9th April – Editorials/Opinions Analyses

Contents:

1. Needed, greater decentralisation of power
2. While taking over MPLADS funds, Centre must allocate judiciously
   A key arsenal in rural India’s pandemic fight
3. Financing the Pandemic rescue package
4. No lockdown for abuse

NEEDED, GREATER DECENTRALISATION OF POWER

Focus: GS-II Governance, GS-III Disaster Management

Why in news?

Over the course of the last few weeks, as we have found ourselves in the throes of a pandemic, one of the striking features of governance has been the signal role played by State Chief Ministers across India.

What did the Governments do?

• 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.
• But, by and large, they have been tailored to the reality faced on the ground by the respective governments.
• 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.
• In doing so, they have acted not merely as “laboratories of democracy”, to paraphrase the former U.S. Supreme Court Justice Louis Brandeis, but also as founts of reasoned authority.

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.

Three Specific Limitations:

1. The inability of States to access funds and thereby structure their own welfare packages.
2. The curbs imposed by a public finance management system that is mired in officialdom.
3. 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.

Division of Powers- Federal Feature

• There are varying accounts of what Indian federalism truly demands. But what is 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.
• But the responsibilities vested with the States are no less important. 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.

Status Quo – Financially

• 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.
• Therefore, while the Centre, for example, was accorded the power to tax all income other than agricultural income and to levy indirect taxes in the form of customs and excise duties, the sole power to tax the sale of goods and the entry of goods into a State was vested in the State governments.
• 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.

Reality of the Status Quo, views on what the current government is doing?

• The Supreme Court said in S.R. Bommai v. Union of India, that states are mere “appendages of the Centre”.
• Time and again, efforts have been made to centralise financial and administrative power, to take away from the States their ability to act independently and freely.
• 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 this has not happened.
• Gains made by the States, as the paper underlines, have been entirely offset by a simultaneous decline in share of grants and by a concomitant increase in the States’ own contribution towards expenditures on centrally sponsored schemes.
• 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.

WHILE TAKING OVER MPLADS FUNDS, CENTRE MUST ALLOCATE JUDICIOUSLY

Focus: GS-III Indian Economy

Why in news?

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.

Why this move 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. However, past experience has been that some members do not utilise their full entitlement and that there is a gap between recommendation made by members and implementation by the administration under this scheme.
• 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.
• Now that the entire scheme has been suspended, the government should ensure that recommendations already made are acted upon immediately.
• While the transfer of these sums to the Consolidated Fund of India would help judicious deployment anywhere in the country, based on an assessment of the varying needs in different regions, it would redound to the government’s credit if the genuine efforts made by members to help their constituents are not frustrated.
• It should also see to it that allocations are non-discriminatory.

Criticism of the MPLADS Scheme

• A conceptual flaw pointed out by experts is that it goes against the separation of powers.
• It allows individual legislators to encroach on the planning and implementation duties of the administration.
• 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.

A KEY ARSENAL IN RURAL INDIA’S PANDEMIC FIGHT

Focus: GS-III Disaster Management

Ground Realities in Villages- COVID-19 Lockdown

• 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.

Success stories of a few States

• Notwithstanding the fact that the entire State machinery is now involved in near wartime efforts to contain the spread of this pandemic, 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.
• In some southern States with pre-embedded conditions of self-governing and nearly autonomous panchayats, they are becoming the beacons of hope by proactively engaging with citizens at the village level.
• 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.

Significance of Gram Panchayats

• 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.
• It is here that gram panchayats which are very well placed, and close to their own people with limited resources, can help them in enforcing isolation and making the necessary arrangements.
• 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.
• With sustained engagement, they have been able to coordinate with the administration to use the resources of panchayats, collaborate with self-help groups and to set isolation conditions within village premises (with beds, sanitisers, drinking water, cooked meals, etc.) in many interior blocks across the districts in central and eastern India.
• 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 police cannot reach out to each and every village round the clock because of their inadequate resources.
• 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.

Conclusion

• A seminal understanding developed is that, without the agency of gram panchayats, it is not possible to deploy any system effectively and to adequately take prompt actions to include the excluded.
• Reinvigorating panchayats is an unattended area which needs a push in strengthening the arsenal available in this fight against COVID-19.
• 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.
• Thrust is needed from top layer of administration — a direction that will help the nation fight this deadly virus.
• 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.

FINANCING THE PANDEMIC RESCUE PACKAGE

Focus: GS-III Indian Economy

The Current Predicament

• 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.
• The Government’s 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.

What can be done with GDP-linked bonds?

• The GoI may issue listed, Indian rupee denominated, 25-year GDP-linked bonds that are callable from, say, the fifth year.
• 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 callable feature from the fifth year till maturity allows the GoI to effect partial repayments during high growth years and when it earns non-recurring revenues such as proceeds from disinvestment of public sector enterprises (PSEs).
• The listing of bonds provides investors an exit option.

Is this really possible?

• 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.

Significance of PSEs

• 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’) to enable PSEs to monetise their non-core assets at remunerative prices, maximise their enterprise value and focus on their core businesses.
• It is essential that businesses maintain liquidity, especially during a downturn. However, the outstanding cash and bank deposits of the 15 CPSEs (₹64,253 crore) is in excess of their operating requirements.
• CPSEs must determine the cash they require to meet, say, six months of operating expenses and use the excess cash to repay statutory dues and upstream dividends to the GoI.
• Banks must extend to CPSEs committed lines of credit that the latter may draw down during exigencies.

• 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.
• 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.

NO LOCKDOWN FOR ABUSE

Focus: GS-II Social Justice

Why in news?

• The National Commission of Women has recorded a more than two-fold rise in domestic violence and sexual assaults and a three-fold increase in cases of police apathy in the first week of lockdown since March 24th 2020.
• 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.
• These reports highlight the need for Indian authorities to take this issue seriously too.

Why is this happening?

• 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.
• The lack of access to friends, family and support organisations is expected to aggravate the situation for abused women further.

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 disparity between the crimes reported in a survey and registered with the police highlights how women are unlikely to seek help.
• 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.
• The NFHS data also highlight how the proportion of women reporting violence is increasing among families with lower wealth.
• The lockdown due to the pandemic is leading to a substantial negative income shock for everyone.
• In our interviews with unorganised sector workers, we often heard that women suffered domestic violence coupled with the husband’s alcoholism.
• The NFHS data also show a high correlation between alcohol intake and domestic violence. Keeping in mind that access to alcohol may be limited in these times, frustration could also lead to abuse.

Way Forward: 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 NCW has appealed to women to reach out to their nearest police stations or call the State Women’s Commission for support.
• While this is the least that can be done, there are some other formal means by which we can extend help to women right now.
• 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.
• Since the lockdown began, the amount of TV viewing, particularly of news, has increased. Coupled with a lack of other activity, this is an opportune time to improve messaging.
• The NCW could increase its advertising expenditure on 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.
• 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.