The HINDU Notes – 03rd December 2019 - VISION

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Tuesday, December 03, 2019

The HINDU Notes – 03rd December 2019

📰 SC/ST creamy layer exclusion from quota: Centre seeks review, says refer matter to 7-judge Bench

The fresh petition has been filed by Samta Andolan Samiti and O.P. Shukla, a former IAS officer

•The Centre on Monday asked the Supreme Court to refer to a seven-judge Bench the question whether the creamy layer concept should apply or not to the Scheduled Castes/Scheduled Tribes while providing them reservation in  promotions.

•On September 26 last year, a five-judge Bench in the Jarnail Singh case unanimously agreed with a 2006 judgment of another five-judge Bench in the M. Nagaraj case, which had upheld the application of the creamy layer principle  in promotions. The 2018 judgment, authored by Justice Rohinton F. Nariman, had also refused the government’s plea to refer the 2006 Nagaraj case judgment to a seven-judge Bench.

•On Monday, however, Attorney General K.K. Venugopal urged the court to reconsider the ruling and refer the Nagaraj case judgment to a seven-judge Bench. A Bench, led by Chief Justice of India Sharad A. Bobde, agreed to hear the case after two weeks.

Plea rejected

•The 2018 judgment, modifying the part of the Nagaraj case verdict which required the States to show quantifiable data to prove the “backwardness” of a Scheduled Caste/Scheduled Tribe in order to provide quota in promotion in public employment, had, however, rejected the Centre’s argument that the Nagaraj case ruling had misread the creamy layer concept by applying it to the SCs/STs.

•“The whole object of reservation is to see that the backward classes of citizens move forward so that they may march hand in hand with other citizens of India on an equal basis. This will not be possible if only the creamy layer within that class bag all the coveted jobs in the public sector and perpetuate themselves, leaving the rest of the class as backward as they always were,” Justice Nariman had said, upholding the Nagaraj case ruling.

•The 2018 judgment said that when a court applies the creamy layer principle to the Scheduled Castes and the Scheduled Tribes, it does not in any manner tinker with the Presidential List under Article 341 or 342 of the Constitution. The caste or group or sub-group named in the list continues exactly as before, Justice Nariman had reasoned.

•“It is only those within that group or sub-group, who have come out of untouchability or backwardness by virtue of belonging to the creamy layer, who are excluded from the benefit of reservation,” he had explained.

•He had observed that unless the creamy layer principle was applied, those genuinely deserving reservation would not access it and those who were undeserving within the same class would continue to get it. The court held that the principle was based on the fundamental right to equality. “The benefits, by and large, are snatched away by the top creamy layer of the backward caste or class, keeping the weakest among the weak always weak and leaving the fortunate layers to consume the whole cake,” Justice Nariman had observed.

📰 'Power of Siberia' gas pipeline cements China-Russia bond

First cross-border gas pipeline between Russia and China inaugurated.

•Chinese President Xi Jinping and his Russian counterpart Vladimir Putin on Monday remotely inaugurated the “Power of Siberia” gas pipeline — a massive cross-border undertaking not only central to China’s energy security but also for bolstering special ties between Beijing and Moscow. The 30-year project is anchored by a $400 billion gas deal.

•From the Atamanskaya compressor station on the border with China, Alexi Miller, the head of the Russian gas giant Gazprom, which has played a leading role in conceiving and implementing the project, invited Mr. Putin and President Xi to the inaugural via a video link.

•“Dear Vladimir Vladimirovich, allow me to give a command to open the pipeline valve,” Mr. Miller said, addressing President Putin, the Russian news agency Tass reported.

•On receiving Mr. Putin’s permission, Mr. Miller said: “Dear Vladimir Vladimirovich, Dear Xi Jinping, the valve has been open. Gas is flowing to the gas transmission system of the People’s Republic of China.”

•Russia has been a primary gas supplier to Europe, but the Power of Siberia is the first cross-border gas pipeline between Russia and China, adding a prominent eastern dimension to Moscow’s energy blueprint. 

•Under the contract, Russia will deliver 1 trillion cubic meters of natural gas to China over the next 30 years.

•Next year, Moscow will supply around 5 billion cubic meters (bcm) of natural gas, but the volume will gradually rise to 38 billion cubic meters per year, the China National Petroleum Corporation (CNPC) said on Monday in a statement.

•From Siberia to China’s Yangtze River delta in Shanghai, the massive pipeline will cover 8,000 km, with 5,111 km inside China, passing through nine provinces and municipalities.

•Gas is being sourced from Chayandinskoye and Kovytka fields in eastern Siberia, and is then piped to Blagoveshchensk — the last town on the Russian side of the border. From there, it is tunneled under the Amur River, before entering Heihe on the Chinese side.

•Analysts say that the brand new pipeline is an emblem of closer energy integration in Eurasia, with Russia and China as the key partners.

📰 In telecom, time to send the right signals

The government needs to take bold action like it did in 1999; it is critical to have multiple players

•In the early 1990s, India had merely seven million telephones with a waiting time of seven to eight years to get a connection. The simple reason was that the cost of installing a landline telephone was too high and the required average revenue per user (ARPU) just to break even was ₹1,250 per month, which was too high for most Indians at that time.

•Indian telecom grew at a slow pace through government budgets and subsidies. It is in this context that wireless telephony was introduced. This would bring down the capital cost, make telephones affordable in India, would be easier to install and bring in private investments for a potentially profitable business.

Rapid growth

•The results have been nothing short of dramatic. The telecommunications sector has grown at a rapid pace, riding on a virtuous cycle of growing demand and increasing competition that has pushed down prices to levels not seen anywhere else in the world.

•Today, the sector is at a turning point. The troubles of today are rooted in the fast-paced growth of yesterday and regulation that increased tele-density by pushing down ARPUs. This drove businesses to work with a single mind focus on consumer acquisition as the base of users ballooned. It is important to take a historic look if one is to understand the imbroglio of today.

•The first telecom auctions for private players were in 1995. The financial bids were unbelievably high; some international consultants proposed large licence fees without understanding Indian affordability. As the dust settled, the winners realised that the bids were economically unsustainable. Several legal ploys were used to stop the payment against bids, cases multiplied, and the telecom dream was stillborn. In 1999, when Atal Bihari Vajpayee became Prime Minister, a group of telecom academics and professionals advised him that the only way out of this imbroglio was to cancel the licence fees due to the government and introduce the “revenue share” model. He was worried that he would be accused of selling the country and causing huge “loss of revenue”. But this group egged him on saying that India needed this bold step for telecom to thrive and he could do this only in his first hundred days. The Prime Minister took the bold step and licensees were offered an option to switch to revenue-share instead of upfront licence fees.

•This bold step got mobile telephony going. The installation cost of wireless telephony was less than one-fourth of a landline telephone. Low ARPU was no longer a big concern. By around 2003, India had around 300 million telephone lines and the urban market was saturating. Airtel, Vodafone and Idea, with their GSM mobile-licence, were the leaders. The CDMA mobile licensees had grown slowly, stuck with a technology without a future and could not compete. Rural markets required lower tariff, but the GSM trio were happy with the urban market and resisted reduction in tariffs. The market grew at a slow pace since then.

•It was around 2007 that the then government saw this imbroglio and found ways to give new GSM licences using primarily revenue-share. These newcomers, primarily Reliance Communications (RCOM) and Tata Teleservices, dropped tariffs and introduced per-second billing. Others had to follow. The market grew quickly to 900 million lines. Indian telecom was thriving. The operators were making decent money, even with lower tariffs. Till then, India was using only 2G telephony. Data and Internet was at very low speed; 3G telephony was just being introduced and operators were haggling for more 3G spectrum in 900 MHz and 1800 MHz bands. The government was periodically conducting auctions since 2010, fetching large spectrum bids.

Old versus new players

•Around 2013, the Government made available some spectrum in the 2300-2500 MHz band. This was not considered suitable for 3G telephony then; 4G was in its infancy and there was some concern about technology standards and technology readiness. A new company, Reliance Jio, betted on it and won the whole spectrum pan-India through a partner company at a relatively lower price as there was little interest from established operators. Jio had to wait four years to get the technology ready and launched the 4G service late in 2016 and caught the imagination of users. It made voice calls almost free and offered good quality video on smart handsets at very low tariffs. Others did follow suit but paid higher amounts for spectrum in later auctions. Jio has been gaining market share since then. The older operators have been on the defensive, facing serious erosion in market share and profitability. RCOM and Tata Teleservices have been wiped out. Vodafone and Idea merged to just about survive. Airtel, the strongest operator two years back, continues to lose market share and profitability.

Issue of penalties

•It is at this time that the revenue-sharing agreement that companies like Airtel, Idea, Vodafone and others signed in 2001 has come to haunt them. The Supreme Court ruled this October that these companies are liable to pay revenue share not just on telecom revenue but all revenues of the company — sales proceeds on handsets, renting of their towers, infrastructure sharing, and even on dividend incomes from any investment. Furthermore, they have to pay huge late-fees and penalties, totalling ₹1.3 lakh crore.

•While the court has rightly interpreted the written agreement of 2001, the amounts are enormous that when paid, is likely to bankrupt these players. The industry is already saddled with debt of ₹7 lakh crore. Once again India is faced with the prospect of a telecom monopoly or duopoly. Further, except that it says so in a contract, it makes little sense to pay revenue share to the government on unrelated businesses. If the operators ever thought otherwise, they would have hived off these businesses to a sister company as many have done since then.

•It is precisely in such a precarious situation, that the government needs to act, just like it did in 1999. They could offer the operators payment of principal in instalments and waive off interest and penalties. It is critical for the nation to have multiple players compete in telecom services. Besides, the time has come to relook the role of telecom in the country. The Prime Minister has rightly emphasised the role digital connectivity plays in society. If India is to reap the benefit of being fully digital, government’s taxes and earnings from telecom should be limited. Today, in addition to corporate taxes, the government’s telecom revenue includes Goods and Services Tax, spectrum auction, revenue share as licence fees, amounting to about 30% of customer bill. The government should not look at the telecom sector primarily as a revenue-earner. The money could be better spent by operators to improve today’s average service-quality. This would help telecom reach the remotest parts of the country and the service needs to continue to be affordable.