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Karnataka political saga

In such a political scenario, 16 MLAs of the ruling alliance have resigned, and the BJP is being charged by the JD(S) and the Congress of poaching its MLAs.

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The current political crisis for the Kumaraswamy government in Karnataka is not a surprise for many, rather it was something in waiting since the day the government was formed. Anyone with a little idea of Karnataka politics knew that this government would not last long. All the three major parties in the state must be working on their respective strategies accordingly in the last 13 months.

The on-going crisis has everything which you can imagine in a blockbuster political saga – rebellion of MLAs from both the ruling parties, rebel MLAs moving to the neighboring opposition-ruled state by an aircraft of a company owned by an MP of that party, MLAs holed up in a 5-star hotel, MLAs taking the matter to the Supreme court.

On the face of it, it looks like the opposition party in the state – the BJP has engineered this crisis, which is actually true to a larger extent, but there are other angles of this saga which probably has gone unnoticed in this political storm. Let’s look at why and how this crisis has got created and what are all different angles of this political crisis in the state.

Let’s start from May 15, 2018 – the vote counting day of the election of the current Karnataka assembly – by afternoon, the Bharatiya Janata Party (BJP) was well ahead of the Congress party, but it was looking like it will continue to be well ahead to the Congress, but will fall short of the majority mark. The Congress party, which was upset after losing the 2014 general election and then quite a few state assembly elections to the BJP didn’t want Karnataka to go that way at any cost. After being recently outsmarted by the BJP in Goa where even after having a higher number of MLAs, it had missed out on forming the government – in Karnataka, it came into action even before counting for many constituencies were half way, and hurriedly got into a deal with the Janata Dal (S) with an offer of the Chief Minister post to the JD(S).

When the deal was getting finalized, the JD(S) and the Congress were having a difference of 20+. But by late evening, when all results were out, the final tally was: BJP-105, Congress-79 and JD(S)-37, with the Congress number being more than double of JD(S). The Congress realized that it was a mistake to have been in a hurry and offer the chief minister’s post to the JD(S). Had it waited for the complete results to be out, the JD(S) would have agreed to join hands with it for some decent share in the government without the Chief Minister’s post.

So, here the priority of the Congress party while offering the deal to the JD(S) was not to get into power but to put a break on the BJP’s winning streak and ensure that the BJP didn’t take over another state from it, and it was successful in doing so. But after that, if the Kumaraswamy government did well and lasted long, it would be a gain for the JD(S) and that would be at the cost of the Congress and not the BJP, as the regions and the demography where the JD(S) is strong, the Congress party was the main opponent and not the BJP.

Obviously the Congress doesn’t want this government to last long, but it doesn’t want to be seen as the reason for fall of the government. With not much cooperation from the Congress party, overall the Kumaraswamy government has not been able to come up to the expectations of the people of the state, and so far it is definitely not a popular government. In the recently held general elections, the Congress and the JD(S) suffered their worst-ever performance even after contesting the election together. Though this was largely attributed as a mandate for the Narendra Modi government and was in sync with the national mood, in Karnataka it was also taken as a feedback for the Kumaraswamy government’s performance. So, probably this was the right time for the Congress party to let this government fall, but still it was not be willing to engineer this overtly.

Meanwhile, the BJP has been claiming since May 2018 that the Kumaraswamy government will not last long and the BJP would replace it. But it was not successful in convincing enough MLAs of the Congress and the JD(S) to come over to its side so that the government fell. Suddenly in July 2019, one after another MLA from the two ruling parties started revolting. So, what happened suddenly? There seems to be the following reasons for it – the BJP state unit was probably on hold till the general elections were over, and it came into action after it got over.

When the BJP restarted its Operation Lotus, some of the MLAs of the Congress party and the JD(S) found the BJP better for their future political career and an immediate opportunity to grow fast in their career. But there is one another angle to this saga – If we look at the list of the MLAs from the Congress party who have resigned, it gives a clue that probably the Congress state leadership has used the BJP’s Operation Lotus to work on its own plans. At least four to five of this list are either close associates of former chief minister Siddaramaiah or are senior leaders, who won’t just walk out of the party. This suggests that there are more angles and deeper insights to this crisis.

Let’s look at this political crisis in the state from the point of view of the three political parties in the state

and what could be their respective strategies in the current scenario.

The Congress party: Its initial plan to stop the BJP from coming to power in the state is successfully over. For quite some time now, the Congress party would be strategizing to either to push the JD(S) to the point where it agrees to hand over more power to the Congress and probably the chief minister’s post as well, or let this government fall.

The BJP’s renewed Operation Lotus has provided the Congress the opportunity to work on its strategy without taking any blame for troubling the Kumaraswamy government. If we look at the list of the Congress MLAs who have resigned, it seems the Congress state leadership has giving its nod to some of the rebel MLAs to ensure the count reaches to a number, where the Kumaraswamy government cannot survive.

There can be the following two strategies, the Congress party might be working on. Save the Kumaraswamy government by bringing back some of its rebel MLAs. If the Congress party decides on this, and is successful in doing so, it should be bargaining for plumb ministries for all of them and probably a deal of rotation-based chief minister’s post in proportion to the strength of the two parties in the assembly – two years to the JD(S) and the remaining three years to the Congress party.

Let the government fall, and let the BJP take the blame – this is the other scenario which the Congress party would

be looking at it to let the Kumaraswamy government fall, and have the blame go to the BJP. And post that, let the BJP form the government with a razor thin majority. Now, if we look at the list of the resigned Congress MLAs, there are at least 3-4 who are close associates of former chief minister Siddaramaiah and there are couple of senior Congress leaders whom the Congress can bring back to its fold and field in the by-election.

Apart from the constituencies which these leaders represent, there are some constituencies where the JD(S) and the Congress have strong support base, and the BJP is a third force. For this reason, even if the BJP fields the rest of the MLAs, 4-5 of these MLAs may fail to get re-elected. So, that means, after the by-election, there will be a high probability of the BJP government falling. This will be the most favorable scenario for the Congress party – any anti-incumbency will be against the JD(S) and the BJP, BJP will get blame for destabilizing the JD(S)-Congress government. The JD (S) will get the blame for not running the government satisfactorily and not fulfilling the expectations of the people of Karnataka. Overall, in such a scenario, if a fresh election takes place, the Congress party would be better placed than the other two parties in the state.

The BJP: It has the sympathy of the people for not getting to form the government even though it won a higher number of seats than the other two parties and was quite close to majority. To add to it, the 13-month-old JD(S)-Congress government has been marred by internal friction and open criticism of each other. Overall, the government has not been popular. In the recently held general election, the BJP swept the state by winning 25(+1 independent) out of 28 parliamentary constituencies, the Congress and the JD (S) won just one each.

In such a political scenario, 16 MLAs of the ruling alliance have resigned, and the BJP is being charged by the JD(S) and the Congress of poaching its MLAs. If the Kumaraswamy government falls, and the BJP forms the government after that, it have a thin majority government and there will be a probability of it not surviving beyond the by-election for the assembly constituencies getting vacated by these resignations. Considering this fact, the BJP must be looking either to break away more of the Congress, JD(S) MLAs or go for fresh elections. The BJP may opt for elections – where it can go with a high moral ground and can blame the JD(S) and the Congress party for not honouring the people’s mandate and forcing the state to be in a state of political instability for 13 odd months.

The JD(S): It’s very clear that the 13 month old Kumaraswamy government is not popular in the state. Chief Minister

Kumaraswamy has often complained in public that the Congress is not allowing his government to function. The JD(S) leaders even believe that the Congress party has not done enough to contain its rebel MLAs. In the current political scenario, it is only the JD (S) which is trying hard to save the government, so that it gets some time to improve the image of its government. And in case the government does not survive this crisis, the JD (S) must be looking for a scenario where it could blame the Congress not only for allowing his government to function properly but for the fall of the government as well and play victim to get sympathy of the electorate.

(Rahul Vatsa is a researcher. The views expressed are personal. He can be reached at [email protected])

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Rajnath: I pray for early release of Abdullahs & Mehbooba from detention

Rajnath Singh drew accolades in Kashmir while he was the Home Minister in the previous government under Prime Minister Narendra Modi, for his uprightness and kindness.

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New Delhi, Feb 22 : Defence Minister Rajnath Singh on Saturday said that he is praying for the early release of three former chief ministers of Jammu & Kashmir from their detention and hoping that they will contribute to normalizing situation in Kashmir.

Dozens of politicians, including three former chief ministers — Farooq Abdullah and his son Omar Abdullah of National Conference (NC) and Mehbooba Mufti of People’s Democratic Party (PDP) — were placed under preventive detention soon after the Modi government reorganized and bifurcated Jammu and Kashmir state into two Union Territories on August 5 last year.

Though most of the politicians have been released since then, the three chief ministers and a dozen politicians remain detained. While Farooq Abdullah was booked under the stringent Public Safety Act (PSA) in September, Omar and Mehbooba were also recently detained under the same law. The government cited their provocative statements and threats issued before the nullification of Article 370 of the Indian constitution which granted special status to Jammu & Kashmir state.

In an exclusive interview to IANS on Saturday, Defence Minister Rajnath Singh said, “Kashmir has been peaceful. The situation is improving rapidly. Along with the improvement, these decisions (release of politicians from detention) will also be finalized. The government has not tortured anyone.”

Defending the government’s decision, the Defence Minister said that certain steps had been taken in the interests of Kashmir. “Everybody should welcome it,” he said.

Singh said he will pray for the early release of the Abdullahs and Mufti from their detention. “I also pray that once they are out, they work and contribute towards improvement of the situation in Kashmir,” the Union Minister said.

Rajnath Singh drew accolades in Kashmir while he was the Home Minister in the previous government under Prime Minister Narendra Modi, for his uprightness and kindness.

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Research and development activity to get hit as WD benefit to cease from FY21

According to experts, R&D activity is a key proponent of the ‘Make in India’ strategy and to further expand the manufacturing sector in the country.

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New Delhi, Feb 19 : India Inc’s R&D activity might get adversely impacted as weighted deduction (WD) benefits, including those on capital expenses, stand withdrawn from the next fiscal.

Till now, the Income Tax Act allowed for weighted deduction for all R&D activities.

However, four years back a sunset provision was introduced in the Budget on the availability of weighted deduction from April 1, 2020.

This deadline was expected to have been extended in this year’s Budget. However, that did not happen.

“The weighted deduction was a key reason for entities to invest in R&D infra. This withdrawal will impact future investments in this area,” said Amarjeet Singh, Senior Partner, International Tax and Regulatory, KPMG in India.

According to experts, R&D activity is a key proponent of the ‘Make in India’ strategy and to further expand the manufacturing sector in the country.

Besides, R&D investments into India have grown with many MNCs establishing their research bases here.

“The ‘Make in India’ programme has got the booster of a reduced tax rate. Similarly, had the government continued with the weighted deduction for R&D, it would have surely ensured that India marched ahead both in manufacturing and in the corresponding R&D,” said Gukul Chaudhri, Partner, Deloitte India.

“So, while India may not lose its tag as the R&D lab of the world, the availability of weighted deduction would have ensured that India continued as one of the most attractive destinations for R&D in the world,” Chaudhri added.

The Finance Act, 2016, restricted the availability of expenditure incurred on scientific research to 150 per cent from April 1, 2017, and no weighted deduction from April 1, 2020.

“Globally, most countries are encouraging R&D activity as it generates new ‘intellectual property’ (IP), which in turn creates sustainable revenues. Such IP or new product gives rise to a new industry and other supporting activities,” said Samir Kanabar, Partner, Tax and Regulatory Services, Ernst & Young.

“In India, several sectors like auto, pharma etc. have invested substantially in R&D facilities to develop new IPs, patents and hence, a new tax regime to boost R&D was a major expectation,” Kanabar added.

However, Suman Chowdhury, President, Ratings, Acuite Ratings and Research, said that the reduction in weighted tax deduction will not have any significant effect on India Inc’s R&D activity.

“India’s R&D activity has held steady at 0.7 per cent of GDP over 5 years and no visible signs of positive outcomes were seen emanating from private enterprises despite such benefits,” Chowdhury said.

“Nevertheless, corporates now enjoy a reduced effective corporate tax structure, which should more than compensate for the loss, at least for the manufacturing sector. Service oriented enterprises, whose business model thrives on innovation, do not require incentives to do R&D in our opinion,” Chowdhury added.

(Rohit Vaid can be contacted at [email protected])

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AGR risk for GAIL, OIL and Powergrid stays: Fitch

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New Delhi, Feb 19 : India’s telecom-related regulatory dispute still is event risk for GAIL, OIL and Powergrid, Fitch Ratings said on wednesday.

Fitch Ratings continues to treat any payments that three India-based companies – GAIL (India) Limited (BBB-/Stable), Oil India Limited (BBB-/Stable) and Power Grid Corporation of India Ltd (BBB-/Stable) – may have to make under a demand notice from the Department of Telecom as an event risk for the companies’ ratings.

Fitch is not taking immediate rating action on the three companies, as the Supreme Court of India allowed the companies to withdraw their clarification applications on February 14, 2020, and resolve their dispute with Department of Telecom outside the court.

This is in stark contrast to the court’s decision to demand immediate payments from the telecom companies that are also involved in the dispute, Fitch added.

“We expect the three companies to eventually resolve the dispute, although resolution timing is uncertain. A speedy solution is important to prevent disrupting the companies’ investment plans and damaging their performance. The three companies are considering an appeal against the demand notices. We understand that they have the option to resolve the matter through alternate dispute-resolution mechanisms available to state-owned enterprises. This is in addition to the legal options available to telecom license holders in general,” it said.

The Department of Telecom has issued demand notices to GAIL, OIL and POWERGRID for Rs 1,831 billion, Rs 480 billion and Rs 220 billion, respectively.

The notices include license fees on non-telecom revenue and additional interest and penalties on the license fees. However, the three companies’ telecom-related revenue is insignificant, at around Rs 0.5 billion, Rs 0.01 billion and Rs 23 billion, respectively, for the same time period as the demand notices.

The three companies have created telecom infrastructure for internal use and have obtained national long distance and Internet service provider licenses to rent out spare capacity. They maintain that their licenses differ from the unified access licenses held by telecom companies, hence, the court’s decision on adjusted gross revenue for telecom companies does not apply to them.

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