9 PM Daily Brief – October 28,2020

Good evening dear reader.

Here is our 9pm current affairs brief for you today

GS-2

1. GST Issue
2. India – Myanmar relations
3. Governance reforms for commerce
4. Chinese economic policy

GS-3

 5. DISCOMs

6. Punjab Assembly Rejects Centre’s Farm Laws

9 PM for Preliminary examination

FACTLY

1. GST Issue

Source: The Hindu

Syllabus: GS2: Issues and Challenges Pertaining to the Federal Structure,

Context: Centres unilateral decisions on the issue of GST compensation to states without having consensus of GST council is threatening the federal architecture.

What is GST?

• The GST is a single destination-based tax that replaced numerous central and State taxes with States giving up almost all their powers to tax.
• In exchange for this bargain, the Centre assured them full compensation, for five years, for all losses arising due to the transition to the GST.
• Followingly, a GST Council was established, consisting of the Central and State Finance Ministers who are empowered to make recommendations about various issues related to the GST.
• Benefits of GST includes efficiency, equity, stabilisation, economic growth, and balanced development, among others.
• GST is hailed as one of the most significant fiscal reforms since Independence.

What is the background of the issue?

• Due to the COVID-19 pandemic induced disruption, Tax collections were low leading to a massive revenue shortfall.
• This has also reduced the available resources in the compensation fund.
• The centre with limited abilities to raise revenues was initially not committed to the agreement on full compensation to states for five years, for all losses arising due to the transition to the GST.
• Though, the centre was not committed at first to compensate states for GST losses claiming the pandemic as an ‘act of God’, later it came up with other options to meet the states shortfall in tax revenue collection.
• The Centre allowed states to increase its fiscal deficit from 2% to 3% and asked the states to borrow from the market to meet their shortfall.

How Centre’s decision is affecting Co-operative federalism?

• Borrowing on Conditional basis: The states were allowed to borrow on conditional basis that states need to bring reforms in four areas including universalisation of a ‘One Nation-One Ration Card’, electricity distribution, ease of doing business, and urban local body revenues.
• Shifting the fiscal burden to the states: While most of the States preferred that the Centre should borrow the entire shortfall the responsibility to borrow was transferred on to the states.
• Unilateral decisions: there was a deliberate attempt to prevent “unionised bargaining” by the States as the decisions were not being made in the GST Council but announced in press meetings.

What is the way forward?  Co-operative federalism——-Case of VAT (Value added tax)

• It has to be noted that, it was the empowered group of State Finance Ministers who helped to bring fiscal reforms earlier namely, VAT the precursor to GST.
• This consensus based decision-making process gave States both the confidence and ownership of reforms and the new institutions being put in place.
• It assured that, authority migration towards the Centre might not make a difference to States as their interests are being taken care of by the Centre.
• Such collective decision-making process will guarantee the continuity of federal institutions.

The recent Centre’s actions on GST compensation issue undermine the federal architecture. If this happens consistently over time, it will threaten the very existence of GST as a federal institution.

2. India – Myanmar relations

Source: The Hindu

Syllabus: GS-2- International Relations

Context: The recent visit of Foreign Secretary and Chief of the Army Staff Gen. to Myanmar revealed India’s multidimensional interests in the country and the deepening of ties between Delhi and Naypyidaw.

More on news:

• The visit featured two lines of thinking that drive India’s Myanmar policy: engagement with key political actors and balancing neighbours.
• For Myanmar, the visit would be viewed as India’s support for its efforts in strengthening democratisation amidst criticisms by rights groups over the credibility of its upcoming election.

What has India’s policy for Myanmar been?

• India’s policy to support democratisation driven from within the country has had following outcomes:
• This has allowed Delhi to engage with the military that played a key role in Myanmar’s political transition and is still an important political actor.
• It has enabled Delhi to work with the party in power, whether the military-backed Union Solidarity and Development Party or the pro-democracy National League for Democracy.
• India is aware of the geopolitical dimension of Myanmar’s democratisation.
• Policy of diversifying its foreign engagements: India and a few Asian countries have engaged Myanmar keeping in mind the need to reintegrate it with the region and world.
• Reason for military regime in Myanmar was to reduce dependence on china. By engaging Myanmar, Delhi provides alternative options to Naypyidaw.
• This driver in India’s Myanmar policy has possibly gained greater importance in the rapidly changing regional geopolitics.

What are the recent initiatives taken?

• Some initiatives announced during the joint visit suggest Delhi is taking steps to influence its political, diplomatic, and security ties with Myanmar:
• The inauguration of the liaison office of the Embassy of India in Naypyidaw.
• India has proposed to build a petroleum refinery in Myanmar that would involve an investment of $6 billion.
• Another area of cooperation that has expanded involves the border areas. The joint visit restated the “mutual commitment not to allow respective territories to be used for activities inimical to each other.”
• The balancing act between Bangladesh and Myanmar remains one of the keys to its overall approach to the Rohingya issue.
• Delhi has retold its support for “ensuring safe, sustainable and speedy return of displaced persons” to Myanmar.
• India has made it clear that it supports Myanmar’s efforts and also understands Bangladesh’s burden.

Way forward

• These initiatives could be the beginning of change on the ground by establishing India’s presence in sectors where it ought to be more pronounced.
• For India, Myanmar is key in linking South Asia to Southeast Asia and the eastern periphery becomes the focal point for New Delhi’s regional outreach.

Read also:-  Daily Current Affair

3. Governance reforms for commerce

Source: The Hindu BusinessLine

Syllabus: GS-2- Polity

Context: A Commerce Ministry for the 21st century with specialised departments for trade policy, negotiations and industrial development are of vital importance.

How the commerce ministry can be revamped to serve the needs of 21^st century?

• The Ministry of Commerce and Industry is tasked with navigating the complex web of issues to support India’s industrial development and competitiveness, and its engagement with the global economy.
• This task requires institutional depth and high levels of capability and domain expertise.

Competent trade negotiators

• The first suggestion is to create a specialised department focussed only on trade policy and negotiations headed by a Secretary.
• This department would be responsible for all negotiations for the WTO, FTAs, and other trade and investment related agreements.
• Senior officers including Joint and Additional Secretaries should have contracts of minimum five years, and should be individuals with major trade policy related experience because longer tenures would ensure institutional memory.

Competitiveness & value-chains

• The second suggestion is to create a single department responsible for the country’s industrial development and competitiveness.
• This would require bringing together of the mandates of the Director-General of Foreign Trade (DGFT), the Department for Promotion of Industry and Internal Trade (DPIIT).
• Special Economic Zones (SEZs) and Export Promotion Councils (EPCs) would also be under this department’s realm.
• Department of Industrial Development and Competitiveness, would lead to streamlining of the overall policy making and involvements required to address issues of industrial development, sectoral strategies and incentives, and export promotion.

Export discounts, trade promotion

• Export incentives should be replaced by schemes that reward firms for new product development, expanding into new markets, for job creation, or for significant achievements in value-addition.
• The digital information available with GSTN, Customs ICEGATE, the RBI, Unique LIN linked to EPFO and ESIC, and the JAM trinity has made this very easy.
• Dynamic MSMEs would be the biggest beneficiaries of trade facilitation schemes.
• EPCs should be made responsible for systemically collecting data and commercial intelligence in their sector, mapping global market opportunities and potential sources of competition.
• An anonymous committee drawn from industry members in EPCs should be made responsible for an independent inspection.
• EPCs should be made responsible for actual buyer-seller matching, and successful conclusion of deals achieved due to their efforts. They should be formally certified by beneficiary member firms.
• A grievance redress mechanism for members who have not received sufficient level of support from their EPCs should be set up, headed by the Secretary of the department.

Logistics Division

• Another suggestion is that the Logistics Division should become a full-fledged department headed by a Secretary.
• It should also be made responsible for Trade Facilitation along with providing holistic institutional basis to coordinate logistics infrastructure development, master-planning, and policy development.
• The Logistics Division should become the secretariat for the National Trade Facilitation Committee (NTFC), and be made responsible for framing the National Trade Facilitation Action Plan (NTFAP) and its implementation.

Way forward

• In order to impart Customs related domain expertise, officers from Customs could be supported to the Logistics Division to support the NTFC related activities.

4. Chinese economic policy

Source- Live Mint

Syllabus- GS 2- Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.

Context – Importance of China’s economic strategy for India.

What is the significance of china’s 14^th five year plan?

The Five-Year Plan (FYP) is China’s top-level policy blueprint created every five years since 1953, the 14th is in development and will cover 2021–25. There are two new growth model based on economic self-reliance-

1. Made in China programme– To ensure that china dominates production in 10 select sectors, such as artificial intelligence, robotics, new materials, electric vehicles, high-end medical equipment and next-generation transport technologies.

• China plans to use credit subsidies, public sector enterprises and intellectual property acquisitions to ensure that it achieves 70% self-sufficiency by 2025, and global dominance by 2049.

2. China’s dual circulation strategy- The two circulations are economic exchange within China and economic exchange with the rest of the world.

Aim-

1. Moving bank lending from services to high-end manufacturing, as well as restricting funds to real estate.
2. Cutting dependence on food and energy imported from the rest of the world.

In short, China will rely mainly on internal circulation i.e., the domestic cycle of production, distribution, and consumption for its development, supported by innovation and upgrades in the economy.

What are important lessons from the expected shifts in Chinese economic strategy?

There are three important lessons from the expected shifts in Chinese economic strategy-

1. Driver of Economic growth– China has been trying to increase domestic demand as a driver of economic growth rather than exporting goods in international market.
2. Technology war with USA – China is building capabilities in emerging industries through domestic industrial policy which indicates not only trade war but also technology war with USA in international market.
3. Increase the share of wages– Any country aiming for a higher reliance on its domestic market necessarily needs to increase the share of wages in its economy. The ability to build a mass consumption base is crucially dependent on higher wages across the economy.

Way forward- India has been a laggard in attracting manufacturing industries, but shift of supply chains out of China provides the opportunity to India to become global manufacturing hub and increase its global export.

5. DISCOMs

Source: The Hindu

Syllabus: GS3: Infrastructure: Energy

Context:  Providing only Stimulus package will not solve the entire problems of DisComs.

More in News

• DisComs, are utilities that buy power from generators and retail these to consumers.
• The government provided an ear marked stimulus package of ₹1,25,000 crore for DisComs to respond to COVID-19’s economic shock.
• The loan is meant to be used by DisComs to pay off generators.

Why the Stimulus package provided won’t be sufficient?

• As per PRAAPTI (Payment Ratification And Analysis in Power procurement for bringing Transparency in Invoicing of generators) portal, DisComs owe one lakh crore rupees to generators.
• But, PRAAPTI portal is not comprehensive as it is based on voluntary compilation of dues.
• Whereas, according to The Power Finance Corporation (PFC)’s Report on Utility Workings for 2018-19, DisComs owe ₹2,27,000 crore to generators which is twice that of the dues shown in PRAAPTI portal.

Why do DisComs face financial crunch?

• Management issues: Inefficiency and Aggregate Technical and Commercial (AT&C) losses that arise due to theft, lack of collection from consumers.
• Unsustainable tariff rates: Regulators themselves have failed to fix cost-reflective tariffs that denies DisComs to become a profitable sector.
• State as defaulters: State governments are the biggest defaulters, responsible for an estimated a third of trade receivables, besides not paying subsidies in full or on time.
• Consumers as defaulters: Consumers owed DisComs over ₹1.8 lakh crore in FY 2018-19, booked as trade receivables.
• Impact of Covid19: it has disproportionately impacted revenues to DisComs from paying customers, commercial and industrial segments.

What is the way forward?

• It is important to Improve AT&C losses.
• Need for a complete overhaul of the regulation of electricity companies and their deliverables.
• Rationalisation of electricity tariffs instead of free electricity. For this, regulators must allow cost-covering tariffs.
• Need a much larger liquidity infusion than has been announced along with credible plans to pay down growing debt.

To meet the current national needs of quality, affordable, and sustainable power its vital to improve the financial position of DisComs.

6. Punjab Assembly Rejects Centre’s Farm Laws

Source- The Indian Express

Syllabus- GS 3- Issues related to direct and indirect farm subsidies and minimum support prices; Public Distribution System- objectives, functioning, limitations, revamping; issues of buffer stocks and food security; Technology missions; economics of animal-rearing.

Context – Legislative approach of Punjab government to nullify some provisions of the Central farm laws

What are the sole objectives of farms bills 2020?

Liberate farmer from out-dated system– Opens up agricultural sale and marketing outside the notified Agricultural Produce Market Committee (APMC) mandis for farmers.

• It will allow farmers an option to sell their produce directly to these new zones, without going through the middlemen and paying levies such as mandi fees.

What are the new farm bills introduced by Punjab state government?

Punjab government passed legislation under Article 254(2) of the Constitution, to negate the enforcement of three Farm Acts passed by the Central government under Entry 33 of the Concurrent List.

Punjab State Bills – The Punjab assembly introduced three farm Bills-

1. Agreement on price assurance and farm services- It seeks to ensure that sales or purchase of wheat and paddy in Punjab is not allowed below the Minimum Support Price.

• It provides for imprisonment of not less than three years and fines for harassment of farmers or payment of less price to the farmer.

2. Fee on trade outside the APMCs– The central law abolished any market fees or licences for private players outside the APMCs, the Punjab bills have reintroduced it. These fees will go towards a fund for the welfare of small and marginal farmers.
3. Essential Commodities bills– It prevents hoarding and black-marketing of agricultural produce and seeks to ensure status quo ante with regard to implementation of the Central Act namely, ‘The Essential Commodities (Amendment) Act, 2020’.

What is the main reason of passing new bills by Punjab Government?

Against the Spirit of Cooperative federalism– Since agriculture and markets are State subjects – entry 14 and 28 respectively in List II – the ordinances are being seen as a direct encroachment upon the functions of the States.

• The main subjects of the three acts are agriculture and market that are essentially state subjects as per the Seventh Schedule of the Constitution.
• The Central government in devious manner its way into the legislation by misconstruing its authority on food items, a subject in the Concurrent List, as authority over the subject agriculture.

What is Article 254 (2) will this help the states?

It enables a State government to pass a law, on any subject in the Concurrent List, that may contradict a Central law, provided it gets the President’s assent.A state legislation passed under Article 254 (2) requires the assent of the President of India.

Way forward-

• Farming community and state governments should give the reform measures a fair chance by giving farmers access to competitive purchases, affording better prices.
• Government should improve agricultural infrastructure to strengthen competition.

9 PM for Preliminary examination

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