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GS Paper: GS3

  • RBI surprises with 40 bps rate increase in Repo Rate

    The Reserve Bank of India (RBI), in a sudden move, raised the repo rate by 40 basis points (bps) to 4.4% citing inflation that was globally rising alarmingly and spreading fast.

    Why in news?

    • The repo rate increase was the first since August 2018.
    • The MPC retained its ‘accommodative’ policy stance even as it focuses on withdrawal of accommodation to keep inflation within the target range while supporting growth.
    • Due to Ukraine War, persistent and spreading inflationary pressures are becoming more acute with every passing day.

    Hues over the REPO spike

    • The move — to have such a meeting and to raise the interest rates — is, at two different levels, both surprising and obvious.
    • It is surprising because the RBI’s MPC meets once every two months — and the meeting this week was not scheduled.

    What is Repo Rate?

    • Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds.
    • It is used by monetary authorities to control inflation.
    • In the event of inflation, central banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank.
    • This ultimately reduces the money supply in the economy and thus helps in arresting inflation.

    How does the repo dynamics work?

    • When there is a shortage of funds, commercial banks borrow money from the central bank which is repaid according to the repo rate applicable.
    • The central bank provides these short terms loans against securities such as treasury bills or government bonds.
    • This monetary policy is used by the central bank to control inflation or increase the liquidity of banks.
    • The government increases the repo rate when they need to control prices and restrict borrowings.
    • An increase in repo rate means commercial banks have to pay more interest for the money lent to them and therefore, a change in repo rate eventually affects public borrowings such as home loan, EMIs, etc.
    • From interest charged by commercial banks on loans to the returns from deposits, various financial and investment instruments are indirectly dependent on the repo rate.

    What is accommodative stance of policy?

    • Accommodative monetary policy is when central banks expand the money supply to boost the economy. Monetary policies that are considered accommodative include lowering the Federal funds rate.
    • These measures are meant to make money less expensive to borrow and encourage more spending.

    What triggered the RBI to take sudden decision?

    • Inflation has been rising for over two years: By law, the RBI is supposed to target retail inflation at 4%. Inflation constantly above 4% since last year.
    • Inflation has not been “transitory”: The reasons for high inflation have tended to change over the months due to wide range of reasons like war, crude oil prices rise, taxes on fuels etc.
    • Spike in crude oil prices is not new: The RBI has pointed to high crude oil prices in the wake of the Ukraine war, as one of the key reasons for high inflation in India.
    • High core inflation: The core inflation which is essentially the inflation rate stripped of the effect of fuel and food prices has been rising up. This is more worrisome for RBI since it cannot be altered overnight.
    • Monetary policy has lags. RBI waited too long: If the RBI wanted to contain inflation in May, it should have acted in February or at least in April. Raising rates right now may not bring down the inflation rate immediately.

    Try this PYQ from CSP 2020:

    Q.If the RBI decides to adopt an expansionist monetary policy, which of the following it would NOT do?

    1. Cut and optimize the statutory liquidity ratio
    2. Increase the Marginal Standing Facility Rate
    3. Cut the Bank Rate and Repo Rate

    Select the correct answer using the code given below:

    (a) 1 and 2 only

    (b) 2 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

     

    [wpdiscuz-feedback id=”u0fhdp0i3d” question=”Please leave a feedback on this” opened=”1″]Post your answers here:

    [/wpdiscuz-feedback]

     

     

     

    Back2Basics: Monetary Policy Committee (MPC)

    • The Monetary Policy Committee (MPC) is a committee of the RBI, which is entrusted with the task of fixing the benchmark policy interest rate (repo rate) to contain inflation within the specified target level.
    • The RBI Act, 1934 was amended by Finance Act (India), 2016 to constitute MPC to bring more transparency and accountability in fixing India’s Monetary Policy.
    • The policy is published after every meeting with each member explaining his opinions.
    • The committee is answerable to the Government of India if the inflation exceeds the range prescribed for three consecutive months.
    • Suggestions for setting up a MPC is not new and goes back to 2002 when YV Reddy committee proposed to establish an MPC, then Tarapore committee in 2006, Percy Mistry committee in 2007, Raghuram Rajan committee in 2009 and then Urjit Patel Committee in 2013.

    Composition and Working

    • The committee comprises six members – three officials of the RBI and three external members nominated by the Government of India.
    • The meetings of the Monetary Policy Committee are held at least 4 times a year and it publishes its decisions after each such meeting.
    • The Governor of RBI is the chairperson ex officio of the committee.
    • Decisions are taken by a majority with the Governor having the casting vote in case of a tie.
    • They need to observe a “silent period” seven days before and after the rate decision for “utmost confidentiality”.

     

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  • France pulls out of P-75I Project

    Ahead of PM Modi’s scheduled visit, France has denounced its participation in the P-75 India (P-75I) project under which six conventional submarines are to be built in India for the Indian Navy.

    Why did France pull out?

    • The reason was that the Request for Proposal (RFP) requires that the fuel cell AIP be sea proven, which not the case is for us yet since the French Navy does not use such a propulsion system.
    • AIP refers to Air-Independent Propulsion, a technology for conventional — that is, non-nuclear — submarines.

    Backgrounder: Project 75

    • Project 75 India is a part of India’s thirty-year-old submarine building plan by which all the six submarines which are under the project should already be sailing and it should have been followed by the submarines now for which the RFP has been issued.
    • It is a long-awaited and long-overdue project.
    • This should have happened way back but it got delayed because it was difficult to find a strategic partnership model.

    What is P-75I?

    • The Project 75I-class submarine is a follow-on of the Project 75 Kalvari-class submarine for the Indian Navy.
    • In the late 1990s, around the time of Kargil war, a three-decade plan took shape for indigenous construction of submarines.
    • It was known to have two separate series of submarine building lines – codenamed Project 75 and Project 75I — in collaboration with foreign entities.
    • Under this project, the Indian Navy intends to acquire six diesel-electric submarines, which will also feature advanced air-independent propulsion systems.
    • This is for enabling them to stay submerged for longer duration and substantially increase their operational range.

    What is the status of the project?

    • The navy is slightly behind the curve on P-75I.
    • The project faces choppy waters; the Naval Group has already announced it is pulling out, and sources said the Russian and Spanish companies might also not proceed with their bids.
    • Among the concerns, is the requirement to demonstrate a sea-proven fuel cell AIP.
    • While some manufacturers may have the technology, it may not have been proven at sea yet.
    • Another problem for the OEMs is the transfer of technology, which is built into the process.

    Why does the Navy want AIP subs?

    • Simply put, AIP technology allows a conventional submarine to remain submerged for much longer than ordinary diesel-electric submarines.
    • All conventional submarines have to surface to run their generators that recharge the batteries that allow the boat to function under water.
    • However, the more frequently a submarine surfaces, the higher the chances of it being detected.
    • AIP allows a submarine to remain submerged for more than a fortnight, compared to two to three days for diesel-electric boats.
    • IP has a force multiplier effect on lethality of a diesel electric submarine as it enhances the submerged endurance of the boat several folds.

    What submarines does India have now?

    • India has 16 conventional diesel-electric submarines, which are classified as SSKs.
    • After the last two Kalvari Class subs are commissioned under P-75, this number will go up to 18.
    • India also has two nuclear ballistic submarines, classified SSBN.

    Strategic importance of submarines development

    • Ageing arsenal: Currently, India has less number of submarines than what is required with some more of those from both types being at various stages of construction.
    • Combat roles in near future: The nuclear powered and diesel-electric submarines have their designated roles in the Carrier Battle Groups, which are formations of ships and submarines with Aircraft Carriers at the lead role.
    • Strategic deterrence: As per the basic principles of submarine deployment and the minimum requirement for India to create a strategic deterrence, there is a specific number of submarines of both types that India needs to have in active service.

    Significance of P-75 I

    • ‘Make in India’ Projects: It will serve to facilitate faster and more significant absorption of technology and create a tiered industrial ecosystem for submarine construction in India.
    • Self-Reliance: From a strategic perspective, this will help reduce current dependence on imports and gradually ensure greater self-reliance and dependability of supplies from indigenous sources.
    • Securing Indo-Pacific: China is increasing its presence in the Indian Ocean Region (IOR) and this is creating pressure on the Indian Navy in sprucing up the submarine arm.

     

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  • Russia officially quits the International Space Station (ISS)

    Russia is responding to the Western sanctions. It has decided to walk out of the International Space Station.

    International Space Station

    • The ISS was launched in 1998 as part of joint efforts by the U.S., Russia, Japan, Canada and Europe.
    • The idea of a space station originated in the 1984 State of the Union address by former U.S. President Ronald Reagan.
    • The space station was assembled over many years, and it operates in low-earth orbit.
    • Since its inception, it has served as a laboratory suspended in space and has aided multiple scientific and technological developments.
    • The ISS was originally built to operate for 15 years.

    Why was ISS launched?

    • A space station permits quantum leaps in research in science, communications, and in metals and lifesaving medicines which could be manufactured only in space.
    • ISS has consistently maintained human presence for the past 21 years, providing astronauts with sophisticated technologies for scientific research.

    What is Russia’s role in maintaining the ISS?

    • The ISS is built with the co-operation of scientists from five international space agencies — NASA of the U.S., Roscosmos of Russia, JAXA of Japan, Canadian Space Agency and the European Space Agency.
    • Each agency has a role to play and a share in the upkeep of the ISS.
    • Both in terms of expense and effort, it is not a feat that a single country can support.
    • Russia’s part in the collaboration is the module responsible for making course corrections to the orbit of the ISS.
    • They also ferry astronauts to the ISS from the Earth and back.
    • Until SpaceX’s dragon spacecraft came into the picture the Russian spacecrafts were the only way of reaching the ISS and returning.

     

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  • Advanced Towed Artillery Gun System (ATAGS) passes validation trials

    The indigenous Advanced Towed Artillery Gun System (ATAGS) developed by the Defence Research and Development Organisation (DRDO) successfully completed the validation trials.

    Why in news?

    • The ATAGS has demonstrated a range of over 45 km, making it the “most consistent and accurate gun in the world”.

    ATAG System

    • The ATAGS is a 155-mm, 52-calibre artillery gun jointly developed by the DRDO in partnership with Bharat Forge of the Kalyani Group and the Tata Power SED.
    • ATAGS has greater than 95% of indigenous content. It set a world record for the longest unassisted projectile range of 48 kilometres.

    Its features

    • The gun consists of a barrel, breech mechanism, muzzle brake and recoil mechanism to fire 155 mm calibre ammunition with a firing range of 48 km.
    • It has an all-electric drive to ensure reliability and minimum maintenance over a long period of time.
    • It has advanced features like high mobility, quick deployability, auxiliary power mode, advanced communication system, automatic command and control system with night capability in direct fire mode.

     

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  • The supply bottlenecks causing power shortages

    Context

    The power sector in India is going through a crisis. Peak shortages in some states have reached double digits.

    Chronology of the crisis

    • First, with summer approaching before time, power demand has shot up to record levels.
    • The second reason for the rise in power demand is that the economy is recovering, and demand from the industrial sector is going up.
    • All things put together, power demand crossed 207 GW on April 29, which is about 14 per cent higher than what it was a year ago.
    • Experts feel that the peak demand may even touch 215 GW in the coming months.

    Coal shortage crisis

    • On average, coal stocks available are only good enough for about eight days’ generation against a norm of 24 days.
    • In some plants, the stocks available are just about enough to run the plant for a day or two more.
    • Part of the problem of poor coal stock is also rumoured to be on account of the non-payment of dues of coal companies.
    • But this is not the major cause of the shortage.

    Reasons for coal shortage and fall in generation

    • The fall in coal stock in power stations is because of two main reasons.
    • 1] Rise in international price of coal: The first is that due to a rise in the international price of coal on account of the Ukraine crisis, all plants that were importing coal have either stopped generating completely or are generating at much lower levels.
    • We have a sizeable generating capacity based on imported coal, estimated at about 16 GW to 17 GW.
    • All these plants after stopping imports are now looking for domestic coal, creating pressure on domestic coal.
    • 2] Non-availability of rakes with Indian railways for transporting coal: Though about 22 MT of coal may be available in power stations, if one includes the stocks available with mining companies, the figure is well over 70 MT.
    • So, it is all a question of transporting the coal to the power stations.
    • 3] Fall in generation from gas-based plants: To make matters worse, generation from gas-based plants has also fallen due to high gas prices in the world market.
    • 4] Impact on hydro generation: Reservoirs, too, are drying up due to intense heat which will adversely affect hydro generation.

    Transportation problem faced by Indian railways

    • The railways have about 2,500 rakes which can be used for coal transportation.
    • With a turn-around time of about four-and-a-half days which goes up to nine days for coastal regions, the railways can provide only about 525 rakes on any single day. 
    • Of this, about 100 rakes are used for transporting imported coal and therefore, only about 425 rakes are available on a daily basis for transporting domestic coal.
    • But only 380 rakes were being provided in the first half of April this year, though efforts are on to increase this to about 415 rakes.
    • The railways prefer to transport coal over short distances in order to save on the turn-around time.
    • There is also the issue of availability of tracks since they are being used on a back-to-back basis.
    • Thus production has to be enhanced so that the replenishment rate is higher than consumption.
    • Unless we do that, the total stock of coal in the country will deplete further and it will no longer be a mere transportation problem as it is now, but a general lack of supply of coal.

    Conclusion

    This is the right time to enhance coal production and build adequate stocks because once the monsoon sets in, production will fall.

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  • [pib] National Open Access Registry (NOAR)

    National Open Access Registry (NOAR) has successfully gone live from 1st May 2022.

    What is NOAR?

    • NOAR is a centralized online platform through which the short-term open access to the inter-state transmission system is being managed in India.
    • It is an integrated platform accessible to all stakeholders in the power sector, including open access customers (both sellers and buyers), power traders, power exchanges, National/Regional/State LDCs and others.
    • The platform provides automation in the workflow to achieve shorter turnaround time for the transactions.
    • NOAR platform also has a payment gateway integrated for making payments related to interstate short-term open access transactions.
    • NOAR platform provides transparency and seamless flow of information among stakeholders of open access.

    Key features

    • Centralized System: Single point electronic platform for all the stakeholders
    • Automated Process: Automated administration process of the short-term open access
    • Common Interface: Interface with the RLDCs scheduling applications and Power Exchanges (s)
    • Payment Gateway: Make payments related to STOA transactions

     

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  • LIC

    Context

    LIC is now at a transformational moment. Its listing on the bourses should lift LIC to be a part of the elite corporate community in India.

    Insurance sector in India

    • Opening of the insurance sector: A milestone in the history of India’s insurance industry was the opening of the sector for private participation in the year 2000 and this caused widespread concern that LIC will find the competition tough and could very well be marginalised.
    • Today, there are 24 private players in the life insurance space and many of them have foreign collaborations.
    • LIC has steadily grown in the past six decades and today with over 290 million policyholders and an asset value of ₹38 lakh crore ($520 billion), it ranks as one of the largest insurance companies in the world.
    • Yet, LIC remains a colossus capturing 75% of the life insurance business in the country.
    • Its claim settlement at 99.87% is far above the industry average of 84%.

    Role of LIC in skilling and women’s employment

    • LIC created large scale employment for women right from its inception in 1956. 
    • Thousands of women became LIC agents in the 1950s and 60s, when job opportunities were scarce.
    • There was no entry barrier in terms of age or fixed time for work.
    • Education requirement was a mere high school pass.
    • Many of these women were housewives who could earn an extra income by selling LIC policies.
    • This was a period before the arrival of digital technologies and mobile phones.
    • Skill development program: LIC’s training programme with its mix of online education and real-life case studies offer the best model for India’s skill development programmes.
    •  LIC’s relevance comes from its track record of creating vast number of employment opportunities for ordinary Indians, male and female, urban and rural.

    Policies focused on savings

    • In a country of vast poverty and low income, LIC recognised from the beginning that it cannot sell insurance as a risk cover on premature death.
    • It, therefore, devised policies focussing on savings and the need for children’s education and daughter’s marriage which are fundamentals to family values in India.
    • These policies also ensured that a part of the premium paid was returned at regular intervals before the maturity period, providing liquidity for emergencies.
    • They simultaneously covered risk caused by death.
    • People-centric approach: While the private players concentrated on technology-driven marketing, LIC’s approach was significantly people-centric.
    • When Pradhan Mantri Jan Dhan Yojana was launched for financial inclusion of over 300 million of the rural population on August 15, 2014, LIC was already there with its policies covering a rural population of 200 million.

    Conclusion

    The nation must not forget the fact that LIC was built on sweat and tears, pain and sacrifice of ordinary Indians. It is these democratic credentials that remain LIC’s most valuable asset.

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  • India must use markets to decarbonise

    Context

    Climate change is bound to impact human lives and the global economy at an exceptionally high scale in the not-so-distant future. The solution to the problem calls for government intervention.

    Carbon intensive nature of India’s energy ecosystem

    • After China and the United States, India, which releases 2.44 billion tonnes of carbon dioxide annually, is the third-largest emitter of this GHG, making it a key player in emissions reduction.
    •  The International Energy Agency’s (IEA) World Energy Outlook 2017 Report estimates that India will account for nearly one-fourth of the global energy demand by 2040.
    • As per the IEA’s India Energy Outlook 2021 Report, India’s energy system is highly dependent on fossil fuels — coal, oil and bioenergy — that supply about 90 per cent of the country’s demand.
    • Low electrification: About 38 per cent of primary energy is consumed for power generation, implying that the level of electrification is still low in the country.
    • Power generation is highly dependent on coal — about 78 per cent of it comes from this fossil fuel — and, transportation is almost entirely dependent on oil.
    • The Indian energy ecosystem is, thus, highly carbon-intensive.

    Climate change as a feature of market failure

    • Market failure due to climate change: Economic activities by consumers (driving or air-conditioning, for instance) and by producers (such as electricity generation and manufacturing) cause emissions, leading to pollution and global warming.
    • Negative externalities: These negative externalities, causing outcomes that are not efficient, are not reflected in the costs incurred by consumers or producers.
    • The true costs to the consumers, producers and society are not reflected in the market interactions.
    • This leads to an uncontrolled rise in emissions and also breeds apathy towards mitigation efforts.

    Way forward

    • Government intervention: Achieving economic growth sustainably requires a strategy for reducing carbon emissions aggressively while also focusing on efficiency, equity, fairness and behavioural aspects.
    • The solution to the problem of market failure calls for government intervention.
    • Limits of emission: The most natural option of government intervention for reducing emissions is by fixing limits of emissions through regulation, taking into consideration the Nationally Determined Contribution targets set by the country under the Paris Agreement.
    • Experts have shown that the wrongly set emission levels could lead to cost-inefficient outcomes.
    • It makes it difficult for the regulator to obtain the information about each firm’s abatement-cost and damage-cost schedules in advance.
    • Therefore, setting emission targets and regulating emissions through command and control might be good only during the initial phase of the mitigation strategy.
    • Why Carbon tax is a better option? The carbon tax is a better option than regulating the pre-fixed levels of emissions.
    • The marginal cost of abatement rises as the firms keep on reducing the emissions further, and the firm will stop reducing emissions and choose to pay tax at the point when the cost of abatement becomes higher than the rate of tax.
    • This option will lead to near-efficient outcomes.
    •  The trading scheme will bring in higher efficiency as the price of certificates will be determined by allowing firms facing low and high abatement costs to compete in the free market as per their own abatement and damage cost schedules.
    •  The emissions trading scheme will determine the optimal and cost-efficient levels of emissions reduction by providing a choice to the firms to either mitigate or trade — the net effect of this will be a reduction in emissions.
    • The low abatement-cost firms will keep reducing emissions as they would profit by trading the certificates.
    • Equity in energy access: The issue of equity in energy access must be addressed by channelling the revenues generated from carbon pricing to households and firms impacted by the carbon trading and carbon tax — these could be through incentives or lump-sum transfers.

    Conclusion

    The socio-economic impact of decarbonising the economy and the way humans live would be crucial in setting our priorities. We have limited time and our resources are scarce.

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  • PDS has had a spectacular run. That may not last

    Context

    2020-21 was one of Indian agriculture’s finest moments, as memorable as 1967-68 that inaugurated the Green Revolution. Agriculture was the only sector to grow 3.3 per cent in 2020-21, even as the economy overall contracted by 4.8 per cent.

    Increase in grain offtake under PDS

    • NFSA along with PMGKAY has led to a massive jump in grain offtake through the PDS.
    •  More importantly, this increase has largely taken place in the poorer states.
    • UP, Bihar and Jharkhand together accounted for 21.6 per cent of national grain offtake in 2012-13, which was pre-NFSA.
    • Sales of rice and wheat under various government schemes totalled 92.9 million tonnes (mt) in 2020-21 and 105.6 mt in 2021-22.
    • This was as against an average offtake of 62.5 mt during the first seven years after the implementation of the National Food Security Act (NFSA) in 2013-14 and 48.4 mt in the seven years preceding the legislation.

    Provisions under NFSA

    • The NFSA legally entitles up to 75 per cent of India’s rural and 50 per cent of the urban population — translating into some 813.5 million people — to receive 5 kg of grain per person per month at highly subsidised rates of Rs 2/kg for wheat and Rs 3/kg for rice.
    • In the wake of the Covid-induced economic disruptions, a new Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) scheme was launched giving NFSA beneficiaries an extra 5 kg grain per person per month free of cost.
    • PMGKAY was implemented for eight months (April-November) in 2020-21 and 11 months (May-March) of 2021-22.

    PDS reforms in states

    • Only a handful of states — Kerala, Tamil Nadu and Andhra Pradesh — had well-functioning PDS till the early 2000s.
    • In the late-2000s, Chhattisgarh initiated reforms to curb diversion/leakages by entrusting the running of fair price shops to cooperatives and local bodies (as against private licensees), making timely allocation and supplying grain directly to PDS outlets (bypassing middle-level distribution agencies), and using IT to track dispatches right from procurement centres to points of sale.
    • Chhattisgarh’s example was emulated by Odisha, followed by Madhya Pradesh and West Bengal — all by 2015-16.
    • The three poorest states are the latest entrants to the list.
    • The accompanying charts show the offtake of rice and wheat both at the all-India level and for the three poorest states as per the NITI Aayog’s National Multidimensional Poverty Index — Bihar, Jharkhand and Uttar Pradesh (UP).
    • UP particularly has seen its grain offtake soar from 9.5 mt to 17.3 mt in the last two years.
    • Out of the 17.3 mt (10.7 mt wheat and 6.6 mt rice) distributed in 2021-22, 7.8 mt comprised free grains under PMGKAY.
    • The PDS, indeed, turned out to be the only effective social safety net during the pandemic.
    • Some states went beyond rice and wheat.

    Challenges

    •  The expansion of the PDS, especially post-NFSA, was underwritten by the superabundance of rice and wheat in government granaries.
    • Official wheat procurement is likely to halve this time from last year’s record 43.3 mt, because of a poor crop singed by the abnormal spike in March temperatures.
    • Rice stocks are far more comfortable, though the precarious supply situation in fertilisers raises questions about the prospects for the coming kharif season.
    • Looking ahead, the Food Corporation of India’s stocks can probably sustain the pre-2020-21 annual offtake levels of 60-65 mt – enough for NFSA, but certainly not schemes such as PMGKAY.

    Conclusion

    The PDS was originally meant to protect ordinary people from extraordinary price rises. Whether it can do that at a time of renewed global inflation remains to be seen.

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  • Confidentiality ring amendment and its impact on antitrust disputes

    Context

    Amazon (the defendant) decided to take the confidentiality route towards its submissions in an order dated March 7 passed by the DG-CCI on the Amazon dispute.

    About the Confidentiality Ring

    • In 2015, the EU mandated the creation of a data room to respect the confidentiality of certain documents.
    • The EU has to protect this mandate to ensure that the right of defence is not prejudiced. 
    • Articles 101 and 102 of the Treaty of the European Union, which states: “Through confidentiality rings, DG Competition (EU) can safeguard the rights of defence while respecting the legitimate interests in the confidentiality of the information providers.
    • In addition, confidentiality rings remove or reduce the burden of preparing non-confidential versions of documents.”

    Adoption of Confidentiality ring by CCI

    • CCI’s investigation under Sections 3, 4 or 5 of the Competition Act are related to the suo motu powers given to the director-general of the commission, which have now extended toward establishing a confidentiality ring.
    • The CCI has taken an alternative view by vaguely replacing the intent with the regulation.
    • The commission may provide the Confidentiality ring after providing a reasonable opportunity to the informant to represent its case before the Commission.
    • This casts an onus on the informant.
    • Turning to the provider of confidential information, the party seeking confidentiality has to submit reasons and the same must be rebutted by the informant, CCI or any other parties, largely driven by the CCI.

    Issues with the CCI adoption of the Confidentiality Ring

    1] Indiscriminate use of defendant’s reputation ground

    • What would happen if the informant seeks additional documents so that the agency is not prejudiced?
    • By hearing parties out, through redacted information the CCI is bound to be questioned as to the reasons for deciding in a certain manner and worse, could stifle the process at the start.
    • This is likely because the CCI has to hear the objections that the informant may have regarding the reasons for keeping information confidential.
    • The usual ground for seeking this protection is the defendant’s reputation.
    • However, this defence can be used to indiscriminately to subdue any counter that may arise from the informant, who may not possess the intricate details of how a cartel works.

    2] Rejection of informant’s right to know the information

    • The second question is about the relief under Section 35 of the Act that empowers the CCI to establish a confidentiality ring including the parties in dispute to disseminate the information for which the confidentiality clause is invoked.
    • However, this is immediately caveated by Regulation 8 of the “Confidentiality Ring” Amendment of April 8, which states that the informant shall not be part of the ring.
    • This will essentially lead the CCI to gather more information surreptitiously for the determination of the case.
    • Void the informant’s right to know information: It has also effectively rejected the informant’s right to know the information, which would be necessary to establish their claim.
    • Brings secrecy: This not only empowers the CCI to further its cause of suo motu investigation but also brings secrecy to cases of high-value disputes.

    3] It protects the defendant

    • The reason the CCI decided to establish a confidentiality ring is the opposite of the EU directive.
    • The EU would like to protect the information provider, but the CCI seems to want to protect the documents of the defendant.
    • This contradicts the intent in regulation 1 wherein the CCI intends to protect the informant and regulation 2, which gives unfettered rights to “parties” in the dispute to summarily drop the confidentiality card which, according to any reasonable person, includes the defendant.

    Conclusion

    The protection provided to the informants, unfortunately, turns out to be to the advantage of the defendants, who are usually large multi-billion dollar entities. It enables the CCI to ringfence its investigation creating legal immunity for “all” involved.

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