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  • Policy Wise: India’s Power Sector

    True empowerment of the electricity consumer

    The article examines the various provisions of the Electricity (Rights of Consumers) Rules, 2020 and analyses whether or not these Rules will empower the consumers. 

    Empowering electricity consumers

    • The Electricity (Rights of Consumers) Rules, 2020 was promulgated in December to deal with the problems faced by the consumers.
    • The enactment of consumer-centric rules does spark public debate that brings the rights of consumers to the fore.
    • the Rules lay an emphasis on national minimum standards for the performance parameters of DISCOMs. without urban-rural distinction.
    • They also reiterate the need for automatically compensating consumers.

    Let’s analyse the changes introduced by the new Rule and issues with them

    Supply quality issue

    • Many States have not been able to provide quality supply, especially to rural and small electricity consumers.
    • Provisions similar to made in the new Rule already exist in the Standards of Performance (SoP) regulations of various State Electricity Regulatory Commissions (SERCs).
    • It is not because of a lack of rules or regulations that quality supply is not provided; rather, it is on account of a lack of accountability systems to enforce them.
    • Unfortunately, neither these rules nor past efforts address these accountability concerns.
    • Guarantee of round the clock supply is a provision that the Rules emphasise, which might be missing in State regulations.
    • It is difficult to enforce since the availability of power supply is inadequately monitored even at 11 kV feeders, let alone at the consumer location.
    • This highlights not only the need for implementation of existing provisions in letter and spirit but also amending them with strong accountability provisions.

    Weakening of existing provision

    • The Rules, in few cases, dilute progressive mechanisms that exist in State regulations.
    • For example, the Rules say that faulty meters should be tested within 30 days of receipt of a complaint.
    • Compared to this, regulations t in Andhra Pradesh, Bihar, and Madhya Pradesh, respectively, say that such testing needs to be conducted within seven days.
    • A similar observation can be drawn from the suggested composition of the Consumer Grievance Redressal Forum. 
    •  The Rules say that the forum — constituted to remedy complaints against DISCOMs should be headed by a senior officer of the company.
    • This is a regressive provision that would reduce the number of cases that are decided in favour of consumers.

    Lack of clarity on net-metering

    • The Rules guarantee net metering for a solar rooftop unit less than 10 kW.
    • However, there is no clarity if those above 10 kW can also avail net metering.
    • This could lead to a change in regulations in many States based on their own interpretations.
    •  The possible litigation that follows would be detrimental to investments in rooftop solar units, and would discourage medium and large consumers to opt for an environment-friendly, cost-effective option.

    Way forward

    • SERCs should assess the SoP reports of DISCOMs and revise their regulations more frequently.
    • SERCs should organise public processes to help consumers raise their concerns.
    • DISCOMs could be directed to ensure automatic metering at least at the 11 kV feeder level, making this data available online.
    • The Forum of Regulators — a central collective of SERCs — could come up with updated model SoP regulations.
    • Central agencies have taken proactive efforts to ensure regular tariff revision.
    • They could also support independent surveys and nudge State agencies to enforce existing SoP regulations.
    • The central government could disburse funds for financial assistance programmes based on audited SoP reports.

    Consider the question”What are the problems faced by the electricity consumers in India? Will the Electricity (Rights of Consumers) Rules, 2020 help consumers to deal with the existing issues?”

    Conclusion

    The governments, DISCOMs and regulators need to work jointly and demonstrate the commitment and the will power to implement existing regulations. It is not yet late to recognise this and initiate concerted efforts to truly empower consumers.

  • Tax Reforms

    Digital Service Tax could be an interim solution to cyber tax conundrum

    Business models of digital companies challenge the conventional basis of taxation in which the fixed place of business formed the basis. Digital Service Tax could provide a basis to deal with the challenge. The article deals with this issue.

    Equalisation levy and issues with it

    • Equalisation levy seeks to tax payments made for online advertising services to a non-resident business by residents in India.
    • India is amongst the first to have implemented such levy.
    • It is predominantly applicable to US companies since the market for digital services is dominated by US-based firms.
    • Any company that has a permanent residence in India is excluded since it is already subject to tax in India.
    •  In March 2020, India expanded the scope of the existing equalisation levy to a range of digital services that includes e-commerce platforms.
    • Such levy can result in over-taxation since the company will not be able to claim any credit for tax paid on Indian sales.
    • Such an approach is often viewed as contrary to the ethos of international agreements.

    Issue of taxation of digital companies

    • The agenda to reform international tax law so that digital companies are taxed where economic activities are carried out was formally framed within the OECD’s base erosion and profit shifting programme.
    • Worried they might cede their right to tax incomes, many countries have either proposed or implemented a digital services tax (DST).
    • However, the proliferation of digital service taxes (DSTs) is a symptom of the changing international economic order.
    • Countries such as India which provide large markets for digital corporations seek a greater right to tax incomes.
    • The core problem that the international tax reform seeks to address is that digital corporations, unlike their brick-and-mortar counterparts, can operate in a market without a physical presence.
    • The current basis for taxing in a particular jurisdiction is a notion of fixed place of business.

    Way forward

    • To overcome the challenge, countries suggested that a new basis to tax, say, the number of users in a country.
    • The EU and India were among the advocates of this approach.
    • In 2018, India introduced the test for significant economic presence in the Income Tax Act.
    • However, the proposal of a revised nexus was not supported widely.
    • Moreover, to give effect to a new system would require bilateral renegotiation of tax treaties that supersede domestic tax laws.
    • Meanwhile, the OECD continued to work to find commonalities among a range of solutions.
    • In its current form, the solution is too complex to administer and proposes to allocate residual profit — a term that has no economic definition.
    • It would also require political consensus on multiple issues, including sensitive matters such as setting up of an alternative dispute resolution process comparable to arbitration.
    • This can increase the compliance burden.
    • The US has expressed its preference to apply this measure on a safe harbour basis, which can limit the companies to which it may be applicable.

    Consider the question “Digital corporations can operate in a market without a physical presence. The current basis for taxing in a particular jurisdiction is a notion of fixed place of business. In light of this, examine the challenges in taxing the digital companies and how India is dealing with such a challenge?” 

    Conclusion

    As countries calibrate their response to competing demands for sovereignty to tax, DST is an interim alternative outside tax treaties. It possesses the advantage of taxing incomes that currently escape tax and creates space to negotiate a final, overarching solution to this conundrum.

  • Aadhaar Card Issues

    Supreme Court dismisses Aadhaar Review Petition

    The Supreme Court, in a majority view (4:1), dismissed a series of petitions seeking a review of its 2018 judgment upholding the Lok Sabha Speaker’s certification of Aadhaar law as a Money Bill and its subsequent passage in Parliament.

    Try this PYQ:

    Consider the following statements:

    1. Aadhaar card can be used as a proof of citizenship or domicile.
    2. Once issued, Aadhaar number cannot be deactivated or omitted by the Issuing Authority.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

    Backgrounder

    • The review petitions had highlighted how the Aadhaar Act was passed as a Money Bill by superseding the Rajya Sabha. It was called a “fraud on the Constitution”.
    • The review petition had argued that the Aadhaar Act clearly did not fall within the ambit of Article 110 (1) of the Constitution, which restricted Money Bills to certain specific fields only.

    What is a Review Petition?

    • Article 137 of the Constitution provides that subject to provisions of any law and rule made under Article 145 the Supreme Court of India has the power to review any judgment pronounced (or order made) by it.
    • Thus the binding decision of the Supreme Court/High Court can be reviewed in the Review Petition.

    Aadhaar Case: Two questions for review

    • Two questions had come up for review regarding the five-judge Aadhaar Bench’s judgment in 2018.
    • One, whether the Speaker’s decision to declare a proposed law as Money Bill was “final” and cannot be challenged in court.
    • The second, whether the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 was correctly certified as a ‘Money Bill’ under Article 110(1) of the Constitution.

    What is the majority Judgment?

    • On the first question, the majority judgment in 2018 said the Speaker’s decision could be challenged in court only under “certain circumstances”.
    • On the second, it concluded that the Aadhaar Act was rightly called a Money Bill.

    Back2Basics: Money Bill

    • A Bill is said to be a Money Bill if it only contains provisions related to taxation, borrowing of money by the government, expenditure from or receipt to the Consolidated Fund of India.
    • Bills that only contain provisions that are incidental to these matters would also be regarded as Money Bills.
    • A Money Bill may only be introduced in Lok Sabha, on the recommendation of the President as per Article 110 of the Constitution.
    • Then, it is transmitted to the Rajya Sabha for its recommendations. Following this, it may be sent to the Rajya Sabha for its recommendations, which Lok Sabha may reject if it chooses to.
    • If such recommendations are not given within 14 days, it will be deemed to be passed by Parliament.

    How is a Money Bill different from a financial bill?

    • While all Money Bills are Financial Bills, all Financial Bills are not Money Bills.
    • For example, the Finance Bill which only contains provisions related to tax proposals would be a Money Bill.
    • However, a Bill that contains some provisions related to taxation or expenditure, but also covers other matters would be considered as a Financial Bill.
  • Insolvency and Bankruptcy Code

    What is Section 32A of IBC?

    The Supreme Court has held that the bidders for a corporate debtor under the Insolvency and Bankruptcy Code (IBC) would be immune from any investigations being conducted either by any investigating agencies.

    Q.Examine the impact of various amendments to the Insolvency and Bankruptcy Code (IBC) and suggest further improvements in the IBC.

    Backgrounder: IBC

    • IBC was enacted on May 28, 2016, to effectively deal with insolvency and bankruptcy of corporate persons, partnership firms and individuals, in a time-bound manner.
    • It has brought about a paradigm shift in laws aimed to maximize the value of assets, providing a robust insolvency resolution framework and differentiating between impropriety and business debacle.
    • The predominant object of the Code is the resolution of the Corporate Debtor.
    • It has been amended four times to resolve problems hindering the objectives of the Code.

    What is Section 32A?

    • In cases involving property of a corporate debtor, Section 32A covers any action involving attachment, seizure, retention, or confiscation of the property of the corporate debtor as a result of such Proceedings.
    • It provides immunity to the corporate debtor and its property when there is the approval of the resolution plan resulting in the change of management of control of the corporate debtor.
    • This is subject to the successful resolution applicant being not involved in the commission of the offense.

    What were the challenges?

    • Since the IBC came into being in 2016, the implementation of the resolution plan of several big cases has been delayed because of various challenges mounted by its own agencies and regulators.
    • For example, a debt-laden company, admitted into insolvency in 2017, owes more than Rs 47,000 crore to banks and other financial institutions.
    • After a prolonged bidding battle, another won the rights to take over it with a bid of Rs 19,700 crore.
    • However, before it could move to take over, the ED/SEBI swooped in, and attached assets worth Rs 4,000 crore citing alleged fraud in a bank loan under the Prevention of Money Laundering Act (PMLA).

    Observations made by the SC

    • In its judgment, the apex court upheld the validity of Section 32.
    • It said it was important for the IBC to attract bidders who would offer reasonable and fair value for the corporate debtor to ensure the timely completion of the corporate insolvency resolution process (CIRP).
    • Such bidders, however, must also be granted protection from any misdeeds of the past since they had nothing to do with it.
    • Such protection, the court said, must also extend to the assets of a corporate debtor which will help banks clean up their books of bad loans.
    • The apex court has, however, also said that such immunity would be applicable only if there are an approved resolution plan and a change in the management control of the corporate debtor.

    Significance of SC’s intervention

    • With the Supreme Court upholding the validity of Section 32 A will give confidence to other bidders to proceed with confidence while bidding on such disputed companies and their assets.

    Must read

    [Burning Issue] Insolvency and Bankruptcy Code

  • Foreign Policy Watch: India-Pakistan

    Ratle Hydroelectric Project

    The Centre has decided to go ahead with the long-pending 850-megawatt Ratle hydroelectric power project on the river Chenab in J&K Kishtwar district, despite objections raised by the Pakistan government over the same.

    Tap to read more about Indus River System

    Ratle Hydel Plant

    • It is a run-of-the-river hydroelectric power station currently under construction on the Chenab River, downstream of the village near Drabshalla in Kishtwar district of the Indian UT of Jammu and Kashmir.
    • The project includes a 133 m (436 ft) tall gravity dam and two power stations adjacent to one another.
    • The installed capacity of both power stations will be 850 MW.
    • In June 2013, then PM Manmohan Singh laid the foundation stone for the dam.
    • Pakistan has frequently alleged that it violates the Indus Water Treaty.

    What is the Indus Water Treaty?

    • The Indus Waters Treaty is a water-distribution treaty between India and Pakistan, brokered by the World Bank signed in Karachi in 1960.
    • According to this agreement, control over the water flowing in three “eastern” rivers of India — the Beas, the Ravi, and the Sutlej was given to India.
    • The control over the water flowing in three “western” rivers of India — the Indus, the Chenab, and the Jhelum was given to Pakistan
    • The treaty allowed India to use western rivers water for limited irrigation use and unrestricted use for power generation, domestic, industrial, and non-consumptive uses such as navigation, floating of property, fish culture, etc. while laying down precise regulations for India to build projects
    • India has also been given the right to generate hydroelectricity through the run of the river (RoR) projects on the Western Rivers which, subject to specific criteria for design and operation is unrestricted.
  • RBI Notifications

    Secured Overnight Financing Rate (SOFR)

    State Bank of India (SBI) has executed two inter-bank short term money market deals with pricing linked to SOFR (Secured Overnight Financing Rate).

    Try this PYQ:

    Q.The money multiplier in an economy increases with which one of the following?

    (a) Increase in the cash reserve ratio

    (b) Increase in the banking habit of the population

    (c) Increase in the statutory liquidity ratio

    (d) Increase in the population of the country

    What is SOFR?

    • Secured Overnight Financing Rate (SOFR) is a secured interbank overnight interest rate.
    • It is a replacement for USD LIBOR (London Inter-bank Offered Rate) that may be phased out end-2021.
    • The overnight rate is generally the interest rate that large banks use to borrow and lend from one another in the overnight market.

    Why SOFR?

    • Global regulators decided to move away from the Libor, a vital part of the financial system after it was revealed in 2012 that banks around the world manipulated it.
    • It also didn’t help that volume underlying the benchmark dried up.
    • U.K regulators set the deadline at 2021 for financial firms and investors to transition away from the Libor.

  • Festivals, Dances, Theatre, Literature, Art in News

    What is a Tripuri Risa?

    Tripura CM has of late made a statement to sport the Risa, a customary hand-woven cloth used by Tripura’s indigenous tribal communities.

    Try this PYQ:

    Q.Consider the following pairs:

    Sr. Tradition State
    1. Chapchar Kut festival : Mizoram
    2. Khongjom Parba ballad : Manipur
    3. Thang-Ta dance : Sikkim

    Which of the pairs given above is/are correct? (CSP 2018)

    a) 1 only

    b) 1 and 2

    c) 3 only

    d) 2 and 3

    What is Risa?

    • Risa is one of the three parts of customary Tripuri female attire, the other two being the Rignai and Rikutu.
    • The Risa, which is essentially a customary hand-woven cloth, is used as headgear, stole, female upper cloth or presented to honour a distinguished recipient.
    • The Rignai is primarily used to cover the lower part of the body and literally translates into ‘to wear’. The Rituku covers the upper half of the body, wrapping it all around.
    • However, it is also used as a ‘chunri’ or a ‘pallu’ of the Indian saree. It is also used to cover the head of newly married Tripuri women.

    Its cultural significance

    • Apart from its beautiful designs, the Risa plays a host of crucial social utilities.
    • Adolescent Tripuri girls are first given Risa to wear when she reaches 12-14 years in an event called Risa Sormani.
    • The event involves prayers to a Lampra god, where her elder women pray for her wellbeing throughout her life.
    • However, it is also used in religious festivals like the Garia Puja, a customary festival of the tribal communities, or as a head turban by male folks during weddings and festivals, as a cummerbund over dhoti or headscarf.
    • The cloth is even used as a makeshift baby carrier on the mother’s back.
  • Innovations in Sciences, IT, Computers, Robotics and Nanotechnology

    The threat of deepfakes

    Deepfakes creates media in which it challenges our ability to detect real from fake, it blurs the line between two. This article explains the threat associated with it.

    What are deepfakes and threat associated with it

    • Deepfakes are synthetic media (including images, audio and video) that are either manipulated or wholly generated by Artificial Intelligence.
    • AI is used for fabricating audios, videos and texts to show real people saying and doing things they never did, or creating new images and videos.
    • These are done so convincingly that it is hard to detect what is fake and what is real.
    • They are used to tarnish reputations, create mistrust, question facts, and spread propaganda.

    Legal provision in India

    • Deepfakes even have the power to threaten the electoral outcome.
    • So far, India has not enacted any specific legislation to deal with deepfakes.
    • However, there are some provisions in the Indian Penal Code that criminalise certain forms of online/social media content manipulation.
    • The Information Technology Act, 2000 covers certain cybercrimes.
    • But this law and the Information Technology Intermediary Guidelines (Amendment) Rules, 2018 are inadequate to deal with content manipulation on digital platforms.
    • The guidelines stipulate that due diligence must be observed by the intermediate companies for removal of illegal content.
    • In 2018, the government proposed rules to curtail the misuse of social networks.
    • Social media companies voluntarily agreed to take action to prevent violations during the 2019 general election.
    • The Election Commission issued instructions on social media use during election campaigns.

    How to deal with the problem of deepfakes

    • Only AI-generated tools can be effective in detection.
    • Blockchains are robust against many security threats and can be used to digitally sign and affirm the validity of a video or document.
    • Educating media users about the capabilities of AI algorithms could help.
    • Six themes identified in the workshop convened by the University of Washington and Microsoft are to dela with the deepfakes
    • 1) Deepfakes must be contextualised within the broader framework of malicious manipulated media, computational propaganda and disinformation campaigns.
    • 2) Deepfakes cause multidimensional issues which require a collaborative, multi-stakeholder response that require experts in every sector to find solutions.
    • 3) Detecting deepfakes is hard.
    • 4) Journalists need tools to scrutinise images, video and audio recordings for which they need training and resources;
    • 5) Policymakers must understand how deepfakes can threaten polity, society, economy, culture, individuals and communities.
    • 6) Any true evidence can be dismissed as fake is a major concern that needs to be addressed.

    Consider the question “What are the deepfakes and threats associated with it? How these threats can be tackled?”

    Conclusion

    In today’s world, disinformation comes in varied forms, so no single technology can resolve the problem. As deepfakes evolve, AI-backed technological tools to detect and prevent them must also evolve.

  • Real Estate Industry

    Impact of RERA on real estate sector

    The article highlights the various provision of RERA and its overall impact on the sector.

    How it changed the real estate sector

    • Real Estate (Regulation and Development) Act (RERA) was enacted in 2016 and it had been in the works for more than a decade.
    • RERA has infused governance in a hitherto unregulated sector.
    • Along with demonetization and GST, it has, to a large extent, cleansed the real estate sector of black money.
    • It has transformational provisions, conscientiously addressing issues that have been a constant bane for the sector.

    Important provisions of RERA

    • The Act stipulates that no project can be sold without project plans being approved by the competent authority and the project is registered with the regulatory authority.
    • This provision ended the practice of selling on the basis of deceitful advertisements.
    • Promoters are required to maintain “project-based separate bank accounts” to prevent fund diversion.
    • The mandatory disclosure of unit sizes based on “carpet area” strikes at the root of unfair trade practices.
    • The provision for payment of “equal rate of interest” by the promoter or the buyer in case of default reinforces equity.
    • These and many other provisions have empowered consumers, rectifying the power asymmetry prevalent in the sector.

    How RERA is an effort in cooperative federalism

    • Though the Act has been piloted by the Central government, the rules are to be notified by state governments.
    • The regulatory authorities and the appellate tribunals are also to be appointed by them.
    • The regulatory authorities are required to manage the day-to-day operations, resolve disputes, and run an active and informative website for project information.
    • Since RERA came into full force, 34 states and Union territories have notified the rules, 30 states and Union territories have set up real estate regulatory authorities and 26 have set up appellate tribunals.
    • The operationalization of a web-portal for project information, which is at the heart of ensuring full project transparency, has been operationalized by 26 regulatory authorities.
    • Around 60,000 projects and 45,723 real estate agents have been registered with regulatory authorities.
    • Twenty-two independent judicial officers have been appointed to redress consumer disputes, and 59,649 complaints have been disposed-off.

    Consider the question “What were the various problems faced by the consumers in real estate sector? How various provisions in RERA helped in the protection of consumers’ interests?” 

    Conclusion

    RERA is to the real estate sector what SEBI is to the securities market. It helped consumers from the various malpractices in the real estate sector.

     

  • Foreign Policy Watch: India-Nepal

    India-Nepal relations in a new transition

    India-Nepal Joint Commission meeting took place at a time when Nepal in going through a political turmoil. The article examines the issues discussed in the meeting and how its implications for the bilateral relations between the two countries.

    India-Nepal joint commission meeting amid political chaos in Nepal

    • Recently, the Minister for Foreign Affairs of Nepal visited New Delhi for the sixth meeting of the India-Nepal Joint Commission.
    • Nepal’s Prime Minister dissolved the House of Representatives in late December 2020, the move was termed ‘unconstitutional’ by the experts and the country’s Supreme Court is hearing writ petitions against the move.
    • As a unique characteristic, Nepal’s internal political fundamentals continue to shape its foreign policy choices. 
    • In such a scenario, any inbound or outbound delegation is seen from a different prism.

    Issues discussed in the meeting

    1) Progress on the development partnership front

    • On the development partnership front, the expansion of the Motihari-Amlekhganj petroleum products pipelines to Chitwan and the establishment of a new pipeline on the eastern side connecting Siliguri to Jhapa in Nepal formed a part of the discussions.
    • The operating procedures for commencement of train services of the first passenger railway line between India and Nepal from Jaynagar to Kurtha via Janakpurhave have been discussed.
    • Other cross-border rail connectivity projects, including a possible Raxaul-Kathmandu broad gauge railway line, were also discussed.
    • The joint hydropower projects, including the proposed Pancheshwar Multipurpose Project, should get positive momentum following this round of meetings.

    2) Facilitating the cross-border movement of people

    • The recently inaugurated Integrated Check Posts (ICPs) at Birgunj and Biratnagar have helped in the seamless movement of people and trade between the two countries.
    • The construction of a third integrated check post at Nepalgunj has already commenced, while the new integrated check post at Bhairahwa would begin shortly.
    • Since Nepal relies on India’s seaports in a big way for trading, and goods are transported by road, the integrated check posts are expected to ease trade and transit.

    3) Border issue

    • Nepali side’s demand to include the boundary in the Joint Commission Meeting.
    • However, India made it clear to find a fresh mechanism to resolve any such crucial long-pending issue.

    4) New direction to bilateral ties

    • India’s support for two more cultural heritage projects in Nepal, namely, the Pashupatinath Riverfront Development and the Bhandarkhal Garden Restoration in Patan Durbar is significant.
    • Nepal expressed support for India’s permanent membership of an expanded UN Security Council (UNSC) to reflect the changed balance of power.
    • The next meeting of the Joint Commission in Nepal should be crucial in giving a new direction to the bilateral ties, keeping a balance between change and continuity.

    India’s deepening engagement with all sections

    • There is growing disenchantment among the Nepali masses over the increased centralization of power, failure of the Provincial System in addressing the developmental issues, misuse of Presidential authority, and unprecedented corruption.
    • While the unusual developments are taking place in Nepal, there are many who still think that India is comfortable with some changes as its Nepal policy is heading very clearly towards a deeper engagement with all sections.

    Consider the question “How India-Nepal ties are affected by the internal political fundamentals in Nepal? What approach should be adopted by India in dealing with Nepal?” 

    Conclusion

    Nepal cannot afford to enter into another round of political instability, and those who have commanding authority to spearhead India-Nepal bilateral relations must give a humane consideration to it. At the crossroads, Nepal needs action and to come to terms with realities.

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