Daily CUrrent Affairs 26.06.2021 (Prepare the ground for a ‘Naya J&K’,‘Govt. can cut fuel cess by ₹4.5’)

Daily CUrrent Affairs 26.06.2021 (Prepare the ground for a ‘Naya J&K’,‘Govt. can cut fuel cess by ₹4.5’)


1.Prepare the ground for a ‘Naya J&K’

It must capture the best practices of democratic governance globally, yet be reflective of the idea of India

It is too early to conclude whether the all-party meeting held at Prime Minister Narendra Modi’s residence to reduce the trust deficit between New Delhi and the leaders of Jammu and Kashmir will succeed in building the foundations of a ‘Naya Jammu and Kashmir’. That the meeting was held, remarkably without rancor, does signal a new beginning after the momentous events of August 2019, which included the dilution of Article 370 and the preventive detention of many of the leaders who attended the all-party meeting .

There are also signals that a new minimal consensus could be forged between the mainstream of political leaders in Jammu and Kashmir and the central leadership that could lead to an early return of democratic governance and full Statehood. In its long and chequered history, there have been several and previous occasions during which federal relations have been rebooted and reset and this would not be the first time that a new, forward-looking political compact is executed.

Centre’s policies, the world

It is tempting, especially for out-of-work diplomats, to over-analyse New Delhi’s latest moves within a chessboard of a ‘great game’ being played out, reminiscent of 19th century British strategies in the region. Anyone who has studied New Delhi policies since the troubles of the 1990s will recognise that the Centre’s policies on Jammu and Kashmir rarely shift under international pressure, even while tactical gestures may be made to assuage the sentiments of what the establishment often describes as woolly-headed liberals.

In the hostile atmosphere of the early 1990s, when India was confronted with a full-blown insurgency in the Kashmir Valley and India’s staunchest ally, the Soviet Union had collapsed, the United States Assistant Secretary of State for South Asia (and Central Asia), Robin L. Raphel (with direct access to U.S. President Bill Clinton) questioned Jammu and Kashmir’s accession to India. Prime Minister P.V. Narasimha Rao’s fragile coalition, within an economically precarious India, refused to concede ground in any substantial measure. Surely, it is surreal to believe that the Modi government would do so under pressure from the Joe Biden administration or gratuitous advice from its Acting Assistant Secretary for South Asia, even while the photo opportunity presented by the all-party meeting would, of course, be flashed by the media czars of the Ministry of External Affairs across the globe.

Similarly, while the dangers to Afghanistan from the gradual takeover by the Taliban are real and present, it is difficult to find any evidence that the once-messianic students rooted in the madrassas of the Frontier will now turn their attention to Kashmir. Moreover, any backchannel that exists between India and Pakistan that led to a successful ceasefire on the Line of Control is reflective much more of Rawalpindi’s own internal fault lines and problems on multiple fronts, than any real concession toward India. To be sure, if Pakistan’s leadership wanted a face saver to stand down from its fierce reaction to the ‘Ides of August’, Mr. Modi has provided the very steps to down the ante.

From a position of strength

Counterintuitively, the Modi government seems to have acted unilaterally precisely because there is a window of opportunity where it can speak and act from a position of almost absolute strength. Even while there are stray incidents of violence, terrorism and militancy are at their lowest levels in recent years; there is little popular disquiet that is finding expression in the streets of the towns and the cities of Kashmir; and the separatists are either in jail or are surprisingly silent. The popular press, once a source of anxiety for the establishment, has either been arm-twisted into projecting good news or found it pragmatic to do so given the scrutiny of central law enforcement agencies on almost every private institution of importance and influence in the Union Territory.

The mainstream of political parties, who had been derided by the Centre as the ‘Gupkar gang’ et al and detained for months, (who had taken an absolutist stand on the dilution of Article 370) seem to have found at least a modicum of accommodation with the Centre, at least good enough for all of them to respond positively to the Prime Minister’s invitation. In sum the employment of the entire spectrum of Kautilyan policies (saam, daam, dand and bhed — persuade, purchase, punish, and exploit the weakness) have helped to create this new space; this is not to justify the Centre’s conduct, but merely find a convincing explanation for the remarkable degree of acquiescence to the Centre’s policies, admittedly within the convenient judicial cover provided by the Supreme Court of India having admitted but not heard the case on the legitimacy of the dilution of Article 370. As the Harvard trained legal ace, Muzaffar Beigh, apparently declared in the all-party meeting : any discussion on Article 370 could be tantamount to contempt of the Supreme Court given its sub judice status.

In turn, the Centre also seems to have realised that there are limits to which Chaplinesque ‘little dictators’ from the bureaucracy, and their minions can deliver in terms of better public services or investment opportunities despite the laudable intentions of the Lieutenant Governor of Jammu and Kashmir, Manoj Sinha.

The state of delivery of public service has not improved significantly nor has promised investment from corporate groups translated into reality. The promise of Kashmir remains just that: the promise of Kashmir!

Need for a local connect

Moreover, the experience in Jammu and Kashmir has amplified the Sangh Parivar’s long-standing recognition that real leaders cannot be manufactured, but have to be connected organically to the grassroots and supported by a cadre of dedicated workers. The over-reliance on a new crop of shifty leaders, who were paraded into television studios or before visiting diplomats (and who zealously mouthed Bharat mata ki jai) had the strong imprint of an intelligence operation, and was, in any case, counterproductive amongst even those already sympathetic to New Delhi’s narrative on Kashmir. The elections to the District Development Council demonstrated that the Bharatiya Janata Party, the National Conference, the Congress, Peoples Democratic Party, People’s Conference and the Apni Party — all of whom relied on the political leaders of the so-called Ancien Régime — still had a significant constituency amongst the voters of the State.

Federal relations are dynamic even in countries with almost inviolable rights of the States, including the United States. For most of the 20th century, even much before India’s Independence, New Delhi’s policies towards this border region have moved between tight central control and a gentler federal grip that provided space for autonomous self-governance. When the British sold Kashmir to the Dogra ruler, Gulab Singh, they wanted to secure the frontiers, but not be responsible for governance. But the British Empire too realised, especially within the reign of Pratap Singh, that they could not firewall security from governance.

Use the bedrock of the young

Twenty-first century governance and empowerment requires a federal solution that is contemporary and built on best practices globally. The fresh consensus for a ‘Naya’ Jammu and Kashmir must capture the best practices of democratic governance globally, especially from a country such as Australia which I know best, and yet be reflective of the idea of India: a celebration of diversity in all its forms. The challenge before Jammu and Kashmir’s leaders, old and new, is to arrive at a compelling blueprint for good governance within a framework of healthy federal relations that will be rooted in a vision for peace, prosperity and real empowerment. The bedrock of such a vision must be the extraordinarily talented and gifted young people of the State, who have, despite the troubles, been able to carve out a niche for themselves across the world.

On 5th August 2019, President of India in the exercise of the powers conferred by Clause (1) of Article 370 of the Constitution had issued the Constitution (Application to Jammu and Kashmir) Order, 2019. Through this, Government of India has made modifications in Article 370 itself (not revoked it).

With this, the Government of India has dramatically altered the relationship between the state of Jammu and Kashmir and the Indian Union.


  • On October 17, 1949, Article 370 was added to the Indian constitution, as a ‘temporary provision’, which exempted Jammu & Kashmir, permitting it to draft its own Constitution and restricting the Indian Parliament’s legislative powers in the state.
    • It was introduced into the draft constitution by N Gopalaswami Ayyangar as Article 306 A.
  • Under Article 370: The Constituent Assembly of Jammu & Kashmir was empowered to recommend which articles of the Indian Constitution should apply to the state,

    • The J&K Constituent Assembly was dissolved after it drafted the state’s constitution. Clause 3 of the article 370 gives the President of India the power to amend its provisions and scope.
  • Article 35 stems from Article 370 and was introduced through a Presidential Order in 1954, on the recommendation of the J&K Constituent Assembly.
    • Article 35A empowers the Jammu & Kashmir legislature to define the permanent residents of the state, and their special rights and privileges.
    • It appears in Appendix I of the Constitution.

Key Changes

  • The Constitution (Application to Jammu and Kashmir) Order, 2019 has replaced Presidential Order of 1954.
  • Subsequently, the Jammu and Kashmir Reorganisation Bill, 2019, passed by Parliament divides the state of Jammu and Kashmir into two new Union Territories (UTs): Jammu & Kashmir, and Ladakh.
    • This is the first time that a state has been converted into a UT.
    • Of the six Lok Sabha seats currently with the state of Jammu and Kashmir, five will remain with the union territory of Jammu and Kashmir, while one will be allotted to Ladakh.
    • The UT of Jammu and Kashmir will have an Assembly, like in Delhi and Puducherry.
    • Instead of 29, India will now have 28 states. Kashmir will no longer have a Governor, rather a Lieutenant Governor like in Delhi or Puducherry.
  • Status of J&K Union Territory
    • J&K Assembly will have a five-year term, not six, as was the earlier case.
    • Section 32 of the J&K 2019 Bill proposes that the Assembly can make laws on any subjects in the State and Concurrent lists except on state subjects relating to “public order” and “police”.
      • This is similar to Article 239 A of the Constitution that is applicable to Union Territories of Puducherry and Delhi.
      • However, by insertion of Article 239AA and by virtue of the 69th Constitutional Amendment, the Delhi Assembly cannot legislate on matters in entry 18 of the State List, i.e. land.
      • In the case of J&K, the Assembly can make laws on land.
  • The special status provided to J&K under Article 370 will be abolished.
    • Jammu & Kashmir will no longer have the separate constitution, flag or anthem.
    • The citizens of Jammu and Kashmir will not have dual citizenship.
    • As the new union territory of Jammu and Kashmir will be subject to the Indian Constitution, its citizens will now have the Fundamental Rights enshrined in the Indian constitution.
    • Article 360, which can be used to declare a Financial Emergency, will now also be applicable.
    • All laws passed by Parliament will be applicable in Jammu and Kashmir, including the Right to Information Act and the Right to Education Act.
    • The Indian Penal Code will replace the Ranbir Penal Code of Jammu and Kashmir.
    • Article 35A, which originates from the provisions of Article 370 stands null and void.
      • Since Presidential Order has extended all provisions of the Constitution to Jammu and Kashmir, including the chapter on Fundamental Rights, the discriminatory provisions under Article 35A will now be unconstitutional.

The Need for Changes

  • Article 370 was added in the Indian constitution to provide autonomy to J&K.
    • However, it failed to address the well-being of Kashmiris who have now endured two generations of insurgency and violence.
    • It contributed to the gap between Kashmir and the rest of the nation.
  • International events
    • The situation emerging in the western neighbourhood and the possible re-ascendance of the Taliban in Afghanistan call for greater attention and care.
    • More so, the emerging geopolitical dynamics in Afghanistan and the resultant United States-Pakistan rapprochement could have potentially led to more heat on the Kashmir situation in the months ahead.


  • Constitutional challenges
    • Presidential order that sought to abrogate of Jammu and Kashmir’s special status, according to Article 370 (3) the President would require the recommendation of the constituent assembly of Jammu and Kashmir to make such a change.
    • However, the 2019 Presidential order adds a sub-clause to Article 367, replacing the terms:
      • “Constituent Assembly of Jammu and Kashmir” to mean “legislative Assembly of Jammu and Kashmir”.
      • “Government of Jammu and Kashmir” to mean “Governor of Jammu and Kashmir acting on the aid and advice of the council of ministers”.
    • The government sought to dilute the autonomy under Article 370 without bringing a Constitutional Amendment that would require a two-thirds majority in the Parliament.
      • This provision is currently under challenge in the Supreme Court on the ground that it added article 35A in the Indian Constitution only through a Presidential Order.
  • Conversion of Jammu and Kashmir into a Union Territory is in violation of Article 3, as the Bill was not referred to the President by the State Assembly.
    • In the reorganisation of the state, the Presidential order also requires the concurrence of the government of the state. However, since Jammu & Kashmir is currently under Governor’s rule, the Governor’s concurrence is deemed to be the government’s concurrence.
  • Federalism issue:
    • The Instrument of Accession was like a treaty between two sovereign countries that had decided to work together.
      • The maxim of pacta sunt servanda in international law, which governs contracts or treaties between states, asks that promises must be honoured.
    • In Santosh Kumar v. State of J&K & ors (2017), the SC said that due to historical reasons, Jammu and Kashmir had a special status.
    • In SBI v Zaffar Ullah Nehru (2016), the SC held that Article 370 cannot be repealed without the concurrence of the Constituent Assembly of Jammu and Kashmir.

Possible Consequences

  • Rise in Militancy: Article 370 was seen by Kashmiris as a marker of their separate identity and autonomy.
    • There is a possibility of widespread protests and violence as a reaction to the dilution of Article 370.
    • Terror elements in Pakistan would find Kashmir to be the most fertile ground for breeding terrorism.
    • The unrest can affect the democratic progress that has been made so far.
  • Out-maneuvering Pakistan: Pakistan used 370 to wage a proxy war, internationalise Kashmir, supporting terrorism, all that is gone now.

2.OFB federations threaten to go on indefinite strike

The three main recognised federations of defence civilian employees of the Ordnance Factory Board (OFB) have threatened to go on an indefinite strike against the Union Cabinet decision to split the organisation into seven corporate entities.

They have jointly written a letter to Defence Minister Rajnath Singh and Secretary Defence Production Raj Kumar protesting against the “arbitrary, one-sided and biased decision” in violation of all the previous written agreements and assurances, and demanded it be withdrawn. “It is astonishing that when negotiations are pending, conciliation process is inconclusive, in the absence of the federations in the conciliation meeting held on June 15, 2021, the government has taken a hurried decision to corporatise the OFB into seven entities,” the federations said in the letter dated June 23.

On June 16, the Cabinet approved the corporatisation plan to turn the OFB, which has 41 factories, into seven fully government-owned corporate entities for better management and improvement of efficiency.

The letter stated that the Secretary DP had agreed to arrange a meeting with the Empowered Group of Ministers (EGoM) formed to oversee the corporatisation to discuss about the alternate proposals given by the federations.

“It is a clear case of betrayal by the government, because Secretary, DP himself has asked the federations to give a viable alternate and robust proposal to MoD which would be submitted to the EGOM for a discussion with the federations, so that OFB could achieve the higher expectations of its customers, being in the government set up itself,” it said.

The federations said that the entire process to corporatise the OFB is “stage-managed, hasty and taken in a hurried manner, without any application of mind about the impact of this decision on the defence preparedness of our country and also about the future and service conditions of 76,000 employees”.

The letter noted that employees were recruited as Central government employees, and as per Article 309 of the Constitution, there was no mention in their appointment letters that their status would be changed during the service period and would have to work in Corporation or Public Sector Undertakings (PSU).

The federations, as well as three other associations, have called for a joint meeting on June 27.

Article 309 in The Constitution Of India 1949

309. Recruitment and conditions of service of persons serving the Union or a State Subject to the provisions of this Constitution, Acts of the appropriate Legislature may regulate the recruitment, and conditions of service of persons appointed, to public services and posts in connection with the affairs of the Union or of any State: Provided that it shall be competent for the President or such person as he may direct in the case of services and posts in connection with the affairs of the Union, and for the Governor of a State or such person as he may direct in the case of services and posts in connection with the affairs of the State, to make rules regulating the recruitment, and the conditions of service of persons appointed, to such services and posts until provision in that behalf is made by or under an Act of the appropriate Legislature under this article, and any rules so made shall have effect subject to the provisions of any such Act

3.‘Govt. can cut fuel cess by 4.5

Move will ease inflation pressures, spur consumption without revenue loss: ICRA

The Union government has room to cut the cess levies on petrol and diesel by ₹4.5 per litre to ease inflationary pressures without a net loss in revenue, rating agency ICRA said on Friday.

Stressing that consumer sentiment had been singed by the second COVID-19 wave, ICRA said that the record retail fuel prices were ‘weighing upon disposable incomes and consumption’ and feeding into inflationary pressures. Retail inflation crossed the central bank’s comfort zone at 6.3% in May.

The revenue loss entailed by the cess cuts would be offset by an expected increase in fuel consumption making this a revenue-neutral measure, ICRA’s chief economist Aditi Nayar pointed out.

“Benefitting from the anticipated rise in mobility and economic recovery aided by an acceleration of vaccine coverage, ICRA has forecast the YoY growth in the consumption of petrol and HSD (high-speed diesel) at about 14% and about 10%, respectively,” Ms. Nayar wrote. “Our forecasts suggest that consumption this year will be 6.7% higher for petrol and 3.3% lower for HSD.”

Aggregate revenue from fuel taxes is expected to rise by about 13% to ₹3.6 lakh crore this year, with additional revenue of ₹40,000 crore. Foregoing the ₹40,000 crore can support a reduction of ₹4.5 per litre, ICRA estimated in a note.

Room for RBI

“Such a cut in the cess rates would offer some relief to household budgets and ease the inflationary pressures related to the rising global crude oil prices,” Ms. Nayar emphasised, stressing that this would also give the central bank more room to focus on growth imperatives rather than fret about accelerating inflation.

In the three monetary policy reviews since February, the Monetary Policy Committee, chaired by Reserve Bank of India Governor Shaktikanta Das, has reiterated concerns about inflationary pressures created by the higher cess and VAT rates announced by the Centre and State governments on fuel last year, and the need to unwind them to ease cost push pressures.

While global crude oil prices were on an upswing since January, riding on expectations of a rebound in the global economy, India’s record retail fuel prices were also driven by a weaker rupee and the higher domestic imposts levied by the Centre and States, said ICRA.

What is Monetary Policy Committee?

The Monetary Policy Committee (MPC) is a committee constituted by the Reserve Bank of India and led by the Governor of RBI. Monetary Policy Committee was formed with the mission of fixing the benchmark policy interest rate (repo rate) to restrain inflation within the particular target level. The RBI governor controls the monetary policy decisions with the support and advice of the internal team and the technical advisory committee.

Initially, the main decisions related to interest rates were taken by the Governor of RBI alone before the establishment of the committee. MPC was constituted under the Reserve Bank of India Act, 1934 as an initiative to bring more transparency and accountability in fixing the Monetary Policy of India. MPC conducts meetings at least 4 times a year and the monetary policy is published after every meeting with each member explaining his opinions.

Use of Monetary Policy

Monetary Policy is the process of regulating the supply of money in an economy by the monetary authority of the country. The Monetary Policy, generally, adjusts the inflation rates or interest rates to sustain the price stability and to maintain the predictable exchange rates with foreign currencies. The Reserve Bank of India is the central banking authority of India which controls the monetary policy in conjunction with the central government’s developmental agenda. The Reserve Bank of India is authorized to make monetary policy under the Reserve Bank of India Act, 1934.

Monetary policy is either contractionary or expansionary and is often seen separate from the fiscal policy which deals with taxation, spending by government, and borrowing. When the total money supply is increased rapidly than normal, it is called an expansionary policy while a slower increase or even a decrease of the same refers to a contractionary policy.

Objectives of Monetary Policy

Monetary Policy was implemented with an initiative to provide reasonable price stability, high employment, and a faster economic growth rate. The major four objectives of the Monetary Policy are mentioned below:

  1. To stabilize the business cycle.
  2. To provide reasonable price stability.
  3. To provide faster economic growth.
  4. Exchange Rate Stability.

How was the Monetary Policy Committee formed?

Urijit Patel Committee first proposed the idea for the formation of a five-member Monetary Policy Committee. Later, the government proposed the setting up of a seven-member committee. MPC is assisted by the Monetary Policy Department (MPD) of the Reserve Bank in the formulation of the policy.  Monetary Policy Committee came into force on 27th June 2016. The Financial Markets Operations Department (FMOD) operationalizes the monetary policy, mainly through day-to-day liquidity management operations.

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