9 PM Daily Current Affairs Brief for 8 February 2017 is below:
- Front Page / NATIONAL‘
- 1892 Cauvery pact an unequal bargain’
- SC dismisses TN’s review plea on remission power
- Talks to end economic blockade in Manipur fail
- Editorial/OPINION
- Pride as well as prejudice
- Time for upgrade
- ECONOMY
- PSU banks to join BHIM by February-end
- Indian Express
- Rehab for the balance sheet
- Live Mint
- India’s de facto carbon tax is excessive
- The budget sidesteps geostrategic risks
Front Page / NATIONAL
‘1892 Cauvery pact an unequal bargain’
Issue– The Case of Cauvery river water dispute is ongoing.Background
On January 4, Supreme Court had asked Karnataka to continue releasing 2,000 cusecs of Cauvery water to Tamil Nadu
Stand of Karnataka on 1892 agreement
Both the 1892 and 1924 pacts between the then princely State of Mysore and the Madras government reflected an “inequality of bargaining power” which was “without conscience” and which could claim no validity after the birth of the Indian Constitution.
The 1892 agreement, which was the parent of the 1924 pact, dictated that Mysore could not develop any irrigation infrastructure on the river without the previous consent of the Madras government. Any grievances could be addressed only through arbitration.
Tamil Nadu government’s previous stand
In 2002, before Cauvery tribunal, TN stated that the 1892 agreement was preceded by a good deal of mutual consideration of the interests of both the Madras presidency and the Mysore State.
The agreement was a result of a mutual realisation for a pact which would allow Mysore reasonable freedom in dealing with its irrigation works and also give Madras practical security against injury to its interests.
SC dismisses TN’s review plea on remission power
Context
The Supreme Court has dismissed a review petition against a 2015 Constitution Bench judgment that a State government does not have the power to remit sentences of persons convicted under a Central law.
About the Verdict
1.The verdict was based on a move to remit life sentences of convicts in the Rajiv Gandhi assassination case. The review petition was also filed by Perarivalan.
2.The judgment held that the Centre would have “primacy” in deciding whether persons convicted in matters of the CBI or a Central agency should be released or not on remission.
What is remission?
In simple terms, remission implies reducing the period of a sentence without changing its character.
Major Issues Involved
- National interest
In terms of national interest, the executive power of the Union can be exercised.
- Prior consent
The word ‘consultation’ means ‘concurrence’. This means that the State government should have got prior consent of Centre before issuing its order to remit the life sentence of seven convicts in the Rajiv Gandhi case.
Conclusion
“We find no scope to apply the concept of ray of hope to come for the rescue of such hardened, heartless offenders, which, if considered in their favour, will only result in misplaced sympathy and again will be not in the interest of the society,” Justice Kalifulla had observed.
Talks to end economic blockade in Manipur fail
Context
Talks to end the long economic blockade of a crucial highway in Manipur could not make any progress with the Naga group refusing to bow down on its position of not allowing seven districts to be carved out. The Centre is disappointed with the outcome of the meeting where representative from the Home Ministry, State government and United Naga Council (UNC) had participated.
Timeline of the Blockade
- United Naga Council (UNC) calls for indefinite economic blockade on National Highways.
- Union Government officials meet with representatives of UNC.
- Total shutdown called by the UNC and other Naga organizations.
- Chief Minister makes claim not to go back on its decision to create seven new districts.
- Talks failed to arrive at a settlement.
- Economic blockade continues.
Problems
Manipur government is not seen to cooperate with the Union Government, and UNC is taking a different stand now. There is a lack of cooperation among the three parties concerned.
Way Forward
Efforts need to be made to end the economic blockade in the poll-bound State (Manipur) as early as possible.
Editorial/OPINION
Pride as well as prejudice
Issue
- Tribal bodies’ protest against reservation for women in local municipalities in Nagaland.
Reason
- Naga customs, culture and traditions preclude women from inheriting land and participating in the decision-making process.
Chronology
- Women were given 33 per cent reservation in urban local bodies through Nagaland Municipal (First Amendment) Act in 2006.
- All-male tribal bodies were against this as according to them it will violate Article 371(A) of the Constitution. (Article 371(A) gives protection to Naga culture, tradition and customary laws)
- Thus because of opposition Nagaland government did not conduct elections to civic bodies for over 10 years.
- Naga Mothers’ Association (NMA), filed a writ petition challenging the State government’s refusal to hold municipal elections.
- Court directed the government to hold elections to municipal councils and town councils on or before January 20, 2012.
- Government filed an appeal and Court stayed the previous ruling.
- On September 22, 2012, the Nagaland State Assembly adopted a resolution rejecting women’s reservation in ULBs on the ground that it infringes on the social and customary practices of the Nagas, which Article 371(A) safeguards.
- The Joint Action Committee on Women Reservation (JACWR) then moved tothe Supreme Court in September 2012.
- On April 20, 2016, the Supreme Court upheld the single-judge ruling of the Gauhati High Court of October 2011. So, the Nagaland government enacted the Nagaland Municipal (Third Amendment) Bill 2016, which revoked the September 2012 resolution, paving the way for women’s reservation in ULBs.
- The tribal bodies protested loudly as soon as the elections were announced and when the State government refused to call off the elections, the tribal bodies announced a bandh and violence also occurred.
Step taken by government
- Nagaland government has decided to write to the Centre demanding that Nagaland be exempted from Part IX A of the Constitution.
- Part IX A of the Constitution, contains a mandatory provision under Article 243T for 33% women reservation in ULBs.
Concern raised by civil society and women group
- If Nagaland is exempted from the purview of Part IX of the Constitution, Naga women will have absolutely no hope of entering into and participating in decision-making bodies.
Time for upgrade
Context
- Though modernisation of the military is regularly discussed, intellectual and organisational change, which should support it, is not even mentioned. This article talks about the much needed organisational change.
Recommendation in this context
- A Group of Ministers (GoM) had been set up in April 2000 to review the national security system to consider the recommendations of the Kargil Review Committee and formulate specific proposals for implementation.
- In a report titled “Reforming the National Security System”, the GoM observed: “… far-reaching changes in the structures, processes and procedures in [the] defence management world will be required to make the system more efficient, resilient and responsive. This will ensure maximisation of our defence capabilities through the optimal utilisation of our resources, potential and establishment of synergy among the Armed Forces.”
Present structure in defence
- At present, each of the service chiefs provides military advice to the civil-political executive, all independent of one another.
- Military advice received by the Ministry of Defence (MoD) is fragmented and from multiple points. What is absent are the benefits of holistic military assessment and estimates.
- Higher political leadership requires briefing on the military implications of decisions and policies. But at the moment, these are neither appreciated nor processed with the deep and holistic understanding that they deserve.
- What emerges as an outcome is a “we shall do with what we have” attitude.
Suggested change in structure
- Appointment of Chief of Defence Staff (CDS).
Advantages of this
- Its justification is that it will provide single-point military advice to the government.
- The CDS and his control structures through a strategic vision are expected to enhance the efficiency and effectiveness of the planning process and ensure the required jointness is achieved in execution through theatre commands against a nuclear backdrop.
- Service chiefs would continue to advise the Defence Minister on command matters concerning their forces, whenever necessary.
- As was also envisaged and clearly articulated in the GoM report, the Defence Secretary would function as the Principal Defence Adviser to the Defence Minister in a manner similar to the role to be performed by the CDS/PC-COSC as the Principal Military Adviser, with both enjoying an equal status in terms of their working relationship.
Such a structure is expected to provide a politico-military decision-making authority with a sophisticated crisis management procedure
Additional things need to be done
- The CDS/PC-COSC would require support from a restructured Integrated Defence Staff (IDS), empowered through appropriate amendments in the Allocation and Transaction of Business Rules and other regulations to reflect new responsibilities.
- A human resources policy of reward and reprimand will need to be recalibrated to support new realities.
ECONOMY
PSU banks to join BHIM by February-end
Issue
- All Public Sector Banks are expected to join the Bharat Interface for Money (BHIM) app for digital payments by the end of February.
What is BHIM app
- BHIM is a digital payments solution app based on the Unified Payments Interface (UPI) from the National Payments Corporation of India (NPCI), the umbrella organisation for all retail payments systems in India.
- BHIM allow one to send and receive money to other UPI accounts or addresses.
- One can also send money via IFSC (Indian Financial System Code) and MMID (Mobile Money Identifier) Code to users who don’t have a UPI-based bank account.
- There’s also the option of creating one’s own QR (Quick Response) code for a fixed amount of money, which the merchant can scan to make the deduction.
Present situation
- There is a gap in the number of app downloads and the number of customers linking the app to their bank accounts because all the banks are still not active on platform.
- It is observed that most of these customers have downloaded BHIM without checking if their bank is active on the platform.
- So, all the banks are expected to join by February end.
Indian Express
Rehab for the balance sheet
Issue
- A centralised Public Sector Asset Rehabilitation Agency (PARA) has been mooted in economic survey to tackle twin balance sheet problem (TBS).
Reason for TBS
- It is an economic problem, not a morality play.
- Without doubt, the stench of crony capitalism permeates discussions of the TBS problem.
- It is also true that there have been cases where debt repayment problems have been caused by a diversion of funds.
- But a vast bulk of the problem has been caused by unexpected changes in the economic environment: Timetables, exchange rates and growth rate assumptions that have gone badly wrong.
Earlier strategy to tackle TBS
- In the beginning TBS was considered as a minor problem, which would largely be resolved as economic recovery took hold.
- But the problem has only worsened. Earnings of the stressed companies have deteriorated, forcing them to borrow more to sustain their operations.
- So far, the strategy has been to solve the TBS through a decentralised approach, under which banks have been put in charge of the restructuring decisions.
- A number of such schemes have been put in place by the Reserve Bank of India (RBI) like Asset Reconstruction Companies (ARCs)
Why this strategy did not work
- Most of the time, above is indeed the best strategy. But in the current circumstances, effectiveness has proved elusive as banks have simply been overwhelmed by the size of the problem.
- Among other issues, they face severe coordination problems, since large debtors have many creditors, with different interests.
- If public sector banks grant large debt reductions, this could attract the attention of investigative agencies. But converting debt to equity, taking over the companies and then selling them at a loss — even in transparent auctions — will be politically difficult.
- Private Asset Reconstruction Companies (ARCs) haven’t proved any more successful than banks in resolving bad debts and are too small to handle the large cases.
Affect of this strategy
- With balance sheets under such strain, the private corporate sector has been forced to curb its investments, while banks have been reducing credit in real terms.
- This took a toll on economy and thus to sustain growth, these trends will need to be reversed, and the only way to do so is by fixing the underlying balance sheet problems.
- Since banks can’t resolve the big cases, they have simply refinanced the debtors, effectively. But this is costly for the government, because it means the bad debts keep rising, increasing the ultimate recapitalisation bill for the government and the associated political difficulties.
Strategy suggested in economic survey
- A formal agency may be needed to resolve the large bad debt cases – the same solution the East Asian countries employed after they were hit by severe TBS problems in the 1990s. In short, the time may have arrived to create a ‘Public Sector Asset Rehabilitation Agency’ (PARA)
Advantages of PARA
- It could take charge of the largest, most difficult cases and make politically tough decisions to reduce debt.
- It could solve the coordination problem since debts would be centralised in one agency
- It could be set up with proper incentives by giving it an explicit mandate to maximise recoveries within a defined time
- It would separate the loan resolution process from concerns about bank capital
How would a PARA actually work
- There are many possible variants, but the broad outlines are clear.
- It would purchase specified loans (for example, those belonging to large, over-indebted infrastructure firms) from banks and then work them out, depending on professional assessments of the value-maximising strategy.
- Once the loans are off the books of the public sector banks, the government would recapitalise them, thereby allowing them to shift their resources — financial and human — back toward the critical task of making new loans.
- Similarly, once the financial viability of the over-indebted enterprises is restored, they will be able to focus on their operations, rather than their finances. And they will finally be able to consider new investments.
Price that needs to be paid for this
- Accepting and paying for the losses and this cost is inevitable.
- Loans have already been made, losses already occurred and because state banks are the major creditors, the bulk of the burden will fall on the government.
- The main issue with any strategy now is how to minimise a liability that has already been incurred by resolving the bad loan problem as effectively as possible.
From where would this funding come?
- Part of the funding would need to come from government issues of securities.
- Part could come from capital markets, if stakes in the public sector banks were sold or the PARA were structured in a way that would encourage the private sector to take up an equity share.
- A third source of capital could be the RBI. The RBI would (in effect) transfer some government securities it is holding to public sector banks and PARA;
(The RBI’s capital would decrease, while that of the banks and PARA would increase. There would be no implications for monetary policy since no new money would be created.)
Live Mint
India’s de facto carbon tax is excessive
Context
It is not required for India to adopt the highest rate of carbon tax in the world as its per capita consumption of electricity is almost half the world’s average.
What is Carbon tax
A carbon tax is usually defined as a tax based on greenhouse gas emissions (GHG) generated from burning fuels. It puts a price on each tonne of GHG emitted, sending a price signal that will, over time, elicit a powerful market response across the entire economy, resulting in reduced emissions. Carbon tax offers social and economic benefits. It is a tax that increases revenue without significantly altering the economy while simultaneously promoting objectives of climate change policy.
Issue of Climate change
There is a greater awareness and support to mitigate climate change. A total of 194 countries had signed the Paris Agreement, and promised to aggressively cut greenhouse gas emissions in a time-bound manner.
Stand of India on Climate Change
- The timeline to achieve renewable capacity is advanced, and scale enlarged.
- India’s initiatives for Climate change goes back to 1972 UN conference in Stockholm.
Problems with adopting high Carbon tax in India
- India would become the most expensive place to produce coal.
- It is hurting our competitiveness, and will directly undermine us as it faces lesser imports from China.
- The Economic Survey mentions that petrol and diesel excise have increased drastically. India has the highest tax imposed on petroleum products.
- A high carbon tax is not necessary for India, whose per capita consumption of electricity is half of the world’s average, to adopt the highest rate of carbon tax in the world.
- India needs to be cautious in calibrating its greening pace and carbon tax.
The budget sidesteps geostrategic risks
Context
- Criticism of the budget
Background
- Both the budget document and the Economic Survey have painstakingly detailed risks that endanger the Indian economy and can disrupt growth and employment impulses.
- Both see major risks emanating from the external sector. Budget lists multiple Fed rate hikes likely in 2017, commodity price uncertainty (especially crude prices) and protectionism.
Economic survey
- Economic Survey, which identifies clothes and shoes as ideal candidates for low-skill, high-employment manufacturing potential and for occupying crucial trade space being vacated by China.
- The survey also finds India has competitive advantage in these two items despite myriad challenges—such as domestic labour laws and tax structure, or the duty preferences enjoyed by competing countries in key buyer markets.
Criticism of Budget
- Budget has allocated only Rs0.01 crore to the Footwear Design and Development Institute, compared with Rs109.99 crore in 2015-16 and Rs25 crore in 2016-17. The institute provides skilled human resources and technology development to the leather and footwear industry.
- The Indian leather development programme (ILDP) gets a higher allotment of Rs500 crore, compared with Rs235 crore in 2015-16 and Rs400 crore in 2016-17. But then the ILDP focuses on improving the raw material base for leather units but the Survey actually shows non-leather footwear has achieved higher exports than leather footwear.
- There’s a token entry of Rs0.50 crore against the project development fund, which the ministry created with the Exim Bank to promote Indian private sector investments in Cambodia, Laos, Myanmar and Vietnam (commonly referred as CLMV nations) as part of India’s “Act East” policy. The creation of the fund was announced in 2015 budget. There are, no follow-up remarks in subsequent budgets.
- India has attached great geostrategic significance Chabahar port in Iran. But Chabahar port has been allotted only Rs150 crore under the ministry of external affairs, compared with Rs100 crore in 2016-17.
Bad effect of this
- India’s on-now, off-now engagement with Iran may have pushed the country closer to China through a joint military cooperation agreement and possible One Belt, One Road connectivity. Thus budget has been criticised because it lost an opportunity to make some critical course corrections.
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