💥Join UPSC 2027,2028 Mentorship (July Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

Distribution: weekly

  • What is the Pre-pack under Insolvency and Bankruptcy Code?

    The central government has promulgated an ordinance allowing the use of pre-packs as an insolvency resolution mechanism for MSMEs with defaults up to Rs 1 crore, under the Insolvency and Bankruptcy Code.

    Read till the end to know about the ‘Swiss Challenge’.

    What are Pre-packs?

    • A pre-pack is the resolution of the debt of a distressed company through an agreement between secured creditors and investors instead of a public bidding process.
    • This system of insolvency proceedings has become an increasingly popular mechanism for insolvency resolution in the UK and Europe over the past decade.
    • Under the pre-pack system, financial creditors will agree to terms with a potential investor and seek approval of the resolution plan from the National Company Law Tribunal (NCLT).
    • The approval of a minimum of 66 percent of financial creditors that are unrelated to the corporate debtor would be required before a resolution plan is submitted to the NCLT.
    • Further NCLTs are also required to either accept or reject any application for a pre-pack insolvency proceeding before considering a petition for a CIRP.

    Benefits of pre-packs over the CIRP

    • One of the key criticisms of the Corporate Insolvency Resolution Process (CIRP) has been the time taken for resolution.
    • One of the key reasons behind delays in the CIRPs is prolonged litigations by erstwhile promoters and potential bidders.
    • The pre-pack in contrast is limited to a maximum of 120 days with only 90 days available to the stakeholders to bring the resolution plan to the NCLT.
    • The existing management retains control in the case of pre-packs while a resolution professional takes control of the debtor as a representative of creditors in the case of CIRP.
    • This allows for minimal disruption of operations relative to a CIRP.

    What is the key motivation behind the introduction of the pre-pack?

    • Pre-packs are largely aimed at providing MSMEs with an opportunity to restructure their liabilities and start with a clean slate.
    • It provides adequate protections so that the system is not misused by firms to avoid making payments to creditors.
    • Pre-packs help corporate debtors to enter into consensual restructuring with lenders and address the entire liability side of the company.

    How are creditors protected?

    • The pre-pack also provides adequate protection to ensure the provisions were not misused by errant promoters.
    • The pre-pack mechanism allows for a swiss challenge for any resolution plans which proved less than full recovery of dues for operational creditors.
    • Under the swiss challenge mechanism, any third party would be permitted to submit a resolution plan for the distressed company and the original applicant would have to either match the improved resolution plan or forego the investment.
    • Creditors are also permitted to seek resolution plans from any third party if they are not satisfied with the resolution plan put forth by the promoter.

    Back2Basics: Swiss Challenge

    • A Swiss Challenge is a method of bidding, often used in public projects, in which an interested party initiates a proposal for a contract or the bid for a project.
    • The government then puts the details of the project out in the public and invites proposals from others interested in executing it.
    • On the receipt of these bids, the original contractor gets an opportunity to match the best bid.
    • In 2009, the Supreme Court approved this method for the award of contracts.
    • This method can be applied to projects that are taken up on a PPP basis but can also be used to supplement PPP in sectors that are not covered under the PPP framework.

  • [pib] Sadabahar: A mango variety that bears fruits round the year

    A farmer from Kota, Rajasthan, has developed a round-the-year dwarf variety of mango called Sadabahar, which is resistant to most major diseases and common mango disorders.

    Try this PYQ:

    Q.With reference to the Genetically Modified mustard (GM mustard) developed in India, consider the following statements:

    1. GM mustard has the genes of a soil bacterium that give the plant the property of pest-resistance to a wide variety of pests.
    2. GM mustard has the genes that allow the plant cross-pollination and hybridization.
    3. GM mustard has been developed jointly by the IARI and Punjab Agricultural University.

    Which of the statements given above is/are correct? (CSP 2018)

    (a) 1 and 3 only

    (b) 2 only

    (c) 2 and 3 only

    (d) 1, 2 and 3

    Sadabahar

    • The fruit is sweeter in taste, comparable to langra and being a dwarf variety, is suitable for kitchen gardening, high-density plantation, and can be grown in pots for some years too.
    • Besides, the flesh of the fruits, which is bourn round the year, is deep orange with a sweet taste, and the pulp has very little fiber content which differentiates it from other varieties.
    • The bountiful nutrients packed in mango are immensely good for health.
    • This variety has been verified by the National Innovation Foundation (NIF), India, an autonomous institution of the Department of Science & Technology.

  • Integrated Health Information Platform (IHIP)

    The Union Minister of Health & Family Welfare has launched the Integrated Health Information Platform (IHIP).

    About IHIP

    • The new version of IHIP will house the data entry and management for India’s disease surveillance program.
    • In addition to tracking 33 diseases now as compared to the earlier 18 diseases, it shall ensure near-real-time data in digital mode, having done away with the paper mode of working.

    Various functions

    • IHIP will provide a health information system developed for real-time, case-based information, integrated analytics, advanced visualization capability.
    • It will provide analyzed reports on mobile or other electronic devices. In addition, outbreak investigation activities can be initiated and monitored electronically.
    • It can easily be integrated with another ongoing surveillance program while having the feature of the addition of special surveillance modules.

    Unique features

    • This is the world’s biggest online disease surveillance platform.
    • It is in sync with the National Digital Health Mission and fully compatible with the other digital information systems presently being used in India.
    • The refined IHIP with automated -data will help in a big way in real-time data collection, aggregation & further analysis of data that will aid and enable evidence-based policymaking.
    • With IHIP, the collection of authentic data will become easy as it comes directly from the village/block level; the last mile from the country.
    • With its implementation, we are fast marching towards AtmaNirbhar Bharat in healthcare through the use of technology.

    Also read:

    [Burning Issue] Rolling-out of National Digital Health Mission

  • Global Gender Gap Report, 2021

    India has slipped 28 places to rank 140th among 156 countries in the World Economic Forum’s Global Gender Gap Report 2021, becoming the third-worst performer in South Asia.

    For the 12th time, Iceland is the most gender-equal country in the world. The top 10 most gender-equal countries include Finland, Norway, New Zealand, Rwanda, Sweden, Ireland and Switzerland.

    Global Gender Gap Index

    • The report is annually published by the World Economic Forum (WEF).
    • It benchmarks countries on their progress towards gender parity in four dimensions: Economic Participation and Opportunity, Educational Attainment, Health and Survival and Political Empowerment.
    • The report aims to serve “as a compass to track progress on relative gaps between women and men on health, education, economy and politics”.

    Highlights of the 2021 report

    Indian prospects

    According to the report, India has closed 62.5% of its gender gap to date.

    • Economic participation: India’s gender gap on this dimension widened by 3% this year, leading to a 32.6% gap closed to date.
    • Political empowerment: India regressed 13.5 percentage points, with a significant decline in the number of women ministers.
    • Income: Further, the estimated earned income of women in India is only one-fifth of men’s, which puts the country among the bottom 10 globally on this indicator.
    • Health: Discrimination against women is also reflected in the health and survival subindex statistics. With 93.7% of this gap closed to date, India ranks among the bottom five countries in this subindex.
    • Violence: Wide gaps in sex ratio at birth are due to the high incidence of gender-based sex-selective practices. In addition, more than one in four women has faced intimate violence in her lifetime, the report said.

    India’s neighbourhood

    • In South Asia, only Pakistan and Afghanistan ranked below India.
    • Among India’s neighbours, Bangladesh ranked 65, Nepal 106, Pakistan 153, Afghanistan 156, Bhutan 130 and Sri Lanka 116.
    • Among regions, South Asia is the second-lowest performer on the index, with 62.3% of its overall gender gap closed.
    • Within the region, a wide gulf separates the best-performing country, Bangladesh, which has closed 71.9% of its gender gap so far, from Afghanistan, which has only closed 44.4% of its gap.
    • Because of its large population, India’s performance has a substantial impact on the region’s overall performance.

  • E-commerce policy is needed for speedy, inclusive growth

    The article highlights the untapped potential of the e-commerce sector in the transformation of the Indian economy and suggests factors to take into account in the new e-commerce policy.

    How pandemic contributed to the growth of e-commerce

    • A celebrated McKinsey study has revealed that we have covered a ‘decade in days’ in the adoption of digital during the pandemic.
    • Behavioural changes have been witnessed in most areas like work, learning, health, travel, entertainment, etc.
    • But the biggest surge has been in e-commerce, both in goods and services.

    Significance of the sector for India

    • E-commerce is one of India’s fastest-growing sectors, for attracting FDI and creating jobs, and providing a pan-India market for lakhs of SMEs, and facilitating exports.
    • India has a vibrant retail sector, bubbling with energy and a bright future.
    • E-commerce can rope in lakhs of MSMEs in cross-border trade and multiply turnover and revenues enormously.
    • Its role in facilitation of exports with linkages and access to overseas markets can also help inject competitiveness in our products and creating a lot of jobs and market opportunities, adding to inclusive growth.

    Issues faced by the sector

    • The digital interface during e-commerce processes with multiple agencies has resulted in a plethora of compliances.
    • These compliances include Income Tax Act 1961, Information Technology Act 2000, Consumer Protection Act 2019, FEMA Act 2000, Competition Act 2002, Companies Act 2013, Anti-Piracy Law, GSTN, DGFT, etc.
    • In addition, handling, generation and protection of humongous data is a major issue under data protection laws.
    • At times, there are requirements of compliances with various local and state laws, and during exports, adherence to foreign laws, many of which could be quite complex and rigorous.

    E-commerce policy to aid Inclusive growth

    • Inclusive growth being an important objective of the proposed e-commerce/FDI policy, it should recognise and support new business models in both product and service segments.
    • The policy should be aimed at improving consumer experience and providing gainful employment to regular and gig workers with improved earnings.
    • India, in fact, is the first country to extend protections to workers including the new-age gig and platform workers, which is being viewed with interest globally.
    • With the passage of the Code on Social Security 2020, policymakers have focused on financial and social security associated with employment to contemporary socio-economic realities.
    • The role of platform workers amidst the pandemic has presented a strong case to attribute a more robust responsibility to platform aggregator companies and the State.
    • This has cemented their role as public infrastructures who also sustain demand-driven aggregators and e-commerce platforms.
    • This role of the platform workers may help in higher productivity and more sustainable employment, when many of them could potentially become mini-entrepreneurs.
    • This, however, would need to be facilitated by concerned public and private institutions as also the multiple regulators in the e-commerce ecosystem.
    • In an online services market place and to provide full support to regular and gig professionals rendering services on the platform, it must be imperative on the service platform to build their capacity through training, technology and access to high-quality consumables and tools.

    Consider the question “Examine the role e-commerce can play in India’s pursuit of inclusive growth? What are the issues faced by the sector in India?” 

    Conclusion

    We are in for exciting times, as we enter this decade, rightly called the ‘Techade’; 2020 has accelerated technology infusion in all segments of life and activity. The world is looking at India with expectations and we owe it to our nation.

    Source: https://www.financialexpress.com/opinion/e-commerce-policy-needed-for-speedy-inclusive-growth/2226729/

  • Should Petroleum be brought within the ambit of GST?

    The article deals with the issues of demand for the inclusion of fuel oils in the GST regime and its implications for the revenue of the states and the Centre.

    How much tax we pay on petrol and diesel

    • The Union and state levies put together account for roughly 55 per cent and 52 per cent of the retail price of petrol and diesel respectively.
    • These work out to around 135 per cent and 116 per cent of the base prices of the two products respectively.
    • The central levy on petrol and diesel works out to around 36 per cent of the retail price while the state component is around 20 per cent (diesel) to 28 per cent (petrol).
    • Of the total central levies on petrol and diesel, Rs 1.40 per litre and Rs 1.80 per litre is the basic excise duty for the two fuels, and Rs 11 per litre and Rs 18 per litre is the special additional excise duty.
    • Both these components form part of the divisible pool of taxes i.e. 42 per cent of which (approximately Rs 52,000 crore) goes to the states.
    • The remaining portion of Rs 18 per litre in both cases is the Road and Infrastructure Cess and Rs 2.50 per litre and Rs 4 per litre is the Agriculture Infrastructure and Development Cess which are retained by the Centre.

    How other countries tax fuel oils

    • Being demerit goods, fuel oils and liquor are almost universally subject to a dual levy by countries that implement any kind of VAT or GST.
    • The levy is a mix of GST at a fixed percentage of the price which qualifies for credit in the value chain and a fixed amount or percentage of the price which is not creditable and is thus outside GST.
    • Punitive taxes of this order are levied primarily to discourage consumption of environmentally degrading fossil fuels and to garner revenues to fund infrastructure, while the creditable component enables offsetting of taxes on basically capital inputs.
    • These products are subjected to a plethora of levies like VAT, excise duty, storage levies, security levies and environmental taxes in the EU and the total incidence of such taxes ranges from around 45 per cent to 60 per cent.
    • The US is an exception in these matters since it imposes taxes at rates as low as around 15 per cent.

    Including fuel oils in the GST regime

    • the 122nd Constitution Amendment Bill in 2014 for GST adopted the delayed choice approach.
    • Under the delayed-choice approach, petroleum products would be subjected to GST with effect from such date as the council may recommend.
    • Accordingly, sections 9(2) and 5(2) of the CGST/SGST Act and the IGST Act respectively, explicitly provide for levy of GST on these products with effect from such date as the Council may recommend.
    • Thus, bringing the aforesaid petro-products under GST is not within the reach of the central government alone.

    How much will be the loss of revenue

    • A 28 per cent levy of GST on the base price would fetch around Rs 5.40 per litre on petrol and around Rs 5.45 on diesel to the central and each of the state governments.
    • Contrast the above with the current yield of Rs 32.90 per litre on petrol and Rs 31.80 per litre on diesel to the Centre alone and an average of around Rs 20 per litre and Rs 15 per litre on petrol and diesel, respectively, to each of the states.
    • This, however, would bring down the prices of petrol and diesel to around Rs 55 per litre.
    • This would translate into a revenue loss of around Rs 3 lakh crore on account of petrol and around Rs 1.1 lakh crore on account of diesel to the Centre and the states, at current volumes.

    Consider the question “What are the various levies contributing to the prices of petrol and diesel in India? Examine the rationale for the heavy taxing of these products in India.”

    Conclusion

    Clearly, bringing petro-products under GST would not lower fuel oil prices by itself, unless the Union and the state governments are willing to take deep cuts in their revenues.

  • Maintaining the inflation target at 4%

    On the last day of the financial year 2020-21, the Finance Ministry announced that the inflation target for the five years between April 2021 and March 2026 will remain unchanged at 4% (+/-2 %).

    Inflation targeting in India

    • India had switched to an inflation target-based monetary policy framework in 2015, with the 4% target kicking in from 2016-17.
    • Many developed countries had adopted an inflation-rate focus as an anchor for policy formulation for interest rates rather than past fixations with metrics like the currency exchange rate or controlling money supply growth.
    • Emerging economies have also been gradually adopting this approach.

    Try this PYQ:

    Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?

    (a) Curbing imports of non-essential goods and promoting exports

    (b) Encouraging Indian borrowers to issue rupee denominated Masala Bonds

    (c) Easing conditions relating to external commercial borrowing

    (d) Following an expansionary monetary policy

    What is the rate of consumer price inflation?

    • Moody’s Analytics recently pointed out that volatile food prices and rising oil prices had already driven India’s consumer price index (CPI)-based inflation past the 6% tolerance threshold several times in 2020.
    • While inflation headwinds remain, especially with oil prices staying high, there was some speculation that the Central government may ease up on the inflation target by a percentage point or two.
    • This would have given the Reserve Bank of India (RBI) more room to cut interest rates even if inflation was a tad higher.

    What is the RBI’s position on this?

    • The RBI had, in recent months, sought a continuance of the 4% target with the flexible tolerance limits of 2%.
    • The 6% upper limit, it argued, is consistent with global experience in countries that have a large share of food items in their consumer price inflation indices.
    • Accepting inflation levels beyond 6% would hurt the country’s growth prospects, the central bank had asserted.

    Why should these concern consumers?

    • The central bank’s monetary policy and the government’s fiscal stance may not have necessarily reacted to arrest inflation pressures even if retail price rise trends would shoot past 6%.
    • As high oil prices spur retail inflation higher, the central bank is unhappy as its own credibility comes under a cloud if the target is breached.
    • If the upper threshold for the inflation target were raised to 7%, the central bank may not have felt the need to seek tax cuts (yet).
    • Thus, the inflation target makes the central bank a perennial champion for consumers vis-à-vis fiscal policies that, directly or indirectly, drive retail prices up.

    Back2Basics:

    Types of Inflation: Demand Pull, Cost Push, Stagflation, Structural Inflation, Deflation and Disinflation

  • Places in news: Chenab Arch Bridge

    A half-a-kilometre long arch, the defining feature of the world’s highest railway bridge over river Chenab, is set to be completed today.

    Chenab Arch Bridge

    • The bridge is part of an ambitious 272-km rail link project and is being constructed by the Northern Railway at an estimated cost of ₹28,000 crores.
    • The bridge will be able to withstand earthquakes with a magnitude of up to eight and high-intensity blasts.
    • The bridge, which will include a 14-metre dual carriageway and a 1.2-metre-wide central verge, will have a design speed of around 100 kilometres per hour with a lifespan of 120 years.

    Its inception

    • The preparations of the rail link began in 2002 and the initial plan was to connect Kashmir’s northernmost city Baramulla to New Delhi.
    • Work on the bridge started again in July 2017 with the aim of completing the construction by the end of 2019 but due to contractual issues in 2018, it was delayed.
    • Steel was specifically chosen for the construction of the bridge as it will make the project more economical.
    • The metal will also be able to resist temperatures of minus 20 degree Celsius and wind speeds of above 200 kilometres per hour.

    Significance

    • A railway bridge like this, with this kind of geography, has not been made anywhere in the world, according to the Railways.
    • It will symbolise the Kashmir rail link, to be ready for at least a century.
    • In other words, a train from Kanyakumari can reach all the way to Kashmir uninterrupted.
    • The cable crane that will do the job of completing the arch itself measures around 900 meters and is said to be the longest in the world, made especially for this project.

  • The conundrum of financial distress and higher household savings amid covid

    The article explains the paradoxical increase in savings of Indian households during the pandemic.

    Increase in savings during lockdown

    • Counterintuitively, the financial savings of people went up in April-June 2020.
    • Data compiled by the RBI reveal that in April-June 2020, household financial savings was ₹8.16 trillion.
    • For a perspective on how big this is, in April-June 2019, household financial savings was ₹2.02 trillion.
    • In July-September 2019, it was ₹4.85 trillion and in the two following quarters, it was ₹4.2 trillion and ₹5.14 trillion, respectively.
    • As a percentage of GDP, it was 21% of GDP in April-June 2020 (the lockdown quarter) against 4% of GDP in April-June 2019.

    So, what happened to savings in the next quarter?

    • In the immediate quarter after April-June 2020, would you expect savings to move up, as things were opening up gradually?
    • Again, counter-intuitive.
    • In July-September 2020, household savings was ₹4.92 lakh crore, or 10.4% of GDP.

    What explains such saving behaviour?

    • This has got to do with the human response to an emergency situation.
    • When things are looking bleak, one does not know how worse it can get.
    • Discretionary spending was cut down.
    • One section of the population was losing jobs and opting for moratorium on loans.
    • Now we know, in hindsight, that it was not the entire population—people with access to means were rather saving than spending.
    • Household financial savings is the net of flow of financial assets minus flow of financial liabilities.
    •  In April-June 2020, flow of financial assets at ₹7.38 trillion was much higher than ₹3.83 trillion of April-June 2019.
    • The big difference was the flow of financial liabilities.
    • In April-June 2020, it was a negative ₹0.78 trillion over a positive ₹1.81 trillion in April-June 2019.
    • That is, people paid off their liabilities in April-June 2020, whereas usually they add to it.
    • Things normalized in July-September 2020.
    • The flow of financial assets rose to ₹7.47 trillion, but the flow of financial liabilities was ₹2.55 trillion i.e., people added to financial liabilities.
    • The household debt to GDP ratio rose to 37.1% in July-September 2020 from 35.4% in April-June 2020.

    What do we learn from all this?

    • In a pandemic-induced financial distress phase, a majority of the people preferred to save.
    • One basic tenet of financial planning is that you have an emergency fund equivalent to, say, six months of expenses.
    • People usually follow the principle of Income – Expenses = Savings/Investments.
    • Ideally, it should be Income – Savings/Investments = Expenses.

    Consider the question “What explains the increased saving of Indian households during the quarter of lockdown? What lessons we can draw from this for reliance on the demand-led recovery from the pandemic?”

    Conclusion

    The data from the RBI attest to the well-established fact that people tend to save in emergencies. This also suggests that the demand-led recovery path during emergencies faces the risk of failure.

  • Prakash Singh Judgment on Police Reforms, 2006

    Political interference in police postings continues despite the landmark Prakash Singh judgment nearly a decade-and-a-half ago that addressed the issue and was pegged to be a watershed moment in police reforms.

    Politics is a perplexing, but fascinating game. It takes ages to unravel the intricate secrets that shroud the kernel of closed room politics. But contrary has happened with the Maharashtra Police.

    What is the SC’s Prakash Singh judgment on police reforms?

    • Prakash Singh, who served as DGP of UP Police and Assam Police besides other postings, filed a PIL in the Supreme Court post-retirement, in 1996, seeking police reforms.
    • In a landmark judgment, the Supreme Court in September 2006 had directed all states and Union Territories to bring in police reforms.
    • The ruling issued a series of measures that were to be undertaken by the governments to ensure the police could do their work without worrying about any political interference.

    What measures were suggested by the Supreme Court?

    • The seven main directives from the Supreme Court in the verdict were fixing the tenure and selection of the DGP to avoid situations where officers about to retire in a few months are given the post.
    • In order to ensure no political interference, a minimum tenure was sought for the Inspector General of Police so that they are not transferred mid-term by politicians.
    • The SC further directed postings of officers being done by Police Establishment Boards (PEB) comprising police officers and senior bureaucrats to insulate powers of postings and transfers from political leaders.
    • Further, there was a recommendation of setting up the State Police Complaints Authority (SPCA) to give a platform where common people aggrieved by police action could approach.
    • Apart from this, the SC directed the separation of investigation and law and order functions to better improve policing, setting up State Security Commissions (SSC) that would have members from civil society and forming a National Security Commission.

    How did states respond to these directives?

    • The Commonwealth Human Rights Initiative (CHRI), in its report of 2020 has some useful data.
    • It tracked changes made in the police force following the 2006 judgment.
    • It has found that not even one state was fully compliant with the apex court directives and that while 18 states passed or amended their Police Acts in this time, not one fully matches legislative models.

    What has been the response of the Supreme Court to these issues?

    • Prakash Singh said that he has followed up on these issues and has had nearly five contempt petitions issued in the past decades to states found to be non-compliant.
    • Singh said that bigger states like Maharashtra, Tamil Nadu and UP have been the worst when it comes to bringing about systemic changes in line with the judgment and that it is only the North-Eastern states that have followed the suggested changes in spirit.
    • Singh said states like Maharashtra make their own laws that are not effective.
    • The need of the hour is an all-India Act that all states have to follow and small changes can be made in exceptional cases relating to the situation in a particular state.