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

    What are Doppler Radars?

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

    The India Meteorological Department’s (IMD) Doppler Radar in Mumbai, which surveys weather patterns and forecasts, stopped working after heavy rainfalls.

    How does a Doppler radar work?

    • In radars, a beam of energy– called radio waves– is emitted from an antenna.
    • When this beam strikes an object in the atmosphere, the energy scatters in all directions, with some reflecting directly back to the radar.
    • The larger the object deflecting the beam, the greater is the amount of energy that the radar receives in return.
    • Observing the time required for the beam to be transmitted and returned to the radar allows weather forecasting departments to “see” raindrops in the atmosphere, and measure their distance from the radar.

    What makes a Doppler radar special?

    • It can provide information on both the position of targets as well as their movement.
    • It does this by tracking the ‘phase’ of transmitted radio wave pulses; phase meaning the shape, position, and form of those pulses.
    • As computers measure the shift in phase between the original pulse and the received echo, the movement of raindrops can be calculated.
    • Thus it is possible to tell whether the precipitation is moving toward or away from the radar.

    Types of Doppler radar

    • In India, Doppler radars of varying frequencies — S-band, C-band and X-band — are commonly used.
    • They help track the movement of weather systems and cloud bands and gauge rainfall over its coverage area of about 500 km.
    • The radars guide meteorologists, particularly in times of extreme weather events like cyclones and associated heavy rainfall.
    • An X-band radar is used to detect thunderstorms and lightning whereas C-band guides in cyclone tracking.

    Why are they called ‘Doppler’ radars?

    • The phase shift in these radars works on the same lines as the “Doppler effect” observed in sound waves.
    • It tells that the sound pitch of an object approaching the observer is higher due to the compression of sound waves (a change in their phase).
    • As this object moves away from the observer, the sound waves stretch, resulting in lower frequency.
    • This effect explains why an approaching train’s whistle sounds louder than the whistle when the train moves away.
    • The discovery of the phenomenon is attributed to Christian Doppler, a 19th-century Austrian physicist.

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  • Issues with coercive Population Policy

    op-ed snap | Governance | Mains Paper 2: Government Scheme/Policies

    Context

    Recently, the government of Uttar Pradesh released a “Population Policy” in which it stated its intention to bring the gross fertility rate in the State down from the existing 2.7 to 2.1 by 2026.

    Provisions in the Bill

    • This draft law, titled the Uttar Pradesh Population (Control, Stabilisation and Welfare) Bill, 2021, seeks to provide a series of incentives to families that adhere to a two-child norm.
    • The Bill also intends on disentitling families that breach the norm from benefits and subsidies.
    • It promises public servants who undergo sterilisation and adopt a two-child norm several benefits.
    •  The draft Bill also contains a list of punishments.
    • A person who breaches the two-child norm will be debarred from securing the benefit of any government-sponsored welfare scheme and will be disqualified from applying to any State government job.
    • Existing government employees who infringe the rule will be denied the benefit of promotion.
    • Transgressing individuals will be prohibited from contesting elections to local authorities and bodies.

    Issues with coercive population control policies

    1) Counter-productive measure

    • Through an affidavit filed in court, the central government argued that “international experience shows that any coercion to have a certain number of children is counter-productive and leads to demographic distortions”. 

    2) Against international obligations

    • India is committed to its obligations under international law, including the principles contained in the International Conference on Population and Development Programme of Action, 1994.
    • Foremost in those principles was a pledge from nations that they would look beyond demographic targets and focus instead on guaranteeing a right to reproductive freedom.

    3) Against right to reproductive freedom and privacy

    •  In Suchita Srivastava & Anr vs Chandigarh Administration (2009),  the Court found that a woman’s freedom to make reproductive decisions is an integral facet of the right to personal liberty guaranteed by Article 21.
    • This ruling was endorsed by the Supreme Court’s nine-judge Bench verdict in K.S. Puttaswamy vs Union of India (2017).
    • A reading of the plurality of opinions there shows us that the Constitution sees a person’s autonomy over her body as an extension of the right to privacy.
    • A simple reading of U.P.’s draft law will show us that, if enacted, it will grossly impinge on the right to reproductive freedom.
    • However, In Javed & Ors vs State of Haryana & Ors (2003), the Court upheld a law that disqualified persons with more than two children from contesting in local body elections.
    • But the present UP Bill is far more disproportionate, therefore, the judgment in Javed can no longer be seen as good law.
    • The UP government will likely argue that there is no violation of privacy here because any decision on sterilisation would be voluntary.
    • But, as we ought to by now know, making welfare conditional is a hallmark of coercion.
    • Therefore, the proposed law will fall foul of a proportionality analysis.

    4) Negative consequences

    • An already skewed sex ratio may be compounded by families aborting a daughter in the hope of having a son with a view to conforming to the two-child norm.
    • The law could also lead to a proliferation in sterilisation camps, a practice that the Supreme Court has previously deprecated.
    • In Devika Biswas vs Union of India (2016), the Court pointed to how these camps invariably have a disparate impact on minorities and other vulnerable groups.

    Way forward

    • Experiences from other States in India show us that there are more efficacious and alternative measures available to control the growth of population, including processes aimed at improving public health and access to education.

    Conclusion

    For one thing, the reasoning of the Bill goes against the Puttaswamy case.  But as rousing as the nine-judge Bench verdict is, its legacy depends on how its findings are applied.

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  • e-Commerce: The New Boom

    The proposed e-commerce rules shield vested interests

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

    Context

    The proposed Consumer Protection (E-Commerce) Rules, 2020, have been drafted ostensibly in the name of the consumer.  The rules are driven more by the desire to shield the traditional brick-and-mortar stores, and handicap e-commerce firms, especially the foreign ones.

    Issues with the provisions of draft Consumer Protection (E-Commerce) Rules, 2020

    1) Fall-back liability clause is unfair for those operating through marketplace model

    • Under this provision, e-commerce entities will be liable in case suppliers on the platform fail to deliver the goods to consumers, causing them a loss.
    • E-commerce firms in India operate through either the inventory model or the marketplace model.
    • As FDI is permitted only in the marketplace model.
    • Under the marketplace model, e-commerce platforms don’t hold inventory, but simply connect buyers and sellers.
    • Foreign players typically operate through this model. 
    • Considering that these platforms exercise little or no control over the inventory under this model, how can they be held liable for the sellers’ actions.

    2) Identifying goods based on country of origin and providing fair opportunity to domestic sellers

    • The draft rules also require e-commerce platforms to identify goods based on their country of origin.
    • And when goods are being viewed for purchase by consumers, the rules also mandate platforms to provide suggestions to ensure “fair opportunity” for domestic sellers.
    • This raises the question as to why the Make in India campaign is being pushed through the Consumer Protection Act.
    • Surely, if domestic manufacturers are competitive, consumers will automatically gravitate towards them.
    • Interests of consumers, not domestic manufacturers, should be at the core of the consumer protection framework.

    3) Overlapping/competing jurisdictions

    • Data protection: The draft rules have sought to safeguard consumer data by restraining e-commerce firms from sharing consumer data without consent.
    • But the data protection should be governed by the provisions under the Personal Data Protection Bill and not the Consumer Protection Act.
    • Considering the graded approach that is likely to be adopted under the Data Protection Bill, an e-commerce user’s data could be classified as per its vulnerability and be left under the jurisdiction of the data protection authority.
    • Dominant position: The rules also state that e-commerce entities are prohibited from abusing their dominant positions in the market. 
    • The “abuse of dominant position” has been given the same meaning as that prescribed under Section 4 of the Competition Act, 2002.
    • This will open the scope for new consumer protection authority to enter into issues of abuse of dominant position — the domain of the Competition Commission of India.

    Consider the question “Over-regulation tends to curb competition and create monopolies instead of ensuring its holistic growth dovetailed with fair competition. In light of this, examine the issues with the draft Consumer Protection (E-Commerce) Rules, 2020?”

    Conclusion

    The lines of demarcation that have been drawn up in the retail landscape — single brand vs multi-brand, online vs offline, domestic vs foreign — serve only to protect powerful vested interests, not benefit the consumer as is often proclaimed.

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  • Amnesty Scheme for violators of Environment Norms

    | Enviro & Biodiversity | Mains Paper 3: Conservation, Environmental Pollution & Degradation, Eia

    The union environment ministry has put together an amnesty scheme for infrastructure and industrial projects that have violated environmental clearance (EC) norms for Environment Impact Assessment.

    What is the Scheme?

    The new amnesty scheme empowers regulatory institutions at both central and state levels:

    (1) To identify and report cases of violation

    • It refers to identify, examine and appraise violation projects, refraining from causing further environmental damage and also compensating for causing damage to the environment.

    (2) To take action against violators in terms of closure or demolition of a project

    • It defines three different actions to be taken for the violation projects depending upon their EC status.
    • In case the project has not obtained EC, it will be ordered to close its operations.
    • If the project has undergone expansion without obtaining EC for the expanded portion, it will be ordered to revert the activity/production to the limit granted in the existing EC.

    (3) To levy penalty on them that is akin to the scale of the project

    • It entitles the regulatory authorities to levy penalties on the proponent, in addition to the bank guarantee.

    Issues with the scheme

    • There is also no established procedure to ensure that the complaints made against the violator are not dismissed without hearing.
    • This ambiguity in the memorandum leaves scope for a less transparent redressal mechanism.
    • The penalties suggested could be termed as legitimating non-compliance.

    Criticisms

    • Environmental experts argue that such a move to regularise projects, irrespective of size, scale or impact, is purely a political move.
    • They regarded this move as weakening the EIA process.
    • This will be the largest regularization scheme for projects that have operated illegally in India and added to our total environmental and social burdens.
    • Thousands of projects operate in different states without any environmental approval.

    Way forward

    • Looking at the plethora of violation cases it is imperative to develop such a mechanism.
    • However, we should not compromise the existing environmental regulations and adopt a ‘zero tolerance for violation’.

    Back2Basics: Environment Impact Assessment

    • Environment impact assessment is a process under the Environment (Protection) Act, 1986, which prevents industrial and infrastructural projects from being approved without proper oversight.
    • This process ensures that every project should go through the EIA process for obtaining prior environmental clearance.
    • EIA covers projects such as mining of coal or other minerals, infrastructure development, thermal, nuclear and hydropower projects, real estate and other industrial projects.
    • The projects are assessed based on their potential impact on the environment. Based on the assessments, they are granted or denied environmental clearance by a panel of experts.

    Loopholes in draft EIA 2020

    • The EIA new draft 2020 allows post-facto clearance.
    • This means that even if a project has come up without environmental safeguards or without getting environment clearances, it could carry out operation under the provision of the new draft EIA 2020.
    • This is disastrous because we already have several projects that are running without EIA clearances.

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  • Civil Services Reforms

    Dismissal of govt employees: What the Constitution says

    Prelims Only | Governance | Mains Paper 2: Civil Service

    Lt Governor has dismissed 11 Jammu and Kashmir government employees for alleged terror links under provisions of Article 311(2)(c) of the Constitution.

    What is Article 311?

    • Article 311 of the Constitution deals with ‘Dismissal, removal or reduction in rank of persons employed in civil capacities under the Union or a State’.
    • Under Article 311(2), no civil servant can be “dismissed or removed or reduced in rank except after an inquiry in which he has been informed of the charges and given a reasonable opportunity of being heard in respect of those charges’’.
    • Subsection (c) of the provision, however, says this clause shall not apply “where the President or the Governor, as the case may be, is satisfied that in the interest of the security of the State it is not expedient to hold such inquiry”.

    Remedy available

    • The only available remedy to a terminated employee is to challenge the government’s decision in the High Court.

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  • Minority Issues – SC, ST, Dalits, OBC, Reservations, etc.

    [pib] Commission for Sub-categorization within OBCs gets another extension

    PIB | Polity | Mains Paper 2: Indian Constitution – historical underpinnings, evolution, features, amendments, significant provisions and basic structure

    The Union Cabinet has approved of the term of the Commission constituted under Article 340 of the Constitution to examine the issue of Sub-categorization within Other Backward Classes (OBCs) in the Central List.

    What is the Sub-categorization of OBCs?

    • OBCs are granted 27% reservation in jobs and education under the central government.
    • In September 20202, a Constitution Bench of the Supreme Court reopened the legal debate on the sub-categorization of SCs and STs for reservations.
    • The debate arises out of the perception that only a few affluent communities among over 2,600 included in the Central List of OBCs have secured a major part of this 27% reservation.

    Need for sub-categorization

    • The argument for sub-categorization — or creating categories within OBCs for reservation — is that it would ensure “equitable distribution” of representation among all OBC communities.
    • To examine this, the Rohini Commission was constituted on October 2, 2017.
    • At that time, it was given 12 weeks to submit its report but has been given several extensions since, the latest one being the 10th.
    • Before the Rohini Commission was set up, the Centre had granted constitutional status to the National Commission for Backward Classes (NCBC).

    Why so many extensions are being given?

    • In process of preparing the sub-categorized central list of OBCs, the Commission has noted several ambiguities in the list as it stands now.
    • The Commission is of the opinion that these have to be clarified/rectified before the sub-categorised central list is prepared.
    • A hurdle for the Commission has been the absence of data for the population of various communities to compare with their representation in jobs and admissions.
    • Many groups of OBCs have been demanding enumeration of OBCs in the Census.

    Back2Basics: Article 340

    • Article 340 of the Indian Constitution lays down conditions for the appointment of a Commission to investigate the conditions of the backward classes.
    • The President may by order appoint a Commission consisting of such persons as he thinks fit to investigate the conditions of socially and educationally backward classes within the territory of India.

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  • Judicial Pendency

    [pib] Scheme for Development of Infrastructure Facilities for Judiciary

    | Polity | Mains Paper 2: Executive & Judiciary

    The Union Cabinet has approved the continuation of the Centrally Sponsored Scheme (CSS) for the Development of Infrastructure Facilities for Judiciary. It also approved the decision to support the Gram Nyayalayas by proving recurring and non-recurring grants for a period of 5 years with a total outlay of Rs 50 crores.

    About the Scheme

    • A Centrally Sponsored Scheme (CSS) for Development of Infrastructure Facilities for Judiciary has been in operation since 1993-94.
    • Adequacy of judicial infrastructure is critical for the reduction of pendency and backlog of cases in Courts.
    • The primary responsibility of infrastructure development for the subordinate judiciary rests with the State Governments.
    • The present proposal provides for additional activities like the construction of lawyer halls, toilets complexes and digital computer rooms.
    • This will add to the convenience of lawyers and litigants besides reducing the digital divide.

    Why such a move?

    • Adequacy of judicial infrastructure is critical for the reduction of pendency and backlog of cases in Courts.
    • Several courts are still functioning in rented premises with insufficient space and some in dilapidated conditions without basic amenities.
    • Well-equipped judicial infrastructure facilitates the administration of justice in a manner that allows easy access and timely delivery of justice to all.

    What is Gram Nyayalayas Scheme?

    • Gram Nyayalayas were established for speedy and easy access to the justice system in the rural areas across the country.
    • The Gram Nyayalayas Act came into force on October 2, 2009.
    • In terms of Section 3(1) of the Act, it is for the State Governments to establish Gram Nyayalayas in consultation with the respective High Courts.
    • The Act authorizes Gram Nyayalaya to hold a mobile court outside its headquarters.
    • Some major reasons behind the non-enforcement include financial constraints, the reluctance of lawyers, police and other government officials.

    Features of the Gram Nyayalayas

    • Gram Nyayalaya is established generally at headquarter of every Panchayat at the intermediate level or a group of contiguous panchayat in a district where there is no panchayat at an intermediate level.
    • The Gram Nyayalayas are presided over by a Nyayadhikari, who will have the same power, enjoy the same salary and benefits of a Judicial Magistrate of First Class.
    • Such Nyayadhikari is to be appointed by the State Government in consultation with the respective High Court.

    Jurisdiction

    • A Gram Nyayalaya have jurisdiction over an area specified by a notification by the State Government in consultation with the respective High Court.
    • The Court can function as a mobile court at any place within the jurisdiction of such Gram Nyayalaya, after giving wide publicity to that regard.
    • The Gram Nyayalayas have both civil and criminal jurisdiction over the offences and nature of suits specified in the First, Second and Third schedule of the Act.
    • The pecuniary jurisdiction of the Nyayalayas are fixed by the respective High Courts.
    • Appeals in criminal matter can be made to the Sessions Court in the respective jurisdiction and in civil matters to the District Court within a period of one month from the date of judgment.

    Trials

    • Gram Nyayalayas can follow special procedures in civil matters, in a manner it deem just and reasonable in the interest of justice.
    • Civil suits are proceeded on a day-to-day basis, with limited adjournments and are to be disposed of within a period of six months from the date of institution of the suit.
    • In execution of a decree, the Court can allow special procedures following rules of natural justice.
    • Gram Nyayalayas allow for conciliation of the dispute and settlement of the same in the first instance.
    • They have been given the power to accept certain evidence which would otherwise not be acceptable under the Indian Evidence Act.

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  • Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

    Growth matters but income levels matter more

    | Economics | Mains Paper 3: Indian Economy

    Context

    But the quest for sustained higher growth has been elusive for India for the last five years. The pandemic seems to make it more elusive.

    The magnitude of contraction in the economy

    • There is nothing encouraging in the provisional estimates of annual national income (2020-21), released by the National Statistical Office.
    • The agriculture sector continued its impressive growth performance, reiterating that it still remains as the vital sector of the economy, especially at times of crisis.
    • The manufacturing sector continued its subdued growth performance, failing to emerge as the growth driver.
    •  The contraction in trade (-18.2%), construction (-8.6%), mining (-8.5%) and manufacturing (-7.2%) is a matter of concern as these sectors account for the bulk of low-skilled jobs.
    • Gross Domestic Product (GDP) at Constant (2011-12) Prices in Q4 of 2020-21 is showing a growth of 1.6%.
    • The magnitude of contraction in the economy and the policy responses towards it raises an important issue of growth prospects for the next year.

    Contextualising the current growth rates in terms of following three macroeconomic data would provide us a better perspective on growth recovery.

    1) Rising unemployment

    • The unemployment data released by the Centre for Monitoring Indian Economy (CMIE) says, that in May 2021, India’s labour participation rate at 40 per cent was the same as it was in April 2021.
    • But, the unemployment rate shot up to 11.9 per cent from 8 per cent in April.
    • A stable labour participation rate combined with a higher unemployment rate implies a loss of jobs and a fall in the employment rate.
    • The employment rate fell to 35.3 per cent in May 2021 from 36.8 per cent in April 2021.
    • According to CMIE, over 15 million jobs were lost in May 2021.
    • May 2021 was therefore a particularly stressful month on the jobs front.

    Takeaway

    • Employment and aggregate demand in an economy are related via the channel of disposable incomes of workers.
    • Aggregate demand and output growth have a positive correlation.
    • Hence, the prospects of growth revival in the next year look bleak at the moment and from employment perspective.

    2) Low business confidence

    • It is the second important data point that needs to examined.
    • Business confidence index (BCI), from the survey by the industry body FICCI, plummeted to 51.5 from 74.2 in the previous round.
    • The survey also highlights the weak demand conditions in the economy.
    • Compounding this is the uncertainty arising out of the imposition of localised curbs due to the second wave of infections and a muddled vaccine policy in the country.

    3) Low PMI

    • Manufacturing Purchasing Managers’ Index (PMI) has slipped to a 10-month low indicating that the manufacturing sector is showing signs of strain with growth projections being revised lower.
    • Both BCI and PMI slipping down indicates that the overall optimism towards 2021-22 is low, which could impact investments and cause further job losses.

    Why focusing on supply-side will not work

    • Since last year, the policy responses have been to rely on credit easing, focusing more on supply side measures.
    • This policy stance is unlikely to prop up growth for three reasons.
    • First, the bulk of the policy measures, including the most recent, are supply side measures and not on the demand side.
    • Second, large parts of all the stimulus packages announced till now would work only in the medium term.
    • Third, the use of credit backstops as the main plank of policy has limits compared to any direct measure on the demand side as this could result in poor growth performance if private investments do not pick up.
    • Further, the credit easing approach would take a longer time to multiply incomes as lending involves a lender’s discretion and borrower’s obligation.

    Way forward

    • Growth recovery depends on demand recovery.
    • The combined increase in exports of April and May 2021 is over 12% indicating that global demand rebound is much faster than the domestic demand. 
    • What needs to be addressed immediately is the crisis of low domestic demand.
    • A tight-fisted fiscal policy approach comes at a time when conventional fiscal stimulus packages might not be enough as supply side issues arising out of episodic lockdowns need to be addressed simultaneously.
    • Focusing on short-term magnified growth rates resting on low bases might be erroneous, as income levels matter more than growth rates at this juncture.

    Conclusion

    India needs a sharp revival of demand for which higher per capita incomes are necessary.

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  • The upcoming challenges to Indian federalism

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

    Context

    In 2026, there will be the challenge of addressing the conflict between the democratic principles and the federal principles, when there will be a reallocation of Lok Sabha seats. India needs to reimagine the current federal compact to address the challenges to federalism.

    Population freeze for Lok Sabha seats

    • Since 1976, seats in the Lok Sabha have reflected the 1971 census and have not taken into account changes in the population.
    • The primary reason for this has been unequal population growth among States.
    • India’s most highly developed and prosperous States have been successful at family planning, while the poorer States continue to expand.
    • The freeze was thus a chance to ensure that India’s most successful States are not punished politically for their success.
    • Therefore, the Indian Constitution may face an unprecedented crisis in 2026 when there will be a dramatic change in the composition of the Lok Sabha.

    Challenge of balancing the principle of democracy and federalism

    • As Article 1 of the Indian Constitution says, India is a Union of States.
    • However, the history of the linguistic reorganisation of States in 1956, and subsequent movements for Statehood afterwards demonstrates that States are distinct associative communities, within the federal structure of the Indian Union.
    • In a democratic set-up, all citizens are equal and are thus entitled to equal representation in governance.
    • But this would imply that bigger States are likely to dominate the national conversation over smaller States.
    • This leads us to an inherent contradiction between the principles of democracy and federalism when federal units are unequal in size, population and economics. 
    • The small States fear that they would get a smaller share of the pie economically, a much reduced say in national issues, and be irrelevant in the political governance of the country.

    How the US Constitution addresses the concerns of small states

    • When the Americans adopted their Constitution, they protected smaller States in four ways.
    • First, national powers over the States were limited.
    • Second, each State regardless of size had two seats in the Senate, giving smaller States an outsized role in national governance.
    • Third, Presidents are elected by electoral votes, which means they must win States rather than the total national population.
    • Fourth, the slave-owning states were allowed to count the slaves for purposes of representation, with each slave being counted as three-fifths of a person.
    • This essential structure remains the bedrock of the American Constitution today.

    How Indian Constitution deals with the issue?

    • India’s quasi-federal structure has always been sui generis.
    • Our founders knew that India’s diversity made federalism inevitable, but, fearing separatist tendencies among States that had never been a single political unit, they also created a strong centre.
    • However, the 1956 reorganisation of States on linguistic lines was a popular recognition of federal principles and yet did not result in separatist tendencies.
    • Since then, new States within the Union have been created in response to the demands of people for greater autonomy.

    Way forward on addressing the challenges to federalism

    • There is an urgent need to reimagine our national compact.
    • Following are the components of such a new balance that need to be fine-tuned to Indian realities.
    • Give more powers to States: The powers of States vis-à-vis the Centre contained in the Lists and in the provisions dealing with altering boundaries of States must be increased to assuage the fear of smaller States that they will be dominated by bigger ones.
    • More localised decision-making is bound to increase national prosperity.
    • Indeed, this was the entire goal of the creation of Panchayat governance through the 73rd and 74th Amendments to the Constitution.
    • Expand the role of Rajya Sabha: The role and composition of the Rajya Sabha, our House of States, must be expanded.
    • This would allow smaller States a kind of brake over national majoritarian politics that adversely impact them.
    • Consent of all states on financial redistribution: Constitutional change and the change in financial redistribution between the States must require the consent of all or nearly all States.
    • Constitutional provisions dealing with language and religion must also be inviolate.
    • Break the bigger States: Serious thought must be given to breaking up the biggest States into smaller units that will not by themselves dominate the national conversation.

    Conclusion

    The unity of India is, of course, the fundamental premise underlying this discussion; but this unity does not depend on an overbearing Centre for its survival.

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  • Capital Markets: Challenges and Developments

    SEBI needs to adopt dual approval system for independent directors

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

    Context

    While the regulators have taken giant strides to enhance board independence in India, one significant conundrum persists about appoint and removal process of the independent directors.

    How appointment and removal process affects the independence of independent directors?

    • Independent directors are appointed just like other directors through shareholder voting by a simple majority.
    • This confers a significant power in the hands of significant shareholders to handpick the independents.
    • In case of family-owned companies, it is not uncommon to appoint “friendly” independent directors.
    • As for public sector undertakings, there is a demonstrable affiliation between independent directors and the ruling political parties.

    Dual Approval System: Way forward

    • The above trends suggest that unless independent directors owe their allegiance to the shareholder body as a whole, independence is likely to remain largely in form and not function.
    • In its consultation paper, SEBI proposed a “dual approval” system.
    • Under this system, the appointment of an independent director required the satisfaction of two conditions:
    • First, the approval by a majority of all shareholders.
    • Second, the approval of a “majority of the minority”, namely the approval of shareholders other than the promoters.
    • SEBI recommended the same “dual approval” system for the removal of independent directors as well.
    • SEBI drew inspiration from Israel and the premium-listed segment of the United Kingdom, which confers greater power to minority shareholders in installing or dethroning independent directors.
    • SEBI has not yet made any mention of implementing the dual approval system.

    Issues with Dual Approval System

    • The first issue is that it militates against the majority rule principle that is intrinsic in a corporate democracy.
    • While understandable, that is hardly an immutable rule as corporate law does make exceptions in cases involving oppression of minority shareholders.
    • The second concern is that placing too much power in the hands of minority shareholders would be counterproductive, as it could result in a tyranny of the minority.
    • However, the dual approval system instead represents the best of both worlds. It does not negate the promoter’s involvement in the process of appointing or removing independent directors.
    •  Only consensus candidates would end up becoming independent directors.
    • The third issue is one of shareholder apathy: Will minority shareholders be motivated to exercise an informed and meaningful choice?
    • Minority shareholders tend to be passive when they are unable to influence the outcome of shareholding voting.
    • However, where they do have a significant say, like in the “majority of the minority” process, they are likely to be more active in exercising their franchise.

    Consider the question “How far has the provision of appointing independent directors to safeguard the interest of minority shareholders succeeded in its objectives? Suggest the changes to improve the challenges faced by the independent directors.”

    Conclusion

    In all, the appointment and removal system continues to undermine the independence and efficacy of corporate boards. The SEBI needs to implement the dual approval system at the earliest.

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