(Current Affairs) Economy & Energy | November: 2016

Economy

Centre rethinks 40% NPS annuity order

  • To make the National Pension System (NPS) more attractive, the government could do away with a norm mandating retiring employees to buy an annuity with 40 per cent of their accumulated corpus.

  • Returns on annuity products that deliver a monthly income to retirees are quite low and the compulsory annuitisation puts off potential investors who may prefer to park their retirement savings elsewhere for better returns.

  • For premature withdrawals from the NPS before the age of 60, eighty per cent of the amount must be invested in an annuity product.

  • At retirement, 40 per cent of savings must be invested in an annuity, although the PFRDA has allowed retirees to defer the purchase for three years, if the financial markets are in a downturn when they turn 60.

  • The intent is to ensure people get a monthly income in their sunset years instead of frittering away their entire nest-egg on large expenses at retirement.

  • Scrapping the annuity requirement altogether would need a change in the PFRDA Act which stipulates an annuity purchase at retirement, but it is possible to reduce the proportion of corpus to be annuitised from the 40 per cent prescribed now.

  • So the PFRDA has proposed a reduction in the mandatory annuity norm, giving people the option to invest in other products that could offer higher returns, Mr. Contractor said. The Finance Ministry is considering the proposal.

  • Diluting the annuity prescription would spur greater competition between the 12-year old NPS, which is managing Rs.1.45 lakh crore savings for 3.8 million members, and the EPFO which has Rs.10 lakh crore under its watch.

  • It may be recalled that the Centre had to backtrack on a Budget proposal this year, intended to bring parity between the two retirement savings alternatives by making 60 per cent of EPF corpus taxable, after widespread furore and an intervention at the highest level.

  • While he had rolled back the tax on EPF savings, Finance Minister Arun Jaitley made 40 per cent of the NPS corpus tax-free in this Budget. Earlier, the entire NPS corpus was taxable.

  • Govt had granted an additional annual deduction of Rs.50,000 from gross taxable income for NPS investments over and above the Rs.1.5 lakh deduction permitted for similar investments such as life insurance premia, public provident fund and EPF.

  • The PFRDA chief said the additional deduction triggered a surge in new NPS accounts, most of which were opened towards the end of the previous financial year.

The Tea Board of India has decided to keep on hold the post-auction settlement module

  • The Tea Board of India has decided to keep on hold the post-auction settlement module for four weeks, according to its Chairman S. Sarangi

  • The decision was made after two rounds of meetings here on Monday to address the issue which has been dogging the tea industry and trade since mid-September when the Tea Board started the post-auction settlement system for pan-India auctions through Bank of India, the settlement bank.

  • While NSEIT has prepared the software for the settlement module., Bank of India is the designated settlement bank.

  • The magnitude of problem was such that the tea industry had problems in making bonus payments, while companies could not close their second quarter results due to payment reconciliation issues through the four sales since mid- September.

  • The Tea Board’s official missive said that it had been decided that pan-India post settlement module would be kept on hold from October 18 or “till further orders.” Trade and industry see this as a temporary rollback.

RBI has asked banks to replace debit cards for security reasons

  • The Reserve Bank of India (RBI) has asked banks to replace debit cards whose security is suspected to have been compromised after being used in some automated teller machines (ATMs).
  • The issue was first suspected by payment gateways such as Visa, Mastercard and Rupay, the last of which is operated by NPCI, when it came to their notice that security could have been breached in some instances.
  • Debit cards and credit cards face security issues when unauthorised parties access confidential details embedded in the card. Such access could happen even as the card is being used in an ATM.
  • Cards falling in the suspicious category and needing replacement would number about 17.5 lakh. The total debit card base in the country was 697 million as of July 2016.
  • Banks such as State Bank of India (SBI), HDFC Bank and Bank of Baroda have already started replacing the cards. SBI, the country’s largest lender, has started the process of replacing 0.6 million debit cards.
  • Mr. Mahapatra added that while the bank had advised customers to change the debit card pin, the institution had also blocked the cards, and is now issuing fresh cards. He said the process would be competed in two to three days.
  • SBI is investigating the issue to ascertain whether there was any financial loss to the customers.

Union brought a logo for the IPR Policy

  • To promote the National Intellectual Property Rights Policy, the Centre brought out a logo for the Cell for IPR Promotion and Management (CIPAM) — the body set up to take forward the implementation of the National IPR Policy.
  • Launching the logo, Commerce and Industry Minister Nirmala Sitharaman said India’s intellectual property-related activities needed great traction. The logo has been designed keeping in mind the slogan of the National IPR Policy: ‘Creative India, Innovative India’, said a statement.
  • The CIPAM is working towards creating public awareness about IPRs in the country, promoting the filing of IPRs through facilitation, providing inventors a platform to commercialise their IP assets.

Draft bankruptcy bill to be ready soon

  • The draft bill on the resolution of bankruptcy of financial firms would put public sector financial companies on par with their private counterparts, according to Moody's Investors Service.
  • Under existing laws, resolution of public sector banks can only happen by order of the government and in the manner it directs,” according to a note prepared by Moody’s.
  • While the proposed law is a credit positive for banks, Moody's said it would be a deterrent for senior unsecured creditors due to their altered rankings.
  • This bill addresses the lacunae of a having a legally codified framework for resolution, and hence is a credit positive in terms of enhancing overall systemic stability.”
  • The note also highlighted the fact that once enacted, the Bill would create a significant delineation of regulatory powers between the Reserve Bank of India and the Resolution Corporation (RC), the organisation to be formed under the Bill.
  • A key role of the Corporation will be to assign risk ratings to financial sector companies based on their viability, according to the draft Financial Resolution and Deposit Insurance Bill, 2016.

Regional connectivity proposal may face problems

  • The government’s plans to boost regional air connectivity could hit a legal air pocket as leading domestic airlines have opposed the proposal to charge a levy on flights on major routes to fund subsidies for regional flights.
  • It said the government is not empowered to levy a tax on airlines to fund the regional connectivity scheme under the Aircraft Act of 1934.
  • As a part of its proposed regional connectivity scheme, the Union Civil Aviation Ministry had mooted amendments to the Aircraft Rules of 1937 in August to set up a regional connectivity fund to subsidise the losses of airlines that wanted to fly on regional routes.
  • The fund was proposed to be financed by a levy on domestic flights along with contribution from states and credit proceeds from other sources.
  • Passengers will be able to fly to unserved and underserved airports for a fare of Rs 2,500 an hour, under the scheme which is slated to be launched on October 21.
  • A levy in the nature of tax can only be levied having regard to the provisions contained in the Article 265 of the Constitution of India i.e. by authority of law.
  • The airlines said imposition of a regional connectivity levy would require amendment to the Aircraft Act, 1934 and not the rule and until then the draft rules would be “beyond the authority of law and in contravention to the Constitution of India.”
  • In its letter, the FIA said that Section 5(2) (ab) of the Aircraft Act of 1934 does empower the Centre to make rules for economic regulation of air services but it doesn’t authorise it “to introduce a levy in the nature of tax on air services.”

Moody's report says India's infrastructure needs require PPP model

  • India’s infrastructure needs can be addressed by enhancing the public-private partnership (PPP) model, which will help attract more private sector investment, according to a Moody's Investors Service report.
  • While the country's PPP model has seen reasonable success in some sectors over the last 20 years, PPP activity has been low in the last four fiscal years due to challenges with the model.
  • The sharp drop in private investment in PPP projects in recent years was due to delays in project approvals and land purchases by the government.
  • Complicated dispute resolution mechanisms in concession agreements and lower than expected revenues due to aggressive assumptions.

Centre has turned optimistically cautious about regional connectivity scheme

  • A day ahead of its introduction, the Centre has turned “optimistically cautious” about its regional connectivity scheme, which aims to activate torpid airports and make flying a cheaper option.
  • Regional connectivity scheme will offer passengers air fares for Rs.2,500 for an hour’s journey to an unconnected airport. The Centre plans to revive dormant airports and attract regional airlines under the scheme.
  • To help airlines offer cheaper airfares on such flights, the Centre will provide subsidies to them by creating a regional connectivity fund. The fund will be financed by a levy on domestic flights on major routes.
  • However, most domestic airlines have termed the move illegal and are likely to challenge it in courts.
  • In a bid to make the scheme more attractive for lessors, the Union Civil Aviation Ministry has issued draft rules to help aircraft leasing firms to take back aircraft quickly from defaulting airlines.
  • Minister of State Civil Aviation Jayant Sinha said that land and skill development were the two big bottlenecks grappling the aviation sector today.

International Air Transport Association disappointed over India’s opposition

  • Global airline body IATA has expressed disappointment over India’s opposition to a global pact for curbing aviation emissions proposed by the United Nations’ International Civil Aviation Organisation (ICAO) in Montreal recently.

  • Although 65 countries signed the pact committing to cap emissions at 2020 levels, India and Brazil were among countries that opted out as it felt the deal would be unfair for developing countries where the civil aviation market is not mature.

  • India ratified the COP21 accord on climate change in the same week and Mr. de Juniac was “hopeful that the spirit of climate leadership would extend to aviation emissions.”

  • India is set to become the third largest aviation market by displacing the UK in 2026. Minister of State Civil Aviation said earlier this month that the government is examining ways to offset higher emissions from rising aviation traffic.

Government to come up with second version of APMC act

  • Government will be ready with second version of model Agricultural Produce Market Committee (APMC) Act by next year, aiming to increase farmers’ income by measures like taking contract farming out of the law.
  • NITI Aayog and Agriculture Ministry are working on the new model law, which can be adopted by the states. At present, few states like Punjab have come out with separate contract farming law.
  • The new APMC Act will also have provision for promoting online or spot (e-national agriculture market) agriculture market platforms and ensure that all these measures are revenue neutral for states.

Cyber criminals from Pakistan may target banks infrastructure

  • The Centre’s cyber security arm has issued a fresh warning to all banks cautioning them that cyber criminals from Pakistan may target their information infrastructure.
  • The alert came from the Computer Emergency Response Team-India (CERT-In), the nodal agency under the Ministry of Electronics and IT.
  • The cyber-security agency is working closely with the Reserve Bank of India to enhance financial sector security apparatus in the wake of the biggest security breach in Indian banking affecting over 32 lakh accounts.
  • The incident has so far not been reported by the banks to CERT-In, which is the national nodal agency for monitoring and responding to cyber security incidents. It collects, analyses and disseminates information on cyber incidents.
  • It has been learnt that CERT-In had also issued alerts to banks on July 1, regarding cyber attacks planned on their information infrastructure. The official further added that two such warnings were sent to banks in August as well.
  • CERT-In along with National Critical Information Infrastructure sent mails to Chief Information Security Officers of the banks on October 19, on the rise in the frauds carried out through Bank ATMs using malware and the modus operandi.

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