PRS Capsule November 2020

• 23 Dec 2020

Key Highlights of PRS

• Governance
  • AtmaNirbhar Bharat 3.0
  • PM-KUSUM Scheme
  • The Draft Data Centre Policy
  • Occupational Safety and Health Code
• Economy
  • Revised Viability Gap Funding Norms for Social Infrastructure
  • Committee on Retail Business Development in the IFSC Submits Report

Governance

AtmaNirbhar Bharat 3.0

• The Finance Minister announced measures worth around Rs. 1.2 lakh crore to increase employment, and provide stimulus to certain sectors such as infrastructure and real estate.
• An additional outlay of Rs. 65,000 crore is being provided as a fertiliser subsidy to support increasing demand on the back of a good monsoon and sharp increase in the crop-sown area.
• These measures include:
  
  • EPF contribution: The central government will pay the employee provident fund (EPF) contribution for new employees for two years. New employees are defined to include those who
    
    • Joined an EPF Organisation registered establishment for the first time
    • Lost employment between March 1 and September 30, 2020, but re-joined the workforce from October 1, 2020.
    • For establishments with less than 1,000 employees, EPF contribution of both the employer and the employee will be covered.
    • For others, the government will only cover the employee’s EPF contribution.
  • Extension of credit guarantee scheme: The Emergency Credit Line Guarantee Scheme. was announced as part of the Atma Nirbhar Bharat Abhiyaan in May.
    
    • The ECLGS 2.0 is being launched for the Healthcare sector and 26 stressed sectors (as identified by the Kamath Committee) with credit outstanding of above Rs. 50 crore and up to Rs. 500 crore as on 29^th February 2020 stressed due to Covid-19, among other criteria.
    • It provides eligible entities additional, collateral-free credit of up to 20% of the outstanding loan value at capped interest rates. The eligible entities include:
      
      • MSMEs, those availing individual loans for business purposes, among others.
        
        • Those with outstanding credit of up to Rs 25 crore, and annual turnover of up to Rs 100 crore.
    • The period of the loan is four years, one-year moratorium on repayment and three-year repayment period.
    • 100% of the additional credit is guaranteed by the government. The scheme will be valid till 31^st March, 2021.
  • Additional budgetary allocation: The central government has proposed to increase spending under the Pradhan Mantri Awas Yojana -Urban by Rs 18,000 crore for construction of housing in urban areas.
  • This is in addition to Rs 8,000 crore allocated for the scheme in the 2020-21 Budget.
  • Income tax relief for real estate: Under the Income Tax Act, 1961, a home buyer or a real estate developer (seller) has to pay tax on the difference between the circle rate of the house and the transaction value, if the difference exceeds 10%.
    
    • This limit has been raised to 20%.
    • The circle rate is the government determined value of a property used for calculating stamp duty.

PM-KUSUM Scheme

• The Ministry of New and Renewable Energy revised the targets of Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahaabhiyaan (PM-KUSUM) scheme.
  • The scheme was launched in March 2019 for solarisation of agriculture pumps.
  • It planned to add solar and other renewable capacity of 25.8 GW by 2022 with total financial support of Rs 34,422 crore.
• In pursuit of renewable energy generation, India has also launched the International Solar Alliance and set a target of producing 100 GW of solar power by 2022.
• The revised targets:
  • The scheme is being expanded to achieve 30.8 GW of enhanced solar capacity by 2022 with revised financial support of Rs 34,035 crore from the central government.
  • The scheme has been divided into three components – A, B, and C. As per earlier target:
    • Component A was aimed at achieving 10,000 MW of decentralised ground mounted grid-connected solar power plants of individual plant size of 2 MW.
    • Component B was aimed at installation of 17.5 lakh standalone solar powered agricultural pumps of individual capacity up to 7.5 HP.
    • Component C was aimed at solarisation of 10 lakh grid-connected agricultural pumps of individual pump capacity up to 7.5 HP.63
  • While there is no change in the target under Component A, under the revised scheme.
    • The installation target under Component B has been increased from 17.5 lakh pumps to 20 lakh pumps.
    • Solarisation target under Component C has been increased from 10 lakh pumps to 15 lakh pumps.

The Draft Data Centre Policy

• The Ministry of Electronics and Information Technology (MEITY) has released the Draft Data Centre Policy, which aims to simplify clearances for setting up data centres in the country. It seeks to promote the data centre sector in the country.
  • Data Centres are centralised locations where computing and networking equipment is concentrated for the purpose of collecting, storing, processing, distributing, or allowing access to large amounts of data.
    • In India, the data centre industry has been largely concentrated in top 4 cities, with Mumbai, Delhi, Bengaluru and Chennai accounting for 60% of total sites.
• Need for the Policy: The Ministry observed that the advent of the digital economy around the world presents an opportunity for India to become a global data centre hub.
  • It also noted that the need for data centre infrastructure within the boundaries of the country is further necessitated due to the data localisation provisions under various data protection regulations.
• Key features of the Draft Policy include the following:
  • Infrastructure status: The central government will work towards providing infrastructure status for the data centre sector, at par with other infrastructure sectors such as Railways and Power.
    • This will enable the data centre operators to avail long-term credit and thus, provide a boost to investments in the sector.
    • Data centre will also be declared as an essential service under the Essential Services Maintenance Act, 1968.
      • The Act empowers the central government to prohibit strikes by employees engaged in rendering essential services.
  • Data centre economic zones and parks: The central government will set up at least four data centre economic zones in the country as a central sector scheme.
    • States will be encouraged to demarcate land parcels with necessary infrastructures such as road, power, and high capacity internet connectivity for setting up data centre parks
  • Data Centre Incentivisation Scheme: A scheme will be formulated by the central government to provide fiscal and non-fiscal incentives for promotion of data centres.
  • Institutional mechanism: An Inter-Ministerial Empowered Committee will be set up under the chairmanship of the secretary of the MEITY.
    • The committee will be the key decision-making body for the effective implementation of the policy.
    • A Data Centre Facilitation Unit will be set up within the Ministry as the nodal agency to work under the Committee and support the implementation of its decisions.

Occupational Safety and Health Code

• The Ministry of Labour and Employment released the draft central rules under the Occupational Safety, Health and Working Conditions Code, 2020 which comes under the Labour Reforms.
• The draft Rules will apply to establishments which are under the control of the central government and will replace 13 previous central rules on these matters.
• Key features of the draft Rules include:
  • Appointment:
    • According to the draft rules, no employee shall be employed in any establishment unless he has been issued a letter of appointment.
    • The draft rules provide for appointment letters in prescribed format including designation, category of skill, wages, avenue for achieving higher wages or higher position to every employee of an establishment within three months of coming into force of the rules.
    • Besides, provision has also been made in the rules for journey allowance once a year.
  • Work hours: The Code provides that no worker shall be allowed to work for more than eight hours a day.
    • It requires the Rules to notify intervals and spread over to meet the eight hours maximum work limit.
    • The draft Rules specify that the work day should not spread over more than 12 hours including intervals for rest.
    • Further, no worker will be allowed to work for more than 48 hours every week.
  • Overtime work: The Code provides that if a worker exceeds eight hours of work per day, he is entitled to overtime wages at twice the ordinary wage rate.
    • The draft Rules provide that no worker can exceed 125 hours of overtime work in a quarter.
    • It provides that for calculating overtime on any day, a fraction of an hour between 15 to 30 minutes shall be counted as 30 minutes.
    • Currently, less than 30 minutes is counted as no overtime.
  • Free health examination: The Code provides that employers will arrange for free annual health examinations for such class of employees, and in such class of establishments as may be prescribed by the appropriate government.
    • The Rules provide that employers of factory, dock, mine, and building or other construction work, must arrange for free medical examination for every worker, above the age of 45 years.
  • Safety Committee: The Code provides for the constitution of a Safety Committee in such class of establishments as may be prescribed.
    • The draft Rules provide that every establishment employing 500 or more workers shall constitute a Safety Committee.

Economy

Revised Viability Gap Funding Norms for Social Infrastructure

• Recently, the Cabinet Committee on Economic Affairs has approved continuation and revamping of the Viability Gap Funding (VGF) Scheme under the Public Private Partnership (PPP) model till 2024-25 with a total outlay of Rs. 8,100 crore.
  • An estimated Rs 2,100 crore will be provided as support to social infrastructure projects, with the remaining Rs 6,000 crore earmarked for economic infrastructure projects.
  • Viability Gap Funding (VGF) means a grant one-time or deferred, provided to support infrastructure projects that are economically justified but fall short of financial viability.
  • Public-Private Partnerships (PPPs) involve collaboration between a government agency and a private-sector company that can be used to finance, build, and operate projects, such as public transportation networks, parks, and convention centers.
• The scheme was started in 2006 to support infrastructure projects that are economically justified, but commercially unviable due to:
  • High capital investment requirements
  • Long gestation period
  • The inability to increase user charges to commercial levels.
• Under the existing scheme, the central government provides VGF to cover up to 20% of the project cost.
• Under the revised scheme, a higher VGF has been approved for the following kinds of social infrastructure projects:
  • Social sectors: The central government will provide a higher VGF of up to 30% of the project cost to infrastructure projects in social sectors (such as education, health, water supply, wastewater treatment, and solid waste management). The public partner in the project may additionally cover up to 30% of the project cost.
  • Pilot projects: The central and state governments will provide a total VGF of up to 80% of the project cost to pilot projects in education and health sectors.
    • Additionally, they may provide up to 50% of the project’s operational cost for the first five years of its commercial operation.
    • Share of the central government will be capped at 40% of the project cost and 25% of the operational cost.

Committee on Retail Business Development in the IFSC Submits Report

• The International Retail Business Development Committee submitted its report to the International Financial Services Centre Authority (IFSCA).
  • The Committee made recommendations to develop retail participation in the banking, insurance, and capital markets segments in the IFSC.
• Key recommendations include:
  • Banking
    • Banking units in the IFSC should be allowed to provide banking services to resident Indian retail clients.
      • Clients must also be permitted to open current, savings, and term deposit accounts in any currency of their choice.
    • The Reserve Bank of India (RBI) circular regulating the banks operating in the IFSC, allows them to serve non-retail clients.
      • The Committee also recommended that resident Indians be allowed to use the Liberalised Remittance Scheme (LRS) to remit money to an account in the IFSC.
        • LRS allows resident individuals to remit foreign currency for permitted transactions.
  • Insurance
    • Non-resident Indians (NRIs) and Persons of Indian Origin (PIOs) should be allowed to buy insurance policies for themselves and family members who are based in India and abroad from insurers in the IFSC.
      • The insurance premium should be payable in any currency and portable (to later permit a change in the currency of payment).
    • Currently, insurers operating in the IFSC are allowed to only transact in foreign currency.
      • The Committee also recommended that resident Indians should be allowed to buy overseas health insurance for medical treatment anywhere in the world.
    • Currently, insurers operating in the IFSC are permitted to transact within the IFSC, with other Special Economic Zones in India, or with entities outside India.
  • Capital markets
    • Resident Indians should be allowed to invest in
      • Companies listed on the IFSC stock exchanges
      • Alternative investment funds, and mutual funds in the IFSC (through the LRS route).
    • Currently, resident Indians may invest in entities in the IFSC provided their net worth is at least USD one million and are eligible under Foreign Exchange Management Act (FEMA) to invest funds offshore.

Special Economic Zones

• SEZ is a geographical region that has economic laws different from a country's typical economic laws.
  • Usually the goal is to increase foreign investments.
• SEZs have been established in several countries, including China, India, Jordan, Poland, Kazakhstan, Philippines and Russia.
  • North Korea has also attempted this to a degree.