Author: Explains

 

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Note4students

It is a very crucial technology. It is likely to have unprecedented impact on mankind. UPSC in last few years have asked a number of Questions on Land-mark developments and Since it is a revolutionary development, it is important for mains 2017.

What is CRISPR?

1. It is a revolutionary gene editing technique that scientists have borrowed from nature.
2. CRISPRs (clustered regularly interspaced short palindromic repeats) are sections of DNA, while CAS-9 (CRISPR-associated protein 9) is an enzyme.
3. Bacteria use them to disable attacks from viruses.

Working of the CRISPR

1. Crispr scans the genome looking for the right location and then uses the Cas9 protein as molecular scissors to snip through the DNA.
2. Cas9 endonuclease – guide RNAs direct it to a particular sequence to be edited.
3. When Cas9 cuts the target sequence, the cell repairs the damage by replacing the original sequence with an altered version.
4. Unlike other gene-editing methods, it is cheap, quick, easy, safer and more accurate to use because it relies on RNA–DNA base pairing, rather than the engineering of proteins that bind particular DNA sequences.

What is Genome Editing?

1. It is a type of genetic engineering in which DNA is inserted, deleted or replaced in the genome of an organism using engineered nucleases, or “molecular scissors”.
2. These nucleases or enzymes create site-specific double-strand breaks (DSBs) at desired locations.
3. The induced double-strand breaks are repaired through end joining or recombination, resulting in targeted mutation.

CRISPR/Cas9 Applications

Arguably, the most important advantages of CRISPR/Cas9 over other genome editing technologies is its simplicity and efficiency.

Basic Science

To date, the CRISPR/Cas9 gene editing tool appears to work in nearly every organism, from micro-organisms to monkeys, and in every cell type: kidney, heart and those, like T-cells, that researchers had previously found difficult to modify.

Agriculture

Some of the earliest papers using CRISPR/Cas9 for gene editing focused on crops important for agriculture such as rice and wheat. It was realized early on that this system could be utilized to specifically alter the DNA of these crop species to improve traits like disease and drought tolerance.

Disease Modeling

Disease modeling using animals has been a hurdle for study of many types of human diseases due to the difficulty in generating genetically modified animals that accurately recapitulate human pathology. The process was inefficient and inaccurate or simply impossible to do. CRISPR-Cas9 has allowed for generation of transgenic animals like rats, monkeys and other animals which are more suitable for human disease modeling than mice and thus permit better drug-development tests.

Gene Therapy

In 2014, CRISPR-Cas9 was used in mice to correct a mutation associated with a human metabolic disease called tyrosinaemia (Yin et al., 2014). It was the first use of CRISPR/Cas9 to fix a disease-causing mutation in an adult animal and an important step towards using the technology for gene therapy in humans.

Concerns related to CRISPR Tech.

1. CRISPR is basically knock out strategy to silence the gene by inhibiting the RNA polymerase activity inside the nucleus. It’s still in the nascent stage, so it would be hard to comment about the major disadvantages
2. But it’s very labour intensive and high cost oriented technique than RNA interference which provides a complete gene knock down within the cytosol with higher efficiency.

The Way Forward

1. CRISPR/Cas9 gene editing technology is being touted as one of the biggest biotechnology breakthroughs of the century
2. This new technology is a powerful tool for manipulating the genomes of not only mice but also somatic and embryonic stem cells from other species, including humans.
3. It is likely that the refinements of these systems will continue and that they will be adapted in new ways to create ever more sophisticated animal models for and genetic therapies for treating human diseases.

Question

Q.) “CRISPR technology is much faster, yield better results, and is relatively easy to do.” Examine.

Source

http://cellculturedish.com/2016/05/crispr-cas9-system-applications/

https://www.taconic.com/taconic-insights/gems-design/crispr-genome-engineering-advantages-limitations.html

https://www.jax.org/news-and-insights/jax-blog/2014/march/pros-and-cons-of-znfs-talens-and-crispr-cas

Wikipedia
Quora

Note4students

This technology is in its early stages of development. It has become more important due to its relevance in agriculture sector. As, India has many issues(For example, late monsoon) related to agriculture sector. This technology can become solution to these problems in future.

What is Cloud Seeding?

1. Cloud seeding is a form of weather modification, a way of changing the amount or type of precipitation that falls from clouds, by dispersing substances into the air that serve as cloud condensation or ice nuclei, which alter the microphysical processes within the cloud.
2. The usual intent is to increase precipitation (rain or snow), but hail and fog suppression are also widely practiced in airports.
3. The history of cloud seeding has experienced uncertain results because it can never be known whether a cloud that rains after seeding might have rained anyway. This is because seeding is performed on clouds that look like they have some potential for producing rain.

Cloud Seeding Methods

There are three cloud seeding methods: static, dynamic and hygroscopic.

1. Static cloud seeding involves spreading a chemical like silver iodide into clouds. The silver iodide provides a crystal around which moisture can condense. The moisture is already present in the clouds, but silver iodide essentially makes rain clouds more effective at dispensing their water.
2. Dynamic cloud seeding aims to boost vertical air currents, which encourages more water to pass through the clouds, translating into more rain [source: Cotton]. Up to 100 times more ice crystals are used in dynamic cloud seeding than in the static method. The process is considered more complex than static clouding seeding because it depends on a sequence of events working properly. Dr. William R. Cotton, a professor of atmospheric science at Colorado State University, and other researchers break down dynamic cloud seeding into 11 separate stages. An unexpected outcome in one stage could ruin the entire process, making the technique less dependable than static cloud seeding.
3. Hygroscopic cloud seeding disperses salts through flares or explosives in the lower portions of clouds. The salts grow in size as water joins with them. In his report on cloud seeding, Cotton says that hygroscopic cloud seeding holds much promise, but requires further research.

Pros of Cloud Seeding:

(1) It creates rain, providing relief to drought-stricken areas

Of course, this is the best advantage of cloud seeding as it is its main purpose after all. Offering the ability to reduce the impact of droughts by and bring stimulating rain is very powerful. It can lead to more crop yields, and the best part is, this could occur in areas that might not have supported crops in the past. This means that this technology has the potential to get rid of future water scarcity and famine for some regions.

(2) It makes a place more hospitable

Due to extreme heat, some parts of the world have become dry, even making them unsuitable to live in or visit. But thanks to cloud seeding, we can increase the probability of rainfall and make these typically dry areas much more hospitable. As a result, these places will be become habitable and will be able to receive more tourists, helping the overall economy. The potential effects of this technique are definitely far reaching.

(3) It would allow for economic growth

If farmers were able to grow and sell more crops, then a region’s overall economy would improve greatly. Aside from agriculture, we have previously mentioned that tourism would also be boosted, where previously inhospitable places would be transformed into desirable holiday spots. The boost in economy would then circulate among the local residents and improve their living conditions.

(4) It can reduce crop damage

The technology of cloud seeding has been effectively utilized in suppressing undesirable forms of precipitation, such as hail, which can cause damage to crops and cities. As you can see, it can alter or modify storm clouds that would produce hail and other frozen forms of precipitation otherwise.

(5) It has the potential to help regulate the weather

Even the best regions to grow crops are facing severe weather, which means that they are still suffering some damage to their produce. Luckily, this technology is stated to have the capability to regulate atmospheric conditions through water vapor, so this problem would also be solved.

Cons of Cloud Seeding:

(1) It uses chemicals that might be harmful.

As cloud seeding basically involves the use of chemicals and putting them in the air, it does have the potential to harm plants, animals and people, or the environment as a whole. The way the chemicals are being used in this technology and would affect the organisms that will be hit by the artificial rainfall is considered its most direct concern. As of yet, scientists and researchers have been able to state the complete effect of this technique. Though silver iodine is not currently known to be hazardous to human health, this might change in the future as more and more research is being conducted and completed.

(2) It can lead to abnormal or unpredictable weather patterns and flooding.

Though cloud seeding is believed to regulate the weather, some people fear that it might ultimately change climatic patterns on the planet. Places that are normally receiving moisture might start experiencing drought due to the artificial process of adding chemicals to the atmosphere to stimulate rain. Remember that once the compounds used by this technology are released into the atmosphere, we will have no control over what type of weather would form afterwards. There are several possible consequences, such as excessive rain that can cause flooding, which means that regions experiencing chronic water shortage would suffer more, as they probably do not have any system designed to deal with floods and other disasters.

(3) It is yet to be fully proven as cost-efficient and effective.

Assessments done on the effectiveness of cloud seeding is not foolproof so far. Since it is used mostly on clouds that already show signs of potential rainfall, it is not known if the technique is actually the reason for producing rain.

(4) It can cause cloud pollution.

As the artificial rain falls, seeding agents like silver iodide, dry ice or salt will also fall. While research on the effects of silver iodide is still ongoing, there have been found high levels of the residual silver discovered in places near cloud-seeding projects, which are considered toxic. As for dry ice, it can also be a source of greenhouse gas that contributes to global warming, as it is basically carbon dioxide.

(5) It is a costly process.

The cost of cloud seeding is indeed astronomical, considering the procedures involved in it, such as delivering chemicals to the sky and releasing them into the air by flare shots or airplanes. Of course, the costs of chemicals add up to the overall amount. The expense we pay for cloud seeding can be justified if the amount of rainfall during the first attempt would thoroughly water crops and saturate the ground, otherwise the process would have to be repeated even up to several times.

The Way Forward

As the procedure is still in its early development stages, a lot of changes to improve it can be expected. Trying to address the problem of drought is an ongoing battle, so as the debates around the world about its use. Determining if cloud seeding is good or bad is definitely not easy, but by taking into account the pros and cons listed above, you will be able to have a better understanding about its functionality and efficiency.

Q.) “Is Cloud Seeding a solution for rising irrigation problems in Indian Agriculture Sector.” Critically examine.

References:

http://www.physics.org/article-questions.asp?id=98

http://science.howstuffworks.com/nature/climate-weather/meteorologists/cloud-seeding1.htm

https://flowpsychology.com/10-pros-and-cons-of-cloud-seeding/

Note4Students

Swachh bharat mission is the one of the pet project of the Prime minister. It is important to trace the development made by the project.

Introduction

1. Swachh Bharat is a campaign by the Government of India to keep the streets, roads and infrastructure of the country’s 4,041 statutory cities and towns and its rural areas clean.
2. The mission is bifurcated into sub-missions as Swachh Bharat Abhiyan (Gramin), under Ministry of Drinking Water and Sanitation, and Swachh Bharat Abhiyan (Urban), under Ministry of Housing and Urban Affairs. It includes ambassadors and activities such as a run, national real-time monitoring and updates from NGOs.

 

Objectives Of Swachh Bharat Mission

1. Elimination of open defecation
2. Eradication of manual scavenging
3. Modern and Scientific Municipal Solid Waste Management
4. To effect behavioural change regarding healthy sanitation practices
5. Generate awareness about sanitation and its linkage with public health
6. Capacity Augmentation for Urban Local Bodies (ULB)
7. To create an enabling environment for private sector participation in Capex (capital expenditure) and Opex (operation and maintenance)

Fact and figures

1. AS OF 2011, ACCORDING TO INDIA’S LATEST CENSUS,1 percent of the country’s 246.7 million households had no latrine on their premises. Of these, a small share used public latrines, and the vast majority—half of all the households in the country—practised open defecation.
2. The United Nations, in a report on water access and sanitation in India released in 2015, said that 564 million of the country’s people still defecated in the open. They accounted for nearly half of the country’s population, and for over half of the 1.1 billion people across the world who practised open defecation. The UN estimated that 65,000 tonnes of uncovered, untreated faeces—equal to the weight of around 180 Airbus A380s—were being introduced into the environment in India every single day.
3. India’s crisis of sanitation has huge costs.
4. The UN estimates that around 117,000 of the deaths of Indian children under the age of five in 2015 were caused by diarrhoea, the incidence of which correlates closely with the quality of sanitation in an area. This means that 10 percent of all deaths under the age of five in the country are due to the disease—among the highest proportions of anywhere in the world.
5. Diarrhoea and other diseases tied to poor sanitation can have debilitating long-term effects, such as malnutrition and stunting. They also have costs in terms of decreased productivity, expenditure on treatment and premature deaths.
6. A 2015 report on the global costs of poor sanitation, co-authored by the charity WaterAid, valued the loss to India’s economy at $106 billion per year, or over 5 percent of its gross domestic product.
7. Sikkim has become the first state to be declared Open Defecation Free (ODF) this year followed by Himachal Pradesh and Kerala.
8. 6 of the top 10 clean cities of 2017 viz.,  Indore, Bhopal, Visakhapatnam, Surat, Tirupati and Vadodara have improved their sanitation rankings in 2017 over the 2016 and 2014 rankings.
9. Bottom 10 clean cities/towns  of India in 2017 are: Gonda (UP)-434, Bhusawal (Maharashtra)-433, Bagaha (Bihar)-432, Hardoi (Uttarakhand)-431, Katihar (Bihar)-430, Bahraich (UP)-429, Muktsar (Punjab)-428, Abohar (Punjab)-427, Shahjahanpur (UP)- 426 and Khurja (UP)-425.
10. Four of the bottom 10 clean cities are from UP, two each from Bihar and Punjab and one each from Uttarakhand and Maharashtra.

Analysis

Important points from cag report

1. The CAG said its audit has brought out planning level weaknesses which were critical for the success of programme.
2. More than 30 per cent of individual household latrines were defunct/non-functional for reasons like poor quality of construction, incomplete structure, non- maintenance,” it pointed out.
3. Nearly Rs 10,000 crore was spent on the rural sanitation programme by the Central government in the five years covered by audit and large scale diversions, wastages and irregularities were noted.
4. “The conceptual frame-work kept changing from supply driven to demand driven and finally to ‘saturation and convergence’ approach, yet the lessons learnt and experimentations through this long journey do not seem to have made much impact on the sanitation status in the country”.
5. CAG said unless implementation is based on realistic planning and is backed by large scale information, education and communication campaigns to bring about behavioural changes in the target population and overall governance at the grass root level improves, mere deployment of resources may not have any significant impact.

Performance analysis

1. The first step in eliminating open defecation is to make sure that people have latrines to use in the first place—
2. On this the mission is making significant headway.
3. To end manual scavenging, these latrines must be of the kinds that eliminate the handling of fresh excreta, and must be used as per design
4. .Maintaining sanitary facilities also require systems to handle the sewage they capture.
5. Manual scavenging exists in the yawning gap between the amount of excreta produced by India’s enormous population and the country’s existing capacity for processing it sanitarily.
6. If that gap is not closed, especially as the government strives to get more than half a billion people who did not previously use latrines to start using them, it will perpetuate the same old practices.

There is also another factor in getting all of India’s households and communities to use latrines, and to take collective responsibility for their upkeep.

1. Many of the current practices responsible for the abysmal state of sanitation in the country are rooted in traditional notions of purity and hygiene—often the same ones that normalise the allocation of sanitation work to the oppressed castes
2. . Transforming sanitation in India will require a large-scale change in these beliefs, yet here again the Swachh Bharatag Mission is faltering.

Funding

1. It has set up Swachh Bharat Kosh, a special fund to seek charitable contributions to the cause. Finance minister Arun Jaitley has already proposed a Swachh cess in the budget, a 2% surcharge on select services to finance and promote initiatives under the flagship programme.
2. But even the government realizes that there is a need to do much more.
3. Recently the Urban Development ministry wrote to all states requesting them to levy a user charge to support solid waste management services.
4. It has admitted that inadequate budget of municipalities can derail the Swachh Bharat initiatives in urban areas. Recently, a committee of the National Institution for Transforming India (NITI) Aayog has also recommended levying a cess on telecom services, fossil fuels like coal and petrol to garner resources for the campaign. 

Social mentality

1. The problem is that rural sanitation policy does not address the real reasons why people do not like to use toilets.
2. Many people in rural India, where 90% of the country’s open defecation occurs, believe that the kinds of toilets the government promotes are impure. There is also substantial concern over what will happen when the pits of these toilets fill up, since emptying a pit is associated with manual scavenging.
3. Unfortunately, the government’s awareness campaigns are not addressing these concerns.
4. in urban areas – where 13% of the households defecate in the open – and where the remaining 1.04 crore toilets are to be built, the progress is nothing to crow about.

 

Conclusion

1. One year down the line, government statistics reveal that it has a long way to go before the goal of eliminating open defecation can be achieved. Inadequate funds, lack of capacity of municipalities and district panchayats to undertake the gargantuan task, an ineffective awareness campaign that has failed to bring about behavioural changes among the people to use latrines, are among some of the reasons that urban experts are citing as factors that could end up derailing the ambitious mission.
2. Government has set an overall target of building roughly 11.1 crore toilets by 2019 as a part of the Swachh Bharat Abhiyan campaign.
3. 3 crore toilets have been constructed so far. So that means about 27% of the target has been achieved. The country still has a long way to go, and the progress made so far needs to be sustained and strengthened further in the new year.

Question

Q.) What are the achievements of Swachh bharat abhiyan. Analyse in the light of CAG remarks on Swachh bharat abhiyan

Note4students

Skill India is one of the ambitious programmes of the prime minister. Many programmes failed achieve its targets due to various reasons. It is essential to understand the shortcomings of the programmes to suggest new paradigm.so performance appraisal needs to be carried out to write answers for elimination of unemployment, elimination of extremism by empowering youth etc.

Introduction

Skill India a flagship programme of government of India has completed one year of its launching. It includes various initiatives of the government like National Skill Development Mission, National Policy for Skill Development and Entrepreneurship, 2015, Pradhan Mantri Kaushal Vikas Yojana and the Skill Loan scheme. It has aim to train impart skill to over 400 million people by 2022. The programme made some head ways in last one year, but it need to be improved to achieve desired goals. Recently government revised this mission.

Fact and Figures

Analysis

1. According to the Sharada Prasad Committee set up by the skill development ministry to review the performance of various sector skill councils.
2. Since it was a scheme where trainees were rewarded between Rs 5,000 and Rs 12,000, the government through the National Skill Development Council (NSDC) overshot its target by training 1.8 million people, and certified another 1.2 million,
3. The second phase or PMKVY 2.0 was launched the following year, with a budget of Rs 12,000 crore to skill 10 million youth by 2020.
4. Of those 10 million, 6 million were to be provided fresh training and 4 million were to be certified for the RPL programme.
5. Sharada Prasad committee observed that, no evaluation was conducted of PMKVY 2015 (the first version of the scheme) to find out the outcomes of the scheme and whether it was serving the twin purpose of providing employment to youth and meeting the skill needs of the industry before launching such an ambitious scheme
6. The committee noted that in its consultations with various stakeholders, all of them said in one voice that the targets allocated to them were very high and without regard to any sectoral requirement. Everybody was chasing numbers without providing employment to the youth or meeting sectoral industry needs.”
7. The report has pointed at apparent overlaps across formations such as the National Skill Development Corporation (NSDC), National Skill Development Authority (NSDA), National Skill Qualification committee (NSQC), National Council on Vocational Training (NCVT) and Directorate General of Training (DGT), and suggested that the ministry address such duplication.
8. Data shows that the NSDC, through its partners, only managed to skill around 600,000 youth till September 1, 2017, and could place only 72,858 trained youth, exhibiting a placement rate of around 12 per cent. Under PMKYV 1, the placement rate stood at 18 per cent.
9. Critics say the focus of PMKVY has been largely on the short-term skill courses, resulting in low placements.
10. The Comptroller and Auditor General (CAG) made a recommendation to the Union government to re-look at the design and operations of the NSDC and National Skill Development Fund to ensure achievement of skill development goals.
11. The CAG report was based on various irregularities and performance aspects of the NSDC.  “NSDC provided financial assistance to partners for meeting their agreed training targets.
12. It was observed that in the years 2010-11 to 2013-14, the percentage of partners, who had not achieved training targets were 57, 77, 83 and 68, respectively. Majority of them also could not achieve the placement targets for the trained persons,” the report had noted.
13. The Sharada Prasad Committee also held the NSDC responsible for poor implementation of the Standard Training Assessment and Reward (STAR) programme between August 2013 and September 2014.
14. Only 8.5 per cent of the persons trained were able to get employment. That is what has been claimed by NSDC. But the real ground reality will emerge only after a detailed survey of trainees trained and placed

Conclusion

1. Skill India is ambitious programme of Government of India. At present India faces a severe shortage of trained workers. Only 2.3% of India’s work force has formal skill training compared to 68% in the UK, 75% in Germany, 52% in USA, 80% in Japan and 96% in South Korea. Hence there is is an urgent need to impart skills in more efficient way. Similarly success of many initiatives like Make-in-India depends on availability of the requisite skilled manpower. Hence Skill India needs concerted attention to achieve desired goals.
2. We need to have a holistic approach to vocational education and skill development by having a defined approach for both short-term and long-term training courses to meet the objectives of the Skill India programme
3. Skill development cannot happen without developing a credible, sound, aspirational, national system, which is quality assured and internationally compatible.

Questions:

Q.) Why did skill India mission failed to achieve its targets

Q.)“We need to have a holistic approach to vocational education and skill development by having a defined approach for both short-term and long-term training courses to meet the objectives of the Skill India programme” evaluate the statement

Note4Students

The Union Cabinet has decided to disallow the use of the red beacon on vehicles on India’s roads. Starting May 1, only vehicles on emergency services, such as ambulances, fire trucks and police cars, will be permitted the use of a beacon from now, a blue-coloured one. For this, the Central Motor Vehicles Rules of 1989 are to be amended, so that the Central and State governments lose the power to nominate categories of persons for the red-beacon distinction.

Introduction

In 2013, a Supreme Court bench had asked the central and state government as to how they plan to remove the VIP culture. It had also directed States to amend the Motor Vehicle Rules to restrict the use of the red beacon and impose an exemplary fine on those who misused it. More than 80000 VIPs are given escort by central and state governments. So the challenge is how to stop the security of such personnel from flashing their sirens. The privileges given to MPs, MLAs, judges at various places cause a lot of trouble for public. Even these places like toll plazas and airports have list of exempted people. The President expressed his wish to not be called with various titles and the PM expressed himself as Pradhan Sevak.

Origin/Cause of VIP Culture

This was a part of the colonial hangover. In India, the beacon became a symbol of VIP and public servants who believe in the arm chair bureaucracy. It was the legacy of a mentality of those who served British Government and treated the natives as slaves. Vehicles with beacon lights have no place in a democratic country. People often find these flashing lights as an example of power and VIP status rather than security aids. Even lower-level politicians and officials misuse the beacons to show off their importance, especially in smaller towns. So, this is a welcome step by Government in order to change the culture to reduce the gap between the ruler and those being ruled. Security should be unobtrusive.

Benefits of the decision

1. It is a blow to the colonial hangover of the arm chair bureaucracy and public servants.
2. The Supreme Court in Abhay Singh v. Union of India case termed red beacons a “menace”.
3. It said, red lights symbolise power and a stark differentiation between those who are allowed to use it and those who are not.
4. A large number of those using vehicles with beacon lights really disregard ordinary citizens on the road.
5. SC also cited that the use of beacon lights on the vehicles of public representatives and civil servants has no parallel in the world democracies.
6. This will reduce the trust-deficit and gap between citizens and leaders/administrators.

What more needs to be done

1. It is a symbolic beginning of ending of the VIP culture in India.
2. We must ban the traffic diversions and road blocks when VIPs pass by.
3. Humble behaviour of leaders in western countries should be popularised in India.
4. Attitude change of the leaders is a must here. Rules cannot be made in every possible situations. Hence conscience is the real guide of a person, especially the leaders.
5. Awareness among citizens of their rights and amongst the leaders of their duties.

Conclusion

1. There should be complete rejection of VIP culture. When the ruling classes refuse to imbibe and embody the concept of political equality as a way of life, there seems to be no alternative other than forcing them to be humble before the public. All leaders and administrators should imbibe such democratic values which are the founding stones of the largest democracy. The removal of beacons is a huge democratic decision. Though the implementation will take time and at the same time awareness generation is also important. Beacon lights shouldn’t become status symbol but should be need based. The VIP culture will take time to go away from mind-set but an initiation has been made which was required for a long time.

Questions

Q.) What do you understand by VIP culture? How has it affected governance in the country? Critically analyse.

References

The Hindu

The Indian Express

Note4Students

Economic Survey 2017 mentioned a new institution PARA (bad bank) which could be utilized to solve the Twin Balance concept. Since it was a controversial institution it has raised debate among experts. A number of op-eds both in favour and against have been written against this proposed Institution. Therefore, we find this topic as a probable topic for mains 2017

Context

The latest Economic Survey has mooted a new idea, PARA, as a solution to the NPA problem.

What is PARA?

1. The Public Sector Asset Rehabilitation Agency or PARA will be an independent entity that will identify the largest and most vexatious NPA accounts held by banks, and then buy these out from them.

Need for PARA?

1. To resolve bad debts on sound economic principles
2. Stressed debt is concentrated in larger companies. Bigger cases are difficult to resolve and needs an independent agency.
3. Banks have difficulty in solving these cases due to lack of coordination, capital etc. Even private ARCs have failed. International practice has shown PARA like organization to be viable to solve TBS problem. E.g. Post East Asian crisis
4. Many of the companies are unviable at current level of debt requiring debt write-downs in many cases.
5. Immediate step is needed because delays are increasing the problem

Ill effects of NPA on the Economy

1. Lenders suffer lowering of profit margins.
2. Stress in banking sector causes less money available to fund other projects, therefore, negative impact on the larger national economy.
3. Higher interest rates by the banks to maintain the profit margin.
4. Redirecting funds from the good projects to the bad ones.
5. As investments got stuck, it may result in it may result in unemployment.
6. In the case of public sector banks, the bad health of banks means a bad return for a shareholder which means that government of India gets less money as a dividend. Therefore it may impact easy deployment of money for social and infrastructure development and results in social and political cost.
7. Investors do not get rightful returns.
8. Balance sheet syndrome of Indian characteristics that is both the banks and the corporate sector have stressed balance sheet and causes halting of the investment-led development process.
9. NPAs related cases add more pressure to already pending cases with the judiciary.

How will PARA work?

It would purchase loans from banks and adopt value maximizing strategy to solve them. E.g. Converting loan (debt) to equity etc. Then the government can recapitalize PSBs.  In this process, losses would have to be paid to the creditors.

The bulk of this burden will fall on government as PSBs are major creditors.

The government can finance this capital by –

Issuing Government Securities.

Capital markets – Private sector can take equity floated by PARA. Government can sell its holdings in PSBs too.

RBI is one of the most highly capitalized banks in the world. Therefore, its excess capital like securities can be transferred to PARA.

International Experience

Issues/Challenges With Bad banks:

Worsen Macroeconomic stability

creation of a bad bank puts a strain on government finances in the short term. Even if the government funds only 20% of stressed assets in the banking system, it would exceed the net market borrowing target in 2017-18 by more than 30%. Achieving committed targets for fiscal deficit and government-debt-to-GDP also becomes difficult for the finance minister.

2. Who will have the majority stake in the bad bank? Will it be the government or private investors?

3. A big chunk of NPAs at PSBs pertains to projects that are viable.

4. Why would taxpayers’ money be used to buy bad loans of private sector? It would be socialisation of the losses of the private sector” who can pay but are not willing to pay.

Way Forward

Set up a bad bank to deal with NPAs at some of the weaker PSBs, instead of one that picks up NPAs from all PSBs.

It would prove less controversial if the government had a majority stake in it.

This must be complemented with other steps.

1. The government must infuse more capital into the better-performing PSBs.
2. It must also create, through an act of Parliament, an apex Loan Resolution Authority for tackling bad loans at PSBs. The authority would vet restructuring of the bigger loans at PSBs.

Conclusion:

Resolution of bad loans and restoring the health of PSBs is among the biggest challenges the economy faces today. It’s a challenge that requires a response on multiple fronts. A bad bank cannot be the sole response.

Question:

Q.1) To solve the Twin Balance problem, Economic Survey has suggested setting up of a Centralised Public Sector Asset Rehabilitation Agency. Critical discuss whether setting up of an agency like PARA will be feasible?

 

Note4Students

Economic Survey for the year 2016-17 has an entire chapter dedicated to the discussion on Universal Basic Income (UBI). This shows the Importance of this topic. UPSC loves to ask Questions on issues which are debatable and controversial and this Topic certainly meets both of these criteria.

Context

The Economic survey has endorsed universal basic income (UBI) in an annual report. UBI is a “powerful idea” and would be more effective at combating poverty than existing state benefits, according to the country’s 2016-2017 Economic Survey.

What is a Universal Basic Income?

A UBI would mean every single individual, regardless of their identity or economic status, is guaranteed a monthly income, transferred directly into their bank account by the government every month. It has three key components: universality, unconditionality and agency – the last condition as a way to give people a choice in how to spend the transferred money.

Argument Against Universal Basic income

1. Unaffordable-Assuming roughly 700 million people between ages of 18 and 60 will have to be provided Universal basic income of Rs 5000 in India that will be 3.5 trillion rupees, or about 3 per cent of the current GDP. That seems huge and unaffordable for a poor country like India.
2. Disincentive to work– It provides a disincentive to work, which in the grand scheme of things means we produce less as a society. critics state that this system would lead to a reduction in labour, as more people would be motivated to be ‘free loaders’
3. Over-Migration-If a country like India which do not have strong border controls, implements a guaranteed income, it will become a magnet for immigration. Inflow of migrants from countries like Nepal and Bangladesh would increase in India.
4. Impractical: Funding it would require raising tax rates to levels that are not politically feasible. For instance, according to a UK study by Joseph Rowntree Foundation, direct tax rates might have to be 50 per cent.
5. Misuse:The final argument against basic income is that the poor will use the money to fund personally or socially detrimental activities, such as gambling and alcohol consumption.

Arguments in favour of Universal basic income

1.  No direct disincentives: Being unconditional, it does not create any direct disincentives for those who want to work more and live better.
2.  By just letting people have the money and decide what they want to do with it, it gets away from the “nanny state” that so many Market economists despise.
3. Many economists believe that a basic income is a means to provide equal opportunity and counter exploitation.
4. In country like India there is the question of whether the current, multifariously fractured system of welfare, where multiple authorities give out different subsidies (money, food, housing, travel, education, healthcare), guided by their own priorities and targets (the young or the old, the mother or the child, the poor or the indigent), makes any sense. Why not have one universal basic subsidy that covers everything (perhaps except health and education) and let people decide how they will spend it, rather than trying to target subsidies based on our imperfect knowledge of what people need and deserve.
5. The number of extant government “welfare schemes” exceeds 350, though most of those programmes are not much more than a name, an office and a few underemployed bureaucrats. Moreover, many of our bigger schemes, like MGNREGS or PDS, are far from being well targeted or well run. Why not replace these 350 odd schemes by a single Universal Basic Income of, say, Rs 250 a week, which entitles every adult resident to a minimum weekly income as long as they verify their identity using Aadhaar (or in some other way) every week. The verification process will serve the dual purpose of making sure there is no fraud and discouraging the rich, who will find it unpleasant and a waste of time, from claiming a subsidy they don’t need.
6. At the very least, this will reduce poverty and free up the bureaucracy to do other things. But potentially, the benefits could be much larger. For example, the poor, liberated from having to worry about where their next meal or school fee will come from, might plan their lives better and invest more effectively in their children and their businesses
7. Assuming roughly 700 million people between ages of 18 and 60 are provided basic income of Rs 5000, that will be 3.5 trillion rupees, or about 3 per cent of the current GDP. That seems huge and unaffordable. But, the challenge may be surmountable. For instance, all the subsidies meant for the poor are more than 4 per cent of GDP (Centre plus states).Thus compared to subsidies it is a cheaper option.
8. Experiences with direct cash transfers in a range of countries, including Ecuador, India, Mexico, and Uganda, have not provided much evidence of any misuse of cash transfers; in general, the cash is spent on worthwhile goods and services.

What is needed?

1. UBI alone is not sufficient for the overall upliftment of poor. Two distinct sets of reforms are needed:
2. Broad-based economic reforms that would strengthen entrepreneurship, remove barriers to job creation, and increase the returns to human capital investments by the poor.
3. Specific reforms to allow the poor to gain better education and health

What does Economic Survey says on UBI?

1. ES advocated for the concept of Universal Basic Income (UBI) as an alternative to the various social welfare schemes in an effort to reduce poverty.
2. It suggests that a more efficient way to help the poor will be to provide them resources directly, through a UBI.
3. It will be an efficient substitute for a plethora of existing welfare schemes and subsidies.

Why ES say so?

1. Promoting social justice, reducing poverty, unconditional cash transfer that lets the beneficiary decide how she uses the money, employment generation by promoting labour flexibility.
2. It will bring in administrative efficiency as a direct cash transfer through JAM (Jan Dhan-Aadhar-Mobile) platform.
3. It will be more efficient as compared to the “existing welfare schemes which are riddled with misallocation, leakages and exclusion of the poor.
4. It can help to achieve considerable gains in terms of bureaucratic costs and time by replacing many of these with a UBI

Conclusion

Proposals for a universal basic income, fancied by utopian socialists and libertarians, may be premature in the advanced countries. But such schemes should not be dismissed in the developing world, where conditions are such that they could offer an affordable alternative to administratively unwieldy and ineffective welfare programs. Basic incomes are no panacea; but for overworked developing-country citizens living in extreme poverty, they would certainly be a relief.

Questions:

Q.1) Examine the arguments in favour and against introduction of universal basic income?

Q.2) Critically comment on recommendations made by the Economic Survey in introducing a universal basic income in India.

Note4Students/Syllabus Mapping: GS3

The GST is undoubtedly one of the single biggest historic tax reform ever since independence so much so that it aims to alter the dynamics of the current indirect taxation system and render it a single, unified, modern, transparent and uniform structure nationwide. This article will look into the nuances of this tax reform from various perspectives. Though a few questions have been asked earlier but its final rollout on July 1 2017 with its multiplier implications and impediments in implementation makes it a hot topic for analysis in this year CSE Mains.

 

What is GST—One nation one tax!

1. GST is a simpler, modern and more transparent taxation system that will do away with 500 different taxes levied across the country’s 29 States and seven Union Territories.
2. GST is essentially a consumption tax and is levied at the final consumption point.
3. It would comprise of two components, a central GST and a state GST.
4. It is levied on the value addition and thus avoids the cascading effect or tax on tax which increases the tax burden on the end consumer
5. It is collected on goods and services at each point of sale in the supply line
6. The GST that a merchant pays to procure goods or services can be claimed as input tax credit later against the tax applicable on supply of goods and services

Key Provisions of GST:

1. The GST with principle of One Nation and One Tax, and a unified market could make the movement of goods freer across the country.
2. GST was implemented through Constitution (One Hundred and First Amendment) Act, 2016, following the passage of Constitution 122nd Amendment Bill.
3. GST will be taxed at 0.25%, 5%, 12%, 18% and 28%. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. The implementation has been complex, as it has a five layered taxation slab for various commodities.
4. Transactions made within a single state will be levied with central GST (CGST) by the central government and State GST (SGST) by the state government.
5. For interstate transactions imported goods or services, an integrated GST (IGST) is levied by the central government.
6. GST is a consumption based tax, so taxes are paid to the state where the goods or services are consumed and not in the state in which they are produced.
7. As a parallel development, a Goods and Services Tax Network (GSTN), a nonprofit organization has been formed to create a platform for all the stakeholders, government, tax payers to collaborate on a single portal.
8. GST tax of 28% on luxury goods is the highest in the world. Even UK and USA don’t have GST higher than 17%.
9. Most economists forecast inflation to come down as GST rates for most goods have been fixed at a lower rate.
10. GST laws focus on anti-profiteering measures-the benefits of the reduction in the tax rate and input credit shall be passed on by a commensurate reduction in prices.

One Nation- One Tax but Multiplier Benefits:

1. End of Cascading of Taxes: It seeks to eliminate inefficiencies in the tax system which results in ‘tax on tax’.
2. A Destination-based Tax on consumption, as per which the state’s share of taxes on inter-state commerce goes to the one that is home to the final consumer, rather than to the exporting state.
3. The central and state governments will witness tax buoyancy and the tax collection costs will reduce significantly.
4. Exports will become competitive.
5. Make in India programme will get a major fillip due to increased ease of doing business and protection from cheap imports.
6. All these benefits will add to the GDP growth of India in the medium and long run.
7. The Prime minister added that its introduction was not just a tax or economic reform, but a social reform that would nudge people on the path to honesty and benefit the poor the most.
8. The practice of giving out kachcha (informal) bills would become history as the GST presented an opportunity to stop black money and corruption, and give people a chance to do honest business
9. It would end the spectre of tax terrorism and Inspector Raj, as the technological backing for the GST would do away with grey areas and reduce the discretion enjoyed by the bureaucracy over tax matters
10. GST will also lead to economic integration of the country
11. The GST could make the movement of goods freer across the country.
12. GST seeks to align the Indian taxation system with the global standards and norms particularly with USA and Europe.

What is in the kitty of GST? Which Indirect taxes get subsumed and which are not?

SIMPLE WORKING OF GST:

GST – How does it impact various sectors?

 

For Business and Industry	For Central and State governments	For the consumer	Disadvantages of GST
Easy compliance	Simple and easy to administer- easier tax governance	Single and transparent tax proportionate to the value of goods and services	Services are expected to become costlier as the expected GST rate would be higher than the existing service tax rate of 15%.
Uniformity of tax rates and structures	Better controls on leakage and reduced corruption	Relief in overall tax burden	Supply of certain category of goods may come down depending on the effective rate of indirect taxes.
Removal of cascading	Higher revenue efficiency		Problems of anti-profiteering clause
Improved competitiveness	Will boost GDP on the longer run		Regressivity inherent in GST would result in hurting poor the more
Gain to manufacturers and exporters	Balances fiscal federal relations – cooperative federalism
Ease of doing business enhanced	Facilitate Make in India

Apprehensions/ challenges in Implementation:

IT Preparedness and Infrastructure

1. It cannot be assured whether all the States and Union Territories in India are currently equipped with infrastructure and requisite manpower.
2. Except few states like Karnataka, Maharashtra and Gujarat, who have pioneered the E-Governance model, we have not heard about this trend in other States and Union Territories.

Officers Training

1. The unlearning of the old law and learning GST provisions is imperative. GST law heavily banks on Information Technology and hence proper training has to be given to the departmental officers for effective usage and implementation.

New Registrants

1. Transition of existing registered assesses and registration of new assesses and resolving of migration issues is a big challenge.

Pending Cases/ Past Disputes

1. There are many disputes pending in the context of present indirect tax laws (both Centre and State), which are at various stages, viz, adjudication or appellate level. Government should find ways and means to resolve these disputes.
2. A possibility of introducing a dispute settlement scheme on the lines of Kar Vivad Samadhan Scheme needs to be explored which would enable the litigants to resolve pending matters.

Tax Administration

1. With GST, both the centre and state level officers are expected to work under one roof and in tandem by giving up their differences.
2. Cadre differences may arise, as presently in Central Excise and Service Tax, the departments are headed by officers of IRS, whereas in the state commercial departments, the commissioner is from IAS and his subordinates would be from State Administration Service.

Anti- Profiteering Clause

1. The idea of rolling out GST along with an anti-profiteering clause is to prevent the possibility of businesses and traders retaining the benefits of tax reduction to themselves rather than passing them on to the consumers.
2. The steps are being taken to make sure that businesses and traders pass on the benefits to the consumer-such as setting up an anti-profiteering authority and creating awareness among traders and consumers.
3. A National Anti-profiteering Authority (NAA) is to be set up to ensure that the benefits due to reduction in costs are passed on to the consumers.

The anomaly of India’s tax revenue

1. Indirect taxes, now made up chiefly of the nationwide goods and services tax (GST), are inherently regressive. They hurt the poor more than the rich. GST is a consumption tax. For the poor, almost their entire income (or more) is spent on consumption, and is hence subject to the tax.
2. The rich have a big share of their income go into savings, which is not taxed (or even subsidized). With the widening of GST and higher tax slabs, the unfairness of the indirect system becomes more acute. The global average rate for consumption taxes is 16%. Most Asian countries have rates of 10-15%. But India’s modal rate is 18%. This hurts the poor much more.

Operational Difficulties

1. The requirement that taxpayers must register in each jurisdiction in which they operate. If a unit operates in several states, it must register in each state in which it operates, and be taxed in each jurisdiction, and also maintain records that allow the tax paid in each jurisdiction to be audited.

Far from Ideal GST 

1. It is very far from being universal and according to some it excludes 50% of the gross domestic product. Major items such as petroleum, natural gas, alcohol, electricity, and real estate/construction are left out.
2. The second flaw is too many rates: 3% (on gold), 5%, 12%, 18% and 28 %, plus an extra GST cess on some luxury or socially undesirable items. Multiple rates are an invitation to misclassification and disputes/harassment arising from suspicion of misclassification. This reduces the efficiency gains which were expected to generate higher growth.

Way forward:

1. The initial collection figures for GST in India already show higher than expected revenue. The GST Council should set up an expert group that could assess the performance of the system based on results of the first year and work on a revised GST rate structure towards desirability of migrating to fewer rates. A Progressive and universal coverage should be the step ahead. A systematic effort should be launched to correct deficiencies over time through the mechanism of the GST Council. The long answer then is to focus on correcting the unfairness and skew in goods and services tax (GST), with greater redistribution.

Conclusion:

1. Introduction of GST is a very good start. Reforms, however, do not end here. Certain features can be further streamlined. Rolling out GST on 1 July was the result of more than a decade of discussions, tussles among states, and between states and the Union government, instances of give and take, lobbying and compromise.
2. The GST that is being rolled out is far from ideal. The guiding principle was that it is better to have a good GST instead of waiting endlessly for the best one. Despite its imperfections, Policymakers must continue to bet on GST to achieve various economic goals in one stroke. Continued follow up of structural reforms as big as this one definitely needs diligence and reinvention for rich dividends ahead.

Note4Students

There is intense debate on labour market reforms in India today. It is argued that but for restrictive labour laws that create inflexibility in the labour market, the Indian economy would have experienced a higher growth of employment. The government has come up with some Labour reforms like: Deen Dayal Upadhyay Shramev Jayate Karyakram, new social security schemes, convergence of social security schemes with labour welfare etc.

Context/Introduction

• The body of legislation that shapes the industrial and labour environment in India is huge. Here is a minuscule sampler:
• Minimum Wages Act, 1948; Trade Unions Act, 1926; Contract Labour Act, 1970; Weekly Holidays Act, 1942; Beedi and Cigar Workers Act, 1966.
• These and much more form a crisscrossing network of chaotic, strangulating, overlapping and often-contradictory laws that are crying out for overhaul.
• Despite low wages, India is not a global manufacturing hub, even while being one of the fastest growing service sectors in the world. India’s service sector has grown at an annual rate of 9% since 2001, and contributed 64% of the GDP in 2015-16.The industrial sector, meanwhile, only recorded a negligible increase and contributes nearly half at 20% of GDP.

Despite the availability of human resources, India has not been able to leverage its demographics for industrial development.

Issues in Indian labour laws

Archaic laws

1. In the pre-independence period, British colonialists in India suppressed labour rights, trade unions and the freedom of association among workers. As a result, labour activism became a part of the Indian freedom struggle.
2. In 1950, the newly framed Constitution of India looked to undo these wrongs by including fundamental labour rights, along with complex labour laws. These laws made hiring additional workers increasingly difficult.
3. Despite several decades of economic progress, these laws have not been amended or reformed in order to foster a friendlier climate for business.

Labour productivity

1. India has low labour productivity in comparison with other developing nations.
2. As a result, in the early days of offshoring, Western firms showed greater interest in setting up manufacturing facilities in Thailand, Mexico, China, Vietnam and Philippines rather than in India.
3. All of these countries had as bad a record of bureaucratic corruption as India did at the time, but labour productivity was found to be higher in those countries.

Politics

1. In Kerala alone, for example, there were nearly 363 hartals between 2005 and 2012, causing loss of so many working days
2. In addition, in the 1970s and 1980s, Indian politics was dominated by socialists who created the impression that profit making by private enterprises is undesirable.
3. Policymakers also further strengthened India’s complicated labour laws

Complexity

1. Labour is a subject in concurrent list of the Constitution of India. Thus both centre and states can enact laws on labour matters
2. There are about 45 central government laws and more than 100 state statutes, sometimes overlapping or contradicting

Rigidity

1. India has one of the most rigid labour regulatory frameworks in the world
2. Example- Industrial Disputes Act of 1947 stipulates that a firm with 100 employees or more cannot close down without government permission
3. Such laws curtail the growth of a firm by forcing it to hire fewer workers and remain small

Cost of compliance

1. There are also high costs involved in complying with several labour laws
2. Example- under the Factories Act, firms with 10 or more workers and firms which use electric power are required to keep records and file regular reports on matters such as overtime work, wages, attendance, sick leave and worker fines.

Need For Reforms

1. As early as in 2002, the Second National Commission on Labour suggested the formulation of labour codes similar to those in Russia, Germany, Poland, Hungary and Canada
2. The commission recommended that labour legislation be divided into five broad areas: industrial relations, wages, social security, safety and welfare, and working conditions.
3. NITI Aayog has pressed for ‘substantive’ reforms in labour laws to take the country out of the current low-productivity and low-wage jobs situation.
4. It is predicted that the size of India’s workforce will swell to 249 million by 2050, while China’s is set to decline to 166 million during the same period.

Recent Reforms

1. Recently Govt. unveiled a new roadmap, including measures to end ‘Inspector Raj’ with a system that is expected to sharply curb the element of discretion with labour inspectors and a single window compliance process for companies on labour-related issues.
2. As a step in this direction, all 1,800 labour inspectors will be disallowed from swooping down on companies and instead, a computerised system will randomly send them on inspections, based on data trends and objective criteria.
3. Following inspections, they will have to upload their reports within 72 hours and cannot modify them thereafter.
4. Govt. also unveiled nearly half-a-dozen schemes, including a Shram Suvidha Portal where employers can submit a single compliance report for 16 labour laws, a new web-based labour inspection system, unique account numbers for members of the EPFO, a revamped Rashtriya Swasthya Bima Yojana as well as a new skill development and apprenticeship scheme.
5. Sharply streamlined the cumbersome compliance process, manufacturers can now register online at the Shram Suvidha portal and file a self-certified single compliance report for 16 Central labour laws.
6. In return, labour inspections by four central agencies — EPFO, Employees’ State Insurance Corporation, Central Labour Commissioner and Director General of Mines’ Safety — will be based on a computerised list of units that are picked up from this database.
7. A panel, headed by Finance Minister Arun Jaitley, is mulling converting 44 labour laws into four simplified codes. They relate to industrial relations, wages, social security and safety.

Criticism for the Reforms

1. Any dilution of the existing laws will compromise employees’ welfare and they think the government is insisting on changing labour laws without realizing that it is not a short cut for job creation
2. The government said that 30 million organized sector workers are getting less than 15000 a month. So, by changing the laws you will put these poor workers in
   further trouble.
3. The trade unions have opposed the provision of deducting 8 days salary for one day of strike.

Way ahead:

1. Legislative reforms such as those taken up recently by central government and states such as Rajasthan, Gujarat, MP are very much needed
2. Empowering women to enter the workplace and providing them additional support
3. Physically challenged- Increasing current 3% reservation in governmental and government-funded jobs. Also ensuring that workplaces are disabled-friendly
4. Example- Karnataka granted exemptions to IT industries from the Industrial Employment (Standing Orders) Act of 1946. It undermines the employer’s autonomy in determining the terms of employment, working hours, leave grant and similar matters
5. Providing social security to workers in the informal sector would also pave the way for a more satisfied and productive workforce
6. Training and skilling- India has a demographic advantage but in order to utilize this dividend, India needs to invest heavily in training its talent
7. India’s supply of labour presently outnumbers industry’s demand for them. As a result, the government and manufacturing firms need to invest in training and skilling

Conclusion:

1. The guiding principle for India’s labour policy reformers should not merely be ring fencing jobs but safeguarding workers through social assistance, re-employment support (such as that which is provided in several Western nations) and skill building, and supporting employers in employee training and development.

Model Question

Q.) Recent Labour Reforms balance the concerns of the industries and the workers. Critically evaluate.

Q.) “Success of make in India program depends on the success of Skill India programme and radical labour reforms.” Discuss with logical arguments.(2015 GS Paper III)

References

http://labour.nic.in/

http://indianexpress.com/article/india/india-others/live-prime-minister-narendra-modi-announces-labour-reforms/

http://www.livemint.com/Politics/OeEG5RZFnP7xEX61lV9rYM/Niti-Aayog-presses-for-substantive-reforms-of-labour-laws.html

http://www.thehindu.com/business/budget/india-has-second-fastest-growing-services-sector/article6193500.ece

 

Note4Student

India offers today the world’s largest market for PPPs. As the PPP market in infrastructure matures in India, new challenges and opportunities have emerged and will continue to emerge. To address this Kelkar committee submitted its report “Report on Revitalising and Revising PPP models in Infrastructure” and Infrastructure vital part of GS 3 . Makes this topic important from exam point of view.

Definition

Standards & Poor definition of PPP is any medium to long term relationship between public and private sectors, involving sharing of risks and rewards for multi sectorial skills, expertise and finance to deliver desired policy outcomes.

Introduction

According to the World Bank, India is one of the leading countries in terms of readiness for PPPs.

Rapid Urbanisation, increase in per capita income and high industrial growth led demand for basic infrastructure such as water supply and sanitation, seamless transportation and energy. To fulfil these demands India has systematically rolled out a PPP program with increasing budgetary allocation in 12th FYP for the delivery of high-priority public utilities and infrastructure.

Context

According to the data from the Ministry of Statistics and Programme Implementation’s (MOSPI) Online Computerised Monitoring System for projects and infrastructure monitoring, of 351 ongoing projects costing above Rs 1,000 crore in the infrastructure sector, 127 projects were delayed and 115 were in cost overruns, and 51 were showing both time and cost overruns as of February 2017.

Why PPP and its challenges

1. Investment in infrastructure in India has posed a challenge in the last few years.
2. Reports of delayed or stalled infrastructure projects.
3. Rate of growth of Gross Fixed Capital Formation (GFCF) have been disappointing.
4. Inadequate acceleration in private sector projects due to unfavourable market conditions.
5. lack of appetite for fresh investment by promoters and
6. Delays in obtaining environmental clearances.
7. Slowdown in delivery of projects has been attributed to over regulation, problems in land acquisition and scarcity of funds.
8. “Obsolescing Bargain”-the loss of bargaining power over time by private player in PPPs due to plicy changes.

Different PPP Models

In India, road projects are awarded via one of the three models: Build-Operate Transfer (BOT)-Annuity, BOT-Toll, and EPC (engineering, procurement and construction) contract.  An advanced version  of  (MCA) Model Concession Agreement HAM model is a mix of BOT (Built Operate Transfer) and EPC (Engineering, Procurement and Construction) model.

Engineering Procurement  Model:

1. Under this system the entire project is funded by the government.
2. The EPC entails the contractor build the project by designing, installing and procuring necessary labour and land to construct the infrastructure, either directly or by subcontracting.
3. Under EPC model the contractor is legally responsible to complete the project under some fixed predetermined timeline and may also involve scope for penalty in case of time overrun.
4. In EPC as all the clearances, land acquisition and regulatory norms have to be completed by the government itself and the private players do not have to get itself involved in these time taking procedures.

Hybrid Annuity Model:

1. In India, the new HAM is a mix of BOT Annuity and EPC models.
2. As per the design, the government will contribute to 40% of the project cost in the first five years through annual payments (annuity). whereas the remaining 60% is raised by developer from equity or loan as variable depending upon the value of assets created.
3. Under HAM, Revenue collection would be the responsibility of the National Highways Authority of India (NHAI).The developer doesn’t have right to collect revenue.

Advantages:

The brief picture of Risk Allocation can be tabulated as in Table:

Type of Risks/Models	Financing Risk	Revenue collection Risk	O&M Risk
BOT Model	By Private	By Private	By Private
Annuity Model	By Private	By Govt	By Private
VGF	By Govt and Private	By Private	By Private
EPC Model	By Govt	By Govt	By Govt
HAM	By Govt and Private	By Govt	By Private

1. Financial burden of private players and even government will reduce.
2. Will reduce dependency on Banks for loans private player can raise money form equity. Thus NPAs of banks for long gestation project will also decrease. Helps cut the overall debt and improves project returns.
3. Developers will take ‘traffic risk’ help in expediting project completion. From government side it does take the traffic risk, it also earns better social returns by way of access and convenience to daily commuters.
4. Will speed up stalled projects.

Kelkar Committee recommendations

1. Contracts need to focus more on service delivery instead of fiscal benefits.
2. Better identification and allocation of risks between stakeholders
3. Renegotiation clause of Concession Agreement
4. Infrastructure PPP Project Review Committee (“IPRC”) may be constituted to evaluate and send its recommendations on any problems of PPP project.
5. Infrastructure PPP Adjudication Tribunal (“IPAT”) chaired by a Judicial Member (former Judge SC/Chief Justice HC) with a Technical and/or a Financial member, where benches will be constituted by the Chairperson as per needs of the matter in question.
6. Institutionalization of mechanism like the National Facilitation Committee (NFC)to ensure time bound resolution of issues e.g. Clearances.
7. Unsolicited Proposals(“Swiss Challenge”)to be discouraged to avoid information asymmetries and lack of transparency.
8. PPP structures not to be adopted for very small projects.
9. Amend the Prevention of Corruption Act, 1988 to distinguish between genuine errors in decision-making and acts of corruption.
10. vBuild up capacity in all stakeholders, including regulators, authority, consultants, financing agencies, developers.
11. Set up an institute of excellence in PPP to inter alia guide the sector, provide policy input, timely advice and undertake sustainable capacity building.

Conclusion

1. India’s infrastructure deficit-whether congested roads and ports, inadequate hospitals or wastewater treatment facilities, and slow trains-is a key factor constraining rapid, competitive economic growth and job creation and thereby imposing huge costs on society. Low productivity, poor competitiveness, high costs, and the slow pace of urbanization are some of the consequences of this deficit.
2. India will be the world’s most populated country before 2030, outgrowing China. Without sustained rapid economic growth and the resulting productive jobs, India will be unable to convert its demographic transition into a demographic dividend.
3. To address the above concerns it is imperative to create quality infrastructure by different means. One of the most effective mean is PPP.

Questions:

Q.) Examine the features of HAM model? How it is different from EPC? Explain how it will revitalise infrastructure deficit to achieve broad developmental objectives?

Q.) Recently kelkar committee submitted report on Revitalising and reviving languishing infrastructure projects. Discuss major recommendations of kelkar committee.

References:

Kelkar ‘ Report on Revitalising and Revising PPP models in Infrastructure’.

PIB

Ministry of Statistics and program Implementation

Ministry of Roadway Transport and Highways.

News on Air and Rajya sabha Debate.