Mna Jan Orient Ias1

2016
Monthly News
Analysis
January
Civil Services examination is going through a transition period. Its
not just the syllabus that has been changed but also the skills and
abilities tested in the exam that have undergone a change. It is no
longer a recognition based test but one, which requires a basic clarity
of concepts and understanding on the part of students. This
publication is a humble effort to bring diverse and informed
perspectives on some of the seminal issues which emerge from the
immediate context of public discourse, flux of events and
developments, and wanderings in the unending realms of ideas.
By
ORIENT IAS
57, 3RD FLOOR, ORN, DELHI-60
9643772112; 9810949873
2
Monthly News Analysis

Call 9643772112; 9810949873 or visit www.orientias.com for queries and feedback
INDEX
1. ARUNACHAL PRADESH CRISIS
2. REFORMS IN BCCI
3. THE BASICS OF FREE SPEECH
4. START-UP INDIA MOVEMENT FROM JOB SEEKERS TO JOB CREATORS
5. POST-NAIROBI: WTO - DOHA DEVELOPMENT AGENDA
6. POWER REFORMS TOWARDS ENERGY SECURITY FOR ALL 24X7
7. KELKAR COMMITTEE ON REVISITING AND REVITALIZING THE PPP MODEL OF INFRASTRUCTURE DEVELOPMENT
8. HYBRID ANNUITY MODEL
9. MASTERING THE FOURTH INDUSTRIAL REVOLUTION
10. INSOLVENCY AND BANKRUPTCY C ODE
11. GLOBAL HDR 2015 & CONCERN F OR INEQUALITY
12. FINANCIAL INCLUSION
13. PATHANKOT ATTACKS AND RELATED ISSUES
14. REVIVING NATGRID
15. NATIONAL BIOTECHNOLOGY DEVELOPMENT STRATEGY 2015 - 2020
1. ARUNACHAL PRADESH CRISIS

Expected questions:
1. In the background of Arunachal Pradesh Crisis, many experts argue that Governor has misused his
powers. Do you agree that this is the case of Governors Overreach? Also, discuss the constitutional role
of the Governor.
2. Anti-Defection Law is doing more harm than good. In the light of this statement, critically analyze
the role played by this law in sustaining democracy. Suggest some measures to improve the functioning
of this law.
3. Dr. B R Ambedkar believed that the constitutional provision of the imposition of Presidents Rule
would remain a dead letter but reality is different. Critically analyze the need of Presidents Rule. What
safeguards can be inserted in the Constitution to prevent the arbitrary imposition of Presidents Rule?
BACKGROUND

The Governor without consulting the council of ministers had summoned the assembly on December
16, instead of the scheduled date of January 14, 2016. He overstepped his powers by instructing the
assembly to first take up a resolution to remove the Speaker, with the Deputy Speaker (a rebel)
presiding, though notice for removal was pending. He violated the Valluri judgment which states that
as long as a democratically elected government exists, the Governor can only act on its advice.
In the face of public protests, the rebels were not able to enter the assembly hall. They then held a
meeting in a private hall where they impeached the Speaker and removed the Chief Minister through
no-confidence motion. Never before has India witnessed such a rump assembly. Meanwhile, a
number of Congress MLAs were disqualified by the Speaker on grounds of defection.
The Speaker appealed to the Guwahati high court which stayed the Governors actions. Another judge
vacated that stay. The case is now before a Supreme Court constitutional bench which has to decide on
the appropriate powers of the Speaker and Governor.
The present situation is that Presidents Rule is imposed in the state.
ISSUES WHICH CAME INTO LIGHT
The Anti-Defection provision is the foundation of these allegations in more than one cases
something that should prompt us to drastically review the provision itself. Ever since it came into being,
the anti-defection provision has done more harm than good to the cause of democracy. It could well be
disbanded altogether.
It is also being alleged that the Governor recommended Presidents rule without consulting the State
Cabinet at a time when several cases on the matter were in the Supreme Court.
There was no justification for the Governor to advance the session to December 16 on his own, and a
legitimate question arises whether the Constitution permits such action. In another partisan act, he
sent a message to the House to take up Resolution for removal of the Speaker as the first item on the
agenda.
HOW GOVERNOR DEFENDS HIMSELF?

The Governor defends himself by saying that he has power to summon the House under Article 174 (Clause
1) of the Constitution and he has the power to summon the House as and when he deems fit.
Even if the Supreme Court rules in favour of the interpretation that this session was not valid, there will be
a constitutional breakdown because the requirement of Article 174(1) would have been breached. On the
other hand, if the court holds that the December 16 session was valid, it is clear the government is in a
minority and is not allowing a vote of confidence. Therefore, in either case, the State is heading for a
constitutional crisis.
OBSERVATIONS MADE BY T HE GAUHATI HIGH COURT
The Gauhati High Court has suspended the governors directive until February 1. The court has
observed that the governor, as the constitutional head of the state, is bound to act on the advice of the
council of ministers.
The high court has come down heavily on Arunachal Pradesh governor JP Rajkhowa saying his action of
preponing the Assembly session on the demand of opposition MLAs taints the decision and renders it
unworthy of the states constitutional head.
The court has also observed that the power of the Governor to send message to the House was with
respect to a pending bill in the House and this power under Article 175(2) cannot be utilized to send
message on a pending resolution for removal of the Speaker and hence this appears to be an act of
exceeding the jurisdiction.
ISSUE 1: ROLE OF GOVERNOR

CONSTITUTIONAL PROVISIONS
Article 163 - Council of Ministers to aid and advise Governor.

Article 175 - It does empower the Governor to address and send messages to the House or Houses (in
states with a Legislative Council). The Governor can send messages whether with respect to a Bill then
pending in the Legislature or otherwise, and the House shall with all convenient dispatch consider
any matter required by the message to be taken into consideration
Article 356 - Provisions in case of failure of constitutional machinery in States.
SUPREME COURTS O BSERVATIONS IN SUCH CASES
Article 175 does empower the Governor to address and send messages to the House or Houses (in
states with a Legislative Council). However, as held by the Supreme Court in many cases, the power of
the Governor is not absolute. He is bound to act on the advice of the state cabinet.
In Union of India vs Valluri Basavaiah Chaudhary (1979), a Constitution bench held that the governor is
a constitutional head of the state executive, and has, therefore to act on the advice of the council of
ministers. The governor has the power to summon, prorogue and dissolve the assembly under Article
174, but here again; the apex court has said that he is bound by the advice of the council of ministers.
The right of the Governor to send messages under Article 175(2), with respect to a Bill then pending in
the legislature or otherwise, normally arises when the Governor withholds his assent to a Bill under
Article 200, or when the President, for whose consideration a Bill is reserved for assent, returns the Bill.
As already stated, a Bill is something quite different from a resolution of the House and, therefore,
there is no question of the Governor sending any message under Article 175(2) with regard to a
resolution pending before the House or Houses of the Legislature.
RECOMMENDATION OF SARKARIA C OMMISSION

Coming to the recommendations of the Sarkaria Commission in regard to the institution of Governor, they
are briefly the following:The person to be appointed as a Governor
1.
2.
3.
4.
should be an eminent person;

must be a person from outside the State;
must not have participated in active politics at least for some time before his appointment;
he should be a detached person and not too intimately connected with the local politics of the
State;
5. he should be appointed in consultation with the Chief Minister of the State, Vice-President of India
and the Speaker of the Lok Sabha;
6. His tenure of office must be guaranteed and should not be disturbed except for extremely
compelling reasons and if any action is to be taken against him he must be given a reasonable
opportunity for showing cause against the grounds on which he is sought to be removed.

7. After demitting his office, the person appointed as Governor should not be eligible for any other
appointment or office of profit under the Union or a State Government except for a second term
as Governor or election as Vice-President or President of India, as the case may be.
The other recommendations are that the issue of majority support should be allowed/directed to be tested
only on the floor of the House and nowhere else and that in the matter of summoning and proroguing the
Legislative Assembly, he must normally go by the advice of Council of Ministers but where a no confidence
motion is moved and the Chief Minister advises proroguing the Assembly, he should not accept it
straightaway and advise him to face the House.
The Report also recommended certain measures in the matter of dissolution of the Assembly. The Report
recommended that while sending ad hoc or fortnightly reports to the President, the Governor should
normally take his Chief Minister into confidence, unless there are overriding reasons to the contrary.
The discretionary power of the Governor as provided in Article 163, it was recommended, should be left
untouched.
Generally, it will be reasonable to allow the Chief Minister a period of 30 days for the summoning of the
Assembly unless there is very urgent business to be transacted like passing the Budget, in which case, a
shorter period may be allowed. In special circumstances, the period may go up to 60 days.
ISSUE 2: NEED OF ANTI-DEFECTION LAW??

The Tenth Schedule popularly known as the Anti-Defection Act was included in the Constitution in
1985 through the 52nd Amendment act. It sets the provisions for disqualification of elected members on
the grounds of defection to another political party
Does the law, while deterring defections, also lead to suppression of healthy intra-party debate and
dissent?
Does it restrict representatives from voicing the concerns of their voters in opposition to the official
party position?
Should the decision on defections be judged by the Speaker who is usually a member of the ruling
party or coalition, or should it be decided by an external neutral body such as the Election Commission?
BACKGROUND
Immediately following Independence, there was a period of stability in the Centre and the States that were
mostly ruled by Congress Party. However, soon the euphoria of Indias independence and the spirit of
patriotism fuelled by the freedom struggle were over.

The period of unprincipled defection and opportunism began to unfold in Indian politics, leading to
repeated floor crossings and toppling of Governments, which served as stark reminders to the prophetic
words of Winston Churchill about Indian politicians.
Historians and writers often refer to this period of repeated and endless floor crossings as the "Aaya Ram,
Gaya Ram" of Indian politics.
Therefore, to enforce discipline and stability in Indian political landscape, the anti-defection law was
passed by parliament in 1985. The 52nd amendment to the Constitution added the Tenth Schedule which
laid down the process by which legislators may be disqualified on grounds of defection. It was later
amended through The Constitution (91st Amendment) Act, 2003, which restricted the size of Council of
Ministers to 15% of total strength of house. Under the provisions of anti-defection law, splits and mergers
can be recognized only if the splitter group enjoys the support of at least two-third of the legislators of that
party.
SUBJECT
Disqualification
Powers
disqualify
to
PROVISION IN THE TENTH SCHEDULE

If a member of a house belonging to a political party:
Voluntarily gives up the membership of his political party, or
Votes, or does not vote in the legislature, contrary to the directions of his political
party. However, if the member has taken prior permission, or is condoned by the
party within 15 days from such voting or abstention, the member shall not be
disqualified.
If an independent candidate joins a political party after the election.
If a nominated member joins a party six months after he becomes a member of the
legislature.
The Chairman or the Speaker of the House takes the decision to disqualify a member.
b. If a complaint is received with respect to the defection of the Chairman or
Exception
Speaker, a member of the House elected by that House shall take the decision.
Merger
A person shall not be disqualified if his original political party merges with another,
and:
He and other members of the old political party become members of the new
political party, or
He and other members do not accept the merger and opt to function as a
separate group.
This exception shall operate only if not less than two-thirds of the members of party
in the House have agreed to the merger
MERITS OF THIS LAW
Provides stability to the government by preventing shifts of party allegiance.

Ensures that candidates elected with party support and on the basis of party manifestoes remain loyal
to the party policies. Also promotes party discipline.
DEMERITS
By preventing parliamentarians from changing parties, it reduces the accountability of the government
to the Parliament and the people.
Interferes with the members freedom of speech and expression by curbing dissent against party
policies.
All proceedings in relation to any question on disqualification of a member of a House under this
Schedule are deemed to be proceedings in Parliament or in the Legislature of a state.
CHALLENGES AND INTERPRETATIONS

The anti-defection law raises a number of questions, several of which have been addressed by the courts
and the presiding officers.
Does the law impinge on the right of free speech of the legislators?
This issue was addressed by the five-judge Constitution Bench of the Supreme Court in 1992 (Kihoto
Hollohan vs Zachilhu and others). The court said that the anti-defection law seeks to recognize the
practical need to place the proprieties of political and personal conduct above certain theoretical
assumptions. It held that the law does not violate any rights or freedoms, or the basic structure of
parliamentary democracy.
What constitutes voluntarily resigning from a party?
Various judgments and orders indicate that a member who publicly opposes the party or states his support
for another party would be deemed to have resigned from his party. News reports may be used as
evidence for this purpose.
Can the decision of the presiding officer be challenged in the courts?
The law states that the decision is final and not subject to judicial review. The Supreme Court in
S.R.Bommai Vs Union of India struck down part of this condition. It held that there may not be any judicial

intervention until the presiding officer gives his order. However, the final decision is subject to appeal in
the High Courts and Supreme Court.
The Tenth Schedule has laid down certain norms for keeping the flock of legislators of each party together,
and the whips in the hands of legislative party leaders reducing the honble leaders and peoples
representatives into shepherds and sheep.
As the political parties invented mechanisms to fail this constitutional legislation, the judiciary played a
very significant role in upholding the legality and morality of the law besides expanding its horizons to curb
most treacherous practice of sudden political disloyalty.
The political parties, instead of maintaining standards within the party with effective leadership, are
resorting to litigation, begging the courts to decide the political issues, which they failed to settle. It is not
fair to blame judiciary for taking time to decide this tricky question within the frame work of constitution.
Neither the Governor nor the Speaker is bona fide. Their moves are not fair.
RECOMMENDATIONS OF VARIOUS BODIES ON ANTI-DEFECTION LAW
CONCLUSION:
Anti-defection law when it was passed, it aimed at bringing down the political defection but due to ever
increasing political dishonesty and corruption this law never evolved properly and now a question arose
that whether achieving the goals of this law a reality or a myth? Politicians found loopholes in this law
and used it for their own benefit. It is high time that a watchdog should be provided to our Parliament and
there is a need for our constitutional pundits to revisit the issue to combat the menace of corruption and
defection which has eroded the values of democracy.
ISSUE 3: PRESIDENTS RULE: IS IT A DEAD LETTER AFTER BOMMAIS CASE?
The Union Cabinet has recommended imposition of Presidents rule on the Congress-ruled Arunachal
Pradesh after it felt the State was heading for a constitutional breakdown. Now, the President will issue a
proclamation in this regard under Article 356(1) of the Constitution.
WHY PRESIDENTS RULE?
The Centre based its decision on Article 174 of the Constitution, according to which six months shall not
intervene between the last sitting of the Assembly in one session and the date appointed for its first sitting
in the next session. According to one interpretation, the next session should therefore have taken place at
the latest by January 21, 2016.
The Centre has also considered the fact that the Speaker, using the State machinery, prevented the
session, though it was called by the Governor. The Union government also felt that there was flouting
of Article 167(b) of the Constitution as the government was not responding to the Governors letters on
issues of public importance.
ABOUT PRESIDENT S RULE:
Whats in the constitution?
The article 356 of the constitution which focuses on the failure of the Constitutional machinery of
the State is often termed as the Presidents rule. There are various reasons for which Presidents
rule can be imposed on a State. The failure of the State government to function as per the
constitution is the first step towards this.
Other factors include the loss of majority; break down of law and order, indecisive outcome of
elections, no alternate claimant to form the government, insurgency, defections and break-up of
coalition.
It can be imposed initially for a period of six months.
What happens to the legislative assembly?
When Presidents rule is imposed, the assembly is either dissolved or kept in suspended animation.
DISCUSSIONS IN THE CONSTITUENT ASSEMBLY

The Constitution-framers conceived these provisions as more than a mere grant of overriding powers to
the Union over the States. They regarded them as a bulwark of the Constitution, an ultimate assurance of
maintaining or restoring representative government in States responsible to the people. They expected
that these extraordinary provisions would be called into operation rarely, in extreme cases, as a last resort
when all alternative correctives fail.
LANDMARK JUDGMENT:
There was widespread belief that imposition of Presidents rule was more to do with the priorities of the
Central government than the constitutional crisis. The judgment of the Supreme Court in 1994 gave a clear
definition as to when the Presidents rule can be imposed on a state thereby paving the way for the state
governments to challenge the Centre if it feels that it has been unduly removed.
S. R. Bommai v. Union of India: a landmark judgment of the Supreme Court of India, where the Court
discussed at length provisions of Article 356 of the Constitution of India and related issues.
The Supreme Court held that a state government could be dismissed only under justifying
circumstances and laid down guidelines for the same.
This judgment is called the Bommai judgement after the former Karnataka Chief Minister S R Bommai
whose government was dismissed by the Centre and the Presidents rule was imposed.
While dealing with the question as to whether the Presidential Proclamation under Article 356 was
justiciable all the judges were unanimous in holding that the presidential proclamation was justiciable.
The Supreme Court held that the proclamation under Article 356(1) is not immune from judicial review.
The Supreme Court or the High court can strike down the proclamation if it is found to be malafide or
based on wholly irrelevant or extraneous grounds
The second question which was taken into consideration by the court was that whether
the President has unfettered powers to issue Proclamation under Article 356(1) of the Constitution.
The Supreme Court in this regard held that the power conferred by Article 356 upon the President is a
conditioned power. It is not an absolute power.
Invalidation of Proclamation: The Supreme Court also held that the power of the court to restore the
government to office in case it finds the proclamation to be unconstitutional, it is, in Courts opinion,
beyond question. Even in case the proclamation is approved by the Parliament it would be open to the
court to restore the State government to its office in case it strikes down the proclamation as
unconstitutional.
Moreover, the Supreme Court firmly held that there was no reason to make a distinction between the
Proclamation so approved and legislation enacted by the Parliament. If the Proclamation is invalid, it does
not stand validated merely because it is approved of by the Parliament.
RECOMMENDATION OF SARKARIA C OMMISSION
It pointed out in the first instance that the use of article 356 has been rising with the passage of
time. Whereas between 1950 and 1954, it was invoked only on 03 occasions, it was invoked on 09
occasions between 1965 and 1969; it rose to 21 instances during the period 1975-1979 and to 18
during the period 1980-1987.
Article 356 should be used very sparingly, in extreme cases, as a measure of last resort, when all
available alternatives fail to prevent or rectify a breakdown of constitutional machinery in the State.
All attempts should be made to resolve the crisis at the State level before taking recourse to the
provisions of article 356.
A warning should be issued to the errant State, in specific terms, that it is not carrying on the
government of the State in accordance with the Constitution. Before taking action under article
356, any explanation received from the State should be taken into account. However, this may not
be possible in a situation when not taking immediate action would lead to disastrous consequences
In a situation of political breakdown, the Governor should explore all possibilities of having a
government enjoying majority support in the Assembly. During the interim period i.e till fresh
elections take place, the caretaker government should be allowed to function. As a matter of
convention, the caretaker government should merely carry on the day-to-day government and
desist from taking any major policy decision.
Normally, the President is moved to action under article 356 on the report of the Governor. The
report of the Governor is placed before each House of Parliament. Such a report should be a
"speaking document" containing a precise and clear statement of all material facts and grounds on
10

the basis of which the President may satisfy himself as to the existence or otherwise of the
situation contemplated in article 356.
CONCLUSION
In any event, we feel that the stage has not yet arrived in our constitutional development, where we can
recommend the deletion of Art. 356. What is required is its proper use and that has to be ensured by
appropriate amendments to the article.
2. REFORMS IN BCCI
Expected questions:
1. Lodha committee reforms, if implemented, will bring a paradigm shift in the functioning of the Board
of Control for Cricket in India (BCCI) that would dismantle the existing ecosystem of the Indian cricket
board. Comment.
2. BCCI is characterized by a feudal set up built on secrecy. Which recommendations of Lodha
committee, in your opinion, could materialize the decentralization and egalitarianism in the governance
of BCCI and Why?
3. The reforms recommended by Lodha committee will put former players in a better position in the
current system which favours administrators and leaves little room for former players to contest
elections in the apex governing body. Critically analyze.
The Board of Control for Cricket in India (BCCI) is the national governing body for cricket in India. The board
was formed as a society, registered under the Tamil Nadu Societies Registration Act. It is a consortium of
state cricket associations and the state associations select their representatives who in turn elect the BCCI
officials.
WHY LODHA COMMITTEE WAS APPOINTED ?
BCCI has been alleged of facing problems on numerous fronts - financial wrongdoings, an elaborate system
of proxy voting, conflict of interests, its labyrinthine structure etc. Despite reforms taken by BCCI in some
areas recently, judiciary felt more needs to be done. It wanted a complete overhaul. Therefore, Supreme
Court appointed a committee last year (2015) to recommend reforms in Cricket under the chairmanship of
Justice (retd.) R.M. Lodha. Its main mandate was to safeguard the purity of the game.
The reason the judges had to enter the cricket field was that the BCCI had failed to convincingly deal with
the 2013 IPL spot-fixing scandal. For so long, the BCCI has worked behind an iron curtain. The judges felt
that all the stakeholders of the game had the right to know the activities of the BCCI and proposed the
legislature to seriously consider bringing BCCI within the purview of the RTI Act.
LODHA C OMMITTEE REPORT
The Lodha committee, in January 2015, recommended a complete overhaul of Indian cricket, from the very
top down to the grassroots level. Its report covered every aspect of the game with special focus on the
BCCI's administrative and governance structures and the issue of transparency.
Major recommendations & why they are difficult to implement
11

No minister or government servant can be a BCCI office-bearer
Pros - Even if the political class as a whole is not barred, it will at least prevent influential politicians in
government eyeing the spoils of office in cricket administration.
Against - Some BCCI officials argue that without political and bureaucratic help, cricket bodies cannot run
smoothly. Since organizing a cricket game needs several governmental clearances and is a mammoth
effort, an influential figure at the top helps. In India, a phone call can open doors and avoid last-minute
snags. Cricketers do not always make the best administrators and not all politicians are bad for sports.
No one above 70 should assume office in the BCCI as Unsound mind is a hindrance to good
governance and the able and enthusiastic should govern the game.
Favour: The proposal, if implemented, will mark the end of heavyweights such as Sharad Pawar, N
Srinivasan, Farooq Abdullah, Niranjan Shah in cricket administration.
Against: administrators feel the BCCI shouldnt be singled out. No other sports body in the country has
such a clause enforced on it.
Do away with zonal rotation for the BCCI president ship
Favour: It will not prevent the best and most competent person from being selected.
Against: In a vast country like India, its imperative that every zone gets a fair share of opportunity.
12
No BCCI official should be allowed to hold on to any seat for more than nine years, which means, it
cannot hold office for more than three terms, with a cooling-off period between terms after each
term.
Favour: It ensures the posts are not treated as permanent positions of power.
Against: BCCI would never have had administrative greats such as N K P Salve, and even Jagmohan
Dalmiya, if such a cap was in place.
A person cannot simultaneously be an office-bearer of the BCCI and also a state association.
Favour: It ensures decentralisation of power.

Against: implementing this would seriously compromise the governance of Indian cricket. BCCI members
and office-bearers are nominated by their respective state associations and the two must be concurrent.
BCCI members and those in state associations are unanimously against it.
Each state association gets only one vote - if a state (like Maharashtra or Gujarat) has three
associations, one of them will have full voting rights, while the other two will be relegated to
associate members. The committee has proposed that states will be restricted to just one member,
though they can continue to field different teams as in the past.
Favour: It ensures all states are represented on the board and to stop over-representation by some
states. What ultimately matters is that cricket should not suffer because of whimsical individuals holding
on to key posts in the administration. This policy will see the excluded and disenfranchised states have a
say in the running of the BCCI.
Against: The BCCIs argument against limiting one vote to each state is that all these associations have
contributed to the organic growth of the BCCI. It could also take away from the history of the sport centres
like Saurashtra and Baroda, where cricket was an important sport, even before the countrys
Independence. Mizoram having the same vote as Mumbai, winner of the national title 44 times, might
sound illogical
No geographical base, No Votes - Services, Railways and All India Universities three national
service groups have been treated as Full Members with voting rights thus far. They have no
geographical base for representation as they dont represent any territories and their relatively
small statures have allowed them to be used as pawns in the voting game. The panel has
recommended that Services, Railways can continue to field Ranji teams but cannot be deemed as
Full Members and cannot have voting rights.
A three-member committee comprising former Test cricketers should do the selection for domestic
and international matches.
Against: The BCCI feels that in a large country like India, zonal representation in the selection committee is
required to cover all bases. Test cricketers do not always make the best selectors.
Legalizing betting in cricke:t an in-built mechanism to ensure that players and administrators
dont bet on matches.
Favour: Many will welcome such legalization as that will bring in an element of regulation and monitoring.
Also black money involved in the betting will be reduced
13
Against: Its implementation, however, will hinge on suitable local legislation across the country. The BCCI
will have to ensure strict adherence to the condition that players, managers, officials or anyone associated
with cricket are not allowed to participate in betting. Legalising betting may not wipe out match-fixing. If
betting is legalised, Ladbrokes, a British company through which people across the world place bets on EPL
matches, Ashes and Fifa World Cup, could enter India.
BCCI be brought under the ambit of the Right to Information Act.
Favour: the Supreme Court held last year to be a body discharging a public function
Against: It will both require legislative change and a balancing rule that unnecessary queries are not
directed towards decisions made by captains and selectors of the national and domestic teams.
The state associations should mirror the structure of the national body
Favour: the report has simplified the administration.

Against: bigger problems lie in the hinterland. The constitutions of the BCCIs various affiliated units differ,
and in some cases arent available for public scrutiny despite the board making it mandatory.
Formation of a players association - players association is something the BCCI has traditionally not
been a fan of. And that is unlikely to change.
De-link the BCCI from the IPL. - Separate governing bodies for the BCCI and the IPL
Appointing a full-time CEO who will be assisted by six professionals,
registration of players agents
IS THE REPORT BINDING ON BCCI?

The Supreme Court has unequivocally held that the orders by the Committee shall be final and binding if
it decides to impose punishment on any person in the 2013 IPL spot fixing and betting case. Therefore, the
Committees order shall be binding if the panel holds IPL COO Sunder Raman guilty of any irregularity.
However, recommendations relating to reforms in the BCCI are not per se binding and the Board may opt
not to accept some or all of them.
The matter has been taken to the apex court by the Cricket Association of Bihar (CAB). Hence, if the BCCI
rejects some recommendations of the Lodha Committee, CAB will certainly raise its contentions before the
bench and the issue will become subject to the orders of the court once again.
Therefore, in all likelihood, the final word on the recommendations will be of the Supreme Court in various
permutations and combinations.
CONCLUSION
The BCCIs reluctance comes as no surprise. The recommendations, if adopted, would make the game
more important than the officials. A feudal set-up built on secrecy and favours will be forced to replace its
primitive style with the modern and professional. A reluctance to adapt such avenues would raise grave
doubts about the actual intentions of the administration. Frankly, the only excuses the governing body
might have for resisting would be ego, the greed for concentrated power, reduced chances of getting
hands in the till, the fear of transparency and accountability, and the life-long ambition to remain life-long
administrators.
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3. THE BASICS OF FREE SPEECH

Expected questions:
1. Contempt of Court has its traces in the monarchy system of England which might not be suitable for a
democratic country like India. Critically analyze the need for law on Contempt of Court. Does it possible
to reconcile the Free Speech and the law on Contempt of Court?
2. Sections 499-500 of the IPC related to criminal defamation are vestiges from Indias colonial past that
are not appropriate for a modern democracy. Analyze. Do you think criminal defamation has a
pernicious effect on society? Justify your view.
3. Laws of defamation and contempt must be seen as lingering anachronisms. Do you believe that such
laws need to be repealed from the Statute Book in the modern era of Free Speech and Expression?
Critically Analyze.
CONSTITUTIONAL PROVISIONS
Article 19(1)(a) of the Constitution of India guarantees all Indian citizens the right to freedom of speech
and expression. Article 19(2) allows the state to make laws which impose reasonable restrictions on this
right in the interests of the sovereignty and integrity of India, the security of the state, friendly relations
with foreign states, public order, decency or morality or in relation to contempt of court, defamation or
incitement to an offence. Of these, only defamation protects the private interest in protecting an
individuals reputation. All the other interests are essentially public interests. The test in determining the
constitutionality of a law under Article 19(2) is whether the law is a reasonable restriction on free
speech.
In order to be reasonable, the Supreme Court has laid down that a restriction must be narrowly tailored
or narrowly interpreted so as to abridge or restrict only what is absolutely necessary. Reasonable
restriction means that the limitation imposed on a person in enjoyment of the right should not be
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arbitrary or of an excessive nature beyond what is required in the interests of the public. In other words,
the restriction must be narrow and restrict only what is necessary and should not be arbitrary or excessive.
If the restriction is too broad, it will have a chilling effect on speech which will make it unconstitutional.
ISSUE 1: CONTEMPT OF COURT: NEED FOR A SECOND LOOK?
BACKGROUND
A judgment delivered by Justice A.B. Chaudhari, sitting on the Nagpur Bench of the Bombay High Court,
issued notice to the Booker Prize-winning writer Arundhati Roy for committing what he believed
constituted a clear case of criminal contempt of court. The decision was rendered on an application for bail
by the Delhi University professor, G.N. Saibaba. Not only did the court reject Dr. Saibabas plea, in spite of
his substantial disabilities, it also hauled Ms. Roy up for writing in support of the professor, and in criticism
of the Indian state, including the countrys judiciary.
In initiating contempt proceedings, Justice Chaudharis judgment has exemplified the state of the right to
free speech in India - a liberty fractured by colonial vestiges such as the law on contempt, which we have
embarrassingly embraced as a supposed necessity to uphold the majesty of our courts.
WHAT IS CONTEMPT OF COURT??
According to the Contempt of Courts Act, 1971 there are two common forms of contempt:
1. Civil contempt will include, among other things, a willful disobedience of a courts judgment, order or
direction.
2. Criminal contempt will include publications that do one or more of the following:
Scandalize or lower the authority of any court;
Prejudice or interfere with the due course of any judicial proceeding; or
Interfere with or obstruct the administration of justice in any other manner.
DISCUSSIONS IN THE CONSTITUENT ASSEMBLY
During the course of drafting the Constitution, there was a marked uncertainty among the framers about
the understanding of contempt they were inserting into the Constitution. When T.T. Krishnamachari
suggested the inclusion of contempt of court as one of the permissible limitations to free speech, many
members of the constituent assembly opposed his suggestion right away.
One of these challengers, Pandit Thakur Das Bhargava, believed that contempt of court was simply not
germane to a discussion on freedom of speech and expression. He argued that powers to reprimand
contempt concerned only actions such as the disobedience of an order or direction of a court, which were
already punishable infractions. Speech in criticism of the courts, he argued, ought not to be considered as
contumacious, for it would simply open up the possibility of gross judicial abuse of such powers. His core
argument was that the guarantee of free speech in a democracy ought to serve as a value unto itself.
SUPREME COURT VERDICT IN 1996
In a 1996 decision in which the Supreme Court ruled that all acts which bring the court into disrepute or
disrespect or which offend its dignity or its majesty or challenge its authority amount to punishable
contempt.
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The ultimate consequence of this ruling is typical of Indian free speech jurisprudence: A complete eschewal
by the courts of any regard for individual choice and liberty, coupled with a belief that some forms of
speech are to be muzzled purely by virtue of their content as opposed to any actual anti-democratic harm
stemming through their expression.
AMENDED CONTEMPT OF COURTS ACT
Parliament amended the Contempt of Courts Act of 1971 in 2006, with a view to reducing the breadth of
the judiciarys powers. The law now provides two additional safeguards in favour of a dissenter:
One, it establishes that a sentence for contempt of court can be imposed only when the court is
satisfied that the contempt is of such a nature that it substantially interferes, or tends to substantially
interfere with the due course of justice.
Two, the truth in speech now constitutes a valid defence against proceedings of contempt, if the court
is satisfied that the larger public interest is served through the publication of such content.
In spite of these amendments, courts have continued to routinely equate the supposed scandalizing of the
judiciarys authority to an act of contempt.
The basic principle in a democracy is that the people are supreme. It follows that all authorities whether
judges, legislators, Ministers, bureaucrats are servants of the people. Once this concept of popular
sovereignty is kept firmly in mind, it becomes obvious that the people of India are the masters and all
authorities (including the courts) are their servants. Surely, the master has the right to criticize the servant
if the servant does not act or behave properly. It would logically follow that in a democracy the people
have the right to criticise judges. Why then should there be a Contempt of Courts Act, which to some
extent prevents people from criticising judges or doing other things that are regarded as contempt of
court?
ARGUMENTS FOR THE LAW ON CONTEMPT OF COURT
Article 19(1)(a) no doubt grants to the countrys citizens a right to freedom of speech and expression. But
the ensuing clause, Article 19(2), limits this freedom, and accords the state the express authority to make
laws that establish reasonable restrictions on speech, on various grounds, including contempt of court.
Articles 129 and 215 of the Constitution explicitly give the power to the Supreme Court and High Courts to
punish for contempt of itself. Thus, the power cannot be abrogated or stultified.
In Pallow Sheth vs. Custodian Case 2001, Supreme Court ruled that any provision of the law which stultifies
or abrogates that power under Articles 129 and/or 125, there can be little doubt that such law would not
be regarded as having been validly enacted.
The courts power to punish acts that tantamount to disobedience of its orders, or indeed a courts
inherent authority to ensure that its hearings are conducted in a fair and undisturbed manner, is required
to ensure that we subscribe to a basic rule of law.
Such laws ensures in safeguarding the judiciarys reputation, dignity and most importantly enable the
courts to function.
CRITICISMS AGAINST THE LAW ON CONTEMPT OF COURT
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Indias courts have routinely invoked the long arm of its contempt powers to often punish expressions of
dissent on purported grounds of such speech undermining or scandalising the judiciarys authority. But,
while doing so, the court has rarely conducted a strict analysis on whether those acts posed any actual
threat to or interfered in any direct manner with the administration of justice.
Judges are expected to be uninfluenced by occasional criticism relating to their judicial orders, especially
by journalists and writers who are not parties before them.
In times when both mainstream and social media are full of observers, critics, commentators and
detractors, courts ought not to be unduly sensitive to outspoken critics, subject of course to the rule that
the criticism is fair and does not attribute motives to judges or malice to judicial functioning.
Courts dignity is better served if it takes routine criticism in its stride and moves only against vicious and
tendentious remarks or actions that bring the judiciary into disrepute or ridicule.
The offence of scandalising the court is a mercurial jurisdiction in which there are no rules and no
constraints that creates uncertainty.
In a democracy there is no need for judges to vindicate their authority or display majesty or pomp. Their
authority will come from the public confidence, and this, in turn, will be an outcome of their own conduct,
their integrity, impartiality, learning, and simplicity.
Article 19(1)(a) of the Constitution gives the right of freedom of speech and expression to all citizens. But
Articles 129 and 215 give the power of contempt of court to the higher judiciary, and this power limits the
freedom granted by Article 19(1)(a). How are these two provisions to be reconciled?
The reconciliation can only be affected by treating the right of the citizens to free speech and expression
under Article 19(1)(a) to be primary, and the power of contempt to be subordinate. In other words, the
people are free and have the right to criticize judges, but they should not go to the extent of making the
functioning of the judiciary impossible or extremely difficult.
CONCLUSION
Interestingly, in England, whose laws of contempt weve so indiscriminately adopted, there hasnt been a
single conviction for scandalizing the court in more than eight decades. Whats more, in 2013, after a
recommendation by its Law Commission, the country altogether abolished as a form of contempt the
offence of scandalizing the judiciary.
A fresh, modern, democratic approach, like that in England, the United States, and Commonwealth
countries, is now required in India to do away with the old anachronistic view. Contempt jurisdiction is
now very sparingly exercised in these western countries. In a democracy the people should have the right
to criticise judges. The purpose of the contempt power should not be to uphold the majesty and dignity of
the court but only to enable it to function.
As observed by Lord Denning in R vs. Commissioner of Police (1968):
In spite of the fact that contempt of court is one of the explicitly spelled out restrictions to the guaranteed
right to freedom of speech under the Constitution, in a democracy, properly understood, its difficult to
locate any justification for opposing speech at the face of the judiciary. Hence, the power of contempt
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should be used sparingly and that too, only against those willfully subverting justice, and not against critics
of the state.
ISSUE 2: CRIMINAL DEFAMATION:
INTRODUCTION
Unlike many other countries, India has both civil defamation (if you defame someone, you have to pay
compensation), and criminal defamation (punishable by up to two years of imprisonment). Most other
countries have removed criminal defamation as a crime from their law books. The result is that in India,
not only does a publisher face the threat of having to pay stiff monetary penalties in case he/she defames
someone; there is the bigger threat of being imprisoned for defamation.
The Supreme Court pointed out that the Indian Penal Code (IPC), which defined criminal defamation as an
offence, was framed much before the Constitution came into force and it was high time to judge whether
this provision can now stand the test of validity. While the IPC was framed in 1860, the Constitution came
into force in 1950.
ARGUMENTS FOR REMOVING SECTION 499-500
Under Section 499, it is not just enough to show that the statements made are truthful but one must
also show that it is for the public good to disclose the truth. Otherwise one is liable to be prosecuted
for criminal defamation.
The penal sections were misused by those in power to settle political scores. Criminal defamation has a
pernicious effect on society: for instance, the state uses it as a means to coerce the media and political
opponents into adopting self-censorship and unwarranted self-restraint.
The state has no compelling interest in restricting free speech under Article 19(1) between or among
private persons. Free speech restrictions under Article 19(2) must necessarily originate from compelling
state interest, not private interest.
There is nothing in section 499, nor in the case law, which protects a person who has not made any
statement at all from being roped into a defamation case as a defendant on the bald allegation of
having conspired with someone who did make a statement. Thus section 499 is used to settle business
scores as even companies can be prosecuted for criminal defamation on the wily theory that they
conspired to defame the plaintiff.
Even an ironical statement can amount to defamation. Explanation 3 to section 499 states that an
imputation expressed ironically may amount to defamation. This provision is also excessive and
arbitrary as who is to decide what is ironical?
Sections 123, 125 of the Representation of the People Act, 1951, ought to be considered exhaustive of
the reasonable restrictions imposed on a political speech during elections.
The United Nations Special Rapporteur on freedom of expression, the Human Rights Committee of the
International Covenant on Civil and Political Rights and other international bodies have all called upon
states to abolish criminal defamation, recognizing that it intimidates citizens and dissuades them from
exposing wrongdoing.
The United Kingdom, from whom India borrowed this pernicious provision of the defamation law,
abolished criminal libel five years ago. The Indian government should have taken the cue from such
developments and exhortations from global bodies.
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Increasingly, there is reason to worry that journalist and bloggers (especially those without the resources
to fight back) will face harassment from powerful corporates and business houses. This is even more
worrying for a country at our stage of development, where we are welcoming private investment into
numerous sectors, allotting and selling off scarce resources to attain higher growth. A free media is
important to ensure such transactions and investments are fair and not marked by crony capitalism. Well
considered defamation laws are essential to ensure this journalistic freedom and integrity.
GOVERNMENT A RGUMENTS IN FAVOUR OF DEFAMATION
The Centre had refuted the petitioners by denying that criminal defamation had a chilling effect on free
speech. It maintained that a person would be charged for criminal defamation only if his speech had
neither social utility nor added to the value of public discourse and debate.
The government argued that that the law is part of the states compelling interest to protect the
dignity and reputation of citizens.
Sections 499 and 500 are constitutionally saved and they are to be read as reasonable restrictions on
an individuals right to free speech. Article 19(2) uses the word defamation in the context of
reasonable restriction. Therefore, it is clear that the Constitution-makers have sanctified usage of
Sections 499 & 500.
The government said that since there was no mechanism to censor Internet from within, online
maligning could be countered only by continuing with defamation as a criminal offence.
The government said that in India, citizens are unlikely to have enough liquidity to pay damages for civil
defamation and hence criminal defamation is necessary.
CONCLUSION
Criminal defamation should not be allowed to be an instrument in the hands of the state, especially when
the Code of Criminal Procedure gives public servants an unfair advantage by allowing the states
prosecutors to stand in for them when they claim to have been defamed by the media or political
opponents.
Sections 499-500 of the IPC are vestiges from Indias colonial past that are not appropriate for a modern
democracy. Just as it did in the case of section 66A of the IT Act, the time has come for the Supreme Court
to once again take a stand in defence of freedom of speech in India.
4. START-UP INDIA MOVEMENT FROM JOB SEEKERS TO JOB CREATORS

Expected questions:
1. Start-Up India Action Plan has been announced in the background of Start-Up Revolution in India.
What was the need of such a policy? Evaluate the provisions of such policy.
2. It is argued that the creation of Fund of funds will give a boost to the domestic venture capital
industry but at this juncture is more a case of putting the cart before the horse. Critically Analyze.
3. Start-up Revolution without educational reforms is Utopia. Do you agree? Justify.
BACKGRUND
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Prime Minister Narendra Modi had announced the 'Startup India, Standup India' initiative in his
Independence Day address last year. Recently, PM Modi unveiled the action plan for startups in the
country. Addressing the first conference of start-up entrepreneurs, PM announced an action plan to boost
such ventures which are seen as key to employment generation and wealth creation. With this, the
government seeks to infuse more energy into Indias start-up ecosystem.
WHAT IS STARTUP INDIA, STANDUP INDIA?
Aim: To encourage the entrepreneurial spirit among the youth of India.
Objective: To reinforce commitment of the Government towards creating an ecosystem that is conducive
for growth of Start-ups.
Organizing Partners: Department of Industrial Policy and Promotion (DIPP), along with other key Indian
startup ecosystem players
The Startup India, Standup India initiative aims to celebrate the countrys entrepreneurial spirit, and
create a strong ecosystem for fostering innovation and startups in India that will drive sustainable
economic growth and generate large scale employment opportunities. The Government through
this initiative aims to empower Startups to grow through innovation and design.
The Standup India Scheme anchored by Department of Financial Services (DFS) to
encourage Greenfield enterprises by SC/ ST and women entrepreneurs will support 5 lakh borrowers
with bank loans repayable up to seven years and between Rs. 10 lakhs to Rs. 1 crore for Greenfield
enterprises in the non-farm sector.
The Start Up India mission brought out on 16th January, 2016 by PM includes an ambitious plan to
create a network of startup centres, technology business incubators and research parks, to take the
startup culture beyond the top-tier education institutions such as IITs and IIMs.
The campaign aims at getting as many banks on board for financing startup ventures and offer incentives
to boost entrepreneurship, leading to creating thousands of jobs across India.
DEFINITION OF START-UP
The action plan defines startups as:
Startup means an entity, incorporated or registered in India not prior to five years, with annual turnover
not exceeding INR 25 crore in any preceding financial year, working towards innovation, development,
deployment or commercialisation of new products,
processes or services driven by technology or
intellectual property.
Provided that such entity is not formed by splitting
up, or reconstruction, or a business already in
existence.
Provided also that an entity shall cease to be a
Startup if its turnover for the previous financial year
has exceeded INR 25 crore or it has completed 5
years from the date of incorporation/registration.
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Provided further that a Startup shall be eligible for tax benefits only after it has obtained certification from
the Inter-Ministerial Board, setup for such purposes.
If a startup has revenue of Rs 25 crore in any preceding financial years, it should not be allowed to claim
benefits under the action plan. This seems fair. However, to claim benefits, such startup should be working
towards (i) innovation, (ii) development, (iii) deployment or (iv) commercialisation of new products,
processes or services driven by technology or intellectual property.
HIGHLIGHTS OF THE START-UP INDIA ACTION PLAN:
A Rs. 10,000 crore fund for startups: The government will set up a fund with an initial corpus of Rs.
2,500 crore and a total corpus of Rs. 10,000 crore over a period of four years, which will be managed by
a board with private professionals drawn from industry bodies, academia, and successful startups.
Essentially, the government will take taxpayer funds to invest in other venture capital funds, which will
then fund start-ups.
A single point of registration for startups: The government will launch a mobile app and a portal on
April 1, which will enable startups to register their company in a day. The portal will also serve as a
single point of contact for clearances, approvals and registrations, and for companies to apply for
schemes under the Startup India Action Plan.
A simplified regulatory regime based on self-certification: To reduce the regulatory burden for
startups, the government will allow startups to self-certify compliance on nine labour and environment
laws through the startup mobile app. No inspections will be conducted in case of the labour laws for a
period of three years.
This would improve the ease of doing business and must be done for all businesses and not just startups.
A fast-track mechanism filing patent applications: Launched on a pilot basis for a year, the Central
Government shall bear the cost of patents, trademarks and designs for a startup, with an 80% rebate to
encourage the creation and protection of its intellectual property.
It brings out the confidence among the entrepreneurs to start with hassle free process. With faster
patent registration and protection for Intellectual Property rights, every entrepreneur would be
confident of not losing his or her ideas to any other.
A credit guarantee fund for startups: A credit guarantee mechanism will help startups raise debt
funding through the formal banking system through National Credit Guarantee Trust Company
(NCGTC)/SIDBI, which has an annual corpus of Rs. 500 crore for the next four years.
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Tax exemption for startups: Aimed at facilitating growth and help retain capital, startups will be
exempted from income-tax for a period of three years. However, the exemption shall be available
subject to non-distribution of dividend by the startup.
Exemption from Capital gains Tax: Currently, investments by venture capital funds in startups are
exempt from this law. Now, the same is being extended to investments made by incubators in startups.
A Startup India Hub for collaboration: The Startup India Hub will serve as a single point of contact for
startup ecosystem players, and will function in a hub and spoke model with central and state
governments, Indian and foreign VCs, angel networks, banks, incubators, legal partners, consultants,
universities and R&D institutions. The hub will assist startups in obtaining financing and organise
mentorship programs to encourage knowledge exchange.
Relaxed norms of public-procurement: The Central Government, State Government and PSUs will
exempt startups in the manufacturing sector from the criteria of prior experience/ turnover as long
as they have their own manufacturing facility in India, and have the requisite capabilities and are able
to fulfil the project requirements.
Faster exits for startups: Startups may be wound up within a period of 90 days from making of an
application for winding up on a fast track basis, as per the recently tabled Insolvency and Bankruptcy
Bill 2015, which has provisions for voluntary closure of businesses. This process will respect the concept
of limited liability.
Atal Innovation Mission to encourage entrepreneurship and innovation: The Atal Innovation Mission
will establish sector specific incubators and 500 Tinkering Labs to promote entrepreneurship, provide
pre-incubation training and a seed fund for high-growth startups. Three innovation awards will be given
per state and union territory, along with three national awards, as well as a Grand Innovation Challenge
Award for finding ultra-low cost solutions for India.
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Innovation focused programs for students: An innovation core program targeted at school kids aims to
source 10 lakh innovations from five lakh schools, out of which the the best 100 would be shortlisted
and showcased at an Annual Festival of Innovations, to be held in Rashtrapati Bhavan. A Grand
Challenge program called NIDHI (National Initiative for Developing and Harnessing Innovations) shall be
instituted through Innovation and Entrepreneurship Development Centres (IEDCs) to support and
award INR 10 lakhs to 20 student innovations.
An annual incubator grand challenge: The government will identify and select ten incubators,
evaluated on pre-defined Key Performance Indicators (KPIs) as having the potential to become world
class, and give them Rs.10 crore each as financial assistance to ramp up their infrastructure.
Promote entrepreneurship in Biotechnology
WHAT WAS THE NEED FOR SUCH AN ACTION PLAN?
The economy of any country depends on its countrymen. Larger the number of employed or working
people, better be the economy.
The Indian government realized that Indian people have the potential to work hardly, all they need is a
promising start up.
Many people dream of starting up their own business, but due to financial or other similar issues are
unable to do so. So, Indian government decided to offer a gift as a nation wide program Start Up
India.
According to the NASSCOM Startup Report 2014, India is the 4th largest startup ecosystem globally
after USA, UK, Israel and Canada. But Indian start ups are in dire need of infrastructure.
The technology product startups inception rate in India is growing at 14% Y-o-Y. In 2014, the country
had 3100 startups and is expected to see 11500+ startups by the year 2020. In 2014, startup ecosystem
employed about 65000+ people. This number is expected to rise to 250,000 in 2020
India is also home to eight of the worlds unicornsstart-ups valued at more than $1 billion.
INDIAN VENTURE CAPITALISTS NEW BENEFACTOR THE GOVERNMENT

As part of a bunch of measures that constitute the action plan for governments Start-Up initiative, the
centre will shortly be setting up a Fund of Funds that would invest in private venture capital funds.
The fund will be set up with the initial corpus of 10,000 crore (about $1.5 billion). However, it will be
deployed in tranches of Rs.2,500 crore over a period of four years. Indias venture capitalists are very
happy with this announcement.
The idea of a fund of funds isnt new. Finance minister Arun Jaitley had earmarked Rs.10,000 crore for a
fund of funds nearly 18 months ago in the Union Budget 2014-2015. The fund of funds announced as
part of start-up action plan is a reiteration, rather a repackaging of the July 2014 budget proposal with
some clarity on how it will be structured and managed.
Presently, the domestic venture capital industry is practically non-existent in the country. The countrys
venture capital industry, consisting mostly of foreign firms, currently raise more than 90% of their capital
from foreign institutional investors, commonly known as limited partners. Thus, it is necessary to stimulate
the growth of the domestic venture capital industry. It is because of mainly two reasons:
1. Firms backed by foreign capital tend to jump towards start-ups that replicate business models that
have been successful in the US, or in other developing markets. Their limited partners are
understandably more comfortable with that strategy. The fund of funds aims to fix that imbalance by
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specifically investing in funds that will, in turn, invest in sectors such as health, education,
manufacturing and agriculture.
2. The dependence on foreign capital makes firms in India vulnerable to the ups and downs of those
markets. While the Indian venture capital market is not currently strapped for capital and India remains
an attractive investment destination for global limited partners, even a tremor in the US economy or
venture capital market could trigger a major upset here.
Challenges before the Venture Capital Industry
According to data compiled by Chennai-based Venture Intelligence, in 2015, venture capital

investments in India stood at about $1.8 billion. Therefore, Rs.10,000 crore is not sufficient to spur the
growth of this industry.
The government has announced that it intends to contribute up to 50% of the stated corpus of a Sebiregistered venture capital fund. However, the problem here is that it is quite difficult for these funds to
raise the rest 50%. Added to it, the government contributes 50% only after the Sebi-registered fund has
already raised commitments from other investors for the balance 50%.
These venture capital funds do not have access to a large pool of domestic institutional capital. Even
the banks and insurance companies cannot help them as their investment limits are capped at 10% of
the overall corpus of a Sebi-registered venture capital fund.
Hence, the only sources of domestic capital currently available to venture capital funds are HNIs (high
net-worth individuals) and family offices. However, neither is incentivised enough, through tax
concessions, to put meaningful money into play in venture capital funds.
This leaves domestic venture capital funds with no option but to raise capital from overseas investors.
Even that is not easy because of a complex regulatory framework.
As a result, most domestic venture capital funds have to adopt a dual fund structure (in which capital
raised from foreign investors is parked in a separate offshore fund).
When there is clearly a thriving venture capital industry that funds start-ups, what is the rationale for
the government to risk taxpayer funds in this?
Pros: Israel, the US and Canada have done it.
Cons: All these countries invested tax dollars into government venture funds to kick-start their innovation
economy, not when there was one already thriving. There was no external risk capital in their economy,
which necessitated the government to step in with funds. India does not have this problem today.
Pros: India is over-reliant on foreign venture capital and the government needs to offset this imbalance.
Cons: It is true that close to 90% of venture financing over the past decade has been through foreign
capital. Foreign capital inevitably supports business models that are proven in the Western world and can
potentially skew the balance. But it is a futile chase to try to throw matching taxpayer funds to foreign
flows in order to correct this imbalance. India needs its scarce tax resources to provide for healthcare and
education to a vast majority of her citizens, not chase foreign risk capital as matching grants. If India needs
to incentivize domestic risk capital pools, it is best done through tax incentives for private investors.
SOME CRITICISMS OF THE SCHEME
Governments restrictive definition of a start-up driven by technology or intellectual property
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Only those companies which satisfy the above definition will be termed as start up and access to
enabling environment is made possible.
In addition, to be eligible for schemes, start-ups will have to show that their innovation has
significantly improved existing processes.
Oddly, there is no self-certification as to whether the improvement is significant allowing the
bureaucrat to once again insert himself into the process. It is thus possible that discretion to a startup ecosystem may have been built into the scheme from the outset.
It is unexplainable why benefits from any such scheme should not be extended to all start-ups
depending on criteria that are transparently laid down and objective.
The government cannot target or identify innovation; only the market can. The government should
focus on creating conditions for innovation.
Innovation and investments go hand in hand, but not enough was done by the government for the
latter as there was no encouragement for investors.
Some probing questions have also been asked about the use of tax incentives for start-ups.
Exemption from income tax, of course, will only be available to those vetted by an inter-ministerial
panel. This clause has been targeted by certain economists who argue that tax to GDP ratio will
further reduce in India.
Start-up Revolution without education reforms is Utopia.
Success of a start-up revolution in this new economy solely depends upon our ability to create an
environment where every citizen is able to apply his or her creativity for sustaining an ever-growing
pipeline of knowledge-intensive innovative ideas and game-changing solutions.
The new education system must be able to develop inquisitive mindset of each and every individual
from the early childhood.
In this new innovative start-up-driven economy, if we want to succeed then our huge population
must not only be literate, but also knowledge-economy ready.
Our government's start-up action plan must provide a broad framework for educational
development - not only for educational institutions, but also for large companies - that can create
opportunities for students and workers to develop their innovation potential.
CONCLUSION
While it remains unclear whether tech start-ups have anywhere near the potential to create the kind of
employment that India needs, the government on its part has done well to give these start-ups the
necessary ammunition to get on with value creation with the minimum of government interface. Overall,
while the intent is praiseworthy and there are many laudable ideas in the policy, much in the fine print
needs attention if its goal is to be realised.
On the other hand it appears that the launch of the fund of funds at this juncture is more a case of putting
the cart before the horse. And, it certainly isnt the most efficient use of taxpayers money. It is nave to
expect that without addressing our archaic system of academic governance and by simply creating some
incubators and science parks, we'll be able to automatically turn India to the start-up capital of the world.
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5. POST-NAIROBI: WTO - DOHA DEVELOPMENT AGENDA

1. Recent times are characterized by waning of multilateralism, a strong tool in the hands of developing
countries. Why do you think international scene is rife with such speculations? Give your views.
2. The contentious issue of principle of differential treatment has actually lost relevance with the
emerging share of developing countries in global trade in recent times. Critically comment.
3. Both developed countries and developing countries are committed to conclude the negotiations on
Doha development agenda among other issues in WTO. Comment in the light of outcomes of recently
concluded negotiations at Nairobi.
4. Critically analyze differences in opinion between India and US on various issues under WTO along with
the mega FTAs concluded recently of which US is also a part.
5. Doha development agenda gave a new hope for multilateralism but due to the ignorance of western
world, its sustenance stands questioned in recent times. Discuss.
BACKGROUND
World Trade Organization, as an institution, was established in 1995. It replaced General Agreement on
Trade and Tariffs (GATT) which promoted seamless trade among all the countries and that there are
minimal tariff and non- tariff barriers to increase development.
Success of GATT
Reduction of tariffs
Measures against dumping of goods like imposition of Anti-Dumping Duty in victim countries
Limitations of GATT
Failed to curb non-tariff barriers
No institutional structure
Did not cover trade in services (only goods)
Perceived as preserving the interests of western countries
Thus WTO came into existence and seeks to give more weightage to interests of global south in framing of
multilateral treaties. A number of other aspects have been included such as Intellectual property under
Trade related aspects of Intellectual Property (TRIPS), Services by General Agreement on Trade in Service
(GATS), Investments under Trade related Investment Measures (TRIMS). GATT didnt cease to exist. It
continues as WTOs umbrella treaty for trade in goods.
MAJOR AGREEMENTS UNDER WTO
Agreement on subsidies and countervailing measures SCM
The WTO SCM Agreement contains a definition of the term subsidy which includes three basic elements
a financial contribution
by a government or any public body within the territory of a Member
which confers a benefit.
27

Within this definition, only specific subsidies are subject to the SCM Agreement disciplines against which
members can take Countervailing Measures, such as imposing countervailing duties or antidumping duty.
These can only be done in a transparent manner with a defined period.
General Agreement on Trade in Services GATS
Services currently account for over 60 percent of global production and employment; they represent no
more than 20 per cent of total trade (BOP basis). This share is likely to increase because of the introduction
of new transmission technologies and changing consumer preferences, thus there is a need to have a
global framework for trade in services
Agreement on Trade-Related Aspects of Intellectual Property Rights - TRIPS
TRIPS is an international agreement administered by the World Trade Organization (WTO) that sets down
minimum standards for many forms of intellectual property (IP) regulation as applied to nationals of other
WTO Members. It remains an issue between developed and developing countries. TRIPS was fine tuned in
favor of developing countries in 2003, as part of Doha development agenda, when all members agreed to
compulsory licensing in certain cases. However, now U.S. and Europe remain unhappy about current strict
terms of patent allowed by TRIPS
Agreement on Trade-Related Investment Measures - TRIMS
TRIMS recognizes that certain investment measures can restrict and distort trade. It states that WTO
members may not apply any measure that discriminates against foreign products or that leads to
quantitative restrictions such as local content requirements
Agreement on agriculture - AoA
It was concluded in 1994, and was aimed to remove trade barriers and to promote transparent market
access and integration of global markets. It is often criticized as a tool in hands of developed countries to
exploit weak countries and therefore, countries are negotiating on it. It is based on 3 pillars
Domestic Support in
terms of subsidies
Market access
Reduce tariff barriers
Green box
Amber box
Blue box
Convert non-tariff barriers

into tariff duties
Export subsidies
Subsidies on input of
agriculture
Making exports cheaper
There is a De-Minimis provision in domestic support provisions under which developed countries are
allowed to maintain trade distorting subsidies or Amber box subsidies to level of 5% of total value of
agricultural output. For developing countries this figure was 10%.
There is also a Special Safeguard Mechanism (SSM) in export subsidies provisions which allows developing
countries to impose additional (temporary) safeguard duties in the event of an abnormal surge in imports
or the entry of unusually cheap imports.
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DOHA DEVELOPMENT AGENDA 2001
Owing to the allegations by developing countries of ignoring their developmental needs, developed
countries agreed to a developmental agenda for new round of negotiations. Thus, Doha Development
Round begun at 4th ministerial meet in Doha.
Main issues of Doha Development Round
Agriculture It called for
Agreement to commit to substantial improvements in market access

reductions and ultimate elimination of all forms of export subsidies (including Green and blue box)
substantial reductions in trade-distorting support
Access to patented medicines It involves the balancing the interests of pharmaceutical companies of
developed countries that hold patents and the public health needs in developing countries. On 30 August
2003, WTO members reached agreement on compulsory licensing.
Special and differential treatment - In Doha round, members agreed that Developing and Least developed
countries will continue to be eligible for a favorable treatment. However, lately, developed countries are
claiming that big developing countries like India, China, Brazil and South Africa are unreasonable in their
demand
BALI PACKAGE TRADE FACILITATION AND PEACE CLAUSE 2013

In Bali ministerial meet, all nations agreed for
Trade facilitation
Peace clause which gave countries 4 year times to adjust to the limit and avoid sanctions.
Date for ratification of Bali agreement was 31 July, 2014, on which India declined to ratify unless a
permanent solution is reached. After this, in November 2014, India US reached understanding in which
time limit of 4 years was removed and in return Trade Facilitation was agreed to by India.
NAIROBI MEET 2015
Recently concluded Nairobi meet was a huge disappointment for the developing and under developed
world.
USA
trying to set aside the development aspect of negotiations which was agreed at Doha
total focus on trade facilitation agreement
trying to introduce new issues such as Government Procurement, E-commerce, Investment,
Competition policy
Developing countries demands
permanent solution for public stockholding programmes for food security
29

a special safeguard mechanism (SSM) to protect millions of resource-poor and low-income farmers
from the import surges from industrialized countries.
Continuing DDA negotiations
Demands on both sides were actively opposed by one another.

Highlights of Nairobi outcomes:
Developed members have committed to remove export subsidies immediately, except for a handful of
agriculture products, and developing countries will do so by 2018. Developing members will keep the
flexibility to cover marketing and transport costs for agriculture exports until the end of 2023.
Developing countries are allowed to continue food stockpile programmes until a permanent solution is
found by the 11th Ministerial Conference in 2017. The decision commits members to engage
constructively in finding a permanent solution to this issue.
Developing members will have the right to temporarily increase tariffs in face of import surges by using
an SSM and members will continue to negotiate the mechanism in dedicated sessions of the
Agriculture Committee
Made in LDC products will get unrestricted access to markets of non-LDCs.
Regional Trade Agreements (RTAs) remain complementary to, not a substitute for, the multilateral
trading system (WTO).
Ministers acknowledged that members have different views on how to address the future of the Doha
Round negotiations but noted the strong commitment of all Members to advance negotiations on the
remaining Doha issues.
Also on the issue of differential treatment of developed countries from developing countries and LDCs is
under scanner considering the surge of share in global trade of developing countries. But in no case we can
compare the developing countries with developed countries because the countries with large share in
global trade are also facing serious social developmental issues of poverty, hunger, mortality rates etc.
From Indias point of view, the Nairobi declaration was disappointing on multiple fronts. India has returned
with very few, if any, of its demands met.
There is no concrete agreement on a special safeguards mechanism to protect farmers in the

developing countries against sudden import surges, and no short deadline for a permanent solution on
public stockholding for food security purposes.
The lack of an unambiguous reaffirmation of the Doha Development Agenda means new issues of
interest to developed countries, including competition policy, government procurement and
investment are now open for negotiations.
India needs to prepare a clear cut strategy for negotiations of the future. It needs to chalk out a
comprehensive mechanism to take all developing countries on board so that incidents like Brazil
supporting the western demands have a counter-strategy by the group of developing countries or the
demands of Brazil are adapted within the agenda of developing countries itself. For the future, the
government needs to broaden its preparation:
by holding wide-ranging meetings on WTO-related issues with all stakeholders in a bipartisan

manner
30

renewing and strengthening its ties with the developing and LDC economies to protect the
development agenda
finally bolstering its pool of trade negotiators by picking the best and brightest trade experts and
lawyers.
RELEVANCE OF WTO
WTO right now faces a serious existential crisis due to the following reasons:
This is primarily because, since its inception in 1995, it has failed to deliver on significant trade
liberalization
Conclusion of a plethora of free trade agreements (FTAs), including mega FTAs like TPP which involves
members with a collective GDP of $27.5 trillion, approximately 40 per cent of the global economy and
covering nearly a third of global trade.
All these FTAs operate on the basis of non-most favoured nation (MFN) principle, which is a
fundamental cornerstone of the WTO.
Why important?
It is the only multilateral platform that allows smaller and developing countries to make concerted
efforts at integrating trade and development by allowing developed countries to negotiate
international trade issues in blocks and together withstand the relentless demand of developed
countries to open their markets without reciprocal benefits.
It also allows for effective and non-partisan settlement of trade disputes and for the review of each
countrys trade policy.
Thus there is a need to strengthen the WTOs CRTA (Committee for Regional Trade Agreements) so that it
examines the compatibility of the notified FTA with WTO rules and see that mega FTAs like TPP dont act as
stumbling blocks by setting such high standards for effectively blocking significant market access for many
developing countries. However, WTOs CRTA, which must decide by consensus, has never been able to
finalise any report examining the compatibility of FTAs with WTO rules.
6. POWER REFORMS TOWARDS ENERGY SECURITY FOR ALL 24X7

1. It is argued that UDAY is a big bang reform in the power sector and will bring the sector out from the
crisis. Do you agree? Justify.
2. In the light of the grave situation of power loss, can State prove to be a beacon of light, leading the
path away from the crisis? Discuss.
3. The UDAY Scheme is not just a bailout programme but a show of Collaborative Federalism. Critically
Examine.
4. The holistic amendments to Power Tariff Policy which complement schemes like UDAY will ensure the
realization of 24x7 affordable Power for All. Do you agree? Evaluate.
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BACKGROUND
The National Democratic Alliance (NDA) government has offered a bailout plan for state governmentowned electricity distribution companies (discoms) in a move that could fundamentally change Indias
power sector and also reduce the stress on books of banks that have loaned money to these financially
unsound utilities. The plan comes at a time when state electricity boards (SEBs), with a combined debt
of 4.30 trillion and losses of around 3.8 trillion, are on the brink of financial collapse. This has made them
averse to buying electricity, which affects the viability of power plants (and the banks that have loaned
money to them). The majority of the overall debt is held by utilities in the eight states of Rajasthan, Uttar
Pradesh, Haryana, Tamil Nadu, Andhra Pradesh, Jharkhand, Bihar and Telangana.
To be sure, this is not the first bailout plan for the power distribution firms. This is the third such bailout for
the Indian distribution sector in around 13 years; the first two failed to incentivize the states to act.
POWER SECTOR IN INDIA
Power Sector is at a crucial juncture of its evolution from a controlled environment to a competitive,
market driven regime which endeavors to provide affordable, reliable and quality power at reasonable
prices to all sectors of the economy. Since its structured growth post-Independence, Indian power sector
has made substantial progress both in terms of enhancing power generation and in making available
power to widely distributed geographical boundaries. India has the worlds 5 th largest electricity generation
capacity and it is the 6th largest energy consumer accounting for 3.4% of global energy consumption.
In spite of the massive addition in generation, transmission and distribution capacity over the last over
sixty years, growth in demand for power has always exceeded the generation capacity augmentation.
Although the country has achieved capacity addition of about 1,81,500 MW over the last six decades, peak
and energy shortages of varying magnitude are being experienced.
In December 2011, over 300 million Indian citizens had no access to electricity.
Over one third of India's rural population lacked electricity, as did 6% of the urban population.
Of those who did have access to electricity in India, the supply was intermittent and unreliable.
At the time of Independence, only about 1500 villages of the country had access to electricity. The scenario
has changed significantly since then. It has been possible to extend electricity to about 5,58,296 numbers
of villages out of a total of 608,000 census villages thereby electrifying 90.8% of villages. As per rough
estimates, out of this about 50,000 villages are located in remote and difficult areas and it is not possible to
extend power supply to these villages through the existing power grid. Electrification of these villages,
therefore, is proposed to be done through various sources of distributed generation including renewable
sources of energy.
Key implementation challenges for India's electricity sector include:
New project management and execution;

Ensuring availability of fuel quantities and qualities;
Lack of initiative to develop large coal and natural gas resources present in India;
Land acquisition;
Environmental clearances at state and central government level; and
Training of skilled manpower to prevent talent shortages for operating latest technology plants.
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As per the Indian Constitution, the power sector is a concurrent subject and is the joint responsibility of the
State and Central Governments. The power sector in India is dominated by the government. The State and
Central Government sectors account for 58% and 32% of the generation capacity respectively while the
private sector accounts for about 10%. The bulk of the transmission and distribution functions are with
State utilities. The private sector has a small but growing presence in distribution and is making an entry
into transmission. Power Sector which had been funded mainly through budgetary support and external
borrowings was opened to private sector in 1991.
Power Sector Reforms since Independence
The below figure provides the chain of power sector from Fuel Supply till the Consumption by the
individual. But well be dealing here only the reforms in the distribution Sector.
33

UJWAL DISCOM ASSURANCE YOJANA (UDAY)

UDAY provides for the financial turnaround and revival of Power Distribution companies (DISCOMs), and
importantly also ensures a sustainable permanent solution to the problem. It is a path breaking reform for
realizing the Prime Ministers vision of affordable and accessible 24x7 Power for All.
It is another decisive step furthering the landmark strides made in the Power Sector over the past one and
a half years, with the sector witnessing a series of historic improvements across the entire value chain,
from fuel supply (highest coal production growth in over 2 decades), to generation (highest ever capacity
addition), transmission (highest ever increase in transmission lines) and consumption (over 2.3 crore LED
bulbs distributed).
The weakest link in the value chain is distribution, wherein
DISCOMs in the country have accumulated losses of approximately 3.8 lakh crore and outstanding
debt of approximately 4.3 lakh crore (as on March, 2015).
Financially stressed DISCOMs are not able to supply adequate power at affordable rates, which
hampers quality of life and overall economic growth and development.
Efforts towards 100% village electrification, 24X7 power supply and clean energy cannot be
achieved without performing DISCOMs.
Power outages also adversely affect national priorities like Make in India and Digital India.
In addition, default on bank loans by financially stressed DISCOMs has the potential to seriously
impact the banking sector and the economy at large.
The massive transmission and distribution losses can be attributed to the following reasons:
Inadequate Tariff increases

Poor Power purchase planning
Sale of power at prices lower than the discoms procurement costs
Political Willingness
Lack of timely Subsidy Payments
34
Inefficiencies in metering and billing

Illegal Connections
Reckless funding by banks to loss-making Discoms
UDAY assures the rise of vibrant and efficient DISCOMs through a permanent resolution of past as well as
potential future issues of the sector. It empowers DISCOMs with the opportunity to break even in the next
2-3 years. This is through four initiatives:
Improving operational efficiencies of DISCOMs by adopting measures such as compulsory smart

metering, upgradation of transformers, meters etc., energy efficiency measures like efficient LED
bulbs, agricultural pumps etc.
Reduction of cost of power would be achieved through measures such as increased supply of
cheaper domestic coal, coal linkage rationalization, liberal coal swaps from inefficient to efficient
plants, coal price rationalization based on GCV (Gross Calorific Value), supply of washed and
crushed coal, and faster completion of transmission lines.
Reduction in interest cost of DISCOMs; and
Enforcing financial discipline on DISCOMs through alignment with State finances.
SALIENT FEATURES OF UDAY
States shall take over 75% of DISCOM debt as on 30 September 2015 over two years - 50% of
DISCOM debt shall be taken over in 2015-16 and 25% in 2016-17.
Government of India will not include the debt taken over by the States as per the above scheme in
the calculation of fiscal deficit of respective States in the financial years 2015-16 and 2016-17.
States will issue non-SLR including SDL bonds in the market or directly to the respective banks/
Financial Institutions (FIs) holding the DISCOM debt to the appropriate extent.
DISCOM debt not taken over by the State shall be converted by the Banks / FIs into loans or bonds
with interest rate not more than the banks base rate plus 0.1%. Alternately, this debt may be fully
or partly issued by the DISCOM as State guaranteed DISCOM bonds at the prevailing market rates
which shall be equal to or less than bank base rate plus 0.1%.
States shall take over the future losses of DISCOMs in a graded manner and shall fund them as
follows:
Year
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
Previous Years 0% of the 0% of the 5% of the 10% of the 25% of the 50% of the
DISCOM loss to loss
of loss
of loss
of loss
of loss
of previous
be taken over by 2014-15
2015-16
2016-17
2017-18
2018-19
year loss
State
35
States accepting UDAY and performing as per operational milestones will be given
additional/priority funding through Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), Integrated
Power Development Scheme (IPDS), Power Sector Development Fund (PSDF) or other such
schemes of Ministry of Power and Ministry of New and Renewable Energy.
Such States shall also be supported with additional coal at notified prices and, in case of availability
through higher capacity utilization, low cost power from NTPC and other Central Public Sector
Undertakings (CPSUs).
States not meeting operational milestones will be liable to forfeit their claim on IPDS and DDUGJY
grants.
UDAY is optional for all States. However, States are encouraged to take the benefit at the earliest as
benefits are dependent on the performance.
BENEFITS
OF
UDAY SCHEME
To Government
Achievement of 24x7 Power for All.

Power to 5 crore households without electricity.
Speedy achievement of electrification of remaining 18,500 villages.
Energy Security through coal and renewable.
Reduce Current Account Deficit (CAD) from higher diesel import (current annual imports of around
Rs. 50,000 crore).
Meet ambitious renewable energy commitments as a responsible global citizen.
Revive investments in power sector to create jobs.
To Industry & Consumers
Availability of 24x7 power improving quality of life and efficiency.

Lower cost of power -Typical 3,000 MW NTPC plant running at 60% Plant Load Factor (PLF) has a
fixed cost of Rs. 2.67 / unit, vs Rs. 1.80 at 90% PLF.
36

Global competitiveness of industry.
To Banks and Investors
Avoid banking contagion (Rs, 40,000 crore of repayments due to banks in 2015-16) which will
create significant NPAs.
Lower risk for existing investments and loans in power, coal and renewables sector.
Lower capital adequacy.
Increased procurement of power by DISCOMs revives existing power projects suffering from low
PLFs.
Reduce investment uncertainty across the sector.
The governments Ujjwal Discom Assurance Yojana (UDAY) scheme to revive them should mean that new
PPAs will be signed in the future.
IS UDAY AN ANOTHER BAILOUT PLAN OR A REVIVAL PACKAGE FOR DISCOMS?
UDAY will be a significant departure from the previous bailout package wherein banks were funding
the operating losses of SEBs.
Banks should run their loan book based on prudential norms to ensure that most of the states
SEBs come into profits.
UDAY is indeed a Discom Revival Plan and not limited to Debt Restructuring as it has all the three
elements:
Clear up the legacy issues of past losses and debt,
Provide a financial road map to bring tariffs in line with costs by FY19 and
Provide enough deterrents for the state government to not allow the state discoms to become
loss ridden post FY18 as losses start to impact their FRBM limits,
This is much more comprehensive about any other SEB Restructuring Scheme seen till date as it
talks about both cost-side efficiency and improvements in revenue side.
Cost-side efficiency such as immediate reduction of interest service burden, reduction in fuel
cost through coal swapping, time-bound loss reduction, etc.
On the revenue side, it talks about a strict discipline of quarterly fuel cost adjustment, annual
tariff increase, taking regulators on board and finally including discom losses in the FRBM limits
for the states.
UDAY is better than the previous financial restructuring plan that didnt do much to change the health of
the discoms. This time, with state governments on board and having more skin in the game, the chances of
success are far higher.
ISSUES WITH UDAY
State Subject: Electricity is not a Central subject and thus, the scheme cannot be made a
compulsory one which leaves the door open for unequal working of the Discom per State.
No monetary assistance is being provided by the State though states willing to become a part of the
scheme will be granted with subsidised funding in the governments schemes and priority in the
supply of coal
The conversion of discom debt into bonds is not as difficult as is finding a suitable buyer for those
bonds, not enjoying SLR Status additionally.
37

The key to the success of the scheme is acceptance and implementation by state governments. In the
current policy central government is using a Carrot and Stick approach to see that states toe the line. As an
incentive, the states adhering to the operational milestones will be given additional central funding through
Deendayal Upadhyaya Gram Jyoti Yojana, Integrated Power Development Scheme, Power System
Development Fund or other such schemes by the ministry of power and renewable energy. However, the
laggards "would be liable to forfeit their claim on IPDS and DDUGJY grants.
CONCLUSION
UDAY is a shining example of the utilization of the best principles of cooperative and competitive
federalism and has been evolved through discussions at the highest levels with multiple States. Adopting
UDAY is optional for States, but provides the fastest, most efficient and financially most feasible way for
providing 24x7 Power for All. It will be operationalized through a tri-partite agreement amongst the
Ministry of Power, State Government and the DISCOM.
UDAY accelerates the process of reform across the entire power sector and will ensure that power is
accessible, affordable and available for all. UDAY truly heralds the UDAY (rise), of a Powerful India.
UDAY a step in right direction which has potential to unclog the entire power chain (if implemented as
intended).
AMENDMENTS IN TARIFF POLICY

The Union Cabinet, chaired by the PM has
approved the proposal of the Ministry of Power
for amendments in the Tariff Policy. For the first
time, a holistic view of the power sector has been
taken and comprehensive amendments have been
made in the Tariff policy 2006. The amendments
are also aimed at achieving the objectives of Ujwal
DISCOM Assurance Yojana (UDAY) with the focus
on 4 Es: Electricity for all, Efficiency to ensure
affordable tariffs, Environment for a sustainable
future, Ease of doing business to attract investments and ensure financial viability.
Highlights of Amendments are:
Electricity:
24X7 supply will be ensured to all consumers and State Governments and regulators will devise a
power supply trajectory to achieve this.
Power to be provided to remote unconnected villages through micro grids with provision for
purchase of power into the grid as and when the grid reaches there.
Affordable power for people near coal mines by enabling procurement of power from coal washery
rejects based plants.
Efficiency:
Reduce power cost to consumers through expansion of existing power plants.
38

Benefit from sale of un-requisitioned power to be shared allowing for reduction in overall power
cost.
Transmission projects to be developed through competitive bidding process to ensure faster
completion at lower cost.
Faster installation of Smart meters to enable Time of Day metering, reduce theft and allow netmetering.
Lower power cost by creating transmission capacity for accessing power from across India.
Environment:
Renewable Power Obligation (RPO): In order to promote renewable energy and energy security,
8% of electricity consumption excluding hydro power, shall be from solar energy by March 2022.
Renewable Generation Obligation (RGO): New coal/lignite based thermal plants after specified
date to also establish/procure/purchase renewable capacity.
Affordable renewable power through bundling of renewable power with power from plants whose
PPAs have expired or completed their useful life.
No inter-State transmission charges and losses to be levied for solar and wind power.
Swachh Bharat Mission to get a big boost with procurement of 100% power produced from Wasteto-Energy plants.
To release clean drinking water for cities and reduce pollution of rivers like Ganga, thermal plants
within 50 km of sewage treatment facilities to use treated sewage water.
Promotion of Hydro projects through long term PPAs and exemption from competitive bidding till
August 2022.
Ancillary services to support grid operation for expansion of renewable energy.
Ease of Doing Business:
Generate employment in coal rich Eastern states like Odisha, West Bengal, Jharkhand, Chhattisgarh
etc. by encouraging investments. States allowed to setup plants, with up to 35% of power procured
by DSICOMs on regulated tariff.
Remove market uncertainty by allowing pass through for impact of any change in domestic duties,
levies, cess and taxes in competitive bid projects.
Clarity on tariff setting authority for multi-State sales. Central Regulator to determine tariff for
composite schemes where more than 10% power sold outside State.
BENEFITS OF THESE AMENDMENTS

These amendments will benefit power consumers in multiple ways.
It will reduce the cost of power through efficiency;

They will spur renewable power for a cleaner environment and protect India's energy security;
They would also aid the objectives of Swachh Bharat Mission as well as Namami Gange Mission
through conversion of waste to energy, usage of sewage water for generation and in turn ensure
that clean water is available for drinking and irrigation\;
These amendments will ensure availability of electricity to consumers at reasonable and
competitive rates;
39

Will improve ease of doing business to ensure financial viability of the sector and attract
investments;
Promote transparency, consistency and predictability in regulatory approaches across jurisdictions;
It will further facilitate competition, efficiency in operations and improvement in quality of supply
of electricity;
These holistic amendments to Power Tariff Policy which complement schemes like UDAY will ensure the
realization of Hon'ble Prime Minister Shri Narendra Modi's vision of 24x7 affordable Power for All.
7. KELKAR COMMITTEE ON REVISITING AND REVITALISING THE PPP MODEL OF

INFRASTRUCTURE DEVELOPMENT
1. The Economic Survey 2014-15 has called for restructuring the public private partnership (PPP) model
of investment to boost the infrastructure projects in India. Critically examine the problems it has
identified in PPP model and the solutions it has suggested to restructure the model.
2. Critically examine the measures taken by government to revamp PPP in infrastructure development
with special reference to Kelkar committee recommendations.
3. CAG in its audit of different sectors has criticized the working of PPP projects. In the light of CAG
findings, discuss the possible solutions that can be provided to improve the functioning of PPP projects.
BACKGROUND
In the Union Budget 2015-16, the Finance Minister had announced that the PPP mode of Infrastructure
Development has to be revisited and revitalised. In pursuance of this announcement, a Committee on
Revisiting & Revitalising the PPP model of Infrastructure Development was set-up which was chaired by Dr.
Vijay Kelkar. The Report of the Committee has been submitted to the Government.
40

India offers today the worlds largest market for PPPs. It has accumulated a wealth of experience in getting
to this premiere position. As the PPP market in infrastructure matures in India, new challenges and
opportunities have emerged and will continue to emerge. Periodic review of PPPs, as in the present
Committee's remit, are a must to help address issues before they become endemic and to mainstream
innovations and foster new ones that improve the successful delivery of PPP projects.
PUBLIC PRIVATE PARTNERSHIP IN INFRASTRUCTURE
Public Private Partnerships (PPPs) in Infrastructure refer to the provision of a public asset and service by a
private partner who has been conceded the right (the Concession) for the purpose, for a specified period
of time, on the basis of market determined revenue streams, that allow for commercial return on
investment.
This collaboration or partnership is built on the expertise of each partner that meets clearly defined public
needs through the appropriate allocation of:
Resources;
Risks;
Responsibilities; and
Rewards
Potential Benefits of Public Private Partnerships

The financial crisis of 2008 onwards brought about renewed interest in PPP in both developed and
developing countries. Facing constraints on public resources and fiscal space, while recognizing the
importance of investment in infrastructure to help their economies grow, governments are increasingly
turning to the private sector as an alternative additional source of funding to meet the funding gap. While
recent attention has been focused on fiscal risk, governments look to the private sector for other reasons:
Exploring PPPs as a way of introducing private sector technology and innovation in providing better
public services through improved operational efficiency.
Incentivizing the private sector to deliver projects on time and within budget.
Utilizing PPPs as a way of developing local private sector capabilities through joint ventures with
large international firms, as well as sub-contracting opportunities for local firms in areas such as
civil works, electrical works, facilities management, security services, cleaning services,
maintenance services.
Using PPPs as a way of gradually exposing state owned enterprises and government to increasing
levels of private sector participation (especially foreign) and structuring PPPs in a way so as to
ensure transfer of skills leading to national champions that can run their own operations
professionally and eventually export their competencies by bidding for projects/ joint ventures.
Creating diversification in the economy by making the country more competitive in terms of its
facilitating infrastructure base as well as giving a boost to its business and industry associated with
infrastructure development (such as construction, equipment, support services).
Supplementing limited public sector capacities to meet the growing demand for infrastructure
development.
Extracting long-term value-for-money through appropriate risk transfer to the private sector over
the life of the project from design/ construction to operations/ maintenance.
41

Potential Risks of Public Private Partnerships

There are a number of potential risks associated with Public Private Partnerships:
Development, bidding and ongoing costs in PPP projects are likely to be greater than for traditional
government procurement processes - the government should therefore determine whether the
greater costs involved are justified.
There is a cost attached to debt While private sector can make it easier to get finance, finance will
only be available where the operating cash flows of the project company are expected to provide a
return on investment (i.e., the cost has to be borne either by the customers or the government
through subsidies, etc.)
Some projects may be more politically or socially challenging to introduce and implement than
others - particularly if there is an existing public sector workforce that fears being transferred to the
private sector, if significant tariff increases are required to make the project viable, if there are
significant land or resettlement issues, etc.
There is no unlimited risk bearing private firms (and their lenders) will be cautious about
accepting major risks beyond their control, such as exchange rate risks/risk of existing assets.
Private firms will also want to know that the rules of the game are to be respected by government
as regards undertakings to increase tariffs/fair regulation, etc. Private sector will also expect a
significant level of control over operations if it is to accept significant risks.
Private sector will do what it is paid to do and no more than that therefore incentives and
performance requirements need to be clearly set out in the contract. Focus should be on
performance requirements that are out-put based and relatively easy to monitor
Government responsibility continues citizens will continue to hold government accountable for
quality of utility services. Government will also need to retain sufficient expertise, whether the
implementing agency and/ or via a regulatory body, to be able to understand the PPP
arrangements, to carry out its own obligations under the PPP agreement and to monitor
performance of the private sector and enforce its obligations
A clear legal and regulatory framework is crucial to achieving a sustainable solution.
Given the long-term nature of these projects and the complexity associated, it is difficult to identify
all possible contingencies during project development and events and issues may arise that were
not anticipated in the documents or by the parties at the time of the contract.
It is more likely than not that the parties will need to renegotiate the contract to accommodate
these contingencies.
ECONOMIC SURVEY 2014-15 OBSERVATIONS ON PPP

Many infrastructure projects are today financially stressed, accounting for almost a third of stressed assets
in banks. New projects cannot attract sponsors, as in recent NHAI bids, and banks are unwilling to lend.
Given its riskiness, pension and insurance funds have sensibly limited their exposure to these projects. This
current state of the public private partnership (PPP) model is due to poorly designed frameworks, which
need restructuring.
Flaws in existing design
First, existing contracts focus more on fiscal benefits than on efficient service provision.
42

For example, in port and airport concessions, the bidder offering the highest share of gross revenue
collected to the government is selected. Thus, if this share is 33% (higher in many actual contracts),
the user pays 50% more than what is required, since the concessionaire is able to provide service
even though it gets only Re. 1 for every 1.50 charged.
Second, they neglect principles allocating risk to the entity best able to manage it. Instead,
unmanageable risks, e.g., traffic risk in highways, even though largely unaffected by their actions,
are transferred to concessionaires. This is also true for railways and in part, for ports (though interterminal competition is possible) and airports.
Third, the default revenue stream is directly collected user charges. Where this is deemed
insufficient, bidders can ask for a viability grant, typically disbursed during construction. This
structure leaves the government with no leverage in the case of non-performance, with few
contractual remedies short of termination.
Fiscal reporting practices also affect this choice. Current accounting rules treat future committed
expenditure as a contingent liability. However, foregone future revenue is not accounted for.
Fourth, there are no ex-ante structures for renegotiation. If a bureaucrat restructures a project,
there are no rewards; instead it may lead to investigation for graft. Failed projects lead neither to
penalties nor investigation. With such asymmetric incentives, bureaucrats naturally avoid
renegotiation.
Finally, contracts are over-dependent on market wisdom, e.g., bidders in ultra-mega power projects
(UMPP) could index tariff bids to both fuel prices and exchange rates, but almost all chose very
limited indexation. When fuel prices rose and the rupee fell, these bids became unviable. To
enforce market discipline and penalise reckless bidding, these projects should have been allowed to
fail.
Needed Modifications
Despite such flaws, PPP generated significant investment. Can these flaws be rectified in a country, like
India, which is reluctant to let concessionaires fail? What should future contracts look like?
First, it is better to continue combining construction and maintenance responsibilities to incentivise

building quality. In many projects, especially highways, maintenance costs depend significantly on
construction quality.
If a single entity is responsible for both construction and maintenance, it takes life-cycle costs into
account. Separating these responsibilities provide an incentive to increase profits by cutting corners
during construction.
Suggestions to let the public sector build assets and have the private sector maintain and operate
them ignore this linkage.
Second, risk should only be transferred to those who can manage it. In a highway or a railway
project, it is not sensible to transfer usage risk since it is outside the control of the operator. But, it
can be done in telecom projects and for individual port terminals that compete with each other,
where demand can respond to tariff and quality.
Third, financing structures should be able to attract pension and insurance funds, which are a
natural funding source for long-term infrastructure projects. What does this mean for key sectors?
43

First, rather than prescribed Model Concession Agreements, states should be allowed to
experiment. For example, in ports, terminals can be bid on the basis of an annual fee, with full tariff
flexibility, subject to competition oversight. For electricity generation, bids can be two-part, with a
variable charge based on normative efficiency, or alternatively, determined by regulators and a
capacity charge.
Another option, without that drawback, is the Least Present Value of Revenue (LPVR)a contract,
where the bid is the lowest present value (discounted at a pre-announced rate) of total gross
revenue received by the concessionaire. The concession duration is variable and continues until the
bid present value amount is received. A key advantage of this contract is that it converts usage risk
to risk of contract duration, which is more manageable for financial institutions. Since the bid is on
gross revenue, it also selects bidders who can execute at low cost and demand relatively lower
margins and by limiting the scope for renegotiation to the remaining uncollected value of the LPVR
bid, it discourages opportunistic bidding. Further, since the present value is protected, this
structure is suitable for pension and insurance funds.
Restructuring of existing contracts
Revival of private interest and bank lending needs existing contracts to be restructured, with burden
sharing among different stakeholders.
Lenders may have extended credit without necessary due diligence, assuming that projects were
implicitly guaranteed. Without burden sharing, this behaviour will be reinforced.
Similarly, many bidders may have assumed that they could renegotiate in the event of negative
shocks. Thus, there was potentially adverse selection of firms who felt they had the capacity to
renegotiate; rather than firms better at executing and operating the project.
In particular, this may have limited participation by foreign firms. In the absence of burden sharing,
such adverse selection would be supported.
Thus, the guiding principle should be to restructure contracts based on the project's revenues,
differentiating between temporary illiquidity and insolvency.
KELKAR COMMITTEE BROAD RECOMMENDATIONS

Kelkar Committee has proposed a series of recommendations with respect to revamping PPP in
infrastructure projects.
1. Clear-cut norms on resolving issues and clarifying norms on re-negotiation of contracts.
Infrastructure investments worth around Rs 12 Lakh Crore remained stuck at different stages as of endDecember 2014 due to a variety of issues such as land acquisition, lack of clearances, unfavourable market
conditions, and costly finances, according to Assocham study. This puts stress on banks and the
developers balance sheet.
The Kelkar report has drawn up extensive guidelines regarding the re-negotiation of the terms of
concession agreement, stipulating the reasons that form the basis for re-negotiation and those that should
not be entertained as valid reasons.
44

For example, if the distress in the project is not caused by the private party and is likely to adversely
affect the government or users, then that forms the basis for re-negotiation.
Similarly, if the project distress is due to material reasons and may result in default under the
existing concession agreement, then the pact itself can be re-negotiated.
However, if the distress is due to reasons that were foreseeable at the time of signing the
agreement, then no re-negotiation will take place.
2. Creation of Multi-Disciplinary Expert Institutions to address the problem of stalled PPP projects
The report talks about setting up an Infrastructure PPP Project Review Committee (IPRC) comprising at
least one expert in finance and economics, law, and one or more sectoral experts, preferably engineers
with a minimum of 15 years of experience in the industry in question.
It also recommends the creation of an Infrastructure PPP Adjudication Tribunal (IPAT) which is to be
chaired by a former Supreme Court Judge or former High Court Chief Justice, with at least one technical
and financial member.
3. Amend prevention of corruption act 1988
The government should take early action to amend the Prevention of Corruption Act, 1988 which does
not distinguish between genuine errors in decision-making and acts of corruption.
Measures may be taken immediately to make only malafide action by public servants punishable, and
not errors, and to guard against witch hunt against government officers and bureaucrats for decisions
taken with bonafide intention.
4. Moving away from the one-size-fits-all approach to PPP model concession agreements (MCAs)
The committee recommends that MCAs for each sector be reviewed independently to capture the
interests of all participating stakeholders users, project proponents, concessionaires, lenders and
markets.
5. Creation of dedicated institutions for PPP projects
Every stakeholder, without exception, has strongly emphasised the urgent need for a dedicated
institute for PPPs, as was announced in the previous budget.
The committee strongly endorses the 3P India (3PI), which can function as a centre of excellence,
enable research, and review and roll out activities to build capacity.
6. Promote zero coupon bonds
The finance ministry should allow banks and financial institutions to issue zero-coupon bonds, which
will also help to achieve soft landing for user charges in the infrastructure sector and its financing in
longer term.
7. Unsolicited Proposals (Swiss Challenge) may be actively discouraged as they bring information
asymmetries into the procurement process and result in lack of transparency and fair and equal treatment
of potential bidders in the procurement process.
8. The authorities should not treat PPPs as an off-balance sheet funding method for the governments
responsibility of providing reliable infrastructure services to its citizens.
45

PPPs should not be used as the first delivery mechanism without checking its suitability for a particular
project.
States and other agencies should also not treat Central PPP VGF as a source of additional grants that
can be accessed by adopting a PPP delivery mode for projects that are not suitable for such a long-term
financing structure.
9. Some countries have a legal framework for PPPs in the form of PPP Act/Law/Policy. MoF may develop
and publish a national PPP Policy document.
10. The committee agreed with concerns expressed both by the government and private parties against
demands for audits of PPP projects and revealing information through the Right to Information (RTI) Act.
Conventional audit by authority of private partners books per standard procurement process risks
delivery of poor quality of service and public assets the report contended, while advising that the
boundaries of operation of various statutory bodies be clearly defined through an overarching
mechanism.
SECTOR SPECIFIC RECOMMENDATIONS

Roads: Increase concession period for BOT projects
Introduce Hybrid Models, Viability Gap Funding, Operation and Maintenance Grants, etc for non-BOT
projects.
Relax exit norms.
Dispose pending cases between developers and NHAI.
Shift to electronic tolling in time-bound manner.
Ports: Move from pre-TAMP (Tariff Authority for Major Ports) to current-TAMP
Strengthen and accelerate environmental clearance.

Provide support infrastructure (including land, reliable access to utilities, dredging, rail, roads) to
developer.
Railways: Take up simpler projects first to build credibility
Such projects can be brownfield monetisation of existing stations or, greenfield development of
new stations.
Set up regulatory authority to settle technical issues such as track-access charges.
Power: Not many power projects are under PPP. But the sector has a far-reaching impact on
infrastructure PPPs
Immediately address power sector finances as they are hurting bank loans.
Airports: Prepare a policy that addresses the expected growth parameters of the sector and promotes
PPPs
Concession agreement should stipulate important commercial parameters like return on equity,
treatment of land for non-commercial purposes.
Develop brownfield and green-field airports with defined structure, revenue sharing mechanisms.
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SOME POINTS OF CRITICISM BY CAG IN ITS VARIOUS PPP REPORTS AND THE POSSIBLE SOLUTIONS BY KELKAR COMMITTEE
PORTS
Criticism by CAG
Delays in majority of projects due to time
taken in finalization of tenders, security
clearances, concession agreement and
tender process.
Delays in obtaining environmental

clearance.
Delays in handing over of project sites and
back up area.
Solutions by Kelkar Committee

Urgent need to focus on strengthening the systems to
speed up the overall environmental clearance
process.
More institutions are required to be given
authorization for conducting Coastal Regulation Zone
Demarcation.
Need to provide support infrastructure facilities
including land, utilities, dredging, rail and
road evacuation infrastructure through enforceable
obligations.
ROADS
Criticism by CAG
Inconsistency in adopting carrying
capacity/tollable traffic as yardstick for
determining the Concession Period by
NHAI resulted in fixing higher concession
period and higher toll burden on road
users.
Projects were approved despite the known
late realization of minimum threshold
traffic.
The Total Project Cost (TPC) worked out by

the concessionaires was higher as
compared to TPC worked out by the NHAI.
In 25 projects, TPC worked out
by concessionaire was higher by 50%.
Solutions by Kelkar Committee

In
the
case
of
BOT
toll projects, focus on projects with longer
concession period. NHAI, concessionaire can opt for
revenue share on a case to case basis.
In case of projects that are not viable on BOT toll
basis, options to fund through hybrid models, grant of
VGF, part annuity, O&M grants, and debt instruments,
maybe explored.
The concessioning authority may undertake detailed
project development activities including demand
assessment, soliciting stakeholder views on project
structure and financial viability analysis to estimate a
shadow bid, which could be used to compare actual
bids received.
CONCLUSION
The success of deploying PPP as an additional policy instrument for creating infrastructure in India will
depend on the change in attitudes and mindsets of all the authorities including public agencies partnering
the private sector, government departments supervising the PPPs, and auditing and legislative institutions
providing oversight of the PPPs. The PPP reflects a paradigm shift involving the private sector. It means
moving away from transaction to relationship, accommodating give and take between private and
public sector partners, and finally accepting uncertainties and appropriate adjustments inherent in
implementing long-time contracts. The Committee urges all parties concerned to foster trust between
the private sector and public sector partners in implementing PPP.
Indias demographic deadlines are staring at us. There are only two or three decades left to complete the
transition from a country that has just attained middle-income status to that of a high-income and
developed economy. Besides the basic problems for provision of adequate infrastructure, the middle-
47

income trap is also to be averted. Without adequate infrastructure, this will simply not be possible. India
is currently in a global win-win situation with a large young population that will need good jobs and a huge
pool of global savings that can be tapped for building out our infrastructure. PPPs are an important policy
instrument that will enable India to compress time in this journey towards economic growth and
development. A successful and growing stream of PPPs in infrastructure will go a long way in accelerating
the countrys development process.
8. HYBRID ANNUITY MODEL

1. What do you mean by Hybrid Annuity Model (HAM)? Why was it needed? Does it provide Win-Win
situation for both government and private developers?
2. The government has recently introduced a new variant of PPP model i.e. Hybrid Annuity Model. What
are its significant features and compare it with other PPP Models and EPC?
BACKGROUND
The Cabinet Committee on Economic Affairs (CCEA) has approved a Hybrid Annuity Model (HAM) for
national highways in January 2016, clearing the way for stranded road projects worth Rs.25,000 Crore.
While Engineering, Procurement and Construction, or EPC, was the preferred mode for highway project
development in 2013-14 and 2014-15, it suffered from an inherent limitation - the financial resources
available with the government. This is what led the Ministry of Road Transport and Highways to introduce
an alternative mode of project delivery to sustain the pace of implementation of highway projects through
optimum utilization of available financial resources.
The Hybrid model will be the fourth to be introduced in India for the execution of road projects and is
intended to kick start stalled projects and accelerate highway construction.
The three formats for road projects in India followed so far:
1. BOT (Toll) - Build Operate Transfer and Toll: This was one of the earliest models of PPP used for road
construction. The private party is selected to build, maintain and operate the road based on the fact that
which private bidder offered maximum sharing of toll revenue to the government. Here, all the risks- land
acquisition and compensation risk, construction risk (i.e. risk associated with cost of project), traffic risk
and commercial risk lies with the private party. The private party is dependent on toll for its revenues. The
government is only responsible for regulatory clearances.
Clearly private party bears maximum risk in BOT (Toll).
2. BOT (Annuity) - Build Operate and Transfer: This model was brought in to reduce risk for private players
so as to attract them for PPP projects (as the previous BOT - Toll model was happening to be an unviable
project for many road projects due to excessive risk involved, thus, forcing private players to shy from
bidding in road PPP projects).
In this model, the private player build, maintain and operate the road projects while government pays each
year (annually) the private player a fixed amount of annuity for the term of contract. The private party
48

recovers all the costs which it incurred for building, maintaining and operating the road project from the
annual annuity amount paid by the government.
It is obvious that there is no commercial and traffic risk to the private party as was the case with BOT
Toll model. However, risk associated with cost of project remains. And it goes without saying that the
government selects that private player (in competitive bidding) who asks for minimum annual annuity
from the government for the project
3. Engineering, Procurement and Construction (EPC): From year 2010 and more so after year 2013/2014,
government failed to attract private players for road projects even under BOT - Annuity model. So, EPC
Model was brought in, where all (100%) money or cost to build the road is provided by the government
including that for land acquisition and rehabilitation of people affected by project. Private developers will
only design and build fixed length of stretches and leave after completing their part of work handing the
road to the government, which then maintains and operates the road by collecting toll or otherwise. The
contract for building road is given to that private player who offers to build it at lowest price while
simultaneously guaranteeing the quality desired.
Quite clearly, the risk to private player in this model is minimum as it only bears construction risk. On the
other hand, forget all other risks like land acquisition, compensation, commercial, traffic, security etc.
which is borne by government. The model even makes the government responsible for financing the road
projects. So, in a sense, EPC Model is a simple contract which a government gives to a private player for
getting a work done efficiently and so technically speaking, the EPC Model cant be called a PPP Model but
a public funded model.
The EPC model was putting lot of strain to the
government for financing road projects. The model was
defeating all grand plans of government to bring a
substantial part of financing of road projects from
private sector. The precarious situation of government
finances with mounting subsidy bill and fiscal deficit
coupled with the necessity of quickly building roads and
highways, caused the realization of one thing to the
government- that the EPC Model is unsustainable and
private players needed to be attracted to some new and
innovative PPP model.
HYBRID ANNUITY MODEL (HAM)
The HAM is a mix of Engineering, Procurement and

Construction (EPC) and build-operate-transfer (BOT)
formats, with the government and the private
companies sharing the total project cost in the ratio
of 40:60 respectively.
The government also shoulders the responsibility of
revenue collection. The National Highway Authority
of India (NHAI) will collect toll and refund the
49

amount in instalments over a period of 15 years in 20 equated instalments.

MAJOR ADVANTAGES OF THE MODEL
Private sector is not required to bear the traffic risk.

Reduced Equity Investments by the developers.
Reduced initial capital outflow for authority compared to EPC mode.
Easier Debt Servicing by concessionaires during the initial years of project compared to BOT (Toll)
projects.
Comfort to lenders through assured Annuity Payments.
HOW WILL THE NEW HYBRID ANNUITY MODEL IMPACT HIGHWAY PROJECTS?
Return of Old Contractors: The hybrid annuity model probably has some hope of bringing a few select
Indian contractors back into the highway concession business, where they may have struggled to
deploy capital into toll roads. This model involves lower equity outlay upfront and substantially higher
revenue certainty.
Entry of International Contractors: International road contractors will view this as a low-to-moderate
risk deferred payment
EPC contract and use
the (hybrid) model as a
significant contracting
opportunity.
No
Aggressive
Bidding: In spite of the
lower equity investment
requirement and the
minimal revenue risks in
this
model,
many
existing companies with
hugely stressed balance
sheets may still struggle to participate in these bids because any incremental equity outlay and project
finance may be beyond their present means.
Stress-free Lending: Lending for hybrid annuity-modelled projects would be comparatively easier as
there is no traffic risk associated. Lenders would be comfortable as the execution risk is less for
contractors as the bidding rolls out only after 90% land is available. Also, there would be softer interest
rate provided to the industry along with annuity payments from NHAI will help in stress free lending.
Speedy Completion of the Projects: Introduction of the hybrid annuity model is expected to result in
speedy completion of projects. For private participants, this allows them to focus on execution of the
projects wherein they will be hedged against inflation risk associated with increasing cost of raw
materials as project cost will be allowed to increase with inflation.
IS THIS MODEL A WIN-WIN SITUATION FOR BOTH GOVERNMENT AND DEVELOPER?
In the current situation where developers lack capital, the move to lower the upfront costs is
significant. Given the certainty of cash flows in the annuity model, developers can obtain more
50

leverage from banks. This model is likely to ease financial burden on the exchequer too, as it lowers
their upfront contribution for the project compared to EPC.
An important feature of the Hybrid Annuity Model for highways development is the rational approach
adopted for allocation of risks between the PPP partners - the Government and the private partner i.e.
the developer/investor.
While the private partner continues to bear the construction and maintenance risks as in BOT (Toll)
projects, it is required only to partly bear financing risk.
Further, the developer is insulated from revenue/traffic risk and the inflation risk, which are not within
its control.
This new model will reduce financial burden on the concessionaire during project implementation
phase. Compared to EPC projects, the shift to HAM would also ease cash flow pressure on the NHAI.
Adopting such a model for projects not found viable on BOT (Toll) mode shall be more effective in
terms of maximizing the quantum of kilometers implemented within the available financial resources
of the Government.
By adopting the model, all major stakeholders in the PPP arrangement the Authority, lender and the
developer, concessionaire would have an increased comfort level resulting in revival of the sector
through renewed interest of private developers/investors in highway projects and this will bring relief
thereby to citizens/travelers in the area of a respective project.
9. MASTERING THE FOURTH INDUSTRIAL REVOLUTION

1. Explain the concept of Fourth Industrial Revolution and compare it with the previous three Industrial
Revolutions.
2. Fourth Industrial Revolution is nothing more than a prolongation of the Third Industrial Revolution.
Critically analyze.
3. Fourth Industrial Revolution is a technological revolution that will fundamentally alter the way we
live, work and relate to one another. Argue this with the impact of such revolution on different
stakeholders.
4. Is it India time to shine in the Fourth Industrial Revolution? Comment.
BACKGROUND
The official theme of the World Economic Forum held in January 2016 was mastering the fourth
industrial revolution, also known as Industry 4.0. Leading global thinkers have defined this as a new era
in which increase of automation and agility will transform and disrupt business. It is described by the
founder and executive chairman of WEF, Klaus Schwab, as a technological revolution that will
fundamentally alter the way we live, work and relate to one another. According to a report, adopting
the fourth industrial revolution could add $14.2 trillion to the world economy over the next 15 years.
THE INDUSTRIAL REVOLUTIONS
1. The First Industrial Revolution began in Britain in the last quarter of the 18th century with the
mechanization of the textile industry, harnessing of steam power, and birth of the modern factory.
2. The Second Revolution began roughly a century after the first and peaked at the beginning of the 20th
century, embodied in Henry Fords creation of the moving assembly line that ushered in mass
production.
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3. The Third Industrial Revolution, beginning at around 1970s, was digital and applied electronics and
information technology to processes of production.
4. The Fourth Industrial Revolution is conceptualized as an upgrade on the third revolution and is marked
by a fusion of technologies straddling the physical, digital and biological world.
A KEY NOTE ON FOURTH INDUSTRIAL REVOLUTION
The Fourth Industrial Revolution combines digital and physical systems to completely transform the
interaction between humans and machines.
The tools that it has at its disposal include big data, robotics, augmented reality and the Internet of
Things.
The Fourth Industrial Revolution builds upon the first three industrial revolutions (steam power and
mechanical production; assembly lines and electrification; and electronics and computing) and the
rapid pace of technological progress since then to achieve almost surreal results by fusing the
boundaries between all of them.
The vision of Industry 4.0 is for cyber-physical production systems in which sensor-laden smart
products tell machines how they should be processed. Processes would now govern themselves in a
decentralized, modular system. Smart embedded devices start working together wirelessly either directly or
via either the Internet cloud the Internet of Things (IoT) to once again revolutionize production. Rigid,
centralized factory control systems give way to decentralized intelligence as machine-to-machine
communication hits the shop floor. This is the Industry 4.0 vision of the Fourth Industrial Revolution.
There are 5 main reasons why Industry 4. 0 is pertinent and essential and a revolutionary catalyst:
1.
2.
3.
4.
5.
Data can alleviate current challenges for manufacturers.

It generates an innovation economy.
The consumer becomes the central focus.
Workers become coordinators instead of manual laborers.
A sustainable prosperity for business is on the cards.
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IS IT A PROLONGATION OF THE THIRD INDUSTRIAL REVOLUTION OR A DISTINCT ONE?
The Fourth Industrial Revolution is distinct from the Third Industrial Revolution in 3 parameters: Velocity,
Scope and Systems Impact.
The speed of current breakthroughs has no historical precedent. When compared with previous
industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace.
It is disrupting almost every industry in every country.
The breadth and depth of these changes herald the transformation of entire systems of production,
management, and governance.
The possibilities of billions of people connected by mobile devices, with unprecedented processing power,
storage capacity, and access to knowledge, are unlimited. And these possibilities will be multiplied by
emerging technology breakthroughs in fields such as artificial intelligence, robotics, the Internet of Things,
autonomous vehicles, 3-D printing, nanotechnology, biotechnology, energy storage, and quantum
computing.
Already, artificial intelligence is all around us, from self-driving cars and drones to virtual assistants and
software that translate or invest. Impressive progress has been made in Artificial Intelligence in recent
years, driven by exponential increases in computing power and by the availability of vast amounts of data,
from software used to discover new drugs to algorithms used to predict our cultural interests. Digital
fabrication technologies, meanwhile, are interacting with the biological world on a daily basis. Engineers,
designers, and architects are combining computational design, additive manufacturing, materials
engineering, and synthetic biology to pioneer a symbiosis between micro-organisms, our bodies, the
products we consume, and even the buildings we inhabit.
IMPACT OF THIS REVOLUTION ON DIFFERENT STAKEHOLDERS

Impact on Government
As the physical, digital, and biological worlds continue to converge, new technologies and platforms
will increasingly enable citizens to engage with governments, voice their opinions, coordinate their
efforts, and even circumvent the supervision of public authorities.
Simultaneously, governments will gain new technological powers to increase their control over
populations, based on pervasive surveillance systems and the ability to control digital infrastructure.
However, governments will increasingly face pressure to change their current approach to public
engagement and policymaking, as their central role of conducting policy diminishes owing to new
sources of competition and the redistribution and decentralization of power that new technologies
make possible.
Ultimately, the ability of government systems and public authorities to adapt will determine their
survival. If they prove capable of embracing a world of disruptive change, subjecting their structures to
the levels of transparency and efficiency that will enable them to maintain their competitive edge, they
will endure. If they cannot evolve, they will face increasing trouble.
This will be particularly true in the realm of regulation.
Current systems of public policy and decision-making evolved alongside the Second Industrial
Revolution, when decision-makers had time to study a specific issue and develop the necessary
response or appropriate regulatory framework. The whole process was designed to be linear and
mechanistic; following a strict top down approach. But such an approach is no longer feasible.
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Given the Fourth Industrial Revolutions rapid pace of change and broad impacts, legislators and
regulators are being challenged to an unprecedented degree and for the most part are proving
unable to cope. This means regulators must continuously adapt to a new, fast-changing
environment, reinventing themselves so they can truly understand what it is they are regulating. To
do so, governments and regulatory agencies will need to collaborate closely with business and civil
society.
The Fourth Industrial Revolution will also profoundly impact the nature of national and international
security, affecting both the probability and the nature of conflict.
The history of warfare and international security is the history of technological innovation, and
today is no exception. Modern conflicts involving states are increasingly hybrid in nature,
combining traditional battlefield techniques with elements previously associated with non-state
actors. The distinction between war and peace, combatant and noncombatant, and even violence
and non-violence (think cyber warfare) is becoming uncomfortably blurry.
Impact on People
The Fourth Industrial Revolution, finally, will change not only what we do but also who we are. It will
affect our identity and all the issues associated with it: our sense of privacy, our notions of ownership,
our consumption patterns, the time we devote to work and leisure, and how we develop our careers,
cultivate our skills, meet people, and nurture relationships.
The inexorable integration of technology in our lives could diminish some of our quintessential human
capacities, such as compassion and cooperation.
One of the greatest individual challenges posed by new information technologies is privacy.
The revolutions occurring in Biotechnology and Artificial Intelligence, which are redefining what it
means to be human by pushing back the current thresholds of life span, health, cognition, and
capabilities, will compel us to redefine our moral and ethical boundaries.
Impact on Businesses
There is clear evidence that the technologies that underpin the Fourth Industrial Revolution are having a
major impact on businesses.
On the supply side, many industries are seeing the introduction of new technologies that create
entirely new ways of serving existing needs and significantly disrupt existing industry value chains.
Major shifts on the demand side are also occurring, as growing transparency, consumer engagement,
and new patterns of consumer behavior (increasingly built upon access to mobile networks and data)
force companies to adapt the way they design, market, and deliver products and services.
A key trend is the development of technology-enabled platforms that combine both demand and
supply to disrupt existing industry structures, such as those we see within the sharing or on
demand economy.
On the whole, there are four main effects that the Fourth Industrial Revolution has on business - on
customer expectations, on product enhancement, on collaborative innovation, and on organizational
forms.
1. Whether consumers or businesses, customers are increasingly at the epicenter of the economy, which
is all about improving how customers are served.
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2. Physical products and services, moreover, can now be enhanced with digital capabilities that increase
their value. New technologies make assets more durable and resilient, while data and analytics are
transforming how they are maintained.
3. A world of customer experiences, data-based services, and asset performance through analytics,
meanwhile, requires new forms of collaboration, particularly given the speed at which innovation and
disruption are taking place.
4. And the emergence of global platforms and other new business models, finally, means that talent,
culture, and organizational forms will have to be rethought.
CHALLENGES AND OPPORTUNITIES
The Fourth Industrial Revolution has the potential to raise global income levels and improve the quality
of life for populations around the world.
To date, those who have gained the most from it have been consumers able to afford and access the digital
world; technology has made possible new products and services that increase the efficiency and pleasure
of our personal lives.
In the future, technological innovation will also lead to a supply-side miracle, with long-term gains in
efficiency and productivity.
Transportation and communication costs will drop, logistics and global supply chains will become more
effective, and the cost of trade will diminish, all of which will open new markets and drive economic
growth.
As the economists have pointed out, the revolution could yield greater inequality, particularly in its
potential to disrupt labor markets.
As automation substitutes for labor across the entire economy, the net displacement of workers by
machines might exacerbate the gap between returns to capital and returns to labor.
On the other hand, it is also possible that the displacement of workers by technology will, in aggregate,
result in a net increase in safe and rewarding jobs.
In the future, talent, more than capital, will represent the critical factor of production. This will give rise
to a job market increasingly segregated into low-skill/low-pay and high-skill/high-pay segments,
which in turn will lead to an increase in social tensions.
In addition to being a key economic concern, inequality represents the greatest societal concern
associated with the Fourth Industrial Revolution. The largest beneficiaries of innovation tend to be the
providers of intellectual and physical capital - the innovators, shareholders, and investors - which
explains the rising gap in wealth between those dependent on capital versus labor.
Technology is therefore one of the main reasons why incomes have stagnated, or even decreased, for a
majority of the population in high-income countries: the demand for highly skilled workers has increased
while the demand for workers with less education and lower skills has decreased. The result is a job market
with a strong demand at the high and low ends, but a hollowing out of the middle.
HOW IMPORTANT IS THE FOURTH INDUSTRIAL REVOLUTION FOR INDIA?
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Extremely important
In 1600, India contributed more than 22% of the worlds gross domestic product, which reduced to
about 4% in 1990 before economic reforms revived it up to 6.8%. This was a major reason for India
failing to climb the bandwagon of the first industrial revolution.
India remained behind the curve on the next two as well. If India fails to reap the benefits of the fourth,
it will not have imperial Britain to blame this time.
Challenges India may face in reaping benefits

Indias path is strewn with challenges.
Its comparative advantage of cheap labour, most of which is very poorly skilled, will be blunted by the
fourth industrial revolution.
While India needs to invest heavily in up skilling initiatives, the probability of some dislocations cannot
be discounted.
This will require it to make provisions for elaborate safety nets without letting it degenerate into an
entitlement culture.
Building the right institutions of governance, particularly regulatory institutions, is another challenge.
Hierarchical bureaucracies operating in silos are not geared to deal with networked firms operating on
dynamic real-time data.
Regulators have to do a lot better for India to realize the fourth industrial revolutions benefits.
CONCLUSION
In the end, it all comes down to people and values. We need to shape a future that works for all of us by
putting people first and empowering them. In its most pessimistic, dehumanized form, the Fourth
Industrial Revolution may indeed have the potential to robotize humanity and thus to deprive us of our
heart and soul. But as a complement to the best parts of human nature - creativity, empathy and
stewardship - it can also lift humanity into a new collective and moral consciousness based on a shared
sense of destiny.
10. INSOLVENCY AND BANKRUPTCY CODE

1. The current road of handling insolvency and bankruptcy is marked with legislative and judicial hurdles
which has serious repercussions for our economy. In the context of this statement, analyze how the
proposed IBC improves the situation.
2. Barring few provisions, the insolvency and bankruptcy code can be considered as panacea for dealing
with the problem of stresses assets in the banking sector. Critically comment.
3. It is said that current regime of insolvency and bankruptcy in India is a major problem of
entrepreneurs. Why? And how IBC is proposing to resolve it?
Background
The Insolvency and Bankruptcy Code, 2015 was introduced by the Minister of Finance in Lok Sabha on
December 21, 2015. The Code seeks to create a unified framework for resolving insolvency and
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bankruptcy in India. And like other Bills in this winter session, it has now gone into deep freeze and has
been referred for further scrutiny to a joint parliamentary committee.
The Code seeks to repeal the Presidency Towns Insolvency Act, 1909 and Provincial Insolvency Act,
1920. In addition, it seeks to amend 11 laws, including the Companies Act, 2013, Recovery of Debts Due to
Banks and Financial Institutions Act, 1993 and Sick Industrial Companies (Special Provisions) Repeal Act,
2003, among others. The Code will apply to companies, partnerships, limited liability partnerships,
individuals and any other body specified by the central government.
DIFFERENCE BETWEEN INSOLVENCY AND BANKRUPTCY
Insolvency is a state of affairs in which the financial difficulties of a company are such it is unable to run its
business at its current pace.
Warning signs could be drop in sales, delay in payments, erosion of share capital and increasing reliance on
credit. Tests of insolvency are two fold cash flow test where it is unable to pay debts, and the balance
sheet test where the liabilities, including contingent and prospective exceed the realizable assets. Very
often a company may have considerable assets, but illiquid, or the balance sheet reflects solvency, yet the
company is unable to honour its debt obligations. The line of difference is thin, bankruptcy being a legal
option, if the insolvency is not addressed the end of the road of the twilight zone.
But insolvency is capable of being managed or resolved and a company does not have to declare
bankruptcy.
NEED OF A UNIFIED FRAMEWORK
Speedier, time-bound and robust insolvency resolution mechanism can help creditors recover a larger
part of their investment faster, allowing them to re-invest in other businesses, thereby facilitating the
efficient flow of capital across the economy by promoting investment and boosting credit markets
It helps in improving ease of doing business in India. Currently it takes, on an average, more than four
years to resolve insolvency in India, according to the World Banks Ease of Doing Business report. The
new code seeks to cut down the time to less than a year.
India is a capital starved country and therefore it is essential that capital isnt frittered away on weak
and unviable businesses. Quick resolution of bankruptcy can ensure this.
For streamlining and consolidating all the existing laws to make the process simpler.
To provide an easy exit option for insolvent and sick firms.
It will enable quick and prompt action to be taken in the early stages of debt default by a firm,
maximizing the recovery amount.
The creditors will not be stymied by red-tape and promoters will directly become accountable for any
financial lapses.
It will help address the crisis of non-performing assets in the banking sector, improve the climate for
entrepreneurship and enable the corporate and infrastructure bond market.
To ensure that neither the executive nor the judiciary take economic decisions about the firms future.
MAJOR PROVISIONS
Insolvency Resolution: The insolvency resolution process (IRP) for individuals varies from that of
companies. These processes may be initiated by either the debtor or the creditors.
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Resolution process for companies and limited liability partnerships: The resolution process will have to be
completed within a maximum period of 180 days from the date of registration of the case. This period may
be extended by 90 days if 75% of the financial creditors agree. The process will involve negotiations
between the debtor and creditors to draft a resolution plan. The process will end under two circumstances
- (i) when a resolution plan is agreed upon by a majority of the creditors and submitted to the adjudicating
authority, or (ii) the time period for negotiation has come to an end. In case a plan cannot be negotiated
upon, the company will go into liquidation.
Resolution process for companies with smaller operation: There will be provision for a fast track
insolvency resolution process for companies with smaller operations. The process will have to be
completed within 90 days, which may be extended if 75% of financial creditors agree.
Resolution process for individuals and partnerships: Before going in for insolvency resolution, the debtor
may apply for forgiveness of a specified amount of debt, provided that his assets are below a limit set by
the central government. This process will have to be completed within six months.
Insolvency professionals and agencies: In case of insolvency resolution, negotiations between the debtor
and creditors will be supervised by an insolvency professional. If negotiations succeed, a repayment plan,
agreed upon by a majority of the creditors, will be submitted to the adjudicator. If they fail, the matter will
proceed to bankruptcy resolution. The IRP will be managed by a licensed professional. The professional
will also control the assets of the debtor during the process. The Bill vests the insolvency professionals
tasked with the job, with substantial powers. Criminal charges will apply if they notice any asset stripping
by the promoters or responsible parties. The Code also proposes to set up insolvency professional
agencies. These agencies will admit insolvency professionals as members and develop a code of conduct
and evolve performance standards for them.
Information Utilities: The Code proposes to establish information utilities which will maintain a range of
financial information about firms. These utilities will collect, collate and disseminate this information to
facilitate insolvency resolution proceedings.
Insolvency regulator: The Code seeks to establish the Insolvency and Bankruptcy Board of India, to oversee
insolvency resolution in the country. The Board will have 10 members, including representatives from the
central government and Reserve Bank of India. It will register information utilities, insolvency
professionals and insolvency professional agencies under it, and regulate their functioning.
Insolvency and Bankruptcy Fund: The Code creates an Insolvency and Bankruptcy Fund. Deposits to the
Fund will include:
grants made by the central government,

amount deposited by persons, and
Interest earned on investments made from the Fund
Any person who has contributed to the Fund may apply for withdrawal, in case of proceedings against him.
Bankruptcy and Insolvency Adjudicators: The Code proposes two separate tribunals to adjudicate
grievances related to insolvency, bankruptcy and liquidation of different entities under the law:
the National Company Law Tribunal will have jurisdiction over companies and limited liability
partnerships, and
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The Debt Recovery Tribunal will have jurisdiction over individuals and partnership firms. Appeals
against orders of these tribunals may be challenged before their respective Appellate Tribunals, and
further before the Supreme Court.
Offences and penalties: The Bill specifies that for most offences committed by a debtor under corporate
insolvency (like concealing property, defrauding creditors, etc.), the penalty will be imprisonment of up to
five years, with a fine of up to one crore rupees. For offences committed by an individual (like providing
false information), the imprisonment will vary based on the offence. For most of these offences, the fine
will not exceed five lakh rupees.
Distribution of proceeds: The bill also provides for priority with regard to distribution of proceeds
following liquidation of the company. In the order of priority, the first charge will be insolvency resolution
process cost and liquidation costs to be paid in full. Liquidation proceeds will then be used to clear debts
owed to secured creditors, and then to pay workmens dues for 12 months, unpaid dues to employees
other than workmen, and financial dues owed to unsecured creditors, in that order. Government taxes for
two years, other debts, preference shareholders and equity shareholders will receive last priority for
payment.
HOW THE BILL IMPROVES CURRENT REGIME ?

Available legal routes and its unpredictability
In current regime, if an Indian company defaults on debt, there are at least four different legal routes
available to the debtor and its creditors, each under a different law. And, typically, all these routes tend
to be used by different parties when a company is on the brink of insolvency.
Currently, there is no single law dealing with insolvency and bankruptcy in India. Liquidation of companies
is handled by the high courts, individual cases are dealt with under the Presidency Towns Insolvency Act,
1909 and Provincial Insolvency Act, 1920.
As a result, four different agencies, the high courts, the Company Law Board, the Board for Industrial and
Financial Reconstruction (BIFR), and the Debt Recovery Tribunals (DRTs), have overlapping jurisdiction,
giving rise to the potential of systemic delays and complexities in the process. A strong bankruptcy law can
help overcome these challenges.
It leads to obvious inefficiencies, delays and situation of conflict, unpredictability of outcomes in case of a
default
The draft Bill addresses this issue by providing an organised process for insolvency resolution that can
be initiated by either the debtor or its creditors. Once an application for insolvency resolution is
accepted, a 180-day moratorium comes into place during which no claims can be pursued against the
debtor or its assets. The debtor will have the comfort that all pledged assets remain with the firm, and
that no creditor can disrupt the smooth working of the enterprise. In return for this protection, the
debtor will agree to the firm being managed by a regulated insolvency professional. Doing so will
assure the creditors that managers will not resort to asset stripping.
Delay
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Time is of the essence in insolvency proceedings as the net worth of a debtor in default tends to erode
quickly over time.
In current regime, Delays are particularly prevalent in liquidation where court-appointed official liquidators
take years to complete the distribution of assets of the insolvent debtor. Courts have done little to help
this process as they have historically adopted a pro-rehabilitation stance
The draft Bill proposes to minimise the possibility of delay in several ways. First, it stipulates strict
timelines. Second, recognising that several delays arise from bottlenecks in court proceedings, the draft
Bill seeks to minimise the role of the adjudicating authority. The principal business decisions such as
the economic viability of the debtor, will be determined through negotiations between the debtor and
creditors - an exercise that will be facilitated by insolvency professionals.
CRITICISMS OF THE BILL
The draft Bill needs careful review, particularly on how the new law would interact with existing laws in
this space, including the Sarfaesi Act and other debt recovery laws. If these laws are not repealed (as
sought by the bill), there must at least be a clear demarcation of when these laws would apply and of
overriding provisions in cases of conflict with the code, if we are to avoid reverting to the old regime of
chaos and uncertainty.
The proposed Bill is also quite ambitious in the creation of a new institutional architecture to deal with
insolvency. Among other things, it proposes the establishment of a new regulator, the creation of a
new profession of insolvency professionals and the establishment of institutions known as information
utilities that are designed to provide accurate information on defaults. These institutions and practices
will take time to establish and there need to be well thought out transitional arrangements in the
interim. Equally essential is significant training for insolvency professionals and judges if insolvency
resolution and liquidation are to be the efficient and time-bound processes that the draft Bill envisages.
Cynics think that the Bill will promote hire-and-fire policies. The optimists say that as long as employees
are adding value, they will continue to be sought-after.
Another controversy regarding this bill was to introduce it as a money bill, implying that Rajya Sabha will
have a limited role in it. This is disconcerting because money bills have a special place in our Constitution.
Article 110 mandates that a money bill must only entertain provisions dealing with the imposition,
abolition, remission, alteration or regulation of any tax; the regulation of borrowings by the government of
India and the regulation of the Consolidated Fund of India, including appropriation of moneys out of this
fund and the bankruptcy code, by any reckoning, is not a money bill and introducing it as such was an
unfortunate constitutional trick.
CONCLUSION
A sound bankruptcy legislation is a complex piece of procedural law. The drafting has to be ironclad so that
there are no loopholes, which may lead to delays. The proposed law rests on four pillars of enabling
infrastructure: A regulator, insolvency professionals, information utilities and the tribunals. For the
bankruptcy process to work properly, each of these pillars has to be of world-class quality. If they are not,
we run the risk of having a law that only looks good on paper.
The proposed Insolvency and Bankruptcy Bill is only a starting point for easing exits for debtors in distress,
preserving value and providing creditors with greater certainty in outcomes. Yet, by providing for a linear,
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time-bound and collective process for insolvency resolution and liquidation, it is a step in the right
direction.
11. GLOBAL HDR 2015 & CONCERN FOR INEQUALITY

The HDI is a composite index meant to compare the well-being of people across countries and was first
introduced by the UNDP in 1990. It is calculated as the geometric mean of three indicators: life expectancy
(a long and healthy life), education (access to knowledge - measured by mean years of education among
the adult population, and access to learning and knowledge measured by expected years of schooling for
children of school-entry age) and national income (a decent standard of living).
The country was ranked 130 among 188 nations in the Human Development Report 2015 by the UN
Development Programme (UNDP). Indias ranking of 135 in the previous years report was revised to 131,
the report said. India climbed one spot to 130 in the latest United Nations Human Development Index
(HDI), indicating slow progress in improving peoples living standards in Asias third-largest economy.
Indias 2014 HDI value of 0.609 is below the average for countries in the medium human development
group but above the average for countries in South Asia
Progress
Among Indias HDI parameters that have improved between 1980 and 2014 were life expectancy at birth,
which increased to 68 years in 2014 from 67.6 in the previous year and 53.9 in 1980.
Per capita gross national income was $5,497 in 2014up from $5,180 in 2013 and $1,255 in 1980. But On
the Multidimensional Poverty Index developed by the Oxford Poverty and Human Development Initiative,
which measures deprivation on six indicators, over half of Indias population is multi-dimensionally poor,
while a further 18 per cent are close to this line. However, the data for this index for India dates back to
2005-06.
Of the three sub-components, India had a substantially higher income per capita than countries that did
better than it on the index
Reason for low ranking

Inequality, particularly in education
The average adult man in India gets twice as many years of schooling as the average adult woman.
The average years of schooling that the average Indian adult has received (5.4 years) was particularly
low among middle income countries. Although mean years of schooling have increased from 4.8 to 5.4
over the period 2005-2014.
It said the expected years of schooling in India has been stagnant at 11.7 since 2011. Also, average
years of schooling at 5.4 have not changed since 2010.
ROLE OF WORK IN IMPROVING HUMAN DEVELOPMENT

This years report focused on the nature of work and how new technologies and innovations influenced it.
Work is an important factor which determines the increase or decrease in the capability, in turn well-being,
of an individual.
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Through work, people can build a secure basis for their lives, enabling them to make long-term decisions
and establish priorities and choices. They can also sustain stable households, particularly if they use their
income prudently on food and nutrition for their family, on education and health for their children, or for
savings,
The report takes special care to differentiate work from jobs. While work is not necessarily always
rewarded, a job is work done for a predetermined payment.
Implicit work like the contributions of homemakers and volunteers add significantly to human
development, whereas explicit work which is underpaid or bonded may have negative repercussions. The
work of overseas workers and their remittances have brought about human development to both the
source and destination countries. In 2014, with $70 billion (4% of GDP) India topped the list of developing
nations which received remittances from abroad.
It is the divergence between the monetary evaluation of work and job that essentially divides the world,
widening inequality.
To ensure that the work-force is capable of adapting to rapidly changing demands, governments need to
make strategic investments into education and health care considering the direct relationship between
education, health and work
HDR 2015 has an agenda for decent work that rests on four pillars: employment creation and enterprise
development; standards and rights at work; social protection and governance; and social dialogue. The
formula is simple enough. Making use of it will be less so
STEPS NEED TO BE TAKEN BY INDIA

India needs to address the three parameters of human development separatelyand simultaneously.
First, for long and healthy life It cannot envisage this goal without addressing the issue of
malnutrition which is plaguing it. The recent improvements in nutrition have been noteworthy but not
enough.
Second, in terms of knowledge, India needs to ensure access and quality through effective
implementation of schemes such as Digital India and Skill India.
Stress quality & reduce inequality: Education experts say inequalities in education have not been
addressed by policies such as the 2009 Right to Education, although it is enshrined in law. This Act does
not address the inequality in education at all, it focuses on the inputs and infrastructure, not the quality of
education, There is no reference to learning outcomes. This needs to be addressed by the new education
policy.
Skilling people: India has been stressing the need to skill Indians to ensure the 12 million youth who enter
the labour force every year are job-ready. Prime Minister Narendra Modi has created a separate ministry
to deliver on his Skill India mission.
Third, for a higher standard of living, it should ensure that work is quantitatively and qualitatively
enhanced in the country. The countrys efforts in terms of employment guarantee schemes have been
lauded for its role in reducing unemployment. But it is by no means a long-term remedy.
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India needs to reform its rigid labour market governed by obsolete laws, address problems of child labour
and forced labour, and bring about wage equality.
Utilise the potential of the two groups of labour women & youth, whose potential is not fully exploited.
HDI is lower for women than men in all regions. The HDI report said that global participation of women in
the labour forcewho are generally less educated than menhave fallen slightly in recent years, mainly
because of the reductions in India (from 35% in 1990 to 27% in 2013) and China (from 73% in 1990 to 64%
in 2013). Indias female literacy rate among youth aged 15-24 years was 74.4% as against the male literacy
rate of 88.4%, according to the report.
Fourth, is reducing inequality in all the three areas. Inequality, in recent times, has become one of the
most important issues for India. Let us take this issue in detail as this is the reason for major loss for
India in HDI ranking also. The UNDP report showed that when inequality is factored in, India loses
nearly 30 per cent of its HDI values
ISSUE OF INEQUALITY
Reducing inequality in all three areas: Between 1990 and 2015, income poverty in developing country
regions fell by more than two-thirds. But during the same period, income inequality increased by 11%. High
inequality in all three dimensions has cut Indias HDI score by an estimated 28.6%.
Reasons of inequality Two major reasons of inequalities are:
Market fundamentalism - much in favour with Indias successive governments, but pursued with
particular fervour by the one led by Narendra Modi is the insistence that economic growth requires
reduced government interventions, and further freeing up markets. It opposes public investments in
education, nutrition and health, and progressive taxation, and demands dilutions of labour protections
and acquisition of peoples lands and forests, all of which further fuel inequality.
Economic elite capture of the levers of power It is the unreported story of Indias public life.
Economic elites buy political clout, which in turn purchases tax exemptions, land concessions, cheap
credit, and subsidies on electricity and water. In India, tax exemptions to corporate India in every
recent budget of around five lakh crore rupees could substantially finance Indias education, nutrition
and health care gaps.
Effects of Inequality
undermine the productivity and morale of working people

Limits the number of people who could participate in the market.
These in turn is required for Robust and lasting growth
It might lead to social and political instability and civil conflict, which will harm the economy.
It hurts democracy - As warned by B.R. Ambedkar in 1949, we cant be building a democratic edifice on
the principle of political equality, while social and economic inequalities continue to widen.
Extent of inequality
Global: Eighty-five people own as much wealth as the poorest half of the global population put together.
Oxfam calculates that if even a tax of 1.5 per cent was imposed on the wealth of all the worlds billionaires,
it could get every child into school and deliver health services in all the poorest countries of the world,
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saving an estimated 23 million lives. It estimates that if India just stops inequality from rising, it could end
extreme poverty for 90 million people by 2019. If it reduces inequality by 36 per cent, it could completely
eliminate extreme poverty.
India: India today is home to the third largest numbers of dollar billionaires in the world but, at the same
time, harbours within its borders a third of the worlds poor and hungry.
Gender inequality
India ranks 130 out of 155 countries in the Gender Inequality Index (GII) for 2014, way behind Bangladesh
and Pakistan that rank 111 and 121 respectively, according to data in the United National Development
Programmes latest Human Development Report (HDR) 2015. Pakistan and Bangladesh have a lower
Human Development Index (HDI) than India and yet perform better on gender equality as measured by GII.
Among South Asian countries, India fares better than only Afghanistan which is at 152.
The index captures inequalities in gender-specific indicators:
reproductive health measured by maternal mortality ratio and adolescent birth rates,
empowerment quantified by share of parliamentary seats and attainment in education, and
economic activity measured by labour market participation rate.
In all the above indexes, Indias performance is way below the South Asian average. With respect to each
parameter on the gender index, India lags behind both its neighbours. Consider this:
MMR
India
190
Pakistan
170
Bangladesh
170
Parliamentary seats held by women

Secondary education
Labour force participation
12.2%
27%
27%
19.7%
20%
34%
57%
The only parameter where India fares slightly better is the adolescent birth rate, which is the number of
births per 1000 women aged 15 to 19 years. A lower adolescent birth rate indicates a female population
that is more in control of its choices when it comes to marrying and conceiving late. On this scale, Indias
figures are much better than that of Bangladesh as well as the South Asian average, though Pakistans
record is marginally better than Indias.
UNDP officials state that over the last couple of years, Indias GII values have improved slightly from 0.61
to 0.563. This is mainly due to improvements in maternal mortality rate and womens representation in
parliaments in this period though other indicators have remained stagnant and steep reduction for India,
from 35 per cent women in 1990 to 27 per cent in 2013 in labour force participation of women.
One reason for low LFP is largely under-counting in much of the government surveys.For instance, these
surveys fail to capture details on large number of women in agriculture since land is in the name of the
man. Due to this invisibility in official data, such women are often bereft of benefits such loans or seeds
which the land-holding men are eligible for. This creates in India what we call a sticky floor situation
where a majority of women cannot rise above a certain level of earnings, skills and benefits. It is the
opposite of the what the West refers to as glass ceiling.
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If Indias women were their own country, they would be 30 ranks lower on the HDI than the country as a
whole is now, with far worse educational outcomes dragging them down. Indian women are at a particular
disadvantage in the workforce; the high proportion (up to 39 per cent of GDP by one estimate) of unpaid
care work that falls on women alone pushes them out of the workforce, resulting in one of the worlds
lowest female labour force participation rates.
Ways to dam the surging tides of inequality
Raising and enforcing statutory wages

expanding taxation of the rich
Enhancing public investments in education, health and the small farm agriculture
enlarging social protection for the aged, infirm and disabled
enhancing maternity and child benefits
protecting indigenous and socially disadvantaged groups
ensuring water, sanitation and basic utilities to the rural poor and urban slums
Protecting the rights of workers.
These all can be summed up in one measure that is increased spending by the government.
Increased spending: For just four per cent of its GDP, India could provide a basic and modest set of social
security guarantees for all citizens with universal pension, basic health care, child benefits and
employment schemes. Contrary to the widely propagated belief that fighting inequality would damage
the pace of economic growth, the report points instead to evidence to the contrary that extremes of
poverty are bad for growth. Robust and lasting growth requires reducing inequalities, which otherwise
undermine the productivity and morale of working people, and limit the number of people who could
participate in the market. Indeed public investments like in MNREGA not only extend social protection to
Indias impoverished populations: they also place more disposable income in millions of more hands which
spurs growth, but equitably, from below.
Pikettys (well known economist) lessons on inequality for India
He said that India needs to address increasing inequality by increasing its tax-to-GDP (gross domestic
product) ratio. It need not mean higher tax rates. But the tax net should be cast wider. For corporate
taxes, the route is simpler tax code, lower rates and very few exemptions.
Our tax regime should move towards a progressive regime. Indirect taxes impinge regressively, with
the poor bearing a disproportionately higher burden. Our share of direct taxes in the national
exchequer crossed 50% only recently.
Effective income tax rate paid by the richest Indians should be increased. The tax collection capacity
should be improved.
Need to continue with the process that was started with the 2011 census and the long-term objective
should be to gradually move away from a caste-based reservation system to a system of reservation
that is more based on parental income, parental wealth. That would take a long time but I think its
important to start moving in this direction.
The most powerful way to reduce inequality is diffusion of education and knowledge investment in
education is the number one policy solution. There is no better avenue for breaking the shackles of
inequality which in India extends to even caste-based discrimination than giving universal access
to quality education. The unrest being witnessed in several educational institutions, including the most
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recent one at the University of Hyderabad, is no less a reflection of the frustrations of an aspiring youth
feeling locked out and left behind.
Transparency in statistics and data sharing: If you look at democratic countries, its pretty rare not to
publish this data. It is true that there are some countries like China that do not publish income tax
statistics. But then it comes together with a very opaque political system. In India, also it is not
published. It is not only income tax data but there is a lack of transparency in other forms of inequality
data. For instance, you have the socio-economic census of caste that was conducted in 2011. This was
five years ago but we still dont have access to this data.
12. FINANCIAL INCLUSION

1. Analyse the extent and causes of low financial inclusion in India. Explain measures taken by
government to promote better financial inclusion in India.
2. Jan Dhan Yojana has succeeded only to some extent in financial inclusion as it has not been able to
address the exclusion of the marginal and vulnerable in the formal financial system. Comment.
3. Jan Dhan Yojana is a unidimensional approach towards financial inclusion but in a country like India,
we need proactive steps on numerous fronts. Critically analyze in the light of recent report of Deepak
Mohanty committee on financial inclusion.
Background
Progress has been made in financial inclusion on various fronts
In terms of access of financial products and services and sharp rise in savings accounts especially after
the launch of the Jan Dhan Yojana.
The average number of branches per 100,000 individuals in India had jumped to 9.7 by June 2015,
compared with 7.2 in 2010. The growth in branch penetration has also resulted in an improvement in
the number of savings bank accounts in rural and semi-urban locations in India
The government is also focusing on paying benefits directly into these accounts. This will ensure that a
big chunk of the accounts opened under various schemes, which are presently dormant, witness
movement, thereby integrating access with use.
Substantial progress has been made in terms of universal financial access but aim of financial inclusion is
crumbling under various issues like
significant gaps in terms of usage of accounts under Jan Dhan Yojana

inadequate last mile service delivery
Exclusion of women as well as small and marginal farmers
very low formal link for micro and small enterprises.
sharp rise in savings accounts can be mostly because of multiple accounts opened by individuals rather
than a larger proportion of the population entering the banking system.
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Despite the leap in the number of accounts, the share of unorganized lenders such as money lenders
has not reduced over time. Out of every 1,000 households of marginal farmers, more than 600 are in
debt to money lenders. The share of banks is just 129 households.
Against this background, the Committee set a much wider vision of financial inclusion as convenient
access to a basket of basic formal financial products and services that should include savings, remittance,
credit, government-supported insurance and pension products to small and marginal farmers and lowincome households at reasonable cost with adequate protection progressively supplemented by social
cash transfers, besides increasing the access of small and marginal enterprises to formal finance with a
greater reliance on technology to cut costs and improve service delivery, such that by 2021, over 90 per
cent of the hitherto underserved sections of society become active stakeholders in economic progress
empowered by formal finance. The Committee was of the view that a meaningful financial inclusion is not
feasible without government-to-person (G2P) cash transfer.
DEEPAK MOHANTY COMMITTEE ON FINANCIAL INCLUSION
This Committee was constituted with the objective of working out a medium-term (five year) measurable
action plan for financial inclusion. It was mandated to, inter alia, review the existing policy of financial
inclusion including supportive payment system and customer protection; study cross-country experiences
of financial inclusion to identify key learnings, particularly in the area of technology-based delivery models;
articulate the underlying policy and institutional framework and finally, suggest a monitorable mediumterm action plan for financial inclusion in terms of its various components such as payments, deposit,
credit, social security transfers, and other financial products and services. The financial inclusion initiative
envisaged by the Committee is much broader in scope, going beyond the traditional domain of the Reserve
Bank
RECOMMENDATIONS
For inclusion of small-medium farmers
Make crop insurance mandatory for all agriculture loans for Small-medium farmers and give subsidy to
such crop insurance
Stop interest subvention to farmers. Because its not really helping the lower strata for the farmers.
complete digitization of land records be taken up by the states on a priority basis to improve credit
flow to agriculture which would enhance the use of mechanization and reduce input costs and prices
A scheme of Gold KCC (Kisan Credit Card) with higher flexibility for borrowers with prompt repayment
records. This move could be dovetailed with a government-sponsored personal insurance, and
digitization of the KCC to track expenditure pattern. It will encourage discipline in loan repayments and
expenditure.
Favour: At present, the government mandates banks to offer 2% interest subsidy on short-term farm loans
to small and marginal farmers. The centre compensates banks for the subsidy that they extend while giving
farm loans at 7%. The report notes that interest subsidy only increases misuse and does not go to the
intended beneficiary. Since the subsidy is only for short-term loans, it does not encourage capital
formation in agriculture as long-term loans continue to be expensive. Phasing out of interest subvention
will make the credit culture more healthy and the process more transparent. The goal of the RBI has been
to do away with all sorts of subsidies in order to strengthen the credit culture as the subsidy in many cases
doesnt reach the intended beneficiary,
67

Criticism: an insurance works for the farmer when the crop fails, while subvention helps even under
normal circumstance
For inclusion of women
Committee proposed Sukanya Shiksha scheme (deposit scheme) that can be jointly funded by the
Central and State governments. The scheme will link education with banking habits by crediting a
nominal amount in the name of each girl child belonging to the lower income group who enrols in
middle school. This would make it incumbent on the school and the lead bank and its designated
branch to open an account for social cash transfer.
Favour: This scheme will also have the benefit of lowering school dropout rates and empowering the girl
child.
For inclusion of MSMEs
We need to reviewed flow of credit to the micro, small and medium enterprises
Create a system of unique identification for all MSME borrowers and the sharing of information with
credit bureaus.
Use CSR funding to nurture SHG.
For inclusion in general

Providing last mile services
We need to change in the banks traditional business model through greater reliance on mobile
technology for last mile service delivery, given the challenges of topography and security issues in
some areas. The RBI committee suggested low-cost mobile solutions for last-mile delivery of banking
products and proposed that the government marry mobile technology with Jan Dhan Yojana. The
committee has recommended the use of application-based mobile phones as points of sale for creating
necessary infrastructure to support the large number of new accounts and cards issued under the Jan
Dhan Yojana.
Use USSD technology to deliver mobile banking services to people with non-smart phones.
It recommended a graded system of certification of BCs, from basic to advanced training and not taking
the competence of BCs for granted. BCs with a good track record and advanced training can be trusted
with more complex financial tasks such as credit products that go beyond deposit and remittance,
Favour: Using technology is good instead of asking banks to open yet more unviable branched in rural
areas. It reduces the effects on normal operations of banks.
Direct cash transfers to administer subsidies with the use of Aadhaar to tag bank accounts of the
beneficiaries. Given the low level of personal disposable income, particularly for the bottom quartile of the
population, the RBI committee is of the view that meaningful financial inclusion will not happen without
Government-to-Person (G2P) social cash transfers.
Favour It will help reform the countrys subsidy administration and cut graft
Against - India must enact a robust privacy law to prevent any abuse of Aadhaar
Interest-free banking - The committee recommended that commercial banks in India be enabled to open
specialised interest-free windows (Islamic banking) with simple products such as demand deposits. In an
68

interest-free banking structure, the bank accepting deposits will not engage in lending as a purely financial
activity but undertakes operations on the basis of profit and loss sharing by engaging in equity and/or
trade financing.
All credit accounts be linked to a unique biometric identifier such as the Aadhaar unique identity number
and shared with credit information companies to help identify multiple loan accounts and prevent
borrowers from becoming over-indebted. It will also help access the number of people linked to financial
system rather than number of accounts opened which did not give the true picture
CONCLUSION
To attain the lofty goal of universal financial inclusion, the RBI will have to stitch together a holistic strategy
that involves not only its own constituents such as banks and NBFCs, but also ropes in telecom operators,
Central and State agencies, land registrars and small and payment banks, to deliver last-mile inclusion.
On the primary problem of inclusion, the report finds that the attempts to improve banking access through
rural branches, ATMs, banking correspondents (BCs) and no-frills accounts have delivered a six-fold
expansion in bank accounts in the last five years. But some pockets remain excluded, such as towns in East
and North-East India, women in general and the minorities. To address this, it offers specific solutions are
recommended by the Mohanty Committee.
While most of them appear worthy of implementation, the difficulty will lie in the fact that their success is
dependent on transparent information-sharing and coordination among many agencies. Nevertheless, this
comprehensive approach to financial inclusion needs to be taken seriously. A multi-disciplinary agency at
the Central level should be set up to put these ideas into action.
13. PATHANKOT ATTACKS AND RELATED ISSUES

1. Despite having a vast intelligence infrastructure, attacks like 26/11, Pathankot etc. throws a bad light
on our intelligence systems. At this backdrop explain the various drawbacks in our intelligence
system. Suggest measures to revamp the same.
2. Though Indias wars with neighbouring countries have played the most important role in impacting
its security posture, terrorism has, in fact, been the biggest threat faced by the country on almost all
major counts. Critically comment.
3. Pathankot has shred to pieces the cycle of terror responses in India: from processing intelligence
alerts, mobilising first responders, carrying out counterterror operations under a well-defined
command-and-control system. Elucidate
Background
On 2 January 2016, a heavily armed group attacked the Pathankot Air Force Station, part of the Western
Air Command of the Indian Air Force. The counter-operation continued for three days with checking
continued on 4th day. Security personnels were also killed and injured in the process. The infiltrators, two
days before the attack, also hijacked the car of police personnel and were in regular touch with their
handlers. Yet, no suspicion was done by the intelligence and investigation agencies. This attack raises
several questions on the manner in which India handles terrorism and its preparedness in uprooting it.
69

Questions posed by Pathankot attacks:
Weeks after a fidayeen attack on the Pathankot airbase, several key questions are yet to be answered.
Among these are:
If indeed there was good intelligence, why was the airbase so poorly guarded, and the intelligence not
acted upon?
How does one explain the gaping holes in the security architecture of a military installation situated so
close to the border?
Why was there no unified command and control once the attack commenced?
Can this attack on an Indian airbase be termed as a mere handiwork of non-state actors, which might
have needed a carefully contrived plan with prior preparations?
Whether Mr. Sharif has control over Pakistans India policy? Is he in no position to determine foreign
policy options? Whether in the future a Nawaz Sharif can be relied upon to deliver?
ASSESSING INDIAS RESPONSE
The Indian government, through inaction, is rendering its powerful military impotent to defeat
terrorism. This was apparent even in the Pathankot siege
Despite New Delhi receiving advance intelligence of the attack, the terrorists not only gained entry into
the base but the operation to flush them out was also poorly conceived and executed, without a
unified operational command. In Pathankot case, the U.S. agencies had alerted their Indian
counterparts around Christmas about a group of half-a-dozen terrorists planning to target the city. By
early morning of January 1, a senior police officer reported his ordeal with the terrorists. Despite
several hours available to intercept the terrorists in a limited space, New Delhi, in its wisdom, decided
to waste time by flying in National Security Guard (NSG) commandos from the national capital, while
thousands of trained army soldiers were already stationed all over Pathankot. As with 26/11, the
criminal neglect by those responsible for acting on the information would again be whitewashed. The
Central government would again come to the conclusion that no one was responsible for the lapses
that resulted in the humiliating attack and the mismanaged counterterror operation.
Precious time was lost due to the governments bungled decision to airlift National Security Guard
commandos to the scene rather than immediately press readily available army commandos into action.
Indias biggest threat is from asymmetric warfare, waged across porous borders or gaps in Indian
frontier defenses. This asymmetric warfare takes different formsfrom Pakistans proxy war by terror
and Chinas furtive, salami-style encroachments into the Himalayan borderlands to Nepal. Yet India, far
from focusing on neutralizing the asymmetric warfare, has sought to prepare for a full-fledged
conventional war through improvident arms imports.
WHAT STEPS SHOULD BE TAKEN BY INDIA ?

With respect to relation with Pakistan
Prepare a long-term strategic vision or even a Pakistan policy. Almost every season in New Delhi brings
a new Pakistan policy.
An unconventional war must be countered with an unconventional war. Nuclear weapons have no
deterrence value in an unconventional war. Nor can they guarantee Pakistans survival.
The right of self-defence is embedded as an inherent right in the United Nations Charter. India did
not impose costs on the terror masters in Pakistan even for the bloody Mumbai attacks. India,
unfortunately, has shied away from imposing costs, although the right to retaliate is a right enshrined
70

in international law. Defending ones interests against a terrorism onslaught, in fact, is a constitutional
and moral obligation for any self-respecting country. Let us be clear: No nation gets peace merely by
seeking peace. To secure peace, India must be able to impose deterrent costs when peace is violated in
order to tell the other side that the benefits of peaceful cooperation outweigh hostilities.
Also refer to steps given by MK Nrayanan (discussed in section of Indo-pak relations)
With respect to National security
Evaluating and bolstering intelligence capabilities

NATGRID can be operationalised with appropriate safeguards (explained in separate section)
Intelligence agencies are working in opaque nature with no credible external audit which creates
suspicion around the intelligence inputs provided by them. There should be cooperation between
intelligence and investigation agencies from time to time.
Upgrading military capacity.
Refer to MK Narayanans suggestion regarding military (in section below)
It should not be rigid rather flexible in its operation to swiftly carry counter-attack operation in the
time of need.
ITS IMPACT ON INDO-PAK RELATIONS

There has been observation since long that the positive increase in perception of engagement between
India and Pakistan has almost always been followed by an attack on Indian soil without fail. This poses a
question as to what course the bilateral relations between the two nations would take after Pathankot
attack.
According to MK Narayanan (Former National Security Adviser),
India tends to work towards the longer-term goal of restoring the strategic unity of the subcontinent,
enlarge its strategic space, and enhance its security options. Since taking over, Mr. Modi has put a high
premium on neighbourhood diplomacy. If he is unable to establish better relations with Pakistan, it would
leave his neighbourhood policy in a shambles and be a serious setback to Indias efforts to fashion the
region in a manner best suited to it. On the other hand, Pakistans identity is often defined by its
opposition to and rejection of India. It has shorter-term goals and sees talks and negotiations as a mere
stratagem.
Way ahead according to him: Pakistans policy towards India has always been a bundle of inconsistent and
irrational policies. This is further reinforced by the image of Pakistan as a dysfunctional state. The question,
hence, is whether it is wise in the circumstances to embark upon major policy initiatives and risk further
embarrassment in the future. Mr. Modis trademark has been personal diplomacy, often executed with
energy and panache. It has produced good results, except perhaps in Indias neighbourhood (Pakistan)
where care has to be taken, hence, not to arouse undue expectations. Moreover, while dealing with
Pakistan, processes are often as important as the outcomes. What is needed today according to him, is
new thinking, rather than a mere change in style.
Extended period of disengagement at this point might prove worthwhile - Conventional wisdom
stipulates that conflicting nations hold talks to settle their differences. It may be worthwhile to take a
hard look at the utility of this course of action given the India-Pakistan record of talks and desist
from embarking upon talks merely for the sake of it, or due to external pressure. It would not be for
71

the first time that such a policy has been adopted, for there have been many periods in the past when
the situation has oscillated between extremes of comprehensive engagement and almost complete
disengagement.
Adoption of a minimalist approach, including limiting trade relations and restricting movement of
people between the two countries.
India must evolve a new Counter Force Doctrine. Operation Parakram (2001-02) exposed the inherent
weakness of a large standing army as a means to counter a terror attack, including ones as serious as
an attack on the Indian Parliament. Alongside a Counter Force Doctrine, the Army must convert many
of its static formations on the border into more mobile and leaner units. These should be capable of
sudden and swift retaliation in the event of an attack, especially when directed against military
installations, key facilities and critical infrastructure. It would send the right message to the Pakistani
deep state that they cannot exploit our democratic freedoms without facing retaliation.
Once the situation improves, India could consider resorting to a step-by-step normalisation process,
beginning with the resumption of Track II and Track 1 1/2 dialogues, followed by a resumption of
backchannel negotiations, before proceeding to full-scale talks.
Was military base was chosen deliberately?
One view is that Pakistan military is involved in the plan of attack and after the widespread anger and
indignation triggered by the recent Paris and San Bernardino attacks, a Mumbai-style strike on civilian
targets was not a credible option for the Pakistani military as civilian hit could not have avoided
international spotlight and outrage that the Mumbai strikes drew.
It cannot be a coincidence of orchestrating the attack through a terror group it founded in 2000 by
installing as its head one of the terrorists the Atal Bihari Vajpayee government released to end the
hijacking of Indian Airlines Flight 814.
Also coming of a pivotal Indian air base against Pakistan under an extended siege represented a bigger
hit for the terror sponsors than the earlier coordinated attacks on soft Mumbai targets.
It was not an accident that the Pathankot attack coincided with a 25-hour gun and bomb siege of the
Indian consulate in Mazar-i-Sharif, Afghanistan for which Afghani authorities are blaming on Pakistan
military.
Can we trust Pakistan to act on this case?

It is said that, Rather than learn from the mistakes of his immediate two predecessorswho learned the
hard way how peace overtures to Pakistan, by signalling weakness, invited cross-border aggressionModi
chose to commit the same folly, reposing his faith in Sharif, who back-stabbed Vajpayee. As far as action
from Pakistan side is concerned, it seems farfetched to expect that because:
Its military cannot afford peace with India. It employs terrorist surrogates as a highly cost-effective
force multiplier to undermine Indias rise and regional clout, which explains why Indian diplomatic
missions in Afghanistan have repeatedly been attacked and why Bangladesh and Nepal have become
new gateways to India for Pakistans proxies. Peace with India will pose question on the existence of
large military in small state of Pakistan and also will deviate budgetary allocations from military to
civilian development
Pakistan has still to deliver even in the 1993 case internationally known as the Bombay bombingsthe
bloodiest terrorist attack in India and also on 2008 Mumbai case.
72

CAN INDIA HAVE A STANDARD DOCTRINE?
After the attack, newspapers are rife with the articles seeking the action by the government regarding
establishing a standard doctrine with respect to the operations like Pathankot to not repeat the same
follies again in the future.
Need of a doctrine?
In the absence of such a clearly articulated consensus, Indias response is qualitatively linked to the
government of the day, its key leaders and their personal ability, or inability, to understand and appreciate
security challenges.
How to go about it?
The challenge thrown up by the terrorist attack on the Pathankot air force base is to evolve Indias national
security doctrine to include its response to non-state actors. While carrying on diplomatic engagement
with Pakistan, India needs a firm strategy to deal with terrorist threats that are now the prime challenge to
the state. We must take care of following facts
Political consensus must be evolved, in a publicly transparent manner, to reflect the complex challenge
facing the country
Detailed thresholds, interests that would be protected at any cost and response calibration vis--vis
armed aggression.
The doctrine must be accompanied by a national security strategy that spells out the command and
control structures for meeting eventualities such as terror strikes, so that last-minute goof-ups such as
those that have been evident at the Pathankot airbase are not repeated.
We need to come together and clearly define Indias permanent interests with commitment to
protecting the life, liberty and interests of its people and not facing another national humiliation in
times to come
Multiple cross-border terror attacks have failed to galvanize India into devising a credible counterterrorism
strategy. With the ISI using narcotics traffickers to send opiates and terrorists into Indias Punjab, the
Pathankot killerslike the Gurdaspur attackerscame dressed in Indian army uniforms through a drugtrafficking route. The influx of narcotics is destroying Punjabs public health. When the next major terror
strike occurs, India should not go through the same cycle again, including a silly debate on whether to talk
to Pakistan or not. As army chief General Dalbir Singh said, India needs to change its security policy
towards Pakistan. Every time Pakistan bleeds us... we just talk about it for a few days and after that it is
business as usual.
CONCLUSION
On the question of what should be Indias way ahead, the answer could be summed up as this. First,
according to Vivek Katju, former Indian Ambassador, the solution lies in bilateral talks only when Pakistans
military is on board and is a party to talks. Second, India should gear up to build up its own capability in
terms of intelligence machinery, military capabilities for responding to unconventional warfare and
simultaneously engage bilaterally but with utmost caution
73

14. REVIVING NATGRID

1. India, in recent times, have felt the need to have a centralized database for effective coordination
among different intelligence agencies and between intelligence and investigation agencies. In light of
this statement critically analyse the need of reviving NATGRID along with the hurdles faced by this
project.
2. NATGRID project has fallen prey to the traditional hurdles as well as the modern rights & cooperative
federalism movement. Elaborate.
What is NATGRID?
The National Intelligence Grid or NATGRID is the integrated intelligence grid connecting databases of core
security agencies of the Government of India to collect comprehensive patterns of intelligence that can be
readily accessed by intelligence agencies. It was first proposed in the aftermath of the terrorist attacks on
Mumbai in 2008 and was yet to establish as of 2014 with the latest deadline for completing the Phase-1 of
the project being 2016.
Problems faced by it
Missing deadlines since 2012 for completing just the phase-I of project
After 1st CEOs term of natgrid ended, it had only ad hoc directors
The environmental clearance for its official building took two years for the approval of MoEF (Ministry
of Environment and Forests)
Cautions for the future
Issue of accountability - In the absence of a clear line of control, NATGRID will fall under the control of
the Intelligence Bureau (IB). Since agencies like IB and Research and Analysis Wing are not institutions
established by Acts of Parliament, this raises the additional question of accountability. It is diametrically
opposite to systems in countries like the US where intelligence agencies answer to Senate and House
committees.
Issue of privacy: Privacy is always an issue when set against intelligence. NATGRID by no means invades
the privacy that individuals currently enjoy. It is merely a technological interface which allows for quick
transfer of valuable information to legitimate authorities.
Issue of involving state agencies: among the 10 agencies which are permitted to access information
from NATGRID in Phase I, no state agencies have been included. If states are to actively contribute
towards updating the NATGRID database in the spirit of cooperative federalism, they should be among
the ones who benefit from it.
Issue of compatibility of datasets: At the level of execution, NATGRID also faces issues like
consolidating data from a huge population, lack of compatibility with data sets in regional languages,
risk of spies ratting out vital information to outside sources and security from external attacks.
Issue of cyberattack on vital information from outside - The story of WikiLeaks and leakages from
SIPRNet, its US counterpart, still haunt the cyber world. India is not far from the days when cyber
warfare will become its primary security issue. In September last year, the website of the government
of Kerala was hacked by Pakistani hackers.
74

In its present form, NATGRID suffers from many inadequacies, some due to bureaucratic red tape and
others due to fundamental flaws in the system. If New Delhi takes enough measures to ensure that
information does not fall through the firewalls that guard it, NATGRID has the potential to become Indias
go-to grid for a 360-degree perspective to prevent and contain crises.
15. NATIONAL BIOTECHNOLOGY DEVELOPMENT STRATEGY 2015 - 2020

The National Biotechnology Development Strategy 2015-20 was unveiled recently by the Minister for
Science & Technology and Earth Sciences. India stands at an extraordinary position in science and
technology. The challenge is to build on this foundation to see how to take the country further.
AIM
The National Biotechnology Development Strategy 2015-20 aims to establish India as a world-class biomanufacturing hub.
It intends to launch a major mission, backed with significant investments, for the creation of new
biotech products, create a strong infrastructure for R&D and commercialization, and empower Indias
human resources scientifically and technologically.
It aims to turn the sector into a US$ 100 billion industry with focus in areas of healthcare, food and
nutrition, clean energy and education.
It is aimed at ensuring strategic and focused investment in building human capital by setting up a Life
Science and Biotechnology Education Council which will spearhead the initiative.
Research will be intensified in the field of vaccines, human genome, infectious and chronic diseases,
crop science, animal agriculture and aqua culture, food and nutrition, environmental management and
technologies for clean energy.
It also wants to create a technology development and translation network across India with global
partnership, including five new clusters, 40 biotech incubators, 20 bio connect centres.
KEY ELEMENTS OF THE STRATEGY
Building a Skilled Workforce and Leadership

Re-vitalising the knowledge environment at par with the growing bio-economy
Enhance Research opportunities in basic, disciplinary and inter-disciplinary sciences
Encourage use-inspired discovery research
Focus on biotechnology tools for inclusive development
Nurturing innovation, translational capacity and entrepreneurship
Ensuring a transparent, efficient and globally best Regulatory system and communication strategy
Biotechnology cooperation- Fostering global and national alliances
Strengthen Institutional Capacity with redesigned governance models
Create a matrix of measurement of processes as well as outcome
The key elements would be implemented in collaboration and partnership with Other Ministries,
Departments, State Governments and international agencies towards achieving:
Making India ready to meet the challenge of achieving US$100bn by 2025.

Launching Four Major Missions Healthcare, Food and Nutrition, Clean Energy and Education.
75

Creating a Technology Development and Translation Network across the country with global
partnership-5 new clusters, 40 Biotech incubators, 150 TTOs, 20 Bio-connect Centres.
Strategic and focused investment in building the Human Capital by creating a Life Sciences and
Biotechnology Education Council.
STATUS OF BIOTECHNOLOGY INDUSTRY IN INDIA
India is amongst the top 12 biotech destinations in the world and ranks third in the Asia-Pacific region.
India has the second highest number of USFDAapproved plants, after the USA.
India adopted the product patent regime in 2005.
India is the largest producer of recombinant Hepatitis B vaccine.
India has the potential to become a major producer of transgenic rice and several genetically modified
(GM) or engineered vegetables.
CHALLENGES THAT LIES AHEAD
Our challenge is to stimulate the industry players to make them partner internationally in developing
products at the fraction of the cost of what is possible outside India, and the sell them nationally as
well as globally. A huge opportunity exists in the manufacture of diagnostic kits too.
The task to carry out scientific risk assessment of every biotech products be in the field of agriculture,
health or environment, or to supervise field trials of crops and to regulate the lucrative sector, would
be difficult because of a lack of regulator for the sunrise sector.
Biotechnology Authority of India Bill is pending in the House.
Lack of early stage funding for biotechnology is another hurdle.
Scale up and sustainability are important for novel efforts and approaches to make institutional
mechanisms of innovation empowering. This has to be taken care of in an effective manner.
The entrepreneurs need to change their mindset as well - from mere manufacturers to sophisticated
solutions providers, from tinkering entrepreneurs to true innovators.
The industry should rapidly move on from contractual services and outcome-based businesses to risksharing and co-development of products, particularly with large life sciences companies.
It is important to raise public awareness of the modern tools of biotechnology and how it could
improve our well-being, offer food and energy securities and helps in preserving our environment.
With this mandate, DBT would engage with not-for-profit and other professional organizations to
clearly articulate scientifically the benefits, risks and impacts of biotech products for easy
understanding of society.
Enhancing quality and refinement of inventory & monitoring of plant and animal biodiversity through
biotechnological tools, would be another challenge.
Boundaries between disciplines once considered distant are now beginning to blur and as a
consequence of their convergence given birth to newer opportunities and challenges. Hence biotech
education policies have to be reshaped to bring in breadth and depth as accelerated growth is
propelled by both a highly skilled work force and talented leadership.
Our universities need to be redesigned for evolving an ecosystem in which scientists, innovators and
future entrepreneurs can be nurtured.
CONCLUSION
76

There is a paradigm shift in the relationship between government, academia, industry and civil society.
This is critical for the new era of science-driven, society relevant innovation and entrepreneurship.
National Biotechnology Development Strategy provides the impetus for building indigenous capabilities in
health, food and environment. It also lays the foundation for offering research support to biotech
industries through launching of major PPP programs and spearheaded new frontiers of biotech research by
drafting guidelines for transgenic plants, recombinant vaccines and drugs and stem cell therapy.
There is a need to enhance our own capacity to comply with our commitments and to enable our flow of
resources. Investments need to be strengthened to promote innovation and R&D for development of
affordable products for Indian and global market.
The new strategy would seamlessly build on the earlier strategy to accelerate the pace of growth of
biotechnology sector at par with global requirements. But, the challenges that lie need to be overcome to
reap benefits of biotechnology.

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2016

Monthly News Analysis

1. ARUNACHAL PRADESH CRISIS

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ISSUES WHICH CAME INTO LIGHT

HOW GOVERNOR DEFENDS HIMSELF?

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ISSUE 1: ROLE OF GOVERNOR

Article 163 - Council of Ministers to aid and advise Governor.

SUPREME COURTS O BSERVATIONS IN SUCH CASES

RECOMMENDATION OF SARKARIA C OMMISSION

should be an eminent person;

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ISSUE 2: NEED OF ANTI-DEFECTION LAW??

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PROVISION IN THE TENTH SCHEDULE

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MERITS OF THIS LAW

Provides stability to the government by preventing shifts of party allegiance.

CHALLENGES AND INTERPRETATIONS

What constitutes voluntarily resigning from a party?

Can the decision of the presiding officer be challenged in the courts?

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ISSUE 3: PRESIDENTS RULE: IS IT A DEAD LETTER AFTER BOMMAIS CASE?

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What happens to the legislative assembly?

DISCUSSIONS IN THE CONSTITUENT ASSEMBLY

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No minister or government servant can be a BCCI office-bearer

Do away with zonal rotation for the BCCI president ship

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Favour: It ensures decentralisation of power.

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BCCI be brought under the ambit of the Right to Information Act.

Favour: the report has simplified the administration.

IS THE REPORT BINDING ON BCCI?

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3. THE BASICS OF FREE SPEECH

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4. START-UP INDIA MOVEMENT FROM JOB SEEKERS TO JOB CREATORS

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WHAT WAS THE NEED FOR SUCH AN ACTION PLAN?

INDIAN VENTURE CAPITALISTS NEW BENEFACTOR THE GOVERNMENT

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