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

Civilsdaily

Login

GS Paper: GS3

  • Universal Declaration of the Rights of Rivers

    Activists have highlighted the plight of rivers as well as the support building up for according rights to them under the Universal Declaration of the Rights of Rivers.

    What constitutes the Rights of Rivers?

    • Flow: If we look at a river as an ecosystem instead of cubic metres of water, then the ambit of rights gets broadened.
    • Flora and fauna: It includes aquatic flora and fauna, the biodiversity in its catchment areas, forests, its tributaries, groundwater, the rocks and soil in its bed and banks.
    • Human settlements: The rights of rivers in a sense would mean the ecological causes and conditions making up the natural habitat. Human settlements dependent is the prime factor.
    • Economy: Such rights should not put an end to fishing or other localized, subsistence-based human needs related to the river, but rather push for a healthy relationship respecting the river as an ecosystem.

    Universal Declaration of the Rights of Rivers

    • The declaration is a civil society initiative to define the basic rights to which all rivers are entitled, according to a note by non-profit, International Rivers.
    • This trend of granting rights to nature, taking place across the world, signals the beginnings of a radical shift from an extractive mindset to one where conservation safeguards are being extended to nature.
    • The right to recognize rivers as living entities rather than mere human property started in 2008.
    • That year, Ecuador became the first country to constitutionally recognize the Rights of Nature.

    Present campaigns

    • In the one year since the declaration, rights have been recognised or declared for the Boulder Creek watershed in the US, the Magpie River in Canada, the Alpayacu river in Ecuador and the ParanĂĄ river and its wetlands in Argentina.
    • Several campaigns calling for rights to be accorded to rivers have also incorporated the declaration.
    • These include campaigns for the Lempa river in El Salvador, Tavignanu river in France, Ethiope river in Nigeria, the Indus river in Pakistan and the Frome river in the UK.
    • In 2017, a treaty agreement between the Whanganui Iwi (a Māori tribe) and the New Zealand government recognized the Whanganui River as a legal person.

    Recognition of such rights in India

    • In 2017, the Uttarakhand HC ruled that the Indian rivers Ganga and Yamuna, the Gangotri and Yamunotri glaciers, as well as other related natural elements are “legal persons” with all corresponding rights, duties, and liabilities of a living person.
    • Subsequently, in 2018, the same high court ruled that the entire animal kingdom has rights equivalent to that of a living person.

    Challenges

    • Cultural practices: Activists and communities have been arguing for a need of cultural change that can bring about the ethic of care with regard to the rest of nature. Indigenous people have had such an ethic in their worldviews and ways of living.
    • Development paradigm: The most critical challenge is whether can rights be protected without changing the current development paradigm. Any paradigm shift also needs questioning of fundamental forms of injustices, including capitalism, statism, anthropocentrism, and patriarchy.
    • Cross-boundary issues: Rivers don’t necessarily follow human-made political boundaries. Indus, one of the longest that runs through China, Pakistan, and India, doesn’t flow as per political boundaries. Its contiguity demands a cross-boundary approach.
    • Cooperation deficit: There is still very limited understanding across the world on how a law on the rights of rivers can be implemented. What would be the best ways to ensure custodianship, restitution, compensation.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Needed: A tribunal for CAPF

    Context

    There have been numerous cases of Central Reserve Police Force (CRPF) officers overstaying leave. The Ministry of Home Affairs (MHA) to issue orders to the CRPF headquarters to “include the provisions of Security Force Court (SFC), for initiating disciplinary action against the delinquent officers.

    Departmental enquiries Vs SFC

    • The SFC is a purely judicial process where the guilt must be proved beyond reasonable doubt and the charged official is at liberty to engage a legal practitioner to defend him.
    • Departmental enquiry is a quasi-judicial proceeding where the mere element of the preponderance of probability is enough to determine guilt.
    • Though the Central Reserve Police Force Act of 1949 provides for conducting judicial trial by a Commandant in his capacity as a Magistrate, seldom is it exercised as it gets into the realm of the judicial process.
    • Hence, the conduct of a departmental enquiry is the better option.

    What leads to delay in departmental enquiries against gazetted officers?

    • CRPF rules lay down the procedure for the conduct of departmental enquiries against non-gazetted ranks, and in normal circumstances, the departmental enquiries are completed within three to six months.
    • But when gazetted officers are charge-sheeted, the time taken to order the enquiries is longer.
    • Delay due to getting the views of other institutions: In the case of a gazetted officer, the other institutions like the Union Public Service Commission, the Central Vigilance Commission, the Department of Personnel and Training, and the MHA are also roped in for their views and legal opinion.
    • Dealy due to postponement: When the delinquent officers appear before the inquiring authority presence of the presenting officer and the defence assistant of the charged official is also required.
    • Even if one of them fails to appear for the hearing, the conduct of enquiry must be postponed.
    • Procedural delay: Often, the enquiry is conducted ex parte (without the presence of the charged official), so the recorded statements and other documents must be sent to the charged official.
    • Quite often, delays occur in providing certain prosecution documents to the charged official who may demand them for preparing his own defence.
    • Postal delays further aggravate the matter.
    • Since most officers are busy with operational matters, which gain priority over everything else.

    Way forward

    • Appoint retired officers as inquiring authorities: The solution lies in appointing retired officers as inquiring authorities, who can afford to devote their time to the conduct of enquiries as is being done in most departments of the government.
    • Tribunal for CAPF: With increasing cases being filed in the High Courts across the country in service matters, it is high time the government considered the setting up of tribunals for the CAPFs on the lines of the Armed Forces Tribunal for defence services.
    • Retired officers of the rank of Inspectors General and Additional Directors General from the CAPFs could be part of these tribunals along with retired judges of High Courts.

    Conclusion

    Taking the steps suggested here would ensure the speedy delivery of justice and reduce the burden of the High Courts.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • The economic reforms — looking back to look ahead

    Context

    The economic reforms, so far, have been more focused on the technical nature of the economy than the system, process and people. The fundamentals need to be set right with a focus on human capital, technology readiness and productivity.

    Benefits and limits of economic reforms of 1991

    • Economic reforms of 1991 — and from time to time, subsequent interjections for liberalisation of economy and trade — have enabled some credible gains for the country.
    • Benefits: Foreign exchange reserves (over $600 billion), sustained manufacturing contribution in GDP, increased share in global exports (from 0.6% in the 1990s to 1.8%), robust software exports, and sustained economic growth in the range of 6%-8% are clear indicators of its success.
    • Limits: Primary drivers of the economy — human capital, technology readiness, productivity, disposable income, capital expenditure, process innovation in setting up businesses, and institutional capacity — have not got enough recognition.

    Issues affecting the Indian economy

    1) Lack of Human resource capital formation

    • The human resource capital (HRC) formation, a good determinant of labour productivity, has been missing over the entire period of reforms.
    • The HRC rank for India stands at 103; Sri Lanka is at 70, China at 34, and South Korea at 27, as brought out by the Global Human Capital Report, 2017.
    • Factors responsible for low HRC: The lack of quality education, low skilled manpower, and inadequacies in basic health care have resulted in low HRC.

    2) Low disposable income

    • The World Bank database on GDP for 2019 indicates the low per capita GDP in India, at $2,104 (at $6,997 in PPP terms, ranked 125th globally) against the world average of $11,429 (at $17,678 in PPP terms).
    • Low per capita GDP has direct links to low per capita family income.
    • Low wages: The report by Deloitte (Global Manufacturing Competitiveness Index in 2016) reflects that the hourly wages in India have been $1.7; they are $38, $24, $20.7, and $3.3 for the United States, Japan, South Korea, and China, respectively.
    • Low wages have a direct bearing on the disposable income of families, affecting demand.

    3) Low R&D expenditure

    • India’s research and development expenditure stand at 0.8% of GDP, for other fast-emerging economies such as South Korea, it is (4.5%), China (2.1%), and Taiwan (3.3%).
    • Reduced technology readiness: This low expenditure is resulting in lower capacity for innovation in technologies and reduced ‘technology readiness’, especially for manufacturing.

    4) Low labour productivity: Result of low HRC and lack of technology readiness

    • The lack of HRC and low technology readiness have impacted labour productivity adversely.
    • World Bank publication of 2018 indicates that India’s labour productivity in manufacturing is less than 10% of the advanced economies including Germany and South Korea, and is about 40% of China.
    • Low productivity has unfavourable consequences for competitiveness, manufacturing growth, exports and economic growth.

    5) Long time and more cost in setting up a business

    • There are difficulties in acquiring land for businesses, inefficient utilization of economic infrastructure, and in providing business services.
    • This results in a long time and more cost in setting up enterprises, resulting in a loss of creative energy of entrepreneurs.

    Way forward

    • Investment in human capital and technology: First, to attract large investment in manufacturing and advanced services, at a basic level, investment in human capital and technology is a prerequisite.
    • Technology readiness: The reports by McKinsey and the World Economic Forum on advanced manufacturing suggest that Industry 4.0 will be defined by new technologies such as robotics, 3-D printing, artificial intelligence (AI), the Internet of things (IoT), etc.
    • Consequently, efforts for technology readiness are very essential to stay competitive.
    • It demands enhancing public research and development expenditure to 2% of GDP over the next three years.
    • Strategies to enhance per capita income: There is a need to work on strategies to enhance per capita income by more wages for workers through higher skills and enhancing minimum wages, besides improving the social security net.
    • Promote business-centric approach: Using insights from the work of Nobel laureate (1993) Douglass C. North, it is necessary to build the capacity of public institutions to create a good environment for business and industry.
    • Policy reforms should lay an emphasis on process innovation and promote a business-centric approach to create a friendly ecosystem and for efficient internal supply chain management to integrate with the global supply chain.
    • Innovative nature in public policymaking: The future of the economy should be particularly viewed in the backdrop of a significant and irreversible shift in terms of reliance on the global supply chain as a result of the knowledge-intensive nature of businesses and exponential effects caused by advanced technologies under Industry 4.0, since the 2010s.
    • Therefore, the strategies adopted since the 1990s till now may not ensure adequate returns and call for innovative approaches in public policymaking.

    Consider the question “The economic reforms, so far, have been more focussed on the technical nature of the economy than the system. This resulted in fundamental deficiencies. Suggest the way forward to deal with these deficiencies.”

    Conclusion

    In sum, it necessitates a systemic approach for policy reforms for setting the economic fundamentals right and to achieve higher growth.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Govt. mulls allowing local sales by SEZ units sans import tag

    The government is considering a proposal to allow producers in Special Economic Zones (SEZs) to sell their output to the domestic market without treating them as imports.

    What are SEZs?

    • A Special Economic Zone (SEZ) is an area in which the business and trade laws are different from the rest of the country.
    • SEZs are located within a country’s national borders, and their aims include increasing trade balance, employment, increased investment, job creation, and effective administration.
    • To encourage businesses to set up in the zone, financial policies are introduced.
    • These policies typically encompass investing, taxation, trading, quotas, customs, and labor regulations.
    • Additionally, companies may be offered tax holidays, where upon establishing themselves in a zone, they are granted a period of lower taxation.

    SEZs in India

    • The SEZ policy in India first came into inception on April 1, 2000.
    • The prime objective was to enhance foreign investment and provide an internationally competitive and hassle-free environment for exports.
    • The idea was to promote exports from the country and realizing the need for a level playing field must be made available to the domestic enterprises and manufacturers to be competitive globally.
    • Subsequently, the SEZ Act 2005, was enacted to provide the umbrella legal framework, covering all important legal and regulatory aspects of SEZ development as well as for units operating in SEZs.

    Who can set up SEZs? Can foreign companies set up SEZs?

    • Any private/public/joint sector or state government or its agencies can set up an SEZ.
    • Yes, a foreign agency can set up SEZs in India.

    What is the role of state governments in establishing SEZs?

    • State governments will have a very important role to play in the establishment of SEZs.
    • A representative of the state government, who is a member of the inter-ministerial committee on private SEZ, is consulted while considering the proposal.
    • Before recommending any proposals to the ministry of commerce and industry (department of commerce), the states must satisfy themselves that they are in a position to supply basic inputs like water, electricity, etc.

    Are SEZs controlled by the government?

    • In all SEZs, the statutory functions are controlled by the government.
    • The government also controls the operation and maintenance function in the central government-controlled SEZs. The rest of the operations and maintenance are privatized.

    Are SEZs exempt from labor laws?

    • Normal labor laws are applicable to SEZs, which are enforced by the respective state governments.
    • The state governments have been requested to simplify the procedures/returns and for the introduction of a single-window clearance mechanism by delegating appropriate powers to development commissioners of SEZs.

    Who monitors the functioning of the units in SEZ?

    • The performance of the SEZ units is monitored by a unit approval committee consisting of a development commissioner, custom, and representative of the state government on an annual basis.

    What are the special features for business units that come to the zone?

    • Business units that set up establishments in an SEZ would be entitled to a package of incentives and a simplified operating environment.
    • Besides, no license is required for imports, including second-hand machinery.

    How do SEZs help a country’s economy?

    • SEZs play a key role in the rapid economic development of a country.
    • In the early 1990s, it helped China and there were hopes that the establishment in India of similar export-processing zones could offer similar benefits – provided, however, that the zones offered attractive enough concessions.
    • Traditionally the biggest deterrents to foreign investment in India have been high tariffs and taxes, red-tapism, and strict labor laws.
    • To date, these restrictions have ensured that India has been unable to compete with China’s massively successful light-industrial export machine.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Crypto is not currency, must regulate it as asset: Former RBI DG

    Former RBI Deputy Governor R. Gandhi made a case for treating and regulating crypto as a separate asset class with a view to enabling governments around the world to effectively deal with illegal activities associated with virtual currencies.

    Why in news?

    • After quite a lot of debate over the years, people have fully understood that crypto cannot be a currency because the fundamental element of a currency that it should be a legal tender is missing in this case.
    • The general consensus among many policymakers is that it should be deemed as an asset, not as a currency, not as a payment instrument, and not as a financial instrument as there is no clear identified issuer.

    What are Cryptocurrencies?

    • A cryptocurrency is a digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger existing in a form of a computerized database.
    • It uses strong cryptography to secure transaction records, control the creation of additional coins, and verify the transfer of coin ownership.
    • It typically does not exist in physical form (like paper money) and is typically not issued by a central authority.
    • Cryptocurrencies typically use decentralized control as opposed to centralized digital currency and central banking systems.

    How does it work?

    • Cryptocurrencies work using a technology called the blockchain.
    • Blockchain is a decentralized technology spread across many computers that manage and record transactions.

    What is Blockchain Technology?

    • Simply, blockchain is a decentralized, distributed, and public digital ledger.
    • Blockchains are a new type of network infrastructure (a way to organize how information and value move around on the internet) that creates ‘trust’ in networks by introducing distributed verifiability, auditability, and consensus.
    • Blockchains create trust by acting as a shared database, distributed across vast peer-to-peer networks that have no single point of failure and no single source of truth.
    • No individual entity can own a blockchain network, and no single entity can modify the data stored on it unilaterally without the consensus of its peers.

    Also read

    Cryptocurrency and Regulation of Official Digital Currency Bill, 2021

    Back2Basics: Legal Tender Money

    • A legal tender is a coin or a banknote that is legally tenderable for discharge of debt or obligation.
    • Coin of any denomination not lower than one rupee shall be legal tender for any sum not exceeding one thousand rupees.
    • Fifty paise (a half rupee) coins shall be legal tender for any sum not exceeding ten rupees.
    • While anyone cannot be forced to accept coins beyond the limits mentioned above, voluntarily accepting coins for amounts exceeding the limits mentioned above is not prohibited.
    • Every banknote issued by the Reserve Bank of India unless withdrawn from circulation shall be legal tender at any place in India.
    • â‚č1 notes issued by the Government of India are also Legal Tender.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • [pib] What is Pollen Calendar?

    Chandigarh now has its first pollen calendar, which can identify potential allergy triggers and provide a clear understanding for clinicians as well as allergy sufferers about their causes to help limit their exposure during high pollen loads.

    What is a Pollen Calendar?

    • Pollen calendars represent the time dynamics of airborne pollen present in a particular geographical area.
    • They yield readily accessible visual details about various airborne pollen present throughout the year in a single picture.

    Is this a new concept in India? Where else in the west has this calendar been used?

    • Though the concept is not essentially new, this is one of the major environmental concerns that had not been addressed for the Indian cities.
    • Such calendars are location-specific, as pollen concentrations are closely related to locally distributed flora.
    • Europe, UK and the US are using regional pollen calendars in a big way to prevent and diagnose allergic rhinitis/hay fever and predict the timing and severity of the pollen season.

    Why is it important to study pollen?

    • Pollen grains are male biological structures with the primary role of fertilization, but when inhaled by humans, they may strain the respiratory system and cause allergies.
    • Pollen found suspended in air can cause widespread upper respiratory tract and naso-bronchial allergy with manifestations like asthma, seasonal rhinitis, and bronchial irritation.
    • About 20-30 percent of the population suffers from allergic rhinitis/hay fever in India, and approximately 15 percent develop asthma.
    • Pollen is considered a major outdoor airborne allergen responsible for allergic rhinitis, asthma, and atopic dermatitis in humans.

    What were the key findings?

    • The study highlights the variability of crucial pollen types in different seasons.
    • Spring and autumn are two seasons when airborne pollen dominate.
    • The findings will enhance the understanding of pollen seasons, which will in turn help minimize pollen allergies.

    How will a pollen calendar benefit people, especially those who have respiratory issues?

    • A pollen calendar provides a clear understanding for clinicians, as well as people with allergies to identify the potential allergy triggers and help to limit their exposure during high pollen load season.
    • The early advisories can be prepared and disseminated through media channels to the citizens so that they can use protective gear during the period when the concentration of allergic pollen will be high.

    Does the study infer that gardens and parks in the city contribute to the pollen and thus there must be proper scientific tree plantation?

    • It is important to involve experts while designing parks.
    • We should try to plant trees/shrubs that release no or little pollen.
    • Trees such as palms, nettle, safeda, white mulberry (shahtoot), congress grass, pine, have a high incidence of pollen.

    What kind of trees must be grown alongside our roads or in parks?

    • Plant monoecious plants (male and female flowers on the same plant).
    • Hibiscus, lilies, and holly that are grown widely in Chandigarh are examples of such plants.
    • Cucumbers and squashes are also monoecious. Select plants with low to moderate pollen production.
    • Non-allergic or entomophilous plant species should be chosen to provide an allergen-free atmosphere.
    • Examples of such plants include rose, jasmine, salvia, Bougainvillea, Raat Rani, and sunflower.

    With inputs from:

    Indian Express

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Places in news: Gulf of Mexico

    An oil spill spanning at least 10 miles has been captured by satellite imagery in waters off the Louisiana coast near the Gulf of Mexico.

    Gulf of Mexico

    • The Gulf of Mexico is an ocean basin and a marginal sea of the Atlantic Ocean, largely surrounded by the North American continent.
    • It is bounded on the northeast, north and northwest by the Gulf Coast of the United States; on the southwest and south by the Mexican states of Tamaulipas, Veracruz, Tabasco, Campeche, Yucatan, and Quintana Roo; and on the southeast by Cuba.
    • The US states of Texas, Louisiana, Mississippi, Alabama, and Florida, which border the Gulf on the north, are often referred to as the “Third Coast” of the United States (in addition to its Atlantic and Pacific coasts).
    • It is covered with a tangle of pipes, wells and other energy infrastructure, much of it no longer used, as a result of generations of oil extraction there.

    Its formation

    • The Gulf of Mexico took shape approximately 300 million years ago as a result of plate tectonics.
    • Its floor consists of sedimentary rocks and recent sediments.
    • It is connected to the part of the Atlantic Ocean through the Florida Straits between the US and Cuba, and with the Caribbean Sea via the YucatĂĄn Channel between Mexico and Cuba.
    • Because of its narrow connection to the Atlantic Ocean, the Gulf experiences very small tidal ranges.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Revolution unfolding in data regulation

    Context

    A number of countries have been looking to extend their existing data protection frameworks to ensure that users have more effective control over their data than their regulations currently allow.

    Measures to unlock the data silos

    • Benefits: These measures aimed at unlocking data silos will make it easier for data to flow from the entity that currently holds it to any other data business that might want to use it with the permission of the data subject.
    • In Australia, Consumer Data Right framework will allow consumers in Australia to require any business with which they have a commercial relationship to transfer that data to any other business of their choice.
    • The first sector in which this new data right is being rolled out in the banking sector, with power set to follow close on its heels.
    • The EU’s proposed Data Act will create a fairer data economy by ensuring better access to and use of data and is intended to cover both business-to-business and business-to-government transfers of data.
    • Along similar lines, the EU has also drafted a Data Governance Act to govern the data exchanges and platforms.
    • It will thus both enable and regulate new data-sharing arrangements that will intermediate the transfer of data from data businesses that currently hold it to those that have been permitted to use it.
    • Data regulation to protect and utilize data: Regulatory activity seems to suggest that it is not enough to protect data if you cannot also ensure that this data is effectively utilized.

    What are the issues with regulation measures?

    1) Law and regulation cannot keep pace with technology

    • Technology determines how data is collected, processed and used, and, by extension, the manner in which it is transferred.
    • Decades of trying to regulate technology businesses have taught us that laws and regulation simply cannot keep pace with changes in technology.
    • No matter how fast we move, if the only weapon we are using to regulate technology is the law, we will be doomed to play catch-up forever.
    • These new consumer-centric measures are likely to fail if they are to be implemented solely through legislation.

    2) Data transfers in the absence of a legal framework can lead to problems in India

    • India has adopted a slightly different approach to data transfers known as the Data Empowerment and Protection Architecture (DEPA).
    • DEPA offers a technology-based solution for consent-based data flows, allowing users to transfer their data from data businesses that currently hold them to those that want to use them.
    •  Last week, the country’s Account Aggregator framework—the first implementation of DEPA—went live in the financial sector.
    •  It too suffers from infirmities that could threaten its success.
    • India still does not have a data protection regulation and implementing a technological solution for data transfers in the absence of a legal framework could lead to new problems.

    Way forward: Techno-legal approach

    • Use techno-legal approach to regulate: Technology businesses are most effectively regulated through a judicious mix of law and technology—strong, principle-based laws to provide the regulatory foundation, with protocol-based guardrails to ensure compliance.
    • Seven countries came together to endorse a techno-legal approach to data regulation.
    • If successful, this would be the first global attempt to adopt a techno-legal solution for data-transfer regulation.

    Consider the question “There is growing appreciation in regulatory circles that it is not enough to protect data if you cannot also ensure that this data is effectively utilized” In light of this, examine the challenges in regulation of data while ensuring its safe transfer for utilisation.” 

    Conclusion

    Techno-legal solution offers effective ways to deal with the problems of data regulation and data transfer.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Consequences of asset monetisation on ordinary citizens

    Context

    In the Budget for 2021-22, the Finance Minister had announced the Government’s decision to monetise operating public infrastructure assets. The National Monetisation Pipeline (NMP) was unveiled, which shows that the Government intends to raise â‚č6-lakh crore over the next four years by monetising several “core assets”.

    Four issues with NMP

    1)  Assets transferred would be performing assets and not idle asset

    • Strategic and significant asset: The Government has identified “performing assets” to transfer to private entities and these are both strategic and significant.
    • These include over 26,700 kilometres of highways, 400 railway stations, 90 passenger trains etc.
    • Moreover, existing public sector infrastructure in telecoms, power transmission and distribution and petroleum, petroleum products and natural gas pipelines are included in the NMP.
    • Under the NMP, the Government intends to lease or divest its rights over these assets via long-term leases against a consideration that can be upfront and/or periodic payments.

    2) Consequences for ordinary citizens

    • There are two dimensions about the impact on common citizens.
    • Public as a stakeholder: The assets have all been created through substantial contribution by the tax-paying public, who have stakes in their operation and management.
    • Double taxation: These assets have, until now, been managed by the Government and its agencies,  which operate in public interest.
    • Therefore, charges borne by the public for using these assets have remained reasonable.
    • With private companies getting the sole responsibility of running all these assets, prices of these services will go up, as resutl the citizens of this country would be double-taxed.
    • First, they paid taxes to create the assets, and would now pay higher user charges.
    • Concern: Therefore, as the Government prepares to transfer “performing assets” to the private companies, it has the responsibility to ensure that user charges do not price the consumers out of the market.

    3) Are there other avenues to plug the revenue gap?

    • Increase tax revenue: One possibility was to increase the tax revenue, for at 17.4% in 2019-20, India’s tax to GDP ratio was relatively low, as compared to most advanced nations.
    • Improvements in tax compliance and plugging loopholes have long been emphasised as the surest way to improve tax revenue, but little has been done, as the following example shows.
    • Since 2005-06, the Government has been providing data on the profits declared and taxes paid by companies that file their returns electronically.
    • Data shows that India’s large companies have been exploiting the loopholes for reporting lower profits and to escape the tax net.

    4) Efficiency issue

    • According to NITI Aayog, the “strategic objective of the Asset Monetisation programme is to unlock the value of investments in public sector assets by tapping private sector capital and efficiencies”.
    • The NITI Aayog objective assumes that public sector enterprises are inefficient, which is contrary to the reality.
    • In 2018-19, while 28% of these enterprises were loss-making, the corresponding figure for large companies was 51%.

    Consider the question “How asset monetisation is different from the privatisation? What are the issues with the National Manetisation Pipeline that seeks to monetise the assets?”

    Conclusion

    The government should address the issues mention here associated with the roll out of the National Monetisation Pipeline to make it a success.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • New Code for Creditors (CoC) under IBC

    The insolvency regulator has called for public comments on a proposal to introduce a code of conduct for Committees of Creditors (CoC), of companies undergoing insolvency proceedings under the Insolvency and Bankruptcy Code (IBC).

    Before proceeding, try this PYQ first:

    Q. Which of the following statements best describes the term ‘Scheme for Sustainable Structuring of Stressed Assets (S4A)’, recently seen in the news? (CSP 2017)

     

    (a) It is a procedure for considering the ecological costs of developmental schemes formulated by the Government.

    (b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.

    (c) It is a disinvestment plan of the Government regarding Central Public Sector Undertakings.

    (d) It is an important provision in ‘The Insolvency and Bankruptcy Code’ recently implemented by the Government.

     

    [wpdiscuz-feedback id=”lq23m2nrph” question=”Please leave a feedback on this” opened=”1″]Post your answers here.[/wpdiscuz-feedback]

    About IBC

    • The IBC, 2016 is the bankruptcy law of India that seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
    • It is a one-stop solution for resolving insolvencies which previously was a long process that did not offer an economically viable arrangement.
    • The code aims to protect the interests of small investors and make the process of doing business less cumbersome.

    Key features

    Insolvency Resolution: The Code outlines separate insolvency resolution processes for individuals, companies, and partnership firms. The process may be initiated by either the debtor or the creditors. A maximum time limit, for completion of the insolvency resolution process, has been set for corporates and individuals.

    1. For companies, the process will have to be completed in 180 days, which may be extended by 90 days, if a majority of the creditors agree.
    2. For startups (other than partnership firms), small companies, and other companies (with assets less than Rs. 1 crore), the resolution process would be completed within 90 days of initiation of request which may be extended by 45 days.

    Insolvency regulator: The Code establishes the Insolvency and Bankruptcy Board of India, to oversee the insolvency proceedings in the country and regulate the entities registered under it. The Board will have 10 members, including representatives from the Ministries of Finance and Law, and the RBI.

    Insolvency professionals: The insolvency process will be managed by licensed professionals. These professionals will also control the assets of the debtor during the insolvency process.

    Bankruptcy and Insolvency Adjudicator: The Code proposes two separate tribunals to oversee the process of insolvency resolution, for individuals and companies:

    1. National Company Law Tribunal: for Companies and Limited Liability Partnership firms; and
    2. Debt Recovery Tribunal: for individuals and partnerships

    What is the recent development?

    Ans. Code of conduct for Committees of Creditors (CoC)

    • A CoC is to be composed of financial creditors to the Corporate Debtor (CD) — or operational creditors in the absence of unrelated financial creditors.
    • Under the IBC, CoC is empowered to take key decisions, including decisions on haircuts for creditors, that are binding on all stakeholders, including those dissenting.
    • The CoC is also empowered to seek and choose the best resolution plan for a corporate debtor from the market, and its role is vital for a timely and successful resolution for a CD.
    • The IBBI noted that a code of conduct for CoCs would promote transparent and fair working on the part of CoCs.

    What are the issues that the code of conduct is seeking to address?

    • Several cases in which certain lenders have withdrawn funds from a CD undergoing insolvency proceeding and contributed to delays in the insolvency process.
    • Delays in resolution are seen as contributing to the loss of value in corporate debtors and have become a key criticism of the IBC, with over 75 percent of proceedings having crossed the 270-day timeline.
    • The IBBI highlighted cases in which representatives of lenders have had to seek approval from seniors for decisions such as an appointment of resolution professionals.
    • IBBI has recommended that a code of conduct require that members of the CoC nominate representatives with sufficient authorization to participate in meetings and make decisions during the process.
    • The regulator also highlighted cases where lenders have withdrawn funds from a corporate debtor during insolvency or liquidation proceedings.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)