Analysis: Economic package for MSMEs

Reading time: 8-10 minutes.

The micro, small and medium enterprises (MSMEs) division in India is the second-biggest on the planet. The MSMEs in India are assuming an essential job by giving enormous business openings. The segment has been adding to 30% approx in GDP of India. According to the NSS 73rd round overview (2015-16), there are a sum of 633.88 lakhs MSMEs in India out of which assembling is 31%, exchange is 36%, different administrations is 33%. The small-scale segment works with 630.52 lakhs which represents over 99% of the complete evaluated number of MSMEs. The little area with 3.31 lakhs and rest of 0.05 lakhs medium par.

As a major aspect of the bundle, the Finance Minister of India divulged the main tranche of the financial alleviation bundle on May 13, 2020 which concentrated on Micro, Small and Medium Enterprises (“MSME”)

THE UNION CABINET affirmed an extended meaning of MSMEs, a Rs 50,000 crore Fund of Funds to give value backing to development situated MSMEs, and Rs 20,000 crore financing backing to upset organizations through arrangement of incomplete credit ensure. It likewise concluded that send out turnover of organizations won’t be included in the restrictions of turnover for any class of MSME.

Salient Features

  • Re-examined MSME definition by expanding the maximum furthest reaches of venture. As indicated by the new definition for MSMEs, organizations with a venture of not as much as Rs 1 crore are delegated smaller scale undertakings, those with not as much as Rs 10 crore as little and organizations with speculation not as much as Rs 20 crore venture will be named medium endeavours. Another proviso on turnover has additionally been included.
  • Term credit at concessional pace of enthusiasm for MSMEs for those with exceptional contribution of up to Rs 25 crore and turnover of Rs 100 crore. The advances will give 20% working capital money to these MSMEs without assurance and securities, with a residency of four years and a ban of a year. This will give liquidity of Rs 3,00,000 crore to the segment and advantage 45 lakh MSMEs
  • Arrangements for Rs 20,000 crore in the credit was reported for focused on MSMEs. Of this, the administration will give credit ensure trust to miniaturized scale and little ventures with Rs 4,000 crore. Advertisers can acquire up to 15% of their stakes in the organization with a constraint of Rs 75 lakh.
  • A value reserve of assets for the MSME segment with Rs 10,000 crore and is probably going to activate Rs 50,000 crore. This will be worked with influence of 1:4 through a Mother subsidize.
  • E-showcase linkage for MSMEs to supplant exchange fairs and displays.

How can MSMES can avail the benefits?

New companies that meet the MSMEs rules can enlist on Udyog Aadhar and profit the advantages.

Guarantee Free Loans

  • The Centre has chosen to offer guarantee free credits to MSMEs. To profit a security advance, the borrower needs to promise an advantage.
  • The credit sum relies upon the estimation of the guarantee. This sort of advance is made sure about on the grounds that the loan specialist has the alternative to exchange the advantage if there should be an occurrence of instalment default with respect to the borrower.
  • These credits will stand completely ensured by the Centre to stay away from the monetary weight of defaults on the financial division and to permit them to give chance free advance to such borrowers.
  • There will likewise be an essential reimbursement ban (head instalment to be conceded/delayed) for a year and the loan cost will be topped.
  • Additionally, there will be no assurance charge. It is normal that the credit sum would infuse liquidity in the organizations that don’t have money inflow due to the coronavirus emergency and the lockdown.
  • Around 45 lakh MSMEs are required to pick up from this plan.
  • An aggregate of ₹20,000 crore will be placed into the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) whereby banks will loan cash to advertisers which can be put as value in their organizations.
  • In another transition to imbue value into MSMEs, a Fund of assets framework will be made with an implantation of ₹50,000 crore which will be utilized to give accounts to MSMEs through ‘Daughters Fund’ of the principle Fund of assets.
  • It has been made to help the undertakings to develop in size and limit with value and supposedly additionally assist them with getting recorded for stocks.
  • In an invite move, the Finance Minister raised the base limit of starting bankruptcy procedures from ₹ 1 lakh to ₹ 1 crore.
  • This would give assurance to the MSMEs and assist them with holding over an emergency circumstance. The Finance Minister included that the indebtedness procedures won’t be started as long as one year.

Critical Analysis

The money serve disclosed a $55 billion spending plan explicitly intended to restore MSMEs and stem work misfortunes. At the centre, and by a long shot the biggest piece of this bundle (73 percent), is sans security programmed advances for MSMEs worth $40 billion, focused on 4.5 million disturbed—or what the fund serve suggested as non-performing—private companies with a turnover of under $13 million and with credits remarkable of at any rate $3 million. The remaining $15 billion (27 percent) of the MSME salvage bundle centres principally around liquidity support.

There is extra help of $2.6 billion (17 percent of the $15 billion), with a 20 percent first misfortune borne by the legislature, as subjected obligation to be given by banks to 200,000 MSMEs to improve their obligation value proportions. Value financing of $1.3 billion (9 percent of the $15 billion) is likewise intended to be made accessible to practical organizations by means of a MSME reserve of assets.

At long last, a help bundle of $55 billion for the nation’s greatest manager, which is not exactly a large portion of the size of the monetary record of a huge Indian bank, shows up minimal more than emblematic. It’s focal point, the credit ensure program, which moves the full obligation of advance misfortunes of qualified borrowers to the exchequer, in any case, shows up strange when the legislature is scrambling to contain the financial shortage. Organizing the program to cover the credit and execution dangers of MSME advance arrangement of monetary organizations through hazard interest or hazard sharing would have been a savvier decision for the administration.

Conclusion

THE UNION CABINET certified an all-encompassing importance of MSMEs, a Rs 50,000 crore Fund of Funds to give esteem sponsorship to improvement arranged MSMEs, and Rs 20,000 crore financing support to disturb associations through course of action of deficient credit guarantee. As demonstrated by the new definition for MSMEs, associations with an endeavour of not as much as Rs 1 crore are designated littler scope endeavours, those with not as much as Rs 10 crore as meagre and associations with hypothesis not as much as Rs 20 crore adventure will be named medium undertakings. An entirety of ₹3-lakh crore has been doled out to outfit advantages for all such MSMEs with a turnover of up to ₹100 crore and with extraordinary credit of up to ₹25 crore.

Author: Prabhjyot Singh from Amity Law School, Noida, Amity University.

Editor: Silky Mittal, Junior Editor, Lexlife India

Explained: Finance Commission (FC)

Reading time: 8-10 minutes.

The 15th Finance Commission was constituted in November of 2017. It was headed by Chairman Mr. Nand Kishore Singh, former IAS Officer, a senior politician and an economist. The permanent members of this commission include former IAS Officer Mr. Ajay Narayan Jha, economist Mr. Ashok Lahari, and adjunct professor Mr. Anoop Singh. Mr. Ramesh Chand, a member of NITI Aayog is a part-time member of the commission. This commission was set up for the fiscal year starting from 1st of April 2020.

Meetings took place between the Commission and the Advisory Council at regular intervals; however, the most recent meetings were in regard to the effect of the Covid-19 Pandemic over the GDP of India. The meeting took place for two days, on 23rd and 24th of April 2020 with the meeting mode being online.

The meeting revolved around the economy of India post- lockdown. With the emergence of an economic slowdown, there would be a severe shortage in the flow of money for various financial institutions and businesses. There would also be a dip in the demand for Indian goods in the foreign market due to global slowdown. Discussions were also held over the impact of the pandemic on government expenses. The government shall be burdened by the cost paid for public health, for empowerment of the downtrodden and any other economic issues that shall take place due to the current scenario. Discussions were also made over the fall in the tax receipts due to the lockdown, lower economic activity would mean a lower amount of taxes paid. Therefore, the commission felt that the planning for the coming fiscal years should be made with more minute inspection.  

Significance of this development

One of the most important significances of this meeting was with regards to the calculation towards the projection of real GDP. A common conscience among the members of the meeting was that the projections of the real GDP, which was estimated initially, before March of 2020 should be recalculated. The members believed that the projections should be revised lower to what was estimated before the pandemic.

This belief was brought in considering the fact that even after the relaxation of lockdown, economic activities shall take time to revert back to the original pace and that it will happen according to various other sources that are dependent on each other such as the restoration of supplies, the availability of intermediate products, and finally, the demand by customers. 

The other significance of this development includes the recommendations or suggestions that were put up by the council to the commission. The first of which included the economic aid that the small-scale industries would require. The small-scale industries have always been able to earn at a slower pace. However, with the lockdown, their money flow has completed dried up which would mean the help they would require by the government would be high.

The second recommendation that came up was in relation to non-banking financial companies. This was in regards to policies that will have to be made to keep them away from bankruptcies. The solution for these would include methods like partial loan guarantee. The role of RBI was considered to be of utmost importance.    

One of the most important issues to address was that of the money matters of Government, both at Union and State level. Even though various measures have been devised to keep up the expenditure of the government, for the future, methods would have to be thought of to fund the deficit that the governments are additionally facing.

Light was also thrown over the fact that various states would come out of this economic halt at different times and with variation to the effect they have on the economy. Therefore, the rebooting of the economy would take place at different times in different states.

What is Finance Commission?

India follows the policy of Fiscal Federalism. This means that India follows a division of powers even when it comes to matters related to its finance. In furtherance of this policy, Dr. Ambedkar, the then Law Minister of India, came up with the idea of the Finance Commission. It first came to function on the 22nd of November, 1951. The commission constituted of a Chairman and four other members that are to be assigned by the President in accordance with Article 280 of our constitution along with any essential manpower including a secretary. The present Finance Commission is the 15th FC with Mr. N K Singh, an ex- Planning Commission member, as the Chairman.

The main task of the commission is the division of tax among the Centre and the various states. This is done by formulating plans that take into consideration both the constitutional arrangements among the states and the Union and the present requirements of these states.

The commission majorly has meetings with various important people of power, such as cabinet ministers, department of the Central Government, ministers of various states, major financial stakeholders such as bankers, traders and various industries to make up the policy on how finance with respect to taxes shall function, both horizontally and vertically. They also work towards the Finance Commission Grants. These are the amount of taxes or grants that are given to various local bodies from the total tax share. This Grant becomes a part of the Union Budget.

The recommendations given by the commission are of utmost importance. In fact, it is the duty of the President to ask for an explanation from Lok Sabha and Rajya Sabha over how have they implemented the recommendations given under the Report by the Finance Commission. This has also been sanctioned under Article 281 of our Constitution.

Objectives and purposes

The Indian Economy suffers from two types of imbalances, namely, horizontal and vertical imbalance. Vertical Imbalance refers to the imbalance that takes place when a state incurs expenditure more than its revenue while providing to its people. Horizontal Imbalance refers to the imbalance that takes place between the various states due to any historical reason or due to their resources. The former is easier to handle as it can be fixed rather easily through good governance and policy. However, the latter is difficult to handle as the base of the development is different for the various states due to their resource share or history. The main objective of the Finance Commission is to balance out the fiscal imbalances the economy suffers.

To do so, the Commission does various actions. This can also be defined as the commission’s purpose. These include:

  • distribution of proceeds of Income Tax among Union and states.
  • selection of suitable principles for distribution of grants in aids from Consolidated Funds.
  • distribution of the net proceeds of the taxes and how such proceeds should be allocated among the Union and the states.

Legal/ constitutional basis

As mentioned earlier, the basis for the Finance Commission is the very Constitution itself. The provisions concerning the establishment of the Finance Commission can be observed in Article 280 of our Constitution. The first sub-clause of the article states the duty of the president to establish a commission, two years from the effect of the constitution and after the end of every five years or any time the president considers suitable. He may do so through an order. It also states that such a commission shall consist of a Chairman and four other members. 

The next sub-clause states about the qualification and selection of the members. It states that the Parliament can decide the qualification of the members and the manner through which they shall be selected and that such a decision should be made by law. The law with relation to this has been established in the Finance Commission (Miscellaneous Provisions) Act of 1951 and the Finance Commission (Salaries & Allowances) Rules of 1951.

The third part of the article is one of importance. It talks about the subject over which the commission is to make its recommendations. The first subject emphasizes the distribution of the net proceeds of the taxes and how such proceeds should be allocated among the Union and the states. The next subject talks about the recommendations made about the principles that deal with the Consolidated Funds for the States through which the grants- in- aid of revenues are extracted. The next two subjects deal with how funds can be added into the Consolidated Funds of India to support the requirements of the Panchayats and the Municipalities in the various states. The final subject includes any other matters that the President may refer to the commission in the interest of the finance.

The last part of the article states that a law that should be set by the Parliament, to set the method of working and the powers for the sound functioning of the Finance Commission. This is also mentioned in the Finance Commission (Miscellaneous Provisions) Act of 1951 and the Finance Commission (Salaries & Allowances) Rules of 1951.

Critical analysis

With the downwards predictions of India’s growth by the World Bank, it is a growing concern for the population to predict how India would fight through this pandemic economically. The Finance Commission is where all the heads turn towards to find policies that would make up a solution for the economy. The Finance Commission was built to restore the balance of the economy in India. However, with such an imbalance that is so vague to calculate but has put down the economy of India at so much lower of a situation, the Finance Commission will have to create policies that would aid in the development of the falling and failing economy. The Finance Commission would have to work through finding solutions for the slow down without even knowing when and how this pandemic would come to an end.

The only buffer that they have is the Internet. This modern piece of technology has helped many companies function, even at the quarter of their capacity. However, this shall not help in saving the collapsing economy. Driving forces of the world economy, including the US, Europe and Japan are also at stake. It will only be difficult for India to understand how it will boost its economy to not fall in the hands of its worst emergency, as stated by ex- RBI Governor, Mr. Raghuram Rajan.

Conclusion

The Finance Commission is a constitutional body that was created to balance out the imbalances that happen in the economy. Their main objectives were to look into the financial relationships between the Union and the various states. The commission was given a constitutional base through Article 280 of the Constitution. Division of taxes among states and dividing consolidated funds among Panchayats and Municipalities are among their major functions. The 15th Finance Commission was created in the year 2017 with the fiscal year of 2020 to 2021 as its current main agenda. However, the ongoing pandemic has created a whole downward shift of the economy, not just in India, but globally. This has caused the Commission to come up with newer calculation of projections and policies to cover up the deficit. However, what will happen once the economy starts working at its normal pace is something they cannot fully and accurately predict.

Author: Maitreyi Shishir from Symbiosis Law School, Hyderabad.

Editor: Yashika Gupta from Rajiv Gandhi National University of Law, Patiala.

Removal of tax on dividends

Reading time: 6-8 minutes.

The budget of 2020 spurred the debate over taxations and raised several conundrums as to whether it could rescue the downtrodden economy of the country. Among several issues, one of the prime fiscal discourses which stole the limelight was the removal of Dividend Distribution Tax (DDT) and reverting back to classical system of dividend taxation. In praesenti, DDT stands at 15%, with the effective rate coming out to be 20.56%, on inclusion of surcharge and cess.

The latest budget to be implemented from 1st April, 2020 has abolished the DDT and shifted the burden wholly from the companies to their investors; the dividend amount received by a shareholder will be added to the personal income and the overall amount would be subjected income tax slab. It is speculated that it would benefit and attract foreign investors and also would benefit persons those are in the lower tax slabs along with imposing an annual burden of 25,000 Crore on the government too.

What is the issue of double taxation?

The genesis of DDT and double taxation in the Indian Economy can be traced back to the ‘dream budget’ of 1997 placed by the former FM P Chidambaram, imposing a flat tax rate of 7.5% to be paid by the companies on the profit dividends which the company distributes among its shareholders. As a result of it, the issue of double taxation was faced both by the companies and its shareholders, as for company needed to pay DDT and Corporate Tax and the shareholders had to pay DDT and 10% tax if the amount exceeded 10 lakhs, leading to double taxation.

Problems caused by it

The system of DDT leads to several problems as the resultant tax on the company and its shareholders, in aggregate, falls as an avalanche. The problem faced by companies, is that, at first, it pays a 25% Corporate Tax and further, it again pays the tax on DDT which takes the wholesome levy to 48.5%, leading to double taxation.

Similarly, a shareholder is also doubly taxed as firstly, the rule of DDT taxes the dividend when it is in the hands of companies and secondly, if the amount of dividend which is received by a shareholder exceeds Rs. 10 Lakhs, the excess amount is further subjected to a tax rate of 10% under section 155BBDA of Income Tax Act, 1961 and hence double taxation attracted. The problem of double taxation is also a bane for foreign investors, as the credit of DDT could not be borne by foreign company in their home countries and they too were doubly taxed.

Its effect on business

It is a fact that foreign investments are instrumental in development of economy of every nation. However, DDT is one of such levies which acted as a deterrent for foreign investments and businesses in India as it has a direct effect on the cost of business. As a result of DDT, the burden is upon the corporates, which increases the cost of business and the cascading effect is on the shareholders as the dividend paid is after subtraction of the DDT amount and hence no matter where the recipient shareholder stands on the tax slab, everyone bears the same burden.

DDT also acts as a deterrent to corporate equity financed investments; those are heavily taxed as compared to the same type of businesses carried by corporations, partnerships and sole proprietorship. The ultimate effect the DDT puts on business is that, it keeps companies bereft of the fund which it would other re-invest.

Significance of this relief

It is averred by the Finance Minister that the significance of the relief begotten by the abolishment of DDT will be accrued to those person who comes under the lower tax slab of income tax. This is because abolishment of DDT would add the income from dividends directly to their overall personal income and taxed accordingly. Similarly, the IT department will be benefitted as those fall in the higher tax brackets of income charged accordingly on their overall income.

The significance of this relief could trickle down to the downtrodden Indian economy, as now when there is no DDT, foreign investors can claim tax credit in their respective countries for every tax they pay in India and this will surely attract more foreign investments and bolster the fiscal oppression.

According to the Finance Minister, it is also contended that the abolishment of DDT would encourage investors to take a dig into debt mutual funds product because the rate, similar to DDT for distribution of income vide debt, was at 25% for single person and Hindu Undivided Family while 38% for rest which, on inclusion of surcharges and cess, went up to 38.33% and 49.92% respectively. Hence, removal of DDT would increase investments in debt mutual funds as individuals would pay much less in aggregate income tax in comparison to what they paid under the DDT system.

Public reaction to it

A duplexed public reaction can be gathered post annulment of DDT. Person belonging to the lower tax slabs hope to reap the benefits, while those who invested in mutual funds (MF) are in a dilemma. Pre-abolishment, dividends out of MF was subjected to a DDT of 11.64% however post-abolishment, though there will be no DDT, the government imposed TDS at a rate on 10% which is to be deducted from if the MF dividend exceeds Rs. 5,000. Hence, a bitter reaction is expected from who belong to the tax slab of lower than 10% and it is suggested by analyst that individuals investing in MFs should shift to growth oriented plans.

Similarly, High Net-worth Individuals (HNIs) too would be dissatisfied as they would pay tax in the effective income amount more than the DDTs. Alongside, promoters those who own highest stake-holdings in a company cannot digest the annulment of DDT as they primarily fall within the highest tax bracket of 30% income tax slab as a result of which, if previously they had to pay approx. 20% tax on the dividend amount, now since the amount would get added to their income, that is, their aggregate income which is subjected to a tax rate of 42.7% after inclusion of other charges leading to a burden far more than the DDT. It may also act as a double taxation for them as after already paying a corporate tax, their income amount will be subjected to another levy.

Conclusion

The above analysis would lead to the perception that annulment of DDT cannot be viewed as an isolative move but a strategic one. Its inception point can be found in September, 2019 when the government made a cut in the corporate tax rate foregoing 1.45 Lakh Crore with a latent objective of delving more money on the hands of corporates. Now this step would result into an otiose venture if an ultimate cascading effect could not be imposed and the extra money which is retained in the hands of corporates are used in dividends pay-outs.

Hence, abolishment of DDT would trigger the use of such monies on capital expenditure and business expansion where the contribution to GDP could be 4-5 times more than the foregone amount. Thus, it can be seen as a calculative step to not only to lessen the burden put on the shoulders of lower tax slab assesses but also a move that could help the economy in the long run, at the same time conceding the fact that it may militate against some classes of people both wealthy and indigent.

Author: Ishan Mazumder from West Bengal National Law University of Juridical Sciences (WBNUJS), Kolkata.

Editor: Ismat Hena from Faculty of Law, Jamia Millia Islamia.

Disinvestment in LIC: Explained

Reading time: 6-8 minutes.

There is a separate department under the Ministry of Finance known as the “Department of Investment and Public Asset Management” which takes care of all disinvestment and privatisation related works of the government. Since late 1990’s, disinvestment has become an important feature of the union budget to raise finances from stakes in public sector enterprises.

This year too, the Finance Minister Nirmala Sitharaman has announced the disinvestment in Life Insurance Corporation of India (LIC). The identification of LIC as candidate for public listing by the government was first reported by the Indian Express in July 2019. The government owns 100 percent of it and has planned to sell part of it through Initial Public Offering (IPO). In Budget of 2019, the government has planned to make minimum 35 percent of shares public of the listed companies.

Disinvestment and its method

Disinvestment or Divestment means sale or liquidation of assets by the government, be it of public sector enterprises or other fixed assets, of the government. The government may sell whenever it wants; whole of its enterprises or parts of it. If the government sells whole of it to the private sectors, it can no longer control it and this is called “privatisation”. But the government usually avoids it and sells only part of it keeping majority stake so it can still access control.

In order to achieve its aims and objectives the government follows different methods of disinvestment. These include Public Offer, Sale of Equity, Offer for Sale, Cross Holding, Golden Share, Warehousing and Strategic Sale. The government has proposed to disinvest in LIC by IPO i.e Initial Public Offering. But before disinvesting in LIC, the government has to amend its LIC Act. LIC is supervised by the IRDAI (Insurance Regulatory Development Authority of India) but is governed by LIC Act, 1956 which enables the state-owned insurer to obtain a special dispensation in higher stakes in companies beyond the limit set by the IRDAI.

What is an IPO?

IPO (Initial Public Offering) is a way used by the companies/government to raise funds from public investors through issuance of public share ownership. It is a process of offering shares of a private corporation to public in a new stock issuance. As the transition happens, the existing private sharers become worth the public trading price. They may retain their shares or sell, whole or part of it, for profits. Meanwhile the company provides opportunities to public market investors to invest in the company shares. Public includes any individual or institutional investor who is interested in buying the shares.

The number and price of the shares the company sells determine the equity value for the new shareholders. Shareholders’ equity represents the shares owned by the investors (when it is private or public) but with an IPO, the shareholders’ equity increases with cash from primary issuance. Besides seeing IPO as an exit strategy for the company’s founders and early investors, realizing the full profit from their private investments, it increases the transparency and hence exposure and prestige of the company, opening it for more gains.

Stated purpose of disinvestment in LIC

The government had already listed the shares of General Insurance Corporation and New India Assurance through IPOs three years ago. Public listing of LIC will lead to more disclosures of investment and loan portfolios and better governance with greater transparency and accountability. The government has made the move with an aim to look at stake sales in government entities to raise its finances and to allow these public sector units (PSU’s) to raise their finances.

Though LIC makes huge profit but with its declining market share in the domestic market, the company’s performance has become a concern for its new management. Its market share declined to 66.74 per cent in 2018-19. According to the performance analysis by LIC’s top management, the corporation, except in pension and group scheme (P&GS), has missed its own targets in most of the parameters during financial year 2018-19.

Pros and cons of disinvestment in LIC

With this transition of LIC, and increased accountability, it will be in far better position to manage its balance sheets and function without the need of government assistance or bailout. Such public holdings like LIC play an important role in easing government finances by diluting equity and providing it with access to public debt markets to raise funds. After IPO, LIC may see incremental dilution through direct share sale which may benefit the PSU. The government will benefit both from making the organization self-sustaining and disinvestment as this would add value to the left government holdings.

Today, the LIC customers have almost no access to the information of how the policies and investments are administered. Going public will increase the accountability and credibility. The debut of the firm will be ideal for passive investors or those foreign investors looking at Indian allocations.

But still there are some issues that need to be tackled before the proper implementation of this plan. The issue of issuance of guarantee of about 300 million users of LIC policies will be the first problem to be dealt with. The process of settling the terms for the IPO will take about 4-5 months and even when done, the sale can only be done after waiting for right market conditions.

The plan would take about a year to materialise as there are a lot of legal hurdles. The government will moreover have to negotiate with the employees of LIC who are already opposing the divestment. The announcement of doing away with all kind of exemptions in future may cause loss to the company.

Public reaction

The government has proposed this plan in lines with ‘maximum governance, minimum government’ and the “government has no business to be in business” mantras and to raise funds. But there are various other views by the opposition parties. LIC is where the ordinary people have invested their hard-earned money, which will face an uncertain future once LIC has fallen into the hands of private players,” said BSP MP Danish Ali. Congress is also against this step of the government. The employees are against the disinvestment and say that this is against the national interest. It will endanger the economic sovereignty of the people and will put the savings of crores of policyholders at stake.

There has been no immediate public reaction but there has been a debate by both the sides for the public where the opposition believes that this is against the public and expresses it as “family jewel being sold”. On the other hand, the government says that this decision is taken keeping the interest of public in mind. This step will ensure transparency and will increase the public participation.

Conclusion

The government has taken a bold step by including LIC in the public listing disinvestment list of the budget. Though the Government says it will cause no problem, the employees of LIC have already gone on strike against this step. There are both pros and cons to the plan but the plan can be materialised only after tackling the opposite reactions to it as well as the legal hurdles. If done well, the LIC disinvestment can easily fix several years of budget deficit while providing a significant jump in valuation for each incremental disinvestment..

Author: Ridhima from Rajiv Gandhi National University Of Law, Punjab.

Editor: Ismat Hena from Faculty of Law, Jamia Millia Islamia.

One Stop Centre: Let’s Stop and Think Over

Reading time: 4-5 minutes.

In 2013, the Ministry of Finance launched the Nirbhaya Scheme that funded a sub-scheme called the ‘One Stop Centre Scheme’ to operate crisis intervention centers for survivors of Sexual and Gender Based Violence (SGBV).

One Stop Centers (OSCs) were setup as a single point relief institution for SGBV survivors immediately after having suffered or been subject to violence. To support the survivors, the OSC scheme proposed an array of services such as medical assistance, shelter, access to the police, legal services and psychological care for SGBV victims.

What are the services provided by OSCs?

The scheme required OSCs to be constructed within a hospital or within a 2 km radius of the hospital facility at an existing government or semi government institution. Presently, OSCs are integrated with women’s helplines, the police and anganwadi workers, to provide the following services:

  • Medical assistance for the examination;
  • Police assistance for filings;
  • Psycho-social support and counselling;
  • Legal aid; and
  • Video conferencing facilities.            

What is the structure of this scheme?

OSC Scheme is completely centrally funded, where the funds are made available by the Ministry of Women and Child Development to the district authorities directly. After the initial investment, the subsequent rounds of funds are released bi-annually on the basis of expense and utilization reports from district authorities.

It is estimated that the cost of constructing an OSC is estimated to be approximately INR 49 Lakhs and the yearly cost of operating INR 35 Lakhs and a total of INR 2000 Crores is available under the Nirbhaya Scheme. The investment required in setting up and operating an OSC raises a question especially after considering the magnitude of funds deployed for the said purpose.

Is OSC Scheme actually standing true to its objective of providing relief to SGBV survivors?

After extensive research, following operational lapses were unearthed:

Locked Centres: The 2017 Guidelines on the Implementation of the OSC Scheme requires OSCs to be open round the clock to serve emergency cases of SGBV victims. Be that as it may, the centres were found to be non-functional and the they only saw the light of the day when a complaint was routed through Police.

Such lacklustre attitude on the part of the concerned authorities is an obstruction to justice. Henceforth, the government ought to make sure that the guidelines enumerated under “2017 Guidelines on the Implementation of the OSC” are followed with outmost sincerity.

Non Compliance with MLHC Protocol: One of the primary functions of the OSCs is to provide medical assistance to SGBV victims. OSCs have collaborations with government hospitals, where the doctors are employed by the State or the Central Ministry of Health. Therefore, the medical professionals providing assistance for OSCs are not incentivized under the scheme.

Further, the OSC Guidelines mandates compliance with the Medico-Legal Guidelines, 2014 for SGBV survivors. Be that as it may, medical professionals assisting the OSC were found to be unaware about complying with the Medico-Legal Guidelines, 2014.

Absence of Legal and Psycho Socio Care: In addition to medical assistance, OSCs are required to provide psychological care and legal assistance to the survivors. Unfortunately, this piece of information seems to be missing in OSC centres. The sheer lack of knowledge is alarming considering the paramount importance of legal assistance to the victim at the time of crisis.

Another imperative façade of providing relief to the SGBV victim is psychological care owing to the propensity to develop mental illness such as depression, anxiety and PTSD—Post Traumatic Stress Disorder.

This article is brought to you in collaboration with Neha Koshy, Founder Trustee of Ladee Foundation Trust.