INDIAN EXPRESS EDITORIALS AND EXPLAINED 28TH JANUARY 2020

ISSUE: LEGISLATIVE COUNCILS

WHY IN NEWS?

The Andhra Pradesh Assembly on Monday evening passed a resolution to abolish the state’s Legislative Council, where the opposition Telugu Desam Party (TDP) has a majority.

The resolution was passed under Article 169(1) of the Constitution, which allows Parliament to either create or abolish a Council in a state “if the Legislative Assembly of the State passes a resolution to that effect by a majority of the total membership of the Assembly and by a majority of not less than two-thirds of the members of the Assembly present and voting”.

The Council’s journey

The Vidhan Parishad of united Andhra Pradesh was created on July 1, 1958, and dissolved on May 31, 1985. It was resurrected after 22 years, on March 30, 2007. Ironically, it was abolished the last time by N T Rama Rao, the founder of the TDP, after the Congress blocked all the government’s decisions in the Council. And it was restored by Dr Y S Rajashekara Reddy, the father of Chief Minister Jaganmohan Reddy.

Since the bifurcation of Andhra Pradesh in 2014, the Council has had 58 members. The TDP’s strength fell to 28 last week after the resignation of D Manikya Varaprasad. Two Ministers in the Jaganmohan Reddy government, Deputy Chief Minister Pilli Subhash Chandra Bose, and Marketing Minister Mopidevi Venkata Ramana are members of the Council. They will have to resign when the Council is ultimately abolished.

That, however, will happen only after Parliament approves the resolution passed by the Assembly. The Union Law Ministry will prepare a Bill to be tabled in Parliament. The process may take 3-6 months, during which time the Council will continue to function.

Councils in the Constitution

Under Article 168, states can have either one or two Houses of legislature. Article 169 leaves the choice of having a Vidhan Parishad to individual states.

The Constituent Assembly was divided on having a second chamber in the states. It was argued that a second House can help check hasty actions by the directly elected House, and also enable non-elected persons to contribute to the legislative process. However, it was also felt that some of the poorer states could ill afford the extravagance of two Houses.

Under Article 171, a Council cannot have more than a third of the number of MLAs in the state, and not less than 40 members. A third of the MLCs are elected by MLAs, another third by a special electorate comprising sitting members of local government bodies such as municipalities and district boards, 1/12th by an electorate of teachers, and another 1/12th by registered graduates. The remaining members are appointed by the Governor for distinguished services in various fields.

Councils in other states

Besides Andhra Pradesh, five other states have Vidhan Parishads — Bihar (58 members), Karnataka (75), Maharashtra (78), Telangana (40), UP (100). Jammu and Kashmir had a Council until the state was bifurcated into the Union Territories of J&K and Ladakh.

ISSUE: REVIVING AIR INDIA

WHY IN NEWS?

The NDA government has kicked off the disinvestment process for Air India for the second time — its previous attempt in 2018 had failed to receive a single bid. It has issued a preliminary information memorandum for interest to sell its stake in Air India, Air India Express and Air India-SATS. Qualified bidders will be notified by March 31, implying that the stake sale will be closed only in the next fiscal year.

The government has sweetened the deal on several counts.

First, unlike last time when it offered to offload only 76 per cent of its stake in the airline, the government will offload its entire stake. This is likely to encourage prospective bidders as it implies having full operational freedom to run the carrier.

Second, the government has taken steps to address the airline’s massive debt, which has been a major stumbling block for prospective buyers. This time around, the government has transferred part of the debt to a special purpose vehicle. As a result, the buyer will now have to take over only Rs 23,286 crore of debt.

Third, the government has lowered the net worth criteria for potential bidders from Rs 5,000 crore to Rs 3,500 crore.

Fourth, eligibility norms have been tweaked and consortiums have been given greater flexibility for bidding, making it a better structured deal. However, prospective buyers will still have to contend with the airline’s huge workforce. Some have argued that investors may find it difficult to buy the entire airline.

Thus, a more prudent approach would be to split its various businesses such as international and domestic operations, its ground services arm, and the airport services company, and sell them separately. With the demise of Jet Airways — Air India’s competitor in both domestic and international markets — this revised structure should be attractive to investors.

WHAT NEEDS TO BE DONE?

The repeated delays in the government’s stake sale in Air India, or BPCL for that matter, underline the need to have a better strategy for the disinvestment programme. So far, the approach has been to view it as a means for shoring up the Centre’s revenue towards the end of each financial year. Instead, the Centre could draw up a list of companies for disinvestment and release an advance calendar. This would provide clarity and help potential investors.

ISSUE: STRESS IN STATE FINANCES

The unaudited fiscal data of 21 states, which account for around 90 per cent of India’s GDP in 2017-18, for the first eight months (April-November) of the current financial year, reveals some sombre trends.

First, at the aggregate level, revenue receipts of these states have grown by a mere 4.6 per cent, sliding down from 15.3 per cent over the same period last year. Under the broad rubric of revenue receipts, the analysis shows that the states’ share in Central tax devolution has slowed the most, contracting by 2.3 per cent during this period, after having grown by 12.1 per cent over the same period last year.

This fall likely reflects an adjustment made for the higher-than-mandated devolution carried out in during the last fiscal year. This was a consequence of the optimistic forecast of the Centre’s gross tax collections in its revised estimates for that year, relative to the subsequently available provisional actuals.

In addition, the states’ own non-tax revenues have contracted by 1.5 per cent during the first eight months of this fiscal year, after an expansion of 15.3 per cent over the same period last year. Further, growth of states’ own tax revenues, the largest source of their revenue receipts, eased to a tepid 2.2 per cent during this period, down from a healthy 16 per cent over the same period last year, dampened, in part by the modest rise in collections of the State Goods and Services Tax (SGST).

Some state governments have voiced concerns over the delays in receipt of the compensation amount in recent months, which has complicated their fiscal position and cash flow management. The timing of receipt of the compensation is the second major revenue risk facing state governments. If compensation for one or more months of the current fiscal year gets delayed to the next fiscal year, we may well find some traditionally revenue surplus states staring at a revenue deficit as well as a sharp rise in their fiscal deficit this year. But it seems states will have to start gearing up for life without the GST compensation.

WHAT IS ITS IMPACT?

The brunt of subdued revenue expansion is clearly faced by capital expenditure, whose growth shrank to 1.4 per cent in the first eight months of this fiscal year, down from a healthy 19.8 per cent over the same period last year.

The data indicates a multi-fold increase in the aggregate revenue deficit of these states to Rs 829 billion (April-November 2019), up from Rs 155 billion over the same period last year. Their fiscal deficit has also widened to Rs 2,643 billion over this period (53 per cent of the budgeted amount), up from Rs 2,199 billion last year (48.7 per cent of the budgeted amount).

 

 

Leave a Reply

%d bloggers like this: