📰 Kisan Rath will link farmers to transport options
They will have access to a network of over 5 lakh trucks and 20,000 tractors
•In a bid to ease the disruption of agricultural supply chains, especially for perishable produce, the Agriculture Ministry has launched a Kisan Rath mobile application, which will connect farmers and traders to a network of more than 5 lakh trucks and 20,000 tractors.
•The application, developed by the National Informatics Centre, is meant to help farmers and traders who are searching for vehicles to move produce. This includes primary transport from the farm to the mandis, local warehouses or the collection centres of farmer producer organisations, as well as the secondary transport from the local mandis to intra-and inter-State mandis, processing units, railway stations, warehouses or wholesalers.
•The application will lead to on-boarding of over 5 lakh trucks through transport aggregators as well as 20,000 tractors from the custom hiring centres run by farmer groups. Refrigerated vehicles will also be available.
•“It will be a stepping stone towards provision of timely transportation service at competitive rates for farmers and traders, besides achieving a reduction in food wastage,” said a Ministry statement.
More funds for NBFCs, Nabard, Sidbi
•The Reserve Bank of India (RBI) on Friday announced a slew of liquidity measures to ease financial stress and increase credit flows, while indicating that more room was likely to emerge for reduction in interest rates as inflation softens.
•Among the measures announced was liquidity infusion of Rs. 1 lakh crore, of which Rs. 50,000 crore is exclusively for non-banking finance companies (NBFCs), via banks. The NBFCs have experienced liquidity shortage since banks have not offered them any moratorium for repayment, while these entities have had to extend the moratorium option to their customers.
•The RBI will extend another Rs. 50,000 crore to refinancing agencies like Nabard, Sidbi and National Housing Bank.
Help for States
•Separately, RBI also said it has increased the ways and means advances (WMA) limits of States by 60%, over and above the level as on March 31, 2020.
•The move was aimed at providing greater comfort to the States for undertaking containment and mitigation efforts, and to plan market borrowing programmes better, the RBI said. On April 1, the RBI increased the limit by 30%. The increased limit will be available till September 30, 2020.
•Citing the retail inflation numbers of March, which was at 5.9%, RBI Governor Shaktikanta Das said inflation could be on a declining trajectory. “...Early developments suggest that inflation is on a declining trajectory, having fallen by 170 basis points from its January 2020 peak,” Mr. Das said, while announcing the liquidity measures.
•He said recent data showed a softening of food inflation by around 160 bps though in other categories of the CPI, inflation pressures remained firm.
📰 NBFCs get Rs. 50,000-cr. liquidity booster
Banks to get funding via targeted long-term repo operation, invest in CP, NCDs, bonds of these entities
•The Reserve Bank of India (RBI) has announced a host of measures to provide liquidity support to non-banking financial companies (NBFCs), apart from giving them certain benefits for loans extended to the commercial real estate sector.
•To begin with, banks have to invest the funds availed under targeted long-term repo operation (TLTRO), in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs. RBI stipulated that small and mid-sized NBFCs and micro-finance institutions (MFIs) should receive at least 50% of these funds.
Auction on April 23
•Banks can avail Rs. 50,000 crore through the targeted long-term repo operation. The first auction of TLTRO for Rs. 25,000 crore will be conducted on April 23.
•Of the 50% stipulated for smaller entities, 10% has to be invested by banks in securities of MFIs, 15% in securities issued by NBFCs with asset size of Rs. 500 crore and below; and 25% in securities issued by NBFCs with assets size between Rs. 500 crore and Rs. 5,000 crore.
•“These investments have to be made within one month of availing liquidity from the RBI,” the banking regulator said. The RBI clarified that investments made by banks under this facility would be classified as ‘held-to-maturity’ (HTM), even in excess of 25% of the total investment permitted to be included in the HTM portfolio.
•“This will, in turn, ease the liquidity problem faced by NBFCs and MFIs to some extent, if their lender bank does not provide moratorium on payment of instalment and interest which they are extending to their customers,” said Deo Shankar Tripathi, MD & CEO of Aadhar Housing Finance.
•NBFCs and housing finance companies are facing liquidity pressure since banks have not extended any repayment moratorium to these entities even if NBFCs have to provide the same for their borrowers.
•The RBI has also decided to provide special refinance facility of Rs. 50,000 crore to NABARD, SIDBI and NHB to enable them to meet sectoral credit needs. This would comprise Rs. 25,000 crore to NABARD for refinancing regional rural banks (RRBs), cooperative banks and micro finance institutions (MFIs); Rs. 15,000 crore to SIDBI for on-lending/refinancing; and Rs. 10,000 crore to NHB for supporting housing finance companies (HFCs).
•The regulator has also allowed non-banking institutions to extend the date for commencement for commercial operations (DCCO) by an additional one year, without treating the same as restructuring, if the project is delayed due to reasons beyond the control of the promoter.
📰 Institutional fixes and the need for ethical politics
As Madhya Pradesh politics shows, the anti-defection law continues to be circumvented to bring down governments
•Late night on March 23, while the nation was vexed with the coronavirus crisis, Shivraj Singh Chouhan of the Bharatiya Janata Party (BJP) was sworn in as the Chief Minister of Madhya Pradesh in a small ceremony at the Raj Bhavan. The next morning, he won a trust vote in an Assembly session boycotted by the Congress legislators. The Supreme Court had, on March 19, given an order directing the Speaker to conduct a floor test the next day. Kamal Nath of the Congress party resigned as Chief Minister just hours before the scheduled time for the floor test. With the resignation of the 22 Congress MLAs who subsequently joined the BJP, the halfway mark of the Assembly had reduced, allowing the BJP to stake claim to form the government.
•In the midst of the coronavirus pandemic, the BJP machine was still active and able to wrest power in yet another State it lost in the Assembly elections. The rush to hold a floor test seems to be have been driven by the need to capture the reins of the State before a longer coronavirus lockdown. Much of India was already in a lockdown when Mr. Chouhan took oath. Since no other Minister was sworn in, Madhya Pradesh does not presently have a cabinet or a dedicated Health Minister at this time of a health emergency.
New method of bypass
•The political skulduggery in Madhya Pradesh represents a new method of bypassing the anti-defection law and toppling elected governments. The H.D. Kumaraswamy-led Congress-JD(S) government was brought down in July last year in a similar manner with 17 MLAs of the ruling coalition resigning and joining the BJP. Under this novel method, a set of legislators of the party in power is made to resign from the Assembly to reduce the total strength of the House enough for the BJP to cross the halfway mark to form government. In the ensuing by-elections, the members who resigned were then fielded as BJP candidates (most of whom have been re-elected in the case of Karnataka). The same practice is likely to be repeated in Madhya Pradesh soon.
•This method of mass defection circumvents the provisions of the Tenth Schedule of the Constitution (better known as the anti-defection law) that prescribes the grounds for disqualification of legislators: voluntarily giving up party membership and voting or abstaining to vote against party directions. Though resignation is not mentioned as a ground for disqualification, the Speaker in Karnataka disqualified them for the rest of the Assembly’s term, thereby barring them from contesting the by-polls. While the Supreme Court upheld the disqualification, it stuck down the bar from contesting by-polls. In Madhya Pradesh, since the Speaker has accepted the resignation of the MLAs, the defectors can in any case contest the by-polls.
•The recurrence of this model of defection signals the exploitation of the inherent weaknesses of the anti-defection law. While solo legislators jumping ship might have reduced now, “horse-trading” seems to have gone from retail to wholesale. This threatens the underpinnings of India’s electoral democracy since such surreptitious capture of power essentially betrays the people’s mandate in a general election. Further, as the by-polls are held after the alternate political formation has assumed office, the turncoats now have an upper-hand in the election as members of the ruling dispensation.
Rethinking the law
•In this context, it is important to examine whether the anti-defection law fulfils any purpose. This law raises fundamental concerns regarding the role of a legislator in a parliamentary democracy. It denies the legislator the right to take a principled position on a policy matter and reduces her to an involuntary supporter of the whims of party bosses. The constitutionality of the Tenth Schedule was challenged for violating the Basic Structure of Constitution with regard to parliamentary democracy and free speech, but the Supreme Court in Kihoto Hollohan v. Zachillhu (1992) in a 3-2 verdict upheld the law while reserving the right of judicial review of the Speaker’s decision.
•Hence, the anti-defection law, on the one hand, severely restricts the freedom of a legislator and makes her a slave of party whips. On the other hand, it has not been able to meet its primary objective of preventing horse-trading and continues to be circumvented to bring down elected governments. This calls for reforms that address concerns at both ends of the spectrum. For addressing the first issue, as the Dinesh Goswami Committee also suggested, the scope of the binding whip should be restricted to a vote of confidence. For addressing the second issue, it is best to institutionalise the Karnataka Speaker’s decision to bar the defected members from contesting in the ensuing by-poll, if not for a longer period, and thereby disincentivise MLAs from jumping ship.
•These reforms would require a constitutional amendment to the Tenth Schedule, an uphill task under the current circumstances. Even if these measures are introduced, our politics might come up with other ingenious ways to circumvent them. As the orders in the Karnataka and Madhya Pradesh cases show, the courts also cannot be relied on much to curb defections. We are facing a deeper challenge of the corrosion of India’s parliamentary system, for even in jurisdictions without such anti-defection laws, we do not see “horse trading” and “resort politics”. Hence, beyond institutional fixes, we also need a popular articulation of an ethical politics that causes the public to shun such political manoeuvres.
📰 Helping a lending hand
The RBI has made life easier for banks; it hasgiven the govt. the cue for a fiscal support plan
•The RBI has infused oxygen into the financial system with a second set of measures announced on Friday by Governor Shatikanta Das to combat the lockdown impact on the economy. Most are aimed at maintaining liquidity, the economy’s lifeblood, though there are some regulatory proposals aimed at making life easier for banks, NBFCs and borrowers. It is now clear the bank prefers to calibrate its moves based on constant feedback from the ground — the way it should be. In what should be reassuring for the markets, Mr. Das was categorical that the RBI would do what it takes to support the economy and also monitor the evolving situation. Indeed, the RBI has been very generous in its liquidity maintenance measures in recent times and particularly so after the lockdown began in March. There will surely be consequences for the economy but that is a worry for another day. The overarching objective now should be to keep the economy afloat by deploying all the instruments at the RBI’s command.
•The central bank has learnt from its experience of the Targeted Long Term Repo Operations (TLTRO) till now when banks preferred to deploy the funds in bonds of PSUs and large corporates. The RBI has called out this risk-off attitude of the banks while announcing a further Rs. 50,000 crore TLTRO — all of this has to be invested in bonds and paper of NBFCs and microfinance institutions. The response to the next round of TLTRO will be interesting to watch. Similarly, by reducing the reverse repo rate by another 25 basis points to 3.75%, the RBI has made it furthermore unattractive for banks to indulge in ‘lazy banking’ by parking excess funds with the central bank rather than lend. As much as Rs. 6.9-lakh crore was parked with the RBI as on April 15. This is the time when banks will have to be liberal in extending help for working capital loans and overdrafts to their borrowers, including MSMEs. The government could help here by extending a scheme of credit assurance cover that will encourage banks to be more liberal in their risk outlook. By clarifying that there will be an asset classification standstill during the moratorium period for accounts that were not already NPAs as of March 1, the RBI has brought relief to borrowers who were worried that opting for the moratorium may turn them into NPAs. State finances have got some breathing space through the increase of WMA (Ways and Means Advances) limit to 60% over the level as on March 31. The special refinance facility of Rs. 50,000 crore extended to NABARD, SIDBI and NHB will help these institutions to prop up their respective constituents. The central bank has done what it can. It is now over to the government for the fiscal support package.
