Anurag Vaishnav's blog

Recent rise in LPG prices

Last week, oil-marketing companies (or OMCs, such as Indian Oil Corporation Limited and Hindustan Petroleum Corporation Limited) raised the price of domestic LPG in the country. [1]  The price of a domestic cylinder (14.2kg) has increased from Rs 714 in January 2020 to Rs 858.5 in February 2020.  This is a 20% hike in the price of a LPG cylinder.  Note that this is the sixth consecutive month for which LPG prices have been revised upwards.  Figure 1 shows the variation in price of a domestic (non-subsidised) LPG cylinder in Delhi over the last year.

Figure 1: Variation in price of non-subsidised domestic LPG cylinder

 

Sources:  Indian Oil and Corporation Limited; PRS.

How is the price of LPG cylinders determined?

LPG prices are revised every month.  The price is determined by public sector OMCs namely, Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited and Bharat Petroleum Corporation Limited, in line with the changes in the international market prices and other market conditions. [2]  The international market price affects the import parity price of petroleum products (the price that importers pay for import of product at the respective Indian ports).  This includes exchange rate, ocean freight, insurance and customs duty among others.

The Ministry of Petroleum and Natural Gas has stated that the recent hike in the price of LPG cylinder is due to a sharp rise in international LPG prices during January 2020 (from USD 448/Metric Tonne to USD 567/Metric Tonne). [3] 

What is the difference between the price of a subsidised and non-subsidised cylinder?

The price determined by the OMCs reflects the price of a non-subsidised domestic LPG cylinder.  The government modulates the effective price to provide subsidised LPG cylinders to consumers under the 'Pratyaksha Hastaantarit Laabh' direct benefit transfer (or DBT-PAHAL) scheme. [4]   Under the scheme, a consumer (with annual income of up to Rs 10 lakh) can avail DBT cash-subsidy for a LPG cylinder.   The beneficiaries buy LPG cylinders at market rate and subsequently receive subsidy directly in their bank accounts.  

With the recent increase in price of a LPG cylinder, the government has increased the subsidy amount for PAHAL consumers from Rs. 153.86 per cylinder to Rs. 291.48 per cylinder (89% increase).3   This is done to ensure that the subsidized LPG consumers are insulated from the volatility of LPG prices in the international market.  Table 1 shows the amount of subsidy provided by the government for LPG cylinder.  Note that price of a subsidised cylinder has increased from Rs 494 to Rs 567 (14.8%) from February 2019 to February 2020. 

Table 1: Difference between the price of subsidised and non-subsidised LPG cylinder

As on

Non-subsidised cylinder

Subsidised cylinder

Subsidy

February 2018

Rs 736.00

Rs 495.63

Rs 240.37

February 2019

Rs 659.00

Rs 493.53

Rs 165.47

February 2020

Rs 858.50

Rs 567.02

Rs 291.48

Sources: Unstarred Question No.1211, February 13, 2019, Ministry of Petroleum and Natural Gas, Rajya Sabha.
 Note: Prices are at Delhi. 

How many people avail the subsidy on LPG cylinders?

Currently, there are a total of 27.16 crore LPG (domestic) connections in the country.3  Of these, 26.12 crore (94%) consumers are beneficiaries under the PAHAL scheme, and therefore, can avail LPG cylinders at subsidised rates.  Note that, under the scheme, a maximum of 12 subsidised cylinders per year can be availed under one connection.  Further, a household cannot have more than one connection. 

What is the cost of subsidy for the government?

The subsidy on domestic LPG is met through the budgetary grants of the Ministry of Petroleum and Natural Gas.  In 2020-21, the government is estimated to spend Rs 37,256 crore on LPG subsidy.   This includes Rs 35,605 crore for DBT-PAHAL and Rs 1,118 crore for Pradhan Mantri Ujjwala Yojana.  This is an increase of 9.3% from the expenditure in 2019-20 of Rs 34,086 crore (revised estimate).  Note that LPG subsidy constitutes 87% of the Ministry's total budget (Rs 42,901 crore).   

Figure 2 below shows the year-wise expenditure on LPG subsidy, and as a proportion of the total budget of the Ministry from 2015-16 to 2020-21. 

Figure 2: LPG subsidy over the years (2015-16 to 2020-21). 

Sources: Union Budget Documents; PRS.

For more trends and analysis related to the finances of the Ministry of Petroleum and Natural Gas, see  here

[1] "LPG price hiked by Rs 144.5 per cylinder", Economic Times, February 12, 2020,  https://economictimes.indiatimes.com/industry/energy/oil-gas/lpg-price-hiked-by-rs-144-5-per-cylinder/articleshow/74096745.cms.

[2] Frequently Asked Questions (FAQ), Petroleum Planning and Analysis Cell,  https://www.ppac.gov.in/content/137_3_Faq.aspx.

[3] "LPG Price is Derived based on International Market Price", Press Information Bureau, Ministry of Petroleum and Natural Gas, February 13, 2020. 

[4] PAHAL-Direct Benefits Transfer for LPG (DBTL) Consumers Scheme, Ministry of Petroleum and Natural Gas,  http://petroleum.nic.in/dbt/whatisdbtl.html.

The Personal Data Protection Bill, 2019: How it differs from the draft Bill

The Personal Data Protection Bill, 2019 was recently introduced in Parliament.  The Bill has been referred to a Joint Parliamentary Committee for detailed examination, and the Committee is expected to submit its report by the last week of Budget Session, 2020.  The Bill seeks to provide for the protection of personal data of individuals (known as data principals), and creates a framework for processing such personal data by other entities (known as data fiduciaries).  It provides the data principal with certain rights with respect to their data, such as seeking correction, completion or transfer of their data to other fiduciaries.   Similarly, it sets out certain obligations, and other transparency and accountability measures to be undertaken by the data fiduciary, such as instituting grievance redressal mechanisms to address complaints of individuals.  Processing of personal data is exempted from the provisions of the Bill in certain cases, such as security of state, public order, or for prevention, investigation, or prosecution of any offence.  The Bill also establishes a Data Protection Authority to ensure compliance with the provisions of the Bill and provide for further regulations. 

 

As per the Statement of Objects and Reasons of the 2019 Bill, the provisions of the Bill are based on the recommendations of the report of the Expert Committee (Chair: Justice B. N. Srikrishna) which examined issues related to protection of personal data and proposed a Draft Personal Data Protection Bill, 2018.  

 

In a previous blog, we provided a brief background to the 2019 Bill, explained why a Bill was brought for personal data protection and what are some of the key provisions of the Bill.  In this blog, we look at how the 2019 Bill differs from the 2018 Draft Bill.

Table 1: Comparison of the provisions of the 2018 Draft Bill with the 2019 Bill

Provision

Draft Personal Data Protection Bill, 2018

Personal Data Protection Bill, 2019

Definition of personal data 

  • Personal data pertains to characteristics, traits or attributes of identity, which can be used to identify an individual.
  • The Bill retains the definition and adds that such characteristics or traits will also include any inference drawn from such data for the purpose of profiling.

Sensitive personal data

  • Sensitive personal data includes personal data related to health, sex life, sexual orientation, financial data, passwords, among others.  
  • The Data Protection Authority can categorise any other personal data as sensitive personal data. 
  • The Bill removes passwords from the category of sensitive personal data.  
  • The power to further categorise personal data as sensitive personal data will lie with the central government (in consultation with Data Protection Authority and the sector regulator concerned).

Rights of individual (data principal)

  • The data principal has certain rights with respect to their data such as obtaining confirmation on whether their data has been processed, seeking correction, transfer, or restriction on continuing disclosure of their data.
  • The Bill provides the right to erasure of personal data which is no longer necessary for the purpose for which it was processed, as an additional right for the data principal.

Non-consensual processing of personal data

  • Personal data may be processed without obtaining the consent of the individual on certain grounds.  These include: (i) any function of Parliament or state legislature, (ii) if required by the State for providing benefits to the individual, and (iii) for reasonable purposes specified by the Authority, such as fraud detection, debt recovery, and whistle blowing.   
  • The Bill removes the provision on any function of Parliament or state legislature as a ground for non-consensual processing of personal data. 
  • The Bill adds ‘operation of search engines’ as a reasonable purpose for which non-consensual processing of personal data may be allowed by the Authority.

Social media intermediaries

  • The draft Bill did not contain this term.
  • The Bill defines a social media intermediary as an intermediary which enables online interaction between users and allows for sharing of information.  
  • All social media intermediaries which are classified as significant data fiduciaries (fiduciaries with users above a notified threshold whose actions can impact electoral democracy or public order) must provide a voluntary user verification mechanism for all users in India. 

Exemptions for the government for processing of personal data 

  • The State is exempted from the provisions of the Bill while processing personal data in the interest of national security.     However, such processing must be permitted by a law and must be proportionate to the interests being achieved.  Further, such processing must be done in a fair and reasonable manner. 
  • The government can exempt any of its agencies from any or all provisions of the Act, for processing of personal data in certain cases.     These include: (i) in interest of security of state, public order, sovereignty and integrity of India and friendly relations with foreign states, and (ii) for preventing incitement to commission of any cognisable offence relating to the above matters.

Exemptions for manual processing by small entities

  • Transparency and accountability measures and certain other obligations will not apply to small entities.  These are fiduciaries which: (i) have annual turnover below Rs 20 lakh (or such lower amount as prescribed), and (ii) did not process data of more than 100 individuals in any one day in the last year.
  • The Bill retains the exemption for small entities.     However, it does away with the prescribed limits and allows the Authority to classify fiduciaries as small entities based on the annual turnover of fiduciary and the volume of data processed by such fiduciary. 

Transfer of personal data outside country

 

  • One serving copy of all personal data should be stored in India. 
  • The Bill removes the provision for mandatory storage of all personal data in the country.  It provides that sensitive personal data must continue to be stored in India.  Such data can be transferred outside India if explicitly consented by the individual, and subject to certain additional conditions.

Composition of Data Protection Authority of India

  • The chairperson and members of the Authority will be appointed by the central government on the recommendations of a selection committee.  The selection committee will be comprised of: (i) Chief Justice of India or a Judge of Supreme Court as the chairperson, (ii) Cabinet Secretary, and (iii) an expert in field of data protection, information technology and related subjects.
  • The Bill provides that the selection committee will be comprised of: (i) Cabinet Secretary as the chairperson, (ii) Secretary, Department of Legal Affairs, and (iii) Secretary, Ministry of Electronics and Information Technology. 

Offences and penalties 

  • Under the Bill, offences such as: (i) obtaining, disclosing, transferring, or selling personal data in contravention of the Act, and (ii) re-identification and processing of de-identified personal data (data from which identifiers have been removed) without consent, are punishable with imprisonment. 
  • Under the Bill, re-identification and processing of de-identified personal without consent is the only offence punishable with imprisonment.  

Non-personal and anonymised personal data

  • No provision of the Bill would apply to non-personal data used by government for formulation of policies for digital economy, growth or security. 
  • The Bill retains the provision and further provides that the government can direct data fiduciaries to provide it any: (i) non-personal data and (ii) anonymised personal data (where it is not possible to identify data principal) for better targeting of services and formulation of evidence-based policy.

Sources: The Draft Personal Data Protection Bill, 2018; The Personal Data Protection Bill, 2019; PRS. 

The Personal Data Protection Bill, 2019: All you need to know

Recently, the  Personal Data Protection Bill, 2019 was introduced in Parliament.  The Bill has been referred to a Joint Parliamentary Committee for detailed examination, and the report is expected by the Budget Session, 2020.  The Bill seeks to provide for protection of personal data of individuals, create a framework for processing such personal data, and establishes a Data Protection Authority for the purpose.  In this blog, we provide a background to the 2019 Bill, and explain some of its key provisions.

What is personal data and data protection?

Data can be broadly classified into two types: personal and non-personal data.  Personal data pertains to characteristics, traits or attributes of identity, which can be used to identify an individual.   Non-personal data includes aggregated data through which individuals cannot be identified.  For example, while an individual’s own location would constitute personal data; information derived from multiple drivers’ location, which is often used to analyse traffic flow, is non-personal data.  Data protection refers to policies and procedures seeking to minimise intrusion into the privacy of an individual caused by collection and usage of their personal data.  

Why was a Bill brought for personal data protection?

In August 2017, the Supreme Court  held that privacy is a fundamental right, flowing from the right to life and personal liberty under Article 21 of the Constitution.  The Court also observed that privacy of personal data and facts is an essential aspect of the right to privacy.  In July 2017, a Committee of Experts, chaired by Justice B. N. Srikrishna, was set up to examine various issues related to data protection in India.  The Committee submitted its report, along with a Draft Personal Data Protection Bill, 2018 to the Ministry of Electronics and Information Technology in July 2018.  The Statement of Objects and Reasons of the Personal Data Protection Bill, 2019 states that the Bill is based on the recommendations of the report of the Expert Committee and the suggestions received from various stakeholders.

How is personal data regulated currently?

Currently, the usage and transfer of personal data of citizens is regulated by the  Information Technology (IT) Rules, 2011, under the IT Act, 2000.  The rules hold the companies using the data liable for compensating the individual, in case of any negligence in maintaining security standards while dealing with the data.  The Expert Committee in its report, held that while the IT rules were a novel attempt at data protection at the time they were introduced, the pace of development of digital economy has shown its shortcomings.3  For instance, (i) the definition of sensitive personal data under the rules is narrow, and (ii) some of the provisions can be overridden by a contract.  Further, the IT Act applies only to companies, not to the government.  

What does the Personal Data Protection Bill provide?

The Bill regulates personal data related to individuals, and the processing, collection and storage of such data.  Under the Bill, a data principal is an individual whose personal data is being processed.  The entity or individual who decides the means and purposes of data processing is known as data fiduciary.  The Bill governs the processing of personal data by both government and companies incorporated in India.  It also governs foreign companies, if they deal with personal data of individuals in India. 

Will individuals have rights over their data?

The Bill provides the data principal with certain rights with respect to their personal data.   These include seeking confirmation on whether their personal data has been processed, seeking correction, completion or erasure of their data, seeking transfer of data to other fiduciaries, and restricting continuing disclosure of their personal data, if it is no longer necessary or if consent is withdrawn.  Any processing of personal data can be done only on the basis of consent given by data principal. 

Are there any restrictions on processing of an individual’s data?

The Bill also provides for certain obligations of data fiduciaries with respect to processing of personal data.  Such processing should be subject to certain purpose, collection and storage limitations.   For instance, personal data can be processed only for specific, clear and lawful purpose.  Additionally, all data fiduciaries must undertake certain transparency and accountability measures such as implementing security safeguards and instituting grievance redressal mechanisms to address complaints of individuals.  Certain fiduciaries would be notified as significant data fiduciaries (based on certain criteria such as volume of data processed and turnover of fiduciary).  These fiduciaries must undertake additional accountability measures such as conducting a data protection impact assessment before conducting any processing of large scale sensitive personal data (includes financial data, biometric data, caste, religious or political beliefs). 

What is the grievance redressal mechanism if the above restrictions are not followed?

To ensure compliance with the provisions of the Bill, and provide for further regulations with respect to processing of personal data of individuals, the Bill sets up a Data Protection Authority.  The Authority will be comprised of members with expertise in fields such as data protection and information technology.  Any individual, who is not satisfied with the grievance redressal by the data fiduciary can file a complaint to the Authority.  Orders of the Authority can be appealed to an Appellate Tribunal. Appeals from the Tribunal will go to the Supreme Court.

Are there any exemptions to these safeguards for processing of personal data?

Processing of personal data is exempt from the provisions of the Bill in some cases.  For example, the central government can exempt any of its agencies in the interest of security of state, public order, sovereignty and integrity of India, and friendly relations with foreign states.  Processing of personal data is also exempted from provisions of the Bill for certain other purposes such as prevention, investigation, or prosecution of any offence, or research and journalistic purposes.  Further, personal data of individuals can be processed without their consent in certain circumstances such as: (i) if required by the State for providing benefits to the individual, (ii) legal proceedings, (iii) to respond to a medical emergency. 

Is the Bill different from the draft Bill suggested by the Expert Committee?

The Bill has made several changes from the draft Bill.  For instance, the Bill has added a new class of significant data fiduciaries, as social media intermediaries.  These will include intermediaries (with users above a notified threshold) which enable online interaction between users.  Further, the Bill has expanded the scope of exemptions for the government, and additionally provided that the government may direct data fiduciaries to provide it with any non-personal or anonymised data for better targeting of services. 

In a follow-up blog, we will provide a detailed comparison of the key provisions of this Bill with the Draft Personal Data Protection Bill 2018, released by the Justice B. N. Srikrishna Committee.

Ban on cryptocurrencies: Understanding the proposed legislation

In July, a Committee set up by the Ministry of Finance to study issues related to virtual currencies, submitted its report.  The Committee recommended that all private cryptocurrencies should be banned in India.  Correspondingly, the Committee proposed a draft Bill banning cryptocurrency in the country.  In this blog, we explain cryptocurrencies and how they are used, recommendations of the Committee with respect to cryptocurrencies and the regulatory framework for cryptocurrencies in India and other countries.

What are virtual currencies and what is their use?

Virtual currency is a digitally tradable form of value, which can be used as a medium of exchange, or a stored value which can be utilised later.  It does not have the status of a legal tender.  A legal tender is guaranteed by the central government and all parties are legally bound to accept it as a mode of payment.

Cryptocurrency is a specific type of virtual currency, which is decentralised and protected by cryptographic encryption techniques.  Bitcoin, Ethereum, Ripple are a few notable examples of cryptocurrencies.  Decentralisation implies that there is no central authority where records of transactions are maintained.  Instead, anyone can create a transaction.  This transaction data is recorded and shared across multiple distributor networks, through independent computers as shown in Figure 1.  This technology is known as Distributed Ledger Technology.

Figure 1: Distributed Ledger Technology

  The Committee noted that there are two principal ways in which cryptocurrencies are raising money.  First, through Initial Coin Offerings, where digital tokens are issued in exchange for other currencies.  Second, through using it as a means of exchange or a payment system.  As of February 2019, there were more than 2,000 cryptocurrencies across the world, with a market capitalisation of approximately USD 120 billion.

Why has the Committee recommended banning of cryptocurrencies?

The Committee noted various regulatory concerns around virtual currencies, and cryptocurrencies in particular.  These include:

Fluctuation in prices: Cryptocurrencies are subjected to market fluctuations and the lack of a centralised authority makes it difficult to regulate them.  For instance, in December 2017, the value of Bitcoin cryptocurrency was around USD 20,000 per coin, which reduced to USD 3,800 per coin by November 2018.  The Ministry of Finance, in a press statement, noted that the price of virtual currencies is a matter of mere speculation resulting in spurt and volatility in their prices.

Risk to consumers: The Committee also noted that there are several vulnerabilities in the design of cryptocurrencies which leave consumers open to risk of fraud.  These include phishing cyber-attacks and ponzi schemes.  For instance, a Rs 2,000 crore ponzi scheme was unveiled in April 2018.  Further, cryptocurrency transactions are irreversible, which means once a transaction is done, there is no way to remedy it.

Impact on power consumption: The Committee also observed that cryptocurrencies can have unfavourable consequences on India’s energy demand.  Validating transactions in a distributed network involves high electricity consumption and requires high computation power.  The Committee noted a study which estimated that 19 households in USA can be powered for one day by the electricity consumed in a single transaction of bitcoin cryptocurrency.

Potential use for criminal activity: The Financial Action Task Force, an intergovernmental organisation to combat money laundering, in its report (2014) observed that virtual currencies provide greater anonymity than traditional payment methods.  This makes them more vulnerable to money-laundering and illicit funding for terror financing.  The Committee noted that the decentralised nature and the anonymity which cryptocurrencies provide makes it difficult for law enforcement authorities to track down people involved in illicit activities.  

Is there any country which has permitted use of cryptocurrencies?

Different countries have adopted different regulatory frameworks with respect to cryptocurrencies.  Some countries have permitted the use of cryptocurrencies as a payment system while there is a complete ban on cryptocurrencies in some others.  Note that no country has allowed use of any virtual currency as legal tender.

Table 1: Regulatory framework for cryptocurrencies in different countries

Country

Regulatory Framework

Canada

Permitted as a payment system and as a form of investment, income from it is taxed

Switzerland

Permitted as a payment system (including consumer to government transactions) and as a form of investment

Japan

Permitted and regulated as a payment system

China

Use of cryptocurrency is banned for all purposes

What are the present regulations in India with respect to cryptocurrencies?

In the last few years, the Reserve Bank of India (RBI) has notified the potential financial, operational, legal and security risks related to cryptocurrencies on multiple occasions (December 2013, February 2017 and December 2017).  In December 2017, the Ministry of Finance issued a statement which clarified that virtual currencies are not legal tender and do not have any regulatory permission or protection in India.  Further, the investors and participants dealing with them are doing so entirely at their risk and should best avoid participating.  In the 2018-19 budget speech, the Finance Minister announced that the government does not consider cryptocurrencies as legal tender and will take all measures to eliminate their use in financing illegitimate activities or as a part of payment system.  In April 2018, RBI notified that entities regulated by it should not deal in virtual currencies or provide services for facilitating any person or entity in dealing with or settling virtual currencies.

How does the draft Bill proposed by the Committee change these regulations?

Currently, only the entities regulated by the central bank are prohibited from dealing in, or providing services for dealing in virtual currencies.  The draft Bill prohibits any form of mining (creating cryptocurrency), issuing, buying, holding, selling or dealing in cryptocurrency in the country.  Further, it provides that cryptocurrency should not be used as legal tender or currency in India.  The Bill allows for the use of technology or processes underlying cryptocurrency for the purpose of experiment, research or teaching. 

The Bill also provides for offences and punishments for the contravention of its provisions.  For instance, it states that mining, holding, selling, issuing or using cryptocurrency is punishable with a fine, or imprisonment up to 10 years, or both.  For individuals who might be in possession of cryptocurrencies, the Bill provides for a transition period of 90 days from the commencement of the Act, during which a person may dispose of any cryptocurrency in their possession, as per the notified rules.

Are there any areas where the Committee recommended use of cryptocurrencies?

According to the Committee, while cryptocurrencies or virtual currencies do not offer any advantages, the underlying technology behind them (Distributed Ledger Technology, DLT) has many potential applications, both in finance and non-finance sectors.  Some of these are listed in Table 2.  The Committee observed that DLT makes it easier to identify duplicate transactions, and therefore can be utilised for fraud-detection, processing KYC requirements, and claim management for insurance.  Further, it can be helpful for removing errors and frauds in land markets, if used for maintaining land records.  The Committee was also of the view that the idea of an official digital currency in India can be explored further, and that the government may setup a group to examine and develop an appropriate model of digital currency in India.

Table 2: Applications of Distributed Ledger Technology

Sector

Possible uses of DLT

Payments

Faster and cheaper cross-border payments

Reduced transaction cost for micro-payments

Identification

Storing personal records such as birth, marriage or death certificates

Removing duplicates in identification platforms such as KYC

Insurance

Fraud detection and risk prevention

Claims prevention and management

Ownership registries

Removing errors and frauds in land markets

Administrative ease of maintaining land records

Trade Financing

Reduced operational complexity and transaction costs