📰 Government establishing a new normal: Adhir Ranjan Chowdhury
Lok Sabha passes two more Bills without debate.
•As the Lok Sabha on August 4 once again passed two Bills without a debate and amid Opposition sloganeering over the Pegasus spyware snooping scandal and the farm laws, Congress leader Adhir Ranjan Chowdhury accused the government of establishing a “new normal” with regard to passage of Bills.
•The two Bills that were passed with a voice vote include the Commission for the Management of Air Quality in the National Capital Region and Adjoining Areas Bill, 2021 and the Coconut Development Board Amendment Bill, 2021.
•Moving the Commission for the Management of Air Quality in the National Capital Region and Adjoining Areas Bill, 2021 for consideration and passing, Environment Minister Bhupendra Yadav said it would provide a holistic framework for the management of air quality in Delhi as pollution in the city was affected by activities in its adjoining areas.
•“Not just environmental experts but also representatives of states from the adjoining areas of Delhi will be included in the Commission,” he said.
•The Commission for Air Quality Management for the National Capital Region and Adjoining Areas Bill, 2021 was first cleared as an Ordinance in October 2020 but lapsed before it could get tabled as farmers’ groups protested against penal provisions and heavy fines of up to ₹1 crore as a punishment for stubble burning.
•Talks with farmers’ groups ensured a tweaking of the Bill wherein farmers were exempted from penal provisions but were held liable for paying environmental compensation for causing pollution due to stubble burning, and a fresh Ordinance was issued in April, 2021.
•While amendments were moved by Opposition MPs Saugata Roy of the Trinamool Congress and the Revolutionary Socialist Party’s N.K. Premachandran, these were defeated and the Bill was passed. All this took place amid loud protests by Opposition members and repeated appeals by both Lok Sabha Speaker Om Birla, and Bharatiya Janata Party MP from Meerut-Hapur Rajendra Agarwal, who was chairing part of the proceedings.
•Between 11 a.m. and 2 p.m., the House was adjourned thrice before the Bill on air quality was passed, and then got adjourned again until 3.30 p.m.
•When the House reassembled, Mr. Agrawal, who was presiding, asked Agriculture Minister Narendra Singh Tomar to move the Coconut Development Board Amendment Bill —– aiming to make changes in the appointment procedure of the Board — for passage.
•When Mr. Chowdhury objected to the passing of Bills in the din and called it a “new normal”, Minister of State for Parliamentary Affairs Arjun Meghwal hit back and accused the Opposition of stalling Parliament. Mr. Meghwal said the government was ready to debate important issues, including the COVID-19 pandemic, but the Opposition was obstructing it.
Cabinet approves Samagra Shiksha scheme extension till March 2026
•The Centre plans to pay students their Right to Education entitlements in the form of cash transfers, as part of a revamp and extension of its flagship school education scheme that was approved by the Cabinet on Wednesday.
•The Samagra Shiksha scheme, which has been extended till March 2026, will have a financial outlay of ₹2.94 lakh crore, including a Central share of ₹1.85 lakh crore, and several new initiatives on early childhood education, foundational literacy and numeracy and language education.
•Samagra Shiksha is an integrated scheme for 11.6 lakh government and aided schools with over 15 crore students and 57 lakh teachers. It involves a 60:40 split in funding between the Centre and most States. The Centre’s share now works out to about ₹37,080 crore per year, higher than the amounts allocated over the last three years.
•“In order to enhance the direct outreach of the scheme, all child-centric interventions will be provided directly to the students through DBT [or direct benefit transfer] mode on an IT-based platform over a period of time,” said an official statement issued after the Cabinet meeting, listing some of the new interventions that have been incorporated in the revamped Samagra Shiksha based on the recommendations of the National Education Policy, 2020.
•This DBT would include RTE entitlements such as textbooks, uniforms and transport allowance, Education Ministry officials told The Hindu, although it is not clear whether the tuition fees for students in the economically weaker section quota in private schools would also be paid directly to students as a cash transfer. The stipend for children with special needs will be paid in this mode, officials said.
•Keeping with the NEP’s recommendations on encouraging Indian languages, the revamped scheme has a new component for appointment of language teachers, which includes salaries, and training costs as well as bilingual books and teaching learning material.
•In accordance with NEP’s recommendation on pre-primary education, Samagra Shiksha will now include funding to support pre-primary sections at government schools, both in terms of teacher training as well as ₹500 per child per year for teaching and learning materials, indigenous toys and games and play-based activities. Master trainers for pre-primary teachers and anganwadi workers will be supported under the scheme.
•Another new component is the NIPUN Bharat initiative for foundational literacy and numeracy, which will get an annual provision of ₹500 per child for learning materials, ₹150 per teacher for manuals and resources and ₹10-20 lakh per district for assessment.
•As part of digital initiatives, there is a provision for ICT labs and smart classrooms, including support for digital boards, virtual classrooms and DTH channels which have become more important in the wake of the COVID-19 pandemic.
•The pandemic is likely to cause more school dropouts as well, so it is important that Samagra Shiksha now includes a provision to support out of school children from age 16 to 19 with funding of ₹2000 per grade to complete their education via open schooling. There will also be a greater focus on skills and vocational education, both for students in school and dropouts, said Education Minister Dharmendra Pradhan, who is also the Minister for Skill Development.
•In an Olympic year, the Samagra Shiksha scheme announced an incentive of up to ₹25000 for schools that have two medal-winning students at the Khelo India school games at the national level.
📰 50% funds allotted for ongoing MPLADS projects lapse
Parliamentary panel calls it a serious lapse with negative consequences.
•Virtually half of a belated ₹2,200 crore allotted for completing ongoing MPLADS projects in 2020-21 simply lapsed, as the Finance Ministry granted “barely a week” to the Ministry of Statistics and Programme Implementation (MoSPI) to release the funds — inviting the ire of the Standing Committee on Finance.
•The resultant funding crunch would have hit several local area development projects under implementation across the country, especially in the five States that went to polls this year as no funds were released for these States and constituencies citing the Model Code of Conduct.
•Spending under the Members of Parliament Local Area Development Scheme (MPLADS) had already halved before the government suspended the scheme for two years in April last year and diverted the funds for managing the COVID-19 pandemic. From ₹5,012 crore spent during 2018-19, expenditure of just ₹2,491.45 crore was taken up under the scheme in 2019-20.
Unfinished projects
•Each MP is granted ₹5 crore under the scheme, adding up to ₹3,950 crore a year for 790 MPs, to undertake development projects in their respective constituencies. After the scheme’s suspension, several MPs and parliamentary committees, including the Standing Committee on Finance (SCF), had asked the government to release MPLADS funds due from previous years for projects already sanctioned.
•On March 16 this year, an SCF report on the Statistics Ministry’s demands for grants pointed out that many MPLADS projects that began earlier were “left unfinished midway despite the sanction letters being issued and funds for the same were withheld”, citing the suspension of the scheme. The panel had sought the release of funds for these projects so that MPs could fulfil their promises to the public.
•The very same day, the Department of Expenditure (DoE) conveyed its intent to allot ₹2,200 crore for such projects to the Statistics Ministry. However, the actual allotment of funds by the Department of Economic Affairs (DEA) took place on March 22, with the condition that the funds must be spent or allotted further for eligible projects “within financial year 2020-21 itself, so that the amount is not lapsed”.
•The Statistics Ministry said it cleared eligible proposals received till March 31 noon, amounting to ₹1107.5 crore, leading to the balance ₹1092.5 crore lapsing.
“Ad-hocism” says panel
•In a fresh report tabled in Parliament on Tuesday, the SCF headed by BJP MP Jayant Sinha has sharply criticised this “ad-hocism” and noted: “The Committee are unable to comprehend the reason as to why Rs. 2,200 crore were allotted to MoSPI barely one week before the end of FY 2020-21… This constitutes a serious lapse in fiscal management with negative consequences for communities across India.”
•“Only those proposals which were not found eligible due to lack of documents and non-fulfilment of eligibility criteria as per MPLADS guidelines, and in those districts where the Model Code of Conduct was under implementation due to assembly elections in five States/UT and by-elections in some constituencies, the Ministry was not able to release pending instalments,” MoSPI informed the committee.
•The Statistics Ministry said it wrote to the Finance Ministry on April 7, to allot the remaining funds towards MPLADS this year so that the pending instalments as on March 31, 2020, may be released.
‘Tighten guidelines’
•The Finance Ministry has also asked the Statistics Ministry to further tighten the scheme’s guidelines by September this year, so that “if a work sanctioned by an MP is not used for five years, it will automatically lapse even if there is a committed liability for the work to be completed”. Currently, funds released to district authorities under MPLADS is not lapsable, while funds not released by the government in a particular year are carried forward.
📰 Maiden indigenous aircraft carrier starts sea trials off Kochi
The 40,000-tonne carrier, the biggest warship made indigenously, is slated to join the Navy as INS Vikrant late next year
•The much-awaited sea trials of India’s maiden indigenous aircraft carrier (IAC-1), built by the public sector Cochin Shipyard Ltd (CSL), began here on Wednesday.
•The 40,000-tonne carrier, whose keel-laying was held in 2009, is slated to join the Navy as INS Vikrant late next year.
•Its induction will give a fillip to the sea control capabilities of the Navy in the Indian Ocean Region. While the Indian Navy currently operates one aircraft carrier, INS Vikramaditya, it is keen to add a third one to its fleet in line with its perspective plan to simultaneously operate three carrier battle groups (CBG) so that two of them remain serviceable on either flank at any given time.
Capacity to carry 30 aircraft
•The IAC-1, the biggest warship made indigenously, has an overall length of 263 m and a breadth of 63 m. It is capable of carrying 30 assorted aircraft including combat jets and helicopters. Propelled by four gas turbines, it can attain a top speed of 30 knots (about 55 kmph). The vessel will have a complement of 1,500 personnel.
•Like Vikramaditya, IAC-1 has a STOBAR (short take off but arrested recovery) system of aircraft launch and recovery on the flight deck.
Contract signed in 2007
•After toying with the idea of having an air defence ship (ADS) for some time, the Cabinet Committee on Security (CCS) approved the carrier construction project in 2002 and the contract for the first phase of construction was signed with the Cochin Shipyard in 2007.
•The carrier is armed with the Barak LR-SAM (long range surface-to-air missile) air defence and AK-630 close-in weapon system besides a slew of advanced sensors and an electronic warfare suite.
Italian, Russian help
•While the design was done with help from the Italian firm Fincantieri, the Russians collaborated in designing and developing the aviation complex. However, the project gave a boost to indigenisation right from the beginning, with a special grade steel for the construction of its hull developed within the country.
•The IAC-1 construction catapulted India into an elite league of countries capable of building complex aircraft carriers.
📰 Over the borderline: On Centre’s role in resolving Assam-Mizoram row
A people-oriented approach facilitated by the Centre can help resolve Assam-Mizoram row
•The drawing down of tensions between Assam and Mizoram, at least at the leadership level, with the respective governments announcing the withdrawal of FIRs against the Chief Minister of Assam and a Rajya Sabha MP from Mizoram, among other steps, comes as a great relief. These actions followed the deaths of six policemen and a civilian from Assam in a violent gunfight in the border town of Vairengte in Mizoram on July 26, which exacerbated an already fraught situation between the States. The retaliatory actions such as filing FIRs against prominent representatives, at a time when locals in the Barak Valley in Assam had already imposed a blockade, disallowing trucks with essential goods from entering Mizoram, seemed to indicate that the States’ leaderships were throwing away their scabbards, militating against their own moves to restore calm. After all, the governments had taken the right decision to withdraw their police forces from a four-kilometre “disputed stretch” and let it be manned by central paramilitary forces till a permanent solution is found on the border question. But the “blockade” and the damage caused to the only rail line connected to Mizoram made matters tough, culminating in the Mizo Bar Association filing a PIL before the Aizawl Bench of the Gauhati High Court against the “economic blockade”. The Chief Ministers now seem committed to talks, with Assam’s Himanta Biswa Sarma even suggesting that his government will approach the Supreme Court to find an amicable solution. Continuing talks without recriminations is the only way out to tamp down tensions between the two States.
•The situation should never have come to this. What began as a conflict between residents of the States in the border area that is disputed between them, morphed into a violent battle between police, with paramilitary forces doing little to control or halt this. Their role in stopping the violence and securing the peace in the border areas between the States will now be paramount, even as the Assam government must compel residents to avoid continuing the blockade. An impartial inquiry into the sequence of events that led to the firing incident and the deaths must also be held so that such a situation does not recur. On the question of settling the borders to the satisfaction of both States, a concerted, people-oriented approach by the respective authorities with the facilitation of the Centre can strive to achieve that instead of a purely juridical approach that seeks to address this via the States’ respective historical claims, a method that is used to settle sovereign claims. After all, both Assam and Mizoram are part of the Indian Union, and inter-State cooperation and cohesion are central to the sanctity of the federal system.
📰 A language ladder for an education roadblock
The dreams of many Indian students seeking to pursue professional courses in their mother tongue can be realised
•Every great change starts with a revolutionary step. The recent decision of 14 engineering colleges across eight States to offer courses in regional languages in select branches from the new academic year marks a historic moment in the academic landscape of the country on which rests the future of succeeding generations.
Showing the way
•On a parallel note, the decision of the All India Council for Technical Education (AICTE), to permit B. Tech programmes in 11 native languages in tune with the New Education Policy (NEP), is a momentous one. This monumental move opens the door to a whole world of opportunities — to students of B.Tech courses, in Hindi, Marathi, Tamil, Telugu, Kannada, Gujarati, Malayalam, Bengali, Assamese, Punjabi and Odia.
•The Prime Minister, Narendra Modi, in his address marking the first anniversary of the National Education Policy (NEP), hailed the move and pointed out that the NEP’s emphasis on the mother tongue as the medium of instruction will instil confidence in students from poor, rural and tribal backgrounds. Importantly, he added that even in elementary education, the mother tongue is being promoted and referred to one of the key drivers in this regard — the Vidya Pravesh programme launched on the occasion.
•These remarkable steps should be welcomed and scaled up over the next few years to ensure that the dreams of millions of students seeking to pursue professional courses in their mother tongue are realised.
•Interestingly, in a survey conducted by the AICTE in February this year, of over 83,000 students, nearly 44% students voted in favour of studying engineering in their mother tongue, underscoring a critical need in technical education.
•The progressive and visionary NEP 2020 champions education in one’s mother tongue right from the primary school level — improving the learning outcomes of the child and the development of his/her cognitive faculties hinge upon this.
•Multiple studies have proved that children who learn in their mother tongue in their early, formative years perform better than those taught in an alien language. UNESCO and other organisations have been laying emphasis on the fact that learning in the mother tongue is germane to building self-esteem and self-identity, as also the overall development of the child. Unfortunately, some educators and parents still accord unquestioned primacy to English, and resultantly, the child’s mother tongue ends up as their ‘second/third language’ in schools.
There are bubbles now
•It would be pertinent to recall the words of the great Indian physicist and Nobel Laureate, Sir C.V. Raman, who, demonstrating exemplary vision, observed, “We must teach science in our mother tongue. Otherwise science will become a highbrow activity. It will not be an activity in which all people can participate...” While our educational system has seen phenomenal growth to the extent that it offers courses of international repute in engineering, medicine, law and the humanities, we have, paradoxically, excluded our own people from accessing it. Over the years, we have ended up building academic roadblocks, impeding the progress of the vast majority of our students and remained content with creating a small bubble of English-medium universities and colleges, while our own languages languish when it comes to technical and professional courses.
Global practices
•A cursory look at the global best practices in the medium of instruction at the level of higher education should inform us more on where we stand. Among the G20, most countries have state-of-the-art universities, with teaching being imparted in the dominant language of their people.
•Take the Asian nations among them, for instance. In South Korea, nearly 70% of the universities teach in Korean, even as they aspire to play a role on the international stage. In a unique move, with the increasing craze for learning English among parents, the South Korean government, in 2018, banned the teaching of English prior to third grade in schools, since it appeared to slow pupils’ proficiency in Korean.
•Similarly, in Japan, a majority of university programmes are taught in Japanese; in China too, universities use Mandarin as the medium of instruction. In Europe, France and Germany offer us great insights into how nations protect their languages. France went to the extent of having a strict ‘French-only’ policy as the medium of instruction in schools. In Germany, while the language of instruction in schools is predominantly German, even in tertiary education, more than 80% of all masters’ programmes are taught in German.
•Canada showcases a sound approach to education, revealing a picture of a country with linguistic diversity. While English is the dominant medium of instruction in most provinces, in Quebec, a province with a majority French-speaking population, French is the medium of instruction in primary and secondary education in many schools, as also a number of universities.
•In this global context, it is ironic that India has an overwhelming majority of professional courses being taught in English. In science, engineering, medicine and law, the situation is even bleaker, with native language courses being practically non-existent. Fortunately, we are now beginning to find our voice in our own languages.
•How do we improve this grim situation? The NEP outlines the road map, demonstrating to us the means to protect our languages while improving the access and quality of our education. We must begin with imparting primary education (at least until Class 5) in the student’s mother tongue, gradually scaling it up. For professional courses, while the initiative of the 14 engineering colleges is commendable, we need more such efforts all across the country. Private universities must join hands and offer a few bilingual courses to begin with.
•One of the biggest bottlenecks for more students to take up higher education in the native languages is the lack of high-quality textbooks, especially in technical courses, and this needs to be addressed urgently.
Build on these initiatives
•In the digital age, technology can be suitably leveraged to increase accessibility of these Indian language courses to students in remote areas. Content in the digital learning ecosystem, still a nascent domain in our country, is greatly skewed towards English which excludes the vast majority of our children, and this has to be corrected.
•A welcome development in this regard is the collaboration between the AICTE and IIT Madras to translate SWAYAM’s courses in eight regional languages such as Tamil, Hindi, Telugu, Kannada, Bengali, Marathi, Malayalam and Gujarati. This will be a major boost for engineering students and help them transition more smoothly to an English-dominated curriculum in later years. We need more such tech-led initiatives to really democratise higher education.
Not exclusivist
•Laying the stress on instruction in the mother tongue is not exclusivist in nature — as I often say, one should learn as many languages as possible, but what is required is a strong foundation in the mother tongue. In other words, what I am advocating is not a ‘Mother tongue versus English’, but a ‘Mother tongue plus English’ approach. In today’s increasingly interconnected world, proficiency in different languages opens new vistas to a wider world.
•Together, we must work to remove the sense of inferiority some of us display when it comes to speaking in our own languages. In the end, we must remember that if we neglect a language, not only do we lose a priceless body of knowledge but also risk depriving future generations of their cultural roots and precious social and linguistic heritage.
•I hope more institutions will be encouraged and inspired in the coming years to offer courses in regional languages. India is a land of immeasurable talent. We must unlock the full potential of our youth, without letting their seeming inability to speak a foreign language impede their progress. It is against this backdrop that the decision of the 14 engineering colleges across eight States to offer courses in regional languages needs to be seen and appreciated.
📰 No fundamental right to strike
Essential workers should not resort to strike
•Recently, the Minister of Defence introduced the Essential Defence Services Bill, 2021, in the Lok Sabha to provide for the maintenance of essential defence services so as “to secure the security of nation and the life and property of the public at large” and prevent staff of the government-owned ordnance factories from going on strike. The Bill seeks to empower the government to declare services mentioned in it as “essential defence services” and prohibit strikes and lockouts in any industrial establishment or unit engaged in such services. The Minister, however, assured the Ordnance Factory Board (OFB) employees that their service conditions will not be affected.
Rules and rights
•This is not for the first time that strikes by government employees are being made explicitly illegal by the government. The Madhya Pradesh (and Chhattisgarh) Civil Services Rules, 1965, prohibit demonstrations and strikes by government servants and direct the competent authorities to treat the durations as unauthorised absence. A strike under this rule includes “total or partial cessation of work”, a pen-down strike, a traffic jam, or any such activity resulting in cessation or retardation of work. Other States too have similar provisions.
•Under Article 33 of the Constitution, Parliament, by law, can restrict or abrogate the rights of the members of the armed forces or the forces charged with the maintenance of public order so as to ensure the proper discharge of their duties and maintenance of discipline among them. Thus, for the armed forces and the police, where discipline is the most important prerequisite, even the fundamental right to form an association can be restricted under Article 19(4) in the interest of public order and other considerations.
•The Supreme Court in Delhi Police v. Union of India (1986) upheld the restrictions to form association by the members of the non-gazetted police force after the Police Forces (Restriction of Rights) Act, 1966, and the Rules as amended by Amendment Rules, 1970, came into effect. While the right to freedom of association is fundamental, recognition of such association is not a fundamental right. Parliament can by law regulate the working of such associations by imposing conditions and restrictions on their functions, the court held.
•In T.K. Rangarajan v. Government of Tamil Nadu (2003), the Supreme Court held that the employees have no fundamental right to resort to strike. Further, there is prohibition to go on strike under the Tamil Nadu Government Servants’ Conduct Rules, 1973. Also, there is no moral or equitable justification to go on strike. The court said that government employees cannot hold the society to ransom by going on strike. In this case, about two lakh employees, who had gone on strike, were dismissed by the State government.
Grievance redressal
•A police havildar was convicted of contempt of court by the sub-divisional officer, Gaya. The Gaya police, thereupon, gave notice of strike unless redress was given to the havildar and the sub-divisional officer punished. Though an inquiry was ordered immediately, the strike commenced on March 24, 1947. When some representatives of policemen met Gandhi at Jehanabad on the March 28, he told them that their strike was ill-advised. They were not mere wage-earners but the members of an essential service. They should immediately and unconditionally call off the strike. In his speech on March 27, Gandhi said that “the police... should never go on strike. Theirs was an essential service and they should render that service, irrespective of their pay. There were several other effective and honourable means of getting grievances redressed...”
•There is no fundamental right to strike under Article 19(1)(a) of the Constitution. Strikes cannot be justified on any equitable ground. Strike as a weapon is mostly misused which results in chaos. Though the employees of OFB have threatened to go on strike, Parliament, which has the right to restrict even the fundamental rights of the armed forces, is well within its right to expressly prohibit resorting to strike.
📰 Clash of cultures in a federation
The homogenising tendency of the union in India and EU clashes with the particularism unique to individual states
•Though probably the most equitable form of governance for multiracial, multicultural countries, there are only a few confederations in the world, such as Canada and Switzerland. India and the European Union (EU) are unions. However, India is a federation because powers are divided between the Union and the States, and the EU a supranational organisation that defies definition, with both confederal and federal aspects. It is this division of powers in India and the EU that brings the unions into conflict with their constituent parts.
Latest controversy in the EU
•The EU is variously criticised as a “political dwarf”, “a hobbled giant” distracted by internal bickering and competing national agendas, and an aggregate of secondary powers in search of primary status through collective agency. Despite the EU being one of the largest economies of the world, the 27 leaders squabble over issues from fisheries to budget allocations. The union finds it easier to promote universal standards in areas like climate change and food and bio-safety than domestic values. The latest controversy with Hungary and Poland on gay and lesbian rights is a case in point. Gay marriage is not recognised by Budapest and only heterosexual couples can legally adopt children. The LGBTQ law that took effect in July outlaws information perceived as promoting homosexuality or gender change to children under 18. This led to strong criticism from 17 liberal EU nations who believe the Hungarian law undermines the principle that discrimination on the basis of sexuality, ethnicity and gender is not permissible within the union.
•Hungarian Prime Minister Victor Orbán has countered by proposing a national referendum on the law. He has been re-elected thrice, commands two-thirds of the legislature, and has diminished institutions designed to limit the powers of the state, such as free media, universities and an independent judiciary. Mr. Orbán also regularly frustrates EU’s unity on foreign policy, such as on refugees in 2016, opposing criticism of China’s actions in Hong Kong, and the call for a ceasefire between Israel and Hamas. Hungary was the first EU member to accept Russian and Chinese COVID-19 vaccines before approval by the EU medicines regulator.
•The European Parliament voted overwhelmingly to haul Hungary before the European Court of Justice over its LGBTQ law, and while there is an EU provision to remove voting rights from an offending country, penalties require unanimous agreement from EU states. This will never be forthcoming since Hungary and Poland support each other and the union cannot expel a member state without the unanimity requirement.
•Poland’s Catholic-conservative governing party takes a similar stance on LGBTQ with by-laws that have designated one-third of the nation as ‘LGBT-free zones’. Budapest and Warsaw are supported by Slovenian Prime Minister Janez Janša, who condemns Brussels for imposing “imaginary European values” without paying heed to local tradition. All three countries’ leaderships have expressed doubts, and placed restrictions, on the functioning of judicial independence.
•Although none of these leaders believe they can convince their EU colleagues to follow their social policies, they do not wish to separate from the union, since EU membership is supported by a huge majority. Hungary is the second-largest net beneficiary of the EU budget, receiving €5 billion more than it contributes each year. The measures introduced by the three nations are for domestic popularity in a combined population of nearly 50 million with cultural traditions different from more liberal EU member states. The crisis represents a clash of cultures, which underlines why integration towards a closer union is unlikely to materialise.
A fractious relationship
•In India, the Centre and Opposition-controlled States have a historically fractious relationship. Prime Minister Jawaharlal Nehru in 1959 dislodged the Communist government in Kerala on specious grounds. Ever since, the pattern of the Union government attempting to subvert Opposition States by stimulating defections, ordering selective raids by investigative agencies, electronic surveillance, and delaying or refusing financial entitlements has become the unsavoury norm, now taken to extremes by Hindutva ideologues in control of the Centre. The tensions between New Delhi and the Opposition-led periphery are magnified by differences in values, perceived arrogance on the part of the Centre and the victimhood card played by Opposition parties. The homogenising bias of the union clashes with the particularism unique to individual States, resulting in the clash of cultures. The term ‘cooperative federalism’, coined by Prime Minister Narendra Modi, has been reduced to an oxymoron.
📰 A grand tax bargain in danger of coming apart
A Goods and Services Tax version 2.0 may have to be designed soon given the flaws in the existing structure,
•After four years, the promise of the Goods and Services Tax (GST) remains substantially unrealised. It is a far cry from the attempted avoidance of cascading and continues to be a not very transparent multi-rate system with associated difficulties in computing and assessing tax liability, tax burden and tax incidence. States have less headroom in handling GST collection shortfall after surrendering their fiscal autonomy. When the period of five years of compensation ends in 2022, will we see a continued flawed system or a freshly minted GST 2.0, given the asymmetry of the power equations between the States and the Centre?
•The tax base of GST does not appear to be expanding as the recent uptick has reversed last month. The GST is strongly co-related to overall GDP. Revenue collection of the GST is dependent on the nominal growth rate of Gross Value Added (GVA) in the economy. Since inception, GVA per quarter has been between ₹40-lakh crore to ₹47-lakh crore and GST revenue has not been higher than ₹2.7-lakh crore to ₹3.1-lakh crore. The Tax to Gross value addition is only about 5% to 6.5% though GVA growth was much higher. Obviously, a very large segment is covered by exemption, composition schemes, evasion and lower tax rate.
Centre holds the cards
•The fundamental weakness of the GST is its political architecture which is asymmetrically loaded in favour of the Centre. Disputes between States and between the Centre and the States are inevitable in a mosaic arrangement. But in the current structure, no particular body is tasked to adjudicate this though the original Constitution (115th Amendment) Bill 2011 (GST Bill) had a provision for such an institution. In the voting, the central government has one-third vote and States have two-thirds of total votes (with equal voting rights regardless of size and stake). With the support of a dozen small States whose total GST collection is not more than 5% of the total — and their Budget is mostly underwritten by the central government — the game is hugely in the Centre’s favour. With equal value for each States’ voting, larger and mid-sized States feel shortchanged.
•Severe fiscal strain is expected when the 14% compensation comes to an end as the median growth rate of subsumed taxes is only 11%, and in many States between 5% to 10%. The median subsumed tax buoyancy is below unity. This means with 1% growth, there will be a 0.75% growth of tax. The contraction of GST revenue across the country means that the compensation amount will be higher and the clamour for a continuance of compensation scheme is inevitable.
Issues with tax structure
•The second problem is the design flaws in the tax structure. Nearly 45% to 50% of commodity value is outside the purview of the GST, such as petrol and petroleum products. In addition, States which export or have inter-State transfers or mineral and fossil fuel extractions are not getting revenue as the origin States and need a compensation mechanism. The pre-existing threshold level of VAT has been tweaked too often which has led to an evaporation of tax base incentivising, enabling evasion and mis-reporting. Most trading and retail establishments, (however small) are out of the fold of the GST. At the retail level, irrespective of whether Input Tax Credit (ITC) is required or not, the burden can be passed off to the consumer. As a result, the loss could be as high as one third.
•Third, exemptions from registration and taxation of the GST have further eroded the GST tax base compared to the tax base of the pre-existing VAT. Exemptions are purely distortionary and also provide a good chance to remain under the radar, thereby directly increasing evasion or misclassification. Theoretically, exemptions at the final stages reduce tax realisation. As multiple rates are charged at different stages, it goes against the lessons of GST history. This tax works well with a single uniform tax rate for all commodities and services at all stages, inputs and outputs alike. While most countries have a single rate, India stands out and is among the five countries to have four rates/slabs.
Exclusion as another issue
•The fourth is that of exclusion. Petroleum products remaining outside the purview of GST has helped the Centre to increase cesses and decrease central excise, in what would otherwise have been shareable with the States. Now, States will be keen on including petrol and diesel under the GST as their share of tax goes up in the process, even if there is a special rate fixed for it.
•In April 2017, cess and surcharge formed 56% and 35% of the excise duty on petrol and diesel, respectively. Now, their share has increased to 91% and 85%, respectively, and the shareable central excise has reduced by ₹6.5 a litre, making it ₹2.98 for petrol and ₹4.83 for diesel. Equity requires that petrol and diesel be brought under the GST. Apart from the complexity it creates in record keeping and ‘granting ITC’, in the present form it also leads to a cascading which the GST avowedly tried to avoid.
•Fifth, compliance with GST return (GSTR-1) filing stipulation and the resultant tax information is not up to date. The gap in filing GSTR-1 was 33% in 2019-20 and has been increasing. As per GSTR-3B, the effective tax rate is as low as 6.5% when GSTR-1 shows an average 15% tax rate. Fraudulent claims of Input Tax Credit (ITC) because of a lack of timely reconciliation are quite high though it has come down by two thirds. Tax evasion, estimated by a National Institute of Public Finance and Policy’s paper, is at least 5% in minor States and plus 3% in the major States.
•These policy gaps with regard to a higher threshold (when in sales tax, it was lower) exemption level and multiple tax rates have led to a base erosion. Policy gaps along with compliance gaps do need to be addressed. Without proper tax information, infrastructure and base, the States would go in for selective tax enforcement. In the long run, voluntary compliance will suffer and equity in taxation will be violated. Finally, the grand bargain will come apart. Given all these problems, a version 2.0 of GST may have to be designed sooner rather than later.
