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November 1, 2013

PRS Legislative Research Institute for Policy Research Studies

3rdFloor, Gandharva Mahavidyalaya 212, Deen Dayal Upadhyaya Marg New Delhi 110002

Tel: (011) 43434035-36, 23234801-02 www.prsindia.org

Monthly Policy Review

October 2013

Highlights of this Issue

RBI releases second quarter review of Monetary Policy (p. 2)RBI reduced the marginal standing facility to 8.75%, and increased the repo rate to 7.75%. It reduced the growthprojection for the economy in 2013-14 to 5%.

JPC submits report on allocation and pricing of telecom licences and spectrum (p. 6)The Joint Parliamentary Committee recommended a review of spectrum pricing by TRAI and formulation of a clearpolicy by the government in consultation with concerned departments.

Cabinet approves the creation of a new state of Telangana (p. 7)The Union Cabinet has approved the creation of a new state of Telangana through the bifurcation of the existingstate of Andhra Pradesh, with the city of Hyderabad serving as a common capital.

Land acquisition draft Rules released for comments (p. 8)The draft Rules to the Act relate to consent, retrospective application of the Act, and rehabilitation and resettlement.

Expert Group on Diesel, Domestic LPG and PDS Kerosene pricing submits report (p. 10)The expert group recommended a reduction of subsidy and price hike for regulated petroleum products.

Housing ministry releases draft model policy on affordable housing (p. 13)The policy seeks to promote affordable housing, through interventions by the central and state governments in land,finance and legal and regulatory structures.

SC directs setting up of Civil Services Board; fixed tenure for bureaucrats (p. 15)The Supreme Court directed that a Civil Services Board be set up for the management of transfers, postings andordered a fixed minimum tenure of civil servants at the centre and state levels.

Supreme Court orders 3% reservation in government jobs to disabled people (p.14)The Court ruled that reservation for disabled persons has to be computed on the basis of the total number ofvacancies in the cadre and has to apply to Group A, B, C and D posts in a uniform manner.

Third and fourth set of draft Rules under Companies Act, 2013 released (p. 9)The draft Rules pertain to acceptance of deposits by companies, the National Financial Reporting Authority andthe Investor Education and Protection Fund.

Supreme Court holds that co operative societies are outside the ambit of RTI (p. 16)The judgment holds that co operative societies would not fall under the definition of public authority in theRight to Information Act, 2005, and hence are not bound to provide information to citizens under the Act.

Draft amendments to the Electricity Act, 2003 proposed (p. 11)The amendments propose open access in distribution, unbundling and competitive bidding.

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Monthly Policy Review October 2013 PRS Legislative Research

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Macroeconomic Developments

Saumya Vaishnava ([email protected])

Trade deficit declines, WPI and CPI

inflation increases further

Indias trade deficit fell to USD 6.8 billion inSeptember 2013 against USD 10.9 billion inAugust 2013 as shown in Figure 1.1 The deficitdeclined 60.6% from its September 2012 valueof USD 17.2 billion. Compared to September2012, imports declined 18.1%, exports increased11.2%, and oil imports declined 5.9%.

Figure 1: Trade deficit contracts, oil imports

decrease (in USD billion)

Sources: Ministry of Commerce; PRS.

The Index of Industrial Production (IIP)increased 0.6% during August 2013 above itsAugust 2012 level. Production of basic goodsand intermediate goods increased 1.5% and 3.6%respectively. Capital goods production declined

2.0%, and consumer goods production declined0.8%, driven by a 7.6% decline in production ofconsumer durables.

As can be seen from Figure 2, electricalmachinery and apparatus continued to be thesector with the most buoyant output growth forthe second consecutive month, and increased26.0% above August 2012.2 Excluding thisindustry group, IIP would have declined0.5%.

Figure 2: IIP increases due to growth in

electrical machinery output

Sources: RBI; PRS.

Wholesale Price Index (WPI) inflation increasedfor the fourth successive month. WPI rose to6.5% in September 2013 from 6.1% in August2013.3 Price rise was led by food inflation,which rose 18.4% in September from 18.2% inAugust. Manufactured goods inflation increasedto 2.1% in September from 1.8% in August,

reflecting the slowdown in demand in theeconomy.

Figure 3: WPI inflation driven by food

inflation

Sources: RBI; PRS.

The Consumer Price Index (CPI) inflation forSeptember 2013 was 9.8%, a slight increase fromthe August 2013 figure of 9.5%. 4 The CPIinflation was driven by inflation in the foods,beverages and tobacco commodity group, whichincreased to 11.3% in September from 11.0% inAugust.

RBI cuts MSF rates further, and

increases repo rate

In its second quarter Monetary Policy Review2013-14, the Reserve Bank of India(RBI)announced the following measures:5

Liquidity Adjustment Facility (LAF)policy repo rate has been increased to 7.75%from 7.50%. The LAF repo rate is the rate atwhich banks can borrow from RBI againsttheir excess holding of government securities(above the Statutory Liquidity Ratiorequirement). Banks can borrow overnightup to 0.50% of the banks Net Demand andTime Liabilities or NDTL (roughly speaking,

all deposits).

Marginal Standing Facility (MSF)rate hasbeen reduced from 9.00% to 8.75%. TheMSF rate was reduced to 9.50% (from10.25%) in September, 2013,6and further to9% at the beginning of October.7 Theemergency liquidity requirement of banks, inexcess of LAF, is met through the MSFwindow, which is available on an overnight

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basis to banks to the extent of excessholdings of government securities (other thanthose used for borrowing through repo). Inaddition, banks can borrow up to 2% of theirNDTL.

Term repos for 7-day and 14-day tenureunder the LAF were introduced by the RBIon October 8, 2013 in addition to the existingrepo and MSF facility. The amount ofliquidity available under term repo wasrestricted to 0.25% of the NDTL of thebanking system.8 This total amount ofliquidity has been increased to 0.5% ofNDTL.

Other rates:The Cash Reserve Ratioremains unchanged at 4% of NDTL, whilethe reverse repo and the bank rate stand re-adjusted at 6.75% and 8.75% respectively.

According to the RBI, the WPI inflation isexpected to remain high for the rest of the year,while the CPI inflation is expected to be around9% in the months ahead. The RBI also loweredthe growth projection for the economy from5.5% to 5% for 2013-14. The RBI said that themeasures taken were intended to curb mountinginflationary pressures and manage inflationexpectation in situations of weak growth.

Figure 4: Changes to the MSF rate in 2013

Sources: RBI; PRS.

MSF rate, upon its introduction in 2011, was tobe set at 100 basis points (a basis point is one-hundredth of a percentage point) above the reporate, and remained so till June 2013. As can beseen from Figure 4, the RBI raised the MSF rate

to 10.25% from 8.25% in July 2013 to restrictliquidity and curb speculation in the forexmarkets. With the rupee exchange ratestabilising, the RBI started reducing the MSFrate in September 2013. With the latest revisionthe MSF rate is again 100 basis points above therepo rate, which is in line with the normalmonetary policy operation.

In addition to the monetary policy, RBI alsoreleased developmental and regulatory policymeasures. These are listed in Table 1 below.

Table 1: Development and policy regulation

decisions of the RBISubject Details Policy measurePayment ofinterest onrupee-savings/termdeposits

Currently, banks payinterest at quarterlyor longer intervals

Banks have beengiven the option to

pay interest atshorter intervals

Licensing ofnew banks inthe privatesector

A High LevelAdvisoryCommittee (HLAC)under Dr. BimalJalan had beenconstituted

HLAC will giverecommendations toRBI on applicationfor new licenses, butfinal decision willrest with RBI

Roadmap forprovision ofbankingservices inunbanked

villages

State Level Banker'scommittees preparea roadmap forcovering allunbanked villages

with population ofless than 2000

4,90,000 unbankedvillages have beenidentified andallotted to various

banks to be covered

by March 2016

Mode ofpresence offoreign banksin India

Incentivise banks toconvert to WhollyOwned Subsidiaries(WOS), and giveWOSs near nationaltreatment

This scheme to bereleased by mid-

November 2013

RetailInflationindexedsecurities

CPI indexedsecurities with 10year tenure for retailinvestors

To be launched inNovember/December 2013

Interest RateFutures (IRF)

Decision tointroduce 10-yearIRF contracts

Guidelines by mid-November, andproduct launch byend-December 2013

Creditenhancementsin corporate

bonds

Corporatessignificantlydependent on bankfinancing becausecorporate bonds lackdepth and liquidity

Allow banks to offerpartial creditenhancement tocorporate bonds byway providing creditfacilities andliquidity facilities.

Revision intiming ofMSF

MSF conductedbetween 4.45 pmand 5.15 pm

Now will beconducted between7.00 pm and 7.30

pm

Repo facilityfor mutualfunds

Window for banksto meet liquidityrequirements ofmutual funds was

opened in July

This window hasbeen shut

GeneralCredit Card(GCC)scheme

Increase coverage ofGCC to include non-farm entrepreneurialactivity

Guidelines by mid-November 2013

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International Finance Corporation to

launch rupee-linked bonds worth USD 1

billion

The International Finance Corporation (IFC), amember of the World Bank group, has launcheda USD 1 billion off-shore rupee-denominated

bond programme.9

Under the programme, theIFC will issue the rupee bonds and use theproceeds to finance private sector investment inIndia. In the past IFC has issued bonds in 13local currencies, including the Brazilian Real,Chinese Renmibi, and the Russian Rouble.10

Finance

Nithin Nemani ([email protected])

IRDA releases draft circular on life

insurance products for People Living with

HIV/AIDS (PLHA)

The Insurance Regulatory and DevelopmentAuthority (IRDA), on October 11, 2013 releaseda draft circular on life insurance products forpeople living with HIV/AIDS. Further, thecircular includes guidelines for health insuranceschemes.11 IRDA has invited comments within15 days. Through the circular, IRDA seeks toprohibit refusal of life insurance/ healthinsurance coverage to subscribers withHIV/AIDS and lays down a set of guidelines for

evaluating such subscribers. The key features ofthe circular are:

Life insurance products for people living with

HIV/AIDS

Life insurers are required to put in place anunderwriting policy approved by theirrespective Boards with respect to lifeinsurance products for people living withHIV/AIDS. The policy should provide clearguidelines, indicate eligibility criteria interms of medical and non-medical parametersand specify risks which would be deferred or

denied coverage. It explicitly prohibits therefusal of life insurance coverage to eligiblesubscribers.

The underwriting policy of the life insurershould clearly indicate the specific loadingsapplicable to people living with HIV/AIDSwith reference to the different stages of thedisease. Loading refers to an increase ininsurance premium upon progression of adisease. The specific loadings in this case

shall be detailed by IRDA and periodicallyreviewed.

Subscribers who are HIV negative at the timeof commencement of the policy and aresubsequently found to be HIV positive duringthe term are not to be denied a claim on such

grounds. In such cases, underwriting policiesat the commencement of the policy shallapply.

Health insurance products for people

acquiring HIV/AIDS after commencement of

policy

Health insurers may provide schemes inwhich contracting HIV/AIDS is considered acritical illness and entails a lump-sum payoutin such a case. Further, there may beprovisions for such a lump sum payment tobe converted into an annuity or for healthcover to be provided on a benefit basis,excluding treatment of only HIV/AIDS.

Consultation paper on draft SEBI

(Settlement of Administrative and Civil

Proceedings) Regulations, 2013 released

On October 14, 2013 the Securities andExchange Board of India (SEBI) released aconsultation paper on draft regulations forconsent settlements. These regulations arepreceded by guidelines issued for consent ordersin April, 2007 and an amendment to theseguidelines in May, 2012.12 SEBI has invited

comments on the draft by October 30, 2013.

The Securities Laws (Amendment) SecondOrdinance, 2013 which was promulgated onSeptember 16, 2013 confers explicit powers onSEBI to settle administrative and civilproceedings through consent settlements. Theconsent settlement procedure involves SEBIagreeing to the proposal for settlement, onpayment of a sum by a defaulter, after taking intoconsideration the nature, gravity and impact ofdefaults.

The important features of the regulations are:

Any person against whom proceedings havebeen initiated or may be initiated may file anapplication to SEBI for consent settlements.However, no application shall be consideredif made after 60 days from the date of serviceof show-cause notice issued by SEBI.

SEBI may decline an application forsettlement under the followingcircumstances: (i) commission of insider

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trading or communication of unpublishedprice sensitive information in contraventionof the provisions of the SEBI Act, (ii)fraudulent and unfair trade practicesincluding front running, i.e. usage of non-public information to undertake securitiestransactions, (iii) defaults or manipulative

practices by mutual funds or assetmanagement companies.

The settlement amount paid will be creditedto the Consolidated Fund of India.

SEBI shall constitute a high poweredcommittee consisting of a retired Judge of aHigh Court and three external experts havingexpertise in the securities market. Thecommittee shall make recommendations onthe consent settlement.

SEBI shall constitute one or more internalcommittees for assisting the high poweredcommittee. The application is first referredto the internal committee, which shall placeits proposal for the terms of settlement beforethe high powered committee. A panel of twowhole time members may be constituted bySEBI to consider the recommendations of thehigh powered committee. The panel willpass settlement orders after choosing toaccept or reject the recommendations.

Further, settlement orders may be passed byan adjudicating officer appointed by SEBI.

Consultation paper on draft SEBI (RealEstate Investment Trusts) Regulations,

2013 released

On October 10, 2013 the Securities andExchange Board of India (SEBI) released aconsultation paper on the regulation of RealEstate Investment Trusts (REITs) that areproposed to be introduced in India.13

REITs are currently in operation in severalcountries abroad. REITs are trusts which collectfunds from investors, invest the same mainly incompleted real-estate projects and distribute the

revenue generated to their investors. The salientfeatures of the regulations are:

Structure of the REITs:The REITs shall beset up as a Trust under the provisions of theIndian Trusts Act, 1882. It shall have partiessuch as trustee (registered with SEBI),sponsor, manager and principal valuer.

Offer of units to the public:The REITsshall raise funds through an initial offer of

units after compulsorily getting themselveslisted on a stock exchange recognised underthe Securities Contracts (Regulation) Act,1956. Once listed, they may subsequentlyraise funds through follow-on offers. REITsmay raise funds from any investor, domesticor foreign but SEBI has recommended that

until the market develops, funds be raisedfrom high net-worth individuals orinstitutions with a minimum subscription sizeof Rs two lakh.

Responsibilities of various parties to theREITs: (i) The trustee shall be independentof the sponsor and manager and have asupervisory role. It shall ensure that theactivities are taking place in accordance withthe proposed regulations. (ii) The managershall assume all operational responsibilitiesincluding application for registration, issueand listing of units, day to day operation andmanagement of assets and delisting of units.(iii) The sponsor shall be responsible forappointment of the trustee and shall maintaina certain percentage holding in the REIT toensure a level of accountability. Valuershave to ensure fair and transparent valuationof assets and must have robust internalcontrols.

Investment conditions and dividend policy:REITs are required to invest at least 90% oftheir assets in completed revenue generatingproperties. They may invest the remaining

10% in other assets as may be specified.They may invest directly in properties orthrough Special Purpose Vehicles (SPVs)which hold at least 90% of their assetsdirectly in such properties. REITs are onlypermitted to invest in India and are notallowed to invest in vacant or agriculturalland. They may invest 100% of their assetsin one project provided that the minimumsize of such an asset is Rs 1,000 crore. Atleast 90% of the net distributable incomeafter tax has to be paid as dividend.

Borrowings and deferred payments: Theaggregate consolidated borrowings anddeferred payments of the REIT have beencapped at 50% of the value of its assets.

Valuation of assets:REITs are required toconduct a full valuation of underlying assetsin physical inspection at least once a year andupdate it every six months. Consequently,the Net Asset Value (NAV) is required to bedisclosed at least twice a year.

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Rights of investors:The investors have theright to remove the manager, auditor,principal valuer, seek delisting of units andapply to SEBI for changes in trustee.Further, approval of investors is mandatoryfor transactions exceeding 15% of REITassets, borrowing in excess of 25%, change in

manager or sponsor, change in investmentstrategy etc.

RBI appointsTechnical Committee on

Mobile Banking

The Reserve Bank of India (RBI), on October 9,announced the constitution of a TechnicalCommittee on Mobile Banking to examinevarious alternative modes of mobile fundtransfersto expand mobile banking in thecountry.14 The Committee is also tasked withexamining the feasibility of using SMS based

fund transfers using an application that can runon any type of handset. The Committee ischaired by Mr. B. Sambamurthy.

The Terms of Reference of the Committee are:

To understand the challenges faced by banksin expanding mobile banking coverage.

To understand the challenges faced in theimplementation of the UnstructuredSupplementary Service Data (USSD) channeland to suggest solutions.

To study the advantages of having a singleSMS-based application across all handsets.

To examine solutions to challenges faced andto draw up a road map for theirimplementation.

The RBI invited suggestions from the publicuntil October 31, 2013.

Committee on financial inclusion inviting

suggestions from stakeholders

The Reserve Bank of India (RBI) had appointeda Committee on Comprehensive FinancialServices for Small Businesses and Low-IncomeHouseholds to propose measures for achievingfinancial inclusion and financial deepening.15

The Committee, constituted on September 23, ischaired by Mr. Nachiket Mor. It is due to submitits report by the end of December, 2013. It hasinvited suggestions from stakeholders to be sentby October 31.16

Telecom

Alok Rawat ([email protected])

JPC submits report on allocation and

pricing of telecom licences and spectrum

The Joint Parliamentary Committee (Chairman:Mr. P. C. Chacko) tasked with examiningallocation and pricing of telecom licenses andspectrum submitted its report to the Lok Sabhaspeaker on October 29, 2013.17 The terms ofreference of the Committee were to: (i) examinetelecom policy and its interpretation bysuccessive governments from 1998 to 2009, (ii)examine irregularities and aberrations, if any,and (iii) make recommendations for theformulation of appropriate procedures for theimplementation of laid down policy.

Key observations and recommendations made in

the report are:

The Migration Package offered to thelicensees under the New Telecom Policy,1999 resulted in a Rs 43,524 crore reductionin licence fee and spectrum chargescollection.

The 2004 reduction in the licence fee forUnified Access Services (UAS) licenseescaused a loss to the exchequer to the tune ofRs 968 crore for the first four years and Rs885 crore per annum thereafter.

The Department of Telecommunications(DoT) decision to fix October 1, 2007 as thecut-off date for the receipt of cellular licenceapplications was transparent and consistentwith existing policy. However, the laterdecision to advance the cut-off date fromOctober 1, 2007 to September 25, 2007 wasunfair and not communicated promptly.

The Prime Minister was misled by the thenMinister of Communications andInformation Technology (MoCIT) about theprocedure to be followed in respect ofissuance of UAS licences.

The First Come, First Serve mechanism,announced by the DoT for the award oflicences through a January 10, 2008 pressrelease, was a departure from its existingpolicy.

The Committee censured DoT for theunusual manner in which it announced itsdecision to issue Letters of Intent (LOI) toall eligible applicants, issued LOIs/responses

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and also received compliance with LOIconditions, all on a single day.

While 85 of the 122 licences thus issued didnot satisfy the eligibility conditions, DoThad no mechanism to detect such lapses.

The loss figures calculated by theComptroller and Auditor General (CAG) incontext of the licences issued in 2008 shouldhave been based on proven facts. CAG alsofailed to take cognisance of the benefitsaccrued to the citizens as a result of thegovernments telecom policy.

The government should respond to TelecomRegulatory Authority of Indias (TRAI)recommendations within a specific timeframe and the TRAI Act, 1997 should beamended correspondingly.

TRAI should be asked to conduct acomprehensive review of spectrum pricing.Government should formulate a policy onspectrum pricing, in consultation withconcerned departments and agencies. Sucha policy should also give due considerationto the telecom sectors growth, the SupremeCourt verdict/opinion on spectrum auctionand the results of recent auctions.

Stringent guidelines for allocation ofadditional spectrum are needed to maximiseutilisation of available spectrum anddiscourage hoarding of excess spectrum.

The conclusions of the report were notunanimous as 11 of the 30 members of theCommittee voted against adoption of the draftreport. Portions of the Minute of Dissentsubmitted by some of the members have beenexpunged under the directions of the Speaker,Lok Sabha. Key concerns raised in the editedMinutes of Dissent are:

The report selectively quotes from evidencepresented before it, ignoring crucialdocuments and verbal evidence. TheCommittee did not examine several keywitnesses, including the Prime Minister, the

Minister of Finance and the then MoCIT.

The report, while contesting CAGspresumptive loss estimates, fails to addressthe question if there was any loss to theexchequer in allocation of licences in 2008.

The report claims that spectrum was pricedat low levels to ensure low telecom tariffsfor the end-user. It fails to examine why

there was a change in rollout norms and theMerger and Acquisition (M&A) policy.

The report asserts that the then MoCITmisled the Prime Minster. However, it doesnot examine why the Prime Minister did notstop the process of awarding licenses despite

holding concerns about the process. The report fails to examine the role of

Minister of Finance, the Cabinet Secretaryand the Solicitor general in the awarding oflicences and subsequent M&A deals.

The report also fails to examine the licensesawarded during 2004 to 2007, butunnecessarily focuses on the allocationsbetween 1998 and 2004.

Home AffairsPrianka Rao ([email protected])

Cabinet approves creation of a new state

of Telangana

On October 3, 2013, the Union Cabinet approvedthe creation of the new state of Telanganathrough the bifurcation of the existing state ofAndhra Pradesh.18 It has also been announcedthat the city of Hyderabad will function as thecommon capital for both the states for a period often years.

The Union Cabinet has approved the setting upof a Group of Ministers (GoM) to work outnecessary legal and administrative measures.These include: (i) safety and security, andprotection of fundamental rights of the residents,(ii) modalities for the provision of specialfinancial disbursements required for the settingup of a new capital for the residuary state ofAndhra Pradesh, and (iii) meeting the specialneeds of the backward regions and districts of thetwo states.

The GoM has had two meetings so far. In itsfirst meeting on October 11, 2013, the GoMdiscussed theapproach and methodology to beadopted by it.19 The GoM also finalised thedifferent nodal ministries and departments of thecentral government, and state government, forthe preparation of status reports on the subjectsin the Terms of Reference.19

In its second meeting on October 19, 2013, theGoM had received status notes, on the issues inthe terms of reference, from the central ministries

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and departments, and the PlanningCommission.20 They have decided that moretime should be given to enable political parties,public representatives and individuals to submittheir suggestions.

Further, recent reports suggest that the Telangana

Joint Action Committee has also submitted itsreport to the GoM, on 11 core issues, including asuggestion that Hyderabad should be madeacommon capital for a period of three years.21

Rural DevelopmentJoyita Ghose ([email protected])

Draft land acquisition Rules released

The Ministry of Rural Development released thedraft Rules for the Right to Fair Compensationand Transparency in Land Acquisition andRehabilitation and Resettlement Act, 2013 onOctober 14, 2013.22 The Act seeks to regulatethe process of land acquisition and provides forrehabilitation and resettlement of affectedfamilies.

The draft Rules cover provisions such as (a)consent, (b) Social Impact Assessment (SIA), (c)retrospective application, (d) Land AcquisitionRehabilitation and Resettlement Authority, (e)compensation, rehabilitation and resettlement,and, (f) establishment of monitoring authorities

and a national resource centre. Consent: Land is acquired for government

projects, private projects and public-privatepartnership projects with a public purpose.Consent is not required for governmentprojects. Private projects require the consentof at least eighty percent affected families.Public-private partnership projects require theconsent of at least seventy percent affectedfamilies.

The draft Rules specify the procedure forobtaining consent and require that consentmust be sought within six months of thenotification of the SIA. Where acquisition isspread across multiple locations, consentmust be sought in all the affected areas at thesame time.

Social Impact Assessment: The Actmandates carrying out an SIA to examine,among other things, whether the acquisitionserves a public purpose, the number offamilies that will be affected, and the social

impact of the project. It also mentions certaincases where an SIA need not be conducted.

The draft Rules further state that stategovernments will have to identify or establishstate SIA Units to ensure that SIAs arecarried out. The draft Rules specify the

procedure for conducting the SIA includingreviewing its stated public purpose,conducting a land assessment, determiningthe number of affected families, preparing asocio-economic and cultural profile of theaffected area and preparing a Social ImpactManagement Plan. In addition, the processfor conducting public hearings to present thefinding of the SIA is outlined.

Retrospective application: The LandAcquisition Act, 1894 (1894 Act) willcontinue to apply in certain cases when anaward has been made under the 1894 Act.

The new Act will apply in case an award hasbeen made five years prior to thecommencement of the new Act but thephysical possession of the land has not beentaken or compensation has not been paid.23

The draft Rules state that for acquisitionsinitiated under the 1894 Act, if compensationhas not been accepted or possession of landnot released for five years or more prior tothe commencement of the new Act then thenew Act will apply. However, in caseacquisition has remained pending for lessthan five years prior to the commencement of

the new Act, the new Act will not applyunless the situation remains pending for atotal of five years.

Rehabilitation and Resettlement (R&R):The Act specifies that each affected familywill get an R&R award.

The draft Rules specify the manner ofpreparation of the R&R scheme. The draftR&R scheme shall be based on the SocialImpact Management Plan and shall besubmitted to the Collector. The Collectorwill discuss the scheme with the R&R

Committee at the project level and submit thescheme to the Commissioner R&R. TheCommissioner will scrutinise the scheme,place it in the public domain and theCollector will grant the R&R award to eachaffected family.

National Resource Centre / Cell for LandAcquisition, Rehabilitation and

Resettlement: The draft Rules state that the

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central government will establish a NationalResource Centre for Land Acquisition andR&R to serve as a hub for capacity buildingand knowledge sharing on land acquisition.It will also provide support to stategovernments for conducting SIAs and ensurethat SIAs are undertaken for multi-state

projects.

Rules to be framed exclusively by stategovernment: State governments will frameRules on the: (a) limits on the acquisition ofmulti-crop land and agricultural land, (b)limits beyond which private purchases willhave to provide for rehabilitation andresettlement and, (c) multiplier to be usedwhile determining compensation in ruralareas.

The Ministry has invited comments on the draftRules within 45 days of placing the document in

the public domain. The deadline for commentsis November 28, 2013.

In addition to the draft Rules, the Ministry hasproposed to issues guidelines for theimplementation of the Act which will be in areaswhere the central government does not havejurisdiction.

For PRS documents on land acquisition, seehere.

Corporate AffairsNithin Nemani ([email protected])

Third and fourth set of Draft Rules under

Companies Act, 2013 released

The Ministry of Corporate Affairs (MMA)released the third and fourth set of draft Rulesunder the Companies Act, 2013 on October 22,2013 and October 28, 2013 respectively.24 MCAhas invited comments for the same by November5, 2013. The salient features of the third set ofDraft Rules are:

Acceptance of deposits by companies:The Act permits companies other than banksand non-banking financial companies toaccept deposits from its members. Thecompany is required to provide depositinsurance, secure the deposit against its assetsand deposit at least 15% of the funds raised ina separate account called the deposit

repayment reserve account. The provisionsof the Rules are as follows:

(i) Limits to acceptance of deposits: TheRules specify that deposits accepted orrenewed, along with other deposits, arenot to exceed 25% of the aggregate ofthe paid up share capital of the companyand its free reserves. Further, the Rulesapply an additional condition foraccepting deposits having maturitiesbetween three and six months, in thatdeposits not exceed 10 percent of theaggregate of the paid up share capitaland free reserves of the company. TheRules prohibit acceptance of depositswith maturity exceeding three years.

(ii) Cap on interest and brokerage:Further, the rate of interest charged orbrokerage paid is not to exceed the

corresponding figures prescribed by theReserve Bank of India (RBI) for non-banking financial companies.

(iii) Deposit insurance:The Rules requirethat the terms of the deposit insurancecontract specify the monetary ceilingapplicable to the payment to thedepositor in case the company defaultsin repayment.

(iv) Trustees:Further, the Rules mandatethe appointment of trustees prior to theacceptance of deposit, whose role wouldbe to ensure that the assets provided assecurity are sufficient to repay theprincipal and interest outstanding.

(v) Penalties:The Rules specify a penalrate of interest of 18% for re-paymentsthat are overdue. Further, any officer ofa company found contravening theprovisions of the Rules shall bepunished with a fine of Rs 10,000.

National Financial Reporting Authority:The Act allows the central government toconstitute a National Financial ReportingAuthority to make recommendations relatingto the formulation of accounting and auditingpolicies and standards. The authority willalso monitor and enforce compliance withaccounting and auditing standards. The keyprovisions of the rules are as follows:

(i) Constitution of committees:The Rulesrequire the constitution of threecommittees under the authority, namelythe Committee on Accounting
http://www.prsindia.org/billtrack/the-land-acquisition-rehabilitation-and-resettlement-bill-2011-1978/http://www.prsindia.org/billtrack/the-land-acquisition-rehabilitation-and-resettlement-bill-2011-1978/

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Standards, the Committee on AuditingStandards and the Committee onEnforcement. The chairpersons of therespective committees may benominated as full time members by thecentral government. The Committee onAccounting Standards and the

Committee on Auditing standards arerequired to examine matters related tothe formulation of accounting andauditing standards respectively. TheCommittee on Enforcement shallexamine matters referred to it by theother two committees for furtherinvestigation and inquiry. It is requiredto complete the investigation processwithin six months.

(ii) Punitive action:If the party beinginvestigated is found to be guilty ofprofessional misconduct, the Committeeon Enforcement can, after giving theparty a chance to be heard, recommendpunitive action to be taken by theauthority. The authority may pass anorder which may include reprimand,restriction or debarment from practiceand imposition of penalty.

(iii) Appellate authority:A personaggrieved by such an order mayapproach the Appellate Authorityconstituted under the Act within 90 daysof receiving the order.

The fourth set of Draft Rules pertains to theInvestor Education and Protection Fund (IEPF).The salient features are:

Investor Education and Protection Fund:The Rules further delineate the powers andfunctions of the IEPF constituted by thegovernment under the Act. As per the Act,the fund is to be utilised for promotion ofinvestors awareness, refund of unclaimeddividends and distribution of disgorgedamounts made to investors who have sufferedwrongful gains. Further, the Act provides forthe establishment of an authority for theadministration of the fund. The keyprovisions of the rules are as follows:

(i) IEPF Authority: The Rules providefor the setting up of an IEPF authority,chaired by the Secretary, Ministry ofCorporate Affairs. The authority shalladditionally be composed of a nomineeof RBI, a nominee of the Securities andExchange Board of India, an eminent

expert nominated by the governmentand three members with at least fifteenyears of experience in investoreducation and/or protection. TheAuthority shall be responsible for theadministration of the Fund.

(ii)

Sources of funds:The Rules specifyadditional sources of amounts that willbe credited to the fund. The Rulesexpand the list of amounts to be creditedto include disgorged amounts earnedthrough unfair means, undue gains madeby Managing Directors and earnings ofthe Authority.

(iii) Classification and uses of funds:TheRules classify the funds into threedifferent heads: (a) trust funds,containing funds and securities that canbe claimed back by the rightful owner;

these funds shall be used for settlingclaims of the respective beneficialowners, (b) revenue account containingall revenue receipts; the receipts shall beused for interest and salary payments,and (c) IEPF capital fund containing allother sums of money received by theAuthority; these sums shall be creditedto the revenue account.

Petroleum and Natural GasAnjana Agarwal ([email protected])

Expert Group on Diesel, Domestic LPG

and PDS Kerosene pricing submits report

The expert group (Chairman: Dr. Kirit S. Parikh)constituted by the Ministry of Petroleum andNatural Gas, to advise on the pricingmethodology for petroleumproducts submittedits report in October 2013.25 The expert groupfocussed in particular on the prices of diesel,domestic LPG and PDS kerosene as thesecontinue to be government regulated and not

market determined. This is in the context oflosses incurred by Oil Marketing Companies onaccount of sharp increases in international oilprices and inadequate increases in domesticprices of petroleum products.

Some broad suggestions made by the expertgroup are as follows:

The need to follow a pricing policy that willensure sufficient returns to domestic

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refineries to ensure long term sustainabilityof the sector and protect the energy securityof the country;

Deregulation of prices of petroleumproducts in the long run and gradualphasing out of subsidy;

Fast-tracked implementation of directbenefit transfer schemes; and

Making the crude oil procurement processmore flexible and adopting global practices.

Some specific recommendations made withrespect to the pricing are as follows:

Diesel: Price to be raised by Rs 5 per litreand subsidy amount to be capped at Rs 6per litre.

PDS Kerosene: Price to be increased byRs 4 per litre.

Domestic LPG: Price to be increased to Rs250 per cylinder and number of cylinderseach household can buy in a year to bereduced from nine to six.

Acquisition of participating interest in oil

blocks in Mozambique by ONGC and

OIL

On October 3, 2013, the Cabinet Committee onEconomic Affairs approved the Ministry ofPetroleum and Natural Gas proposal to authoriseONGC Videsh Limited (OVL) and Oil India

Limited (OIL) to acquire a 20% participatinginterest in Rovuma Area 1 offshore block inMozambique.26 A participating interest withrespect to the oil and gas sector implies acommitment to contribute to the costs ofexploration and an assurance of receiving a shareof the benefits of exploration to the extent ofcommitment.

The acquisition is proposed to be done in twoparts:

(i) OVL and OIL will jointly acquire a 10%participating interest in Videocon

Mauritius Energy Limited for USD 2,475million closing of which is expected totake place by December 31, 2013; and

(ii) OVL will acquire a 10% participatinginterest in Anadarko PetroleumCorporation Limited for USD 2,640million closing of which is expected totake place in February 2014.

Area 1 which is around 2.6 million acres large isestimated to contain 35 to 65 trillion cubic feet ofrecoverable resources, making it the largest gasdiscovery in offshore East Africa.

PowerAnjana Agarwal ([email protected])

Draft amendments to Electricity Act,

2003

The Ministry of Power proposed some draftamendments to the Electricity Act, 2003 onOctober 17, 2013. These have been circulated togovernment bodies, including the CentralElectricity Authority, the Central ElectricityRegulatory Commission, Public SectorUndertakings under the Ministry, and state

generation, transmission anddistributioncompanies, for comments.27

The key proposed changes are as follows:

Distribution licensees are mandatorilyrequired to provide open access of itsdistribution system. The functions ofelectricity distribution and supply should beunbundled;

Supply licenses to be granted for the purchaseof electricity from transmission companiesand sale to the final consumer;

Provision for tariff setting by the market withrespect to such consumers where more thanone supply licensee is obligated to supplypower and benchmarking tariff to fuel cost;

According to the Act, dedicated transmissionlines are electricity supply lines required forpoint to point transmission, i.e. to connectelectric lines or electric plants of a captivegenerating plant or generating station to anytransmission lines or sub-stations orgenerating stations, or the load centre, as thecase may be. The proposed amendmentschange this definition to restrict the same toradial lines that do not form a loop with thegrid and can be shared only with the priorapproval of the appropriate commission;

Introduction of a new definition ofrenewable energy sources to meanrenewable sources such as small hydro, wind,solar including its integration with combinedcycle, biomass, bio fuel co-generation, urban

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or municipal waste and other such sources asapproved by the central government;

The provisions of the National ElectricityPolicy have been made binding on electricityregulatory commissions, the central and stategovernments, authorities, licensees,

generating companies and consumers; and The penalty amount for failure to comply

with Regional Load Despatch Centre andState Load Despatch Centre regulations hasbeen increased to Rs 1 crore and Rs 50 lakhfrom Rs 15 lakh and Rs 5 lakh respectively.

Deepak Parekh Committee report on

compensatory tariff submitted

The Deepak Parekh Committee, which was setup to recommend a mechanism for payment ofcompensatory tariff to private power purchasers,

recently submitted its report in October 2013.

28

The Committee had been established by an orderof the Central Electricity RegulatoryCommission (CERC) pursuant to petitions filedby Adani Power Limited (APL) and CoastalGujarat Private Limited (CGPL). APL andCGPL had argued before the CERC that they hadentered into power purchase agreements (PPAs)with state utilities in 2007 and 2008 agreeing tosell power at a pre-determined rate. In themeantime, fuel costs and project costs hadincreased significantly on account of non-availability of adequate coal linkages from Coal

India Limited and increase in international coalprices. These companies claimed that as a resultof these events, they were incurring significantloss.

The Committee held four consultative meetingswith representatives from the state utilities,power generating companies, SBI CapitalMarkets Limited and technical experts. Majordomestic lenders to these power projects werealso consulted on other possible means tomitigate hardship, such as reduction of rates ofinterest, extension of tenor of loans andincreasing the moratorium period.

After considering various options, theCommittee arrived at the conclusion thatgiven the volatility of fuel prices, acompensatory tariff in the form of a fueladjusted charge should be provided to APLand CGPL. The proposed compensatorytariff is to be calculated each year based onthe difference between the actual energy cost

and the energy cost component quoted in thePPA.

The Committee is of the view that thismechanism will, on the one hand, providerelief to the private power producers. On theother hand, in case there is any reduction in

coal prices, the benefits from the same will bepassed on to the power purchasers.

The Committee also observed that thecompensation determined through thismethod is one of the lowest and thereforethere is minimal financial burden on the stateutilities. It is also consistent with the CabinetCommittee on Economic Affairs recentguidelines on pass through of the cost ofimported coal and the Ministry of Powersrecommendation that bids be invited onStation Heat Rate1basis under the reviseddraft Standard Bidding Documents.

Based on coal prices as on June 30, 2013, theillustrative compensatory tariff payable to APLin 2013-14 is as follows:

(i) Rs 0.89 per unit for the PPA with theGujarat state utility; and

(ii) Rs 0.61 per unit for the PPA with theHaryana state utility.

(iii) Based on coal prices in July 2013, theillustrative compensatory tariff payable toCGPL in 2013-14 is Rs 0.59 per kWh.

The Committee also suggested that the CERC

may fix a ceiling on the compensatory tariffamount as a predetermined percentile of thepower procurement cost.

Kudankulam Unit-1 synchronised to grid

The Department of Atomic Energy reported thatthe first unit of the Kudankulam Nuclear PowerProject (KKNPP) has been operationalised andsynchronised to the grid. While the plant willnow generate 160 MW of power, it is expectedthat the output will be gradually raised to 1000MW. This will take the total nuclear power

output of the country from 4780 MW to 5780MW.29

1Station Heat Rate is the amount of heat energy, i.e. coal inthe case of a thermal power plant or gas in the case of a gas

power plant, required to generate each unit of electricalenergy. It is measured in kCal/kWh.

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750 MW of grid connected solar projects

to be set up under solar mission with VGF

The Cabinet Committee on Economic Affairsapproved the implementation of a scheme to setup 750 MW of grid connected solar photovoltaic(PV) projects under Batch-1 of Phase-II of the

Jawaharlal Nehru National Solar Mission.30

The projects will be supported through viabilitygap funding (VGF) of Rs 1,875 crore from theNational Clean Energy Fund. VGF is a grantgiven by the central government to supportinfrastructure projects being undertaken throughPPP mode. VGF is disbursed only after theprivate partner has subscribed and expended theequity contribution required for the project. It isestimated that the VGF support to these solarprojects will leverage private investment ofapproximately Rs 5,000 crore.

The projects are likely to be built on a Build,Own and Operate basis at various locationsaround the country to supplement grid powergeneration. The selection of projects will bedone through open competitive bidding based onthe amount of VGF required by the privatepartner.

The power generated through these projects willbe purchased by the Solar Energy Corporation ofIndia for Rs 5.45 per kWh and sold to stateutilities and distribution companies for Rs 5.50per unit. Both the purchase and sale tariffs havebeen fixed for 25 years.

Urban DevelopmentJoyita Ghose ([email protected])

Housing ministry releases draft model policy

on affordable housing

The Ministry of Housing and Urban PovertyAlleviation (MoHUPA) has released a DraftModel State Affordable Housing Policy topromote affordable housing for all with special

emphasis on Economically Weaker Sections(EWS) and Lower Income Groups (LIG).31Since housing is a state subject under theConstitution, the central government has releasedthe draft policy as a Model policy which statescan adopt.

Background: The gap between the supply anddemand of housing has been widening.According to the report of the Technical Groupon Housing Shortage (2012-17), constituted by

the Ministry, there is a shortage of close to 19million dwelling units, of which nearly 96% is inthe EWS and LIG category.32 The policy seeksto address this gap and encourage privateparticipation in the housing industry.

Key features of the Policy include:

Applicability: The policy is applicable toareas that have been identified as municipalareas by state governments.

Role of the central government: Thecentral government is expected to support thepolicy through: (i) the provision of capitalgrants for affordable housing schemes, (ii)ensuring greater access to capital throughexternal sources such like ExternalCommercial Borrowings and Foreign DirectInvestment and, (iii) encouraging thedevelopment of new avenues for financing ofaffordable housing through insurance andpension funds.

Role of the state governments: Stategovernments are to undertake initiatives inkey areas such as:

a. Land: through reserving a certainpercentage of the total dwelling units forEWS, provision of land for affordablehousing projects, providing certainproperty rights to slum dwellers andensuring slum up-gradation.

b. Finance: through providing financialincentives to housing providers forreducing the cost of dwelling units. Thisincludes providing appropriate subsidies,facilitating access to loans under the RajivRinn Yojana, establishing State ShelterFunds to fund affordable housingprojects, linking beneficiaries to formallending institutes and granting certainconcessions to private developers throughwaiver of stamp duty or charging anominal stamp duty on affordable housingprojects, etc.

c. Legal and Regulatory Reforms: includepreparing an affordable housing actionplan, establishing a faster process forgetting building permits, creatinginstitutional mechanisms to facilitatefaster conversion of agricultural land tonon agricultural land and reviewingexisting master plans of cities to ensureland for affordable housing; and

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d. Technology support: through providingsupport for appropriate building andconstruction technologies.

Guidelines issued for Rajiv Rinn Yojana

The Ministry of Housing and Urban Poverty

Alleviation has issued guidelines for Rajiv RinnYojana (RRY).33 The RRY is a central sectorscheme which provides an interest subsidy onhousing loans to EWS and LIG households. Itreplaces the Interest Subsidy Scheme forHousing the Urban Poor (ISHUP).

Background: The ISHUP was launched in 2008to enable the urban poor to access long terminstitutional finance for housing. It provided asubsidy on the interest charged on housing loansto EWS (monthly income up to Rs 5,000) andLIG households (monthly income from Rs 5,001to Rs 10,000). An interest subsidy of 5% was

provided on loans up to Rs 1 lakh. In 2011, thescheme was made a part of the Rajiv AwasYojana, a centrally sponsored scheme whichseeks to eradicate slums. Earlier this year, thescheme was re-launched as a central sectorscheme and renamed Rajiv Rinn Yojana.

Key features of the Policy are:

Aim: The scheme will provide home loanswith an interest subsidy to EWS and LIGhouseholds. Assistance will also be given tosuch EWS/LIG beneficiaries with dwellingunits of less than 40 square metres to make

additions to the same. Eligibility: Unlike the ISHUP, under RRY,

EWS households are identified as those withmonthly incomes of less than Rs 3,300 permonth and LIG households are those withmonthly incomes between Rs 3,301 and Rs7,300 per month.

Loan amount: EWS individuals will begiven loans of up to Rs 5 lakh, with aninterest subsidy of 5%. LIG households willbe given loans up to Rs 8 lakh and an interestsubsidy on loans up to Rs 5 lakh.

Implementation mechanism: The centralnodal agencies for the scheme are theHousing and Urban DevelopmentCorporation Limited (HUDCO) and theNational Housing Bank (NHB). ScheduledCommercial Banks and Housing FinanceCompanies will sign agreements with theseagencies for the disbursement of housingloans. While borrowers can approach lendinginstitutions directly, most borrowers will be

identified by state governments or urban localbodies.

Steering Committee: A Steering Committeewill be established, chaired by the Secretaryof the Ministry. Other members will includeofficials from state governments, Ministry of

Finance, Reserve Bank of India, HUDCO andNHB. It will be responsible for providingguidance regarding the implementation andmonitoring of the scheme.

Social Justice andEmpowerment

Supreme Court directs government to

provide 3% reservation in government

jobs to disabled persons

Mandira Kala ([email protected])

On October 8, 2013 the Supreme Court directedthe government to provide reservation fordisabled persons in all government departments,companies and institutions.34 In its judgment,the Court interpreted certain provisions of thePersons with Disabilities (Equal Opportunities,Protection of Rights and Full Participation) Act,1995 with regard to reservation for disabledpersons in government jobs. The Act definesdisability in terms of blindness, low vision, curedleprosy, hearing impairment, locomotor

disability, mental retardation, and mental illness.

Section 32 of the Act requires the government toidentify posts in establishments to be reservedfor persons with disability and periodicallyreview the posts so identified. Section 33 of theAct states that the government shall allocate atleast three percent of vacancies in everyestablishment for disabled persons. Of this, onepercent is to be reserved for persons sufferingfrom: (i) blindness or low vision, (ii) hearingimpairment and, (iii) locomotor disability orcerebral palsy, in the posts identified for each ofthese disabilities. Section 33 of the Act, allows

the government to exempt any establishmentfrom reserving posts for the disabled.

In December 2005, an office memorandum of theDepartment of Personnel and Training appliedthe reservation for disabled persons: (i)differently for Group A and B, and Group C andD government posts, and (ii) such reservationwas to be confined to posts identified for eachdisability. The three percent reservation for

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persons with disabilities in Group A, B, C and Dposts was to be computed on the basis ofvacancies occurring in direct recruitment in allthe identified posts across the four groups. Inaddition, three percent of vacancies would bereserved for disabled persons in case ofpromotion to Group C and D posts (if direct

recruitment does not exceed 75%).

Given the above office memorandum, thequestion before the Court was whether the threepercent posts to be reserved for the disabled wasto be on the basis of the vacancies available inthe posts identified for disabled persons or on thetotal cadre strength.

The Court ruled that the reservation for disabledpersons had to be computed on the basis of totalnumber of vacancies in the strength of a cadreand not just on the basis of the vacanciesavailable in the identified posts. It also held that

three per cent reservation has to be computedacross Group A, B, C and D posts in an identicalmanner, in entities established by, owned,controlled or aided by central, state or localgovernments or by a local authority.

The Court directed the government to: (i) amendthe office memorandum and make it consistentwith the judgment, (ii) compute the number ofvacancies available in all governmentestablishments, and (iii) identify the posts fordisabled persons within three months of thepassing of the judgment.

Draft Scheduled Castes Sub-Plan Bill

Jhalak Kakkar ([email protected])

The Ministry of Social Justice andEmpowerment has prepared a draft ScheduledCastes Sub-Plan Bill, 2013. The existingScheduled Castes Sub-Plan (SCSP) seeks toensure proportionate flow of Plan resources forthe development of Scheduled Castes (SC). TheSCSP requires the relevant central/state levelministries to earmark funds under SCSP from thePlan outlay, at least in proportion to thepercentage of SC population in the state/country.

As per the 2011 census, SCs constitute 16.62%of the countrys population.35

Implementation of the SCSP has been viewed asbeing inadequate. Hence, it was consideredappropriate to provide legislative backing to theSCSP. The Ministry constituted a WorkingGroup to draft the SCSP Bill.

Key features of the draft Bill are:36

Planning Commission/state planningdepartments have to earmark a portion of thetotal plan outlay of the central/stategovernment as the outlay for the SCSP. Theoutlay will be in proportion to the SCspopulation in the jurisdiction.

The draft Bill seeks to put in place aneffective institutional mechanism foridentification, preparation, approval,implementation and monitoring of the SCSP.

The ministries/departments identified forimplementation of SCSP shall designschemes for the development of SCs. TheMinistry of Social Justice and Empowermentat the central level and the social welfaredepartment at the state level will appraiseSCSP schemes submitted byministries/departments to ensure conformitywith the Act. It will also recommend

reallocation of SCSP funds from one ministryto another. It will also facilitate an annualsocial auditing of expenditure of SCSP funds.

It creates national and state-level scheduledcaste development councils to advise onpolicy matters related to SCSP and approvethe budget proposal. It proposes to set up anexclusive SCSP wing in the finance ministryof the central/state government for budgetimplementation and allocation.

Funds will only be allocated to schemesspecially designed to accelerate the

development of SCs; not to general schemesaccessible to all.

The Bill provides that the central and stategovernment should take disciplinary actionfor proven negligence and lack of duediligence while discharging responsibilitiesunder the Act. It also provides incentives forcommendable performance.

Law and Justice

Prianka Rao ([email protected])

Supreme Court orders setting up of Civil

Services Board, fixed minimum tenure for

civil servants

The Supreme Court on October 31, 2013,directed the centre and the states to set up a CivilServices Board (CSB) for the management oftransfers, postings, inquiries, promotion, reward,

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punishment and disciplinary matters.37 Further,it stated that Parliament could enact a CivilServices Act to set up a CSB.

The judgment was passed in a public interest writpetition filed by senior ranking bureaucrats. TheSupreme Court had taken into consideration the

recommendations made by the Hota Committee,2004, the second Administrative ReformsCommission, 2008-2009,the Committee onPrevention of Corruption, 2012, and theSanthanam Committee, 1962.

The reasons cited by the Supreme Court werethat civil servants did not have stability of tenure,particularly in the state governments wheretransfers and postings were made frequently, forpolitical considerations and not in public interest.

Key highlights of the judgment include:

Setting up of CSB within 3 months:Thecentre, state governments and the unionterritories shall constitute such Boards withhigh ranking serving officers, includingspecialists in their respective fields, within aperiod of three months. It shall be chairedby the Cabinet Secretary at the centre, andthe Chief Secretary at the state.

Fixed minimum tenure: This would ensurestability and efficiency of administration. Itwas also noted that minimum tenure hadbeen implemented by the centre and about13 states. Fixed minimum tenure wouldenable the civil servants to function as

effective instruments of public policy.

Recording of Instructions and directions:Civil servants should not act on verbalorders given by political executives and allactions must be taken by them on the basisof written communication. By acting on oraldirections, that are not recorded, the rightsguaranteed to the citizens under the Right toInformation Act could be defeated.

Supreme Court holds that co-operative

societies are outside the ambit of RTI

The Supreme Court has held that co-operativesocieties would not fall under the definition ofpublic authority under Section 2 (h) of theRight to Information Act, 2005(RTI Act).38Consequently, co-operative societies would notbe bound by obligations to provide informationsought for by a citizen, under the RTI Act.

This question came up for examination in thematter of Thalappalam Service Co operative

Bank v. State of Kerala.The said co-operativesociety was registered under the Kerala Co-operative Societies Act, 1969. Earlier, theKerala High Court had decided that all co-operative institutions under the administrativecontrol of the Registrar of Cooperative Societies,Kerala would satisfy the definition of public

authority under the RTI Act. Consequently, anappeal was filed before the Supreme Court.

Key highlights of the judgment include:

Public Authority under the RTI Act: Co-operative societies would not fall within thedefinition of public authority under theRTI Act.

(i) Statutory body: Societies are neither abody nor institution of self-governmentestablished or constituted under theConstitution, by law made byParliament or state legislature.

(ii) Substantial Control: The control bythe appropriate government must be of asubstantial nature. The meresupervision or regulation by a statuteor otherwise of a body would not makethat body a public authority within themeaning of the RTI Act. Further,powers exercised by the Registrar ofCo-operative societies and others underthe Co-operative Societies Act are onlyregulatory or supervisory in nature, withno interference in the management or

affairs of the society.(iii) Substantial Funding: Merely providing

subsidies, grants, exemptions, privilegescannot constitute funding to asubstantial extent, unless it is proventhat but for such funding, the bodywould struggle to exist.

Burden of proof: The burden to show that abody or NGO is owned, controlled orsubstantially financed by the government ison the applicant who seeks information oron the government.

State under Article 12: Co- operativesocieties, of the nature discussed in thisappeal, (like those registered under theKerala Co-operative Societies Act, 1969)will not fall within the ambit of state orinstrumentalities of state within themeaning of Article 12 of the Constitution.

Fundamental Right: Right to form a co-operative society is a fundamental right

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under Article 19(1)(c) of the Constitution.Further, a co-operative society is essentiallyan association of persons who have cometogether for a common purpose of economicdevelopment or for mutual help.

Railways


Railways revises passenger fares and

freight tariffs via FAC

The Ministry of Railways has undertaken FuelAdjustment Component (FAC)-linked tariffrevision for both passenger fares as well asfreight tariffs.39 The 2013-14 Railway Budgetprovided for FAC-linked tariff revisions, butpassenger fares were excluded from the first

FAC-linked revision conducted in April 2013.The revised passenger fares will be effectivefrom October 7, 2013 while revised freight tariffswill come into effect on October 10, 2013. TheMinistry expects these revisions to add Rs 1,150crore to earnings in the second half of thefinancial year 2013-14.

Passenger fares for second class suburban andmonthly season tickets remain unchanged. Faresfor second class non-suburban travel have beenraised by Rs 5 for 129 out of 240 distance slabsand by Rs 10 for 9 slabs; fares for remaining

slabs have been left unchanged. For all otherclasses, fares have been raised by about 2%.Freight tariffs have been increased by about1.7% across-the-board.

India and Japan Sign MoU for Feasibility

Study of High Speed Railway System

India and Japan have signed a Memorandum ofUnderstanding (MoU) to conduct joint feasibilitystudy for the proposed Mumbai-AhmedabadHigh Speed Railway corridor.40 The trains onthis corridor are planned to run at speeds of 300-350 km/hour. The study is expected to take 18

months and costs will be shared equally by thetwo countries. A Joint Monitoring Committeeconsisting of the concerned ministries from bothcountries, Planning Commission, Embassy ofJapan and Japan International CooperationAgency shall also be established.

Agricul ture

Sakshi Balani ([email protected])

Minimum Support Prices of Rabi crops

announced

The central government fixed the minimumsupport prices (MSPs) of rabi crops of the 2013-14 season to be marketed in 2014-15.41 Thecentral government fixes MSPs based onrecommendations by the Commission forAgricultural Costs and Prices. Table 1 indicatesthe MSPs of rabi crops for the 2014-15marketing season compared to last year and tothe average rate of increase per year between2008-09 and 2013-14. The MSP for wheat thisseason increased by 3.7% compared to last year,while the compound average growth rate(CAGR) in the years during 2008-09 and 2013-14 was 6.2%.

Table 2: MSPs of rabi crops for 2014-15

season (Rs/quintal)

Commodity

MSP(2014-

15)

MSP(2013-

14)

%change

over2013-14

2008-09to 2013-14 CAGR

Wheat 1400 1350 3.7 6.2%

Barley 1100 980 12.2 8.6%

Gram 3100 3000 3.3 13.4%

Lentil 2950 2900 1.7 11.3%Rapeseed/Mustard 3050 3000 1.7 10.8%

Safflower 3000 2800 7.1 11.2%Sources: Minimum Support Prices for 2013-14(July-June), Ministry of Agriculture; PressInformation Bureau.

Education

Mandira Kala ([email protected])

Cabinet gives nod to Rashtriya Uchhatar

Shiksha Abhiyan

On October 4, 2013, the Cabinet approved a newcentrally sponsored scheme in higher education,i.e. Rashtriya Uchhatar Shiksha Abhiyan(RUSA).42 The scheme will be implementedthrough the Twelfth and Thirteenth Plan period.The scheme focuses on state higher educationalinstitutions and proposes to reach 316 statepublic universities and 13,024 colleges. It isalso expected to improve the Gross Enrolment

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Ratio in these institutions from 19% currently to30% by 2020.

The key objectives of the scheme are as follows:

Improve the quality of existing state highereducational institutions by ensuringcompliance with quality norms and

standards, including accreditation.

Correct regional imbalances in access tohigher education through high qualityinstitutions in rural and semi-urban areas.

Improve equity in higher education byproviding adequate opportunities forwomen, minorities, Scheduled Castes,Scheduled Tribes, Other Backward Classes,and disabled persons.

Ensure adequate availability of qualityfaculty in all higher educational institutionsand ensure capacity building at all levels.

Create an atmosphere of research andinnovation in higher educational institutions.

Integrate skill developments efforts of thegovernment with the conventional highereducation system.

The funding for the scheme will be provided bythe central and state governments in the ratio of65:35 for most states and union territories, 90:10for north-eastern states and Jammu & Kashmir,and 75:25 for special category states. In theTwelfth Plan period, the scheme would have a

financial outlay of Rs 22,855 crore, of which Rs18,027 crore will be the central share. Privategovernment-aided institutions can avail fundingunder the scheme upon meeting certain pre-conditions.

In order to be eligible for funding under thescheme, states will have to fulfill certain criterionwhich include among others: (i) creation of aState Higher Education Council, (ii) creation ofaccreditation agencies, (iii) preparation of stateperspective plans, (iv) commitment of certainstipulated share of funds towards the scheme, (v)academic, and institutional governance reforms

and, (vi) filling faculty positions etc.

An initial amount will be provided to the stategovernments to prepare them for complying withthe above requirements. On meeting theserequirements, states will receive funds on thebasis of certain outcomes. The parameters fordeciding the amount of funds for state highereducation institutions include improvement inaccess, equity and excellence in education.

At the national level, the scheme will beimplemented by the RUSA Mission Authorityand assisted by a project advisory group,technical support group and project directorate.The State Higher Education Council will be setup as an autonomous body to coordinate thescheme in different states. The Council will be

assisted by a state project directorate andtechnical support group.

Information Technology


Cabinet approves National Policy on

Universal Electronic Accessibility

The Cabinet has approved the National Policy onUniversal Electronic Accessibility on October 3,

2013, which aims to eliminate discrimination onthe basis of disabilities.43 The policy also seeksto facilitate equal and unhindered access toelectronics and Information and CommunicationTechnologies (ICT) product and services bydifferently-abled persons including locallanguage support.

India ratified the United Nations Convention onthe Rights of the Persons with Disabilities(UNCRPD) in 2007. UNCRDP requiressignatories to take appropriate measures toensure that persons with disabilities have equal

access to the physical environment,transportation, ICTs, systems and other facilitiesand services provided to the public.

Key strategies envisaged under the Policy are:

Creating awareness on universal electronicsaccessibility and universal design.

Setting up of model electronics and ICTcentres for providing training anddemonstration to special educators anddifferently-abled persons.

Developing programme and schemes withgreater emphasis on differently-abledwomen/children.

Developing procurement guidelines forelectronics and ICTs for accessibility andassistive needs.

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Consumer Affairs, Food andPublic Distribution

Sakshi Balani ([email protected])

Standing Committee presents report on

Bureau of Indian Standards(Amendment) Bill, 2012

The Standing Committee on Food, ConsumerAffairs and Public Distribution (Chairperson:Mr. Vilas Muttemwar) presented its report on theBureau of Indian Standards (Amendment) Bill,2012 on August 30, 2013.44 The Bill wasintroduced in the Lok Sabha on May 3, 2012 bythe Minister of Consumer Affairs, Food andPublic Distribution, Mr. K.V. Thomas.

The Bill seeks to amend the Bureau of IndianStandards Act, 1986. The Act establishes theBureau of Indian Standards (BIS) for theharmonisation of standards, marking and qualitycertification of goods and processes.

The Bill aims to: (i) establish BIS as the nationalstandards body; (ii) empower BIS to bringimportant products and services under thecompulsory certification scheme; (iii) allow self-registration by a manufacturer of a product to therelevant Indian Standard as an alternativemechanism to the compulsory certificationregime; (iv) facilitate the introduction ofhallmarking of precious metal articles under thecompulsory certification regime; and (v)

strengthen the penal provisions under the Act.Some key recommendations of the Committeeare:

Decentralisation of functions andstrengthening of human resources: TheCommittee noted that as a result of theamendments, the workload of BIS willincrease significantly. It recommended thatBIS involve other institutions such as theQuality Council of India and accreditationboards to conduct surveys, inspection, andtesting the quality of goods. This willreduce its workload and help it focus on itsprimary responsibility of standardsformulation. In addition, BIS should bestrengthened in terms of manpower,infrastructure, technical expertise and testingfacilities like laboratories.

Need for grievance redressal forum: TheCommittee noted that neither the Act nor theBill provide for a redressal forum forcomplaints relating to the faulty execution of

the Bill. It recommended the setting up of adirect redressal forum under BIS, toexclusively deal with complaints and issuespertaining to the misinterpretation or faultyexecution of the Bill.

Need for effective monitoring by BIS:The Committee noted that mandatorystandards are implemented by stategovernment officers or higher officers in theconcerned central ministries. However,there is no monitoring mechanism by BIS,which often leads to inferior qualityproducts. The Committee recommended theformulation of a well-devised policy onstandards which should be properlyimplemented through mass and regularmarket checks by BIS.

Hallmarking of precious metals: TheCommittee noted that with the

implementation of compulsory hallmarkingof jewellery, there will be a manifoldincrease in the number of licenses forhallmarking. It recommended that thegovernment set up the required number ofhallmarking centres so as to be equipped todeal with the increase in applications forlicenses. To this end, it is necessary topublicise the financial assistance providedby the government for the setting up ofhallmarking centres. The Committee alsorecommended that such centres be heldaccountable if they fail to conform to the

standards of hallmarked jewellery.For a PRS Standing Committee report summary,see here.

Media


Expert Committee submits report on film

certification

An Expert Committee (Chairperson: Justice

Mukul Mudgal) set-up by the Ministry ofInformation and Broadcasting to examine issuesrelated to film certification under theCinematograph Act,1952 submitted its report onSeptember 28, 2013.45 The Committee has alsoincorporated most of its recommendations in adraft Cinematograph Bill.46 Key observationsand recommendations are:
http://www.prsindia.org/billtrack/the-bureau-of-indian-standards-amendment-bill-2012-2303/http://www.prsindia.org/billtrack/the-bureau-of-indian-standards-amendment-bill-2012-2303/

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Appointment of Advisory Panel members:The central government has set-up AdvisoryPanels at different regional centres toexamine films and make recommendationsregarding certification to the Central Boardof Film Certification (CBFC). TheCommittee noted some instances where

panel members lacked cinematicunderstanding or imposed their political,religious or personal opinions. Hence, theCommittee recommended introducingeligibility criteria for panel members andensuring that the selection process isautonomous. CBFC should set-up acommittee to draw up a list of qualifiedpersons to be appointed as panel members.The strength of the list should be at leastthrice the number of vacancies in AdvisoryPanel(s). At least one-third of the membersof each panel should be women.

Guidelines for film certification: TheCommittee opined that the guidelines forfilm certification cannot be water-tight.Hence, it recommended that such guidelinesshould include provisions for protectingartistic and creative freedom while ensuringsocial responsibility and sensitivity. TheCommittee argued that the AdvisoryPanel/CBFC should view a film in itsentirety instead of the perspective of stand-alone scenes. The film should be examinedin the light of the period depicted, context,content, theme and people. The deletions or

amendments suggested by theCBFC/Advisory Panel should be clearlystated in terms of minutes and secondsinstead of percentage.

Classification of films: The Committee hasrecommended a revised form ofclassification with the following categories:(i) unrestricted exhibition (U), (ii) restrictedto people above the age of twelve (12+), (iii)restricted to people above the age of fifteen(15+), (iv) restricted to adults (A), and (v)restricted to members of any profession orclass of persons (S). This classification is on

the lines of age and certifications prevalentinternationally.

Suspension of exhibition by states: TheCommittee concluded that the centralgovernment has the dominant legislative andexecutive power regarding exhibition offilms throughout the country. Hence, itrecommended inclusion of a legislativeprovision to ensure that exhibition of a film

certified by CBFC shall not be suspended innormal circumstances. In case exhibition ofa film leads to or is likely to lead to a breachof public order, the central government mayitself or on a state governmentsrecommendation, suspend exhibition of sucha film after providing the films producer or

distributor an opportunity to be heard. Sucha suspension can be ordered only publicexhibition of the film. A suspension can bechallenged in the Film CertificationAppellate Tribunal (FCAT).

Appellate Tribunal: The Committee notedthat presently, only an applicant for filmcertification can appeal to the FCAT againstthe CBFCs decision. Any other personaggrieved by such decision typicallyapproaches the relevant High Court. Thishas led to large number of cases andadoption of disparate standards by variousHigh Courts. Hence, the Committeerecommended that FCATs jurisdiction beexpanded to permit appeals by any personaggrieved by CBFCs decision. FCATshould also be given powers to issue interimorders. The decisions of the FCAT shouldbe allowed to be appealed only in theSupreme Court.

Scope of the Cinematograph Act: Thescope of the Cinematograph Act, 1952should be widened to include a films songs,lyrics and advertising material.

TRAI releases consultation paper on issue

and extension of DTH licences

The Telecom Regulatory Authority of India(TRAI) has issued a consultation paper onissue/extension of Direct-to-Home (DTH)licences.47 A DTH license allows the operator toprovide broadcasting service directly to the end-user. The first DTH licence was issued onOctober 1, 2003 and currently there are six DTHoperators in the country.

The first DTH licence expired on September 30,

2013 and current DTH guidelines do not have anexplicit provision for extension/renewal of thelicence. Hence the Ministry of Information andBroadcasting sought TRAIs recommendationson terms and conditions for the extension of theDTH licences. TRAI has invited comments fromstakeholders by October 15, 2013.

Key issues discussed in the paper are:

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Entry fee: TRAI has argued that the entryfee is typically levied to: (a) deter non-serious players, (b) account for the cost ofinduction of a service provider in the sector,(c) account for the fixed component of theoverall licence fee, and (d) account for thecost of administering the licence. The paper

invites comments on whether an entry feeshould be charged for issue of a new licenceto an existing DTH licensee and what shouldbe quantum of such an entry fee.

Period of new licence: The paper invitescomments on the period for which the newlicence should be issued to an existing DTHlicensee on the expiry of his initial licenceperiod. TRAI also believes that newlicences should have clear provisions forextension/renewal. Hence, the paper alsoinvites comments about the period of futureextension/renewal of the new licences ontheir expiry.

Period of bank guarantee: The paper invitescomments on the amount and the validity periodof the bank guarantee to be furnished by anexisting DTH licensee on the issue of a newlicence.

ChemicalsAnjana Agarwal ([email protected])

Scheme for setting up of plastic parks

approved

The Ministry of Chemicals and Fertilisersapproved a scheme to support the setting up ofplastic parks to promote downstream plasticprocessing industries, increase capacityinvestment in thesector and promote exports onOctober 9, 2013.48 The scheme envisages theestablishment of Special Purpose Vehicles(SPVs) to provide infrastructure and commonfacilities to the industries.

It is proposed that the central government would

provide a grant-in-aid to the extent of 50% of theproject cost up to a maximum of Rs 40 crore foreach SPV. Funds will be released based ontimely achievement of milestones identified bythe Scheme Steering Committee in theDepartment of Chemicals and Petrochemicals.At least 20% of the equity of each SPV must becontributed by state governments or theiragencies. The remaining cost is to be funded by

beneficiary industries or loans from financialinstitutions.

Rating system for safety and security of

chemical plants proposed

The Ministry of Chemicals and Fertilisers hasproposed a draft rating system for safety andsecurity of chemical plants and sought commentsfrom stakeholders by the end of the month.49The rating system aims to promote the need formaking the sector accident-free and incentivisechemical units that have good safety operationalmeasures.

The draft rating system lays down 19 keyperformance indicators to assess the rating ofchemical plants, such as whether or not there isan Emergency Preparedness and Response Planin place, and whether the facility handlescorrosive,toxic, explosive or inflammable

materials.

50

The proposed system envisages a two-stagemethodology for assessment of safe and secureperformance of facilities:

(i) First stage: Organisations that do notmeet basic safety and securitymechanisms will be filtered out; and

(ii) Second stage: A more rigorousassessment will be carried out tobenchmark the present safety and securitymechanisms against the stipulated safetyand security framework.

Environment

Jhalak Kakkar ([email protected])

MoEF to declare parts of the Western

Ghats as ecologically sensitive

The Ministry of Environment and Forests(MoEF) has decided in principle to declareparts of the Western Ghats as an EcologicallySensitive Area (ESA).51 The MoEF decision is

based on an acceptance of the recommendationof the High Level Working Group (HLWG)(Chairman: Dr. K. Kasturirangan) that submittedits report in April 2013.

The HLWG has identified approximately 37%(60,000 sq km) of the Western Ghats asEcologically Sensitive Area (ESA). The ESA isspread across six states of the Western Ghats

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region: Gujarat, Maharashtra, Goa, Karnataka,Kerala and Tamil Nadu.

The MoEF has accepted the followingrecommendations of the HLWG on the ESA:

Complete ban on mining, quarrying and sandmining as also thermal power plants and

other heavily polluting industries.

Hydro power and wind energy permittedsubject to applicable regulations.

Ban on new building and constructionprojects of over 20,000 sq m.

Cumulative impact and development needs ofprojects, not specifically prohibited, to beassessed before grant of environmentclearance.

The Forest Rights Act should beimplemented. Consent of the gram sabha for

projects should be mandatory.

A draft notification declaring parts of theWestern Ghats as an ESA would be issued by theMoEF and circulated for inputs of stakeholders.A High Level Committee of the MoEF would beset up to monitor the time bound implementationof the recommendations of the HLWG.

Constitution of Expert Committee on

Uttarakhand floods

The Ministry of Environment and Forests hasconstituted an Expert Committee to study

whether: (i) hydroelectric power projects in theriver basins of Alaknanda and Bhagirathi havecontributed to environmental degradation, and(ii) whether they contributed to the floods thatoccurred in Uttarakhand in June, 2013. 52

The Committee will also do the following:

Examine the impact of the proposed 24hydropower projects on the biodiversity ofAlaknanda and Bhagirathi river basins.

Prepare a Draft Himalayan Policy forUttarakhand given its unique ecological andsocial characteristics.

Suggest suitable measures to mitigate theadverse environmental impact of ongoingprojects including tourism projects.

The Committee was set up consequent to aSupreme Court direction to the Ministry.53 TheCourt referred to various reports which pointedto the adverse impact of the various hydroelectricpower projects on the ecology and environmentof the Alaknanda and Bhagirathi river basins.

The Court was of the view that the cumulativeimpact of the various projects on the river basinshas not been properly examined, and requires ascientific study.

The report is due to be submitted by January 14,2014.

Karnataka High Court stays notification

of Draft Municipal Solid Waste Rules

The Ministry of Environment and Forests hasissued the draft Municipal Solid Wastes(Management and Handling) Rules, 2013 underthe Environment Protection Act, 1986.54 Thesewill replace the Municipal Solid Wastes(Management and Handling) Rules, 2000.

As per news reports, the Karnataka High Courthas directed that these draft Rules be kept onhold.55 The Court was of the view that the draft

Rules run counter to the 2000 Rules, becausethey do notprioritise waste segregation at sourceby citizens.56

For the key features of the draft Rules please seethe September 2013 PRS Monthly PolicyReview, here.

Draft amendments to the Hazardous

Waste Rules, 2008

The Ministry of Environment and Forests(MoEF) has put out a draft notificationcontaining amendments it proposes to make to

the Hazardous Wastes (Management, Handlingand Transboundary Movement) Rules, 2008.57The MoEF is seeking comments on the draftrules until December 13, 2013.

Key proposed amendments are:

Change in title:The title of the rules is beingchanged to Hazardous and OtherWastes(Management, Handling and TransboundaryMovement) Rules, 2008.

Definition of waste added:Waste meansmaterials that are not products or by-products, for which the generator has no

further use for the purposes of production,transformation or consumption and which areto be disposed of.

Trade in hazardous waste:At present theimport and export of certain specifiedhazardous wastes including wastes bearingmercury, selenium, asbestos and thallium isprohibited. The draft rules seek to amend thisposition. While import of such hazardous