Govt Policy Review January 2014 to July 2014

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Policy Review January to July 2014

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January

1. Land Acquisition Act and Draft Rules notified

The Right to Fair Compensation and Transparency in Land Acquisition and Rehabilitation and Resettlement Act, 2013 came into force on January 1, 2014.The Act regulates the process of land acquisition and provides for rehabilitation and resettlement of affected families.

The Draft Rules for Social Impact Assessment (SIA) and consent were notified on December 31, 2013. Key features of the Draft Rules, as notified are:

Social Impact Assessment: The Act provides for an SIA to examine: (a) whether the acquisition serves a public purpose, (b) the number of families that will be affected, and (c) the social impact of the project. It also mentions certain cases where an SIA need not be conducted.

The Draft Rules specify that state governments will have to identify or establish state SIA Units to ensure that SIAs are carried out. The procedure for conducting the SIA includes: (a) conducting an assessment of the land to be acquired, (b) determining the number of affected families, (c) preparing a socio-economic and cultural profile of the affected area, and (d) preparing a Social Impact Management Plan. In addition, the process for conducting public hearings to present the finding of the SIA is outlined. Public hearings must be conducted in all gram sabhas where more than 25% of the members are directly or indirectly affected by the acquisition. An Expert Group will evaluate the SIA within two months from the date of its constitution. The government will examine the SIA report and the recommendations of Expert Group.

Consent: Land is acquired by the government for government, private and public-private partnership projects with public purpose. Consent is not required for government projects. Private projects require the consent of at least 80% of the affected families. Public-private partnership projects require the consent of at least 70% of the affected families. At least 50% of the gram sabha members must be present at the meeting and a majority of those present must pass a resolution giving consent, containing the negotiated terms of compensation and Rehabilitation and Resettlement (R&R). The government acquiring land must ensure that the following are provided to individuals whose consent is sought: (a) SIA report, (b) initial R&R package being offered, (c) list of rights current enjoyed by the village and its residents under various legislations, and (d) a written statement by the collector stating that there will be no consequences if consent is denied, etc.

2. Committee submits report to RBI to revise and strengthen the monetary policy framework

An expert committee to recommend measures to revise and strengthen the current monetary policy framework, with a view of making it transparent and predictable. The Committee (Chairperson: Dr. Urjit Patel) submitted a draft report January 21, 2014.3 The main recommendations are:

Choice of nominal anchor: Currently, RBI uses a multiple indicator approach to draw monetary policy perspective. The Committee made the following recommendations:
(i) Inflation, as measured by Consumer Price Index (CPI) should be the nominal anchor for the monetary policy framework. This is because CPI, as an indicator of retail inflation, is the closest proxy of a true cost of living, and influences inflation expectations of households.
(ii) Nominal anchor will be targeted at 4% with a band of +/- 2%.
(iii) CPI inflation should be brought down to 8% over next 12 months, and 6% in the next 24 months before formally adopting the recommended target.

Organisational Structure: Currently, monetary policy decisions are made by the Governor of the RBI, who is accountable to the Government of India.

The Committee recommended that monetary policy decision making be vested in a Monetary Policy Committee. This Committee should be composed of five members, with the Governor as its head. The Committee will be held accountable for failure to establish and achieve the nominal anchor.

Operating Framework: Currently, the monetary policy framework operates via changes in repo rate, which sets interest rates for overnight borrowing by banks. The Committee recommended moving towards using term repo rate instead of overnight repo rate.

3. Guidelines for flexi-funds within centrally sponsored schemes released

The Ministry of Finance released guidelines for flexi-funds within centrally sponsored schemes (CSS). CSS are schemes, such as Sarva Shiksha Abhiyan, Pradhan Mantri Gram Sadak Yojana, and National Rural Livelihoods Mission that are funded fully or partially by the central government and implemented by states, based on guidelines issued by the centre.

• In June 2013, the Cabinet approved the restructuring of CSS. This included a provision for 10% of the budget of CSS to be kept as flexi-funds whose usage could be decided by states. Key features of the guidelines include:

• Objectives: Key objectives of flexi-funds are to: (a) provide flexibility to states to meet local needs and requirements, (b) pilot innovations and improve efficiency within the overall objective of the scheme, and (c) undertake mitigation and restoration activities in case of natural calamities in sectors covered by the CSS.

• Budgetary allocation: Central ministries shall keep at least 10% of their plan budget for each CSS as flexi-funds, except for schemes which emanate from legislations (such as MGNREGA) and those where a substantial portion of the budgetary allocation is already flexible. Once the plan budget for a CSS has been approved, central ministries shall communicate the tentative state-wise allocation for each CSS to states, including the allocation of flexi-funds. In CSS that are jointly funded by the centre and states, flexi-funds will be also be funded jointly. Flexi-funds may be released along with the normal releases for CSS, and will be subject to the same audit requirements as the CSS.

• Monitoring and evaluation: Flexi-funds may be monitored online and evaluation of flexi-funds may be done through the existing evaluation process for CSS.

4. Nachiket Mor committee on financial inclusion submits report to RBI

The Committee on Comprehensive Financial Services for Small Businesses and Low Income Households (Chairperson: Dr. Nachiket Mor) submitted its final report. The Reserve Bank of India (RBI) had appointed the Committee to propose measures for achieving financial inclusion and increased access to financial services. The key recommendations of the Committee were:

• Provide each resident above the age of 18 years with an individual, full-service electronic bank account.
• Improve access to suitable credit, deposit and insurance products to low-income households at reasonable price.
• Set up payments banks whose primary purpose will be to provide payments services and deposit products to small businesses and low income households.
• Set up wholesale banks which will lend to corporates and purchase securitised retail and small-business loans.
• Establish a unified Financial Redress Agency that will handle customer grievances across all financial products in coordination with their respective regulators.

5. SEBI releases FPI regulations

The Securities and Exchange Board of India (SEBI) notified the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014. These Regulations shall provide the framework for registration and procedures with regard to Foreign Portfolio Investors (FPIs). FPIs are foreign nationals who are permitted to invest in securities in the Indian market. The key provisions are as follows:

• Designated depositories: No FPI shall deal in securities without obtaining a certificate from the designated depository participant on behalf of SEBI. A designated depository must be registered with SEBI as a participant.

• Eligibility criteria for FPIs: FPIs must reside in a country whose securities markets regulator is a signatory to the International Organisation of Securities Commission's Multilateral Memorandum of Understanding. Further, the central bank of that country must be a member of the Bank for International Settlements.

• Investment restrictions: FPI investments are restricted to listed securities, mutual funds, exchange traded derivatives, treasury bills, commercial paper, and security receipts.

• Limitation on issue of offshore derivative instruments: No FPIs can issue offshore derivative instruments except to persons who are regulated by an appropriate foreign regulatory authority.

6. Cabinet approves the National Youth Policy 2014

Union Cabinet approved the National Youth Policy 2014, which replaces the 2003 Policy currently in force. The Policy provides a framework for interventions by the government and other stakeholders to enable the youth to realise their full potential. The Policy covers all youth in the age group of 15-29 years that constitute 27.5% of India's population. The priority areas suggested in the Policy are education, skill development and employment, entrepreneurship, health, sports, promotion of social values, community engagement, participation in politics and governance, youth engagement, inclusion and social justice. According to the Ministry, the interventions proposed in the Policy are consistent with the priorities highlighted in the 12th Plan and therefore do not propose any specific programmes or schemes, with financial implications. Relevant ministries and departments are expected to focus on youth issues within their programmes and schemes.

7. Cabinet approves policy guidelines for television rating agencies

The Cabinet has approved a proposal by the Ministry of Information and Broadcasting to bring out a comprehensive regulatory framework in the form of guidelines for the television rating agencies in India. These guidelines cover detailed procedures including registration, eligibility norms, cross-holdings, methodology, complaint redressal mechanism and audit and disclosure. The guidelines are based on the recommendations made by the Telecom Regulatory Authority of India. Key features of the guidelines are:

• All rating agencies including the existing ones shall obtain registration from the Ministry.
• No company/entity including related entities holding more than 10% stake in a ratings agency can hold more than 10% stake in another ratings agency, broadcaster, advertiser or advertising agency.
• Ratings should be technology neutral and should capture data across multiple platforms.
• The rating agency shall set up a complaint redressal system with a toll free number.
• The rating agency shall set up systems for periodic internal as well as independent audit of its methodology and processes.

8. SEBI releases regulations on consent settlements, and search and seizure

The Securities and Exchange Board of India (SEBI) released regulations on consent settlements and search and seizure. The consent settlement procedure involves SEBI agreeing to the proposal for settlement, on payment of a sum by a defaulter, after taking into consideration the nature, gravity and impact of defaults. The key features of the Regulations pertaining to consent settlements are:

• Any person against whom any proceedings have been initiated or may be initiated may file an application to SEBI for consent settlements.
• SEBI may decline an application for settlement if the applicant is found to be guilty of commission of insider trading or unfair trade practices.
• SEBI shall constitute a high powered committee to make recommendations on the consent settlement. Based on these recommendations, a panel of whole-time members shall communicate the final decision. The high powered committee shall be assisted by an internal committee.

The Securities Law (Amendment) Ordinance conferred explicit powers on the SEBI chairman to authorise search and seizure operations on a suspected violator's premises. With the lapse of the Ordinance, the search and seizure regulations will no longer be valid. The Securities Laws (Amendment) Bill, 2013 is currently pending in Parliament. If passed, the Bill will reinstate SEBI's power to issue the following regulations regarding search and seizure operations:

• The Chairman may authorise an investigating authority or any other officer within SEBI (authorised officer) to undertake a search operation within the premises of the person being investigated. The service of a police officer may be requisitioned for assistance.

• The authorised officer has the power to seize documents or books of account, found as a result of the search. He is required to prepare a seizure memo containing details of the seized documents.

• The authorised officer can record on oath the statement of any person who is found in possession of documents or books of account that are relevant to the investigation.

FEBRUARY

9. Bill on bifurcation of Andhra Pradesh passed by Parliament

The Andhra Pradesh Reorganisation Bill, 2014 was introduced in Lok Sabha on February 13, 2014 by the Minister for Home Affairs, Mr. Sushil Kumar Shinde.1 It was passed in Lok Sabha on February 18, 2014, with several amendments. Rajya Sabha passed the Bill on February 20, 2014. Further, according to reports, the Bill received Presidential assent on February 28, 2014.2 The Bill provides for the reorganisation of the state of Andhra Pradesh. It creates two states, namely Andhra Pradesh and Telangana.

Salient features of the Bill include:

Formation of Telangana: The newly formed state of Telangana will comprise of the following districts of Andhra Pradesh: Adilabad, Karminagar, Medak, Nizamabad, Warangal, Rangareddi, Nalgonda, Mahbubnagar, Khammam (excluding certain revenue villages) and Hyderabad.

• Capital city: Andhra Pradesh and Telangana will have a common capital, Hyderabad, for 10 years. After this period, Hyderabad shall be the capital of Telangana only. The central government will constitute an expert committee to recommend a new capital for Andhra Pradesh within six months of this Bill’s enactment.

• Role of Governor: The Governor of the existing state of Andhra Pradesh shall be the common Governor for both states for a period to be determined by the President. As part of the administration of the common capital area of Hyderabad, he shall be responsible for: (i) security of life, liberty and property, (ii) law and order, (iii) internal security, and (iv) management and allocation of government buildings.

• Representation in the Legislative Assembly and Lok Sabha: Currently, the Andhra Pradesh Legislative Assembly has 294 seats. After the bifurcation, Andhra Pradesh will have 175 seats (29 Scheduled Castes and 7 Scheduled Tribes), and Telangana 119 seats (19 Scheduled Castes and 12 Scheduled Tribes). In Lok Sabha, Andhra Pradesh will have 25 and Telangana 17 seats.

• Revenue Distribution: The resources allocated by the 13th Finance Commission to the existing state of Andhra Pradesh will be apportioned between the two successor states on the basis of population ratio and other parameters. The President shall make a reference to the 14th Finance Commission to make separate allocations for each of the successor states, after taking into account their current resources.

• Special Development Package: The central government shall ensure that adequate benefits in the form of special development package are given to the backward areas of Andhra Pradesh. This shall include special incentives for Rayalaseema and north coastal regions of the state.

10. The Whistle Blowers Protection Bill, 2011 passed by Parliament

The Whistle Blowers Protection Bill, 2011 was passed.

Salient features of the Bill include:

The Bill seeks to protect whistleblowers, i.e. persons making a public interest disclosure related to an act of corruption, misuse of power, or criminal offence by a public servant.

• Any public servant or any other person including a non-governmental organisation may make such a disclosure to the Central or State Vigilance Commission.
• Every complaint has to include the identity of the complainant.
• The Competent Authority may disclose the identity of the complainant to the head of the department only after the prior written consent of the complainant.
• The Bill prescribes penalties for knowingly making false complaints.

More information about the Bill is available here.

Standing Committee report on Prevention of Corruption (Amendment) Bill, 2013

The Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice submitted its report on the Prevention of Corruption (Amendment) Bill, 2013. The Bill amends the Prevention of Corruption Act, 1988. The Bill makes the giving of a bribe an offence, enlarges the definition of taking a bribe and covers commercial organisations.

Key recommendations of the Committee are:

• Definitions: The definitions of ‘corruption’ and ‘corrupt practices’ should be included in the Bill. The definition of ‘public servant’ should include retired officials, in line with a provision that extends protection of sanction for prosecution to retired public servants.

• Coercive bribery: The government must formulate laws and regulations to ensure that chances of coercive bribery are reduced.

• Related laws: The Right of Citizens for Time Bound Delivery of Goods and Services and Redressal of their Grievances Bill, 2011, and the Whistle Blowers Protection Bill, 2011, should be enacted. This would address concerns of persons forced to give bribes to access services from the state, and encourage them to report acts of corruption.

• Disproportionate assets: The inclusion of proving the intention of a public servant, in a disproportionate assets case against him should be removed. His inability to explain the source of his disproportionate asset should be sufficient for prosecution.

• Parity with Lokpal Act: Minimum punishment for habitual offenders should be enhanced from three to five years to ensure parity with the Lokpal and Lokayuktas Act, 2013. Further, the timeline for trial of corruption cases should be prescribed as provided for in Lokpal and Lokayukta referred cases.

11. Committee of Secretaries approves policy related to pre-legislative consultation

The Committee of Secretaries took certain decisions related to pre-legislative consultations.

Salient decisions of the Committee are:

• Every Ministry or Department shall publish proposed legislations online and through other means.
• The draft legislation and accompanying information must be placed in the public domain for a minimum period of 30 days. It must cover the following aspects related to the proposed legislation: (i) brief justification for its introduction, (ii) essential elements, (iii) broad financial implications, and (iv) estimated impact assessment on environment, fundamental rights and livelihood of persons concerned.
• When such legislation affects a specific group of people, it must be widely publicised to ensure it reaches the people concerned.
• A summary of feedback received from the public should be published online.
• The Ministry may also hold consultations with all stakeholders.
• Following the pre-legislative and inter-ministerial consultations, the Bill should then be referred to the Law Ministry for vetting.
• The Cabinet note prepared by the Ministry should include a brief summary of feedback received. When the Bill is referred to the Standing Committee, a summary of the pre-legislative process should also be included.

12. Street Vendors Bill passed by Parliament

The Street Vendors (Protection of Livelihood and Regulation of Vending) Bill, 2014 was passed by Parliament. The Bill seeks to protect livelihood rights of street vendors and regulate street vending.

The Bill was passed by Lok Sabha with certain amendments on September 6, 2013. The Rajya Sabha passed the Bill on February 19, 2014 without any additional changes.

13. The Rights of Persons with Disabilities Bill, 2014 introduced in Rajya Sabha

The Rights of Persons with Disabilities Bill, 2014 was introduced in the Rajya Sabha on February 7, 2014 by the Minister of Social Justice and Empowerment, Mr. Mallikarjun Kharge.26 As this Bill is still pending in Rajya Sabha, it will not lapse when the new Lok Sabha is formed after the general elections.

The Bill repeals the Persons with Disabilities (Equal Opportunity Protection of Rights and Full Participation) Act, 1995.

The key features of the Bill are:

• Definition of disability: The definition is expanded to include 19 conditions including autism, blindness, intellectual disability, mental illness, muscular dystrophy, multiple sclerosis, and learning disability. Persons with benchmark disabilities are defined as those with at least 40% of any disability.

• Rights of persons with disabilities: The Bill states that persons with disabilities shall have the right to equality and shall not be discriminated on grounds of their disability. Rights of disabled persons include protection from inhuman treatment and equal protection and safety in situations of risk, conflict, and natural disasters.

• Education, skill development and employment: The Bill provides for access to inclusive education, vocational training and self-employment of disabled persons. All government institutions of higher education and those getting aid from the government shall reserve at least 5% of seats for persons with benchmark disabilities.

• At least 5% of the vacancies in posts of the central and state governments are to be filled by persons or class of persons with benchmark disabilities. Of this, 1% shall be reserved for persons with: (i) blindness and low vision, (ii) hearing and speech impairment, (iii) locomotor disability, (iv) autism, intellectual disability and mental illness, and (v) multiple disabilities.

• Bodies set up under the Act: The central and state governments are required to establish a National and State Commissions for Persons with Disabilities. The Commissions shall inquire into matters relating to the deprivation of rights of disabled persons, and monitor the implementation of the Act. The Bill also sets up Central and State Advisory Boards to advise governments on policies and programmes on disability.

14.SEBI amends corporate governance norms in listing agreements

The Securities and Exchange Board of India (SEBI) has approved amendments to listing agreements to bring them in-line with the provisions of the Companies Act, 2013. These amendments seek to improve corporate governance norms for listed companies and will come in effect from October 1, 2014.

Key amendments are:

• A Director nominated by any financial institution will not be considered as an independent Director.
• An independent Director cannot serve on the board of more than three listed companies (versus seven earlier) nor can they be given stock options. The total tenure of an independent Director has been restricted to two terms of five years.
• There should be at least one woman director on the board of each listed company.
• All significant related-party transactions will require approval from the Audit Committee as well as minority shareholders.
• Establishment of a whistle blower mechanism shall be compulsory for all listed companies.

15. Corporate Social Responsibility rules under the Companies Act, 2013 notified

The Ministry of Corporate Affairs has notified the Companies (Corporate Social Responsibility Policy) Rules, 2014 under the Companies Act, 2013. The list of permissible Corporate Social Responsibility (CSR) activities in Schedule VII of the Act has also been amended. The Rules, Section 135 and the amended Schedule VII shall come into force from April 1, 2014. Section 135 of the Act mandates every company whose: (i) net worth is above Rs 500 crore, or (ii) turnover is above Rs 1,000 crore, or (iii) net profit is above Rs 5 crore, to spend at least 2% of its average net profits for the last three financial years towards CSR activities.

Key highlights of the Rules and the amendments to Schedule VII are:

• Applicability: CSR provisions of the Act shall be applicable to every Indian company and every foreign company with a branch or project office in India. It shall not be applicable to a company that does not meet the net worth, turnover or net profit criteria for three consecutive financial years.

• CSR activities: The CSR activities now permissible under Schedule VII include: (i) promoting women’s empowerment and gender equality, (ii) protecting environment, (iii) welfare of weaker sections and former soldiers, (iv) promotion of arts, culture and sports, (v) rural development and technology incubation projects, and (vi) contributions to the Prime Minister's National Relief Fund or any other fund set up by the central government towards development, relief works and welfare of the weaker sections.

• CSR committee: The Rules provide some exemptions regarding the composition of the CSR committee to private, unlisted and foreign companies.

• CSR Policy: A company’s CSR Policy should include the details of projects or programmes to be undertaken and the monitoring mechanism. The annual report of the company should include a report on CSR in the prescribed format.

• Excluded activities: Activities for the exclusive benefit of company’s employees, contribution to political parties and normal business activities shall not be considered as CSR activities.

16. New scheme to propel literacy among Muslim adults

The Ministry of Human Resource Development launched the Maulana Azad Taleem-e-Balighan scheme. The scheme seeks to achieve the task of educating around one crore, non-literate, Muslim adults.
The scheme comprises imparting functional literacy, implementing HUNAR and continuing education opportunities.

HUNAR is a project aimed at providing free, skill or vocation based training to young Muslim girls. The scheme was initially a collaboration between the central government of India, National Institute of Open Schooling and the government of Bihar. It was subsequently launched on a national scale.

The 2011 Census indicates the literacy rate of Muslims in the country to be at 59.1%, below the national average of 74.04%. Under this scheme, the National Literacy Mission Authority, established by the Ministry, has set down certain targets including:

• Scaling up of basic education for 2.5 lakh adults,
• Providing livelihood skill training to three lakh beneficiaries, and
• Providing opportunities of continuing educating the community.

Under the scheme, 410 Saakshar Bharat Districts will be covered with a financial outlay of Rs 600 crore. Saakshar Bharat was initially a mission launched to attain 80% literacy on a national level by 2012.

17. National Mission for Green India launched as centrally sponsored scheme

The Cabinet Committee on Economic Affairs has approved the National Mission for Green India as a centrally sponsored scheme, with an allocation of Rs 13,000 crore over the 12th Plan.

Objectives: The objectives of the scheme are to: (a) increase forest and tree cover and improve the quality of forest cover spanning two to eight million hectares, and (b) improve ecosystem services including biodiversity and forest based livelihoods.

Implementation: Gram Sabhas, along with restructured Joint Forest Management Committees, will oversee implementation of the scheme at the local level. At the state level, the Forest Development Agency and State Forest Development Agency, both restructured, will oversee implementation. A Governing Council, chaired by the Minister of Environment and Forests, and an Executive Committee will facilitate the implementation of the programme at the national level.

18. Launch of National Mission on Libraries

The Ministry of Culture launched the National Mission on Libraries (NML). The Mission aims to modernise and digitally link public libraries across the country. It will focus on four core areas: (a) creation of a National Virtual Library of India to share digitised reading material in various languages, (b) setting up NML Model Libraries, (c) quantitative and qualitative survey of libraries, and (d) capacity building.

The central government has allocated Rs 400 crore over the next three years for the Mission. The Raja Rammohun Roy Library Foundation, Kolkata is the nodal agency for the implementation of the Mission.

MARCH

19. SC rules that trial of a convicted legislator must be completed within one year

The Supreme Court (SC) has passed an order in relation to trial proceedings of MPs and MLAs facing criminal charges.7 It stated that trial courts must complete proceedings within one year from the date of framing of charges. The SC has also ordered day to day hearings in such cases. Further, trial courts would have to give reasons to the chief justices of the respective high courts for any delay in this regard. If satisfied with the reasons cited, the Chief Justice of the relevant high court may extend the period of trial.

This order was passed by the SC in an ongoing Public Interest Litigation filed by an NGO, Public Interest Foundation related to decriminalisation of politics. In December 2013, the SC had passed an order in the same PIL directing the Law Commission of India to submit a comprehensive report on all aspects of electoral reforms.8 Further, it asked the Law Commission to submit a report within two months on two specific issues, i.e., the stage at which the disqualification of candidates would take effect and the consequences of filing a false affidavit.9 The Law Commission has submitted this report. Its key recommendations are provided below.

20. Government notifies multiple sections of the Companies Act, 2013

The Ministry of Corporate Affairs has notified multiple sections of the Companies Act, 2013. It has also released rules related to some of these provisions. The notified provisions and rules will come into effect from April 1, 2014. The subjects covered under these sections and rules include:

• Definitions: Terms such as company‟s accounts, foreign company, independent directors and „one person company‟.
• Incorporation: Formation of company and its memorandum and articles of association.
• Allotment of securities: Private placement of securities, prospectus for such placements and issuance of Global Depository Receipts.
• Capital structure: Kinds of share capital, issue of shares, share buy-back, voting rights, debentures and deposits from public.
• Administration: Shareholders‟ register, annual reports, general meetings, voting rights and dividends.
• Directors: Appointment removal and disqualification of directors (including independent directors), duties of directors, board meetings and committees and related party transactions.
• Management: Appointment of executive directors and managers, managerial remuneration and appointment and functions of the company secretary.
• Inspection, inquiry and investigation: Central government‟s power to conduct inspection, inquiry and investigation into affairs of a company and the establishment and powers of the Serious Fraud Investigation Office.

21. Independent Evaluation Office launched

The Planning Commission launched an Independent Evaluation Office (IEO). IEO can conduct independent evaluation of any programme, including government flagship programmes, which (i) receive public funding, or (ii) have guarantees from the government. IEO will assess the programme for its effectiveness, relevance and impact, and can make its findings public without interference from the government. The Cabinet had approved the establishment of the IEO in November 2010.31 The IEO has been set up as an attached office to the Planning Commission, with Dr. Ajay Chhibber as its Director-General.

22.Notification issued for constitution of the Coal Regulatory Authority

The government has issued a notification to constitute the Coal Regulatory Authority (CRA) under the overall administrative control of the Ministry of Coal. CRA shall consist of a Chairperson and four members. They will be appointed on the recommendation of a Selection Committee and will hold office till CRA is set up as a statutory authority or till they attain the age of 65 years, whichever is earlier.

The Chairperson shall have at least 15 years of experience in mining, economics, commerce, finance, management, law or public administration. Other members shall be qualified and experienced in law, coal mining, finance and power, steel or cement industries. The functions of CRA include advising the central government on matters regarding:

• Methodologies for determination of prices for raw coal, washed coal and by-products.
• Performance and operational standards for coal industry (except mines safety).
• Formulation of policies in coal sector, including allotment of coal blocks.
• Promotion of competition, efficiency and economy in the coal industry.
• Promotion of investments in the coal industry.

The Coal Regulatory Authority Bill, 2013 was introduced in Lok Sabha on December 13, 2013 to establish CRA as a statutory body. This Bill will lapse once Lok Sabha is reconstituted after the general elections. Hence, the government has decided to establish the authority through an executive order.

23. Ministry releases the Policy on Regional and Remote Area Air Connectivity

The Ministry of Civil Aviation has issued the Policy on Regional and Remote Areas Air Connectivity. The Policy aims to improve air connectivity to: (i) towns and cities with low air connectivity (Regional Air Connectivity), and (ii) areas with inadequate surface transport network (Remote Area Air Connectivity). It replaces the erstwhile Route Dispersion Guidelines mandating airlines to provide a minimum number of scheduled flights to remote areas and smaller towns and cities. Key highlights of the Policy are:

• Incentives: Scheduled flights to specified regional and remote airports will be provided concessions on airport charges and ground handling. State governments will also be asked to provide incentives like reduction in VAT on aviation fuel and underwriting of seats.
• Air Connectivity Fund: An Air Connectivity Fund is envisaged to provide long-term financial support for promotion of connectivity to remote and strategic areas.
• Services to remote areas: All scheduled airlines are required to operate at least 10% of their domestic capacity on routes to/from airports in remote areas and 1% on routes within remote areas. Remote areas include all airports in North East (except Guwahati and Bagdogra), Jammu and Kashmir (except Jammu), Andaman and Nicobar Islands, and Lakshadweep.

24. Central Sector Scheme for Assistance to Disabled Persons modified

The Cabinet Committee on Economic Affairs approved some modifications in the cost norms of the Scheme of Assistance to Disabled Persons for purchase and fitting of aids and appliances.38 The modifications will be effective from April 1, 2014.

The scheme was launched in 1981 with the objective of providing durable, sophisticated and scientifically manufactured modern aids and appliances for disabled persons. The key changes in the scheme are:

For disabled persons with income upto Rs 15,000 per month, the scheme will cover the full cost of the aid or appliance. For persons with a monthly income between Rs 15,000 to Rs 20,000, 50% of the cost of the aid will be provided.

• Visually impaired students who are 18 years of age or above, will be provided accessible mobile phones. For students in class 10 and above, a laptop, Braille note taker and Braille typewriter will be provided.
• Assistance for essential surgical correction for fitting of aids and appliances is enhanced for persons with hearing, speech, visual, and orthopaedic disability.
• The subsidy for motorised tricycles and wheelchairs is enhanced to Rs 25,000 for persons who are 18 years of age and above, and have severe locomotor disabilities such as muscular dystrophy, stroke, cerebral palsy etc.

APRIL

25. Government released new draft Direct Taxes Code 2013

The draft Direct Taxes Code, 2013 was released on the Department of Income Tax website for comments. This is a revised version of the Direct Taxes Code Bill, 2010, which was introduced in Parliament, and thereafter, was referred to the Standing Committee on Finance. The Direct Taxes Code proposes to consolidate and amend the laws relating to direct taxes. Consequently, it replaces the Income Tax Act 1961 and the Wealth Tax Act, 1957. The Direct Taxes Code, 2010 (DTC 2010) had proposed to widen tax slabs for individuals, and increase tax on companies. In addition, it had proposed to remove several deductions currently allowed for companies and retain deductions available to individuals. The Bill had also proposed the General Anti-Avoidance Rules (GAAR) to allow tax authorities to classify any arrangement as one entered into for evading taxes. The Bill will lapse with the dissolution of the 15th Lok Sabha. In Direct Taxes Code, 2013 (DTC 2013), various recommendations of the Standing Committee, as well as recommendations of the Kelkar Committee on fiscal consolidation have been incorporated. Some of the changes made in the DTC 2013 are:

The age of senior citizens is proposed to be relaxed from 65 years in DTC 2010 to 60 years in DTC 2013.

• GAAR in the DTC 2010 was discussed as one of the rules regarding avoidance of tax. However, in DTC 2013, more clarity and precision has been brought to the provisions. DTC 2013 includes the applicability of the GAAR, the impermissible avoidance agreements and the treatment of connected person etc. Importantly, the onus of proof is to rest with the tax authority invoking GAAR.
• For the purpose of wealth tax determination, DTC 2013 includes all assets as the base for wealth tax. The 2010 version had included only the unproductive assets for the levy of wealth tax.
• An additional tax of 10% (over the 15% dividend distribution tax) is proposed to be levied on recipients of dividend exceeding Rs one crore.

• A fourth slab for income tax may be introduced. Currently, the highest slab is for incomes in excess of Rs 10 lakh, which is taxed at 30%. The new slab will tax total income in excess of Rs 10 crore at 35%.

26. RBI grants in-principal approval for banking licences to two applicants

The Reserve Bank of India (RBI) has granted in-principle approval to IDFC Ltd. and Bandhan Financial Services Pvt. Ltd. to set up banks under the Guidelines on Licensing of New Banks in the Private Sector. RBI had notified the Guidelines and invited applications for licences in February 2013. A High Level Advisory Committee was constituted in October 2013 to screen the applications. These applicants were recommended for grant of in-principle approval by the Committee. RBI also accepted the Committee‟s recommendation that RBI consider the licence application by the Department of Posts separately in consultation with the government. The in-principle approval will be valid for a period of 18 months. The applicants have to meet the requirements under the Guidelines and other stipulated conditions during this period. They will be granted a licence for commencement of banking business once RBI is satisfied that they have complied with the requisite conditions. RBI will use the learnings from current licensing exercise to revise the Guidelines. It hopes to ultimately move to a system where eligible entities can be granted licences on demand.

27. Supreme Court recognises constitutional rights of transgender persons

The Supreme Court passed a judgment that gave legal recognition to transgender persons as a third gender. It also gave directions to safeguard their constitutional rights on the grounds of right to equality and equal protection under Articles 14 and 15 and the right against gender discrimination under Article 16 of the Constitution. The Court also directed the central and state governments to take appropriate steps to:

• Treat transgender persons as socially and educationally backward classes, and extend reservation in cases of admission to educational institutions and for public appointments;
• Operate separate HIV sero-surveillance centres for transgender persons;
• Provide adequate medical care to transgender persons in hospitals and ensure separate public toilets and other facilities.

The Court noted that an expert committee is already looking into issues related to transgender persons. It stated that the Committee must make recommendations in light of these legal developments. Further, the recommendations of the Committee should be implemented within six months. "Transgender" is an umbrella term that describes persons whose gender identity, gender expression or behaviour does not conform to their biological sex.

MAY

28. Supreme Court upholds constitutionality of Articles related to RTE; exempts minorities from 25% reservation

The Supreme Court on May 6, 2014 ruled that there was no violation of the basic structure of the Constitution by the insertion of Articles related to the Right of Children to Free and Compulsory Education (RTE) Act, 2009. It also ruled that minority institutions do not need to reserve at least 25% of seats for children from weaker sections of society. Minority institutions refer to religious and linguistic minorities.The questions put to the five-judge bench of the Supreme Court related to whether the insertion of Article 15(5) and Article 21(A) has altered the basic structure of the Constitution. Article 15(5) outlines the right of the state to make special provisions for the advancement of any socially and educationally backward classes, and their admission into educational institutes.

Article 21(A) refers to the state’s obligation to provide free and compulsory education to all children between the ages of six and 14 years. The Court held that both Articles do not violate the basic structure of the Constitution. The RTE Act, 2009 provides for at least 25% of the strength of a class to be reserved for children belonging to weaker sections or disadvantaged groups. This applies to all schools of a specified category (such as Kendriya Vidyalaya, etc.) or unaided schools. The Court upheld the 25% seat reservation for private unaided institutions and noted that there was no violation of their right to trade/business.

The other query pertained to whether the RTE Act, 2009 alters the minority character of aided or unaided institutions covered under Article 30(1) (stating that all minorities have the right to establish and administer educational institutes of their choice) and the Court held that it did.

29. Constitution of SIT for money stashed abroad

The Cabinet decided to constitute a Special Investigation Team (SIT) under the chairmanship of former Supreme Court judge, Justice M. B. Shah, for investigating large amounts of unaccounted money stashed abroad. This is in keeping with the decision of the Supreme Court. The SIT will investigate, initiate proceeding and prosecute in cases related to Hasan Ali (an Indian businessman in jail on suspicion of money laundering) and other matters involving unaccounted money. In addition to the Chairman and Vice-chairman, there are 11 members in the SIT representing the Reserve Bank of India, Ministry of Finance, Financial Intelligence Unit, Intelligence Bureau, etc.

JUNE

30. President addresses first joint sitting of Parliament, outlines the agenda of the new government

• The President of India, Mr. Pranab Mukherjee addressed the first joint sitting of the newly constituted 16th Lok Sabha. He outlined the major policy priorities of the new government. These included:

• Macro-economy: Reforms will be undertaken to ease the process of doing business. Investments, including Foreign Direct Investment will be encouraged in sectors that help create jobs. An attempt will be made to introduce the Goods and Services Tax, while addressing the concerns of state governments.

• Infrastructure and transport: An infrastructure development plan will be created, to be implemented over the next 10 years. A fast track and investment friendly, Public-Private Partnership mechanism will be implemented. Railways will be modernised and a Diamond Quadrilateral Project of high speed rails will be launched.

• Energy: A National Energy Policy will be formulated to focus on energy-related infrastructure and technology. International civil nuclear agreements will be operationalised, and nuclear power for civilian purposes will be developed. Transparent policies will be formulated for the allocation of natural resources such as coal and minerals.

• Agriculture: Public and private investment in agriculture, especially in infrastructure, will be encouraged.

• Urban development: By 2022, every family will have a pucca house with a water connection, toilet facilities, and 24 hour electricity supply. 100 cities will be created, with world class amenities.

• Governance and Administration: The government is committed to providing a clean and efficient administration, with timebound service delivery.

31. Hike in railways freight rate and passenger fares

The Ministry of Railways has implemented revised railway passenger fares and freight rates to meet its annual expenditure. The new rates will come into effect from June 25, 2014.

Key changes relate to:

Freight:

i. Freight rates will increase by 5%. There will be an additional increase of 1.5% for Fuel Adjustment Component (FAC) that was due since April, 2014. The total increase in freight rates will be 6.5%.
ii. All concessions in charging of freight for all commodities booked for short distances up to 100 km have been withdrawn. The minimum distance for charge has been increased from existing 100 km to 125 km.
iii. The number of Low Rated Classes (goods of low value) has been reduced from 4 to 3. Certain concessions for some of these commodities have also been withdrawn. Examples of low rated commodities include organic manures, paper, cotton and other textiles, etc.

Passenger:

i. There is a flat 10% increase in all classes and additional increase of 4.2% for FAC for passenger fares (a total increase of 14.2%).
ii. The cost of Second Class Monthly Season Ticket (MST) fares of suburban and nonsuburban trains shall be increased by 14.2% inclusive of FAC. There is no change in second class suburban travel fare up to a distance of 80 km. According to the Ministry the FAC is to adjust for any fluctuations in the price of fuel. It is revised once in six months routinely, depending upon the fluctuations in the price of oil

32. Government proposes amendments to four labour laws

The Ministry of Labour and Employment has proposed certain amendments to the Factories Act, 1948, the Minimum Wages Act, 1948, the Child Labour (Prohibition and Regulation) Act, 1986 and the Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Act, 1988.

The Ministry has invited comments from stakeholders on the proposed amendments to Minimum Wages Act, 1948 by June 30, 2014, Factories Act, 1948 by July 4, 2014 and Child Labour Act, 1986 by July 15, 2014 and Labour Laws Act, 1988 by July 22, 2014.

Key features of the proposed amendments are:

Factories Act, 1948: The owner or manager of a factory should ensure that the factory’s expansion does not involve any hazard to the workers’ safety and workers involved in hazardous process have protective
equipment and clothing. Adult women (except those who are pregnant or disabled) will now be allowed to work on moving machinery. The state government may allow women to work during night shifts.

Minimum Wages Act, 1948: The central government will revise the National Floor Level for Minimum Wages every five years, and update it every six months in line with consumer price inflation. State governments have to link minimum wages to inflation or revise them every two years. State governments are also obliged to fix minimum wages for all professions.

Child Labour Act, 1986: The Child Labour (Prohibition and Regulation) Amendment Bill, 2012 is currently pending in Rajya Sabha and the Standing Committee on Labour has submitted its report on the Bill.The Ministry has now accepted two of the Standing Committee’s suggestions: (i) to regulate the work of children in the entertainment industry, and (ii) parents of adolescents working in hazardous occupations should not be punished in the first instance, only repeat offenders.

Labour Laws Act, 1988: The Act exempts small establishments from filing returns and maintaining registers as required by certain labour laws. The Labour Laws (Amendment) Bill, 2011 is currently pending in Rajya Sabha and the Standing Committee on Labour has submitted its report on the Bill.22,23 The Ministry has now accepted some of the Standing Committee’s recommendations. These include: (i) allowing records to be maintained and submitted in either physical or electronic form, (ii) changing the period and last date for submission of annual returns, and (iii) including the names and addresses of employees/workers in annual return forms.

33. TARC submits its First Report

The Tax Administration Reform Commission (Chair: Dr Parthasarathi Shome) submitted its first report on May 30, 2014. Key recommendations of the Committee are:

• Central Board of Direct Taxes and Central Board of Excise and Customs should move towards a convergence, starting with a unified management structure with a common Board in the next five years.
• The post of Revenue Secretary should be abolished and its functions should be assigned to the two Boards.

In addition, the report made recommendations regarding customer focus, human resource development, dispute management, internal processes, and use of information and communication technology.

34. Ministry issues guidelines for formulation and implementation of Tribal Sub Plan

The Ministry of Tribal Affairs has placed guidelines relating to the formulation, implementation, and monitoring of the Tribal Sub Plan and Article 275(1) grants. The Tribal Sub Plan seeks to ensure the socioeconomic development of tribal communities through the allocation of government resources. Article 275(1) provides for central assistance to states to raise the level of administration in Scheduled Areas in these states. Scheduled Areas refer to those areas notified in the Fifth Schedule of the Constitution as such by the President based on certain criteria.

Key recommendations include:

• At the state level, the department in charge of tribal welfare shall be the nodal department for the Tribal Sub Plan.
• The guidelines recommend using varied criteria such as literacy rates, etc., for allocation across sectors instead of merely looking at the proportion of the tribal population in the state.

• Grants must be given in the following order of priority: (a) strengthening Integrated Tribal Development Agencies, (b) strengthening Tribal Research Institutes, (c) establishing schools and hospitals, (d) for livelihoods projects, and (e) projects relating to the well being of tribal communities.

JULY

35. TRAI issues recommendations on guidelines on spectrum sharing

The Telecom Regulatory Authority of India (TRAI) released its recommendations on the guidelines on spectrum sharing. Spectrum sharing refers to an arrangement, where two telecom operators in a telecom circle pool their respective spectrum for simultaneous use. The Department of Telecommunications issued the broad guidelines for sharing of 2G spectrum in February 2012. Key highlights of the recommendations are:

• Spectrum sharing: Spectrum sharing should be permitted only when both operators have spectrum in the same frequency band. Sharing of spectrum across two bands should not be allowed.
• Government permission not required: There should not be any requirement for prior government permission for spectrum sharing. However, the operators should inform the government at the time of entering into such an agreement.

• Spectrum Usage Charges: The rate at which Spectrum Usage Charges (SUC) is calculated varies according to the amount of spectrum held by an operator. TRAI has recommended that for the purpose of SUC calculation, it should be assumed that the operators are sharing their entire spectrum holdings in the particular band.

• Use of shared spectrum: An operator that holds spectrum for providing limited services in a circle cannot use the shared spectrum for providing other services.

36. Changes in projects allowed under the MGNREG Act, 2005

The government amended Schedule I of the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA). Context: Schedule I of the Act allows four major types of projects to be undertaken: (a) public works relating to natural resource management, (b) those that create individual assets for vulnerable communities, (c) those that create common infrastructure for Self Help Groups (SHGs) compliant with norms established by the National Rural Livelihoods Mission (NRLM), and (d) those that create rural infrastructure.

Amendments: The recent amendment to Schedule I makes the following key changes:

• It mandates that 60% of the works to be taken up in districts shall be for the creation of productive assets linked to agriculture and allied activities through the development of land, water, and trees.
• It allows for the creation of community assets for vulnerable communities in addition to individual assets.

Convergence with IAY: The Ministry has also published guidelines for convergence between the Indira Awas Yojana (IAY) and the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).14 The guidelines specify that: (a) the unskilled wage component of the construction of a new house under IAY can be provided under MGNREGS, (b) the beneficiary must have a job card under MGNREGS, (c) the construction must be undertaken by the beneficiary himself, unless the beneficiary is handicapped, or above the age of 60, and (d) beneficiaries will be selected as specified by IAY guidelines.

37. Supreme Court gives decision on validity of fatwas

The Supreme Court examined issues related to the validity of fatwas and muslim courts. The question before the Court was whether: i) Dar-ul-Qazas (Muslim Courts) and Shariat courts, and ii) fatwas pronounced by them were illegal and unconstitutional. The Court held that:

• The decision or fatwa issued by any institution or body is not recognised by law, and so is not binding on anyone, including the person who had asked for it.
• An adjudication or fatwa does not have the force of law and, therefore, cannot be enforced by using coercive methods.
• A fatwa on a religious or other issue may be issued as long as it does not infringe upon the rights of individuals guaranteed under law.
• Any institution, including Dar-ul-Qazas, shall not give a verdict or issue fatwa related to the rights, status and obligation of an individual unless such individual has asked for it.

38. Centre and state governments adopt ‘National Declaration on Urban Governance and Housing for All’

The centre and state governments adopted a "National Declaration on Urban Governance and Housing for All".

The Declaration recognizes "housing as a part of the dignity and indicator of quality of life of the individual". The Declaration lays special emphasis on housing for economically weaker sections (EWS), low income groups (LIG) and other vulnerable and minority groups. Under the Declaration, the central government will improve the approval processes and funding to the states and UTs.

EWS/ LIG housing will be encouraged by examining the possibility of: (i) liberal Floor Area Ratio/ Floor Space Index, (ii) Transferable Development Rights, and (iii) examining the concept of deemed building permissions. States and UTs will also consider amending their rental laws to balance the interests of owner and tenant. This is to encourage rental housing in urban areas. Efforts will be made to implement single window scheme for approval of lay-out and building permissions.

States and UTs will also ensure citizens‟ participation in governance, maintenance of public amenities, transparency in the system and accountability for proper growth of cities and towns. They will also provide basic amenities like better roads, transport, sanitation, drinking water etc.