📰 Indians averse to adopting children with special needs
Adoptions by foreign applicants rise by 50%
•For every Indian parent who adopts a differently-abled child there are at least seven foreigners who adopt such children from India after they fail to find a family in the country.
•The latest data shared by the apex body for adoption in the country — Child Adoption Resource Authority (CARA) — reveals that domestic adoptions of children with special needs has fallen with every passing year. At the same time, foreigners adopting children with a physical deformity or an ailment rose by 50% last year alone.
•A total of 355 differently-abled children were adopted by foreign applicants in 2017-2018, up from 237 in the preceding year. Only 46 such children were adopted by Indian parents in the same year. It was 76 in 2015-2016 and 49 in 2016-2017.
•“Those who do adopt such children actually would have opted for a healthy child but because of the long waiting period involved, they switch to a differently-abled child,” says CARA CEO Lieutenant Colonel Deepak Kumar. He explains that, as per law, efforts have to be made to place a child within India first, and only when a child is not accepted by Indian applicants is he or she referred to foreigners. As a result, overseas applicants are mostly referred differently-abled children.
•Activists and parents attribute the huge gap to differences in cultural attitudes towards disabilities. “We often see how parents of healthy children have huge expectations of them. So, naturally, there is social stigma attached with disabilities in our country,” says 28-year-old Kavita Baluni, who adopted a child with Down’s Syndrome last year.
•Activists says that while better social security abroad helps families adopt a child with disabilities, there is also a need to look within.
•“In India, there are issues related to schooling, access to public spaces, and employment opportunities. While all these factors do contribute to parents in India not opting for differently-abled children, the primary reason is our attitude towards them. After all, why is it that those with means in India also don’t adopt these children?” says Lorraine Campos, assistant director, Delhi Council for Child Welfare.
📰 Inclusion and the right to dignity
The onus of battling discrimination must not fall on the shoulders of Dalits alone
•On the morning of April 3, the front pages of newspapers told us of violent protests by Dalits in northern India the day before. They had opposed the dilution by the Supreme Court, in its order of March 20, 2018, of the Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act. Blazing headlines and accounts that followed told us how many people had been killed and injured, about innumerable acts of arson, of the blocking of trains, closure of shops and the calling in of Central forces in some States. Sadly, the tone of most reports was dispassionate, soulless and bare. They might have been recounting a tale of a privileged group inflicting violence on geographical and human landscapes for the noble purpose of lowering taxes.
•But we need to go beyond headlines and ask why a vulnerable community took to the streets. Think of its desperation, how it has lost confidence in the ability of Indian democracy and now the judiciary to give it justice, how the promises of the Constitution have been blatantly and vulgarly betrayed, and how it has been subjected to repeated indignities, reiterated insults and bodily harm by citizens of this great Republic. Worse, its own leaders have let it down.
•If the leadership had faithfully discharged its mandate of representing the needs of Dalits, the represented would not be living lives that are best described as subhuman. In January 2016 the death of Rohith Vemula, in July 2016 the public attacks on Dalits in Una, and earlier this year attacks on celebrations of the historic Bhima-Koregaon battle in Maharashtra showed up in great detail the flaws of our body politic. How many more indignities does the community have to suffer? How long will non-Dalits be indifferent to this suffering? It is time to reflect. What has gone wrong with the project of justice that independent India initiated with a flourish? What has gone wrong with our own sensibilities? It is time to agonise and to feel shame.
Uneven results
•Affirmative action policies centring on the politics of presence have certainly contributed to the repair of historical wrongs. The advantages of these policies are, however, unevenly spread out. The constituency of affirmative action has benefited in bits and pieces. For instance, we see the making of an educated and professionally qualified Dalit middle class. A Dalit movement has succeeded in prising open worlds that for long had been closed to the community. Activists have seized the right to voice through collective action, and now influence and even shape, public debates.
•Today, Dalits write their own histories and biographies. A vibrant literary movement denounces the ostracism of an entire community from mainstream society, and chronicles the nerve-racking experience of being treated as an outcaste. Challenging prevailing literary conventions, rewriting the script of literary and poetic production, inserting the community into critical narratives of the Indian nation, and intent on representing their own community, writers have profoundly dented the way we think of others and of ourselves.
•This genre of literature has gained considerable acclaim. English translations of Dalit literary works, for example Omprakash Valmiki’s Joothan (2003), Narendra Jadhav’s Untouchables (2005), and Baby Kamble’s The Prisons We Broke (2009), have expanded the canon of post-colonial literature and aesthetics in Indian and western universities. And, above all, electoral politics, affirmative action and the space afforded by civil society for mobilisation have enabled a suppressed community to recover agency and speak back to codified power. Yet caste-based discrimination persists in significant areas of social interaction. In short, the one vital good that the justice project tries to secure — respect/self-respect — continues to elude attempts at repair of historical injustice.
Unrealised justice project
•The impact of disrespect upon the Dalit community cannot be underestimated. Disrespect reinforces other injustices confronted by the community in everyday life. And it disrupts social relationships based on the reciprocal obligation to see each other as equal and as worthy of dignity. Disrespect demoralises and diminishes human beings and erodes their confidence to participate in the multiple transactions of society with a degree of assurance. Despite historical struggles against rank discrimination in words, verse, and collective action, despite acceptance of historical wrongs by the leaders of the freedom struggle, despite the mobilisation of the Dalit community, and despite affirmative action, caste-based discrimination continues to relentlessly stalk the political biography of independent India. Till today what caste we belong to continues to profile social relations, codify inequalities, govern access to opportunities and propel multiple atrocities. The project of justice remains unrealised.
•Indians have failed to secure justice for their own fellow citizens. It is time to express solidarity. Constitutional and legislative provisions and Supreme Court judgments are important, but they are simply not enough. If the right to justice is violated, citizens should be exercised and agitated about this violation. For this to occur, for society to feel deeply about violations of basic rights, the right to justice has to be underpinned by a political consensus. A consensus on what constitutes, or should constitute, the basic rules of society is central to our collective lives. A social movement geared to attack caste-based discrimination can remind us that denial of respect is a problem for non-Dalits as well.
Shrugging off indifference
•To put the issue starkly, if respect is compromised, the project of redistributive justice has borne inadequate results. One of the most essential goods human beings are entitled to, the right to dignity, has not been realised. For this right to be recognised, social movements that speak the language of equality for their own particular constituencies have to come together and support the idea of building a political consensus on what is due to all human beings, what should be done for them and what should not be done to them.
•We read of such movements in pre-Independence India. In independent India, the onus of battling discrimination has fallen onto the shoulders of Dalits. The rest of society wends its way without regard for the infirmities of its fellow citizens. We have to shrug off indifference and shoulder responsibility. It is only when we concentrate on the construction of a political consensus in society, that the uncomfortable distinction between ‘us’ and ‘them’ that bedevils much of the case for remedial justice will dissolve. We have to do this because disadvantaged communities are not only likely to be economically deprived but also socially marginalised, politically insignificant in terms of the politics of participation as distinct from the ‘vote’, humiliated, dismissed and subjected to intense disrespect through practices of everyday life. Anyone who suffers from these multiple disadvantages will find it impossible to participate in social, economic and cultural transactions as an equal.
•Certainly, efforts have been made to repair historical injustice. But the ideology of discrimination continues to dominate despite a multitude of constitutional provisions, laws, affirmative action policies and political mobilisation. We can no longer assume that some redistribution of resources will lead to respect and self-respect. The politics of voice can achieve a great deal in the public sphere, but if the ideology of discrimination continues to shape social relations, much of the gains are lost. One of the most essential goods human beings are entitled to, the right to respect, has not been realised.
📰 A case to withdraw the triple talaq Bill
The Bill in its current form has many procedural and legal infirmities
•The Prime Minister’s lament to the outgoing Rajya Sabha MPs that they missed out on an opportunity to debate important issues such as the triple talaq Bill — the Muslim Women (Protection of Rights on Marriage) Bill, 2017 — due to disruptions is an indication that despite widespread public opinion against it, the Centre is inordinately keen on making it a law.
•What defies comprehension is the refusal of the Central government to appreciate the legal point that no person can be jailed for an act that is not a crime. The Supreme Court, in Shayara Bano v. Union Of India (2017), had set aside the validity of instant talaq (talaq-e-biddat), thus rendering its pronouncement ineffective in dissolving a marriage. Yet this Bill makes the pronouncement punishable with a three-year imprisonment without realising that such an arbitrary exercise of legislative power is liable to be judicially reviewed and struck down for violating the principles of natural justice and rule of law.
An unjust recommendation
•Interest in the triple talaq Bill has also been sustained by the erroneous belief held by some women’s organisations that the pronouncement of talaq-e-biddat could be brought under the definition of emotional abuse mentioned in Section 3 of the Protection of Women from Domestic Violence Act, 2005 (PWDVA).
•This view is as legally untenable as the obsession to criminalise inconsequential words. The PWDVA brings “verbal and emotional abuse” under domestic violence and defines it as: “a) insults, ridicule, humiliation, name calling and insults or ridicule specially with regard to not having a child or a male child; b) repeated threats to cause physical pain to any person in whom the aggrieved person is interested.”
•After its invalidation by the apex court, instant talaq comes nowhere near this definition. It will constitute abuse only if it is accompanied by the forcible removal of the wife from the matrimonial home, or her abandonment. But the Bill criminalises talaq-e-biddat even if it is not followed by eviction or desertion of the wife.
•And as per Section 31 of the PWDVA, a person who indulges in domestic violence to the prima facie satisfaction of the magistrate can ultimately be punished with imprisonment which may extend to one year, or with a maximum fine of Rs. 20,000, or with both if he violates the “protection order” issued by the magistrate under Section 18 of the Act.
•A protection order is meant not only to prohibit the accused from committing any act of domestic violence, it can also stop him from entering the place of employment of the aggrieved person, or attempting to communicate with her in any form. In addition, the magistrate can also pass a “residence order” under Section 19 inter alia directing the accused to remove himself from the shared household and restraining him or any of his relatives from entering any portion of the shared household in which the aggrieved person resides.
•Most importantly, Section 32 declares that a breach of the protection order is a cognisable and non-bailable offence which the magistrate may conclude to have been committed by the accused on the “sole testimony of the aggrieved person.”
•Indeed as per Section 4, “any person” who has reason to believe that an act of domestic violence has been, or is likely to be, committed can give information about it to the Protection Officer concerned. No liability, civil or criminal, shall be incurred by that person for giving the information in good faith.
•It is astonishing that those who want talaq-e-biddat, which can no longer be used to threaten a wife into submission, to be declared an act of “domestic violence” fail to realise that innocent men could be forced to undergo the aforementioned humiliating punishments reserved for cognisable and non-bailable offences. Can any recommendation be more unjust and anti-therapeutic in nature?
Personal liberty
•But the most significant ground on which the triple talaq Bill fails the test of constitutionality is found in Article 21 which states that “no person shall be deprived of his life or personal liberty except according to procedure established by law.”
•In Maneka Gandhi v. Union of India (1978), a seven-judge Constitution Bench ruled that fairness is implicit in the phrase “procedure established by law” and therefore, the procedure should be “fair, just and reasonable, not fanciful, oppressive or arbitrary”; otherwise it would be no procedure at all and the requirement of Article 21 would not be satisfied. The court also clarified that “law” means reasonable law, not any enacted piece.
•Endorsing this view, the Supreme Court, in Justice K.S. Puttaswamy v. Union of India (2017), said that “a law which provides for a deprivation of life or personal liberty under Article 21 must lay down not just any procedure but a procedure which is fair, just and reasonable” and that “the validity of a law which infringes the fundamental rights has to be tested not with reference to the object of state action but on the basis of its effect on the guarantees of freedom.”
•Earlier, the same was emphasised in stronger words by Justice V. Krishna Iyer inSunil Batra v. Delhi Administration (1978): “True our Constitution has no ‘due process’ clause or the VIII Amendment; but, in this branch of law, after Cooperand Maneka Gandhi the consequence is the same. For what is punitively outrageous, scandalizingly unusual or cruel and rehabilitatively counterproductive, is unarguably unreasonable and arbitrary and is shot down by Art. 14 and 19, and if inflicted with procedural unfairness, falls foul of Art. 21.”
•Seen in the light of these categorical pronouncements, the procedure imposing penal imprisonment for talaq-e-biddat in the proposed Bill is not just unfair and unreasonable but is also, to paraphrase a view of the U.S. Supreme Court (quoted in Law, Hermeneutics and Rhetoric by Francis J. Mootz III), so totally without penological justification that it would result in the gratuitous infliction of suffering on a person for doing nothing more than utter words rendered harmless by the Supreme Court.
•This unwarranted punitive deprivation of personal liberty also runs afoul of Article 19, especially clauses 19(1)d and 19(1)g which allow all citizens “to move freely throughout the territory of India” and “practise any profession, or to carry on any occupation, trade or business.” Thus, if a man is unjustifiably jailed under the proposed law even for a few weeks, he will be denied of these rights for that period, to say nothing about the dim prospects of securing a job after the stigmatising confinement.
•Given these procedural and legal infirmities, the chances of the triple talaq Bill being judicially challenged when it becomes law are high. This apart, the Centre has completely ignored the fact that the passage of the Bill in the Lok Sabha has unwittingly pushed Muslim women towards the All India Muslim Personal Law Board if one were to go by the recent massive demonstrations against it across India.
•The only way to remedy the situation is for the government to withdraw the Bill.
📰 Broken Houses
The Budget session shamed democracy; the damage can be undone with a new session
•With the two Houses of Parliament adjourned sine die on April 6, the institutional crisis afflicting the legislature has been framed by both statistics and the solutions being offered by the Treasury and Opposition benches. While each side is stacking the blame at the other’s doorstep, neither will emerge unscathed; within the heavily polarised, disruption-at-any-cost strategising inside Parliament there is no sign of wiser counsel to reach across the floor and forge a via media. The session began on January 29, the Union Budget was presented on February 1, and the first part concluded on February 9. In the second part of the session, starting March 5, the productivity of both Houses was less than 10%. Against a long list of pending Bills, just one was passed by both Houses, the Payment of Gratuity (Amendment) Bill 2017. That was it for the Rajya Sabha. The Lok Sabha passed three other bills related to the Budget: the Finance Bill 2018 and two Appropriation Bills. These are money bills that do not need the Rajya Sabha’s nod, and with the National Democratic Alliance’s numbers in the Lok Sabha, their passage was never going to be in doubt. But it must be an occasion of shame that the Budget was passed in the Lower House without any debate whatsoever. Other numbers deepen the reading of the crisis: both Houses lost more than 120 hours each to disruptions; and the Rajya Sabha took up just five out of 419 listed starred questions (that is, questions that Ministers answer orally, with MPs allowed to ask supplementary questions).
•However, the crisis is defined by more than numbers; it is the quality of interaction that is damaging India’s democracy. The Lok Sabha Speaker, most glaringly, failed to use the powers at her command to suspend unruly MPs so that a notice for a no-confidence motion could be considered. Certainly, for all the expedient calculations that guided Opposition parties and the government at different points to have the Houses disrupted, eventually neither benefits. Both come across looking effete — the Opposition for failing to keep the government answerable (especially by failing to use Question Hour), and the government for not mustering the grace and conviction to debate a no-trust motion. Some ruling party MPs proposed that their salaries be docked, as if the crisis is nothing but budgetary. A special session before the monsoon session to finish pending business has been mooted. Although this is bound to raise the question why Parliament was held to ransom if the Opposition had indeed wanted it to function, it is an idea worth considering seriously by all parties. For one, it provides an opportunity to fix a broken parliamentary calendar and finish unfinished legislative business. For another, even the process of reaching an understanding to hold another session may help in repairing, at least to a degree, the very image of our parliamentarians — who seemed to be unabashed about creating and sustaining an institutional crisis.
📰 EC to take a call on electoral bonds soon
Examining notification to see if concerns are addressed
•The Election Commission will soon take a fresh view of the electoral bonds after analysing the terms of the government notification and the outcome of two rounds of their sales since March.
•The Union government notified the scheme on January 2. Under the rule, only registered political parties which have secured not less than 1% of the votes polled in the previous Lok Sabha or Assembly elections are eligible for these bonds.
•The first round of sales was allowed in the designated branches of the State Bank of India (SBI) in New Delhi, Mumbai, Kolkata and Chennai from March 1 to 10. The second phase is on from April 2 to 10.
Rs. 222 crore sales
•“In the first round, bonds worth Rs. 222 crore were issued by the SBI. This fact was not reported directly to the Election Commission. The government disclosed it in the Lok Sabha in response to the question from an MP, and that was how it came into the public domain,” an official said. It is learnt that Election Commission officials held a meeting on the basis of this information. “Now that the second phase of sales is under way, we will wait for more details for further analysis,” the official said.
•The EC Secretariat is also examining the notification to determine whether all the concerns raised by the Election Commission have been addressed. The Election Commission had earlier told a parliamentary committee that the introduction of electoral bonds would be a retrograde measure in the effort to make political funding transparent. It had submitted that the changes made to the election laws for the bonds could compromise transparency.
•The amendment to Section 29C of the Representation of the People Act has made it no longer mandatory for the parties to report the details of donations received through the bonds. It is not clear how the details of the bonds will be shared with the Election Commission. However, the issuing bank has their money trails.
📰 Why Indian firms don’t innovate
A majority of companies lack the capability, says William Maloney of the World Bank
•A large proportion of Indian companies just don’t have the policy or human resource capabilities to invest in innovation though the country fares favourably in terms of research and development (R&D) spending when compared with its peers, according to a top World Bank official.
•“If you look at how much India invests in R&D as a share of GDP compared to other countries at its level of income per capita, it actually doesn’t do badly,” said William Maloney, chief economist for equitable, growth, finance and institutions in the World Bank.
•“It’s (R&D spending) substantially above the average. That said, there are a couple of things to note,” Mr. Maloney said in an interview.
‘Low R&D investments’
•“One, there aren’t that many of the big and modern firms that are investing a huge amount in R&D,” he added. “And, the vast majority of firms in India don’t have the capability to do R&D.
•“We have [the] data on measures of management practices around the world and you have the good performers such as Sweden and Germany, and you have parts of Africa that do pretty badly. India is somewhere in the middle. It’s around China, Latin American levels.”
•What this means, Mr. Maloney explained, is that firms in India lack the capability to take a careful look at their basic plant layouts, can’t make long-term plans, don’t have an innovation strategy and don’t have an HR (human resources) policy to staff their innovation strategy.
•The other point Mr. Maloney made about India was that the focus should be on increasing productivity and not simply focussing on R&D or single-mindedly increasing employment.
•“R&D is one of several types of innovation that firms can do, but there are lots of others, such as the adoption of better practices and products, upgrading quality, licensing technology from abroad, all these things are under the heading of ‘innovation,’” he said.
•Mr. Maloney acknowledged that it is not feasible for a country or a company to do everything by itself, and that India still stands to gain a lot from borrowing technology from abroad, which then enables it to leapfrog some existing technologies, such as the case with 4G adoption or the implementation of BS-VI fuel norms.
•“You can’t do everything, Every firm is going to have to find out what process and product innovations it needs to do to improve productivity,” he said.
•However, Mr. Maloney did concede that borrowing technology from abroad and then implementing it at cheaper prices in India could lead to some friction between the exigencies of a developing country and the huge investment needed for R&D. A case in point being how, in 2012, the Indian government stripped pharmaceutical company Bayer of its exclusive rights to sell its cancer treatment drug in India and granted Natco Pharma a licence to sell a generic version of the drug at about 3% of the price Bayer was charging. “It’s difficult, to reconcile the demands of a developing country and the huge investments that R&D requires,” Mr. Maloney said. “Ideally, you could say the government should be paying whatever the costs are to recover the R&D investment and delivering it at lower prices. But this is a huge demand on the government Budget.”
•There are a number of reasons why a firm doesn’t innovate, he added, explaining that several of these have to do with internal inadequacies, while others have to do with externalities beyond the control of the firm.
Business environment
•“What leads a firm to want to accumulate more knowledge or innovate.
•“On the one hand, you have to look at the business environment, the macro stability [and] look at opportunities to export once you get going, all those sorts of things that say it will be worthwhile to sink money into upgrading, raising quality levels, doing R&D, etc,” he said. “All those things on the demand side are critical.
•“But many firms have trouble identifying an opportunity,” he added.
•“In the sense that they don’t have the managerial capabilities. SMEs (small and medium enterprises) are constantly in a situation where they are putting out fires, they don’t have a five-year plan, they don’t have somebody keeping track of what new technology has come out of some place that they could bring to the firm.
‘Upgrading capability’
•“That managerial capability comes with much more sophisticated firms and part of what we are arguing is that countries like Japan and Singapore invested a lot in capability upgrading programmes that sought to first organise the plant, get people with good records and a clean plant, with some sort of vision for the future, some way of listening to workers and evaluating the quality of the staff, all those very basic building blocks,” he said.
•One manner to address these deficiencies is to attract talent from abroad by engaging with the Indian diaspora more and trying encourage them to come back and bring their training and expertise to India.
•“In both China and India, a lot of international patenting is being done by firms that are multinationals,” Mr. Maloney said. “So, in some sense, you have very sharp Indians working for multinationals, but with unclear spillovers to the local economy. So, both the ‘brain drain’ and this phenomenon could be seen as bad.”
•“On the other hand, Ireland, Taiwan, and India started their tech industries largely due to the returning diaspora,” he added.
•“Ideally, you’d like to create a landing pad here so that they [diaspora] say ‘okay, I would like to go home and try to start something there.’ It’s an obvious thing, but you’d be amazed at the number of countries that don’t make it that easy.”
•Another way in which the Indian government could help SMEs is to help them identify their strengths and weaknesses in a systematic manner and then provide them with access to international best practices and advice on how those could help them. Most of the SMEs I have worked with are full of smart people, often trained as engineers, very committed to their firms and the workers, but they are often just not aware of how they could be doing things better. The management support programmes that Japan, Singapore, the entire West engages in are important for exactly that reason, he said.
‘Quick wins’
•There are some quick wins if you just tell firms that this what you should be doing and this is where you are.
•“And the thing is, most of these governments subsidise these programmes,” he added. “If you have a small company that doesn’t know how good or bad it is, you can’t expect them to shell out a huge sum of money to find out. But if the company becomes better and starts earning more, then the government earns back that money in taxes.”
📰 Will IBC bankrupt banks?
•Mrs. Bumble had broken some trinkets but it was her husband who was held guilty...“Indeed, You are the more guilty of the two, in the eye of the law; for the law supposes that your wife acts under your direction.”
•“If the law supposes that," said Mr. Bumble, squeezing his hat emphatically in both hands, "the law is an ass — an idiot. If that's the eye of the law, the law is a bachelor; and the worst I wish the law is, that his eye may be opened by experience” — Charles Dickens in Oliver Twist
•Two hundred years have passed. Laws have changed but the process of lawmaking and the end result seem much the same. When Parliament passed the Insolvency and Bankruptcy Code (IBC) in 2017, it was intended to herald a new era for banking. Assets — steel mills, power plants, telecom towers languishing in the never-never land of corporate debt restructuring would be auctioned and put back into use. Banks would take a hair cut but would emerge healthier. Or so it was thought.
No equality?
•The government, in its anxiety to help banks, passed a law which gives seniority to bondholders and lenders over suppliers of goods and services. The Indian constitution provides for equality under the law. This is a fundamental right and a basic feature of the constitution.
•It cannot be legislated away. By taking the ground that the act can pay certain types of creditors ahead of others, the IBC opens up a basic question. Can a credit card company claim precedence over the Kirana Store in a bankruptcy?
•A company could source equipment from two suppliers. One supplier insists on a Letter of credit from a bank. The other would provide it without a letter of credit. The buyer would have to pay that bank ahead of the supplier who did not ask for a letter of credit.
•The mere involvement of a bank or financial institution would seem to be adequate for achieving this priority. Ericsson and L&T, to name but two, have taken recourse to the courts in their recoveries from RCom and Bhushan. Banks take over assets deemed to be charged under an umbrella “present and future assets” clause. When neither the company nor the banks have parted with cash for assets, why would the principles of natural justice allow banks to get the assets for free? Should not the supplier at least be deemed to be a secured creditor with a collateral of the goods supplied?
•Even if the Act was just, would it apply to supplies made and debt incurred before the Act was passed? The Vodafone case brought the spotlight on the legality of retrospective taxation.
•The law had to be amended to provide for the retrospective effect. The tax involved was a fraction of the amounts at stake in the resolution of the top 25 NPAs alone. The IBC is silent on its applicability in relation to debt incurred prior to its promulgation.
•The one certainty is that this legal tangle will be many years into resolution. The RBI provides for a 50% provision for secured assets which are referred to NCLT.
•Provisions rise to 100% if the company is insolvent or the asset is an NPA for three years. All other ways of resolutions have been dispensed with in RBI’s February circular. As time elapses, it looks like the IBC will result in a hit to the networth of the banks. May be this dawning realisation is why the RBI allowed banks to reduce provisions to 40% for NCLT cases in late March.
•Conventional wisdom is that equity ranks last — below all financial debt, trade credits and even preference shares. In India, banks can use “strategic debt resolution” by which they convert part of their debt to equity.
•The devolution of powers to the committee of creditors, which comprises only secured financial lenders, has resulted in strange antics where equity gets paid before debt.
•Witness that so far many offers for assets are targeted solely at the interest of the secured financial lenders by giving a repayment of secured loans in cash as well as an offer to buy out outstanding equity.
•The real problem stems from moral hazard. Legislators should have aimed for fairness to all creditors and equality under law not merely because they are high-sounding moral principles, but because people can accept a sacrifice if every one else sacrifices too.
•Its difficult to avoid the impression that the IBC’s legal sleight of hand is an attempt to avoid a second recapitalisation bill.
📰 Bad loan menace: auditors come under lens of RBI
Focus on ‘colluding’ with promoters in loan defaults
•With the RBI cracking the whip on bad loans menace, more than three dozen chartered accountants (CAs) are under the scanner for allegedly conniving with promoters in defaulting as well as restructuring the stressed assets, sources said.
•At a time when more number of companies with stressed assets are coming under the Insolvency and Bankruptcy Code (IBC), the central bank is also looking at the role of various key personnel associated with such entities.
•Sources said the Reserve Bank of India (RBI) is looking into the role of about 35 to 40 chartered accountants in loan defaults by companies.
•The regulator is looking to ascertain whether these chartered accountants helped the entities in any illegal manner causing deliberate defaults and subsequently assisting them in restructuring the dud assets, they added.
•The RBI lens on chartered accountants for suspected illegal activities with defaulting companies also come at a time when a substantial number of stressed assets are being taken up under the insolvency resolution mechanism. NPA woes in the banking system have been further highlighted with the over Rs. 13,000-crore scam at Punjab National Bank by diamond merchants Nirav Modi and Mehul Choksi.
SEBI scanner
•Meanwhile, CAs, company secretaries, cost accountants and valuers may have to forfeit their fees and face penalties if they are found lacking in their dealings with listed firms, according to a new set of norms being considered by SEBI.
•The Securities Exchange Board of India (SEBI) is looking to enhance oversight to check such frauds with new regulations for fiduciaries in the securities markets, a senior official said.
•It will require additional disclosure requirements and greater scrutiny of financial statements by auditors and other third party entities, he said. SEBI may finalise rules which will put the responsibility on chartered accountants, company secretaries, cost accountants, valuers and monitoring agencies to get firms to comply with securities regulations and act in the interests of shareholders, he added.
•If such entities are found lacking in their dealings, SEBI may disgorge the wrongful gains, including the fee earned, along with an interest of 12% per annum from the date of default. Besides, SEBI may ask them not to directly or indirectly issue any certificate or report.
📰 ‘LTCG tax to spur growth in fixed-income MFs’
Uptick in IIP, GDP and growth in car sales, air traffic augur well for 2018: Aditya Birla Sunlife AMC head
•The mutual fund industry, which witnessed significant growth in the wake of demonetisation of high-value currency notes in November 2016, is likely to grow faster in this current financial year. The industry’s efforts to reach smaller towns have started to reap fruit. In an interview, A. Balasubramanian , CEO, Aditya Birla Sun Life AMC, said that 2018 looked promising with the recent uptick in the industrial production and the GDP numbers, significant growth seen in passenger car sales and air traffic and in the progress in corporate earnings. Excerpts
2017 was a good year for the mutual fund industry. Will 2018 mirror similar growth in flows and assets under management?
•Year 2017 was one of the most remarkable years for the mutual fund industry both in terms of growing the equity asset class, as well as systematic investment plans (SIP) as a mode of investing.
•This has not only resulted in an increase in the overall customer folio but has also led to new customer additions for the industry. The government’s bold move of demonetisation also acted as a blessing in disguise for the mutual fund industry, clocking huge inflows.
•Having seen this unprecedented flow into mutual funds in 2017, we may probably see the momentum in asset growth continue; however the rate of growth would be marginally lower.
•The SIP mode of investing will gain momentum in the coming year too. With the introduction of the Long Term Capital Gains (LTCG) tax, we see a pick up in fixed income-oriented mutual funds and serving the larger needs of the customers in choosing all possible asset classes from the mutual fund bouquet of products over and above equity-oriented schemes.
What will drive the next leg of growth?
•With the continued effort by both AMFI [the Association of Mutual Funds in India] and individual AMCs to increase the awareness level through various campaigns such as ‘Mutual Funds Sahi Hai’, we see the number of new customer acquisitions continuously going up and unlocking huge untapped potential. We see the overall mutual fund pie increasing in relation to the bank deposit base; [it] is currently at 18% of the banking industry size.
What are the key contributors to growth for Aditya Birla Sun Life? What are your business targets ?
•With the continuous focus on building the equity asset base, we are one of the fastest among the top five AMCs in terms of equity asset growth. Our overall growth was in excess of 84% [over] the previous year base. The other major growth contributor is our monthly SIP book size. We are also constantly focusing on building our customer base with various initiatives around digital.
•Going ahead, we [will] continue to keep our focus on market and customer expansion while building our retail asset base in all the asset classes serving the needs of customers such as savings, income, growth or wealth and tax-oriented schemes.
SIPs continue to show growth. Is this sustainable?
•SIP has become one of the most preferred modes of investment. Currently, the industry’s monthly SIP book size has reached a billion-dollar size and is clocking new heights every month. This will only further increase given the ease [of use] and the advantages of SIPs.
•B-15 (beyond the Top-15) towns have shown steady increase in retail assets under management. What is making this work?
•Yes, B-15 markets have shown tremendous growth over the years. These huge inflows of B15 retail assets are due to continued efforts of both investor education events, as well as our distributor fraternity reaching to the nooks and corners of B15 cities and contributing to the retail assets at large.
Given the current stock market scenario and the corrections one has seen, what strategy should a retail investor follow?
•Strategy for retail investing should always revolve around goal-based themes of individuals and time horizon. Currently, keeping the recent volatility in mind, investors should not only continue their SIPs but they should also consider increasing their SIP ticket size or multiple SIPs based on their broad goals, whether it is for savings, regular income, wealth creation or for tax-saving solutions.
•Such investments should be spread across different equity schemes ranging between large-, multi- and mid-cap funds. While one does lumpsum investment, one should not only invest through equity, but also look at fixed income schemes in order to have the right asset mix between both the asset class.
What’s your view on the economy and markets?
•Barring the last three months, due to some volatility in the global space such as rising U.S. interest rates, trade protectionism, oil price volatility [and the like], we experienced a bullish market, with investors receiving handsome returns.
•Closer home in India too, the last three months were not a cakewalk for the broad economy, Events such as the PSU bank [fraud controversy], recent bypoll elections, introduction of the LTCG and the like had created temporary volatility waves.
•The future, in 2018, looks promising with: the recent uptick in the IIP [index of industrial production] and GDP numbers; significant amount of growth seen in passenger car sales and air traffic; [and] progress in corporate earnings.
•Now that two major reforms — demonetisation and GST — have settled, we see a major reflection of a sustainable economy in the coming future.
📰 Humanity’s first flight to sun in July: NASA
Parker Solar Probe is in final preparations
•NASA’s Parker Solar Probe — humanity’s first mission to the Sun — is undergoing final preparations for its launch scheduled for July 31.
•The spacecraft will continue testing, and eventually undergo final assembly and mating to the third stage of the Delta IV Heavy launch vehicle. It will be launched from NASA’s Kennedy Space Center in Florida.
•After launch, it will orbit directly through the solar atmosphere — the corona — closer to the surface than any human-made object has ever gone.
•While facing brutal heat and radiation, the mission will reveal fundamental science behind what drives the solar wind, the constant outpouring of material from the Sun that shapes planetary atmospheres and affects space weather near Earth.
•For the next several months, the spacecraft will undergo comprehensive testing. Just prior to being fuelled, one of the most critical elements of the spacecraft, the thermal protection system (TPS), or heat shield, will be installed.
📰 Smoke in the woods
The draft Forest Policy re-emphasises production forestry, raising many ecological and social concerns
•Government policy documents are statements of goals, priorities and strategies. If old strategies have failed or circumstances have changed, they should be revised. Given that our Forest Policy was last revised in 1988, changes are perhaps overdue. The new draft Forest Policy 2018, however, ignores the lessons from this period and returns to the state-managed forestry of the 1950s, but with a neoliberal twist.
Policy conundrum
•India’s diverse forests support the livelihoods of 250 million people, providing them firewood, fodder, bamboo, beedi leaves and many other products. The timber currently benefits the state treasury. Forests also regulate stream flows and sediment, benefitting downstream communities. Finally, they provide global benefits of biodiversity and carbon sequestration. However, these multiple goods and services, flowing to different beneficiaries, cannot be simultaneously maximised. Forest policy, therefore, focusses primarily on which benefits (and beneficiaries) to prioritise, where and through what process. Another focus area is to decide when and through what process to allow diversion of forest land for “non-forest” activities such as dam building, mining and agriculture.
•Forest policy in colonial India focussed on maximising products and revenues for the state through the imperial forest department as sole owner, protector and manager of the forest estate. Unfortunately, post-Independence policy continued this statist approach. Forests were seen as sources of raw material for industry and local communities were simply treated as labour.
•In a paradigm shift, the 1988 Forest Policy recognised the multiple roles of forests and prioritised environmental stability over revenue maximisation. It also acknowledged that the needs of forest-dependent communities must be the “first charge” on forest produce. Equally important, the policy emphasised people’s involvement in protecting and regenerating forests, thus formally recognising the limitations of state-managed forestry.
Post-1988 experience
•Joint forest management (JFM) was initiated in the 1990s to implement the concept of people’s involvement. But what began with great expectations eventually ended up as a nation-wide charade. Foresters created thousands of village forest committees but severely limited their autonomy and jurisdictions. Donor money was spent on plantations but activities were stopped once funds ran out. “People’s participation” by executive order was too weak and lopsided a concept. Instead what was required was substantive devolution of control over forests.
•The Forest Rights Act (FRA) of 2006 created a historic opportunity for such devolution. Its community forest resource provisions gave communities rights to both access and manage forests. Today, thousands of villages in Maharashtra and Odisha have received these rights, and hundreds have begun to exercise them.
•The 1990s also saw the Supreme Court getting involved in forest governance. To regulate forest diversions, it introduced a high ‘net present value’ (NPV) charge on the lands diverted. But the court refused to assign any role to local communities affected by such diversion, not even a share in the NPV received. Again, the FRA democratised the diversion process by requiring community concurrence for forest diversion once community forest rights are recognised. The Adivasis of Niyamgiri in Odisha exercised this provision to prevent bauxite mining in their sacred hill tracts.
Production and plantations
•Does the 2018 Forest Policy draft build on the new direction of 1988 and incorporate the lessons learnt since then? Unfortunately, the answer is a no. But in the haze of poorly written text with its platitudes and confusion, one intent is visible. Carping about the decline in forest productivity, it identifies “production forestry” and plantations as the “new thrust area”. Forest development corporations, white elephants of the statist era, are to be the institutional vehicle. But in a neoliberal twist, they will now enter into public-private partnerships (PPPs) to bring corporate investment into forest lands.
•In the past, production forestry led to replacing natural oak forests with pine monocultures in the Himalayas, natural sal forests with teak plantations in central India, and wet evergreen forests with eucalyptus and acacia in the Western Ghats. All this has decimated diversity, dried up streams and undermined local livelihoods. PPPs will entail more such destruction, with even the profits ending up in corporate hands.
•If local communities had a say in forest governance, they would challenge this production forestry model. So there is little about decentralised governance in the draft policy though the term “community participation” is tossed around liberally. The draft talks of “ensuring synergy” between gram sabhas and JFM committees, when the need is to replace JFM committees with statutorily empowered gram sabhas, and revamp the colonial-era Indian Forest Act by incorporating FRA provisions.
Carbon and CAMPA
•So, what is the impetus behind this new draft policy? Granting the private sector access to public resources is one. But an additional driving force seems to be India’s commitment made in Paris in 2015 to sequester 3 billion tonnes of carbon dioxide in our forests. “Carbon neutral timber” is listed as the first benefit from forests and a subsection on integrating climate change concerns highlights its importance. Conveniently, the accumulated Rs. 50,000 crore of NPV monies (called CAMPA, or Compensatory Afforestation Fund Management and Planning Authority, funds) provides the means to achieving this carbon target. The CAMPA Act and its recently released rules demonstrate the government’s intent to fall back on state-managed forestry to meet new “national” goals; the draft policy ropes in the private sector as well. This overlooks the ecological and social implications of carbon and production forestry and the need for decentralised democracy.
