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  • Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

    Issues with the MSP in the age of surplus production

    op-ed snap | Agriculture | Mains Paper 3: Issues Related To Farm Subsidies & Msp,PDS, Buffer Stock & Food Security

    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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  • Urban Transformation – Smart Cities, AMRUT, etc.

    Redefining cities

    op-ed snap | Polity | Mains Paper 2: Governance, Transparency & Accountability, Citizens Charters,Government Scheme/Policies

    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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  • Mother and Child Health – Immunization Program, BPBB, PMJSY, PMMSY, etc.

    Assisted Reproductive Technology Bill needs a thorough review

    op-ed snap | Governance | Mains Paper 2: Laws, Institutions & Bodies Constituted For The Vulnerable Sections

    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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  • PPP Investment Models: HAM, Swiss Challenge, Kelkar Committee

    Reviving the private investment in infrastructure

    op-ed snap | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.

    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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  • Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

    Provisions for platform workers in the labour code and issues with them

    op-ed snap | Governance | : Laws, Institutions & Bodies Constituted For The Vulnerable Sections,Parliament & State Legislatures

    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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  • US policy wise : Visa, Free Trade and WTO

    H-1B visa amid the U.S. elections

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

    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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  • Social Media: Prospect and Challenges

    Tackling the challenge of Big Tech

    op-ed snap | Science Tech | Mains Paper 3: Social Media Networks & Internal Security

    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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  • Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

    Labour code reforms address basic needs

    op-ed snap | Governance | : Laws, Institutions & Bodies Constituted For The Vulnerable Sections

    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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  • Parliament – Sessions, Procedures, Motions, Committees etc

    Legal challenges the Farm Acts could face

    op-ed snap | Polity | Mains Paper 2: Government Scheme/Policies,Parliament & State Legislatures

    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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  • Insolvency and Bankruptcy Code

    Asset Reconstruction Companies

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

    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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