The Afghanistan Embassy in New Delhi held a reception on 17 August 2026, marking five years of Taliban rule. Indian officials attended despite India continuing to withhold formal recognition of the Islamic Emirate of Afghanistan.
The event highlights India’s growing working relationship with the Taliban without formal diplomatic recognition.
What is a Chargé d’Affaires-led Mission?
Chargé d’Affaires: Diplomat heading a mission when no ambassador is accredited.
Under the Vienna Convention on Diplomatic Relations, 1961, it ranks below an ambassador.
An ambassador presents credentials to the Head of State, while a chargé d’affaires is accredited to the Foreign Ministry.
It allows diplomatic engagement without necessarily signalling formal recognition.
The Afghan mission in Delhi has operated under this arrangement since November 2025.
What is the Islamic Emirate of Afghanistan?
Formal name used by the Taliban administration since August 2021.
India engages with the Taliban as a de facto authority but has not formally recognised it as Afghanistan’s government.
How Has India-Taliban Engagement Evolved?
2021: India closed its Kabul embassy and evacuated personnel.
2022: India established a technical mission in Kabul.
2025: Afghan Foreign Minister visited India.
India subsequently upgraded its Kabul mission to full embassy status.
November 2025: Taliban-appointed diplomats took charge of the Afghan Embassy in Delhi under a chargé d’affaires.
2026: Embassy hosted its first public victory anniversary reception in Delhi.
Why is India Engaging the Taliban?
Security: Maintains visibility over terrorist groups and developments affecting India.
Connectivity:Chabahar Port provides access to Afghanistan bypassing Pakistan.
Development assets: India has invested heavily in projects such as the Salma Dam, Zaranj-Delaram Highway and Afghan Parliament.
Regional competition: China, Russia, Iran and Central Asian countries are expanding engagement with Kabul.
Trade: Bilateral trade remains around $1 billion.
“[2013, GS2, 10 marks] The proposed withdrawal of International Security Assistance Force (ISAF) from Afghanistan in 2014 is fraught with major security implications for the countries of the region. Examine in light of the fact that India is faced with a plethora of challenges and needs to safeguard its own strategic interests.”
The Union government assured a three judge Bench of the Supreme Court that transgender identity cards issued before the Transgender Persons (Protection of Rights) Amendment Act, 2026 came into force continue to remain valid. The assurance was given in a challenge arguing that the amendment, in force since 30 March, dismantles the right to self identification recognised in the National Legal Services Authority v Union of India (2014) line of cases. The dispute turns on whether gender identity is declared by the person or certified by the State.
What is the Transgender Persons (Protection of Rights) Amendment Act, 2026?
About: It amends the Transgender Persons (Protection of Rights) Act, 2019, the statute that governs recognition of transgender identity and the certificate of identity issued to a transgender person.
Commencement: It came into force on 30 March 2026.
Core objection to it: Petitioners argue that it dismantles the right to self identification and gives the State unfettered authority to determine gender identity.
Status of earlier cards: The Solicitor General assured the Court that identity cards issued before the amendment remain valid, and their validity is unaffected by the new law.
Judicial position so far: The Court had already indicated in the previous hearing that the 2026 law should not operate retrospectively to invalidate cards issued under the earlier legislation.
Forum: The challenge is before a three judge Bench headed by the Chief Justice of India.
What is self identification of gender?
About: Self identification is the principle that a person’s gender is determined by that person’s own declaration of identity, without any requirement of medical examination or third party certification.
Legal origin in India: The Supreme Court recognised it in National Legal Services Authority v Union of India (2014), holding that the right to determine one’s gender is integral to dignity under Article 21.
What is a transgender identity card?
About: A certificate of identity issued to a transgender person that provides official recognition of the person’s self identified gender.
Practical use: It is used to support changes to name and gender across official records, and the government’s transgender portal expressly enables such changes.
What is the current status of gender identity recognition in India?
Statutory basis: Recognition runs through the certificate of identity issued under the Transgender Persons (Protection of Rights) Act, 2019 and the rules made under it.
Application route: An application is made to the District Magistrate, who issues a certificate of identity as a transgender person and a revised certificate after gender affirming surgery.
Third gender status: Transgender persons are recognised as a third gender for the purposes of state welfare and identity documents.
Prohibition of discrimination: The 2019 Act bars discrimination in education, employment, healthcare, access to public goods and the right to residence.
Reservation position: No reservation in education or public employment has been extended to transgender persons as a class, despite the direction in the 2014 judgment to treat them as socially and educationally backward.
Position after the amendment: The 2026 Amendment Act is in force from 30 March 2026, and its validity is under challenge before a three judge Bench.
Position of existing card holders: Cards issued before the amendment continue to remain valid on the government’s own assurance to the Court.
Constitutional Provisions Related to gender identity
Article 14: Guarantees equality before the law and equal protection of the laws to every person, not only to men and women.
Article 15: Prohibits discrimination on grounds of religion, race, caste, sex or place of birth, with sex read to include gender identity.
Article 16: Guarantees equality of opportunity in matters of public employment and permits reservation for backward classes.
Article 19(1)(a): Protects freedom of expression, which includes expression of gender identity through dress, speech and behaviour.
Article 21: Guarantees life and personal liberty, read to include dignity, personal autonomy and the right to determine one’s gender.
Article 15(4) and Article 16(4): Permit special provisions and reservation for socially and educationally backward classes, the route directed in the 2014 judgment.
Article 32: Provides the remedy through which the present challenge to the amendment has been brought.
Article 23: Prohibits trafficking and forced labour, relevant to the exploitation the community faces in the absence of livelihood options.
What did the National Legal Services Authority judgment establish?
Recognition of a third gender: The Supreme Court held in April 2014 that transgender persons must be recognised as a third gender for the purposes of law.
Right to self identification: It held that the gender to which a person belongs is to be determined by that person’s own identification and not by biological or medical criteria.
Constitutional grounding: It located the right in Articles 14, 15, 16, 19(1)(a) and 21, treating gender identity as an aspect of dignity and personal autonomy.
Backward class direction: It directed the Centre and the States to treat transgender persons as socially and educationally backward for the purposes of reservation.
Positive obligations: It directed provision of separate public toilets, medical facilities, welfare schemes and measures to address social stigma.
The wider line of cases: Puttaswamy v Union of India (2017) recognised privacy and decisional autonomy, Navtej Singh Johar v Union of India (2018) decriminalised consensual same sex relations, and Arunkumar v Inspector General of Registration (2019) upheld the marriage rights of a transgender person.
What do the petitioners argue against the 2026 amendment?
Loss of self determination: The amendment allows the State unfettered authority to determine gender identity, displacing the person’s own declaration.
Conflict with binding precedent: Self identification was recognised as a constitutional right in 2014, and a statute cannot narrow a right located in Article 21.
Value of existing documents: The importance of transgender identity cards already issued cannot be trifled away, since name and gender across official records depend on them.
Retrospective effect: Any reading that invalidates earlier cards would strip recognition already granted under a previous legislation.
Who is before the Court: The petitioners include community members and activists, so the challenge is brought by the group the law regulates.
Can the State certify gender identity without displacing the right to determine it?
Two claims in tension: The State has an interest in a verifiable identity document, and the individual has a constitutional right to declare gender without external validation.
Where certification becomes control: A certificate that records a declaration is administrative, and a certificate that decides the declaration is determinative of the right itself.
Documentary dependence: Name and gender in every other official record follow from the certificate, so control over the certificate is control over legal personality.
Precedent against statute: The right was recognised through Article 21 in 2014, and the amendment operates on the same subject through ordinary legislation.
The retrospectivity carve out: Protecting existing cards resolves the immediate hardship of current holders and leaves the question of future applicants untouched.
The unresolved core: The assurance settles who keeps a card already issued, not who will be entitled to one under the amended procedure.
Major debates surrounding gender self identification
Declaration against certification: Whether recognition should follow a self declaration or require screening by a district authority.
Medicalisation of identity: Whether any surgical or medical requirement for a revised certificate is consistent with autonomy under Article 21.
Appeal and remedy: Whether refusal of a certificate by a District Magistrate should carry a statutory appeal, which the 2019 Act was criticised for omitting.
Reservation for transgender persons: Whether the 2014 direction to treat the community as socially and educationally backward requires a horizontal reservation across categories.
Penalty asymmetry: Whether the lower punishment for sexual violence against transgender persons under the 2019 Act compared with the general criminal law is constitutionally sustainable.
Family and residence: Whether the requirement to reside with the natal family or in a rehabilitation centre respects the autonomy of adults who leave hostile homes.
Data and enumeration: Whether recognition can be operationalised at all without accurate population data, since the last enumeration of the community was in Census 2011.
Challenges to the transgender rights framework
Certification bottleneck: Recognition depends on a single district officer with no statutory appeal against refusal. e.g. applicants under the Transgender Persons (Protection of Rights) Rules, 2020 have reported long delays in issue of the certificate of identity.
Absence of reservation: The 2014 direction on backward class status has not been operationalised at the national level. e.g. Karnataka became the first State to provide a one per cent reservation in public employment in 2021, and most States have not followed.
Weak penalty structure: Offences against transgender persons carry lower punishment than equivalent offences in the general criminal law. e.g. the 2019 Act prescribes six months to two years for sexual abuse of a transgender person.
Healthcare exclusion: Gender affirming care and mental health support are unevenly available and rarely insured. e.g. Ayushman Bharat TG Plus was created precisely because transgender persons were excluded from mainstream health coverage.
Livelihood and employment: Discrimination pushes the community towards begging and sex work despite a statutory bar on discrimination. e.g. the SMILE scheme’s livelihood component was designed to move persons out of begging.
Documentation mismatch: Records in education certificates, bank accounts and property documents do not update automatically after a change in gender. e.g. the government’s transgender portal exists specifically to enable name and gender changes across records.
Data invisibility: Policy runs on a 2011 count with no subsequent enumeration. e.g. Census 2011 recorded 4.88 lakh transgender persons, a figure widely regarded as an undercount.
Conclusion
The assurance protects existing card holders and leaves the constitutional question untouched, since the dispute is about whether gender identity is declared or certified. The Transgender Persons (Protection of Rights) Amendment Act, 2026 remains in force from 30 March 2026, and its validity is pending before a three judge Bench of the Supreme Court on a challenge grounded in the 2014 line of cases. The Court has recorded that the law should not operate retrospectively and the government has accepted that position on the record. The source names no next date for the hearing, so the stage reached is the government’s undertaking and the pending challenge.
[2024] Under which of the following Articles of the Constitution of India, has the Supreme Court of India placed the Right to Privacy? (a) Article 15 (b) Article 16 (c) Article 19 (d) Article 21
The National Legal Services Authority (NALSA) directed that contracts of Legal Aid Defence Counsel (LADC) engaged by legal services institutions across India not be renewed, following representations from Bar Associations in Punjab, Haryana, Himachal Pradesh and Chandigarh. The Bar’s claim is that a salaried public defence cadre is displacing private criminal practice, while the caseload data shows LADCs handling about 1.6 per cent of criminal cases instituted in a year. A scheme created by a statutory body is therefore being wound down without any national assessment of what it achieved.
What is the Legal Aid Defence Counsel system?
About: The LADC system is India’s experiment with a full time public defender office, staffed by salaried lawyers engaged by legal services institutions to defend accused persons who cannot afford a private lawyer.
Purpose: It provides quality legal representation in criminal cases at every stage, from first production and remand through bail, trial and appeal.
Structure: Each district office is headed by a Chief Legal Aid Defence Counsel supported by deputy and assistant counsel who work only on legal aid matters.
Difference in accountability: Counsel work under institutional oversight with fixed remuneration, monitoring and case reporting rather than as empanelled private practitioners paid per case.
Coverage in the last cycle: The NALSA dashboard records 4,86,354 cases assigned to LADCs in the 2025 to 2026 year, including 1,88,878 bail cases.
What is the National Legal Services Authority?
About: NALSA is the apex statutory body constituted under the Legal Services Authorities Act, 1987 to provide free legal services to eligible persons and to organise Lok Adalats.
Structure: It works through State Legal Services Authorities, District Legal Services Authorities and Taluk Legal Services Committees, and it frames the schemes those bodies implement.
What is the National Judicial Data Grid?
About: The National Judicial Data Grid is the public database of pending and disposed cases across district and High Courts, updated from court software in near real time.
Use here: It supplies the denominator of criminal cases instituted, against which the legal aid caseload is measured.
What do the Bar Associations argue against the scheme?
Parallel criminal bar: Bar Associations argue that a salaried defence cadre creates a parallel criminal bar inside the court system.
Independence of the profession: They argue that lawyers paid and supervised by a state funded institution weaken the independence of the legal profession.
Livelihood of practitioners: They argue that the scheme takes away work from advocates who depend on criminal briefs at the district level.
Where the representations came from: The direction followed representations from Bar Associations in Punjab, Haryana, Himachal Pradesh and Chandigarh.
The institutional response: NALSA acted on those representations by directing non renewal of LADC contracts across India, not only in the States from which the objection came.
What do the caseload figures show about displacement?
Cases assigned to LADCs:4,86,354 cases were assigned in the 2025 to 2026 year as recorded on the NALSA dashboard.
Bail work within that:1,88,878 of those were bail cases, the stage at which delay translates directly into custody.
Monthly institution of criminal cases: The National Judicial Data Grid records 24,68,339 criminal cases instituted in a single month.
Annual criminal caseload: That translates to roughly 2.96 crore criminal cases instituted in a year.
The resulting share: The 4.86 lakh cases assigned to LADCs represent approximately 1.6 per cent of criminal cases instituted.
What the ratio establishes: A cadre handling one case in sixty cannot be the cause of a livelihood crisis in criminal practice.
How does the LADC model differ from the assigned counsel system?
Assigned counsel model: Private lawyers are empanelled and paid per case by the legal services institution to appear for indigent accused.
Recorded weaknesses of that model: It has been criticised for missed hearings, delayed applications and complaints over the fees paid by the state.
Why LADCs became popular: Many LADCs appear promptly at production and remand hearings, which is where an unrepresented accused is most exposed.
Quality of filings: LADCs file appropriate and timely petitions challenging violations of procedural law and protecting the client’s rights.
The reframing: Treating a more competent legal aid service as a threat to private practice converts an opportunity to raise professional standards into a demand to remove the comparison.
What the Bar could take from it: The diligence that made LADCs effective is a benchmark for the assigned counsel system rather than a case against it.
Why does the interim arrangement worry criminal justice practitioners?
What replaces the cadre: Legal aid matters revert to young and relatively inexperienced lawyers assigned through the empanelment route.
What criminal defence actually requires: Case preparation, cross examination, bail and remand advocacy, trial strategy and navigation of the criminal justice system.
Where inexperience costs most: Bail and remand decisions are taken in minutes and determine months of custody, and 1,88,878 of the assigned cases were bail matters.
Who bears the risk: Persons unable to afford private lawyers become the group on whom an untested arrangement is tried.
Effect on pending matters: Ongoing cases change hands mid trial, breaking continuity of representation at the stage where evidence is being recorded.
Whose interest should prevail when the livelihood of the Bar meets the fair trial right of the accused?
Two genuine claims: Advocates have a legitimate interest in the volume and value of criminal briefs, and the accused has an enforceable constitutional right to competent representation.
Asymmetry of voice: Bar Associations are organised and can make representations to a statutory authority, while indigent accused persons have no comparable channel.
Asymmetry of consequence: A lawyer loses a share of a brief pool, an accused person loses liberty pending trial.
The constitutional tilt: Article 39A and Article 21 place free and competent legal aid as a duty of the State, not as a welfare option to be balanced against professional interest.
What the numbers settle: At 1.6 per cent of criminal institutions, the displacement claim is not supported by the caseload, so the two claims do not actually collide.
What remains unresolved: Even a scheme that survives this objection needs a fair remuneration structure for the wider Bar, which the debate has not addressed.
Why is the absence of any national assessment the central failure?
No evaluation exists: There has been no national assessment of the LADC system since it was introduced.
What an assessment would measure: Bail success rates, timeliness of appearance, conviction and acquittal patterns and client feedback against the assigned counsel baseline.
The procedural objection: A scheme duly adopted and implemented by a statutory body is being stalled without an evaluation of its impact on ongoing cases.
Evidence displaced by representation: The decision rests on submissions from professional associations rather than on outcome data from the scheme itself.
The correct response to a working model: Where dedicated lawyers, institutional oversight and accountability improve defence quality, the response is to learn from the model rather than dismantle it.
Challenges to the Legal Aid Defence Counsel system
Contractual insecurity of counsel: Engagement on renewable contracts leaves the cadre vulnerable to a single administrative direction. e.g. the present non renewal order ends the engagement of counsel across India at once.
Remuneration and parity: Salaries have to compete with private practice to retain experienced criminal lawyers. e.g. senior criminal advocates in metropolitan district courts earn multiples of the fixed LADC remuneration.
Case overload per counsel: A small cadre carrying nearly five lakh cases limits time per client. e.g. 1,88,878 bail matters in a year across district offices leaves minutes of preparation for each.
Resistance from the organised Bar: Institutional hostility can block access to court infrastructure and listings. e.g. Bar Associations in four northern States and Union Territories triggered the present direction.
Uneven coverage across districts: The model has not been staffed uniformly, so quality of aid depends on the district. e.g. legal aid uptake remains far weaker in districts without a functioning prison legal aid clinic.
Absence of outcome monitoring: Without published performance data the scheme cannot defend itself. e.g. no national assessment of the LADC system exists even after the scheme completed multiple years.
Awareness deficit among the accused: Many undertrials do not know that free representation is available at remand. e.g. undertrials form about three quarters of India’s prison population, and a large share remain unrepresented at first production.
Conclusion
The case against the LADC system rests on a displacement claim that the caseload data does not support, since the cadre handled about 1.6 per cent of criminal cases instituted in a year. The decision to stop renewals was taken on professional representations without any national assessment of what the scheme delivered on bail, timeliness or trial quality. The immediate cost falls on indigent accused persons whose matters revert to inexperienced assigned counsel in the middle of ongoing trials. Reform of remuneration, cadre structure and Bar relations is the answer that the evidence supports, and withdrawal is not.
What is Free Legal Aid?
About: Free legal aid is the provision of legal services at state expense to persons who cannot afford them, so that access to justice does not depend on ability to pay.
Rationale: An adversarial system delivers a fair result only where both sides are competently represented, and the criminal process places the individual against the resources of the State.
Constitutional basis: Article 39A directs the State to secure equal justice and free legal aid, and the Supreme Court has read it into the fair procedure guarantee of Article 21.
Who is eligible: Women, children, members of Scheduled Castes and Scheduled Tribes, victims of trafficking, persons with disabilities, industrial workmen, persons in custody and those below the prescribed income ceiling.
Delivery structures: Legal aid is delivered through panel advocates, retainer lawyers, front office and legal aid clinics, Lok Adalats and the Legal Aid Defence Counsel system.
Key Concerns Regarding Free Legal Aid
Quality over availability: The system counts lawyers assigned rather than outcomes achieved, so representation can be nominal.
Late entry into the case: Aid frequently begins after remand, when the most consequential decision on liberty has already been taken.
Low remuneration for panel lawyers: Fees paid per case are modest and delayed, which affects the seniority of lawyers willing to take the work.
Weak monitoring: Legal services institutions have limited capacity to audit the quality of representation their panels provide.
Awareness gap: Eligible persons, especially undertrials and rural litigants, often do not know the entitlement exists.
Fragmented data: Case level outcome data across States is not published in a comparable form, which prevents evaluation of any model.
Constitutional Framework Governing Free Legal Aid
Article 14: Guarantees equality before the law and equal protection of the laws, the basis for equal access to the courts.
Article 21: Guarantees life and personal liberty through fair procedure, read to include the right to free legal aid for an indigent accused.
Article 22(1): Guarantees the right of an arrested person to consult and to be defended by a legal practitioner of choice.
Article 39A: Directs the State to secure equal justice and to provide free legal aid through suitable legislation or schemes.
Article 32 and Article 226: Provide the remedies through which denial of competent representation is challenged.
Article 38: Directs the State to promote a social order in which justice, social, economic and political, informs all institutions.
Laws and Rules Governing Legal Aid in India
Legal Services Authorities Act, 1987: Constitutes NALSA, State and District Legal Services Authorities and provides for free legal services and Lok Adalats.
Landmark provision under the 1987 Act: Section 12 lists the categories entitled to legal services as of right, irrespective of income in specified cases.
Legal Services Authorities (Amendment) Act, 2002: Created Permanent Lok Adalats for pre litigation conciliation in public utility services.
NALSA (Free and Competent Legal Services) Regulations, 2010: Prescribe empanelment standards, monitoring committees and the duty to provide competent and not merely nominal representation.
Bharatiya Nagarik Suraksha Sanhita, 2023: Requires the court to assign a pleader at state expense where the accused has no means to engage one.
Advocates Act, 1961: Governs enrolment, professional conduct and the disciplinary jurisdiction of Bar Councils over advocates.
Mediation Act, 2023: Institutionalises pre litigation mediation and links it to the legal services framework.
Arbitration and Conciliation Act, 1996: Provides the wider alternative dispute resolution framework within which Lok Adalats operate.
Back2Basics: Legal Services Authorities Act, 1987
Enactment and commencement: Passed in 1987 and brought into force on 9 November 1995.
Administering ministry: The Department of Justice under the Ministry of Law and Justice.
Apex body: NALSA, with the Chief Justice of India as Patron in Chief and the second senior most judge of the Supreme Court as Executive Chairman.
State level: State Legal Services Authorities are headed by the Chief Justice of the High Court as Patron in Chief, with a sitting High Court judge as Executive Chairman.
District and taluk level: District Legal Services Authorities are headed by the District Judge, and Taluk Legal Services Committees by a senior civil judge.
Lok Adalats: The Act gives a Lok Adalat award the status of a civil court decree, which is final and not appealable.
Supreme Court level: The Supreme Court Legal Services Committee provides legal aid for matters before the Supreme Court.
Government Initiatives
Legal Aid Defence Counsel System: Introduced by NALSA in 2022 to create a salaried public defence office in district legal services authorities.
Tele Law: Connects citizens at Common Service Centres to panel lawyers through video conferencing for pre litigation advice.
Nyaya Bandhu: A pro bono legal services programme linking volunteer advocates to registered applicants through a mobile application.
Legal aid clinics: Village and community level clinics, and clinics inside prisons, staffed by para legal volunteers and panel lawyers.
Under Trial Review Committees: District committees that review the cases of undertrial prisoners eligible for release on bail or on completion of maximum custody.
Designing Innovative Solutions for Holistic Access to Justice (DISHA): The Department of Justice scheme integrating tele law, pro bono services and legal awareness.
Pan India Legal Awareness and Outreach Campaign: NALSA’s nationwide campaign to inform citizens of legal entitlements at the panchayat level.
Key Facts about Legal Aid in India
National Legal Services Day: Observed on 9 November, the day the Legal Services Authorities Act, 1987 came into force.
Reach of eligibility: Roughly 80 per cent of India’s population is eligible for free legal aid under the income and category criteria of Section 12.
Landmark ruling on state funded defence: Hussainara Khatoon v State of Bihar (1979) held free legal aid to be part of a fair procedure under Article 21.
Landmark ruling on assignment of counsel: Khatri v State of Bihar (1981) held that the right arises at the first production before the magistrate.
Lok Adalat scale: National Lok Adalats dispose of crores of cases in a single sitting day, mostly pre litigation and compoundable matters.
Custody context: Undertrials form about three quarters of India’s prison population, which is the primary constituency of the LADC system.
Caseload in 2025 to 2026: LADCs were assigned 4,86,354 cases, including 1,88,878 bail cases.
Challenges in Delivering Free Legal Aid
Representation at the first hearing: Many accused persons face remand without counsel. e.g. prison legal aid clinics do not exist in every district jail, so first production frequently proceeds unrepresented.
Quality of panel advocates: Empanelment is often by seniority or availability rather than by demonstrated competence in criminal defence. e.g. the assigned counsel system has been criticised for missed hearings and delayed applications.
Delayed and low remuneration: Panel fees are modest and payment is slow. e.g. complaints regarding fees paid by the state are a standing feature of the assigned counsel model.
Institutional resistance from the Bar: Reform of the delivery model is contested by organised professional bodies. e.g. Bar Associations in Punjab, Haryana, Himachal Pradesh and Chandigarh triggered the non renewal of LADC contracts.
Absence of outcome measurement: No comparative evaluation exists between delivery models. e.g. no national assessment of the LADC system has been conducted since it began.
Awareness and access: Eligible litigants in rural and tribal areas do not know of the entitlement or how to claim it. e.g. Tele Law was created precisely because pre litigation advice was unavailable at the village level.
Prison overcrowding as the downstream cost: Weak bail advocacy translates into custody. e.g. Indian prisons operate well above sanctioned capacity, driven mainly by undertrial numbers.
Way Forward
Assess before deciding: Commission a national assessment of the LADC system measuring bail outcomes, appearance timeliness and disposal rates against the assigned counsel model.
Protect ongoing matters: Continue existing engagements until each pending case reaches a natural stage, so representation does not break mid trial.
Give the cadre statutory footing: Convert the LADC office into a permanent public defender structure with secure tenure and a defined career path.
Reform assigned counsel in parallel: Raise panel fees, pay them promptly and empanel on demonstrated criminal defence competence to address the Bar’s underlying grievance.
Cap caseloads: Set a maximum active caseload per counsel so that preparation time per client is protected.
Publish performance data: Release district level legal aid outcome data so that the effectiveness of each model is verifiable.
Guarantee representation at first production: Station legal aid counsel at every remand court and prison so that no accused person is produced unrepresented.
Matching Previous Year Question
“[2023, GS2, 10 marks] Who are entitled to receive free legal aid? Assess the role of the National Legal Services Authority(NALSA) in rendering free legal aid in India.”
The 22nd report of the amicus curiae to the Supreme Court records 4,192 criminal cases pending trial against sitting and former Members of Parliament and Members of Legislative Assemblies, with 519 pending for more than a decade. The figure has stayed above 4,000 every year since 2018, through three rounds of Supreme Court directions creating special courts, designated courts and suo motu monitoring. The report therefore shifts the question from what should be ordered to why nine years of orders have not moved the number.
Who is an amicus curiae?
About: An amicus curiae is a senior lawyer appointed by a court to assist it impartially in a matter, rather than to represent any party before it.
Role here: The amicus in this public interest litigation collects pendency data from every High Court, audits compliance with earlier directions and files periodic reports with recommendations.
What is a designated court for cases against legislators?
About: A designated court is an existing Sessions or Magisterial court identified in each district to hear criminal cases against sitting and former legislators on priority.
Difference from a special court: A special court is constituted exclusively for such cases, while a designated court continues to carry its ordinary docket alongside them.
What does the 22nd amicus report record?
Total pendency:4,192 cases against sitting and former MPs and MLAs are pending trial across the country.
The oldest bracket:519 cases have been pending for more than a decade.
Cases still under investigation:700 cases are pending investigation, of which 360 have stayed at that stage for more than three years without a chargesheet.
Source of the data: The figure is drawn from information received from High Courts and their websites, and the High Court websites together show 4,442 pending cases.
A gap in reporting: The Allahabad High Court did not submit a report, so its figure of 1,171 cases is taken from its website as of February 2024.
Reach into high office: Chief Ministers of 14 of 28 States have criminal cases pending trial against them.
Where the case is listed: The matter was referred to a three judge Bench in February 2025 and was listed before that Bench on 18 August.
What is the full pendency profile in the data?
Cases pending for 5 to 10 years:754.
Cases pending for 3 to 5 years:562.
Cases pending for less than 3 years:1,095.
State wise concentration: Uttar Pradesh leads with 1,171 cases, followed by Kerala at 543, Bihar at 373, Maharashtra at 364 and Odisha at 330.
Chief Ministers facing cases: The Telangana Chief Minister faces the highest number at 89, followed by the West Bengal Chief Minister at 29, the Karnataka and Andhra Pradesh Chief Ministers at 19 each and the Kerala Chief Minister at 18.
The trend line: Pendency rose from 4,075 in December 2018 to 5,140 in November 2022 before settling at 4,192 in July 2026, remaining above 4,000 throughout.
Scale in the sitting Houses:251 of 543 members of the Lok Sabha and 75 of 233 members of the Rajya Sabha have criminal cases against them.
Data caveat: The cut off dates for the State figures vary, so the totals are indicative rather than a single day snapshot.
What has the Supreme Court already directed since 2017?
Special courts in 2017: The Court ordered the setting up of 12 special courts in 10 States and Union Territories for speedy trial of criminal cases involving legislators.
Designated courts in December 2018: It directed that one designated Sessions Court and one designated Magisterial Court be identified in every district to try such cases on priority.
Suo motu monitoring in November 2023: It directed the Chief Justices of all High Courts to register suo motu cases to monitor early disposal and empowered special benches to issue directions for expeditious trial.
Reference in February 2025: The matter went to a three judge Bench after an earlier amicus report flagged the absence of effective monitoring by most High Courts.
The outcome so far: Pendency has remained at roughly the same level across all three rounds of directions.
Why has pendency stayed above 4,000 since 2018?
Designated courts carry ordinary work: Courts identified for legislators’ cases continue to handle their regular judicial docket, so priority exists on paper only.
Repeated adjournments: Hearings are deferred at the instance of parties without effective cost or consequence.
Non appearance of accused persons: Accused legislators fail to appear on listed dates, and the trial cannot proceed in their absence.
Delays in securing witnesses: Witnesses are not produced on the dates fixed, breaking the continuity of evidence.
Inadequate High Court monitoring: Most High Courts have not run the suo motu monitoring the Court ordered in November 2023.
What does the amicus recommend?
Exclusive trials: Designated courts should conduct trials involving lawmakers exclusively until their backlog is cleared.
Day to day hearing: Cases pending for more than three years should be heard on a day to day basis.
Non bailable warrants: Courts should issue non bailable warrants where an accused lawmaker fails to appear on two consecutive dates.
Nodal prosecution officer: A nodal prosecution officer should be appointed to secure the attendance of witnesses.
Real time data upload: Case data and order sheets should be uploaded in real time on High Court websites.
Trial within one year: Trials should be completed within one year of the framing of charges.
Monthly monitoring: High Courts should monitor cases pending for more than three years every month.
Micro monitoring: Individual delayed cases should be tracked separately rather than only in aggregate.
Does prioritising legislators’ cases sit comfortably with equal treatment of all undertrials?
Two competing claims: Legislators exercise public power and merit faster scrutiny, while ordinary undertrials suffer longer custody and have a stronger claim under Article 21.
Fixed judicial capacity: Exclusive trials for legislators redirect court time within an unchanged pool of judges, so another category of case slows down.
The trigger for priority: A legislator’s continuation in office turns on conviction under Section 8 of the Representation of the People Act, 1951, which no ordinary accused faces.
Delay as a strategy: Prolonged trial protects the incumbent, so the beneficiary of delay is the accused who holds power.
Why the equality objection is limited: The priority attaches to the office and its power over the criminal justice system, not to the person’s status as a citizen.
The unresolved part: Neither the special courts of 2017 nor the designated courts of 2018 came with additional judges, so the priority was ordered without the capacity to deliver it.
Challenges to expeditious trial of legislators
No additional judicial capacity: Priority was mandated without creating new posts. e.g. the 2017 order created only 12 special courts across 10 States and Union Territories for a national caseload above 4,000.
Investigation stalling before trial: A case never reaches the designated court if the chargesheet is not filed. e.g. 360 cases have stayed under investigation for more than three years without a chargesheet.
Prosecutorial dependence on the executive: Public Prosecutors are appointed by State governments that the accused may lead. e.g. Chief Ministers of 14 of 28 States face pending criminal cases.
Witness hostility and intimidation: Witnesses turn hostile where the accused holds local power. e.g. India still has no operational witness protection framework beyond the 2018 scheme approved in Mahender Chawla v Union of India.
Withdrawal of prosecution: Section 360 of the Bharatiya Nagarik Suraksha Sanhita, 2023 permits withdrawal with the court’s consent. e.g. Uttar Pradesh moved to withdraw a large batch of political cases in 2020, prompting High Court scrutiny.
Inconsistent High Court reporting: Monitoring cannot work without uniform data. e.g. the Allahabad High Court, holding the largest caseload at 1,171, did not submit a report at all.
Conviction does not follow speed: Faster trials do not by themselves improve the quality of investigation. e.g. pendency fell from 5,140 in November 2022 to 4,192 in July 2026 without any recorded rise in convictions.
Conclusion
The report shows an institutional pattern rather than a backlog problem, since pendency has stayed above 4,000 through three separate rounds of Supreme Court directions since 2017. Priority listing without additional judges, an independent prosecution and enforceable attendance simply redistributes delay. The matter now stands listed before a three judge Bench of the Supreme Court on 18 August, where the amicus has sought exclusive trials, day to day hearing of cases older than three years and completion of trial within one year of charge framing. The number to watch after that hearing is the count of cases older than a decade, currently 519.
“[2024, GS2, 15 marks] Explain the reasons for the growth of public interest litigation in India. As a result of it, has the Indian Supreme Court emerged as the world’s most powerful judiciary?”
The Supreme Court held that ridding the electoral process of black money is a responsibility of the Election Commission of India (ECI) and issued a set of binding directions on how election season seizures must be reported, investigated and tried. The Court linked unaccounted money directly to the quality of the voter’s choice, holding that a choice made under gratification is not a free choice. The ruling shifts the problem from detection at the checkpoint to conviction in court, where election money cases have historically stalled.
What did the Supreme Court hold about black money and the electoral process?
Core holding: Black money in the electoral process compromises democracy, the rule of law and the electoral process itself.
Effect on the voter: A choice is not free where ill gotten money is involved, since it is clouded by gratification, monetary or otherwise, or by promises that are sometimes genuine and sometimes misleading.
Where responsibility rests: Ridding the electoral process of black money is placed on the Election Commission of India rather than treated as an ordinary police function.
What the Court sought: Timely investigation and conclusion of criminal cases relating to recovery of ill gotten money during elections.
Bench: The judgment was delivered by a Bench of two judges and authored by the presiding judge of that Bench.
What is a Static Surveillance Team?
About: A Static Surveillance Team is a fixed check post team deployed by the district election machinery during the election period to intercept the movement of cash, liquor, drugs and gifts.
Composition and function: It is staffed by police and magisterial personnel with videography, and it works alongside mobile Flying Squads that respond to complaints.
What is election expenditure monitoring?
About: Election expenditure monitoring is the machinery through which the Election Commission tracks candidate spending against the statutory ceiling from the date of nomination to the declaration of result.
Instruments used: It combines Expenditure Observers, shadow observation registers, daily account inspections and coordination with the Income Tax Department and enforcement agencies.
What directions has the Court issued on seizures and prosecutions?
Reporting within 24 hours: The authority effecting a seizure must report it to the District Magistrate, Additional District Magistrate or the court of competent jurisdiction within 24 hours.
Written reasons on record: The report must carry written reasons disclosing the prima facie nexus between the cash or asset seized and the suspected electoral offence.
Threshold for tax referral: Where Static Surveillance Teams find money in excess of Rs 10 lakh during checks, the information must be forwarded to the Income Tax authorities.
Investigation deadline: Once an FIR is registered, the investigating officer must make every endeavour to complete the investigation within a year.
Quarterly reporting to the ECI: The investigating officer must submit a quarterly status report on the investigation to the electoral body.
Compliance affidavits: The Election Commission and State governments must file compliance affidavits by 18 November.
Role of the High Courts: High Courts are directed to ensure speedy trial of election related black money cases.
Why did the case arise from the 2014 Bellary seizures?
Origin of the plea: The proceedings arose from a plea filed by the Karnataka government relating to the 2014 Lok Sabha election.
The trigger: Black money was seized on a large scale during polling in Bellary district, a mining region with a long record of election money cases.
Why it reached the Court: Seizure alone produced no completed prosecution, so the issue moved from enforcement to judicial supervision.
What it exposed: Cash intercepted during an election rarely connects to an identified candidate, so the seizure ends in a tax proceeding rather than an electoral offence.
Why the timeline matters: A case that outlives the term of the legislature it was meant to police delivers no deterrence at all.
Why does money power distort the voter’s choice?
Direct inducement: Cash and gifts distributed close to polling day convert a political choice into a transaction.
Entry barrier: High unaccounted spending prices out candidates without access to such funds, narrowing the field before voters choose.
Post election recovery: A candidate who spends unaccounted money has a standing incentive to recover it through office.
Ceiling evasion: The statutory ceiling applies to the candidate and not to the party or third parties, so spending shifts outside the accounted channel.
Weak evidentiary link: Seized cash is difficult to attribute to a specific candidate, so corrupt practice petitions under the Representation of the People Act, 1951 rarely succeed.
Federal enforcement gap: Police are under State control while the election is run by a central constitutional body, which weakens follow through on investigation.
Challenges to curbing black money in elections
Attribution of seized cash: Interception rarely produces evidence linking the money to a named candidate. e.g. the 2014 Bellary seizures produced no concluded electoral offence trial in more than a decade.
No ceiling on party expenditure: Candidate limits are enforceable while party and third party spending is effectively uncapped. e.g. the Representation of the People Act, 1951 ceiling of Rs 95 lakh for a Lok Sabha candidate does not restrict what the party spends on the same seat.
Opacity of political funding: Donor identity remains partly shielded even after reform. e.g. the Supreme Court struck down the Electoral Bond Scheme in February 2024 for violating the voter’s right to information.
Cash intensity of the rural economy: Legitimate and illegitimate cash movement look identical at a check post. e.g. Static Surveillance Teams routinely seize traders’ working capital that is later released.
Investigative capacity and turnover: Election duty officers are transferred out before investigations mature. e.g. the Court had to specify a one year deadline precisely because probes drift beyond the life of the House.
Corrupt practice standard of proof: An election petition requires proof almost to a criminal standard. e.g. very few election petitions on bribery under Section 123 of the Representation of the People Act, 1951 end in a declaration that the election is void.
In kind inducement: Money is increasingly replaced by goods, liquor and services that leave no trail. e.g. the Commission’s seizure data in recent general elections shows drugs and precious metals outweighing cash in value terms.
Conclusion
The judgment moves the problem of election money from interception to prosecution and fixes named officers with dated obligations at each step. The Court has placed the responsibility on the Election Commission of India, set a 24 hour reporting rule, a Rs 10 lakh referral threshold and a one year investigation deadline, and required quarterly status reports. The next milestone is the compliance affidavit due from the Election Commission and the State governments by 18 November. The measure of the ruling will be the number of election money cases that reach conviction, not the value of cash seized.
Election Expenditure Monitoring in India
About: Election expenditure monitoring is the system through which the Election Commission enforces the statutory ceiling on candidate spending and intercepts the flow of inducements during the election period.
How it works: Every candidate maintains a day to day account of expenditure, which is compared against a shadow observation register maintained by the district election machinery.
Field machinery: Expenditure Observers, Assistant Expenditure Observers, Flying Squads, Static Surveillance Teams, Video Surveillance Teams and Accounting Teams operate in each constituency.
Current ceilings: Candidate expenditure is capped at Rs 95 lakh for a Lok Sabha seat and Rs 40 lakh for an Assembly seat in larger States, revised in 2022.
No party ceiling: There is no statutory limit on what a political party may spend on general propaganda.
Scale of seizures: Seizures during the 2024 general election crossed Rs 10,000 crore in cash, liquor, drugs, precious metals and freebies, the highest recorded for a national election.
Consequence of default: Failure to file the account of election expenses within 30 days of the result can attract disqualification for up to three years under Section 10A of the Representation of the People Act, 1951.
Constitutional Framework Governing Free and Fair Elections
Article 324: Vests superintendence, direction and control of elections in the Election Commission of India, the source of its power to issue enforcement instructions.
Article 325: Bars a separate electoral roll or exclusion from it on grounds of religion, race, caste or sex.
Article 326: Provides for adult suffrage as the basis of elections to the House of the People and State Legislative Assemblies.
Article 327: Empowers Parliament to legislate on all matters relating to elections, including corrupt practices.
Article 329(b): Bars challenge to an election except by an election petition presented to the High Court after the poll.
Article 19(1)(a): Grounds the voter’s right to know the antecedents and funding of candidates, as read by the Supreme Court.
Article 21: Grounds the right to a speedy trial, which the Court invoked in setting investigation and trial timelines.
Laws and Rules Governing Election Funding and Expenditure
Representation of the People Act, 1951: Governs the conduct of elections, corrupt practices, disqualification and election petitions.
Landmark provisions under the 1951 Act: Section 77 requires an account of election expenses, Section 78 requires its lodging, Section 123 defines corrupt practices including bribery and undue influence, and Section 8 provides disqualification on conviction.
Conduct of Elections Rules, 1961: Prescribe the manner of maintaining and lodging the account of election expenses and the expenditure ceiling.
Companies Act, 2013: Section 182 governs corporate political contributions and their disclosure in the profit and loss account.
Income Tax Act, 1961: Section 13A exempts political party income subject to maintenance of accounts and reporting of contributions above the prescribed threshold.
Foreign Contribution (Regulation) Act, 2010: Regulates receipt of foreign contributions by political parties and candidates.
Prevention of Money Laundering Act, 2002: Provides for attachment and confiscation of proceeds of crime, including in election money cases.
Bharatiya Nagarik Suraksha Sanhita, 2023: Governs seizure, investigation, chargesheet timelines and trial in criminal cases arising from election seizures.
Electoral Bond Scheme, 2018: Notified for anonymous political donations through banking channels and struck down by the Supreme Court in February 2024.
Back2Basics: Election Commission of India
Constitutional status: A permanent constitutional body established under Article 324 on 25 January 1950.
Composition: A Chief Election Commissioner and two Election Commissioners, deciding by majority where they differ.
Appointment law: Governed by the Chief Election Commissioner and other Election Commissioners (Appointment, Conditions of Service and Term of Office) Act, 2023.
Tenure: Six years or up to the age of 65 years, whichever is earlier.
Removal: The Chief Election Commissioner can be removed only in the manner and on the grounds applicable to a Supreme Court judge.
Jurisdiction: Elections to Parliament, State legislatures and the offices of President and Vice President.
Quasi judicial role: It advises the President or Governor on post election disqualification of a sitting member under Article 103 and Article 192.
Government Initiatives
Election Seizure Management System: A digital platform that records and reconciles every seizure made by enforcement agencies during the election period.
cVIGIL: A citizen application allowing time stamped and geotagged reporting of cash distribution and other Model Code of Conduct violations.
Expenditure Monitoring Division of the ECI: The dedicated division that issues instructions, deploys observers and compiles seizure data.
Integrated deployment of enforcement agencies: The Income Tax Department, Directorate of Revenue Intelligence, Narcotics Control Bureau, State excise and police are co ordinated through a district election expenditure monitoring committee.
Suvidha portal: Provides a single window for candidates and parties to seek permissions for rallies, vehicles and campaign material, creating an auditable record.
Mandatory disclosure of criminal antecedents: Parties and candidates must publish criminal cases in newspapers and on television under the Supreme Court’s 2020 directions.
Systematic Voters’ Education and Electoral Participation: Runs voter awareness campaigns against accepting cash and gifts for votes.
Key Facts about Money Power in Indian Elections
Expenditure ceilings: Rs 95 lakh for a Lok Sabha candidate and Rs 40 lakh for an Assembly candidate in larger States, revised in January 2022.
Seizure record: Seizures crossed Rs 10,000 crore during the 2024 Lok Sabha election, more than three times the 2019 figure.
Electoral bonds: Struck down on 15 February 2024 in Association for Democratic Reforms v Union of India for violating Article 19(1)(a).
Disclosure threshold: Political parties must report contributions above Rs 20,000 to the Election Commission under Section 29C of the Representation of the People Act, 1951.
Electoral trusts: Introduced under the Electoral Trusts Scheme, 2013 to route corporate donations with disclosure.
Committee record: The Indrajit Gupta Committee (1998) recommended State funding of elections in kind, and the Law Commission’s 255th Report (2015) recommended tighter regulation of party finance.
Challenges in Regulating Election Finance
Unregulated party spending: The ceiling binds the candidate alone. e.g. a party’s national advertising campaign is not counted against any constituency limit.
Cash donations below threshold: Parties report large shares of income as small anonymous contributions. e.g. donations below Rs 20,000 need no donor disclosure under Section 29C.
Absence of a legal audit mandate: Party accounts are not subject to statutory audit by an independent auditor appointed by the Commission. e.g. the Law Commission’s 255th Report recommended exactly this in 2015 without follow up.
Slow prosecution of seizure cases: Election money FIRs drift beyond the term of the House. e.g. the 2014 Bellary case required Supreme Court intervention twelve years later.
In kind inducement outside cash: Liquor, drugs and precious metals substitute for currency. e.g. drug seizures outweighed cash seizures in value in several States during the 2024 general election.
Weak deterrence from disqualification: Disqualification for failing to lodge expense accounts is rarely applied to sitting members. e.g. Section 10A action is used against a very small number of candidates each cycle.
Federal split in enforcement: The Commission directs, the State police investigate and the High Courts try. e.g. the present judgment had to separately direct High Courts to ensure speedy trial.
Way Forward
Complete the compliance loop: Treat the 18 November compliance affidavit as a baseline and publish a public dashboard of election seizure cases by stage.
Cap party expenditure: Extend a statutory ceiling to political party and third party spending per constituency, as recommended by successive committees.
Mandate independent audit: Require party accounts to be audited by auditors from a panel maintained by the Comptroller and Auditor General.
Lower the disclosure threshold: Reduce the anonymous contribution limit and require reporting of donor identity for aggregate annual contributions.
Create dedicated election offence courts: Designate courts to try election money cases exclusively until the backlog is cleared, mirroring the special courts for legislators.
Strengthen the seizure to prosecution link: Require every seizure above the referral threshold to result in a recorded decision to prosecute or release, with reasons.
Move towards partial State funding: Provide in kind support for campaign essentials, as the Indrajit Gupta Committee recommended, to reduce dependence on unaccounted money.
Matching Previous Year Question
“[2025, GS2, 10 marks] Discuss the ‘corrupt practices’ for the purpose of the Representation of the People Act, 1951. Analyze whether the increase in the assets of the legislators and/or their associates, disproportionate to their known sources of income, would constitute ‘undue influence’ and consequently a corrupt practice.”
The enumeration phase of the Special Intensive Revision (SIR) of electoral rolls closed with forms uploaded for only 97.47 lakh of Delhi’s 1.45 crore electors, implying a deletion of about 32.41 per cent, the highest in the country. The same exercise has left 2.08 crore forms uncollected in Maharashtra and 1.08 crore Karnataka electors outside the draft roll. The revision is designed to purify the roll, and the figures show that the burden of staying on it has shifted to the elector within a fixed calendar.
What is the Special Intensive Revision of electoral rolls?
About: A house to house revision of electoral rolls conducted by the Election Commission of India (ECI) in which every existing elector must be re verified rather than only new applicants being added.
Enumeration phase:Booth Level Officers (BLOs) carry pre filled enumeration forms door to door, help electors complete them and upload the details to the official portal.
Mapping requirement: Electors are required to map themselves or their lineage to an earlier reference roll, the 2002 roll in the States covered so far.
Consequence of non collection: A name whose form is not collected and digitised does not appear in the draft roll published at the end of the phase.
Restoration route: Exclusion from the draft is not final, since an elector may apply afresh during the claims and objections window.
What is the ASDDO category?
About: ASDDO stands for Absent, Shifted, Dead, Duplicate and Other, the classification used for electors whose enumeration forms could not be collected.
What it does not mean: A form recorded as uncollected does not by itself establish that the elector is dead, has shifted or is ineligible, since the elector may simply not have been traced at the recorded address.
What is Form 6 in the electoral roll process?
About: Form 6 is the application for inclusion of a name in the electoral roll, prescribed under the Registration of Electors Rules, 1960.
Use in this revision: Electors dropped from the draft roll must file Form 6 during the claims and objections period to be added to the final roll.
What do the State level enumeration figures show?
Delhi: Forms were uploaded for 97.47 lakh electors, about 67 per cent of the 1.45 crore on the roll when the exercise began, leaving 47.62 lakh marked uncollectible.
Maharashtra: Of an electorate of 9,78,54,049, forms for 7,69,52,262 or 78.64 per cent were digitised, 2,07,93,916 or 21.25 per cent were uncollected and 1,07,871 or 0.11 per cent remained pending.
Karnataka:1.08 crore electors fall in the ASDDO list, of whom 65.61 lakh or 11.84 per cent have permanently shifted, 16.38 lakh or 2.96 per cent are dead and 15.28 lakh or 2.76 per cent are untraceable or absent.
Karnataka notices: A further 25.14 lakh electors face notices under the No Mapping category for failing to link themselves or their lineage to the 2002 roll, with about 4.46 crore mapped electors digitised at 80.46 per cent.
Telangana:73.39 lakh names were deleted in the draft roll, 60 lakh showed anomalies and 32 lakh remain unmapped, so 92 lakh electors will receive notices out of a total of 3.38 crore.
Telangana breakdown:9,22,229 electors or 2.73 per cent have died, 57,46,803 or 16.99 per cent were found shifted or absent and 6,70,203 or 1.98 per cent were enrolled in more than one place.
Published draft rolls so far: Telangana recorded the highest deletion at 21.59 per cent, followed by Arunachal Pradesh at 19.09 per cent and Uttar Pradesh at 18.7 per cent.
How do the numbers differ between urban and rural districts?
City comparison: Deletions in the draft roll stand at 32.41 per cent in Delhi, 40.09 per cent in Hyderabad, 27.16 per cent in Pune and 20.26 per cent in Gurgaon.
Maharashtra’s four largest urban districts: Thane, Mumbai City, Mumbai Suburban and Pune account for 94.47 lakh uncollected forms, 45.4 per cent of the State total, while holding only 27.5 per cent of the electorate.
District level peaks: Thane leads with 28.88 lakh of 74.51 lakh electors uncollected at 38.77 per cent, followed by Mumbai City at 37.57 per cent, Mumbai Suburban at 34.48 per cent and Pune at 31.92 per cent.
Next tier: Nagpur recorded 14.06 lakh uncollected forms at 30.32 per cent, Palghar 6.87 lakh at 28.88 per cent and Raigad 5.91 lakh at 23.33 per cent.
Rural contrast: Uncollected forms stand at 8.82 per cent in Hingoli, 9.10 per cent in Buldhana, 9.93 per cent in Ratnagiri and 10.62 per cent in Latur.
Concentration: Seven districts hold about 1.21 crore or 58.3 per cent of all uncollected forms while holding about 37 per cent of Maharashtra’s electorate.
Movement in the final days: Maharashtra’s uncollected figure rose from 1.80 crore on 12 August to 2.08 crore on 17 August, an increase of about 27.3 lakh in five days.
Why are deletion rates highest in the largest cities?
Floating population: Officials attribute the urban pattern to large migrant workforces recorded at addresses they no longer occupy.
Address updation gap: Government employees and salaried private sector workers move frequently and rarely update their address in the roll.
Physical verification limits: A Booth Level Officer must find the elector at the recorded address, which fails in high rise and high churn neighbourhoods.
Refusal category: Delhi officials estimate 1 to 2 lakh electors in the Other category, covering those who refuse to sign or submit enumeration forms.
Booth level concentration: In nearly 3,000 booths in Karnataka, deletion rates exceed 60 per cent, so the effect is concentrated rather than spread evenly.
Timeline pressure: Delhi’s enumeration was extended twice, from 29 July to 8 August and then to 17 August, because digitisation of forms lagged.
Does a shorter roll necessarily mean a more accurate one?
Two defensible objectives: Removing dead, shifted and duplicate entries protects the roll, and retaining every genuine elector protects the franchise, and the same procedure serves both unevenly.
Category conflation: A single uncollected label covers the dead, the shifted, the duplicated and the merely absent, so an administrative failure to trace is recorded alongside genuine ineligibility.
Reversal of the burden: The elector must now prove entitlement afresh within a fixed window rather than the State proving ineligibility before deletion.
Unequal cost of restoration: Filing Form 6 and producing documents is easiest for those with stable addresses and hardest for the migrant workers who dominate the deletion lists.
Contested reading of the data: Officials state that the draft is not a permanent deletion, while civil society groups in Karnataka petitioned the Chief Minister that about half of Bengaluru’s electors face removal.
Demand for more time: Civil society groups have asked the Karnataka government to seek a three month extension of the revision and to approach the Supreme Court if necessary.
What is the timeline from draft roll to final roll?
Draft publication: Draft electoral rolls are published on 24 August in Delhi, Maharashtra and Karnataka.
Claims and objections: Electors may file claims and objections in Delhi until 23 September, and in Telangana from 17 August to 16 September.
Disposal window: Claims and objections in Delhi are to be disposed of between 24 August and 22 October, and in Telangana until 15 October.
Notices for incomplete forms: Electors who submitted forms with incomplete details receive notices seeking proof of eligibility over the following two months.
Final roll: The final electoral roll for Delhi is published on 27 October, and only that number settles the actual scale of exclusion.
Pre draft correction: Booth Level Agents of political parties and residents may point out errors in the list before the draft is published.
Challenges to the Special Intensive Revision
Documentary burden on the poor: Proof of lineage against a 2002 roll is hardest for those without stable records. e.g. Karnataka has issued No Mapping notices to 25.14 lakh electors who could not link themselves to the 2002 list.
Compressed calendar: Enumeration, notice and disposal phases overlap, leaving little time for genuine electors to respond. e.g. Delhi’s enumeration was extended twice and still closed with 47.62 lakh forms uncollected.
Booth Level Officer workload: One official covers a full booth in a fixed window with no realistic revisit capacity. e.g. Thane recorded nearly four in ten forms uncollected against fewer than one in ten in Hingoli.
Migrant disenfranchisement: India has no portable voting right, so a worker deleted at the home address is not automatically enrolled at the workplace. e.g. Mumbai Suburban recorded 26.99 lakh uncollected forms in a district built on internal migration.
Political contestation of the process: Deletion figures become an electoral dispute rather than an administrative one. e.g. a leading public figure in Karnataka reported being marked as shifted during enumeration.
Verification quality: Duplicate and dead entries are identified by field report rather than by linkage to a civil registration database. e.g. Telangana classified 9.22 lakh electors as dead on field verification alone.
Appeal capacity: Disposal of lakhs of claims within two months strains Electoral Registration Officers. e.g. Telangana must dispose of notices to 92 lakh electors by 15 October.
Conclusion
The revision has converted a routine roll correction into a mass re registration event whose cost falls hardest on internal migrants in large cities. The published deletion figures record failure to trace as much as genuine ineligibility, and the two are not separated in the draft. Draft rolls publish on 24 August, claims and objections close on 23 September in Delhi, and the final roll on 27 October is the first number that will show how many genuine electors were actually lost. The scale of restoration achieved in that window is the real test of the exercise.
[2024, GS2, 10 marks] Examine the need for electoral reforms as suggested by various committees with particular reference to “one nation-one election” principle.”
Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2026 last week, barring States from imposing specified levies on mineral rights and on mineral bearing land. The bar removes the very taxing power the Supreme Court had affirmed for States on 25 July 2024. Mineral bearing States say the change strips out a revenue stream they control fully, while the Centre says uncapped State levies raise the cost of minerals for the whole economy.
What is the Mines and Minerals (Development and Regulation) Amendment Bill, 2026?
About: It amends the Mines and Minerals (Development and Regulation) Act, 1957, the parent law governing grant of mineral concessions and regulation of mines.
Core bar: It restricts States from imposing specified levies on mineral rights and on mineral bearing land.
Extinguishment of past dues: It wipes out unpaid or unrecovered dues arising from such levies imposed before the amendment comes into force.
Scale of the dues: Estimates place outstanding dues of this kind across the mining sector at about Rs 2 lakh crore.
Ceiling design: Mines Ministry officials state that about 14 levies in the mineral sector will survive, subject to a combined percentage ceiling.
Stated purpose: The Centre frames the measure as fiscal certainty for mining companies over their total statutory burden.
What is royalty on minerals?
About: Royalty is the payment a lease holder makes to the State government for every unit of mineral extracted under a mining lease.
Who fixes it: Rates are specified in the Schedules to the Mines and Minerals (Development and Regulation) Act, 1957 and revised by the Union government, not by the State that receives the money.
What is the District Mineral Foundation?
About: A non profit trust set up in every mining affected district, funded by a statutory contribution from lease holders, created by the 2015 amendment.
Use of funds: Money is spent on people and areas affected by mining under the Pradhan Mantri Khanij Kshetra Kalyan Yojana.
What is the National Mineral Exploration Trust?
About: A trust created by the 2015 amendment and funded by a contribution equal to 2 per cent of royalty paid by lease holders.
Use of funds: It finances regional and detailed mineral exploration through accredited agencies.
What is the current status of State powers to tax mineral rights in India?
Judicial position: A nine judge Constitution Bench held on 25 July 2024 that States hold legislative competence to tax mineral rights and mineral bearing land.
Precedent overruled: That ruling overruled India Cement Ltd v State of Tamil Nadu (1989), which had treated royalty as a tax and placed the subject beyond State competence.
Statutory position now: The 2026 amendment bars the specified levies, so a power the Court restored stands narrowed by ordinary legislation.
Levies that survive: About 14 levies continue, including environmental and pollution cesses, subject to a combined ceiling still to be fixed.
Centrally fixed payments: Royalty, District Mineral Foundation contributions and National Mineral Exploration Trust contributions remain set under central law.
Effect on accrued claims: Levies imposed before commencement lose their recoverability, so demands already raised become unenforceable.
Constitutional Provisions Related to taxation of mineral rights
Article 246: Distributes legislative power between Parliament and State legislatures through the three lists of the Seventh Schedule.
Entry 54, Union List: Regulation of mines and mineral development to the extent Parliament declares expedient in the public interest.
Entry 23, State List: Regulation of mines and mineral development, expressly subject to Entry 54 of the Union List.
Entry 49, State List: Taxes on lands and buildings, the entry States have relied on for a mineral bearing land cess.
Entry 50, State List: Taxes on mineral rights, subject to any limitations imposed by Parliament by law relating to mineral development.
Article 265: Bars the levy or collection of any tax except by authority of law.
Article 300A: Bars deprivation of property save by authority of law, the provision invoked when accrued statutory dues are extinguished.
Article 39(b): Directs the State to ensure that ownership and control of material resources are distributed to subserve the common good.
Why does the 25 July 2024 ruling sit at the centre of the dispute?
What was decided: The Court upheld the power of States to tax mineral rights and mineral bearing land as a distinct field from royalty.
What was overruled: The 1989 India Cement position, that royalty is itself a tax, had blocked States from taxing the same subject for 35 years.
What States did next: Several mineral bearing States began framing fresh cesses on mineral bearing land after the judgment.
What the Centre saw: Mines Ministry officials describe the resulting levies as excessive cesses stacked on top of existing statutory payments.
How Parliament responded: The amendment uses the limitation power built into Entry 50 to restrict what the Court had permitted.
Why do mineral bearing States say the Bill damages their finances?
Dependence on mining: Mining revenue accounted for about 84.9 per cent of Jharkhand’s own non tax revenue in the 2024 to 2025 financial year.
Forgone cess: The Mineral Bearing Land Cess was expected to yield about Rs 11,000 crore a year for Jharkhand alone.
Dues written off: Outstanding dues across the mining sector estimated at about Rs 2 lakh crore cease to be recoverable.
Fiscal capacity argument: The Jharkhand Chief Minister wrote to the Prime Minister that mineral revenues are a critical component of the State’s fiscal capacity and not marginal receipts.
Federal objection: The Kerala Chief Minister has raised concerns over the implications of the amendment for India’s federal structure.
Political response: Jharkhand has threatened protests against the amendments.
What is the Centre’s case for restricting State levies?
Cost of key minerals: Unchecked State levies raise mineral prices and feed into inflation and infrastructure costs.
Predictability for industry: A single combined ceiling gives mining companies certainty over their total fiscal burden across States.
Cumulative burden: Companies already pay royalty, District Mineral Foundation and National Mineral Exploration Trust contributions and environmental and pollution cesses.
The largest single addition: Industry assessment identifies the mineral bearing land tax as the biggest additional burden of the recent levies.
A ceiling, not abolition: About 14 levies survive, with the combined percentage to be fixed after consulting all States.
Limited realised loss: Industry view holds that most of these levies were legally contested for decades, so little was actually collected.
Does fiscal certainty for industry justify overriding a power the Court has just affirmed?
Two legitimate claims: Investment certainty in a capital heavy sector sits against the fiscal autonomy of the States that hold the minerals.
A judicial gain reversed: States won the power in 2024 and lost its practical use in 2026 without any change in the constitutional text.
The retrospective element: Extinguishing accrued dues removes revenue already claimed, which goes further than limiting future levies.
Sequence of consultation: The ceiling is to be fixed after the bar is enacted, so States negotiate the number after losing their leverage.
Who gains and who pays: The saving accrues to mining companies and mineral consuming States, the loss falls on a small group of mineral bearing States.
Cost borne locally: Land loss, displacement and pollution stay with the producing State even after its claim on the rent is narrowed.
Major debates surrounding taxation of mineral rights
Royalty as tax or as consideration: India Cement treated royalty as a tax, the 2024 ruling treated it as contractual consideration, and that classification decides State competence.
Reach of the Entry 50 limitation: How far Parliament may hollow out a State taxing entry through a limitation clause remains legally contested.
Recovery of past dues: The 2024 ruling allowed staggered recovery of past demands, the amendment extinguishes them outright.
Producer against consumer States: Mineral bearing States argue they carry the ecological and social cost while value addition and tax revenue accrue elsewhere.
Cooperative against unilateral federalism: The Centre frames the change as integration of a national market, States frame it as unilateral action on their own revenue base.
Deepening vertical fiscal imbalance: Non tax mineral revenue is one of the few sources States control fully, so its removal raises dependence on central transfers.
Challenges to the Mines and Minerals Amendment Bill
Litigation risk: States can challenge the bar and the extinguishment of accrued dues as a colourable exercise of legislative power. e.g. Jharkhand and Kerala both registered formal objections within days of the Bill’s passage in August 2026.
Concentrated revenue shock: A small set of States carries almost the entire loss. e.g. Odisha and Jharkhand together account for the bulk of India’s iron ore and coal output.
Undecided ceiling: The combined percentage is unfixed at the point of enactment, leaving States unable to plan budgets. e.g. the Mines Ministry states only that the figure will follow consultation with all States.
Weak district level spending: Money already collected for mining affected areas is poorly used. e.g. audits have repeatedly flagged large unspent District Mineral Foundation balances in mining districts.
Unpriced ecological damage: Removing land based levies weakens the price signal for land degradation. e.g. the Shah Commission findings preceded the suspension of iron ore mining in Goa in 2012.
Certainty alone does not unlock supply: Fiscal predictability does not resolve clearance and land bottlenecks. e.g. several auctioned coal blocks remain unoperationalised for want of forest clearance.
Weak consultation machinery: Resource disputes between the Union and States lack a standing forum for settlement. e.g. the Inter State Council has met only rarely since its creation in 1990.
Conclusion
The dispute is about who captures the rent from a fixed natural resource, not about the rate of any single cess. Parliament has passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2026, and the measure now moves to Presidential assent and commencement. The next concrete step named by the Mines Ministry is fixing the combined percentage ceiling on the roughly 14 surviving levies after consulting all States. Until that ceiling is notified, mineral bearing States carry a quantified loss against an unquantified entitlement.
“[2025, GS2, 15 marks] Examine the evolving pattern of Centre-State financial relations in the context of planned development in India. How far have the recent reforms impacted the fiscal federalism in India?”
Kerala’s Vizhinjam International Seaport began full scale export and import operations, moving India’s first dedicated deepwater transshipment terminal from handling mother ship calls to regular cargo work. The shift tests whether a domestic deepwater port can pull back the transshipment cargo that Colombo, Singapore and Salalah have historically handled for India.
What is the Vizhinjam International Seaport?
About: Vizhinjam is India’s first dedicated deepwater container transshipment port, located near Thiruvananthapuram on the southern tip of Kerala.
Ownership model: It is developed on the landlord port model, with the Government of Kerala owning the asset and a private concessionaire building and operating the terminal.
Concession: The concession agreement was signed in August 2015 for a period of 40 years, with provision for extension.
Status in law: It is a non major port under the Government of Kerala, unlike the twelve major ports administered by the Union government.
Automation: It is India’s first port to use a fully automated container handling system with remotely operated ship to shore cranes.
Operational milestones: The first mother ship called in July 2024, commercial operations began in December 2024, and the port was formally dedicated in May 2025.
What is transshipment?
About: Transshipment is the transfer of containers from one vessel to another at an intermediate port before they reach their final destination.
Why it exists: Very large mainline vessels call only at a few deep draft hubs, and smaller feeder vessels then distribute the boxes to shallower regional ports.
The commercial value: The hub port earns handling charges twice on the same container, once on discharge from the mother vessel and once on loading to the feeder.
What is natural draft and why does it matter?
About: Draft is the depth of water a vessel needs beneath its keel, and natural draft is the depth a harbour has without dredging.
Vizhinjam’s advantage: The site has a natural depth of about 20 metres close to the shore, deep enough to take the largest container vessels in service.
The cost effect: A naturally deep harbour avoids the recurring capital and maintenance dredging bill that shallow Indian ports carry every year.
The sedimentation factor: The site has minimal littoral drift, so the channel does not silt up at the rate seen at river mouth ports.
What is Viability Gap Funding?
About: Viability Gap Funding is a one time or deferred grant given by the government to a public private partnership project that is economically justified but not commercially viable on its own.
Use here: Central and State assistance under this route covered part of the capital cost of the first phase of the port.
Why has India depended on foreign transshipment hubs?
Scale of leakage: A large majority of India’s transshipment containers have historically been handled outside the country.
The dominant hub:Colombo in Sri Lanka has handled the single largest share of India’s transshipped boxes, aided by its position on the same shipping lane.
Other hubs:Singapore and Salalah in Oman handle much of the remainder, along with Port Klang in Malaysia.
The reason: Indian ports lacked the natural draft and the crane capacity to receive the largest mainline vessels, so mother ships called at neighbouring hubs instead.
The cost: Routing a container through a foreign hub adds an extra handling charge and transit time on every box, and the associated revenue leaves the country.
The strategic exposure: Dependence on a foreign port for the movement of national trade is a vulnerability during a diplomatic or economic dispute.
What makes the Vizhinjam site suitable for a hub?
Proximity to the shipping lane: The port lies about 10 nautical miles from the international east and west shipping route linking the Suez Canal to the Strait of Malacca.
Minimal deviation cost: A short deviation from the mainline route means a mother ship loses little time by calling, which is the decisive commercial factor for a hub.
Deep water close to shore: The natural draft of about 20 metres is available near the coast, which shortens the approach channel.
Low maintenance dredging: Limited sedimentation keeps the recurring dredging requirement low compared with other Indian container ports.
Southern position: Its location at the southern tip of the peninsula makes it the natural first and last Indian call on the route.
What does the move to full scale export and import operations add?
From transshipment to trade: The port moves from handling mother ship calls and transfers to handling India’s own export and import containers.
Direct connectivity for shippers: Exporters in Kerala and neighbouring States can load on a mainline vessel without an intermediate feeder leg through a foreign hub.
Time and cost saving: Removing a feeder leg cuts transit days and one round of handling charges from the door to door cost.
Revenue retention: Handling charges, customs revenue and ancillary services are retained domestically rather than paid to a foreign hub operator.
Feeder network effect: Regular export and import volume gives the port a base load that makes it more attractive for shipping lines to add services.
Economic linkage: Full operations activate customs, warehousing, logistics and bunkering activity in the port’s hinterland.
Challenges to the Vizhinjam International Seaport
Hinterland connectivity: A hub needs rail and road links to move export and import cargo inland at scale. e.g. the dedicated rail link and the road connectivity to the national highway network for Vizhinjam are still being completed.
Competition from an established hub: Shipping lines change hub calls only when the switch is commercially compelling. e.g. Colombo has long established feeder networks, bunkering and repair services that a new port must match.
Fisher community livelihood: Port construction alters the coastline and affects traditional fishing grounds. e.g. the Vizhinjam project faced sustained protests by the local fishing community over shoreline erosion and loss of fishing access.
Coastal erosion and shoreline change: Breakwaters interrupt the natural movement of sand along the coast. e.g. erosion at nearby Kerala coastal settlements has been attributed by residents to the breakwater and has required protective works.
Concentration risk in a single operator: Container handling capacity concentrated with one private group reduces competitive pressure on tariffs. e.g. a single group already operates a large share of India’s private container terminal capacity.
Cyclone and monsoon exposure: The Arabian Sea coast faces intensifying cyclonic activity that halts port operations. e.g. Cyclone Ockhi in 2017 caused heavy loss of life among fishers off the Kerala and Tamil Nadu coast.
Capacity ramp up risk: Later phases depend on demand materialising at the pace assumed in the concession. e.g. the full build capacity target depends on winning transshipment volume currently committed to competing hubs.
Conclusion
India has for decades paid a foreign hub to handle its own transshipment containers, and Vizhinjam is the first Indian facility with the natural draft and route position to change that. The port has now moved from the transshipment calls it began with in December 2024 to full scale export and import operations from 18 August 2026, which gives it a domestic cargo base alongside transfer volumes. The next milestone is the completion of the later development phases and the dedicated rail and road connectivity that will decide whether the hinterland can feed the quay.
Ports and Maritime Sector in India
About: India’s port system handles the overwhelming share of the country’s external trade, moving bulk, break bulk, liquid and containerised cargo.
Trade dependence: Around 95 per cent of India’s trade by volume and about 70 per cent by value moves through sea ports.
Port structure: India has 12 major ports administered by the Union government and around 200 notified non major ports under State governments.
Coastline: India has a coastline of about 11,098 kilometres across nine coastal States and four Union Territories, with an exclusive economic zone of about 2.37 million square kilometres.
Location advantage: The peninsula sits astride the east and west shipping lane connecting the Suez Canal to the Strait of Malacca, through which a large share of world trade passes.
Structural weakness: Indian ports have historically lacked deep draft berths, so mainline vessels called at foreign hubs and Indian ports were served by feeders.
Institutional structure: The Ministry of Ports, Shipping and Waterways administers the sector, with State Maritime Boards governing non major ports.
Constitutional Framework Governing Ports
Entry 27 of the Union List: Covers ports declared by or under law made by Parliament to be major ports, including their delimitation and the powers of port authorities there.
Entry 25 of the Union List: Covers maritime shipping and navigation, and provision of education and training for the merchant marine.
Entry 31 of the Concurrent List: Covers ports other than those declared to be major ports, the basis of State jurisdiction over ports such as Vizhinjam.
Entry 32 of the Concurrent List: Covers shipping and navigation on inland waterways as regards mechanically propelled vessels.
Article 297: Vests in the Union all lands, minerals and other things of value underlying the territorial waters, continental shelf and exclusive economic zone.
Entry 41 of the Union List: Covers trade and commerce with foreign countries and import and export across customs frontiers.
Laws and Rules Governing Ports and Shipping
Indian Ports Act, 1908: The long standing statute governing port limits, port dues, pilotage and safety of shipping at ports.
Indian Ports Act, 2025: Enacted to replace the 1908 statute, updating port administration, State Maritime Boards, pollution control and dispute resolution.
Major Port Authorities Act, 2021: Replaced the Major Port Trusts Act, 1963 and gave the twelve major ports autonomy in tariff setting and land management through Port Authority Boards.
Tariff autonomy: The Act removed tariff fixation from the Tariff Authority for Major Ports for new projects, allowing market based rates.
Merchant Shipping Act, 1958: Governs registration of Indian vessels, seafarer welfare, safety and marine pollution obligations.
Customs Act, 1962: Governs clearance of imported and exported goods and the designation of customs ports and bonded warehouses.
Marine Aids to Navigation Act, 2021: Replaced the Lighthouse Act, 1927 and modernised the framework for navigational aids and vessel traffic services.
Coastal Regulation Zone Notification, 2019: Issued under the Environment (Protection) Act, 1986, regulating construction and port development along the coast.
Inland Vessels Act, 2021: Provides a uniform national regime for registration and safe operation of inland vessels, relevant to port hinterland movement by waterway.
Back2Basics: Sagarmala Programme
Administering ministry: Ministry of Ports, Shipping and Waterways.
Launch year: Approved in 2015 as the flagship programme for port led development.
Aim: To reduce the logistics cost of export and import and domestic cargo by using India’s coastline and inland waterways more intensively.
The four pillars: Port modernisation and new port development, port connectivity enhancement, port linked industrialisation, and coastal community development.
Targeted beneficiaries: Exporters and importers, coastal shipping operators, port linked industrial clusters and coastal communities including fishers.
Design feature: Projects are implemented by ports, State governments, central ministries and special purpose vehicles, with the Sagarmala Development Company providing funding support.
Coastal community component: Funds fishing harbours, fish landing centres and skill development for coastal populations.
Government Initiatives in the Maritime Sector
Maritime India Vision 2030: Sets out the ten year blueprint for port capacity, connectivity, shipbuilding and inland waterways.
Maritime Amrit Kaal Vision 2047: Extends the roadmap to 2047 with targets for port capacity, transshipment share and green shipping.
PM Gati Shakti National Master Plan: Integrates port, rail, road and waterway projects on a common geographic platform to remove last mile connectivity gaps.
Harit Sagar Green Port Guidelines: Set targets for reducing carbon intensity at ports, including shore power and alternative fuel bunkering.
Maritime Development Fund: Announced to provide long term low cost finance for shipbuilding, ship acquisition and port infrastructure.
Shipbuilding Financial Assistance Policy: Provides assistance to Indian shipyards to compete with subsidised foreign shipbuilders.
Cabotage relaxation: Allows foreign flagged vessels to carry transshipment containers between Indian ports, a measure intended to make Indian hub ports viable.
Jalvahak Scheme and National Waterways development: Encourages cargo movement on inland waterways to reduce road congestion to and from ports.
Key Facts about Vizhinjam and India’s Ports
First of its kind: Vizhinjam is India’s first dedicated deepwater container transshipment port and its first semi automated container terminal.
Location: Thiruvananthapuram district, Kerala, on the Arabian Sea coast near the southern tip of the Indian peninsula.
Natural draft: About 20 metres close to shore, among the deepest at any Indian port.
Distance from the shipping lane: About 10 nautical miles from the international east and west shipping route.
Concession model: Landlord model public private partnership with the Government of Kerala, signed in 2015 for 40 years.
Major ports: India’s twelve major ports include Deendayal (Kandla), Mumbai, Jawaharlal Nehru, Mormugao, New Mangalore, Cochin, Chennai, Kamarajar (Ennore), V.O. Chidambaranar (Tuticorin), Visakhapatnam, Paradip and Syama Prasad Mookerjee (Kolkata).
Busiest container port: Jawaharlal Nehru Port in Maharashtra handles the largest container volume among Indian ports.
Newest major port: Vadhavan in Maharashtra was approved as a deepwater major port to add mainline capacity on the west coast.
Challenges in India’s Port and Maritime Sector
Transshipment leakage: A large share of India’s container transshipment is still handled at foreign hubs. e.g. Colombo has historically handled the biggest single share of India’s transshipped boxes.
Hinterland connectivity gaps: Rail and road links to ports lag behind quay side capacity. e.g. dedicated freight corridor connectivity reached some ports years after their capacity expansion was complete.
Low draft at legacy ports: Older river and estuary ports cannot take the largest vessels without continuous dredging. e.g. Kolkata port requires sustained maintenance dredging on the Hooghly to keep its channel usable.
Turnaround time and dwell time: Container dwell time at Indian ports remains higher than at competing hubs. e.g. Indian container dwell time has been benchmarked unfavourably against Singapore and Colombo in trade facilitation assessments.
Small national fleet: Indian flagged tonnage carries only a small share of the country’s own trade, so freight payments go abroad. e.g. Indian ships carry a small fraction of India’s export and import cargo, with the rest on foreign flagged vessels.
Weak shipbuilding base: India holds a marginal share of global shipbuilding orders. e.g. global shipbuilding is dominated by China, South Korea and Japan, which together hold the overwhelming majority of the order book.
Coastal environment and livelihood conflict: Port expansion collides with fishing livelihoods and coastal ecology. e.g. the Vizhinjam project saw prolonged protests over erosion and loss of fishing grounds.
Climate and disaster exposure: Ports are exposed to cyclones, storm surge and sea level rise. e.g. Cyclone Fani and Cyclone Amphan forced extended shutdowns at east coast ports.
Way Forward
Complete port connectivity projects on schedule: Finish the dedicated rail spur and highway links so hinterland cargo can reach the quay without road congestion.
Consolidate transshipment volume: Use cabotage relaxation, competitive tariffs and customs facilitation to make an Indian hub call cheaper than a Colombo call.
Invest in feeder shipping capacity: Build an Indian flagged feeder fleet so the distribution leg of transshipment is also domestically earned.
Institutionalise coastal community compensation: Provide time bound rehabilitation, alternative livelihood and shoreline protection commitments as part of every port concession.
Monitor shoreline change scientifically: Mandate independent long term shoreline and sediment monitoring around breakwaters, with published results.
Diversify operators: Encourage more than one terminal operator across the national container network to keep tariffs competitive.
Green the port: Deploy shore power, alternative fuel bunkering and electrified handling equipment in line with the green port guidelines.
Digitise clearance: Extend single window clearance and port community systems to cut dwell time to the levels prevailing at competing hubs.
Matching Previous Year Question
“[2026] In what way(s) does the Vizhinjam International Seaport represent a structural shift in India’s maritime trade and logistics policy? 1. By functioning exclusively as a domestic cargo hub to reduce reliance on coastal shipping and eliminate the need for foreign collaborations. 2. By focusing primarily on passenger cruise tourism and heritage shipping to increase Kerala’s profile as a maritime heritage destination. 3. By leveraging its natural deep draft and strategic location to reduce dependence on foreign trans-shipment ports, enhance revenue retention, and reposition India in regional maritime trade. Select the answer using the code given below: (a) 1 only (b) 1 and 2 (c) 2 and 3 (d) 3 only Answer: (d)”
Banks mobilised $52.3 billion in foreign currency inflows between 8 June and 13 August under the Reserve Bank of India (RBI) special swap facility, with Foreign Currency Non Resident Bank, or FCNR(B), deposits accounting for the bulk of the funds. The RBI closed the swap window a month earlier than scheduled, and the rupee fell to a 17 day low of 95.61 against the dollar the same day. A country can defend its currency by earning dollars or by borrowing them, and this stabilisation belongs to the second kind.
How does the RBI special swap facility for FCNR(B) deposits work?
The deposit: FCNR(B) deposits let non resident Indians hold foreign currency with Indian banks, free of rupee risk, with tax free interest and full repatriation.
Step one, raising the money: Banks raise fresh deposits of three to five year maturity in foreign currency.
Step two, the swap: Banks swap those dollars with the RBI in exchange for rupees.
Step three, the subsidy: The central bank absorbs the hedging cost of that swap, which is the cost banks would otherwise pay to protect themselves against currency movement.
The result for the depositor: Once the cost is lifted, banks can offer dollar rates near 6 to 7.5 per cent, and some add leverage of 9 to 19 times.
The nature of the transaction: For a wealthy depositor borrowing abroad and placing the proceeds in India at a protected high yield, this is a carry trade with the currency risk removed by someone else.
What is a carry trade?
About: A carry trade is borrowing in a currency where interest rates are low and investing in an asset that pays a higher return, keeping the difference between the two rates.
The risk it normally carries: The lender bears the exchange rate risk, since a fall in the investment currency can wipe out the interest gain.
What is different here: The currency risk is removed by the central bank absorbing the hedging cost, so the investor keeps the yield without the exposure that usually pays for it.
What is a hedging cost in a currency swap?
About: A currency swap exchanges one currency for another today with an agreed reversal at a future date and a pre agreed rate.
The cost: The hedging cost is the price of that future certainty, set mainly by the interest rate difference between the two currencies and by expectations of depreciation.
Who pays it here: The RBI absorbs it, which is why the transaction is a subsidy rather than a market clearing price.
What is an asset liability mismatch?
About: An asset liability mismatch arises when a bank’s borrowings and its lending differ in currency, maturity or interest rate basis.
The form it takes here: Banks raise three to five year foreign currency money and lend against it in rupees on different terms, so repayment obligations and asset returns do not move together.
What did the swap window actually mobilise?
The headline number: Banks mobilised $52.3 billion in foreign currency inflows between 8 June and 13 August under the facility.
The composition: FCNR(B) deposits accounted for the bulk of the funds raised.
Early closure: The RBI closed the FCNR(B) swap window a month earlier than originally scheduled.
The immediate market reaction: The rupee depreciated 0.2 per cent to close at a 17 day low of 95.61 against the dollar, the worst performing currency in Asia that day despite a softer dollar.
The added pressure: A rise in crude oil prices to nearly $90 a barrel compounded the fall, with importers rushing to take forward cover and exporters holding back dollar sales.
The intervention: Intervention by the central bank prevented a sharper slide.
Why did the money need such inducement?
The prior position: Confidence had already left, since the rupee was Asia’s worst performing currency in the financial year 2025 to 2026.
The portfolio exit: Foreign portfolio investors had pulled out billions from Indian markets over that period.
The partial return: They turned net buyers in July, bringing in about $2.1 billion, a modest reversal relative to the scale of the preceding exodus.
The reading that follows: It is too early to read this as investors rediscovering India.
The revealing detail: The money recorded a sharp fall as soon as the inducement was withdrawn, which measures the incentive rather than belief in Indian assets.
Why does a subsidy work when good data does not?
The nature of currency markets: Currency markets move not only on fundamentals but on expectations about future movement.
The trap of one way expectations: Once investors believe depreciation is one way, good data stops persuading them.
The mechanism that breaks the loop: The way to break that loop is to make the bet against the rupee expensive, which is what the FCNR(B) window does.
The price of the fix: Flows surged only after the subsidy appeared, so the pace of mobilisation measures the incentive.
The conclusion drawn: Confidence that materialises only after the price is raised is not confidence, it is a purchase.
What has India actually bought?
The two ways to defend a currency: A country can earn more dollars or it can borrow them, and the two look alike when the money arrives.
The category this falls into: India’s latest external sector stabilisation largely falls into the borrowing kind.
What was purchased: India has bought time, and a quiet transfer of risk.
The repayment obligation: These deposits will mature, and every dollar arriving now must be repaid in three to five years.
The correct classification: The surge is best viewed as a balance of payments stabiliser rather than a durable source of dollars.
The accounting reality: FCNR(B) deposits are ultimately a form of external borrowing and create future repayment and rollover obligations.
Where does the risk actually sit?
The scheme does not remove risk: The facility does not make the rupee’s risk disappear, it relocates it.
The first relocation: When the RBI absorbs hedging costs, the exposure moves onto the public balance sheet.
The second relocation: When banks raise three to five year money and lend against it, the risk resurfaces as an asset liability mismatch.
The transformation over time: A visible currency problem today can become a less visible banking problem tomorrow.
Who ultimately holds it: The depositor keeps a protected yield, and the currency exposure that yield was compensating for sits with the central bank and the banking system.
What is genuinely not in crisis?
Reserves: India’s foreign exchange reserves are large, giving the central bank room to intervene in the spot and forward markets.
Invisible earnings: Services exports and remittances cushion the external account against a goods trade deficit.
External factors: Part of the rupee’s weakness reflects the strength of the dollar rather than a domestic failure.
The correct qualification: Being out of crisis is not the same as being secure.
The deterioration that matters: India slipped into a current account deficit in May, which is the backdrop against which the FCNR(B) surge must be read.
What should India do with a window it has paid to open?
Treat it correctly: Treat the period as a purchased pause and spend it well, rather than as evidence that the external problem has been solved.
Build export surplus sectors: Develop sectors that earn a durable dollar surplus rather than relying on capital inflows to balance the account.
Attract foreign direct investment: Draw investment that takes a lasting stake, since it does not carry a fixed repayment date the way a deposit does.
Cut energy import dependence: Reduce the largest single item of the import bill, which is also the most exposed to geopolitical shocks.
Treat tourism as a foreign exchange industry: Recognise inbound tourism as an export earning activity and plan for it accordingly.
The blunt limit: If India earns too few dollars, no better way of borrowing will solve it.
Challenges in managing India’s external sector
Rollover risk on maturing deposits: Large foreign currency deposits raised in one window fall due together and must be repaid or renewed at whatever rate then prevails. e.g. the $34 billion of FCNR(B) deposits raised under the 2013 swap window created a concentrated redemption in 2016 that the RBI had to manage in advance.
Oil price exposure: India imports the overwhelming share of its crude oil, so the trade deficit moves with a price it does not set. e.g. crude near $90 a barrel in August 2026 directly widened the import bill and pressured the rupee.
Gold import demand: Household demand for gold converts savings into imports and worsens the current account. e.g. gold has repeatedly been the second largest item in India’s import bill after crude oil.
Volatility of portfolio flows: Foreign portfolio investment can reverse within weeks on a change in global interest rates. e.g. the taper announcement of 2013 triggered an exit that took the rupee past 68 to the dollar.
Narrow export basket and market concentration: A few products and a few destinations carry a large share of merchandise exports. e.g. tariff action by a single large trading partner can hit textiles, gems and jewellery and shrimp exports simultaneously.
Rising import intensity of exports: Electronics and refined petroleum exports require heavy imported inputs, so gross export growth adds less net foreign exchange. e.g. smartphone exports rely on imported displays, camera modules and cells.
Sterilisation cost of intervention: Defending the rupee by selling dollars injects rupee liquidity that must then be absorbed at a cost. e.g. the RBI uses open market operations and the standing deposit facility to drain the liquidity created by intervention.
External debt servicing: A rising stock of short term external debt raises the share of reserves committed to repayment. e.g. short term debt on residual maturity has at times exceeded a fifth of foreign exchange reserves.
Conclusion
The $52.3 billion mobilised under the swap window is borrowed rather than earned, and the currency risk that made it attractive has been moved onto the public balance sheet and into bank balance sheets. The central bank acted decisively and bought time, and every dollar of that time must be repaid within three to five years. What remains unresolved is the underlying position, since India slipped into a current account deficit in May and the flows arrived only after the price was raised. Rupee stability now rests increasingly on liabilities the country has paid to attract and must one day repay.
What is the Balance of Payments?
About: The balance of payments is the systematic record of all economic transactions between residents of a country and the rest of the world over a period.
Rationale: It exists to show whether a country is paying its way through what it earns, or financing consumption and investment through borrowing and asset sales.
Current account: Records trade in goods and services, primary income such as investment income, and secondary income such as remittances.
Capital and financial account: Records foreign direct investment, portfolio investment, external commercial borrowing, banking capital including non resident deposits, and reserve movements.
Errors and omissions: The residual balancing entry that reconciles the two accounts, since the sources for each side differ.
The accounting identity: A current account deficit must be financed by a surplus on the capital account or by drawing down reserves.
Key Concerns Regarding India’s External Sector Position
Deficit financed by volatile capital: A current account deficit funded by portfolio flows and non resident deposits is more fragile than one funded by foreign direct investment.
Dependence on invisibles: Services exports and remittances mask a persistent and large merchandise trade deficit.
Reserve adequacy measured wrongly: A large absolute reserve stock can still be thin when measured against short term external liabilities on a residual maturity basis.
Commodity price pass through: Oil, gold and fertiliser prices are set abroad, so a large part of the external position is outside domestic policy control.
Rupee internationalisation lag: Almost all of India’s trade is invoiced in dollars, so every trade shock passes directly into demand for foreign exchange.
Contingent liabilities of intervention: Forward market intervention creates future dollar delivery obligations that do not appear in the headline reserve figure.
Statutory Framework Governing Foreign Exchange and External Borrowing
Entry 36 of the Union List: Places currency, coinage and legal tender, and foreign exchange, exclusively with Parliament.
Entry 37 of the Union List: Covers foreign loans, the constitutional basis for regulating external borrowing.
Section 3 of the Foreign Exchange Management Act, 1999: Prohibits dealing in foreign exchange except through authorised persons.
Section 6 of the Foreign Exchange Management Act, 1999: Governs capital account transactions, including non resident deposits and external borrowing.
Section 47 of the Foreign Exchange Management Act, 1999: Empowers the RBI to make regulations to carry out the provisions of the Act.
Sections 17 and 33 of the Reserve Bank of India Act, 1934: Govern the business the RBI may transact and the assets backing the note issue, including foreign securities.
Preamble to the Reserve Bank of India Act, 1934: States the objective of operating the currency and credit system to the country’s advantage and maintaining price stability.
Laws and Rules Governing Non Resident Deposits
Reserve Bank of India Act, 1934: Establishes the central bank and its powers over currency, reserves and monetary operations.
Section 45ZB: Provides for the Monetary Policy Committee, which sets the policy rate that shapes the interest differential behind a swap.
Foreign Exchange Management Act, 1999: Replaced the Foreign Exchange Regulation Act, 1973 and shifted the regime from control to management of foreign exchange.
Foreign Exchange Management (Deposit) Regulations, 2016: Govern the operation of Non Resident External, Non Resident Ordinary and FCNR(B) accounts.
Banking Regulation Act, 1949: Governs the conduct of banking companies, including the reserve and liquidity requirements applicable to these deposits.
Foreign Exchange Management (Borrowing and Lending) Regulations, 2018: Govern external commercial borrowing and the terms on which residents may borrow abroad.
Prevention of Money Laundering Act, 2002: Applies customer due diligence and reporting requirements to non resident deposit accounts.
Income Tax Act, 1961: Provides the exemption that makes interest on FCNR(B) and Non Resident External deposits tax free for a non resident.
Back2Basics: Non Resident Deposit Accounts in India
FCNR(B) account: A term deposit held in a permitted foreign currency with an Indian bank, with maturity from one to five years.
Currency risk on FCNR(B): The deposit is denominated in foreign currency, so the depositor faces no rupee depreciation risk and the bank or the central bank carries it.
Non Resident External (NRE) account: A rupee denominated account funded from abroad, fully repatriable, with tax free interest in India.
Non Resident Ordinary (NRO) account: A rupee account for income earned in India such as rent, pension or dividends, with limited repatriation and taxable interest.
Regulatory basis: All three are governed by the Foreign Exchange Management (Deposit) Regulations, 2016 under the Foreign Exchange Management Act, 1999.
Policy use: The RBI periodically relaxes interest rate ceilings and reserve requirements on these deposits to attract dollar inflows when the rupee is under pressure.
Balance of payments classification: Non resident deposits are recorded as banking capital under the capital account, not as current account earnings.
Government and RBI Initiatives on External Stability
Special swap facility for FCNR(B) deposits: Absorbs the hedging cost of bank dollar deposits to attract diaspora funds during periods of currency pressure.
Special Rupee Vostro Accounts: Allow settlement of international trade in rupees with partner countries, reducing dollar demand for those transactions.
Gold Monetisation Scheme: Brings idle domestic gold into the financial system to cut fresh import demand.
Sovereign Gold Bonds: Provide a paper substitute for physical gold, reducing the import component of gold demand.
Liberalised Remittance Scheme: Sets the annual limit within which resident individuals may remit funds abroad, a control on outflows.
External Commercial Borrowing framework: Sets maturity, cost ceiling and end use conditions for corporate borrowing abroad.
Foreign exchange reserve management: Reserves are held in foreign currency assets, gold, Special Drawing Rights and the reserve tranche position with the International Monetary Fund.
Key Facts about India’s External Sector
Reserve composition: India’s foreign exchange reserves comprise foreign currency assets, gold, Special Drawing Rights and the reserve tranche position with the IMF.
Remittance rank: India is the largest recipient of inward remittances in the world.
Services strength: India is among the top ten exporters of commercial services globally, led by software and business services.
Import composition: Crude oil and gold are consistently the two largest items in India’s merchandise import bill.
The 2013 precedent: A similar concessional swap window in 2013 raised about $34 billion through FCNR(B) deposits and bank capital during that year’s currency crisis.
Exchange rate regime: India follows a managed float, where the rate is market determined and the RBI intervenes to contain volatility rather than to defend a level.
Convertibility status: The rupee is fully convertible on the current account and only partially convertible on the capital account.
Way Forward
Sequence the repayment: Publish a maturity profile of the deposits raised and build forward cover ahead of the redemption window rather than at it.
Shift the financing mix: Prioritise foreign direct investment and long term equity flows over interest sensitive deposits as the source of external financing.
Expand export capability: Target sectors with high domestic value addition so export growth adds net foreign exchange rather than gross turnover.
Reduce energy import intensity: Accelerate renewable capacity, ethanol blending and electrification of transport to shrink the crude oil bill.
Widen rupee trade settlement: Extend Special Rupee Vostro arrangements to more trade partners so a larger share of trade avoids dollar intermediation.
Treat tourism as an export sector: Fund visa facilitation, connectivity and destination infrastructure with the same seriousness as merchandise export promotion.
Report the contingent position: Disclose the forward book and swap obligations alongside headline reserves so the true net position is visible.
Matching Previous Year Question
“[2015, GS3, 12.5 marks] Craze for gold in Indians have led to a surge in import of gold in recent years and put pressure on balance of payments and external value of rupee. In view of this, examine the merits of Gold Monetization Scheme.”
The Securities and Exchange Board of India (SEBI) is soliciting public views on allowing Foreign Portfolio Investors (FPIs) into non agricultural, physically settled commodity derivatives covering bullion, energy and base metals. India is a major importer of crude oil, gold and industrial metals, yet it takes prices set on foreign exchanges rather than setting them. The proposal tests whether deeper liquidity turns India into a price setter or imports the volatility of global markets.
What are physically settled commodity derivatives?
About: A commodity derivative is a contract whose value is derived from an underlying commodity, traded as a future or an option on an exchange.
Physical settlement: A physically settled contract is closed by actual delivery of the underlying goods at expiry, rather than by paying the cash difference between the contract price and the market price.
Why the distinction matters: Physical settlement ties the exchange price to the real warehouse and delivery market, which is what makes a contract usable as a benchmark.
The categories in question: The proposal covers bullion meaning gold, silver and their derivatives, energy meaning crude oil and natural gas, and base metals meaning aluminium, copper, lead, nickel and zinc.
The present bar: Overseas investors are at present not allowed to participate in contracts linked to crude, natural gas, gold or silver that are settled by actual delivery of the underlying goods.
What is a Foreign Portfolio Investor (FPI)?
About: An FPI is a non resident investor registered with SEBI to invest in Indian securities and financial instruments without acquiring management control.
Distinguishing feature: Portfolio investment is liquid and can exit quickly, unlike foreign direct investment which takes a lasting interest in an enterprise.
Present count: More than 11,000 FPIs are currently registered in India.
What does price taker versus price setter mean?
Price taker: A market participant large enough to buy in volume, yet whose own trading does not influence the reference price at which the commodity is quoted globally.
Price setter: A market whose exchange price becomes the reference benchmark that buyers and sellers elsewhere quote against.
The stake for India: A price setting market retains benchmark authority, transaction value and hedging activity inside the country instead of exporting them.
What is Average Daily Turnover (ADT)?
About: Average Daily Turnover is the average notional value of contracts traded per trading day over a stated period, used as the standard measure of an exchange’s activity.
Use here: It is the figure by which the Multi Commodity Exchange (MCX) is compared against global commodity exchanges for depth.
Why is India a price taker despite being a major importer?
Import weight without market weight: India is a major importer of crude oil, gold and industrial metals, and still has no proportionate influence on how those commodities are priced.
Hedging happens offshore: Domestic commodity risk is currently hedged largely through London, New York, Chicago and Singapore rather than on Indian exchanges.
Missing institutional depth: MCX has strong retail and domestic participation and relatively limited institutional depth compared with global exchanges.
The missing precondition: For India to become a price setter, its domestic commodity market needs integration with the global financial architecture.
The consequence of the gap: Indian users of these commodities accept a price discovered abroad and pay the transaction and collateral cost of using a foreign venue.
What exactly is SEBI proposing?
The consultation: SEBI is proposing to allow access to foreign portfolio investors into non agricultural derivatives and is seeking public views on the design.
The stated objective: The aim is to bring global commodity risk management into India.
The expected byproduct: Increased depth and liquidity in commodity derivative markets, enabling the country to serve as a global benchmark.
The product scope: Participation is proposed in physically settled contracts in bullion, energy and base metals, the segments that are either imported or globally priced.
The safeguard already stated: SEBI has mandated that such participants square off positions before the delivery period.
The stated challenge: The design problem is to ensure that greater liquidity does not become greater volatility.
How would onshore hedging change India’s foreign exchange position?
Margin retention: Margin money posted against contracts stays within the country instead of moving to a foreign clearing house.
Brokerage retention: Brokerage paid on the trade remains domestic revenue.
Lower collateral demand on banks: Banks would need less foreign currency for collateral purposes when hedging moves onshore.
What is not saved: India cannot avoid paying dollars for demand inelastic imported commodities, so the total import bill does not fall.
What is saved: The country saves on offshore collateral, transaction costs and financial outflows.
The precise gain: The result is a reduction in the volatility of India’s foreign exchange requirement, not a large reduction in total foreign exchange outflow.
What multiplier effect do FPIs bring to the domestic market?
The liquidity function: FPIs can create a multiplier effect by providing the liquidity that domestic hedgers need on the other side of their trades.
The hedgers who benefit: Airlines, oil marketing companies (OMCs) and industrial users would be able to hedge efficiently on Indian exchanges.
The scale even at low participation: Of the more than 11,000 registered FPIs, even a tenth participating on a conservative estimate would bring in considerable liquidity.
Benchmark influence: By attracting global capital, Indian exchanges can gradually become more influential in regional price discovery.
Reduced benchmark dependence: A deeper market also cuts India’s dependence on overseas benchmarks for the same commodities.
What does the MCX data show about the market’s current depth?
Combined turnover: MCX recorded a combined futures and options Average Daily Turnover of Rs 10.5 lakh crore as of the first quarter of FY27.
Rate of growth: The combined futures and options ADT of MCX rose by 238 per cent in the first quarter of FY27.
What the growth reflects: The rise reflects growing investor adoption of commodity derivatives for both hedging and trading.
Client base: The active client base almost doubled year on year to 13.72 lakh in the review period.
Registered foreign investors: More than 11,000 FPIs are already registered in India across asset classes.
Composition advantage: MCX is dominated by commodities that are either imported or globally priced, which is why the proposal is expected to benefit it most.
The positioning goal: The change is expected to expand MCX’s addressable market and strengthen its position as an Asian commodity trading hub.
How did the present proposal evolve from earlier reform?
The origin: The seeds of the present proposal were sown in 2015, at the time of the merger of the Forward Markets Commission with SEBI.
The approach since: SEBI has taken measured steps in developing the commodity derivatives market in an orderly manner.
The products introduced: SEBI introduced futures on commodity indices, options on commodity futures, and options in goods.
The stated purpose of those products: To attract broad based participation, enhance liquidity, facilitate hedging and bring more depth to the commodity derivatives market.
Who took them up: The products launched by the exchanges are witnessing substantial trading volumes, driven by mutual funds, alternate investment funds and portfolio management services.
The earlier foreign access route:Eligible Foreign Entities (EFEs) were initially allowed to participate only for hedging, and only if they had direct exposure to Indian physical commodities.
Why that route failed: The response of eligible foreign entities was woefully low, due to operational complexities in the eligibility and compliance design.
What does the single international precedent cited actually establish?
The one study relied upon: SEBI cites a study of China, which found a jump in volume and in the number of deals after internationalisation of its futures markets.
The cost finding: That study also found trading cost was largely unaffected by the entry of foreign participants.
The inference drawn: SEBI reasoned from this evidence for the entry of FPIs into Indian commodity derivatives.
The limit of the evidence: A single country study of volume and cost does not establish that benchmark authority shifted, which is the outcome India is actually seeking.
The offshore venues that matter: The benchmarks India competes against sit in London, New York, Chicago and Singapore, and none of those cases is examined in the proposal.
Does deeper liquidity buy price setting power or imported volatility?
The reform is significant: Widening access for FPIs into non farm commodity derivatives is a significant step towards market depth.
The speculation risk: Speculation may amplify price movements in an already charged geopolitical environment, with currency fluctuations and supply disruptions.
Position concentration: Large international commodity trading houses and hedge funds could accumulate significant positions and influence short term prices.
The partial safeguard: SEBI has mandated such participants to square off positions before the delivery period, which limits delivery squeezes but not price influence during the contract’s life.
Contagion channel: Indian commodity markets may sway to Federal Reserve policy and dollar movements once foreign capital is a large presence.
Financialisation risk: Excessive financialisation of commodities may create a discord between futures prices and physical market realities.
The central trade off: The same foreign capital that gives India benchmark weight also transmits foreign monetary policy into domestic commodity prices.
Challenges to opening commodity derivatives to foreign portfolio investors
Volatility transmission to consumer prices: Commodity futures prices feed into fuel and metal costs that households and industry pay. e.g. a spike in crude futures during the Strait of Hormuz disruption of 2026 pushed the Indian crude basket towards $90 a barrel.
Warehousing and delivery infrastructure: Physical settlement needs accredited warehouses, assaying and quality certification at scale. e.g. the National Spot Exchange Limited payment crisis of 2013 arose from unverified underlying stocks in warehouses.
Regulatory arbitrage with offshore venues: Participants can shift between Indian and foreign contracts to exploit margin and tax differences. e.g. Indian single stock and index derivative volumes migrated to Singapore before the exchanges restructured their offshore licensing.
Currency convertibility limits: The rupee is not fully convertible on the capital account, which constrains how freely foreign hedgers can move funds. e.g. offshore participants continue to use non deliverable forward markets for rupee exposure.
Concentration and manipulation risk: A few large global houses dominate physical trade in several of these commodities. e.g. global metal trading is concentrated among a small number of houses whose positions can move benchmark prices.
Retail exposure to a wholesale market: Indian commodity exchanges have unusually high retail participation for a risk transfer market. e.g. the active client base at MCX almost doubled to 13.72 lakh in a single year.
Agricultural spillover through sentiment: Even with farm contracts excluded, financialisation shapes expectations across commodity classes. e.g. futures trading in seven agricultural commodities was suspended in 2021 over inflation concerns and the suspension was extended repeatedly.
Conclusion
India buys crude oil, gold and base metals in global volume and still accepts a price discovered on exchanges abroad, and the proposal to admit FPIs is an attempt to relocate that price discovery onshore. The measurable gain is narrower than the framing suggests, since it lowers the volatility of India’s foreign exchange requirement and retains margin, brokerage and collateral, without reducing the dollar bill for demand inelastic imports. What remains unresolved is whether the same foreign capital that supplies depth also imports Federal Reserve policy and dollar movements into Indian commodity prices. The proposal is at the public consultation stage, and the design question SEBI must answer is how to ensure greater liquidity does not become greater volatility.
Commodity Derivatives Market in India
About: A commodity derivatives market allows producers, importers and consumers to lock in a future price for a commodity, transferring price risk to participants willing to bear it.
The two functions: The market performs price discovery, by aggregating expectations into a single quoted price, and risk management, by allowing hedging against adverse price movement.
Regulatory history: Commodity derivatives were regulated by the Forward Markets Commission under the Forward Contracts (Regulation) Act, 1952 until the Commission merged with SEBI in 2015.
The exchanges:MCX dominates non agricultural commodities, while the National Commodity and Derivatives Exchange (NCDEX) is the principal agricultural commodity exchange.
India’s scale: India is the world’s largest consumer of gold after China, the third largest consumer and importer of crude oil, and a leading consumer of silver and base metals.
The structural weakness: Institutional and foreign participation is thin, so Indian contracts track international benchmarks rather than generating them.
The newer venue: The India International Bullion Exchange at GIFT City was created to route bullion imports through an organised exchange platform.
Entry 48 of the Union List: Places stock exchanges and futures markets exclusively within Parliament’s legislative competence.
Securities Contracts (Regulation) Act, 1956, Section 2(bc): Defines a commodity derivative, brought in by the Finance Act, 2015.
SEBI Act, 1992, Section 11: Sets out SEBI’s duty to protect investors and to regulate the securities market, extended to commodity derivatives after the merger.
Finance Act, 2015: Repealed the Forward Contracts (Regulation) Act, 1952 and transferred regulation of commodity derivatives to SEBI.
Foreign Exchange Management Act, 1999, Section 6: Governs capital account transactions, the route through which foreign participation and collateral flows are controlled.
Essential Commodities Act, 1955: Empowers the Union to regulate production, supply and trade in notified essential commodities, including suspension of futures trading.
Laws and Rules Governing Commodity Market Participation
Securities Contracts (Regulation) Act, 1956: Governs recognition of stock exchanges and the legality of contracts in securities and commodity derivatives.
Section 2(bc): Introduced the statutory definition of a commodity derivative in 2015.
SEBI Act, 1992: Establishes SEBI with powers of investigation, adjudication and penalty across securities and commodity derivative markets.
SEBI (Foreign Portfolio Investors) Regulations, 2019: Set out registration categories, eligibility and investment conditions for foreign portfolio investors.
Foreign Exchange Management Act, 1999: Governs the cross border movement of funds, margins and collateral by foreign participants.
Foreign Exchange Management (Debt Instruments) Regulations, 2019: Regulate FPI access to Indian debt, the parallel route to their equity access.
Warehousing (Development and Regulation) Act, 2007: Establishes the Warehousing Development and Regulatory Authority and the negotiable warehouse receipt system that underpins physical settlement.
Essential Commodities Act, 1955: Provides the power under which futures trading in specific commodities has been suspended.
Prevention of Money Laundering Act, 2002: Applies know your customer and reporting obligations to intermediaries handling foreign participant funds.
Back2Basics: Multi Commodity Exchange of India (MCX)
What it is: MCX is India’s largest commodity derivatives exchange, dealing mainly in bullion, energy and base metals.
Regulator: Regulated by SEBI under the Securities Contracts (Regulation) Act, 1956 since the 2015 transfer of commodity market regulation.
Year of operations: Began operations in 2003 and became India’s first listed commodity exchange.
Product range: Offers futures and options in gold, silver, crude oil, natural gas, aluminium, copper, lead, nickel, zinc, cotton and other commodities.
Index products: Operates commodity indices such as iCOMDEX, on which index futures are traded.
Settlement types: Runs both cash settled and physically settled contracts, with delivery through accredited warehouses and vaults.
Current scale: Combined futures and options average daily turnover reached Rs 10.5 lakh crore in the first quarter of FY27, with an active client base of 13.72 lakh.
Government Initiatives Related to Commodity Markets
Merger of the Forward Markets Commission with SEBI: Unified regulation of securities and commodity derivatives under a single regulator from 2015.
India International Bullion Exchange at GIFT City: Created to channel bullion imports through a regulated exchange and build a domestic gold price benchmark.
Gold Monetisation Scheme: Mobilises idle household and institutional gold into the banking system to reduce fresh import demand.
Sovereign Gold Bonds: Offer a paper alternative to physical gold holding, reducing import linked demand.
Electronic Negotiable Warehouse Receipts: Issued under the Warehousing Development and Regulatory Authority framework to make stored commodities financeable and deliverable.
Electronic National Agriculture Market (eNAM): Creates a unified electronic spot market for agricultural produce across regulated mandis.
International Financial Services Centres Authority: Regulates the unified financial services centre at GIFT City, including commodity and bullion derivatives available to non residents.
Key Facts about India’s Commodity Market
Regulator: SEBI, since the Forward Markets Commission merged into it on 28 September 2015.
Repealed statute: The Forward Contracts (Regulation) Act, 1952 was repealed through the Finance Act, 2015.
Principal exchanges: MCX for non agricultural commodities and NCDEX for agricultural commodities.
Gold consumption: India is among the two largest gold consuming countries in the world, with imports a major component of its current account deficit.
Crude dependence: India imports well over 85 per cent of its crude oil requirement, which is why energy contracts dominate hedging demand.
Institutional access built in stages: Mutual funds, alternate investment funds and portfolio management services were allowed into commodity derivatives before foreign portfolio investors.
Physical settlement mandate: SEBI moved several non agricultural contracts to compulsory delivery based settlement to align futures prices with physical markets.
Challenges in India’s Commodity Derivatives Market
Shallow institutional participation: Banks, insurers and pension funds are largely absent from commodity hedging. e.g. Indian banks are not permitted to take proprietary positions in commodity derivatives the way global banks do.
Fragmented physical markets: Spot markets remain dispersed and unstandardised, weakening the link between futures and delivery. e.g. agricultural produce market committee mandis quote different grades and prices for the same crop within one State.
Policy reversals: Sudden suspension of contracts undermines confidence in the market as a hedging venue. e.g. futures trading in seven agricultural commodities including wheat, mustard and chana was suspended in December 2021.
Tax and transaction cost: Commodity transaction tax and stamp duty raise the cost of trading relative to offshore venues. e.g. Indian participants have historically routed positions through Dubai and Singapore for cost reasons.
Quality assaying and standardisation: Delivery requires reliable and uniform quality certification. e.g. bullion delivery requires refiners accredited to internationally recognised good delivery standards, which few Indian refiners hold.
Investor protection in a leveraged market: Retail participants trade leveraged contracts they may not fully understand. e.g. the negative settlement of crude oil futures in April 2020 imposed large losses on Indian retail participants holding long positions.
Weak farmer linkage: The agricultural segment does not reach the producers it is meant to protect. e.g. participation by farmer producer organisations in agricultural futures remains a very small share of turnover.
Way Forward
Phase the entry with position limits: Admit foreign portfolio investors in stages with commodity wise position limits, so liquidity builds without allowing concentrated control of a contract.
Strengthen surveillance: Build cross market surveillance linking futures positions with warehouse stocks and physical trade data to detect manipulation early.
Deepen delivery infrastructure: Expand accredited warehouses, vaults and assaying laboratories so physical settlement scales with volume.
Allow domestic institutional hedgers: Permit banks, insurers and pension funds calibrated access, so foreign capital is not the only source of institutional depth.
Stabilise policy: Commit to a rule based framework for suspending a contract, so intervention is predictable rather than discretionary.
Rationalise transaction cost: Review the commodity transaction tax and stamp duty structure to remove the incentive to hedge offshore.
Extend hedging to the producer: Support aggregation through farmer producer organisations and small industry associations so hedging reaches beyond large firms.
Matching Previous Year Question
“[2021] Consider the following: 1.Foreign currency convertible bonds 2.Foreign institutional investment with certain conditions 3.Global depository receipts 4.Non-resident external deposits Which of the above can be included in Foreign Direct Investments? (a) 1, 2 and 3 (b) 3 only (c) 2 and 4 (d) 1 and 4 Answer: (a)”
