Compliance norms eased for firms

Paper: III

For Prelims: SEBI

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

Context of News:

  • Finance Minister recently, in wake of plunging economy of India has announced a series of regulatory and compliance related relaxations for taxpayers, MSMEs, company directors and bank customers, but said the government was readying an economic package on priority in the wake of the corona virus lockdown and would present it ‘sooner than later’.

Securities and Exchange Board of India:

  • The Securities and Exchange Board of India is the regulator of the securities and commodity market in India owned by the Government of India. It was established in 1988 and given Statutory Powers on 30 January 1992 through the SEBI Act, 1992.
  • Objective:
  • SEBI plays an important role in regulating all the players operating in the Indian capital markets.
  • It attempts to protect the interest of investors and aims at developing the capital markets by enforcing various rules and regulations.
  • Functions of SEBI
  • SEBI is primarily set up to protect the interests of investors in the securities market.
  • It promotes the development of the securities market and regulates the business.
  • SEBI provides a platform for stockbrokers, sub-brokers, portfolio managers, investment advisers, share transfer agents, bankers, merchant bankers, trustees of trust deeds, registrars, underwriters, and other associated people to register and regulate work.
  • It regulates the operations of depositories, participants, custodians of securities, foreign portfolio investors, and credit rating agencies.
  • It prohibits inner trades in securities, i.e. fraudulent and unfair trade practices related to the securities market.
  • It ensures that investors are educated on the intermediaries of securities markets. It monitors substantial acquisitions of shares and take-over of companies.SEBI takes care of research and development to ensure the securities market is efficient at all times.

About Measures Announced:

  • For MSMEs:
  • For Micro, Small and Medium Enterprises, the Finance Ministry raised the threshold default by 100 times for companies being taken to Insolvency and Bankruptcy Code (IBC) to Rs 1 crore from Rs 1 lakh now. This will prevent triggering of default in stress situation caused by Covid 19.
  • Choking Cash Flow:
  • Slump in cash flows resulting from lockdown across the country is expected to put a number of companies in a precarious financial position, forcing lenders to take them to National Company Law Tribunal for resolution.
  • Possibility of suspension of Certain Section of IBC:
  • If the existing precarious situation continues beyond 30th of April 2020, Finance Minister may consider suspending sections 7, 9 and 10 of the IBC 2016 for a period of six months so as to stop companies at large from being forced into insolvency proceedings in such force majeure causes of default.
  • About Sections 7, 9 and 10 of the IBC:
  • Sections 7, 9 and 10 of the IBC deal with initiation of insolvency for a company by a lender, and operational creditor or the company itself, respectively. This move was necessary as there would be many companies defaulting on obligations due to the impact of the corona virus outbreak on businesses. However, this is expected to be negative for lenders and banks as they may face difficulty in recovery of loans.
  • Extended deadlines for income tax and Goods and Services Tax (GST):
  • The government extended deadlines for income tax and Goods and Services Tax (GST). The deadline for filing monthly GST summary returns due in March, April and May was extended till June 30 with no interest, penalty and late fee for those with turnover below Rs 5 crore, and a reduced 9 per cent interest on taxpayers above Rs 5 crore turnover threshold from current 18 per cent.
  • The deadline for filing I-returns for financial year 2018-19 and that Aadhaar-PAN linking has also been extended to June 30 from March 31.
  • Relaxation debit cardholders to withdraw money from any bank’s ATM without paying extra charges :
  • On the consumer banking side, the government provided relaxation to debit cardholders to withdraw money from any bank’s ATM without paying extra charges for next three months, while fee for maintaining minimum balance in bank accounts have also been waived for this period.

Way Forward:

  • Finance minister Work is going on and they are exploring the possibilities to come up with an economic package, which will be announced sooner rather than later. On the volatility in the financial markets, all the regulators, the Reserve Bank and the Ministry of Finance are all working together.
  • Problem is that India’s GST collections are expected to be way below their targets, as also the corporate and personal income tax collections, given the ongoing slowdown made worse by the pandemic.
  • 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.

Why quarantine works better than airport screening?

Paper: II

For Prelims: Indian Council of Medical Research (ICMR).

For Mains: Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation.

Context of News:

  • The corona virus outbreak has become a global concern. Globally, corona virus cases have been detected in large numbers, most of which are in China. The death toll is more than 5000 according to the World Health Organization. The central government in China has taken efforts towards combating the virus.
  • With this virus becoming epidemic in China and Italy, concerns have been raised out once again about the amicable public spending on health care by India.
  • A new ICMR paper’s hypothetical model finds quarantining 50% of symptomatic cases within 3 days of symptoms would reduce overall cases by 62% and peak number of cases by 89% in an optimistic scenario. In a pessimistic scenario, these numbers would be 2% and 8% respectively.

Indian Council of Medical Research (ICMR):

  • The Indian Council of Medical Research (ICMR), New Delhi, the apex body in India for the formulation, coordination and promotion of biomedical research, is one of the oldest medical research bodies in the world.
  • The ICMR functions under Department of Health Research, Ministry of Health and Family Welfare. It is headquartered in New Delhi. Its Governing Body is presided over by Health Minister
  • The council performs research on and control and management of communicable diseases, fertility, maternal and child health, nutritional disorders, health care delivery (including the development of alternative strategies), environmental and occupational health problems; major non-communicable diseases such as cancer.

Key Findings of Indian Council of Medical Research (ICMR):

  • Quarantining symptomatic cases can achieve a meaningful impact on the disease burden:
  • The research makes a case for post-travel tracking rather than border containment. It uses mathematical modelling to show that spending resources on quarantining symptomatic cases can achieve a meaningful impact on the disease burden (assuming an “optimistic” scenario), rather than attempting to achieve infeasible levels of containment at the borders.
  • Validity of symptomatic surveillance:
  • ICMR also accounted for the inevitability that an outburst of cases would make lab confirmations impractical. Therefore, the paper proposes “symptomatic surveillance” to be included with quarantine measures.

Why airport screening won’t stop the spread of corona virus?

  • Exit and entry screening may look reassuring, but experience with other diseases shows it’s exceedingly rare for screeners to detect infected passengers. Examples of China revealing, eight passengers who later tested positive for COVID-19 arrived in Shanghai from Italy and passed the airport screeners unnoticed. And even if screeners do find the occasional case, it has almost no impact on the course of an outbreak.
  • Researchers say, there can be benefits of airport screening or random screening. Evaluating and quizzing passengers before they board planes, exit screening may prevent some who are sick or were exposed to a virus from travelling. Entry screening, done on arrival at the destination airport, can be an opportunity to gather contact information that is useful if it turns out an infection did spread during a flight and to give travellers guidance on what to do if they become ill.
  • There are many ways infected people can slip through the net. Thermal scanners and handheld thermometers aren’t perfect. The biggest shortcoming is that they measure skin temperature, which can be higher or lower than core body temperature, the key metric for fevers. The devices produce false positives as well as false negatives.

How does the paper interpret the feasibility of border containment?

  • If all asymptomatic arrivals from China were screened, India would need to identify at least 75% of asymptomatic infected arrivals in order to achieve an “appreciable” delay in the outbreak. If 90% were identified, the delay would be 20 days.
  • The argument is that there would be little impact from addressing only symptomatic cases, but also that covering the necessary asymptomatic infections (almost all of them) is “practically infeasible”.
  • Further, there is no accurate, rapid test to achieve the required detection levels, the paper notes, citing other studies to show that thermal screening can miss at least 46% of infections. The only way to achieve the needed detection levels, in fact, may be isolation of all arrivals from the specified airports.
  • Any containment strategy focused on symptomatic infections, no matter how comprehensively tends to be negated by the asymptomatic infections that escape detection and can go on to cause onward transmission in the community… Resources may be better spent on the mitigation of infection in the community.

Effectiveness of quarantining symptomatic cases:

  • The researchers built their model with two scenarios. The optimistic scenario assumes that each infected person transmits the virus to 1.5 other people (known as R0 or reproduction number) and that asymptomatic infections do not infect others. The pessimistic scenario assumes each infection transmits to four other people, and that asymptomatic cases are half as infectious as symptomatic cases.
  • A different study by scientists at the Institute of Mathematical Sciences in Chennai shows that India currently has a R0 around 1.7, much lower than other badly-hit countries. Research is beginning to show that asymptomatic cases do transmit the infection, but it’s still unclear by how much.

Way Forward:

  • Entry screening should be paired with collecting data about the patient’s whereabouts over the past few weeks that can later help with tracing their contacts. Travelers should also be given information to increase disease awareness and encouraged to practice good personal hygiene.
  • Ultimately measures aimed at catching infections in travelers will only delay a local epidemic and not prevent it

PM Modi announces 21-day lockdown as COVID-19 toll touches 12

Paper: II

For Mains: Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation.

Why in News:

  • As the death toll from COVID-19 rose to 12, Prime Minister Narendra Modi on 24.03.2020 announced a 21-day lockdown for the entire country, stating that it was the only way to break the chain of infection.
  • The lockdown will be in effect till April 14.
  • allots ₹15,000 crores to beef up infrastructure for treatment of patients.

SERVICES THAT WILL REMAIN OPEN DURING LOCKDOWN OF 21 DAYS:

  • Shops, including ration shops, dealing with food, groceries, fruits and vegetables, dairy and milk booths, meat and fish, animal fodder. District authorities to encourage home delivery to minimise individual movement.
  • Banks, insurance offices and ATMs
  • Print and electronic media
  • Telecommunication services (internet, cable, IT/IT enabled services for essentials)
  • Delivery of food, pharmaceuticals, medical equipment through e-commerce
  • Petrol pumps, LPG, petroleum and gas retail and storage outlets
  • Power and electricity services
  • Capital and debt markets notified by SEBI
  • Cold storage and warehousing
  • Private security services
  • Also open are offices of GOI such as Defence, police forces, treasury, public utilities, disaster management, power generation and transmission, post offices, NIC, early warning agencies; State govt. institutions such as police, home guards, fire services, disaster management and prisons, district administration and treasury, electricity, water sanitation, municipal bodies. Hospitals and all medical establishments will be open. Transportation only of essential services will be permitted.
  • Manufacturing/production units of essential commodities, hotels/Lodges etc which accommodate tourists and persons stranded due to lockdown, emergency staff, air and sea crew will also remain open

SERVICES THAT WILL REMAIN CLOSED DURING LOCKDOWN OF 21 DAYS:

  • GOI & State offices, commercial, private establishments, transport services (with exceptions) will remain closed.
  • Educational institutions, places of worship, functions and gatherings will be closed/barred without exception.
  • Funerals – not more than 20 people will be permitted
  • People violating containment measures will be liable to be proceeded against provisions of Disaster Management Act, besides legal action under Sect. 188 of the IPC 

REASONS BEHIND CENTRAL GOVERNMENT’S DECISION ON A NATIONWIDE LOCKDOWN

  • The COVID-19 epidemic has affected many countries and the World Health Organisation has declared it ‘Pandemic’.
  • Government of India (GOI) has been taking several proactive preventive and mitigating measures starting with progressive tightening of international travel, issue of advisories for the members of the public, setting up quarantine facilities, contact tracing of persons infected by the virus and various social distancing measures. Several advisories have been issued to States and Union Territories (UTs) for taking necessary measures to contain the spread of this virus. Government have temporarily suspended metro and rail services as well as domestic air traffic.
  • The situation has been continuously reviewed at the level of Hon’ble Prime Minister. The Hon’ble Prime Minister has addressed the Nation on the need for preventive measures and has also held meeting with all the Chief Ministers through video conference.
  • Experts, keeping in view the global experiences of countries which have been successful in containing the spread of COVID-19 unlike some others where thousands of people died, have recommended that effective measures for social distancing should be taken to contain the spread of this pandemic.

WAY FORWARD:

It took 67 days to reach 100,000 infections, and another 11days to reach 200,000, but just four days to hit 300,000.By referring to the experience of several countries and even developed nations with the best medical infrastructure had not been able to slow down the spread, the only “ray of hope” was the example of some that had managed to slow its spread by strictly implementing a lockdown. The way we conduct ourselves in these 21 days will be critical in our fight against the coronavirus.It is now up to civil society, government agencies, the healthcare and corporate sectors to ensure that the burden of fighting the pandemic does not fall too heavily on those at the margins, the migrant and daily wage labourers, the rickshaw pullers and others for whom these 21 days could prove to be the toughest.

  • The Centre and state governments will need to work together, setting aside their political differences, to ensure that there is no shortage of essential commodities and the supply chains are not broken.

Is India prepared to meet the supply requirements of foodstuffs?

Paper: III

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

Context of News:

  • On Tuesday 04/03/2020 midnight, Prime Minister reiterated that the Centre and state governments will take all steps to ensure the supply of “essential items” during the lockdown to combat the novel corona virus, which has now covered nationwide regions. This comes with apprehension about how prepared India is to meet the supply requirements of the most essential products?

What is the domestic availability situation in foodstuffs?

  • There’s no real issue as far as production or supply goes for most agri-commodities, starting with food grains. As on March 1, stocks of wheat and rice with the Food Corporation of India (FCI) stood at around 77.6 million tonnes (mt). This was over three-and-a-half times the minimum operational buffer-cum-strategic stock of 21.04 mt required to be maintained for April 1. Moreover, the new wheat crop, which is a bumper one, will arrive in the mandis from the coming month.
  • As far as Pulses is concered, according to the National Agricultural Cooperative Marketing Federation of India, Nafed was holding 2.25 mt of stocks as on March 19. This, even as fresh market arrivals of rabi (winter-spring) pulses such as chana (chickpea), masur (red lentils) and matar (field pea) have started.
  • Stuff like milk, sugar and edible oils:
  • These, again, are produce not brought to be sold in mandis. Dairies procure milk directly from farmers or through bulk vendors. The sugar that mills produce similarly comes from cane sourced straight from growers. Two-thirds of the edible oil consumed by India is imported.
  • In the current lockdown situation, there are actually mitigating factors on the supply requirement front, particularly for the three food items. The most important of them is the demand destruction due to shutting down of HORECA (hotels, restaurants and catering) businesses. With hardly any business-to-business (B2B) sales happening, the demand for milk products, sugar and edible oil is now only in the business-to-consumer segment.

Food products whose supplies are being affected?

  • Basically perishable items like ,fruits and vegetables (F&V), which are produce sold through APMC mandis.Such closures are, however, more likely in terminal markets close to cities than the primary APMCs, where the bulk of farmers bring their produce.
  • Right now, the fear of the pandemic is less in rural areas, however there is possibility of 25-30% harvesting labour shortage in the coming days. According to him, many migrant labourers have fled to their villages in Bihar, which will hit cane harvesting when crushing operations in UP are at a peak.

Way Forward:

  • COVID-19s impact will not be on production, given that most rabi crops are close to ripening, if not already harvested. The impact will be only on marketing the produce at the mandis and reaching it to the final consumer. Simply put, it isn’t a “supply”, but a “supply chain” problem arising from the various movement restrictions imposed under the ongoing lockdown.
  • Same approach like perishable stuffs like of milk has not been visible in other food items. Indiscriminately imposed inter-state movement restrictions have resulted in tomato-laden trucks from Madanapalle in Andhra Pradesh not crossing over to Bengaluru or brinjal and beans from Chikkaballapur in Karnataka not reaching Hyderabad’s consumers. Alphonso mangoes and grapes not being allowed to move freely will hurt growers in Ratnagiri and Sangli just when their crop is being harvesting.
  • There are similar reports about F&V collection and distribution centres of online grocers being forcibly shut down; sugar mills in UP running out of lime, sulphur and HDPE bags procured from Rajasthan and Gujarat; and labourers engaged in grading and packing of produce not being permitted to go their workplaces. All these impediments need to go at the earliest – like in milk from day one of the lockdown.
  • Online grocery delivery services like Big Basket, Grofers and Amazon had been forced to cancel many orders over the past few days due to shortage of supply and on account of local authorities (police) misinterpreting the lockdown as a total curfew. Online grocery delivery services allowed during 21-day lockdown. Online grocery retailers are expected to deliver more in upcoming days to clear backlog, online grocery can play important role in this 3 week long fight of lockdown.
  • India needs coordinated fiscal action and monetary stimulus to overcome Corona virus crisis. Given that inflation is coming down, and will decline further, RBI should start with at least a 50-basis-points (bps) cut in the repo rate in its April meeting, or even earlier. The US Fed cut rates dramatically by 150 bps. But as also in the US and EU, a rate cut alone will not help too much, especially for industries linked to external supply chains.