Daily News Simplified - DNS

05 05 20
Notes
SL. THE HINDU
TOPICS
NO. PAGE NO.
1 COVID19 and India’s fiscal conundrum 07

2 MPLADS, its suspension, and why it must go 06

3 Off course (Editorial) 06

Dated: 05-May-2020 DNS Notes

Title 1. COVID19 and India’s fiscal conundrum (Pg: 07)

Syllabus Mains: GS Paper III – Indian Economy
Theme Government Finances
Highlights
Context
While India was forecasted as one of the fastest growing economy, now IMF has slashed
the projected growth to 1.9%. Besides recently World Bank estimated that India would
grow 1.5% to 2.8% in 2020-2021, the lowest since the start of the 1991 economic
reforms.

Fiscal Stimulus and its impact

• India’s fiscal stimulus to date, estimated at Rs 1.7 trillion, is less than 1% of the
country’s GDP, which is paltry compared to the magnitude of stimulus injections
undertaken by many
• East Asian countries.
• India’s fiscal stimulus after 2008 financial meltdown was 4.3% of GDP.

Ways to finance Fiscal Stimulus

Dated: 05-May-2020 DNS Notes

What can be done?

What can be done?
a) Tap into the money we already have –
60,000 crores is already available under State Disaster Response fund.
The outstanding cash and bank deposits of the 15 PSU is around Rs 65,000 crores which
is much higher than their operational requirements.
Monetization of Non-core Assets of PSUs.
For India, one silver lining is the sharp drop in global oil and gas prices (1-1.5% of GDP)
with positive effects on the current account deficit (CAD).
b) Fiscal Responsibility and Budget Management constraints be relaxed
FRBM Act-mandated maximum target of a fiscal deficit of 3.8% of GDP already have
been breached for FY20. There is a case for temporarily suspending the FRBM Act, as
was done during the global
financial crisis of 2008.
c) Re-prioritizing expenditures away from low-priority, unproductive areas towards
greater spending
on health and social safety nets for low-income households.
d) Focus has to be on good governance
Dated: 05-May-2020 DNS Notes

Income support and Direct cash transfer to people whose livelihood has been impacted.
Clean water and sanitation must be given critical attention.
The FCI currently has about 30 million tonnes of rice and over 27 million tonnes of
wheat which three times the stipulated buffer and strategic reserves. It must be
efficiently distributed among the poor.
e) Further tax simplification, especially of GST for MSMEs and exporters, could be
accelerate. GST rates need to be reduced by 50%.
f) The government can suspend capital gains tax temporarily to incentivise flows back
into the equity market in the short term.
g) The government could consider issuing a tax-free health emergency bond to tap
more resources.
h) Spending by the states has greater positive effect than centre. State governments
should receive their fund allocations so that they do not create a credit crunch.
Dated: 05-May-2020 DNS Notes

Title 2. MPLADS, its suspension, and why it must go (Pg 06)

Syllabus Mains: GS Paper II – Polity and Governance
Theme Design of Development Schemes
Highlights
Members of Parliament Local Area Development (MPLAD) Scheme

• It is a Central Sector Scheme, announced in December 1993 (initially under Ministry of

Rural Development). From October 1994, it is under the Ministry of Statistics and
Programme Implementation.
• The objective is to enable MPs to recommend works of developmental nature with
emphasis on the creation of durable community assets based on the locally felt needs
to be taken up in their Constituencies.
• MPs receive Rs 5 crore in two instalments of Rs 2.5 crore each.
• Funds under MPLADS are non-lapsable.
• Lok Sabha MPs have to recommend the district authorities projects in their Lok Sabha
constituencies, while Rajya Sabha MPs have to spend it in the state that has elected
them to the House. The nominated MPs can recommend works anywhere in the
country.
• Member of Parliament “has the choice to suggest to the District Collector for works to
the tune of ₹5 crores per annum to be taken up in his/her constituency”.
• Under the MPLADS rules, an MP can donate a maximum of Rs 1 crore to a trust or a
public fund.
• MPLAD funds can also be used for implementation of the schemes such as Swachh
Bharat Abhiyan, Accessible India Campaign (Sugamya Bharat Abhiyan), conservation of
water through rain water harvesting and Sansad Aadarsh Gram Yojana, etc.

The decision to suspend MPLADS for two years is a good first step

1. Violation of principle of separation of powers - This scheme, in effect, gives an executive

function to legislators.
2. Breach of federalism –
• Union Government can incur expenditure only with respect to matters over which it
has subject domain as per seventh schedule.
• MPLADS encroaches upon the domain of local self governing institutions and
thereby violates Part IX and IX-A of the Constitution.

3. No statutory backing - The MPLAD Scheme is not governed by any statutory law and is
subject to the whims and fancies of the government of the day.

4. Under utilization of funds

• Only 16% of the money had been spent in the first year of last Lok Sabha.
• Since the MPLADS began in 1993, ₹5,000 crore was lying unspent with various district
authorities by May 15, 2015.

5. Ineffective implementation - CAG in its report has flagged the following issue:
• The purpose was asset creation by 78% of the fund is used for maintenance.
• No accountability for the expenditure in terms of the quality and quantities executed
against specifications
• the scheme is alleged to be marred by the nexus of MP and private firms.
• Due to this sometimes spending of MPLADS funds is seen for private works,
recommending funds to ineligible agencies, diverting funds to private trusts, etc.
Dated: 05-May-2020 DNS Notes

6. Misappropriation of fund
• Money under MPLADS being used to appease or oblige two sets of people: opinion-
makers or opinion-influencers, and favorite contractors.
• Contractor and the MP being financially linked with each other.

Recommendation of various committees

• In 2002, the National Commission to Review the Working of the

Constitution recommended immediate discontinuation of the MPLAD scheme on the
ground that it was inconsistent with the spirit of federalism and distribution of powers
between the centre and the state.
• Similar thing has also been taken by the 2nd Administrative Reforms Commission’s
report 2007.
In 2010 a five-judge bench of the SC held that:

• Indian Constitution does not recognise strict separation of powers.

• Even though MPs have been given a seemingly executive function, their role is limited
to ‘recommending’ works and actual implementation is done by the local authorities.
Therefore, the scheme does not violate separation of powers
• India has a quasi-federal nature of the Constitution.
• Article 282 held that both the Union and the State have the power to make grants for a
purpose irrespective of whether the subject matter of the purpose falls in the Seventh
Schedule provided that the purpose is "public purpose" within the meaning of the
Constitution.
• Also, the Scheme falls within the meaning of "public purpose" aiming for the
fulfillment of the development and welfare of the State as reflected in the Directive
Principles of State Policy.

Personal
Notes
Dated: 05-May-2020 DNS Notes

Title 3. Off course (Editorial) (Page No. 06)

Syllabus Mains: GS Paper II – Polity and Governance
Theme Inter-state disputes
Highlights
Background of CWMA
• There has been long standing dispute over sharing of Kaveri river water among
Tamil Nadu, Karnataka, Kerala and Puducherry.
• The Cauvery Water Disputes Tribunal (Constituted under Inter-State River
Water Disputes Act, 1956) announced its final verdict on 5 February 2007.
• According to Article 262, in case of disputes relating to waters:
o Parliament may by law provide for the adjudication of any dispute or
complaint with respect to the use, distribution or control of the waters
of, or in, any inter-State river or river valley.
o Parliament may, by law provide that neither the Supreme Court nor any
other court shall exercise jurisdiction in respect of any such dispute or
complaint as mentioned above.
• Though award is final and beyond the jurisdiction of Courts, either States can
approach Supreme Court under Article 136 (Special Leave Petition)
under Article 32 linking issue with the violation of Article 21 (Right to Life).
• Supreme Court in its judgment of February, 2018 had directed the Central
Government to draft a scheme under Section 6A of the Inter-State River Water
Dispute Act, 1956 within a span of six weeks to implement the Tribunal’s
Award.
• Section 6A authorizes the Central Government to make schemes to implement
decision of Tribunal constituted for adjudication of disputes.
• The Central Government as per the directions of the honorable Court has
submitted the Cauvery Draft Water Management Scheme.
• The Cauvery Draft Water Management Scheme comprised –
o Cauvery Water Management Authority (CWMA) and
o Cauvery Water Regulation Committee (CWRC)
to give effect to the decision of Cauvery Water Dispute Tribunal (CWDT) as modified by
the Hon’ble Supreme Court as per its of 2018.

Powers & Functions of CWMA

• CWMA will be sole body to implement CWDT award as modified by Supreme
Court. The Central Government will have no say in implementing of the scheme
except for issuing administrative advisories to it.
• The authority will comprise a chairman, a secretary and eight members.
• The main mandate of the CWMA will be to secure implementation and
compliance of the Supreme Court’s order in relation to “storage,
apportionment, regulation and control of Cauvery waters”.
• CWMA will also advise the states to take suitable measures to improve water
use efficiency. It will do so by promoting use of micro-irrigation, change in
cropping patterns, improved farm practices and development of command
areas.
• Authority’s decision shall be final and binding.
• However, if the authority finds that any one of the States is not cooperative,
Dated: 05-May-2020 DNS Notes

then it can seek the Centre’s help and the Centre’s decision will be final and
binding.
• The authority would also decide on the “distress formula” in water-sharing
among riparian states.
• The CWMA will determine the total residual storage in the specified reservoirs
on June 1 every year.
• In case of deficiency in the water availability, the Authority will consider
reduction of water. The decision will be taken based on voting by the
members.
• It will also consider states' proposal on creating new water storage facilities.
Cauvery Water Regulation Committee will monitor the daily water levels, inflows and
storage position at major reservoirs storing the Cauvery water. It will be headed by
Whole-Time Member (Water Resources) of the Authority and comprise
representatives from the riparian States, the India Meteorological Department, the
Central Water Commission, Ministry of Agriculture and a Member Secretary.

Problems with CWMA

• Even two years after its formation, the Authority does not have a full-fledged
chairman.
• CWMA is not fully operational especially when the south-west monsoon is
about to set in which will further escalate water sharing between Karnataka
and Tamil Nadu.

Way Forward – The union government must make CWMA fully functional by
appointing key functionaries as per the Supreme Court directive.