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Archive for October, 2012

Are there enough regulatory safeguards against nuclear power?

October 30th, 2012 No comments

The protests against the nuclear power plant at Kudankulam have intensified over the recent weeks.  The Kudankulam plant is expected to provide 2 GW of electricity annually.  However, activists concerned about the risks of nuclear energy are demanding that the plant be shut down.  The safety of nuclear power plants is a technical matter.  In this blog post we discuss the present mechanism to regulate nuclear energy and the legislative proposals to amend this mechanism.

Atomic materials and atomic energy are governed by the Atomic Energy Act, 1962.  The Act empowers the central government to produce, develop and use atomic energy.  At present, nuclear safety is regulated by the Atomic Energy Regulatory Board (AERB).  Some of the drawbacks of the present mechanism are discussed below.

Key issues under the present nuclear safety regulatory mechanism

The AERB is not empowered to operate as an independent operator.  The AERB was established by the government through a notification and not through an Act of Parliament.  Its powers and functions are therefore amendable by the Department of Atomic Energy through executive orders.  The parliamentary oversight exercised upon such executive action is lower than the parliamentary oversight over statutes. 1

Furthermore, the Atomic Energy Commission that sets out the atomic energy policy, and oversees the functioning of the AERB, is headed by the Secretary, Department of Atomic Energy.  This raises a conflict of interest, as the Department exercises administrative control over NPCIL that operates nuclear power plants.

It is pertinent to note that various committee reports, including a CAG Report in 2011, had highlighted the drawbacks in the present regulatory mechanisms and recommended the establishment of a statutory regulator.  A summary of the Report may be accessed here.

Proposed mechanism

Following the Fukushima nuclear incident in 2011, the Nuclear Safety Regulatory Authority Bill, 2011 was introduced in Parliament to replace the AERB.

The Bill establishes the Nuclear Safety Regulatory Authority (NSRA) to regulate nuclear safety, and a Nuclear Safety Council to oversee nuclear safety policies that the NSRA issues.  Under the Bill, all activities related to nuclear power and nuclear materials may only be carried out under a licence issued by the NSRA.

Extent of powers and independence of the NSRA

The Bill establishes the NSRA as a statutory authority that is empowered to issue nuclear safety policies and regulations.  The Nuclear Safety Council established under the Bill to oversee these policies includes the Secretary, Department of Atomic Energy.  The conflict of interest that exists under the present mechanism may thus continue under the proposed regulatory system.

The Bill provides that members of the NSRA can be removed by an order of the central government without a judicial inquiry.  This may affect the independence of the members of the NSRA.  This process is at variance with enactments that establish other regulatory authorities such as TRAI and the Competition Commission of India.  These enactments require a judicial inquiry prior to the removal of a member if it is alleged that he has acquired interest that is prejudicial to the functions of the authority.

The proposed legislation also empowers the government to exclude strategic facilities from the ambit of the NSRA.  The government can decide whether these facilities should be brought under the jurisdiction of another regulatory authority.

These and other issues arising from the Bill are discussed here.


 

  1. The executive action or the Rules are in force from the date of their notification.  They are to be tabled before Parliament mandatorily.  However, an executive action is discussed and put to vote in Parliament only if an objection is raised by a Member of Parliament.  The executive orders may be reviewed by the committee on sub-ordinate legislation.  However, this committee has to oversee a large volume of rules and regulations.  For instance, there were 1264 statutory notifications that were tabled before the Rajya Sabha in 2011-12.

Will the changes to the Contract Labour Act benefit workers?

October 26th, 2012 4 comments

A change in the Contract Labour (Regulation and Abolition) Act, 1970 may be in the pipeline.  According to news reports, the government may amend the 1970 Act to safeguard the interest of contract workers.  The proposal is to bring parity between permanent and contractual workers in wages and other benefits.

The Contract Labour Act, 1970 regulates the employment of contract labour in establishments which employ 20 or more workmen.  It excludes any establishment whose work is intermittent or casual in nature.  The appropriate government may require establishments to provide canteens, rest rooms and first aid facilities to contract labourers.  The contractor shall be responsible for payment of wages to each worker employed by him.  There are penalties listed for contravening the Act.

According to the Report of the National Commission on Enterprises in the Unorganised Sector (NCEUS), more than 90% of the workforce is part of the unorganised sector.  Contract labour is found in certain activities in the unorganized sector such as in stone quarrying, beedi rolling, rice shelling and brick kiln.  The Commission recommended some measures to protect the workers in the unorganized sector such as ensuring minimum conditions of work, minimum level of social security and improved credit flow to the non-agricultural sector.

The Report of the Working Group on “Labour Laws and other Regulations” for the 12th Five Year Plan, also proposed that the 1970 Act should be amended.  The amendment should ensure that in case of contract labour performing work similar to that performed by permanent workers, they should be entitled to the same wage rates, holidays, hours of work and social security provisions.  Furthermore, whenever a contract worker is engaged through a contractor, the contract agreement between the employer and the contractor should clearly indicate the wages and other benefits to be paid by the contractor.

However, other experts such as Bibek Debroy, Kaushik Basu and Rajeev Dehejia have recommended broad reforms in India’s labour laws to allow for more flexibility in the labour market.  According to them, these laws protect only a small portion of workers in the organized sector.

FAQ on Civil Aviation

October 22nd, 2012 1 comment

According to a press release, the Ministry of Civil Aviation is considering abolishing the development fee being levied at the Delhi and Mumbai airports.  The Ministry has already asked the Kolkata and Chennai airports not to levy a development fee.  According to the Ministry, this is being done to make air travel more affordable.  Currently, development fee charged at the Delhi Airport ranges from Rs 200 to Rs 1300.  At the Mumbai airport, the fee ranges from Rs 100 to Rs 600.

It is pertinent to note that though, the Ministry has proposed abolishing the development fee, the airport operators may still levy a user development fee.  In this blog we discuss some of the aspects of development fee and user development fee.

What is a development fee and a user development fee?

Development Fee (DF) is primarily intended to fund the establishment or upgradation of an airport.  It is intended to bridge the gap between the cost of the project and the finance available with the airport operator.  Currently only the Mumbai and Delhi Airports levy a DF. However, there are other types of tariffs, such as a user development fee (UDF), which may be levied by the airports. UDF is generally regarded as a revenue enhancing measure.  It is levied by the airport operators to meet operational expenditure

Section 22 A of the Airports Authority Act, 1994 (amended in 2003) gives the Airport Authority of India (AAI) the power to levy and collect a development fee on embarking passengers.  The Act provides that the development fee can be utilised only for: (a) funding or financing the upgradation of the airport; (b) establishing a new airport in lieu of the airport at which is levied; and (c) investing in shares of a private airport in lieu of an existing airport .

Unlike DF,  UDF is not levied and collected under the Airport Authority of India Act but under Rule 89 of the Aircraft Rules, 1937. Under the Aircraft Rules, UDF may be levied and collected by either the AAI or the private operator.   According to the Airport Economic Regulatory Authority, UDF is levied to ensure that the airport operators can get a fair return on their investments.

What is the role of the Airport Economic Regulatory Authority?

In 2008, the Airport Economic Regulatory Authority (AERA) was established to regulate aeronautical tariffs.  Among others, AERA’s functions include determining the amount of DF and UDF for major airports.  In case of non-major airports, the UDF shall be determined by the central government.

What has been the role of the Supreme Court?

In 2009, the central government permitted the Mumbai and Delhi Airports to levy a DF.  The rate of was prescribed by the central government and not by AERA.  In 2011, the Supreme Court held that this levy of DF was illegal.  The Court based its decision on two grounds.

Firstly, the court held that the rate of DF has to be determined by the AERA and not the central government.  Secondly, the Court held that the power to levy the fee lies with the Airport Authority as the development fee can only be utilised for the performance of the purpose specified in the Act.  The court held that while the Airport Authority can utilise the development fee for any of the functions prescribed in the Act, it can assign the power to levy a development fee to a private operator only for funding or financing the upgradation or expansion of the airport.

Can private operators collect a development fee and a user development fee?

In 2003, the government amended the Airport Authority of India Act to allow the AAI with the prior permission of the central government to: (i) to lease the premises of airports to private entities to undertake some of the functions of the AAI; (ii) levy and collect a development fee on the embarking passengers at a rate that may be prescribed.

Till 2011, the power to collect the development fee lay only with the Airport Authority.  However with the notification of the Airports Authority of India (Major Airports) Development Fees Rules, 2011, private operators have also been permitted to collect the development fee.

 

Are we closer to a law on privacy?

October 19th, 2012 2 comments

On October 16, the Group of Experts on Privacy, Chaired by Mr. A. P. Shah, submitted its Report to the Planning Commission.  The Expert Group was appointed to set out the principles that Indian privacy law should abide by.   Even though privacy has been held to be a fundamental right as long back as in 1962, India does not have a law that specifies safeguards to privacy.  Moreover, recent government initiatives, such as the UID, involve collection of personal information and storage in electronic form.  The absence of a law on privacy increases the risk to infringement of the fundamental right.

In this blog we list the recommendations made by the expert group, discuss the status of the right to privacy in India, and why there is a need for an enactment.

Recommendations of the Expert Group on Privacy

  • The Expert Group recommended that the new legislation on privacy should ensure that safeguards are technology neutral.  This means that the enactment should provide protections that are applicable to information, regardless of the manner in which it is stored: digital or physical form.
  • The new legislation should protect all types of privacy, such as bodily privacy (DNA and physical privacy); privacy against surveillance (unauthorised interception, audio and video surveillance); and data protection.
  • The safeguards under the Bill should apply to both government and private sector entities.
  • There should be an office of a ‘Privacy Commissioner’ at both the central and regional level.
  • There should be Self-Regulating Organisations set up by the industry.  These organisations would develop a baseline legal framework that protects and enforces an individual’s right to privacy.  The standards developed by the organisations would have to be approved by the Commissioner.
  • The legislation should ensure that entities that collect and process data would be accountable for these processes and the use to which the data is put.  This, according to the Group, would ensure that the privacy of the data subject is guaranteed.

Present status of the Right to Privacy

While the Supreme Court has held privacy to be a fundamental right, it is restricted to certain aspects of a person’s life.  These aspects include the privacy of one’s home, family, marriage, motherhood, procreation and child-rearing.  Therefore, to claim privacy in any other aspect, individuals have to substantiate these are ‘private’ and should not be subjected to state or private interference.  For instance, in 1996 petitioners had to argue before the Court that the right to speak privately over the telephone was a fundamental right.

Risks to privacy

Government departments collect data under various legislations.  For instance, under the Passport Act, 1967 and the Motor Vehicles Act, 1988 persons have to give details of their address, date of birth etc.  These enactments do not provide safeguards against access and use of the information by third parties.  Similarly, information regarding ownership of property and taxes paid are publicly available on the MCD website.

Furthermore, recent government initiatives may increase the risk to infringement of privacy as personal information, previously only available in physical form, will now be available electronically.  Initiatives such as the National e-Governance Plan, introduced in 2006 and Aadhaar would require maintenance of information in electronic form.  The Aadhaar initiative aims at setting up a system for identifying beneficiaries of government sponsored schemes.  Under the initiative, biometric details of the beneficiaries, such as retina scan and fingerprints, are collected and stored by the government.  The government has also introduced a Bill in Parliament creating a right to electronic service delivery.  As per news reports, a draft DNA Profiling Bill is also in the pipeline.

 

N(I)AB-ing that environmental clearance

October 18th, 2012 3 comments

There has been much discussion about bringing the GDP growth on track and the need for expediting infrastructure projects in this regard. At the Planning Commission Meeting to approve the Twelfth Five Year Plan, last month, there were concerns about the  implementation of such  projects because of the delay in the grant of environment and forest clearances.

In this context, there has been talk of setting up a singular body that will grant approvals for large infrastructure projects. News reports suggest that the government is considering forming a National Investment Approval Board (NIAB). The NIAB will be responsible for expediting the clearances for mega project proposals above a certain financial threshold. The Board would be headed by the Prime Minister and will have the authority to provide the ‘final decision’ on investment projects. According to news reports, the NIAB will be the final decision making body. The Ministry of Environment & Forests (MoEF) has raised concerns that this would create ambiguity in the current process of granting clearance for projects. While the formation of the NIAB is still being deliberated and discussed, it would be relevant to understand the process that the MoEF follows before granting clearance to a project and look at data on number of clearances granted and pending.

The MoEF has developed certain processes to examine the potential environmental impact of new projects or expansion of existing projects. These are contained in the Environment Impact Assessment Notification, 2006. This notification empowers the Expert Appraisal Committees (EAC) to review the environmental impact of projects. The EAC carries out a combination of these steps depending on the classification of the project:

  • Screening: To determine whether the project requires further study for preparing the Environmental Impact Assessment (EIA).
  • Scoping: Setting clear guidelines that state the environmental concerns identified in the project.
  • Public Consultation: To ascertain the concerns of the local persons affected by the environmental impacts of the project.
  • Appraisal: The EAC studies the application, final EIA report, and outcome of the public consultations and makes its recommendations to the MoEF.

The MoEF considers the grant of environmental clearance to development projects in terms of the provisions of EIA Notification, 2006. From July 13, 2011 to July 12, 2012 the MoEF has given environmental clearances to 209 development projects. For a sector wise break up see Table 1.

Table 1: Number of Environment Clearances Accorded

Sector No.  of  projects
accorded EC
Industry (Steel & Cement)

88

Thermal Power

29

River Valley and Hydro-electric

6

Coal Mining

29

Non-Coal Mining

25

National Highways

32

Total

209

Source: “Environmental Clearance accorded from 13.07.2011 to 12.07.2012”, MoEF

A total of 593 proposals are pending for environmental clearance as on August 13, 2012.[i]

It remains to be seen how the process of granting clearances as established by the MoEF will be reconciled with the expedited process of the NIAB.


[i] MoEF, Lok Sabha, Unstarred Question no. 637, August 13, 2012,

Kelkar Fiscal Report – Highlights

October 17th, 2012 2 comments

Recently, the Kelkar Committee published a roadmap for fiscal consolidation.  The report stresses the need and urgency to address India’s fiscal deficit.  A high fiscal deficit – the excess of government expenditure over receipts – can be problematic for many reasons.  The fiscal deficit is financed by government borrowing; increased borrowing can crowd out funds available for private investment. High government spending can also lead to a rise in price levels.  A full PRS summary of the report can be found here.

Recent fiscal trends

Last year (2011-12), the central government posted a fiscal deficit of 5.8% (of GDP), significantly higher than the targeted 4.6%.  This is in stark contrast to five years ago in 2007-08, when after embarking on a path of fiscal consolidation the government’s fiscal deficit had shrunk to a 30 year low of 2.5%. In 2008-09, a combination of the Sixth Pay Commission, farmers’ debt waiver and a crisis-driven stimulus led to the deficit rising to 6% and it has not returned to those levels since.  As of August this year, government accounts reveal a fiscal deficit of Rs 3,37,538 crore which is 65.7% of the targeted deficit with seven months to go in the fiscal year.   With growth slowing this year, the committee expects tax receipts to fall short of expectations significantly and expenditure to overshoot budget estimates, leaving the economy on the edge of a “fiscal precipice”.

Figure 1 (source: RBI)

 

Committee recommendations – expenditure

To tackle the deficit on the expenditure side, the committee wants to ease the subsidy burden.  Subsidy expenditure, as a percentage of GDP, has crept up in the last two years (see Figure 2) and the committee expects it to reach 2.6% of GDP in 2012-13.  In response, the committee calls for an immediate increase in the price of diesel, kerosene and LPG.  The committee also recommends phasing out the subsidy on diesel and LPG by 2014-15.   Initial reports suggest that the government may not support this phasing out of subsidies.

Figure 2 (source: RBI, Union Budget documents, PRS)

 

For the fertiliser subsidy, the committee recommends implementing the Department of Fertilisers proposal of a 10% price increase on urea.  Last week , the government raised the price of urea by Rs 50 per tonne (a 0.9% increase). Finally, the committee explains the rising food subsidy expenditure as a mismatch between the issue price and the minimum support price and wants this to be addressed.

Committee recommendations – receipts

Rising subsidies have not been matched by a significant increase in receipts through taxation: gross tax revenue as a percentage of GDP has remained around 10% of GDP (see Figure 3). The committee seeks to improve collections in both direct and indirect taxes via better tax administration.  Over the last decade, income from direct taxes – the tax on income – has emerged as the biggest contributor to the Indian exchequer.  The committee feels that the pending Direct Tax Code Bill would result in significant losses and should be reviewed. To boost income from indirect taxes – the tax on goods and services – the committee wants the proposed Goods and Service Tax regime to be implemented as soon as possible.

Figure 3 (source: RBI)

 

Increasing disinvestment, the process of selling government stake in public enterprises, is another proposal to boost receipts. India has failed to meet the disinvestment estimate set out in the Budget in the last two years (Figure 4).  The committee believes introducing new channels 1 for disinvestment would ensure that disinvestment receipts would meet this year’s target of Rs 30,000 crore.

Figure 4 (source: Union Budget documents, PRS)

 

Taken together, these policy changes, the committee believe would significantly improve India’s fiscal health and boost growth.  Their final projections for 2012-13, in both a reform and no reform scenario, and the medium term (2013-14 and 2014-15) are presented in the table below:

Kelkar Committee projections (% of GDP)

2012-132013-142014-15
BudgetNo reformReformProjections with reform
Gross tax revenue10.610.110.310.611.1
Total receipts9.69.19.49.39.5
Subsidies1.92.62.21.71.5
Plan expenditure5.15.04.84.94.9
Total expenditure14.715.214.613.913.4
Fiscal deficit5.16.15.24.63.9
Source: Kelkar Report

 


 

  1.  The committee suggests introducing a ‘call option model’. This is a mechanism allowing  the government to offer for sale multiple securities over a period of time till disinvestment targets are achieved.  Investors would have the option to purchase securities at the cost of a premium.  They also propose introducing ‘exchange traded funds’ which would comprise all listed securities of Central Public Sector Enterprises and would provide investors with the benefits of diversification, low cost access and flexibility.

Are genetically modified crops safe enough?

October 15th, 2012 5 comments

A recent news report stated that the Planning Commission has advocated putting in place a “proper regulatory mechanism” before permitting the use of genetic modification in Indian crops.  A recent Standing Committee report on genetically modified (GM) crops found shortcomings in the regulatory framework for such crops.  The current framework is regulated primarily by two bodies: the Genetic Engineering Appraisal Committee (GEAC) and the Review Committee on Genetic Manipulation (RCGM).  Given the inadequacy of the regulatory framework, the Standing Committee recommended that all research and development activities on transgenic crops be carried out only in containment (in laboratories) and that ongoing field trials in all states be discontinued.  The blog provides a brief background on GM crops, their regulation in India and the key recommendations of the Standing Committee.

What is GM technology?

GM crops are usually developed through the insertion or deletion of genes from plant cells.  Bt technology is a type of genetic modification in crops.  It was introduced in India with Bt cotton.  The debate around GM crops has revolved around issues of economic efficacy, human health, consumer choice and farmers’ rights.  Some advantages of Bt technology are that it increases crop yield, decreases the use of pesticides, and improves quality of crops.  However, the technology has also been known to cause crop loss due to resistance developed by pests and destruction of local crop varieties, impacting biodiversity.

Approval process for commercial release of GM crops

  1. Initially, the company developing the GM crop undertakes several biosafety assessments including, environmental, food, and feed safety assessments in containment.
  2. This is followed by Bio-safety Research Trials which require prior approval of the regulators, the GEAC and the RCGM.
  3. Approval for environmental release is accorded by the GEAC after considering the findings of bio-safety studies.
  4. Finally, commercial release is permitted only for those GM crops found to be safe for humans and the environment.

Committee’s recommendations for strengthening the regulatory process

The Standing Committee report found several shortcomings in the regulatory framework, some of which are as follows:

  • State governments are not mandatorily consulted for conducting open field trials on GM crops.  Several states such as Kerala and Bihar have opposed field trials for GM crops.  The Committee recommended that mandatory consultation with state governments be built into the regulatory process.
  • The key regulators, the GEAC and the RCGM, suffer from poor organisational set-up and infrastructure.  The Committee recommended that the regulatory framework be given statutory backing so that there is no scope for ambiguity or complacency on the part of the authorities responsible for the oversight of GM organisms.  It urged the government to introduce the Biotechnology Regulatory Authority Bill.
  • There is evidence that the GEAC has not complied with international treaties.  These include the Cartagena Protocol on Biosafety and the Rio Declaration on Environment and Development.  It recommended that legislation relating to liability and redress for damage arising from living modified organisms be enacted.
  • Some international scientists have raised doubts about the safety of Bt Brinjal and the way tests were conducted.  To remedy this situation, the Committee recognised the need for an overarching legislation on biosafety to ensure that biotechnology is introduced without compromising the safety of biodiversity, human and livestock health, and environmental protection.

Note that over the last few sessions of Parliament, the government has listed the Biotechnology Regulatory Authority Bill for introduction; however the Bill has not been introduced yet.  The Bill sets up an independent authority for the regulation of GM crops.

For a PRS summary of the report and access to the full report, see here and here.