Lok Sabha passes Appropriation Bill

GS Paper II

Topic: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.

Prelims: Guillotine

Mains: Difference between a Money Bill and the Finance Bill

What’s the News?

Lok Sabha passed the demands for grants of various ministries without any discussion. The Lok Sabha will now discuss the Finance Bill, which essentially contains the government’s tax proposals.

Power of Parliament:

  • Both appropriation and finance bills are classified as money bills which do not require the explicit consent of the Rajya Sabha.
  • Rajya Sabha only discusses them and returns the bills. After passing of the Finance Bill, it enters the statute as the Finance Act. Thus, the final Budget gets approved.

Appropriation Bill:

Appropriation Bill gives power to the government to withdraw funds from the Consolidated Fund of India for meeting the expenditure during the financial year.

  • Post the discussions on Budget proposals and the Voting on Demand for Grants; the government introduces the Appropriation Bill in the Lok Sabha.
  • It is intended to give authority to the government to withdraw from the Consolidated Fund, the amounts so voted for meeting the expenditure during the financial year.

Demand for grants:

  • The demands for grants of only three Ministries — Rural Development,Tribal Affairs and Water Resources — were discussed by the House during the past few days.
  • Those for the remaining Ministries were guillotined and adopted in one go without discussion.


“Guillotine” means to bunch together and fast-track the passage of financial business. It is a fairly common procedural exercise in Lok Sabha during the Budget Session.

  • With parliament having very limited time for scrutinising the expenditure demands of all the ministries, after a pre-decided period of discussions over spending envisaged in the budget for some ministries is over, a guillotine is applied.
  • Once the speaker applies the guillotine, all the outstanding demands for grants, whether discussed or not, are put to vote at once. After this, appropriation bill is taken into consideration.

Finance Bill:

  • As per Article 110 of the Constitution of India, the Finance Bill is a Money Bill.
  • The Finance Bill is a part of the Union Budget, stipulating all the legal amendments required for the changes in taxation proposed by the Finance Minister.
  • This Bill encompasses all amendments required in various laws pertaining to tax, in accordance with the tax proposals made in the Union Budget.
  • The Finance Bill, as a Money Bill, needs to be passed by the Lok Sabha — the lower house of the Parliament. Post the Lok Sabha’s approval, the Finance Bill becomes Finance Act.

Difference between a Money Bill and the Finance Bill:

  • A Money Bill has to be introduced in the Lok Sabha as per Section 110 of the Constitution. Then, it is transmitted to the Rajya Sabha for its recommendations.
  • The Rajya Sabha has to return the Bill with recommendations in 14 days. However, the Lok Sabha can reject all or some of the recommendations.
  • In the case of a Finance Bill, Article 117 of the Constitution categorically lays down that a Bill pertaining to sub-clauses (a) to (f) of clause (1) shall not be introduced or moved except with the President’s recommendation. Also, a Bill that makes such provisions shall not be introduced in the Rajya Sabha.
  • The Speaker of the Lok Sabha is authorised to decide whether the Bill is a Money Bill or not. Also, the Speaker’s decision shall be deemed to be final.

Need of the Finance Bill:

  • The Finance Bill seeks to insert amendments into all those laws concerned, without having to bring out a separate amendment law for each of those Acts.
  • For instance, a Union Budget’s proposed tax changes may require amending the various sections of the Income Tax law, Stamp Act, Money Laundering law, etc. The Finance Bill overrides and makes changes in the existing laws wherever required.

Cashing on Declining Crude Oil Prices

Paper: III

For Mains: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Context of News:

  • With major cities and trading centres across the globe putting restrictions on travel, and some in lockdown mode, economic activity is expected to slow down at a fast clip. This worry is paramount in the minds of investors, as the impact of a prolonged slowdown will be far greater than the benefit for India from lower crude oil prices. The country imports more than 80% of its oil requirements.
  • The price of Brent crude had already dropped from $66 a barrel on 31 December to $45 a barrel on 16 March owing to concerns on demand. But with the Organization of the Petroleum Exporting Countries and allies failing to reach a consensus on supply cuts, a price war triggered a further drop to about $34 per barrel.

Why oil price crash is good for Indian economy:

  • Positive impact on India’s current account deficit and inflation:
  • Lower crude prices have a positive impact on India’s current account deficit and inflation. In the unfortunate event that the corona virus situation worsens, the gains to India from the sharp crude price drop may well be offset by the demand destruction that would occur due to slowing economic activity.
  • Given that the country is the world’s third-largest crude consumer and imports close to 85% of the oil that it consumes, any fall in oil prices is a relief, as the import bill comes down.

Impact of High oil prices?

  • Crude oil is bought and sold internationally in dollars. When an Indian company imports oil, it needs to pay for it in dollars. This pushes the demand for dollar vis-à-vis the rupee. With oil prices falling, the dollar demand for oil imports is going to come down and this should act in India’s favour at a time when there is tremendous downward pressure on the rupee.
  • Permanent increase in crude oil prices by 10% under ceteris paribus conditions could translate into the CAD increasing by 0.4-0.5% of GDP. It said rupee will be under pressure and dollar outflows will be the natural outcome of higher oil prices.
  • Rising crude prices may hurt the margins of Indian companies amid growing expectations of an earnings revival, which is very critical to sustain Indian markets.
  • Rise in crude prices also impact raw material supply chain of many manufacturing companies as India imports a major portion of its crude requirements. Impact on demand and higher input costs puts pressure on the operating margins.

Why consumers won’t gain from cheap oil?

  • Aviation:
  • Aviation turbine fuel forms a huge chunk of the operating costs of airlines, which means lower crude prices help profits. But what good are lower oil prices when demand is low? Covid-19 fears have already led to cancellation of many conferences and meetings. Accordingly, one can expect passenger load factors and fares to remain subdued.
  • Automobiles:
  • It is a mixed bag for the automobile industry. It is being expected that falling fuel prices to provide support to automobile volumes through lower cost of ownership; lower fuel prices impact cost of ownership more than lower interest rates.
  • Supply chain issues could impact production for Indian auto companies although incrementally supplies are easing; Global OEMs such as Tata Motors are facing demand issues.
  • Telecom:
  • Telecom companies may be the only major industry to report a strong growth in profits in the next fiscal, riding piggyback on tariff hikes taken last December. There is also talk of a further increase in tariffs after the industry regulator allows a floor price for mobile services. The spread of Covid-19 isn’t expected to impact volumes of tacos.
  • Pharmaceuticals:
  • India’s pharmacy companies are largely expected to be impacted by the supply chain disruption in China owing to the pandemic. However, with things gradually improving in China, the impact isn’t expected to be severe. The general increase in precaution and health-related concerns can aid sales of some pharmaceutical products.
  • Capital goods:
  • Within the capital goods sector, exposure to the Middle East is a negative .Exposure to the Middle East is negative for Larsen & Toubro Ltd (L&T) as well. With hopes of a rebound in economic growth being dashed due to the spread of the virus, sentiment for these stocks has fallen further.

Way Forward:

  • It is more than likely that if lower oil prices persist, the state governments will end up increasing VAT or the sales tax they charge on petrol and diesel, in the months to come. It is the easiest way for them to shore up their coffers. Also, the central government has been known to capture a fall in the past, by increasing the excise duty on petrol and diesel, instead of passing it on to the consumers. Hence, the Indian consumer, as has been the case before, is unlikely to fully benefit from lower oil prices.
  • To be sure, the extent of the damage on overall demand depends on how severe Covid-19 gets. For now, investors can breathe a sigh of relief that lower oil prices softens the blow to some extent.

India not to implement WTO’s dispute panel recommendations

Paper: III

For Prelims: WTO’s dispute panel settlement body.

For Mains: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Context of News:

  • India is under no obligation to implement the recommendation of the WTO’s dispute panel on its export promotion schemes which was challenged by the US, as New Delhi has appealed against that order at the higher level.

Background of this, Matter:

  • A dispute settlement panel of World Trade Organization (WTO) in its report issued to members on 31 October 2019 has ruled that India’s export-related schemes (including SEZ scheme) are in the nature of prohibited subsidies under the Agreement on Subsidies and Countervailing Measures and are inconsistent with WTO norms.
  • The panel has given a time-frame of 180 days for withdrawal of Special Economic Zone (SEZ) scheme. India has appealed at the WTO’s appellate body against this ruling. India has appealed at the WTO’s appellate body against this ruling. Due to non-functioning of appellate body (of the WTO’s dispute settle mechanism), the appeal has been kept in suspension.

Existing Disputes of India in WTO:

  • Currently, India is involved in 15 disputes at the WTO, in which it is complainant in 4 and respondent in 11.
  • The disputes where India is a complaining party are countervailing duty by the US on Indian steel products; measures by America concerning non-immigrant visas; renewable energy programmes of the US; and import duties imposed on steel and aluminium products by America.
  • WTO disputes where India is a responding party include prohibition by India on import of poultry and poultry products filed by the US, and import duties on certain information and communication technology goods filed by the EU, Japan and Taiwan.

WTO’s Appellate Body

  • The Appellate Body, set up in 1995, is a standing committee of seven members that presides over appeals against judgments passed in trade-related disputes brought by WTO members.
  • Countries involved in a dispute over measures purported to break a WTO agreement or obligation can approach the Appellate Body if they feel the report of the panel set up to examine the issue needs to be reviewed on points of law.
  • However, existing evidence is not re-examined but legal interpretations are reviewed.
  • The Appellate Body can uphold, modify, or reverse the legal findings of the panel that heard the dispute. Countries on either or both sides of the dispute can appeal.
  • The Appellate Body has so far issued 152 reports. The reports, once adopted by the WTO’s dispute settlement body, are final and binding on the parties.

Challenges Associated with functioning of WTO Appellate Body:

  • The WTO’s dispute settlement procedure is seen as being vital to ensuring smooth international trade flows. The Appellate Body has so far issued 152 reports.
  • The reports, once adopted by the WTO’s disputes settlement body, are final and binding on the parties.
  • There is now great uncertainty over the dispute settlement process.
  • Once the body becomes non-functional, countries may be compelled to implement rulings by the panel even if they feel that gross errors have been committed.
  • A country which refuse to comply with the order of the panel on the ground that it has no avenue for appeal may run the risk of facing arbitration proceedings initiated by the other party in dispute.

Way Forward:

  • It is difficult, if not impossible for membership to prevent the fall of the Appellate Body as we know it; several states have adopted ad hoc solutions. States such as Indonesia and Vietnam have, through a no appeal pact, agreed in advance not to appeal the ruling of the panel in the dispute between them, effectively waiving their right of appeal. The European Union (EU), Norway and Canada have agreed on an interim appeal system for resolving any disputes through arbitration using Article 25 of the dispute settlement
  • Although the overall effectiveness of such alternative strategies to overcome the demise of the WTO Appellate Body is uncertain, they do represent good faith efforts by some members at resolving future trade disputes.
  • In sum although the fall of the WTO Appellate Body represents a turbulent period in the history of trade disputes adjudication, it by no means spells the end of the WTO. On the contrary it presents an opportunity to the members to rethink and “iron out some of the creases” with the present system.

Government receives 121 applications for compounding CSR-related offences

Paper: III

For Prelims: About CSR

For Mains: Inclusive Growth and issues arising from it.

Context of News:

  • The corporate affairs ministry recently said 121 application for compounding CSR-related offences have been received and for compounding CSR-related offences have been received and  compounding has been done in 37 cases.
  • Under the law, certain classes of companies have to shell out at least two per cent of the average net profits, made during the three immediately preceding financial years, towards Corporate Social Responsibility (CSR) activities.

About Corporate social Responsibility:

  • The term “Corporate Social Responsibility” in general can be referred to as corporate initiative to assess and take responsibility for the company’s effects on the environment and impact on social welfare.
  • In India, the concept of CSR is governed by clause 135 of the Companies Act, 2013.
  • India is the first country in the world to mandate CSR spending along with a framework to identify potential CSR activities.
  • The indicative activities, which can be undertaken by a company under CSR activities include:
  1. Eradicating extreme hunger and poverty.
  2. Promotion of education, gender equality and empowering women.
  3. Combating Human Immunodeficiency Virus, Acquired Immune Deficiency Syndrome and other diseases.
  4. Ensuring environmental sustainability.

Benefits of CSR:

  • For company:
  • Brand and Image building CSR is a tool for companies to meet aspirations of the community and in turn obtain a license to operate from them or gain their loyalty and trust.
  • Employee retention and satisfaction improves as CSR initiatives increase employee morale and create a sense of belongingness in them.
  • For civic society:
  • The community benefits through welfare initiatives taken by companies under CSR.
  • Plays a value positive role CSR fosters social trust and inspires ethical conduct amongst employees and members of society.
  • For government:
  • Reduced pressure on the country s fiscal resources.
  • Aids in achieving welfare obligations of the government as investments are made towards education, healthcare etc.
  • Bridging of socio-economic disparities.

Why CSR is not being utilized?

  • The bulk of CSR spending is going into education, health, rural areas, environment and so on. Already the government is spending hundreds of lakhs of crores for the same purposes.
  • Corporate executives are unable to decide on the best social use of CSR funds because they are not equipped to do so.
  • Regional disparity CSR spending is concentrated in states of Maharashtra, Gujarat, Andhra Pradesh etc., while North Eastern states escaped the attention of corporates.

Argument against CSR:

  • CSR is also criticized as a tool to tax corporates which already face high taxation in the country. This can make India unattractive for business.
  • CSR is often termed as an eyewash as companies tend to invest in CSR only to overcome questions and scrutiny over their core business practices which may not necessarily be ethical. CSR thus deflects pressure on companies to change their business practices.
  • Difficulty in distinguishing social responsibility from commercial interests Companies often undertake measures for employee welfare and place these under CSR. It is here that the line between CSR and company s interests gets blurred.
  • Problems with the legislation The categories included under CSR are vaguely worded and lack clarity. Besides, the act does not spell out any enforcement mechanism or penalty for non-compliance with its provisions.

Penalty for not adhering to CSR Rules:

  • Whenever any violation of CSR provisions is reported, action against such non-compliant companies is initiated as per provisions of the Companies Act, 2013 after due examination of records and following due process of law. So far, sanction for prosecution has been accorded in 366 cases.
  • All CSR related offences are compoundable. So far 121 applications for compounding have been made and 37 cases have been compounded.
  • Under Section 135 of the Companies Act, 2013, every company having net worth of at least Rs 500 crore, turnover of Rs 1,000 crore or more, or a minimum net profit of Rs 5 crore during the immediately preceding financial year has to make CSR expenditure.

Way Forward:

  • Measures should be taken to promote voluntary undertaking of CSR initiatives by companies. This can be done by inculcating social and ethical values in youth that join the workforce.
  • Facilitating collaboration between NGOs, Agencies involved in environmental and social work and corporates this will enable better utilization of CSR funds.
  • Assessing impact of CSR initiatives this should be done over a longer period of 3 to 5 years to gauge the full impact of costs incurred.
  • Encouraging corporates to spend in hitherto neglected areas such as sports, conservation of heritage etc.

SC invokes plenary power to remove Manipur cabinet minister

Paper: II

For Prelims: Plenary power under Article 142.

For Mains: Structure, Organization and Functioning of the Executive and the Judiciary.

Context of News:

  • In a rare move, the Supreme Court recently invoked its plenary powers and ordered forthwith removal of BJP lawmaker and Manipur Forest Cabinet Minister TH Shyamkumar, restraining him from entering the Assembly till further orders.
  • The top court rarely invokes its plenary power under Article 142 of the Constitution to remove a cabinet minister from any government.

Background of this Issue:

  • MLA Removed by SC was elected an MLA in 2017 on a Congress ticket before switching to the BJP to become Minister in the coalition government.
  • The apex court’s ruling came on an appeal against a Manipur High Court order on a petition seeking directions to Speaker Y Khemchand to decide the disqualification pleas within a reasonable period of time.
  • A three-judge Supreme Court Bench had asked the Speaker to decide the disqualification petitions within four weeks. In case no decision is forthcoming even after a period of four weeks, it will be open to any party to the proceedings to apply to this Court for further directions/ reliefs in the matter.
  • The deadline was not met, and the Additional Solicitor General, appearing for the Speaker, had submitted that a detailed petition would be filed in ten days.
  • The apex court while delivering the judgement said that it went out of our way to give the Hon’ble Speaker a chance to perform his functions under the Tenth Schedule to the Constitution of India and decide the matter.

Plenary power under Article 142:

  • Article 142 in our Constitution empowers the Supreme Court to pass such “decree or order as may be necessary for doing complete justice between the parties”. Thus Article 142 supplements the powers already conferred upon the Supreme Court under the Constitution to guarantee that justice is done and in doing so the Court is not restrained by lack of jurisdiction or authority of law.
  • Over the years the Supreme Court to meet the ends of justice has frequently relied upon Article 142. However, exercise of exceptional powers conferred under Article 142 has of late met with some criticism with the courts today more frequently resorting to use of Article 142 than ever before. Critics thus demand that the Supreme Court should clearly state the extent and scope of its powers under Article 142 thereby defining its limits within which the Supreme Court may opt to exercise its power.
  • Article 142 is conceived to meet the situations which cannot be effectively and appropriately tackled by existing provisions of law. Thus it appears that where existing provisions of law can adequately deal with the issue at hand and do justice between the parties, the Supreme Court would not normally exercise its powers under Article 142.

Should Speaker of a House continue to have powers to disqualify lawmakers?

  • The role of Speaker in a House becomes crucial in case of a hung verdict. It has been seen in several recent instances, including in Karnataka, where the disqualification petitions were not decided promptly by the Speaker.
  • In January 2020,apex court said; Parliament must seriously consider amending the Constitution to substitute the Speaker of the Lok Sabha and Legislative Assemblies as arbiter of disputes concerning disqualification which arise under the Tenth Schedule (anti-defection law) with a permanent Tribunal headed by a retired SC judge or a retired Chief Justice of a High Court, or some other outside independent mechanism.

Loopholes in Anti Defection:

  • Controversial: 
  • The law has invited controversy from the beginning, being challenged in court multiple times. Soon after its introduction, it was taken to the SC for being “unconstitutional.”
  • Misuse: 
  • Though it curbed the free movement of legislators between parties, its loopholes still enabled the misuse of its provisions for partisan ends. In 1987, paragraphs 6 and 7 of the Tenth Schedule came into question because they did not allow room for judicial review of cases of defection.
  • Partisan Speakers:
  • The power to decide petitions seeking disqualification of lawmakers under the anti-defection law i.e. the Tenth Schedule rests with the Speaker. The speaker necessarily belongs to a political party, and therefore, their judgment cannot be impartial.  This negates the spirit of the Anti-Defection Law.
  • Delay in duty: 
  • In most cases, Speakers have failed to act in an impartial manner, forcing the top court to intervene from time to time.
  • Pressure & criticism: 
  • The anti-defection law has put the entire onus on the Speaker in the matters related to disqualification of members of the Legislative House. Even if the Speaker is impartial, he faces undue pressure and criticism.

Way forward:

  • A time has come when Parliament should have “a rethink on whether disqualification petitions ought to be entrusted to a Speaker as a quasi-judicial authority when such Speaker continues to belong to a particular political party either de jure or de facto.
  • Parliament may seriously consider amending the Constitution to substitute Speaker of Lok Sabha and Legislative Assemblies as arbiter of disqualification issues with “a permanent Tribunal headed by a retired Supreme Court Judge or a retired Chief Justice of a High Court” or some other mechanism to ensure swift and impartial decisions.
  • Article 142 was introduced in our Constitution to serve the interests of justice. The Supreme Court is the highest court from which no appeal lies. Its decisions are final and binding. Thus this article was included in our Constitution with a view to ensure that the interests of justice are paramount and in doing so the Supreme Court can disregard any provision which prevents the court from performing its constitutional obligations. But, while exercising this power SC should not undermine the role legislature.