For better use 

#GS2 #Governance 

While taking over MPLADS funds to fight the virus, Centre must allocate judiciously 

  • The suspension of the Members of Parliament Local Area Development Scheme (MPLADS) for two years to boost the funding available for the COVID-19 fight is a step in the right direction. It may appear at first blush that the decision may undermine the decentralised manner of funding local area development. 
  • The immediate benefit now is the freeing up of about ₹7,900 crore over a two-year period so that it can be spent on boosting the health infrastructure needed to combat the pandemic. 
  • Many members made immediate use of the one-time dispensation to recommend the procurement of N95 masks, personal protective equipment, and ventilators. Now that the entire scheme has been suspended, the government should ensure that recommendations already made are acted upon immediately. 
  • Political reactions indicate that there is considerable disenchantment over the suspension — the ₹5-crore corpus available to each member is a source of much goodwill for elected representatives. 
  • Jurists have pointed out that the Constitution does not confer the power to spend public money on an individual legislator. Experts have called it out for weak monitoring. The Supreme Court, while declining to strike down the scheme, called for a robust accountability regime. 
  • MPLADS gives scope for MPs to utilise the funds as a source of patronage that they can dispense at will. The CAG has flagged instances of financial mismanagement and inflation of amounts spent.  
  • The Second Administrative Reforms Commission recommended its abrogation altogether, highlighting the problems of the legislator stepping into the shoes of the executive. The current suspension gives some scope for a reconsideration of the scheme in its totality. 

A key arsenal in rural India’s pandemic fight 

#GS2 #Governance #PandemicManagement 

With migrant labour back in their hometowns, gram panchayats can strengthen containment measures in the interiors 

With the ongoing war against COVID-19, it is the exact opposite which needs equal if not greater attention — the state of preparedness within the fortress. Yes. With the ubiquitous 21-day national lockdown unprecedented in the history of independent India, stronger and harsher than anywhere else in the world, the interiors within the boundaries need attention. 

Ground realities 

  • With the influx of thousands of migrant labourers into their villages, there is an imminent need to isolate them for at least 14 days. Unfortunately, the houses here, which are often one or two-room dwellings, with an average seven family members to accommodate, are some of the worst places where one can hope to contain the deadly disease.  
  • Along with the absence of running water within households, the possibility of common points in village arenas becoming hotspots for this deadly contagion becomes manifold. 
  • Only a few States have been able to organically involve their foundational governance structure — i.e. gram panchayats — very effectively and efficiently in this situation. A case in example is the community kitchens run by local bodies in Kerala, where home delivery of cooked food is spiking as the situation demands. 
  • Issuing orders from the top is the norm and an ecosystem has evolved where even the elected representatives of panchayats wait for directions and a sarpanch does not assert himself before a bureaucrat. 
  • Many scientists and researchers have already predicted the possibility of villages becoming hotspots of the disease after the 21-day lockdown is lifted. Though geographical spread may be limited, the concentration of the spread may get out of hand. 
  • Panchayats can work exactly in three areas: awareness generation, setting up isolation conditions, and streamlining social security measures announced by the Central and State governments. 

Reaching out effectively 

  • First, a model needs to be established, with concrete standard operating procedures and best practices that can be replicated throughout rural India. Organisations such as Professional Assistance For Development Action (PRADAN) have been trying to influence gram panchayats and district administrations in many States ever since the pandemic. 
  • Involving panchayats — and by observing adequate safety measures — to establish isolation facilities across the length and breadth of the country is the need of the hour. 
  • The harvesting of wheat almost over in States such as Madhya Pradesh; people are still out in the fields, but once they are done with their work it is the panchayat that can do the work effectively to confine people within their homes with adequate awareness generation. 
  • Community policing with the active engagement of panchayats, by collaborating with women’s collectives, is a potential area where a people-led movement can be kick-started in a short time span. 
  • Without the active engagement of panchayats, it would be chaotic to even expect everything remaining under control within villages in case of even a minor disturbance.  

With a package of ₹1.7-lakh crore to meet the needs of the population and streamlining health services, it is clear that the government is trying its best; with more volunteers and social commitment through raising resources, civil society organisations are trying their best; with pledges of financial support and donations, concerned citizens and industry players are also trying their best. But laying stress on three actions specifically — arranging isolation facilities with cooked meal supply; awareness generation, and finally, ensuring that the most vulnerable have access to the welfare measures announced — is crucial if rural India is to be saved. It is time for panchayats to exercise their agency. With enough political will, and a changed perspective of executive machineries, it is totally possible. It is time to unleash the power of panchayats to be with the people and lead this fight. 

Needed, greater decentralisation of power 

#GS3 #DisasterManagement 

Even as States have taken up positions of leadership in the pandemic response, federal limitations are becoming hurdles 

  • Even before the Union government invoked the Disaster Management Act, 2005, many State governments triggered the Epidemic Diseases Act, 1897, and installed a series of measures to combat what was then an oncoming onslaught of COVID-19. These actions have not always been perfect. Some of them have even disproportionately trenched upon basic civil liberties. 
  • States such as Maharashtra, Kerala, Tamil Nadu, Rajasthan, and Karnataka have shaped their policies to address their direct, local concerns. They have communicated these decisions to the public with clarity and consideration, helping, in the process, to lay out a broad framework for the nation. 

Stifled by limitations 

  • Equally, though, as much as State governments have taken up positions of leadership, they have repeatedly found themselves throttled by the limitations of the extant federal arrangement. 
  • Yamini Aiyar and Mekhala Krishnamurthy of the Centre for Policy Research have pointed out at least three specific limitations.  
  • One, the inability of States to access funds and thereby structure their own welfare packages.  
  • Two, the curbs imposed by a public finance management system that is mired in officialdom. This has prevented States from easily and swiftly making payments for the purchase of health-care apparatus such as ventilators and personal protective equipment.  
  • Three, the colossal disruption of supply chains not only of essential goods and services but also of other systems of production and distribution, which has placed States in a position of grave economic uncertainty. 

Two distinct levels 

  • Manifest from a reading of the Constitution is that it creates two distinct levels of government: one at the Centre and the other at each of the States. The Seventh Schedule to the Constitution divides responsibilities between these two layers. The Union government is tasked with matters of national importance, such as foreign affairs, defence, and airways. 
  • Issues concerning public health and sanitation, agriculture, public order, and police, among other things, have each been assigned to State governments. In these domains, the States’ power is plenary. 
  • This federal architecture is fortified by a bicameral Parliament. Significantly, this bicameralism is not achieved through a simple demarcation of two separate houses, but through a creation of two distinct chambers that choose their members differently: a House of the People [Lok Sabha] comprising directly elected representatives and a Council of States [Rajya Sabha] comprising members elected by the legislatures of the States. 
  • In formulating this scheme of equal partnership, the framers were also conscious of a need to make States financially autonomous. To that end, when they divided the power to tax between the two layers of government they took care to ensure that the authority of the Union and the States did not overlap. 
  • The underlying rationale was simple: States had to be guaranteed fiscal dominion to enable them to mould their policies according to the needs of their people. 

Matters of finance 

  • Consider the widely hailed decision to accept the 14th Finance Commission’s recommendation for an increase in the share of the States in total tax revenues from 32% to 42%. While, in theory, this ought to have enabled the States to significantly increase their own spending, in reality, as a paper authored by Amar Nath H.K. and Alka Singh of the National Institute of Public Finance and Policy suggests, this has not happened. 
  • Notably, the creation of a Goods and Services Tax regime, which far from achieving its core purpose of uniformity has rendered nugatory the internal sovereignty vested in the States. By striking at the Constitution’s federal edifice, it has made the very survival of the States dependent on the grace of the Union. 
  • Union Finance Ministry highlighting that more than four months’ worth of Goods and Services Tax compensation to the States — reportedly totalling about a sum of ₹40,000 crore — remains unreleased. 

To be sure, this impulse to appropriate authority is not in any way unique to the Bharatiya Janata Party’s command. Congress-led governments of the past have also been susceptible to such motives. But perhaps a crisis of the kind that COVID-19 has wrought will show us that India needs greater decentralisation of power; that administration through a single central executive unit is unsuited to its diverse and heterogeneous polity. We cannot continue to regard the intricate niceties of our federal structure as a nettlesome trifle. In seeing it thus, we are reducing the promise of Article 1 of the Constitution, of an India that is a Union of States, to an illusory dream. 

No lockdown for abuse 

#GS3 #WomenWelfare 

Both formal and informal means of support can be extended to women facing domestic violence now 

  • The call helps to highlights the plight of many silent sufferers of domestic violence across the world in these times. In China, France, the U.K. and other countries, there have been reports of a significant increase in domestic violence cases since the imposition of lockdowns. 
  • The literature on domestic violence suggests that when men and/or women get employed, domestic violence tends to fall as interactions between couples reduce. Under a lockdown, interaction time has increased and families have been left without access to the outside world. 
  • The literature also suggests that violence is a way for the man to assert his notion of masculinity. The current atmosphere of fear, uncertainty, food insecurity, and unemployment may create feelings of inadequacy in men. All these factors are only likely to aggravate tensions at home and make women victims of those tensions. 

Violence against women in India 

  • The National Family Health Survey (NFHS) data show that 24% of women faced domestic violence in 2015-16 not seeing any reduction since 2005-06. Compared to the survey results, the actual reports of domestic violence to the police are negligible at 58.8/ one lakh women. 
  • The more telling statistic from the NFHS data is perhaps that 52% of the surveyed women and 42% of the surveyed men think there is at least one valid reason for wife-beating. This attitude highlights how ingrained and normalised the idea is such that an abused woman should not expect support from others. 

What can be done? 

  • The most important thing that we can do is to acknowledge and accept that domestic violence happens and work to reduce the stigma attached to the victims of such violence. Such support may prompt abused women to seek at least informal means to redress their issues. 
  • The provision of cash transfers and ration support are likely to sustain the family and also reduce stress in the household leading to lower violence against women. 
  • TV to relay messages requesting women to contact the police station for help. The 181 helpline number set up for this reason should remain active, and women should be reminded of this number via TV ads. The government could also send mass SMS messages as it did during the onset of the COVID-19 crisis as most women have access to at least a basic phone. 
  • The French government has extended monetary support to organisations fighting this crime. British activists have requested their government to release emergency funds to support organisations that are dealing with domestic violence-related issues. 
  • The Indian government should also extend monetary support to such organisations in India rather than rely entirely on ASHA workers on whom the burden of community welfare is already very high. The staff of such organisations should be allowed to travel without being stopped by the police. 
  • Studies show that women more than men tend to be affected adversely during epidemics. We need to take these advisories seriously to prevent further widening of the rift between men and women in our society. 

Financing the pandemic rescue package 

#GS3 #Economy 

The govt. must issue GDP-linked bonds, tap the excess liquidity of PSUs, and monetise non-core assets 

  • The priority for India is to ensure that it overcomes the COVID-19 pandemic and kick-starts GDP growth rather than fix the weaknesses in the macroeconomy: a high fiscal deficit of 7.49% and government indebtedness that was 69% of GDP in 2019. 
  • Government of India (GoI) swung into action by announcing a 21-day national lockdown and a ₹1.7-lakh crore (approximately $22.59 billion) rescue package. Available in the state disaster relief fund is ₹60,000 crore, comprising ₹30,000 crore of outstanding balance and the Central government’s allocation of a similar amount for FY2021.  
  • Hence, the GoI needs to raise an additional ₹1.1-lakh crore, i.e., 65% of the rescue package outlay. Its financing strategy should be to raise long-term funds at cost effective rates, with flexible repayment terms that allow it to take tactical advantage of market movements. 

GDP-linked bonds 

  • The coupon (interest) on a GDP-linked bond is correlated to the GDP growth rate and is subject to a cap. The issuer, the GoI, is liable to pay a lower coupon during years of slower growth and vice-versa.  
  • The listing of bonds provides investors an exit option. Costa Rica, Bulgaria and Bosnia-Herzegovina issued the first pure GDP-linked bonds in the 1990s. Argentina and Greece issued warrant-like instruments similar to GDP-linked bonds in 2005 and 2012 respectively. India could learn from their experience. 
  • Publishing reliable and timely GDP data is a prerequisite for the successful issue of GDP-linked bonds, which the GoI may use to part-finance the COVID-19 rescue package and to diversify its borrowing sources. 

Streamlining PSEs 

  • The 15 largest non-financial central PSEs (CPSEs) in the S&P BSE CPSE index contributed approximately 75% of the GoI’s ₹48,256.41 crore dividend income from PSEs in FY2020. The Union Budget projected PSE dividends to increase by 36.25% to ₹65,746.96 crore in FY2021. This milestone is unlikely to be achieved in the current environment. 
  • The 15 CPSEs have accumulated sizeable non-core assets including financial investments, loans, cash and bank deposits in excess of their operating requirements, and real estate. The return on these assets (excluding real estate) is around 200 basis points lower than the returns on their core businesses.  
  • These CPSEs owe the government ₹25,904 crore as of end-March 2019. These non-core assets must be monetised to repay statutory dues and upstream dividends to GoI. 
  • It is imperative for the GoI to form a PSE and public sector bank holding company (‘Holdco’) along the lines of Singapore’s Temasek Holdings and Malaysia’s Khazanah Nasional Berhad to enable PSEs to monetise their non-core assets at remunerative prices, maximise their enterprise value and focus on their core businesses. 
  • The 15 CPSEs have accumulated ₹93,562 crore financial investments comprising listed and unlisted debt, equity and mutual fund units. These exclude investments in associates and joint ventures. The CPSEs ought to transfer these investments to Holdco, which can manage the portfolio and transfer the returns to the original investors. 
  • The GoI must mandate all PSEs and government departments to transfer their non-core properties to Holdco, which can opportunistically sell these properties and transfer the proceeds to the owners. 

RBI dividends 

  • The Reserve Bank of India (RBI) has allocated ₹1 lakh crore to carry out long-term repo operations in tranches and has reduced the repo rates by 75 basis points to 4.4% to help banks augment their liquidity in the wake of the pandemic.  
  • Recognising the RBI’s liquidity requirements, the GoI must refrain from asking the RBI to pay more dividends that it can viably pay. During the five years ending on June 30, 2019, the RBI paid the GoI 100% of its net disposable income, with its FY2019 dividends more than trebling to ₹1.76 lakh crore from ₹50,000 crore in FY2018.  
  • During the five years ending on June 30, 2019, the RBI paid the GoI 100% of its net disposable income, with its FY2019 dividends more than trebling to ₹1.76 lakh crore from ₹50,000 crore in FY2018.  
  • The Bimal Jalan panel constituted in 2019 to review the RBI’s economic capital framework opined that the RBI may pay interim dividends only under exceptional circumstances and that unrealised gains in the valuation of RBI’s assets ought to be used as risk buffers against market risks and may not be paid as dividends. 

This sound recommendation must be adhered to in letter and spirit. The GoI may finance the COVID-19 rescue package by issuing GDP-linked bonds, tapping PSEs’ excess liquidity and monetising non-core assets. Further, it is in India’s self-interest to allow a robust and independent RBI to defend the financial sector’s stability.

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