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20 February, 2020

26 Min Read

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Paper Topics Subject
GS-II Assisted Reproductive Technology Regulation Bill, 2020
Law Commission of India
Empowered Technology Group
Swachh Bharat Mission (Rural): 2nd phase
Pradhan Mantri Fasal Bima Yojana (PMFBY)
100-day sister cities challenge
GS-III The link between small savings and deficit Economic Issues
Pledging of Shares Economic Issues
Force Majeure Clause Economic Issues
GS-II :
Assisted Reproductive Technology Regulation Bill, 2020

Syllabus subtopic: Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation.

 

Prelims and Mains focus: about the key features of the bill and its significance

 

News: The Union Cabinet chaired by the Prime Minister approved the Assisted Reproductive Technology Regulation Bill, 2020 to monitor medical procedures used to assist people to achieve pregnancy.

 

Background

India has one of the highest growths in the number ART centres and ART cycles performed every year. India has become one of the major centres of this global fertility industry, with reproductive medical tourism becoming a significant activity. This has also introduced a plethora of legal, ethical and social issues; yet, there is no standardisation of protocols and reporting is still very inadequate.

 

Key features of the Bill

  • The Bill provides for a national Board which will lay down a code of conduct to be observed by those operating clinics.

 

  • It will also formulate minimum standards for laboratory and diagnostic equipment and practices to be followed by human resources employed by clinics and banks.

 

  • The States and Union Territories will also have to form State Boards and State authorities within three months of the notification of the proposed legislation.

 

  • Under the proposed law, a national registry and registration authority will maintain a database to assist the national Board to perform its functions.

 

  • The Bill also proposes stringent punishment for those who practise sex selection, indulge in sale of human embryos or gametes and those who operate rackets.

 

  • The Bill will also ensure confidentiality of intending couples and protect the rights of the child.

 

 

Note:  In the Surrogacy Regulation Bill 2020, the government is planning to restrict the maximum age of surrogates from “above the marriageable age” to 50 years.

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GS-II :
Law Commission of India

Syllabus subtopic: Structure, Organization and Functioning of the Executive and the Judiciary

 

Prelims and Mains focus: about the commission: composition and functions

 

News: The Union Cabinet gave its approval to set up the 22nd Law Commission. The Law Ministry will now notify the new panel, which will have a three-year term.

 

Background

  • In 2015, a proposal was mooted to make the law panel into a permanent body either through an Act of Parliament or an executive order (resolution of the Union Cabinet).

 

  • The move was shelved after the Prime Minister’s Office preferred the existing system to continue. In 2010, the then UPA government had prepared a draft Cabinet note to give statutory status to the commission but the idea did not take off.

 

About Law Commission of India

  • Law Commission of India is a non-statutory body constituted by the Government from time to time.

 

  • Originally formed in 1955, the commission is reconstituted every three years and so far, 277 reports have been submitted to the government. The tenure of the twenty-first Law Commission ended in August 2018.

 

 

Composition:

  • Chairperson: A retired Supreme Court judge or Chief Justice of a High Court.

 

  • Apart from a full-time chairperson, the commission will have four full-time members, including a member-secretary.

 

  • The Law and Legislative Secretaries in the Law Ministry will be ex-officio members of the commission.

 

  • It will also have not more than five part-time members.

 

Functions

  • The Law Commission advises the government on complex legal issues.

 

  • The Law Commission shall, on a reference made to it by the Central Government or suo motu, undertake research in law and review of existing laws in India for making reforms and enacting new legislation.

 

  • It shall also undertake studies and research for bringing reforms in the justice delivery systems for elimination of delay in procedures, speedy disposal of cases, reduction in cost of litigation, etc..

 

21st Law Commission

  • The previous Law Commission, under Justice B.S. Chauhan (retd.), had submitted reports and working papers on key issues such as simultaneous elections to the Lok Sabha and the Assemblies and a uniform civil code.

 

  • While it supported simultaneous elections, the commission had said the time for a common code was not yet ripe.
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GS-II :
Empowered Technology Group

Syllabus subtopic: Structure, Organization and Functioning of the Executive and the Judiciary

 

Prelims and Mains focus: about the group: its mandate and significance

 

News: The Union Cabinet has approved the setting up of an empowered technology group to help address issues such as “sub-optimal industrial development”.

 

About the group

  • The 12-member panel will be headed by the Principal Scientific Adviser (PSA).

 

  • The decision to set up such a group was based on recommendations of a committee led by the Principal Scientific Adviser.

 

  • The Principal Scientific Adviser (PSA) chairs the Prime Minister’s Science, Technology and Innovation Advisory Council (PM-STIAC), which includes industrialists, scientists and technocrats and is tasked with recommending policy action on science and technology as well as coordinating between different Ministries.

 

 

Mandate

  • Among the key issues, the group will address is “dual-use technologies not being optimally commercialised”. Dual-use technologies have civilian and military applications.

 

  • The group is expected to develop in-house expertise in aspects of policy and use of emerging technologies, and ensure sustainability of technology being developed at public sector organisations.

 

  • The group would also work to
  1. ensure that India had an updated map of technology and technology products available and being developed;
  2. develop an “indigenisation road map” for selected key technologies;
  3. encourage Union Ministries and departments and State governments to develop in-house expertise in policy; and
  4. use aspects of emerging technologies.

 

  • The group will also facilitate cross-sector collaborations and research alliances with universities and private companies and formulate “standards and a common vocabulary” to screen proposals for research and development.

 

Significance of the move

  • Today, all the Ministries procure their own technology, but they don’t know if it’s the latest. This group will give advice to all ministries, agencies and PSUs.

 

  • The move would be useful to coordinate research.
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GS-II :
Swachh Bharat Mission (Rural): 2nd phase

Syllabus subtopic: Welfare Schemes for Vulnerable Sections of the population by the Centre and States and the Performance of these Schemes

 

Prelims and Mains focus: about the second phase and its implementation: about Swachh Bharat Mission and its significance

 

News: The Centre approved the second phase of Swachh Bharat Mission (Rural), PM Modi’s pet project focussed on sustainability of ODF (Open defecation free) and management of solid and liquid waste.

 

Background

The rural sanitation programme was started on October 2, 2014, when the sanitation coverage in the country was reported at 38.7 per cent. More than 10 crore individual toilets have been constructed since the launch of the mission and as a result, rural areas in all states have declared themselves open defecation free (ODF) as on October 2, 2019.

 

Implementation of second phase

  • The second phase will be implemented on a mission mode between 2020-21 and 2024-25 with an estimated central and state budget of Rs 52,497 crore.

 

  • The second phase will focus on Open Defecation Free Plus (ODF Plus), which includes ODF sustainability and solid and liquid waste management (SLWM).

 

  • The ODF Plus programme will converge with MGNREGA, especially for grey water management, and will complement the newly launched Jal Jeevan Mission.

 

  • The programme will also work towards ensuring that no one is left behind and everyone uses a toilet.

 

  • The 15th Finance Commission has proposed earmarking Rs 30,375 crores for rural water supply and sanitation to be implemented by rural local bodies for the upcoming financial year.

 

  • The Department of Drinking Water and Sanitation (DDWS) under the Ministry of Jal Shakti has, however, advised all the states to reconfirm that there are no rural households that still don't have access to a toilet.

 

  • The department has also said that to provide the necessary support to any such identified households to build individual household toilets in order to ensure that no one is left behind under the programme.

 

  • The fund sharing pattern between the Centre and States will be

 

  1. 90:10 for North-Eastern States and Himalayan States and UT of J&K;
  2. 60:40 for other States; and
  3. 100:0 for other Union Territories, for all the components.

 

  • The Jal Shakti ministry said the Swachh Bharat Mission-Grameen continue to generate employment and provide impetus to the rural economy through construction of household toilets and community toilets, as well as infrastructure for waste management such as compost pits, soak pits, waste stabilisation ponds, material recovery facilities, etc.

 

About Swachh Bharat Mission (SBM)

  • SBM (1st phase) was a nation-wide campaign in India for the period 2014 to 2019 that aims to clean up the street, roads and infrastructure of cities towns, urban and rural cities and area in India.

 

  • The objectives of Swachh Bharat include eliminating open defecation through the construction of household-owned and community-owned toilets and establishing an accountable mechanism of monitoring toilet use.

 

  • Run by the Government of India, the mission aims to achieve an "open-defecation free" (ODF) India by 2 October 2019, the 150th birth anniversary of Mahatma Gandhi, by constructing 100 million toilets in rural India at a projected cost of Rs.1.96 lakh crore (US$28 billion).

 

  • The mission will also contribute to India reaching Sustainable Development Goal 6 (SDG 6), established by the UN in 2015.

 

  • The campaign was officially launched on 2 October 2014 at Rajghat, New Delhi by PM Modi. It is India's largest cleanliness drive to date with three million government employees and students from all parts of India participating in 4,043 cities, towns, and rural communities. PM Modi has called the campaign Satyagrah se Swachhagrah in reference to Gandhi's Champaran Satyagraha launched on 10 April 1916.

 

  • The mission has two thrusts:
  1. Swachh Bharat Abhiyan ("gramin" or "rural"), which operates under the Ministry of Jal Shakti; and
  2. Swachh Bharat Abhiyan ("urban"), which operates under the Ministry of Housing and Urban Affairs.

 

  • As part of the campaign, volunteers, known as Swachhagrahis, or "Ambassadors of cleanliness", have promoted indoor plumbing and community approaches to sanitation (CAS) at the village level. Other non-governmental activities include national real-time monitoring and updates from non-governmental organizations (NGOs) such as The Ugly Indian, Waste Warriors, and SWaCH Pune (Solid Waste Collection and Handling) that are working towards its ideas of Swachh Bharat.

 

  • The government has constructed 11 million toilets since 2014. Many people continue to not use toilets despite having them. The campaign has been criticized for using coercive approaches to force people to use toilets. Many households have been threatened with a loss of benefits such as access to electricity or food entitlements through the public distribution system. However, a report by UNICEF shows promising improvements with sanitation coverage reaching 90 percent.
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GS-II :
Pradhan Mantri Fasal Bima Yojana (PMFBY)

Syllabus subtopic: Welfare Schemes for Vulnerable Sections of the population by the Centre and States and the Performance of these Schemes

 

Prelims and Mains focus: about the move; about PMFBY: objectives and criticisms

 

News: The Union Cabinet approved the revamp of the Pradhan Mantri Fasal Bima Yojana (PMFBY) and the Restructured Weather Based Crop Insurance Scheme at its meeting.

 

Key highlights of the meeting

  • The Centre has almost halved its contribution to its own flagship crop insurance schemes, slashing its share of the premium subsidy from the current 50% to just 25% in irrigated areas and 30% for unirrigated areas from the kharif season of 2020.

 

  • In another significant step, enrolment in the two schemes has also been made voluntary for all farmers, including those with existing crop loans. When the PMFBY was launched in 2016, it was made mandatory for all farmers with crop loans to enrol for insurance cover under the scheme.

 

  • 58% of farmers enrolled in the schemes are loanees who will no longer have to compulsorily take insurance cover. The numbers of enrolled farmers may go down in the first year, but it will pick up again after that. The Centre would launch an awareness campaign to encourage farmers to voluntarily sign up for crop insurance policies. Coverage under the scheme is now 30% of cropped area, according to government data.

 

Criticism of PMFBY

PMFBY has come in from flak from a wide variety of stakeholders.

  • Farmers groups and opposition politicians have claimed that private insurance companies have made windfall gains on the scheme.

 

  • Several major insurers, including ICICI Lombard and Tata AIG, have opted out of the scheme in 2019-20, reportedly due to losses because of high claims ratios. Several States, including Punjab and West Bengal, have refused to participate in the scheme as well.

 

Revamping PMFBY

  • The Centre has made changes to the scheme based on consultations with States and inputs from all stakeholders.

 

  • Farmers pay a fixed share of the premium: 2% of the sum insured for kharif crops, 1.5% for rabi crops and 5% for cash crops.

 

  • Currently, the Centre and State split the balance of the premium equally. However, the revamp now reduces the burden on the Centre and increases the share of States.

 

About PMFBY

  • In April, 2016, the government of India had launched Pradhan Mantri Fasal Bima Yojana (PMFBY) after rolling back the earlier insurance schemes viz. National Agriculture Insurance Scheme (NAIS), Weather-based Crop Insurance scheme and Modified National Agricultural Insurance Scheme (MNAIS).

 

  • It envisages a uniform premium of only 2% to be paid by farmers for Kharif crops, and 1.5% for Rabi crops. The premium for annual commercial and horticultural crops will be 5%.

 

  • The scheme is mandatory for farmers who have taken institutional loans from banks. It’s optional for farmers who have not taken institutional credit.

 

Objectives:

  1. Providing financial support to farmers suffering crop loss/damage arising out of unforeseen events.
  2. Stabilizing the income of farmers to ensure their continuance in farming.
  3. Encouraging farmers to adopt innovative and modern agricultural practices.
  4. Ensuring flow of credit to the agriculture sector which contributes to food security, crop diversification and enhancing growth and competitiveness of agriculture sector besides protecting farmers from production risks.
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GS-II :
100-day sister cities challenge

Syllabus subtopic: Welfare Schemes for Vulnerable Sections of the population by the Centre and States and the Performance of these Schemes

 

Prelims and Mains focus: about the key features of the event; about smart city mission and its objectives

 

News: Organised by the Ministry of Housing and Urban Affairs (MoHUA), the 100-day sister cities challenge will commence on 20th February.

 

What is it?

  • The challenge pairs the 20 best performing Smart Cities with the 20 bottom ones in implementing projects under the Smart City mission.

 

  • The program of pairing the best performing smart cities to poorly performing smart cities as 'sister cities' is being called 20-20 formula. Sister Cities will sign a memorandum agreement on February 20 under this program.

 

About the event

  • The cities have been paired based on a certain criteria; for instance, coastal towns, state capitals, industrial hubs, hilly terrain or educational destinations are paired up with each other.

 

  • PM Modi’s Varanasi constituency, currently ranked 14th, will be paired up with Amritsar as both attract religious tourists.

 

  • The sister cities will have a joint meeting once every 30 days (via video conferencing), and at least once in the 100-day period “the teams of sister cities would visit the city and understand the Smart Cities projects under implementation and completion.” Technical drawings and financial studies including DPRs, feasibility reports and impact assessment reports will be shared amongst the two cities.

 

  • The internal rankings of the cities is drawn up every Friday in the Ministry based on performance (80 per cent) and utilisation of funds (20 per cent).”

 

About Smart City Mission

  • The Smart City Mission focuses on the most relevant and greater opportunities to improve lives in India. The objective of this project is to provide a clean and sustainable environment for smart solutions.

 

  • The project includes core infrastructure elements like proper sanitation, adequate water supply, robust IT connectivity, sustainable environment, safety and security of citizens, education, and health, etc.

 

  • The government of India has been distributed to 100 smart cities among the total number of states and UTs.
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GS-III : Economic Issues
The link between small savings and deficit

Syllabus subtopic: Government Budgeting.

 

Prelims and Mains focus: about the exemptions in this year’s budget and its impact on savings and deficit

 

News: Getting rid of exemptions under a new tax regime proposed by the budget could make small savings less attractive for individuals and dry up this source of funds for the government.

 

 

How do exemptions apply to small savings?

  • Small savings schemes are savings instruments such as the Public Provident Fund, National Savings Certificate and Sukanya Samriddhi. These are central government schemes that allow depositors tax exemption on such deposits up to a particular amount in a fiscal.

 

  • The deposits received under these schemes are held with the National Small Savings Fund (NSSF). The Centre offers an attractive tax-free rate of return on these instruments for depositors. Many depositors hold their deposits in a combination of a conventional savings account and small savings schemes to save taxes to get a higher return on deposits.

 

How are the rates of interest determined?

  • The central government fixes the interest rates on small savings schemes. A committee led by former Reserve Bank of India (RBI) deputy governor Shyamala Gopinath has recommended that interest rates of various schemes be 25-100 basis points more than the yields of government bonds of similar maturity.

 

  • A high-level advisory group, however, argued for the need to link the small savings rate with RBI’s repo rate to allow rates to come to market level and not be kept artificially elevated. The government continues to have some flexibility in determining the interest rate of these schemes.

 

Okay, but how does the government utilize NSSF?

The government uses NSSF as a source of funds for some of its investments through the National Highways Authority of India (NHAI) bonds and also to finance part of its deficit through government securities. NSSF buys these securities and collects the interest on them. Without exemptions in the new tax regime, this steady source of funds may not be available to the government.

 

How do small savings impact deficits?

Economists has said how state governments till 2003 could borrow from people in the form of postal savings. The rates on postal savings were above the average interest rates and there was no limit on borrowings for the states. The high interest rate led to a 15.2% growth in small savings rates per annum from 1995-2003 compared to 11% nominal growth. This coincided with high state deficits as there was no fiscal discipline and state governments could borrow as much as they wanted through postal savings.

 

Will a new tax regime bring fiscal discipline?

The removal of exemptions will have implications for the quality of our fiscal statistics. The magnitude of the impact in the short run would depend on how many people switch to the new tax regime. As more people move to the new regime, the Centre will find limited funds in NSSF, which it could earlier tap to finance its deficit or utilize it for off-budget borrowing. Removing exemptions will bring in self-discipline in the way the Centre uses public money.

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GS-III : Economic Issues
Pledging of Shares

Syllabus subtopic: Effects of Liberalization on the Economy, Changes in Industrial Policy and their Effects on Industrial Growth.

 

Prelims and Mains focus: about the move; benefits and significance; about share pledging

 

News: The Securities and Exchange Board of India (SEBI) has amended the SEBI (Depositories and Participants) Regulations by including an additional explanation that states that ‘pledge’ would also refer to ‘re-pledge of securities for margin or settlement obligations.’

 

Why?

A minor tweak in the manner ‘pledge’ is defined in the regulatory laws is expected to go a long way in minimising instances where stock brokers misuse client securities by pledging such shares for their own benefit in terms of meeting their margin requirements.

 

Background

  • This assumes significance as the recent past has seen few instances of brokers pledging client securities to raise funds from banks and non-banking finance companies (NBFCs). More importantly, this was done without the clients being aware that their securities were being misused in such a manner.

 

  • The most high-profile matter in the recent past was of Karvy Stock Broking in which the Hyderabad-based firm raised funds from entities such as Bajaj Finance, ICICI Bank, HDFC Bank and IndusInd Bank by pledging client securities.

 

 

  • Further, according to the lenders — as stated in an order by the Securities Appellate Tribunal — Karvy Stock Broking had even given an undertaking that the securities that were being pledged were its own and that they did not belong to clients.

 

Changes made

  • Onus of bonafide pledge created from margin account of a stock broker will now lie with the depository following the SEBI amendment.

 

  • In the past, pledge from the margin account was directly routed by the stock broker using the power of attorney route, without the active consent or approval of the beneficiary holder of shares. Now consent of beneficial owner will be necessary.

 

 

Likely benefits

  • Instances where a client’s funds/securities were diverted or misutilised by brokers toward margin or settlement obligations of itself, or for some third party, or for raising loans against shares on its own account, will be minimised.

 

  • With the insertion of this explanation, depository participants of both the pledger and the pledgee will have to inform the pledger and the pledgee respectively of the entry of creation of the re-pledge.

 

The latest SEBI move comes close on the heels of the regulator developing an in-house system to track the movement of client securities that are collected as collateral by the brokers.

 

 

What is a pledged share?

Simply put, it is taking loan against the shares one holds. It can be done by both investors and promoters.

 

Why do promoters pledge shares?

One of the methods promoters use to raise finance is to take loans against their holding in their company from banks or non-banking financial companies. For these financial institutions, these shares are collateral. Promoters can raise funds for various reasons-for meeting requirements of the business or personal needs.

 

Can banks sell the shares pledged by promoters?

  • Banks can sell the pledged shares if the price of the stock falls closer to the value agreed in the contract between them and the company. Typically, the amount that is lent by banks/NBFCs to promoters is less than the market value of the shares.

 

  • This shortfall is the margin is the amount that these lenders retain as security. In case the stock price falls, lenders ask the promoter to provide more cash or shares to top up this margin. If the promoters are not able to top up the collateral, the lenders can sell the shares to maintain this margin. Conversely, revoking of pledged shares by promoters is seen as a positive sign.

 

What is the risk for retail investors in this?

High promoter pledged shares can wreak havoc in a stock if price continues to fall and lenders sell these shares in the market. The sudden supply of shares can lead to further price fall and is a risk for retail investors who may have to sell the shares for a significant loss.

 

What should be the approach of retail investors in stocks with high pledged promoter holding?

  • Shares of companies with high pledged promoter holding tend to witness higher volatility. The risk is assessed on the basis of the amount of pledged shares as a percentage of the total shareholding.

 

  • A stock is considered a risky bet if pledged shares are more than 50% of the total shares in the company so ideally, retail investors should avoid such stocks.
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GS-III : Economic Issues
Force Majeure Clause

Syllabus subtopic: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

 

Prelims and Mains focus: about the move and its implications; about force majeure clause

 

News: The government said supply chain disruptions caused by the novel coronavirus (Covid-19) outbreak in China would allow companies to invoke force majeure clause

 

Background

  • The announcement comes a day after Finance Minister met several industry representatives to take stock of the situation, announcing the government would “speedily” formulate measures to minimise its impact on sectors.

 

  • The Department of Expenditure in a notification dated February 19 advised ministries that the impact on supply chains due to the spread of the virus was a fit case for the invocation of the force majeure clause.

 

What is the force majeure clause?

  • A ‘force majeure’ means extraordinary events or circumstances beyond human control, including events like natural calamities that could be described as an ‘act of god’. Other events include wars, strikes, riots and crimes. However, events like negligence or wrongdoing and predictable or seasonal rain are not considered force majeure.

 

  • A force majeure clause in the contract frees both parties from contractual liability or obligation when they are prevented by such events from fulfilling their obligations. It is an extraordinary provision that allows them to wriggle out of liabilities in case they are unable to fulfill their contractual obligations.

 

Significance

The move is a potential relief for companies facing difficulty in receiving shipments from China due to issues like shutdown of operations there or a hold-up at the ports in India.

 

Sectors facing supply chain issues

  • Sectors like pharmaceutical, chemicals (such as paints and tyre manufacturing) and solar equipment were “very vocal” about disruptions in their supply chain.

 

  • Today, when their raw materials have to come, there is a delay, or the products come, but the papers (necessary paperwork from China for Indian customs) don’t come. So the disruption is felt increasingly by these three.

 

  • Some micro, small and medium enterprises (MSMEs) had been facing delayed and staggered raw material supply, which had been impacting their ability to manufacture and send out their products. These MSMEs had sought flexibility from the banks, as their operations were affected due to the outbreak.

 

Impact of supply chain disruption (CII analysis)

  • The Indian industry is heavily dependent on China, especially for raw materials for various products sold here and exported to other countries.

 

  • China accounts for a significant share of the top 20 products that India imports from the world, according to an analysis paper by the Confederation of Indian Industry (CII).

 

  • According to CII, this includes a 45 per cent share in India’s total electronics imports, a third of machinery and almost two-fifths of the country’s global organic chemical imports. India also sources about 65-70 per cent of active pharmaceutical ingredients used to make several medicines here as well as close to 90 per cent of certain mobile phone parts from China.

 

  • “With supply chains disrupted, many enterprises will face working capital shortages and be unable to meet their credit obligations. This will particularly impact smaller firms which can go under, leading to huge disruption in jobs and incomes,” stated CII’s analysis.

 

  • The industry body had proposed a “one-time emergency waiver” of NPA regulations under a force majeure clause “given the exigencies of the situation” to quell fears of the impact of the outbreak on credit ratings of enterprises.
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