Feb-17Eco Flashcards
Feb-17Eco-Index
3.1. Direct Benefit Transfer in Fertilizer Sector
3.2. World Employment and Social Outlook Report
3.3. India Innovation Index
3.4. Rail Safety
3.5. Rail Cadre Management
3.6. FIPB to be abolished
3.7. Proposed Ban on FDI in Tobacco
3.8. CBDT Signs Four Advance Pricing Agreements
3.9. Civil Aviation Reforms
3.10. Centre to Double Solar Park Capacity
3.11. Energy Saving Certificates
3.12. Agricultural Marketing
3.13. Tax Terrorism
3.14. Proposed Payment Regulatory Board
3.15. Credit Enhancement Guarantee Fund
3.16. Transit Oriented Development Policy
3.17. APMC: De-Notification of Few Items
3.18. Revenue Insurance Scheme for Plantation Crops
(RISPC)
3.19. TAMRA: Portal of Ministry of mines
3.20. SEBI to Tighten Algo Trading Rules
3.21. 100% FDI in White Labelled ATM
3.1. DIRECT BENEFIT TRANSFER IN FERTILIZER SECTOR
Why in News?
Pilot projects to introduce Direct Benefit Transfer
(DBT) in fertilizer sector have been taken up in 16
districts.
Why fertilizer sector is suitable for DBT?
Fertilizer sector has high leakages of about 40%.
DBT can help in prevention of leakages to make
subsidies efficient and targeted.
Central government control over fertilizer sector is
high. This minimizes administrative complexity.
Government has a real time Fertilizer Monitoring
System that monitors the fertilizer supply chains.
Economic Survey considers it ideal to introduce DBT in fertilizer sector with
Direct Benefit Transfer given in cash
Biometrically Authenticated Physical Uptake (BAPU) – certifying identity using Aadhar and physically taking subsidized goods.
Challenges of DBT in Fertilizer Sector
With respect to fertilizer subsidy, the beneficiaries and entitlements are not clearly defined.
Subsidy in case of Urea is more than double its MRP. Therefore, farmer may be burdened financially to give MRP and subsidy upfront to receive the DBT afterwards.
Before DBT, there is a need of reforming the subsidy structure in fertilizers which promotes the excessive
use of Urea and destroys soil health.
Suggestions
Decanalizing urea imports: Allowing more agencies to import urea and giving them more freedom in procurement decision would allow flexibility in adjusting to demand.
Bringing urea under nutrient based subsidy compared to current practice of cost based subsidy.
Secure long term supplies from locations where energy prices are cheap. For eg. Agreements from Iran and Oman.
Way Forward
Government should make full use of universalization of banking via the Jan-Dhan Yojana, efficient targeting via Aadhaar, and the increasing spread of smartphones, to extend DBT to fertilizer sector..
Box–1-Direct Benefit Transfer (DBT)
DBT scheme was started on 2013 to:
oReform Government delivery system for simpler and faster flow of information/funds.
oEnsure accurate targeting of the beneficiaries by preventing de-duplication and fraud.
DBT Mission was created in the Planning Commission to implement the DBT programmes.
In 2015 it was placed in Cabinet Secretariat under Secretary (Co-ordination & PG). JAM i.e. Jan Dhan, Aadhaar and Mobile are the three enablers of DBT.
Box–2-Uniqueness of DBT in fertilizer sector
The subsidy would be given to the fertilizer companies rather than to the beneficiaries as given in DBT in LPG.
The subsidy varies with different fertilizers and also from company to company.
Box–3-Some other reforms in fertilizer sector
Neem Coated Urea – It checks diversion of urea from agriculture uses and also reduces leaching of nitrogen into soil.
Gas price pooling - Under this, price of domestic natural gas is averaged or pooled with cost of imported LNG to create a uniform rate for fertilizer plants.
3.2. WORLD EMPLOYMENT AND SOCIAL OUTLOOK REPORT
Why in News?
International Labour Organization recently released the World
Employment and Social Outlook –Trends 2016 Report.
Findings of the Report
It predicts that the number of jobless in India will increase from
17.7 million in 2016 to 18 million by 2018. It also predicts the
employment rate to go down from 3.5% to 3.4% in 2017.
Its predictions related to ‘vulnerable employment’ are:
o It may fall by less than 0.2% per year for the next two years, showing only marginal improvements.
o It is expected to remain above 42% of the total employment in 2017 and account for 1.4 billion people all over the world.
o In emerging countries like India, one in two workers fit this category while in developing countries it is four out of five workers.
o South Asia and sub-Saharan Africa are the most affected areas by vulnerable employment.
About International Labour Organization
It was established in 1919 as a part of Treaty of Versailles post WWI.
It is the only tripartite UN agency, brings together governments, employers and workers of member states.
Its aim is to set labour standards, policies and programmes to promote decent work for all women and men.
India is the founding member of ILO.
It has three main bodies –
o International Labour Conference – It sets the labour standards and broad policies.
o Governing Body – It is the executive body taking the final decisions.
o International Labour Office – It is the permanent secretariat of ILO supervised by Governing Body.
Box–Vulnerable Employment
As per ILO, vulnerable employment covers the own account workers and unpaid family workers.
They most likely lack decent working conditions, social security or any representation in unions.
3.3. INDIA INNOVATION INDEX
Why in News?
The World Economic Forum, NITI Aayog, the World Intellectual Property Organization and the Cornell University will work together to develop an India Innovation Index.
Background
The Global Innovation Index (GII) is an annual ranking of countries according to their capacity and success in innovation.
It is published by Cornell University, INSEAD, and the World Intellectual Property Organization, in partnership with other organizations and institutions.
More about India Innovation Index It will be a “first-of-its-kind online platform” where Global Innovation Index (GII) indicators and India-centric data from various states will be updated periodically.
The index will measure and rank the innovation performance of all Indian states
It will be structured based on the best practices followed in Global Innovation Index (GII) indicators and additionally by adding India-centric parameters those truly reflect the Indian innovation ecosystem.
The index will be based on key pillars of innovation and sub-indices that together will assist in tailoring policies that promote inclusive growth.
The pillars include the strength of institutions, capacity of human capital and research, supporting infrastructure and the level of business sophistication, among others.
The first ranking is expected to be released at the India Economic Summit in New Delhi on October 4-6, 2017.
Significance
Will identify and measure the grassroots issues that affect innovation capabilities and can help move India to an innovation-driven economy.
Identifying the root cause problems might eventually help in growth of innovation in the innovation laggard states such as UP, Bihar, etc.
It will also help in upgrading the overall rank of India in innovation sector globally. Currently India ranks 66 in Global Innovation Index.
More transparency would eventually help in better policy making and more aware general public and media.
The ranking among states will also promote competitive federalism.
It will also be giving more impetus to Make In India, Digital India, Start Up India, etc. campaign.
Box–GLOBAL INNOVATION INDEX GII is co-published by World-Intellectual Property Organization (WIPO), Cornell University and INSEAD with CII as a Knowledge Partner Since inception in 2007, it has been ranking world economies according to their innovation capabilities and outcomes using 82 indicators among a host of other important parameters India currently ranks 66th out of 128 countries on the Global innovation Index (GII) 2016. It has established itself as both a leading reference on innovation and a ‘tool for action’ for policy makers.
3.4. RAIL SAFETY
Why in news?
The Railways Ministry is planning to consult the World Bank to identify areas that require investment from the special rail safety fund announced in the Budget.
Background The union budget 2017-18 made following announcements for rail safety:
For passenger safety, a Rashtriya Rail Sanraksha Kosh will be created with a corpus of ` 1 lakh crores over a period of 5 years.
Besides seed capital from the Government, the Railways will arrange the balance resources from their own revenues and other sources.
Government will lay down clear cut guidelines and timeline for implementing various safety works to be funded from this Kosh.
Unmanned level crossings on Broad Gauge lines will be eliminated by 2020.
Expert international assistance will be harnessed to improve safety preparedness and maintenance practices
Reasons for rail accidents in India
Derailments constitute 50% of the total rail accidents, followed by 36% accidents at unmanned level crossings gates.
Lack of fire detection systems: Most trains in India still lack effective systems to detect smoke and fire.
Lack of anti-collision technologies: These are devices that automatically halt the train if it overshoots a red signal. India, which has the world’s fourth-largest railway network after the U.S. China and Russia, still doesn’t have such safety devices.
Staff deficit: Speeding and skipping red signals are the main causes of concern, human error is another common cause of accidents. The reason for this is partly that there is a shortage of staff, meaning that workers are often overworked.
Inappropriate maintenance of tracks: According to the Khanna Railways Safety Review Committee Report, nearly 25 per cent of the total railway track in India is over aged and is due for replacement.
Resource crunch: The Khanna Committee had further reported resource crunch is said to be the main cause of all these happenings in the Indian Railways.
Poor Rolling stock: Rolling stock, namely locomotives of most trains are not equipped with the Linke Hoffman Busch (LHB) coaches.
Negligence of the Government: There were three high level committees constituted on the Railways constituted recently like Sam Pitroda Committee on Modernization of Railways, Anil Kakodkar Committee on Railway Safety review, Bibek Debroy Committee on Restructuring of Railways etc. All of those reports are lying dormant and recommendations un-implemented.
Accidents also occur due to sabotage.
Steps needed for reducing railway accidents
Strict auditing regarding the integrity of tracks needs to be carried out regularly.
Ultra sound fault detection machines used for precise fault detection need to be expeditiously installed.
Strict legal action should be taken against employees for allowing trains to be loaded heavily beyond the prescribed limits.
Need to ensure materials used in the construction of tracks are of high quality. Strict auditing of signaling and integrity of tracks.
Use LHB coaches in place of the ICF coaches so that even if derailments occur due to sabotaged tracks, casualties are minimized. The customization to Indian conditions of foreign technologies like Anti-Collision Device and the Train Protection and Warning System
A time-bound filling up of vacancies in Critical Safety Categories and Manpower Planning Issues, addresses the demand by railway unions.
Prioritizing the completion on Sethu-Bharatam project, so that unmanned railway crossings are eliminated.
There should be an independent body like Railway Safety Authority under the government with chairman and experts from outside
3.5. RAIL CADRE MANAGEMENT
Why in News?
A senior team of bureaucrats have recently argued against the idea of a single unified management cadre in the Indian railways.
Background
Presently Indian Railways cadres are organized as follows –
o Five cadres directly engaged in train operations - Traffic (operations and earnings), Civil Engineering (track, stations and such assets), Mechanical (Rolling Stock), Electrical, and Signaling.
o Three cadres are in back-end support roles: Accounts (Finance), Personnel (Human Resources) and Stores (Procurement).
Vinod Rai committee suggested constituting a single Senior Management Cadre for all general top posts to end departmental conflicts.
After this, a team of senior officers was constituted to analyze Vinod Rai committee recommendations which gave its report recently.
Need of the proposal
Vinod Rai committee noted that presently there have been interdepartmental conflicts due to less exposure of other department’s working in Indian Railways.
Other railway committees on railways like Rakesh Mohan Committee, Sam Pitroda Committee etc. have also been apprehensive on the rising departmentalism in Railways.
Vinod Rai recommended an officer for top Railways posts only if he/she had experience of department other than his own for 3 years. This proposal may increase synergy in the different cadres of railways.
3.6. FIPB TO BE ABOLISHED
3.6. FIPB TO BE ABOLISHED
Why in news?
Government announced in the Budget 2017-18 its intention to abolish FIPB (foreign investment promotion board) in fiscal year 2018.
Background
Foreign Direct Investment (FDI) flows into India in two ways, the automatic route and through government approval.
FIPB offers a single window clearance mechanism for FDI applications in sectors under the approval route. The board has handled investment proposals worth up to ₹5,000 crore.
FIPB is located in the Department of Economic Affairs, Ministry of Finance and the Finance Minister is in charge of the FIPB.
Reasons Cited
At present, more than 90% of the FDI inflows are routed through the automatic route which do not require prior approval from the FIPB and are subject to sectoral rules.
For the rest of the FDI (about 8% of the total FDI inflows), every department concerned has a framework or a regulator for it.
Further, FIPB has successfully implemented e-filing and online processing of FDI applications.
Therefore, the government feels that it has now reached a stage where FIPB can be phased out.
3.7. PROPOSED BAN ON FDI IN TOBACCO
Why in News?
Ministry of Commerce has proposed a blanket ban on Foreign Direct Investment (FDI) in tobacco sector.
Background
Although FDI in tobacco manufacturing
has been banned since 2010 in India,
foreign tobacco companies can invest
through technological collaborations,
licensing agreement and by forming
trading companies.
The proposal has been opposed by NITI
Aayog.
Issues involved
India has an $11 billion tobacco industry.
There will be a loss of employment and
foreign exchange with proposed
restrictions.
India can be challenged under various
BITs on account of causing discrimination in domestic and foreign manufacturers.
Significance of the proposal
As per its obligation under WHO’s Framework Convention on Tobacco Control (FCTC), India has to reduce higher consumption of tobacco products.
Such proposal may help in reducing government’s health expenditure related to tobacco consumption.
Limitations of the proposal
It will end participation of foreign companies in India leading to loss of investments and livelihoods of tobacco farmers.
WHO’s FCTC does not contain any provisions for banning FDI in tobacco sector as a means of reducing tobacco use.
Foreign tobacco companies like Phillip Morris International of USA says such a ban may be protectionist and discriminatory.
It is unsure that banning foreign manufacturers would reduce tobacco use. The foreign manufacturers may be replaced by domestic ones with the problem unsolved.
Way Forward
India should consider alternative regulatory mechanisms which may better achieve a reduction in tobacco consumption like plain packaging regulations, increase taxes on cigarettes, involving bidis in taxation etc. rather than having a blanket ban on FDI in tobacco sector.
Box–Bilateral Investment Treaty (BIT)
A BIT is a treaty between two countries that provides basic protections to the investors of one state investing in another. Eg. Most Favoured Nation provision
India has about 83 BITs with different countries
India’s model draft on BIT
After losing in the 2011 White Industries case, India prepared a model BIT. Some of its provisions are-
Deleting the MFN clause.
Enterprises based definition of investment- Investors who do not set up an enterprise in India to carry business cannot seek protection under BIT.
Compulsorily exhausting the local courts first before approaching international tribunal for dispute resolution.
List of subject exceptions where provisions of BIT would be invalid are health, environment etc.
3.8. CBDT SIGNS FOUR ADVANCE PRICING AGREEMENTS
Why in news? The Central Board of Direct Taxes (CBDT) announced signing of four more unilateral Advance Pricing Agreements (APAs) in February, 2017. The APAs signed pertain to the manufacturing, financial and Information Technology sectors. With this, the total number of APAs entered into by the CBDT has reached 130. This includes eight bilateral APAs and 122 Unilateral APAs.
What are APAs? An APA is a contract, usually for multiple years, between a taxpayer and at least one tax authority specifying the pricing method that the taxpayer will apply to its related-company transactions. They can be classified as:
Unilateral APA- between taxpayer and tax authority of country where the taxpayer is located.
Bilateral APA- between taxpayer, tax authority of host country and the foreign tax authority.
Multilateral APA-between taxpayers, tax authority of host country and more than one foreign tax authorities.
Advantages of APAs
Obtains certainty for complex, high risk transactions to be done in future.
Avoids double taxation as there is agreement between the tax authorities of countries.
Avoids litigation costs and saves time for tax payers and tax authorities.
Reduces the burden of record keeping.
It promotes the better business environment.
Box–1-Why APAs were introduced
Multi-National Companies apart from genuine cases can misuse this by shifting profits to tax haven countries using transfer pricing mechanism
Here, APAs play crucial role. They can define the mechanism for Arm’s Length Price
They also fix the taxes to be shared between the countries on the profit made by the parent company in future.
Box–2-Related concepts
The price at which divisions of a company transact with each other is called transfer price.
A transaction in which buyers and sellers of any products act independently and have no relationship with each other is known as Arm’s length transaction.
3.9. CIVIL AVIATION REFORMS
3.9. CIVIL AVIATION REFORMS
Why in News?
There are some proposals in recent times to reform civil aviation
sector
Amending the Airports Authorities of India Act (AAI Act) to
monetize the land with AAI.
Transformation of PSUs like Air India, Pawan Hans etc.
Issue 1: Amending AAI Act
Need of the proposal
Airports Authority of India Act is very restrictive on monetizing the lands under the possession of the Airports Authority of India.
For eg. The Act mentions land for activities like hotels, restaurants, restrooms and do not have a comprehensive list.
Significance of the proposal
Monetizing the land better would allow government to build more airports in line with Civil Aviation Policy.
Building airport infrastructure would become self-funded and self-sufficient.
Issue 2: Transformation of civil aviation PSUs
Background
o Air India has the largest fleet in
India including new planes. It also
has a 17% market share and
controls 14.6% of the domestic
passenger market.
o Air India has a debt of Rs 46,570
crores. A bailout package for 10
years was approved in 2012 and
already Rs 24,000 crores has gone
into it.
o In 2016, government completed the strategic sale of Pawan Hans Ltd also.
Need of the proposal
o A recent report ranked Air India as globally the third-worst performing airline in 2016
o Although Air India’s losses have decreased compared to previous year and it also had an operational profit in 2014-15, Air India needs funding to sustain it.
Significance of the proposal
o Government has limited resources to finance the airline. Also money used for its restructuring can be used in other welfare schemes.
o It would help the government shift focus from non-core activities to core activities of governance.
Challenges Involved
The private sector has the objective of maximizing profit. Privatizing the national airlines may be an obstacle to the objectives of the recently proposed civil aviation policy. For eg. Capping of air fares.
There is also an apprehension towards staff retrenchment after the proposed privatization.
Way Forward
In recent times airport privatization has taken the form of awarding management contracts rather than a change in ownership. For eg. Jaipur and Ahmedabad airports. This is a welcome step.
FDI in civil aviation sector has also been relaxed to 100% with government approval for above 49%. This is also a gradual step in opening the civil aviation sector of India.
Civil Aviation PSUs should be reformed gradually starting from alternatives like outsourcing smaller operations to private sector.
Box–1-Airports Authority of India
●It is a statutory body constituted in 1995. ●It is entrusted with the responsibility of creating, upgrading, maintaining and managing civil aviation infrastructure both on the ground and air space in the country.
Box–2-CAG report on Air India (2011)
Failed acquisition plans - Report says that the basic reasons that Air India is financially crippled is that –
oMoney was wasted to purchase and lease aircrafts.
oAcquisition took 8 years (1996-2004).
oIn early 2004, planes were inducted despite being no demand for that.
oNo cost benchmarks were sent before buying planes.
oAcquisition was funded by raising high interest loans and debts.
Merger of Air India and Indian Airlines – It would have benefitted only before massive fleet expansion by both.
Subsidized and free travel for VIPs hurt airline.
Liberalized policy on international routes like non-stop flights to US were loss making.
3.10. CENTRE TO DOUBLE SOLAR PARK CAPACITY
Why in News?
Cabinet has approved the doubling
of solar park capacity to 40,000
MW.
State will identify the solar park
developer and also the land on
which it would be built.
Need of the move
The move is aimed at India’s greenhouse emissions
commitment at the global stage as part of INDCs.
As of now, 34 solar parks have been commissioned
equivalent to 20000 MW. Now this move would add other such parks.
Eligibility of the scheme
All the States and UTs are eligible for this scheme.
Solar Energy Corporation India (SECI) will administer the scheme under Ministry of New and Renewable Energy.
Significance of the move
This move would help set up at least 50 solar parks of about 500MW wach by 2019-2020. This would help promote transition towards a better energy security.
It would give India an ecologically sustainable growth by reduction in carbon emissions and carbon footprint.
It would generate large direct & indirect employment opportunities in solar and allied industries like glass, metals, heavy industrial equipment etc.
The solar parks will also provide productive use of abundant uncultivable lands which in turn facilitate the development of the surrounding areas.
Centre would also give a grant of up to 25 lakh apart from a central funding assistance of 20 lakh per megawatt or 30% of the project cost, whichever is lower. This would improve credit flow for green projects.
Box–1-Intended Nationally Determined Contributions
They are the public commitments on post-2020 climate actions that were made by countries at the COP21 meet of UNFCCC in 2015.
The aim of the commitments is to hold the increase in global average temperature to well below 2 degree Celsius.
BOx–2-Solar Energy Corporation of India (SECI)
It is a not-for-profit company under Ministry of New and Renewable Energy.
It is currently the implementing agency of many solar programs of government of India.
3.11. ENERGY SAVING CERTIFICATES
Why in News? Under the Draft Energy Savings Certificates regulations, Central Electricity Regulatory Commission (CERC) has approved the trading of ESCs on power exchanges. Proposal The Power System Operation Corporation Limited has to perform the role of registry of the ESCs. The Bureau of Energy Efficiency has been assigned the role of administrator for exchange of ESCs. CERC will supervise and approve the procedures as framed by the Administrator from time to time. It would also exercise market oversight over the power markets. Significance of the move This would create a transparent and efficient platform to exchange ESCerts. It would enable power exchanges like Indian Energy exchange to become a one-stop shop to buy and sell Electricity, Renewable Energy Certificates and ESCerts. Way Forward Trading of the ESCs through power exchanges is a welcome step. The government should also setup a floor price to the ESCerts so that in case of oversupply of them, their prices do not fall below market prices.
Box–1-Perform Achieve and Trade scheme
It is a scheme under the National Mission on Enhanced Energy Efficiency.
It was introduced as an instrument to reducing specific energy consumption in energy-intensive industries.
It is aimed at major industries like thermal power, fertilizer, cement etc.
It is a market-based mechanism that allows the trading of ESCerts (energy saving Certificate)
oESCerts were introduced in 2013 by the Bureau of Energy Efficiency (BEE) for industries which achieved energy efficiency standards.
oThey are issued by BEE or Ministry of Power.
oOne certificate is equal to the energy consumed in terms of one metric tonne of oil equivalent (mtoe).
Box–2-Renewable Energy Certificates:
It addresses the mismatch between availability of Renewable Energy sources and mandatory Renewable Purchase Obligations.
Its value is equivalent to 1 MWh of electricity injected from renewable energy sources.
3.12. AGRICULTURAL MARKETING
Why in News?
Recent Budget has proposed to integrate spot and derivatives market for farm produce using electronic National Agriculture Market platform.
Significance
Integration of spot and derivatives market will:
o End uncertainty on delisting of commodities.
o It would help farmers to get best prices for their produce.
Related information
Spot Market - It is an electronic trading platform which facilitate-
o Purchase and sale of specified commodities like agricultural commodities, metals and bullion
o It provides spot delivery contracts which are immediate contracts or those in 11 days.
Derivatives Market - Derivatives are financial contracts that derive their value from an underlying asset.
o These could be stocks, indices, commodities, currencies, exchange rates, or the rate of interest.
o These help make profits by betting on the future value of the underlying asset.
3.13. TAX TERRORISM
Why in News?
Finance Bill 2017 proposed that tax official may not disclose the ‘reason to believe’ to conduct a searches and surveys. This step is being considered to be a step towards tax terrorism.
It plans to amend Section 132 (1) of the Income Tax Act for the same.
The Budget 2017-2018 also proposes to give tax officials power of provisional attachment for 6 months with prior approval of a senior official.
Reasons of Tax Terrorism
The root cause of tax terrorism is the setting of unrealistic revenue collection targets in the Union Budgets.
Complex and multiple tax laws. Eg. High number of exemptions
Tax avoidance by Base Erosion and Profit Shifting practices leads to loss of revenue to government and it taking drastic steps leading to tax terrorism.
Need for the proposals
The government says that this step will arrest a decline in tax-GDP ratio from 12 per cent in 2008 and to 9 per cent in recent times occurring due to a fall in collection of excise, customs duties and corporate tax.
Presently assessee’s property is attached only after its request for stay on property’s attachment is rejected by the Income Tax Commissioner.
Proposed provisional attachment powers can help curb the problem where the tax evaders sell their property during the investigation to escape law.
3.14. PROPOSED PAYMENT REGULATORY BOARD
Why in News?
RBI has differed on opinions given by Ratan Watal committee on payment regime in India and especially on the recommendation of a new Payment Regulatory Board.
Background
Watal committee recommended constituting a Payment Regulatory Board (independent of RBI) to promote competition and innovation in the payment ecosystem in India.
Presently Board for Regulation and Supervision of Payment and Settlement Systems overlooks the payment ecosystem in India.
Recent Budget has recommended that Payment Regulatory Board would be setup in the RBI with 6 members:
o 3 from RBI and 3 external members nominated from the centre.
o RBI Governor would remain the chairman.
o Deputy RBI Governor in charge of Payments and settlements would also be a member.
Need of the proposal
Present Payment and Settlement Systems Act 2007 (PSS Act) restricts the reach of digital payments, thus promoting cash transactions.
o E.g. it is silent on data protection issues.
o Committee also says that the
present law does not focus
on promoting competition in
the payments sector.
Payment regime is a more
technology-business driven
activity that should be viewed
independently from the banking
sector.
Significance of the proposal
It is envisaged that an independent body focused on the goal to facilitate digital payments would increase the digital payments from the current 5% to about 20% in 3 years.
Challenges Involved
It may be a threat to RBI’s autonomy after already constituting a Monetary Policy Committee (MPC) to set inflation targets.
Banking is not much different from payments systems because non cash payments require the existence of financial intermediaries like banks. Therefore separating both of them may create problems in coordination.
Board for Regulation and Supervision of Payment and Settlement Systems is already quite independent as it has membership of experts too outside the RBI.
A separate competition law exists presently and enshrining it within PSS Act can lead to overlapping jurisdictions.
Defining what would constitute “an innovation” would be difficult for the Payment Regulatory Board.
Way Forward
A separate regulator for digital payments is the need of the hour and Payment Regulatory Board is a welcome step.
(For Ratan Watal Committee recommendations, refer to the Vision IAS December 2016 Current Affairs module)
Box–Board for Regulation and Supervision of Payment and Settlement Systems
It is a sub-committee of the Central Board of the RBI
It is the highest policy making body on payment systems.
It is empowered to authorize, prescribe policies and set standards to regulate and supervise all the payment and settlement systems in the country.
It secretariat is at the Department of Payment and Settlement Systems of RBI.
It is a statutory body set as per Payment and Settlements systems Act 2007.
