For registration call @ 9958826967 or mail at info@beandbyias.com

Daily Category  (Indian Economy )

E-­Shram Needs Some Hard Work to Get Going

Context:

  • On August 26, 2021, the Ministry of Labour and Employment (MOLE) launched the E­-Shram, the web portal for creating a National Data­ base of Unorganized Workers (NDUW), which will be seeded with Aadhaar.

About e-Shram Portal:

  • It is a national portal will help build a comprehensive National Database of Unorganised Workers (NDUW) in the country.

  • It seeks to register an estimated 398­400 million un­organised workers and to issue an E­Shram card.

  • The categories of unorganised workers that will be covered includes

    • Construction workers

    • Migrant workers

    • Gig and platform workers

    • Street vendors

    • Domestic workers

    • Agriculture workers

    • Other unorganised workers

  • The workers will be issued an e-Shram card containing a 12-digit unique number, which, going ahead, will help in including them in social security schemes.

  • If a worker is registered on the e-shram portal and meets with an accident, he will be eligible for

    • Rs 2.0 Lakh on death or permanent disability

    • Rs 1.0 lakh on partial disability.

  • Government in States/UTs will conduct registration of unorganised workers across the country.

  • Registration under the e-SHRAM portal is totally free and workers do not have to pay anything for his or her registration at Common Service Centres (CSCs) or anywhere.

See the source image

Major challenges:

A long process:

  • Given the gigantic nature of registering each worker, it will be a long­drawn process.

  • It is natural that in the initial stages, the pace of registrations will be slower; so far, 0.61 million workers have been registered.

  • Considering the estimated 380 million workers as the universe of registration — debatable as the novel coronavirus pandemic has pushed lakhs of workers in to informality and the estimate also depends on the assumptions used for estimation — 6.33 million workers have to be registered for completion of registration in 60 days, and 4.2 million workers for 90 days.

  • The Government has not mentioned a gestation period to assess its strategy and eficiency.

  • Workers stand to gain by registration in the medium to long run.

  • But the instant benefit of accident insurance upto Rs 0.2 million to registered workers is surely not an attractive carrot.

  • The main point of attraction is the benefits they stand to gain during normal and crisis­ridden periods such as the novel coronavirus pandemic now which the Government needs to disseminate properly.

Data security:

  • One of the vital concerns of e­portals is data security, including its potential abuse especially when it is a mega ­sized database.

  • The central government would have to share data with State governments whose data security capacities vary.

  • There are also media reports pointing out the absence of a national architecture relating to data security.

  • There are several issues concerning the eligibility of persons to register as well as the defnitional issues. 

  • By excluding workers covered by EPF and ESI, lakhs of contract and fixed-­term contract workers will be excluded from the universe of UW. 

  • Under the Social Security Code (SSC), hazardous establishments employing even a single worker will have to be covered under the ESI, which means these workers also will be excluded.

  • The NDUW excludes millions of workers aged over 59 from its ambit, which constitutes age discrimination.

  • Given the frugal or no social security for them, their exclusion will hurt their welfare.

  • As such, SSC is exclusionary as ESC and EPF benefits will be applicable only to those employed in establishments employing 10 or 20 workers, respectively.

  • Thresholds in labour laws segment the labour market. 

  • Many workers will not have an Aadhaar-­seeded mobile or even a smartphone. 

  • Aadhaar­-seeding is a controversial issue with political overtones, especially in the North-­eastern regions.

  • But it is necessary and the Government is right in insisting on it. 

  • The extent of de?nitional and systemic exclusions is vast and there may be other categories of exclusion due to possible procedural deficits.

Complex identities:

  • The very identity of unorganised workers presents problems thanks to its complexity and ever­changing identities.

  • Many are circular migrant workers and they quickly, even unpredictably, move from one trade to another.

  • Many others perform formal and informal work as some during non­-office hours may belong to the gig economy.

    • For example as an Uber taxi or a Swiggy employee.

  • They straddle formal and informal sectors.

  • The nuances of the unorganised workers’ identity are so complex that one wonders whether the mechanical and assumptions­-based portal registration will be able to capture the complexities and dynamics involved regarding them.

  • Even though MOLE has included gig workers in this process, it is legally unclear whether the gig/platform worker can be classified first as a worker at all (the other three Labour Codes do not include these workers), and second as organised or unorganised workers — the definition of an “unorganised worker” in the Social Security Code does not specifically include them, unless they are declared ‘self-­employed’ or ‘wage workers’.

  • In fact, the NCO family code does not specifically include ‘gig/platform worker’ even though they may be registered under several categories of ‘drivers’ which will hide their unique identity.

Other impediments:

  • The central government will have to depend on the State governments for this project to be successful.

  • The main trouble points arise at the regional level for two primary reasons. 

  • It has been reported that in some States such as Maharashtra, the server was down for a few days. 

  • The incentive for multiple attempts on the part of registering workers will be weak.

  • The helping stakeholders must make suitable interventions in these cases.

  • In many States, the social dialogue with the stakeholders especially is rather weak or non­existent. 

Way forward:

  • The success of the project depends on the 

    • Involvement of a variety of stakeholders apart from trade unions, 

    • Massive and innovative dissemination exercises involving multiple media outlets of various languages.

    • The holding of camps on demand by the stakeholders and on their own by the Government, Efficiency of the resolution of grievance redress mechanisms

    • Micro­level operations

  • There is also the concern of corruption as middle-­service agencies such as Internet providers might charge exorbitant charges to register and print the E­-Shram cards. Therefore, the involvement of surveillance agencies is crucial.

  • More importantly, the Government must publish statistics at the national and the regional levels of the registrations to assess the registration system’s effciency.

Conclusion:

  • E­-Shram is a vital system to provide hitherto invisible workers much-­needed visibility. 

  • It will provide the Labour Market Citizenship Document to them. 

  • Registrations cannot be a source of exclusion of a person from receiving social assistance and benefits.

Source: The Hindu

Edible Oil and Oilseeds

Context:

  • Food inflation especially in staples like pulses and edible oil is the last thing any political party wants in the run up to a crucial election.

See the source image

Key Details:

  • Essential Commodities Act 1955 is aimed at ensuring adequate availability of the scheduled essential commodities at fair prices to the common people.

  • Recently despite reduction in import duty, a sudden spurt in prices Edible oils/oilseeds has been observed which may be due to alleged hoarding of it by the stock holders.

Government Intervention:

  • Government has asked for declaration of stocks held by traders, millers, stockists etc which would be verified by the state government.

  • Also states have been asked to monitor prices of edible oil and oilseeds on a weekly basis.

  • This would be the second intervention by the central government in controlling the prices of edible oil.

  • Earlier in August, import duty of crude soya bean and sunflower oil as well as refined sunflower and soya bean oil was reduced.  

Need for interventions when a new harvest is just round the corner?

  • Two main reasons can be attributed to the decision so close to the start of the kharif harvest which is expected to start next month onwards.

  • As the letter states, the central government has taken this step with an eye on price increase in the edible oils.

  • Ahead of the state polls including that of Uttar Pradesh, food inflation is the last thing any government wants to face.

Where else has the government stepped in to control prices?

  • Earlier this year spike in prices of dal had seen government going all out in the pulses sector.

  • It started with early announcement of import quotas in March and then doing away with the license requirement for imports in May.

  • Government asked millers, stockists and traders to declare the stock with them and directed the state governments to verify the same.

  • When all the above steps failed to have desired effect, on July 2, the central government imposed stock limit on processors and traders which made excess holding a crime.

National Mission on Edible Oil-Oil Palm (NMEO-OP)

  • The Centre will spend Rs 11,000 crore on a new mission to ensure self-sufficiency in edible oil production.

  • This financial outlay will be over a five-year period.

  • It has been launched at a time when India’s dependence on expensive imports has driven retail oil prices to new highs.

  • Palm oil region: North-eastern India and the Andaman and Nicobar Islands as prime locations for oil palm cultivation.

  • It would aim to reduce import dependence from 60% to 45% by 2024-25.

  • Oil Production: By increasing domestic edible oil production from 10.5 million tonnes to 18 million tonnes, a 70% growth target.

  • It projected a 55% growth in oilseed production, to 47.8 million tonnes.

Essential Commodities Act, 1955:

  • Essential Commodities Act 1955 is aimed at ensuring adequate availability of the scheduled essential commodities at fair prices to the common people.

  • Ironically, imposition of stock limits come almost a year after the Narendra Modi-led government amended the Essential Commodities Act, 1955.

  • To delink oilseeds, pulses, onions etc from the Act and thus freeing them from stock limit imposition.

  • However, since the Supreme Court has stayed the implementation of the Acts in January, the central government has taken refuge in the Act and imposed stock limits to control prices.

Source: Indian Express

Major Container Shortage and its Impact on International Trade

Context:

  • Reduction in the number of shipping vessels operating as a result of the Covid-19 pandemic has led to fewer empty containers being picked up, leaving many containers in inland depots and stuck at ports for long durations.

Trade imbalance causes container shortage; freight rates hit the roof |  Business Standard News

Key Details:

  • The government is in talks with exporters to help them deal with an international container shortage that has led to freight rates rising by over 300 per cent in the past year for key shipping routes.

  • The lack of availability of containers and the faster than expected recovery in international trade has pushed up freight rates significantly.

Why is there an international container shortage?

  • The reduction in the number of shipping vessels operating as a result of the Covid-19 pandemic has led to fewer empty containers being picked up, leaving many containers in inland depots and stuck at ports for long durations.

  • Long waiting times at key ports such as those in the US due to congestion are also contributing to lengthening turnaround time for containers.

  • Additionally, structural problems such as the high turnaround time for ships in India also add to the container shortage issue.

  • Container shortage in India is also due to trade imbalance i.e. the uneven import-export scenario.

How is the container shortage impacting Indian exporters?

  • Indian exporters are facing major delays in their shipments.

  • Consequent liquidity issues as they have to wait longer to receive payment for exported goods.

  • Exporters noted that shipments that used to take 45 days are now taking 75-90 days leading to a 2-3 month delay in payments leading to liquidity crunch particularly for small exporters.

How can the government help address this issue?

  • Exporters are calling on the government to regulate the export of empty containers.

  • Exporters have asked the government to curb the export of empty containers at all Indian ports in line with a move by the Kolkata port to restrict the number of empty containers permitted to be exported to 100 per vessel for a three month period.

  • Exporters are also calling on the government to release about 20,000 containers that have been abandoned or are detained by government agencies so that they can augment supply.

  • The Federation of Indian Export Organisations has also called on the government to notify a freight support scheme for all exports till the end of the fiscal when freight rates are expected to normalise.

  • Exporters are also asking the government to push back on a move by shipping lines to offer priority bookings at higher rates, asking that shipping lines revert to taking bookings on a first come first serve basis.

  • In the medium term, exporters have called on the government to take steps to boost the manufacturing of containers in India.

Shipping Industry & Ports in India

  • According to the Ministry of Shipping, around 95% of India's trading by volume and 70% by value is done through maritime transport.

  • In 2020, the Ministry of Shipping was renamed as the Ministry of Ports, Shipping and Waterways.

  • India has 12 major and 205 notified minor and intermediate ports.

  • Under the National Perspective Plan for Sagarmala, six new mega ports will be developed in the country.

  • The Indian ports and shipping industry play a vital role in sustaining growth in the country’s trade and commerce.

  • India is the sixteenth-largest maritime country in the world with a coastline of about 7,517 kms.

  • The Indian Government plays an important role in supporting the ports sector.

  • It has allowed Foreign Direct Investment (FDI) of up to 100% under the automatic route for port and harbour construction and maintenance projects.

  • It has also facilitated a 10-year tax holiday to enterprises that develop, maintain and operate ports, inland waterways and inland ports.

Source: Indian Express; www.ibef.org/industry/ports-india-shipping.aspx

Big Tech Companies in The Financial Services

Context:

  • E-commerce giant Amazon’s financial services unit Amazon Pay has partnered with investment platform Kuvera to offer wealth management services

Key Details:

  • This follows Google Pay’s deal with Equitas Small Finance Bank for fixed deposits.

  • The involvement of large tech players in the financial services segment is something that has been specifically flagged by the Reserve Bank of India (RBI).

Amazon Pay’s partnership with Kuvera:

  • Under the partnership, Kuvera will provide services, products and technology know-how to Amazon Pay that will facilitate investments in mutual funds, fixed deposits, etc for its customers.

  • Through this arrangement with Amazon Pay India, it seek to add value to the investors’ journey.

  • Its goal is to accelerate the democratisation of investing and wealth management in India,” Kuvera’s founder and CEO Gaurav Rastogi said.

Other partnerships like this:

  • The most recent partnership involving a big tech company and a financial services firm for wealth management was Google Pay’s deal with Equitas Small Finance Bank for fixed deposits.

  • Several tech companies, though, have tied up with banking partners for short-term financing instruments.

  • These include Amazon Pay that has tied up with Capital Float and IDFC FIRST Bank for the Amazon Pay Later instrument.

  • Paytm, which has tied up with Clix Finance India Pvt. Ltd for its postpaid service.

  • Kunal Shah-led platform CRED also has an online lending platform in partnership with IDFC FIRST Bank.

RBI on involvement of tech companies in the financial services space:

  • While the RBI hasn’t commented on specific deals, in the Financial Stability Report released in July 2021, the central bank flagged concerns with big tech firms offering digital financial services.

  • “Big techs offer a wide range of digital financial services and have a substantial footprint in the payment systems, crowdfunding, asset management, banking and insurance of several advanced and emerging market economies.

  • While this holds the promise of supporting financial inclusion and generating lasting efficiency gains, including by encouraging the competitiveness of banks, important policy issues arise.

Challenges:

  • “Specifically, concerns have intensified around a level-playing field with banks, operational risk, too-big-to-fail issues, challenges for antitrust rules, cyber security and data privacy.

  • Big techs present at least three unique challenges.

  • First, they straddle many different (non-financial) lines of business with sometimes opaque overarching governance structures.

  • Second, they have the potential to become dominant players in financial services.

  • Third, big techs are generally able to overcome limits to scale in financial services provision by exploiting network effects.

Source: Indian Express

Asset monetisation - National Monetisation Pipeline

Context:

  • The Government has announced an ambitious programme of asset monetisation. It hopes to earn ?6 trillion in revenues over a four-year period.

See the source image

Asset monetisation:

  • At a time when the Government’s finances are in bad shape, that is money the Government can certainly use. Getting asset monetisation right is quite a challenge, though.

  • In asset monetisation, the Government parts with its assets — such as roads, coal mines — for a specified period of time in exchange for a lump sum payment.

    • At the end of the period, the assets return to the Government.

  • No Sale: Unlike in privatisation, no sale of government assets is involved.

  • Revenues: By monetising assets it has already built, the Government can earn revenues to build more infrastructure.

  • Sectors: Asset monetisation will happen mainly in three sectors: roads, railways and power. Other assets to be monetised include: airports, ports, telecom, stadiums and power transmission.

National Monetisation Pipeline:

  • The government unveiled a four-year National Monetisation Pipeline (NMP) worth an estimated Rs 6 lakh crore.

  • Aim:

    • To unlock value in brownfield projects by engaging the private sector,

    • Transferring to them revenue rights and not ownership in the projects, and

    • Using the funds so generated for infrastructure creation across the country.

  • It provides a clear framework for monetisation and give potential investors a ready list of assets to generate investment interest.

  • The government has stressed that these are brownfield assets, which have been “de-risked” from execution risks, and therefore should encourage private investment.

  • Structuring the monetisation transactions, providing a balance risk profile of assets, and effective execution of the NMP will be key challenges.

Private Players and under-utilised assets:

  • Two important statements have been made about the asset monetisation programme. One, the focus will be on under-utilised assets.

  • Two, monetisation will happen through public-private partnerships (PPP) and Investment Trusts. Let us examine each of these in turn.

  • Suppose a port or airport or stadium or even an empty piece of land is not being used adequately because it has not been properly developed or marketed well enough.

  • A private party may judge that it can put the assets to better use. It will pay the Government a price equal to the present value of cash flows at the current level of utilisation.

  • By making the necessary investment, the private player can reap the benefits of a higher level of cash flows.

  • The difference in cash flows under Government and those under private management is a measure of the improvement in efficiency of the assets.

  • This is a win-win situation for the Government and the private player. The Government gets a ‘fair’ value for its assets.

  • The private player gets its return on investment. The economy benefits from an increase in efficiency. Monetising under-utilised assets thus has much to commend it.

Private Players and Assets well utilised:

  • Matters could be very different in monetisation of an asset that is being properly utilised, say, a highway that has good traffic.

  • In this case, the private player has little incentive to invest and improve efficiency. It simply needs to operate the assets as they are.

  • The private player may value the cash flows assuming a normal rate of growth of traffic. It will pay the Government a price that is the present value of cash flows minus its own return.

  • The Government earns badly needed revenues but these could be less than what it might earn if it continued to operate the assets itself. There is no improvement inefficiency.

  • Suppose the private player does plan to improve efficiency in a well-utilised asset by making the necessary investment and reducing operating costs.

  • The reduction in operating costs need not translate into a higher price for the asset than under government ownership. The cost of capital for a private player is higher than for a public authority.

  • A public authority needs less equity capital and can access debt more cheaply than a private player.

  • The higher cost of capital for the private player could offset the benefit of any reduction in operating costs.

  • As we have seen, the benefits to the economy are likely to be greater where under-utilised assets are monetised.

  • However, private players will prefer well-utilised assets to assets that are under-utilised. That is because, in the former, cash flows and returns are more certain. Private incentives in asset monetisation may not accord with the public interest.

Issues in Asset Monetisation:

  • There are other complications. It is very difficult to get the valuation right over a long-term horizon, say, 30 years.

    • Does anybody know what would be the growth rate of the economy over such a period?

  • For a road or highway, growth in traffic would also depend on factors other than the growth of the economy, such as the

    • Level of economic activity in the area,

    • The prices of fuel and vehicles,

    • Alternative modes of transport and

    • Their relative prices, etc.

  • If the rate of growth of traffic turns out to be higher than assessed by the Government in valuing the asset, the private operator will reap windfall gains.

  • High Cost for Consumers: Alternatively, if the winning bidder pays what turns out to be a steep price for the asset, it will raise the toll price steeply.

    • The consumer ends up bearing the cost.

  • If transporters have to pay more, the economy suffers. There is also the possibility that roads whose usage is currently free are put up for monetisation.

  • Again, the consumer and the economy bear the cost. It could be argued that a competitive auction process will address these issues and fetch the Government the right price while yielding efficiency gains.

  • But that assumes, among other things, that there will be a large number of bidders for the many assets that will be monetised.

  • Lastly, there is no incentive for the private player to invest in the asset towards the end of the tenure of monetisation.

  • The life of the asset, when it is returned to the Government, may not be long. In that event, asset monetisation virtually amounts to sale.

    • Monetisation through the PPP route is thus fraught with problems.

Another way Asset Monetisation: Infrastructure Investment Trusts (InvIT)

  • InvITs are mutual fund-like vehicles in which investors can subscribe to units that give dividends.

  • The sponsor of the Trust is required to hold a minimum prescribed proportion of the total units issued.

  • InvITs offer a portfolio of assets, so investors get the benefit of diversification.

  • The other form of monetisation the Government has indicated is creating Infrastructure Investment Trusts (InvIT) to which monetisable assets will be transferred.

  • Assets can be transferred at the construction stage or after they have started earning revenues.

  • In the InvIT route to monetisation, the public authority continues to own the rights to a significant portion of the cash flows and to operate the assets.

  • So, the issues that arise with transfer of assets to a private party — such as incorrect valuation or an increase in price to the consumer — are less of a problem.

Infrastructure Investment Trusts (InvIT):

  • An Infrastructure Investment Trust (InvITs) is like a mutual fund.

  • It enables direct investment of small amounts of money from possible individual/institutional investors in infrastructure to earn a small portion of the income as return.

  • Objective: To facilitate investment in the infrastructure sector.

  • InvITs work like mutual funds or real estate investment trusts (REITs) in features.

  • InvITs can be treated as the modified version of REITs designed to suit the specific circumstances of the infrastructure sector.

  • Regulated by: The SEBI notified the SEBI (Infrastructure Investment Trusts) Regulations, 2014 for registration and regulation of InvITs in India.

  • The InvITs listed on the stock exchange are IRB InvIT Fund and India Grid Trust.

What are the challenges?

  • Among the key challenges that may affect the NMP roadmap are:

    • Lack of identifiable revenues streams in various assets,

    • Level of capacity utilisation in gas and petroleum pipeline networks,

    • Dispute resolution mechanism,

    • Regulated tariffs in power sector assets, and

    • Low interest among investors in national highways below four lanes.

  • Execution of the plan remains key to its success.

  • Structuring of monetisation transactions is being seen as key.

  • The slow pace of privatisation in government companies including Air India and BPCL, and less-than-encouraging bids in the recently launched PPP initiative in trains, indicate that attracting private investors interest is not that easy.

  • Creating an effective monetisation transaction structure could be a bit challenging in this case.

Way Forward:

  • A public authority has inherent advantages on the funding side.

  • In general, the economy is best served when public authorities develop infrastructure and monetise these.

  • Second, monetisation through InvITs is likely to prove less of a problem than the PPP route.

  • We are better off monetising under-utilised assets than assets that are well utilised.

  • To ensure proper execution, there is a case for independent monitoring of the process.

  • The Government may set up an Asset Monetisation Monitoring Authority staffed by competent professionals.

  • The authority must put all aspects of monetisation under the scanner — valuation, the impact on price charged to the consumer, monetisation of under-utilised versus well-utilised assets, the experience across different sectors, etc. — and document the lessons learnt.

  • Asset monetisation is fine if executed properly — and that is always a big ‘if’.

Source: The Hindu

National Monetisation Pipeline

Context:

  • The government has unveiled a four-year National Monetisation Pipeline worth an estimated Rs 6 lakh crore.