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GS Paper: GS3

  • Solar Energy – JNNSM, Solar Cities, Solar Pumps, etc.

  • Pay Commission Updates

    The 7th Central Pay Commission Report

    The Seventh Pay Commission, headed by Justice A K Mathur, submitted its report to the Centre in November, recommending 23.55% overall hike in pay, allowances and pensions of government employees from January 1, 2016. This means the Centre’s salary bill will go up by Rs 1,02,100 crore in 2016-17.

    The terms of reference of 7th CPC

    1. To review the principles that should govern the emoluments structure including pay, allowances and other benefits, in respect of the following categories of employees:-
      • Central Govt employees (industrial and non-industrial)
      • Personnel of the All India Services
      • Personnel of the UTs
      • Officers and employees of the Indian Audit and Accounts Dept
      • Members of regulatory bodies (excluding the RBI) set up under Acts of Parliament
      • Officers and employees of the Supreme Court
    2. To review the principles that should govern emoluments, concessions and benefits, as well as retirement benefits of Defence Forces
    3. To work out a framework for an emoluments structure to attract the most suitable talent to Govt service, promote efficiency, accountability and responsibility in the work culture
    4. To examine the existing schemes of payment of bonus and recommend general principles for an appropriate incentive scheme to reward excellence in productivity, performance and integrity
    5. To review the existing allowances available to employees and suggest their rationalization and simplification
    6. To examine the principles that govern the structure of pension and other retirement benefits
    7. To recommend the date of effect of its recommendations on all the above

    The recommendations should consider the following criteria:

    • Economic conditions in India and the need for fiscal prudence
    • Need to ensure that adequate resources are available for developmental expenditures and welfare measures
    • Likely impact of the recommendations on the finances of the States, which usually adopt the recommendations with modifications
    • Prevailing emolument structure and retirement benefits available to employees of Central PSUs
    • Best global practices and their adaptability and relevance in Indian conditions

    The above information may be helpful during prelims, though it has little relevance for mains

    Now, let’s take a look at the key recommendations

    It has recommended overall hike of 23.55% in pay, allowances and pensions of central govt. employees with effect from January 1, 2016

    • The minimum pay in govt to be set at ₹18,000 per month
    • The  system of pay bands and grade pay has been dispensed with and a new pay matrix has been designed
    • The Military Service Pay will be admissible only to the Defence forces personnel. <It is a compensation for the various aspects of military service>
    • Introduce a health insurance scheme for central govt employees and pensioners
    • The force personnel of CAPFs should be accorded martyr status in case of death in the line of duty. <Currently, it is accorded only to defence forces personnel>
    • Fair and equitable treatment must be given to all services; or it will widen the gap between the IAS and other services
    • A screening committee should be set up to decide on the allocation of officers on deputation to the centre on the basis of domain knowledge
    • Introduce Performance Related Pay for all categories of central govt employees
    • Take steps to improve the functioning of NPS and establishment of a strong grievance redressal mechanism

    Now, let’s analyse various issues pertaining to personnel in govt. sector.

    It is a long-pending debate that there are huge disparities between private sector and govt. employees in terms of salaries.

    Let’s analyse the difference in salaries of private and govt. employees

    • Compensation to Group C and D employees in govt. is greater than the private sector.< More than 90% of the workforce employed by govt. lies here>
    • For Group B employees, it is similar to private sector <Govt. workforce includes approx 5% group B employees>
    • However, for Group A employees, it is lower than private sector <Govt. workforce includes less than 5% group B employees>

    Govt. job offers added benefits, which are not available in private sector

    Pay Commission on Performance Related pay (PRP)

    What is it : Paying salaries or wages based on performance

    Rationale: Human beings respond to incentives. Recognition for good effort and achievement through an incentive is expected to energize and motivate officers to perform even better

    What’s the problem in implementing such a scheme?

    1. How to measure performance of an organization when targets are more in the nature of social and public goods which may not even be tangible?
    2. How to distribute credit among various departments for such larger public good?
    3. How to separate individuals from collective?
    4. How to prevent PRP degenerating into routine entitlements?

    The Commission notes it may be easier to implement such schemes in profit-driven private organizations where targets based on quantitative criteria make performance appraisal easier.

    Pay flexibility reforms are not a silver bullet, and involve trade-offs and risks. A study of the literature on the subject reveals that employee motivation and performance are not exclusively linked to Performance Related Pay (PRP) which may only enforce temporary compliance.

    Yet evidence from many countries indicates that pay flexibility contributes to management improvements, promotes an atmosphere of dialogue, rewards teamwork and is helpful in efficient task allocation.

    Two important aspects to be kept in mind before evolving such a scheme:

    1. Evolve proper criteria to measure performance along with setting a context where individual and organizational goals are clearly aligned
    2. Devise a performance appraisal system in which the objectives of the appraisal system match with that of the reward system

    Recommendation

    1. Results Framework Document (RFD) can be used as the primary assessment tool for linking the targets of the organization with that of the individuals
    2. Suitable changes in the Annual Performance Appraisal Report (APAR) can provide the necessary link between targets of the appraisal system with those of the RFD document

    Let’s see some of the critical observations of 7th CPC

    • The core of govt. employees (excluding security and commercial department) is very small
    • Pay, allowances and pension as a proportion of govt. expenditure has been declining sharply. <In 1998-99, it was 38% of revenue expenditure, which has reduced to 18% in 2015-16>
    • Pay and allowances in the central govt. have remained stable since 2010-11 at around 1.8%-2% of GDP
    • Impact of the pay hike will be .65% of the GDP. However, some increase in the salary comes back to govt. as taxes, reducing the net impact

    Often, it is argued that Indian govt. employs less people in proportion to its population. Let’s take a look at it.

    Why govt. should hire more?

    • Indian govt. employs less than 1.5% of its population with respect to China which employs 3% of its population
    • The number of personnel per lakh population is 139 for India, against  668 for the US
    • 7th CPC notes there is overall vacancy of around 18% of sanctioned strength
    • It has also observed that sanctioned strength is not adequate to deliver adequate governance

    Recent Developments

    • The Union finance ministry has set up an implementation cell for processing and implementing accepted recommendations of the 7th Pay Commission
    • Recently, several States have approached the Union govt. seeking more time in implementation of the Commission’s report.

    India should implement the recommendations of 7th CPC and II ARC together, reflecting the new mindset. Govt. should be ready to pay its public officials well, increase their strength and invest in building competence.

    It’s time for some questions:

    1. Pay commissions are relics of an age when India was a closed economy and govt. was the major employer. This archaic model has no role in today’s economy and it’s high time India scrapped the system of setting up pay commissions. Comment.
    2. Private organizations are generally thought to be more efficient than government organizations. What could be the possible reasons for this? How can we make our government system more efficient?
    3. Salary hikes are generally linked to performance. This truism of management is totally lost in the public sector, where duration of employment is linked to salary hikes. Keeping in view of the recommendations of 7th Pay commission, discuss the pros and cons of performance related pay.
    Published with inputs from Pushpendra

  • Policy Wise: India’s Power Sector

  • Make in India: Challenges & Prospects

  • Antibiotics Resistance

  • Pulses Production – Subramanian Committee, Eco Survey, etc.

    Pulses are important source of protein, high in fibre content and provide ample quantity of vitamins and minerals. India having the largest shares about 25% production, about 33% acreage and about 27% consuming of total pulses of the world.

    Although India is the highest producer of pulses in the world, its domestic demand outstrips domestic production. The shortfall is met from imports. In last 1 year prices of pulses have increased sharply which has made pulses unaffordable for the common man.

    In this article We will explain why despite India being the largest producer of pulses, the price of pulses have increased so rapidly and we will also discuss steps taken by government in this regard and why those steps have not achieved intended results.

    • What Factors caused increase in prices of pulses in recent years?
    • Government steps in recent years to curb pulse prices
    • Why government steps have failed to reduce prices?
    • Will creating buffer stock for pulses would be able to curb pulses price?

    source

    What factors caused increase in prices of pulses in recent years?

    • Draught: Successive back to back drought i.e failure of crops in 3 successive seasons biggest reason for current price increase in pulses
    • Low MSP: Low production of pulses due to Lower MSP prices for pulses in comparison to wheat and rice and even this low target for pulses procurement is not realized by the government, all these factors disincentives farmers towards pulse production.
    • Grown in only Marginal Land: Since pulses could be grown in marginal land, a trend has developed in India where pulses are only grown in marginal and arid lands and mostly by small farmers, all this has led to low productivity for pulse crop. Only 15% of the 25 million hectares area sown annually for pulses in India is irrigated, compared to 60% for paddy and 90-95% for wheat and sugarcane
    • Limited option of import: Option of import are limited in case of pulses since its production is restricted to few countries in Africa and Asia and even there due to lack of local demand, the production of pulses are low.
    • Rise in demand: Rise in rural income due to MNREGA and better functioning of PDS has increased demand for protein rich food including pulses in last few years.

    Steps taken by Government in recent years to curb pulse prices

    • Banned exports and future trade in pulses.
    • Created buffer stock for pulses
    • Government has signed agreement with Mozambique under which India will encourage greater production of pulses in Mozambique with an assurance that it will be purchased by India at a mutually-agreed price.
    • Allowed import of pulses at zero duty.
    • Government has imported 50000 tonnes of pulses and also subsidized the domestic cost of transport, handling and milling through a price stabilization fund.
    • Imposing essential commodities act and cracking down on hoarders and black marketer through imposition of stock holding limit.
    • Government has increased MSP price of 2 pulse crops i.e. Arhar and masur by Rs 250 per quintal.
    • Inclusion of cluster demonstrations in rice fallows for pulses cultivation in rabi season from 2015-16 under BGREI (Bringing Green Revolution in Eastern India) scheme in order to increase production of pulses in Eastern India in states of Assam, Bihar, Chhattisgarh, Jharkhand, Odisha, Eastern U.P. and West Bengal
    • A special programme for demonstration of new varieties of pulses through Krishi Vigyan Kendra (KVKs) has been taken up from Rabi 2015-16 in order to increase availability of seeds of new varieties of pulses and promote adoption of new varieties

    Why government steps failed to reduce prices?

    • Firstly steps taken against stockers are discouraging them to further invest in warehouses and cold storage. In the absence of stockiest, market prices of pulses collapse, discouraging farmers from growing them in current season.
    • Secondly by suspending future and forward market in pulses, the government has simply shot the messenger. Forward and future market give signal about likely future prices and if harnessed they could actually help the government take preventive measures.
    • Thirdly government imported just 7000 tonnes to tame prices, whereas overall consumption is 3.3 to 4 million tones.
    • Fourthly the government announced MSP norms in November 2015 , which had a limited impact on Pulse production in 2016, since by that time farmers had already made decision regarding which crop they will sow in rabi season.

    Will creating buffer stock for pulses help curb the rising pulses price?

    • Creation of buffer stock of 150000 tonnes from both domestic production and imports could reduce fluctuations in prices as the accumulated reserve could be released in market whenever price of pulses spikes
    • It could also increase production of pulses, since The Food Corporation of India, National Agricultural Cooperative Marketing Federation of India, Small Farmers’ Agribusiness Consortium and other agencies would be engaged in purchasing the crop from farmers.
    • The payment for these purchases would be made from the price stabilisation fund created by the government. This will encourage farmers to take up pulses production on a larger scale and will enable India to help achieve self-sufficiency in pulses in a few years
    • However buffer stock alone would not be able to curtail price in the long run, alongside this step the government has to take number of other steps which include

    source

    The Way forward?

    1. Create a crop-neutral incentive structure for farmers, which at present are skewed in favour of rice, wheat & sugarcane. This could be done by rapidly increasing MSP for pulses in next few years.
    2. Greater public investment in providing irrigation facilities in areas under pulse production could increase productivity of pulses
    3. Augment seed availability of pulses
    4. More allocation should be done on scientific research related to pulses varieties so that better varieties of pulses could be developed

    References:

  • Disasters and Disaster Management – Sendai Framework, Floods, Cyclones, etc.

  • Mission Clean Ganga

  • Housing for all – PMAY, etc.

  • Start-up Ecosystem In India

    START-UP India Launch by Prime Minister Modi on 16th January, 2016, aimed at celebrating the entrepreneurship spirit of country’s youth and has been attended by CEOs and founders of top startups (over 1500) from across the country. Let’s see this in brief!

    <In Part I, we have taken a glance on Simplification and Handholding of Start up Plan, rest part will be covered in Part II of this series>

    What is Start up India programme and its mandates?

    • Startup India is a flagship initiative, intended to build a strong ecosystem for nurturing innovation and Startups in the country that will drive sustainable economic growth and generate large scale employment opportunities.
    • In order to meet the objectives of the initiative, Government of India is announcing this Action Plan that addresses all aspects of the Startup ecosystem.

    How can this Action Plan help accelerate the Startup movement?

    • It is spread across movement from digital/ technology sector to a wide array of sectors including agriculture, manufacturing, social sector, healthcare, education, etc.
    • From existing tier 1 cities to tier 2 and tier 3 cities including semi-urban and rural areas.

    The Action Plan is divided across the following areas:

    • Simplification and Handholding
    • Funding Support and Incentives
    • Industry-Academia Partnership and Incubation

    What is the exact definition of a Startup ?

    • Startup means an entity, incorporated or registered in India not prior to 5 years, with annual turnover not exceeding INR 25 crore in any preceding financial year.
    • Provided that such entity is not formed by splitting up, or reconstruction, of a business already in existence.

    What will be the Action plan for Simplification and Handholding task?

    #Compliance Regime based on Self-Certification

    • To reduce the regulatory burden on Startups thereby allowing them to focus on their core business and keep compliance cost low.
    • Startups shall be allowed to self-certify compliance (through the Startup mobile app) with 9 labour and environment laws (refer below).
    • In case of the labour laws, no inspections will be conducted for a period of 3 years.
    • In case of environment laws, Startups which fall under the ‘white category’ (as defined by the Central Pollution Control Board (CPCB)) would be able to self-certify compliance and only random checks would be carried out in such cases. [Can you think of question on white category in Prelims?]

    #Startup India Hub

    To create a single point of contact for the entire Startup ecosystem and enable knowledge exchange and access to funding.

    How will “Startup India Hub” be a key stakeholder in this vibrant ecosystem?

    • Work in a hub and spoke model and collaborate with Central & State governments, Indian and foreign VCs, angel networks, banks, incubators, legal partners, consultants, universities and R&D institutions.
    • To all young Indians who have the courage to enter an environment of risk, the Startup India Hub will be their friend, mentor and guide to hold their hand and walk with them through this journey.

    #Legal Support and Fast-tracking Patent Examination at Lower Costs

    • To promote awareness and adoption of IPRs by Startups and facilitate them in protecting and commercializing the IPRs.
    • By providing access to high quality Intellectual Property services and resources, including fast-track examination of patent applications and rebate in fees.
    • The scheme for Startup Intellectual Property Protection (SIPP) shall facilitate filing of Patents, Trademarks and Designs by innovative Startups.

    Various measures being taken in this regard include:

    #1. Fast-tracking of Startup patent applications:

    Patent application of Startups shall be fast-tracked for examination and disposal, so that they can realize the value of their IPRs at the earliest possible.

    #2. Panel of facilitators to assist in filing of IP applications:

    Facilitators will be responsible for providing general advisory on different IPRs as also information on protecting and promoting IPRs in other countries.

    #3. Rebate on filing of application:

    Startups shall be provided an 80% rebate in filing of patents vis-a-vis other companies. This will help them pare costs in the crucial formative years.

    #Relaxed Norms of Public Procurement for Startups

    • At present, effective April 1, 2015 Central Government, State Government and PSUs have to mandatorily procure at least 20% from the Micro Small and Medium Enterprise (MSME).
    • In order to promote Startups, Government shall exempt Startups (in the manufacturing sector) from the criteria of “prior experience/ turnover” without any relaxation in quality standards or technical parameters.

    #Faster Exit for Startups

    • To make it easier for Startups to wind up operations.
    • The Insolvency and Bankruptcy Bill 2015 (“IBB”), tabled in the Lok Sabha in December 2015 has provisions for the fast track and / or voluntary closure of businesses.
    • In terms of the IBB, Startups with simple debt structures or those meeting such criteria as may be specified may be wound up within a period of 90 days from making of an application for winding up on a fast track basis.

    Let us know what do you think on this question?

    #Q. How will start ups create an ecosystem that can flourish with ‘Digital India’ initiative? Discuss with examples.

     

    Published with inputs from Arun