Note4Students
From UPSC perspective, the following things are important :
Prelims level: MSP. SAP
Mains level: Paper 3- Issues with the MSP regime
The author analyses the inefficiencies in the MSP regime while comparing it with the sugar sector and the milk sector. The recent agri-reform in the opinion of the author could help to make the Indian agriculture more efficient.
MSP system Vs. Market-driven system
- MSP regime was the creation of the era of scarcity in the mid-1960s.
- Indian agriculture has, since then, turned the corner from scarcity to surplus.
- In a surplus economy, unless we make agriculture demand-driven, the MSP route can spell financial disaster.
- This transition is about changing the pricing mix — how much of it should be state-supported and how much market-driven.
- The new laws are trying to increase the relative role of markets without dismantling the MSP system.
- Currently, no system is perfect, be it the one based on MSP or that led by the markets, but the MSP system is much more costly and inefficient.
- The market-led system will be more sustainable provided we can “get the markets right”.
Issues with the MSP
- A perusal of the MSP dominated system of rice and wheat shows that the stocks with the government are way above the buffer stock norms.
- The economic cost (to FCI) of procured rice comes to about Rs 37/kg and that of wheat is around Rs 27/kg.
- No wonder, market prices of rice and wheat are much lower than the economic cost incurred by the FCI.
- So, grain stocks with the FCI cannot be exported without a subsidy[i.e. export below the cost], which invites WTO’s objections.
- The FCI’s burden is touching Rs 3 lakh crore which is not reflected in the Central budget as the FCI is asked to borrow more and more.
- The FCI can reduce costs if it uses policy instruments like “put options”.
2 Lessons: from sugarcane and milk pricing
1) Populism resulted in making sugar industry globally non-competitive
- In the case of sugarcane, the government announces a “fair and remunerative price” (FRP) [not MSP]to be paid by sugar factories [not paid by the Government].
- While some states like Uttar Pradesh announces its own “state advised price” (SAP).
- The sheer populism of SAP has resulted in cane arrears amounting to more than Rs 8,000 crore, with large surpluses of sugar that can’t be exported.
- This sector has, consequently, become globally non-competitive.
- Unless sugarcane pricing follows the C Rangarajan Committee’s recommendations the problems of the sugar sector will not go away.
2) Success story of milk sector
- In the case of milk co-operatives, pricing is done by the company in consultation with milk federations.
- It is more in the nature of a contract price.
- It competes with private companies, be it Nestle, Hatsun or Schreiber Dynamix dairies.
- The milk sector has been growing at a rate two to three times higher than rice, wheat and sugarcane.
- Today, India is the largest producer of milk — 187 million tonnes annually.
So, how the recent reforms will help the farmers
- As a result of changes in farm laws in the next three to five years companies will be encouraged to build efficient supply lines somewhat on the lines of milk.
- These supply lines — be it with farmers producer organisations (FPOs) or through aggregators — will, of course, be created in states where these companies find the right investment climate.
- These companies will help raise productivity, similar to what has happened in the poultry sector.
- Milk and poultry don’t have MSP and farmers do not have to go through the mandi system paying high commissions, market fees and cess.
Conclusion
The pricing system has its limits in raising farmers’ incomes. More sustainable solutions lie in augmenting productivity, diversifying to high-value crops, and shifting people out of agriculture to high productivity jobs elsewhere, the recent reforms are the steps in this direction.
Back2Basic: What is MSP
- Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.
- The minimum support prices are announced by the Government of India 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).
- 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.
- In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.
What are ‘put options’
- Put options give holders of the option the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time frame.
- Put options are available on a wide range of assets, including stocks, indexes, commodities, and currencies.
- Put option prices are impacted by changes in the price of the underlying asset, the option strike price, time decay, interest rates, and volatility.
- Put options increase in value as the underlying asset falls in price, as volatility of the underlying asset price increases, and as interest rates decline.
- They lose value as the underlying asset increases in price, as volatility of the underlying asset price decreases, as interest rates rise, and as the time to expiration nears.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Definition of urban area
Mains level: Paper 2- Need for new definition of urban area
The article the need for liberal and realistic definition of the ‘urban’ area in the next Census and mention the implications of such change.
2 ways to define urban areas
1) Statutory town
- These towns are defined by state governments and place India’s urbanisation rate at 26.7%.
- A statutory town includes all places with a municipality, corporation, cantonment board or notified town area committee.
2) Census-based criteria
- Census adopts three criteria to define what is urban.
- The three criteria are:
- i) a minimum population of 5,000;
- ii) at least 75% of the male main working population engaged in non-agricultural pursuits, and
- iii) a density of population of at least 400 persons per sq km
- This, coupled with statutory towns, pegs India’s urbanisation rate at 31%.
- Total number of towns (state and census) stands at 7,933, together constituting a 377-mn population.
Why there is a need for changing the definition of ‘urban’
- There is growing evidence—mostly from satellite imagery—that India is way more urban than the 2011 Census estimate.
- This is quite plausible because there is a large sum of money allocated for rural development, and it is in the interest of state governments to under-represent urbanisation.
- Besides, the Census’s stringent definition was first carved out in 1961 which do not reflect the realities of the 21st century.
- India won’t be alone in changing these definitions for Census 2021.
- Many countries, such as China, Iran, the UK, among others, have changed the definition of ‘urban’ from one census to another.
Getting the right picture of urbanisation
- A more liberal and realistic definition in the upcoming census will present the actual picture of urbanisation.
- For instance, if we just use the population density criteria like 37 other countries, with the 400 people per sq km threshold, we will add around 500 mn people to the urban share of the population.
- This pegs the urbanisation rate at over 70%!
What will be its implications?
- First, the budgetary allocation will reflect the reality and scales will balance between rural and urban areas.
- Second, the urban areas will not be governed through rural governance structures of Panchayati Raj Institutions.
- Third basic urban infrastructure like sewerage networks, fire services, building regulations, high-density housing, transit-oriented development, piped drinking water supply.
- Fourth, these newly defined urban areas could act as a new source of revenue for funding local infrastructure development.
- This would ease pressure on state finances.
- Lastly, the rethink of urban definition would have an impact on the regional and national economy.
- These newly defined urban areas will open them to new infrastructure such as railway lines, discom services, highway connectivity, creation of higher education institutes which will together increase the connectivity and resource capability at the local level.
- This will not only boost the local economy but also ease pressure on bigger cities and help in cluster level development.
Conclusion
A rethink of urban definition in Census 2021, particularly with some degrowth in urban areas due to Covid, will bode well for India for coming decades in more ways than one.
Source:-
https://www.financialexpress.com/opinion/redefining-cities-a-new-urban-consensus/2102154/
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: ART Bill
Mains level: Paper 2- Concerns with the ART Bill
There are several issues with the Assisted Reproductive Technology Bill and these issues need consideration before the passage of the Bill.
What the Bill aims to achieve
- Union Health Minister introduced the Assisted Reproductive Technology (Regulation) Bill, 2020 (Bill) in the Lok Sabha.
- Its aim is to regulate ART banks and clinics, allow safe and ethical practice of ARTs and protect women and children from exploitation.
- The Bill was introduced to supplement the Surrogacy (Regulation) Bill, 2019 (SRB), which awaits consideration by the Rajya Sabha after review by two parliamentary committees.
Concerns with the Bill
1) Exclusion in the access of ART
- .The Bill allows for a married heterosexual couple and a woman above the age of marriage to use ARTs.
- It excludes single men, cohabiting heterosexual couples and LGBTQI individuals and couples from accessing ARTs.
- This violates Article 14 of the Constitution and the right to privacy jurisprudence of Puttaswamy, where the Supreme Court held that “ the liberty of procreation, the choice of a family life” concerned all individuals irrespective of their social status and were aspects of privacy.
- In Navtej Johar case, Justice Chandrachud exhorted the state to take positive steps for equal protection for same-sex couples.
- Unlike the SRB, there is no prohibition on foreign citizens accessing ARTs.
- Foreigners can access ART but not Indian citizens in loving relationships.
- This fails to reflect the true spirit of the Constitution.
2) Consent
- The ART Bill does little to protect the egg donor.
- Harvesting of eggs is an invasive process which, if performed incorrectly, can result in death.
- The Bill requires an egg donor’s written consent but does not provide for her counselling or the ability to withdraw her consent before or during the procedure.
- She receives no compensation or reimbursement of expenses for loss of salary, time and effort.
- Failing to pay for bodily services constitutes unfree labour, which is prohibited by Article 23 of the Constitution.
- The commissioning parties only need to obtain an insurance policy in her name for medical complications or death; no amount or duration is specified.
- The egg donor’s interests are subordinated in a Bill proposed in her name.
- The Bill restricts egg donation to a married woman with a child (at least three years old).
3) Threat of eugenics
- The Bill requires pre-implantation genetic testing.
- If the embryo suffers from “pre-existing, heritable, life-threatening or genetic diseases”, it can be donated for research with the commissioning parties’ permission.
- These disorders need specification or the Bill risks promoting an impermissible programme of eugenics.
4) Overlap with Surrogacy Regulation
- There is considerable overlap between ART and SRB sectors. Yet the Bills do not work in tandem.
- Core ART processes are left undefined; several of these are defined in the SRB.
- Definitions of commissioning “couple”, “infertility”, “ART clinics” and “banks” need to be synchronised between the Bills.
- A single woman cannot commission surrogacy but can access ART.
- The Bill designates surrogacy boards under the SRB to function as advisory bodies for ART, which is desirable.
- However, both Bills set up multiple bodies for registration which will result in duplication or lack of regulation (e.g. surrogacy clinic is not required to report surrogacy to National Registry).
- Also, the same offending behaviours under both Bills are punished differently + punishments under the SRB are greater.
- Offences under the Bill are bailable but not under the SRB.
- Finally, records have to be maintained for 10 years under the Bill but for 25 years under the SRB.
- The same actions taken by a surrogacy clinic and ART clinic attract varied regulation.
Other concerns
- Children born from ART do not have the right to know their parentage, which is crucial to their best interests and protected under previous drafts.
- There is no distinction between ART banks and ART clinics, given that gamete donation is not compensated, economically viability of ART Banks raises a question.
- In previous drafts, gametes could not be gifted between known friends and relatives if this is not changed, gamete shortage is likely.
- The Bill’s prohibition on the sale, transfer, or use of gametes and embryos is poorly worded and will confuse foreign and domestic parents relying on donated gametes.
- Unusually, the Bill requires all bodies to be bound by the directions of central and state governments in the national interest, friendly relations with foreign states, public order, decency or morality — being broadly phrased, it undermines their independence.
Way forward
- The Bill to maintain a grievance cell but clinics must instead have ethics committees.
- Mandated counselling services should also be independent of the clinic.
- The poor enforcement of the PCPNDT Act, 1994, demonstrates that enhanced punishments do not secure compliance — lawyers and judges also lack medical expertise.
- Patients already sue fertility clinics in consumer redressal fora, which is preferable to criminal courts.
Conclusion
The Bill raises several constitutional, medico-legal, ethical and regulatory concerns, affecting millions and must be thoroughly reviewed before passage.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Declining private investment in the infrastructure and ways to boost it
Declining private investment in the infrastructure needs policy overhaul. The article suggests the changes in the policy and approach on the part of the government to achieve the sustainable 40 per cent private investment in the infrastructure.
Declining private investment in infrastructure
Currently, private financing into the infrastructure sector has declined to around 20 per cent of the total funding.
Reasons for the decline are-
- 1) the crisis in the non-banking finance sector.
- 2) the financial challenges faced by infrastructure companies.
- 3) the inadequately developed Indian market for infrastructure financing.
- The Economic Survey 2017-18 has assessed India’s infrastructure financing needs at $4.5 trillion by 2040.
- Reviving private investment flows into infrastructure to around 40 per cent will be key to attaining this threshold.
Actions need to be taken to revive the private investment in infrastructure
- The Vijay Kelkar committee had put out a balanced report in 2015 on overhauling the PPP ecosystem, including governance reform, institutional redesign, and capacity-building.
Ramping up private investments in infrastructure will need action on two fronts:
- 1) Refreshing institutions and policies for channelling financing.
- 2) Providing a stable, durable, and empowering ecosystem for private players to partner with government entities.
1) Institutions and policies for channelling financing
- Due to long-duration profitability cycles of infrastructure projects, successful PPP requires stable revenue flow assurances and a settled ecosystem to investors over long periods.
- This could be achieved means of policy stability, assurances possibly secured by law.
- PPP contracts also need to provide for mid-course corrections to factor in uncertainties including utilisation patterns, as well as the creation of competing infra assets.
- Government partners in PPP arrangements need to ensure that open-ended arrangement that might entail unforeseeable risk are minimised for the private investor, including aspects such as land availability and community acceptance.
2) Institution and policies for financing
- There is a need to change the culture and attitude towards the conjoining of government entities and private partners.
- Kelkar committee has stated that there needs to be an approach of “give and take” and the Government should avoid a purely transactional approach.
- Government should avoid trying to minimise risk to themselves by passing on uncertain elements in a project — like the land acquisition risk — to the private partner.
- This attitudinal change can be achieved by amending the Prevention of Corruption Act to encompass modern-day requirements, including factoring in the need for government agents to take calibrated risks while engaging with the private sector.
- The private partners also need to be incentivised to focus on project outcomes, with guard-rails in place to discourage rent-seeking behaviour.
- In sum, risk avoidance by the public entity and rent-seeking by the private partner are the twin challenges that need to be carefully addressed.
- On the regulatory front, a compelling need would be to promulgate a PPP legislation which can provide a robust legal ecosystem and procedural comfort.
Consider the question “Declining private investment in the infrastructure has several implications for the economy. In ligh of this, examine the factor for such decline and suggest the measures to boost the private investment in the infrastructure.”
Conclusion
After we emerge out of this pandemic, a focus area for public policy has to be the creation of a modern-day, sustainable and resilient infrastructure. . Designing a fresh approach and creating a stable policy environment that provides comfort and incentives to private investors will be key to attaining this goal.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Provision in labour codes
Mains level: Paper 2- Provisions for gig workers and platform workers in the labour codes
The article examines the provision made for the platform workers and the gig workers in the labour codes passed by the Parliament recently and explains the issues with it.
Context
- The three new labour codes passed by Parliament recently acknowledge platform and gig workers as new occupational categories in the making.
Definition issue
- The specific issues of working in factories, the duration of time needed on a factory floor, and associated issues are recognised as the parameters for defining an ideal worker.
- The Code on Wages, 2019, tries to expand this idea by using ‘wages’ as the primary definition of who an ‘employee’ is.
- Yet, the terms ‘gig worker’, ‘platform worker’ and ‘gig economy’ not defined with in connection with their wages.
- The new Code on Social Security allows a platform worker to be defined by their vulnerability — not their labour, nor the vulnerabilities of platform work.
Issues with the code
- Since the laws are prescriptive, what is written within them creates the limits to what rights can be demanded, and how these rights can be demanded.
- Platform delivery people can claim benefits, but not labour rights.
- This distinction makes them beneficiaries of State programmes.
- This does not allow them to go to court to demand better and stable pay, or regulate the algorithms that assign the tasks.
- This also means that the government or courts cannot pull up platform companies for lapses[ ex. choice of pay, work hours etc].
Benefits with no guarantee
- In the Code on Social Security, 2020, platform workers are now eligible for benefits like maternity benefits, life and disability cover, old age protection, provident fund, employment injury benefits, and so on.
- None of these are secure benefits.
- This means that from time to time, the Central government can formulate welfare schemes that cover these aspects of personal and work security, but they are not guaranteed.
- Actualising these benefits will depend on the political will at the Central and State government-levels and how unions elicit political support.
- The language in the Code is open enough to imply that platform companies can be called upon to contribute either solely or with the government.
Consider the question “What are the provisions for gig workers and platform workers in the new labour code? What are the issues with the provision?”
Conclusion
The ‘platform worker’ identity has the potential to grow in power and scope, but it will be mediated by politicians, election years, rates of under-employment, and large, investment- heavy technology companies that are notorious for not complying with local laws.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: H-1B term
Mains level: Paper 2- H-1B visa issue
Trump administration’s two moves on the visa could have implication for both India and corporate America. It needs to be seen whether the situations will remain the same after the Presidential elections in the U.S.
Context
- The U.S. President announced a hike in the salaries for those arriving in the U.S. on H-1B or skilled-worker visas.
Implications for India
- This hike is expected to cut visa applications by around 33%.
- Trump administration has in its earlier executive actions banned the issuance of new skilled worker visas and new green cards.
- India’s export of services to the U.S. is estimated to be at $29.6 billion in 2018, 4.9% more than in 2017, and 134% more than 2008 levels.
- The U.S. has been issuing 85,000 H-1B visas annually, of which 20,000 are given to graduate students and 65,000 to private sector applicants, approximately 70% of which are granted to Indian nationals.
- The visa issuance ban, combined with the mandatory salary floor soon to be instituted, will seriously hit U.S. imports of services from India.
Criticism of the move
- A federal judge in the Northern District of California blocked the enforcement of the new visa ban, ruling that the President “exceeded his authority” under the U.S. Constitution.
- Google CEO hit out at the ban, saying, “Immigration has contributed immensely to America’s economic success, making it a global leader in tech, and also Google the company it is today.”
Consider the question “What makes the H-1B visa important for India? What are the implications of the recent rise in the salary floor by the U.S. for the visa on India?”
Conclusion
While the ban and floor limit on salary come in the election milieu, India should prepare for the after election scenario.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Social media and challenges
The article discusses the threat posed by the spread of misinformation on the internet and suggests the steps to tackle it.
Warning for India
- The U.S.’s experience with the Internet should serve as a stark warning to India.
- Most Americans now get their news from dubious Internet sources.
- This resulted in hardening of political stances and the acute polarisation of the average American’s viewpoint.
- For India, the danger is that like the U.S., such extreme polarisation can happen in a few short years.
- There are anywhere between 500 million and 700 million people are now newly online, almost all from towns and rural areas.
Use of targeted algorithm
- Social networks such as Facebook, WhatsApp, and Twitter have become the source of news for the people, but these have no journalistic norms.
- The spread of the misinformation or news has been greatly enhanced by the highly targeted algorithms that these companies use.
- They are likely to bombard users with information that serves to reinforce what the algorithm thinks the searcher needs to know.
- As they familiarise themselves with the Internet, newly online Indians are bound to fall prey to algorithms that social network firms use.
Steps to control the misinformation on the internet
- 1) Tech firms are already under fire from all quarters, nonetheless, we need to act.
- They are struggling to meet calls to contain the online spread of misinformation and hate speech.
- 2) Unlike the U.S., India might need to chart its own path by regulating these firm before they proliferate.
- In the U.S., these issues were not sufficiently legislated for and have existed for over a decade.
- Free speech is inherent in the Constitution of many democracies, including India’s.
- This means that new Indian legislation needs to preserve free speech while still applying pressure to make sure that Internet content is filtered for accuracy, and sometimes, plain decency.
- 3) The third issue is corporate responsibility.
- Facebook, for instance, has started to address this matter by publishing ‘transparency reports’ and setting up an ‘oversight board’.
- But we cannot ignore the fact that these numbers reflect judgements that are made behind closed doors.
- What should be regulatory attempts to influence the transparency are instead being converted into secret corporate processes.
- We have no way of knowing the extent of biases that may be inherent inside each firm.
- The fact that their main algorithms target advertising and hyper-personalisation of content makes them further suspect as arbiters of balanced news.
- This means that those who use social media platforms must pull in another direction to maintain access to a range of sources and views.
Consider the question “What are the factors responsible for the spread of misinformation on social media and suggest the measures to tackle it.”
Conclusion
We need strong intervention now. Else, in addition to the media, which has largely been the responsible fourth estate, we may well witness the creation of an unmanageable fifth estate in the form of Big Tech.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Various provisions of labour code
Mains level: Paper 2- Labour code reforms
The article highlights the key provision of the labour code and how it will help in removing the various hurdles faced by the key stakeholders.
Increase in the threshold for closure/lay-off and its impact
- The Industrial Relations Code 2020 increased the threshold for retrenchment/closure or lay-off without requiring government approval, from 100 to 300 workers.
- This will help in addressing the matter of expansion of the firms.
- In 2014, Rajasthan had increased the threshold of taking prior permission of the government before retrenchment.
- The reform has helped firms to set up larger operations in Rajasthan, and the same amendment was followed by 15 states.
Fixed Term Employment(FTE): Ensuring flexibility and tackling exploitation
- In many jobs employees are required for a few months such as infrastructure projects, textiles and garments, food and agro-processing, etc.
- However, the contractual employment workforce is quite often exploited with respect to wages, social security, and working conditions as well as welfare facilities.
- Fixed Term Employment is an intervention to enable the hiring of employees directly instead of hiring through contractors, which will ensure flexibility.
- For employees, all statutory entitlements and service conditions equivalent to those of a regular employee have now been made applicable.
- The Code on Industrial Relations also extends the benefit of gratuity even for an FTE contract of one year, which is five years in the case of regular employees.
Strengthening the formal economy
- The inclusion of the gig and platform workers in the Social Security Code 2020 is a step towards strengthening the formal economy.
- The provision for insurance coverage has been extended to plantation workers, and free annual health check-ups and a bipartite safety committee has been introduced for establishments such as factories, mines and plantation sectors in place of hazardous factories.
- The ESIC and EPFO requirements will now apply to establishments employing less than 10 and 20 workers respectively on a volunteer basis.
Ensuring female labour force participation
- Falling women’s workforce participation in India has been a matter of concern for a long time.
- Female labour force participation is a driver of growth and, therefore, participation rates indicate the potential for a country to grow more rapidly.
- The new Code ensures the employment of women in night shifts for all types of work.
Expansions of the provisions for migrant workers
- The Occupational Health, Safety & Working Conditions Code expands the definition of a migrant worker.
- The expanded definition includes workers who would be directly employed by the employer besides those employed through a contractor.
- Also a migrant, who comes on his own to the destination state, can declare himself a migrant worker by registering on an electronic portal.
- Registration on the portal has been simplified and there is no requirement of any other document except Aadhaar.
- For de-licencing/de-registration, it is mandated to notify registering officers about the closure of their establishment and certify payment of dues to all employed workers.
- This will ensure that workers will not be exploited even during the closure of the concerned establishment.
Other provisions
- The introduction of a concept of conducting web-based inspections can be seen as an attempt of matching corporate needs in the digital world.
- The provision for a 14-day notice period before strikes and lockdowns would allow both workers and employers to attempt resolving the issues.
- The codes also promote lifelong learning mechanism to match the evolving skill sets required for technology and process changes through the introduction of a reskilling fund.
Consider the question “What are the various provision added in the three labour code and how it will help revive the economy and tackle barriers in the expansion of firms?”
Conclusion
The reform measures address basic needs — to revive the economy and tackle barriers in the expansion of firms. Moreover, they promote the employment of women as well as reskilling of the workforce for the deployment of migrants.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: List 2 and List 3 of the Constitution
Mains level: Paper 2- Legal challenges Agri Acts 2020 could face
Farm Acts passed by the Parliament could face the legal hurdle in the court when challenged on its constitutional basis. This article explains the issue.
Background
- Recently, Parliament passed three acts related to agriculture. These Acts are-
- 1) The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020.
- 2) The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020.
- 3) The Essential Commodities (Amendment) Act, 2020.
- This has led to the question: Does the Union government have the authority to legislate on what are rightfully the affairs of States?
Why agriculture is considered as States’ prerogative
- Agriculture is a State subject in the Constitution, listed as Entry 14 in the State List (List II).
- Entry 26 in the State List refers to “trade and commerce within the State”.
- Entry 27 in the State List refers to “production, supply and distribution of goods”.
- Entry 28 refers to “markets and fairs”.
- For these reasons, intra-State marketing in agriculture was always considered a legislative prerogative of States.
What was the legal basis used by the Parliament to pass the Farm Acts
- The central government invoked Entry 33 in the Concurrent List (List III).
- Entry 26 and 27 in List II are listed as “subject to the provisions of Entry 33 of List III”.
Entry 33 in List III: Trade and commerce in, and the production, supply and distribution of, — (a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products; (b) foodstuffs, including edible oilseeds and oils; (c) cattle fodder, including oilcakes and other concentrates; (d) raw cotton, whether ginned or unginned, and cotton seed; and (e) raw jute.
Historical background of “Entry 33” of Concurrent List
- Entry 33, in its present form, was inserted in List III through the Constitution (Third Amendment) Act, 1954 after heated constitutional debates.
- The contention of the dissent was the following:
- As per Article 369 in the original version of the Constitution, the responsibility of agricultural trade and commerce within a State was temporarily entrusted to the Union government for a period of five years beginning from 1950.
- The 1954 Amendment attempted to change this into a permanent feature in the Constitution.
- According to dissident “if matters enumerated in Article 369 in were placed in List III, State autonomy would be rendered illusory and State powers and rights would be progressively pulverised…”.
- While another dissident argued that “passage of the Bill would transform the Indian Constitution into a “unitary Constitution” instead of a “federal Constitution” and reduce “all the States’ powers into municipal powers”.
- Notwithstanding the strong dissenting voices, the Bill was passed.
Let’s look into the related Supreme Court Judgments
- In many of its judgments after 1954, the Supreme Court of India has upheld the legislative powers of States in intra-State agricultural marketing.
- Most notable was the ruling of the five-judge Constitution Bench in I.T.C. Limited vs. Agricultural Produce Market Committee (APMC) and Others, 2002.
- The Tobacco Board Act, 1975 had brought the development of the tobacco industry under the Centre.
- However, Bihar’s APMC Act continued to list tobacco as an agricultural produce.
- In this case, the question was if the APMC in Monghyr could charge a levy on ITC for the purchase of unprocessed tobacco leaves from growers.
- An earlier judgment had held that the State APMC Act will be repugnant to the Central Act, and hence was ultra vires.
- But the Constitution Bench upheld the validity of the State APMC Act, and ruled that market fees can be charged from ITC under the State APMC Act.
Consider the question “Examine the validity of legal basis used by the Parliament to pass the Farm Acts. Why it could face the legal challenge?”
Conclusion
It was unwise on the part of the Centre to use Entry 33 in List III to push the Farm Bills. Such adventurism weakens the spirit of federal cooperation that India needs in this hour of crisis. Second, agriculture is exclusively a State subject.
Back2Basics: Read more about 3 Agricultural Acts passed by the Parliament here-
[Burning Issue] Agricultural Reform Bills, 2020
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Asset Reconstruction Company
Mains level: https://indianexpress.com/article/opinion/columns/insolvency-law-ibc-corporate-debt-resolution-bankruptcy-code-nirmala-sitharaman-6704399/
The article argues for the greater role to Asset Reconstruction Companies by allowing them to invest in the equity [shares] of the distressed companies.
Context
- In a recently released paper “Indian Banks: A time to reform” Viral Acharya and Raghuram Rajan argued for a greater role for Asset Reconstruction Companies.
- They argue that when there are fewer bids in a bankruptcy auction, the value on loans is better realised if read an asset reconstruction company takes over the borrower and places the firm under new management.
Current limits on the role of ARC
- The RBI limited the role of ARC to participation in resolutions under the Insolvency and Bankruptcy Code, 2016 (IBC) only by partnering with an equity investor, which is the resolution applicant.
- If the application succeeds, the equity investor would acquire the shares, while the ARC trust would acquire the debt.
Background of the ARCs
- Some stakeholders are asking for extending the role of ARCs by allowing direct invest in the equity of distressed companies through IBC resolution just like private equity funds.
- The RBI doesn’t appear to favour such an extended role for ARCs.
- This is due to the uninspiring performance of the Asset Reconstruction Companies in the past.
- At the time of the Asian Financial Crisis, India’s non-performing assets stood at a whopping 14.4 per cent.
- It was in this context that the Narasimham Committee (1998) recommended setting up an ARC specifically for purchasing NPAs from banks and financial institutions.
- Subsequently, the SARFAESI Act, 2002 created the legal framework for establishing multiple private ARCs.
- This policy achieved only modest success.
- The maximum average recovery by ARCs as a percentage of total bank claims stood at 21.5 per cent in 2010.
- Since then, it has steadily declined and reached 2.3 per cent in 2018.
- This low recovery could be the result of collateral disposal rather than genuine business turnarounds [i.e. operating the business and turning it profitable].
Need for extending the role of ARCs
- In 2002, India lacked an effective bankruptcy system.
- There was no market for corporate control of distressed firms.
- ARCs were originally designed for this peculiar institutional ecosystem.
- They were required to hand over the distressed business back to the original promoter once they had generated enough value to repay the debt.
- Consequently, ARCs had little incentive to turn around distressed businesses.
- This situation completely changed in 2016 as the IBC seeks to maximise the value of distressed businesses through a market for corporate control.
- ARCs should be able to fully participate in this market and attempt successful turnarounds by acquiring strategic control over distressed businesses.
- In a solvent company, shareholders have stronger incentives than creditors to maximise enterprise value.
- This is because an increase in enterprise value automatically increases the value of its equity.
- In contrast, creditors do not benefit from increases in enterprise value beyond their individual claims.
- If ARCs could hold more equity instead of debt in the resolved company, they would also have a stronger incentive to take strategic control to ensure successful turnaround.
Way forward
- The law should enable ARCs to invest in a distressed company’s equity, whether by infusing fresh capital or by converting debt into equity.
- Effectively, an ARC should act more like a private equity fund, as Acharya and Rajan suggested.
- This in turn would make the market for corporate control under IBC deeper and more liquid, improving ex-ante recovery rates for banks.
Consider the question “What are Asset Reconstruction Companies? How allowing the ARCs to invest in equity of distressed companies under IBC help successful turnaround of the distressed business?”
Conclusion
- If only ARCs are allowed to directly participate in IBC resolutions by infusing equity, they could emerge as the most efficient vehicle for turning around distressed Indian businesses.
Back2Basics: Difference between debt and equity
- Debt market and equity market are two broad categories of investment available in the general investment milieu.
- Equity markets trade in shares or stocks of the company listed on the stock exchanges.
- A stock in a company indicates a unit in the ownership of the company.
- As shareholders, you become part owners of the company.
- The largest shareholder, with 50% or more shares, becomes the owner of the company.
- Equity markets are riskier than debt markets.
- Debt is a form of borrowed capital.
- The central or state governments raise money from the market by issuing government securities or bonds.
- In effect, the government is borrowing money from you and will pay interest to you at regular intervals.
- The principal amount is returned on maturity.
- In the same way, a company raises money from the market by selling debt market securities such as corporate bonds.
- The debt market is made up of bonds issued by government authorities and companies.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Labour Code Bills
Mains level: Paper 2- Issues with the labour laws
Increase in the jobs without employment security
- Between 2004-05 and 2017-18, the share of salaried workers outside agriculture without any written contract increased from 60 per cent to 71 per cent.
- Even in private and public limited companies, this share increased from 59 per cent to 71 per cent.
- In the government and the public sector the share of such workers increasing from 27 per cent to 45 per cent over the period.
- Many of the wage jobs in the organised sector came through contractors.
- In organised manufacturing, the reported share of contract labour increased from 13 per cent in 1995-06 to 36 per cent in 2017-18.
Policy response
- A policy to deal with the problem of employment security was much needed.
- The response came in the form the three revised labour Code Bills — on Industrial Relations, Occupational Safety, Health and Working Conditions, and Social Security.
- These were introduced in Parliament in the Monsoon Session, and approved on September 23.
- These three labour codes, along with the Code on Wages approved earlier, touch the lives of every Indian worker.
“Fixed term” worker
- In 2018, the government amended the Standing Orders on Employment Act and introduced the category of “fixed term” worker.
- That category creates a permanent cadre of temporary workers, with no prospects of career growth and job security.
Changes and issues with the Bills
- 1) Government had rationalised fixed-term employment by arguing that industries had resorted to the third-party engagement of contract labour to get around the rigidities in firing workers.
- But that has not stopped the Codes from further liberalising the provisions relating to employment of contract labour and making their regulation applicable only in establishments employing 50 or more workers, instead of 20 or more.
- 2) The key provisions which regulate the employment of inter-state migrant workers have been further diluted and made applicable only to establishments employing 10 or more such workers, compared to five earlier.
- 3) Along with the provisions of retrenchment, the applicability of the Standing Orders, which regulate the categorisation as well as the terms of employment of workers in establishments, has also been raised from 100 to 300 workers.
- 4) The threshold for factories has now been doubled — from 10 to 20 workers with power — thereby eliminating a large number of important regulatory provisions for the smaller factories.
- 5) Relevant governments have been given much more leeway in exempting establishments from the applicability of a whole range of provisions in the Code.
- 6) Inspection provisions have been diluted in all the Codes and will no longer even be complaints based.
- 7) The changes have also made legal industrial action a virtual impossibility, and the presence of unions less possible.
Conclusion
Informality contributes to inequality and to conditions which make sustainable growth impossible, and economic recovery more difficult. It also creates conditions in which employers under-invest in workers’ capacities and workers are not invested in a company’s future — leading to low productivity and lack of competitiveness.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: APMC Act, Companies Act, ECA 1955
Mains level: Paper 3- Reforms in various sectors of economy
The article discusses the issues faced by the various sectors of the economy and how the reform measures introduced by the government could help these sectors.
Exploitation of farmers and consumers
- The Indian farmer has bee treated as captive sources of producing cheap food grain while living at subsistence levels.
- There was no freedom to choose the point of sale for his produce, he could not decide the price of his product and had no say in selecting the buyer.
- The end consumer was equally short-changed with frequent cycles of persistent high inflation.
- The only beneficiaries of this perverse system were middlemen who thrived under political protection.
How reforms will help farmers
- The stifling nature of the Essential Commodities Act and the APMC Act have both been removed.
- Contract farming is now nationally enabled, allowing private investment to come in.
- Private investment will bring in technology, modern equipment, better seeds, know-how for in-between-season crops, improved yields, better logistics and freer access to national and international markets.
- The Indian farm sector will now finally begin to see the benefits of economies of scale.
Need for the reforms in various sectors
- There were 44 different labour laws with more than 1,200 sections and clauses that demanded compliance if one even thought of becoming an entrepreneur.
- Different inspectors and departments administered these laws and this stunted many entrepreneurs.
- The Companies Act of 2013 completely paralysed risk-taking and quick decision-making among the private wealth creators.
- There were a large number of organisations that called themselves “banks” but were completely outside the ambit of RBI regulation.
- The politicians who controlled these banks were the primary obstacles in introducing any reforms in these sectors.
- Indian mainstream banks, contrary to international norms, had a peculiar practice of “grossing” their bilateral liabilities rather than “netting”.
- As per estimates, this locked anywhere between Rs 50,000 to Rs 70,000 crore funds.
Reforms made by the government
- In place of the 44 central labour laws, the Parliament has now put in place four labour codes that are much simpler — the Code on Wages, the Industrial Relations Code, the Social Security Code and the Occupational Safety, Health and Working Conditions Code.
- The bilateral banking netting law has been passed and a large corpus of unproductive capital has been freed to be deployed in the market.
- Cooperative banks will now be regulated by the RBI and its customers will have the same protections as those of other regular banks.
- The problematic sections of the Companies Act 2013 have been done away with and the fear of criminal prosecution gone.
Conclusion
The reforms in various sectors of the economy are bound to help the faster recovery of the economy as well as help the farmers realising their full potential.
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From UPSC perspective, the following things are important :
Prelims level: Quad members
Mains level: Paper 2- Future course of action for Quad
The article discusses the future course of action for the Quad and issues it faces in the present circumstances.
Evolution of the Quad
- In 2007, the Quad (the United States, Japan, India, and Australia) was an idea whose time had not yet come.
- The global financial crisis was yet to happen as America continued to enjoy its ‘unipolar moment’.
- The American still expected China to become a ‘responsible stake-holder’.
- America required Chinese goodwill in handling issues with North Korea and Iran, and the War on Terror.
- Japan and Australia were riding the China Boom to prosperity.
- If India was ambivalent at the time, it was because this mirrored the uncertainties of others.
China’s reaction and naval expansion
- When the idea of Quad was barely on the table; the Chinese, labelled it as an Asian version of the North Atlantic Treaty Organization.
- The real reason for China’s hyperreaction was out of concern that such a grouping would “out” China’s plans for naval expansion by focusing on the Indo-Pacific maritime space.
- Once the idea of Quad 1.0 had died down, China advanced a new claim — the Nine-Dash Line — in the South China Sea.
- It undertook the rapid kind of warship building activity
- It built its first overseas base in Djibouti.
- It started systematically to explore the surface and sub-surface environment in the Indian Ocean beyond the Malacca Straits.
- China’s dismissal of the Arbitral Award in the dispute with the Philippines on the South China Sea and its militarization of the islands has given a second chance to the Quad.
Quad: A plurilateral mechanism
- The Quad nations need to better explain that the Indo-Pacific Vision is an overarching framework being discussed in a transparent manner.
- They should also explain that the objective of Indo-Pacific vision is of advancing everyone’s economic and security interests.
- The Quad is a plurilateral mechanism between countries that share interest on specific matters.
- In 2016, China itself established a Quadrilateral Cooperation and Coordination Mechanism with Afghanistan, Pakistan and Tajikistan.
- The Quad is no exception.
Way forward
- The forthcoming Ministerial Quad meeting will be an opportunity to define the idea and chart a future path.
- Needless provocation of China should be avoided.
- Other countries might be invited to join in the future.
- An outreach to the Indian Ocean littoral states is especially important since there are reports from some quarters suggesting that India is seeking to deny access to some extra-regional countries through the Indian Ocean.
Conclusion
A positive agenda built around collective action in humanitarian assistance and disaster relief, monitoring shipping for search and rescue or anti-piracy operations, infrastructure assistance to climatically vulnerable states, connectivity initiatives and similar activities, will re-assure the littoral States that the Quad will be a factor for regional benefit, and a far cry from Chinese allegations that it is some sort of a military alliance.
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From UPSC perspective, the following things are important :
Prelims level: Eight Schedule
Mains level: Paper 2- Eighth Schedule and related issues
The article discusses the issues with excessive attention given to Hindi and how the neglect of another language could lead to the loss of language and the way of life associated with it as well.
Debate in Constituent Assembly and issues in the adoption of Hindi
- The issue of adopting a national language could not be resolved when the Constituent Assembly began drafting India’s Constitution.
- Members from the Hindi-speaking provinces who moved a number of pro-Hindi amendments and argued for adopting Hindi as the sole national language.
- Widespread resistance to the imposition of Hindi led to the passage of the Official Languages Act of 1963, which provided for the continued use of English for all official purposes.
- Hindi became the sole working language of the Union government by 1965 with the State governments free to function in the language of their choice.
- The constitutional directive for the Union government to encourage the spread of Hindi was retained within Central government entities in non-Hindi-speaking States.
Issues with the Eighth Schedule
- According to the 2001 Census, India has 30 languages that are spoken by more than a million people each.
- The Constitution lists 22 languages and protects them in the eighth schedule.
- Many languages are kept out of this schedule even if they deserve to be included.
- This includes Tulu which is spoken by over 1.8 million people and has inscriptions dating back to the 14th and 15th centuries.
- While Hindi, a much younger Indo-Aryan language, has been gaining prominence since before independence.
- When a refined language loses its status in literary and daily interactions, the way of life associated with it also vanishes.
- The Census found that while Hindi is the fastest growing language, the number of speakers of other languages has dropped.
Way forward
- While discussing Hindi and its use, let us also focus on the merit of other Indian languages.
- Instead of focusing on one national language, we should learn a language beyond the mother tongue and get to know a different way of life too.
Conclusion
If we don’t protect and promote other well-evolved or endangered and indigenous languages, our future generations may end up never understanding their ‘real’ roots and culture
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2-Issues with the Code on the Wages
The article discusses the issues in the Code on Wages (yet to be notified) 2019 and how it fails to achieve what it seeks to achieve.
Code on Wages 2019
- The Code on Wages, 2019 seeks to consolidate and simplify four pieces of legislation into a single code. These 4 legislations are-
- 1) Payment of Wages Act, 1936.
- 2) Minimum Wages Act, 1948.
- 3) Payment of Bonus Act, 1965.
- 4) Equal Remuneration Act, 1976.
- Its object and reasons stated that even the Second National Commission on Labour- 2002 suggested consolidating all labour laws into four codes.
Issues with the consolidation
- While the previous four pieces of legislation had a total of 119 sections, the new Code has 69 sections.
- Any consolidation will impact the length of the sections.
- Further, all requirements for enforcing the Act, have been relegated to the Rules.
- As a result, the delegated pieces of legislation (Rules) will be bigger than the Code; this is no way to condense prior pieces of legislation.
- All the four repealed pieces of legislation were enacted historically at different points in time and to deal with different situations.
- The combining of asymmetrical laws into a single code is not an easy task and will only create its own set of new problems.
- The central government will have the power to fix a “floor wage”.
- Once it is fixed, State governments cannot fix any minimum wage less than the “floor wage”.
- The concept should be for a binding minimum wage and not have dual wage rates — a binding floor wage and a non-binding minimum wage.
- Neither the Code nor the Rules (presently, draft Rules) prescribe the qualifications and experience required for appointment of competent authority.
- Anew provision (Section 52) has been introduced where an officer will be notified with power to impose a penalty in the place of a judicial magistrate.
- An essential judicial function is now sought to be vested with the executive in contravention of Article 50 of the Constitution.
Issue of MGNREGA wages
- There were cases as to whether the Minimum Wages Act would have an over-riding effect over the provisions of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), 2005.
- Several High Courts have placed the Minimum Wages Act to override MGNREGA.
- That has been set to rest by excluding MGNREGA from the purview of the Code on Wages.
- That has been set to rest by excluding MGNREGA from the purview of the Code on Wages.
Conclusion
The Code on Wages (yet to be notified) has neither succeeded in consolidation of laws nor will it achieve the expansion of the coverage of workers in all industries in the unorganised sector.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Retrospective legislation
Mains level: Paper 3-Implications of Vodafone tax case ruling
Context
- An Investor-State Dispute Settlement (ISDS) tribunal has ruled that India’s imposition of tax liability amounting to ₹22,000 crore on Vodafone is in breach of India-Netherlands bilateral investment treaty obligations.
Background of the case
- This case arose after the Indian Parliament in 2012 amended the Income Tax Act.
- As per the amendment, income deemed to be accruing to non-residents, directly or indirectly, through the transfer of a capital asset situated in India is taxable retrospectively with effect from April 1, 1962.
- This amendment was carried out to override the Supreme Court ruling in favour of Vodafone.
- This amendment dented India’s reputation as a country governed by the rule of law, and shook the faith of foreign investors.
Key lessons from Vodafone case
- 1) All the three organs of the Indian state — Parliament, executive, and the judiciary — need to internalise India’s BIT and other international law obligations.
- These organs need to ensure that they exercise their public powers in a manner consistent with international law, or else their actions could prove costly to the nation.
- 2) India should learn that being a country that values the rule of law is an important quality to win over the confidence of foreign investors and international goodwill.
- 3) It is likely that the government might challenge the award at the seat of arbitration or resist the enforceability of this award in Indian courts alleging that it violates public policy.
- It would mean that India does not honour its international law obligation.
- 4) This ruling might have an impact on the two other ISDS claims that India is involved in with Cairn Energy and Vedanta on the imposition of taxes retrospectively.
- 5) It is quite possible that India might use this award to further harden its antagonistic stand against ISDS and BITs.
- India unilaterally terminated almost all its BITs after foreign investors started suing India for breaching BITs.
- But the fact is that this case and several others are a result of bad state regulation.
- 6) This decision shows the significance of the ISDS regime to hold states accountable under international law when in case of undue expansion of state power.
- The case is a reminder that the ISDS regime, notwithstanding its weaknesses, can play an important role in fostering international rule of law.
Consider the question “What were the issues involved in the Vodafone tax case? What are the implication of Investor-State Dispute Settlement ruling for India?”
Conclusion
If government is serious about wooing foreign investment, India should immediately comply with the decision.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: U.N. and its organs
Mains level: Paper 2- United Nations and the challenges it faces
As the U.N. enters into 75th year of its existence, it faces several challenges. The article discusses such challenges.
Challenges to the multilateralism
1) Withdrawal of the main stakeholders: U.S. and the U.K.
- The U.S. is withdrawing from multilateralism and so it the U.K.
- Brexit has shown that nationalism remains strong in Europe.
- Nevertheless, the most important development is the position of the U.S.
- The U.S., which created the international system as we know today, is no longer willing to be its “guarantor of last resort”.
- U.S. President Donald Trump stressed “America First” and suggested that others too should put their countries first.
2) China’s reluctance
- China has stepped in to take advantage of the West’s retreat from multilateralism.
- But China is not embracing the idea of multilateralism.
- China’s Belt and Road Initiative consists of a series of bilateral credit agreements with recipient countries with no mechanism for multilateral consultation or oversight.
- The European Union’s and U.S.’s sanctions against Russia have driven it closer to China.
- Work of the UN Security Council has been affected by the lack of consensus between its permanent members.
3) Turkey’s interventions
- Turkey has intervened in Syria, Libya, and the Eastern Mediterranean, which is a breach of international law.
- The last was a reference to Turkey sending a drilling ship in Greek and Cypriot exclusive economic zones.
- Turkish President Recep Tayyip Erdogan made a detailed reference to the Jammu and Kashmir issue.
- As Turkey has assumed the position of UN General Assembly President, statement and its actions matters.
4) Paucity of resources
- Over 40 UN political missions and peacekeeping operations engage 95,000 troops, police, and civil personnel. it suffers from a paucity of resources.
- The UN peacekeeping budget, a little over $8 billion, is a small fraction of the $1.9 trillion military expenditure governments made in 2019.
- Most of the humanitarian assistance, developmental work, and budgets of the specialised agencies are based on voluntary contributions.
- There are calls for increasing public-private partnerships. This is not a satisfactory arrangement.
- The UN provides ‘public goods’ in terms of peace and development often in remote parts of the world.
- There may not be enough appetite on the part of corporations. The UN remains an inter-governmental body.
5) Climate action
- President Trump mentioned that China’s emissions are nearly twice of those of the U.S.
- Despite its withdrawal from the Paris Agreement, the U.S. has reduced its carbon emissions by more than any country in the world.
- President Xi said that after peaking emissions by 2030, China will achieve carbon neutrality before 2060.
- President Macron said that he was determined to see the EU agree on a target of achieving carbon neutrality by 2050.
Consider the question “As the world is facing the retreat from multilateralism, what are the challenges facing the U.N. in the current global order?”
Conclusion
What does the UN bring to the developing countries? It gives them greater political space. We need to support reform not only to expand the permanent members’ category of the Security Council but also to revitalise the role of the General Assembly. The retreat from multilateralism would undermine the UN’s capacity to face diverse challenges.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Doctrine of colorable legislation
Mains level: Federalism issue raised by the Agricultural Bills
The President has finally given assent to the controversial farm Bills passed by Parliament last week. Amid protests by farmers’ organisations across the country, questions are being raised about the anti-federal nature of these ‘Acts’.
Here we shall only discuss its constitutionality and federal nature. Tap to read more about the theme at:
What is the question over the constitutionality of these laws?
- These are some of the questions that will be raised in the petitions challenging the constitutionality of the Acts.
- As per Union of India v H.S.Dhillon (1972), the constitutionality of parliamentary laws can be challenged only on two grounds — that the subject is in the State List, or that it violates fundamental rights.
- As per Ram Krishna Dalmia v Justice S R Tendolkar (1958) and other judgments, the Supreme Court will begin hearings after presuming the constitutionality of these laws.
- The bills (now Acts as they have got the President’s assent) do not mention, in the Statement of Objects & Reasons, the constitutional provisions under which Parliament has the power to legislate on the subjects covered.
Where does the question of federalism come in?
What is federalism, first?
- Federalism is the system of government in which sovereignty is constitutionally divided between a central governing authority and constituent political units.
- It is based upon democratic rules and institutions in which the power to govern is shared between national and state governments, creating a federation.
- It essentially means both the Centre and states have the freedom to operate in their allotted spheres of power, in coordination with each other.
Try this PYQ:
Q.Which of the following federal principles are not found in Indian federation?
- Bifurcation of the judiciary between the Federal and State Governments
- Equality of representation of the states in the upper house of the Federal Legislature
- The Union cannot be destroyed by any state seceding from the Union at its will
- Federal Government can redraw the map of the Indian Union by forming new States
Select the correct answer using the codes given below:
a) 1, 2 and 3
b) 2, 3 and 4
c) 1 and 2
d) 3 and 4
Federalism in India
- The Seventh Schedule of the Constitution contains three lists that distribute power between the Centre and states.
- There are 97 subjects in the Union List, on which Parliament has exclusive power to legislate (Article 246); the State List has 66 items on which states alone can legislate.
- The Concurrent List has 47 subjects on which both the Centre and states can legislate, but in case of a conflict, the law made by Parliament prevails (Article 254).
- Parliament can legislate on an item in the State List under certain specific circumstances laid down in the Constitution.
Concretization of the idea
- Federalism, like constitutionalism and separation of powers, is not mentioned in the Constitution. But it is the very essence of our constitutional scheme.
- In the State of West Bengal v Union of India (1962), the Supreme Court held that the Indian Constitution is not federal.
- But in SR Bommai v Union of India (1994), a nine-judge Bench held federalism as part of the basic structure of the Constitution.
- Neither the relative importance of the legislative entries in Schedule VII, Lists I and II of the Constitution, nor the fiscal control by the Union per se is decisive to conclude the Constitution is unitary.
- The respective legislative powers are traceable to Articles 245 to 254… The State qua the Constitution is federal in structure and independent in its exercise of legislative and executive power,” it said.
Where is agriculture in the scheme of legislative powers?
Terms relating to agriculture occur at 15 places in the Seventh Schedule.
- Entries 82, 86, 87, and 88 in the Union List mention taxes and duties on income and assets, specifically excluding those in respect of agriculture.
- In the State List, eight entries contain terms relating to agriculture: Entry 14 (agricultural education and research, pests, plant diseases); 18 (rights in or over land, land tenures, rents, transfer agricultural land, agricultural loans, etc.); 28 (markets and fairs); 30 (agricultural indebtedness); 45 (land revenue, land records, etc.); 46 (taxes on agricultural income); 47 (succession of agricultural land); and 48 (estate duty in respect of agricultural land).
- In the Concurrent List, Entry 6 mentions the transfer of property other than agricultural land; 7 is about various contracts not relating to agricultural land; and 41 deals with evacuee property, including agricultural land.
- It is clear that the Union List and Concurrent List put matters relating to agriculture outside Parliament’s jurisdiction, and give state legislatures exclusive power.
- No entry in respect of agriculture in the State List is subject to any entry in the Union or Concurrent Lists.
What about Entry 27 of the State List that is subject to Entry 33 of List III (Concurrent)?
- Entry 33 of the Concurrent List mentions trade and commerce, production, supply and distribution of domestic and imported products of an industry over which Parliament has control in the public interest.
- This includes foodstuffs, including oilseeds and oils; cattle fodder; raw cotton and jute.
- The Centre could, therefore, argue that it is within its powers to pass laws on contract farming and intra- and inter-state trade, and prohibit states from imposing fees/cesses outside APMC areas.
- However, like education, farming is an occupation, not trade or commerce.
- If foodstuffs are considered synonymous with agriculture, then all the powers of states in respect of agriculture, listed so elaborately in the Constitution, shall become redundant.
So what happens in case of legislation that covers entries in two Lists?
- In cases such as State of Rajasthan v G Chawla (1959), courts have used the doctrine of “pith and substance” to determine the character of legislation that overlaps between entries.
- The constitutionality of legislation is upheld if it is largely covered by one list and touches upon the other list only incidentally.
- But the two new farm Acts go beyond that — they impinge on entries in the State List.
- In interpreting the lists, the Supreme Court in State of Bihar v Kameshwar Singh (1952) invoked the doctrine of colourable legislation, which means you cannot do indirectly what you cannot do directly.
What is the Doctrine of Colorable Legislation?
- This doctrine refers to the question of competency of the legislature while enacting a provision of law.
- If a legislature is prohibited from doing something, it may not be permitted to do this under the guise or pretence of doing something while acting within its lawful jurisdiction and this prohibition is an implied result of the maxim “what cannot be done directly, cannot be done indirectly”
- This doctrine is a tool used to determine the legislative competence of laws enacted by various legislatures.
- Therefore, it is a means to implement the separation of powers and impose judicial accountability.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Issues with medical education in India
The article discusses the issues with medical education in India and how it affects the principle of equality.
Role of private entities
- Due to demand for high-quality medical care on the one hand and constraints on public resources on the other, private entities have been permitted to establish medical educational institutions to supplement government efforts.
- In the field of health care, there is a continuing shortage of health-care personnel.
- The infrastructure required for high-quality modern medical education is expensive.
- The three stated objectives of medical education has been — providing health-care personnel in all parts of the country, ensuring quality and improving equity.
- None of the three stated objectives of medical education has been achieved by the private sector.
- Though they are supposed to be not-for-profit, taking advantage of the poor regulatory apparatus and the ability to both tweak and create rules, these private entities, with very few exceptions, completely commercialised education.
Demand for regulation and equity
- There have been attempts to regulate fees, sometimes by governments and sometimes by courts.
- These efforts have not been fruitful.
- The executive, primarily the Medical Council of India, has proven unequal to the task of ensuring that private institutions comply with regulations.
- When the courts are approached, which issues are seen as important depends on the Bench.
- It was in this situation that led to the introduction of the National Eligibility-cum-Entrance Test (Undergraduate), or NEET-UG, as a single all-India gateway for admission to medical colleges.
- Challenged in courts, after an initial setback, the NEET scheme has been upheld.
How NEET affected equity
- NEET may have improved the quality of candidates admitted to private institutions to some extent, but it seems to have further worsened equity.
- Under any scheme of admission, the number of students from government schools who are able to get admission to a medical college is very low.
- With NEET, the number has become lower.
- The high fees of private medical colleges have always been an impossible hurdle for students from government schools, whatever the method used for admission.
Way forward
- The basic cause of inequity in admission to higher educational institutions is the absence of a high quality school system accessible to all.
- Allowing government medical colleges to admit students based on marks in Standard XII and using NEET scores for admission to private colleges will be more equitable right now.
Conclusion
Only a resolute government, determined to ensure that economic policy facilitates quality and equity in education, can do it.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Fiscal deficit and government budget
Mains level: Paper 3- Impact of pandemic on Indian economy
The government faces the challenge of high fiscal deficit and declining revenue. This article discusses the challenge and suggests the way forward to deal with the situation.
Dismal growth prospects
- At (-)23.9% contraction for the first quarter of 2020-21, India’s growth showed one of the highest contraction globally.
- What is most surprising in the Q1 data is that the sector ‘Public Administration, Defence and other Services’ contracted at (-) 10.3%.
- This means that there was no fiscal stimulus.
- The 2020-21 real GDP growth for India is forecast in the range of (-) 5.8% (RBI) to (-) 14.8% (Goldman Sachs).
- The OECD in its September 2020 Interim Economic Outlook has projected a contraction of (-) 10.2% in FY21 for India.
Challenge of decline in revenue
- Due to a sharp contraction in nominal GDP growth, central and State tax revenue, both may contract.
- . In the first quarter of 2020-21, the Centre’s gross tax revenues contracted by (-) 32.6%.
- The CAG-based data pertaining to 19 States show a contraction of (-) 45% in their own tax revenues.
- Given the adverse impact of the lockdown, even the budgeted non-tax revenues are not likely to be realised.
- The revenue calculations of the Budget were made on the assumption that the nominal income of the country would grow at 10%.
- Some estimates indicate that the tax and non-tax revenue and non-debt capital receipts in the current fiscal may fall well short of the budget estimates by an amount higher than ₹5-lakh crore.
- The combined fiscal deficit of the Centre and the States will have to make up for the shortfall in tax and non-tax revenues, if the level of budgeted expenditures is to be maintained.
Challenge of widening of fiscal deficit
- In order for the central government to maintain the level of budgeted expenditure and also provide for additional stimulus, its fiscal deficit may have to be increased to close to an estimated 8.8% of GDP.
- If one adds the Centre’s and States’ fiscal deficit, the combined fiscal deficit amounts to 13.8% of GDP.
- If the nominal GDP actually contracts in 2020-21, the fiscal deficit as the percent of GDP would go up further.
Role of the RBI
- The International Monetary Fund, in its June 2020 update of the World Economic Outlook, estimated the fiscal deficit of India and China at 12.1% of GDP.
- India doesn’t have adequate resources to support a fiscal deficit of nearly 14% of GDP.
- All this will therefore require substantial support from the Reserve Bank of India which will have to take on itself, either directly or indirectly, a part of the central government debt.
- In the direct mode, the RBI takes on the debt directly from government at an agreed rate.
- It took India long to move away from the automatic monetisation of debt.
- Even if the RBI wants to support the borrowing programmes, it should not do so directly.
- The indirect method is preferable as the market still sends out the signals on interest rate.
- In both cases, the RBI is the provider of liquidity.
- The question ultimately relates to the extent of debt monetisation that may be undertaken.
- The country has also to guard against high inflation.
Role of government
- The economic situation warrants enhanced government expenditure.
- It appears that governments are withholding expenditure. That is not the right approach.
- At the same time, there is a limit to monetisation of debt.
Conclusion
Perhaps the best course of action would be to keep the combined fiscal deficit at around 14% of GDP in the current year and find ways to finance it. This will have to be brought down gradually. It may take several years of normalisation.
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