Op-Ed Volume 5

14 May 2020

Op-Ed is a collection of editorials which may be useful for UPSC, RBI G B and other top exams.

Diluting the APMC, MSP regimes isn’t a good idea

1. The mainline economists usually blame the denial of freedom to farmers to sell as the main reason of agrarian distress.APMC (Agricultural Produce Market Committees), Minimum Support Price (MSP) are treated as the main reason behind this.

2. Instead of amending the APMC act, parallel private market networks can be set up in the areas where the regulated mandis do not exist.After all, 94 per cent farmers do not have access to regulated markets.

3. It is a fact the MSP is not covering the cost of production for most crops still it is the only instrument that provides for price discovery. Dilute the MSP regime, and prices for agricultural commodities would register a fall. Any effort to dismantle the procurement system therefore is fraught with unforeseen dangers.

RIL-FB deal may reshape India’s digital domain

1. In the middle of global pandemic all of a sudden Reliance Industries Ltd (RIL) entered into deals with Facebook Incfor equity stake of 10 per cent in Jio Platform.

2. Jio Mart has reportedly tied up with millions of local grocery stores across the country which will now be brought on the Jio-WhatsApp platforms creating a unique model of e-commerce where Jio, kirana stores and Facebook will all be e-commerce companies and the same time Jio Payment Bank will be revived. On the other side Facebook will fulfill its dream of 2014’s ‘Free Basics’ project.

3. The deal will help the Facebook to reach out 400 million Jio subscribers and will help in expanding the upcoming ‘WhatsApp Pay’ service.

4. There may be some key issues like efficient service, data protection, commercialisation etc which need to be dealt with.

Are labour law reforms the panacea to the investment problem?

In a bid to provide employment to workers who have migrated back to the State, the Uttar Pradesh government has decided to exempt businesses from all but three labour laws for three years through an ordinance.

The reform argument

1. It will relieve  the industry from complicated regulatory compliances. As markets have become more competitive, companies have to depend on flexible work arrangements such as subcontracting, temporary or casual work, reducing dependence on the “organised workforce”. Diluting the laws helps in informalisation. While the suspension of laws seeks to promote economic growth by reducing unproductive compliance and hurdles to the employers, the basic and fundamental interests of the workmen and vulnerable sections are protected.

The argument against dilution

1. Lifting of these laws can dilute worker rights and increase the schism between workers and employers.Lifting of statutory protections such as compulsory provision of minimum wages, insurance and other social security, right to form unions, etc., may result in diluting the status of workmen and their ability to protest against exploitative practices.As per the WEF’s Global Competitive Index , lack of competitive labour markets is not the main factor driving India’s poor competitiveness and there is little evidence that relaxing labour laws alone will attract overseas investment.

Let TReDS sabotage impair credit rating

1. TReDS is a platform on which large buyers, small companies and banks enrol, small companies list their invoices, large companies on which the invoices are raised authenticate them and banks take over the receivables from the small companies, paying them the invoice amount less a discount that reflects the creditworthiness of the large buyer.

2. In reality the performance of the TReDS platform is below par. The government and government-owned companies, major buyers of MSME produce, are not all on TReDS. And large companies refuse to authenticate the legitimate invoices raised on them.

3. To resolve these issues Sebi should direct rating agencies to recognise a company’s failure to authenticate invoices by suppliers as impairing their credit rating.

India should stave off corona bankruptcies

1. The government plans to spend ₹20 trillion to aid Indians, revive the economy, and make it self-reliant. Here are some suggestions how the package can be used.

2. A “bad bank” can be set up that would buy non-performing assets (NPAs) off regular banks for reconstruction or disposal.In other words, without a speedy recovery from a global recession, a “bad bank” could end up as just another drain on government resources.

3. The government can identify those firms that were doing fine before the covid crisis struck and can survive to service their debts after the disruption is over. These companies need special attention from insolvency law as well as credit support to revive again.

Beyond the Pandemic: Taxing times ahead for NGOs

1. A significant number of NGOs have stepped up by spreading their helping hand to Covid-19 victims. But after some amendments in Finance act 2020-21 they are facing complicated administrative burdens from the regulator.

2. As per the amendments the NGOs have to reapply for registration to get the facility of tax exemption. The new rules in this regard seem rather harsh as not only the assets such organisations own will be valued at market prices, the net worth of their assets will also be taxed at the highest marginal rate. Many old institutions, including schools and hospitals, might just cease to exist, as they’ll have to sell off their assets to settle this demand.

3. Under the new tax regime, most exemptions available in the old regime (including that for donations) are no longer allowed. This would obviously make it even more difficult for NGOs to raise funds, as it could discourage donors from donating.