9 PM Daily Brief – September 26th, 2020

Daily current affairs summaries

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9 PM for Mains examination

GS-2

  1. Cess pool: On CAG report of Centre’s accounts
  2. Parliamentary committees

GS-3

  1. Demand to Rework Inflation Targeting Regime
  2. Farmers protesting on Farm bills

9 PM for Preliminary examination

FACTLy


1.Cess pool: On CAG report of Centre’s accounts

Source: The Hindu

Gs2: Functions and Responsibilities of various Constitutional Bodies.

Context: The audit of the Union Government’s accounts tabled in Parliament revealed that the Finance Ministry retained over 40% of all cess collections in 2018-19 in the Consolidated Fund of India (CFI).

What are key issues highlighted by CAG?

  • Cess were made part of general pool: A large chunk of the money collected as cess to the general pool making it difficult to ensure that the funds were used for specific purpose.
  • Diversion of cess:As many as 35 different cesses, levies and charges yielded ₹2.75-lakh crore in the year. Around ₹1.64-lakh crore was remitted to the specific reserve funds for which these cesses were levied.
  • No new dedicated fund was created:A new 4% Health and Education Cess on income tax was partly deployed towards education, but no fund was created for health. Similarly, Social Welfare surcharge levied on customs.
  • GST compensation:The GST Compensation Cess, over which the Centre and several States have now locked horns with ₹47,272 crore was not remitted to its rightful account over the first two years of GST.
  • Changed statistics:diversion helped understate India’s revenue and fiscal deficit numbers.
  • Disturbed fiscal federalism: compensation cess transfers to States were accounted as Grants-in-aid to States which distorted the Centre-States fiscal math.
  • Over-reliance on Cesses:Centre’s reliance on cesses and surcharges to raise revenue has increased significantly since the States’ share of the divisible pool of taxes was raised to 42% in line with the 14th Finance Commission’s suggestions.
  • Cesses complicates taxation: It is arguable that such levies are in sync with a nation trying to simplify its tax regime.

Other similar incidents:

  • Over 10 years, not a paisa of the ₹1.25-lakh crore of cess collected on crude oil was transferred to an oil industry development body it was meant to finance.
  • Part of the hefty cess collected as additional excise duties on petrol and diesel to finance roads and infrastructure was similarly retained in the CFI.

What should be done?

  • Centre need to rebuild bridges:a climate of distrust is hovering over India’s federal polity. For instance, the GST compensation dispute or the passage of Farm sector Bills without taking States on board.
  • Rationalisation of Cesses: for example, the excise duties on petrol and diesel need to be rationalised to provide stimulus to citizens whose incomes and job prospects have been reduced by the pandemic and a shrinking economy.
  • Ensure transparency: It is needed in the management of cess receipts so that Parliament and the people do not need to wait for audit findings to learn of this subterfuge.

2.Parliamentary committees

Source- The Hindu

Syllabus- GS 2- Parliament and State legislatures—structure, functioning, conduct of business, powers & privileges and issues arising out of these.

Context- The past few years only 26% of the Bills have been referred to the standing committees and have been passed without scrutiny by parliamentary standing committees.

What parliamentary oversight mechanisms are followed in India?

The parliamentary scrutiny of the regulators can take place through the following means-

  • Question hour
  • Discussion in Parliament
  • Parliamentary committees

Some of the means of legislative oversight, such as annual submission of reports by regulators to Parliament, are provided in enactments.

What is Parliamentary Committee?

The Parliamentary committees are established to study and deal with various matters that cannot be directly handled by the legislature due to their volume. They also monitor the functioning of the executive branch.

Types of Parliamentary committees-

  1. Ad hoc committees- These committees are temporary committees established by the board of director to address a specific issue. The latter are created on an ad hoc basis as the need arises and they are dissolved after they complete the task assigned to them.
  2. Standing or permanent committees- A committee consisting of Members of Parliament. It is a permanent and regular committee which is constituted from time to time according to the provisions of an Act of Parliament or Rules of Procedure and Conduct of Business.
  • Due to capacity and time constraints, it is not possible for MPs to scrutinize all policies and legislation on the floor of the House. It was felt that by forming smaller groups of members to examine the subjects would ensure deeper deliberation and debate. The standing committees are of the following kinds-
  • Department related standing committees (DRSC) – Aligned with specific ministries examine their performance and budgets apart from Bills or subjects related to their respective ministries. Currently there are 24 DRSC that comprise members from both Houses of Parliament.
  • Financial standing committees (FSC)–Primarily responsible for scrutinizing the expenditure priorities of the government, suggest measures to improve efficiency in spending and performance of Public Sector Undertakings.
  • Administrative committees– Primarily responsible for ensuring day-to-day activities of the legislature are planned in consultation with the members.

What are the current issues and relevance?

  1. Fewer Bills Referred – To strengthen the lawmaking process, it is important that all Bills are examined by Standing Committees before passage. This ensures thorough scrutiny of the The government has shown extreme reluctance to refer Bills to Select Committees of the Houses or Joint Parliamentary Committees.
  • The 14th and 15th Lok Sabha saw 60 percent and 71 percent of bills referred to committees. This number has dipped sharply to just 27 percent in the 16th Lok Sabha.
  • The last Bill referred to a Joint Parliamentary Committee was The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Second Amendment) Bill, in 2015.
  • Some of the most momentous Acts of Parliament in recent years such as the radical overhaul of Article 370 were not processed by any House committee.
  1. Centre’s willfulness– The government used its majority in both the Houses of Parliament and steamrolled the Bills (with hardly any discussion), amid the predictable din and noise that a fragmented Opposition could mount.
  2. Longer Tenure for Members-The committee system allows a smaller group of legislators to develop technical expertise on a particular subject and ensure better deliberation. In the present format, the members are nominated to a Standing Committee for one year. However, shifting of committees every year defeats this purpose.
  3. Speaker’s traditional non-partisan role- Very few Speakers, with exceptions such as G.V. Mavalankar, P.A. Sangma and Somnath Chatterjee, have taken cudgels with their party leaders to uphold the autonomy of the House.

Way forward-

The need of the hour is for greater and effective utilization of Parliamentary Committees to strengthen Parliament as a deliberative body which can ensure effective oversight. The government must make amends and restore the democratic majesty of Parliament.

3.Demand to Rework Inflation Targeting Regime

Source: Indian Express

Gs3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Context: Recently the monetary policy committee (MPC) concluded that elevated inflation has constrained it from easing policy rates.

Why there is demand to rework inflation targeting regime?

  • Economy slowdown:Since the growth rate is falling that is why question have been raised regarding the inflation targeting framework.
  • Growth-inflation quagmire:there is demand for the government to relax the inflation targeting framework to spur growth and demand.

Suggestions:

  • Greater tolerance for higher levels of inflationeither by adjusting the acceptable range of inflation upwards, or by extending the period over which the MPC has to meet its inflation target.
  • Shift from headline to core-inflationas the nominal anchor of monetary policy.
  • Incorporate other indicators such as nominal GDPexplicitly into the framework.
  • Doing away with the inflation targeting framework altogether.

What are possible way outs and their implications?

Easing policy rate:

  • It will inject a degree of uncertainty and unpredictability in monetary policy.
  • Frequent revisions will destabilize household expectations.
  • It will signal a lack of commitment to maintaining price stability.

Shift to a multiple indicator structure:

  • This move harks back to the pre-MPC days when there was far greater uncertaintyover monetary policy.
  • No clarity over the indicatorthat was dictating the stance of the RBI governor.
  • Absence of a well-defined anchor will reduce transparency and accountabilityfrom the central bank.

Central bank financing the Centre’s capital expenditure on a regular basis.

  • Monetisation should be the last resort: The perils of falling back on this long-discarded policy need to be guarded against.
  • Tilt the balance of power in favour of the government: Government owing to its short-term political imperatives will be seduced by the apparent simplicity of this idea without considering its long-term repercussions.
  • Channel funds to revenue expenditure:It will lead to a situation wherein the entire budgeted capital expenditure is financed by the central bank.
  • Blur the line between fiscal and monetary policy :Giving a central bank a degree of control over the government’s expenditure priorities will allow unelected technocrats to be in charge of determining the expenditure priorities of the government. It will result in the fiscalisation of monetary policy.

Pledge Government shares in companies to avail loans against them:

  • It raises questions whether a sovereign should pledge assets to borrow in the local currency.
  • In 1991, India had pledged gold for a foreign currency denominated loan not a local currency loan.
  • There is not clarity on what will happen if the value of the shares pledged falls below that of the loan.

What is the way forward?

  • There is need topush for more external voices in the MPC. For instance, In the UK, a non-voting treasury representative sits with the MPC to discuss policy issues.
  • During periods of extreme uncertainty, there is need to adopt some unconventional measures but the principles of sound public policyshould not be discarded.

4.Farmers protesting on Farm bills

Source- The Indian Express

Syllabus- GS 3-  Transport and marketing of agricultural produce and issues and related constraints; e-technology in the aid of farmers

Context- Farmer’s organisation across the country gave a call for a bandh on September 25th to protest the three bills passed by Parliament.

What are the new Farm Bills?

Three Farm Bills that are bond for contention-

  1. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 (FPTC).
  2. The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020 (FAPAFS).
  3. The Essential Commodities (Amendment) Bill, 2020.

Why are these bills being protested?

These bills have been protested by not only the farmers, even opposition and state legislatures are not supporting these bills due to-

  1. Unconstitutional Procedure-The manner in which the bills were thrust upon the farming community. Not only the farmers’ organisations, but even state governments and allies have not been consulted.
  2. Against the spirit of cooperative federalism –
  • All the earlier attempts at reforming agricultural marketing respected the constitutional separation of powers. While the Centre proposed the model acts, these were implemented by state governments.

For instances– Out of 36 states and union territories-

    1. 18 states have already enacted reforms allowing for establishment of private market yards/private markets.
    2. 19 states have enacted reforms allowing for direct purchase of agricultural produce from agriculturists by processor/bulk buyer/bulk retailer/exporter.
    3. 20 states have enacted contract farming acts.
    4. Kerala and Bihar do not have APMC mandis and Tamil Nadu has a different system.
    5. Most states have exempted levy of taxes and fees on sale of fruits and vegetables.
  • The current reforms completely bypass the state governments and weaken their ability to regulate agricultural markets even though it is a state subject.
  1. Changing objectives of the government-unlike earlier reforms where the focus was on strengthening the functioning of APMC mandis while allowing for greater private market access and participation, the current FTPC bill bypasses the APMC altogether, creating a separate structure of trading.
  2. Creation of dual market structure-The absence of regulation and exemption from mandi fees creates a dual market structure which is not only inefficient but will also encourage unregulated trade detrimental to the primary purpose of providing market access to farmers for better price discovery and assured prices.
  3. Corporate Exploitation-FTPC Bill is not about delivering on the promise of freedom to farmers but freedom to private capital to purchase agricultural produce at cheaper prices and without any regulation or oversight by the government.
  4. Contract farming bill and amendments in the essential commodities act– Apart from the fact that the provisions of these bills are highly skewed in favour of private capital, with no limits on stockholding and restrictions of government interventions, there is limited recourse to any independent grievance redressal mechanism.
  5. Government actions-Agricultural terms of trade have moved against agriculture with rising input prices (with the government increasing diesel prices despite the collapse in international prices) and declining farm gate prices.

Way Forward

The government should re-consider all the farm bills with the states, famer’s organisations, and their representatives. So, that the farmers will gets the opportunity to give their opinions and address their issues regarding the farm bills. Also by this farmers will understand the agenda of the government’s view of the bills. This will bring harmony and peace among the protestors.


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