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No-Confidence Motion

Paper: General Studies 2

Topic:  Parliament and State Legislatures – structure, functioning, conduct of business, powers & privileges and issues arising out of these.

Why in the news?

Karnataka ruling coalition lost the vote of no-confidence ending the tenure of the ruling government.

What is the no confidence motion?

  • A government can function only when it has majority support in the Lok Sabha/ Lower House in the State Legislature. The party can remain in power when it shows its strength through a floor test which is primarily taken to know whether the executive enjoys the confidence of the legislature. 
  • If any member of the House feels that the government in power does not have a majority then he/she can move a no-confidence motion. If the motion is accepted, then the party in power has to prove its majority in the House. The member need not give a reason for moving the no-confidence motion.
  • A no-confidence motion can be moved by any member of the House. It can be moved only in the Lok Sabha (State Assembly) and not Rajya Sabha. Rule 198 of the Rules of Procedure and conduct of Lok Sabha specifies the procedure for moving a no-confidence motion. The member has to give a written notice of the motion before 10 am which will be read out by the Speaker in the House. 
  • A minimum of 50 members have to accept the motion and accordingly, the Speaker will announce the date for discussion for the motion. The allotted date has to be within 10 days from the day the motion is accepted. Otherwise, the motion fails and the member who moved the motion will be informed about it.
  • If the government is not able to prove its majority in the House, then the government of the day has to resign.

 

Budgetary Process

Paper: General Studies 2

Topic: Parliament and State Legislatures – structure, functioning, conduct of business, powers & privileges and issues arising out of these.

Why in the news?

Rajya Sabha returned the Finance Bill and Appropriation Bill yesterday completing the passage of the Budget.

What is the budgetary procedure/process?

The budget or the annual financial statement of the Government is passed by the Parliament through a special procedure that consists of six steps:

 

  • Presentation of the Budget: The Budget is laid before both the Houses of Parliament and the Finance Minister presents the Budget speech. This constitutes the presentation of the Budget.
  • General Discussion: After the budget is presented, a general discussion is held in both Lok Sabha and Rajya Sabha.  Discussion at this stage is limited to general examination of the budget and proposals of the government.  At the end of the discussion, the Finance Minister gives a reply. No voting takes place at this stage.
  • Scrutiny by Standing Committees: After the general discussion, Parliament may go into recess for a few weeks.  At this point, detailed estimates of expenditure of all ministries, called Demands for Grants, are sent for examination to the Parliamentary Standing Committees, that comprise members of both Lok Sabha and Rajya Sabha. These Committees examine the: (i) amount allocated to various programmes and schemes under the Ministry, and (ii) trends of utilisation of the money allocated to the Ministry.  In doing so, officials of the Ministry are required to depose before the Committee to respond to queries and provide additional information in connection with the Demands for Grants being examined. While examining a ministry’s expenditure, the Committees may consult or invite views from experts. Based on these consultations, the Committees submit their reports to Parliament. The Committees’ recommendations are useful for MPs to understand the implications of the proposed expenditure across ministries and allow for informed debate before approving such expenditure
  • Voting on Demand for Grants: Typically, Lok Sabha decides to hold a detailed discussion on four or five Demands for Grants.  The ministries identified for discussion vary every year and are decided by the Business Advisory Committee of Lok Sabha.  This discussion is followed by voting. The demands which have not been discussed and voted on by the last day are ‘guillotined’, i.e. they are voted upon together. During the voting on Demands for Grants, MPs can express their disapproval through ‘cut motions’.  If a cut motion is passed, it signifies loss of confidence in the government and the Cabinet is expected to resign. MPs can move cut motions to reduce the grant amount for the respective ministry: (i) to Re 1 to signify disapproval of the policies of that ministry, (ii) by a specific amount (an ‘Economy’ cut), or (iii) by a token amount of Rs 100 to express a specific grievance. Only Lok Sabha can vote on the Demand for Grants
  • Passage of Appropriation Bill : After the Demands for Grants are passed, they are consolidated into an Appropriation Bill.  This Bill seeks to authorise the government to spend money from the Consolidated Fund of India, which consists of all receipts and borrowings of the government. It being a Money Bill is only passed by the Lok Sabha. The Rajya Sabha can only discuss the bill and return it within 14 days. The passage of the Appropriation bill legalises the expenditure side of the Budget.
  • Passage of Finance Bill: After the passing of the Appropriation Bill, the Finance Bill is taken up for consideration and passing.  This Bill includes details of the change in tax rates, and imposition of taxes on various entities. The Finance Bill is introduced with the budget and consists of the government’s financial proposals for the upcoming year.  The Finance Bill is usually introduced as a Money Bill. The Constitution defines Money Bill as one which only contains provisions related to taxation, borrowings by the government, or funds of the Consolidated Fund of India.  A Money Bill only needs the approval of Lok Sabha, after which Rajya Sabha can only give its recommendations. The passage of the Finance bill legalises the income side of the budget completing the budgetary process.

 

 

Budgetary Process

 

Code on Occupational Safety, Health and Working Conditions Bill, 2019

Paper: General Studies 3

Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Why in the news?

  • The Minister of State (I/C) for Labour and Employment introduced The Code on Occupational Safety, Health and Working Conditions Bill, 2019 in Lok Sabha to amend the laws regulating the Occupational Safety, Health and Working Conditions of the persons employed in an establishment. 
  • The Code has been drafted after amalgamation, simplification and rationalisation of the relevant provisions of the 13 Central Labour Acts. After the enactment of the Code, all these Acts being subsumed in the Code will be repealed.

What are the salient features of the Bill?

  • The Code provides basic broad legislative framework with enabling provisions for framing rules, regulations, standards, and bye-laws as per the requirements of different sectors which has Resulted in reduction of 622 sections to 134 sections in the Code. This would result in simple legislation with flexibility in changing the provisions in tune with emerging technologies and makes the legislation dynamic.
  • The proposed Code enhances the coverage of workers manifold as it would be applicable to all establishments employing 10 or more workers, where any industry, trade, business, manufacture or occupation is carried on, including, IT establishments or establishments of service sector.
  • The Bill proposes one registration for an establishment instead of multiple registrations. Presently 6 labour acts out of 13 provide for separate registration of the establishment. This will create a centralized database and promote ease of doing business. At present, separate registration is required to be obtained under 6 Acts.
  • Employer to provide free of cost annual health check-up for employees above prescribed age for prescribed tests and for prescribed establishments. Increases productivity as it would be possible to detect diseases. Coverage of employees above a certain age for health check-up would promote inclusion.
  • First time statutory provision to issue appointment letter to every employee of the establishment with the minimum information prescribed by the appropriate government. The provision of appointment letter will result in formalization of employment and prevent exploitation of the worker.
  • The multiple committees under five labour Acts have been substituted by one National Occupational Safety and Health Advisory Board. The National Board is of tripartite nature and has representation from trade unions, employer associations, and State governments. This will result in reduction in multiplicity of bodies/committees in various Acts and simplified and coordinated policy-making.
  • Enabling provision for constituting a bi-partite Safety Committee in any class of establishment by appropriate government. It will promote safe and healthy working conditions in an establishment. The participatory nature of the committee will encourage implementation of decisions taken by the management.
  • A part of the penalty for contravention of provisions relating to duties of employer leading to death or serious bodily injury to any person may be given to the victim or the legal heirs of the victim by the Court. The part of penalty would help in rehabilitation of injured worker or would provide financial support to the family of the deceased.
  • Presently, different applicability thresholds exists for welfare provisions like crèche, canteen, first aid, welfare officer etc in different Acts. The proposed Code has envisaged uniform threshold for welfare provisions for all establishment as far as practicably feasible.
  • Women permitted to work beyond 7 PM and before 6 AM subject to the safety, holidays, working hours or any other condition as prescribed by appropriate government in respect of prescribed establishments. However, only after taking their consent for night work. This will promote gender equality and is in tune with demands from the various forums including international organizations as it leads to protective discrimination. Further, the condition of taking consent/ willingness of the women employees for night work would avoid any kind of misuse of the provision.
  • The provision of one license and one return in place of multiple licenses and returns in existing 13 labour laws subsumed in this Code to save time, resources and efforts of establishments.

 

Code on Wages Bill, 2019

Paper: General Studies 3

Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Why in the news?

  • The Minister of State (I/C) for Labour and Employment Shri Santosh Kumar Gangwar introduced The Code on Wages Bill, 2019 in Lok Sabha today to amend and consolidate the laws relating to wages and bonus and matters connected therewith.
  • The Code on Wages Bill, 2019 subsumes relevant provisions of The Minimum Wages Act, 1948, The Payment of Wages Act, 1936, The Payment of Bonus Act, 1965 and The Equal Remuneration Act, 1976. After the enactment of the Code on Wages, all these four Acts will get repealed. 
  • This is in line with the ongoing labour law reforms in the country.

What are the salient features of the Bill?

  • The Code on Wage universalizes the provisions of minimum wages and timely payment of wages to all employees irrespective of the sector and wage ceiling. At present, the provisions of both Minimum Wages Act and Payment of Wages Act apply on workers below a particular wage ceiling working in Scheduled Employments only. This would ensure “Right to Sustenance” for every worker and intends to increase the legislative protection of minimum wage from existing about 40% to 100% workforce. This would ensure that every worker gets minimum wage which will also be accompanied by increase in the purchasing power of the worker thereby giving fillip to growth in the economy. 
  • Introduction of statutory Floor Wage to be computed based on minimum living conditions, will extend qualitative living conditions across the country to about 50 crore workers. It is envisaged that the states to notify payment of wages to the workers through digital mode.
  • There are 12 definitions of wages in the different Labour Laws leading to litigation besides difficulty in its implementation. The definition has been simplified and is expected to reduce litigation and will entail at lesser cost of compliance for an employer. An establishment will also be benefited as the number of registers, returns, forms etc., not only can be electronically filed and maintained, but it is envisaged that through rules, not more than one template will be prescribed.
  • At present, many of the states have multiple minimum wages. Through Code on Wages, the methodology to fix the minimum wage has been simplified and rationalised by doing away with the type of employment as one of the criteria for fixation of minimum wage. The minimum wage fixation would primarily based on geography and skills. It will substantially reduce the number of minimum wages in the country from existing more than 2000 rates of minimum wages.
  • Many changes have been introduced in the inspection regimes including web based randomised computerised inspection scheme, jurisdiction-free inspections, calling of information electronically for inspection, composition of fines etc. All these changes will be conducive for enforcement of labour laws with transparency and accountability.
  • There were instances that due to smaller limitation period, the claims of the workers could not be raised. To protect the interests of the workers, the limitation period has been raised to 3 years and made uniform for filing claims for minimum wages, bonus, equal remuneration etc., as against existing varying period between 6 months to 2 years.

 

Mauritius Leaks

Paper: General Studies 3

Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Why in the news?

  • After Swiss Leaks, Panama Papers and Paradise Papers, over 200,000 emails, contracts and bank statements leaked from Mauritius show how the island nation was used by a long list of corporates to facilitate partnerships with multinationals and, without paying any capital gains tax, remit profits as Foreign Direct Investment (FDI) to India.
  • Several companies including Conyers Dill & Pearman were among those who benefited in the decades when there were tax breaks for companies and corporations routing their investments to India via Mauritius, among other offshore destinations. In 2016, India amended its Double Taxation Avoidance Agreement (DTAA) with Mauritius, and the new provisions — capital gains tax instance — are now fully applicable.

What is a Double Taxation Avoidance Agreement?

  • A DTAA is a tax treaty signed between two or more countries. Its key objective is that tax-payers in these countries can avoid being taxed twice for the same income. A DTAA applies in cases where a tax-payer resides in one country and earns income in another.
  • DTAAs can either be comprehensive to cover all sources of income or be limited to certain areas such as taxing of income from shipping, air transport, inheritance, etc. India has DTAAs with more than eighty countries, of which comprehensive agreements include those with Australia, Canada, Germany, Mauritius, Singapore, UAE, the UK and US.
  • DTAAs are intended to make a country an attractive investment destination by providing relief on dual taxation. Such relief is provided by exempting income earned abroad from tax in the resident country or providing credit to the extent taxes have already been paid abroad. DTAAs also provide for concessional rates of tax in some cases.
  • Favourable tax treatment for capital gains under certain DTAAs such as the one with Mauritius have encouraged a lot of foreign investment into India. Mauritius accounted for $93.65 billion or one-third of the total FDI flows into India between April 2000 and December 2015. It has also remained a favoured route for foreign portfolio investors. But the problem is DTAAs can become an incentive for even legitimate investors to route investments through low-tax regimes to sidestep taxation. This leads to loss of tax revenue for the country.
  • India amended its Double Taxation Avoidance Agreement (DTAA) with Mauritius in 2016 to plug certain loopholes. Now, a Mauritian entity will have to pay capital gains tax here while selling shares in a company in India from April 2017. Earlier, the company could avoid tax as it was not a ‘resident’ in India. It could get away from the taxman in Mauritius too, due to non-taxation of capital gains for its residents. As a result, many shell entities sprang up in Mauritius to profit from investments in India and get away without paying taxes anywhere.

 

What is capital gains tax?

A capital gains tax (CGT) is a tax on capital gains, the profit realized on the sale of a non-inventory asset that was greater than the amount realized on the sale. The most common capital gains are realized from the sale of stocks, bonds, precious metals, and property.

What is a shell company?

  • A shell corporation is a corporation without active business operations or significant assets. These types of corporations are not all necessarily illegal, but they are sometimes used illegitimately, such as to disguise business ownership from law enforcement or the public. 
  • The number one reason for a domestic company to set up a shell company is to realize a tax haven abroad. This helps the company avoid taxation and thus shore up its profits.
  • Another way that shell companies help with taxes surrounds the need for financial institutions to conduct financial activity in foreign markets. This allows them to invest in capital markets outside of domestic borders and realize potential tax savings.

 

Coastal Regulation Zone (CRZ)

Paper: General Studies 3

Topic: Conservation, environmental pollution and degradation, environmental impact assessment

Why in the news?

  • Maharashtra revenue department proposal to treat a portion of the Arabian Sea foreshore in South Mumbai as government land has been cleared by the Government.
  • However, any development on it will be subject to the Coastal Regulation Zone (CRZ) regulations.

What is a Coastal Regulation Zone?

  • The coastal land up to 500m from the High Tide Line (HTL) and a stage of 100m along the banks of creeks, estuaries, backwater and rivers subject to tidal fluctuations, is called the Coastal Regulation Zone(CRZ). 
  • With the objective of conservation and protection of the coastal environment, Ministry of Environment and Forest and Climate Change notified the Coastal Regulation Zone Notification in 1991, which was subsequently revised in 2011. The notification was amended from time to time based on representations received.
  • The Union Cabinet has approved the Coastal Regulation Zone (CRZ) Notification, 2018 which was last reviewed and issued in 2011, with periodic amendments to some clauses. The move comes in the backdrop of a series of representations received by the Ministry of Environment, Forest & Climate Change from various Coastal States/UTs, besides other stakeholders, for a comprehensive review of the provisions of the CRZ Notification, 2011, particularly related to the management and conservation of marine and coastal ecosystems, development in coastal areas, eco-tourism, livelihood option and sustainable development of coastal communities etc.
  • The proposed CRZ Notification, 2018 will lead to enhanced activities in the coastal regions thereby promoting economic growth while also respecting the conservation principles of coastal regions. It will not only result in significant employment generation but also to better life and add value to the economy of India. The new notification is expected to rejuvenate the coastal areas while reducing their vulnerabilities.