Recent rise in LPG prices

Anurag Vaishnav - February 20, 2020

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.

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Union Budget 2020-21: Are the fiscal targets realistic?

Gayatri Mann an... - February 6, 2020

Today, a general discussion on the Union Budget 2020-21 is being held in both Houses of Parliament.  In the budget, the government presented the estimates of the money it expects to spend on various ministries, and how much money will be raised from different sources such as levy of taxes and dividends from public enterprises in 2020-21.  In addition, the budget presented the revised estimates made by the government for the year 2019-20 in comparison to the estimates it had given to Parliament in the previous year’s budget.  The budget also gave an account of how much money the government actually raised and spent in 2018-19.  

What are revised estimates?

Some of the estimates made by the government might change during the course of the year.  For instance, once the year gets underway, some ministries may need more funds than what was actually allocated to them in the budget, or the receipts expected from certain sources might change.  Such deviations from the budget estimates get reflected in the figures released by the government at later stages as part of the subsequent budgets.  Once the year ends, the actual numbers are audited by the Comptroller and Auditor General of India (CAG), post which they are presented to Parliament with the upcoming budget, i.e. two years after the estimates are made.

For instance, estimates for the year 2019-20 were presented as part of the 2019-20 budget in July 2019.  In the 2020-21 budget (February 2020), the government presented 2019-20’s revised estimates based on the actual receipts and expenditure accounted so far during the year and estimations made for the remaining 2-3 months.

Is there a way to find out the government’s actual receipts or expenditure mid-year?

The actual receipts and expenditure accounts of the central government are maintained by the Controller General of Accounts (CGA), Ministry of Finance on a monthly basis.  On January 31, 2020, the CGA updated the accounts figures for the period April to December 2019.  Thus, we have unaudited actuals for the first nine months of the financial year.

How do the actual figures for the year 2019-20 so far compare with the revised estimates?

Table 1 gives the revised estimates presented by the central government for the year 2019-20 and the monthly account figures maintained by the CGA for the nine-month period April to December 2019.  The difference between these two figures gives us the three-month target that the government will have to meet by March 2020 to reach its revised estimates.    

Till December 2019, the government has spent Rs 21.1 lakh crore, which is 78% of the revised estimates for 2019-20.  While the expenditure has reached 78% of the target, so far, the government has been able to generate only Rs 11.8 lakh crore or 61% of the receipts (excluding borrowings) for the year 2019-20.  This implies that the receipts will have to grow at a rate of 41% in the three-month period January-March 2020 to meet the revised estimates of Rs 19.3 lakh crore.   So far, receipts have grown at a rate of 4%.

Table 1:  Budget at a Glance – Comparison of 2019-20 revised estimates with Apr-Dec 2019 figures (Rs crore)

Budget

at a Glance

Actuals

Revised

Nine-month period

Three-month target

Growth rate so far

Growth target

2018-19

2019-20

Apr-Dec 2019

Jan-Mar 2020

% change
  (Apr-Dec 2018 to Apr-Dec 2019) 

% change
  (Jan-Mar 2019 to Jan-Mar 2020) 

Revenue Expenditure

20,07,399

23,49,645

18,54,125

4,95,520

14%

28%

Capital Expenditure

3,07,714

3,48,907

2,55,522

93,385

21%

-3%

Total Expenditure

23,15,113

26,98,552

21,09,647

5,88,905

15%

22%

Revenue Receipts

15,52,916

18,50,101

11,46,897

7,03,204

6%

50%

Capital Receipts

1,12,779

81,605

31,025

50,580

-33%

-24%

of which Disinvestment

94,727

65,000

18,100

46,900

-47%

-22%

Total Receipts (without borrowings)

16,65,695

19,31,706

11,77,922

7,53,784

4%

41%

Revenue Deficit

4,54,483

4,99,544

7,07,228

-2,07,684

   

Fiscal Deficit

6,49,418

7,66,846

9,31,725

-1,64,879

 

 

Primary Deficit

66,770

1,41,741

5,07,411

-3,65,670

   

Sources:  Union Budget 2020-21; Controller General of Accounts, Ministry of Finance; PRS.

How do the actual tax receipts fare in comparison to the revised estimates of 2019-20?

A lower than estimated growth in nominal GDP has also affected the tax receipts of the government during the year. The 2019-20 budget estimated the nominal GDP to grow at 12% over the previous year, whereas the latest estimates suggest this growth rate to be 7.5% in 2019-20.  The revised estimates for 2019-20 show gross tax receipts of Rs 21.6 lakh crore (includes states’ share).  Till December 2019, tax receipts of Rs 13.8 lakh crore has been collected, which is 64% of the target.  The tax receipts will have to grow at 19% in the three-month period January-March 2020 to meet the target.  Table 2 shows similar comparison for the various taxes and also for the tax receipts devolved to states.  While the budget estimated a growth in receipts from all major taxes, receipts from taxes such as corporation tax (-14%), union excise duties (-2%), and customs (-12%) have declined during the period Apr-Dec 2019.

Table 2:  Tax receipts – Comparison of 2019-20 revised estimates with Apr-Dec 2019 figures (Rs crore)

Revenue

Receipts

Actuals

Revised

Nine-month period

Three-month target

Growth rate so far

Growth target

2018-19

2019-20

Apr-Dec 2019

Jan-Mar 2020

% change
  (Apr-Dec 2018 to Apr-Dec 2019) 

% change
  (Jan-Mar 2019 to Jan-Mar 2020) 

Gross Tax Revenue

20,80,465

21,63,423

13,83,035

7,80,388

-3%

19%

Devolution to States

7,61,454

6,56,046

4,76,113

1,79,933

-2%

-34%

Net Tax Revenue

13,17,211

15,04,587

9,04,944

5,99,643

-3%

57%

Dividend and Profits

1,13,420

1,99,893

1,61,979

37,914

175%

-30%

Other Non-tax Revenue

1,22,284

1,45,620

79,974

65,646

-10%

96%

Revenue Receipts

15,52,916

18,50,101

11,46,897

7,03,204

6%

50%

Note:  Figures for income tax exclude receipts from the Securities Transaction Tax.

Sources:  Receipts Budget, Union Budget 2019-20; Controller General of Accounts, Ministry of Finance; PRS.

If we look at sources of receipts other than taxes, non-tax revenue during Apr-Dec 2019 is Rs 2.4 lakh crore, i.e. 69% of the estimated Rs 3.5 lakh crore.  Disinvestment receipts till date amounted to Rs 18,100 crore, i.e. 17% of the budget target of Rs 1.05 lakh crore.  Though the investment target has been revised down to Rs 65,000 crore, it implies that Rs 47,000 crore would need to be raised in the next two months.    

How does this impact the borrowings of the government?

When the expenditure planned by the government is more than its receipts, the government finances this gap through borrowings.  This gap is known as fiscal deficit and equals the borrowings required to be made for that year.  Given lower than expected receipts, the government has had to borrow more money than it had planned for.  Borrowings or fiscal deficit of the government, till December 2019, stands at Rs 9.3 lakh crore, which is 22% higher than the revised estimate of Rs 7.7 lakh crore.  Note that with three months still remaining in the financial year, fiscal deficit may further increase, in case receipts are less than expenditure.

When we look at fiscal deficit as a percentage of GDP, the 2019-20 budget estimated the fiscal deficit to be at 3.3% of GDP.  This has been revised upward to 3.8% of GDP.  However, till December 2019, fiscal deficit for the year 2019-20 stands at 4.6% of GDP (taking the latest available GDP figures into account, i.e. the First Advance Estimates for 2019-20 released in January 2020).  This increase in fiscal deficit as a percentage of GDP is because of two reasons: (i) an increase in borrowings as compared to the budget estimates, and (ii) a decrease in GDP as compared to the estimate made in the budget.  The latter is due to a lower than estimated growth in nominal GDP for the year 2019-20.   The 2019-20 budget estimated the nominal GDP to grow at 12% over the previous year, whereas the latest estimates suggest this growth rate to be 7.5% in 2019-20.

Note that, in addition to the expenditure shown in the budget, the government also spends through extra budgetary resources. These resources are raised by issuing bonds and through loans from the National Small Savings Fund (NSSF).  The revised estimates for 2019-20 show an expenditure of Rs 1,72,699 crore through such extra-budgetary resources. This includes an expenditure of Rs 1,10,000 crore by the Food Corporation of India financed through loans from NSSF. Since funds borrowed for such expenditure remain outside the budget, they do not get factored in the deficit and debt figures.  If borrowings made in the form of extra-budgetary resources are also taken into account, the fiscal deficit estimated for the year 2019-20 would increase from 3.8% of GDP to 4.6% of GDP due to extra-budgetary borrowings of Rs 1,72,699 crore.  This does not account for further slippage if the targeted revenue does not materialise.   

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Recommendations of the 15th Finance Commission for 2020-21

Rohin Garg and ... - February 3, 2020

The Finance Commission is a constitutional body formed by the President of India to give suggestions on centre-state financial relations.  The 15th Finance Commission is required to submit two reports.  The  first report will consist of recommendations for the financial year 2020-21.  The final report with recommendations for the 2021-26 period will be submitted by October 30, 2020. In this post, we explain the key recommendations of the report.  

What is the amount of tax devolution to the states, and how is it being calculated?

The Finance Commission uses certain criteria when deciding the devolution to states.  For example, income distance criterion has been used by the 14th and 15th Finance Commissions.  Under this criterion, states with lower per capita income would be given a higher share to maintain equity among states.  Another example is Demographic Performance criterion which has been introduced by the 15th Finance Commission.  The Demographic Performance criterion is to reward efforts made by states in controlling their population. 

The 15th Finance Commission used the following criteria while determining the share of states: (i) 45% for the income distance, (ii) 15% for the population in 2011, (iii) 15% for the area, (iv) 10% for forest and ecology, (v) 12.5% for demographic performance, and (vi) 2.5% for tax effort.  For 2020-21, the Commission has recommended a total devolution of Rs 8,55,176 crore to the states, which is 41% of the divisible pool of taxes.  This is 1% lower than the percentage recommended by the 14th Finance Commission.  

Table 1 below compares the new criteria with the criteria recommended by the 14th Finance Commission.

 Table 1: Criteria for devolution (2020-21)

Criteria

14th FC

2015-20

15th FC

2020-21

Income Distance

50.0

45.0

Population 1971

17.5

-

Population 2011

10.0

15.0

Area

15.0

15.0

Forest Cover

7.5

-

Forest and Ecology

-

10.0

Demographic Performance

-

12.5

Tax Effort

-

2.5

Total

100

100

 Sources: Report for the year 2020-21, 15th Finance Commission; PRS.

Uttar Pradesh and Bihar have received the largest devolutions for 2020-21, receiving Rs 1,53,342 crore, and Rs 86,039 crore respectively.   Karnataka and Kerala saw the largest decreases in the share of the divisible pool with a decrease of 0.49% and 0.25% respectively.  Table 2 below displays the state-wise breakdown of the share in the divisible pool and the total devolution.

Table 3: Share of states in the centre’s taxes

State

14th Finance Commission

15th Finance Commission

Devolution for FY 2020-2021

Share out of 42%

Share in divisible pool

Share out of 41%

Share in divisible pool

(In Rs crore)

Andhra Pradesh

1.81

4.31

1.69

4.11

35,156

Arunachal Pradesh

0.58

1.38

0.72

1.76

15,051

Assam

1.39

3.31

1.28

3.13

26,776

Bihar

4.06

9.67

4.13

10.06

86,039

Chhattisgarh

1.29

3.07

1.4

3.42

29,230

Goa

0.16

0.38

0.16

0.39

3,301

Gujarat

1.3

3.1

1.39

3.4

29,059

Haryana

0.46

1.1

0.44

1.08

9,253

Himachal Pradesh

0.3

0.71

0.33

0.8

6,833

Jammu and Kashmir

0.78

1.86

-

-

-

Jharkhand

1.32

3.14

1.36

3.31

28,332

Karnataka

1.98

4.71

1.49

3.65

31,180

Kerala

1.05

2.5

0.8

1.94

16,616

Madhya Pradesh

3.17

7.55

3.23

7.89

67,439

Maharashtra

2.32

5.52

2.52

6.14

52,465

Manipur

0.26

0.62

0.29

0.72

6,140

Meghalaya

0.27

0.64

0.31

0.77

6,542

Mizoram

0.19

0.45

0.21

0.51

4,327

Nagaland

0.21

0.5

0.23

0.57

4,900

Odisha

1.95

4.64

1.9

4.63

39,586

Punjab

0.66

1.57

0.73

1.79

15,291

Rajasthan

2.31

5.5

2.45

5.98

51,131

Sikkim

0.15

0.36

0.16

0.39

3,318

Tamil Nadu

1.69

4.02

1.72

4.19

35,823

Telangana

1.02

2.43

0.87

2.13

18,241

Tripura

0.27

0.64

0.29

0.71

6,063

Uttar Pradesh

7.54

17.95

7.35

17.93

            1,53,342 

Uttarakhand

0.44

1.05

0.45

1.1

9,441

West Bengal

3.08

7.33

3.08

7.52

64,301

Total 

42

100

41

100

            8,55,176 

Sources: Reports of 14th and 15th Finance Commission; PRS.

What are the various grants recommended by the 15th Finance Commission?

The Terms of Reference of the Finance Commission require it to recommend grants-in-aid to the States.  These grants include: (i) revenue deficit grants, (ii) grants to local bodies, and (iii) disaster management grants.

14 states are estimated to face a revenue deficit post-devolution.  To make up for this deficit, the Commission has recommended revenue deficit grants worth Rs 74,341 crore to these 14 states.  Additionally, three states (Karnataka, Mizoram, and Telangana) have received special grants worth Rs 6,674 crore.  The special grants are being given to compensate for a decline in the sum of tax devolution and revenue deficit grants in 2020-21 as compared to 2019-20.

The Commission has recommended a total of Rs 90,000 crore for grants to the local bodies in 2020-21.  This amounts to an increase over the Rs 87,352 crore allocated for 2019-20 for the same.  The new allocation is 4.31% of the divisible pool.  Of this sum, Rs 60,750 crore has been recommended for rural local bodies, and Rs 29,250 crore for urban local bodies.  These grants will be made available to all three tiers of Panchayat- village, block, and district.

To promote local-level mitigation activities, the Commission has recommended the setting up of National and State Disaster Management Funds.  Recommended grants for the State Disaster Risk Management Fund is Rs 28,983 crore, while the allocation for the National Disaster Risk Management Fund is Rs 12,390 crore.

Apart from these, guidelines for performance-based grants and sector-specific grants have been outlined.  The Commission has recommended a grant of Rs 7,375 crore for nutrition in 2020-21.  Sectors for which sector-specific grants will be provided in the final report include: (i) nutrition, (ii) health, (iii) pre-primary education, (iv) judiciary, and (v) railways.  

For more details, please see our  summary of the report.

 

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

Anurag Vaishnav - December 27, 2019

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. 

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

Anurag Vaishnav - December 23, 2019

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.

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Explainer: The Citizenship (Amendment) Bill, 2019

Roshni Sinha - December 9, 2019

The Minister of Home Affairs introduced the Citizenship (Amendment) Bill, 2019 today in Lok Sabha.   It is scheduled to be taken up for discussion and passing by the House later today.  The Bill amends the Citizenship Act, 1955, and seeks to make foreign illegal migrants of certain religious communities coming from Afghanistan, Bangladesh, and Pakistan eligible for Indian citizenship.  In this blog, we look at the criteria for determining citizenship in India, discuss how the Bill proposes to change the criteria, and highlight other key changes proposed by the Bill. 

How is citizenship acquired in India?

In India, citizenship is regulated by the Citizenship Act, 1955.  The Act specifies that citizenship may be acquired in India through five methods – by birth in India, by descent, through registration, by naturalisation (extended residence in India), and by incorporation of territory into India. [1]  

Can illegal migrants acquire citizenship?

An illegal migrant is prohibited from acquiring Indian citizenship.  An illegal immigrant is a foreigner who either enters India illegally, i.e., without valid travel documents, like a visa and passport, or enters India legally, but stays beyond the time period permitted in their travel documents.  An illegal migrant can be prosecuted in India, and deported or imprisoned.   

In September 2015 and July 2016, the central government exempted certain groups of illegal migrants from being imprisoned or deported. [2]  These are illegal migrants who came into India from Afghanistan, Bangladesh, or Pakistan on or before December 31, 2014, and belong to the Hindu, Sikh, Buddhist, Jain, Parsi, or Christian religious communities.  

How does the Bill seek to change the criteria for determining citizenship?

The Bill proposes that the specified class of illegal migrants from the three countries will not be treated as illegal migrants, making them eligible for citizenship.  On acquiring citizenship, such migrants shall be deemed to be Indian citizens from the date of their entry into India and all legal proceedings regarding their status as illegal migrants or their citizenship will be closed.

The Act allows a person to apply for citizenship by naturalisation, if the person meets certain qualifications.  One of the qualifications is that the person must have resided in India or been in central government service for the last 12 months and at least 11 years of the preceding 14 years.  For the specified class of illegal migrants, the number of years of residency has been relaxed from 11 years to five years.  

Are the provisions of the Bill applicable across the country?

The Bill clarifies that the proposed amendments on citizenship to the specified class of illegal migrants will not apply to certain areas.  These are: (i) the tribal areas of Assam, Meghalaya, Mizoram, and Tripura, as included in the Sixth Schedule to the Constitution, and (ii) the states regulated by the “Inner Line” permit under the Bengal Eastern Frontier Regulations 1873.  These Sixth Schedule tribal areas include Karbi Anglong (in Assam), Garo Hills (in Meghalaya), Chakma District (in Mizoram), and Tripura Tribal Areas District.   Further, the Inner Line Permit regulates visit of all persons, including Indian citizens, to Arunachal Pradesh, Mizoram, and Nagaland.

Is the differentiation among the specified class of illegal migrants and all other illegal migrants reasonable?

The Bill makes only certain illegal migrants eligible for citizenship.  These are persons belonging to the six specified religious communities, from the three specified countries, who entered India on or before December 31, 2014, and do not reside in the Sixth Schedule areas or in the states regulated by the Inner Line Permit states.  This implies that all other illegal migrants will not be able to claim the benefit of citizenship conferred by the Bill, and may continue to be prosecuted as illegal migrants.  Any provision which distinguishes between two groups may violate the standard of equality guaranteed under Article 14 of the Constitution, unless one can show a reasonable rationale for doing so. [3]   The Bill provides differential treatment to illegal migrants on the basis of (a) their country of origin, (b) religion, (c) date of entry into India, and (d) place of residence in India.   The question is whether these factors serve a reasonable purpose to justify the differential treatment.  We examine this below. 

The Bill classifies migrants based on their country of origin to include only Afghanistan, Pakistan and Bangladesh.  While the Statement of Objects and Reasons (SoR) in the Bill reasons that millions of citizens of undivided India were living in Pakistan and Bangladesh, no reason has been provided to explain the inclusion of Afghanistan.  The SoR also states that these countries have a state religion, which has resulted in religious persecution of minority groups.  However, there are other countries which may fit this qualification.   For instance, two of India’s neighboring countries, Sri Lanka (Buddhist state religion) [4] and Myanmar (primacy to Buddhism) [5], have had a history of persecution of Tamil Eelams (a linguistic minority in Sri Lanka), and the Rohingya Muslims, respectively.[6], [7], [8]   

Further, there are other religious minorities from Pakistan, Afghanistan and Bangladesh, such as the Ahmadiyya Muslims in Pakistan (considered non-Muslims in that country) [9], and atheists in Bangladesh [10] who have faced religious persecution and may have illegally migrated to India.  Given that the objective of the Bill is to provide citizenship to migrants escaping from religious persecution, it is not clear why illegal migrants belonging to other neighbouring countries, or belonging to religious minorities from these three specified countries, have been excluded from the Bill.  

The Bill also creates further differentiation between the specified class of illegal migrants based on when they entered India (before or after December 31, 2014), and where they live in India (provisions not applicable to Sixth Schedule and Inner Line Permit areas).  However, the reasons provided to explain the distinction is unclear.  Note that certain restrictions apply to persons (both citizens and foreigners) in the Sixth Schedule areas and in the states regulated by the Inner Line Permit.  Once an illegal migrant residing in these areas acquires citizenship, he would be subject to the same restrictions in these areas, as are applicable to other Indian citizens.  Therefore, it is unclear why the Bill excludes illegal migrants residing in these areas. 

How does the Bill change the regulations for Overseas Citizens of India?

The Bill also amends the provisions on registration of Overseas Citizens of India (OCI). OCI cardholders are foreigners who are persons of Indian origin. For example, they may have been former Indian citizens, or children of current Indian citizens. An OCI enjoys benefits such as the right to travel to India without a visa, or to work and study here.  At present, the government may cancel a person’s OCI registration on various grounds specified in the Act.  In case of a cancellation, an OCI residing in India may be required to leave the country. The Bill adds another ground for cancelling OCI registration — violation of any law notified by the central government.  However, the Bill does not provide any guidance on the nature of laws which the central government may notify.  The Supreme Court has noted that this guidance is necessary to set limits on the authority’s powers and to avoid any arbitrariness in exercise of powers. [11]    Therefore, the powers given to the government under the Bill may go beyond the permissible limits of valid delegation. 

Note:  The blog has been updated to remove the following issue: “Second, the Bill delegates the power to notify laws and not offences.  This may result in the cancellation of OCI for minor violations.  For instance, the government may want to cancel the registration of an OCI who is found guilty of sedition, under the Indian Penal Code, 1861.  However, since the government cannot notify one offence, it will need to notify the entire Indian Penal Code, which would include minor offences such as rash and negligent driving.” 

[1].  Section 2(1)(b) of the Citizenship Act, 1955.

[2].  State of West Bengal vs Anwar Ali Sarkar, AIR 1952 SC 75.  

[3].  State of West Bengal vs Anwar Ali Sarkar, AIR 1952 SC 75.  

[4].  Article 9 of the Constitution of the Democratic Socialist Republic of Sri Lanka states: “The Republic of Sri Lanka shall give to Buddhism the foremost place and accordingly it shall be the duty of the State to protect and foster the Buddha Sasana, while assuring to all religions the rights granted by Articles 10 and 14(1)(e).”

[5].  Articles 361 and 362 of the Constitution of the Republic of the Union of Myanmar state the following.  “361. The Union recognizes special position of Buddhism as the faith professed by the great majority of the citizens of the Union. 362. The Union also recognizes Christianity, Islam, Hinduism and Animism as the religions existing in the Union at the day of the coming into operation of this Constitution.”

[6]. It is estimated that there are over a lakh Sri Lankan refugees in India, two-thirds of them in government camps.  See https://timesofindia.indiatimes.com/city/chennai/why-lankan-refugees-are-reluctant-to-go-back-home/articleshow/65591130.cms

[7]. “Myanmar Rohingya: What you need to know about the crisis”, BBC News, April 24, 2018, https://www.bbc.com/news/world-asia-41566561.

[8]. “Why India is refusing refuge to Rohingyas”, Times of India, September 6, 2017, https://timesofindia.indiatimes.com/india/why-india-is-refusing-refuge-to-rohingyas/articleshow/60386974.cms.

[9].  The Second Amendment to the Constitution of Pakistan passed in 1974 effectively declared Ahmaddiyas as non-Muslims. 

[11].  Hamdard Dawakhana and Anr., v. The Union of India (UOI) and Ors., AIR1960SC554; Confederation of Indian Alcoholic Beverage Companies and Ors. vs. The State of Bihar and Ors., 2016(4) PLJR369. 

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Understanding recent amendments to the Arms Act, 1959

Rohin Garg - December 5, 2019

The  Arms (Amendment) Bill, 2019 was introduced in Lok Sabha recently and is scheduled to be passed in this Winter Session.  The Bill amends the Arms Act, 1959 which deals with the regulation of arms in India.  The Act defines arms to include firearms, swords, and anti-aircraft missiles.  The Statement of Objects and Reasons of the Bill noted that law enforcement agencies have indicated a growing connection between the possession of illegal firearms and criminal activities.  In this context, the Bill seeks to reduce the number of firearms allowed per person, and increases punishments for certain offences under the Act.   The Bill also introduces new categories of offences.  In this post, we explain key provisions of the Bill.  

How many firearms are allowed per person?

The Arms Act, 1959 allows a person to have three licenced firearms.  The Bill proposes to reduce this to one firearm per person.  This would also include any firearms that may have been given as inheritance or as an heirloom.  Excess firearms must be deposited at the nearest police station or licensed arms dealer within one year of the passing of the Bill.  The Bill also extends the duration of a licence from three years to five years.

Note that in 2017, 63,219 firearms were seized from across India under the Arms Act, 1959.  Out of these, only 3,525 (5.5%) were licenced firearms.  Further, 36,292 cases involving firearms were registered under the Act in 2017, of which only 419 (1.1%) cases involved licenced firearms. [1]  This trend persisted even at the level of specific crimes, where only 8.5% of the murders committed using firearms involved licenced firearms. [2]

What changes are being made to existing offences?

Presently, the Act bans manufacture, sale, use, transfer, conversion, testing or proofing of firearms without license.  The Bill additionally prohibits obtaining or procuring un-licensed firearms, and the conversion of one category of firearms to another without a license.  The latter includes any modifications done to enhance the performance of a firearm.

The Bill also proposes increased punishments for several existing offences.   For example, the Act specifies the punishment for: (i) dealing in un-licensed firearms, including their manufacture, procurement, sale, transfer, conversion, (ii) the shortening or conversion of a firearm without a licence, and (iii) import or export of banned firearms.   The punishment for these offences currently is between three years and seven years, along with a fine.  The Bill increases the minimum punishment to seven years and the maximum to life imprisonment.

The Act also punishes dealing in prohibited firearms (such as automatic and semi-automatic assault rifles) without a license, with imprisonment between seven years and life imprisonment, along with fine.  The Bill increases the minimum punishment from seven years to 10 years.  Additionally, the punishment for cases in which the usage of prohibited arms results in the death of a person has been revised.  The punishment has been updated from the existing punishment of death penalty to allow for death penalty or life imprisonment, along with a fine.

Are there any new offences being introduced?

The Bill adds certain news offences.  For example, forcefully taking a firearm from police or armed forces has been made a crime under the Bill.  The punishment for doing so is imprisonment between 10 years and life imprisonment, along with a fine.  Additionally, the Bill punishes the negligent use of firearms, such as celebratory gunfire during weddings or religious ceremonies which endanger human life or personal safety of others.  The proposed punishment in this case is imprisonment of up to two years, or a fine of up to one lakh rupees, or both.

The Bill also adds a definition of ‘illicit trafficking’.  It is defined to include the trade, acquisition, sale of firearms or ammunitions into or out of India where the firearms are either not marked as per the Act or violate the provisions of the Act.  The Bill makes illicit trafficking punishable with imprisonment between 10 years and life, along with a fine.

Does the Bill address issues of organised crime?

The Bill also introduces a definition of ‘organised crime’.  ‘Organised crime’ has been defined as continued unlawful activity by a person, either as a member of a syndicate or on its behalf, by using unlawful means, such as violence or coercion, to gain economic or other benefits.  An organised crime syndicate refers to two or more persons committing organised crime.

The Bill introduces harsher punishments for members of an organised crime syndicate.  For example, for the possession of an unlicensed firearm, the minimum term for an individual would be seven years, extendable to life imprisonment and liable to a fine.  However, the possession of unlicensed firearms by a member of a syndicate will be punishable with imprisonment between 10 years and life, along with a fine.  This increased punishment also applies to non-members contravening provisions of the Act on behalf of a syndicate.

[1] Crime in India 2017, National Crime Records Bureau, October 21, 2019,  http://ncrb.gov.in/StatPublications/CII/CII2017/pdfs/CII2017-Full.pdf.

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