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9 PM Daily NEWS Brief

9 PM Daily Brief – 12 January 2016

A brief of newspaper articles for the day bearing
relevance
to Civil Services preparation

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National 


[1]. Major fillip to ‘Make in India’ in defence purchases

The Hindu

Context:-

The government has approved major changes to the Defence Procurement Procedure (DPP).

It is an attempt to streamline defence acquisitions and give a big impetus to indigenisation through the ‘Make in India’ initiative

It is based on the recommendations of the expert committee headed by Dhirendra Singh

Highlights:-

The highlights of the new procedure are

  1. A new category to promote domestic manufacturing,
  2. Government funding for Research & Development (R&D)
  3. Recognition of the Micro, Small and Medium Enterprises (MSME) in technology development.

Indigenously Designed, Developed and Manufactured (IDDM) platforms:-

The DPP 2016 will have a new category, Indigenously Designed, Developed and Manufactured (IDDM) platforms.

It will be the priority route for procurements.

Within this two sub-categories have been created, one with mandatory 40 percent domestic content for a domestic design and the other mandating 60 percent local content if the design is not Indian.

The domestic companies eligible under this will have majority Indian control and operated by Indian nationals.

Funding Private R&D:-

In addition to building a technology base in the country, the government through the Department of Defence Production will fund private R&D for which various norms have been stipulated.

Under this projects are eligible for up to 90 percent funding.

Offset issue:-

The contentious issue of offsets has been amended from the current Rs. 300 crore to Rs. 2000 crore giving flexibility for foreign companies.

Offset clause mandates that a foreign company should invest 30 percent of the contract value back into the country with a view to bring in technology. Offsets push up cost of contracts by 14-18 percent

Revamping the lowest bidders system:-

The traditional L1 (lowest bidder) system will get a makeover with enhanced performance given weightage of 10 percent from now on.

L1 has been a limiting factor that on various occasions, better equipment was left out due to marginal price difference.

[2]. Is it constitutional to keep women off Sabrimala, asks Supreme Court

The Hindu

Context:-

The Supreme Court on Monday said no temple or governing body can bar a woman from entering the famous Sabarimala shrine in Kerala.

Women in the age group 10-50 are not allowed entry inside the temple.

Key points:-

Personal choice:-

Women may or may not want to go (to worship at Sabarimala), but that is her personal choice and the temple cannot interfere in it.

Proof for the tradition:-

When the Devaswom Board countered that the prohibition was based on custom followed for the past half century, the court asked for proof to show that women did not enter the sanctum sanctorum over 1500 years ago.

Discrimination violative of Constitution:-

The Constitution rejects discrimination on the basis of age, gender and caste as it is against our constitution.

Court said that there is a difference between a temple meant for the public to worship and a mutt

The ban against women entry was violative of Articles 14 (equality before law), 25 and 26 (freedom of religion) of the Constitution.

The petitioners wanted guidelines laid down in matters of gender inequality in religious practices at places of worship

Neither a ritual nor a ceremony:-

Petitioners against the ban held that the discrimination in matters of entry into temples was neither a ritual nor ceremony associated with Hindu religion.

Such discrimination was totally anti-Hindu. The religious denomination could only restrict entry into the sanctum sanctorum and could not ban entry into the temple, making discrimination on the basis of sex.

[3]. PMO sets up panel to fast-track bullet trains

The Business Standard 

Context:-

Panel has been set to hasten the Mumbai-Ahmedabad High-Speed Rail Corridor, meant for bullet trains between the two cities.

The panel will interact with the Japanese counterpart for taking the next step in implementation.

Highlights:-

The Cabinet’s approval for the high-speed line was based on the recommendations of a committee headed by Panagariya.

Also approved was a suggestion to consider allowing private operators on the 508-km line.

Japan over china:-

The Panagariya panel had favoured Japan over China due to

  1. Low-cost funding up to 80 per cent of the cost proposed by Japan International Cooperation Agency at 1 per cent interest rate (50-year repayment),
  2. Commitment for technology transfer
  3. Local manufacturing for a specified period.

It had suggested Indian Railways run the corridor for an initial five years, after which private operators could be allowed.

In India the proposed trains will be run on a standard gauge line and the train is described as having a maximum design speed of 350 km per hour.


International Relations 


[1]. Afghan peace talks: Pakistan warns against preconditions 

The Hindu

Context:-

Delegates from Afghanistan, Pakistan, China and the United States held talks on Monday to resurrect a stalled Afghan peace process.

The process aims to end nearly 15 years of bloodshed, even as fighting with Taliban insurgents intensifies.

The countries are hoping to launch a process that will lead to negotiations with Taliban insurgents, who are fighting to re-impose their strict brand of Islamist rule.

Primary goal:-

The primary goal should be to convince the Taliban to come to the table and consider giving up violence.

It is therefore important that preconditions are not attached to the start of the negotiation process as it will be counterproductive.

The threat of use of military action against opponents cannot precede the offer of talks to all the groups.

Bloodiest year:-

Renewed peace efforts come amid spiralling violence in Afghanistan, with last year one of the bloodiest on record following the withdrawal of most foreign troops at the end of 2014.

Peace efforts last year stalled after the Taliban announced that their founder, Mullah Mohammad Omar, had been dead for two years.

Only Afghans can resolve:-

Some of the factions of Taliban have a very clear-cut stance about peace talks that all the foreign occupying forces would need to be withdrawn

The issue is between the Afghans and only the Afghans can resolve it. We would not allow any third force to mediate between us.”


Economic Digest


[1]. Government to amend mining law 

The Hindu

Already discussed

Extra Info:-

The transfer of captive leases would be subject to the consideration of enforcing Performance Security, Mine Development and Production Agreement and realisation of an appropriate amount, if any, if found feasible at the time of framing terms and conditions

[2]. GST likely to Impact Renewable Energy Sector: Ministry Report 

The Economic Times 

Context:-

Latest findings reveal that the new GST regime could increase the cost of setting up renewable energy systems in the country by up to 20% from solar to wind to biomass to small hydro power projects.

Current scenario:-

The renewable energy sector currently enjoys various fiscal incentives like 100% tax holiday on the earnings for 10 years, concessional excise and custom duties and so on. All these incentives will come to an end in the new GST regime.

GST

Impact:-

The indirect tax reform through the GST could hike renewable energy costs and pricing and hit investors.

The key factors resulting in an adverse impact on the cost of renewable energy are removal of exemption, increase in tax rates and removal of statutory norms.

It is argued that a sudden increase in cost would lead to policy disruption, scare away new investors and also make it difficult to retain existing investors.

Exemptions:-

The ministry of renewable energy has requested an exemption.

The GST bill has provisions for exemptions by state governments and it is believed that renewable energy is a fit case for exemption.

[3]. Stamping out competition

The Financial Express 

Context:-

India Post has done well to cash in on the e-commerce boom—in just the first nine months of the year, it has earned nearly Rs 1,000 crore from delivering parcels.

Highlights:-

Given its extensive network, especially in tier II cities and rural areas, this is only going to grow faster. It is this network that also makes its forthcoming avatar as a payments bank look promising.

With its 1.55 lakh branches—India Post Bank’s operations would receive a major fillip once it becomes completely core banking-enabled.

Once the government’s direct benefits transfer (DBT) scheme picks up, India Post’s bank should be in a good position to make the most of this given the proximity of its branches to most rural households.

With over 35 schemes, including subsidy for LPG, coming under the DBT fold, almost Rs 40,000 crore had been paid to beneficiaries by December 27, 2015.

This will grow manifold once food and fertilizer subsidies are added to this.

Unfair:-

It would, however, be unfair if the DBT market is reserved for the postal bank. Other banks, including those backed by mobile phone firms, should be allowed an equal shot at this business.

[4]. Thank You, Dr, Kelkar

The Business Standard 

Context:-

Provisions of the report have already been discussed. Below we will see the suggestions of the author to create a better PPP environment.

Re-negotiation:

A permanent PPP re-negotiation mechanism has not been clearly articulated in the panel report.

The Infrastructure PPP Project Review Committee and the Infrastructure PPP Adjudication Tribunal that have been suggested are only for the limited purpose of addressing legacy problems.

The chief economic advisor, in the last Economic Survey, suggested that the government set up an “independent re-negotiation commission for PPPs”. This will strengthen the PPP environment.

Swiss challenge:

 The committee has taken a negative stand on the Swiss challenge method of procurement as not being able to pass the test of transparency and good governance.

This may not necessarily be so. Studies show that this method is able to bring in private sector project development capacity to supplement an already stretched public system.

Moreover, there are ways and means available to make Swiss challenge bids amenable to fair play.

Role of states:

 With fiscal devolution and cooperative federalism, the role of state governments in creating and nurturing PPPs will be far greater. A framework is required for linking state PPPs to the mainstream of best practices.

Electricity distribution, irrigation and public housing: 

The report dwells on issues in specific sectors such as roads, ports, airports and railways, it is important that as a nation we shape our thinking on three areas crying out for private involvement – electricity distribution, irrigation and public housing.

Development financial institution (DFI): 

Through the 1960s, 1970s and the 1980s, DFIs played a key role in making capital available for industrial development.

A similar intervention has often been felt necessary for PPPs in infrastructure.

A set of institutions was conceived to partially address this, starting from the Infrastructure Leasing & Financial Services Limited to the Infrastructure Development Finance Company Ltd and finally, the India Infrastructure Finance Company Limited.

However for whatever reasons, the sector lacks a DFI, which could take long-term views on sector financing and development. The issue of whether the PPP movement could benefit from a DFI is still wide open.

Irrational bidding:

Irrational bidding has been the bane of PPP projects. A clear task ahead is to evolve formats that prevent irrational bids from being accepted.

Plug and play:

Much of the stress in PPPs is because of hurried bid-outs without sovereign clearances.

It is not just land acquisition, as rightly emphasised in the report, but also other permissions encompassing forests, environment, utilities, defence and local authorities.

It is important that no concessioning authority in future be allowed to bid out projects without all sovereign clearances first being in place.

[5]. Threats to startup spring 

The Business Standard

Context:-

The article discusses the threats to the new start up climate in India.

The author feels that India’s decades-old institutional framework for creating and financing innovation and enterprise may not be up to the task of dealing with this Startup Spring.

Financial Services:-

The Indian financial services industry’s has the tendency to steer practically all capital flow into real estate and gold trading schemes.

This gravitational force is so overwhelmingly strong that even some marquee technology investors from the United States, once they operate for a few years in India, abandon their plans of investing in technology ventures and play the Indian real estate market.

Adopting the services Model:- 

As soon as early teething troubles emerge in technology startups, their board members and other advisers will push these startups to abandon their dreams and adopt a “services model” – hire, train and place people at customer premises and charge a monthly fee for each person so deployed.

Their justification is that all those great Indian computer companies that tried to make products in the 1990s Personal Computer era died, and only the ones who transformed themselves into Information Technology services companies supplying Indian programmers to international companies survived to tell the tale.

Sophisticated services and limited consumer base:-

Startups tend to create sophisticated products and services and end up addressing a population of  mere 80 million individuals or 16 million households – and that could be the problem to start with.

Also for a startup in India to be revolutionary enough to create products for segments beyond these two high-end groups would mean creating products and services which may not have exact equivalents in the US market

This means such start ups will be greeted with disbelief by the largely US-origin venture capital (VC) system in India.

LLP System:-

A smoothly working LLP system is needed for the angel investment movement to take off. The Securities and Exchange Board of India (Sebi) has created the framework for starting venture funds in India, but the minimum investment that a person needs to make to join such a fund is too high, at Rs 1 crore. While Sebi’s goal of keeping this bar high is well-intentioned (to prevent small investors from joining what is essentially a high risk investment vehicle), this bar may restrict the participation of many knowledge professionals who can’t come up with this scale of personal investment.

Execssive interest rates:-

Startups in India need a relatively low-cost debt for working capital, which is impossible to get in India (a country where banks charge interest rates in excess of 14 per cent for startup businesses) and that may well be the true barrier to success in India for startups.


Opinions & Editorials 


[1]. Improve the investment climate 

The Hindu

Context: India’s dismal performance on economic growth front in 2015 and what needs to be done for better investment climate in 21016 to propel growth engine.

Current Scenario:

Globally, the economy has been in a turmoil with IMF predicting a growth of 3.1%. Developing economies grew at 4% while developed economies at 2%. There is no positive response from countries that have benefited from crash in oil prices.

Among the BRICS nations, India is the only country to show positive performance.

2016, An Expected Picture:

a) IMF has predicted a growth rate of 3.6% globally, 2.2% for developed economies and 4.5% for developing economies. But this move bring about volatility in financial market and may have effect on capital flows in developing economies.

b) One developed economy expected to be doing better in 2016 is US indicated by their recent rise in interest rates by Fed.

c) Oil prices are not expected to rise, which means that oil-producing countries will continue to be in a limbo.

d) Among the developing economies, concerns about the performance of China will continue.

India : Current Scnario

a) Mid year economic analysis forecasts growth to be about 7 – 7.5% for 2015-16.

b) The growth in agriculture and services is expected to be static, with only hope that industrial sector may show some positive growth.

c) External demand has been weak which has made the exports decline.

d) There is a rise in private consumption due to fall in petroleum prices.

The Challenges:

A) Public Investment alone is not adequate: 

The problem has been private corporate investment which has show stagnation over the year.Thus, from the demand side, the only redeeming feature is the rise in public investment.

Despite a lower-than-expected growth in nominal GDP, revenue growth has remained close to the budgetary expectations. On the expenditure side, the subsidy burden came down because of a fall in crude prices. All this kept government expenditures at budgeted levels and allowed it to stick to the fiscal consolidation path. Capital expenditures rose substantially.

B) Pay Commission Burden

The additional burden imposed by the Seventh Pay Commission is substantial. The expenditure on pay and pension will increase by 20 per cent and it will amount to a burden of 0.4 per cent of GDP, after taking into account the additional tax revenue on the increased emoluments.

Against this background, the ability of the government to raise money for capital expenditures will be limited. However, relaxing the fiscal consolidation path is not a solution. A larger fiscal deficit will not only take up a greater share of the available pool of savings but also cause an increase in the interest rates. This is hardly conductive to a growth in private sector investment.

The Problem: 

The present position of private corporate investment is that while there has been some improvement in relation to stalled projects, there is no strong pick up in the new projects. This situation has to change, if the pace of the recovery is to speed up this year.

The corporate sector faces several internal problems, including a slow growth in nominal sales revenue and high levels of debt. For the investment climate to improve, investors’ confidence in the system must be enhanced. The government has an important role to play here.

To restore and enhance confidence even within the present structure, the government can easily remove cumbersome rules and procedures and tone up the delivery system.

[2]. India’s strategy for near west 

The Hindu

Context: High profile visits of leaders from West Asia as well as planned visit of Prime Minister to Saudi Arabia, Israel, Palestine and possibly Iran.

The Vision: 

India which seeks a permanent seat in United Nations Security Council need to engage the west Asia in a multilateral way rather than taking old route of bilateral relations.

The Issues in West Asia:

a) The discord between Iran and Saudi Arabia despite Iran’s landmark agreement with P 5+1 countries.

b) Devastation of Yemen caused by Saudi Arabia

c) Spread of Islamic State

d) Iran – Palestine conflict

e) Stability in the region is threatened by large number of out-flux of refugees to Europe.

Why the WANA ( West Asia and North Africa) crucial for India?

a) Home to over 7 million Indian diaspora accounting for half of incoming remittances to India approxing around $70 billion. The turmoil of the past few years in the region has unleashed untold sufferings on Indians working there. India cannot afford to ignore this peril, or simply issue advisories for citizens not to go there.

b) India’s energy need is dependent on the region heavily.

India’s Role:

Sending troops to region is not an option. India enjoys goodwill among the region due to its doctrine of neutrality in International Geopolitics. India should use her outreach in West Asia as an interlocutor for dialogue instead. India has shown its leadership mantle when it signed with US vision document monitor the South China region.

[3]. Disability is not divinity 

The Hindu

Context: The recent terming of disabled (viklang) as “divyang” by Prime Minister. The article looks into the condition of custodial treatment of disabled prisoners.

The author acknowledges the fundamental rights and empowerment it has given to the citizens of this country against the state as well as private actors.

Author states that Nation has  witness another crisis: the roll-back of hard-won recognition of disability rights in India by the very constitutional authorities entrusted with safeguarding and advancing them.

Between the divine and diabolical

Disproportionate disadvantage, exclusion, and stigmatisation suffered by persons with disabilities are a result of discrimination against them, and are caused by cultural, social, and physical barriers that obstruct their effective participation in social and political life.

In the same vein, it is important to recognise that accessibility and support services for persons with severe disabilities are indispensable to the protection of their right to life, bodily integrity, and dignity under the Constitution.

Imprisonment of persons with severe disabilities aggravates their suffering increasingly in comparison to other prisoners, defeating the fundamental right to equality. For this reason, it must only be used as a measure of last resort, if at all.

[4]. Making a money bill of it 

The Indian Express

Context:-

The Insolvency and Bankruptcy Bill, 2015, was introduced as a money bill in the Lok Sabha.

It was done so that, the Rajya Sabha will not be able to stall the bankruptcy code as it has, unfortunately, blocked the GST bill.

Money Bills:-

Money bills have a special place in our Constitution.

Article 110 mandates that a money bill must only entertain provisions dealing with the imposition, abolition, remission, alteration or regulation of any tax; the regulation of borrowings by the government of India and the regulation of the Consolidated Fund of India, including appropriation of moneys out of this fund.

Special powers of Lok sabha:-

A money bill is special to a ruling party that does not have a majority in the Rajya Sabha.

Unlike other bills, a money bill can be introduced only in the Lok Sabha.

The Rajya Sabha can only make “recommendations” that are not binding on the Lok Sabha.

The president has no power to return a money bill.

The speaker’s decision to certify a bill as a money bill is conclusive and cannot be questioned in a court of law.

The bankruptcy code:-

The bankruptcy code proposes to consolidate and amend laws relating to reorganisation and insolvency resolution of corporate persons and other entities, and to establish an “insolvency and bankruptcy fund”.

Why it can’t be a money bill?

It doesn’t fall under the category:-

The proposed code amends laws relating to central excise, income tax and customs to safeguard the priority rights of secured creditors over tax dues.

But these amendments cannot fall under the category of “imposition, abolition, remission, alteration or regulation of any tax”.

Example:-

The Special Economic Zones Act, 2005, which inserted Section 10AA in the Income Tax Act, 1961, and granted tax exemptions, was not introduced as a money bill.

Mere creation of fund:-

The code creates an insolvency and bankruptcy fund that will receive grants from the Central government, deposits from any person or any other source.

But such grants made by the government will not amount to an “appropriation of money” out of the Consolidated Fund of India.

Example:-

The University Grants Commission Act, 1956, provides for a “fund of the commission” to which the Central government grants money and this does not make it a money bill.

The word “only”:-

The word “only” is also present in Article 110(1).

According to it money bill must contain only matters mentioned in Sub-clauses (a) to (g) of Article 110, although it may incidentally deal with other issues.

But if a bill is primarily concerned with a different topic but incidentally refers to any of the enumerated matters in Article 110, the bill is not a money bill

Conclusion:-

The stated purpose of the bankruptcy code is to consolidate bankruptcy and insolvency laws in India. The fact that the code amends fiscal statutes and provides for a grant from the Central government cannot make it a money bill.

The deadlock in the Rajya Sabha is not grounds to circumvent the Constitution as it is a basic principle of law that what cannot be done directly cannot be permitted to be done indirectly.

The speaker, who is also a Member of Parliament, takes an oath to solemnly affirm his/ her true faith and allegiance to the Constitution of India and certifying a bill as a money bill when its primary purpose is not governed by Article 110 is an unconstitutional act.

[5]. Indian agriculture needs smart investment

The Livemint 

Context: Poor run of agricultural sector in 12th Five Year Plan (FYP) growing at just 1.7% annually compared to 4% in 11th FYP.

The News:

Author says, that in field of agriculture there is a cycle of high growth and low one with India undergoing the low growth phase. But, at the same time there needs to be a work on grassroots level to address the long phase of low growth.

What is Government doing?

Government has shown concern to the issue both vocally and through some initiatives:

  1. The stress by Finance Minister and Chief Economic Adviser to increase public spending in agriculture. Finance Minister has gone on to single out issues like overcoming technology fatigue, better water management and providing farmer access to agriculture markets and information about the same on timely basis.
  2. Government realization about the fact that dependence on Monsoons is a major restraint in the growth aspects of agriculture sector. And, Government has launched initiative with financial layout of Rs. 50,000 crore for bringing in irrigation cover every farm. The Scheme is named Pradhan Mantri Krishi Sinchayi Yojana.

NITI Aayog’s “Raising Agricultural Productivity and Making Farming Remunerative for Farmers” Report: 

  1. India is classified as water stressed country and sliding into water scarce status.
  2. Need to utilize irrigation facilities such as drip irrigation – which has proved to increase yields. This is only sustainable with electric pump sets. But rural electrification has been a major issue and is stilling a missing link with no mention.
  3. Report also points out Mandi system for being prime reason for inefficiency in agri sector. Agricultural infrastructure and APMC acts had made long supply chains which has made farmers dependent on intermediaries, hence enabling cartelization and hoarding.
    1. Impact: Low income of farmers, leading to further demand for increase in Minimum Support Price (MSP) which in turns have a cascading effect on food inflation.
    2. Solution: Cabinet last year has approved establishment of National Agriculture Market as electronic trading platform giving farmers better option to farmer for better sale and access.
      1. Challenges for National Agricultural Market: Investment to enable transport and storage of produce is essential for the system to function—complicated by regulatory inefficiencies and dithering on foreign direct investment in multi-brand retail that have scared away private investment.

A Major Concern:

Most of the entitlement and subsidies programs of the government has been seen to benefit farmers with large land holding while marginal farmers have to depend on money lenders for money creating cyclical debt for them. Also, it has been noticed increased funds demand for entitlements like MNREGS, Interest Subvention has come from well doing states than states that are affected by droughts.


By: ForumIAS Editorial Team


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