Daily Current Affairs 28.07.2022 (Warehousing Act, The poor state of India’s fiscal federalism, Death by hooch, A future free of hepatitis)

Daily Current Affairs 28.07.2022 (Warehousing Act, The poor state of India’s fiscal federalism, Death by hooch, A future free of hepatitis)


1. Warehousing Act

However, the SKM fears it will help corporate houses gain more control

The Union Food and Public Distribution Ministry has suggested major amendments to the Warehousing (Development and Regulation) Act of 2007.

While the Ministry says that the aim is to help farmers get access to the services of quality warehouses, the Samyukt Kisan Morcha (SKM) fears that the amendments are for bringing back certain provisions of the repealed Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act through the backdoors.

An official in the Ministry said the amendment is to make registration of godowns compulsory, to raise the penalty for various offences and to do away the jail term as a punishment for the offences.

At present, registration with the Warehousing Development and Regulation Authority (WDRA) is optional. After the proposed amendment, which is yet to be cleared by the Cabinet, registration of all third party warehouses throughout the country, will be undertaken in a phased manner.

“Central government will have powers to exempt any class of warehouses from registration with the Authority. This will ensure a gradual and non-disruptive change to a regulated warehousing system,” the official said on Wednesday.

The WDRA was established in 2010 to ensure scientific storage by prescribing infrastructural and procedural standards. Captive warehouses such as the FCI are excluded from the ambit of the Act.

The Act wants to establish a system of negotiable and non-negotiable warehouse receipt (NWR), which is now in electronic form.

The Samyukt Kisan Morcha said the repealed Act had also talked about similar provisions such as electronic trading in transaction platform and freedom for trading at farmgate, cold storage, warehouse and processing units.

“This time, too, the purpose should be to help some big corporate houses so that they gain even more control over the warehousing and cold storage sector. The direction of every policy of this government is towards that,” said SKM leader Ashok Dhawale.

2. Editorial-1: The poor state of India’s fiscal federalism

Concerns of the founding fathers — addressing socio-economic inequities — are being forgotten in today’s fiscal policy

In his last speech, in 1949, to the Constituent Assembly, B.R. Ambedkar sounded a note of caution about the Indian republic entering a life of contradictions. “In politics we will have equality and in social and economic life we will have inequality. These conflicts demanded attention: fail to do so, and those denied will blow up the structure of political democracy”, he warned, though Jawaharlal Nehru truly believed that inequities could be addressed through his tryst with the planning process. A degree of centralisation in fiscal power was required to address the concerns of socio-economic and regional disparities, he felt. This asymmetric federalism, inherent to the Constitution, was only accelerated and mutually reinforced with political centralisation since 2014, making the Union Government extractive rather than enabling. While States lost their capacity to generate revenue by surrendering their rights in the wake of the Goods and Services Tax (GST) regime, their expenditure pattern too was distorted by the Union’s intrusion, particularly through its centrally sponsored schemes .

A politicised institution

Historically, India’s fiscal transfer worked through two pillars, i.e., the Planning Commission and the Finance Commission. But the waning of planning since the 1990s, and its abolition in 2014, led to the Finance Commission becoming a major means of fiscal transfer as the commission itself broadened its scope of sharing all taxes since 2000 from its original design of just two taxes — income tax and Union excise duties. Today, the Finance Commission became a politicised institution with arbitrariness and inherent bias towards the Union government. The original intention of addressing inequities, a lofty idea, indeed, was turned on its head as it metamorphosed into one of the world’s most regressive taxation systems due to a centralised fiscal policy.

So, let us see what has changed since 2014. The concerns of the founding fathers — addressing socio-economic inequities — were forgotten in the process of ushering in an era of political centralisation and cultural nationalism that drive today’s fiscal policy. To be sure, India was never truly federal — it was a ‘holding together federalism’ in contrast to the ‘coming together federalism,’ in which smaller independent entities come together to form a federation (as in the United States of America). In fact, the Government of India Act 1935 was more federal in nature than the Constitution adopted on January 26, 1950 as the first offered more power to its provincial governments.

Anticipating this threat of centralisation, C.N. Annadurai asserted in the Tamil Nadu Assembly in 1967, ‘I want the centre to be strong enough to maintain the sovereignty and integrity of India…should they have education and health department here… in what way does that strengthen the sovereignty and independence of India?’ Subsequently, the Dravida Munnetra Kazhagam constituted a committee under Justice P.V. Rajamannar in 1969, the first of its kind by a State government, to look at Centre-State fiscal relations and recommend more transfers and taxation powers for regional governments. It did not cut ice with the rest of India and centralisation, though partly contained in the 1990s and 2000s due to the coalition at the Centre, touched its apogee in 2014.

Hollowing out fiscal capacity

The ability of States to finance current expenditures from their own revenues has declined from 69% in 1955-56 to less than 38% in 2019-20. While the expenditure of the States has been shooting up, their revenues did not. They still spend 60% of the expenditure in the country — 85% in education and 82% in health. Since States cannot raise tax revenue because of curtailed indirect tax rights — subsumed in GST, except for petroleum products, electricity and alcohol — the revenue has been stagnant at 6% of GDP in the past decade.

Even the increased share of devolution, mooted by the Fourteenth Finance Commission, from 32% to 42%, was subverted by raising non-divisive cess and surcharges that go directly into the Union kitty. This non-divisive pool in the Centre’s gross tax revenues shot up to 15.7% in 2020 from 9.43% in 2012, shrinking the divisible pool of resources for transfers to States. In addition, the recent drastic cut in corporate tax, with its adverse impact on the divisible pool, and ending GST compensation to States have had huge consequences.

Besides these, States are forced to pay differential interest — about 10% against 7% — by the Union for market borrowings. It is not just that States are also losing due to gross fiscal mismanagement — increased surplus cash in balance of States that is money borrowed at higher interest rates — the Reserve Bank of India, when there is a surplus in the treasury, typically invests it in short treasury bills issued by the Union at lower interest rate. In sum, the Union gains at the expense of States by exploiting these interest rate differentials.

By turning States into mere implementing agencies of the Union’s schemes, their autonomy has been curbed. There are 131 centrally sponsored schemes, with a few dozen of them accounting for 90% of the allocation, and States required to share a part of the cost. They spend about 25% to 40% as matching grants at the expense of their priorities. These schemes, driven by the one-size-fits-all approach, are given precedence over State schemes, undermining the electorally mandated democratic politics of States.

In fact, it is the schemes conceived by States that have proved to be beneficial to the people and that have contributed to social development. Driven by democratic impulses, States have been successful in innovating schemes that were adopted at the national level, for example, employment guarantee in Maharashtra, the noon meals in Tamil Nadu, local governance in Karnataka and Kerala, and school education in Himachal Pradesh.

The diversion of a State’s own funds to centrally sponsored schemes, thereby depleting resources for its own schemes, violates constitutional provision. Why should there be a centrally sponsored scheme on an item that is in the State list? Similarly, why should the State share the expenditure of a scheme on the Union list? For instance, health is on the State list, so why should the Union thrust this scheme onto States; even on those that are better performing such as Tamil Nadu and Kerala? It only impedes States from charting their own autonomous path of development.

Deepening inequality

This political centralisation has only deepened inequality. The World Inequality Report estimates ‘that the ratio of private wealth to national income increased from 290% in 1980 to 555% in 2020, one of the fastest such increases in the world. The poorest half of the population has less than 6% of the wealth while the top 10% nearly grab two-third of it’. India has a poor record on taxing its rich. Its tax-GDP ratio has been one of the lowest in the world — 17% of which is well below the average ratios of emerging market economies and OECD countries’ about 21% and 34%, respectively.

Pavithra Suryanarayan, a political scientist at London School of Economics, demonstrates that the Indian elites historically undermined fiscal capacity as they felt threatened by the political equality offered by the one person-one vote system. That hollowing out of fiscal capacity continued for decades after Independence, resulting in one of the lowest tax bases built on a regressive indirect taxation system in the world. India has simply failed to tax its property classes. If taxing on agriculture income was resisted in the 1970s when the sector prospered, corporate tax has been slashed by successive governments thanks to a pro-business turn in the 1990s. India does not have wealth tax either. Its income tax base has been very narrow. Indirect tax still accounts for about 56% of total taxes. Instead of strengthening direct taxation, the Union government slashed corporate tax from 35% to 25% in 2019 and went on to monetise its public sector assets to finance infrastructure.

In sum, India’s fiscal federalism driven by political centralisation has deepened socio-economic inequality, belying the dreams of the founding fathers who saw a cure for such inequities in planning. It has not altered inter-state disparities either. If there was anything that alleviated poverty, reduced inequality and improved the well-being of people, these were the time-tested schemes of State governments, but they are now under threat.

3. Editorial-2: Death by hooch

India needs a more honest discussion on the risks and benefits of prohibition

A hooch tragedy that claimed over 40 lives in Gujarat’s Botad district brings to the fore, yet again, the contentious question of prohibition. Gujarat is one of the four States in India that prohibits alcohol. The victims consumed poisonous methyl alcohol sold in plastic pouches by bootleggers. Twenty-four people have been named as accused in the FIRs and 14 have been arrested. Police action that follows every such tragedy barely inspires public confidence; indeed, it conceals the complicity of the administration in protecting the black market for alcohol, wherever prohibition exists. It is difficult to assume that vast networks of illegal manufacturing and sale of liquor could exist without the patronage of the police and politicians. Reports suggest that in this case, specific complaints were made to the police, who continued to look the other way. Prohibition makes liquor illegal, but it hides in the black market. By driving sales and production underground, the State loses tax revenues while consumers are exposed to huge health risks. Though prohibition is listed among the Directive Principles of state policy in the Constitution, no State has been able to achieve it with any enduring effectiveness. Globally, it is a similar experience.

Prohibition has, however, remained a potent slogan for some politicians. Alcohol damages health, family finances, and human relationships, and the call to ban it altogether has a certain moral, even if not practical, appeal. But using the sledgehammer of the law to stop alcohol use can be counterproductive, as experience shows. The Gujarat High Court is considering five petitions that challenge the constitutional validity of the Gujarat Prohibition Act, 1949 on grounds that it violates fundamental rights including privacy. The law is being questioned for its alleged arbitrariness as it allows tourists from outside the State to consume alcohol in the State. The prohibition laws give sweeping and intrusive powers to the police, who, at least in one case in the recent past in Gujarat, used them against political protesters. On the one hand, prohibition offers the opportunity for rent collection and on the other it lets the police free to selectively apply the law. There is a moral burden that several political parties in India try to carry on their shoulders to discourage or bar alcohol consumption — several parties bar members from consuming alcohol — but in practice this turns out to be comical hypocrisy. With Gujarat already in campaign mode for the Assembly election that is only months away, the tragedy has prompted the Congress and the Aam Aadmi Party to train their guns on the ruling Bharatiya Janata Party. Rather than clinging on to dogmas and impossible goals of social reform through coercive law, there must be a more honest discussion on prohibition.

4. Editorial-3: A future free of hepatitis

Early diagnosis is the gateway for both prevention and successful treatment

On this World Hepatitis Day, the World Health Organization (WHO) is highlighting the need to bring hepatitis care closer to the people in need. This means making hepatitis care available, affordable and accessible to all without discrimination. This is crucial in the quest to eliminate viral hepatitis as a public health threat by 2030, a global target. Elimination would translate to 90% reduction in incidence and 65% reduction in mortality by 2030, compared to the corresponding figures of 2015.

It’s time to act

The action against hepatitis cannot wait any longer. Why is that? First, hepatitis is the only communicable disease where mortality is showing an increasing trend. Globally, approximately 354 million people are suffering from hepatitis B and C. Southeast Asia has 20% of the global morbidity burden of hepatitis. About 95% of all hepatitis-related deaths are due to cirrhosis and liver cancers caused by the hepatitis B and C virus.

Second, viral hepatis is preventable. Clean food and good personal hygiene, along with access to safe water and sanitation, can protect us from hepatitis A and E. Measures to prevent hepatitis B and C need to focus on full coverage with hepatitis B immunisation including a birth dose, as well as access to safe blood, safe sex and safe needle usage.

Third, a world free of hepatitis is practical and feasible. We have the tools to diagnose, treat, prevent and therefore eliminate chronic viral hepatitis. Safe and effective vaccines exist to prevent hepatitis B, alongside new and powerful antiviral drugs that can manage chronic hepatitis B and cure most cases of hepatitis C. These interventions together with early diagnosis and awareness campaigns have the potential to prevent 4.5 million premature deaths in low- and middle-income countries by 2030 globally.

However, access to these services are often out of reach for communities as they are usually available at centralised/specialised hospitals at a cost which cannot be afforded by all. People continue to die because of late diagnosis or lack of appropriate treatment. Early diagnosis is the gateway for both prevention and successful treatment.

Modest testing and treatment coverage is the most important gap to be addressed. If we look at the treatment cascade of the Southeast Asia region, only about 10% of people with hepatitis know their status; and of them, only 5% are on treatment. Of the estimated 10.5 million people with hepatitis C, just 7% know their status, of which around one in five are on treatment. This gap needs to be patched up. This is what this year’s World Hepatitis Day campaign is all about.

Amid all the challenges, the region has continued to implement key interventions to prevent, detect and treat hepatitis. Since 2016, when the region launched its Action Plan for viral hepatitis 2016–2021, nine countries have achieved more than 90% coverage of the third dose of hepatitis B vaccine. Four countries have achieved the hepatitis B control target of less than 1% seroprevalence among children over five years of age.

Transitional targets

En route to the 2030 target of eliminating hepatitis, there are some transitional targets to be achieved. By 2025, we must reduce new infections of hepatitis B and C by half, reduce deaths from liver cancer by 40%, ensure that 60% of people living with hepatitis B and C are diagnosed and that half of those eligible receive appropriate treatment. This can only be achieved if hepatitis care reaches the community. Several priorities must be addressed for this. These include the need to enhance political commitment across all countries of the region and ensure sustained domestic funding for hepatitis; improve access to drugs and diagnostics by further reducing prices; develop communication strategies to increase awareness; and innovate service delivery to maximise the use of differentiated and people-centred service delivery options across HIV, viral hepatitis and STIs to tailor and deliver services according to people’s needs and preferences in line with the primary healthcare approach. Decentralising hepatitis care to peripheral health facilities, community-based venues and locations beyond hospital sites brings care nearer to patients’ homes.

For the first time, an integrated Regional Action Plan for viral hepatitis, HIV and STIs 2022–2026 is being developed by WHO. This will ensure effective and efficient utilisation of limited resources available for the region and will guide countries to adopt a person-centred approach rather than a disease-specific one.

As we observe World Hepatitis Day, we must act together with communities and all stakeholders for a future free of hepatitis. This will lay a firm foundation for a healthier, more equitable and more prosperous world.

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