THE INDIAN POLITY AND GOVERNANCE

1. SUPREME COURT QUOTA FOR DALIT MUSLIMS AND CHRISTIANS

THE CONTEXT: The Centre is likely to soon decide on setting up a national commission to study the social, economic and educational status of Dalits who converted to religions other than Hinduism, Buddhism and Sikhism. Several petitions are pending before the Supreme Court seeking Scheduled Caste (SC) reservation benefits for Dalits who converted to Christianity or Islam.
THE EXPLANATION:
Why don’t Dalits who convert to Christianity and Islam get quota benefits?
• The original rationale behind giving reservation to Scheduled Castes was that these sections had suffered from the social evil of untouchability, which was practised among Hindus. Under Article 341 of the Constitution, the President may “specify the castes, races or tribes or parts of or groups within castes, races or tribes which shall…be deemed to be Scheduled Castes”.
• The first order under this provision was issued in 1950, and covered only Hindus. Following demands from the Sikh community, an order was issued in 1956, including Sikhs of Dalit origin among the beneficiaries of the SC quota. In 1990, the government acceded to a similar demand from Buddhists of Dalit origin, and the order was revised to state: “No person who professes a religion different from the Hindu, the Sikh or the Buddhist religion shall be deemed to be a member of Scheduled Caste.”

Does this religion-based bar apply to converted STs and OBCs as well?
• According to Department of Personnel and Training (DoPT) states, “The rights of a person belonging to a Scheduled Tribe are independent of his/her religious faith.” Following the implementation of the Mandal Commission report, several Christian and Muslim communities have found place in the Central and state lists of OBCs.

What efforts have been made to include Muslims and Christians of Dalit origin among SCs?
• After 1990, a number of Private Member’s Bills were brought in Parliament for this purpose. In 1996, a government Bill called The Constitution (Scheduled Castes) Orders (Amendment) Bill was drafted, but in view of a divergence of opinions, the Bill was not introduced in Parliament.
• The UPA government headed by Prime Minister Manmohan Singh set up two important panels: the National Commission for Religious and Linguistic Minorities, popularly known as the Ranganath Misra Commission, in October 2004; and a seven-member high-level committee headed by former Chief Justice of Delhi High Court Rajinder Sachar to study the social, economic, and educational condition of Muslims in March 2005.
• The Sachar Committee Report observed that the social and economic situation of Dalit Muslims and Dalit Christians did not improve after conversion. The Ranganath Misra Commission, which submitted its report in May 2007, recommended that SC status should be “completely de-linked…from religion and…Scheduled Castes [should be made] fully religion-neutral like…Scheduled Tribes”.
The report was tabled in both Houses of Parliament on December 18, 2009, but its recommendation was not accepted in view of inadequate field data and corroboration with the actual situation on the ground.

2. THE CONTROVERSY OVER NAAC’S SYSTEM FOR ASSESSING HIGHER EDUCATION

THE CONTEXT: The National Assessment and Accreditation Council (NAAC), which carries out quality checks or assessments of Indian Higher-level Educational Institutions (HEIs), courted controversy recently over the rating of the Maharaja Sayajirao University of Baroda and allegations of bribery in the process.
THE EXPLANATION:
When the NAAC released the ratings, the institute’s score changed from A to A+ on the back of improvement across parameters. The allegations have surfaced at a time when the NAAC is exploring changes in its approach.
What is NAAC?
The NAAC, an autonomous body under the University Grants Commission (UGC), assesses and certifies HEIs with gradings as part of accreditation. Through a multi-layered process, a higher education institution learns whether it meets the standards of quality set by the evaluator in terms of curriculum, faculty, infrastructure, research, and other parameters. The ratings of institutions range from A++ to C. If an institution is graded D, it means it is not accredited.

THE INTERNATIONAL RELATIONS

3. JAPAN- INDIA MARITIME EXERCISE 2022 CONCLUDES

THE CONTEXT: The sixth edition of the Japan India Maritime Exercise 2022, JIMEX 22 hosted by the Indian Navy concluded in the Bay of Bengal with the two sides bidding farewell to each other with a customary steam past on 17 Sep 22.
THE EXPLANATION:
• JIMEX comprised of complex tactical drills in all dimensions of Naval warfare to enhance interoperability between two key maritime forces in the Indo-Pacific.
• JIMEX 22 witnessed some of the most complex exercises undertaken jointly by the two navies. Both sides engaged in advanced level anti-submarine warfare, weapon firings and Air Defence exercises. Shipborne helicopters, fighter aircraft and submarines also participated in the exercise. IN and JMSDF ships replenished each other at sea under the agreement on Reciprocal Provision for Supply and Services (RPSS).
• The exercise, which marked the tenth anniversary of JIMEX since its inception in 2012, consolidated the mutual understanding and interoperability between the two navies.

THE ENVIRONMENT, ECOLOGY AND CLIMATE CHANGE

4. HOW REPLACING COAL WITH PADDY STRAW IN BRICK KILNS CAN HELP ADDRESS STUBBLE BURNING MENACE

THE CONTEXT: The Punjab Pollution Control Board (PPCB) wants brick kiln owners in the state to replace at least 20% coal with the paddy-straw pellets for fuel requirements in the kilns. The PPCB believes that this will help tackle the problem of stubble burning in the state.
THE EXPLANATION:

The proposal,
In a letter to brick kiln owners, the PPCB has said that the Punjab government is formulating a policy for the mandatory replacement of 20% coal with paddy straw-based pellets. This is based on a study conducted jointly by the Punjab State Council For Science and Technology (PSCST) and PPCB regarding the partial replacement of coal with paddy straw pellets with an aim to reduce air pollution while ensuring economic benefit for kiln owners. A draft notification in this regard has already been issued by the state’s Department of Science, Technology and Environment, and public comments invited.

The rationale
• There are around 2,700 kilns in Punjab out of which nearly 2,100 have been upgraded and are in operation currently. The average coal consumption of a kiln, which runs for 6-7 months in a year, is around 900 tonnes of coal (with upgraded technology).
• So, the coal consumption of these operational kilns’ would come to around 19 lakh tonnes per year, costing around Rs 4,750 crores. The cost of one-tonne coal is around Rs 25,000 including the freight rate.
• In Punjab, kilns are operated two times from October to December and February to July in a year.
• A brick kiln, which is usually 120-ft high (part of which is under the earth), has around 36 chambers in which about 10-12 lakh clay bricks are placed for drying or hardening.
• Brick kiln owners said that the replacement of 20% coal with stubble pellets means that nearly 200 tonnes of coal burning can be reduced in every kiln per year (and to a total of 4.20 lakh tonnes worth Rs 1,050 crores).

Good for the environment?
• The paddy stubble fuel is environmentally friendly as it does not contain a high amount of sulphur like coal.
• According to the Department of Science and Technology and Environment, it can help achieve the stringent emission standard for particulate matter (PM) that is set for the brick kilns.

5. WORLD’S FIRST CLONED ARCTIC WOLF

THE CONTEXT: Recently, the scientists in China have successfully cloned wild Arctic Wolf for the first time.
THE EXPLANATION:
• A Beijing-based gene firm had succeeded in cloning the Arctic Wolf to prevent the endangered species from going extinct.
• The newly cloned wolf was named Maya, which means good health.
• The donor cell of the wolf came from a skin sample of a wild female Arctic Wolf. Its oocyte was obtained from a dog.
• The cloning process involved the construction of 137 new embryos from enucleated (process of removing nucleus from the cell) oocytes and somatic cells.
• 85 embryos were transferred to the uteri of seven beagles.
• The beagle was chosen as the surrogate mother since this dog breed is found to share genetic ancestry with ancient wolf.
What is cloning?
Cloning is the process of producing living organisms, including cells, tissues etc., with identical genetic materials ether through natural or artificial means. In nature, some organisms produce clones through asexual reproduction. Artificially, the first animal to be cloned was a sheep named Dolly. It was created in 1996 by a Scottish scientist using an udder cell from an adult sheep. Recently, in July 2022, Japanese scientists have succeeded in producing cloned mice using freeze-dried skin cells. This new breakthrough makes it possible to practice bio-banking, which involves saving animal cells and creating clones from them.
About Arctic Wolf
The Arctic Wolf is also known as white wolf or polar wolf. It is native to the High Arctic tundra of Canada’s Queen Elizabeth Islands. It is a subspecies of the grey wolf. This medium-sized wolf is smaller than the Alaskan timber wolf. Since the 1930s, there has been a significant decline in the size of the Arctic wolf’s skull because of the wolf-dog hybridization.

THE GOVERNMENT SCHEMES AND INTERVENTIONS

6. INSPIRE AWARDS CONFERRED TO 53,021 STUDENTS ACROSS INDIA

THE CONTEXT: Union Minister of Science and Technology has recently provided financial aid to around 53,000 students under the INSPIRE Scheme.
THE EXPLANATION:
What is INSPIRE Scheme?
• The Innovation in Science Pursuit for Inspired Research (INSPIRE) scheme has been implemented by Indian Government’s Department of Science and Technology (DST) to encourage people aging 10 to 32 years to pursue science and a career in research.
• Its purpose is to attract talent to science at an early age and create the required resource pool for strengthening the science and technology system and research and development base in the country.
• It has three components – Scheme for Early Attraction of Talent (SEATS), Scholarship for Higher Education (SHE) and Assured Opportunity for Research Careers (AORC).
About INSPIRE Award – MANAK
• The Indian Government confers INSPIRE Award – MANAK (Million Minds Augmenting National Aspiration and Knowledge) every year under the SEAT Program.
• Under the INSPIRE AWARDS – MANAK Scheme, students across India are encouraged to send original and creative technological ideas or innovations that can solve common problems.
• The chosen ideas will be provided with complete incubation support required to promote the entrepreneurial journey of students.
• This scheme has attracted 6.53 Lakh ideas and innovations from across India in 2020-21 – the highest till date.
• It represented ideas and innovations from 702 districts (96%) in India.
• This includes 123 of the 124 aspirational districts, 51 per cent representation from girls, 84 per cent from schools in rural regions and 71 per cent of schools run by state/UT governments.
• Of the 6.53 lakh students, 53,021 students have been provided with the financial support of Rs.10,000 to help them develop prototypes for the ideas they submitted.

1. Don’t act under anger READ MORE
2. BODY is COSTUME of the soul READ MORE

1. Increasing Costa Rica’s riparian forests can improve its water quality, carbon storage READ MORE
2. There are better ways than cheetahs to revive ecosystems READ MORE
3. Blame global warming for Pakistan floods; here’s why READ MORE

1. Has forest rights Act enhanced the lives of Adivasis? READ MORE
2. Worsening mental health of employees amid layoffs READ MORE

1. Scandinavian social democracy READ MORE
2. The CBI’s uneasy history READ MORE  
3. The hijab case and the essential practices doctrine READ MORE
4. Knowing the killer: SC has done well to seek norms to present mitigating factors for death READ MORE
5. Fali S Nariman writes: Supreme Court’s basic structure doctrine in a new context READ MORE

(Newspapers, PIB and other important sources)

Prelim and Main

1. Death penalty case: Supreme Court refers matter to five-judge constitution bench to frame guidelines for courts READ MORE
2. The significance of Ethereum Merge and its impact on blockchain architecture READ MORE
3. ECI seeks restrictions on cash donations to political parties, writes to government READ MORE
4. How replacing coal with paddy straw in brick kilns can help address stubble burning menace READ MORE
5. What is the PM PRANAM scheme, likely to be introduced by the govt soon? READ MORE
6. Monsoon stretching longer, displacing more people in south Asia: Report READ MORE
7. Most Indian villages do not have any waste management infrastructure: Study READ MORE
8. Poland opens new canal for ships to sail from Baltic Sea to Vistula Lagoon ports READ MORE

Main Exam

GS Paper- 1

1. Increasing Costa Rica’s riparian forests can improve its water quality, carbon storage READ MORE
2. Has forest rights Act enhanced the lives of Adivasis? READ MORE

GS Paper- 2

POLITY AND GOVERNANCE

1. Scandinavian social democracy READ MORE
2. The CBI’s uneasy history READ MORE  
3. The hijab case and the essential practices doctrine READ MORE
4. Knowing the killer: SC has done well to seek norms to present mitigating factors for death READ MORE
5. Fali S Nariman writes: Supreme Court’s basic structure doctrine in a new context READ MORE

SOCIAL ISSUES

1. Worsening mental health of employees amid layoffs READ MORE

INTERNATIONAL ISSUES

1. With Russia’s declining influence, India needs a new strategy in Eurasia READ MORE  
2. SCO at crossroads of history: New international financial system taking shape in multi-polar world order READ MORE
3. Modi-Xi ‘cold war’ at SCO proves member relationships strained. India must stand on its own READ MORE

GS Paper- 3

ECONOMIC DEVELOPMENT

1. Why we need to build a framework for global digital governance READ MORE
2. Helping businesses to move READ MORE
3. Economic resurgence: Utilise fiscal gains to tackle unemployment READ MORE
4. From the economy, investments to agriculture and jobs: The many repercussions of India’s land woes READ MORE

ENVIRONMENT AND ECOLOGY

1. There are better ways than cheetahs to revive ecosystems READ MORE
2. Blame global warming for Pakistan floods; here’s why READ MORE

GS Paper- 4

ETHICS EXAMPLES AND CASE STUDY

1. Don’t act under anger READ MORE
2. BODY is COSTUME of the soul READ MORE

Questions for the MAIN exam

1. ‘Developing countries are entering a divergent social, political and economic period with sharp downside risks for the most vulnerable and regression in gender equality’. Critically examine.
2. ‘Changes and reforms, howsoever well-intentioned, will deliver beneficial results only if the implementing laws and machinery are appropriate’. In the light of the statement, enumerates the reasons for the failure of the government to attract FDI and Indian private sector investment for Make in India?
3. ‘The Indian state needs to address the ability to utilise technology as a credible foreign policy and diplomacy tool’. Analyse the statement in the light of recent developments.

QUOTATIONS AND CAPTIONS

• We are not going to achieve a new world order without paying for it in blood as well as in words & money.
• When hijab ban comes to an issue concerning a matter of faith, courts have the unenviable task of acting as an expert — on law and on religion.
• Any Court hearing a matter touching upon a matter of faith has the unenviable task of acting not merely as an expert on law but also as an expert on religion.
• Whether Delhi likes it or not, Russia is locked in an unwinnable war with the West, is increasingly beholden to China, and struggling to retain its traditional primacy in inner Asia.
• India’s G20 presidency is a chance to address common challenges of regulating Big Tech.
• Focus on digitalisation and interoperability across the logistics chain will help cut costs and make services accessible to even small and medium enterprises.
• The government needs to bolster the purchasing power of people in order to spur demand and consumption. This is achievable through optimum utilisation of burgeoning financial resources.
• China-Russia power struggle in Central Asia can bring many opportunities. India must keep track to make most of its 2023 SCO presidency.
• Unclear land titles, slow-moving courts and small landholdings, make buying land in India inherently risky. Bureaucratic and legal tangles add to this.

50-WORD TALK

• The Cheetah’s return to India is a brave conservation experiment and a biodiversity milestone. The real hard work of ensuring they survive and multiply begins now and it’s a good challenge for Indian wildlife authorities. If they could protect and revive the tiger population, they can succeed in Kuno too.
• China’s moves to block blacklisting of Pakistani terrorists wanted for attacks in India are becoming so predictable that it’s obvious Beijing just wants to poke New Delhi in the eye. Such rogue diplomacy doesn’t behove a ‘rising power’. Does China want to be known as a state that supports terrorism?
• Strong, statesmanly advice to Putin, dignified distance from Xi, Shehbaz Sharif, surprise patch-up with Erdogan – PM Modi played all the right geopolitical cards in 24 hours. It reflects India’s diplomatic confidence and the ability to hold its own on the global stage. Strategic clarity any day over strategic ambiguity.
• The anti-exclusion principle allows for due-deference to the ability of a religion to determine its own religious tenets and doctrines. At the same time, the anti-exclusion principle postulates that where a religious practice causes the exclusion of individuals in a manner which impairs their dignity or hampers their access to basic goods, the freedom of religion must give way to the over-arching values of a liberal constitution.

Things to Remember:

• For prelims-related news try to understand the context of the news and relate with its concepts so that it will be easier for you to answer (or eliminate) from given options.
• Whenever any international place will be in news, you should do map work (marking those areas in maps and exploring other geographical locations nearby including mountains, rivers, etc. same applies to the national places.)
• For economy-related news (banking, agriculture, etc.) you should focus on terms and how these are related to various economic aspects, for example, if inflation has been mentioned, try to relate with prevailing price rises, shortage of essential supplies, banking rates, etc.
• For main exam-related topics, you should focus on the various dimensions of the given topic, the most important topics which occur frequently and are important from the mains point of view will be covered in ED.
• Try to use the given content in your answer. Regular use of this content will bring more enrichment to your writing.

[WpProQuiz 336]

THE CONTEXT: The discourse on privatization and public assets sale is not new in India. Some people favour it, and some oppose it. The sale of the loss-making national carrier Air India to the Tata Group is a move that evoked a mixed response. While some hailed it on the assumption that it would no longer spell a further loss to the exchequer, its opponents felt that a national asset was being sold at a throwaway price without transparency by the Union government. Critics of the government say that the government failed to fill fiduciary duty in the case of Air India selling.

THE ISSUES WITH THE AIR INDIA SALE

WHAT IS FIDUCIARY DUTY?

In brief, fiduciary duty is a requirement that a person in a position of trusts, such as a real estate agent, broker, or executor, must act in good faith and honesty on behalf of a client. Fiduciary duty is a legal obligation of the highest degree for one party to act in another’s best interest.

The person to whom a fiduciary owes their duty is the principal or beneficiary. Accordingly, the fiduciary must work to the best of their ability to benefit the principal and bring about a satisfactory result or capable stewardship of the principal’s assets.

THE ISSUE OF PUBLIC TRUST

• It is prudent to extend the doctrine of ‘public trust’ to the government’s management of public sector enterprises. There is a fiduciary duty cast upon the government to act reasonably and in a transparent manner while dealing with public assets. Unlike a private asset sale, a government selling public assets and assuming liabilities without proper planning will impose an enormous debt burden on citizens.

SET A DANGEROUS PRECEDENT FOR OTHER SALES

• The Air India asset sale needs scrutiny in light of the Government’s new National Monetisation Pipeline (NMP), where public assets will be monetised either as leases or outright sales. Air India’s asset sale and retention of liabilities set a dangerous precedent as it could result in selling public assets to government faithful and leaving the liabilities to citizens.

CRISIS OF TRANSPARENCY

• The privatisation of loss-making public sector enterprises may prevent the state from incurring further losses. However, unless the sale proceeds are substantial, genuine and transparent, a crisis of legitimacy may arise.

SIMILAR CASES WHERE FIDUCIARY DUTY IS NOT BEING FOLLOWED BY THE GOVERNMENT:

1. One example is the anonymous electoral bonds scheme which taps corporate funding to help any political party and where the details are known only to the ruling party, which could fuel mistrust of such asset sales. A Right to Information filing by the Association for Democratic Reforms showed that with the State Bank of India as the sole authorised dealer of electoral bonds, out of ₹3,429 crores of the total value of electoral bonds generated by the bank (FY19-20), the ruling party at the Centre alone devoured a whopping ₹2,606 crores or 76% of the total bonds issued so far. This is also the period that saw some major privatisation of public sector enterprises.Here, the role of discreet political funding through anonymous electoral bonds needs to be assessed more closely.
2. The recent award of a contract worth ₹1,126 crores to a Chinese firm (Shanghai Tunnel Engineering Co. Ltd.) to construct an underground rail stretch in Delhi and a contract worth ₹170 crores to another Chinese firmfor the supply of wheels to Vande Bharat trains cannot be seen in isolation. It is important to remember that China is an aggressor at the Line of Actual Control.

TYPES OF SALES

• Enterprise sale: In order to unlock the value of assets, liabilities are retained by the seller either by himself or through an SPV, and assets are sold for a competitive price; otherwise, the liabilities will surpass the value of the assets, rendering the enterprise value to negative.
• Asset sale: An asset sale involves selling a business asset to another party, i.e. the purchaser. This includes tangible assets such as equipment and inventory, and intangible assets such as business goodwill, its intellectual property (IP) and customer lists.
• Private asset sale: It involves the consent of the secured creditors (mostly banks) who give their consent to park the liability only when they are satisfied that the promoters or the shareholders of the private enterprise would be able to satisfy the liabilities either from the proceeds of the sale or otherwise.
• Public asset sale: The sale of assets controlled by the government (sovereign), has a few shortcomings as follows:
• Directly or indirectly government-controlled banks cannot conduct due diligence independently on the nature of the sale
• Banks also cannot report fairly on whether the sale proceeds are sufficient to satisfy the debt because the government has given an undertaking to repay the debt, or the government may even force banks into a settlement with lesser repayment or even a write-off.

THE PRESENT PRIVATIZATION POLICY OF THE GOVERNMENT

Fulfilling the government’s commitment under the Atma Nirbhar Package to coming up with a policy of strategic disinvestment of public sector enterprises, with the following feature

• Strategic Sector: Bare minimum presence of the public sector enterprises and remaining to be privatised or merged or subsidiaries with other CPSEs or closed.
• Strategic sector: Industries are considered strategic if it has large innovative spillovers and if it provides a substantial infrastructure for another forum in the same or related industry
• Following 4 sectors come under it :

• • • Atomic energy, Space and Defence
    • Transport and Telecommunications
    • Power, Petroleum, Coal and other minerals
    • Banking, Insurance and financial services
• Non-Strategic Sector: In this sector, CPSEs will be privatised, otherwise shall be closed.

Non-strategic sector

• will include hotel and tourist services, transportation vehicle and equipment, industrial and consumer goods, trading and marketing, and transport and logistics

The policy of the government on the 18 strategic sectors Other sectors

18 strategic sectors under 3 different classificatory types are

• mining and exploration
• processing and generation and
• the service sector

Policy regarding PSU by the govt

• Govt will completely exit the non-strategic sector
• in the strategic sector govt will keep a maximum of 1-4 PSU and subsequently opt for strategic disinvestment

PRIVATIZATION OF PSU SINCE 2014, INCLUDING BANKS

The increase in the supply of PSU stocks and the constrained investor appetite had started affecting the prices. The trade-off between the political objective to privatize and revenue maximization was witnessed the most in this period. Resultantly, the government resort to Strategic Sales.

However, a departure from past govt is also disinvesting profit-making ventures with a rationale that disinvestment of profit-making enterprises by a public offering of shares is desirable as it leads to dispersed shareholding and avoids concentration of economic power.

However, in the case of the bank, an amalgamation policy was followed which reduced the number of the national bank from 28 to 12 by merging various banks.

• But even after this, there was no meaningful resolution of the NPA crisis.
  • In fact, post the covid crisis, this problem will increase as small banks are facing the problem of balancing credit growth and risk.
  • With the spectre of insolvencies looming at the start of pandemic-led lockdown, there was a flight of deposits from small banks to bigger ones.
• In view of this, the govt has focused on taking PSBs out of government control.

Overall approach

Since 2014, the Modi government’s strategic disinvestment approach was to sell minority stakes in public companies to raise revenue, while retaining management control. During the 2014-2019 period, the government raised Rs. 2,79,622 crore from the disinvestment of public sector enterprises (PSEs), compared to Rs 1,07,833 crore collected during 2004-14. However, this has changed now. Recently, five companies were up for 100 per cent disinvestment, including three large profitable companies such as Bharat Petroleum Corporation Ltd. (BPCL), the Container Corporation of India and the Shipping Corporation.

THE CRITICAL ANALYSIS OF PRIVATIZATION POLICY BY THE PRESENT GOVERNMENT

Is privatization of banks panacea for success

• Private players in the financial sector are prone to failure: this fact gave the world economic shock of astronomical proportion, which was over reachingly created by private bank
• Private banks fail all the time. In the 20 years from 2001 to 2020, as many as 559 private banks with assets of $721 billion failed in the US.
• The principle followed by private banks is when they make profits, it goes to shareholders: When they make losses, it gets socialised and falls in the lap of the government to make good the deposits either through insurance or taxpayer bailout. (Yes Bank, Federal Deposit Insurance Corporation (FDIC), bailed out the above bank.)
• Big private banks can fail at any time: There is a myth that if a bank gets large enough, it will not fail. While one can agree that the larger the bank, the greater its ability to absorb losses, this does not mean it cannot fail. The axiom “Higher you go, harder the fall” applies best to private banks. Yes, Bank, Citi Bank, and Washington Mutual Bank are all such examples.

Looking at the larger interest

• The move towards divesting ownership in strategic sectors will have long-term consequences. A diluted public sector would possibly mean that India missing out on the opportunity to capitalise on the global distrust against Chinese supply lines in the wake of the current crisis.
• Moreover, the valuation of PSU is at an all-time low. At the start of NDA-2, the valuation of PSU at the BSE was 22% which has reduced to 9.4% in Oct 2020.
• At present, because of the crisis presented by the pandemic, it is highly unlikely that more than 10 per cent of the shares of the LIC is subscribed, as the market may not be able to absorb more.

PSU MODELS IN DIFFERENT COUNTRIES

PSUs exist virtually everywhere. In Asia where PSUs have played an important role in shaping the economy. According to an OECD report, PSUs pull plenty of economic might —

• in China, they account for 30% of GDP,
• in Vietnam, 38%,
• and they account for roughly a fourth of GDP in India and Thailand.
• PSUs are also big employers in many of these countries — 15% in China, and 5% in Malaysia.
• PSUs play an important role in BRICS economies.
  • According to a recent KPMG report, of the 2,000 largest companies globally, 260 are from BRICS economies.
  • About 123 or 47% of the largest BRICS enterprises are PSU. The market value of PSU amounts to 32% of GNIs (gross national income) among all BRICS countries.

All the above example shows that privatization is not the only panacea for bringing efficiency, improving productivity, and building productive assets.

THE GLOBAL PRACTICES

Reshaping the PSU buy other countries

Three former planned economies have set up centralized holding entities — SASAC in China in 2003, SCIC in Vietnam in 2007 and Druk Holdings and Investments in Bhutan. In 2006, the Philippines pioneered the development of a PSU governance scorecard which has become an important tool for pushing PSU reforms. Since 2004, Malaysia has rolled out a comprehensive ‘transformation programme” to overhaul its PSUs.

An incorporated holding company Temasek to better manage its assets on a commercial basis was launched in Singapore. This allowed its Ministry of Finance to focus on policy making. At inception, Temasek’s initial portfolio was S$354 million, spanning 35 companies. Thereafter began the process of restructuring SOEs. Some were corporatized and privatized, others were allowed to go for big global expansions.

THE CHINA EXAMPLE: 

In 2003, a holding company, the State-Owned Assets Supervision & Administration Commission (SASAC), was created to manage the SEO. The agency, which controls nearly 100 of the largest SOEs, lies “at the heart of China’s industrial deep state

THE WAY FORWARD: WHAT CAN INDIA LEARN?

ALTERNATIVES TO PRIVATISATION (WITH PAST EXAMPLES)

 A fire sale privatisation, as is prescribed by free market evangelists, is an also less efficient method of value maximization, besides being completely impractical in India’s political economy. Neither disinvestment nor the few outright privatizations that have taken place seem to have really maximized value for the key shareholder — the taxpayer of India.

The case for privatisation is trickier and the trick lies likely elsewhere – in control. Within the Indian landscape, there are examples, albeit few, where significant (or even majority) government ownership has not prevented the company from creating enormous value for shareholders. Since Independence, while most government-funded enterprises were set up as public sector undertakings, mostly under enabling legislations, there were other models explored too.

1. Maruti Udyog was set up as a Joint Venture of the government of India with Suzuki of Japan, with the latter initially holding a minority stake. But the cornerstone of the structure was on management control – government, despite its majority stake, allowed a very substantial amount of management and operational freedom to Suzuki to manage the company on commercial lines.
2. A second model used often, mostly in financial services, has been that of indirect ownership — via other PSUs while allowing private sector-level management and operational freedoms. The Industrial Credit and Investment Corporation of India (ICICI), the erstwhile parent company of ICICI Bankwas set up as a joint venture of public sector banks, insurance companies and the World Bank.
3. UTI Bank (known as Axis Banknow) was sponsored by the government owned UTI-1, a special purpose vehicle created out of the restructuring of Unit Trust of India.
4. HDFC, the mortgage lender, was initially sponsored by ICICI, with minority shareholdings with IFC (part of the World Bank group) and the Prince Aga Khan foundation.

Apart from above, government should a progressive approach for privatization as given below:

NEGATIVE BIDS

• The government should permit negative bids: a bid where the government pays someone to take the company off its hands. Negative bids were an important part of the massive privatization which took place in Germany after the end of socialism and helped to get productive assets rapidly into the hands of efficient managers in the private sector.

MOU MODELS

• In  South Korea, PSUs with high social obligation operates with private sectors with the help Of MOUs.
• But one of the most important things, that is forgotten in the outright privatization of CPSUs is that it is unaccompanied by the necessary reforms in the overall regulatory framework in which they operate. Reforms of the regulatory frameworks and the markets are crucial for the performance of both PSUs and private companies, ensuring a rule-based competitive structure covering entry, exit, bankruptcy and competition among existing companies, as manifested by the British privatization of the 1980s and 90s.

CRISIS OF LEGITIMACY

• The privatization of loss-making public sector enterprises may prevent the state from incurring further losses. However, unless the sale proceeds are substantial, genuine and transparent, a crisis of legitimacy may arise.

RECOGNISING THE ROLE OF STATES

• It is vital to recognise the role of States in establishing a public asset such as Air India, They have actively participated in the growth of the airline in the form of land and other infrastructure to its offices.

o   States were not consulted in the whole process which is a breach of the spirit of ‘cooperative federalism’.

THE CONCLUSION: While the experience of other countries is available to India by way of guidance, it would have to evolve its own techniques, best suited to its level of development. The historic, cultural, and institutional context influences the way in which and the pace at which privatization is implemented. Where the market economy is not fully developed, ways would have to be found to safeguard the interests of consumers and investors, which would ensure a fuller play to the wealth-creating role of the entrepreneurs.  Apart from it, along with profit-driven marketplace, the welfare policy interventions of public sector enterprises such as social uplift, full employment need to be advocated.It is prudent to extend this doctrine of ‘public trust’ to the management of public sector enterprises by the government, as selling public assets and assuming the liabilities without proper planning will impose an enormous debt burden on citizens.

QUESTIONS TO PONDER

1. Why is fiduciary duty an important element of government functioning? How can government fulfil its fiduciary duty in its functioning, especially related to asset sale processing?
2. How far do you think that the central government’s approach to the asset sale is facing a trust deficit, and it is resulting in liabilities being left to citizens? Substantiate your views with examples.