9 PM Daily Brief – 30 May 2016

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

What is 9 PM brief?

• GS PAPER 2
  1. Sirisena defends return of land to Sri Lankan Tamils {Foreign Policy}
  2. With connectivity comes growth {Foreign Policy}
• GS PAPER 3
  1. High-speed Spanish Talgo train begins trial run {Infrastructure}
  2. Digital vans all set to take e-governance to rural areas {e- Governance}
  3. Awash in red ink {Indian Economy}
  4. Private insurance can’t heal all  {Governance}
  5. Cloud technology changing TV ad landscape {Economy}
  6. ‘Bring brand ambassadors under law’s ambit’ {Indian Economy}
  7. Task undone {Governance}
  8. For a less taxing regime {Economy}
  9. PSUs: Return to commanding heights {Indian Economy}

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GS PAPER 2

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[1] Sirisena defends return of land to Sri Lankan Tamils

The Hindu

What has happened

The Sri Lankan Government is following a policy of returning land to the native Tamilians in the Northern Province. This was stated by the President Sirisena.

This land was occupied by Security Forces during the Civil war in the Northern Province with the LTTE.

After the Elam war ended, A locally elected responsible government was formed in the Northern Province. This was part of the Sri Lanka’s 13th Amendment and devolution of powers to provinces.

2015 Geneva Resolution : A Resolution adopted by UN Human Rights Council in 2015 that wasnted accountability for human rights violation during Sri Lanka War. It asked Sri Lanka to set up a fair judicial mechanism involving both doemstic , foreign judges to look into the issues of Human Rights Violations.

There was a controversy because Sri Lankan Prime Minister Ranil Wickremesinghe has assured the Security forces that such judicial mechanism will have only domestic judges. Foreign judges may be there only for technical assistance. Security Forces oppose any foreign involvement in this issue.

Nationally there is opposition to returning of land to Tamilians from Security Forces. But Internationally, there is pressure to accomodate the Tamilians , who are a minority in the country but are a majority in the Northern Province.

The 32nd Session of UN Human Right Council is beging held in June- July. Here Sri Lanka will be asked to give an oral briefing on the issue. And hence Sri Lanka will need to quickly take up measures as per the Resolution.

[2] With connectivity comes growth

Livemint

Issue:

• The paramount measure of power in the 21st century is connectivity, specifically to global infrastructure networks, trade flows, capital markets and the digital economy.
• India is now getting connected in each of these arenas and is thus taken much more seriously as a long-term pillar of the global system.

India in its neighbourhood:

• India and Pakistan should move forward with the Most Favoured Nation trade agreement, Iran-Pakistan-India (IPI) gas pipeline from Iran, and even by revitalizing and upgrading the railway connections between Delhi and Lahore, and Karachi and Mumbai.
• The ancient Grand Trunk (GT) Road from Kabul to Kolkata should be actively resurrected as a Central to South-East Asian trade artery which will enable Indian commercial leadership across this high-growth region in ways traditional moribund groups such as South Asian Association for Regional Cooperation never could.
• Indians must remember that India’s neighbours are not waiting for it to take a leadership role in leveraging connectivity for influence.
• The Chinese-led Asian Infrastructure and Investment Bank will strengthen China’s connectivity with Central and West Asia, while the China-Pakistan Economic Corridor reaching Karachi and the port of Gwadar will effectively make China an Indian Ocean power through its client partner Pakistan.
• To not connect to Pakistan and beyond is to further cede strategic ground along the 21st century’s new Silk Roads.

In South-East Asia:

• Despite the long border India shares with Myanmar, trade relations and airline connections are minimal.
• The country still depends on China for most of its exports and most of its inbound investment.
• Not only should the future GT Road extend through Bangladesh all the way to Yangon, but the three governments should accelerate efforts to construct a gas pipeline stretching from Sittwe on the Bay of Bengal through India’s northeastern states of Mizoram and Tripura and across central Bangladesh to Kolkata.
• The BCIM (Bangladesh, China, India, Myanmar) trade corridor along the old Stilwell Road should also be upgraded more rapidly in order to facilitate trade connectivity between India, Bangladesh, Myanmar and China, uplifting the neglected populations along the route.
• The Association of Southeast Asian Nations region has half the population of India but a larger gross domestic product, and now attracts more foreign direct investment (FDI) year on year than China does. South-East Asia is now the world’s factory floor.
• India too is expected to surpass China in inward FDI this year, complementing its now higher growth rate as well.
• The combination of fast growth and rising FDI are mutually reinforcing, with global markets bearish on China and favourable towards India’s long-term demographic fundamentals, opening economy and long overdue focus on infrastructure.

Ties with China:

• Ties with China is also essential to any grand strategy premised on connectedness.
• China ranks as the top trade partner of more than 120 countries in the world, double the number for the US (56), and far higher than for India (only one).
• Even as India seeks to boost trade relations with countries along the Indian Ocean periphery, it must remain focused on improving its trade balance with China through higher value-added exports, while also attracting ever more FDI from China into power, transportation and other sectors.

What government can do?

• So long as commodities’ prices remain low, Current government can keep inflation in check and continue its major commitments to roads and railways, ports and airports, and modernizing dozens of cities across the nation.
• All of these are investments in making India more connected both internally and externally so that its population can reach its full potential.

Beyond transportation and energy, the third category of connectivity is, communications:

• India and China represent the two largest online populations in the world—but as a percentage of the total population, only about half of Indians have functional Internet access.
• And yet, developing countries gain a 1-2% increase in GDP with every 10% of the population that gets online.
• The Indian government and major telecom firms may not want Facebook to be the agent of digital connectivity, but then they should step up and fulfil the responsibility themselves.
• The Digital India initiative, which aims to boost 4G coverage and deliver last-mile Internet connectivity, is a good step in this regard, but India still ranks 44 on Huawei’s most recent 2016 Global Connectivity Index.

Conclusion:

• The 21st century will be permanently multi-polar, with the US, Europe, China, India, Russia and other powers all playing crucial roles.
• But it will also feature an intense tug-of-war over global financial flows and industrial supply chains.
• Make in India is a strong example of how India can become more relevant by becoming more intertwined with global production networks in the manner that the Indian software industry has already achieved.
• Ultimately, it is this commercial and technological connectivity with the rest of the world that will enable India to earn—and retain—a commanding position on the world stage.

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GS PAPER 3

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[1] High-speed Spanish Talgo train begins trial run

The Hindu

News:

• The trial of Spanish train Talgo, the lighter and faster vehicle whose speed goes up to 115 km per hour, was conducted between Bareilly and Moradabad in Uttar Pradesh.
• It is a part of the Railways’ strategy to increase the speed of trains.
• The train left Bareilly at 9.05 a.m., moved at a speed between 80-115 km per hour, and reached Moradabad at 10.15 a.m., the official said.
• As of now, the Delhi-Mumbai Rajdhani Express runs at an average speed of 85 km per hour.

Other benefits of Talgo:

• Talgo’s lighter trains consume 30 per cent less energy.
• The nine-coach train consists of two Executive Class cars, four Chair Cars, a cafeteria, a power car and a tail-end coach for staff and equipment.
• There will be three more such runs before the success or failure could be assessed.
• Besides the officials, the coaches were filled with sand bags.

Rajdhani route next

• After the trial run on the Bareilly-Moradabad line, it will be tried on Rajdhani route between Mathura and Palwal for 40 days with speed up to 180 km per hour.
• The Talgo train coaches are lightweight and designed in a way that it can run on curves without decelerating the speed, the official said.
• Shipped from Barcelona, the coaches anchored at Mumbai port on April 21.

Future:

• Talgo envisages the journey between Delhi and Mumbai can be completed in about 12 hours as compared to 17 hours at present.

[2] Digital vans all set to take e-governance to rural areas

The Hindu

Government’s new initiative:

• The government will roll out a new campaign under which 66 digital vans.
• Van will be equipped with Internet and audio-visual facilities, will go to 657 districts by March 2017 to increase awareness about various e-governance services in rural and semi-urban areas.

Aim:

• To reach out to more than 10 lakh citizens and register over 1.5 lakh rural citizens for MyGov, digital locker, Aadhaar and other digital services.
• These vans would cover more than 13 lakh km in 13,200 man days.
• The campaign will be flagged off by Communications and IT Minister Ravi Shankar Prasad at a conference to present the report card of the Ministry’s two years in office.
• It will run from May 30, 2016 to March 31, 2017.
• The vans will use the Internet and audio visual facilities to interact with and educate the people in rural areas, especially the youth, about the various Digital India initiatives.

State government’s role:

• State governments, along with the Department of Posts, Department of Telecommunications (BSNL) and CSC-SPV, will play an active role in the execution of this campaign.
• A district level committee, headed by the District Collector, will foresee its ground level execution to ensure that the maximum benefit is generated out of this campaign.

34 districts in phase 1

• During phase 1 of the campaign till July 2016, some 16 vans will cover 34 districts in nine States — Haryana, Rajasthan, Punjab, Gujarat, Maharashtra, Chhattisgarh, Karnataka, Kerala and Andhra Pradesh.

Service in 14 languages

• Rural citizens will be informed about the services offered at CSC centres, national scholarship portal, e-hospital, digital lockers and Aadhaar in 14 languages — Hindi, English, Gujarati, Punjabi, Tamil, Telugu, Kannada, Oriya, Bengali, Assamese, Manipuri, Urdu, Marathi and Malayalam.

[3] Awash in red ink

The Hindu

Issue:

• Pile of stressed assets at lenders has grown manifold, lengthening the shadow over balance sheets.
• Forced by the central bank’s time-bound Asset Quality Review to classify troubled loans correctly and make appropriate provisions for them, lender after lender has reported sizeable losses or dramatic declines in profit in recent quarters.

The biggest lender, the State Bank of India: #

• Last week posted a 66 per cent plunge in fourth-quarter earnings as provisioning for non-performing assets — banking parlance for loans where borrowers have defaulted on repayments — more than doubled to Rs.12,139 crore.
• And SBI Chairman indicated that while a bulk of the stressed assets on its books had been recognised last quarter, more provisioning was in the offing as the bank leads lenders in the race to meet the RBI’s goal of completely overhauling balance sheets by March 2017.
• That the clean-up is inflicting short-term pain on banks and investors is evident.

Now the question arises is how much more red will be inked and what cost this is likely to impose on the economy.

• The SBI, for instance, has said that while gross NPAs (as a percentage of the entire Rs.15 lakh crore it has advanced to borrowers) jumped to 6.5 per cent, or Rs.98,173 crore, at the end of March, it was placing loans amounting to another Rs.31,000 crore on a watch list for ‘exposure under stress’.
• Coming as it does from a lender whose total loans amount to more than one-tenth of India’s GDP, the disclosures of bad and stressed loans reflect the extent of distress its borrowers representing various sectors of the real economy are experiencing.
• Iron and steel, engineering, power and construction are some of these key industries that undergird the economy.

The Centre is cognisant of the magnitude of the problem and has in large measure moved in lockstep with the central bank in addressing the systemic and regulatory issues that need fixing.Steps taken by the government:

• An autonomous Banks Board Bureau is now in place, tasked with the specific brief of ensuring that state-owned lenders will hereafter be ring-fenced from political interference in the selection of top management and on business strategy.
• Separately, a Bankruptcy Code intended to improve the legal framework for assisting creditors in taking defaulters’ assets through a liquidation and recovery process has won parliamentary backing and could soon be in operation.
• At the same time, there is the risk that a clutch of lenders will need greater levels of capital infusion than previously estimated; this will test the fiscal deficit as well as the taxpayer’s willingness to underwrite the excesses of the past.

Extra points:

What is NPA?

• A Non-performing asset (NPA) is defined as a credit facility in respect of which the interest and/or installment of principal has remained ‘past due’ for a specified period of time. In simple terms, an asset is tagged as non performing when it ceases to generate income for the lender.

[4] Private insurance can’t heal all

The Hindu

Issue:

• Indians mostly pay for their healthcare out of pocket.
• More than 75 per cent on average of all health expenditure is out of pocket
• Investment in public healthcare is even lower than some countries of Sub-Saharan Africa over the same period (less than 2 per cent on average), despite economic growth rates, averaging 8-10 per cent per annum, and despite the National Rural Health Mission (NRHM).
• Between the potential catastrophes of big out-of-pocket costs for healthcare and the current weaknesses of the public healthcare system, the private insurance markets offer what looks like a way out.
• The idea is tempting: let people choose between insurance companies that offer different packages of treatments, integrate care, and insure people against risks without all the inefficiencies of the government.

Don’t believe the hype:

• Private, competitive insurance companies add instability, bureaucracy, inequality and regulatory trickery without contributing any value to the healthcare system. Private insurance works if you are unconcerned with inequality and efficiency, or work for an insurance company.

A form of risk-pooling

 

• Unstable? Yes.

 

• Insurance is fundamentally a form of risk-pooling.
• We all pay in, we all get the peace of mind of knowing we have insurance, and the person who gets cancer gets a lot of the benefit.
• Naturally, if there are only a few of us, our insurance payments will go up if somebody gets cancer.
• But if there are many of us, our insurance payments won’t go up much at all.
• Private, competitive insurance companies fragment risk pools.
• Each company competes for the most lucrative risk pool, which means the richest and healthiest people.
• The result is a natural state of instability in private insurance markets.
• Each company tries to avoid what Americans call the “death spiral” of high premiums and sick clients.
• Insurers solve this with some obvious tools.
• One is to just discourage sick or prospectively sick people such as smokers from joining.
• Another is “actuarial” rate-setting in which they try to match insurance premiums with likely expenditures.
• Actuarial rate setting is a good deal for healthy people who have an unexpected event, but a very bad deal for people in ill health, who might find insurance entirely unaffordable.
• If you have diabetes and your insurance premiums reflect the costs of insulin and perhaps other related procedures such as kidney failure, and the risks of related ailments such as heart disease, then it’s not an insurance policy.
• It’s a very expensive prepaid health plan.

Accessibility:

• Either way, insurance companies achieve stability by making healthcare less accessible to the people who need it most.
• And even the healthy people who benefit will not continue to benefit, since insurance rates would spike after a diagnosis of cancer or diabetes, or just go up with age.
• Private insurance advocates say we can regulate these problems away.
• We can require insurers to take all comers, regardless of their state of health.
• We can regulate in detail their profit margins, lists of treatments, payments by patients, and procedures.
• We can encourage cooperation and subsidise from lucky insurance companies with healthy people to unlucky companies with sick people.
• But why create a big regulatory framework that will tie everybody up in games and court cases when we can just avoid the whole problem and have a big, simple risk pool?

What about all the other things insurance companies claim to do? Manage care? Integrate care? Encourage people to look after their health?

• In all cases, the burden of proof should be on the people who make claims that insurers are anything other than a financing device.
• The evidence that insurance companies improve health or healthcare just isn’t there.

 

• Why? Insurance companies might be powerful relative to their clients, whose rates they can change, but they are weak relative to the healthcare system.

 

• Their information is never as good as a doctor’s or a patient’s, and even in the data-obsessed U.S. they know startlingly little about their clients’ real needs.
• Their ability to deny care without resistance from doctors and their clients (whether patients or employers) is limited because they have neither knowledge nor legitimacy.
• They certainly have no subtle instruments to make us eat less buttery food or walk to work.

Why entrust them with our health?

• So why does anybody entrust health to competitive insurance companies then?
• In the rich countries, the answer is political. The countries that rely heavily on them — the U.S., the Netherlands, and Switzerland — have very effective regulatory regimes paired with political systems that give a lot of weight to the interests of insurance companies and political parties such as the U.S. Republicans who see no problem with being unfair to the poor and unhealthy.
• These three countries also are among the worst value health systems in the world, with very high costs for average, or in the U.S. below average, quality.
• That’s no accident. They start out with a big, costly layer of insurance companies that adds complexity and paperwork and very little value.
• The risk is that a simple solution at one time becomes a problem later. It is tempting to use private insurance to increase access to healthcare among the middle classes in a country like India.
• But the lesson of history is that one generation’s clever solution to a problem is the next generation’s policy problem.
• The U.S. tried to rely on private insurance, and the result was a politically empowered industry dedicated to preserving its business at the expense of better risk pooling, equality, more efficiency, and simpler administration.
• American political elites see the costs to the country of this entrenched industry as tolerable.
• That doesn’t mean India’s should agree to follow the same path.

Conclusion:

 

• Private insurance works if you are unconcerned with inequality, unconcerned with efficiency, or work for an insurance company.

 

[5] Cloud technology changing TV ad landscape

The Hindu

Issue

• Geo-targeted advertising.

Geo targeting

• Geo targeting in geomarketing and internet marketing is the method of determining the geolocation of a website visitor and delivering different content to that visitor based on his or her location, such as country, region/state, city, metro code/zip code, organization, IP address, ISP or other criteria.

Geo targeted advertisements on Television channels

• Around 25 news and entertainment channels are beaming region-specific ads.
• With the trend of geo-targeted advertising catching on, more companies are making use of technology to beam adverts to only areas where their products have strong presence.

How do they do it?

• Normally, local cable operators have decoder boxes for each channel that receive and relay the programmes to households.
• To enable geo-targeted advertising these boxes are replaced with smart boxes that not only store data but also intelligently identify the spot where the location-specific ad has to replace the nationally telecast one.
• The trigger for the geo-targeted ad comes from a unique watermark inserted on the video, which gives the cue to the smart box to run the local ad.
• Watermark is an invisible and inaudible identifier, like a product barcode.

Cloud computing

Cloud computing is a type of computing that relies on sharing computing resources rather than having local servers or personald evices to handle applications.

Cloud computing is comparable to grid computing, a type of computing where unused processing cycles of all computers in a network are harnesses to solve problems too intensive for any stand-alone machine.

In cloud computing, the word cloud (also phrased as “the cloud”) is used as a metaphor for “the Internet,” so the phrase cloud computing means “a type of Internet-based computing,” where different services — such as servers, storage and applications —are delivered to an organization’s computers and devices through the Internet.

[6] ‘Bring brand ambassadors under law’s ambit’

The Hindu

What happened?

• Traders body Confederation of All India Traders (CAIT) has said brand ambassadors should be brought under the ambit of Consumer Protection Act as consumers are often “guided” through such endorsement, irrespective of quality of product.

What else?

• CAIT also threatened to move court if the government did not take necessary action.
• It has demanded that specific guidelines be formulated, fixing the liability of brand ambassadors.
• Calling the brand ambassadors “service providers”, CAIT said the endorsements influence customer’s choice to great extent.

[7] Task undone

Indian Express

Issue:

• The Indian Air Force has only 33 fighter squadrons while it needs 45, to counter “a two-front collusive threat”.
• The navy has only 14 submarines, half the number it wants.
• The army doesn’t have equipment for the new strike corps being raised on the China border.
• The BJP-led government inherited most of these problems in the defence ministry from the UPA regime and promised to fix them.
• A lot of effort has been put in by the defence minister, Manohar Parrikar, since he took charge in November 2014, but the results on the ground have not lived up to the billing.

 

DPP:

• The new Defence Procurement Procedure (DPP) was meant to be a radical departure from the earlier versions, which would promote “Make in India” in the defence sector and make India a major defence exporter in the near future.
• This meant that India would move away from being one of the world’s biggest defence importers to an indigenous developer and producer of defence platforms.
• While Parrikar’s intentions cannot be faulted, the reality is that the new DPP is still not out in its entirety.
• A major chapter on the strategic partnership model is still pending, as are the details on other new models that have been proposed.
• Both foreign and domestic defence manufacturers are thus awaiting clarity on the business models they need to build for the future.
• Parrikar has followed up on the Dhirendra Singh Committee report on defence procurement by forming two more expert committees.
• One of them, headed by Vivek Rae, has been tasked to reform the organisation, system and process of acquisition in the ministry. Its recommendations will be an important step towards fixing the fundamental problems of defence procurement, but will cause a major upheaval in the ministry which needs to be managed smartly.
• Another committee, headed by Lt General (retd) D.B. Shekatkar, has been tasked with improving the teeth-to-tail ratio of the defence services.
• This is again a long-pending step which can help the defence ministry by rationalising expenditure.
• As the finance ministry has focused on reducing the fiscal deficit, the budget for defence acquisition has also come under pressure.
• By reducing wastage and streamlining the process, Parrikar can overcome the challenge of resources and delayed acquisition.
• But these steps must show quick results.
• The defence services cannot afford to wait for long.

[8] For a less taxing regime

Indian Express

Issue

• Subjective nature of income tax laws and its misuse by Income tax officials.

Constitutional Perspective

• All law making have to conform to the fundamental tenets of transparency and openness on the one hand and responsiveness and accountability on the other.
• Article 13 of the Constitution provides, “The state should not make laws, which are inconsistent with or in derogation of the fundamental rights”.
• These are fundamental tenets flowing from due process requirement under Article 21, equal protection clause embodied in Article 14, and fundamental freedoms ingrained in Article 19.
• A modern deliberative democracy cannot function without these attributes.
• Law has to provide a basic level of “legal security” by assuring that the law is knowable, dependable and shielded from excessive manipulation.
• However, these conditions are not satisfied in the implementation of tax laws.

Compliance of the taxpayers

• Each section of the Income Tax Act, 1961, and allied rules speak about compliance required of taxpayers.
• In the event of any contravention of tax provisions, the taxpayer has to pay interest, penalty or face prosecution.
• Each section of the act defines the duty and accountability of the taxpayer.

Accountability of the Income Tax Officials

• There is not a single provision under the Income Tax Act, which holds a tax officer accountable for misuse of tax provisions or passing unfair orders against a taxpayer.
• The income tax law nowhere provides any penal provisions against the tax officer for passing unfair or legally untenable orders or orders passed on the basis of manipulation of facts.

Subjective nature of Income tax laws

• The law sometimes can be written in such subjective manner that it affects the efficiency and transparent functioning of the government
• The subjective nature of the income tax laws allow for their misuse.
• Officials in the income tax department have enormous discretionary powers that in essence frees the tax department from any obligation to follow objective norms.
• In such cases, the only remedy available to the taxpayer is to go in appeal and wait for years to get justice.
• Until the time he gets a fair order from the appellate authority, he is subjected to interest, penalties and recovery proceedings.
• The agency should be  under obligation from an objective norm, which can enforce accountability in the decision-making process.

This year’s budget had a proposal to address taxation issues:-

• No penalty in respect of income tax cases with disputed tax liability up to 10 lakh and exceeding that will be subject to minimum 25 per cent penalty under the disputes resolution scheme
• A new dispute resolution scheme, which will reduce litigation and the cost of litigation
• No discretion to tax officer for imposing penalty of 100 to 300 per cent of the tax sought to be evaded, instead a penalty of 50 per cent in cases of income underreporting and 200 per cent in cases of misreporting of facts
• Rationalising disallowances under section 14A of expenses incurred to earn exempt income
• Limitation of one year to dispose of a taxpayer’s petition seeking waiver of interest and penalty.

Conclusion

• If tax laws are made more objective and provisions are introduced to fix the accountability of tax officers, there is likely to be a great reduction in litigation.
• Harassment of honest taxpayers too would stop to a great extent.

[9] PSUs: Return to commanding heights

Livemint

Issue

• The Government has cleared the air over the issue of privatization of  public sector undertakings (PSUs), it has reaffirmed its faith in the importance of PSUs in the developing country and it has given signals that  recalibration of PSUs is underway so that it can return to the commanding heights.

What are Public Sector Undertakings (PSUs)?

• The government-owned corporations are termed as Public Sector Undertakings (PSUs) in India.
• In a PSU majority (51% or more) of the paid up share capital is held by central government or by any state government or partly by the central governments and partly by one or more state governments.

EVOLUTION OF PUBLIC SECTOR UNDERTAKINGS

1. Post Independence, India was grappling with grave socio-economic problems, such as: inequalities in income and low levels of employment regional imbalances in economic development and lack of trained manpower weak industrial base inadequate investments and infrastructure facilities, etc. Hence, the roadmap for Public Sector was developed as an instrument for self-reliant economic growth. The country adopted the planned economic development polices, which envisaged the development of PSUs. Initially, the public sector was confined to core and strategic industries. 2. The second phase witnessed nationalization of industries, takeover of sick units from the private sector, and entry of the public sector into new fields like manufacturing consumer goods, consultancy, contracting and transportation etc. The Industrial Policy Resolution 1948 outlined the importance of the economy and its continuous growth in production and equitable distribution. In this process, the policy envisaged active engagement of the State in development of industries. 3. The Industrial Policy Resolution 1956 classified industries into three categories with respect to the role played by the State – The first category (Schedule A) included industries whose future development would be the exclusive responsibility of the State The second (Schedule B) category included Enterprises whose initiatives of development would principally be driven by the State but private participation would also be allowed to supplement the efforts of the State And, the third category included the remaining industries, which were left to the private sector. 4. In 1969, the government nationalized 14 major banks. 5. The Industrial Licensing Policy 1970 placed certain restrictions on undertakings belonging to large industrial houses, defined on the basis of assets exceeding Rs 350 mn. 6. In 1973, the definition of large industrial houses was adopted in conformity with that of the 7. Monopolies and Restrictive Trade Practices Act (MRTP) 1969 and included companies whose assets exceeded Rs 200 mn. 8.The Statement on Industrial Policy in July 1991 was also significant. 9. It brought in fundamental changes in the MRTP Act as well. The statement revised the priority of the public sector.

CLASSIFICATION OF PUBLIC SECTOR UNDERTAKINGS

• Public Sector Undertakings (PSUs) can be classified as Public Sector Enterprises (PSEs), Central Public Sector Enterprises (CPSEs) and Public Sector Banks (PSBs).
• The Central Public Sector Enterprises (CPSEs) are also classified into ‘strategic’ and ‘non-strategic’. Areas of strategic CPSEs are:

• Arms & Ammunition and the allied items of defence equipments, defence air-crafts and warships
• Atomic Energy (except in the areas related to the operation of nuclear power and applications of radiation and radio-isotopes to agriculture, medicine and non-strategic industries)
• Railways transport.

All other CPSEs are considered as non-strategic.

 

Role of Public Sector enterprises in India

1. Maximizing the rate of economic growth
2. Development of capital-intensive sector
3. Development of agriculture
4. Balanced regional development
5. Development of ancillary industries
6. Increasing employment opportunities
7. Model employer

• The State has inaugurated the era of the model employer in contrast to the employer with a feudal outlook.
• It has laid down guidelines for emp­loyer-employee relations and for developing good and efficient personnel.

8. Preventing concentration of economic power
9. Export promotion
10. Import substitution
11. Production and sales
12. Mobilization of resource
13. Research and development
14. Establishment of a socialist pattern

Public Sector Undertakings (PSUs) have laid a strong foundation for the industrial development of the country. The public sector is less concerned with making profits. Hence, they play a key role in nation building activities, which take the economy in the right direction.

 

Problems in Public Sector:

Even though the public sector is going in a correct path, some problems and short comings are there. The main short comings are as follows:

(1) Heavy losses.

(2) Influence of political factors.

(3) Work delays.

(4) Over-capitalisation.

(5) Pricing policy.

(6) Use of Manpower Resources.

(7) Control over employees.

(8) Inefficient Management.

(9) Higher capital intensity leading to lower-employment generation.

(10) Capacity utilisation.

Suggestions to Improve the Performance of Public Sector Enterprises (PSEs):

(i) Controlling the cost at every level of public sector enterprises.

(ii) Increase the production,

(iii) Reforms in capital base.

(iv) Increase the standard of public sector enterprises to manage the competition from both domestic and foreign competitors.

(v) Identifying redundant manpower and dealing with it through means a retraining, redeployment and encouraging self-employment etc.