1. Delhi election results
Relevant for GS Prelims & Mains Paper II; Polity & Governance
Arvind Kejriwal and his Aam Aadmi Party (AAP) were voted back to power with a massive mandate in the Delhi Assembly election as the party won 62 seats in the 70-member House.
Performance of main parties
The AAP secured 53.57 % of the vote share, marginally below its 54.2% in 2015; while the BJP got 38.5% votes and 5 seats; and the Congress 4.3%.
The AAP party dropped just five seats and less than a percentage point in vote share from its stellar 2015 showing.
The Congress, yet again, failed to open its account — the party’s candidates looked set to forfeit their deposits on 63 of the 66 seats contested.
Source: The Hindu
2. Why Maharashtra sugar mills are paying cane fair price in parts
Relevant for GS Prelims & Mains Paper III; Economics
This sugarcane crushing season in Maharashtra, more than half the 136 mills that have entered the season have forged an unusual agreement with farmers. It enables the former to pay the government-declared Fair and Remunerative Price (FRP) for cane purchased in three instalments.
What is FRP and how should it be paid?
Before the start of the crushing season, the Commission of Agriculture Cost and Pricing (CACP) declares the season’s FRP, calculated after taking in consideration the cost of production. FRP is linked to recovery — the amount of sugar produced by crushing 1 tonne cane, expressed as a percentage. The higher the recovery, the higher be the sugar produced, and thus the higher the FRP too. At present , the basic FRP at 10% base recovery is Rs 275 per quintal, with every 0.1% increase in recovery resulting in an increase of Rs 2.75 in the FRP.
The Sugarcane Control Order of 1966 mandates that mills pay the basic FRP within 14 days of purchase, failing which mills are to pay 15% per year interest. Sugar commissioners are empowered to recover pending dues by attaching properties of errant mills. The assured scheme of payment had over the years made cane a preferred crop among growers across the country.
While the law mandates payment within 14 days, the payment schedule has not been rigorously followed. During the 1990s, sugar millers in Maharashtra used to meet at the start of the season and take a call about payment depending upon their finances. The first instalment mostly used to be paid within in 14 days of cane delivery, which was usually around 70-80% of the FRP, and the second instalment was paid in April when the mills ended their crushing operations. Depending on the availability of funds, another payment was made during Diwali ahead of the next crushing season. The total realisation of farmers depended on the finances of the mills which ensured that at least the basic FRP was paid.
Since the start of the farmers’ movement by former MP Raju Shetti, the payment schedule underwent a major change. At the start of the crushing season, the farmers’ union in its Oosh Parishad (Cane Conclave) used to make demands for payment, which often was Rs 100-200 above the FRP. Mills had to accede to the demand to prevent disruption in transportation of cane. The first instalment was always the full FRP, while later instalments covered demands made by the farmers.
How do mills generate capital to pay their growers?
Sugar mills pledge their stock of sugar and avail of working capital from banks to pay their growers as well as to fund their operations. Based on the valuation of sugar (at present Rs 3,100 per quintal), banks issue loans to the tune of 75% of the current valuation.
Why did mills feel the need to get into agreements?
During the 2014-15 season, 20 mills in Maharashtra’s Nanded division had defaulted on payment of basic FRP. Prahlad Ingole, a farmer leader, approached the Aurangabad Bench of the Bombay High Court with demands including payment of 15% interest on late payment of FRP. The court eventually asked the sugar commissioner to start the process of calculation of interest. Shekhar Gaikwad, the then sugar commissioner, started the process in 2019 and appointed government auditors to calculate the interest. The Cooperation Minister, while hearing a similar case relating to mills in Kolhapur and Sangli, however, gave a stay on calculation on interest.
Given the financial implications, mills took the cue from the Sugarcane Control order and started making formal agreements with farmers for part-payment. The order mandates payment of FRP within 14 days of cane delivery if there is no agreement otherwise. This leeway is now being used by the mills to get their farmers to sign agreements that would allow mills to pay 75% of the FRP as the first instalment and the rest in subsequent instalments. Of the 136 mills that have entered the crushing season in Maharashtra, 76 have got into such agreements. The payment clause was put in the cane registration forms that farmers sign and submit to the mills. The trend, started by mills in Marathwada, is now being followed across the state.
What are the ramifications of such an agreement?
It has not gone down well with many farmers’ leaders. They claim the agreement would not stand the test of law as it leaves a farmer without the necessary standing to argue for a fair agreement. In this case, many have said the agreement clause was put in the forms farmers have not read properly, but mills have denied this and said it was only a small section of farmers who were insisting on full payment of FRP. Financial constrains, mills claim, make is impossible for them to pay the full FRP at one go. Until these agreements are challenged in any court of law, mills in Maharashtra will continue to pay their growers as per these agreements.
Source: The Indian Express
3. For AAP 2.0, what is the challenge ahead?
Relevant for GS Prelims & Mains Paper II; Polity & Governance
The Aam Aadmi Party (AAP) routed its closest rival, the BJP, for the second successive time in Delhi’s Assembly elections on Tuesday. Many of AAP’s detractors, especially in the BJP, have repeatedly argued that AAP solely relies on offering fiscally-ruinous “freebies” to the voters and luring them to vote for AAP. Its supporters, on the other hand, argue that AAP’s policy choices — with stress on improving provisioning of public education and public healthcare — present a new model of governance, and point out that under AAP, Delhi has not only grown faster than the India average but also increased its share to the national GDP.
Where does the truth lie? Has the AAP government run its schemes by borrowing money from the market and increasing fiscal deficit? Or has it run one of the most fiscally-prudent governments in India? More importantly, is the AAP model sustainable?
What are the schemes that are referred to as the “freebies”?
The most recent example was the AAP government’s decision to allow free bus rides for women in Delhi. But it was not the first time nor the only scheme that involved the government subsidising a section of the society.
Since 2015, when it came to power with 67 (out of 70) seats, AAP has provided:
* Subsidy for those using less than 400 units of electricity; moreover, there has been no hikes in power prices over 5 years and Delhi now has the lowest electricity tariffs among the metropolitan cities of the country.
* Free water for families that use less than 20,000 litres a month; the number of such families has almost trebled as a result.
* Private schools have had to return the increased fee they charged “arbitrarily”; these schools now also provide 25% seats for students from marginalised backgrounds.
* The government provides a loan of up to Rs 10 lakh to every student so that no student has to leave studies; it has also started a scheme of waiving up to 100 per cent fee for children of extremely poor families.
* The government provides free treatment, medicines and test facilities in nearly 200 mohalla clinics, apart from free surgeries in empanelled hospitals; the government also bears the expenditure for the treatment of road accident and fire burn victims.
* The minimum wage for every worker has been raised from Rs 9,500 to Rs 14,000.
* Similar increases have been seen in the salaries of guest teachers in schools, honorariums of Anganwadi and Asha healthcare workers as well as the pensions of senior citizens, divyangs, and distressed women.
This is not a complete list but the maximum stress of these schemes is towards education and healthcare provisioning by the state government.
How does this affect Delhi expenditures?
Predictably, in Delhi’s budget, the share of expenditure on education and healthcare sectors (as part of the overall expenditure) has zoomed. The line graphs are taken from the Reserve Bank of India’s latest study of state finances. They show how Delhi’s expenditure on education and healthcare shot up when AAP took over. The spike in Delhi is in stark contrast to the attention these sectors received on an average across all other states.
Has this not ruined Delhi’s fiscal health?
Yes, and no. That’s because this can be answered both ways.
The bar graphs detail the two key parameters when judging the fiscal health of any government.
The most commonly used parameter is fiscal balance. The bar graph on fiscal balance contrasts where Delhi stands as against the India average — and it basically maps the level of money (as a percentage of Gross State Domestic Product) that a state government has to borrow from the market in order to fill the gap between its overall expenditures and total revenues. Data show that despite these expenses, the AAP government ran lower fiscal deficits not just when compared to the rest of India’s average but also past Delhi governments. Despite the expected slippage in the current financial year, AAP has the lowest fiscal deficit of any state in the country.
But what is even more striking is its performance on revenue balance, which maps the gap between revenue expenditure and revenue receipts. Typically, maintaining a revenue surplus is very difficult as subsidies and freebies tend to raise the revenue expenditure; states rarely achieve a revenue surplus. But as the graph on revenue balance shows, Delhi continues to have a revenue surplus right through — and makes it charges of fiscal imprudence rather hard to stick, especially when most of the states in the country stay in the negative territory.
Then, what is the reason for worry?
As the revenue and fiscal balance graphs show, Delhi’s revenue surplus is coming down with each passing year and its fiscal deficit is starting to grow significantly. The revenue surplus, for instance, has come down from 1.6% of GSDP to just 0.6% over the AAP’s tenure.
Manish Gupta, Assistant Professor at the National Institute of Public Finance and Policy (NIPFP) said: “If we look at the own tax revenues (OTRs) of Delhi, we find that they have fallen from 5.49% of GSDP in 2015-16 to 4.93% in 2018-19. Despite this fall, its overall revenues have stayed roughly the same because of the GST compensation. But declining OTRs is a worry for sustaining expenditures”.
Apart from this growing weakness in raising its own tax revenues, there was another structural disadvantage of AAP’s policy focus. Capital expenditure — that is investments into making new infrastructure like schools and hospitals — has been falling. “To be sure, capital expenditure had fallen from 1.16% of GSDP in 2011-12 to 0.89% in 2014-15. But, under AAP, it has further fallen to 0.54% in 2018-19,” said Gupta. So while spending more money into improving the functioning of existing schools and hospitals is creditable, not investing adequately towards raising the productive capacity of a growing city like Delhi will create bottlenecks in the medium- to long-term.
Source: The Indian Express
4. Six years on, Lokpal is a non-starter
Relevant for GS Prelims & Mains Paper II; Polity & Governance
The massive public campaign in 2011 demanding an independent anti-corruption ombudsman resulted in the passage of the Lokpal law. The political dividend of the agitation was reaped at the national level by the BJP, which vociferously supported the demand for an effective Lokpal and rode to power in 2014 on the plank of anti-corruption.
More than six years after the Lokpal law received the President’s assent, the institution of the Lokpal is yet to play any significant role in tackling corruption in the country. The manner in which the Lokpal has been emasculated by the current regime closely mirrors the undermining of other institutions of oversight and accountability.
The preambular statement of The Lokpal and Lokayuktas Act, 2013 notes that the law has been enacted to ensure prompt and fair investigation and prosecution in cases of corruption against public servants. The Lokpal was envisioned to be independent. It was accorded a high stature and given extensive powers including the power to inquire, investigate and prosecute acts of corruption.
Delay in appointments
For more than five years, the chairperson and members of the Lokpal were not appointed. The government claimed that since no one could be recognised as the Leader of the Opposition (LoP) after the 2014 general election, the committee responsible for selecting
members of the Lokpal could not be constituted. This malady could have been easily remedied by either recognising the leader of the single largest party in Opposition in the Lok Sabha as the LoP, or by amending the Lokpal law to allow the leader of the largest Opposition party to be a member of the committee in the absence of a recognised LoP (this was done for the selection committee of the CBI Director). However, neither recourse was taken.
The chairperson and members of the Lokpal were appointed only in March 2019 after a contempt petition was filed in the Supreme Court following the failure of the government to comply with the 2017 ruling of the court to initiate the process of making appointments.
A truncated selection committee, without the LoP, was set up. The Prime Minister, Speaker, and the then Chief Justice of India appointed Mukul Rohatgi, who had earlier served as Attorney General of India during the BJP regime, as the eminent jurist on the selection panel. The leader of the largest Opposition party in the Lok Sabha was invited for meetings of the selection committee as a ‘special invitee’, which he declined on grounds that it was mere tokenism.
The four-member selection committee, having a preponderance of representatives of the ruling party with an inherent bias towards recommending candidates favoured by the government, selected the Chair and members of the Lokpal. The manner in which the appointments were made raised doubts about the independence of the Lokpal even before it became operational.
Despite the fracas over appointments, many had hoped that once constituted, the Lokpal would nevertheless be a significant oversight body to check corruption and the arbitrary use of power by the government. More than 10 months later, however, evidence suggests that the Lokpal is a non-starter. Till date, the government has not made rules prescribing the form for filing complaints to the Lokpal. The Central government has also failed to formulate rules regarding asset disclosure by public servants.
In order to ensure independent and credible action on allegations of corruption, the Lokpal was empowered under the law to set up its own inquiry wing headed by a Director of Inquiry and its own prosecution wing headed by a Director of Prosecution. However, information accessed under the Right to Information Act has confirmed that the inquiry and prosecution wings of the anti-corruption ombudsman are yet to be set up. The Lokpal has also not appointed the Director of Inquiry or Prosecution. Further, regulations which the Lokpal was obligated to make under the law are yet to be made, including those specifying the manner and procedure of conducting preliminary inquiry and investigation.
The website of the Lokpal states that it scrutinised 1,065 complaints received till September 30, 2019 and disposed of 1,000. Since necessary procedures to operationalise the law are yet to be put in place, the legal veracity of the decisions of the Lokpal could potentially be challenged in a court of law.
Failure to meet expectations
Without the requisite rules, regulations and machinery in place, it is not surprising that the Lokpal has failed to meet expectations. In recent times, the only reason for the Lokpal being in the news has been the resignation of its judicial member, Justice Dilip B. Bhosale, for undisclosed reasons.
The failure to operationalise the Lokpal in an effective manner lays bare the lack of political will of the BJP government. It took nearly half a century for the Lokpal law to be enacted from the time the need for the oversight institution was first articulated. It is anybody’s guess how much longer it will take before India has an effective, independent and empowered Lokpal.
Anjali Bhardwaj and Amrita Johri are transparency and anti-corruption activists associated with the National Campaign for Peoples’ Right to Information.
Source: The Indian Express
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