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Freebies model of Governance
Context
Against the backdrop of promises of freebies in Punjab, this article deals with the harm caused by such freebies to the economy, life quality and social cohesion in the long run.
Macroeconomic stability of the Union and the States
- India is a Union of states. It is not a confederation of states.
- The Union is indestructible.
- The Union, therefore, is integral to both the Centre and the states.
- The strength of the Centre lies in the strength of the states.
- Therefore, the macroeconomic stability of the Union is contingent on the macroeconomic stability of both the Centre and states.
The complex issue of freebies
- There is great ambiguity in what “freebies” mean.
- Merit goods Vs. Public goods: We need to distinguish between the concept of merit goods and public goods on which expenditure outlays have overall benefits.
- Examples of this are the strengthening and deepening of the public distribution system, employment guarantee schemes, support to education and enhanced outlays for health, particularly during the pandemic.
- All over the world, these are considered to be desirable expenditures.
- Freebies could be expensive? It’s not about how cheap the freebies are but how expensive they are for the economy, life quality and social cohesion in the long run.
Issues with the culture of competitive freebie politics
1] It affects macroeconomic stability
- Freebies undercut the basic framework of macroeconomic stability.
- The politics of freebies distorts expenditure priorities.
- Outlays are being concentrated on subsidies of one kind or the other.
- Illustratively, in the case of Punjab, while estimates vary, some have speculated that the promise of freebies might cost around Rs 17,000 crore.
- As we know, the debt-to-GDP ratio of Punjab is already at 53.3 per cent for 2021-22, which would worsen on account of these new measures.
2] Distortion of expenditure priorities
- Take, for instance, the change to the new contributory pension scheme from the old scheme, which had a fixed return.
- Rajasthan announced that it would revert to the old pension scheme.
- This decision is regressive as the move away from the old scheme was based on the fact that it was inherently inequitable.
- The pension and salary revenues of Rajasthan amount to 56 per cent of its tax and non-tax revenues.
- Thus, 6 per cent of the population, which is made up of civil servants, stands to benefit from 56 per cent of the state’s revenues.
- Intergenerational inequality: This is fraught with dangers not only of intergenerational inequality, but also affects the broader principles of equity and morality.
3] Increases social inequality
- The issue of intergenerational equity leads to greater social inequalities because of expenditure priorities being distorted away from growth-enhancing items.
4] It affects the environment
- When we talk of freebies, it is in the context of providing, for example, free power, or a certain quantum of free power, water and other kinds of consumption goods.
- This distracts outlays from environmental and sustainable growth, renewable energy and more efficient public transport systems.
5] The distortion of agricultural priorities
- The depleting supply of groundwater is an important issue to consider when speaking of freebies pertaining to free consumption goods and resources.
6] Effect on the future of manufacturing
- Lower the quality of competitiveness: Freebies lower the quality and competitiveness of the manufacturing sector by detracting from efficient and competitive infrastructure enabling high-factor efficiencies in the manufacturing sector.
7] Subnational bankruptcy
- Freebies bring into question market differentiation between profligate and non-profligate states and whether we can have a recourse mechanism for subnational bankruptcy.
Way forward
- The race to the bottom implies government deregulation of markets and business.
- We must strive instead for a race to efficiency through laboratories of democracy and sanguine federalism where states use their authority to harness innovative ideas and solutions to common problems which other states can emulate.
Consider the question “What are the challenges in dealing with the competitive freebies politics? What are its drawbacks?”
Conclusion
The economics of freebies is invariably wrong. It is a race to the bottom. Indeed, it is not the road to efficiency or prosperity, but a quick passport to fiscal disaster.
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The Delhi MCA Act and the spirit of federalism
Context
Recently, both Houses of Parliament passed the Delhi Municipal Corporation (Amendment) Act, 2022, to unify the trifurcated Delhi Municipal Corporations.
Background of the trifurcation
- The split-up was first proposed in the 1987 Balakrishnan Committee Report which was bolstered in the 2001 Virendra Prakash Committee Report.
- The proposal finally took shape in 2011 and the law to trifurcate was enacted.
- A seven-member Delhi Legislative Assembly Panel was set up in 2001 to study the recommendations and suggest modalities.
- Trifurcation in 2011: The proposal finally took shape in 2011 and the law to trifurcate was enacted.
Changes introduced by the amendment
- The law provides that the power to determine the number of wards, extent of each ward, reservation of seats, number of seats of the Corporation, etc. will now be vested in the Central government.
- The number of seats of councillors in the Municipal Corporations of Delhi is also to be decided now by the Central government.
- By exercising that very power, the number of councillors to the Municipal Corporations of Delhi has been reduced from 272 to 250.
- The Central government has also taken over powers from the State to decide on matters such as ‘salary and allowances, leave of absence of the Commissioner, the sanctioning of consolidation of loans by a corporation, and sanctioning suits for compensation against the Commissioner for the loss or waste or misapplication of municipal fund or property
Issues with the changes made
- The Central government’s line is that the amendment has been passed as in Article 239AA of the Constitution, which is a provision that provides for special status to Delhi.
- No consultation with Delhi govt.-The large-scale changes by the Central government has been done without any consultation with the Delhi government.
- Not in line with Part IXA of the Constitution: Part IXA specifically states that it will be the Legislature of the State that will be empowered to make laws concerning representation to the municipalities.
- Part IXA is a specific law while Article 239AA is general law: The argument of the Centre that Article 239AA can be applied over and above Part IXA of the Constitution does not hold good as the latter is a specific law that will override the general law relatable to Article 239AA.
- Against the federalism: In State of NCT of Delhi vs Union of India judgment the Supreme Court held, “The Constitution has mandated a federal balance wherein independence of a certain required degree is assured to the State Governments.”
- It was made clear that the aid and the advice of the State government of Delhi would bind the decision of the Lieutenant General in matters where the State government has the power to legislate.
- No doubt, the amendment to the Delhi Municipal Corporation Act, 1957 will lead to further litigation on the aspect of a sharing of powers between the State of NCT of Delhi and the Central government.
Conclusion
The interference of the Centre in matters such as municipal issues strikes a blow against federalism and the celebrated Indian model of decentralisation.
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21st April 2022 | Prelims Daily with Previous Year Questions
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How the Central and State governments procure Wheat?
Wheat procurement is now underway in various states of the country.
Wheat Procurement in India
- The main purpose of procuring for the central pool is ensuring the MSP as well as the country’s food security by making food available to the weaker sections at affordable prices.
- The Centre procures wheat by paying the minimum support price (MSP) announced for the crop.
- The States do it under two systems:
- The centralised one, also called the non-decentralised procurement system (non-DCP) and
- The decentralised one, also called DCP
(1) Non-DCP
- Under this system, the Food Corporation of India (FCI) directly or through state government agencies procure wheat from the purchase centres established across the states based on various parameters like moisture, lustre, broken/shrivelled etc.
- In Punjab and Haryana, farmers sell their crop to the central agency or state agencies through Arhtiyas (commission agents).
- The wheat procured by the state agencies is handed over to the FCI for storage or for transportation to the consuming states.
- The FCI, which is the central nodal agency for wheat procurement, pays the cost of procured wheat to the state agencies.
(2) DCP
- The decentralised system was brought in the late 1990s to promote local procurement and save the transportation cost and time.
- The state government or its agencies procure, store and distribute wheat against the Centre’s allocation for targeted PDS and other weaker sections etc. with the state.
- The excess stocks procured by the state and its agencies are handed over to the FCI for the central pool.
- The expenditure incurred by the state government on the procurement, storage and distribution of stocks under the decentralised system are reimbursed by the Centre.
Role of Arhtiyas
- Apart from paying the MSP, the Centre also reimburses the arhtiyas’ commission, administrative charges, mandi labour charges, transportation charges, custody and maintenance charges, interest charges, the gunny bag cost and statutory taxes.
- The cost of excess stocks handed over to the FCI is reimbursed to the state government or agencies as per the Centre’s policies.
- Procurement agencies ensure that the stocks brought to mandis are purchased as per the specifications fixed by the government and farmers are not compelled to sell their crop below the MSP.
- But if a farmer gets a better price from private players, he can sell to them.
From how many states is wheat procured for the central pool?
- There are 15 states on the procurement list for the central pool, but the contributions from seven of the states are negligible.
- Only Punjab, Haryana, Madhya Pradesh, Uttar Pradesh and Rajasthan are the main contributors to the central pool.
- Bihar also contributed to some extent in the last season.
How much wheat is procured for the central pool by the FCI every year?
- According to the records of the FCI, from 2011 to 2021, procurement for the central pool was between 25-40 per cent of the total wheat production.
- The procurement has doubled in the past one decade as 22.5 million tonnes of wheat was procured in 2011 and 43.3 million in 2021.
- The current season of procurement is going on.
What is the procurement scale against the total production of wheat in India?
- In 2011 the total production of wheat was 88 million tonnes while it was around 109 million tonnes in 2021.
- And the government’s procurement was 26 per cent and around 40 per cent in 2011 and 2021 respectively.
- The procured grain is used for export purposes, the public distribution system and maintaining a particular stock for an emergency period.
- The remaining 60 per cent of the production goes to the bakery industry and other wheat-related businesses.
- Farmers also keep some of this wheat for their self-consumption.
What is the share of wheat contribution of various states to the central pool?
- Barring 2020, Punjab has been the number one wheat contributor to the central pool.
- The state has increased its contribution from 102.09 lakh tonnes in 2011 to 132. 22 lakh tonnes in 2021.
- Haryana has also increased its contribution from 63.47 lakh tonnes to around 84.93 lakh tonnes in the same period.
- Madhya Pradesh’s contribution was 35.38 lakh tonnes in 2011, which jumped to the highest among all states—129.42 lakh tonnes—in 2020 and was 128.16 lakh tonnes last year.
- Uttar Pradesh’s contribution increased from 16.45 lakh tonnes to 56.41 lakh tonnes, and Rajasthan’s contribution rose from 4.76 lakh tonnes to 23.40 lakh tonnes in the same period.
Note: Punjab (despite its small size compared to MP, UP) is also the leading wheat producer state in India.
Back2Basics: Minimum Support Price (MSP)
- MSP is a form of market intervention by the GoI to insure agricultural producers against any sharp fall in farm prices.
- The MSP are announced at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
- MSP is price fixed to protect the producer – farmers – against excessive fall in price during bumper production years.
- In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, govt. agencies purchase the entire quantity offered by the farmers at the announced minimum price.
- The minimum support prices are a guarantee price for their produce from the Government.
- The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.
Methods of calculation
- In formulating the level of MSP and other non-price measures, the CACP takes into account a comprehensive view of the entire structure of the economy of a particular commodity or group of commodities.
- The CACP makes use of both micro-level data and aggregates at the level of district, state and the country.
- Other factors include cost of production, changes in input prices, input-output price parity, trends in market prices, demand and supply, inter-crop price parity, effect on industrial cost structure, effect on cost of living, effect on general price level, international price situation, parity between prices paid and prices received by the farmers and effect on issue prices and implications for subsidy.
Procurement agencies
- Food Corporation of India (FCI) is the designated central nodal agency for price support operations for cereals, pulses and oilseeds.
- Cotton Corporation of India (CCI) is the central nodal agency for undertaking price support operations for Cotton.
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[pib] UDAN Scheme awarded PM Award for Excellence in Public Administration
The Ministry of Civil Aviation’s flagship Regional Connectivity Scheme UDAN (Ude Desh ka Aam Nagrik) has been awarded Prime Minister’s Award for Excellence in Public Administration this year.
What is UDAN Scheme?
- The Ude Desh Ka Aam Nagrik (UDAN) scheme is a low-cost flying scheme launched with the aim of taking flying to the masses.
- The first flight under UDAN was launched by the PM in April 2017.
- It is also known as the regional connectivity scheme (RCS) as it seeks to improve air connectivity to tier-2 and tier-3 cities through revival of unused and underused airports.
Working of the Scheme
- Airlines are awarded routes under the programme through a bidding process and are required to offer airfares at the rate of ₹2,500 per hour of flight.
- At least 50% of the total seats on an aircraft have to be offered at cheaper rates.
- In order to enable airlines to offer affordable fares they are given a subsidy from the govt. for a period of three years.
Success of the scheme
- In a short span of 5 years, today 419 UDAN routes connect 67 underserved/unserved airports, including heliports and water aerodromes, and over 92 lakh people have benefited from it.
- More than 1 lakh 79 thousand flights have flown under this scheme.
- UDAN scheme has immensely benefitted several sectors pan-India including Hilly States, North-Eastern region, and Islands.
- The scheme also led to development of new Greenfield Airports such as Pakyong near Gangtok in Sikkim, Tezu in Arunachal Pradesh, and Kurnool in Andhra Pradesh.
- Krishi UDAN Scheme launched in August 2020, on international and national routes has assisted farmers in transporting agricultural products.
Issues with the working
- Discontinuance: In reality, some of the routes launched have been discontinued as most of the routes awarded under UDAN are not active.
- On-paper Ambitions: UDAN was expanded to provide improved connectivity to hilly regions and islands through helicopters and seaplanes. However, they mostly remain on paper.
- The reasons include:
- Failure to set up airports or heliports due to lack of availability of land
- Airlines unable to start flights on routes awarded to them or finding the routes difficult to sustain
- Adverse impact of the COVID-19 pandemic
Various challenges
- Lack of funds: Many small airlines await infusion of funds, to be able to undertake maintenance of aircraft, pay rentals to lessors, give salaries to its staff, etc.
- Maintenance issue: Many players don’t have more than one or two planes and they are often poorly maintained. New planes are too expensive for these smaller players.
- Availability of pilots: Often, they also have problems with the availability of pilots and are forced to hire foreign pilots which costs them a lot of money and makes the business unviable.
- Competition: Only those routes that have been bagged by bigger domestic players such as IndiGo and SpiceJet have seen a better success rate.
Way forward
- The govt offers subsidies for a route for a period of three years and expects the airline to develop the route during this time so that it becomes self-sufficient.
- Airlines need an extension of the subsidy period for their operational continuity.
- Due to the rise in COVID cases, travel restrictions and passenger safety too needs to be taken into consideration in the loss-making of such airlines.
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Explained: Integrated Command and Control Centres (ICCCs)
The Union Housing and Urban Affairs Minister has announced that 80 Integrated Command and Control Centres (ICCCs), an integral component of the Smart Cities Mission, have already been set up.
What is the Smart Cities Mission?
- The Smart Cities Mission aims at developing 100 cities, which were shortlisted, into self-sustainable urban settlements.
- The mission was launched on June 25, 2015 and was projected as one aimed at transforming the process of urban development in the country.
- Among its strategic components is ‘area-based development’, which includes city improvement (retrofitting), city renewal (redevelopment) and city extension (greenfield development), plus a pan-city initiative in which ‘smart solutions’ are applied covering larger parts of the city.
Focus areas
- Key focus areas of the scheme include the construction of walkways, pedestrian crossings, cycling tracks, efficient waste-management systems, integrated traffic management and assessment.
- The scheme also assesses various indices to track urban development such as the Ease of Living Index, Municipal Performance Index, City GDP framework, Climate-Smart Cities assessment framework, etc.
What is an Integrated Command and Control Centre?
- The Smart Cities Mission includes setting up ICCCs for each such city as a vital step.
- These ICCCs are designed to enable authorities to monitor the status of various amenities in real time.
- Initially aimed at controlling and monitoring water and power supply, sanitation, traffic movement, integrated building management, city connectivity and Internet infrastructure, these centres have since evolved to monitor various other parameters.
- The ICCCs are now also linked to the CCTNS (Crime and Criminal Tracking Networks and Systems) network under the Ministry of Home Affairs.
- The ICCC acts of a smart city acts as a “nerve centre” for operations management. It processes a complex and large pool of data sets at an aggregated level.
- It is the nodal point of availability of all online data and information relating to smart services included in a smart city, such as like LED street lighting, CCTV surveillance cameras, air quality sensors, etc.
How did the ICCCs help in management of Covid-19?
- During the pandemic, they also served as war-rooms for Covid-19 management.
- During the peak of the first wave, when countries were struggling to figure out ways of combating the virus, the government used the ICCCs as war-rooms for managing the outbreak, with real-time surveillance and monitoring of districts across the country.
- Converted into war-rooms, the smart cities’ ICCCs used the central data dashboard and provided information about the status of Covid-positive cases in various administrative zones of these cities, officials aware of the exercise said.
- The war-rooms were also used for tracking people under quarantine and suspected Covid-19 cases.
What is the current status of the Smarts Cities Mission?
- The ambitious project, announced by Prime Minister Narendra Modi in 2015, had an initial deadline of 2021 for the first lot of 20 smart cities out of the 100 selected.
- Although the project was announced in 2015, the cities were selected over a period of two years between 2016 and 2018, each with a deadline of completion within five years from the time of their selection.
- On the recommendation of NITI Aayog, the timeline was extended last year until 2023 due to delays caused by the pandemic.
- According to current Ministry data, the SCM has so far covered over 140 public-private partnerships), 340 ‘smart roads’, 78 ‘vibrant public places’, 118 ‘smart water’ projects and over 63 solar projects.
What next?
- The Ministry of Housing and Urban Affairs has begun work to finalise its recommendation for providing ICCCs as a service to states and smaller cities.
- The Ministry aims to finalise an ICCC model and implement a pilot project across six major states — Uttar Pradesh, Maharashtra, Karnataka, Madhya Pradesh, Rajasthan and Tamil Nadu.
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INS Vagsheer: Key features, capabilities
The sixth and last of the French Scorpene-class submarines, INS Vagsheer, was launched into water at the Mazagon Docks in Mumbai.
Launch of INS Vagsheer
- It was launched by Veena Ajay Kumar (wife of Union Defence Secretary), in keeping with the naval tradition of launch and naming by a woman.
- The six submarines were being built under Project-75 by the Mazagon Docks under technology transfer from the Naval Group as part of a $3.75-billion deal signed in October 2005:
- INS Kalvari was commissioned in December 2017;
- INS Khanderi in September 2019;
- INS Vagir in November 2020;
- INS Karanj in March 2021; and
- INS Vela in November 2021.
- P 75 is one of two lines of submarines, the other being P75I, as part of a plan approved in 1999 for indigenous submarine construction with technology taken from overseas firms.
Why ‘Vagsheer’
- Vagsheer is named after the sand fish, a deep sea predator of the Indian Ocean.
- The first submarine Vagsheer, from Russia, was commissioned into the Indian Navy on December 26, 1974, and was decommissioned on April 30, 1997.
- The new Vagsheer will be officially named at the time of its commissioning.
Specifications
- Vagsheer can take up to eight officers and 35 men.
- It is 67.5 metres long and 12.3 metres high, with a beam measuring 6.2 metres Vagsheer can reach top speed of 20 knots when submerged and a top speed of 11 knots when it surfaces
- It has four MTU 12V 396 SE84 diesel engines, 360 battery cells for power, and a silent Permanently Magnetised Propulsion Motor.
- The hull, fin and hydroplanes are designed for minimum underwater resistance and all equipment inside the pressure hull is mounted on shock-absorbing cradles for enhanced stealth.
Features
- Vagsheer is a diesel attack submarine, designed to perform sea denial as well as access denial warfare against the adversary.
- It can do offensive operations across the spectrum of naval warfare including anti-surface warfare, anti-submarine warfare, intelligence gathering, mine laying and area surveillance.
- It is enabled with a C303 anti-torpedo counter measure system.
- It can carry up to 18 torpedoes or Exocet anti-ship missiles, or 30 mines in place of torpedoes.
- Its superior stealth features include advanced acoustic absorption techniques, low radiated noise levels, hydro-dynamically optimised shape.
- It has the ability to launch a crippling attack using precision guided weapons, underwater or on surface.
Road ahead
- Vagsheer will be commissioned into the Indian Navy’s Western Command after 12 to 18 months when sea trials end.
- It will be based with Western Naval Command, mostly in Mumbai.
- The submarine will undergo a very comprehensive and rigorous set of tests and trials, for more than a year, to ensure delivery of a fully combat worthy submarine.
Back2Basics: Various classes of Submarines in India
In maritime terms, a class of ships is a group of vessels that have the same make, purpose and displacement.
- Chakra Class: Under a 10-year lease from Russia since 2012
- Arihant Class: Nuclear-powered ballistic missile submarines
- Shishumar Class: Diesel-electric attack submarines Indian variant of the Type 209 submarines developed by the German Navy
- Kalvari Class: Diesel-electric attack submarines designed by French company DCNS
- Sindhughosh Class: Kilo-class diesel-electric submarines built with the help of Russia
- Scorpene-Class: French submarines that can undertake various types of missions such as anti-surface warfare, anti-submarine warfare, intelligence gathering, mine laying, area surveillance etc.
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ISRO develops Space Bricks from Martian Soil
Researchers from the Indian Space Research Organisation (ISRO) and the Indian Institute of Science (IISc) have developed a way to make bricks from Martian soil with the help of bacteria and urea.
Space Bricks
- ISRO and IISc have collaborated to develop a novel scalable technique of manufacturing space bricks using Martian Simulant Soil (MSS).
- The team first made the slurry by mixing Martian soil with guar gum, a bacterium called Sporosarcina pasteurii, urea and nickel chloride (NiCl2).
- This slurry can be poured into moulds of any desired shape, and over a few days the bacteria convert the urea into crystals of calcium carbonate.
- These crystals, along with biopolymers secreted by the microbes act as cement holding the soil particles together.
- This method ensures that the bricks are less porous, which was a problem with other methods used to make Martian bricks.
- The bacteria seep deep into the pore spaces, using their own proteins to bind the particles together, decreasing porosity and leading to stronger bricks.
Their significance
- In the past, the team had made bricks out of lunar soil using a similar method.
- These ‘space bricks’ can be used to construct building-like structures on Mars that could facilitate human settlement on the red planet.
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