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Capital controls against FDI in aviation: An example of bad governance in India

13 Jul

I am cross-posting an old post I had co-written on Prof. Ajay Shah’s blog (LINK). The post highlights some of the persistent failures in Indian administration to follow basic rule of law principles.

Excerpts:

“When the coercive power of the State is wielded by the executive, this should be accompanied by appropriate checks and balances. Good practice in regulatory governance requires that when regulators wish to make changes to regulations, and thus affect the rights of private parties, the regulators must furnish reasons for making those changes. This increases transparency, predictability, and accountability.”

“This multiplicity of regulations also leads to uncertainty of regulatory objectives. Investors have no idea of what criteria is used to assess their investments, and grant them business permissions. It is important to recognize that the justifications used to impose regulatory restrictions for relying on the distinctions between private and public, or domestic and foreign entities, is that these distinctions are reasonable proxies for the other characteristics (national security, systemic risk) that are a valid basis for differential treatment. As in so many areas of regulation, the misapplication of easy proxies for characteristics that are difficult to assess becomes a glaring reminder of regulatory uncertainty. It is important that regulatory objectives be identified clearly in relevant statues and regulations.”

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Sex Work and the Law: A Case for Nuanced Debate

23 Dec

The debate over legalization vs decriminalization of prostitution is in the public domain with reports that the National Commission for Women has recommended legalization to the Supreme Court appointed panel for rehabilitation of sex workers. The panel, formed in 2011 when the Supreme Court suo motu converted a criminal appeal relating to a murder of a sex worker into a PIL, is in the process of consulting various stakeholders.

The mandate of this panel was to recommend measures for the rehabilitation of sex workers who wished to leave sex work, and conducive conditions for sex workers who wish to continue working in the profession.

Magnitude of the issue

Estimates of the number of women engaged in prostitution have increased over the years. In 1997, a report of the National Commission of Women put it at 2 million, in 2004, a study sponsored by the Ministry of Women and Child Development estimated it to be 3 million of which 36% were children and a 2013 report on sex trafficking by Dasra, a philanthropic foundation estimated that about 20 million women were engaged in the profession. The 2013 report showed that 80% of these women are victims of sex trafficking. Most disturbingly, out of the estimated 16 million women who are trafficked, 6 million are children under 18 years of age. There is however no official estimates available since 2004 of the prevalence of prostitution.

According to the 2013 report, the prevalence of prostitution is highest in states such as Arunachal Pradesh, Andhra Pradesh, Gujarat, Karnataka, Goa, Madhya Pradesh, Maharashtra, Nagaland, Rajasthan, Tamil Nadu and West Bengal as well Union Territories like Chandigarh and Daman and Diu.

Multiple factors lead to women becoming prostitutes, the most common of which are illiteracy, lack of vocational skills, economic distress, migration, desertion by spouse, ill-treatment by parents and family tradition. Most work in miserable conditions leading to different types of diseases, depression and hopelessness. They are also faced with daily violence, constant police harassment and societal ostracisation. Given the informal economy in which they work, they also find it difficult to open bank accounts, get insurance or identification cards.

The threat of HIV/AIDS also looms large –  reports say prevalence of HIV/AIDS among this category ranged between 2% and 38% in India (globally it is about 12%). However, due to their ambiguous legal status, they are unable to get access to basic services including healthcare, education and bank accounts.

Not prohibited, but is it permitted?

According to the Immoral Trafficking Prevention Act, 1956 (ITP Act), “prostitution” is defined as the sexual exploitation of persons for commercial purposes. While it does not prohibit sex work per se, it imposes penalty for keeping a brothel, soliciting, pimping and plying the trade near a public place such as places of worship, schools and hospitals.

In 2006, India moved towards decriminalization of prostitution when it attempted to amend the ITP Act by deleting the provision that penalized soliciting and adding a provision that penalized clients of sex workers who were trafficked victims. However the Bill lapsed with the dissolution of the 14th Lok Sabha. These provisions were not well thought through given that it did not clarify the confusion about the profession’s basic legal status since provisions such as penalizing clients, prostitution in brothels and public places made it difficult for prostitutes to practice their trade legitimately.

What works?

In most of Asia, Africa and parts of the US, prostitution is illegal. Some states in Australia and New Zealand have decriminalized prostitution (no penalty for prostitutes) while Sweden, Norway, Iceland and Nepal penalize the client on the ground that prostitution is an aspect of male violence towards women. Prostitution is legal in most countries in Latin America and Europe and in some parts of the US.

The evidence however is not clear either ways. Some studies do show a correlation between legitimizing sex work and a drop in violence targeting sex workers while others show that it has resulted in increase in human trafficking.

Decriminalising – the way forward

As we re-open the debate about prostitution, Legalization in India may not improve matters given India’s lax law enforcement mechanism as well as cultural milieu. The safest option at this point may be decriminalizing the trade so that sex work per se is not legalised but sex workers are not harassed and exploited by the police, brothel owners and pimps (middlemen).   It would also reduce barriers to essential health services, education, bank accounts, insurance, voter identity cards. The government needs to play a crucial role by providing credible rehabilitation options if any of them want to opt out.

The recently enacted Criminal Laws (Amendment) Act, 2013 includes provision to penalize trafficking for any purpose. However, the government needs to strengthen its efforts to combat trafficking by dedicating resources, strengthening capacity of existing institutions and encouraging other stakeholders to leverage their own resources and expertise to address this serious problem. Considering the cross-regional and interdisciplinary nature of trafficking, there is a need to build and provide sustainable support to networks that bring together various stakeholders linking source and destination areas, frame common objectives and ensure accountability and effective delivery on the ground. 

The piece was first published on the Bharti Institute of Public Policy, ISB’s blog.

Protecting the Harassed and the Harasser

19 Jul

The Supreme Court recently passed a controversial judgment condemning ‘automatic’ arrests by police in dowry harassment cases against husbands and in-laws. The judgment has received a mixed response. While its supporters praise the Court’s strong statement against misuse of this law by women, others raise concerns over the rights and safety of victim women. While the Court rightly asks for the correct implementation of criminal procedures to avoid harassment by misuse of law, its lack of a simultaneous emphasis on the need for protection of women is problematic.

The judgment speaks of the duties of police officers while making arrests and applies to cases beyond the context of cruelty against women. Thus, one way to understand the ratio of the judgment is to look at it as a criminal procedure case divorced from its gender context. The Court merely reminds police officers of their duty under the Criminal Procedure Code (Cr.P.C.) to exercise discretion while arresting even in non-bailable and cognizable offences and to do away with the attitude “to arrest first and then proceed with the rest”. Instead of mechanically making arrests on receiving an allegation, the police should first arrive at a reasonable satisfaction as to the genuineness of the allegation based on some investigation. Under the Cr.P.C., for offences with punishment of seven or less years, like the provision on cruelty in dispute here, the police can arrest without a warrant only when it is satisfied that arrest is necessary for reasons such as preventing tampering with evidence, preventing threat to witnesses, and preventing commission of further offence. An absolute non-exercise of discretion, whether by mechanically arresting or not arresting, is problematic and may cause unnecessary harassment and humiliation to the arrested person. The judgment requires police officers to forward to the Magistrate not only their reasons for arrest, but also reasons for their decision not to arrest, in the latter case within two weeks from the date of institution of the case. Failure to follow these guidelines may render police officers liable for both departmental action and contempt of court proceedings.

While the operative part of the judgment is written largely in such criminal jurisprudence terms, presenting the judgment in this gender-neutral manner will rob it of its true context and hide its possible implications. Even while the direction is to police officers, the Court is more concerned about harassment by “disgruntled wives” than by the police. The Court emphasizes how women are misusing the criminal provision that was intended to protect them from cruelty by husbands or his relatives, and causing harassment through arrests not only of the husband, but also his old or distant relatives, whether male or female. The Court also notes that marriage is a revered institution in India and seems to lament the increase in matrimonial disputes in the country.

The exclusive focus on misuse instead of use of the provision makes the apparently harmless verdict reiterating the criminal procedural law a questionable and unbalanced one. While the misuse of anti-dowry provisions may be common, but even more widespread is the incidence of dowry-related violence. In its attempt to “maintain a balance between individual liberty and societal order”, the Court totally ignores the concerns of women who may actually be victims of harassment. Patriarchal norms normalizing domestic violence, lack of support for women who fight against such violence and the private domain within which the abuse takes place already make legal remedies difficult to access for many women. In this context, valid concerns were raised around the judgment’s implications for a woman deciding whether or not to use criminal law to her rescue and for the safety of a woman who decides to use criminal law but is not able to procure arrest of the accused persons.

There is a need to take on board concerns both regarding protection of women from domestic violence and regarding harassment caused by arrests of falsely accused persons. While the Supreme Court takes care of the latter, it ignores the former. As a matter of fact, the law already provides this protection in the form of the Domestic Violence Act (DVA). The definition of “domestic violence” under the Act covers physical, mental and economic abuse and includes violence related to dowry demands. It further places a duty on a police officer who receives a complaint of domestic violence to inform the aggrieved woman of her rights to receive protection under the DVA. Thus, even where the police may not arrest the accused persons immediately, they may still assist the complainant woman to use the DVA machinery and seek protection and other reliefs.

While the Court reiterates Cr.P.C. provisions to curtail harassment by misuse of dowry laws, it surprisingly misses out a mention of DVA that can simultaneously be used to provide protection to abused women. The police officers need to be reminded of their duty under both these laws. One can hope that this slip by the apex Court will not result in dilution of the actual exercise of their duty under the other law.

Post on revising the regulatory framework for FDI and capital controls

21 Apr

I have a co-authored post on the reforming the FDI regulatory framework in India on Ajay Shah’s blog here. The post was published on April 21, 2014, and has been co-authored by me, Ajay Shah, and Arjun Rajagopal. The post is being reproduced below. 

 

Capital controls against FDI in aviation: An example of bad governance in India

by Anirudh Burman, Ajay Shah and Arjun Rajagopal.

FDI in aviation was liberalised by the Reserve Bank of India on September 21, 2012 through a change in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (link). Following that change, private players began putting together a number of complex transactions between Indian and foreign companies such as Jet-Etihad, AirAsia-Tata, and Tata-Singapore Airlines.

On November 20, 2013, the Directorate General of Civil Aviation (DGCA) revised its `Civil Aviation Requirements’ or “CAR” (CAR 4.1.5 to 4.1.16) to state that a domestic airline company cannot enter into an agreement with a foreign investing entity (including foreign airlines) that may give such foreign entity a right to control the management of the domestic operator ( link). This change in regulations has major consequences for some of the transactions which are in progress.
There are two important deficiencies in this action by DGCA:

  1. The CAR makes repeated mention of the requirement of control, without clarifying what the term `control’ means. This creates legal risk for transacting parties.
  2. No rationale has been offered to justify the use of the coercive power of the State via the CAR; no estimates of the costs or benefits of this regulatory action have been provided.

What does `control’ mean?

Rule 4.1.8 of the CAR (link) states:

A Scheduled Air Transport Service/Domestic Scheduled Passenger Airline shall not enter into an agreement with a foreign investing institution or a foreign airline, which may give such foreign investing institution or foreign airlines or others on behalf of them, the right to control the management of the domestic operator.

However, the `right to control the management’ has not been defined. This lack of clarity is compounded by two other regulatory requirements: (a) the directors appointed by the foreign entity cannot exceed more than one-third of the total (CAR 4.1.7), and (b) the substantial ownership and effective control of a domestic operator has to be vested in Indian nationals (CAR 3.1).

The new requirements must mean that `the right to control the management’ involves a form of control over and above these two earlier requirements, but no definition of that form of control is offered. Such lack of precision in drafting of laws results in increased legal risk and should be avoided.

Lack of transparency

When the coercive power of the State is wielded by the executive, this should be accompanied by appropriate checks and balances. Good practice in regulatory governance requires that when regulators wish to make changes to regulations, and thus affect the rights of private parties, the regulators must furnish reasons for making those changes. This increases transparency, predictability, and accountability.

In the case of investments, an investor who commits resources would want an element of control in order to ensure his money is not stolen or wasted. A substantial investment in a company is thus often accompanied by rights regarding management and control of the company. If a regulatory requirement interferes with these rights of investors, the onus is on the regulator to explain why. The changes to the CAR affect the rights of investors and potential investors in the aviation industry, but DGCA has not furnished any reasons for its revisions.

Regulatory actions must not be arbitrary acts of God. They must be steeped in the rule of law. The Draft Indian Financial Code, when enacted, will ensure financial sector regulators make qualitatively better regulations by blocking these kinds of mistakes. All draft regulations will have to be accompanied by reasons for the proposed regulations, as well as a cost-benefit analysis of the proposed regulations. These will be made available for public comment, before the final regulations are adopted. This regulation-making process will result in clearer and better regulations, and will enhance the legitimacy of the regulations and of regulators. The adoption of a similar process by DGCA would have led to a better outcome.

Barriers to international economic engagement: A strategic view

Consider trade barriers. The Indian State has the power to introduce customs duties. A number of government bodies undoubtedly have a major stake in the design of customs duties, and may even have critical expertise in the matter. Nonetheless, the power to introduce and modify customs duties is vested in a single authority — the Ministry of Finance. The Ministry of Textiles, for example, has no power to change the customs duty on imported cloth. This is a healthy arrangement: The Ministry of Finance is responsible for maintaining a unified strategic outlook on the question of trade barriers. The Ministry of Textiles can engage with the Ministry of Finance and suggest changes in tariffs, but responsibility for formulating and promulgating a coherent policy ultimately rests exclusively with Ministry of Finance.

This same strategy is required in the field of capital controls. If multiple regulators or government departments set about writing capital controls, we will have a balkanised mess.

Indeed, the current capital controls based framework is just such a balkanised mess. In the absence of a single governing law for foreign investment, a number of agencies have prescribed foreign investor regulations. The types of capital control restrictions and their rationale can be outlined as:

  1. Entry restrictions by financial regulators such as RBI and Ministry of Finance, usually to promote monetary policy and financial stability (under the Foreign Exchange Management Act, but not restricted to it);
  2. Entry restrictions imposed by DIPP and Ministry of Finance on grounds of national security (may include consideration of factors listed under FEMA as well); and
  3. Regulatory restrictions (including on control and ownership) imposed by sectoral regulators.

This multiplicity of regulations also leads to uncertainty of regulatory objectives. Investors have no idea of what criteria is used to assess their investments, and grant them business permissions. It is important to recognize that the justifications used to impose regulatory restrictions for relying on the distinctions between private and public, or domestic and foreign entities, is that these distinctions are reasonable proxies for the other characteristics (national security, systemic risk) that are a valid basis for differential treatment. As in so many areas of regulation, the misapplication of easy proxies for characteristics that are difficult to assess becomes a glaring reminder of regulatory uncertainty. It is important that regulatory objectives be identified clearly in relevant statues and regulations.

In addition to the legal and regulatory uncertainty created by such a multiplicity of regulators and regulations, the regulations themselves may violate India’s obligations under various multilateral and bilateral investment treaties: Many, if not, most such agreements provide for national treatment of investment once it has been allowed to enter the domestic market. Regulators should not be allowed to impose regulatory restrictions after foreign investment has already entered the domestic market. Under this principle of competitive neutrality, there should be no difference in the conditions imposed on the State Bank of India and those imposed on Etihad, when they invest in Jet Airways.

This requires more than administrative changes. A reform of the legalframework is essential. For example, the restrictions in the CAR appear to be grounded in the expansive powers granted to DGCA under the Aircraft Act, 1934. Section 5 of the Act (link) states:

Power of Central Government to make rules. – (1) Subject to the provisions of section 14, the Central Government may, by notification in the Official Gazette, make rules regulating the manufacture, possession, use, operation, sale, import or export of any aircraft or class of aircraft and for securing the safety of aircraft operation.

Those same powers could ground preferential treatment in other areas of regulation. To the extent that other regulatory bodies with responsibilities for other sectors have similar powers, those sectors too are vulnerable to violations of the principle of competitive neutrality.

The report of the FSLRC proposes a cleaner, clearer regulatory framework for foreign investment, one which is consistent with these obligations. Section 2.5 of the report states:

The Commission envisages a regulatory framework where governance standards for regulated entities will not depend on the form of organisation of the financial firm or its ownership structure. This will yield ‘competitive neutrality’. In this framework, the regulatory treatment of companies, co-operatives and partnerships; public and private financial firms; anddomestic and foreign firms, will be identical.

The draft Indian Financial Code, which encodes the principles articulated in the report, explicitly requires all regulators to maintain competitive neutrality while framing regulations. Section 84 (Principles of consumer protection) and section 141 (Principles of prudential regulation) contain the following identical language:

[C]ompetition in the markets for financial products and financial services is desirable in the interests of consumers and therefore… there should be competitive neutrality in the treatment of financial service providers;

This will ensure that sectoral regulators in the financial sector will not be able to discriminate against foreign and domestic firms/investment.

Pending the introduction of the Code, it would be helpful to incorporate its underlying principles into the existing regulatory framework. For example, the BJP has suggested that they will block FDI in retail but they will remove all capital controls against FDI in other sectors. Any government wishing to carry out such a change would need all capital controls be defined at only one place, where a single policy decision is taken. After this, it should not be possible for any other department of government or a regulatory agency to introduce capital controls.

The required single-window system should have the following characteristics:

  1. A comprehensive definition of foreign investment;
  2. A rule-of-law based mechanism for the government to allow/prohibit entry of foreign investment in specific sectors;
  3. A single regulatory barrier for foreign investment before it can enter the domestic market. Currently FIPB is an example of such a barrier;
  4. Clear documentation of approval of foreign investment that must be binding on all government authorities;
  5. Clear enumeration of reasons for which foreign investment can be restricted, and who can impose these restrictions (without any catch-all provisions like “for any other reason”);
  6. A positive obligation on the government to ensure competitive neutrality, OR a restriction preventing the government from discriminating against foreign investment once the investment has been allowed to enter India; and
  7. A review mechanism where foreign investors whose investment has either (a) been rejected, or (b) been subjected to discriminatory treatment compared to a domestic investor, can seek redressal.

Conclusion

There is great outrage in India today, against a capricious State that is a major source of risk for firms. These failures on capital controls are one important component of that problem. It is the right of politicians to interfere with international economic integration – e.g. to block FDI in retail or not or to have tariffs on import of apples or not. But there should be a single-barrier where this political decision is made.

Putting Carts Before Horses. And How?

9 Apr

This post was first published by Humorlessindianlawyer.blogspot.in on April 8, 2014.

Imagine,

living in India with a Parliament that makes laws, an executive that implements these laws and a court system that interprets these laws. Now, imagine Parliament making the following law:

Right to regulate all Economic Activities Completely Act, 2014

Section 1. This Act applies to all of India. Except J&K, because we don’t feel like it.

Section 2. The central government will have the power to ban any economic activity if: (a) it is useful, (b) people can make money from it, (c) it increases the work of government officers, or (d) the concerned officer is in a bad mood that morning.

Section 3. Yes, we really mean business. This time.

Section 4. Notwithstanding thereto anything therefore whereas provided that “economic activity” includes sand mining, coal mining, writing books or, buying, selling, making, eating, drinking, consuming, excreting, advertising any product or service, but does not include the buying or selling of votes.

Section 5. The central government can make rules for the purpose of implementing this Act.

Section 6. This Act will become applicable on the date the central government notifies it in our super cool official gazette. The central government can selectively notify some sections of this Act on days it rains.

Continue imagining,

some super-zealous government officer notifies Section 5 of the Act, but forgets to notify any other section. So out of the entire Act, only Section 5 is in force and applicable law. Thank god, you may say. But the central government goes ahead and starts making rules banning sand mining.

But how? Sections 2 and 4, the two most bad-ass sections have not even been notified yet! People challenge this stupid Act and the rule made under it in the courts.

Dreams get real

In 1988, the Indian Supreme Court made this nightmarish dystopia a reality. In Ajay Canu vs. Union of India the Supreme Court was hearing an appeal from the High Court of Andhra Pradesh. The petitioner had challenged a rule by the state of Andhra Pradesh that required all persons driving motor cycles and scooters to wear helmets.

One of the issues the petitioner raised was that this rule was made under Section 85-A of the Motor Vehicles Act that had not yet been enforced (the other issue was that the Act violated the freedom of movement under the Constitution). Without the section in the parent Act coming into force, no rule, surely could be made under that section? The court swatted away this contention in a majestic display of its wisdom.

The Court pointed to Section 91 of the Motor Vehicles Act. Section 91 gives the government the power to make rules for implementing the Motor Vehicles Act (Importantly, while Section 85-A had not been enforced, Section 91 had been). The Court said it would proceed on the assumption that Section 85-A had not been enforced. However, even if it were not enforced, Section 91 gives the power to the government to make the rules requiring drivers of motorcycles to wear helmets!

Lets re-state this: The Section that gives the power to require drivers of motor cycles to wear helmets has not been enforced. The Section that gives the government the power to make rules for implementing this section is in force. Without the specific power, the rule-making power is useless, one would think. Section 91 specifically states “The … government may make rules for the purpose of carrying into effect the provisions of this chapter…“. And yet, the Supreme Court says it is ok to make rules enforcing a Section that is not even applicable law yet!.

Even worse, this case concerned a challenge to the fundamental right to movement. The Supreme Court held that the rules made by the Andhra Pradesh government did not violate this fundamental right. The net effect of this decision is that the government can impose restrictions on fundamental rights (including, on the freedom to carry on trade and commerce, say, by banning sand mining) by passing a law, and notifying only one section that states that the government can make rules to implement this Act!!

This of course, works brilliantly if you are the government. Suppose the law that is used to do all this provides a right to challenge the government order. Simple. Don’t notify the useless giving-losers-a-chance-to-whine section, and you are good to go!

Foreign direct investment in railways: Does national security matter?

9 Feb

This post has been written by Mr. Pratik Datta.

Background

Present Indian laws ’prohibit’ foreign direct investment (FDI) in railways (other than mass rapid transport system). Of late there has been growing expectation that the Indian Government might allow 100% FDI in construction and maintenance of railway projects (but not in operations). Suddenly the optimism seems to have yielded to apprehensions of ’national security’ concerns (link). These concerns reportedly stem out of potential Chinese investment in Indian railways. India and China have long standing border disputes. The deep penetration of the Indian railways into some remote border areas seem to be bothering the Government. But is this apprehension justified? Do other countries restrict foreign investment based on ’national security’ concerns? Is there no other option but to prohibit foreign investment in railways? These are some of the questions that I will try to answer in this post.

Do other jurisdictions restrict foreign investment on grounds of “national security”?

Yes.

Let’s take the example of US. Since World War II, US has traditionally been an ardent advocate of reduced restrictions on foreign investments. However, at different points of time, specific concerns over national security have shaped US policies on foreign investment. For instance, in 1970s, the US Congress had growing concerns about the increasing foreign investment into US from OPEC countries. This led to the establishment of the Committee on Foreign Investment in the US (CFIUS) in 1975 to oversee the national security implications of foreign investment. In 1988, amidst concerns over acquisition of some US companies by Japanese firms, the Congress approved the Exon-Florio provision that granted the President the power to block cross-border mergers with, or acquisition and takeovers of, certain US companies that might threaten national security.

Subsequently, the 9/11 attacks led to the passage of the Patriot Act, 2001 which declared certain sectors as ’critical infrastructure’ (including transportation) necessary for ’national defense, continuity of government, economic prosperity, and quality of life in the United States ’. The following year, the power to identify ’critical infrastructures’ was transferred to the Department of Homeland Security under the Homeland Security Act, 2002. In 2006, the proposed purchase of the US port operations of British-owned Peninsular and Oriental Steam Navigation Company by Dubai Port World fuelled much discontent among US policymakers. This culminated in the enactment of the Foreign Investment and National Security Act, 2007 that changed the way foreign direct investments are reviewed. First, it included ’critical infrastructures’ and ’homeland security’ as areas of concern comparable with ’national security’ under Exon-Florio provision. Second, it requires CFIUS to investigate all foreign investments involving foreign entities owned or controlled by a foreign government regardless of the nature of business. Therefore, it can safely be concluded that ’national security’ concerns may restrict the free flow of foreign investment into US.

Is US an exception?

No.

An OECD study across 39 jurisdictions found that transportation is the most targeted sector all the jurisdictions have discriminatory foreign investment policy in this sector. The discrimination usually takes three forms: blanket restrictions, sector-specific licensing provisions or contracting, and trans-sectoral measures. The study however concludes that discriminatory investment rules serve as a policy of last resort if all other mechanisms fail, investment policy can be used to prevent investments by foreign entities that may pose risks.

Can it be argued that there is a legitimate national security reason to prevent FDI in Indian railways?

No.

Railways and airways are both modes of transportation. Yet under the present Indian laws, FDI in railways is prohibited while it is allowed in ’air transport service’. In ’scheduled air transport service’ 49% FDI is allowed under automatic route and in ’non-scheduled air transport service’ 74% FDI is allowed – 49% under automatic route and beyond it through approval. Moreover, in ’helicopter services/seaplane services requiring DGCA approval’, 100% FDI is allowed under automatic route. If FDI is not prohibited for air transport on grounds of ’national security’, it is difficult to see why railways should be treated differently.

The prohibition of FDI in railways can be traced back to the Industrial Policy Resolution (IPR), 1948. Railways along with atomic energy, arms and ammunitions were reserved only for state monopolies. The position was reiterated in Schedule A of IPR 1956, which expanded the list of industries (to include air transport also) the ’future development of which would be the exclusive responsibility of the state’. The reason for including ’public utilities services’ within Schedule A was for ’planned and rapid development’ and to provide ’investment on a scale which only the State’ could provide. Evidently, national security never motivated the policy makers to include railways as a state monopoly in the first place. So, it is hard to justify the current blanket ’prohibition’ of FDI in railways on grounds of ’national security’.

If FDI in Indian railways is allowed, would it compromise ’national security’ concerns?

No.

Under the present regime, FDI can come in automatically (automatic route) or through Government approval (approval route). If FDI in railways is allowed under approval route, ’national security’ concerns can be looked into by Foreign Investment Promotion Board (FIPB). If it thinks the concerns are valid, it can reject the FDI proposal. If there is no such valid concern, FDI will be allowed. Subsequent to the FIPB approval, if any genuine ’national security’ concern arises, the foreign investment itself will not be protected under bilateral investment treaties (BITs). For example, Art. 14 of the India-China BIT provides for the ’exception’ clause which excludes from the scope of the treaty any action under domestic laws for protection of ’essential security interests’ by a Contracting Party. The ICSID held in CMS Gas Transmission Company v. Argentine Republic (link) (in paragraph 360) that ’essential security interests’ include ’national security’. Therefore, India can take appropriate actions under domestic law (even expropriate the foreign investment) if there are valid ’national security’ concerns.

To conclude, national security is certainly a crucial issue for foreign investment into any country including India. However, apprehension in itself should not be a ground to prohibit foreign investment. The current legal regime gives enough room to India to address these concerns within the rule of law framework. Imposing a blanket prohibition on foreign investment in Indian railways because of vague national security concerns is neither necessary nor justified.

AAP Governance:The dangerous and regressive fight over Electricity pricing

6 Feb

Introduction

The Aam Aadmi Party led Delhi Government has (link) slashed power tariffs in Delhi, and is in the midst of an ongoing tussle (link) with Reliance owned discom BSES over the supply of electricity in certain parts of Delhi. The AAP, even before taking the reins of the Delhi Government had long accused the Delhi discoms of overcharging consumers, and had demanded an audit into their activities, something they have now initiated (link).

Meanwhile, Delhi’s electricity regulator, the Delhi Electricity Regulatory Commission (DERC) has raised tariffs (link), and also stated that the Delhi Government cannot “cannot interfere in fixing tariff” (link).

What is going on here? On the one hand is the claim by the AAP Government that discoms are over-charging consumers. They seek to resolve this issue by (a) asking discoms to reduce tariffs by 50 percent, and (b) asking the CAG to audit the discoms to see whether they are overcharging. Added to this mix is the DERC which states that the Delhi Government has no power to reduce tariffs. It can only subsidize consumers if it wants. There is a complex legal and regulatory framework with a complex history that needs to be understood here.

 

Electricity regulation in the past

“Electricity” is an entry in List III (Concurrent List) of the Seventh Schedule of the Indian Constitution. This means that electricity can be regulated by both the states and the Central Government. How this works in practice is that purely intra-state generation, production, distribution and consumption of electricity is regulated by the state. Any inter-state aspect of this process is regulated by the Central Government. For example, if a power distribution company in Delhi buys power from a generation company that sells power to 4-5 other states, the terms of the purchase will be regulated by the Central Government.

Until about 10 years ago, electricity distribution in most states was run by state-owned companies (one may remember the infamous DESU in Delhi). Electricity distribution in many states is still run by state-owned companies, but many states have privatised this function to a large extent. More importantly, the process of fixing tariffs for electricity has changed. Why?

State governments have an obvious incentive to keep power prices low. It is a sop given to consumers who then vote for the party in government. How this was being done was broadly the following: the state government would direct the state-owned electricity distribution company to keep electricity prices artificially low. The company would consequently be charging consumers a price lower than the cost of providing them electricity. Since the company never recovered the cost of providing electricity, it basically provided poor quality of electricity. They were essentially loss-making entities, being told by the state government to keep operating as loss-making companies to subsidise consumers. The consequences were poor quality of electricity, and lack of expansion of the electricity supply to all segments of the population.

Most importantly, and conveniently for state governments, the loss from under-charging consumers was borne by the distribution company, and not the state government. State governments, rarely transferred the difference between the cost and the price being charged to the distribution company. So even though discoms became more and more financially unviable, state governments never suffered any financial consequences. They could therefore afford to get away while being fiscally irresponsible, and consumers got low quality electricity at low prices.

Parliament’s Standing Committee on Energy noted in 2002(link):

 

“…tariffs not related to costs of operation, the inefficient operational phases and nearly 50% of the energy consumed not metered which go towards agricultural consumption, hut lighting, T&D losses and pilferage. T&D losses reported by many SEBs are fudged figures. There is free or subsidised power supply and absence of commercial outlook. Political intervention in decision-making by SEBs is rampant. Shortage of power and energy is perennial. There was lack of clear cut policies, organisational purpose, control or responsibility and frequent change of leadership. This is coupled with overstaffing and low productivity and revenue earning distribution function totally neglected.”

 

So what changed?

The condition of discoms throughout the country became acute by the mid-1990s. This extract is from a debate in Parliament in 1998 (link):

 

“…we are today in a critical financial situation in the power sector…I have already explained about the poor and fast deteriorating financial health of the SEBs [State Electricity Boards]. With their finances fast getting eroded, the SEBs will find it difficult to realise any improvement in their operational performance and unless their financial condition improves, they may not be able to realise even the limited capacity addition programme that is now envisaged in the State sector during the next four to five years…In short, if the present scenario of the power sector is allowed to continue, the ability of the SEBs to provide adequate electricity in a reliable manner to the consumers will fast get eroded…”

Starting in 1998, efforts were made to create independent regulators in the electricity sector. These regulators were intended to be independent bodies that would set power prices in a technocratic manner, and be independent of political pressures. This would help discoms charge the cost-price of electricity and make the sector financially viable.

At the same time, a slow process of privatisation of electricity generation and distribution was also initiated. By 2006, the National Electricity Policy of the Central Government explicitly stated that there was a need to attract private investments into the power sector (link)

“…It is therefore essential to attract adequate investments in the power sector by providing appropriate return on investment as budgetary resources of the Central and State Governments are incapable of providing the requisite funds…”

Private investors require certainty and clarity. Unlike discoms owned by states and the Central Government, they are unable to absorb losses on an endless basis. They therefore require a proper, technical mechanism of price fixation, and require that the government will stand by the price fixed by it. This was the reason for setting up independent regulators.

 

Electricity Act and Independent Regulators

In 2003, Parliament passed the Electricity Act (Act) (link). The Act set up independent regulators at the Central (The Central Electricity Regulatory Commission or CERCs) and state levels (SERCs). The Act allows the “Appropriate Commission” to determine tariff according to certain principles laid down in the Act.1 These include keeping in mind that the generation, distribution and supply of electricity is done on “commercial principles”, competition, rewarding efficiency in performance, safeguarding consumer interest, etc. It also stated that tariffs cannot be amended more than once during a year.2 Importantly, the Act states that if the State Government requires a discom to provide a direct subsidy to consumers, the state government will compensate the discom in advance.3

The CERC and SERCs are therefore established as independent bodies, and one of their major functions is to regulate the tariff of electricity. The Act also set up an Appellate Tribunal for Electricity (APTEL). APTEL hears appeals from all orders of the CERC and the SERCs, including orders that fix tariff. State governments and discoms can appeal against orders of the CERC and SERCs if they feel the order is inadequate.

There was thus a very conscious move towards creating a legal framework where electricity prices were to be set by an independent body acting in a technocratic manner. It was hoped that this would lead to private investment and competition, and create a more efficient power sector in India.

State of the power sector today

The provisions of the Electricity Act, 2003 have not been implemented in letter and spirit. Electricity tariffs are not revised and set properly, SERCs are not independent enough, and state governments have done a half-hearted job of privatizing the state-owned discoms. The Chairman, CERC told Parliament’s Standing Committee on Energy in 2012 that the state of State Electricity Boards (SEBs or discoms) is almost as bad as it was in 1998.4 The Tamil Nadu State Electricity Board was reported to be bankrupt (in 2011) (link).

The CERC Chairman told Parliament’s Standing Committee on Energy in 2012 that:

“There are State Commissions which have not rationalised tariff for seven to eight years and there, even if they had taken up any kind of rationalisation exercise, it had been more of a formality. All this has contributed to the Electricity Boards coming back to the situation which they were in 2001 and probably getting worse”5

In response to a question raised in Parliament, the Power Minister stated that the situation of state owned power companies was so bad, that,

“A scheme for Financial restructuring of Discoms has been approved recently (October, 2012) with objective to enable the State Governments and the Discoms to carve out a strategy for the financial turnaround of the distribution companies in the State power sector which will be enabled by the lenders agreeing to restructure/reschedule the existing short-term debt…”6

The answer clearly lies in a continued move towards more technocratic tariff setting, and getting state governments to cede control over state-owned discoms/privatise the electricity sector. It is in this context that we must study the conflicts over the prices of electricity in Delhi.

The Delhi electricity price fight

Delhi privatised its electricity distribution some time in 2002 (link) As per a news report, during the last 10 years, “cost of power has increased 300%, mainly because of higher coal prices and a rise in the financing charges due to higher interest rates, while the rate at which it is sold to retail consumers has increased by only 70% during the period…” (link). Whether the increase in prices is correct needs to be determined through a process of audits and reviews. However, some points need to be made:

 

  1. Electricity prices in Delhi are set by the Delhi Electricity Regulatory Commission (DERC), and not by the Discoms or the State Government. The DERC follows an extremely transparent method of determining tariffs. It involves stakeholders in every stage of this tariff determination process (a recent order can be accessed here).
  2. The Delhi Government is legally not permitted to direct discoms or the DERC to reduce tariffs. The reduction or increase in tariffs is dependent on the process followed by the DERC under the Electricity Act, 2003.
  3. If the Delhi Government thinks the DERC has erred in setting the tariff, it is free to go to the APTEL and challenge DERC’s order.
  4. It is free to order an audit of the discoms, and then take a decision on the functioning of these discoms after the results of the audit are published.
  5. If the Delhi Government still thinks that the electricity prices are too high, it is free to subsidise consumers. There is however, one crucial difference between a subsidy the Delhi Government would give now, as opposed to before discoms in Delhi were privatized. Before privatization, the Delhi Government could have forced state-owned discoms to absorb the losses. Today, the burden of funding this subsidy has to be borne by the Delhi Government. According to news reports, this subsidy will force the government to cough up an additional Rs. 201 crore in the lastquarter of 2013-14… (link). This subsidy is apparently being paid for by scrapping infrastructure projects. Notably, there is no rational basis (yet) for claiming that electricity is over-priced by 50 percent. And as pointed out earlier, even after all the tariff hikes in the recent past, the cost of electricity in Delhi is far higher than what consumers pay for it.

As point 5 shows, once the government bears the burden of the subsidy, taxpayers have a very real stake in the game. We may decide that it is fine for the government to subsidise electricity. But at what cost? We are discussing not just a financial cost, but the cost of trying to bulldoze legal institutions such as the DERC into submission on the basis of a simplistic claim of corruption without any actual evidence (yet) of over-priced electricity. We are also discussing the cost of going back to a regressive era where we consumers received poor quality electricity at low prices because elected governments were playing a cynical game of charging less for less. The current fight over electricity pricing goes to the heart of what kind of institutions we build for the future.

 

————

1. Section 61

2. S. 62

3. S. 65

4. Oral evidence of Chairman, CERC to Standing Committee on Energy in its 30th Report on Functioning of Central Electricity Regulatory Commission (CERC), August 2012.

5. Ibid.

6. Unstarred question no.1635 on Provision of electricity at economical rate, by Shri Wakchaure Bhausaheb Rajaram, answered on 07.03.2013, Lok Sabha.

Interesting reads: Media, merit vs. communism, and elections 2013

10 Dec

Some good stuff to read this week:

Vinod K. Jose in Caravan on the lack of a larger philosophical framework for the Indian media to operate within: “Habits of Mind

Nobel Laureate physicist Walter Kohn remembers one-time partner, Indian physicist Chanchal Kumar Majumdar in “A master and his protege“.

Pratap Bhanu Mehta’s engaging piece on the election verdict in the Delhi, Rajasthan, Madhya Pradesh, Chhattisgarh: “Left Behind

Moiz Tundawala’s incisive piece on the rule of law in India: “ON INDIA’S POSTCOLONIAL ENGAGEMENT WITH THE RULE OF LAW

 

 

 

A parliamentary budget office for India

22 Nov

By Kaushiki Sanyal and Sruti Bandyopadhyay
This article was first published in Mint on Nov 20,2013
At a time when India is going through an economic slow down, it seems counter-intuitive to enact legislation such as the National Food Security Law or continue to dole out subsidies that end up benefiting rich farmers. One reason for these economically questionable actions is the political dividend that parties hope to reap. However, there may be other reasons at work—the lack of understanding among parliamentarians of far-reaching economic impact of government policies. This has grave consequences for a parliamentary democracy where financial oversight is one of the key functions of a legislator. It may also explain to some extent the relative lack of debate on fiscal matters in Parliament.
Data released by PRS Legislative Research since 2000 shows that Lok Sabha has not spent more than 45% of its time discussing the budget. In 2013, Parliament did not discuss the budgetary proposals of any ministry (demand for grants). All were “guillotined” i.e., put to vote without any discussion. In case of Bills, the debate hardly ever goes into their fiscal implications. Financial memoranda of Bills only provide the estimated expenditure at the Union level. For example, the Right to Education Bill, 2008, which required the government to reimburse unaided schools for expenditure on every child, did not provide any estimate for this purpose. The Food Safety and Standards Bill, 2005, only budgeted for setting up the Food Safety and Standards Authority of India. It did not specify whether the cost of implementing this law would be different from the existing system, nor did it account for the enforcement costs to be borne by state governments.
What is holding back members of Parliament (MP) from questioning the executive on fiscal matters? The problem may be lack of expertise among MPs and lack of access to objective and high-quality research that is independent of the executive. Unfortunately, MPs in India do not have a staff of high quality researchers (unlike in other developed democracies) to help them gain expertise in budgetary matters. The institutional research support within Parliament such as a library and reference service is limited due to resource constraints, nor are their research products available readily in the public domain.
A remedy for this may be the establishment of a parliamentary budget office (PBO) in India—a common feature across many countries ranging from developed democracies such as the US, the UK, Canada, Australia, Korea, to Hungary, Uganda, Kenya, Thailand and Bangladesh. PBOs provide legislators with high-quality analysis that is independent of the executive. They specialize in objective and policy neutral analysis on the full budget cycle, the broad fiscal challenges facing the government, budgetary trade-offs and the financial implications of legislative proposals. Such research can raise the quality of debate and scrutiny in Parliament as well as enhance fiscal discipline. Most importantly, it strengthens the role of Parliament in financial oversight.
The key challenges faced by any country that establishes a PBO are threefold—guaranteeing independence and viability of the office in the long-run; ability to carry out truly independent analysis; and demonstrating impact. Countries have adopted different models to suit their specific needs.
The degree of independence of the PBOs varies across countries—in the US, Korea, Uganda, Kenya, Canada and Australia, PBOs fall within the jurisdiction of the parliament, while in Sweden and the UK, it is under the executive. India will need to ensure the independence and non-partisanship of such a body for it to have credibility with legislators. This may best be done if it is established as a statutory body reporting directly to Parliament. A clear set of deliverables may be desirable.
The functions of the PBOs may differ too. For example, the US Congressional Budget Office (CBO) provides information on economic outlook, cost estimates of specific legislative proposals, long-term budget outlook etc. The Canadian PBO provides independent budget projections, fiscal sustainability report, and financial analysis of Bills. In Uganda and Kenya, PBOs exclusively cater to requests from committees while Canada carries out service requests from individual MPs but ranks them below committee requests in terms of importance. The US services requests from committees as well as individual legislators. The UK also caters to individual MPs. It may be worth it in terms of strengthening the legislature if the Indian Parliament were to invest in a well-funded, professionally-run PBO that would cater to both individual MPs and committees.
Has there been any discernable improvement in fiscal oversight in countries which have established PBOs? This is a difficult question to answer given the complexity of policy-making. However, there are some encouraging results. The Canadian PBO contested the true cost of the war in Afghanistan and most famously, exposed the real cost of the government’s proposed F-35 fighter jet procurement. In the US, the CBO focuses on costing or scoring legislative proposals relative to the baseline. This has helped discourage Congress from making unaffordable proposals. In Australia, the PBO does a costing of different political parties’ electoral manifestos, which can discourage unaffordable election commitments.
India will surely benefit from an institutional mechanism that strengthens the capacity of the legislature to hold the executive responsible in financial matters.
It is important to understand that a PBO can only provide independent research; it certainly cannot prevent executives from taking bad fiscal decisions.

Bangalore ATM Attack and police abdication

20 Nov

A woman bank manager was brutally attacked yesterday while inside an ATM in Bangalore yesterday. Apart from the gruesome attack on the lady, what has been bizarrely shocking has been the response of the police to the same.

Facts: On Nov. 20, a woman, who is also a bank manager (not clear if she was the manager of the same bank as the ATM), was attacked brutally by a gun-wielding attacker, who hit her on the head with a machete after she resisted his demand to withdraw cash and hand it to him. The lady, Jyothi Uday, was attacked at 7.10 a.m., and lay unconscious for three hours until 2 schoolchildren saw her and raised an alarm. The right side of her body has reportedly been paralyzed due to the attack. Incidentally, the ATM is located in the LIC divisional office building, 50 metres away from a police station. (Read more here and here)

While the police have launched an extensive manhunt for the assailant (the entire incident has been recorded on CCTV), in a bizarre development, the Home Minister for Karnataka, has also done the following:

1. The Karnataka Government has set a 3-day deadline within which all banks have to provide security guards at all ATM kiosks.

2. ATMs that do not have this security may be locked up/shut down.

The specific statement is: “We are aware that Banks are governed by RBI guidelines. But law and order is a state subject and so we have powers to act against them to ensure Tuesday’s incidents do not recur…”

(This report was published here.)

So, if I may re-frame the argument for the Karnataka government, it is essentially saying:

Law and order is a state subject. That is, the state government has the responsibility to ensure law and order for its citizens. This is usually done by ensuring a well functioning police force, which is alert, and has a good response time. In this case, we do not have either. The lady was lying inside an ATM for 3 hours. The shutter of the ATM was down, when it is usually open. And we had to be alerted by schoolchildren. To get over our inability to provide security, we will force banks to hire security guards. We do not care if this increases the cost of running ATMs substantially. We also do not care if many ATMs have to be shut down, depriving people of access to an easy source of quick, and cheap cash dispensers. We may do a really really bad job of ensuring public safety, but by forcing banks to hire security guards, we can easily solve this problem. Not only do we not have to solve the problem to having to think hard and figure out ways to ensure a better police force, we also do not have to worry about boring stuff like financial inclusion, etc. Tomorrow if pedestrians are killed in road accidents, we will similarly ban people from crossing the road, and force them all to buy cars. So what if many people can then not walk on the road.

All hail our fewi-quik governance.

What entities are public authorities under the RTI Act?

27 Sep

The text below is from my brief titled “Who is a Public Authority under the Right to Information Act, 2005?” as published on the website of Accountability Initiative, published in September 2013. The brief can be accessed here.

 

The definition of ‘public authorities’ under the Right to Information Act, 2005 (“RTI Act”) has been an extremely contentious issue since the RTI came into force. However, in the wake of an order of the Central Information Commission (“CIC”) declaring political parties as public authorities under the RTI Act1, the issue has taken centre stage in public debates. The Central Government sought to undo the CIC decision by proposing to amend the definition of Public Authorities to exclude political parties. This amendment has now been referred to a Parliamentary standing committee. This development affords an important opportunity to examine the definition of public authorities, and controversies arising from its interpretation. The specific focus of this brief is on a sample of cases that were brought to the High Courts.

The RTI Act empowers citizens with the right to access information under the control of ‘public authorities’. Accordingly, RTI Act creates a legal framework to make good this right by defining public authorities, allowing citizens to ask public authorities for information, and imposing penalties on officials of public authorities for failing to disclose ‘information’ defined in Section 2(f). The RTI Act also mandates that “every public authority shall pro-actively disclose information pertaining to it, and maintain its documents and records to facilitate the right to information under the Act”.
Therefore the question of “who is a public authority?” is critical one because it sets the boundaries of the scope of the RTI Act specifically and the transparency regime in the country, more generally. In the last seven years, a wide variety of entities otherwise considered to be private entities (such as schools, colleges and sports associations) have been declared public authorities, and have had to comply with the requirements of the RTI Act. A perusal of judgments of High Courts and the CIC reveals a diverse and at times, conflicting jurisprudence regarding the ambit of ‘public authorities’ under the RTI Act.

 

To read more, click here.

India – No country for women?

17 Sep

A fast track sessions court in Delhi awarded the death penalty to the four adult rapists in the December 16 gang-rape case where a young woman was raped and brutalized by six men.  One of the culprits was a juvenile who was sentenced to three years in a remand home (the highest punishment under the Juvenile Justice Act) and the fifth died in custody.  Ironically, according to a newspaper report, of the 23 rape cases Additional Sessions Judge Yogesh Khanna (the presiding judge) heard this year, 20 of them resulted in acquittal, primarily because the evidence against them was not strong.

In another recent incident, a photo-journalist was gang-raped at the Shakti Mills compound in Mumbai giving a blow to its reputation as one of the safest cities in India for women.  It has now come to light that these men were repeat offenders having raped around 10 women including a rag picker and a sex-worker in the last six months.

And this brings us to the core of the problem – the impunity with which the men feel they can get away with sexual crimes in India.  A toxic mix of patriarchal and regressive values about women’s honour and purity, inert judiciary and an unresponsive and ill-trained police force combines to ensure that women rarely report sexual crimes.  If they do report, they are often subjected to further trauma by the police force who may refuse to file FIRs, blame the victim, and make her undergo degrading medical tests.  While collection of forensic evidence is crucial for investigating a rape, the police are hardly trained in new and scientific investigating techniques nor are there sufficient laboratories to process forensic evidence in a timely manner (see here and here).  The judiciary is also no less to blame for causing trauma to a rape survivor – whether through delays or allowing the moral character of the woman to be called into question.

In India, women are subjected to milder forms of street sexual harassment such as groping, stalking, flashing, passing lewd remarks almost on a daily basis.  In fact, such harassment is so rampant in public places that it is taken as normal.  Often women themselves are blamed for such actions.  Therefore, few women even bother to complain and treat it as something that is upto them to avoid.

The public outrage triggered by the brutal rape of December 16 in Delhi finally broke the silence and apathy surrounding these issues.  It also forced the government to set up a committee under the chairmanship of Justice J.S. Verma to recommend changes to the rape laws.   It made wide-ranging recommendations on laws related to rape, sexual harassment, trafficking, child sexual abuse, medical examination of victims, police, electoral and educational reforms.  Based on some of these recommendations, the government promulgated the Criminal Laws (Amendment) Ordinance amending the Indian Penal Code.  The Ordinance became an Act of Parliament when it was passed in the Budget Session of 2013.

However, a lot of the public debate is focussed on the type of punishment that should be meted out to rapists – castration, death penalty or life-imprisonment.  High penalty may be a deterrent only if there is certainty of prosecution, which is sorely lacking given the condition of the police and judiciary.  The data from the National Crime Records Bureau show that while registration of cases has been rising, the conviction rate remains at a low 13%-14%.  The high number of pending cases is also a cause for concern.

Table 1 provides a snapshot of the penalty levied for certain sexual crimes against women and the number of cases registered each year since 2008.  It may be noted that the new Criminal Laws (Amendment) Act, 2013 which amended the Indian Penal Code among other Acts have added new offences such as acid attack and stalking and changed the quantum of punishment in existing offences.  The data for these offences would be available from next year.

Table 1: Penalty for sexual crimes and number of cases registered

Sexual Crimes Penalty 2009 2010 2011 2012
Rape (Sec 376 IPC) 7 years to life (lower for marital rape) 21,397 22,172 24,206 24,923
Molestation (Sec 354 IPC) Upto 2 years & fine 38,711 40,613 42,968 45,351
Sexual harassment (Sec 509 IPC) Upto 1 year & fine 11,009 9,961 8,570 9,173
Indecent Prohibition of Women (Prohibition) Act, 1986 Upto 2 years & fine of Rs 2000 (increases on second offence) 845 895 453 141
Immoral Traffic (Prevention) Act, 1956 Varies between 3 months to 14 years 2,474 2,499 2,435 2,563
Total crimes 74,436 76,140 78,632 82,151
Sources: Indian Penal Code; Indecent Representation of Women Act,1986; Immoral Traffic (Prevention) Act, 1956; “Crime in India -2012,” National Crime Records Bureau.

Table 2 provides the data for the cases of crimes against women that were tried, convicted and acquitted since 2009.  Crimes against women include rape, kidnapping & abduction of women and girls, dowry deaths, molestation, sexual harassment, cruelty by husband and relatives, importation of girls, Immoral Traffic (Prevention) Act, 1956, Dowry Prohibition Act, 1961, Indecent Representation of Women Act, 1986, and Sati Act,1987.

Table 2: Cases of crimes against women that were tried, convicted, acquitted and pending

 

Status of Cases

Year Registered Trials completed Conviction Acquittal % of convictions
2009 203,804 100,611 27,977 72,634 13.7%
2010 213,585 108,933 30,270 78,663 14%
2011 228,650 112,368 30,266 82,102 13%
Sources: “Crime in India – 2012”; National Crime Records Bureau.

As the data shows, there has certainly been an increase in registration of rape cases.  On the one hand this is a cause for concern, on the other it may be a sign that more people are coming forward to register rape cases.  Therefore, it is difficult to conclude whether the number of incidents of rape has gone up or the registration of cases has improved.  However, the high pendency in courts and the low rate of conviction point to the dire need for police and judicial reforms.  Various commissions such as the National Police Commission, the Law Commission, the Gore Committee, the Ribeiro Committee, the Padmanabhaiah Committee and the Malimath Committee have made extensive suggestions to reform the police.  However, hardly any far-reaching reforms have been undertaken to overhaul the law enforcement machinery in the country.

In order to ensure that women not only feel safe to venture unaccompanied in public places but also report crimes, the government, judiciary and civil society need to change their approaches drastically.  The government needs to muster the political will to ensure an independent, well-trained and well-equipped police force.  It also needs to legislate judiciously and ensure that the laws are implemented.  The judiciary needs to tackle pendency, fine-tune the process of selection of judges and ensure that there is better quality of judicial infrastructure and manpower.  Last but not the least, civil society is crucial for not only pressurizing the government to act but also to initiate far-reaching changes in the way women are treated in the country.

Fatal attraction: The State’s “public purpose” in Land Acquisition

12 Sep

This post was first published in The Broad Mind, on September 12, 2013. 

 

Both houses of Parliament recently passed The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (“2013 Act”), repealing the century-old Land Acquisition Act, 1894. For years, the new law was touted as the panacea to the evils the old Act perpetuated, not least, the broad discretionary powers to state authorities for acquiring land for a “public purpose”. News reports have pointed to how land is allegedly bought at below market prices (read here and here), and consequently sparks loud protests.

 The new Act seeks to resolve this controversy by providing for higher compensation (up to four times the market value in rural areas), requiring prior consent for land acquisition (80 percent of affected families for land acquired on behalf of private companies and 70 percent for public private partnership projects), providing detailed time lines for each stage of the acquisition process (estimated to take approximately 4 years!), rehabilitation and resettlement of affected families in certain cases, etc. This however does not address the main cause of the controversy: state intervention in land acquisition on behalf of private entities.

The old 1894 Act created an expansive definition of “public purpose” based on the assumption that the state would be the chief architect of industrial development, for which it needed to have the power to acquire land for a multitude of purposes. This included some arguably legitimate purposes such as the provision for town planning, development of land from public funds, and “for carrying out any educational, housing, health or slum clearance scheme sponsored by Government or by any authority established by Government. But it also included other purposes such as (a) on behalf of PSUs, and most importantly, (b) “the provision of land for any other scheme of development sponsored by Government or, with the prior approval of the appropriate Government, by a local authority”.

Many protests (including those mentioned in the news reports linked above) arose primarily because of the heavy-handedness of the state in acquiring land, sometimes on behalf of private companies, at below market prices. The new Act intends to correct this heavy-handedness. It does not however question the basic assumption of the role of the state as an interventionist intermediary in land acquisition. Instead, it tries to improve the existing condition by creating more state agencies and broadening consensus-making processes. It requires a social impact assessment through consultation with local municipalities, gram sabhas and panchayats. It creates an expert group consisting of social scientists, representatives of gram sabhas, panchayats or municipalities, technical experts and experts on rehabilitation to evaluate social impact assessment. It also creates a committee for rehabilitation and resettlement, and land acquisition and relief and rehabilitation and resettlement authorities at the state and central levels.

Whether these institutions will work efficiently is hard to predict, but their establishment is an irrevocable step down the path of establishing the state as an intermediary in all land acquisitions for a public purpose. This brings us to the root of the problem: the definition of “public purpose” in the 2013 Act. The definition of public purpose in the 2013 Act has become, if anything, more expansive and explicit. It covers acquisition for strategic purposes, infrastructure purposes (which includes everything from agro-processing units established by government entities to projects for industrial corridors), and retains most of the clauses from the 1894 Act. Worse, this definition is not exhaustive!

The philosophy behind this 2013 Act is therefore seemingly this: the existing role of the state in land acquisitions is non-negotiable. However, multiple controversies have arisen where compensation paid has allegedly been below market prices, or insufficient (This is due to the fault of state agencies since they assess market prices and give compensation.) To correct this wrong, we need to do two things: (1) create more detailed legal process to ensure clear parameters for fixing compensation, and (2) create monitoring and oversight mechanisms.

The question is this: when did the role of the state become non-negotiable? Consider the original Land Acquisition Bill introduced by the UPA in 2007. The Land Acquisition (Amendment) Bill, 2007 (“2007 Bill”), was passed by the Lok Sabha in 2009, but lapsed when the Lok Sabha dissolved prior to the elections. The 2007 Bill contained a narrow, restrictive definition of “public purpose” based on a different premise of the role of the state in land acquisition. The definition is a complete contrast to the page-long definitions in the 1894 Act and the 2013 Act. It includes:

  1. acquisition for strategic purposes,
  2. infrastructure projects of the government where benefits accrue to the public, and
  3. any other purpose where land has already been purchased to the extent of 70%.

The 2007 Bill, which nearly became law, would therefore have been a complete change to this assumption of state intervention that the 2013 Act is predicated on. Between 2009 and 2013, the philosophy of reform which first motivated proposed changes to land acquisition law were completely replaced by a philosophy of incremental change. In this context, our final legislative product, the 2013 Act that replaces a century-old, much-maligned law, is a comparatively small step to prevent market abuses. It does nothing to address the cause of market failure: the role of the state.

Anirudh Burman is a Takshashila Scholar, a law graduate from Harvard, and consults with the National Institute of Public Finance and Policy and the Center for Policy Research.

RTI Amendment: Legislative supremacy and judicial intervention

13 Aug

Bhargavi wrote a great piece yesterday on the tendency of legislatures to nullify judicial pronouncements by passing laws which overturn judgements/orders. She rightly pointed out this practice as a major issue which needs greater deliberation. There is however, one other issue which needs to be considered while thinking of possible solutions. This is the issue of balancing legislative supremacy with judicial intervention.

 

Legislative supremacy is probably the most important cornerstone of a democracy, and judicial intervention is the most important check on unbridled exercise of such supremacy. Constitutions in different countries balance the two through different mechanisms. Our constitution prohibits unbridled exercise of legislative power on issues affecting fundamental rights, and gives the judiciary the power to check the legislature from doing so. In essence however, the legislatures are democratically elected bodies, while the judiciary is unelected. While the legislature gains its legitimacy from the democratic process, the judiciary gets its legitimacy through the perceived correctness of its judgements. At any given point of time therefore, it is difficult to ascribe greater legitimacy to one institution over another, as there is no formulaic mechanism to judge the popular legitimacy of the judiciary and compare it with that of legislatures.

 

Legislatures retrospectively invalidate many rulings. Bhargavi points out some such laws which have nullified historically and constitutionally significant rulings. Some of these invalidations have apparently been made to protect the powers and privileges of politicians. However, many such laws (including the Vodafone incident, and numerous other retrospective laws on tax cases, especially in Punjab&Haryana) can also be said to reflect democratic preferences. In essence, in all such cases, the legislature seems to be saying that it feels that the judiciary has made an improper call in ruling the way it did. This may be easier to disprove objectively in some cases (where politicians clearly invalidate a correct judicial interpretation) than others (I for example, completely disagree with the assertion that political parties fall within the ambit of the RTI Act, read more here).

The important point is this: We should try and focus on mechanisms to make the legislative process more accountable and responsible. As long as we depend on the judiciary to intervene and correct “wrong” steps taken by legislatures, we are not putting sufficient pressure on the legislature to correct itself. I would argue that in the long run, incentivising legislatures to behave more responsibly is better than forcing them to make laws which make them more accountable. Doing so would in turn make the democratic process more virtuous and participatory. If lawmakers fail to consult citizens before passing laws, there should be sufficient public outrage which forces lawmakers to consult citizens.

 

The forum for reforming the democratic process should be direct engagement with the legislature. Using the judiciary as an instrument to dictate popular public policy goals does nothing to further the cause of popular democracy in the long run. It prevents popular engagement with substantive issues since the judiciary does not need to deliberate with, and convince the masses of the correctness of its decision.

Fighting it out with legislatures and politicians may be a tougher alternative, but it is definitely a more virtuous one.

RTI Amendment: Questioning the largesse of retrospective laws.

12 Aug

On June 3, 2013, a full bench of the Central Information Commission (CIC) passed an order declaring six political parties to be public authorities[i], and consequently bringing them under the ambit of the Right to Information Act, 2005 (RTI/ Act). Not unexpectedly, the Centre was quick to react. The UPA and the opposition were quicker to find unanimity on this issue. The media is rife with reports that the Cabinet has approved the introduction of an amendment to the RTI granting immunity to political parties from the Act.[ii] This episode echoes the numerous instances when the Parliament has resorted to retrospective amendments for nullifying the effect of inconvenient judicial pronouncements. It also  reiterates the vulnerability of judicial pronouncements to the legislature’s power to turn the clock back in time. In this post, I trace the checkered history of retrospective amendments, and question the Indian legislature’s aggressive tendency of overruling bothersome judicial pronouncements by large-scale retrospective amendments to the law.

At the outset, it is nobody’s case that the legislature cannot enact laws having retrospective effect, for the power to do so is bestowed on it under the Constitution and fortified by numerous judicial pronouncements.[iii] This post also does not seek to argue for or against political parties being covered under the RTI. What this post questions is the righteousness of an obstinate legislative tendency to wriggle out of judicial pronouncements by making retrospective amendments, especially when redress against an unjustifiable order is available through appeal to a higher forum.

The proposed amendment of the RTI refreshes one’s memories of the numerous election validating laws of the 1970s that were enacted retrospectively for political convenience. One is reminded of the Rajasthan State Legislature’s act of retrospectively amending the definition of office of profit under the The Representation of the People Act, 1951 (RP Act) as applicable to Rajasthan. The amendment was made to override the judgment of the Rajasthan High Court that invalidated a candidate’s election to the Legislative Assembly on the ground that he held an office of profit as defined under the RP Act as it stood at the time of the election. The RTI amendment also reminds one of the landmark judgment of the Allahabad High Court invalidating Indira Gandhi’s election to the Lok Sabha on the grounds of her having engaged in electoral malpractices as defined under the RP Act, as it stood at the time of the election. Indira Gandhi appealed to the Supreme Court against this judgment. During the pendency of the appeal, the Congress-controlled Parliament passed a law amending inter alia the RP Act, so as to obviate the grounds that formed the basis of the Allahabad High Court judgment. The rest, as they say, is history. In both these cases[iv], the Supreme Court respected the unbridled power of the legislature to enact retrospective laws notwithstanding their effect on judicial pronouncements.[v]

Retrospective amendments are most commonly known for neutralizing the effect of anti-Government tax rulings. Of recent prominence is the retrospective amendment that sought to override the Supreme Court’s judgment in the Vodafone dispute, and bring offshore share transfers within the tax net. The amendment was a fall-out of a 2 year-long battle that the Government waged against Vodafone for recovering taxes in respect of an offshore share-sale transaction, and ultimately lost.  In the tax regime, one will recollect numerous such retrospective amendments (some of them turning the clock as many as 30 years behind) that have altered tax liabilities of assessees. For instance, the amendment that brought renting of immovable property within the service tax net nullifying the judgment of the Delhi High Court in the Home Solutions case[vi]; the amendment that retrospectively taxed fees paid for services rendered abroad seeking to defeat the Supreme Court judgement in the Ishikawajma-Harima case[vii], the amendment that nullified the Supreme Court’s decision which held that once a price-classification list was approved by the Excise department[viii], the department could not re-open the matter for levying additional excise duty, to name only a few.

Legislative power to amend laws retrospectively for obviating the effect of a judgment has been justified on several grounds, namely the legislature being empowered to cure defects and infirmities in the law, absence of restrictive language in the plenary powers conferred on the legislature under the Constitution, and the inability of lawmakers to envisage every possible situation that the law may need to address. Often, the power of retrospective legislation has been used to plug genuine loopholes in welfare legislations. At the same time, there is no gainsaying the unforeseen consequences imposed on those who are targeted by retrospective laws, often on those who have fought until the highest court of the land to get their due under the law prevalent at the relevant time.

Even if one were to give the legislature the benefit of doubt for retrospective amendments to taxing statutes as they generally help the exchequer, the question assumes greater significance in the context of retrospective amendments made for political convenience. Particularly so, when the amendment is intended to benefit the amendment-makers alone. For instance and at the risk of digressing from the main issue of retroactivity, has the Government followed the regular process in connection with the potential RTI amendment that it would ordinarily follow whilst enacting any other law? Have consultations been held with all stakeholders? The only argument put forward by the Centre justifying the exemption of political parties from the RTI is the potential of its abuse. However, the legislature’s power to enact retrospective laws has equally been challenged in the past on grounds of potential abuse. This challenge has failed and Courts have repeatedly held that potential for abuse of a law cannot be a ground of challenge.[ix] Does the same principle not defeat the Centre’s argument for exemption of political parties from the RTI?

With the legislature aggressively amending laws retrospectively and with many such amendments being triggered by inconvenient judicial pronouncements, it is perhaps time for lawmakers to introspect on the generous use of its retrospective powers. Let me spell out why – because it will lend much predictability to the Indian legal regime, enable citizens to plan their affairs with more certainty, enhance confidence in the future of the regime, and more importantly, it will restore the sanctity of judicial pronouncements.


[i] The CIC declared the Indian National Congress/ All India Congress Committee (AICC), Bhartiya Janata Party(BJP), Communist Party of India (Marxist) (CPM), Communist Party of India(CPI), Nationalist Congress Party(NCP) and Bahujan Samaj Party(BSP) to be public authorities under the RTI.

[iii] Article 245 of the Indian Constitution that empowers the Parliament and State Legislatures to make laws for the whole of India and the concerned State respectively does not contain restrictive language. The only exception to this can be found in Article 20 of the Constitution which prohibits the conviction or penalization of a person under a retrospective law.

[iv] See Kanta Kathuria v. Manak Chand Surana (1969) SCC 268 and Indira Gandhi v. Raj Narain (1975) 2 SCC 159.

[v] In Indira Gandhi v. Raj Narain (Supra Note iv), the Supreme Court upheld retrospective amendments to the RP Act, and struck down certain retrospective amendments made to Article 329A of the Constitution. However, the latter amendment was struck down on grounds other than retroactivity.

[vi] Home Solutions Retail India Ltd v. Union of India and Ors. 2009-TIOL-196-HC-DEL-ST

[vii] Ishikawajima Harinia Heavy Industries Ltd. v. DIT, Mumbai, (2007) 3 SCC 481

[viii] Collector of Central Excise, Baroda v. Cotspun Ltd. 1999 (113) ELT 353 (S.C)

[ix] In Kanta Kathuria v. Manak Chand Surana (Supra) responded to a challenge to the legislature’s powers to enact retrospective amendments overruling judicial pronouncements, as under:

“The apprehension that it may not be a healthy practice and this power might be abused in a particular case are again no grounds for limiting the powers of the State Legislature.”

Let the public participate

5 Aug

This post was first published in Takshashila’s Pragati – The Indian National Interest Review on May 3, 2013.  The article can be accessed here.

Given the failure of many government legislations in achieving the objectives for which they were formulated, a case for institutionalising deeper public consultations in the legislative process has been made in the recent past. Currently, there are four entry points where citizens can participate in the legislative process: first, the identifying stage; second, the drafting stage; third, the legislative stage; and fourth, the post-legislative stage.

Civil society organisations can alert the government to the need for a particular legislation or changes in an existing law. The Mazdoor Kisan Shakti Sangathan, a farmers and workers group, ran a successful campaign for a Right to Information law, which was finally enacted in 2005. The recent anti-corruption agitation led to the introduction of a Lokpal Bill currently pending in the Rajya Sabha. The long-running Right to Food campaign by a network of NGOs has been instrumental in raising awareness about chronic hunger and the eventual introduction of the National Food Security Bill in 2011.

The government can also suo moto decide that a law is required in a particular sector. It may get inputs from specialised bodies such as the National Human Rights Commission and the Law Commission or appoint a group to study a sector and draft a law. These groups or bodies may hold consultations with independent experts and stakeholders. Furthermore, an individual Member of Parliament (MP) can also introduce a Bill in either House. This is known as a Private Member’s Bill (for example, Lok Sabha MP, Kalikesh Singh Deo introduced the Disclosure of Lobbying Activities Bill in 2013 to regulate lobbying activities). Although these are generally never passed, they act as signalling devices to the government, which may introduce its own legislation on the subject. It is possible for the public to approach their constituency representatives to advocate for a particular law.

Government Bills are drafted by the concerned ministry, which is then vetted by other ministries. There are also times when the government approaches an independent expert to draft a law. Recently, it appointed the Financial Sector Legislative Reforms Commission, under the chairmanship of Justice BN Srikrishna to reform the financial sector laws.

The government may publish the draft legislation in the public domain for feedback. Drafts of the Electronic Service Delivery Bill, the National Sports Bill and the Land Acquisition and Resettlement Bill were published for a specified time period (generally 20-30 days). It may also circulate the draft among a select set of stakeholders for comments.  An individual MP may solicit public feedback on his Private Member Legislation. For example, Biju Janata Dal, MP Baijayant Panda uses his personal website and social media tools such as Facebook to publicise the draft of his private member bills.

There are few avenues of public engagement once the Bill is introduced in the Parliament. Since 1993, 24 Department-related Standing Committees (DRSCs) were formed to scrutinise Bills and other policies of the Government (before 1993 Bills were sometimes referred to ad-hoc committees for scrutiny). Generally most Bills are referred to these DRSCs, however, the presiding officer of the House has the discretion not to do so. For instance, key Bills such as the Special Economic Zones Bill, 2005 and the National Investigation Agency Bill, 2008 were not referred to a DRSC. In contrast, the Lokpal Bill passed by the Lok Sabha was sent to a Select Committee by the Rajya Sabha although it had been examined by the DRSC.

These DRSCs may solicit feedback from the public by issuing notices in key newspapers and the Gazette of India. The public comments are also tabled in the form of a report. However, the level of public engagement varies with different Bills. For instance, the DRSC scrutinising the Companies Bill, 2009 received 101 comments while only 10 submissions were received for the Armed Forces Tribunal (Amendment) Bill, 2012.

The government is not bound to accept the recommendations of the DRSC but individual MPs may introduce amendments to the Bill when it is being considered by the House. The MP may suggest amendments based on the DRSC’s suggestions or any public feedback.

Once Bills are enacted, ministries draft and notify Rules (also known as subordinate legislation) to enable their implementation. These Rules may be scrutinised by the Subordinate Legislation Committee, which is empowered to seek public feedback.

Post legislative scrutiny of laws is not mandatory in India. It may however be undertaken by bodies such as the Law Commission of India, the DRSCs or a specific commission appointed for the purpose who may hold public consultations. Recently, rape laws were reviewed by the Justice Verma Committee before an Ordinance was promulgated on the matter.

Many other democracies have devised meaningful ways to encourage public participation in the legislative process. In countries such as the UK, Australia and South Africa, it is mandatory to hold public consultations or publish draft Bills for comments. In fact, in South Africa it is a constitutionally mandated provision. In the UK, the Government publishes Green Paper and White Paper, which sets out its central ideas on the Bill. After introduction, it is compulsory to refer a Bill to a committee in the UK and the US. However, there is no such requirement in Australia, Canada and South Africa. Unlike in India and South Africa, it is mandatory for the Government in countries such as the UK, Australia and Canada to respond to the recommendations of the committee. While post legislative scrutiny in India is largely a matter of discretion of the Government, in the UK it is compulsory to do so within three to five years. In the US, legislative oversight committees review laws on a continuous basis. In Australia, most laws have to be reviewed within three years.  Public comments are also solicited during the post-legislative scrutiny.

India can learn from the experience of these countries and tailor them to suit our requirements. There are many ways in which the government can deepen public engagement in the legislative process.

First, ministries can be mandatorily required to publish the draft Bill for a reasonable time and publicise it through different media. Along with the draft Bill, the ministry may be required to include available background information on the subject and facilitate access to legal and legislative record on the matter.

Second, it should be compulsory to refer a Bill to a DRSC or select committee for scrutiny. This could be at both the pre-legislative stage and the legislative stage.  These committees should be required to hold wide consultations with a variety of stakeholders (NGOs, state and local governments, special interest groups, academics and legal experts). Public participation may be facilitated by increasing access to constituency offices, using a variety of media outlets to publicise the Bill and creating public participation offices that can interface with the public.

Third, in order to increase transparency in the feedback process, the government could be required to publish a report demonstrating how the inputs from stakeholders have been considered while formulating the law.

Fourth, most Acts should be subject to a post legislative scrutiny through public engagement every three to five years.  This could be carried out if each Bill includes an Explanatory Note giving the criteria or outcomes by which the Bill could be judged for effectiveness.  This responsibility could be given to a specialised committee.

Such measures will result in robust legislations, which shall need lesser amendments and will be successful in achieving the objective with which that legislation was enacted.

The narrative of independent regulators

2 Aug

This post first appeared as an article on Bar and Bench on July 31, 2013. The original can be accessed here.

 

Those following important policy developments recently will notice numerous announcements proposing new “independent” regulators. Beginning with SEBI in the early 1990s, and TRAI in the late 90s, a number of independent regulators have been set up. These include the Central and State Electricity Regulatory Commissions (CERC and SERCs respectively), the Competition Commission of India (CCI), the Insurance and Development Regulatory Authority of India (IRDA), the Pension Fund Regulatory and Development Authority (PFRDA), the Airport Economic Regulatory Authority (AERA), the Petroleum and Natural Gas Regulatory Board (PNGRB) and the Tariff Authority for Major Ports (TAMP).

Recently, there have been proposals for a biotechnology regulator, a real estate regulator, acoal regulator, and even a roads regulator. In the financial sector, the report of the Financial Sector Legislative Reforms Commission (FSLRC) recommends an overhaul of the financial sector regulatory architecture by merging some existing regulators, and creating new ones. The most often talked about rationale for the creation of independent regulators is to ensure greater competition in a given sector, and to create a level playing field for different entities competing in that sector. This fairly regulated competitive market, it is argued, will be of greater benefit to consumers than the existing regime.

While this article does not seek to contest this above-mentioned premise of promoting competition, we need to examine whether the laws and processes creating these independent regulators actually create “independent” regulators who also remain accountable to Parliament. Since many of these regulators create appellate tribunals, or provide for appeals to High Courts and the Supreme Court, this article also discusses the implications of this regulatory sprawl on the existing judicial system. Lastly, the rationale for the creation of independent regulators needs to be debated carefully before more and more regulators are established. I argue that the long-term implications for the establishment of such a large number of sectoral regulators are something lawyers, policy experts and administrators need to examine carefully.

Independence and performance

Independence of regulators from the government is desirable to enable them to perform without political interference. This is especially important in India where the state is a major market participant in many economic sectors. However, not all regulators are equally independent, since the laws establishing them do not follow a uniform standard. Additionally, these laws rarely have the right mix of independence and accountability; a lot of these issues arguably stem from poor legislative design.

To be truly independent from the government, not only must the regulator be an independent statutory authority, it must also be financially and administratively independent from the government. The executive cannot be allowed to either interfere, or arm-twist the regulator to do its bidding. More importantly, since the onus of meeting the regulator’s objectives lies with the regulator, the government cannot be allowed to have unbridled discretion in how the regulator hires and manages personnel, and uses its finances.

For example, in 1999, TRAI, after holding extensive consultations issued its first Tariff Order (TO), a landmark for infrastructure regulatory agencies in India as it attempted to set tariffs to reflect costs more closely. After an uproar in Parliament, and opposition from other quarters, the Department of Telecommunications sent TRAI a 3-line note directing it to put its order on new phone rates on hold. TRAI refused. In response,

 

“[T]he government issued two gazetted notifications … The first related to salaries, allowances and conditions of service of TRAI officials. Here, instead of setting rules for the chairman of TRAI, it made different rules depending on if he were a retired judge of the Supreme Court, a retired chief justice of a high court or if he were a serving judge. It also cut down on the allowances for foreign travel [of TRAI], ostensibly in the wake of a recent Comptroller and Auditor General report.”

(Sourced from here)

Laws establishing regulators must therefore, be drafted to protect against such instances. At the same time, there must also be mechanisms to ensure regulators remain accountable to Parliament. The CAG for example, set up an institute in Jaipur to train officers in environmental audits. As a constitutional authority, the CAG is arguably responsible for auditing the government’s expenditure. While environmental audit may be desirable in itself, it is debatable whether such audits come within the CAG’s existing mandate.

The report of the FSLRC recommends physical, legal and administrative separation of the regulator from the government, implying that regulators must have independent infrastructure, personnel. With regard to financial independence, the FSRLC recommends independent sourcing of finances from sources such as fees. With regard to strengthening accountability, it recommends that regulators (a) be given clear, precise regulatory objectives, (b) explain their regulatory actions to the general public, and regulatory changes be made after prior consultation with the public, and (c) report to Parliament on how they fared on pursuing their regulatory objectives, and the outcomes achieved.

Appellate Mechanisms

Independent tribunals, or some other appellate mechanisms are usually created to entertain appeals or disputes from orders of regulators. SEBI has SAT, the CCI has COMPAT, TRAI has TDSAT, the CERC and SERCs have the Appellate Tribunal on Electricity (APTEL), IRDAs appellate forum is SAT, appeals from PNGRB go to APTEL, and so on. While tribunals perform an adjudicatory function, and are thus not as prone to interference from the executive as the regulators, their relationship with the executive also needs to be looked into.

One such example is the use of APTEL’s use of its suo moto powers. In November 2011, APTEL passed an order exercising its suo moto powers, directing all SERCs to revise electricity tariffs regularly. Under the Electricity Act, 2003, all SERCs are mandated to revise electricity tariffs regularly on the basis of documentation provided to them by state electricity utilities. This was however not being done by most SERCs, and electricity utilities continued to suffer losses as tariffs remained low compared to the cost of producing and supplying electricity.

Significantly, APTEL exercised this suo moto power on the basis of a letter from the Ministry of Power complaining that most state distribution utilities had failed to file annual tariff revisions in time, and as a result, tariff revision has not taken place for a number of years in many states. It also stated that SERCs have not revised tariffs suo moto, and as a result, state distribution utilities are in poor health. While the final order was not an improper exercise of APTEL’s power, this instance can be construed as one where the central government was attempting to regulate the functioning of SERCs (over which it otherwise has no jurisdiction) by writing to APTEL.

The increasing specialization in the administration of justice through the establishment of sector specific tribunals also has repercussions for the broader system of administration of justice. As most legislations establishing these tribunals provide for appeals to the Supreme Court, such laws usually insist that the chairpersons or members of the tribunal, or both be (a) retired Supreme Court judges, (b) serving Supreme Court judges, (c) High Court chief justices, or (d) judges who have served in High Courts for a particular length of time. This arguably creates a high level of expertise in the dispensation of justice in these tribunals.

However, there is no mechanism by which members serving in such tribunals can be re-inducted (if not past the age of superannuation) into the mainstream judiciary. This arguably creates a situation where technical expertise in specific sectors is not channelized back into the mainstream judiciary. The creation of such a two-way process may become imperative in the long run if the increasing tribunalization of justice persists. The present system of promotion and induction into the judiciary emphasizes experience in practicing law or administering justice in different courts and on varied subjects. If tribunals are becoming an important part of the judicial landscape, it is only logical that experience as members of such tribunals also be given weight while considering appointments to the higher judiciary. This would also create a virtuous cycle where good judges would consider serving on tribunals for a period of time before returning to their service in the higher judiciary.

 

Rationale for independent regulation

The last, but perhaps the most significant issue remains the rationale for creating independent regulators. While in some cases there is a need for independent regulation, in some other cases the need for an independent regulator is less easily justifiable. The recent road regulator being proposed is one such example. The need for a regulator has been felt within the sector due to the large number of stalled road projects throughout the country. It was felt that the regulator should deal with “tariff setting, toll policy and modifications, compliance of service levels (for commuters), address public concerns.” The government being one of the parties to such contracts, cannot be the proper entity to mediate such disputes.

None of these functions i.e. ensuring competition, fair-play, and consumer protection however, are those that are usually entrusted to an independent regulator. In other words, the re-negotiation of contracts, regulations regarding toll collection, and other aspects of highway construction are not functions that need to be entrusted to a regulator in the usual course of events. These are not activities, the performance of which, enhances fair competition within the sector. The resolution if these issues may make the development of roads more efficient, but these functions are not those assigned to independent regulators. An official from the Planning Commission has stated that, “In case of roads, everything is decided in the contract itself, and be it the toll rates, other tariff. So, what do we need a regulator for?” Some commentators are justifying the need for such a regulator since the executive has failed to resolve these issues in an efficient and impartial manner.

We therefore need to carefully examine at what point the creation of an independent regulator is in effect an abdication of an essential state function. Many such state functions are questions of policy. They require political negotiation and decision-making. In essence they are policy issues, not regulatory ones. The state cannot abdicate such functions and hand them over to an unaccountable, unelected regulator because it has been unable to perform these functions effectively.

While there are no easy answers to these issues, they do need careful deliberation. There is therefore a necessity for ensuring that while attempts to promote competition within the economy are encouraged, the creation of new regulators and their linkages to the rest of the legal system are thought through.

 

 

State Building in India II: Indian Constitution and new states

31 Jul

I had written this post in 2009 when Telengana first became a major political issue. I am re-posting it since major decisions about the creation of Telengana are underway. Minor edits and updates have been made and are provided in italics. 

In my earlier post on the issue of Telengana’s statehood, I tried to provide a look at the high-handed exercise of the central government’s power to start processes for the creation of new states.  In this part, I try to look at two issues (1) Constitutional provisions regarding state formation, and (2) centre-state relations in relation to state formation.

The provisions for creating new states, and changing the boundaries of new states are provided in Articles 2-4 of the Constitution.  Simply put, a simple law passed by both the Lok Sabha and Rajya Sabha is enough to create a new state.  However, only the central government (“President”) can introduce a Bill for this purpose.  And before introducing the Bill, the states which will be affected have to be consulted.

The process of consultation followed has the following features: (1) The matter is referred to the legislatures of the affected states.  (2) No specific time period within which states have to send their decision back to the centre has been mentioned in the Constitution.  The central government can specify the time period while referring the matter. (3) The Constitution does not mention that the state legislatures have to agree to the proposed creation/alteration of states.  The Parliament can therefore, pass a law creating a new state even if affected states do not agree to the proposal.

Lastly, the names of the states in the Union are mentioned in the First Schedule of the Constitution.  Similarly, the Fourth Schedule lists the number of seats each state is allotted in the Rajya Sabha.  Any law creating a new state would necessarily affect these two Schedules.  Schedules to the Constitution are usually considered parts of the Constitution, and any change to the Schedules has to be done through a constitutional amendment.  However, Article 4(2) of the constitution clearly says that no law creating or altering a new state will be considered a constitutional amendment.

The implications of these provisions are clear: for all practical considerations, the Constitution only requires that the central government should have a simple majority in both houses of Parliament.  The obvious question to ask is whether this system is representative enough to create a new state, and this brings me to the second issue highlighted at the beginning of the page.

These provisions in the Constitution were created at a time when India’s security and sovereignty was at stake, when a number of independent states were forced to merge with the larger Indian state.  There were obvious concerns about giving greater representative power to states who had recently agreed to be governed under the Indian union.  Over the years however, threats of secessionist politics have reduced greatly.  People almost throughout the country acknowledge themselves to be part of a greater Indian union.

However, maintaining the status quo in the Constitutional scheme has greatly reduced political space for raising legitimate regional or geopolitical aspirations within the country.  The Parliament maybe the supreme representative platform for raising issues affecting citizens, it may however not be representative enough.  Though there is no bar for state legislatures on discussing these issues, there seems to be little substantive gain from debating issues they have no practical control over.

Therefore, not only does the present constitutional scheme make it exceedingly simple for the central government to pass laws  creating new states, the procedure involved also undermines the importance of local governments, constituents and state legislatures in the consensus-building process.  It is little wonder then, that groups resort to violence to attract national consciousness.

Mumbai Dance Bar Ban: Differing Perspectives

30 Jul

In 2005, the Government of Maharashtra banned dance performances in eating houses, permit rooms and beer bars through an amendment in the Bombay Police Act, 1951. The ban was recently struck down both by the High Court of Bombay and the Supreme Court of India as unconstitutional.

The High Court and the Supreme Court held the ban to be violative of Article 14 (right to equality) and Article 19(1)(g) (right to practice any profession or occupation). The courts observed that the amendment unreasonably prohibited dance performances in some establishments while permitting them in other establishments like hotels starred three and above. This classification seems to be based on elitist presumptions about the morality of people with lesser incomes and was held to be violating the right to equality. The courts also noted that the prohibition on dancing forced many establishments to shut down and rendered many women workers unemployed. Contrary to its purpose, the law forced many dancers to take up prostitution to earn their living. Thus, the law infringed upon the guarantee under Article 19(1)(g). Now, the state of Maharashtra is likely to revert to the licensing system for regulation of dance bars.

Below, I try to put the debate around prohibiting/regulating dance bars within the framework of various broader perspectives, not necessarily drawn from the judgments, which might help in a better analysis of this debate. My purpose is not to give a definite answer on this issue, but to separate and present the differing strands that get implicated here. Here are the different arguments:

Morality: Dances in beer bars and similar places are obscene and vulgar. They not only degrade women, but also lead to an increase in other immoral activities like prostitution and alcoholism. It can be said this argument belongs to the ‘Conservatives’, though I am wary of using this classification as our prejudices against being a ‘conservative’ may prevent us from fairly appreciating the merits of the argument.

Equality: Performances in dance bars are derogatory to women because they commodity and objectify women. They also often involve minor girls who are trafficked, exploited and forced into dancing in bars. This view is likely to be advocated most strongly by radical feminists who find the root of sex inequality in sexual exploitation of women and argue also against prostitution and pornography on these grounds. They deny that women choose these occupations with their ‘free consent’. This argument opposes bar dancing as being degrading to women not for reasons of protection of public morality, but due to concern for equality of women.

Practical offshoots: Allowing dance bars to flourish may enhance the occurrence of other undesirable activities or hinder implementation of other laws. For example, dance bars are seen as hubs of prostitution and human trafficking. They increase the vulnerability of minor girls and women to sexual exploitation. They may also lead to increased alcohol addiction and related crimes. These practical concerns call for regulation or banning of dance bars.

Right to work and livelihood: All persons have the right to work which includes women’s right to dance in bars. Banning bar dancing not only took away a form of employment, but also forced many bar dancers to take up prostitution to sustain themselves and their families. The ban also forced many establishments to shut down altogether, affecting the livelihood of other workers employed there.

Autonomy: Autonomy feminists seek respect for the agency or choice of women in entering professions such as bar dance, sex work or pornography. They reject the view that women do not take up these activities with their free consent. It is paternalistic to label what is the free choice of a woman as force or exploitation.

Free expression: Dance is a form of expression and prohibition on dance performances in certain establishments is an excessive restriction on the freedom of speech and expression of bar dancers.

Elitism: Selective ban on dances of certain types or in establishments most frequented by people belonging to certain classes or having lesser incomes is based on elitist assumptions about their morality. It is assumed that similar dance performances in establishments like five star hotels do not lead to illegal or immoral activities. It may also imply greater respect for the autonomy of women dancers of a particular class while viewing other women dancers as victims of exploitation. Such bans may stem from beliefs regarding the need to regulate the conduct of certain classes of people. Based on the position on the wider debate on bar dance, this argument may advocate either across-the-board increase or across-the-board decrease in the regulation of dance bars.

This is not an exhaustive set of views on the issue of bar dancing, but I have tried to cover a wide ground. I hope this puts the debate in a wider perspective and helps us avoid conflating the different arguments when responding to the debate.

Ordinance Route

26 Jul

This article first appeared in Frontline on July 24, 2013, and can be accessed here

 

In my article, I examine the true intent behind giving the executive the power to promulgate ordinances, and how the use of this power has been at complete variance from such original intent. The misuse of this power over time is a strong incentive to examine ordinance making power as it currently exists. I argue that having strong standards of judicial review would be one tool to help misuse of this power:

 

“Ordinance-making power is not a new feature added to the Indian Constitution. Articles 42 and 43 of the Government of India Act, 1935, gave the same power to the Governor General. Members of the Constituent Assembly, having experience of abuse of such power, were understandably wary of including the same in the Constitution. Both Hriday Nath Kunzru and Professor K.T. Shah called for restricting the executive’s power to promulgate ordinances through greater oversight by legislatures. They were, however, overruled by Dr B.R. Ambedkar, who stated that ordinance-making powers were necessary since existing law might be deficient to deal with a situation “which maysuddenly and immediately arise”. According to him, the only solution was to “…confer upon the President the power to promulgate a law which will enable the executive to deal with that particular situation because it cannot resort to the ordinary process of law…” when the legislature was not in session.

 

It is clear that the framers of the Constitution envisaged ordinance-making powers only for unforeseen, sudden situations and where the executive required additional legal sanction to address the situation. The executive, however, decided to completely disregard this requirement of necessity for immediate action. According to data furnished in the Statistical Handbook of the Ministry of Parliamentary Affairs, more than 41 ordinances were promulgated during the term of the first Lok Sabha itself. Indeed, in the pre-Indira Gandhi period, that is, before 1966, more than 75 ordinances were passed by the Central government. The necessity of taking immediate action by promulgating ordinances has remained debatable at best through the years.”

 

Certain instances show how the use of this power has been at complete variance from the requirements of immediate necessity:

 

“The Telecom Regulatory Authority of India (TRAI) was created in 1997 first by an ordinance and then by an Act of Parliament. The Minister in charge stated that the ordinance route was taken since “…we were facing difficulties in attracting private investment without an authority like the TRAI. Private investors… were not convinced about our ongoing processes of privatisation and liberalisation.” Important as it is to send out a signal of commitment towards a particular government policy, in this case liberalisation of the telecommunications sector, it is hard to make the case that had immediate action by promulgating an ordinance not been taken, private investment in the telecommunications sector would never have happened.

Similarly, the Electricity Regulatory Commissions Ordinance was promulgated on April 25, 1998, one day before the government of the day decided to convene the next session of Parliament. The National Commission for Minority Educational Institutions (Amendment) Ordinance, 2006, was promulgated in January 2006, even though Parliament was to convene from February 16, 2006. In both cases, no satisfactory reason was given for promulgating these ordinances in haste…

..The National Tax Tribunal Ordinance was promulgated in 2003. As per the parliamentary debate on the National Tax Tribunal Bill, the ordinance was promulgated because various committees had recommended that such a tribunal be established, and as “…huge revenue is blocked in litigation because of pendency of appeal and reference is before the High Court, which has adverse affect on the national economy”. As one Member of Parliament pointed out, though a number of months had elapsed since the promulgation of the ordinance, no tribunal had been established at the time of the debate and no cases referred to it.”

 

These instances clearly reveal a misuse of ordinance making power that urgently needs course-correction.

This shortcut weakens democracy

25 Jul

By Harsimran Kalra and Kaushiki Sanyal

This article was first published in the Hindustan Times on July 23, 2013 (see here)

The promulgation of the National Food Security Ordinance on July 5, shortly before the Parliament session, has raised many eyebrows. Political pundits are speculating that it is a last ditch attempt by the UPA to garner votes before the 2014 general elections. The UPA 2, on its part, has blamed the repeated disruptions in Parliament for this executive intervention.

Leaving political motives aside, the circumstances in which this ordinance was promulgated also raise the issue of propriety. An ordinance can be promulgated by the president only when Parliament is not in session and ‘immediate action’ is required. Therefore, it is in the nature of an emergency power, rather than a means to bypass the legislature. Given that Parliament is going to reconvene in a few weeks and there is already a similar Bill pending in Parliament, has the government acted within the lakshman rekha crafted by the Constitution over the executive’s law making capacity?

The power of ordinance was devised to overcome extraordinary circumstances, however, this power has not been used sparingly. Over 600 ordinances have been promulgated in India. Except, 1963, not a single year has gone by without the government resorting to the ordinance-making power. In fact, in 1994, 34 ordinances were promulgated, the highest in a year till date. Also, in this year itself, the government has promulgated four more ordinances, including the Criminal Laws (Amendment) Ordinance, which amended India’s rape laws.

Successive governments have given short shrift to the ’emergency’ test. Right from the inception of the Constitution, reliance was often placed on ordinance powers to deal, not with emergencies, but failures in negotiating the legislative process. Within the first 20 years after the Constitution was adopted, over 30 ordinances were promulgated a few days before Parliament began or after it ended. The two recent ordinances – Criminal Law (Amendment) Ordinance and the Food Security Ordinance – also hardly meet the emergency criteria. Both these ordinances seek to address deep-rooted problems of the country, which have been raised by many experts and activists over the years. The government has not shown any urgency in taking action over the years so it is not clear what recent emergency triggered their promulgation. Moreover, both these ordinances replaced related Bills that were already at an advanced stage in the legislative process. The Criminal Laws (Amendment) Bill was pending with the standing committee while the discussion on the food security Bill had already been initiated in the Budget session of Parliament.

Parliamentary process and democratic checks are circumvented when an ordinance is issued while a related Bill is pending in Parliament. Instances of this disregard for the spirit of the Constitution are many, right from 1954 when the Press (Objectionable Matters) Amendment Ordinance was promulgated. Other instances include the Essential Commodities (Special Provision) Ordinance, 1997 and the Indian Telegraph (Amendment) Ordinance, 2003.

In light of the public debate that raged around both the recent ordinances, due opportunity ought to have been secured to discuss the issues in Parliament. Although the ordinance has to stand the test of Parliament and be passed within six weeks of the session, this is more in the nature of a check in the political plan of the government. Passage of the ordinance on the floor of the House within the stipulated time becomes a face saving exercise instead of a deliberative, consensus building effort. What does the repeated use of ordinance-making power mean for a democratic nation with a robust parliamentary system? Are there structural weaknesses that need to be addressed so that governments are not allowed to rely excessively on ordinances? The time is ripe to devise measures that would deepen our democratic credentials such as allowing for wider public consultations; encouraging governments to engage with the Opposition to break the legislative log-jam and a stricter test of ’emergency’ for issuing an ordinance that would be open to assessment by the legislature.

The DIPP and Indian FDI policy – The long road to clarity

24 Jul

This post was first published by Bar and Bench on July 23, 2013. The original article can be accessed here.

 

Recently, the Department of Industrial Policy and Promotion (DIPP) prescribed a comprehensive format allowing investors and businesses to seek formal clarifications in connection with the Indian FDI policy regime. For the vast Indian legal community having an M&A, PE or a general corporate practice, the introduction of such a format is a half-hearted respite. Respite, because they need no longer content themselves with informal clarifications obtained through the interactive DIPP website. Half-hearted, because the format requires the querist to make ample disclosures, including the identity of the foreign investor, the Indian investee and details of the transaction.

Prima facie, the introduction of this format may seem to be just another procedural requirement mandated by the DIPP. However, at a more fundamental level, this format is perhaps the first step towards an organized system, which enables stakeholders and legal advisors to seek formal clarity in the Indian legal regime governing foreign investments. This post analyses how this format replaces a hitherto informal interface between stakeholders, corporate law firms and this policymaker, and argues for the establishment of a robust and institutionalized platform for an efficient lawyer-policymaker interface in this realm.

So, in a practice area equipped with veteran lawyers and experts, why is the need for a formal lawyer-policymaker interface so pressing? The answer to this question can be largely attributed to the trial and error approach adopted by the Indian Government towards foreign investment policymaking. In the backdrop of a constant tug of war between liberalization and protectionism, this regime has witnessed numerous policy flip-flops (case in point being the withdrawal of the policy decision on FDI in multi-brand retail within a month of its introduction in 2011); opposite stands taken by the policymaker and the regulator with respect to the same issue (such as the DIPP-RBI tiff on eligibility of instruments with built-in options for the purposes of FDI) and interpretation-disputes. Moreover, since policies in this field are frequently made without systematic interaction with stakeholders and are not generally preceded by statements of purpose, lawyers are often compelled to hazard a guess of the policymaker’s intent. Whilst FDI policy announcements initially comprised of multiple press notes issued at different times by the DIPP and the RBI, the regime has only recently matured to a point where all policy announcements are compiled in two comprehensive annual circulars issued by the DIPP and the RBI respectively. Sector-specific regulations and multiplicity of regulators (such as the IRDA which is in charge of FDI-policy making in the insurance sector, or SEBI which is in charge of some aspects of FDI policymaking for FIIs) further complicate the regime. Lawyers practicing foreign investment laws have had to navigate their way through these multiple circulars, potential policy U-turns, policymaker-regulator tiffs, and sector-specific regulatory guidelines on foreign investment to ensure that transaction structures are kosher.

In the milieu of a scattered legal and regulatory framework, what mechanisms are available to legal advisors for obtaining clarity on unclear issues in this multi-faceted regime? Common methods adopted by lawyers seeking clarity in this area are the interactive bulletin board and chat service introduced by the DIPP on its website in 2003. Stakeholders and legal advisors regularly post specific queries on the bulletin board to obtain answers within an average response time of 36 business hours. The interactive chat service functional on the DIPP website also allows public access to a DIPP official during office hours. These interactive features on the DIPP website have previously clarified substantive policy issues. For instance, in 2009, DIPP clarified a fundamental issue regarding the lock-in period on FDI in real estate through its informal bulletin board service, long before such clarification was finally crystallized in formal policy announcements. It is also not uncommon for legal advisors and stakeholders to schedule meetings with DIPP officials and obtain oral clarifications on their queries.

Whilst these are convenient methods of interacting with the policymaker and ingenious in their own right, the question regarding the sanctity of informal clarifications issued by the DIPP has always remained open. Can the DIPP reverse its position on views conveyed through the website or during meetings with DIPP officials? The answer is yes, this has been done in the past. Can a complex structure be effectively explained through the interactive guidance section of the DIPP website? Does everyone have the benefit of equal access to the regulator or the policymaker for seeking clarifications? The answer to both these questions is no, which begs the next question – Is there is a way to strengthen the clarity-seeking mechanism in the Indian foreign investment policy and regulatory framework?

The DIPP would do well by taking cue from the SEBI-implemented Informal Guidance Scheme, an institutional mechanism for those seeking clarity in the legal regime for the Indian securities markets. This Scheme allows market participants (including companies intending to get listed) to apply for interpretive or no-action letters from SEBI, sets a timeline within which SEBI may respond, provides for a hearing to the applicant before issuing a clarification, provides for publicizing clarifications issued to the applicant, etc. Although the clarifications and no-action letters issued by SEBI under the Informal Guidance Scheme apply only to the original applicant seeking it, their availability on a public platform has largely benefitted stakeholders in the past. For instance, under this scheme, SEBI has clarified substantive issues such as eligibility criteria for FII registration as also several interpretation issues under the Takeover Code. The Scheme, thus, puts in place a formal, transparent platform for interface, which strengthens the regime by bringing about greater clarity and consequent predictability.

The DIPP has, in the past, made laudable efforts (such as InvestIndia) for facilitating easier interface between stakeholders and itself in this sphere. Having said that, a regime that has witnessed multiple policy U-turns, inconsistencies and interpretation issues warrants an effective clarity-seeking mechanism. In the absence of such a mechanism, lawyers and stakeholders will continue to have to rely on oral or informal clarifications, chance meetings and casual relationships with the regulator or the policymaker for addressing their queries.

A scheme on the lines of the Informal Guidance Scheme introduced by SEBI would go a long way in plugging this lacuna. Of course, the efficiency of such a scheme would depend on the support of all the regulators concerned, the idea being that the scheme operates as a single window for those seeking clarifications on any aspect of the foreign investment policy or regulatory framework in India. Thus, for instance, a potential investor seeking to invest or an Indian promoter seeking foreign investment, in an insurance venture will not require to run from the DIPP to the IRDA seeking clarifications on an unclear aspect of the FDI policy on the insurance sector. With the assistance of an Informal Guidance-like scheme, he will be able to procure, in a time bound manner, formal clarity from the DIPP, IRDA and the RBI on all unresolved queries.

In addition to lending certainty and clarity to a regime widely perceived as complex and unpredictable, the scheme will facilitate equal access to the regulator and the policymaker for all. In the meantime, whilst the format recently introduced by the DIPP is a remarkable development in this space, it is only a small step on the long road to an efficient, resourceful and systematic clarity-seeking mechanism.

Is the Food Security Ordinance a game-changer for India’s poor?

23 Jul

Citing the disruptions in Parliament, the UPA government decided to promulgate the National Food Security Ordinance on July 5. Under Article 123 of the Constitution, the President can promulgate an Ordinance when Parliament is not in session and there is need for ‘immediate action’. It is possible that the government has crossed a line of Constitutional propriety by promulgating this Ordinance since Parliament is about to convene in a few weeks and there is a similar Bill already pending in Parliament. This issue will be explored more fully in my next blog post. In this post, I propose to examine the key highlights of the Food Security Ordinance and whether it would deliver food security to the citizens of this country.

Highlights of the National Food Security Ordinance

  • It entitles upto 75% of the rural population and 50% of the urban population to 5 kg food grains per month at a subsidized rate.
  • Rice, wheat and coarse grains will be sold at Rs 3, Rs 2 and Rs 1 per kg respectively.
  • Central government shall decide the proportion of the population to be covered in each state.
  • State governments shall identify the eligible households in the states.
  • Food grains shall be distributed to the eligible persons through the network of fair price shops under the PDS.
  • In case the central government is unable to supply food grains to the state, it shall compensate the state governments who have to give a food security allowance to each entitled person.

Key milestones in India’s food security policy

The notion that access to food should be a right has its origin within the UN’s 1966 International Covenant on Economic, Social and Cultural Rights. Food security exists when all people at all times have access to sufficient, safe, nutritious food to maintain a healthy and active life.

India’s tryst with food security can be traced back to 1996 when the Supreme Court declared that the “right to live guaranteed in any civilized society implies the right to food”. This was followed by a writ petition filed in the Supreme Court by the People’s Union for Civil Liberties (PUCL) Rajasthan in April 2001 against the central government, Food Corporation of India (FCI), and six state governments. The petition contended that the right to food was a fundamental right under “the right to life” provided by Article 21 of the Constitution of India.

Although no final judgment has been given, the Supreme Court has issued several interim orders in the case. On May 8, 2002, the Supreme Court appointed two Commissioners for the purpose of monitoring the implementation of the interim orders (see reports).

Both UPA I and II made food security an electoral promise and entrusted the task of drafting a legislation to the Sonia Gandhi led National Advisory Council (NAC). On October 23, 2010, the NAC made certain recommendations about the basic framework of the Food Security Bill. In response, the Prime Minister set up an Expert Committee under Dr C. Rangarajan to examine the Bill, which submitted its report in January 2011. It stated that it would not be possible to implement the NAC recommendations because of lack of availability of food grains and huge subsidy implications. The NAC however disagreed with it and prepared a draft Bill in June 2011.

The government finally introduced the National Food Security Bill, 2011 in the Lok Sabha on December 22, 2011. It was referred to the Standing Committee on Food, Consumer Affairs and Public Distribution, which submitted its report in January 2013. The discussion on the Bill had been initiated during the Budget session of 2013. The government also introduced a set of official amendments to the Bill, which have been incorporated in the Ordinance that was promulgated recently.

Ordinance: A hit or miss?

Opinion is divided about the need and desirability of the Food Security Ordinance. Some experts such as Jean Dreze and Amartya Sen are staunch supporters of the Bill given India’s malnutrition rates. Others such as Arvind Panagariya, Surjit Bhalla and Abhijit Banerjee have raised certain key issues regarding the need and impact of such a legislation. In fact, the debate on food security has dove-tailed with a larger debate about India’s governance priorities between two renowned economists – Amartya Sen and Jagdish Bhagwati (see here and here for the Sen-Bhagwati debate on re-distribution vs growth).

The criticism of the Ordinance mainly falls into the following categories: (a) purpose of the Ordinance; (b) identification of beneficiaries; (c) mechanism for delivering food security; and (d) the impact on the food subsidy burden.

Purpose of the Ordinance: The basic premise of the Ordinance is that India has a problem of persistent hunger which has led to high rate of malnutrition. Therefore, the government needs to provide the population with subsidized food grains. These premises have been challenged by various experts. Prof Arvind Panagariya, an economist at Columbia University, has recently attacked the notion that India’s child malnutrition rates are higher than that of Sub-Saharan Africa. Blaming the flawed measurement methodology of WHO, he makes a persuasive case that it is improbable that India is ahead of Sub-Saharan Africa in all other health indicators except malnutrition.

Other experts such as Arvind Virmani point out that persistent hunger is a much lesser problem than malnutrition. According to NSSO, in 2004-05, about 2% of households suffered from hunger at some point during the year. This Ordinance only addresses hunger while the focus needs to be on malnutrition which is a problem of a higher magnitude. Given the data on hunger, it is clear that malnutrition exists not so much because of lack of access to food but because of faulty diet. However, the Ordinance only focuses on providing cereals rather than nutrition rich food like vegetable, pulses and fruits. In fact, it may even have the unintended consequence of forcing farmers to grow cereals rather than fruits, pulses and vegetables.

Some experts have also pointed out that one of the major causes of malnutrition is the lack of sanitation. Unless policies focus on addressing this, malnutrition will remain a severe problem (see here, here and here). Others such as Prof Kaushik Basu have suggested that there is need to redesign how the government acquires and releases food on the market.

Identification of beneficiaries: While the Bill had divided the population into three groups (priority, general and excluded), the Ordinance only has two categories (those entitled to subsidized food grains and those who are not). However, this does not do away with the need to identify beneficiaries and thus can lead to inclusion and exclusion errors. According to some estimates, 61% of the eligible population is excluded from the BPL list while 25% of non-poor households are included in the list. The only way to completely eliminate inclusion-exclusion errors is by universalizing the scheme or by having a clear-cut exclusion criteria (see here). However, given the issue of financial burden, the problem of identification may be tackled through the biometric-linked Aadhaar number (see here and here). Basically, Aadhaar will enable the government to authenticate the identity of a person. It may reduce duplicate and ghost beneficiaries (non-existent beneficiaries). However, the success of Aadhaar in weeding out ghost beneficiaries depends on mandatory enrolment. If enrolment is not mandatory, both authentication systems can co-exist. In such a scenario, people will be able to opt out of the Aadhaar system (see here).

Mechanism for delivering food security: The Ordinance legalizes the PDS even though there is a large body of evidence about the inefficiency of the system (see Wadhwa Committee reports, Planning Commission report). These committees have pointed out issues such as targeting errors, low off-take of foodgrains by households, leakages and diversions of food grains to the open market, adulteration of food grains and lack of viability of Fair Price Shops.

Many experts have suggested other alternatives to the PDS such as cash transfer (see here, here and here) and food coupons. There is evidence that these methods have worked in countries such as Brazil (see here and here). Some advantages of these are: reduced administrative costs, expanded choices for beneficiaries, and more competitive pricing among shops. Also, allowing alternate methods could give more flexibility to the states to adopt the mechanism that suits their needs (see here).

Impact on food subsidy burden: According to the government’s calculations, the Ordinance will take the total food subsidy bill to Rs 124, 747 crore in 2013-14. However, there are other costs related to the implementation of the scheme that may not have been factored in such as cost of procurement, storage and transport of food grains. The Bill had given an annual estimate of Rs 95,000 crore as the cost to the exchequer. However, various experts refuted this figure. Their estimations vary from Rs 2 lakh crore to Rs 3.5 lakh crore (see here and here). The basic problem of having a high food subsidy bill is the effect on the fiscal deficit and inflation. Also, given the limited resources available, if the government prioritises one policy, it adversely impacts resource allocation for other policy goals. Therefore, policy choices need to be made based on what would give the most bang for the buck (see here) rather than on populist rhetoric.

It is imperative that the government considers these critiques while framing its food security policy; otherwise the Ordinance would be another lost opportunity to address a key problem faced by the poor.

Electoral Reforms, Vol. I: Recent developments and issues

15 Jul

Crime and Punishment Parliament

This post is the first installment in a series on electoral reforms.

Last week was a blockbuster one for election law, bringing us not one, but two Supreme Court decisions with implications for convicted criminals, political candidates, legislators, and combinations thereof. On Thursday, the Supreme Court ruled that individuals lodged in jails or in police custody cannot contest elections. Earlier in the week, the same bench struck down a provision in the Representation of the People Act that protects legislators convicted of crimes from disqualification for three months from the date of conviction.

These decisions are timely. Upon taking office this past January, Law Commission Chairman Justice DK Jain stated that electoral reforms were going to be a top priority. Last month, the Commission appeared to make good on that promise releasing a [very brief] Consultation Paper on Electoral Reforms, and a notice soliciting feedback.

While any collective soul-searching into the deficiencies of election statutes is a positive development, it’s worth noting that this process has repeated itself many times in the recent past.  Here’s a (possibly non-exhaustive) list of efforts since 1990: [i]

  • Goswami Committee on Electoral Reforms (1990)
  • Vohra Committee Report (1993)
  • Indrajit Gupta Committee on State Funding of Elections (1998)
  • Law Commission Report on Reform of the Electoral Laws (1999)
  • National Commission to Review the Working of the Constitution (2001)
  • Election Commission of India – Proposed Electoral Reforms (2004)
  • The Second Administrative Reforms Commission (2008)
  • Core Committee on Electoral Reforms (2010)

Taking note of issues from election financing to media regulations, the newest Law Commission paper declares the “criminalization of politics” to be its primary concern. Indeed, there is nothing new about the pervasive feeling that Indian Parliamentarians are a particularly compromised lot. In its 1993 report – part of which was deemed so explosive that it was never published – the Vohra Committee observed that “The nexus between the criminal gangs, police, bureaucracy and politicians has come out clearly in various parts of the country” and that “some political leaders become the leaders of these gangs/armed senas and over the years get themselves elected to local bodies, State assemblies, and national parliament.”[ii]

As this week’s Supreme Court decisions have highlighted, it is this last phenomenon – membership in Parliament – that many consider the most vexing manifestation of the mixing of criminal and political activity. Importantly, this week’s Supreme Court rulings do not resolve the issue. That’s because, while the Representation of People Act and this week’s decisions bar certain convicted criminals from holding office,  the more intractable problem is what to do about the many MPs with criminal charges pending, who have not yet been convicted of any crime and are free on bail.  According to a 2009 report of the Association for Democratic Reforms, 1158, or 15%, of all candidates contesting in the general election, had criminal charges pending against them. This included almost a third of all candidates in Bihar, as well as 27% of Congress candidates, 27% of BJP candidates, and 43% of ADMK candidates nationwide. During the election 162 MPs with criminal charges pending were elected (up from 128 in 2004), including 76 involved in “heinous offences such as rape, dacoity, and murder” (up from 58 in 2004).[iii]

The BJP and Congress each sent 42 MPs with criminal charges pending to the Lok Sabha. Of those MPs with serious (defined more broadly than heinous) IPC counts against them, there were 52 BJP, 31 Congress, 31 SP, 18 BSP, and 23 JD(U) MPs, as well as 9 MPs each from the ADMK, NCP and RJD.[iv]

The Law Commission’s recent Consultation Paper highlights two ways in which this could be addressed. Under the status quo contained in section 8 of the Representation of the People Act, MPs convicted of certain crimes will be disqualified for a period of time, based on the severity of the offence. The first alternative presented by the paper is that an MP or candidate could be disqualified much before conviction, when charges are framed by a court.  The second alternative is the creation of a quasi-judicial tribunal that would “travel beyond the domain of criminality” and “evaluate the fitness of a candidate on the touchstone of certain enumerated standards.” In other words, not only criminal charges, but also complaints alleging a much broader spectrum of misconduct could lead to disqualification. Such a tribunal would issue orders disqualifying candidates based on the “preponderance of probability” rather than proof beyond a reasonable doubt.

Similar proposals have been made in the past as well.[v] The Election Commission and the Second Administrative Reforms Commission proposed a similar solution to the first alternative offered by the Law Commission. That proposal also contained provisions to prevent abuse. Only candidates/MPs accused of crimes punishable by 5 years or more of imprisonment could be disqualified upon having charges framed against them. Further, charges filed within six months of an election would not lead to disqualification.

There are a few striking features shared by these proposals. The first is the significant confidence they place in the capabilities of both judges and quasi-judicial tribunals to fairly adjudicate highly politicized questions quickly and without the format of a trial. The second is the tension between holding accused politicians accountable and the enormous potential for abuse. While it may be a popular idea, barring candidates only accused (and not chargesheeted or convicted) of crimes seems to be recognised as a bridge too far.  Yet even the Law Commission proposals would go much further than Thursday’s ruling, which itself leaves plenty of room for abuse. In an editorial on Friday, The Hindu called that decision “a remedy worse than the disease,” noting that, “All that politicians in power now need to do to prevent rivals from contesting an election is to ask the police to file a case and effect arrest.”[vi]

One proposal that might avoid such pitfalls was proposed by The National Commission to Review the Working of the Constitution, in 2001. The Commission proposed the establishment of Special Courts to decide cases against candidates within six months. Candidates against whom charges are pending would be entitled to have their cases heard in the special courts, which would determine if a plausible prima facie case had been made against them or if the case was frivolous. BJD MP Jay Panda recently introduced a Private Members’ Bill in the Lok Sabha that would set up a fast track court within 90 days of charges being registered against an elected official.

The third striking feature of these proposals (and the whole discussion) is that within them lies a certain distrust of the electorate. Any such rule, by its very nature, assumes that, by choosing to elect MPs in criminal trouble, the electorate is either (1) unwise or (2) powerless to prevent those results. One problem with this (aside from its paternalism) is that it is empirically shaky. The ADR report states that in 2009, “Of the 608 candidates with the most serious criminal cases against them, only 76 won. The remaining 532 were rejected by the voters.”[vii] That is a win rate of only 12.5%. In ADR’s list of the top 20 candidates with criminal cases pending against them, all but two lost.[viii]

Finally, it is hard not to come away from the discussion wondering why there is such little acknowledgment of the much larger and more urgent problem at work here. That is, of course, the backlog of cases in the courts and the routine denial of speedy justice that plagues the entire judicial system. After all, if criminal cases were adjudicated more quickly, the existing provisions of the Representation of the People Act might well be enough. In 2009, Chief Justice A.P. Shah of the Delhi High Court said in a report that “it would take the court approximately 466 years” to clear the 2,300 criminal appeals cases pending in that Court alone.[ix] In 2011, there were over 72 lakh cases pending in the entire country.[x] The tainted state of the Lok Sabha is the most visible and most embarrassing consequence of this state of affairs, one that arguably affects each individual citizen far more profoundly than the election of criminal MPs.

Transparency and Political Parties – Finding the Right Instrument

12 Jul

In a recent post, I had written on why I think bringing political parties under the Right to Information Act is a bad idea. Economic and Political Weekly recently published my article on the same topic, where I critique the judgement of the Central Information Commission in detail, and argue that transparency in incomes and expenditures of political parties should be enforced by the Election Commission, rather than under the RTI Act.

While the CIC judgment follows developing judicial precedent under the RTI Act, bringing political parties under the purview of this Act opens a Pandora’s box that the CIC itself probably has not thought through. International practice demonstrates that the onus of creating more transparency within the political system is the task of independent election commissions.

 

The EPW article can be found here

Dams and disasters in the Himalayas

10 Jul

This post was first published as an op-ed by Mint on July 9, 2013. The original article can be accessed here

 

Relief operations in disaster-ravaged Uttarakhand have ended and the time seems ripe to take account of the institutional frailties that have contributed to the ongoing human disaster in the state. Chief minister Vijay Bahuguna has been blamed for inaction when the disaster first struck and has also admitted that the state did not meet the norms for national disaster management. The Union government is also mulling changes to the Disaster Management Act, 2005, to make national disaster response more effective.

Dig a little deeper, and the story, however, indicates multiple institutional failures. In short, the story is not of one or two agencies failing to act. Various factors point to a disturbing lack of clear prioritization, capacity, coordination across multiple government agencies.
In 2012, a paper published by Maharaj Pandit and Edward Grumbine in the journal Conservation Biology highlighted that there were 292 dams proposed and under construction all over the Himalayas. If all of them were to be completed, the dam density in the region would be the highest in the world (an average of 1 dam for every 32km of river channel). Figuring out the impact of such large-scale construction on human settlements in ecologically sensitive areas is going to be difficult even if it is not exactly rocket science. This becomes disturbing when one considers the functioning of the expert appraisal committees (EAC) of the Union ministry of environment and forests that clears river valley projects. In one report (http://bit.ly/18agNGy ), the South Asia Network on Dams, Rivers, and People (SANDRP) noted that:

“The Union ministry of environment and forests’ (MoEF) expert appraisal committee (EAC) on river valley and hydroelectric projects (RVP) has considered a total of 262 hydropower and irrigation projects in close to six years since April 2007 when the new committee was set up to its latest, 63rd meeting in December 2012. It has not rejected any project in this period.” (Page 3 of the report).

If you are not sufficiently bothered yet, consider this. According to SANDRP the Central Water Commission (CWC), which publishes the National Register of Large Dams (NRLD) apparently, does not contain an exhaustive record of large dams. In response to applications under the Right to Information (RTI) Act, 2005, filed by SANDRP, CWC replied that it only relies on information given to it by state governments. Consequently, according to SANDRP, for 2,687 out of 5,187 large dams listed in NRLD, there is no mention of the name of the river on which these projects stand.
SANDRP’s analysis is not an isolated instance. This year, the Comptroller and Auditor General (CAG) of India issued a report on disaster preparedness in India (http://bit.ly/12aPXZt ). The report is scathing with respect to the preparedness and functioning of both the National Disaster Management Authority (NDMA) and the Uttarakhand disaster management authority. The report, for example, highlights that 653 lives have been lost in the past five years to landslides, hailstorms, excessive rain, earthquakes, cloud bursts, avalanches and fire accidents. Yet, the chief minister stated there is no way the state could have been prepared for cloud bursts. Additionally, the state disaster management plan was not prepared, the state disaster management authority never met since it was created and there was no state plan for early warnings. However, and perhaps revealing the skewed sense of priorities, 71,474 government and non-government personnel had been trained through 546 workshops.
CAG also notes that NDMA and the governments at the Union and state levels have performed abysmally with respect to communications systems, capacity building and planning for specific disasters. For example, to address the problem of communications systems being disrupted during national disasters, NDMA was to set up the National Disaster Communication Network. The concept paper for this purpose was developed in October 2007, but the Union ministry of home affairs had not finalized the project by December 2012.
These examples serve to highlight the vast inefficiencies in existing government design and their cumulative potential to exacerbate natural calamities into man-made disasters. While accountability for lapses at various levels should be fixed, it is also important to get right the design, capacity and incentives of public agencies and officials. We may be able to create a more balanced system of ecological preservation and development by a nuts-and-bolts analysis of what goes wrong within existing government agencies, rather than raise the promise of newer, stronger and better legislation to cure all administrative failures. Focusing on issues of capacity, coordination and creating clear, transparent objectives for different agencies may help government in general be more pro-active rather than reactive in matters such as disaster management. Plugging leaks in this case, may therefore be better than building dams.
Anirudh Burman works on law and governance issues with the Centre for Policy Research, Delhi.
He can be reached at aburman@llm12.law.harvard.edu.

US v. Windsor: A Case for Same-Sex Marriages?

9 Jul

The US Supreme Court recently gave a landmark decision in US v. Windsor holding Section 3 of the Defense of Marriage Act, 1996 (DOMA), which defines “marriage” as excluding same-sex unions, unconstitutional. Here’s a quick summary of the judgment. The full 77-page judgment is available here. The decision also contains some lessons for the treatment of homosexual conduct in India, as this post highlights at the end.

Background
The case began with a tax dispute. Two women residents of New York, Edith Windsor and Thea Spyer, got married in Ontario, Canada in 2007. Their marriage was recognized in the state of New York. Spyer died in 2009 leaving her entire estate to Windsor. Windsor paid $3,63,053 as estate taxes but claimed a refund seeking federal estate tax exemption for surviving spouses. This is where the controversial legislation DOMA steps in. Because DOMA excludes same-sex partners from its definition of “marriage” and “spouse”, the tax refund was denied. Thereafter Windsor challenged the constitutionality of DOMA.

Judgment
The District Court, the Court of Appeals as well as the Supreme Court declared Section 3 of DOMA unconstitutional. In a 5:4 majority decision, the US Supreme Court held DOMA as violative of the Fifth Amendment of the US Constitution. While the judgment also involved jurisdictional issues, I will deal only with the judgment on merits here.

The majority court noted that regulation of marriage has historically been within the authority of states. DOMA departs from the tradition of federal government deferring to this state authority. Although the statute does not prevent states from enacting laws allowing or providing benefits to same-sex marriages, DOMA holds a wide reach and extent by laying down a comprehensive definition of marriage for purposes of all federal laws. It affects over 1000 federal laws on various aspects involving marital status including social security, housing, taxes, crimi¬nal sanctions, copyright and veterans’ benefits.

The state of New York, by allowing same-sex marriages, confers dignity and protection on same-sex couples to enjoy their liberty. But the federal government has imposed restrictions and disabilities on them through DOMA. Fifth Amendment’s Due Process Clause protects liberty, which includes equal protection of laws. DOMA singles out and injures and degrades the very class of persons that the state considers entitled to recognition and protection, violating basic due process and equal protection principles.

The court observed that both purpose and effect of DOMA are to impose disadvantage, inferior status and stigma upon same-sex couples, whose marriage has been recognized by the state. Looking at the legislative history and title of DOMA, the majority noted that it is based on moral disapproval of homosexuality and aims to defend the heterosexual marriage institution. Further, the purpose of DOMA was to discourage state laws allowing same-sex marriages and to restrict the freedom and choice of lawful same-sex couples. DOMA treats same-sex unions deemed lawful by states as second-class marriages and also humiliates the children raised in same-sex unions. The majority concluded that the principal purpose and effect of DOMA are to impose inequality. And no legitimate objective overcomes this purpose and effect.

Thus, the court held that Section 3 of DOMA violates Fifth Amendment of the US Constitution. Notably, the court explicitly denied deciding whether DOMA’s intrusion violates the principle of federalism. The majority also cautioned that the judgment is confined to same-sex marriages that have been recognized as lawful by a state.

Dissents

Four of the nine Justices expressed their dissents and held that DOMA is constitutional. The major points of dissent from the separate dissenting opinions are summarized here.

The judges pointed out that it is not clear what the majority’s conclusion of unconstitutionality is based on. There are three possibilities:

(1) Federalism. While the majority does refer to federal government’s departure from deferring to state authority, it itself denies basing its judgment on the grounds of violation of federalism.

(2) Equal Protection. If the decision is based on the violation of equal protection principle, the court has failed to address the basic issue of the level of scrutiny that must be applied to laws against same-sex unions. US equality jurisprudence provides three levels of scrutiny (strict, intermediate and rational-basis) that courts may apply to test the constitutionality of laws. The majority does not seem to apply any of these. Further, the court fails to appreciate the legitimate governmental interests behind this statute in ensuring stability and uniformity in the definition of marriage for the purposes of federal laws, especially in the presence of varying state laws on the status of same-sex unions. Relying on the title of the Act and snippets of legislative history, the majority strikes down the law based solely on its opinion of illicit legislative motive of harming a class of persons.

(3) Liberty and Due Process. The majority held that DOMA deprives liberty and violates basic due process principles. This suggests that the court used substantive due process, which protects rights and liberties deeply rooted in American history and tradition. The court did not assert that right to same-sex marriage is one such right. There is no constitutional right to same-sex marriages. Thus, this is a claim for recognition of new right from the judiciary, and deserves certain judicial restraint.

The dissenting opinions also highlight how this decision acts as a judicial invasion of democracy. The Constitution does not choose between opposing views on the institution of marriage. The dispute over same-sex marriages should be democratically decided by the people, acting through their elected representatives at state and federal levels, and not the court. The court casts the supporters of the traditional institution of marriage as bigots, wrongfully appropriating an important public policy debate.

Position in India
US v. Windsor inevitably reminds India of the pending decision from the Indian Supreme Court on an appeal against the Delhi High Court decision in Naz Foundation case. But there are important distinctions between the two disputes. The Naz judgment held unconstitutional Section 377 of the Indian Penal Code (IPC) that criminalized consensual sexual conduct between same-sex adults, appeal against which is pending before Supreme Court. There is a difference between homosexuality as an identity, homosexual conduct that IPC criminalized and same-sex marriages. The issue of same-sex marriage is yet to be dealt with by Indian courts.

While decriminalization may be an easier issue than same-sex marriages as it spares decision on questions on the institution of marriage, the Naz judgment does seem to be much more legally and constitutionally grounded that the majority opinion in US v. Windsor. Perhaps a bit more nuanced analysis could have at least saved the majority from dissenting Justice Scalia’s remark of the court’s opinion being just “nonspecific hand-waving”.

The Asylum Debate

5 Jul

This article written by Roshni Shanker and Vasudha Reddy originally appeared in Outlook Online, and can be accessed here

Earlier this week, India joined the list of countries that have denied asylum to Edward Snowden, the former National Security Agency consultant, stating that it sees no reason to accede to the request. The decision comes only a few months after Antonio Guterres, United Nations High Commissioner for Refugees, lauded India’s liberal approach to refugees and hailed it as an example for the rest if the world to follow. Despite not being a signatory to the 1951 Convention Relating to the Status of Refugees (“the 1951 Convention”) and its 1967 Protocol, India has over the years adopted a generous and compassionate approach towards asylum-seekers and has provided direct assistance to some 200,000 refugees from different countries. In fact, in the past India has extended asylum to some of the most controversial figures in history such as the Dalai Lama, Sri Lankan Tamil leaders, Aung San Suu Kyi’s political associates etc. Thus, the refusal of Snowden’s asylum request has ignited a furious debate on the law and politics underlying the issue. Many believe that turning a blind eye to the US government’s relentless pursuit of Snowden and denying him the right to asylum is a violation of fundamental human rights principles. However, others classify Snowden as a criminal and hold that a State has the prerogative to determine who they want to grant asylum. The debate has brought to light a number of legal issues, where the arguments of both sides merit consideration.

The right to asylum under international law is governed by the 1951 Convention. This is the key legal document which defines who a refugee is and enumerates his/her rights as well as the obligations of signatories. Certain tenets under the 1951 Convention have attained the status of customary international law, i.e. principles of international law which all countries have to adhere to irrespective of whether they have signed a specific convention or not. The most crucial of these is the principle of non-refoulément which places an obligation on States to not return refugees to countries where they face a serious threat to their lives or safety. Therefore, before denying an asylum request, States need to consider if the asylum-seeker qualifies as a refugee under law. Under Article 1 of the 1951 Convention, a person is considered to be a refugee if he has a well-founded fear of persecution owing to his race, religion, nationality, membership in a social group or political opinion.

The first consideration is whether the asylum-seeker’s fear of returning to his/her country is reasonable and justified i.e. “well-founded”. To determine this in the present case, one needs to examine how the US has treated others tried for similar offences. Given that Snowden has been charged by the US courts with espionage and leaking confidential information, his passport has been revoked and arrest warrants have been issued, the likelihood of him facing serious consequences for his actions is obvious. His fear of returning to the US is thus, well-founded.

The next question is whether the consequences Snowden is likely to face would amount to persecution. “Persecution” refers to serious violations of human rights such as torture, cruel or inhuman treatment or punishment. It is to be differentiated from “prosecution” where a person is brought to trial in accordance with due process of law. This is where opinion differs on Snowden. His opponents argue that if he is returned to the US, he will be given a fair trial with legal representation, as other similarly charged persons have been. Some also contend that he could have exercised his constitutional right to freedom of speech without breaking the law and therefore, he should be treated as a fugitive from justice. His supporters contend that as a whistle-blower, Snowden could not have used State mechanisms to expose State wrongdoing and point to the case of Bradley Manning, who has been subject to torture and severe ill-treatment while in detention, as confirmed by the United Nations Rapporteur. Therefore they believe that the consequences Snowden is likely to face would go beyond “prosecution” to “persecution”.

Finally, if it is determined that Snowden is likely to face persecution, then a nexus needs to be established with one of the five grounds under the 1951 Convention. Given the facts, Snowden can claim that he is either being targeted for his political opinion or his membership of a particular social group, in this case whistle-blowers. This is also under debate. Some believe that his actions do not amount to a mere expression of political belief but have jeopardized national security and diplomatic relations and for the same reason, he should not be regarded as a whistle-blower but as a spy. The contrasting opinion is that in exposing the imbalance of power between the State and its citizens he has expressed a political opinion against the extent of State surveillance, which also makes him a whistle-blower.

Even if Snowden qualifies as a refugee as per the said criteria, Article 1F(b) of the 1951 Convention denies protection to persons who have been convicted of serious non-political crimes. Here too opinion is divided on the nature of his actions, with those who believe that it was clearly political and others who view it as more criminal than political (thereby amounting to a serious non-political crime).

Had Snowden been physically present on Indian soil, the government would have been automatically bound to grant him asylum if the aforementioned criteria were met. However, since he has been making requests for asylum to various countries without being present there, and the 1951 Convention is silent on the subject of physical presence as a precondition for claiming asylum, States have been responding in various ways. While some States have required his physical presence to even consider his claim, India has considered and rejected it, suggesting that physical presence is not required. Due to the lack of binding international standards, States typically rely on their domestic asylum framework and established principles of international law. For example, the European Union has a common asylum framework which sets out a uniform procedure for handling asylum claims.

It is clear that Snowden’s quest for asylum has thrown up many complex legal issues. The determination of his legal status cannot be resolved easily and warrants extensive legal analysis. External Affairs Minister Salman Khurshid, has stated that India has a “very careful and restrictive [asylum] policy”, which Snowden presumably did not conform to. However, India has never had a domestic legal framework for extending asylum. Further, India’s unequivocal denial of the asylum request within a day of it being made raises concerns over India’s political will overriding principled considerations and over whether the request was properly assessed under international law. In the absence of a clear domestic framework for extending asylum, decisions such as that taken on the Snowden case give the impression of the process being ad-hoc and arbitrary, thereby underscoring the urgent need for such a framework.


Roshni Shanker & Vasudha Reddy run a refugee legal aid centre in New Delhi called Ara Legal Initiative and were formerly UNHCR lawyers. They can be contacted at office AT araleagl DOT in

The narrative of judicial appointments

4 Jul

This post first appeared as an article on Bar and Bench on July 2, 2013, and can be accessed at their website here

News reports have indicated the government’s plan to establish a judicial appointments commission (“JAC”) for the appointment of Supreme Court and High Court judges. If established, the body would not only mark a sharp change from the current appointment process, but also from the constitutionally mandated procedure for appointment. The system at present however, is also markedly different from what the Indian constitution mandates. It remains to be seen whether the proposed JAC leads to better outcomes.

The crucial aspect in measuring outcomes is however, the correct determination of the desiredoutcome. In order to assess this issue, certain other considerations need to be examined, which are explained in this paper. These are: (a) constitutional provisions, and the original process of appointment, (b) the present process of appointment and their historical development, (c) the views of different experts and commissions on the issue, and (d) the determination of the desired outcome, and whether the proposed JAC would lead to this desired outcome.

Constitutional provisions

Section 124(2) of the Constitution provides a fairly neat method of appointing judges to the Supreme Court. It states that the President (read the Executive) shall appoint a judge of the Supreme Court after consultation with such judges of the Supreme Court and High Courts as he may deem necessary. The Chief Justice of India (“CJI”) has to be mandatorily consulted regarding the appointment of every judge other than to the position of the CJI. Similarly, under Article 217(1), the President of India appoints judges to High Courts after consultation with the CJI, the Governor of the State, and the Chief Justice of the High Court (for the appointment of a judge other than as Chief Justice of that High Court).

The primary authority for the appointment of judges under the Constitution is thus the President, or the central executive (“Executive”). The Executive has to discharge this function in consultation with other constitutional functionaries. Notice however, that this consultation process is not mandatory (apart from with the CJI for Supreme Court judges, and the Chief Justices of the High Courts for High Court judges). The Constitution also does not state that the Executive has to abide by the opinion of other constitutional functionaries while appointing judges.

Over the years though, this position has been completely deviated from, for reasons many consider completely justified.

Present process and origin of process

The Indian Constitution, like many other constitutions, creates a separation of powers between different wings of the state i.e. Executive, Legislature, and Judiciary. However, all three wings remain accountable to each other in some form or the other. The central and state executives for example, are directly accountable to Parliament and state legislatures respectively. Similarly, while the judiciary is independent of the Legislature and the Executive in most aspects, the power of appointment vests with the Executive as explained above, and the power of removal rests with Parliament. This system is designed to enable the judiciary to remain accountable to the democratic process in some measure.

The present process of appointments arose out of a perceived need to remedy certain ills that became apparent with the constitutionally mandated procedure. Seervai’s Constitutional Law of India (4th Ed., Vol. 3) records that the day before CJI Venkataramaiah retired from the Supreme Court, he gave an interview stating:

…such judges are appointed, as are willing to be ‘influenced’ by lavish parties and whisky bottles…in every High Court, there are at least 4 to 5 judges who are practically out every evening, wining and dining either at a lawyer’s house or a foreign embassy…practically in all 22 High Courts, close relations of judges are thriving. There are allegations that certain judgements have been influenced though they have not been directly engaged in lawyers in such cases.

This extract encapsulates, in brief, the concerns regarding the improper behaviour and conduct of judges in the higher judiciary. Though a number of past judgements had interpreted the respective powers of constitutional functionaries regarding the transfer and re-appointment of judges, the case of Supreme Court Advocates-on-Record v. Union of India (“Judges Appointment case”) is responsible for moving towards the present system of appointment of judges. I summarise the main points laid down by the court below:

1.     The process of appointment of judges “is an integrated participatory consultative process”. All constitutional functionaries must perform this duty collectively to reach an agreed decision.

2.     The proposal for appointment of a judge must arise from the CJI (for appointment of a Supreme Court judge) and from the Chief Justice of a High Court (for a High Court judge).

3.     In the event of conflicting opinions, the opinion of the CJI has primacy. No appointment can be made without the concurrence of the CJI.

4.     A collegium system of appointment must be initiated.

In 1998, in the case In Re Presidential Reference: Under Article 143(1) of the Constitution of India (“2nd Judges Appointment Case”)the Supreme Court further evolved this doctrine and created a system wherein judges would be appointed by a collegium consisting of the four senior-most judges of the Supreme Court. Though the Executive would make the actual appointment, it would have no other role in the appointment of judges to the High Court or Supreme Court. As recently as January 2013, the Supreme Court rejected a plea to revisit the Judges Appointment Cases (read more here).

These two cases therefore departed considerably from the procedure enshrined in the Constitution. Many have argued that insulation of appointments from executive influence is necessary to promote judicial independence, but it is debatable whether this insulation has led to a qualitative betterment in the conduct of the judiciary as a whole, or the quality of judgements. Additionally, various administrative and structural issues have been highlighted. Over the years, political parties, experts and commissions have proposed a number of mechanisms for the appointment of judges. It may be worthwhile to consider them briefly below.

Alternative mechanisms

The table below encapsulates in brief the proposals of various bodies regarding the appointment of judges.

Report/Commission/Body Recommendations
Law Commission – 80thReport (1979) Appointment process in High Courts to be initiated by CJ of that High Court. Constitutional procedure to be followed in other aspects. The Chief Minister of the state is free to disagree with choice of the CJ. One-third of judges appointed should be from outside the state.Interestingly, the report mentioned the need for a “Judges Appointment Commission”, for eliminating the “sway of political or other extraneous considerations…”.
Law Commission – 121stReport (1987) Recommended the establishment of a National Judicial Service Commission. The CJI would be the Chairman, and there would be three senior-most judges of the Supreme Court, three senior-most CJs of the High Courts, the Minister for Law and Justice, the Attorney General of India, the outgoing CJI, and a legal academic in the Commission. Additionally, while deciding a vacancy in a particular High Court, the CJ of the High Court, the Chief Minister and Governor of that state must be co-opted into the deliberations of the Commission.
67th Constitutional Amendment Bill, 1990 Proposed the creation of a National Judicial Commission composed of serving judges headed by the CJI.
Law Commission – 214thReport (2008) Recommended restoration of the original constitutional procedure to be followed in wake of the Supreme Court’s decisions in the Judges Appointments cases.
National Advisory Council Paper titled “A National Judicial Commission: Judicial Appointments and Oversight Recommended creation of National Judicial Commission with the Vice-President as Chairperson, and the Prime Minister, Speaker of Lok Sabha, Law Minister, Leaders of Opposition from both Houses of Parliament, and the CJI as other members. The President would have the power to reject a candidate recommended by the NJC.

As may be noticed from the table above, all the reports above emphasize the need for a broad-based consultative framework for the appointment of judges. Significantly, all these reports have also been informed by practices in other countries, most of which allow for some sort of a consultative process between members of the judiciary, executive, legislature, and civil society. The process being proposed by the Central Government at present also aims to create a broad-based consultative process.

Proposed process

According to news reports (here and here), the proposed Judicial Appointments Commission will probably have the Prime Minister, the Leader of Opposition, the Law Minister, the CJI, four other senior judges of the Supreme Court, and a prominent jurist as members.  The process therefore seeks to give the executive and legislature a greater role in the appointment of judges than the collegium system.

The question however remains: what is the desired outcome? The proposed system seeks to increase democratic accountability in the process of appointments. This is thought to be necessary due to the widespread perception that judicial appointments remain non-transparent, that delays in appointments occur due to the current in-house process of appointment, leading to a huge backlog of pending cases, and finally, that democratic accountability is an end in itself.

But is democratic accountability an end in itself? Does democratic accountability also not seek to further other expectations we may have from the judiciary, such as the writing of better judgements, decrease in backlogs and an increase in access to courts? If yes, would these goals be served merely by the creation of a Judicial Appointments Commission? The point I am trying to make is whether the judiciary can be made more accountable, more accessible, and qualitatively better without tinkering with the present appointment process? Those in favour of changing the status quo would point out that the present system is a complete departure from the constitutionally prescribed procedure. The simplest response is that the process being contemplated would also require a constitutional amendment!

There is a great need to reform the present system of appointment, in order to make it more transparent, and to achieve other social and economic ends. However, we need to think through the available alternatives for meeting our goals, and ensure that the legislative measures we take actually help in the realization of those goals.

Key Principles of Right To Public Service Delivery Legislations

3 Jul

In my last post titled  “Time-bound delivery of Public Services now a reality?!“, I lamented on the need and the importance of the right to public service delivery legislation. In this post I shall be discussing some of the main principles of the acts. While, all the acts differ, the essence of their rules remain the same – providing the public with time bound delivery of specific services of particular departments as mentioned in the rules and notifications which are made after the bill has been passed. This bill penalizes the service provider for failing in his duty according to the rules made with the aim of achieving efficient and effective delivery of the public service to the citizens at large.

Key Principle of the Legislations:

1.      Departments and Services Covered

The number of departments to be covered under this act along with services provided by them is released through notifications. These notifications are revised from time to time and the list is updated accordingly. The list includes some of the services including issuing ration cards, water connections, death certificates, driving licences, electricity connections, mark sheets, attestations and so on. The departments covered include Human Resource Development, Revenue Department, Department of Police, Transport Department, Labour Department and General Administration Department. The services offered are dependent on a number of factors including the demand from the citizens, willingness of the departments or even their current efficiency.

2.      Time Period

The time period is stipulated according to each service offered and differs from state to state. This depends on varied reasons like the simplicity of the service provided, the volume of the applications etc. The time period is measured from the time that an application is submitted to the officer-in-charge (designated officer) or an official responsible/authorized on the officer’s behalf and acknowledged through a receipt. In case the application is rejected, written reasons are to be recorded by the officer and the citizen is to be intimated. For instance, in Jammu and Kashmir, the inclusion of a new born child’s name is to take a maximum of 7 days after the submission of the birth certification. In Rajasthan, the health department is to issue the amount due to the woman under the Janani Shishu Suraksha Yojana (JSSY) immediately after delivery. In Punjab, the Housing and Urban Development Department is stipulated to sanction Building Plans/Revised Building Plans of a residential place within 30 days and of a commercial space within 60 days.

3.      Nodal Departments

The nodal departments are those which are assigned by each government to be incharge of implementing the Right to Public Service Legislation. The nodal departments differ in each state. Some of them include General Administration Department, Administrative Reforms Department, Department of Home, Department of Information Technology or even the Department of Revenue.

4.      Appeals

Every state legislation on public service delivery has its own rules on the number of appeals available to its citizens under the right to services legislation. For instance, in Madhya Pradesh if the application is rejected by the officer-in-charge, the applicant can file an appeal with the First Appellant Officer (FAO) within 30 days of the date of rejection or on expiry of the prescribed time limit. If the FAO rejects the application again, the applicant can appeal for the second time to the Second Appellant Authority (SAT) within 60 days of rejection by the FAO. Similarly, Bihar, UP and Rajasthan also give the applicants an option of two sets of appeal.  On the other hand, the legislation also gives an option to an aggrieved designated officer as well as the FAO to file for a revision before the nominated officer. While, J&K also has an option of two sets of appeal although an aggrieved officer may file a revision before a special tribunal to be set up. Punjab and Uttarakhand provide for three rounds of appeal with the third and final round of appeal to be addressed to the special commission set up under this act.

5.      Penalty

Every government officer who fails to provide the service within the stipulated time period is liable to a certain amount of penalty.  In most of the states (MP, UK, Delhi, J&K, Bihar, Rajasthan, Punjab, Jharkhand, Kerala and Orissa) the penalty is of Rs. 250 per day with the total amount not exceeding Rs. 5000. In Delhi, the penalty is of Rs. 10 per day not exceeding Rs. 200 while in Karnataka it is Rs. 20 per day not exceeding Rs. 500. In Himachal, the penalty can range anywhere between Rs. 1000 to Rs. 5000.

State

Number of Services

Number of departments covered

Penalty for not providing service

Nodal Department

Madhya Pradesh

52

16

Rs. 250 per day, max Rs. 5000

Department of Public Service Management

Uttar Pradesh

13

4

Rs. 250 per day, max Rs. 5000

Department of Revenue

Delhi

96

22

Rs 10 per day, max Rs. 200

Department of Information Technology

Jammu and Kashmir

45

6

Rs. 250 per day, max Rs. 5000

General Administration Department

Bihar

50

10

Rs. 250 per day, max Rs. 5000

General Administration Department

Rajasthan

108

15

Rs. 250 per day, max Rs. 5000

Administrative Reforms Department

Uttarakhand

63

10

Rs. 250 per day, max Rs. 5000

General Administration Department

Himachal Pradesh

 

12

Min Rs. 1000, max Rs. 5000

Department of Home

Punjab

69

11

Rs. 250 per day, max Rs. 5000

Department of Governance Reforms

Jharkhand

54

20

Rs. 250 per day, max Rs. 5000

 

Chattisgarh

139

20

Rs. 100 per day, max Rs. 1000

 

Assam

55

14

Rs. 50 per day, max Rs. 2000

Administrative Reforms and Training Department

Karnataka

334

45

Rs. 20 per day, max Rs. 500

Department of Personal and Administrative Reforms

Kerala

   

Rs. 250 per day, max Rs. 5000

Personal and Administrative Reforms Department

Orissa

56

10

Rs. 250 per day, max Rs. 5000

General Administrations Department

Gujarat

       

Goa

   

Rs 50 per day or Rs. 2500 whichever is less

 

* Information on the services and departments to come under the act is published as notifications. The gaps in the table above are due to lack of sufficient information. They will be updated as and when the information can be accessed. As for Goa and Gujarat both the bills are new and hence the implementation is still in the planning stage.

In my final blog post I will be analysing the working of some of these acts. Some of the questions that arise and that I will be looking into will be relating –

  1. Is penalizing officers the best way of achieving efficiency in delivering public services?
  2. Do these acts simplify the procedures for an applicant? Is there still scope for corruption within these acts?
  3. The success, if any, of the acts in providing better services to the public.

 

Proposed CBI Reforms: Will the Central Bureau of Investigation remain a “caged parrot”?

2 Jul

The Central government recently set up a Group of Ministers to propose reforms and ensure the functional independence of the CBI. This came in the wake of the Supreme Court criticizing the government for its interference in the Coal blocks allocation scam. The Court had asked the government to “come out with a law to insulate the agency from external influence and intrusion”. The government has recently cleared the suggestions of the GoM on ensuring the independence of the CBI. This post examines the proposed reforms, their critique, and other areas of CBI’s functioning which need urgent attention.

Legal and administrative background

(Sourced from here)

The CBI has its origins in a special order of the British Government in the early stages of World War II:

“An executive order was…passed by the Government of India in 1941, setting up the Special Police Establishment (SPE) under a Deputy Inspector General in the then Department of War with mandate to investigate cases of bribery and corruption in transactions with which War and Supply Department of the Government of India was concerned.”

The activities of the SPE were then extended to the Railways, and in 1946, the Delhi Special Police Establishment Act was passed. The Central Bureau of Investigation was set up by a resolution dated April 1, 1963. The CBI would investigate not only cases of bribery and corruption, but also major financial law violations, and other serious crimes. The CBI’s power to investigate crimes currently arises from Section 2 of the DSPE Act, 1946.

Administrative supervision over the CBI is divided between the Ministry for Home Affairs, and the Ministry of Personnel. The overall supervision of work, and budgetary control over the CBI is exercised through the Ministry of Personnel.

Recent proposed reforms

Over the years, the CBI has understandably come in for a lot of criticism regarding its functioning. It has been commonly derided as a “political tool” in the hands of the Central government. The recent criticism by the Supreme Court spurred the government into setting up a GoM to propose reforms to make the functioning of the CBI independent. The GoM consisted of:

1. Shri P Chidambaram, Minister of Finance;
2. Shri Sushilkumar Shinde, Minister of Home Affairs;
3. Shri Kapil Sibal, Minister of Communications and Information Technology and Minister of Law and Justice;
4. Shri Salman Khurshid, Minister of External Affairs; and
5. Shri V Narayanasamy, Minister of State in the Ministry of Personnel, Public Grievances and Pensions; and Minister of State in the Prime Minister’s Office.

The GoM recommended that a panel of retired judges will monitor the investigations being undertaken by the CBI to ensure that the investigations are conducted without any external interference. In addition, it also recommended an increase in the financial powers of the CBI Director, and a new mechanism for the appointment of the Director (Prosecution) which is a Law Ministry appointee at present. These changes will be brought about by way of amendments to the DSPE Act.

These changes were heavily criticized by Leader of Opposition, Rajya Sabha, Mr. Arun Jaitley:

“The recent decision of the Union Cabinet based on GoM recommendations is a camouflage. It creates an illusion by removing the political executive and creating a proxy institution instead. The government’s decision is a remedy worse than the existing problem”

As reforms go, the above-mentioned reforms proposed by the government seem fairly innocuous. Merely appointing a panel of retired judges may not ensure the CBI’s independence. This panel has to have the right incentives to perform their role efficiently. If such incentives are not in place, even their independence will eventually be compromised. This is so, especially since the panel itself will be selected by the Central government. Second, and on a related note, this move could well become just a post-retirement benefit for retired judges. Enlisting them on this panel could have the effect of co-opting them into the process of subverting the CBI’s independence rather than enhancing it. Third, there are a number of other areas of reform of the CBI which are urgently required. Without these, the CBI will struggle to become truly independent of the government.

Other required reforms

A Select Committee of the Rajya Sabha to look into the Lokpal Bill had suggested much more drastic reforms to the CBI in order to ensure its independence (Summary here). Some of these are:

  • The CBI Director would be appointed by a panel consisting of the Prime Minister, the Leader of Opposition, Lok Sabha, and the Chief Justice of India.
  • The CBI would be under the superintendence of the Lokpal.
  • The CBI should have an independent Directorate of Prosecution, who shall be recommended by the Central Vigilance Commission.
  • The CBI Director, and Director of Prosecution shall have a fixed term of two years.

In addition, the Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice had examined the functioning of the CBI and presented a detailed report in 2008. Their main recommendations regarding the working of the CBI were:

  • The number of officers placed within the CBI on deputation should be reduced. Greater emphasis should be placed on direct recruitment of CBI officers, and service conditions such as promotions should be incentivised for direct recruits.
  • The Committee noted that there was a large number of vacancies in the CBI. “It is of the opinion that the large number of vacancies is bound to result in severe strain on the existing manpower who are hard pressed to deliver positive results and that it is detrimental to professional excellence and efficiency.” It recommended that steps should be taken on a “war-footing” to fill up existing vacancies within three months.
  • Shockingly, the Committee also noted a 27% shortage in residential accommodation for CBI personnel. Furthermore, as of 2008, investigating officers had not been provided with mobile phones or laptops!
  • The Committee had also recommended greater financial powers for the CBI Director.

The problem of vacancies

The problem of vacancies within the CBI is indeed acute. A recent press release highlighted more than 800 existing vacancies within the organization. The relevant information is given below:

Cadre

Sanctioned Strength

Available Strength

Vacancy

Executive

4510

3901

609

Legal

318

258

60

Technical

155

115

40

Ministerial

1,538

1,436

102

Canteen posts

70

43

27

TOTAL

6,591

5,753

838

(Sourced from here)

The CBI needs to work independently of the government. Yet, it is a government department, and has to be accountable to democratically elected officials. The reforms proposed by the GoM do not balance this tension between independence and accountability. Unless this is done, the CBI cannot become a well functioning organization.

Where angels fear to tread

1 Jul

This article was published in the Crest edition of the Times of India on June 29, 2013.

It’s rather strange that while the debate over allowing foreign universities to set up campuses in India remains as yet unresolved, the University Grants Commission (UGC), our apex education regulator, is about to notify rules regarding their entry in the country. The government, it seems, is in a bit of a hurry. Presently, Indian institutions can grant degrees and diplomas in collaboration with foreign institutions; but, foreign universities cannot set up branch campuses here without an Indian partner.

There are broadly three perspectives in the debate over the entry of foreign institutions. One, the opponents of the move argue that it would lead to commercialisation of higher education, and restrict access to quality education only to the rich. In response, the move’s proponents argue that it would increase choices for students, enhance competition in the sector – with potential for qualitative improvement in the Indian institutions – and provide technical skills for the job market. They suggest that the government can provide easy loans and scholarships to economically disadvantaged students to ensure that they do not lose out. Three, some experts have taken a middle view. They favour allowing foreign institutions so long as there are appropriate regulations in place to ensure that only good quality institutions are allowed entry.

The proposed UGC regulations have also taken the middle path, it appears, by restricting entry to only institutions that are placed in the top 400 as per ‘world university rankings’ put out by groups such as the Times Higher Education or Quacquarelli Symonds. In addition, only institutions which are accredited and have a track record of a minimum of 20 years in the parent country would be considered. While the purpose for such high entry barriers is to ensure that only quality institutions are allowed to enter, it is an open question whether top institutions would choose to come to India. Till date, hardly any high quality institution has entered India although the regulations notified by the All India Council of Technical Education (AICTE) allow foreign technical institutions to offer degree or diploma courses either directly or through collaboration with an Indian partner.

It is noteworthy that countries such as South Korea, Singapore, and UAE offer incentives that reduce the costs and the risks associated with establishing a campus in a different country. However, the proposed regulations take it for granted that institutions are willing to come to India and appear to focus on increasing the constraints to entry. These include requiring the foreign institution to operate as a non-profit legal entity; insisting that they maintain a corpus of at least Rs 25 crore for each campus they propose to establish and disallowing any repatriation of surplus income. In fact, it allows foreign institutions to utilise only up to 75 per cent of the surplus income for developing the campus.

Foreign educational institutions would also have to mandatorily publish a prospectus with details of course, fees and other charges and money to be refunded. The institutions would be penalised with a minimum fine of Rs 50 lakh which may be extended to Rs 1 crore if they do not conform to the norms of UGC. However, it is not clear what procedure would be followed to penalise such institutions or whether UGC would have the power to close down these institutions.

According to the National Knowledge Commission and the Yash Pal Committee, the regulations should focus on ‘incentivising quality institutions’ to enter India while disincentivising sub-standard institutions from entering the country. But why would quality institutions be interested in entering the Indian market if they have to operate under such constraints? It is also not clear if these institutions would have the autonomy to setup their own courses and charge their own fees. Sadly, this is not the government’s first misguided attempt to facilitate entry of foreign universities. In May 2010, it introduced the Foreign Educational Institutions (Regulation of Entry and Operations) Bill, which is still pending in the Lok Sabha. This Bill had been examined by the Parliamentary Standing Committee on HRD, which recommended that there be adequate safeguards for stakeholders. It suggested that an independent regulator should monitor fee, curriculum and salary;approvals should be given on a short-term basis first before being extended and the government should devise incentives for foreign institutions to utilise their surplus funds in India.

These current UGC notifications, which do not need legislative approval, are an attempt to bypass the legislative logjam. Besides, there is also a basic lack of clarity in purpose. Does the government want to woo good quality foreign universities or does it only seek to regulate the ones who are interested in coming to India? We can’t assume that the two go together. And these regulations fail to serve either purpose fully since they do not provide incentives for quality institutions to enter India but create high entry barriers for other institutions.

Foreign universities are certainly not the panacea for all the ills of the higher education system in India. They would at best bring in some much needed competition into the sector filled with mediocre institutions. Before framing any policy for foreign institutions, our policy-makers need to have a clear understanding on the fundamental question of whether foreign universities need us or do we need them more.

How safe is your personal data with your service provider?

27 Jun

Even as the world grapples with the idea of State surveillance, Financial Times recently carried an alarming article revealing the extent of private surveillance that we may unknowingly be subjected to. The article discloses that in the multi-million dollar consumer surveillance industry, your basic personal data such as gender, age and location is sold for as little as $ 0.0005.[1] It discusses how this industry is so extensive that “resulting dossiers include thousands of details about individuals, including personal ailments, credit scores and even due dates for pregnant women. Companies feed the details into algorithms to determine how to predict and influence consumer behavior.” Companies regularly collect such information by scouring web searches, social networks and also purchase it from service providers virtually sitting on a goldmine of data.

Think of the number of times you have been asked for your personal data by your service provider in the past. From opening a bank account to obtaining a sim card, applying for an insurance policy to a Shoppers’ Stop card, these are only some of the occasions where you have handed over personal information ranging from basic (name, gender, etc.) to sensitive (personal telephone number, email ID, credit card details, etc.). So, what happens to the data you share with your service provider? Is it obligated to keep it confidential? Does the law allow service providers to use consumer data for their own benefit? In the wake of an increasingly aggressive consumer surveillance industry fueled by data-rich service providers, this post summarizes the Indian regulatory framework for data protection in the burgeoning Indian service sector.

Data protection regime under IT Act

In the absence of an umbrella statute recognizing an across-the-board right to privacy in India[2], the Information Technology Act, 2000 (IT Act) contains perhaps the most comprehensive data protection provisions applicable to the Indian service sector.

The IT Act obligates service providers possessing sensitive personal data (such as passwords, financial information, medical records, etc.) of other persons to implement reasonable security practices, failing which, they would be liable to compensate those affected by such failure.[3]  It prohibits them from collecting personal information, except where such information is connected with and necessary for the service provider’s activity. Service providers are also obligated to disclose to consumers the purpose of collecting such information and the intended recipients thereof. Consumers are entitled to the choice of not providing the information sought or withdraw their consent to use such information, and in such case, service providers may refuse to provide only those services for which such information was necessary. Finally, the IT Act criminalizes unauthorized disclosure of personal information by any person (including telecom and internet service providers, search engines, online payment systems and market platforms), if such person has obtained such information while providing services under the terms of a lawful contract.[4] Thus, breach of privacy protection provisions under the IT Act entails civil and criminal proceedings against a service provider.

Despite the fairly extensive data protection framework put in place by the IT Act, market practice indicates that much of the above framework lacks strict implementation, in as much as the data protection regime is largely based on consent which consumers do not often have the option to withhold. So far as concerns enforcement, whilst the IT Act provides for an adjudication mechanism for breach of data protection provisions, there is no comprehensive database compiling orders passed by adjudicating officers, and as such, their orders are publicly reported far and few between.[5] This has resulted in information gaps amongst the public in this sphere. Often, there is a general tendency to ignore minor offences of data leakage by a service provider, especially if such leakage does not involve financial data.

Sector-specific regulatory framework

Several service industries are additionally governed by data-protection guidelines issued by their regulators. For instance, in the insurance sector, IRDA (the insurance regulator) has prohibited service providers such as TPAs from trading in information.[6] The IRDA has permitted insurers to purchase customer databases only from IRDA-licensed referral companies.[7] Similarly, in the banking sector, RBI has repeatedly asserted the obligation of every bank to maintain secrecy of its clients.[8] The RBI also mandates banks to collect only relevant information from their customers and prohibited them from using it for cross-selling purposes. Likewise, in the telecom sector, TRAI has taken steps to promote confidentiality of its customers and their communications. For instance, licenses issued to telecom service providers require them to maintain a mechanism for ensuring such confidentiality. Similarly, professional service sectors such as accountancy, medicine and legal services are governed by self-regulatory codes of conduct, and aggrieved customers can seek redress of privacy violations through disciplinary bodies of such sectors.

A holistic analysis of data protection laws in India suggests that there is a far-reaching data protection legal framework applicable to service sectors. Strict enforcement, strong deterrents and greater customer awareness may, however, go a long way in creating a safer environment for your data with your service provider.


[2] The Constitution of India does not expressly confer a fundamental right of privacy on its citizens. However, the Supreme Court has, on several occasions, held that the right to privacy is a part of the fundamental right to life conferred on every individual, and can be violated by none, not even the State, except in situations of public emergency.

[3] Section 43A of the IT Act, Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal information) Rules, 2011.

[4] Section 72A of the IT Act.

[5] The Cyber Appellate Tribunal has a website which reports orders passed by the tribunal in appeals made against orders passed by the adjudicating officer under the IT Act.

[6] For instance, under the IRDA (Third Party Administrators-Health Services) Regulations, 2001, third party administrators which customarily undertake all data entry work, are prohibited from trading information.

[7] IRDA (Sharing of Database for Distribution of Insurance Products) Regulations, 2010.

[8] Master Circular on Customer Service in Banks and Master Circular on Credit Card Operations of Banks, issued by the RBI.

Death at Kedarnath: Mule owners and their right to strike

26 Jun

Little noticed news reports in a couple of papers (here and here) indicate that the death of many pilgrims in Kedarnath may have been exacerbated by the actions of local mule owners and contractors for car parking lots in the days leading up to the heavy rains and clash floods. The local mule owners and and contractors apparently went on a strike, and prevented private chopper services from operating on June 14, 15, and 16.

Ten private helicopter services ferry pilgrims from Phata and Guptkashi to Kedarnath and back. The car park owners are located in Gaurikund, from where pilgrims walk, or ride on mules to reach Kedarnath. The helicopters were not allowed to land in Kedarnath for two days. Additionally, the mule owners also went on a strike. As a result, there was an unusually large concentration of pilgrims in Kedarnath who could not travel back. This may have contributed to the increase in loss of human life, as so many pilgrims were left stranded when the flash floods struck the region.

 

Why were the mule operators and car parking contractors striking?

As per the news report, local officials said the strike was ostensibly on grounds of “environment protection”. The actual dispute was however that the helicopter services were seen hurting the economic interests of the mule owners and contractors. Their business was suffering due to the decrease in demand for their services owing to the helicopter ferry service. The state government was able to convince these protesting groups to allow helicopter services to land only on June 16. June 16 was also when the rains and flash floods struck the region.

 

How could this have been prevented?

At one level this incident is just a story of short-sighted self interest causing the unnecessary loss of human lives. However, as vague as it sounds, developing a culture that emphasizes the protection of fundamental rights could in the long run, prevent such occurrences.

Let us for one moment keep the humanitarian tragedy to one side. On June 14 and 15, there was little indication (apart from forecasts of heavy rainfall) that a natural calamity of such magnitude would befall the region. At that point of time, the “dispute” between the mule owners and contractors on the one hand, and the helicopter service providers on the other hand was a conflict between two sets of individuals trying to protect their fundamental rights. Article 19(1)(g) of the Constitution allows all citizens the right to “practise any profession, or to carry on any occupation, trade or business”. What this means is that the state cannot take away this right from any individual.

The Supreme Court has clearly held, that since all citizens possess this right, the right of one citizen cannot be curtailed for facilitating the exercise of the Fundamental right of another person (Railway Board v. Niranjan AIR 1971 SC 966). In short, the right of the helicopter service provider cannot be curtailed to facilitate the fundamental right of the mule owner or the car park contractor. One may argue that in this case, the fundamental right of the helicopter service providers was not curtailed by the state, but by other private citizens. However, the state, by failing to protect the rights of the helicopter service providers, and by allowing the local protesters to prevent the helicopters from landing, did in fact prioritze one right over the other. The state may not have violated fundamental rights, and it may not suffer any liability for the same. However, fundamental rights were curtailed in the present case, and the state could have done more to prevent the same.

It must also be stated that while the Constitution allows people the freedom to protest, it does not allow protesters to infringe on the fundamental rights of other citizens while protesting. The mule owners and car park contractors are well within their rights to protest, but in doing so, they cannot prevent the helicopter services from operating, as that infringes on someone else’s freedom to conduct business. The Supreme Court has held that violation of the fundamental right of one individual by another individual (without the support of the state) is not considered a violation of Article 19 (Samdasani v. Central Bank of India AIR 1952 SC 59). On the face of it then, fundamental rights cannot be said to have violated as the mule owners were private operators. However, the district administration was in charge of regulating the mule service. The district administration therefore had an obligation to resolve issues faced by mule owners and also not allowed the rights of the helicopter service providers to be infringed.

Moreover, even if the state has no positive obligation to protect fundamental rights under Article 19, it does have the power to create reasonable restrictions. Sometimes, the creation of such restrictions enable the better enforcement of these fundamental rights. For example, the Supreme Court has held the following to be reasonable restrictions on fundamental rights: (a) protection of slum-dwellers against excessive rent, (b) protection of slum dwellers against eviction, and, (c) protection of debtors from excessive interest. There was thus, nothing preventing the district or state administration from interfering in the protest by the locals to impose a reasonable restriction in the interests of the general public. The state may not have violated a fundamental right by failing to do so. But it does have certain powers given to it under the Constitution, which it could have utilised to ensure the general public was not affected.

 

To be clear, I am not making the case that the state violated fundamental rights in this case. However, the state could, and should have taken a rights-based approach and made sure that helicopter ferry services were not interrupted due to the ongoing protests. If the helicopter service providers had the required permissions and clearances to ferry passengers to and fro from Kedarnath, the government should in no case have allowed local protesters to prevent such a service. It affected the rights of the service providers, and it in effect was restricting the rights of the pilgrims to enter into a contract with a service provider of their choice. While the pilgrims were held to ransom and for all practical purposes denied any means of transport, the state administration merely sent two officials to negotiate with the striking individuals. In short, the government was trying to negotiate the extraction of stranded pilgrims by locals who were acting completely illegally!

This is by no means an isolated incident. While the state routinely subverts many legitimate protests for the enforcement of fundamental rights, it also bends over backwards routinely to negotiate with misbehaving, but important constituencies. Protection of rights in such cases often takes a backseat, and every once in a while, this leads to a completely unnecessary, and tragic loss of human lives. Pilgrims, literally, be damned.

Disaster management: How prepared are we?

25 Jun

The flash floods and landslides caused by sudden heavy rains in Uttarakhand and Himachal Pradesh on June 15 have resulted in heavy casualty and loss of property.  The death toll is likely to be about 1000 while over 20,000 people still need to be evacuated.  Currently, rescue operations are being carried out by several agencies such as the Army, Indo-Tibetan Border Police (ITBP), Border Security Forces (BSF), and the National Disaster Response Force (NDRF) (see here for latest updates).

However, various news reports (see here, here and here) have highlighted the lack of disaster preparedness of the authorities in the state and the centre.  In fact, news reports suggest that the Indian Meteorological Department had warned Uttarakhand government of the likelyhood of heavy rainfall within 48 hours.  However, the local authorities failed to issue any warning or analyse the likely effect of such rainfall.  Given the size of its population and the high risk it faces from natural disasters, it would be absolutely criminal for India to be lackadaisical about its disaster preparedness.

In this blog post, I provide a quick analysis of where India stands in disaster management preparedness.

A blue-print for disaster management

India first woke up to the need for a holistic approach to disaster management (and not relief centric) after the devastation caused by the Indian Ocean tsunami, the super cyclone in Orissa and the earthquake in Gujarat.  Disaster management was recognized as a development issue for the first time during the 10th Five Year Plan (2002-2007).  In 2005, the government passed the Disaster Management Act, to provide for effective management of disasters.  It defined disaster as a catastrophe, calamity or grave occurrence in any area due to man-made or natural causes or by accident where there has been substantial loss of life and property.  The Disaster Management Policy was framed in 2009.

The Ministry of Home Affairs is the nodal ministry for disaster management.  The National Disaster Management Authority (NDMA) is mandated to deal with all types of disasters, natural or manmade with certain exceptions (such as terrorism, counter-insurgency, serial bomb blasts, and hijacking, mine disasters and forest fires).  The National Crisis Management Committee (NCMC), headed by the Cabinet Secretary handles these issues.  NCMC gives directions to the Crisis Management Group, which actually deals with all the matters related to relief activities in the case of any major disasters.

National level authorities under 2005 Act

  • The Act established the NDMA and provided for setting up advisory committees and a National Executive Committee to aid the NDMA in performing its functions.
  • NDMA’s functions include (a) laying down the policies, plans and guidelines for disaster management; (b) approving the National Plan and the plans of various ministries; and (c) laying guidelines for state authorities.  It shall also recommend guidelines for the minimum standard of relief to be provided to persons affected by the disaster (relief camps, ex-gratia assistance).
  • The National Executive Committee would prepare a National Plan for disaster management of the country.
  • The National Disaster Response Force (NDRF) would be under the general superintendence of NDMA but the command of the force shall be with the Director General of NDRF to be appointed by the central government.

State and district level authorities under 2005 Act

  • Every state government has to set up a State Disaster Management Authority, which would be assisted by advisory committees and State Executive Committee.  In addition, it has to set up District Disaster Management Authorities in every district of the state.  The State Executive Committee is responsible for implementing the national and state plans and act as the coordinating and monitoring body for management of disaster in the state.

Penalties

  • The Act also lays down penalties ranging from one to two years imprisonment and fine for offences related to obstruction of any officer in the performance of his duties, false claims, misappropriation of money or material and for making false warning (relevant government officials have been given blanket immunity from this provision).

On-ground status on implementation

By the end of the 10th Plan, a skeletal structure for disaster management had been put in place.  A central law on disaster management was enacted in 2005 and the National Disaster Management Authority was set up.  However, the Act itself had certain shortcomings which contributed to its poor implementation record.

Shortcomings in the Act

The Standing Committee on Home Affairs had examined the Disaster Management Bill and made certain recommendations, most of which were not incorporated in the 2005 Act.  It suggested that at each level, the respective authority should include elected representatives from the Parliament, State Legislatures and local government bodies.  At the district level, there should be a Relief Commissioner (other than the District Collector/Magistrate) to ensure that affected population in disaster hit areas get relief.  Although the Act included penalties for giving false warning and causing obstruction, it is not clear who would be the complainant in such cases.

Other experts (see here and here) also pointed out loopholes in the Act, which might make it less effective.  They include (a) lack of clear guidelines on who shall be entitled to relief and compensation under the Act; (b) lack of clarity on who shall be monitoring the performance of the various agencies set up under the Act; (c) lack of clarity about coordination between the different agencies; (d) no guideline on how to differentiate between a disaster and a disaster of severe magnitude; and (e) no provision for declaring a disaster prone zone or classifying disasters in various categories.

Poor implementation record

The level of preparedness for disaster management at the centre and the states is very uneven.  According to a 2012 report by the Institute of Defence Studies and Analyses, even after six years of the enactment of the Disaster Management Act, many states have not yet established the state-level authorities.  The report concludes that the present capability of civil administration for combating disasters remains inadequate and they rely on the armed forces for major emergency responses.

In 2013, the Comptroller and Auditor General (CAG) released a performance report on India’s disaster preparedness.  It found critical gaps in the preparedness level for various disasters.  It found NDMA to be ineffective in most of the core areas since it neither had information and control over the progress of the work at the state level nor could it successfully implement various projects.  The report stated that the National Executive Committee had not met after May 2008; the National Plan for Disaster Management has not yet been formulated and there were delays and mismanagement in respect of State Disaster Response Fund.

Response to a specific disaster is the best test of the level of disaster preparedness.  However, the response to the Uttarakhand floods has exposed the lack of preparedness of administrative machinery.  While natural disasters may be unpredictable, India cannot afford to wait for the next disaster to strike before getting its act together.

Time-bound delivery of Public Services now a reality?!

21 Jun

Tired of paying repeated bribes for common public services?  Tired of running around in circles to collect government documents? Tired of waiting forever for your file to move? The Right to Public Services Legislation could be the one stop solution for all your woes!

My experiences with government services haven’t been the most pleasant ones. There have been many instances where I’ve heard people complaining about public service delivery mechanisms but I never understood the extent of their misery till I had to face it myself. For instance, the number of bribes I had to pay to get a simple passport made in addition to the extra bucks for tatkal for a speedy delivery was not only taxing financially but also mentally tiring.

1. Bribe number one was to the police to verify my identity,

2. Bribe number two was for the scribe who pushed me ahead in line so that I get my turn faster (I did not belong to the city where the closest passport office was located) and

3. Bribe number three for a special agent as my first application had been denied as they did not believe in the authenticity of my birth certificate because my name was written on the top corner with a pen (was marked during school admission to keep it safe).

This is just one such example. This got me thinking about how it has become a part of our life now. As long as we can pay and get the work done, we go ahead with it. There are people who are harassed because they do not have the means to pay a bribe. Filing a complaint with the courts or the lokayukta for every little bribe that has been asked for or paid till date is not only arduous but also time consuming.

Trying to emphasize on the nature of the issue at hand, Janaagraha, a not for profit institution based in Bangalore came up with a website called IPAIDABRIBE.COM. The website has reports from regular people relating to bribes they have paid, accounts of their tryst with honest policemen and stories from people who fought against it. According to data collected by the website, 23110 reports has been filed from 548 cities in India where people have paid a cumulative bribe of around 186 crores as of 19 June 2013. These are people who 1.) have access to internet, 2.) know about the website and 3.) have taken time out to file a report. Imagine the extent of the unaccounted bribes paid across the country just to get the public services sector to do its job.

India has witnessed an encouraging momentum of people who united against the cause of corruption led by Anna Hazare. While this moment emphasized on an overarching regulating body like the Lokpal in the centre and Lokayuktas in the states, there are other legislations which bring about change which is felt closer home. The crusade on improving public service delivery mechanisms was started in 1997, where in a conference of Chief Ministers of various states and union territories presided by the then Prime Minister, it was decided that both the central and state governments would formulate a citizen’s charter. In 2002, the Government of India under the aegis of Department of Administrative Reforms and Public Grievances set up a comprehensive website. While, this move was good in principle its implementation faced setbacks in terms of lack of will from the lethargic bureaucracy, lack of awareness, constant transfers of concerned officers as well as wrongful understanding of standards or norms relating to the service provided. In 2005, the momentous Right to Information act was passed with the aim to make Indian governance more transparent.

Indian states have come a long way from the non-binding citizen charter to introducing legally binding legislations that guarantee its citizens time bound delivery of select public services. Madhya Pradesh in 2010 under chief minister Shivraj Singh Chouhan was the first state to enact the Madhya Pradesh Lok Sewaon Ke Pradan Ki Guarantee Adhiniyam. The Right to Public services legislation has since been adopted by 16 other states. The bill texts can be found in the table below.

Public Services Legislations in India

 

Title of the Bill Date of passing
The Madhya Pradesh Lok Sewaon Ke Pradan Ki Guarantee  Adhiniyam, 2010 August 18, 2010
The Uttar Pradesh Janhit Guarantee Adhyadesh, 2011 January 13, 2011
The Delhi (Right of Citizen to Time Bound Delivery of Services) Act, 2011 April 28, 2011
The Jammu and Kashmir Public Services Guarantee Act, 2011 April 13, 2011
The Bihar Right to Public Services Act, 2011 August 15, 2011
The Rajasthan Guaranteed Delivery of Public Services Act, 2011 September 21, 2011
The Uttarakhand Right to Service Act, 2011 October 4, 2011
The Himachal Pradesh Public Services Guarantee Act, 2011 October 17, 2011
The Punjab Right to Service Act, 2011 October 20, 2011
The Jharkhand Right to Service Act, 2011 November 15, 2011
The Chattisgarh Lok Seva Guarantee Act, 2011 December 12, 2011
The Assam Right to Public Services Act, 2012 March 29, 2012
The Karnataka (Right Of Citizens to Time Bound Delivery Of Services) Bill, 2011 April 2, 2012
The Kerala Right to Service Bill, 2012 July 27, 2012
The Odisha Right to Public Services Act, 2012 September 6, 2012
The Gujarat (Right of Citizens to Public Services) Bill, 2013* April 1, 2013
The Goa (Right of Citizens to Time-Bound. Delivery of Public Services) Bill, 2013 May 2, 2013

* bill text is not available

The Government of India has also come up with the Right of Citizens for Time Bound Delivery of Goods and Services and Redressal of their Grievances Bill, 2011. The bill was introduced in the Lok Sabha on December 20, 2011 and was sent to the Standing Committee which submitted its report on August 28, 2011.

While, the implementation of these acts as well as its impact is yet to be analysed thoroughly, it’s a step in the right direction. Awareness relating to these acts is low among the local populace. Steps need to be taken to promote the use of these acts just as it was done for the Right to Information Act. In my next blog post, I will be discussing the main principles of these acts and examine its implementation in select states.

Aside

Who watches Big Brother?

20 Jun

Recent news reports provide a sneak peek into the blueprint for the National Cyber Coordination Centre in India.  According to a 2012 Report of the Institute for Defence Studies and Analysis, India’s intelligence agencies and their policy development wings are extremely fragmented.  Thus, the decision to prefer a central authority that would coordinate between different intelligence departments is good, and should be heralded.  However, surveillance strategies typically raise concerns over the right to privacy.  Surveillance agencies are empowered to monitor, record, and intercept communications that may even be private, and access stored private information.  While intelligence collection is required for ensuring security, procedural safeguards are required to ensure that the right to privacy is not violated.  In this article I discuss privacy concerns in the context of their accountability to the electorate and hope to provide a solution that treads the fine balance between right to safe and secure environment and the right to privacy.

The devil lies in the details

Not all intelligence and information collection agencies in India are established under a statute.  For instance, National Intelligence Grid (NATGRID), Unique Identity Authority of India (UIDAI now proposed to be replaced by the National Identity Authority of India), Intelligence Bureau (IB), do not have statutory backing.  Other agencies, such as the Computer Emergency Response Team-India (CERT-In) and National Infrastructure Information Protection Centre (NIIPC), have been envisioned under the Information Technology Act, but its structure and procedures have not been dealt with. Right to private communications was held to be a fundamental right by the Supreme Court of India under Article 19 and 21.  However, communications can be intercepted in case of “public emergency” or “in the interest of public safety”.

Checks against agencies that conduct surveillance and collect information are often not borne out of the enactments under which they are constituted.  For instance, the Telegraph Act did not require surveillance agencies to adhere to procedures that protected the right to privacy.  It was only after the Supreme Court delivered its decision in PUCL vs. UOI (1997), Rules were notified to provide safeguards to privacy in case of interception of telephone calls.  The Rules require permission to intercept from the Home Secretary, which are reviewed by a Review Committee. Similarly, the Information Technology Act, 2000 does not provide guidelines to Computer Emergency Response Team-India or the National Infrastructure Information Protection Centre on how they may use surveillance powers.  Under various provisions of the enactment (Sections 69: interception or monitoring or decryption of any information; and Section 69B: monitor and collect traffic data or information) the government is empowered to monitor online communications.  The enactment however delegates the power to specify procedural safeguards to surveillance.  Admittedly, the safeguards provided under the Telegraph Act have been notified under the IT Act as well.  But the question remains, should the manner in which a fundamental right can be impinged, even on the ground of public interest, be left to the discretion of the executive?

While delegated legislation has developed to provide procedural safeguards to surveillance activities, there is merit in statutory provisions to this effect.  Delegated legislation, such as Rules and Regulations, do not require prior approval of the democratically elected representatives.  They are neither proposed by a member, or subject to in-depth scrutiny by a parliamentary committee that has expertise on the subject.  Rules are deemed to be passed by the parliament once they have been tabled for a period of time, unless they are specifically objected to by a member.  Past experience is telling in this respect.  The Information Technology Rules, 2011 relating to the rights of citizens to express themselves on the internet are in force despite an assurance to review the Rules by the Minister for Information Technology.  On the other hand, statutes undergo rigorous scrutiny by the parliament and allow for citizen engagement at various stages of development. A number of information collecting, sharing and monitoring agencies have been set up without concomitant legislations.  The UIDAI, which is established under the Planning Commission, is not a statutory body.

Similarly, the Crime and Criminal Tracking Network and System, launched by the Home Ministry, is not sanctioned by Parliament.  The NATGRID, which links various databases between intelligence and investigative agencies on the one hand and service providers, such as telecom companies, banks, etc, to enhance our counter terrorism capabilities is also not established through an enactment.  Functions performed by these entities and the powers they wield are likely to impinge the rights of citizens to privacy.  These bodies are not guided by statutory principles for protecting the fundamental right to privacy.  Therefore, the need for accountability in relation to these agencies is higher.

Parliamentary scrutiny of surveillance agencies

Indian law enforcement, surveillance and security agencies have preferred to stay in shadows, protected from demands of accountability.  While these agencies are responsible to the parliament through the Ministers, their accountability has been limited as: (a) there is no requirement for ministries to provide detailed reports about the functioning of these agencies to parliament; (b) annual reports that discuss their working are very skeletal (see here at page 24 – MHA’s annual report that discusses NATGRID). These agencies are also exempt from scrutiny of citizens under the Right to Information Act.  The RTI provides a blanket exemption to intelligence agencies such as IB and RAW and to other agencies when the information dealt with is sensitive in nature.

While such protections are warranted, given the nature of the information that they deal with, adequate mechanisms for accountability need to be developed to ensure that these agencies function within the fold of the policies envisioned by the legislature and the rights it seeks to protect.  The parliament, as the representative of the people, has the onus to ensure that agencies established by the government function according to the demands of national interest.  This may be done through means of direct accountability of officers from these agencies to the parliament, frequent detailed reports of their working, and institution of a parliamentary committee that oversees intelligence agencies across ministries. In developed democracies, intelligence agencies are responsible to the legislature and have to frequently justify their actions to the elected representatives.

For instance, the Government Communications Headquarters (GCHQ) that conducts surveillance in the UK, is responsible to the Intelligence and Security Committee, which comprises parliamentarians though it is not a parliamentary committee.  Government officials are statutorily required to share information with the Committee.  The Committee is answerable to the PM and through him to the parliament.  The Committee Reports are debated in parliament.  In response to the recent allegations arising from the Snowden leak, that the GCHQ relied upon the US surveillance systems to monitor British citizens, the agency is due to submit its report to the Committee.  On the basis of the Report, the Committee will decide its future action.  Such scrutiny ensures that agencies maintain the balance between national security and individual liberties.  It also helps the legislature innovate solutions in real-time to circumstances such as those in the UK today.

Need for Safeguards against “Big Brother”

The fractured politics of today have made the Opposition voices stronger.  The decision to roll-out National Counter Terrorism Centre was shelved when it was rejected by various regional party led governments.  Any move to increase surveillance, needs to be balanced with safeguards of parliamentary oversight and statutory protection of the right to privacy.  In the absence of these rudimentary good governance checks and an overarching law on privacy, the surveillance program would fail to secure the people’s buy-in and only increase the trust deficit between the elected and the electorate.

The Report of the Group of Experts on Privacy too had noted the importance of accountability to ensuring privacy.  It stated that “accountability provides directions for enterprise wide implementation of privacy. For the commitment to accountability, organisations are expected to undertake a trust building exercise in respect of its responsibility towards privacy.”  How the government will undertake trust building exercise remains to be seen.

Should cheque-bouncing be a crime? Issues and consequences

18 Jun

It has been estimated that about 30% of criminal cases in Indian courts are either cheque bouncing or traffic offences. The government has now proposed to amend the Negotiable Instruments Act (N.I. Act) to decriminalise the offence of bouncing cheques (called `138 N.I.’ in legal circles) (See here). This move is aimed a decongesting the judicial system.

The criminalisation of writing cheques without a sufficient balance was introduced in India in 1988. It was an addition to a much older British law called the Negotiable Instruments Act, made in 1881. The reason for the amendment was the endemic problem of cheques being dishonoured. This had made it difficult to do transactions where payment and delivery don’t happen instantaneously. Mistrust of cheques was encouraging cash transactions, with consequent problems of counterfeiting, costs of storing and moving cash, and the law enforcement problems of an underground economy.

In 1988, when the amendment was brought in, no estimation was done of the additional burden on the criminal court system because of the law. This episode has taught all of us that every time legislation is enacted, careful calculations need to be made about the costs of enforcing the law and these costs should find their way into budgets.

The de-criminalisation of cheque bouncing is a good move. It will reduce the burden on criminal courts. However, the cheque bouncing cases are symptomatic of a deeper malaise: poor contract enforcement. While we may cheer the demise of a poorly thought out and draconian measure in 1988, there is a dark side to this as well.

Consequences for contract law

One of the best achievements of the World Bank is their `Doing business’ database. India ranks poorly on many counts in the Doing Business 2013 report. Of the 10 indicators tracked by the report, India’s rank is worst in Enforcing Contracts, where it is ranked 184th out of 185 countries:

  1. It takes 1,420 days to resolve a contract dispute.
  2. 39.6 percent of the contract value is lost, of which 30% is paid out as fees to lawyers.
  3. Even after getting a judgment in your favour, it takes 305 days to enforce the judgment.

Given the absence of good contract enforcement, after 1988, cheques were often used by the recipient of funds to create a deterrent against reneging. A common method of ensuring regular payment of rent is to use post-dated cheques. The landlord takes the entire year’s rent in post-dated cheques. This allows the landlord to bypass the entire rent-controller and court system for evictions when rent is not paid on time. With the voucher from the bank (recording the dishonouring of the cheque), the landlord can file a criminal complaint against the tenant.

This is a bad system of contract enforcement! It is biased towards the party which expects payments and has no remedy to the party which is getting a service or good. As an example, if the tenant sets off some rent because of mandatory repairs which the landlord failed to carry out, the tenant is perfectly allowed to take a defence of `set-off’ in a contractual relationship. However, underlying the NI act is a presumption of debt, which will let the criminal case continue till the tenant is able to establish that there had been a valid set-off.

On a similar note, while the existing Section 138 of the NI Act is a draconian idea and bad in many ways, it has interesting positive effects when placed in an environment of bad contract enforcement. Consider the penalties for bouncing a cheque:

  1. Imprisonment for up to 2 years, or,
  2. Fine up to twice the amount involved, or,
  3. Both of the above.

This is draconian, but there is considerable legal certainty. In contrast, when a contract is violated, there is no statutory method for calculating the amount of damages that the violator has to pay. Given the delays in contract resolution, and the legal and administrative costs, which are usually not awarded, the net receipt is generally much lower than the amount owed. Indian courts are not bound by a strict statutory requirement of calculating litigation costs and interest accrued is rarely granted from the date of dispute. For this reason, there was some method in the madness of S.138 of the N.I. Act.

Consequences for courts

The proposed withdrawal of 138 N.I. has not adequately been thought through, in terms of the implications for the judiciary and the legal system. It is being argued that for many cases, arbitration will be done. However:

  1. What about the increased civil court burden? As argued above, post-dated cheques were used as a substitute for contract enforcement services of civil courts. When this mechanism is no longer available, there will be a surge in contract disputes. This flow of cases will atleast partially counteract the de-bottlenecking of courts that will come from removing cases associated with S.138.
  2. Where will we get the increased number of arbitrators? There are very few arbitrators in India, and there is no institutional system of providing arbitration services outside the larger cities.
  3. Who will bear the costs? The costs of arbitration are very high in India. While it may be appropriate for large businesses to internalise their dispute resolution mechanisms, smaller businesses should have access to a court system.
  4. Will arbitration be faster? There is no standardised procedure in the arbitration system in India for cheque bouncing cases. Evidentiary and procedural variety will lead to more challenges in appeal and increase the burden of the judiciary where every appeal will have to be checked for procedural propriety.
  5. Does the judiciary have the bandwidth to cope with the case load that will appear for review? Orders of arbitrators will be appealed to the higher judiciary. In many cases the courts will have to intervene to appoint arbitrators.
  6. Will people write more bad cheques? The authority of the arbitration system is based on the efficiency of the court system. The rational violator knows that the arbitral award will go to the same over-burdened judiciary where penal costs are rarely imposed, so there will be little incentive to honour arbitration awards.

Conclusion

S. 138 of the N. I. Act is a reminder to us of the complexity of public administration reforms. When liberal democracy works well, it is a Rube Goldberg machine with immense complexity of many moving parts. Simplistic reasoning will almost always lead us astray with unintended consequences. Hurried changes of law (such as those produced through weekend drafting projects) will almost always go wrong. Well done law will almost always require enormous effort, will require sophisticated thinking about incentives in envisioning legal effects, and will involve a certain element of complexity.

Faced with a problem like S.138 of the N. I. Act, what is a thinker of government to do? There is a real opportunity in thinking outside the box. The solution to making payments lies not in making cheques work better but in fundamental change in technology: by moving to electronic payments. All these problems go away if you pay me on an electronic system, and within one second, I know whether I have received the money or not. Our job is to dematerialise money, just as we have dematerialised shares. This will also require consequent changes in the Payments and Settlement Systems Act, which has mistakenly copied S.138 of the N. I. Act. This requires new thinking in financial policy so that India can get to a sensible payments system.

Electronic payments is of course no substitute for the public goods of contract enforcement. India desperately needs a good legal system, which comprises laws, lawyers and courts. But in this specific case, the storm of complexity associated with cheques is actually something that can be completely side-stepped. Amidst the debate around S.138 of the N. I. Act is a failure of imagination on policies about the payments system.

Legalizing Betting in Sports: Some Reflections on Law Making (Part II)

13 Jun

In my previous post, I looked at the recent proposal to legalize betting in sports in India and reflected upon the question of the moral authority of the state to ban conduct such as betting. In this post, I examine some of the justifications offered for the non-implementation of betting laws and the impact of legalization of betting on fixing.

Even as the recent IPL scandal has exposed intricate links between fixing and betting, a solution to betting is being proposed as a solution to fixing. There is a difference between fixing and betting. I don’t think anyone would support legalized or regulated fixing. Fixing is deplorable; it turns a match to a scripted episode, denies honest players a chance to win (or lose) a game on their effort (or the lack of it), and undermines the faith the fans repose in the game and the players. However, legalization of betting in sports is being seen as one of the solutions to mitigate the practice of fixing.

There are mixed reactions to this proposal. On one hand, it seems that betting causes fixing, because bookies are willing to pay players and fix the game to make substantial profits by changing the odds in their favour and winning bets. On the other hand, it is argued that legalization will help monitor the conduct of bookies, take betting away from criminals to financed bookies who have incentive to report corruption, and provide regulatory authorities with a data source to rely on when investigating cases of suspicious bets and fixing. It is also argued that the law should allow regulated betting rather than waste resources imposing a blanket ban which, in any case, is impossible to implement fully. Whether legalization of betting will actually help check fixing or not is debatable. It is argued by some that such experiments in the past have not worked, for example, fixing exists in football even in countries where betting is legal, and spot fixing occurred in cricket in England in 2010 involving Pakistani players, although betting is legal in England.

Here, I do not want to pronounce upon whether a betting ban is in fact impossible to implement and whether legalization will actually help control instances of spot fixing and match fixing. What I do want to reflect upon is whether obedience to a law (i.e. whether a law is generally followed by people) should be a valid ground to repeal or change the law? Assuming these justifications are in fact correct, should that be a good reason to legalize betting? There are two aspects of this argument involved here: one, betting laws themselves are incapable of being fully enforced; and two, legalization of betting will make another law (anti-fixing law) more efficacious.

Enforcing Laws on betting

Let us begin with the first aspect. I believe that the argument in favour of changing betting laws due to their non-enforceability has been received quite comfortably and without much challenge. Similar arguments to legalize conduct because of the perceived difficulty in  implementing them have been made in other areas like prostitution and illegal migration. In India, many laws remain unenforced and many crimes happen despite strict criminal laws. I don’t believe anyone would argue that we should, for instance, legalize rape just because rapes will anyway continue to occur. What about anti-piracy measures under copyright laws?

Of course, no one is so naïve as to argue for legalization on the sole ground that implementation is not possible. However, we need to examine if this should be a ground at all. I feel there is some laziness involved in making the argument to change laws just because they are not being implemented. Questions on legalization of prostitution vis-a-vis rape has got nothing to do with implementation, but about substantive questions about what we consider legal and illegal. I am not saying that the consideration of actual enforcement of a law is irrelevant to law making. However, by itself, inefficacy and non-implementation are not the grounds to change a law.

Other considerations

So what are these other considerations? At first, we need to examine if a law is actually ‘impossible’ to enforce. Many laws may be easy to make but difficult to implement. Is the question really about the difficulty of enforcement or the inadequacy of our enforcement mechanisms? Road traffic laws may be ‘impossible’ to fully implement, but when they are strictly and correctly enforced by concerned authorities through fines and other penalties, these laws may become more efficacious.

Legal philosopher Hans Kelsen has a fascinating point of view on this. He states that the validity of a law is not conditional on the law being efficacious. In fact, according to him, if a norm is anyway followed by all, then the enactment of the very law is meaningless. This indicates that some discord between the law and reality is bound to exist. We may think of ways to make existing enforcement mechanisms better or consider adopting different enforcement mechanisms, without changing the substantive law.

Non-efficacy may help us question some more substantive aspects as well. We may look at the ‘mischief’ that the law seeks to remedy and reconsider if we really do want to regulate that ‘mischief’. For example, in my previous post I considered whether the state should criminalize victimless conducts like betting. If yes, what is the best way to address the mischief—stricter criminal laws as was done in recent amendments on rape laws, or decriminalization coupled with regulation as is being argued in the case of betting? If majority of people are disobeying a law, it might be a good ground to examine our motives and strategies, but not by itself to change the law.

We also need to consider some of the ‘side-effects’ of existing laws. Arguments for relaxation in betting (and prostitution and migration) laws involve not only the continuation of the banned conduct, but also that these laws drive illegal conduct underground, furthering the mischief. Drawing from Justice O.W. Holmes’ Bad Man theory, instead of eradicating the evil, the law may instead drive the bad man to engage in it more clandestinely, causing greater harm.

This brings us to the second aspect that legalization of betting will help address the bigger problem of fixing. The argument is to decriminalize one conduct to check another crime, probably a higher evil (like relaxed migration laws may help reduce vulnerability of migrants to exploitation and forced prostitution). Again, rather than treating this as a ground for legalization itself, there is a need to examine the motives and regulation strategies of the conduct sought to be legalized. There is also a need to examine the strategies being used to counter the higher evil, in this case, fixing. What other possible strategy may prevent a ‘bad man’ from engaging in a wrongful conduct? If the motives behind criminalizing the lesser evil are justified, the improved efficacy of the other law cannot by itself be a ground for decriminalization.

Thus, while concerns around efficacy and non-implementation are valid, we need to use these concerns to question and address the more significant issues. If the real problem lies elsewhere, we must not lazily use these as excuses to change the law.

Welcome to the surveillance state

12 Jun

Last week brought us explosive revelations from the The Guardian that the US National Security Agency (NSA) is conducting extensive surveillance on internet traffic patterns, email, and telecommunications. While perhaps not surprising, the news was shocking on at least three levels – (1) the program’s extensive reach, (2) its corporate participation from the likes of Google, Facebook, Microsoft and Apple, and (3) the fact that it was entirely secret from the public.

In an editorial today entitled “Do not emulate the US on surveillance.”[1] The Economic Times reminds us that in India, “[t]he actual situation might already be alarming: remember, a leading service provider not too long ago revealed it had intercepted around 1.5 lakh phone calls over a five-year period. And that’s just one service provider.” The editorial goes on to declare, “[w]anton use of such capability isn’t just illegal, it vitiates the notions of transparency and accountability central to democracy.”[2]

So what is the actual situation? What is the reach of the Indian cyber surveillance state?

Yesterday, The Hindu reported on an upcoming government initiative that looks eerily similar to the US program, dubbed the National Cyber Coordination Centre (NCCC).[3] According to the newspaper, it obtained details of the program from a “secret government note.” The goal of the NCCC will be to  provide a “real-time assessment of cyber security threats and generate actionable reports/alerts for proactive actions by law enforcement agencies.” In order to accomplish this, the NCCC will “collect, integrate and scan [Internet] traffic data from different gateway routers of major ISPs at a centralised location for analysis,”[4] which also happens to be the backbone activity of the US program.[5] In addition, the NCCC will have several members of the national security apparatus as active participants, including: the IB, RAW, the National Technical Research Organisation (NTRO), DRDO, and all three branches of the military, among others. The NCCC will be under the Department of Electronics and Information Technology and is expected to cost around Rs. 1000 crore.[6]

The NCCC may not be in place just yet, but extensive government surveillance capabilities, both physical and legal, are already in place. The Information Technology Rules, 2011, provide for the release of sensitive personal information (including passwords, bank accounts, credit and debit card details,  physical, physiological and mental health conditions, sexual orientation, medical records, and biometric information) to government officials on written request for the purpose of investigation and prosecution.[7] The free speech implications of provisions in the Rules prohibiting certain types of internet content are already well known, with numerous cases of individuals facing legal action and jail over social media posts.[8]

Just last month, the government began to roll out the Central Monitoring System, which will give government organizations like the Intelligence Bureau, National Investigation Agency, and tax authorities access to the entire spectrum of personal communications, including online activities, phone calls, SMS messages, and social media.[9] Last week, Human Rights Watch issued a statement calling the CMS “chilling.”[10]

This post presents a very cursory sketch of the cyber surveillance apparatus, and nothing in it is intended to say that the government has no legitimate interest in protecting the country from cyber threats. In the modern security landscape, coordinated cyber attacks (especially from China) present a significant national security threat and alarming incidents have already been documented.[11] Assuming the story in The Hindu is accurate, however, the formation of the NCCC and roll out of the CMS, will have huge implications for the privacy of internet and telecom users.

Coupled with  the IT rules and recent developments in the erosion of free speech,[12] such provisions have the potential to further dampen political dissent on internet forums and social media. Unlike the American spying program, however, the basic framework of India’s cyber surveillance state is still in its nascent stages, and public debate may yet impact its scope. A quick search of  parliamentary questions and debates from the Fifteenth Lok Sabha yields many logistical questions about cyber security, but few concerns about cyber privacy. One can only hope that, as programs such as the NCCC are developed further, some measure of parliamentary accountability takes hold and an even more robust public debate ensues.

 


[2] Id.

[3] Sandeep Joshi, India gets ready to roll out cyber snooping agency, The Hindu (Jun. 10, 2013), http://www.thehindu.com/news/national/india-gets-ready-to-roll-out-cyber-snooping-agency/article4798049.ece?homepage=true

[4] Id.

[5]Barton Gellman & Laura Poitras, U.S., British intelligence mining data from nine U.S. Internet companies in broad secret program, The Washington Post (Jun. 7, 2013), http://www.washingtonpost.com/investigations/us-intelligence-mining-data-from-nine-us-internet-companies-in-broad-secret-program/2013/06/06/3a0c0da8-cebf-11e2-8845-d970ccb04497_story.html

[6] Joshi, supra note 2.

[7]Chakshu Roy & Harsimran Kalra, Rules and Regulations Review: The Information Technology Rules, 2011, PRS Legislative Research (Aug. 12, 2011), http://www.prsindia.org/uploads/media/IT%20Rules/IT%20Rules%20and%20Regulations%20Brief%202011.pdf

[8] India’s centralised monitoring system comes under scanner, reckless and irresponsible usage is chilling, DNA (Jun. 8, 2013), http://www.dnaindia.com/india/1845205/report-india-s-centralised-monitoring-system-comes-under-scanner-reckless-and-irresponsible-usage-is-chilling

[9] Indu Nandakumar & J. Srikant, Central Monitoring System to make government privy to phone calls, text messages and social media conversations, Economic Times (May 7, 2013), http://articles.economictimes.indiatimes.com/2013-05-07/news/39091148_1_single-window-pranesh-prakash-internet

[10] India: New Monitoring System Threatens Rights, Human Rights Watch (Jun. 7, 2013), http://www.hrw.org/news/2013/06/07/india-new-monitoring-system-threatens-rights

[11] Manu Kaushik & Pierre Mario Fitter, Beware of the bugs, Business Today (Feb. 17, 2013),  http://businesstoday.intoday.in/story/india-cyber-security-at-risk/1/191786.html

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