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  • Innovations in Sciences, IT, Computers, Robotics and Nanotechnology

    Revolution unfolding in data regulation

    | Science Tech | Mains Paper 3: Awareness in various sc and tech fields

    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.

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  • PPP Investment Models: HAM, Swiss Challenge, Kelkar Committee

    Consequences of asset monetisation on ordinary citizens

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    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 ₹6-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.

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  • Parliament – Sessions, Procedures, Motions, Committees etc

    Spirit of federalism lies in consultation

    op-ed snap | Polity | Mains Paper 2: Federalism

    Context

    Recently, various State governments raised concerns about Central unilateralism in the enactment of critical laws on subjects in the Concurrent List of the Seventh Schedule.

    Objection of the state against Centre legislating on the subject in Concurrent List without consulting States

    • Unilateral legislation on subjects in Concurrent list: Kerala Chief Minister stated that it is not in the essence of federalism for the Union government to legislate unilaterally, on the subjects in the Concurrent List.
    • Encroaching on powers of States: Tamil Nadu Chief Minister raised the issue by calling on other Chief Ministers against the Union government encroaching on powers under the State and Concurrent Lists.
    • The Kerala Legislative Assembly unanimously passed a resolution against the Electricity (Amendment) Bill, 2020.
    • The Tamil Nadu Legislative Assembly passed a resolution against the controversial farm laws.

    Background of the Concurrent List

    • The Concurrent List gives the Union and the State Legislatures concurrent powers to legislate on the subjects contained in it.
    • Purpose of Concurrent List: The fields in the Concurrent List were to be of common interest to the Union and the States, and the power to legislate on these subjects to be shared with the Union so that there would be uniformity in law across the country.

    Union government extending its control on subjects in the Concurrent List and State list

    1) Farm laws: Encroaching on the powers of States

    • Parliament passed the farm laws without consulting the States.
    • State List subject: The laws, essentially related to Entry 14 (agriculture clause) belonging to the State List.
    • However, Parliament passed the law citing Entry 33 (trade and commerce clause) in the Concurrent List.
    • Against legal principle set by the Supreme Court: The Supreme Court, beginning from the State of Bombay vs F.N. Balsara case, said that if an enactment falls within one of the matters assigned to the State List and reconciliation is not possible with an entry in the Concurrent or Union List after employing the doctrine of “pith and substance”, the legislative domain of the State Legislature must prevail.

    2) Major Port Authorities Act 2021 and Indian Ports Bill: Centre taking away the power of State

    • The Major Ports Authorities Act, 2021, was passed by Parliament earlier this year.
    • Goa objected to the law, stating that it would lead to the redundancy of the local laws.
    • Concurrent List subject: When it comes to non-major ports, the field for legislation is located in Entry 31 of the Concurrent List. 
    • The Indian Ports Act, 1908, presently governs the field related to non-major ports.
    • As per the Indian Ports Act, 1908, the power to regulate and control the minor ports remained with the State governments.
    • The new draft Indian Ports Bill, 2021, proposes the Maritime State Development Council (MSDC), which is overwhelmingly controlled by the Union government.

    3) Electricity (Amendment) Bill,2020: Centre taking away powers of State

    • Various States like West Bengal, Tamil Nadu and Kerala have also come forward against the Electricity (Amendment) Bill, 2020.
    • The field related to electricity is traceable to Entry 38 of the Concurrent List.
    • The power to regulate the sector was vested with the State Electricity Regulatory Commissions (SERCs), members of which were appointed by the State government.
    • The proposed amendment seeks to establish National Selection Committee, dominated by members nominated by the Union government that will make appointments to the SERCs.
    • The amendment also proposes the establishment of a Centrally-appointed Electricity Contract Enforcement Authority (ECEA).
    • In effect, the power to regulate the electricity sector would be taken away from the State government.

    Way forward

    • Consultation with States: The National Commission to Review the Working of the Constitution (NCRWC), or the Venkatachaliah Commission, had recommended that individual and collective consultation with the States should be undertaken through the Inter-State Council established under Article 263 of the Constitution.
    • Coordination of policy and action in concurrent jurisdiction: The Sarkaria Commission Report had recommended that there should be a coordination of policy and action in all areas of concurrent or overlapping jurisdiction through a process of mutual consultation.
    • Limit powers to ensuring uniformity: The Sarkaria Commission further recommended that the Union government, while exercising powers under the Concurrent List, limit itself to the purpose of ensuring uniformity in basic issues of national policy and not more.
    • Responsibility of Centre: The Supreme Court itself had held in the S.R. Bommai vs Union of India case, the States are not mere appendages of the Union.
    • The Union government should ensure that the power of the States is not trampled with.

    Consider the question “There has been instances of protest by the State government against Centre legislating unilaterally on subjects in Concurrent List. What are the implications of this for the federalism? Suggest the way forward.”

    Conclusion

    The essence of cooperative federalism lies in consultation and dialogue, and unilateral legislation without taking the States into confidence will lead to more protests on the streets.

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  • Insolvency and Bankruptcy Code

    New Code for Creditors (CoC) under IBC

    | Economics | Mains Paper 3: Indian Economy

    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.

     

    Post your answers here.

    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.

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  • Goods and Services Tax (GST)

    Govt must constitute GST tribunal: SC

    | Economics | Mains Paper 3: Indian Economy

    The Supreme Court has warned that the government had no option but to constitute the Goods and Services Tax (GST) Appellate Tribunal.

    What is GST Appellate Tribunal?

    • The GST Appellate Tribunal (GSTAT) is the second appeal forum under GST for any dissatisfactory order passed by the First Appellate Authorities.
    • The National Appellate Tribunal is also the first common forum to resolve disputes between the centre and the states.
    • Being a common forum, it is the duty of the GST Appellate Tribunal to ensure uniformity in the redressal of disputes arising under GST.
    • It holds the same powers as the court and is deemed Civil Court for trying a case.

    Constitution of the GST Appellate Tribunal

    The GSTAT has the following structure:

    1. National Bench: The National Appellate Tribunal is situated in New Delhi, constitutes a National President (Head) along with 2 Technical Members (1 from Centre and State each)
    2. Regional Benches: On the recommendations of the GST Council, the government can constitute (by notification) Regional Benches, as required. As of now, there are 3 Regional Benches (situated in Mumbai, Kolkata and Hyderabad) in India.
    3. State Bench and Area Bench

    Why in news now?

    • The GST tribunal has not been constituted even four years after the central GST law was passed in 2016.
    • Section 109 of the GST Act mandates the constitution of the Tribunal.
    • Citizens aggrieved are constrained to approach respective High Court and the same was overburdening the work of the High Courts.

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    Back2Basics: Goods and Services Tax

    • The GST is a value-added tax levied on most goods and services sold for domestic consumption.
    • It was launched into operation on the midnight of 1st July 2017.
    • It subsumed almost all domestic indirect taxes (petroleum, alcoholic beverages, and stamp duty are the major exceptions) under one head.
    • The GST is paid by consumers, but it is remitted to the government by the businesses selling the goods and services.
    • GST is levied at four rates viz. 5%, 12%, 18% and 28%. The schedule or list of items that would fall under these multiple slabs is worked out by the GST council.

    Types

    • The GST to be levied by the Centre is called Central GST (CGST) and that to be levied by the States is called State GST (SGST).
    • Import of goods or services would be treated as inter-state supplies and would be subject to Integrated Goods & Services Tax (IGST) in addition to the applicable customs duties.

    The GST Council

    • It is a constitutional body (Article 279A) for making recommendations to the Union and State Government on issues related to GST.
    • The GST Council is chaired by the Union Finance Minister and other members are the Union State Minister of Revenue or Finance and Ministers in charge of Finance or Taxation of all the States.
    • It is considered as a federal body where both the centre and the states get due representation.

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  • Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

    Right to Sit to be mandated in Tamil Nadu

    | Polity | Mains Paper 2: Parliament & State Legislatures

    The Tamil Nadu government has tabled a Bill in the Legislative Assembly making it mandatory for establishments to provide seating facilities for employees.

    Right to Sit

    • The Right to Sit is aimed to benefit thousands of employees of large and small establishments, particularly those working in textile and jewelry showrooms.
    • Persons employed in shops and establishments in the State are made to stand throughout their duty time resulting in varied health issues.
    • The bill mandates for every premises of establishments to have suitable seating arrangements for all employees so that they may take advantage of any opportunity to sit in the course of their work.
    • This would avoid the ‘on their toes’ situation throughout the working hours.

    Inspired from Kerala

    • A few years ago, workers of textile showrooms in Kerala had gone on a protest demanding the ‘Right to Sit’, prompting the government there to amend the Kerala Shops and Establishments Act in 2018.
    • This in turn provided seating arrangements for them.

    A move for women

    • Most owners of shops and other retail outlets forbid women, the bulk of the shop workforce, to sit.
    • Even leaning against a wall was punished. They have varicose veins and joint pain from standing.
    • Toilet breaks were strictly limited. This has led to urinary infections, kidney problems.

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  • International Space Agencies – Missions and Discoveries

    Inspiration4: SpaceX’s first all-civilian space mission

    Prelims Only | Science Tech | Mains Paper 3: Awareness in various sc and tech fields

    SpaceX has announced its ‘Inspiration4’ mission, the first all-civilian, non-governmental spaceflight, for launch.

    What is Inspiration4?

    • Inspiraton4 is a part of an effort to raise funds for pediatric treatment and research facility that focuses on children’s catastrophic diseases, particularly leukemia and other cancers.
    • The mission involves circling the Earth for three days and then splashing down into the Atlantic Ocean.
    • Inspiration4 will orbit the Earth at 575km, higher than the International Space Station (408km) and the Hubble space telescope (547km).
    • This will be the farthest distance travelled by a crewed mission since 2009, when astronauts last went to repair the Hubble.
    • The Dragon module that the group will be using has also been modified for the mission.
    • Usually, the SpaceX module is used for travelling to the ISS, where it has to dock or join the floating laboratory.

    UPSC may ask an MCQ asking: Which of the following is/are the space missions related to human flights? It may throw up 4-5 options (which we all get confused at after few months) like Cassini , InSight , Messanger, Voyager etc.

    Key feature: Dome window

    • Since Inspiration4 is not going to the ISS, the docking port has been removed and has been replaced with a dome window instead.
    • This dome window will offer breath-taking views of the Earth for the four travellers.
    • The window has been inspired by the Cupola, a module on the ISS used to make observations about our planet.

    Why is the mission significant?

    • According to a report in the Independent, the journey will present an opportunity for collecting large amounts of health data that will aid in planning future crewed space missions.
    • As per the report, they will collect data on ECG (electrocardiograph) activity, movement, sleep, heart rate, and rhythm, blood oxygen saturation, cabin noise and light intensity, which will help in assessing behavioral and cognitive changes over the journey.
    • The travelers will undergo balance and prescription tests just before and after their journey to assess their response to the change in gravity.
    • The immune system function will also be monitored by collecting blood. Their organ systems will also be monitored by an AI-powered ultrasound device.

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  • Animal Husbandry, Dairy & Fisheries Sector – Pashudhan Sanjivani, E- Pashudhan Haat, etc

    Odisha’s Manda buffalo gets unique, indigenous tag

    Prelims Only | Agriculture | Mains Paper 3: Economics Of Animal-Rearing

    The National Bureau of Animal Genetic Resources (NBAGR) has recognized the Manda buffalo, found in the Eastern Ghats and plateau of Koraput region of Odisha, as the 19th unique breed of buffaloes found in India.

    Manda Buffalo

    • The Manda are resistant to parasitic infections, less prone to diseases and can live, produce and reproduce at low or nil input systems.
    • These buffaloes have ash grey and grey coat with copper-coloured hair.
    • The lower part of the legs up to the elbow is light in colour with copper colour hair at the knee. Some animals are silver-white in colour.
    • Four breeds of cattle — Binjharpuri, Motu, Ghumusari and Khariar — and two breeds of buffalo — Chilika and Kalahandi — and one breed of sheep, Kendrapada, have already received NBAGR recognition.

    Their economic significance

    • The small, sturdy buffaloes are used for ploughing in their native habitat of the Koraput, Malkangiri and Nabarangpur districts.
    • There are around 1,00,000 buffaloes of this breed in the native tract mostly contributing to the family nutrition of households and assisting in all the agricultural operations in the undulated hilly terrain for generations.
    • The average milk yield of these buffaloes is 2 to 2.5 litres in single milking with more than 8% fat. However, a few of those yield up to 4 litres.
    • After going through the findings, the NBAGR made an assessment and recognised it as an indigenous and unique buffalo.

    Now pls do not ignore this PYQ:

    Q.What is/are unique about ‘Kharai Camel’, a breed found in India?

    1. It is capable of swimming up to three kilometres in seawater.
    2. It survives by grazing on mangroves.
    3. It lives in the wild and cannot be domesticated.

    Select the correct answer using the code given below:

    (a) 1 and 2 only

    (b) 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

     

    Post your answers here.

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  • Reform in India’s reservation system

    | Governance | Mains Paper 2: Government Scheme/Policies

    Context

    While it is undeniable that affirmative action has been one of the protagonists of Indian democracy’s success stories, these have also accumulated a fair share of problems and call for immediate policy attention and debate.

    Problems with the current policy of reservation

    • With the reservation of seats in political and public institutions of the state, it was thought that the hitherto marginalised groups would be able to find place in the power sharing and decision-making processes.
    • This strategy of removal of disabilities has not translated into an equalisation of life chances for many groups in our heterogeneous society.

    What are the problems?

    1) Problem of reification

    • The Justice G. Rohini Commission’s report on the sub-categorisation of OBCs based on the last five years’ data on  central government jobs and OBC admissions to central higher education institutions highlights this problem.
    • The commission concluded that 97% of central OBC quota benefits go to just under 25% of its castes.
    • As many as 983 OBC communities — 37% of the total — have zero representation in both central government jobs and admissions to central universities.
    • Also, the report states that just 10% of the OBC communities have accrued 24.95% of jobs and admissions.
    • Clearly, the assumption that the disadvantages of every sub-group within each category are the same is severely misplaced.
    • Consequently, asymmetrical distribution of reservation has severely deterred political projects of unified subaltern solidarity.

    2) Insufficiency of data

    • There is a dire need of accurate data pertaining to the socio-economic condition of different social groups.
    • Though caste-based reservations have been pivotal in animating upward social mobility we hardly have sufficient data about the actual reach and access of this policy measure.
    • We do not know what liberalisation has done to castes which remained tied to more traditional sources of income and were incapable of realising the new opportunities provided by the opening of the economy.
    • What is urgently required is a mechanism that can address this lacuna and make the system more accountable and sensitive to intra-group demands.

    Way forward

    • Since every further categorisation will only lead to reification and fragmentation in the long run, two things are required.
    • Evidence based policy option: We need to develop a wide variety of context-sensitive, evidence-based policy options that can be tailored to meet specific requirements of specific groups.
    • Institution: We need an institution alike the Equal Opportunities Commission of the United States or the United Kingdom which can undertake two important but interrelated things:
    • 1) Make a deprivation index correlating data from the socio-economic-based census of different communities.
    • 2) Undertake an audit on performance of employers and educational institutions on non-discrimination and equal opportunity and issue codes of good practice in different sectors.
    • This will make the formulation of policy and its monitoring simpler at an institutional level.
    • Similar suggestions were made a decade ago in the recommendations that the expert committee for an Equal Opportunities Commission (2008) made in its comprehensive report that it submitted to the Ministry of Minority Affairs.

    Conclusion

    As evident, a socio-economic caste-based census becomes a necessary precondition to initiate any meaningful reform in the affirmative action regime in India.

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  • Disinvestment in India

    National monetisation pipeline has narrow outlook

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    Context

    Recently, FM announced the National Monetisation Pipeline (NMP) to lease a slew of “brownfield” (already developed) but underutilised public sector assets to the private sector with the objective of raising Rs 6 lakh crore.

    About the NMP

    • The assets identified for lease include roads, railways, ports, power, mining, aviation, oil and gas pipelines, warehouses, hotels and even two sports stadia.
    • The idea is to create “structured public-private partnerships” to unlock value from public sector assets and to recycle the revenues so raised into new infrastructure.
    • But the move raises several concerns.

    3 concerns with NMP

    1) Government is preferring financial value of assets over public welfare

    • The design of the NMP is out of sync with existential challenges — global warming, pandemics, geopolitical chaos and fundamentalism.
    •  The assets are valued on the basis of conventional financial metrics (enterprise value, book value, net present value, the costs of comparable assets).
    • The model seemingly absolves the government from the responsibility to unlock the intrinsic “social” (to include “smart” and “clean” ) value of these assets.

    2) It will lead to concentration of capital

    • NMP is designed to attract deep-pocketed financial institutions (PE firms) and industrial conglomerates.
    • This is because the valuations are so high that few other entities will have the resources or the risk carrying capacity to respond.
    • The result will be a deepening of the concentration of capital and existing inequalities.
    • There will be economic and social implications.

    3) Addressing the system problem

    • The government should have asked itself a fundamental question before placing a substantial share of public assets on the block:
    • Why have these assets been so poorly managed?
    • Was it because of bad leadership, inadequate talent within the PSEs, and/or systemic and structural shortcomings?
    • If the reason for low productivity was poor leadership or lack of talent, the transfer of these assets to a different, private sector-led organisational and investment structure would make sense.
    • Structural issues: But if the reason had to do with structural impediments, then such a change may not be warranted, at least not in the first instance.
    •  The example, gas pipelines GAIL are hugely underutilized, but this is not because of the “inefficiency” of GAIL, the PSE operator.
    • It is because of structural factors such as the shortage of domestic gas supplies; the regressive taxation system; the relatively uncompetitive price of gas and the perennial tussle between the Centre and state governments over land access.
    • A similar point can be made about most of the other assets identified for monetisation.
    • Their low productivity is because their PSE operators have faced a combination of systemic hurdles related to weak dispute resolution mechanisms; regulatory miasma; lack of transparency in governance; pricing distortions and intrusive bureaucratic intervention.
    • Way forward: So, until and unless these systemic problems are addressed, the private sector will find it difficult to harness the full value of these assets and the transfer of operatorship to them will offer at best a partial palliative.

    Conclusion

    Private-public investment structures make sense, but they must be modeled to also generate social value. In today’s world, there are no shortcuts to sustainable development.

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