9 PM Daily Brief – May 22nd ,2020

9 PM for Main examination

GS-2

1. Reviving MGNREGA
2. Relationship between SC and HC

GS-3

3. Agricultural Reforms
4. NPA and Bad Bank

GS-4

5. Ethical angle to labor laws change

9 PM for Preliminary examination

FACTLy

 1.Reviving MGNREGA

Source – Indian Express

Syllabus – GS 2 – Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes

Context – With crores of migrants returning back to their villages, need is to update and revive MGNREGA

1.MGNREGA – Mahatma Gandhi National Rural Employment Guarantee Act

1. The mandate of the MGNREGA is to provide at least 100 days of guaranteed wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual labor.
2. MGNREGA is bottom-up, people-centered, demand-driven, self-selecting and rights-based program.

2.Objectives

1. Social Protection– Social protection for the most vulnerable people living in rural India by guaranteeing wage employment opportunities.
2. Livelihood security– Enhance livelihood security of the rural poor through generation of wage employment opportunities in works leading to creation of durable assets.
3. Rejuvenate natural resource base of rural areas.
4. Rural assets– Create a durable and productive rural asset base.
5. Focus on local governments– Deepen democracy at the grassroots by strengthening Panchayati Raj Institutions (PRI).

3.Suggested Steps to revive MGNREGA

1. Increasing fund allocation– The allocation for FY21, which amounts to 0.47 per cent of the GDP (Rs 1 lac crore including pending liabilities for FY20) continues to be much lower than the World Bank recommendations of 1.7 per cent for the optimal functioning of the programme.
2. Responsibilities of PRI– Local bodies can proactively reach out to returned and quarantined migrant workers and help those in need to get job cards. This also includes giving more autonomy to gram panchayats under the act.
3. Provisions for WASH– At the worksite, adequate facilities such as soap, water, and masks for workers must be provided free of cost for hygiene. For reasons of health safety, MGNREGA tools should not be shared between workers.
4. Timely wage distribution – Lack of financial inclusion of rural people and low density of bank branches in rural areas need urgent reforms so that early distribution of wages to workers can be ensured.
5. Expanding definition– Definition of MGNREGA need to include skilled work taken up by city migrants to cater their demand of work. Care work done by vulnerable sections like women can also be included in the definition.

Way Forward –The demand driven work under the Act will increase cash in hands of people which will boost the consumption and hence private investment will go up. MGNREGA, thus, is one of the most effective tools to revitalize the economy and promote welfare of vulnerable sections in post-CORONA India.

2.Relationship between SC and HC

Source: The Indian Express

Syllabus: GS 2-Structure, organization and functioning of the Executive and the Judiciary—Ministries and Departments of the Government; pressure groups and formal/informal associations and their role in the Polity.

Context: A division bench of the High Court of Karnataka, presided over by its chief justice, questioned the state government’s decision not to fund the travel of migrant workers if their home states do not deposit funds for train fares.

Stand of HC of Karnataka:

• Legality of refusal: It required the state government to clarify the legality of its refusal to pay the fares of migrant workers from states like UP, Bihar and Jharkhand despite the Centre laying down rules for reimbursement from destination states.
• Migrants with no income: It asked the government whether it wanted to take a stand that a migrant worker who was not in a position to pay the railway fare would not be allowed to travel home by the Shramik Special trains.

Stand of the Karnataka government:

• The Karnataka Government unsuccessfully argued that the high court cannot intervene because the Supreme Court, when directly approached under Article 32, had refused to intervene on the issue of migrants walking home due to the lack of transport arrangements.

Supreme court orders on migrants:

• Declined to give directions: Three orders separately passed by different benches had declined to give any direction to the government at the Centre to make transport available to migrant workers.

Instances of issues between High Court and Supreme Court:

• During the internal Emergency of June 1975 judges in six high courts in the country, namely the HCs of Delhi, Bombay, Madhya Pradesh, Allahabad, Karnataka, and Rajasthan refused to accept that oppressive laws and orders were no longer reviewable by courts.
• ADM Jabalpur case: These judgments were overruled by the SC in ADM Jabalpur AIR 1976 by a Constitution Bench of five judges (4:1). The net result was upholding the executive’s prerogative to detain people and a citizen had no right to move a habeas corpus in a high court under Article 226 in the light of the Emergency.
• Puttaswamy vs Union of India case (2017): It stands overruled by a nine-judge bench of the SC.
• Case of Justice C S Karnan:
  • In May 2017, seven judges of the SC invoked its contempt jurisdiction under Article 129 and punished a sitting judge Justice C S Karnan of Madras High Court by sending him to jail.

Relationship between High Court and Supreme Court:

• Not subordinate: Under our Constitution, high courts are not subordinate to the Supreme Court although decisions of the SC are binding on the high court.
• According to Contempt of Courts Act,1971: A judge of a superior court under the Constitution who is vested with the power to commit for contempt of court cannot himself or herself be committed for criminal contempt.

Way Forward

The Court must take humanitarian approach in their working. Judges are the spinal cord of the rule of law and the final interpreters of the Constitution. Their judgments govern social and economic justice.

3.Agricultural Reforms

Source – Indian Express

Syllabus – GS 3 – Transport and marketing of agricultural produce and issues and related constraints

Context – The relief measures for agriculture announced in Atmanirbhar package targets only the market issues not the structural challenges

1. Marketing Issues in Agriculture Sector

APMC Act was enacted to ensure that farmers mandatorily sell their produce in market yard (mandi) through auction and they do not depend on informal channels to sell their produce. However, over time inefficiencies and monopoly of mandi’s created following issues:

Figure 1- Supply chain under APMC Act

2. Current reforms

Recently many states have adopted the model APLM Act,2018 as lockdown forced farmers into distressed sale of their produce:

1. 1. Rajasthan has allowed farmers to sell their produce directly to traders.
   2. Chhattisgarh is rolling out a direct cash transfer of a maximum of Rs. 10,000 per acre subject

3. Implication– All the stakeholders in the supply chain will have following benefits:

Figure 2 –Supply chain under Model APLM Act and Model Contract Farming Act

4. Issue with new reforms– 85% small and marginal farmers – Most of the farmers in agriculture sector are small and marginal. Thus, they have no economies of scale, bargaining power and can’t afford high transportation cost which will force them to sale their produce to small traders in their local markets and villages.

Figure 3- Issues faced by small and marginal farmers

5. Suggested reforms
   Agriculture sector is in dire need of Structural Reforms which are:

• Credit Availability– Increasing reach of institutional credit and ensuring promotion of long-term loans so that investment in next crop cycle can be made by farmers.
• Promoting e-NAM– Creation of an online national market with provision for interstate trading license and freedom to farmers to choose their buyers and vice-versa.
• Rationalizing subsidies– The fiscal cost of subsidies, poor targeting, effect on supply-demand of farm produce and environmental cost demands rationalizing them so that market forces can govern the farm production.
• Boost to Food Processing Industries – FPI act as link between industry and farmer which ensures better income for farm produce on one hand and better value addition by industries on other. This creates employment opportunities for disguised labor force of agriculture and increase exports.

Way forward – Agriculture sector need holistic reforms across its all segments which include crop production management, pricing, marketing and value addition to double farmers income and ensure food security.

4.NPA and Bad Bank

Source: Live Mint

Syllabus: GS 3-Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Context: The Indian Banks’ Association has requested the central government to set up a “bad bank” to reduce the impact of their losses because of provisioning for non-performing assets (NPAs).

Data: The total gross NPAs of banks stands at 9.08% of their total gross advances in 2019.

Concept of Bad Bank:

• Bad bank: It is a structure that moves the distressed and illiquid assets of a bank into another entity through regulatory structures such as asset reconstruction companies (ARCs), alternative investment funds (AIFs) and asset management companies (AMCs).
• Its Working: The proposal envisages setting up an ARC platform to buy these stressed pools from banks and turn them around.
• Benefits:
  • Allow banks to write off the appropriate provisions for the portfolio sold and get the discounted value that the ARC pays for the distressed pool purchase.
  • The stressed assets can alternatively be sold to an AIF, which could turn them around.
• Counter view to bad bank:
  • Opaqueness in dealing bad loans: By forcing the government, in its capacity as the owner of multiple banks, to set up a bad bank and buy distressed assets at “book value”.
  • Precedent for others: If a bank owner wants to own an ARC, it set precedent for other banks and non-banks to also seek an ARC of their own.
  • Not fixed solution: The system should not let pools of assets be juggled between a bank book and ARC.
  • Not fair pricing: Of pools purchased by an ARC.
  • Strict regulations: Most bad loan declarations of late are taking place due to strict regulatory supervision pressures and lenders’ balance sheets are being cleaned out.
  • Need of specialists: Turnaround specialists with specific sectoral skills are needed for the task of ARCs and not just experts with credit underwriting or collections expertise.

Is the current framework equipped to handle NPAs?

• Want higher price: If there is no desire for AMCs, AIFs and ARCs to take over bad loans, it could be because the owners of those assets want a price higher than the fair market value.
• Expectation of higher returns: ARCs will buy those pools of stressed assets only if they see continued viability of those pools being recovered.

NPAs without bad bank:

• Lenders would have to pitch for the interest of ARCs in the market to gauge their interest in the distressed pool.
• Need of more equity: It will be needed as they have to provide for NPAs in the balance sheets.
• Transparency: This would be a transparent way of telling public investors where their money is going.

Way Forward

With COVID-19 crisis, the NPAs are expected to rise further. Any measure to bring it down is a welcome move.

5.Ethical angle to labor laws change

Source: The Indian Express

Syllabus: GS 4-Public/Civil service values and Ethics in Public administration: Status and problems; ethical concerns and dilemmas in government and private institutions; laws, rules, regulations and conscience as sources of ethical guidance; accountability and ethical governance; strengthening of ethical and moral values in governance; ethical issues in international relations and funding; corporate governance.

Context:  Under the cover of the economic impact of the COVID-19 lockdown, the government has moved to reform India’s labour laws.

Ground reality of workers due to lockdown:

• Moving scenes of millions of migrant workers who were abandoned by their employers.
• Images of jobless workers and their homeless families crawling to reach their homes.
• It revealed the fragility of their contracts with their employers.

Case study about workers and employers:

• Planning Commission study:  
  • In 2013, it asked Bain & Company to conduct an objective study of enterprises in India.
  • The management consultancy firm was asked to test the hypothesis that the long-term performance of the companies, who treat their employees as long-term assets is better than the ones who consider workers as a burden and as costs to be adjusted, whenever sales drop.
  • The companies were compared with their peers in the same industries.
  • Result: The companies that invested in their workers and considered them as assets did much better.
• Maruti case study:
  • It was shaken by violent unrest.
  • Treatment of contract workers: They were not paid the same wages as permanent workers doing the same work and did not have the same rights to represent their needs to the management because the contract workers were not the company’s employees legally.

Issues of workers:

• Unfair practice to Contract workers: The Bain study had revealed that the practice of engaging workers through contractors to work alongside permanent skilled workers had permeated all the best employers in the country.
• It reduced the cost of workers for the company: The Bain study had revealed that the companies’ profits would be only marginally reduced if all workers were paid similar wages.

Fact: Employee costs constitute less than 20 per cent of the companies’ costs. Within employee costs, the share of compensation of CEOs and senior executives was often half of the total. (CEO compensation had risen to over 300 times the salary of a worker in many companies; in the early 1990s, it had been less than 20 times.)

• Bad conditions of workers: While workers within the factories of large employers were not being fairly treated by enlightened employers, conditions of workers outside are worse.
• Large companies employ very few people: Most of the employment their business generates is outside their factory walls in terms of suppliers, down to hundreds of tiny and informal enterprises.
• No rights: Labour laws provide even less protection to millions of workers outside in terms of payment of their wages, their safety or their rights of association.

Role of Unions:

• The unions and employers listen to each other so that they could agree on norms and regulations that would give employers requisite freedom to improve the competitiveness of their enterprises while ensuring fairness for workers.
• Speaking for all workers: These unions were also asking employers to consider the conditions of the 96 per cent of the contract workers and not just organized sector.
• Workers suffer: Workers suffer whenever there is a downturn because of weak social security systems. The unions appealed to these big businesses to consider all Indian citizens and not only their own employees and shareholders when they proposed changes in India’s labour law regime.

Term: The Overton window is the range of policies politically acceptable to the mainstream population at a given time.

Need of effective labour laws for workers:

• The weakening of India’s GDP growth.
• Economists’ data that employment is declining.
• The appeals of the unions.
• Pictures of millions of workers abandoned by the system.

Way Forward

India is a democracy. Therefore, workers and their needs must be heard while framing or changing regulations. Their voices must not be silenced by ordinances.

9 PM for Preliminary examination

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