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  • Species in news: Asiatic Lion

    Asiatic lions have now significantly risen in number at an estimated population of 674 in the Gir forest region of Gujarat. Unlike in previous years, this count was estimated not from a Census, but from a population “observation” exercise called Poonam Avlokan.

    Try this question from CSP 2017:

    Q. The term ‘M-STrIPES’ is sometimes seen in the news in the context of

    (a) Captive breeding of Wild Fauna

    (b) Maintenance of Tiger Reserves

    (c) Indigenous Satellite Navigation System

    (d) Security of National Highways

    Asiatic Lion

    • Indian Lion (Panthera Leo Persica) is listed as Endangered and exists as a single population in Gujarat.
    • It is one of five big cat species found in India and Gir National Park and Wildlife Sanctuary is the only habitat for Asiatic lions.
    • Historically, it inhabited much of Western Asia and the Middle East up to northern India.
    • On the IUCN Red List, it is listed under its former scientific name Panthera leo persica as Endangered because of its small population size and area of occupancy.
    • More than two dozen lions died last year in an outbreak of canine distemper virus (CDV) and Babesiosis.

    What is Poonam Avlokan?

    It includes two methods:

    • Block counting method — in which census enumerators remain stationed at water points in a given block and estimate abundance of lions in that block, based on the direct sighting of lions who need to drink water at least once in 24 hours during the summer.
    • Other teams keep moving in their respective territories and make their estimates based on inputs provided by lion trackers and on chance sightings.

    Back2Basics: Lion Census in India

    • The first Lion Census was conducted by the Nawab of Junagadh in 1936; since 1965, the Forest Department has been regularly conducting the Lion Census every five years.
    • The 6th, 8th and 11th Censuses were each delayed by a year, for various reasons.
    • This year it was postponed after the lockdown was announced.

  • Permafrost and the hazards of its Thawing

    The principal reason that led to the recent 20,000-tonne oil leak at an Arctic region power plant in Russia that is now being recognised is the sinking of ground surface due to permafrost thaw.

    Try this question from Mains 2017:
    Q. What is Cryosphere? How does the Cryosphere affect global climate?

    What is Permafrost?

    • Permafrost is ground that remains completely frozen at 0 degrees Celsius or below for at least two years.
    • It is defined solely based on temperature and duration.
    • The permanently frozen ground, consisting of soil, sand, and rock held together by ice, is believed to have formed during glacial periods dating several millennia.

    Where are they found?

    • These grounds are known to be below 22 per cent of the land surface on Earth, mostly in polar zones and regions with high mountains.
    • They are spread across 55 per cent of the landmass in Russia and Canada, 85 per cent in the US state of Alaska, and possibly the entirety of Antarctica.
    • In northern Siberia, it forms a layer that is 1,500 m thick; 740 m in northern Alaska.
    • At lower latitudes, permafrost is found at high altitude locations such as the Alps and the Tibetian plateau.

    How climate change is eating away at these grounds?

    • The Earth’s polar and high altitude regions — its principal permafrost reservoirs — are the most threatened by climate change.
    • Arctic regions are warming twice as fast compared to the rest of the planet, its current rate of temperature change being the highest in 2,000 years.
    • In 2016, Arctic permafrost temperatures were 3.5 degrees Celsius higher than at the beginning of the 20th century.
    • A study has shown that every 1 degree Celsius rise in temperature can degrade up to 39 lakh square kilometre due to thawing.
    • This degradation is expected to further aggravate as the climate gets warmer, putting at risk 40 per cent of the world’s permafrost towards the end of the century– causing disastrous effects.

    The threat to infrastructure

    • Thawing permafrost is also ominous for man-made structures overhead.
    • The Russian oil leak occurred recorded temperatures in Siberia at more than 10 degrees Celsius above average, and called them “highly anomalous” for the region where the power plant is located.
    • As temperatures rise, the binding ice in permafrost melts, making the ground unstable and leading to massive potholes, landslides, and floods.
    • The sinking effect causes damage to key infrastructure such as roads, railway lines, buildings, power lines and pipelines.
    • These changes also threaten the survival of indigenous people, as well as Arctic animals.

    A ticking time bomb

    • Beneath its surface, permafrost contains large quantities of organic leftover from thousands of years prior — dead remains of plants, animals, and microorganisms that got frozen before they could rot.
    • It also holds a massive trove of pathogens.
    • When permafrost thaws, microbes start decomposing this carbon matter, releasing greenhouse gases like methane and carbon dioxide.
    • Researchers have estimated that for every 1 degree Celsius rise in temperature, these grounds could release GHGs to the tune of 4-6 years’ of emissions from coal, oil, and natural gas.
    • Along with greenhouse houses, these grounds could also release ancient bacteria and viruses into the atmosphere as they unfreeze.

    Back2Basics
    https://www.civilsdaily.com/news/thawing-of-permafrost/

    Also read:

    Ambarnaya River Oil spill in Russia

  • Payments Infrastructure Development Fund (PIDF)

    The RBI has created a Payments Infrastructure Development Fund (PIDF) with an outlay of Rs. 500 Cr.

    Possible prelims question:
    Q. Which of the following is the major aim of Payments Infrastructure Development Fund (PIDF) recently created by the Reserve Bank of India (RBI)?
    a) Promotion of UPI payments

    b) Deploying Points of Sale (PoS) infrastructure

    c) Creation of digital wallets

    d)All of the above

    Payments Infrastructure Development Fund (PIDF)

    • PIDF aims to encourage acquirers to deploy Points of Sale (PoS) infrastructure — both physical and digital modes in tier-3 to tier-6 centres and north eastern states.
    • The setting of PIDF is in line with the measures proposed by the vision document on payment and settlement systems in India 2019-2021.
    • It is also in line with the RBI’s proposal to set up an Acceptance Development Fund which will be used to develop card acceptance infrastructure across small towns and cities.

    Its working

    • The PIDF will be governed through an Advisory Council and managed and administered by RBI.
    • It will also receive recurring contributions to cover operational expenses from card-issuing banks and card networks.
    • RBI will also contribute to its yearly shortfalls, if necessary.

    Why need PIDF?

    • Over the years, the payments ecosystem in the country has evolved with a wide range of options such as bank accounts, mobile phones, cards, etc.
    • To provide further fillip to digitization of payment systems, it is necessary to give impetus to acceptance infrastructure across the country, more so in under-served areas.

  • Taking care of finances of local governments

    This article makes some suggestions to improve local finance and argues that the extant fiscal illusion is a great deterrent to mobilisation.

    Advantageous position in handling disasters

    • In terms of information, monitoring and immediate action, local governments are at an advantage, and eminently, to meet any disaster such as COVID-19.
    • While increasing the borrowing limits of the state form 3.5% of GDP to 5%, there was a recognition that local governments should be fiscally empowered immediately.
    • This is a valid signal for the future of local governance.

    4 challenges posed by Covid and addressing them collectively

    • COVID-19 has raised home four major challenges:1) economic, 2) health, 3) welfare/livelihood 4) resource mobilisation.
    • These challenges have to be addressed by all tiers of government in the federal polity, jointly and severally.

    Local government empowerment: 5 critical areas

    • 1) Own revenue is the critical lever of local government empowerment.
    • But the several lacunae that continue to bedevil local governance have to be simultaneously addressed.
    • 2) The new normal demands a paradigm shift in the delivery of health care at the cutting edge level.
    • 3) The parallel bodies that have come up after the 73rd/74th Constitutional Amendments have considerably distorted the functions-fund flow matrix at the lower level of governance.
    • 4) There is yet no clarity in the assignment of functions, functionaries and financial responsibilities to local governments.
    • Functional mapping and responsibilities continue to be ambiguous in many States.
    • Instructively, Kerala attempted even responsibility mapping besides activity mapping.
    • 5) The critical role of local governments will have to be recognised by all.

    Let’s look into resource mobilisation issue: 3 Heads

    • A few suggestions for resource mobilisation are given under three heads: 1) local finance, 2) Members of Parliament Local Area Development Scheme-MPLADs, 3) the Fifteenth Finance Commission (FFC).

    1. Local finance

    • Property tax collection with appropriate exemptions should be a compulsory levy and preferably must cover land.
    • The Economic Survey 2017-18 points out that urban local governments, or ULGs, generate about 44% of their revenue from own sources as against only 5% by rural local governments, or RLGs.
    • Per capita own revenue collected by ULGs is about 3% of urban per capita income while the corresponding figure is only 0.1% for RLGs.
    • There is a yawning gap between tax potential and actual collection, resulting in colossal underperformance.
    • When they are not taxed, people remain indifferent.
    • LGs, States and people seem to labour under a fiscal illusion.
    • In States such as Uttar Pradesh, Bihar and Jharkhand, local tax collection at the panchayat level is next to nil.
    • Property tax forms the major source of local revenue throughout the world.
    • All States should take steps to enhance and rationalise property tax regime.
    • A recent study by Professor O.P. Mathur shows that the share of property tax in GDP has been declining since 2002-03.
    •  The share of property tax in India in 2017-18 is only 0.14% of GDP as against 2.1% in the Organisation for Economic Co-operation and Development (OECD) countries.
    • If property tax covers land, that will hugely enhance the yield from this source even without any increase in rates.

    Other 2 options for raising finances

    • 1) Land monetisation and betterment levy may be tried in the context of COVID-19 in India. To be sure, land values have to be unbundled for socially relevant purposes.
    • 2) Municipalities and even suburban panchayats can issue a corona containment bond for a period of say 10 years.
    • We are appealing to the patriotic sentiments of non-resident Indians and rich citizens.
    • Needless to say, credit rating is not to be the weighing consideration.
    • That the Resurgent India Bond of 1998 could mobilise over $4 billion in a few days encourages us to try this option.

    2) MPLADS

    • The suspension of MPLADS by the Union government for two years is a welcome measure. The annual budget was around ₹4,000 crore.
    • The Union government has appropriated the entire allocation along with the huge non-lapseable arrears.
    • MPLADs, which was avowedly earmarked for local area development, must be assigned to local governments, preferably to panchayats on the basis of well-defined criteria.

    3) Fifteenth finance commission-FFC

    • A special COVID-19 containment grant to the LGs by the FFC to be distributed on the basis of SFC-laid criteria is the need of the hour.
    • The commission may do well to consider this.
    • The local government grant of ₹90,000 crore for 2020-2021 by the FFC is only 3% higher than that recommended by the Fourteenth Finance Commission.
    • Building health infrastructure and disease control strategies at the local level find no mention in the five tranches of the packages announced by the Union Finance Minister.

    Suggestions related to grants

    • The ratio of basic (i.e. with no conditions) to tied (with condition)grant is fixed at 50:50 by the commission.
    • In the context of the crisis under way, all grants must be untied  for freely evolving proper COVID-19 containment strategies locally.
    • The 13th Finance Commission’s recommendation to tie local grants to the union divisible pool of taxes to ensure a buoyant and predictable source of revenue to LGs (accepted by the then Union government) must be restored by the commission.

    Consider the question “The stable source of revenue for the local government bodies whether from their own sources or in the form of grants should lie at the heart of efforts to empower them. Comment.”

     Conclusion

    COVID-19 has woken us up to the reality that local governments must be equipped and empowered. Relevant action is the critical need.

    B2BASICS:

    73rd and 74th Amendment Acts, 1993

    • It’s been 25 years since decentralized democratic governance was introduced in India by the 73rd and 74th Constitution Amendments, which came into force on April 24 and June 1, 1993, respectively.
    • The 73rd Amendment to the Constitution (Part IX) has given constitutional status to the Panchayats, and has provided it with a substantial framework. It envisions the Panchayats as the institutions of local self-governance and also the universal platforms for planning and implementing programmes for economic
      development and social justice.
    • The creation of lakhs of “self-governing” village panchayats and gram sabhas, with over three million elected representatives mandated to manage local development, was a unique democratic experiment.
    • Article 243A gives constitutional recognition to the Gram Sabha as a body consisting of persons registered in the electoral rolls relating to a village comprised within the area of the Panchayat at the village level.
    • The 74th Amendment Act provided for the constitution (Part IXA) of three types of municipalities in urban areas depending upon the size and area.
    • The Constitution provides for a complete institutional mechanism including reservation for women and formation of State Finance Commissions (SFCs) for local democracy.

  • Shapes of Economic Recovery

    Predicting recovery graphs, economists have added cool shapes for our information.

    The types of graphs mentioned here are the possible indicators of macro-economic recovery. They are the potential hotspots for a prelim question. UPSC can puzzle you with the type of graphs and associated macroeconomic situation.

    Try to mirror! How would our economy grow?!

    Types of graphs

    The shape of economic recovery is determined by both the speed and direction of GDP prints. This depends on multiple factors including fiscal and monetary measures, consumer incomes and sentiment.

    • The best scenario is a V-shaped recovery in which the economy quickly recoups lost ground and gets back to the normal growth trend-line.
    • A pipe graph is a V graph with a longer tail — the recovery isn’t one that happens quickly over one quarter but over two-three quarters.
    • The pipe is different from the Swoosh because in the latter the economy bears the pain for longer.
    • A Z–shaped recovery is when a post-lockdown spending surge is so fierce that growth is lifted above the trendline and then after a party settles down to trend. The Z-shaped recovery is the most-optimistic scenario in which the economy quickly rises like a phoenix after a crash.
    • A U-shaped recovery — resembling a bathtub — is a scenario in which the economy, after falling, struggles and muddles around a low growth rate for some time, before rising gradually to usual levels.
    • A W-shaped recovery is a dangerous creature — growth falls and rises, but falls again before recovering yet again, thus forming a W-like chart. The double-dip depicted by a W-shaped recovery is what some economists are predicting if the second wave of COVID comes along and the initial rebound flatters to deceive.
    • The L-shaped recovery is the worst-case scenario, in which growth after falling, stagnates at low levels and does not recover for a long, long time.
    • Then, there is the J-shaped recovery, a somewhat unrealistic scenario, in which growth rises sharply from the lows much higher than the trend-line and stays there.
    • There is also the Swoosh shaped recovery, similar to the Nike logo — in between the V-shape and the U-shape. Here, after falling, growth starts recovering quickly but then, slowed down by obstacles, moves gradually back to the trend-line.
    • Finally, say hello to the Inverted square root shaped In this, there could a rebound from the bottom, the growth slows and settles a step-down.

    Why is it important for India?

    • The Indian economy was slowing down even before COVID hit, and the trouble has now been amplified manifold because of the lockdowns.
    • Experts predict a fall of up to 5 per cent in the GDP in FY-21.
    • This is clearly a crisis situation, and our getting out of the hole will depend a great deal on the shape of the economic recovery that will hopefully follow.
    • A Z- or at least V-shaped recovery would be the most preferable. If not, we should at least have a U-shaped recovery or a Swoosh to get back on our feet in a couple of years.
    • A W-shape will bring in much pain before the eventual gain, while an L-shape or the Inverted-square root will make a wreck of the growth train.

  • International Convention for the Prevention of Pollution from Ships (MARPOL)

    The Ministry of Shipping has informed about the steps taken for prevention and control of pollution arising from ships in the sea and in the inland waterways under the MARPOL Convention.

    Aspirants must note the following things:

    1. If the convention is a subsidiary to the United Nations/IMO,

    2. Whether it is Legally binding?

    3. If India is a signatory or not …..

    MARPOL Convention

    • MARPOL is the main international convention aimed at the prevention of pollution from ships caused by operational or accidental causes.
    • The Protocol of 1978 was adopted in response to a number of tanker accidents in 1976–1977.
    • It is one of the most important international marine environmental conventions.
    • It was developed by the IMO with an objective to minimize pollution of the oceans and seas, including dumping, oil and air pollution.
    • The Convention includes regulations aimed at preventing and minimizing pollution from ships – both accidental pollution and that from routine operations – and currently includes six technical Annexes.
    • India is a signatory to MARPOL.
    • It has six annexes (I to VI) and it deals with prevention of (1) Pollution from ships by Oil, (2) Noxious liquid substances, (3) Dangerous goods in packaged form, (4) Sewage, (5) Garbage and (6) Air pollution from ships respectively.

  • Green colour band for BS-VI 4W vehicles

    The Ministry of Road Transport and Highways (MoRTH) has issued an order mandating a coloured strip to identify four-wheeled BSVI vehicle.

    Note important PM levels allowed under BS VI norms. Note how it is different from the earlier BS IV norm.

    Details of the colour band

    • MoRTH has mandated a strip of green colour of 1 cm width on top of the existing sticker carrying details of registration for BS-VI.
    • Vehicles of any fuel type will carry the green strip irrespective of their original stickers i.e. for petrol or CNG which have a light blue colour sticker and a diesel vehicle which is of orange colour.
    • These stickers will now have a green strip of 1 cm on top for BS-VI, as mandated.

    Back2Basics:  Bharat Stage Norms

    Standard Reference Date of Implementation
    Bharat Stage II Euro 2 1 April 2005
    Bharat Stage III Euro 3 1 April 2010
    Bharat Stage IV Euro 4 1 April 2017
    Bharat Stage VI Euro 6 April 2020 with a mandate (proposed)

    Minutes of BS-VI

    • Carmakers would have to put three pieces of equipment — a DPF (diesel particulate filter), an SCR (selective catalytic reduction) system, and an LNT (Lean NOx trap) — to meet stringent BS-VI norms, all at the same time.
    • This is vital to curb both PM (particulate matter) and NOx (nitrogen oxides) emissions as mandated under the BS-VI norms.

    How is BS-VI Different from BS-IV?

    • The major difference between the existing BS-IV and forthcoming BS-VI norms is the presence of sulphur in the fuel.
    • While the BS-IV fuels contain 50 parts per million (ppm) sulphur, the BS-VI grade fuel only has 10 ppm sulphur content.
    • Also, the harmful NOx (nitrogen oxides) from diesel cars can be brought down by nearly 70%.
    • In the petrol cars, they can be reduced by 25%.
    • However, when we talk about air pollution, particulate matter like PM 2.5 and PM 10 are the most harmful components and the BS-VI will bring the cancer-causing particulate matter in diesel cars by a phenomenal 80%.

  • [Burning Issue] Reorienting MGNREGA in times of COVID

     

    Termed in a moment of hubris by present government as ‘“a living monument of UPA’s failures”, the government has fallen back on this Scheme in this moment of crisis. This piece is an attempt to understand the silent success of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) which was allegedly dying a slow death.

    Context

    Due to the sudden lockdown and resultant job losses, over 1 crore people have returned to their homes, some walking hundreds of kilometres, others using all conceivable means of transport. A sizeable number may take several months to return to the cities and towns to earn a living. This extraordinary scenario of a pandemic poses a formidable challenge for the governments of the ‘home states’ to arrange suitable job opportunities for securing their livelihoods.

    In this bleak scenario, MGNREGA is providing a ray of hope.

    The mighty MGNREGA

    • The MGNREGA stands for Mahatma Gandhi National Rural Employment Guarantee Act of 2005.
    • This is labour law and social security measure that aims to guarantee the ‘Right to Work’.
    • The act was first proposed in 1991 by P.V. Narasimha Rao.

    The objectives of the MGNREGA are:

    • To enhance the livelihood security of the rural poor by generating wage employment opportunities.
    • To create a rural asset base which would enhance productive ways of employment, augment and sustain a rural household income.

    Anyways, what is so Unique about it?

    • MGNREGA is unique in not only ensuring at least 100 days of employment to the willing unskilled workers, but also in ensuring an enforceable commitment on the implementing machinery i.e., the State Governments, and providing a bargaining power to the labourers.
    • The failure of provision for employment within 15 days of the receipt of job application from a prospective household will result in the payment of unemployment allowance to the job seekers.
    • Employment is to be provided within 5 km of an applicant’s residence, and minimum wages are to be paid.
    • Thus, employment under MGNREGA is a legal entitlement.

    Constitutional goals of MGNREGA: The idealistic edge

    1) Implementation of DPSP

    • The MGNREGA aims to follow the DPSPs enunciated in Part IV of the Constitution of India.
    • The law by providing a ‘right to work’ is consistent with Article 41 that directs the State to secure to all citizens the right to work.
    • The statute also seeks to protect the environment through rural works which is consistent with Article 48A that directs the State to protect the environment.
    • It also follows Article 46 that requires the State to promote the interests of and work for the economic uplift of the SCs and STs and protect them from discrimination and exploitation.
    • Article 40 mandates the State to organise village panchayats and endow them with such powers and authority as may be necessary to enable them to function as units of self-government.
    • Conferring the primary responsibility of implementation on Gram Panchayats, the Act adheres to this constitutional principle.

    2) Implementation of FRs

    • In accordance with the Article 21 of the Constitution of India that guarantees the right to life with dignity to every citizen of India, this act imparts dignity to the rural people through an assurance of livelihood security.
    • The FRs enshrined in Article 16 of the Constitution of India guarantees equality of opportunity in matters of public employment.

    The REAL Issues crippling MGNREGA

    On ground, policies and schemes do depart from their idealistic purposes. Go through these Issues to understand HOW?

    1) Insufficient budgetary allocations – No Money!

    • MGNREGA’s success at the ground level is subject to proper and uninterrupted fund flow to the states.
    • Increase in the nominal budget but actual budget (after adjusting inflation) decreased over the years.
    • Rs 61,500 crore has been allocated for the MGNREGA for the year 2020-21, down by more than 13 per cent from the total estimated expenditure for 2019-20 which was at Rs 71,001.81 crore.

    2) Approved Labour Budget Constraints

    • The Centre through the arbitrary “Approved Labour Budget” has reduced the number of days of work and put a cap on funds through the National Electronic Fund Management System
    • According to Ne-FMS guidelines, states won’t be allowed to generate employment above the limits agreed by Approved labour Budget.

    3) Not so attractive wages rate

    • Currently, MGNREGA wage rates of 17 states are less than the corresponding state minimum wages.
    • The ridiculously low wage rates have resulted in a lack of interest among workers in working for MGNREGA schemes, making way for contractors and middlemen to take control, locally.

    4) Delay in wage (Not so attractive) payments

    • Under the MGNREGA, a worker is entitled to get his or her due wages within a fortnight of completion of work, failing which the worker is entitled to the compensation.
    • As of 2016-17, the total amount of wage pending is Rs. 11000 crore.
    • Even the Gram Rozgar Sevak, who is the backbone of the entire scheme, who works part-time, living in the same village, does not get paid on time.

    5) No-work situations are rising

    • None of the states was able to provide full 100 days employment as mentioned in the scheme.
    • Even though the scheme aims at providing 100 days of guaranteed employment, below 50 days of employment was actually provided an average at an all-India level in FY 18.

    6) Data manipulations by authorities

    • A recent study has found that data manipulation in the MGNREGA is leading to gross violations in its implementation.
    • Numerous ground reports across the country suggest that because of a funds crunch, field functionaries do not even enter the work demanded by labourers in the MGNREGA database.

    7) Non-purposive spending and corruptions

    • Many works sanctioned under MGNREGA often seem to be non-purposive.
    • Quite often, they are politically motivated hotspots to create rampant corruption by dominant sections of the local population.
    • Even social audits of such projects are locally manipulated.

    8) Workers penalized for administrative lapses

    • The ministry withholds wage payments for workers of states that do not meet administrative requirements within the stipulated time period (for instance, submission of the previous financial year’s audited fund statements, utilization certificates, bank reconciliation certificates etc).
    • There is no logical or legal explanation for this bizarre arrangement. It is beyond any logic as to why workers would be penalized for administrative lapses.

    9) Genuine job cards being deleted

    • Genuine job cards are being randomly deleted as there is a huge administrative pressure to meet 100 per cent DBT implementation targets in MGNREGA.
    • In states like Jharkhand, there are multiple examples where the districts had later requested to resume job cards after civil society interventions into the matter.

    10) Too much centralization weakening local governance

    • A real-time MIS-based implementation and a centralised payment system has further left the representatives of the Panchayati Raj Institutions with literally no role in implementation.
    • It has become a burden as they hardly have any power to resolve issues or make payments.

    11)  Local priorities being ignored

    • MGNREGA could be a tool to establish decentralized governance. But, with the administration almost dictating its implementation, it is literally a burden now for the people and especially for the local elected representatives.
    • The Gram Sabhas and gram panchayats’ plans are never honoured. This is a blatant violation of the Act as well.

    Dark Knight Rises: MGNREGA in times of COVID

    Within days, India has realized, political friend and foe alike, right-wing egotist and left-wing activist alike, that the world’s largest social welfare scheme, operationalised by UPA 1 in 2006 is a rare lifeline, almost as if designed for times of extreme adversity.

    The importance of the MGNREGA scheme is now accepted by one and all. No wonder that with its hands tied due to Covid-19 crisis the state governments are struggling to ensure remunerative work in villages for the large workforce.

    The central government, too, after considering all options and in order to provide job support to the large workforce which has or is reaching native villages, has acted rationally and announced another Rs 40,000 crore allocation for the MGNREGA scheme.

    Highest registrations

    • MGNREGA data shows that job demand this May was the highest in eight years even as all the data for May is still pouring in.
    • Over 45 crore person days have been generated (2.63 crore households and 3.6 crore individuals have worked) in the 45 days of 2020-21 since works began on April 20.
    • Traditionally, the months of May and June have always witnessed the highest NREGA work demand because is the lean agriculture season after Rabi harvest and before Kharif sowing.

    Only viable option available

    • MGNREGA appears to be the primary hope of sustaining livelihood in almost all states the during a time of massive reverse migration due to the lockdown imposed in light of COVID-19.
    • MGNREGA is the only viable option at present to provide relief and work to the labourers.

    Some innovation in MGNREGA that can go a long way

    1) Looping in the skilled worker

    • First, there is a suggestion to use it to meet the wage cost of their employment in small and medium enterprises (SMEs).
    • Accordingly, skilled migrant workers may be placed in SMEs and their wages would be charged to MGNREGA.

    2) Including farm related works

    • In the last few years, un-remunerative prices of several crops have been the root cause of widespread agrarian distress.
    • The suggestion is to allow farmers to employ MGNREGA workers in agricultural operations like land preparation, sowing, transplantation of paddy, plucking of cotton, intercultural operations and harvesting of crops etc. so as to reduce the cost of cultivation.
    • The idea is to pay part of the wages of labour in agricultural operations from MGNREGA.

    3) Increasing the number of Work Schemes

    • Currently, there are only 2-3 work schemes (say PMAY) running per panchayat, which is leading to the crowding of workers at worksites.
    • To prevent this and to ensure that all willing households are able to access employment through NREGA, the number of schemes needs to be increased, and 6-8 schemes must be introduced in each village.

    4) Paying Workers Immediately

    • Rural households urgently need cash-in-hand, and so the emerging demand is for immediate payment to workers. NREGA payments are frequently delayed by weeks or months.
    • Given the circumstances, such delays will be entirely counterproductive.
    • It is recommended that in remote areas, wage payments should be made in cash, and paid on the same day.

    5) Modify Daily Workloads

    • In compliance with COVID-19 guidelines, workers are wearing masks and other forms of face protection.
    • NREGA works typically involve hard physical labour and workers are finding it challenging to breathe comfortably while working.
    • Consequently, for as long as workers are required to wear masks, the daily volume of work assigned to them must be reduced.

    6) By increasing Wages

    • If NREGA wages are to effectively support rural households as they cope with this crisis, they must, at a minimum, be at par with states’ agricultural wages.
    • For example, the Government of Odisha has increased the daily-wage rate for unskilled manual work under NREGA to INR 298 per day in its 20 migration-prone blocks.

    7) Increase budgetary allocations

    • The central government’s budgetary allocation of INR 61,500 crore to NREGA for FY 2020-21 is inadequate..
    • An additional Rs 1 lakh crore needs to be allocated so that NREGA can act as a safety net and help rural households cope with the devastating impact of the lockdown.

    Way Forward

    • Large scale social security programmes like MGNREA are subjected to undergo several stumbling blocks in the times of ongoing pandemic.
    • Government and NGOs must study the impact of MGNREGA in rural areas so as to ensure that this massive anti-poverty scheme is not getting diluted from its actual path.
    • Since the adverse impact of the COVID-19 pandemic on employment is going to persist in 2020-21, government can ensure more effective implementation and strengthening of the oversight of MGNREGA through mandated social audit.
    • The scheme is not only an ocean of possibilities for the jobless migrants, but it has also given the Central government a chance to get a second bite at the cherry after the devastating economic and job creation figures now officially out for FY 2019-20.

    At this point in time what is needed is neither dismantling of the programme nor its slow suffocation.

    Conclusion

    This week the entire nation saw how teachers in Jaipur started working as MGNREGA labourers amid the pandemic. Unfortunate and not to be celebrated, it nevertheless underlines the importance of MGNREGA as a ray of hope amidst extreme darkness.

    This article has attempted to convey the transformative power of MGNREGA, particularly at a time of economic stress.

    To be clear, MGNREGA cannot substitute deeper and systemic efforts to generate jobs; nor can it address structural weaknesses in the economy. The need of the hour is for the Government to place MGNREGA at the heart of its strategy to tackle this economic emergency.

    The Economic Survey of 2019-20 suggested that MGNREGA offers an early warning signal to detect rural distress. We can help by changing the narrative that has for too long maligned MGNREGA.

    We must view MGNREGA as an opportunity and explicitly include it in a broad-based strategy to tackle the current economic crisis.

     

    Think!

    If the idea is to provide work to anybody demanding it, there should, in principle, be no restrictions on the kind of activities allowed under this scheme. If higher material component helps in building more assets with durable quality, why cannot these projects qualify under the MGNREGA? Why tie it down to particular “permitted works”? What stops MGNREGA labour from being used even to undertake railway or national highway work?

    References

    https://thewire.in/government/mgnrega-wage-payment-delays

    https://www.theindiaforum.in/article/continuing-relevance-mgnrega

    https://www.downtoearth.org.in/blog/economy/mgnrega-is-failing-10-reasons-why-62035

    https://thewire.in/economy/mgnrega-rural-india-farmers

    https://indianexpress.com/article/opinion/editorials/mgnrega-demand-rural-labours-migrant-workers-coronavirus-6441371/

    https://www.thequint.com/news/india/how-nrega-can-help-rural-areas-in-times-of-covid-19-distress

  • Tax Avoidance: case study on Flipkart deal

    Through this story, we will explore how investment fund companies exploit the tax agreements between the two countries. This story involves the famous case of investment by Walmart in Flipkart. So, let’s see what was involved in the case and what argument was made by the investment fund involved in the case.

    Tax avoidance

    Tax avoidance is the use of legal methods to minimize the amount of income tax owed by an individual or a business. This is generally accomplished by claiming as many deductions and credits as is allowable. It may also be achieved by prioritizing investments that have tax advantages, such as buying municipal bonds.

    First, let’s understand why Mauritius is favourite among investors?

    • Mauritius and India do have a tax treaty to start with.
    • Suppose an investment company based out of (why not based in?) Mauritius made a lot of money selling shares of an Indian company.
    • Now, Indian authorities won’t tax the gains you made via the transaction.
    • Instead, you’ll be taxed in Mauritius.
    • But since Mauritius does not tax capital gains, you get away without paying capital gain tax.
    • So you got the answer to why Mauritius.
    • Obviously, foreign corporations lapped up this opportunity until 2016 — when the government finally decided to plug the gaps.
    • They made amendments to the treaty.

    The story of Tiger Global’s investment into Flipkart

    • Tiger Global was one of the earliest investors in Flipkart.
    • They held 22% of the company until 2018 when they sold about 17% to Walmart’s Luxembourg entity FIT Holdings.
    • This transaction was valued at over INR 14,500 Cr.
    • But Tiger Global had made its investments through funds based out of Mauritius.
    • Since Tiger Global had made most of its investments during the first half of the decade (obviously before 2016).
    • So the amendment to the treaty wasn’t really applicable to them.
    • So when they made all that money selling their stake in Flipkart, they figured they wouldn’t have to pay any tax.
    • And at first sight, this argument seems legit.

    Let’s dig deeper into the case by going through 3 arguments

    • The funds were operating out of Mauritius.
    • The directors were discharging their duties in Mauritius.
    • All in all, everything was firmly placed in Mauritius.
    • But if you peel back the layers, you’ll see that these funds are ultimately owned by Tiger Global Management LLC, USA — albeit through a maze of holding companies.
    • So, the tax authorities argued that Tiger Global had in fact set up the Mauritius based entity for the sole purpose of avoiding taxes.
    • And therefore contested that they shouldn’t be exempt from paying tax on gains they made through the Flipkart Transaction.
    • Tiger Global, miffed with the taxmen, took the matter to a quasi-judicial body — The Authority for Advance Rulings (AAR).

    And the case begins.

    Let’s look into three arguments.

    1. Focus on transaction, not on the entity that involved in the transaction

    • Tiger Global investment fund counsel had the following argument to make:
    • “It must be proven that the transaction [the final sale of shares] itself was designed to avoid taxes.”
    • And proving that the structure of the entity undertaking the transaction was designed for the avoidance of income-tax should not be necessary here.
    • So, the Revenue (the Income Tax Department) had failed to discharge its burden of proof. But AAR didn’t agree with this argument.

    2. So, what’s AAR’s argument?

    • AAR said that you don’t just compute taxes by looking at the final transaction.
    • Instead, you look at the transaction as a whole —When were the shares bought? What was the purchase price? What happened in between? Who’s the primary executioner? What’s the appreciation in value? You look at everything.
    • More importantly, the “head and brains” executing the transaction resided elsewhere.
    • Tax authorities had shown rather conclusively that a certain Mr. Charles P. Coleman (operating out of a U.S based entity) was the beneficial owner of the fund.
    • And that “he” was primarily responsible for most management decisions.
    • So the AAR hit back with the following observation:

    In our opinion, it is not the holding structure only that would be relevant. The holding structure coupled with prima facie management and control of the holding structure, including the management and control of the applicants, would be relevant factors for determining the design for avoidance of tax. The applicant companies were only a “see-through entity” to avail the benefits of India-Mauritius DTAA [Double Taxation Avoidance Agreements]

    But wait… what about the past judgements?

    • Tiger Global had another weapon in its arsenal — Past judgements on the matter.
    • Specifically, a particular ruling in the case of Moody’s Analytics Inc.
    • AAR in this case conceded that capital gains accruing to a Mauritius based entity from the transfer of shares of an Indian company shouldn’t ideally be taxed.

    3. Flipkart is a Singaporean company. So, pay the taxes!

    • The AAR said that “In this particular case, gains were made by transferring shares of a Singaporean company. Not an Indian company.”
    • That’s right. Flipkart is based out of Singapore.
    • Flipkart Singapore is the strategic shareholder of Flipkart India.
    • Flipkart India is the entity that owns most of the capital assets.
    • The shares that were sold to Walmart — that’s Flipkart Singapore, not Flipkart India.
    • But the India-Mauritius tax treaty agreement is only applicable to the transfer of shares of Indian companies.

    Is Flipkart Indian?

    Consider the question “Examine the basis used by the Authority for Advance Rulings (AAR) that led it to rule in favour of tax authorities.”

    Conclusion

    AAR concluded that there was no doubt that Tiger Global had set up the Mauritius based entity to avoid paying taxes and therefore should be liable to pay what the Income Tax authorities deem fit.

    Back2Basics: Vodafone tax

    Can India tax the gains made by selling the shares of Singaporean company?

    • According to Section 9(1)(i), (popularly known as the Vodafone tax), any income accruing or arising, whether directly or indirectly (through multiple layers), inter-alia, through the transfer of a capital asset situated in India, shall be deemed to accrue or arise in India.”
    • So Indian tax laws are pretty clear about where the gains ought to be taxed.
    • But the India-Mauritius treaty doesn’t say anything about this matter.
    • That’s why the AAR ruled the way it did.

  • Explained: Gross Value Added (GVA) Method

    The National Statistical Office (NSO) recently released its provisional estimates of national income for the financial year 2019-20. The release also detailed the estimates of the Gross Value Added (GVA).

    Try this question from CSP 2011:

    Q. In the context of Indian economy, consider the following statements

    1. The growth rate of GDP has steadily increased in the last five years.

    2. The growth rate in per capita income has steadily increased in the last five years.

    Which of the statements given above is/are correct?

    (a.) 1 only

    (b.) 2 only

    (c.) Both 1 and 2

    (d.) Neither 1 nor 2

    The GVA method

    • In 2015, in the wake of a comprehensive review of its approach to GDP measurement, India opted to make major changes to its compilation of national accounts.
    • It aims to bring the whole process into conformity with the UN System of National Accounts (SNA) of 2008.

    What is GVA?

    • As per the SNA, GVA is defined as the value of output minus the value of intermediate consumption.
    • GVA is a measure of the contribution to GDP made by an individual producer, industry or sector.
    • At its simplest, it gives the rupee value of goods and services produced in the economy after deducting the cost of inputs and raw materials used.
    • It can be described as the main entry on the income side of the nation’s accounting balance sheet, and from economics, perspective represents the supply side.

    How it has changed income calculation?

    • While India had been measuring GVA earlier, it had done so using ‘factor cost’.
    • GDP at ‘factor cost’ was the main parameter for measuring the country’s overall economic output until the new methodology was adopted.
    • GVA at basic prices became the primary measure of output across the economy’s various sectors and when added to net taxes on products amounts to the GDP.
    • In the new series, the base year was shifted to 2011-12 from the earlier 2004-05.

    GVA estimates by NSO

    • As part of the data on GVA, the NSO provides both quarterly and annual estimates of output — measured by the gross value added — by economic activity.
    • The sectoral classification provides data on eight broad categories that span the gamut of goods produced and services provided in the economy.
    • These are: 1) Agriculture, Forestry and Fishing; 2) Mining and Quarrying; 3) Manufacturing; 4) Electricity, Gas, Water Supply and other Utility Services; 5) Construction; 6) Trade, Hotels, Transport, Communication and Services related to Broadcasting; 7) Financial, Real Estate and Professional Services; 8) Public Administration, Defence and other Services.

    How relevant is the GVA data given that headline growth always refers to GDP?

    • The GVA data is crucial to understand how the various sectors of the real economy are performing.
    • The output or domestic product is essentially a measure of GVA combined with net taxes.
    • However, GDP can be and is also computed as the sum total of the various expenditures incurred in the economy.
    • It includes private consumption spending, government consumption spending and gross fixed capital formation or investment spending; these reflect essentially on the demand conditions in the economy.

    Significance of GVA

    • From a policymaker’s perspective, it is vital to have the GVA data to be able to make policy interventions, where needed.
    • Also, from global data standards and uniformity perspective, GVA is an integral and necessary parameter in measuring a nation’s economic performance.

    Issues with GVA

    • As with all economic statistics, the accuracy of GVA as a measure of overall national output is heavily dependent on the sourcing of data and the fidelity of the various data sources.
    • To that extent, GVA is as susceptible to vulnerabilities from the use of inappropriate or flawed methodologies as any other measure.
    • Economists argue that India’s switch of its base year to 2011-12 had led to a significant overestimation of growth.
    • They argued that the value-based approach instead of the earlier volume-based tack in GVA estimation had affected the measurement of the formal manufacturing sector and thus distorted the outcome.