Note4Students
From UPSC perspective, the following things are important :
Prelims level: Committee of creditor, difference between financial and operational creditors etc.
Mains level: Paper 3- Issues in the IBC and suggestion to improve it.
The article is about the aftermath of Covid-19 for the Indian business. Though the government has announced the slew of relief packages, one expects a significant spike in the number of bankruptcies. Will India’s Insolvency and Bankruptcy Code be able to deal with this new normal? Some pressing issues that could arise and solutions are discussed here.
Rise in the pending cases with NCLT
- Since the commencement of the IBC and setting up of the National Company Law Tribunal (NCLT), 12,000 cases have been filed.
- Around 4,500 cases have been settled before resolution, with a settlement amount of almost ₹2 trillion.
- 1,500 cases have been admitted and 6,000 cases are waiting in the queue.
- The covid-19 epidemic will only increase this traffic jam.
- Increasing the capacity of NCLT: The pile-up of cases needs to be addressed by increasing capacity of the NCLT, and by ensuring that as many cases as possible are settled without going to the IBC.
Every issue mentioned here is important from Mains point of view. IBC has been a significant step by the government to streamline the process of insolvency and bankruptcy.
Need for a relook at section 29A(c) of IBC
- What is section 29A(c) of IBC? This provision makes ineligible the defaulting person (promoter) from bidding for the asset (buying back) if it has been NPA for a year or more.
- What was the purpose of section 29A(c): The intent of section 29A is to prevent persons who, by their misconduct or fraudulent motives contributed to the default of the corporate debtor, from “buying back” the corporate debtor from the creditors, potentially at steep discounts.
- What’s the issue? While this is clearly a justifiable objective, the short window of one year has prevented even genuine promoters who faced major setbacks on account of unforeseen circumstances from being given a second chance.
- Even though such promoters are often in good the best position to revive their businesses.
- In view of the current force majeure, we recommend that the grace period of one year under section 29A(c) be extended to two years.
- And further extensions should be made possible on the approval of a supermajority (i.e. 75%) of the Committee of Creditors.
- Further, the newly introduced Section 12A allows the bank, which was the insolvency applicant, to exit the insolvency process.
- Which brings the promoter back in control—provided 90% of the Committee of Creditors agrees and the public bidding process has not commenced.
- The requirement for exit should be reduced to 75% of the committee.
Extension of timelines
- Recently, the Supreme Court did well by passing a suo-moto order on the extension of limitation generally.
- Based on these SC orders, the National Company Law Appellate Tribunal has ordered that such extension also apply to the outer limit of 330 days for the resolution of corporate insolvency cases.
- This could be further extended once the gravity of the situation becomes clear over the next few months.
- The moratorium period on debt financing recently announced by RBI should also be extended to cover money market instruments.
Need for providing more financing options to corporate debtors
- While the IBC does provide for interim finance with a preferential position for a corporate debtor, there are known limitations and residual risks on the provision of such finance.
- The government would do well to look at expanding the market by making changes.
- The changes could include permitting interim funding by asset reconstruction companies even without being creditors.
- And making provisions for a minimum return even in case of liquidation, and extending the enhanced priority standing given to interim financiers in the IBC phase to the pre-IBC phase.
- Post the lockdown, incremental working capital support upto, say, 25% of existing working capital exposure could be allowed in deserving cases even if the account is in default or NPA.
- This can be deemed to be priority lending to also protect bankers’ interests.
- The provision could also be made for the extension of concessional finance within limits based on demonstrated export potential.
- For example- order, short lead-time business, margin adjustments) in order to contribute to the recovery of exporting industries.
Equitable treatment of operational creditor
- In the Swiss Ribbons judgment, the Supreme Court urged equitable, though not equal, treatment of operational creditors.
- The need to protect the interests of operational creditors in bankruptcy proceedings is all the more critical in difficult market conditions where credit would be hard to obtain.
- Some broad guidelines appear to be desirable.
- For instance, one could stipulate that in the absence of quality issues, two operational creditors belonging to the same sub-class in terms of the type of product or service sold, should be treated equally.
- This should be irrespective of group relationships or continuity in the business of the resolved entity.
Facilitating resolution outside the corporate insolvency resolution process
- On the issue of closing a case before the onset of insolvency proceedings, there was a case for doing this even before the corona outbreak, and even without the paucity of processing capacity.
- The labelling of a company as insolvent or bankrupt has a chilling effect on its already dim prospects.
- Vendors, customers and employees start having second thoughts about associating with this company.
- Certain rules get triggered—for instance, the rule barring an infrastructure company from accepting new orders.
- The current outbreak amplifies the case for facilitating resolution outside the corporate insolvency resolution process.
- At the same time, there is a need to streamline the process to ensure enhanced proceeds.
Conclusion
All institutions of the economy will need to fire together in order to maximize the prospects of recovery. A suitably modified bankruptcy framework has a crucial role to play.
Back2Basics: Difference between financial and operational creditors
- Financial and operational creditors are different in the sense that their liabilities arise from different origins.
- Where a financial creditor is liable because of a contract such as a loan or debt and operational creditor is liable because of operational transactions.
- The difference between a financial creditor and an operational creditor is that a financial creditor is an individual whose relationship with the entity is solely based on financial contracts, such as a loan or debt security.
- Whereas, an operational creditor is an individual whose liabilities from the entity comes in the form of future payments in exchange for goods or services already delivered.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: WHO.
Mains level: Paper 2- How failure of WHO to alert the world in time of Covid-19 pandemic matters for India?
The article elaborates on the role played by China in manipulating WHO to its advantage and to the detriment of the rest of the world. India must take cognisance of the growing Chinese influence at various global platforms and act accordingly.
China’s role in electing Director-General of WHO
- Tedros was Ethiopia’s Minister of Health (2005—2012) and Minister of Foreign Affairs (2012 to 2016).
- In 2017, China catapulted him to lead the WHO as its Director General (DG).
- India, the world’s largest democracy, played second fiddle.
- We will never know who gamed India inside and abroad, but tough questions must be asked.
Pandemic as a wake-up call for India
- Public health is a rights-driven developmental track for any country, especially for India.
- The ministries of foreign, trade, information and broadcasting, home, finance, women and child development, law, infrastructure and industry, among others, should be part of the country’s health equation and decision-making on a daily basis.
- Should the WHO be sitting in on high-level health ministry discussions given what we now know about its allegiance to all things Chinese?
- China, an economic and military behemoth, now seeks the same power in public health.
- India, with its double burden of disease and an uncritical alignment with the WHO, is fertile ground for data and dollars.
Dependence on China for API
- For now, India, like most countries, is at China’s mercy because of years of short-sightedness and corruption in the health sector.
- While it is hailed as the pharmacy of the world and has sent drugs as humanitarian assistance, India relies heavily on raw materials from China.
- Quick thinking and swift action can reverse this.
The above points highlight the implications of Chinese dominance for India. Questions related to China is a recurrent theme in the UPSC papers. Next thing to note here is India’s dependence on China for APIs.
The US’s stand on WHO funding
- Some are blaming US President Donald Trump for contemplating cutting off funding for the WHO and not Tedros, for taking orders from China about the pandemic.
- The war is not between an American President and Tedros.
- It is between Tedros, a global public health head, and his subservience to China.
- That ship of trust, the cornerstone of public health work that the WHO should have been leading, has long set sail.
- Protecting Tedros is important as the WHO needs money to help poor countries with weak health systems.
Last year, UPSC asked about UNESCO when the US and Israel withdrew from it. This year, WHO has been in focus for allegedly towing China’s line.
Issue of funding and spending by the WHO
- War chests are being mobilised to help the WHO help China disburse aid and assistance to dying people and gasping economies.
- The recent announcement by the World Bank to fast track $1.9 billion for health systems to respond to Covid-19 also includes Ethiopia.
- For the first time in its history, the WHO has opened its doors to private funding via a Solidarity fund and China is expected to keep an eye on this.
- To keep track of how the money is spent is a problem.
Conclusion
India must decide if it wants to blindly follow the blind or lead by bringing the WHO back to its original promise. At stake is the country’s economic security of which public health is a key component. India can either be a part of history or pick up the pen even in these times of distress and rewrite it.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- The dominance of private health sector in India makes partnership with it a must to deal effectively with any pandemic.
The article delineates five areas in which partnership with the private sector is essential to deal effectively with the epidemic and ensure a whole-of-society response. Ensuring the participation of the private sector has been the recurring theme of many op-eds we have come across after the outbreak.
Significance of private healthcare in India
- According to the WHO, a critical lesson from the 2014-16 West African Ebola epidemic was that both the public and private sector need to work in tandem in responding to large-scale epidemics.
- In the COVID-19 response in India, the private sector has to play an even more important role, as it is the dominant provider of health services in the country.
- The private sector includes the for-profit and not-for-profit segments.
- The dominance of the private sector in India: The NSSO 71st round data on social consumption of health show that private hospitals, clinics and nursing homes provide over 70 per cent of healthcare.
- Data on the nearly 1 crore treatments received under the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY) corroborate this finding.
- AB PM-JAY data shows that over half of all treatments are being availed of from private providers, accounting for over 60 per cent of total disbursements.
UPSC asked about community-level healthcare intervention in 2018. So, pay attention to the significant role played by the private health sector in India.
Following five are the areas in which cooperation with the private sector will be essential-
1 Testing
- Creating a large and accessible testing infrastructure is the first weapon in the armoury.
- Countries like South Korea, Singapore, Germany and Japan have been successful at controlling the spread of COVDID-19 and reducing mortality through early detection and quick containment.
- This has been possible only through widespread testing.
- India has opened testing up to private labs.
- Testing has been included under the AB PM-JAY as well.
- We need to substantially expand testing capacity.
- This cannot happen without the active participation of the private sector.
2 Converting private hospitals into Covid-19-only hospitals
- As the government deepens its containment efforts, the country will need to rapidly surge the numbers of quarantine units, isolation wards and ICU beds in COVID-19-only
- It will also need to ensure increased and continued supply of essential medical products — from testing kits, masks and other PPEs to oxygen and ventilators.
- According to a recent ICMR study, around five per cent of those infected will need intensive care and half of those in intensive care units will need mechanical ventilation.
- These projections translate into large numbers that considerably exceed the capacity of the government health system.
- Private hospitals with adequate infrastructure will need to convert in COVID-19-only hospitals.
- There should be a clear policy framework of designated hospitals, reporting and referral systems and an appropriate payment system.
- With many government facilities being converted into COVID-19-only hospitals, a large number of non-COVID-19 patients will need facilities and providers to take care of their other urgent, critical or continuing healthcare needs.
- The AB PM-JAY has started a process to bring on board more hospitals to respond to such needs.
3 Protecting healthcare workers
- As more private providers join this fight, a major concern that will arise is keeping healthcare workers from becoming infected.
- In addition to being at a high risk of contracting the virus, healthcare workers are also potential carriers.
- Ensuring their protection is of paramount importance.
- Increasing the production: Companies manufacturing essential medical products such as ventilators, masks will need to crank up their production.
- Direct support from banks may be needed to keep production and supply chains going.
4 The private sector has to support the ecosystem driving health system
- The private sector will need to vigorously support the large ecosystem that drives the health system as the lockdown and ongoing epidemic restrict movement and normal economic activities.
- Activities such as the production of essential drugs and medical products, logistics to maintain smooth supply need to not only continue but also accelerate.
- Support for community activities such as night shelters and community kitchens will need to be strengthened.
5 Collaborate to share knowledge on the epidemic
- An adequate stage-wise response to the pandemic and its economic, social and political aftermath will require the rapid filling of the many knowledge gaps.
- Government, private and not-for-profit research institutions need to collaborate to understand the nature of transmission of the virus.
- They must understand the factors that slow its spread, the most at-risk communities, or the optimal quarantine period.
In 2015, UPSC asked whether the private health sector could help bridge the gap in providing universal health coverage. A question can be asked based on the same theme but in reference to dealing with the pandemic.
Conclusion
The fight against COVID-19 is not a race to a hilltop. It involves the continuous management of an evolving public health crisis that threatens to spawn economic and social crises. These multiple dimensions will require a whole-of-society approach that goes beyond the government alone.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: WHO and its funding
Mains level: Fall of major global institutions amid COVID-19 outbreak
The US has announced to halt the funding it gives to the WHO accusing it of mismanagement of the COVID-19 spread.
WHO is facing the biggest pandemic in human history. For all the responsibility vested in the WHO, it has little power. Whatever the causes of this disaster are, it is clear that the WHO has failed in its duty to raise the alarm in time. This shortfall of WHO is failure indicative of a deeper malaise: the global institutional framework is a pawn in the hands of the great powers, cash-strapped.
About WHO
- The WHO is a specialized agency of the United Nations responsible for international public health.
- It is part of the U.N. Sustainable Development Group.
- The WHO Constitution, which establishes the agency’s governing structure and principles, states its main objective as ensuring “the attainment by all peoples of the highest possible level of health.”
- It is headquartered in Geneva, Switzerland, with six semi-autonomous regional offices and 150 field offices worldwide.
Where does WHO get its funding from?
- It is funded by a large number of countries, philanthropic organisations, UN organisations etc.
- Voluntary donations from member states (such as the US) contribute 35.41%, assessed contributions are 15.66%, philanthropic organisations account for 9.33%, UN organisations contribute about 8.1%; the rest comes from myriad sources.
- India contributes 1% of member states’ donations.
- Countries decide how much they pay and may also choose not to.
Its expenditure
- The WHO is involved in various programmes. For example, in 2018-19, 19.36% (about $1 bn) was spent on polio eradication, 8.77% on increasing access to essential health and nutrition services, 7% on vaccine preventable diseases and about 4.36% on prevention and control of outbreaks.
- The Africa countries received $1.6 bn for WHO projects; and South East Asia (including India) received $375 mn.
How does WHO prioritise its spending?
- The annual programme of work is passed by the WHO’s decision-making body, the World Health Assembly.
- It is attended by delegates from all member states and focuses on a specific health agenda prepared by the Executive Board.
- The main functions of the Assembly, held annually in Geneva, are to determine WHO policies, appoint the Director-General, supervise financial policies, and review and approve the proposed programme budget.
- The decision on which country gets how much depends on the situation in the countries.
WHO and India
- India became a party to the WHO Constitution on January 12, 1948.
- The first session of the WHO Regional Committee for South-East Asia was held on October 4-5, 1948 in the office of India’s Health Minister, and inaugurated by Prime Minister Jawaharlal Nehru.
- The WHO India Country Cooperation Strategy (CCS) 2019-2023 has been developed jointly by the Health Ministry and the WHO India country office.
- The CCS aims to address complex challenges such as the prevention of NCDs, the control of antimicrobial resistance (AMR), the reduction of air pollution, and the prevention and treatment of mental illnesses.
- On the ground, the WHO has been a key partner in the immunisation programme, tackling TB and neglected diseases such as leprosy and kala azar, and nutrition programmes across states.
Immediate reason for US withdrawal
- The US contributes almost 15% of the WHO’s total funding and almost 31% of the member states’ donations, the largest chunk in both cases.
- It receives $62.2 mn for WHO projects.
- That is where most of the WHO funding comes from and the least of it goes.
Impact
- For the WHO, the loss of about 15% of its total funding is bound to have an impact on the world over.
- However, unless other countries do the same as the US, the move may not severely hamstring WHO operations.
Also read:
[Burning Issue] World Health Organization (WHO) And Coronavirus Handling
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: TRAI
Mains level: TRAI and its regulations of telecom services
The Telecom Regulatory Authority of India (TRAI) has recommended that all set-top boxes (STBs) in the country must be interoperable, meaning that consumers should be able to use the same STB across different DTH or cable TV providers.
The TRAI and Telecom Disputes Settlement and Appellate Tribunal are quite often seen in the news. Most recent was the dispute risen due to AGR dues.
TRAI has a wide range of jurisdiction over Telecoms. Keep a track on all such news.
Why such a recommendation?
- TRAI noted that while the STBs deployed in the cable TV networks are non-interoperable, those by DTH players complied with licence conditions to support common interface module based interoperability.
- However, in practice, even in the DTH segment the STBs are not readily interoperable.
- The lack of interoperability of set-top boxes between different service providers deprives the customer of the freedom to change her/his service provider.
- It also creates a hindrance to technological innovation, improvement in service quality, and the overall sector growth.
About TRAI
- The TRAI is a statutory body set up under section 3 of the Telecom Regulatory Authority of India Act, 1997.
- It is the regulator of the telecommunications and its tariffs in India.
- The TRAI Act was amended by an ordinance, effective from 24 January 2000, establishing a Telecom Disputes Settlement and Appellate Tribunal (TDSAT) to take over the adjudicatory and disputes functions from TRAI.
- TRAI regularly issues orders and directions on various subjects such as tariffs, interconnections, quality of service, DTH services and mobile number portability.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Environmental Impact Assessment (EIA) in India
Mains level: EIA and its stages
To address unprecedented situation arising from the global outbreak of COVID-19 and to ramp up availability or production of various drugs, the MoEFCC has made an amendment to EIA Notification 2006.
EIA is a process of evaluating the likely environmental impacts of a proposed project or development, taking into account inter-related socio-economic, cultural and human-health impacts, both beneficial and adverse. Its a hot topic for mains.
What is the amendment about?
- All projects or activities in respect of bulk drugs and intermediates, manufactured for addressing various ailments, have been re-categorized from the existing Category ‘A’ to ‘B2’ category.
- Projects falling under Category B2 are exempted from the requirement of collection of Baseline data, EIA Studies and public consultation.
- The re-categorization of such proposals has been done to facilitate decentralization of appraisal to State Level so as to fast track the process.
Projects Categorization and Clearance under EIA
- Environmental clearance is required in respect of all new projects or activities listed in the Schedule to the 2006 notification and their expansion and modernization, including any change in product –mix.
- Since EIA 2006 the various developmental projects have been re-categorised into category ‘A’ and category ‘B’ depending on their threshold capacity and likely pollution potential.
- They require prior EC respectively from MOEFCC or the concerned State Environmental Impact Assessment Authorities (SEIAAs).
- Where state-level authorities have not been constituted, the clearance would be provided by the MOEFCC.
Back2Basics: Environmental Impact Assessment (EIA) in India
- EIA is a management tool to minimize adverse impacts of developmental projects on the environment and to achieve sustainable development through timely, adequate, corrective and protective mitigation measures.
- The MoEFCC uses EIA Notification 2006 as a major tool for minimizing the adverse impact of rapid industrialization on the environment and for reversing those trends which may lead to climate change in the long run.
- EIA has now been made mandatory under the Environmental (Protection Act, 1986 for 29 categories of developmental activities involving investments of Rs. 50 crores and above.
EIA stages
- Screening: This stage decides which projects a full or partial assessment need study.
- Scoping: This stage decides which impacts are necessary to be assessed. This is done based on legal requirements, international conventions, expert knowledge and public engagement. This stage also finds out alternate solutions that avoid or at least reduce the adverse impacts of the project.
- Assessment & evaluation of impacts and development of alternatives: This stage predicts and identifies the environmental impacts of the proposed project and also elaborates on the alternatives.
- EIA Report: In this reporting stage, an environmental management plan (EMP) and also a non-technical summary of the project’s impact is prepared for the general public. This report is also called the Environmental Impact Statement (EIS).
- Decision making: The decision on whether the project is to be given approval or not and if it is to be given, under what conditions.
- Monitoring, compliance, enforcement and environmental auditing: This stage monitors whether the predicted impacts and the mitigation efforts happen as per the EMP.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Read the attached story
Mains level: India-US arms trade
The US has approved a military sale to India of 16 MK 54 all round up lightweight torpedoes and ten AGM-84L Harpoon Block II air-launched missiles. India plans to use the equipment requested in both the deals on the Indian Navy’s Boeing P-8I maritime aircraft.
What is “Terminal High Altitude Area Defense (THAAD)” , sometimes seen in the news? (CSP 2018) .
MK 54 lightweight torpedo
- The MK 54 lightweight torpedo is known as the Lightweight Hybrid Torpedo (LHT).
- It weighs around 608 pounds, while its warhead weighs around 96.8 pounds and is highly explosive.
- The primary use of this equipment is for offensive purposes when deployed by anti-submarine warfare aircraft and helicopters, and for defensive purposes when deployed by ships and against fast, deep-diving nuclear submarines and slow-moving, quiet, diesel-electric submarines.
AGM-84L Harpoon Block II air-launched missiles
- The Harpoon missile system will be integrated into the P-8I aircraft to conduct anti-surface warfare missions in defence of critical sea lanes.
- It uses GPS-aided inertial navigation to hit the designated target.
- Its warhead weighs over 500 pounds and is capable of delivering lethal firepower against targets, including land-based targets, coastal defence sites, surface-to-air missile sites, exposed aircraft and industrial or port facilities.
About P-8I aircraft
- Boeing’s P-8s are designed for long-range anti-submarine warfare, anti-surface warfare and intelligence, surveillance and reconnaissance missions.
- The P-8s India version is called the P-8I, and helps the Indian Navy carry out important maritime operations.
- According to Boeing, the aircraft can surpass 25,000 flight hours, and gives the Navy a significant edge in the strategically important Indian Ocean.
- India currently has eight of these aircraft and is scheduled to receive four more by 2022.
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