THE HINDU – CURRENT NOTE 31 March
Lok Sabha clears Finance Bill
Five of Upper House’s amendments rejected; Centre accused of riding roughshod over Parliament
•Finance Minister Arun Jaitley invited suggestions from the Opposition for clean and transparent funding of political parties, as the Lok Sabha on Thursday cleared the finance Bill after it rejected five amendments (including those pertaining to anonymity of donors to political parties) recommended by the Rajya Sabha.
•Opposition MPs accused the government of riding roughshod over Parliament over what they termed some “draconian provisions” in the Bill.
•The Rajya Sabha’s amendments pertained to deleting the provisions relating to powers given to taxmen to requisition books of account, power to survey and other such discretionary powers. The Upper House had also approved that there should be a cap of 7.5% of net profit of the last three financial years for donation to political parties. It had also approved an amendment asking for the disclosure of donor names to political parties. These amendments were rejected in the Lok Sabha.
•Mr. Jaitley, while responding to the debate in the Lok Sabha, said he had been “hearing only adjectives like it [political funding] must be clean, it must be transparent. Please give me ideal combination of the two. We are willing to consider it. I will wait for a specific suggestion.” The response came after a spirited discussion in the Lok Sabha on all the amendments.
Checks and balances
•Initiating the discussion, Congress MP Deepender Hooda said there was a need for “checks and balances” on taxmen and they should put on file the objective for conducting survey, search and raid, otherwise there would be no accountability. He also demanded that a new Bill be introduced for regulating political funding. “We are not doubting the intentions of the government, but the manner in which this [changing rules for political funding via finance Bill] is being done,” he said.
•“The process of change in electoral funding has nothing to do with the Consolidated Fund of India,” Mr. Hooda said, observing that the Finance Minister through these amendments had made the Rajya Sabha “incidental.” The government without cleansing the system of political funding was trying to push it under the carpet, he said.
Electoral bonds
•Trinamool Congress MP Saugata Roy said he had suggested that a separate law be brought to introduce electoral bonds as the proposal had been included in the “so-called omnibus Finance Bill.”
•Mr. Roy said the Rajya Sabha had approved the deletion of Clause 51 of Section 132a of the Income Tax Act — which deals with powers to taxmen for requisition of books of accounts. It was a “direct assault on the right of individual.”
•Bhartruhari Mahtab of the Biju Janata Dal sought to know since when was there a provision in the Income Tax Act, 1961, that the person whose House was being searched, or raided was disclosed the reason. Mr. Mahtab also questioned whether political parties should run with funding from the corporate sector. “The floodgates would be opened for corporate funding for political purposes,” he said.
•He added that political parties in power might benefit from the corporate houses but would such benefits accrue to them when they were out of power. He insisted that there should be transparency with regard to political funding and added that it was necessary to make the political system corruption-free.
Delhi to extend $5 billion credit to Dhaka
India interested in railway projects and road transportation and maintenance
•India has offered a new line of credit for $5 billion, its biggest yet in the neighbourhood, to Bangladesh. The announcement is expected during Prime Minister Sheikh Hasina’s visit to Delhi next week, her economic adviser, Mashiur Rahman, said here on Thursday.
•Mr. Rahman said the credit would be open-ended and would follow the $1 billion offered in 2010, when Ms. Hasina previously visited Delhi, and the $2 billion in 2015 during Prime Minister Narendra Modi’s visit to Dhaka.
Open LoC
•“The $5 billion is an open LoC; we can use it to enhance the level of trade, movement, connectivity. The projects are yet to be fully identified, and there is no time line. We can spend it all at once, or as we need it. But where the Indian side has an interest is in connectivity: railway projects, road transportation, road maintenance,” Mr. Rahman said.
•A senior Indian official said lines of credit were part of India’s “well-thought-out” strategy to “give Bangladesh smaller sums it can absorb” and building capacity.
•The two sides are expected to announce a slew of agreements including one for the reconstruction of a seventh India-Bangladesh railway line between Agartala and Akhaura, a ₹1,000-crore project, for which Railway Minister Suresh Prabhu laid the foundation stone in August 2016.
•The 15-km line from Bangladesh to Tripura is significant as it is part of India’s larger strategy of assisting Bangladesh’s infrastructure while using it to transit to the “north-eastern” States.
•The line is expected to shorten rail routes by as much as 1,000 km once completed.
•“In principle, we will be able to send trains from our western border with Bangladesh through to the eastern side, but in practice, we will have to wait until they standardise their track sizes as some are still on broad gauge and some on metre gauge,” the official said.
Ferry services
•Ferry services connecting Assam, Bangladesh and West Bengal and permissions for running cruise liners between the two countries, along with several road projects, are expected to be among more than 40 agreements to be announced when Ms. Hasina meets Mr. Modi on April 8. Also included are power projects and a civil nuclear cooperation agreement, diplomats privy to the negotiations said.
•Officials said the next part of the plan is to link Bangladesh to other neighbourhood countries. While the plan under the Bangladesh-Bhutan-India-Nepal initiative has hit a roadblock over the Bhutanese Parliament’s refusal to ratify the network, officials are understood to be working around it, to link Bangladesh, India and Nepal.
•“When Prime Minister Manmohan Singh came here [in 2011], we had signed a framework for cooperation. The focus was on identifying projects that were mutually beneficial and bring in neighbours such as Bhutan and Nepal and increase the levels of cross-border investment. Because as you increase the investment, you can address the issues that people on both sides face, such as taxes, duties, transport problems,” Mr. Rahman said.
‘India a friend’
•Bangladesh officials rejected comparisons of the plan for India’s $5 billion LoC in infrastructure with the recent announcement by Chinese President Xi Jinping of $24 billion in development aid, with $13 billion more in the private sector for Bangladesh, which joined China’s “Belt and Road initiative” in October 2016.
•“India is a friend and neighbour, while all other countries including China are development partners,” Information Minister Hassanul Haq Inu said.
•Mashiur Rahman, one of the key interlocutors, who visited India last year, said the difference between the loans from India and China was also cultural.
•“The main difference is, in the case of China, the project is identified first and then the money comes in. With India, you get the promise of money first, and then they identify the projects,” he said adding that projects under the B&RI were new projects, while those with India consisted of restoring historical links.
Next steps on GST
The spirit of give and take must continue to operationalise the new indirect tax regime
•The Lok Sabha has duly given its assent to necessary Central legislation to operationalise the Goods and Services Tax, nearly 17 years after the government began discussions on the prospects for a unified indirect tax regime across the country. It is eyeing a July 1 rollout for the GST, which will replace the multiple Central and State-level taxes and levies that make doing business in India a compliance nightmare today. The long and winding road for this reform, punctuated by political about-turns, has had a fairly straight trajectory in recent months, following the constitutional amendments last August. The GST Council has managed to thrash out a consensus on several issues relating to the administration and the legislative provisions for the new tax system within six months. The fact that apparently intractable positions held by the States as well as the Centre on the sharing of administrative powers, for instance, have been reconciled without the Council resorting to a majority vote inspires confidence. So does the alacrity with which the Centre has moved to secure Parliament’s nod for four enabling pieces of legislation within a fortnight of the Council’s approval. State Assemblies should do the same to pass the State GST law by holding special sessions if need be.
•For Indian businesses that have been seeking the reform, it is now time to come to terms with the fine print and embrace the tax system. The GST Council, meeting again on Friday to clear four pending sets of regulations, must sign off on which of the five GST rates will apply to different products and services. Clarity on the applicable rates will help industry alter their accounting systems, supply chains and pricing strategies. But some provisions in the GST laws have the industry in a tizzy. While the highest GST rate has been pegged at 28%, the integrated GST law has set a ceiling of 40%. Though an enabling provision, it gives the government too much leeway to alter the rate structure in coming years without seeking Parliament’s nod. Compare this to the cess ceiling of 15% on luxury cars, for instance, which are likely to see a 12% cess to start with. On several other fronts, the final laws haven’t changed much from their draft versions, despite industry red-flagging several provisions. These include the anti-profiteering clauses to curb ‘unjust enrichment’ of firms, the requirement for branch offices to register separately in each State, and treating all transactions between related parties (including head office and branch offices) as taxable. For the services sector, in particular, compliance requirements could go up multi-fold. It is still not too late for the GST Council to offer some exemptions or resist operationalising some of these provisions through the subordinate rules and regulations in order to address genuine industry grievances.
A clean-up act: no compromise over air quality
The Supreme Court has signalled there can be no compromise over air quality
•The Supreme Court’s direction to transport authorities to stop registering vehicles that do not meet Bharat Stage-IV emission standards from April 1 sends out the welcome message that short-term economic considerations cannot supersede public health concerns. Some automobile companies, notably those manufacturing two-wheelers and commercial vehicles, have suffered a blow as they must now deal with unsold inventories of the obsolete models. The 2017 deadline for a nationwide shift to BS-IV had been repeatedly emphasised in various forums, and reiterated by the Parliamentary Standing Committee on Petroleum and Natural Gas in its review of the Auto Fuel Policy nearly two years ago. But there was some confusion about whether April 1 was the deadline for the manufacture of BS-III models or their sale. Significantly, some automobile manufacturers themselves called for a decisive shift in favour of the higher emission standard, since they had invested in upgraded technologies over time. But it would appear that two-wheeler and commercial vehicle manufacturers made a costly miscalculation when they hoped for a repeat of the experience they had seven years ago, when the shift from BS-II to BS-III norms was carried out with a relaxation of deadlines often stretching across months. The Centre must share some of the blame, because it assured industry of a business-as-usual approach on a sensitive issue such as automotive emissions, even though producers were already equipped and meeting the higher norms in the bigger cities.
•The court’s order means that a little over eight lakh BS-III vehicles will have to be either upgraded or sold abroad. As a total sum, this is a small fraction of the 19 crore vehicles on Indian roads today. It is unlikely that the court’s uncompromising approach will have a significant impact on reducing air pollution. But the message it sends out on air pollution is unmistakable. Research reported three years ago estimated that 30% to 50% of total on-road emissions came from vehicles older than 10 years, or about 17% of the fleet. The requirement for manufacturers to adjust to the new reality should serve as a reminder that they, and the fuel companies, must prepare for the next big deadline: an upgrade to the BS-VI standard by April 1, 2020, leapfrogging BS-V. More immediately, the Centre has to ensure that the objective of the Supreme Court’s order is met, and the ‘one fuel, one country’ goal for BS-IV is fulfilled. This is crucial to ensure that the catalytic converters of newer vehicles are not affected by lower-grade fuels. Liquidating obsolete inventory does pose a challenge for manufacturers, but this can be met through exports, technology upgrades or reuse of dismantled parts. The imperative is to shift to a clean fuel pathway.
Is Aadhaar a breach of privacy?
•Aadhaar is mass surveillance technology. Unlike, targeted surveillance which is a good thing, and essential for national security and public order — mass surveillance undermines security. And while biometrics is appropriate for targeted surveillance by the state — it is wholly inappropriate for everyday transactions between the state and law abiding citizens.
•When assessing a technology don't ask — “what use it is being put to today?”. Instead ask “what use can it be put to tomorrow and by whom?”. The original noble intentions of the Aadhaar project initiators will not constrain those in the future that want to take full advantage of technological possibilities. However, rather than frame the surveillance potential of Aadhaar in a negative tone as three problem statements — I will propose three modifications that will reduce but not eliminate the surveillance potential.
Shift from biometrics to smart cards
•In January 2011, the Centre for Internet and Society had written to the parliamentary finance committee that was reviewing what was then called the “National Identification Authority of India Bill 2010”. We provided nine reasons for the government to stop using biometrics and instead use an open smart card standard. Biometrics allows for identification of citizens even when they don't want to be identified. Even unconscious and dead citizens can be identified using biometrics. Smart cards which require pins on the other hand require the citizens' conscious cooperation during the identification process. Once you flush your smart cards down the toilet nobody can use them to identify you. Consent is baked into the design of the technology. If the UIDAI adopts smart cards, we can destroy the centralized database of biometrics just like the UK government did in 2010 under Theresa May's tenure as Home Secretary. This would completely eliminate the risk of foreign government, criminals and terrorists using the breached biometric database to remotely, covertly and non-consensually identify Indians.
Destroy the authentication transaction database
•The Aadhaar Authentication Regulations 2016 specifies that transaction data will be archived for five years after the date of the transaction. Even though the UIDAI claims that this is a zero knowledge database from the perspective of “reasons for authentication” - any big data expert will tell you that it is trivial to guess what is going on using the unique identifiers for the registered devices and time stamps that are used for authentication. That is how they put Rajat Gupta and Raj Rajratnam in prison. There was nothing in the payload ie. voice recordings of the tapped telephone conversations – the conviction was based on meta-data. Smart cards based on open standards allow for decentralized authentication by multiple entities and therefore eliminates the need for a centralized transaction database.
•Prohibit the use Aadhaar number in other databases
•We must as a nation get over our obsession with Know Your Customer [KYC]. For example, for SIM cards there is no KYC requirement is most developed countries. Our insistence on KYC has only resulted in retardation of Internet adoption, a black market for ID documents and unnecessary wastage of resources by the telecos without preventing criminals and terrorists from using phones. Where we must absolutely have KYC for security, elimination of ghosts and regulatory compliance – we must use a token issued by UIDAI instead of the Aadhaar number. This would make it harder for unauthorized parties to combine databases. But at the same time would enable law enforcement agencies to combine database using the appropriate authorizations and infrastructure like NATGRID. The NATGRID unlike Aadhaar is not a centralized database. It is a standard and platform for the express assembly of sub-sets of up to 20 databases which is then access by up to to 12 law enforcement and intelligence agencies.
•To conclude, even as a surveillance project — Aadhaar is very poorly designed. The technology needs fixing today, the law can wait for tomorrow.
Centre picks five airlines to connect 43 regional airports
Flights for Rs. 2,500 connecting these smaller centres may begin from April
•Beginning April, passengers may be able to fly on as many as 128 routes connecting 70 big and small airports across the country by paying ₹2,500 for an hour’s flight.
•The Centre on Thursday announced a list of routes awarded to five airlines which will operate flights under its regional connectivity scheme, named UDAN (Ude Desh ka Aam Naagrik).
•“We will be adding 43 new destinations with the launch of RCS,” Civil Aviation Minister Ashok Gajapathi Raju said. “Flying was a rich man’s prerogative earlier, but now it has also become a common man’s prerogative.”
Turbo Megha Airways
•Low-cost airline SpiceJet, Air India subsidiary Alliance Air along with regional airlines Turbo Megha Airways, Air Deccan and Air Odisha Aviation won the rights to operate flights under the regional connectivity scheme under which half of the seats on the plane will be capped at ₹2,500 per hour’s flight.
•Some of the inactive airports that will soon witness regional flights include Shimla, Agra, Bikaner, Gwalior, Kadapa, Rourkela, Jharsuguda, Vidyanagar, Burnpur, Diu, Shillong, Kullu, Mysore, Jagdalpur, Salem, Utkela, and Hosur.
•The regional airlines will connect these destinations with their nearest bigger airports such as Delhi, Bengaluru, Chennai, Bhubaneswar, Mumbai, Ahmedabad, and Jaipur, among others.
•Civil Aviation Secretary R.N. Choubey said that the first regional flight may likely begin its operations in April. “Fortunately, in the first round of bidding, the airlines focussed on airports that are ready to take flights. The deadline to start operating regional flights is September,” Mr. Choubey said.
Subsidy on losses
•As per the scheme, the Centre will subsidise the losses incurred by airlines flying out of dormant airports to help airlines charge ₹2,500 for an hour’s flight to passengers.
•80% of the subsidy will be collected by charging a levy of up to ₹8,500 on each departing flight of domestic airlines and the rest 20% will come from the respective State governments.
•The Centre had asked airlines to submit their proposed routes along with subsidy amount required to operate the regional flight. This was followed by counter-bids from other airlines and the one asking for the least financial support won the bid.
•Government will provide subsidy to airlines for first three years of operations when they will have exclusive flying rights on the selected routes.
•“The scheme has a unique market-based design. We have a successful national and international aviation market but an underdeveloped regional market. This scheme will stimulate growth in the regional aviation market and will connect underserved and unserved airports that really didn’t have flight services,” Minister of State for Civil Aviation Jayant Sinha said.
•Mr. Sinha said the airlines which had won the first round of bidding under the scheme would require a subsidy of ₹205 crore for running their operations. This would ultimately lead to the creation of 13 lakh seats in the regional aviation market.
•“This is really about bootstrapping and creating a market which is not a perpetual subsidy,” Mr. Sinha said. “Once the market gets jump started, it will operate on a commercial basis as per market forces of supply and demand,” the Minister of State added.
Board moots EPF for unorganised sector
Decision deferred on PF for apparel and made-ups sector
•The Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation (EPFO) on Thursday recommended to the Centre to extend social security benefits to more than 61 lakh workers in the unorganised sector.
•However, the trustees decided to defer the proposal to amend the Employees’ Provident Fund and Miscellaneous Provisions Act for making provident fund contribution optional for employees in the apparel and made-ups sector following opposition from workers’ representatives.
•“In an important decision, the central board recommended to the central government to consider issuing a notification for extending Social Security Benefits to the volunteers of various schemes workers i.e. Anganwadi, ASHA, Mid-day Meal Workers under the ambit of EPFO,” according to a statement from the EPFO.
Unions welcome move
•D. L. Sachdev, national secretary, All India Trade Union Congress (AITUC) and member of the CBT said: “This is a landmark step taken by the board of trustees. Trade unions have been demanding social security cover to the entire workforce and this is a step forward in that direction.,”
•The EPFO has proposed to the Labour Ministry that a lower contributory rate of 10% of income towards the Employees’ Provident Fund be allowed for scheme workers as against 12% contribution stipulated for the organised workers.
•However, Mr. Sachdev said that the trade unions demanded that central government and state governments pay for the employer’s share of contribution towards the EPFO for the scheme workers.
•According to estimates, there are 14 lakh Anganwadi workers, 12 lakh Anganwadi helpers, 25.5 lakh mid-day meal workers and 10 lakh ASHA workers in the country.
Centre’s notification
•There is no mandatory social security cover for such scheme workers at present. However, the Centre can issue a notification to cover any class of establishments with a lower contributory rate under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.
•The EPFO trustees also approved a new eligibility condition for grant of exemption to firms under Employees’ Provident Fund and Miscellaneous Provisions Act. Exempted firms are allowed to set up their own trusts to manage their workers’ EPF accounts as well as funds themselves.
•“To be eligible to be considered for exemption under the Act, the establishments would henceforth require compliance with EPFO as an un-exempted establishment for a minimum period of 5 years, should employ at least 500 employees and their corpus should be at least ₹100 Crore at the time of seeking an exemption,” according to the statement.
•Besides, the trustees also decided to allow all banks including private ones to collect contributions from employers and make payments to employees in addition to SBI, nationalised banks and payGov platforms on a pilot basis.
•The proposal to increase wage ceiling for social security coverage under EPFO to ₹25,000 a month from ₹15,000 a month at present could not be taken up for discussion in the meeting held on Thursday.
