THE HINDU – CURRENT NOTE 14 APRIL
Right to access Internet cannot be curtailed, says SC
Bench against general ban on online content about pre-natal sex determination
•Citizens have the right to access the Internet to gain information, wisdom and knowledge and their right cannot be curtailed unless it encroaches into the boundary of illegality, the Supreme Court observed on Thursday.
•Calling the Internet a “virtual world” and a “world which is invisible in a way,” the Supreme Court observed that the fundamental right of expression includes “the right to be informed and the right to know and the feeling of protection of expansive connectivity” the Internet offers on the click of a button.
•The court clarified that a general prohibition on all online content about pre-natal sex determination will curtail the fundamental right to know of a genuine information-seeker.
Section 22
•A three-judge Bench led by Justice Dipak Misra held the prohibition should kick in only if the content found online is violative of Section 22 (prohibition of advertisement relating to pre-natal determination of sex) under the Pre-conception and Pre-natal Diagnostic Techniques (Prohibition of Sex Selection) (PCPNDT) Act of 1994.
•“To elaborate, if somebody intends to search for ‘medical tourism in India’, he is entitled to search as long as the content does not frustrate or defeat the restriction postulated under Section 22 of the Act,” Justice Misra dictated for the Bench in the order.
•The Bench was hearing a petition filed by Sabu Mathew George for strict adherence by search engines to Section 22.
•The Centre, represented by Solicitor-General Ranjit Kumar, said the prohibition under Section 22 should be only on paid ads for sex determination or online advertisements masquerading as information.
Assurance to SC
•The three Internet search engines — Microsoft, Google India and Yahoo! India — gave their assurances to the Supreme Court that they would neither advertise nor sponsor advertisements violative of the PNPCDT Act.
•The trio said they had already appointed ‘in-house’ experts to spot illegal content and pull them down. Mr. Kumar said nodal officers had been appointed at State levels to keep tabs on the Net for offensive material contravening Section 22 of the Act.
•In case the nodal officers detect illegal online content, they would communicate with the search engine’s experts, which would take it off within the next 36 hours of receiving the information. These experts would then follow it up by providing the nodal officers concerned with an action taken report.
Why no paper trail in EVMs, SC asks Centre
Chidambaram says machines remain highly vulnerable
•The Supreme Court on Thursday asked the Centre and the Election Commission to respond by May 8 to a plea by the Bahujan Samaj Party (BSP) to comply with a 2013 court directive to introduce paper trail in Electronic Voting Machines (EVMs).
•A Bench led by Justice J. Chelameswar issued notice to the Centre and the top poll body after senior advocate P. Chidambaram submitted that EVMs remain highly vulnerable and susceptible to hacking. “What one man can invent another man can hack,” Mr. Chidambaram submitted.
•“I [voter] press a button on the EVM and I do not know what the machine has recorded,” Mr. Chidambaram said. He said if the EVM was fixed to a vote-verifiable paper audit trail (VVPAT) machine, the voter could see whether the symbol the voter had pressed was the symbol the EVM had registered in the system.
‘Verification a must’
•Verification of the vote was an indispensable part of voting, Mr. Chidambaram submitted. “Only a paper trail can restore the confidence of the people.”
•The Supreme Court had in 2013, on a petition filed by now BJP Rajya Sabha MP Subramanian Swamy, asked the Election Commission to introduce in a phased manner the paper trail in EVMs for the 2014 Lok Sabha polls, saying “it is an indispensable requirement of free and fair” polls which will restore voter confidence.
•The Supreme Court, which directed the Centre to provide financial assistance to the poll panel for introduction of the VVPAT system, had said it would “ensure accuracy” and also help in “manual counting of votes in case of dispute.”
•Mr. Chidambaram said the Election Commission had sent SOS to the Centre for funds to install EVMs with VVPAT. A total of Rs. 3,000 crore was required.
•The BSP and the Congress said they did not want to press their prayer for quashing of the recent Assembly elections.
Judge retorts
•“Nowhere in the world, except in South America, EVMs are used,” senior advocate Kapil Sibal for the Congress submitted. But this comment saw Justice Chelameswar retort that “if I am not wrong, EVM was introduced by your party.”
•“EVM itself was a remedy for other evils like booth-capturing, etc,” Justice Chelameswar said.
•“Science has improved, so has hacking,” Mr. Chidambaram responded.
India plans to buy three more Scorpenes
Will push for several upgrades in the new vessels
•India and France will step up negotiations to expand the Scorpene submarine contract after the presidential elections in France in May. India will push for incorporating several upgrades in the proposed three new submarines that the two sides would be discussing, a senior defence official told The Hindu .
•“We will look at the cost of the upgrades based on which we will take a call whether to go for the additional ones or carry on with the acquisition of the next line of submarines as planned,” the official said.
•Mazgaon Docks Ltd. (MDL), Mumbai, is manufacturing six Scorpene conventional submarines with technology transfer from DCNS under a $3.75-billion deal signed in October 2005.
•After a series of delays, the first submarine Kalvari is now in advanced stages of sea trials and expected to be commissioned in a few months. The second submarine Khanderi was launched in January.
•Another official said that detailed discussions would be held at the India-France strategic dialogue expected around December. As per plan, all submarines are expected to be launched from MDL by 2020 and both sides are on to firm up a deal before that to keep the production line running and preserve the expertise.
•The upgrades will help address concerns of any compromise in the submarine’s capability following the leak of its technical specifications in Australia last year.
Loyalty benefit for EPFO members
For contribution of 20 years or more
•Employees’ Provident Fund Organisation subscribers for 20 years or more will get a loyalty-cum-life benefit of up to Rs. 50,000 at the time of retirement.
•The benefit will be provided in case of permanent disability even if the members have contributed for less than 20 years, the EPFO Board has decided.
•The Central Board of Trustees (CBT) of the organisation has recommended a minimum sum assured of Rs. 2.5 lakh in the event of the death of a subscriber.
•“The suggested benefits will be available to members after government approval. Initially, these will be provided for two years on a pilot basis and will be reviewed thereafter.”
•The benefit will also be provided in case of permanent disability. In these cases, the members who have contributed to the EDLI scheme for less than 20 years will be eligible. Those members whose average basic wages are up to Rs. 5,000 will get a loyalty-cum-life benefit of Rs. 30,000. Similarly, the members with wages of Rs. 5,001-10,000 will be eligible for a Rs. 40,000 benefit. All those members getting more than Rs. 10,000 monthly wage will be eligible for Rs. 50,000 loyalty-cum-life benefit under the proposed scheme. The board has recommended such benefits in view of the EDLI corpus of Rs. 18,119 crore.
Interest rate
•Labour Minister Bandaru Dattatreya, who launched an Aadhaar seeding application after the meeting, said the provident fund deposits for 2016-17 would get an 8.65 per cent interest as decided by the CBT. The comments follow reports suggesting that the Finance Ministry wants the interest rate lowered.
On a glide path?
Adjusting fuel prices daily at petrol stations is a long overdue reform
•Hiking fuel prices at petrol pumps is such a politically fraught exercise that there is even a hesitation to decrease prices so as to safeguard against a possible spike in global petroleum rates in the future. It is worth watching, therefore, how the proposed pilot project by the three public sector oil marketing companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — proceeds as an effort to reform the pricing mechanism. Starting next month, in select cities fuel prices at the pump point will be reset daily in tandem with global oil price movements. Till the project’s outcomes are assessed, the rest of the country will continue with the existing system, under which petrol and diesel prices are calibrated generally on a fortnightly basis. If one considers the latest price change effected by oil companies (a Rs. 3.77 reduction per litre in the price of petrol accompanied by a Rs. 2.91 cut for diesel on March 31), the case for a daily price reset makes eminent sense. Apart from the fact that it is illogical for an economy integrated with the global financial and commodity markets to keep fuel prices unchanged for as much as a fortnight, aligning prices daily and spreading out the degree of change will lessen the impact on consumers, on both the upside and the downside. Marginal changes in the daily price of fuel will not make or break consumer confidence or fuel inflationary expectations, at least because of oil costs, as it currently does.
•A more gradual ascent or descent in fuel prices, rather than abrupt shifts over randomly selected intervals, makes good sense, given how closely our fiscal outlook is tied to oil price movements. The United Progressive Alliance government had freed the regulation of petrol prices in late 2010, and the National Democratic Alliance government followed through by liberating diesel prices within six months of assuming office in 2014. Such dismantling was necessary as previous attempts at abandoning the administered price mechanism for India’s largely import-dependent consumption of petroleum products never really took off, even as subsidies distorted the system further. The fortnightly system of price resets for both fuels has been followed over the last three years. The latest price cuts came after more than two months of no change, overlapping with the Assembly elections in five States. A transparently formulated and dynamic pricing regime would hopefully prevent such distortionary coincidences in the future. It would also allow private companies to compete with the PSU oil marketers, which today control 95% of fuel outlets. The government, on its part, must start winding down the extremely high petroleum product taxes imposed since June 2014, when oil prices began to fall, along with its energy subsidy liabilities.
Banking on Teesta
The wheels within wheels in Delhi, Dhaka and Kolkata on the water-sharing issue
•Prime Minister Narendra Modi’s assurance to Bangladesh Prime Minister Sheikh Hasina that “only my government and your government... can and will find an early solution to Teesta water-sharing issue” has been endlessly debated. The comment, which was made in front of West Bengal Chief Minister Mamata Banerjee, raised eyebrows as it was interpreted as being a step to bypass Ms. Banerjee, who has consistently opposed the changes Dhaka seeks in the sharing of Teesta waters. But it will be difficult to sidestep Ms. Banerjee as water is a State subject and requires her assent.
•Can Mr. Modi then adopt a circuitous route by amending the Constitution to transfer the subject of water from the State List to the Concurrent List, as was indicated by Water Resources Minister Uma Bharti? The amendment would require approval by a two-thirds majority in both Houses of Parliament — the BJP doesn’t have the numbers yet in the Upper House.
•Second, to quote Ms. Banerjee, Teesta is the “lifeline” of north Bengal; ruling parties have never touched it for fear of losing the northern base. The Left Front’s successive Irrigation Ministers insisted that if the waters of the Teesta were shared, it would only “strengthen the opposition (then Mamata Banerjee).” Ms. Banerjee too has maintained that if water is given from water-deficit areas, the onus would be “on them (the Central government)”.
•Ms. Banerjee, however, would perhaps not be averse to witness an accord where she, with a majority, is bypassed; it would be doubly beneficial for her. She would get rid of her anti-Bangladesh image by protecting the Teesta barrage at Jalpaiguri; on the other hand, she would be able to put the BJP on the defensive in north Bengal.
•There is also no reason to think that the BJP is keen to strengthen the Chief Minister of a State where it is on the ascendant. Handing over a larger share of Teesta waters to Bangladesh is handing over north Bengal to Ms. Banerjee before the 2018 panchayat poll. Conversely, for Ms. Banerjee, it makes absolutely no political sense to give in to Bangladesh. She could lose parts of north Bengal, while losing her only bargaining chip, the Teesta, to the Central government.
It’s all internal
•Indeed, Bangladesh’s former Foreign Secretary Tauhid Hossain has a point when he blames, as he did in an interview, India’s “internal politics” for the deadlock. For Bangladesh, Teesta has emerged as a new bargaining chip vis-a-vis India. Diplomats acknowledge that Dhaka’s growing friendship, as indicated through an astronomical investment, with Beijing has disturbed New Delhi, and finding an “early solution” is way more difficult now.
•Bangladesh’s diplomatic missions here do not live in hope. The pessimism has even reached Dhaka; the Awami League cancelled the customary public reception of the Prime Minister on arrival, arguing that such receptions disturb the traffic. But when have the Bengalis — in the east and the west — prioritised public inconvenience over political programmes? The river that received “greatest attention” has thus lost sight of the shore in the summer of 2017.
Allow anchor investors in SME IPOs’
Investment bankers urge SEBI to change norms to attract larger investors
•Investment bankers want the Securities and Exchange Board of India (SEBI) to allow anchor investors in public issues of small and medium enterprises (SMEs) while also enhancing the upper limit for paid-up capital of such companies to allow relatively larger firms to enter the capital market while ensuring institutional investor participation in the dedicated segment.
•The segment for SMEs, unveiled separately by BSE and the National Stock Exchange (NSE) in 2012, has seen a lot of action with a more than 200 companies currently listed on the platform. While BSE has more than 170 companies listed on its SME segment, NSE has close to 50 entities on board.
•Incidentally, the recent past also saw a few institutional investors participate in the segment but that has been far and few. Fund houses like Reliance Mutual Fund and DSP BlackRock Mutual Fund have invested in a few SME IPOs. Union Bank of India and SIDBI also invested in this segment, which saw a foreign investor participate once.
Regulatory push
•Merchant bankers said that if the segment receives a regulatory push then entities like banks, mutual funds, foreign institutional investors (FIIs) and financial institutions would subscribe to SME IPOs quite frequently.
•Merchant bankers want the regulator to evaluate the option of allowing anchor investors in SME IPOs — as is the case with public issues on the main board. Anchor investors are institutional investors that can bid for shares ahead of the IPO and have a lock-in of 30 days.
•“With SME segment growing leaps and bounds, we are being approached by many institutions who are keen to participate as ‘anchors’ in SME IPOs,” said Mahavir Lunawat, Managing Director, Pantomath Capital, an investment banking entity that has handled the maximum number of SME IPOs. However, the existing regulatory framework does not permit it, he said
•Market participants also want the regulator to enhance the paid-up capital cap from the current Rs. 25 crore so that slightly larger companies can tap the segment to get acclimatised with the compliance requirements before moving to the main board.
•Recently, Euro India Fresh Foods came out with an IPO to raise Rs. 51 crore — the largest till date. Data from Prime Database showed that the 2016-17 saw a total of 78 SME IPOs raising a cumulative amount of over Rs. 800 crore — a close to a threefold jump from the previous fiscal that saw Rs. 311 crore being raised from 50 issues.
•A group of investment bankers are to meet the new SEBI chairman Ajay Tyagi next week and these proposals are expected to be part of the larger suggestions that the banking community presents to the regulator.
RBI tightens norms on bank performance
Sets three thresholds, breach of which could lead to mergers or even closure
•The Reserve Bank of India (RBI) has come out with a revised prompt corrective action (PCA) framework for banks, spelling out certain thresholds, the breach of which could invite resolutions such as a merger with another bank or even shutting down of the bank.
•The revised norms have set out three thresholds. The breach of the third one on capital “would identify a bank as a likely candidate for resolution through tools like amalgamation, reconstruction, winding up etc.,” the RBI said.
•The provisions of the revised PCA framework will be effective from April 1, 2017 based on the financials of the banks for the year ended March 31, 2017. The framework would be reviewed after three years, the RBI said.
•The thresholds are based on capital, net non-performing assets, profitability and leverage ratio.
•The breach of the first threshold will invite restriction on dividend distribution or require parents of foreign banks to bring in more capital. This will get triggered if capital adequacy ratio (including capital conservation buffer) falls below 10.25% or common equity tier-I (CET1) capital ratio falls below 6.75%. Breach of either CAR or CET1 would trigger corrective action, the RBI said. The trigger for net NPA is 6% and 4% for leverage ratio. Two consecutive years of negative return on assets (RoA) will also be classified in threshold one.
•The breach of the second threshold will occur when the capital adequacy ratio falls below 7.75% or CET1 goes below 5.125%. The net NPA threshold is breach of 12% and leverage ratio below 3.5%. Three consecutive years of negative ROA will also trigger threshold two. Breach of threshold two will result in restrictions on expansion of branches and higher provisions.
Restriction on pay
•The breach of the last threshold happens when CET1 falls below 3.625% and net NPA goes above 12%. Negative ROA for four consecutive years will also be considered as a breach of the third threshold vis-a-vis the profitability parameter. Restrictions, in addition to that of threshold one and two, will be put on management compensation and directors’ fees if the the third level is breached.
•Corrective action that can be imposed on banks includes special audit, restructuring operations and activation of recovery plan.
•The RBI has said that promoters of banks can be asked to bring in new management, or even can supersede the bank’s board, as a part of corrective action.
