICA ODA during two Financial Years 2015-16 and 2016-17 is JPY 761.40 billion Yen, which is 43.50% of the total targetfor five years.

For the Financial Year 2016-17, the ODA loan assistance has been committed to Mumbai Trans Harbour Link Project (JPY 144.795 billion), Dedicated Freight Corridor Project (Procurement of Electric Locomotives) (JPY 108.456 billion), Chennai Metro Project (V) (JPY 33.321 billion), Andhra Pradesh Irrigation and Livelihood Improvement Project (Phase 2) (I) (JPY 21.297 billion), Rajasthan Water Sector Livelihood Improvement Project (I) (JPY 13.725 billion), Odisha Forestry Sector Development Project (Phase 2) (JPY 14.512 billion), Delhi Eastern Peripheral Expressway Intelligent Transport System (ITS) Installation Project (JPY 6.87 billion), Nagaland Forest Management Project (JPY 6.224 billion) and Tamil Nadu Investment Promotion Program (Phase 2) (JPY 22.145 billion).

The Mumbai Metropolitan Region Development Authority (MMRDA), a State Government entity, has been allowed to borrow directly from Japan International Cooperation Agency (JICA) Official Development Assistance (ODA) loan for Mumbai Trans Harbour Link (MTHL) project. The estimated project cost for Mumbai Trans-Harbour Link (MTHL) is Rs.17,854 crore, out of which JICA loan portion is expected to be Rs.15,109 crore.

India and Japan have had a long and fruitful history of bilateral development cooperation since 1958. In the last few years, the economic partnership between India and Japan has steadily progressed. This further consolidates and strengthens the Strategic and Global Partnership between India and Japan.

(Exchange Rate: Re.1 = Yen 1.72)

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Finance Ministry releases India’s External Debt Statistics end-December 2016

Department of Economic Affairs(DEA), Ministry of Finance, Government of India has been compiling and releasing Quarterly Statistics on India’s External Debt for the quarters ending September and December every year. India’s External Debt position at end-December 2016 is as follows.

(i) India’s external debt stock fell by US$ 29.0 billion (6.0 per cent) to US$ 456.1 billion, at end-December 2016 over the level at end-March 2016. The decline in external debt during the period was due to the fall in long-term external debt, particularly the fall in NRI deposits reflecting the redemption of FCNR (B) deposits and decline in commercial borrowings with fall in both commercial bank loans and securitized borrowings. On a sequential basis, total external debt at end-December 2016 declined by US$ 28.1 billion (5.8 per cent) from the end-September 2016 level.

(ii) The maturity pattern of India’s external debt indicates dominance of long-term borrowings. At end-December 2016, long-term external debt accounted for 81.6 per cent of India’s total external debt, while the remaining 18.4 per cent was short-term debt.

(iii) While long-term debt at US$ 372.2 billion, declined by US$ 29.4 billion (7.3 per cent) at end-December 2016 over the level at end-March 2016, short-term debt increased marginallyby 0.5 per cent to US$ 83.8 billion.

(iv) The valuation gain (appreciation of the US dollar against the Indian rupee and most other major currencies) was US$ 7.3 billion. This implies that excluding the valuation effect, the decrease in external debt would have been lower at US$ 21.7 billion at end-December over end-March 2016.

(v) The shares of Government (Sovereign) and non-Government debt in the total external debt were 19.6 per cent and 80.4 per cent respectively, at end-December 2016.

(vi) The share of US dollar denominated debt was 54.7 per cent of the total external debt at end-December 2016, followed by the Indian rupee (31.1 per cent), SDR (5.9 per cent), Japanese yen (4.4 per cent), Euro (2.7 per cent), Pound Sterling (0.7 per cent) and Others (0.5 per cent).

(vii) Many key external debt indicators of India show improvement at end-December 2016 over end-March 2016. Besides, total external debt falling by 6.0 per cent during this period, the foreign exchange cover for external debt increased to 78.7 per cent from 74.3 per cent and the ratio of concessional debt to total external debt increased to 9.2 per cent from 9.0 per cent. Though, the share of short-term debt (original maturity) in total debt increased to 18.4 per cent from 17.2 per cent during this period due to rise in trade related credits, the share of short term debt (residual maturity) in total external debt fell to 41.4 per cent from 42.6 per cent. While the share of short-term debt (original maturity) to foreign exchange reserves increased marginally to 23.4 per cent from 23.1 per cent during this period, the share of short-term debt (residual maturity) to foreign exchange reserves fell to 52.6 per cent from 57.4 per cent.

(viii) Cross country comparison of external debt indicates that India continues to be among the less vulnerable countries. India’s key debt indicators compare well with other indebted developing countries. Among the top twenty developing debtor countries, India’s external debt stock to gross national income (GNI) at 23.4 per cent was the fifth lowest and in terms of the foreign exchange cover for external debt, India’s position was the sixth highest at 69.7 per cent in 2015. Contrary to China’s high share of short-term debt to total external debt which has been increasing in each quarter of 2016, India’s share is low and has been decreasing. In 2016 Q3 (end-September), the shares were 16.8 per cent for India and 55.4 per cent for China.

The complete quarterly report of India’s external debt at end-December 2016is available on the website of Ministry of Finance – www.finmin.nic.in.

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CESS/Surcharge on Petroleum Products

The Government is collecting taxes through cess and surcharge on petroleum products in the country. An Additional Duty of Excise @ Rs.6 per litre is levied and collected on Motor Spirit (Petrol) under section 111 of the Finance (No. 2) Act, 1998. Also, an Additional Duty of Excise @ Rs.6 per litre is levied and collected, on High Speed Diesel Oil under section 133 of the Finance Act, 1999. In addition, Special Additional Excise Duty @ Rs.6 per litre is levied and collected on Motor Spirit (Petrol) under section 147 of the Finance Act, 2002. The said duties collected on petroleum products namely Motor Spirit (Petrol) and High Speed Diesel Oil during the last three years, current year and Budget Estimates (BE) for 2017-18 thereof are as under:

Financial Year	Motor Spirit (Petrol)		High Speed Diesel Oil	Motor Spirit (Petrol)
	Additional Duty of Excise			Special Additional Excise Duty
F.Y. 2013-14	4120	15,143		13,178
F.Y. 2014-15	5,978	19,144		15,090
F.Y. 2015-16	17,301	52,239		18,171
F.Y.2016-17 (upto February 2017)	17,361	49,045		16,385
BE 2017-18	22,000	59,250		21,300

The total subsidy/ under recovery on petroleum products since 2013-14 is as under:

Particulars	F.Y.2013-14	F.Y.2014-15	F.Y.2015-16	2016-17 (upto December)
Diesel	62,837	10,935	0	0
PDS Kerosene	31,255	24,804	11,496	5,720
Domestic LPG	52,247	40,569	16,074	6,399
Total	1,46,339	76,308	27,570	12,119

This was stated by Shri Santosh Kumar Gangwar, Minister of State in the Ministry of Finance in written reply to a question in Lok Sabha today.

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Education Loans

As per Indian Banks’ Association (IBA) Model Scheme, approved courses leading to graduate/ post graduate degree and P G Diploma conducted by Colleges/ Universities recognized by the University Grants Commission, the All India Council for Technical Education, the Indian Council of Medical Research, etc. are eligible for education loan. Model education loan scheme covers recognized non professional courses.

Complaints regarding educational loans, as and when received by the Government, are taken up with banks concerned for corrective action. As informed by Public Sector Banks, during 2016-17 (upto December, 2016), 2608 complaints related to education loans were received, out of which 2497 were disposed off. In order to facilitate easy processing and disbursal of loans, Government has launched a web-based portal namely, Vidya Lakshmi Portal. Students can view, apply and track the education loan applications online by accessing the portal.

All education loans upto Rs 4 Lakh are collateral free as per RBI guidelines. Further, Government of India has launched a Credit Guarantee Fund Scheme for Education Loans (CGFSEL) wherein collateral free loan is given upto Rs.7.5 lakh.

As per IBA Model Scheme, Education Loan Limit is Rs 10 Lakh for studies in India and Rs 20 Lakh for abroad studies. However, Banks may consider capping stream wise/ institution wise cap on education loan amount by taking into account reputation and placement history of the education institution concerned. Banks may consider higher quantum of loan on course to course basis.