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NATIONAL
[1]. Let O in OBC stand for orphans too, says panel
Context
The National Commission for Backward Classes (NCBC) has passed a resolution stating that destitute orphaned children should be included in the central list of Other Backward Classes (OBC).
Ram Singh v/s Union of India case
NCBCs decision can be seen in the light of the Supreme Court’s 2015 judgment in the Jat reservation case wherein it scrapped the government’s March 2014 notification to include Jats in the central list of the Other Backward Classes (OBC) category in nine states.
It further ruled that
- “Caste” and “historical injustice” cannot be made sole grounds in according backward status to a community and that new emerging groups such as transgenders must be identified for quota benefits.
- Social groups which would be most deserving must necessarily be a matter of continuous evolution. New practices, methods and yardsticks have to be continuously evolved, moving away from caste centric definition of backwardness
Explanation: Reservation should be given not only on the basis of caste. In India we consider that if a person is Dalit then he/she would be poor or if a person is Brahmin then he/she would be from an affluent background, which is not always true. New methods and yardsticks must continuously be evolved to ensure that only the needy get the benefit of the reservation.
Beneficiaries
The action has been proposed for children,
- who have lost their parents before reaching the age of 10, and are admitted to government-run or aided schools and orphanages, with no one to take care of them “either by law or custom”
Have any states included orphans in OBC list?
- The Telangana and Rajasthan governments have included orphans in their state OBC list.
- In Madhya Pradesh, the state Backward Classes Commission recommended the inclusion, but was turned down by the state government
- Tamil Nadu has been providing reservation for orphaned children under the state OBC list for the last three years
What about transgenders? Are they included in central OBC list?
No. The Ministry of Social justice’s initial draft transgender bill had recommended reservation for transgenders under OBC, a provision which was dropped following protests from existing OBC groups against such a move eating into their 27 per cent quota.
A little something about NCBC
The Supreme Court of India in its Judgment in the Indira Sawhney & Others vs Union of India and Others directed the Govt. of India, State Governments and Union Territory Administrations,
- To constitute a permanent body in the nature of a Commission or Tribunal for entertaining, examining and recommending upon requests for inclusion and complaints of over-inclusion and under-inclusion in the list of OBCs.
- In the light of above judgement, the Government of India enacted the National Commission for Backward Classes Act, 1993. The Act came into effect on the 2nd April, 1993.
Members of NCBC – Section 3 of the Act provides that the Commission shall consist of five Members, comprising of,
- A Chairperson who is or has been a judge of the Supreme Court or of a High Court
- A social scientist
- Two persons, who have special knowledge in matters relating to backward classes
- AMember-Secretary, who is or has been an officer of the Central Government in the rank of a Secretary to the Government of India
Note – It may be noted that National Commission for Backward Classes has not yet been empowered to look into the grievances of persons of Other Backward Classes. Under Article 338(5) read with Article 338(10) of the Constitution, National Commission for Scheduled Castes is the competent authority to look into all the grievances, rights and safeguards relating to Backward Classes
[2]. Turning off Indus taps easier said than done
Context
In the wake of recent Uri attack in J&K, one of the options that is being thrown around is the abrogation of the 56 year old Indus water sharing treaty between India & Pakistan. Core thinking behind the idea is that India being an upstream country can stop the flow of waters to Pakistan bringing it to its knees.
Dependence of Pakistan on Indus water system
About 65% of Pakistan’s geographical area, including the entire Punjab province, is part of the Indus basin.
- The country has the world’s largest canal irrigation system, thanks to its development of the basin, which accounts for more than 90% of its irrigated area.
- Pakistan’s three biggest dams, and several smaller ones, are located in the Indus basin.
In short, Indus water system consists of critical sources of hydroelectricity, irrigation and drinking water for millions of Pakistanis.
Indus Water Treaty
The treaty was brokered by the World Bank (then the International Bank for Reconstruction and Development). It was signed in Karachi on September 19, 1960 by Prime Minister of India Jawaharlal Nehru and President of Pakistan Ayub Khan.
The Treaty classified the six rivers of the Indus system into ‘eastern’ and ‘western’ rivers.
- Eastern rivers – Sutlej, Beas and Ravi
- Western rivers – Jhelum, Chenab and Indus
The categorization was relative — the western rivers flow almost parallel to the west of the eastern ones.
- Indus, the largest river & Sutlej originates in China
- Beas, Ravi, Jhelum & Chenab originate in India
- All enter Pakistan from India
Indus water basin (Source: Wikipedia)
Eastern rivers
The Treaty gave India full rights over the waters of the eastern rivers, while it had to let the western rivers flow “unrestricted” to Pakistan. With the eastern rivers, India could do as it pleased.
Western rivers
India could use the waters of western rivers as well, but only in a “non-consumptive” manner. It could use it for domestic purposes, and even for irrigation and hydropower production, but only in the manner specified in the Treaty.
Indus Commission
A Permanent Indus Commission was established to implement the Treaty. Each country has an Indus Commissioner, and they meet regularly — every six months these days — to exchange information and data, and to settle minor disputes.
- Meetings of the Indus Commissioners have never been suspended
Why the Indus water treaty should not be tinkered with?
Indus water agreement has withstood many serious standoffs between the two countries. It is considered as a model of international water co-operation. Moreover, forcing Pakistan to act on cross-border terrorism by using the Indus water treaty will have negative repercussions for India too in the long run. Let us have a look at some of those.
- Fuel to the fire: There is already strong discomfort in Pakistan with the fact that India controls its rivers. This despite the fact that India has always complied with the provisions of the Treaty. Any tampering with the Treaty is likely to see an intensification of Pak-backed activities in J&K adding fuel to the fire.
- Flooding our own cities:Waters cannot be immediately stopped from flowing to Pakistan unless we are ready to flood our own cities. Srinagar, Jammu and every other city in the state and in Punjab would get flooded if we somehow were able to prevent the waters from flowing into Pakistan
- Losing out on bilateral credibility – We have water-sharing arrangements with other neighbors as well. Not honoring the Indus Treaty would make them uneasy and distrustful and we would be in no position to raise our voice if China decides to do something similar to us.
Other propositions
Some experts believe that even without disturbing the Indus water treaty we can send shivers in the Pakistani administration by utilizing the rights granted to us with regards to Western rivers & simultaneously engaging with Afghanistan on Kabul river
- The Treaty allows India to construct storage up to 3.6 million acre feet on the western rivers. But India has developed no storage capacities; nor has it utilised the water it is entitled to for irrigation.
- India’s greater engagement with Afghanistan on the development of the Kabul river that flows into Pakistan through the Indus basin will further send a strong signal to Pakistani establishment.
Conclusion
Instead of a reactive approach, India would do well to adopt a pro-active outlook. Tackling Pakistan on an international scale by active dissemination of information regarding its insurgent activities in India with a simultaneous utilization of innovative methods that make it realize that it can no longer sponsor terror into India, should guide India’s efforts towards finding a solution to this problem.
EDITORIAL
[1]. Getting Railways on track
Context
Recently, the government took the decision to merge the railway budget with the Union Budget. Article elaborates on the fact that how difficult it is even after 69 years of independence to discard some colonial era traditions & why the decision to scrap the rail budget is a correct one.
1st railway budget was presented in – 1924
Why a separate rail budget?
Practice of a separate rail budget was started during British Raj because at that time entire expenditure on railways was more than the combined expenditure on all the other aspects of the administration. This practice lingered on after independence too.
Politicians and leaders have used railways as a portfolio to satisfy populist tendencies & secure their indigenous votebanks.
Why scrap the rail budget now?
At present, rail budget is just 6% of the entire expenditure proposed in the union budget signifying a massive change.
- In fact, revenues from the domestic aviation business are more than the Railways’ traffic earnings.
- Nearly Rs.2.5 lakh crore has been planned this year as defence expenditure, but it found little mention in the Finance Minister’s Budget speech so why accord a special treatment to railways.
Moreover, with a majority government at the centre there could not have been a more proper time than ever to scrap this colonial practice.
Way ahead
Author contends that in order to build upon this progressive step, government should now,
- seriously consider setting up an independent tariff regulator to de-politicise fares meaning fare should be based upon economic feasibility rather than political considerations
- Consider establishing new lines and trains should be determined by economic viability rather than the constituencies covered
- Deploy Initiatives such as demand-driven clone trains to boost earnings
- Ensure that the Rs.37,000-crore on social obligations, including concessional ticketing, must be borne by the exchequer instead by the railways
A little about demand driven clone trains
Clone trains will be run on high-demand routes that will be run within an hour of a scheduled train’s departure to accommodate those on its waiting list.
- The idea behind such real-time demand-driven trains is to ensure that they reach their destination around the same time they had originally envisaged. Moreover, they would be informed about their berths in the clone train soon after the reservation charts for the original scheduled train are firmed up four hours before departure.
- These new parallel trains will be run within an hour of the original train
From which stations these clone trains would be run?
These trains could originate from Howrah, Mumbai CST, Chennai, Secunderabad and New Delhi, where the Railways has big coaching yards and rolling stock to put together a clone train in quick time.
Clone trains vs Vikalp
Concept of clone trains is different from Vikalp.
- Under Vikalp, waitlisted passengers are provided seats on alternate trains within twelve hours of the original train.
Conclusion
Scrapping an age old colonial practice is a move in the right direction by the government. With a strong government at centre the time is right to set a forward-looking agenda for a bankable railways.
[2]. Something for everyone
Context
Government has decided to roll out GST by 1st April 2017. In order to achieve the deadline, newly constituted GST Council is meeting to finalize upon some key issues like fixing tax rate and ensuring that India transitions to a unified tax regime in a smooth manner. Author has put forward a 5 point framework so that a consensus can be built upon towards that aspect.
GST Council
Members of the GST Council,
- representatives of the 29 States
- 2 Union territories
- Finance Minister along with his deputy
5 guiding principles for consensus on GST are,
1). Forget RNR (Revenue Neutral Rate) – Author says that instead of a Revenue Neutral Rate, which is an impossible task, each state should be given a guaranteed minimum amount. Every State can be guaranteed a minimum combined GST (Central and State GST) revenues for a period of five years or a State election, whichever is earlier. This minimum revenue formula should include all of the State’s 2015-16 non-petroleum, non-sin goods indirect tax revenues.
What is RNR?
RNR is simply a rate which ensures that the tax revenue of the states remain unchanged even after introduction of GST.
2).Keep it small and simple – A simple and low standard GST rate should be set to incentivise tax compliance and boost overall tax collections. Author proposes that the GST rate should be 15% which is equal to the current services tax rate including all cesses. All in all there can exist 4 slabs such as,
- Standard GST rate
- Low rate
- Merit rate
- High de-merit rate
GST council then can categorise goods and services under the above mentioned 4 slabs.
At this point author himself acknowledges the fact that both, a minimum revenue to states and a small GST rate go against the principles of fiscal discipline but in order to ensure smooth functioning of GST, such measures can be implemented.
- Explanation: Fiscal discipline is a financial term. We won’t go into the details of it. Just remember that fiscal discipline
3).No more State-specific tax incentives, increase threshold for exemption – Different States have different thresholds under which businesses are exempt from State taxes. Typically for large States, any business with an annual turnover of less than Rs.10 lakh is exempt. Since a uniform GST will remove the States’ ability to attract new businesses with tax incentives, there is an understandable fear of new job creation in the more developed States. Raising this threshold for GST exemption from the current average of Rs.10 lakh to, say, Rs.40 lakh can incentivise existing small businesses to grow faster, thereby creating new jobs.
In the longer run this would be beneficial to smaller states as it would attract larger businesses in the wake of cheap land and labor that is available in such states.
4). Minimal categories of exemption – With a guaranteed revenue to states and an overall lower GST rate, centre needs to ensure that no more goods and services are exempt from GST law except from the ones already agreed upon like petroleum & petro products along with sin goods such as alcohol and tobacco
5). Incentivise States for GST collection – Author posits that states should be given greater responsibility to collect central and state GST taxes within their boundaries because the more they will collect, the more they will get back. Generation of ample revenue by states will ensure successful implementation and functioning of GST
Conclusion
It was after a long and arduous process that GST bill was passed by both the houses of legislature. Now, the onus lies upon the council to chalk out a roadmap for its successful implementation. Evolving a consensus on its various key aspects is a step in the right direction.
[3]. Watch, but don’t wait
Context
Dengue and Chikungunya cases have been reportedly widely throughout India during past few days. Author puts forth few ideas as to how these diseases can be contained
Extent of the danger
- Cases in the world: The number of dengue cases in the world has jumped by almost four times since 1990. Approximately four billion people living in more than 128 countries are at risk of dengue. Every year, an estimated 400 million get infected globally and about 100 million get the disease.
- Cases in India: One report estimates that India has about six million laboratory confirmed dengue cases per year, resulting in an annual economic loss of about $1.11 billion. The official figure for India in 2015 is about a lakh cases.
Spread by
Both diseases are spread by the bite of an infected Aedesaegypti mosquito, and to a lesser extent, the Aedesalbopictus
Mosquito control methods
Control methods commonly applied are,
- Preventing breeding (by avoiding water collection in and around houses, etc.)
- Targeting larvae and pupae (using chemicals like temephos or biological methods like fishes)
- Focusing on adult mosquitoes (through spraying and with personal protection using mosquito repellents, coils, bed-nets, etc.)
Sustained efforts
Author contends that mosquito control methods are successful but only if sustained over a long duration and guided by faster implementation. The key therefore is,
- Effective and sensitive surveillance system to report early cases, immediately followed by large-scale application of control measures.
- Author says that the above measures are difficult to replicate in India as surveillance is weak or non-existent and the public health system is slow to respond
Why dengue control methods have failed?
- Apart from a lax surveillance system and a slow public health system, there is another reason for failure of dengue control methods.
- Lack of information on the efficacy of dengue control methods in reducing human infections and disease. Studies conducted so far only deal with the effect of control methods on larvae and/or mosquito density & it has been found that reduction in mosquito population does not correlate well with predictable reduction in dengue disease
Way ahead
Author suggests that,
- Decrease in dengue cases will only happen if existing tools are evaluated for their efficacy in reducing dengue transmission and not just mosquito numbers.
- A sensitive and effective surveillance system should be set up on priority basis.
- Rigorously designed field trials of existing tools should be undertaken
- Mathematical models should be used to know in which phase of the outbreak interventions like fogging should be initiated to minimize cases of dengue.
- Laboratory studies of successful interventions like a control method or a vaccine should be scaled up to see feasibility and impact. It means that if a vaccine or a control method is found successful at laboratory level then it should be scaled up to see whether it is feasible and effective to employ the same on a larger scale
- Limited resources must be efficiently targeted to only those essential activities that will decrease the number of dengue cases.
ECONOMY
[1]. Centre unveils sops to boost goods exports
The Hindu
Context
Commerce ministry has extended support to certain new products and enhanced the rate of incentives for some other under the reward programme called Merchandise Exports from India Scheme (MEIS)
Why the step has been taken?
There has been a continuous decline in the growth of Indian goods exports. To boost exports is the major rationale behind this step
Products added include several items of traditional medicines, marine products, dried onion, processed cereal products and value added items of plastics, leather articles and suitcases.
What is the MEIS Scheme?
Merchandise Exports from India Scheme (MEIS) under Foreign Trade Policy of India (FTP 2015-20) is one of the two schemes introduced in Foreign Trade Policy of India 2015-20, as a part of Exports from India Scheme. (The other scheme is SEIS, Service Exports from India Scheme).
The Government of India has brought in the Merchandise Exports Incentive Scheme (MEIS), replacing 5 other similar incentive schemes present in the earlier Foreign Trade Policy 2009-14. The schemes that have been replaced by the MEIS scheme include:
- Focus Product Scheme (FPS)
- Focus Market Scheme (FMS)
- Market Linked Focus Product Scheme (MLFPS)
- Agri. Infrastructure incentive scheme
- VisheshKrishiGraminUpajYojna (VKGUY)
As per the present FTP, the MEIS scheme does not aim to merely replace these five schemes but also aims to rationalize the incentives and enlarges their scopes by removing various restrictions.
Objective of MEIS scheme
To reward an exporter, in order to provide him a level playing field in the international market. The reward is the percentage of the total value of the export. It usually ranges between 2% – 5%.
- Scrips – The reward given is not in the form of cash but in the form of freely transferrable duty credit scrips (a kind of financial pieces of paper of a stated value). Exporters can then use these scrips to pay customs duty, service tax, excise duty etc
[2]. Share insights on infrastructure, Jaitley tells BRICS nations
Context
Finance Minister ArunJaitley has called for a formal mechanism within BRICS nations to share and exchange experiences on infrastructure development while delivering the inaugural address at a BRICS India 2016 seminar
Institutionalised knowledge platform
An in-house knowledge hub between the BRICS nations can be created to facilitate the exchange of information through various modern electronic methods like cloud sharing
National Investment and Infrastructure Fund (NIIF)
Finance minister also mentioned that the government has already set up the Rs.40000-crore NIIF in December 2015 for funding commercially viable greenfield, brownfield and stalled projects.
Why the NIIF was set up?
One of the biggest hurdle for India’s infrastructure expansion plans is lack of funds. The country need around $1000 billion in five years to finance the infrastructure programmes extending from roads to communication.
- To overcome the financing hurdle, the government took several steps including the formation of infrastructure financing companies like the IIFCL (Indian Infrastructure Finance Company Limited). But still, the required amount of money flow did not occur. Moreover, even the PPP model failed to contribute much. It is in this context that the government came out with a fresh idea of floating a fund mobilizing entity called National Investment and Infrastructure Fund (NIIF).
Structure
NIIF has been structured as a fund of funds and set up as Category II Alternate Investment Fund (AIF) under the Securities and Exchange Board of India (SEBI) Regulations.
Alternative Investment Fund (AIF)
Alternate investment funds (AIFs) are regulated by the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012
- They are classified under three categories – Categories I, II and III, from the angle of tax treatment under provisions of Income Tax Act.
- If set up as Category I and II AIFs, then NIIF will be eligible for a pass through status under the Income Tax Act. A ‘pass-through’ status means that the income generated by the fund would be taxed in the hands of the ultimate investor, and the fund will be exempted.
Nature of government ownership in NIIF
Government’s stake has been fixed at 49%. The 49% government holding will make it similar to a sovereign fund with guarantee of the government and will attract foreign investors besides generating trust among the foreign investors because of sizable government ownership and management.
Note – NIIF is only similar to sovereign wealth fund. In actuality it is not a sovereign wealth fund (SWF) because a typical SWF will be a state-owned investment company like the China Investment Corporation or the GIC (Government of Singapore Investment Corporation)which are owned by governments and invests their own money (foreign exchange reserves) in foreign countries. These funds are known as SWFs and invests in assets such as stocks, bonds, real estate, commodities etc.
Governance
NIIF has been set up as a Trust registered under the Indian Trust Act. The activities of NIIF will be overseen by a Governing Council, which is to be headed by Finance Minister and which has been formed to oversee the activities of NIIF.
Further, there are five members of this council as follows:
- Secretary, Department of Economic Affairs Secretary, Financial Services
- MsArundhati Bhattacharya (Current Chairman of SBI)
- Hemendra Kothari (Investment Banker)
- Mohandas Pai (former Infosys Director)
Objective
The objective of NIIF is to boost infrastructure development in commercially viable projects, both Greenfield and brownfield, including stalled projects. It could also consider other nationally important projects, for example, in manufacturing, if commercially viable.
- NIIF will raise funds from investors and markets and would invest the same in companies, institutions and infrastructure projects. It will also provide advisory services.
Note – Please note thatNational Investment and Infrastructure Fund (NIIF),National Investment Fund (NIF) and National Innovation Foundation (NIF) are all different entities.
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