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9 PM for Mains examination
- China – Pakistan Axis and Indian implication
- Demarcation in the interest of public order
- Promise and pitfalls of new labour deal
- Parliament and the new labour codes
- Retrospective taxation – Vodafone case
9 PM for Preliminary examination
1. China – Pakistan Axis and Indian implication
Source: The Indian Express
Syllabus: GS-2- International Relations
Context: Pakistan’s growing alliance with China has major implications for India.
How has Pakistan’s alliance with china grown?
- The Financial Action Task Force (FATF):
- Islamabad is likely to convince the US to support it for its role as a successful negotiator in the US-Taliban agreement
- Pakistan has been on the FATF grey list since June 2018 and is gearing up to gather support from China to avoid the blacklisting.
- Pakistan’s military build-up has continued with Chinese defence imports despite its economic slowdown and rising debt.
- China’s assistance to Pakistan over the last six decades has expanded from a purely military relationship to economic and diplomatic levels.
- Beijing’s weapon supply: It added to Pakistan’s defence capability and also strengthened its will to carry out a proxy war through terrorism in India.
How has china given military assistance to Pakistan?
China’s excessive military assistance to Pakistan has been on four critical fronts:
- Export of Chinese conventional military equipment:
- The supply of Chinese conventional weapons started in the 1960s and 1970s with F-7s and MiG-19 fighters.
- Support in Pakistan’s nuclear build-up:
- Pakistan received help with the reactor, weapon design as well as nuclear material in the 1970s and 1980s.
- China continued missile technology assistance to Pakistan and the technology of the Chinese M-11 was used by Pakistan to develop missiles.
- Assistance to Pakistan’s indigenous defence industry:
- Technology transfer from China: the focus of Pakistan’s defence obtaining has been on the build-up of its air force and the maritime strike capabilities of its navy.
- JF-17 is co-developed by Pakistan and China
- In 2006, the Pakistan Navy ordered four F-22P-type frigates from China
- PNS ASLAT is the first indigenously built frigate was done in collaboration with the China Shipbuilding and Trading Company.
- Intelligence sharing with Pakistan:
- Reports suggest posting of Pakistan’s ISI officers (from this March) to China’s Central Military Commission’s Joint Staff Department.
- Beijing’s diplomatic support to Pakistan has grown significantly after the revocation of Article 370 and China has repeatedly raised the Kashmir issue at the UN Security Council.
- The Sino-Pak nexus is expected to grow further in the coming years and India needs to be strategically prepared to deal with the implications of the alliance.
2. Demarcation in the interest of public order
Source: The Hindu
Syllabus: Gs2: Role of Civil services in Democracy
Context: The Delhi riots case have made the case of differentiating the role of the District Magistrate from the Police Commissioner.
What are the key failures highlighted by court in Delhi riots case?
- Failure of police: community-wide protest is not itself a crime and Delhi Police which have magisterial powers under the Criminal Procedure Code to take preventive action failed to maintain public order.
- Non maintenance of law and order: In Delhi, the police did not distinguish between wider political support and violence caused by a few.
- Political interference: In Delhi, public figures intervened to incite violence changed the nature of a peaceful protest and absence of their immediate arrests led to a riot.
- Dual role created dilemma: If an official is allotted a dual role, to both keep in place law and order and maintain public order, this could lead to the displacement of one goal in favour of the other. Example, Jamia Millia Islamia community – allowing religious gathering in Nizamuddin and preventing violence in northeast Delhi.
What are the various judgements related to distinction of duties?
- Ram Manohar Lohia vs. State of Bihar: made distinction between ‘public order’, affecting the community at large and ‘law and order’ affecting only a few. The Supreme Court held that in the case of public order, the community or the public at large have to be affected.
- Madhu Limaye case: The “the emergency must be sudden and the consequences sufficiently grave” for an imposition of restrictions.
- Anuradha Bhasin vs. Union of India: the prohibitive orders should not prevent legitimate expression of opinion, or grievance or exercise of democratic rights.
- Aldanish Rein vs State of NCT of Delhi: The High Court directed the setting up of an oversight mechanism to periodically review the exercise of magisterial powers by Delhi Police.
What needs to be done?
- Judicial review of roles and proportionality of decisions for maintaining public order.
- Need a policy rethink about which duties need to be delegated to the police. The Seventh Schedule of the Constitution distinguishes between ‘police’ and ‘public order’.
- The National Police Commission recognises the coordinating role of the District Magistrate having more leverage than the police.
- Maintain distinction between independent actions for which no political clearance is needed by the District Magistrate to maintain public order.
- Kerala has both a District Magistrate responsible for public order and a senior police officer as city Police Commissioner focusing on crime.
3. Promise and pitfalls of new labour deal
Syllabus: GS2: Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation
Context: Recently, the new labour laws are passed to make doing business easier in India.
What is there need to reform labour laws?
- Dwindling GDP growth rate: It had declined even before the pandemic from 7.5% in 2014 to 5% in 2019.
- Large workforce: India’s population will surpass China’s in about seven years and for the next ten years, at least 10 million youth will enter the workforce each year.
- Low labour costs: India’s supply of labour will keep increasing, thereby keeping labour costs low for a long time.
What are the changes introduced?
- Codified laws on social security: It brings together the provident fund (PF), the employees’ state insurance (ESI), maternity benefits, gratuity and other entitlements under a simplified single law.
- Codification of laws on Occupational safety: It brings together all laws relating to health and hazardous working conditions.
- Security to workers: the laws pins liability on the employer and the contractor and makes PDS benefits transferable for migrant workers. It also stipulates toll-free numbers and assistance cells to help free bonded labour.
- Industrial Relations Code of 2020: It has redefined the terms “employer”, “employee” and “worker”.
- New definition of strike: “strike” now includes mass casual leave by 50% of the workforce employed by any firm.
- Making hiring easier: Law prescribes a single licence for staffing firms to hire contract workers. It has increased the threshold limit of contractor employees from the earlier norm of 20 to 50.
- Creation of National Social Security Board: To formulate schemes for unorganized workers, gig workers and platform workers
What are the concerns?
- Fixed-term contracts: It will take away all social protections to employees under short-term assignments.
- Arbitrary categorisations: Only sites that have more than 10 workers will be covered by the law. Also, “personal residential construction work” is excluded.
- Weak social security: The safety committee will only be made in workplaces that hire more than 250 employees.
- Gig economy: Several small firms have complete impunity in hiring and firing employees. Gig workers have not been identified as unorganized workers.
- Exclusion from social security mechanism: The categories of self-employed are not covered under any social security mechanism. Also, 80% of the country’s migrants are intra-state workers and they find no mention in the new law.
What more needs to be done?
- Learn lessons from states: Rise in contractualization
- In Rajasthan and Gujarat, Workers continue to be underpaid and wage rates have stagnated.
- The state’s unemployment rate steadily went up and is now among the highest in the country along with the increase in the number of contract workers.
- Increase in per capita output without a commensurate increase in wages is ideal for a firm as it becomes more competitive.
- Focus on building support institutions: Provide skilling, apprenticeship and guarantee social security and basic incomes.
- Worker first and productivity and mobility next: Labour law reform must first address the marginal informal worker who works in difficult circumstances.
4. Parliament and the new labour codes
Source- The Hindu
Syllabus- GS 3- Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.
Context- Labour Minister Santosh Gangwar told that four new labour codes will become operational before the year ends. In the brief monsoon session of Parliament, three new labour codes were bulldozed into passing and now await the President’s assent.
What are these new labour codes?
- The Industrial Relations Code, 2020
- The Social Security Code, 2020
- The Occupational Safety, Health and Working Conditions Code, 2020
- The Code on Wages, 2019
What is the Code on Wages, 2019?
1.One single code- It seeks to consolidate and simplify four pieces of legislation into a single code. The four pieces of legislation are as following-
- Payment of Wages Act, 1936
- Minimum Wages Act, 1948
- Payment of Bonus Act, 1965 and
- Equal Remuneration Act, 1976
2.More coverage of workers- The new Code has dispensed with the necessity of having a minimum number of workers and the inclusion of such employment into the schedule.
- It would expand the coverage of workers in all industries in the unorganised sectors as the old Minimum Wages Act covered only 30% of the total workforce.
- While there were 10,000 slabs of minimum wages that existed, they would now be reduced to 200 slabs.
3.Reduction in sections- While the previous four pieces of legislation had a total of 119 sections, the new Code has 69 sections.
What are the challenges in consolidating four different legislations into a single one?
The combining of asymmetrical laws into a single code is not an easy task and will only create its own set of new problems. Such as-
- Impact on the previous legislation- Considering that the repealed legislations each had a definition section, inspectors, penalties, a competent authority, an appellate authority, and rule-making powers, any consolidation will impact their length.
- Framing of rules – Section 67 had authorised the framing of rules relating to as many as 38 provisions of the Act. As a result, the delegated pieces of legislation (Rules) will be bigger than the Code.
- Barring a few new concepts– The new Code retains almost all provisions. like the procedure for fixing minimum wage, limit for fines and deductions in wages, minimum and maximum bonus etc.
- No difference in definition of worker- The Code will have the same definition of the term “worker”; but, a person employed in a supervisory capacity drawing up to ₹15,000 will also be considered a worker.
- State’s power to fix the minimum wage- The central government will have the power to fix a “floor wage”. Once it is fixed, State governments cannot fix any minimum wage less than the “floor wage”.
- Provision on penalty- A new provision (Section 52) has been introduced where an officer (not below the rank of an under-secretary to the government) will be notified with power to impose a penalty in the place of a judicial magistrate.
- Compounding of offences– The Code also exempts employers from penal provisions if they were able “to prove that they had used due diligence in enforcing the execution of the code and it was the other person who had committed the offence without his knowledge, consent or connivance”.
The Labour rights are of utmost importance as they are fundamental freedoms, which have a struggle of hundred years behind them. In this context, the three bills will bring industrial peace and harmony in the country which will immensely help the country in bringing much needed economic growth and will help in employment generation. They will also help promote investment and will create harmonious industrial relations in the country.
5. Retrospective taxation – Vodafone case
Source- The Hindu
Syllabus- GS 3- Role of external state and non-state actors in creating challenges to internal security.
Context– The Vodafone Group has won one of the most high-stakes legal battles involving a foreign investor and the Indian state under international law. The retrospective taxation was in violation of the BIT and the United Commission on International Trade Law (UNCITRAL).
What is the case
- In May 2007, Vodafone bought a 67% stake in Hutchison Whampoa for $11 billion.
- In September that year, Indian government raised a demand of Rs 7,990 crore in capital gains and withholding tax from Vodafone, saying the company should have deducted the tax at source before making a payment to Hutchison
- In 2012, the Supreme Court ruled in favour of the Vodafone group.
- Later, the same year, the then Finance Minister, the late Pranab Mukherjee, circumvented the Supreme Court’s ruling by proposing an amendment to the Finance Act, thereby giving the Income Tax Department the power to retrospectively tax such deals.
- Vodafone then initiated arbitration in 2014 invoking the Bilateral Investment Treaty signed between India and the Netherlands in 1995.
- Ruling: It ruled in favour of Vodafone as the taxation was in violation of the BIT.
- The tribunal said that now since it had been established that India had breached the terms of the agreement, it must now stop efforts to recover the said taxes from Vodafone.
- It also directed India to pay £4.3 million ($5.47 million) to the company as compensation for its legal costs.
What is retrospective taxation?
Retrospective taxation allows a country to pass a rule on taxing certain products, items or services and deals and charge companies from a time behind the date on which the law is passed.
- Countries use this route to correct any anomalies in their taxation policies that have, in the past, allowed companies to take advantage of such loopholes.
- Apart from India, many countries including the USA, the UK, the Netherlands, Canada, Belgium, Australia and Italy have retrospectively taxed companies.
What are the key lessons from Vodafone case?
- Compensation cost- The tribunal has ordered India to reimburse legal costs to the tune of more than ₹40 crore incurred by Vodafone in fighting this case.
- The taxpayer’s money will be used to pay Vodafone
- Key lesson is that three organs of the Indian state — Parliament, executive, and the judiciary — need to internalize India’s BIT and other international law obligations. These organs need to ensure that they exercise their public powers in a manner consistent with international law, or else their actions could prove costly to the nation.
What option does government has to solve the issue?
- Challenge the ruling– government might challenge the award at the seat of arbitration or resist the enforceability of this award in Indian courts alleging that it violates public policy.
- The government would be ill-advised to go down this road because it would mean that India does not honour its international law obligation.
- It would send a wrong signal to foreign investors reaffirming the sentiment that doing business in India is indeed excruciating.
- India is entangled in more than a dozen such cases against companies over retrospective tax claims and cancellation of contracts. The exchequer could end up paying billions of dollars in damages if it loses.
Government should immediately comply with the decision to support foreign investment. The decision shows the significance of the ISDS (Investor-state dispute settlement). Regime to hold states accountable under international law when in case of undue expansion of state power. The case is a reminder that the ISDS regime, notwithstanding its weaknesses, can play an important role in fostering international rule of law.
9 PM for Preliminary examination
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