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  • Judicial Appointments Conundrum Post-NJAC Verdict

    What is Collegium System?

    | Polity | Mains Paper 2: Executive & Judiciary

    What is Collegium System?

    • The Collegium of judges is the Indian Supreme Court’s invention.
    • It does not figure in the Constitution, which says judges of the Supreme Court and High Courts are appointed by the President and speaks of a process of consultation.
    • In effect, it is a system under which judges are appointed by an institution comprising judges.
    • After some judges were superseded in the appointment of the CJI in the 1970s, and attempts made subsequently to effect a mass transfer of High Court judges across the country.
    • Hence there was a perception that the independence of the judiciary was under threat. This resulted in a series of cases over the years.

    Evolution: The Judges Cases

    • First Judges Case (1981) ruled that the “consultation” with the CJI in the matter of appointments must be full and effective.
    • However, it rejected the idea that the CJI’s opinion, albeit carrying great weight, should have primacy.
    • Second Judges Case (1993) introduced the Collegium system, holding that “consultation” really meant “concurrence”.
    • It added that it was not the CJI’s individual opinion, but an institutional opinion formed in consultation with the two senior-most judges in the Supreme Court.
    • Third Judges Case (1998): On a Presidential Reference for its opinion, the Supreme Court, in the Third Judges Case (1998) expanded the Collegium to a five-member body, comprising the CJI and four of his senior-most colleagues.

    The procedure followed by the Collegium

    Appointment of CJI

    • The President of India appoints the CJI and the other SC judges.
    • As far as the CJI is concerned, the outgoing CJI recommends his successor.
    • In practice, it has been strictly by seniority ever since the supersession controversy of the 1970s.
    • The Union Law Minister forwards the recommendation to the PM who, in turn, advises the President.

    Other SC Judges

    • For other judges of the top court, the proposal is initiated by the CJI.
    • The CJI consults the rest of the Collegium members, as well as the senior-most judge of the court hailing from the High Court to which the recommended person belongs.
    • The consultees must record their opinions in writing and it should form part of the file.
    • The Collegium sends the recommendation to the Law Minister, who forwards it to the Prime Minister to advise the President.

    For High Courts

    • The CJs of High Courts are appointed as per the policy of having Chief Justices from outside the respective States. The Collegium takes the call on the elevation.
    • High Court judges are recommended by a Collegium comprising the CJI and two senior-most judges.
    • The proposal, however, is initiated by the Chief Justice of the High Court concerned in consultation with two senior-most colleagues.
    • The recommendation is sent to the Chief Minister, who advises the Governor to send the proposal to the Union Law Minister.

    Does the Collegium recommend transfers too?

    • Yes, the Collegium also recommends the transfer of Chief Justices and other judges.
    • Article 222 of the Constitution provides for the transfer of a judge from one High Court to another.
    • When a CJ is transferred, a replacement must also be simultaneously found for the High Court concerned. There can be an acting CJ in a High Court for not more than a month.
    • In matters of transfers, the opinion of the CJI “is determinative”, and the consent of the judge concerned is not required.
    • However, the CJI should take into account the views of the CJ of the High Court concerned and the views of one or more SC judges who are in a position to do so.
    • All transfers must be made in the public interest, that is, “for the betterment of the administration of justice”.

    Loopholes in the Collegium system

    • Lack of Transparency: Opaqueness and a lack of transparency, and the scope for nepotism are cited often.
    • Judges appointing Judge: The attempt made to replace it with a ‘National Judicial Appointments Commission’ was struck down by the court in 2015 on the ground that it posed a threat to the independence of the judiciary.
    • Criteria: Some do not believe in full disclosure of reasons for transfers, as it may make lawyers in the destination court chary of the transferred judge.

    Way ahead

    • In respect of appointments, there has been an acknowledgment that the “zone of consideration” must be expanded to avoid criticism that many appointees hail from families of retired judges.
    • The status of a proposed new memorandum of procedure, to infuse greater accountability, is also unclear.
    • Even the majority of opinions admitted the need for transparency, now Collegiums’ resolutions are now posted online, but reasons are not given.

     

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  • Oil and Gas Sector – HELP, Open Acreage Policy, etc.

    India’s Crude Oil Imports from OPEC

    | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.

    OPEC’s share of India’s oil imports for the FY22 financial year remained almost steady year-on-year, arresting sharp declines over the past six years, as refiners prefer crude from West Asia to counter rising global prices.

    India’s crude oil imports from OPEC

    • OPEC oil accounted for about 88% of India’s crude imports in FY08.
    • Its share of India’s overall imports could decline because refiners in Asia’s third-largest economy are buying cheaper Russian oil.
    • However, Russian oil continued to account for less than 1% of India’s crude imports in FY22.

    What is OPEC?

    • OPEC stands for Organization of the Petroleum Exporting Countries.
    • It is a permanent, intergovernmental organization, created at the Baghdad Conference in 1960, by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.
    • It aims to manage the supply of oil in an effort to set the price of oil in the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries.
    • It is headquartered in Vienna, Austria.
    • OPEC membership is open to any country that is a substantial exporter of oil and which shares the ideals of the organization.
    • Today OPEC is a cartel that includes 14 nations, predominantly from the middle east whose sole responsibility is to control prices and moderate supply.

    What is OPEC+?

    • The non-OPEC countries which export crude oil along with the 14 OPECs are termed as OPEC plus countries.
    • OPEC plus countries include Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan.
    • Saudi and Russia, both have been at the heart of a three-year alliance of oil producers known as OPEC Plus — which now includes 11 OPEC members and 10 non-OPEC nations — that aims to shore up oil prices with production cuts.

    Why OPEC plus came into existence?

    • When Russia concluded the Vienna Agreement in 2016, the Russian leadership believed that it would help prepare the country for the Russian presidential elections in March 2018.
    • Higher oil prices ensured the Kremlin’s financial capacity to lead a successful electoral campaign.
    • This changed the regime’s priorities – from satisfying the needs of the general population to ensuring the sustainability of the Kremlin’s alliance with powerful tycoons, including that controlling oil production.
    • For Saudi Arabia, turning what had been an ad hoc coalition into a formal group provides a hedge (protection) against future oil-market turbulence.
    • For Russia, the formalization of the group helps expand Putin’s influence in the Middle East
    • However, both reportedly aimed at causing a drop in oil prices in order to hit US shale producers, who have continued to benefit from OPEC production cuts by expanding their market share.

    Try this PYQ:

    Q.The term ‘West Texas Intermediate’, sometimes found in news, refers to a grade of

    (a) Crude oil

    (b) Bullion

    (c) Rare earth elements

    (d) Uranium

     

    Post your answers here.

     

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  • Modern Indian History-Events and Personalities

    Places in news: East Timor

    National Parks/WS | Trivia | Mains Paper 1: Geographical Features & Their Location

    Asia’s youngest nation, East Timor, also known as Timor Leste, holds the second and final round of its presidential election.

    About East Timor

    • The territory was colonized by Portugal in the 18th century and remained under is control until 1975.
    • When the Portuguese withdrew, troops from Indonesia invaded and annexed East Timor as its 27th province.
    • A long and bloody struggle for independence ensued, during which at least 100,000 people died.
    • The East Timorese voted for independence in a 1999 U.N.-supervised referendum, but that unleashed even more violence until peace-keeping forces were allowed to enter.
    • The country was officially recognized by the United Nations in 2002.
    • East Timor has applied to be a member of the Association of Southeast Asian Nations (ASEAN). It currently holds observer status.

    Its geography

    • East Timor comprises the eastern half of Timor Island, the western half of which is part of Indonesia.
    • It spans a 15,000 square km (5,792 square mile) land area – slightly smaller than Israel – and it’s 1.3 million people are predominantly Roman Catholic.

    Politics and economy

    • In nearly 20 years since independence, East Timor’s presidential and parliamentary elections have been dominated by many of the same faces.
    • Its revolutionary have run for and held various positions of power and continue to feature prominently in the running of the country.
    • East Timor depends on revenues from its offshore oil and gas reserves which account for 90% of its gross domestic product.
    • Its main revenue stream, the Bayu Undan gas field, is set to dry up by 2023 and the country is now planning to collaborate with companies like Australia’s Santos to turn it into carbon capture facilities.

     

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  • Blockchain Technology: Prospects and Challenges

    Cryptos and a CBDC are not the same thing

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

    Context

    Cryptocurrency will be discouraged via taxation and capital gains provisions. This was the message from the Finance Minister during the Budget discussion in Parliament.

    Growing worry about the cryptocurrencies

    • The Governor of the Reserve Bank of India, in February, highlighted two things.
    • First, “private cryptocurrencies are a big threat to our financial and macroeconomic stability”.
    • Second, “these cryptocurrencies have no underlying (asset).
    • Clearly, statements from the RBI indicate a growing worry since the proliferation of cryptos threatens the RBI’s place in the economy’s financial system.
    • This threat emerges from the decentralised character of cryptos based on blockchain technology which central banks cannot regulate and which enables enterprising private entities to float cryptos which can function as assets and money.
    • The total valuation of cryptos recently was upward of $2 trillion — more than the value of gold held globally.
    • Challenges in banning it: Cryptos which operate via the net can be banned only if all nations come together.
    • Even then, tax havens may allow cryptos to function, defying the global agreement.

    Crypto as currency

    • A currency is a token used in market transactions. 
    • Historically, commodities (such as copper coins) have been used as tokens since they themselves are valuable.
    • But paper currency is useless till the government declares it to be a fiat currency.
    • Paper currency derives its value from state backing.
    • Cryptos are a string of numbers in a computer programme. And, there is no state backing. 
    • Their acceptability to the well-off enables them to act as money.
    • So, cryptos acquire value and can be transacted via the net.
    • This enables them to function as money.
    • Solving the problem of double spending:  Fiat currency has the property that once spent, it cannot be spent again except through forgery, because it is no more with the spender.
    • But, software on a computer can be used repeatedly.
    • Blockchain and encryption have solved the problem by devising protocols such as ‘proof of work’ and ‘proof of stake’. 

    Why CBDC is not a solution

    • A Central Bank Digital Currency (CBDC) will not solve the RBI’s problem since it can only be a fiat currency and not a crypto.
    • Blockchain enables decentralisation.But, central banks would not want that.
    • Further, central bank would want a fiat currency to be exclusively issued and controlled by them.
    • But, theoretically everyone can ‘mine’ and create crypto.
    • So, for the CBDC to be in central control, solving the ‘double spending’ problem and being a crypto (not just a digital version of currency) seems impossible.
    • Validating transaction: A centralised CBDC will require the RBI to validate each transaction — something it does not do presently.
    • Once a currency note is issued, the RBI does not keep track of its use in transactions.
    • Keeping track will be horrendously complex which could make a crypto such as the CBDC unusable unless new secure protocols are designed.

    Conclusion

    CBDCs at present cannot be a substitute for cryptos that will soon begin to be used as money. This will impact the functioning of central banks and commercial banks.

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  • India’s role in a disordered world

    op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    Context

    Western nations want to throw Russia out of the G-20. China has opposed them. India will be chair of the G-20 from December 1, 2022. The world is greatly disordered. What should India stand for?

    Challenges to the global order

    • The war in Ukraine in February 2022 has put the final nail in the coffin of the boundary-less global economy that seemed to be emerging with the fall of the Berlin Wall and the collapse of the Soviet Union in 1991.
    • Vaccines were hoarded by rich countries in the COVID-19 pandemic: poor countries starved.
    • The World Trade Organization (WTO) was already in a bad state before the novel coronavirus pandemic, with rich and poor countries unable to agree on equitable rules, when COVID-19 froze global supply chains.
    • Institutions of global governance have failed to unite the world.

    Global order and governance challenge

    • In the aftermath of the Second World war, new institutions for global governance were established — the United Nations and the General Agreement on Tariffs and Trade (GATT), and the World Bank and the International Monetary Fund (IMF) to provide finance to build the economies of all countries to eliminate poverty.
    • However, the victors retained their veto power within the United Nations Security Council to determine when force can be used to keep the world in order, and to prevent the proliferation of nuclear power.
    • The UN General Assembly meets every year — now 193 nations strong.
    • It passes many resolutions to address global problems — hunger, poverty, women’s rights, terrorism, climate change, etc.
    • However, “might is right”: members of the Security Council retain their right to deny the democratic will of the Assembly when it does not suit them.
    • Global governance is not democratic.

    G-7 and G-20

    • The United States, the United Kingdom, France, Italy, Japan, West Germany and Canada formed the G7 in 1976. ‘so that the noncommunist powers could come together to discuss economic concerns, which at the time included inflation and recession following the Organization of the Petroleum Exporting Countries (OPEC) oil embargo’.
    • The European Union was invited to attend in 1977.
    • Russia joined in 1998 — and ‘its inclusion was meant as a signal of cooperation between East and West after the collapse of the Soviet Union in 1991’.
    • However, Russia was removed from G-8 in 2014 when it invaded the Crimea. China was never a member.
    • After the Asian financial crisis, the G20 was formed in 1999 with the aim of discussing policies in order to achieve international financial stability.
    • Russia and China are members.
    • Now western nations want to throw Russia out of the G-20. China has opposed them.
    • India will be chair of the G-20 from December 2022.
    • Meanwhile, India is being hectored by officials from the U.S. and the U.K. to support their sanctions on Russia.
    • India has so far refused to be cowed down.

    Backlash against globalisation

    • The belief that unfettered flows of finance and trade across national borders will lift people in all poor countries out of poverty and make the world flatter in terms of inequality has failed.
    •  Strong leaders who put the interests of their own countries first are gaining power through elections — in Turkey, Hungary, Poland, Russia, and even India.
    • Free market capitalism is not ideologically compatible with a genuine democracy.
    • Capitalist institutions are governed by the fundamental principle of ‘property rights’.
    • Whereas, genuine democracies are founded on the principle of equal human rights.
    • The rules of governance of capitalist and democratic institutions have always been in tension within societies.
    • Capitalist institutions want to be unfettered by democratic regulations to make it easier to do business.
    • Democratic institutions want to rein in the competitive animal spirits of capitalism to create a more compassionate capitalism.

    Conclusion

    To prevent violence, it is essential that global governance becomes genuinely democratic. Countries must not attack each other. But they must be given the freedom to evolve their own democracies and economies and not be dictated to by others.

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  • Upholding the right to repair

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

    Context

    Apple recently announced that consumers will have the right to purchase spare components of their products, following an order of the Federal Trade Commission of the United States, which directs manufacturers to remedy unfair anti-competitive practice and asks them to make sure that consumers can make repairs, either themselves or by a third-party agency. The momentum is, however, not so strong in India.

    Challenges in repairing of electronic goods

    • Repairing is becoming unreasonably expensive or pretty much impossible because of technology becoming obsolete.
    • Incompatibility: Companies avoid the publication of manuals that can help users make repairs easily.
    • No repair manual: The absence of repair manuals means that manufacturers hold near-monopoly over repair workshops that charge consumers exorbitant prices.
    • Incompatibility: Manufacturers have proprietary control over spare parts and most firms refuse to make their products compatible with those of other firms.
    • Planned obsolescence results in products breaking down too soon and buying a replacement is often cheaper and easier than repairing them.
    • Big companies often deploy mechanisms that practically forbid other enterprises to repair their products.
    • Digital warranty cards, for instance, ensure that by getting a product from a “non-recognised” outfit, a customer loses the right to claim a warranty.

    Right to repair

    • The rationale behind the “right to repair” is that the individual who purchases a product must own it completely.
    • This implies that apart from being able to use the product, consumers must be able to repair and modify the product the way they want to.
    • Monopoly on repair processes infringes the customer’s’ “right to choose” recognised by the Consumer Protection Act, 2019. 
    •  In Shamsher Kataria v Honda Siel Cars India Ltd (2017), for instance, the Competition Commission of India ruled that restricting the access of independent automobile repair units to spare parts by way of an end-user license agreement was anti-competitive.

    International practices

    • Many countries have taken initiatives, adopted policies and even tried to enact legislation that recognise the “right to repair” to reduce electronic waste.
    • Some jurisdictions offer limited scope for exercising the right to repair.
    • For instance, under the Australian Consumer Law consumers have a right to request that certain goods be repaired if they break too easily or do not work properly.
    • The Massachusetts Motor Vehicle Owners’ Right to Repair Act, 2012 requires automobile manufacturers to provide spare parts and diagnostics to buyers and even independent third-party mechanics.
    • The UK also introduced the path-breaking “right to repair” in 2021 that makes it legally binding on manufacturers to provide spare parts.

    Way forward

    • Well-drafted legislation will not only uphold the right to repair but may aid in striking a much-needed balance between intellectual property and competitive laws in the country.

    Conclusion

    If people want to fix things in a timely, safe and cost-effective way, whether by doing it themselves or taking it
    to a service centre of their choice, providing access to spare parts and information is imperative.

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  • Foreign Policy Watch: India – EU

    India-UK relations: A new shine to old ties

    op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    Context

    As Prime Minister Narendra Modi hosts British premier Boris Johnson this week in India, the moment is ripe to turn the expansive new possibilities — in trade, investment, high technology, defence, and regional cooperation— into concrete outcomes.

    Background of the India-UK ties and  paradoxes

    • Legacies of colonialism: The bitter legacies of colonialism had made it impossible for the two sides to pursue a sensible relationship in the past.
    • India’s post-colonial engagement with Britain has been riddled with multiple paradoxes.
    • 1] India’s post-post colonial resentment and UK’s claim for special role: Delhi’s lingering post-colonial resentments and London’s unacceptable claim for a special role in the Subcontinent generated unending friction.
    • The consequences of Partition and the Cold War made it harder for Delhi and London to construct a sustainable partnership.
    • The important role played by the US: It was the US that first recognised India’s rapidly-growing relative weight in the international system.
    • At the turn of the millennium, Washington unveiled a policy of assisting India’s rise.
    • This was based on a bipartisan American consensus that a stronger India will serve US interests in Asia and the world.
    • Over the last two decades, it has led to a quick transformation of US relations with India.
    • 2] Washington is setting the pace for Delhi’s relationship with London:  At the dawn of Independence, India saw London as the natural interlocutor with an unfamiliar Washington.
    • Today it is Washington that is setting the pace for Delhi’s relationship with London.
    •  3] China’s role in shaping India’s relations with the West: For Washington, the strategic commitment to assist India’s rise was rooted in the recognition of the dangers of a China-dominated Asia.
    • London in the last two decades was moving in the other direction — a full embrace of Beijing.
    • Once the American deep state decided to confront Chinese power in the late 2010s, London had to extricate itself from the Chinese Communist Party’s powerful spell.
    • As the US unveiled a new Asian strategy, Britain followed with its own “Indo-Pacific tilt” that helped secure the region against China’s muscular policies.
    • 4] Historic tilt towards Pakistan: Unlike the US and France, which are committed to an “India first” strategy in South Asia, Britain remains torn between its new enthusiasm for India and the inertia of its historic tilt towards Pakistan.
    • But India is confident that Pakistan’s relative decline in the region is bound to make it a less weighty factor in India’s bilateral relations with Britain.
    • The question of Pakistan brings us to the fourth paradox—the domestic dynamics of Britain that have tended to sour ties with India.
    • Delhi has figured out that the interconnected politics of India and Britain — shaped by the large South Asian diaspora of nearly four million — can be cut both ways.
    • 5] Making best of historic ties:  If the Tories are romantic about the Raj, nationalists in India bristle at the British imperial connection.
    • Yet, together they are constructing a new relationship between India and Britain.

    Better outlook for bilateral ties

    • As the two sides make a determined effort to transcend the paradoxes, the regional and international circumstances provide a new basis for mutually beneficial engagement.
    • Over the last couple of years, Delhi and London have begun a promising and pragmatic engagement devoid of sentiment and resentment.
    • Having walked out of Europe, Britain needs all the partners it can find and a rising India is naturally among the top political and economic priorities.
    • Delhi meanwhile has become supremely self-assured in dealing with London.
    • With the Indian economy set to become larger than Britain’s in the next couple of years, Delhi is no longer defensive about engaging Britain.
    • Even more important, Delhi recognises the value of a deep strategic partnership with London.

    Conclusion

    The UK has a significant international military presence and wide-ranging political influence. Realists in Delhi are trying to leverage these British strengths for India’s strategic benefit.

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  • Real Estate Industry

    RERA

    Bills/Act/Laws | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.

    The Supreme Court has asked the Chief Secretaries of the States to respond to queries raised by the Centre on the implementation of rules framed under the Real Estate (Regulation and Development) (RERA) Act, 2016 in their respective jurisdictions.

    What is RERA, 2016?

    • The Real Estate (Regulation and Development) Act, 2016 seeks to protect home-buyers as well as help boost investments in the real estate industry.
    • It establishes a Real Estate Regulatory Authority- RERA in each state for regulation of the real estate sector and also acts as an adjudicating body for speedy dispute resolution.
    • It was enacted under Entry 6 and 7 (dealing with contracts and the transfer of property) of the Concurrent List.
    • It is followed by the principle “buyer is the king and builders will have to ensure compliances to avoid punishment”.
    • Its main objective is to reduce delay in the work or timely delivery of the project without compromising the quality.

    Objectives of this Act

    It has the following objectives:

    • To protect the interest of the allottees and ensure their responsibility
    • To maintain transparency and reduce the chances of fraud
    • To implement Pan-India standardization and bring about professionalism
    • To enhance the flow of correct information between the home buyers and the sellers
    • To impose greater responsibilities on both the builders and the investors
    • To enhance the reliability of the sector and thereby increase confidence amongst the investors

    Key Provisions of RERA Act

    • Compulsory registration: According to the central act, every real estate project (where the total area to be developed exceeds 500 sq mtrs or more than 8 apartments is proposed to be developed in any phase), must be registered with its respective state’s RERA.
    • Establishment of state level regulatory authorities: It provides for State governments to establish more than one regulatory authority such as RERA to:
    1. Register and maintain a database of real estate projects; publish it on its website for public viewing
    2. Protection of interest of promoters, buyers and real estate agents
    3. Development of sustainable and affordable housing
    4. Render advice to the government and ensuring compliance with its Regulations and the Act
    • Establishment of Real Estate Appellate Tribunal: Decisions of RERAs can be appealed in these tribunals.
    • Mandatory Registration: All projects with plot size of a minimum 500 sq.mt or eight apartments need to be registered with Regulatory Authorities.
    • Deposits: Developers needs to keep 70% of the money collected from a buyer in a temporary pass through account held by a third party (escrow account) to meet the construction cost of the project.
    • Liability of the developer: A developer’s liability to repair structural defects would be for 5 years.
    • Cap on Advance Payments: A promoter cannot accept more than 10% of the cost of the plot, apartment or building as an advance payment or an application fee from a person without first entering into an agreement for sale
    • Carpet Area over super built-up: Clearly defines Carpet Area as net usable floor area of flat. Buyers will be charged for the carpet area and not super built-up area.
    • Punishment for non-compliance: Imprisonment of up to three years for developers and up to one year in case of agents and buyers for violation of orders of Appellate Tribunals and Regulatory Authorities.

    Which projects can get RERA approval?

    • Commercial and residential projects including plotted development.
    • Projects measuring more than 500 sq mts or 8 units.
    • Projects without Completion Certificate, before the commencement of the Act.
    • The project is only for the purpose of renovation/repair / re-development which does not involve re-allotment and marketing, advertising, selling or new allotment of any apartments, plot or building in the real estate project, will not come under RERA.
    • Each phase is to be treated as standalone real estate project requiring fresh registration.

    Benefits offered by the RERA Act

    Industry

    Developer

    Buyer

    Agents
    • Governance and transparency
    • Project efficiency and robust project delivery
    • Standardization and quality
    • Enhance the confidence of investors
    • Attract higher investments and PE funding
    • Regulated Environment
    • Common and best practices
    • Increase efficiency
    • Consolidation of sector
    • Corporate branding
    • Higher investment
    • Increase in organized funding
    • Significant buyers protection
    • Quality products and timely delivery
    • Balanced agreements and treatment
    • Transparency – sale based on carpet area
    • Safety of money and transparency on utilization
    • Consolidation of the sector (due to mandatory state registration)
    • Increased transparency
    • Increased efficiency
    • Minimum litigation by adopting best practices

     

     

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  • WTO and India

    The Process of Cartelisation

    | Economics | Mains Paper 3: Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth

    This newscard is an excerpt from the original article published in TH.

    What is a Cartel?

    • According to CCI, a “Cartel includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services”.
    • The three common components of a cartel are:
    1. an agreement
    2. between competitors
    3. to restrict competition

    What is Cartelization?

    • Cartelization is when enterprises collude to fix prices, indulge in bid-rigging, or share customers, etc. But when prices are controlled by the government under law, that is not cartelization.
    • The Competition Act contains strong provisions against cartels.
    • It also has the leniency provision to incentivize a party to a cartel to break away and report to the Commission, and thereby expect total or partial leniency.
    • This has proved a highly effective tool against cartels worldwide.

    Philosophy behind

    • Cartels, which involve a group of businesses colluding to keep prices high, have been viewed by economists as a significant threat to the market economy.
    • When businesses cooperate with each other rather than compete against each other, there could be many adverse consequences to consumers.
    • For one, consumers will have to pay higher prices for goods and services.
    • It should be noted that the way cartels keep prices high is by limiting the supply of their output. Further, in the absence of any threat from competition, cartels also have very little reason to innovate or cater to consumers in better ways.
    • In other words, they essentially act like a monopoly.
    • The Organization of the Petroleum Exporting Countries (OPEC) is the most well-known international cartel that influences the price of oil globally through coordinated efforts to limit supply.

    How do they work?

    • Four categories of conduct are commonly identified across jurisdictions (countries). These are: price-fixing, output restrictions, market allocation and, bid-rigging
    • In sum, participants in hard-core cartels agree to insulate themselves from the rigors of a competitive marketplace, substituting cooperation for competition.

    How do cartels hurt?

    • They not only directly hurt the consumers but also, indirectly, undermine overall economic efficiency and innovations.
    • A successful cartel raises the price above the competitive level and reduces output.
    • Consumers choose either not to pay the higher price for some or all of the cartelized product that they desire, thus forgoing the product, or they pay the cartel price and thereby unknowingly transfer wealth to the cartel operators.

    Are there provisions in the Competition Act against monopolistic prices?

    • There are provisions in the Competition Act against abuse of dominance.
    • One of the abuses is when a dominant enterprise “directly or indirectly imposes unfair or discriminatory prices” in the purchase or sale of goods or services.
    • Thus, excessive pricing by a dominant enterprise could, in certain conditions, be regarded as abuse and, therefore, subject to investigation by the Competition Commission if it were fully functional.
    • However, where pricing is a result of normal supply and demand, the Competition Commission may have no role.

    What is the penalty for cartelization?

    • The Competition Act calls for a penalty on each member of the cartel, which is up to three times its profit for each year of anti-competitive behavior, or 10% of turnover for each year of its continuance, whichever is higher.
    • However, in case of a leniency petition, CCI can waive the penalty depending on the timing and usefulness of the disclosure  and  full cooperation  in  the  probe.

    How might cartels be worse than monopolies?

    • Monopolies are bad for both individual consumer interests as well as society at large.
    • Monopolist completely dominates the concerned market and, more often than not, abuse this dominance either in the form of charging higher than warranted prices or by providing lower than the warranted quality of the good or service in question.

    How to stop the spread of cartelization?

    • Strong deterrence to those cartels that are found guilty of being one.
    • Typically this takes the form of a monetary penalty that exceeds the gains amassed by the cartel and it is not always easy to ascertain the exact gains from cartelization.
    • The threat of stringent penalties can be used in conjunction with providing leniency — as was done in the beer case.

    Back2Basics: Competition Commission of India (CCI)

    • The CCI is the chief national competition regulator in India.
    • It is a statutory body within the Ministry of Corporate Affairs.
    • It is responsible for enforcing The Competition Act, 2002 in order to promote competition and prevent activities that have an appreciable adverse effect on competition in India.

     

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  • Foreign Policy Watch: United Nations

    What is the UK-Rwanda Asylum Plan?

    IOCR | International Relations | Mains Paper 2: Important International Institutions

    The United Kingdom has signed a deal with Rwanda to send some asylum seekers to the East African nation — a move that PM Boris Johnson said will “save countless lives” from human trafficking.

    Immigrants crisis in UK

    • Since 2018, there has been a marked rise in the number of refugees and asylum seekers that undertake dangerous crossings between Calais in France and Dover in England.
    • Most such migrants and asylum seekers hail from war-torn countries like Sudan, Afghanistan, and Yemen, or developing countries like Iran and Iraq.
    • The Britain that has adopted a hardline stance on illegal immigration, these crossings constitute an immigration crisis.
    • The Nationality and Borders Bill, 2021, which is still under consideration in the UK, allows the British government to strip anyone’s citizenship without notice under “exceptional circumstances”.
    • The Rwanda deal is the operationalization of one objective in the Bill which is to deter illegal entry into the United Kingdom.

    What is the Rwanda Deal?

    • The UK and Rwanda Migration and Economic Development Partnership or the Rwanda Deal is a Memorandum of Understanding (MoU) signed between the two governments.
    • Under this deal, Rwanda will commit to taking in asylum seekers who arrive in the UK on or after January 1, 2022, using illegally facilitated and unlawful cross border migration.
    • Rwanda will function as the holding centre where asylum applicants will wait while the Rwandan government makes decisions about their asylum and resettlement petitions in Rwanda.
    • Rwanda will, on its part, accommodate anyone who is not a minor and does not have a criminal record.

    Rationale of the deal

    • The deal aims to combat “people smugglers”, who often charge exorbitant prices from vulnerable migrants to put them on unseaworthy boats from France to England that often lead to mass drownings.
    • The UK contends that this solution to the migrant issue is humane and meant to target the gangs that run these illegal crossings.

    What will the scheme cost the UK?

    • The UK will pay Rwanda £120 million as part of an “economic transformation and integration fund” and will also bear the operational costs along with an, as yet undetermined, amount for each migrant.
    • Currently, the UK pays £4.7 million per day to accommodate approximately 25,000 asylum seekers.
    • At the end of 2021, this amounted to £430 million annually with a projected increase of £100 million in 2022.
    • The Rwanda Deal is predicted to reduce these costs by outsourcing the hosting of such migrants to a third country.

    Will the Rwanda Deal solve the problem of illegal immigration?

    • This deal will be implemented in a matter of weeks unless it is challenged and stayed by British courts.
    • While Boris Johnson’s government is undoubtedly bracing for such legal challenges, it remains unclear if the Rwanda Deal will solve the problem of unlawful crossings.
    • Evidence from similar experiences indicates that such policies do not fully combat “people smuggling”.

    Criticisms of the deal

    • Several activists, refugee and human rights organizations have strongly opposed the new scheme.
    • There are dangers of transferring refugees and asylum seekers to third countries without sufficient safeguards.
    • The refugees are traded like commodities and transferred abroad for processing.
    • Such arrangements simply shift asylum responsibilities, evade international obligations, and are contrary to the letter and spirit of the Refugee Convention.
    • Rwanda also has a known track record of extrajudicial killings, suspicious deaths in custody, unlawful or arbitrary detention, torture, and abusive prosecutions, particularly targeting critics and dissidents.

    Do any other countries send asylum seekers overseas?

    • Yes, several other countries — including Australia, Israel and Denmark — have been sending asylum seekers overseas.
    • Australia has been making full use of offshore detention centres since 2001.
    • Israel, too, chose to deal with a growing influx of asylum seekers and illegal immigrants from places like Sudan and Eritrea by striking deals with third countries.
    • Those rejected for asylum were given the choice of returning to their home country or accepting $3,500 and a plane ticket to one of the third countries.
    • They faced the threat of arrest if they chose to remain in Israel.

     

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