THE HINDU – CURRENT NOTE 03 March
India to attend Lahore meet on Indus Waters Treaty
.•Signalling a major shift in its position on talks with Pakistan on the Indus Waters Treaty (IWT), India has accepted an invitation to attend a meeting of the Permanent Indus Commission (PIC) to be held in Lahore in March, various sources confirmed to The Hindu.
•According to officials privy to the development, the move came after two months of diplomatic negotiations, with World Bank officials playing the mediator in encouraging Pakistan to extend an invitation and for India to accept it.
•The news closely follows the visit of World Bank Chief Executive Officer Kristalina Georgieva to New Delhi, where she met with Union Finance Minister Arun Jaitley, weeks after her visit in January to Islamabad, where she met Prime Minister Nawaz Sharif.
•Officials acknowledged that the holding of the next annual round of the PIC, which was last held in July 2016, was a “positive” sign, given that India had announced it was “suspending” the talks after the Uri attacks in September.
•According to senior government officials at the time, the decision to suspend the talks was taken when Prime Minister Narendra Modi held a meeting with key officials, including National Security Adviser Ajit Doval and Foreign Secretary S. Jaishankar, to “review” the IWT.
Half of India-Bangladesh border fenced
•Half of the 4,096-km border India shares with Bangladesh has been fenced. Land acquisition is a major challenge to completing the work by the 2019 deadline.
•The border runs along West Bengal for 2,216.7 km, Assam 263 km, Meghalaya 443 km, Tripura 856 km and Mizoram 318 km.
•The aim of the project is to curb infiltration and smuggling of cattle and fake Indian currency notes.
•“We have surveyed every inch of the land to be fenced. We have identified plots to be acquired. We have sent a proposal to the government,” R.P. Singh, Additional Director-General of the Border Security Force, East, told The Hindu. He said land acquisition was a “legal process” and the moment the final approval was received, fences would be erected.
Land acquisition
•Asked whether the State governments were not cooperating in land acquisition, he said the West Bengal government formed a committee for acquiring land.
• Another important issue in West Bengal is that a large part of the border is riverine: rivers running along the border serve as the border. For instance, 70 km of the south Bengal frontier — from South 24 Parganas to Malda — is riverine. “Where fence is not possible, we are going in for technological solutions such as cameras and lasers,” Mr. Singh said.
• Asked why fake currency notes were being seized in Malda district, he said the fake currency note syndicates are “...located in Malda and Churiantpur areas.” BSF officers said that 13 of the 17 security features of the ₹2,000 note had so far been compromised. In February, fake currency notes with a face value of ₹2.96 lakh were intercepted by the BSF. One person was held.
Campaigning on a budget
•There is a considerable body of thinking in India that political funding is the nodal centre of unaccounted and illicit money transfers, and is the primary cause of corruption of the body politic. Party funding is often equated with political funding, as is demonstrated in much of the political rhetoric following demonetisation. But political funding need not be limited to party funding, and may encompass election expenditure of candidates at various tiers, federal, state and local. It is also important to distinguish such funding from political corruption that may involve funding of members of legislative organs of political parties directly, members of the executive branch of the government or even of the judiciary.
•In India much of the known extent of corruption is strongly associated with the bureaucracy, command organs, public sector, and other constitutional and statutory bodies. Further, even civil society institutions such as the media can act both as the conduit of corruption or harbour it as such. All political corruption involves an unfair, and most often unlawful, use of public office to secure a private gain. In the process common good, which a public office is supposed to serve, is appropriated for partisan ends. However, given the fact of competitive electoral democracy, political parties cannot be denied legitimate ways of aggregating their corpus funds, and a candidate is entitled to seek resources for his/her elections. When do these two modes of political funding seriously compromise public purpose?
•In India political parties are expected to file their income tax returns every year although they do not have to pay income tax. According to a recent resort to the Right to Information Act, the Association for Democratic Reforms found that the total income of all political parties in India from 2004-05 to 2014-15 was ₹11,367.34 crore, in which the share of the Congress and the BJP was more than half. Till recently political parties were required to disclose donations only for amounts higher than ₹20,000. From such known donors, for the period mentioned above, political parties received ₹1,835.63 crore, i.e. 16%, of their income, and another 15% they raised by way of membership, sale of coupons, interest on deposits, etc. The rest, i.e. 69%, of the income of political parties came from unknown sources, and this segment has been steadily on the rise during this period.
Party funding
•If we disaggregate these numbers, a much more complex picture emerges — for some regional parties, more than three-fourths of income came from unknown sources. While the income of national parties increased by 313% from such sources during this period, that of regional parties increased by 652%. It is also important to bear in mind that the corporate sector in India that contributes to political party kitties has generally not favoured the disclosure of the name of the donor, for obvious reasons. A large number of multinational companies that have entered India following liberalisation, and have tended to root themselves in a region, may tend to favour a party prominent in the area while not antagonising its national counterparts.
•The recent demonetisation move has affected the ‘undisclosed’ sources of income of political parties, positioning a ruling party such as the BJP in a much more advantageous position. The recent Budget announcement of the Finance Minister that every cash donation above ₹2,000 needs to be acknowledged in the IT returns further constrains flow of funds to parties other than a ruling party. As a result, political parties that are not ruling parties at present may tend to resort to greater subterfuge in the process. However, it is important to stress that between 2004-05 and 2014-15 the average income of all the political parties in India was just over ₹1,000 crore, and comes to about ₹2,000 crore at present annually. Even the income of large parties such as the BJP and the Congress is just about the budget of a modest university in India. Therefore, while the dossiers of political party funding need to be made transparent, the larger breach may lie elsewhere.
Funding of elections
•The big political funding in India, however, goes into election expenditures. The funds that a political party advances to its party candidates in an election vary from one candidate to another, and there is much variation across political parties in this regard. In the 2014 Lok Sabha elections, 263 members of the House claimed that they received a total of ₹75.59 crore from their parties, which averages out to roughly ₹28 lakh each. These are mere peanuts at the hustings!
•We can safely assume that an MLA spends on an average about ₹5 crore to get elected. The legal limit of ₹28 lakh is far off this mark. Assuming that there are five contending candidates in a constituency, and even if each one of them does not spend as much, but just half of their elected counterpart, an amount of about ₹15 crore will be spent in each constituency, which with about 4,215 MLAs in India works out to an about ₹13,000 crore per annum. While the legal limit that a Lok Sabha candidate can spend is ₹70 lakh, a victorious candidate on an average does not spend less than ₹10 crore for the purpose. Suppose we assume again an average of five candidates per constituency, and halving the amount to losers, about ₹30 crore will be spent in each Lok Sabha constituency, and given 543 members of the Lok Sabha, about ₹3,300 crore per annum. That this is not far off the mark is corroborated by the Centre for Media Studies, which estimated that an amount of ₹30,000 crore was spent by the government, political parties and candidates in the 2014 Lok Sabha elections. Then there are elections to the Upper Houses, both at the Centre and in some States, and the local governing bodies. While there are a few instances of people spending their own money in elections, someone else doles it out to others.
•One of the important considerations before political parties in selecting their candidates today is whether they can foot the expenditure of their election. Often other considerations, such as the background of the candidate or his or her ideological commitment, become secondary. Once a candidate is so elected, he has to make returns for this patronage, or at least hold out such a promise. The striving of an MLA to become a Minister at the earliest is built into the logic of this system of patronage. The return from political funding need not always be a substantial gain, such as land or coal blocks; it could be deferred advantage, defeat of an adversary, ideological support, incentive to desist from a proposed action, postponement of a proposed action to a favourable point of time, a third party advantage, etc. In a country such as India, political funding may seek to ensure a certain measure be not implemented or be implemented in a certain way rather than another. Given the significance of public opinion in a democracy, political funding may just be employed to create favourable public opinion.
The way out
•The key to regulate political funding therefore lies in bringing down election expenditure and ensuring that it provides an opportunity to get the best public men and women to participate in the institutional life of Indian democracy. One of the ways suggested for the purpose is holding simultaneous elections to the Lok Sabha as well as the State Assemblies. While a return to this practice that prevailed till 1967 is worth exploring for other reasons, it may not lead to any significant reduction in the election expenditure as such. Better and close monitoring of the election process by the Election Commission has ensured that overt modes of violation at the hustings are checked. But political entrepreneurs have always found ways of subverting official vigilance and spend lavishly to gain competitive advantage.
•There are, however, many short-term and long-term solutions that are feasible without disparaging competitive electoral democracy, such as citizen activism that keeps a close watch over campaigning. But in the longer run, political patronage itself needs to be reined in. This calls for not merely a decentralisation of power in more substantive ways, but also reordering the relation between the legislature and executive.
The right to choice
•On Tuesday, the Supreme Court declined a woman’s plea to abort her 26-week-old foetus detected with Down’s Syndrome. Senior advocate Colin Gonsalves argued that it was the woman’s constitutional right to terminate her pregnancy. It was contended that the congenital abnormality found in her foetus and the woman’s anguish about the future were the reasons for her decision.
•The court refused permission for abortion, calling the foetus “a life”. It said the Medical Termination of Pregnancy Act of 1971 places a 20-week ceiling on termination of pregnancy.
•However, this case is different from the ones that have preceded it. In January, the same Bench of Justices S.A. Bobde and L. Nageswara Rao had relaxed the 20-week cap to permit another woman to terminate her 24-week pregnancy. The foetus in that case was diagnosed with anencephaly — a congenital defect in which the baby is born without parts of the brain and skull. The court had said abortion was necessary to preserve the woman’s life. In the case of the foetus with Down’s Syndrome, the court said the foetus posed no danger to the woman’s life.
•Had the draft Medical Termination of Pregnancy (Amendment) Bill of 2014 been implemented as law, this case would not have come to court at all. The Bill amends Section 3 of the principle Act of 1971 to provide that “the length of pregnancy shall not apply” in a decision to abort a foetus diagnosed with “substantial foetal abnormalities as may be prescribed”. Besides increasing the legal limit for abortion from 20 weeks to 24 weeks, the draft Bill allows a woman to take an independent decision in consultation with a registered health-care provider. Under the 1971 Act, even pregnant rape victims cannot abort after 20 weeks, compelling them to move court.
•With the 2014 Bill in limbo, the Supreme Court has agreed to look into whether a wider interpretation ought to be given to phrases like “risk to the life of the pregnant woman” and “grave injury to her physical and mental health”.
•Legal experts have argued that medical science and technology have made the 20-week ceiling redundant and that conclusive determination of foetal abnormality is possible in most cases after the 20th week of gestational age. Mr. Gonsalves has led arguments that at least 3% of the 26 million births annually in India involve severe foetal abnormalities
‘Public procurement needs to be opened up’
•Public procurement in India should gradually be opened up in a fair manner to ensure greater competition, while privatisation of public assets has to be done keeping in mind the country’s socio-economic needs and objectives, Commerce Minister Nirmala Sitharaman said.
•Public procurement (procurement by government/its agencies for their own consumption and not for commercial resale) in India is estimated to be about 30% of the country's GDP, with sectors such as defence, railways and telecom — having state-owned enterprises — accounting for a major portion of it, Ms. Sitharaman said at the National Conference on ‘Economics of Competition Law’ organised by the fair-trade watchdog Competition Commission of India (CCI). Referring to the recent CCI orders imposing penalties on some cement companies for rigging bids for supply of cement to the government, as well as on firms for bid rigging of tenders floated by Indian Railways for procurement of ‘brushless DC fans,’ the minister said these regulatory orders are with an aim to ensure greater competition in India’s public procurement.
‘Fair manner’
•“You have to open it (public procurement) up, but layer by layer in a fair manner even in this transition stage, for greater competition,” Ms. Sitharaman said.
•“Collusive bidding and cartelisation (in public procurement) are very serious. The CCI has an important role to play to prevent them and to ensure that there is fair trade and ultimately the consumer benefits,” the minister said.
•During her speech, Ms. Sitharaman referred to a recent article by the economics commentator Martin Wolf, where he quoted Jawaharlal Nehru's phrase “tryst with destiny” and wrote that once again India has a tryst with destiny as it is trying to emerge as a democratic superpower by the middle of the century, but faces enormous challenges.
•She, however, said though it might be easy for many to state that India needs to move faster, “opening up of the economy cannot be done at any cost.”
•Opposing demands for expediting the privatisation process, the minister said, “Public assets cannot be just thrown away resulting in undesirable outcomes. India’s socio-economic needs and objectives and demographic divided will have to be kept in mind… We are not jumping straight into privatisation. We can’t be an open economy like Singapore straight away. India is moving cautiously with a well-planned middle path.”
Russia, China
•Speaking on the occasion, chief economic adviser Arvind Subramanian said privatisation per se will not lead to greater competition and referred to the case of Russia and China saying privatisation there has led to oligarchy.
•Mr. Subramanian said regulatory institutions in India are still a “work-in-progress,” adding that they need to learn that instead of using blunt instruments such as bans and restrictions including in the area of competition policy, what will work better is to have a nuanced approach and intervention.
•He said India is becoming a highly litigious society, in turn leading to a situation promoting decision-making by the judiciary, and the judiciary at times becoming more powerful than the executive and legislature.
•“How do we expedite the implementation of decisions taken by the executive in such a situation,” he asked.
‘Dynamic institution’
•Ms. Sitharaman differed with Mr. Subramanian saying “I would not say regulators like the CCI are a ‘work-in-progress’. The CCI is trying to be a dynamic institution. You have to take into consideration the peculiar needs of India rather than compare the situation here to Singapore or China.”
GST levy may go up to 40%, 4-slab structure to remain
•The GST levy may go up to 40% after the GST Council proposed raising the peak rate in the Bill to 20%, from the current 14%, to obviate the need for approaching Parliament for any change in rates in future.
•The model Goods and Services Tax Bill will replace the clause which states the tax rate “not exceeding 14%, with “not exceeding 20%” when it comes up for debate in Parliament during the second phase of Budget session beginning next week.
Four-slab structure
•The change in the peak rate will not alter the 4-slab rate structure of 5, 12, 18 and 28% agreed upon last year for the moment, but is only a provision being built into the model law to take care of contingencies in future, two officials in the know told PTI.
•The revised draft of model GST law, which was made public in November 2016, provides for a maximum rate of tax under the new regime at 14% (14% central GST and an equal state GST, taking the total to 28 %).
•“There shall be levied a tax called the central/state goods and services tax (CGST/SGST) on all intra-state supplies of goods and/or services... at such rates as may be notified by the central/state government... but not exceeding 14 % on the recommendation of the Council and collected in such manner as may be prescribed,” the draft law states.
•Officials said this will now be changed to say the rate will not exceed “20%.”
•The GST Council, headed by Finance Minister Arun Jaitley and comprising representatives of all states, has agreed to keep the upper band of the rate in the law at 20%.
•“For the moment, we will not tinker with the rate structure of 5, 12, 18 and 28%. The GST Council has decided to keep the upper cap higher at 20% so that in future in case of need to hike tax rate, there is no need to approach Parliament for a nod and the GST Council can raise it,” the officials said.
•This means the central GST and state GST can be up to 20% each, leaving the scope for a maximum levy at 40%.
•“The 4-tier rate structure that has been decided will hold for now. By keeping the upper cap at 20%, we are just keeping an enabling provision which the Council can exercise at a later date after deliberation,” the officials added.
•Mirroring the model GST law, the CGST, the SGST and the UTGST law will be firmed up by the Centre, states and Union Territories, respectively.
•The Centre plans to introduce in Parliament the Central GST (CGST) Bill in the forthcoming session beginning March 9.
•After it is ratified, the states will introduce the State GST (SGST) Bill in their respective legislative Assemblies.
•The central and state officials will soon start the exercise to determine which goods and services should fall in which tax bracket and the same will be taken to the Council for approval soon.
July rollout
•Together with this, they will also decide the goods and services that would attract a cess on top of the peak rate to create a corpus that can be used to compensate states for any loss of revenue from implementation of GST in the first five years.
•The union government is looking at GST rollout from July 1.
