19th April – Trawling for a sustainable livelihood

For a country which is home to 10 per cent of the world’s total biodiversity of fish, one which happens to be the world’s second largest producer of fish, has over 1.5 crore people directly dependent on it for survival and gets more than 5 per cent of its GDP and over 10 per cent of its foreign exchange earnings by exporting fish and marine products, fishermen and fisheries get little to no attention from either policy makers or the political class.

Trawling sustainable livelihood


Potential for fisheries –
India is fantastically well-endowed as far as fisheries is concerned. It has over 8,118 km of coastline, an exclusive marine economic zone of 2.2 million sq km, nearly 2 lakh km of rivers and canals and more that 5 million hectares of reservoirs and ponds.

Department of Fisheries – A reality check –
In a report tabled in Parliament last year by the Parliamentary Standing Committee on inland fisheries and aquaculture (inland fishery accounts for about 65 per cent of India’s total fish production), the committee observed that despite being funded for assessment and development of water bodies, the department of fisheries had not reported any actual work carried out and did not even have an estimate for the number of water bodies where aquaculture activities could be carried out.

Fishermen concerns –
Their list of woes range from the rising cost of diesel to poaching by foreign trawlers to lack of market access and a minimum support price for fish to lack of access to capital and absence of cold storage and processing infrastructure which impacts their earnings directly. Over and above that is periodic, catastrophic losses inflicted by cyclones, and routine harassment by authorities.
To top it all, fishermen on both coasts face the threat of detention by foreign powers — Sri Lanka in the Bay of Bengal and Pakistan in the Gulf of Kutch.
Coastal fishermen, who rely on small country craft and catamarans, on their part, say that mechanised trawlers and indiscriminate fishing, as well as pollution and climate change are destroying their livelihoods.
To top it all, even the meagre subsidies that they get currently are under threat, with both the US and Australia putting pressure to do away with the ‘special and differentiated treatment that India currently enjoys as a developing economy and to cap its subsidies to fisherfolk on a specific and individual basis.
Phytosanitary, as well as tariff barriers are erected by a number of competing major economies with a significant fisheries sector. For instance, India’s shrimp exports have been hit hard by bans imposed by the EU and the US for alleged antibiotic presence.

Way forward –
It is high time that we took a more focused approach to this sector which contributes a tenth of our total GDP.
A focused thrust on developing inland fisheries and protecting and developing our marine fisheries has the potential to have a transformative impact on coastal and rural economies and livelihoods.
India also needs to up its game to protect its ₹45,000 crore plus export market.

Conclusion –
Both leaders of the ruling party and the opposition have promised to create a separate ministry for fisheries (currently, it is a department under the Ministry of Agriculture and Farmers Welfare). One could argue that a mere ministry does not mean that the target sector will actually benefit (just look at agriculture!) but at least it will be a start.

SourceThe Hindu Business Line

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16th April – Necessary steps to ending poverty

ending poverty

It is by now close to 50 years since Indira Gandhi brought the idea of eradicating poverty into the electoral arena in India. ‘Garibi Hatao’ had been her slogan. The role that income generation actually played in lowering poverty in India may be gauged from the facts that economic growth had surged in the 1980s, and the late 1960s was when agricultural production quickened as the Green Revolution progressed.

Why we failed till now?

  • This is because the approach of public policy to the problem has been to initiate schemes which could serve as no more than a sedative.
  • These schemes failed to go to the root of poverty, which is capability deprivation that leaves an individual unable to earn sufficient income through work or entrepreneurship.
  • Income poverty is a manifestation of the deprivation, and focussing exclusively on the income shortfall can address only the symptom.

Politics over poverty –

  • Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) is paying farm households below a threshold ₹6,000 a year. An income-support scheme for any one section of the population is grossly inequitable. We can think of agricultural labourers and urban pavement dwellers as equally deserving of support as poor farmers.
  • The PM-Kisan has, however, been dwarfed by the promise of the Nyuntam Aay Yojana (NYAY), which envisages an annual transfer 12 times greater to the poorest 20% households. While this scheme is not discriminatory, it is severely challenged by the issue of beneficiary identification in real time.
  • Both the schemes on display, but NYAY in particular, have been criticised as running into the absence of fiscal space. This is really neither the case nor of the essence, the latter being the role of income transfers in eradicating as opposed to alleviating poverty in India.
  • Dissecting the fiscal costs –
  • NYAY is estimated to cost ₹3.6 lakh crore per annum at current prices. This comes to approximately 13% of the central budgetary outlay for 2019-20. This expenditure can be incurred without any consequence for the fiscal deficit if all Centrally Sponsored Schemes are taken off and subsidies trimmed just a bit.
  • But the point is that at 13% of outlay, NYAY would amount to more than twice the combined expenditure on health and education and more than capital expenditure in the same budget, they being the items of public expenditure that most impact poverty in the long run.
  • There is an opportunity cost to be acknowledged of an income-support scheme of this magnitude being implemented while there exists a severe deficit of social and physical infrastructure in the country.

What should be done?

  • In light of a pitch that has been made for the implementation in India of a publicly-funded universal basic income (UBI) scheme, we can say that from the perspective of eliminating poverty, universal basic services (UBS) from public sources are needed, though not necessarily financed through the budget.
  • There is indirect evidence that the provision of health, education and public services matters more for poverty than the Central government’s poverty alleviation schemes in place for almost half a century.
  • Per capita income levels and poverty vary across India’s States. A discernible pattern is that the southern and western regions of India have lower poverty than the northern, central and eastern ones. This, very likely, is related to higher human development attainment in the former.
  • A UBI would imply that a nationwide income support scheme that channels funds from a common pool to households in the poorer States would be tantamount to rewarding lower effort by their governments.
  • There is a crucial role for a few services in eliminating the capability deprivation that is poverty. At a minimum these services would involve the supply of water, sanitation and housing apart from health and education. It has been estimated that if the absence of such services is accounted for, poverty in India would be found to be far higher than recorded at present.

Conclusion –

There are no short cuts to ending poverty, but ending it soon is not insurmountable either.

SourceThe Hindu

Also Read: 15th April – Our bankruptcy code is world class

15th April – Our bankruptcy code is world class

BANKRUPTCY CODE

The World Bank conducts an annual examination to gauge the ‘Ease of Doing Business’ in nearly 200 economies and ranks them on ten sets of parameters, which include ‘Resolving Insolvency’. India ranked 142nd in ‘Ease of Doing Business’ for 2015.

In terms of resolving insolvency, the country ranked 137th. The government set an ambitious target of breaking into the top 50 on this index, and initiated a plethora of institutional reforms, including an overhaul of the insolvency framework. After four years, India ranks 77th, up by 65 places, in the aggregate rankings, and 108th on ‘Resolving insolvency’.

Bankruptcy

 

Features of IBC –

  • Its primary focus is revival of an ailing firm, while recovery by creditors is an incidental outcome. Secured creditors have absolute priority over other claims in insolvency (liquidation) proceedings.
  • The recovery rate is a function of time, cost and outcome of insolvency proceedings. In addition to reviving ailing firms, the insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (Code) have returned 210 per cent of liquidation value for creditors. They are realising on an average 48 per cent of their claims through reorganisation, as compared to the erstwhile regime which recovered 26 per cent.
  • The Code provides a timeline of 180 days to conclude a corporate insolvency resolution process (CIRP), extendable by a one-time extension up to 90 days. Probably, no other regime in the world mandates a time-bound resolution. This push has meant that proceedings under the Code take on average about 300 days, including time spent on litigation, in contrast with the previous regime where processes took about 4.3 years.
  • The insolvency resolution process cost, which includes fee of insolvency practitioner and other professionals, and expenses related to meetings of committee of creditors (CoC), public announcements, filings and litigations, etc., have been 0.5 per cent of the realisation by the creditors in contrast with a cost of 9 per cent under the previous insolvency framework.
  • With realisation of 48 per cent of claims through reorganisations coupled with pre-admission and post-admission settlements, the Code has proved to be an efficacious remedy even for loan recovery.
  • The strength of an insolvency framework is a function of four indices relating to commencement of proceedings, management of a firm’s assets, reorganisation proceedings, and creditor participation. The Code does not envisage separate applications or processes for reorganisation and liquidation.

Transparency in proceedings –

  • The Code envisages a resolution plan for reorganisation of a defaulting firm. Irrespective of the composition of the CoC, other stakeholders have a right to receive the agenda and participate in the meetings of the CoC.
  • The CoC takes major decisions on behalf of the firm under CIRP. It appoints the insolvency practitioner to run the operations of the firm as a going concern and run the process as well.
  • Any creditor may seek any information about the firm’s business and financial affairs from the insolvency practitioner. Any creditor may contest the decision of the insolvency practitioner accepting or rejecting its own claims or claims of other creditors.

Conclusion –

It is a matter of satisfaction that within two years of the enactment of the Code, the Indian insolvency regime has all the essential elements and practices that any mature insolvency regime ought to have. Not surprisingly, it bagged the award for the ‘Most Improved Jurisdiction’ for 2018 from the Global Restructuring Review. Hopefully, it will also pass with flying colours in the ongoing examination of the World Bank.

SourceThe Hindu Business Line

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