Wednesday, January 7, 2015

Smart cards soon for unorganised sector workers

Every worker in the unorganised sector may soon be issued a smart card with a unique identification number for accessing social schemes and benefits. The portable benefits card will be issued under the Unorganised Workers Social Security Act, 2008.
On December 25, the Gujarat Chief Minister launched such a card, “U-WIN,” in the State, and announced that benefits under various social security schemes would be routed to registered workers through this card. The Prime Minister joined the function through videoconferencing from Varanasi.
“The Gujarat launch was a pilot for launching the card in all States. It is likely to be launched before the end of the financial year,” said a senior official in the Ministry of Labour and Employment.
Officials said workers’ details may be seeded with the card at a later point.
“The proposal is all workers must get three things — health insurance, pension and disability assistance. This card will allow workers to self-certify that they are unorganised sector workers, and get these benefits through a portable card,” said another official.
By the National Commission for Enterprises in the Unorganised Sector Report, 2005, over 394 million workers, 87 per cent of the country’s working population, are in the unorganised sector. The report said 79 per cent of these workers lived on less than Rs. 20 a dayIn Gujarat, the government announced that benefits under 20 schemes, including education aid, maternity benefits, funeral benefits, accident group insurance scheme and housing, would be routed through the cards.
The Unorganised Workers Social Security Act, 2008, passed after the setting up of the NCEUS in 2004 under Arjun Sengupta, provides for constitution of the National Social Security Advisory Board at the Central level, which is to recommend social security schemes, health and maternity benefits and pension schemes for unorganised workers. It said that every adult worker could self-certify that he or she worked in the unorganised sector and shall be issued a smart card and a unique identification number.
“A universal, portable smart card which will provide social security benefits to all unorganised sector workers will be a good step. But at the same time, employment security of formal employment is being watered down,” Ravi Srivastava, an NCEUS member, said.

“The registration with a portable smart card and its integration with the registration under the Building & Construction Workers Act is a positive first step but will have little meaning unless the Acts/schemes also allow for portability,” he said.


Over the Barrel: Oilpolitik / Vikram S Mehta

A frequently asked but futile question is: Where are oil prices headed? The question is futile because no one knows the answer.
This does not mean that people do not analyse and speculate. It is just that they get it wrong more often than not. The more useful questions would be: What are the implications of the recent downturn in oil prices? What, if any, are the opportunities that this decline offers?
The price of crude oil was $115 per barrel (bbl) in June last year. Today it has fallen to below $60 per bbl.This decline was unanticipated. Prices have fallen comparably sharply in the past, but there has been an explanatory external trigger each time. Between 1997 and 1999, prices fell from $25 per bbl to $10 per bbl.
The trigger was the Thai government’s decision on June 30, 1997, to stop defending its currency. This snowballed into the full-blown Asian financial crisis. Between July and December 2008, prices went from $145 per bbl to $35 per bbl. Here, the triggers were two-fold. First, prices had run up to an unsustainable level and second, investment bank Lehman Brothers went belly up in September and banks stopped lending. This time, however, there has been no external trigger. Prices have slid because supplies have outrun demand.
The International Energy Agency (IEA) had projected that oil demand would rise by 1.4 million barrels a day in 2014 over 2013. But demand increased by only half that amount — 7,00,000 barrels a day. On the supply side, the US tight oil producers (shale) exceeded production expectations by 1 million barrels per day (mbd), and Iraq and Libya by 200 and 300 thousand barrels per day, respectively. In addition, Opec passed the baton of “swing producer” of oil to the US. Instead of cutting production to defend prices, it decided to defend market share. To close observers of the petroleum market, this shift in policy should not have come as a surprise.
For, in September 2013, Saudi Arabia’s minister of petroleum had said that US shale oil production should become the “world’s new swing producer of oil”. Later and all through 2014, both he and the Opec secretary general repeatedly made clear that Opec would not play its traditional role; that with its lower cost reserve base it had the staying power to withstand any price pressure; and that US shale producers should hold back production if they did not wish to be driven into an economic hole.
They knew that US producers could not “cartelise” and buck competitive forces, so these statements were deliberate signals to alert the market of their altered attitudinal stance. So when, at the Opec summit meeting in November, they rolled over the output quotas of individual members unchanged, the price of crude slithered sharply.
Opec is gambling that it will not be long before US production stagnates and that, with faster growth in the US, China and India, the current price trend will reverse. This is a gamble, because there is an eight-month lag before drilling activity responds to price signals. Also, the price point at which the marginal costs of shale production exceed marginal revenues is not clear.
The IEA has estimated that 4 per cent of US shale production will be uneconomic at prices below $80 per bbl. Wood Mackenzie has written that 60 per cent of production from new wells are commercial at $60 per bbl. Cambridge Energy Research Associates has calculated the average break-even cost to be in the mid-2050s. This variance is understandable. It reflects the different cost profiles of the companies. Those that came into the game early and leased land at knockdown prices and have established the required drilling infrastructure can probably make money at prices below even $50 per bbl. Others must already be struggling.
The important point is that while the shale business model is clearly under stress, oil producers are also hurting. The Russian currency is in near freefall; Venezuela is finding it difficult to service its debt; Iran needs $135 per bbl for fiscal break-even. Saudi Arabia, the UAE and Kuwait have seen their revenues decline by approximately $240 billion. The Brazilian pre-salt fields are fast becoming uneconomic. The Opec position is a gamble because if prices stay at this level for long, or slide even further, most of these countries will face an economic, if not political, convulsion.
The implications for India are, of course, on balance hugely positive. It has saved approximately $40 billion in reduced import costs; inflationary pressures have eased; the subsidy outgo has reduced and growth has got a boost. But there is a flipside. Indian companies have substantive investment, trading and financial interests in Venezuela, Russia, Nigeria and the Gulf. Were Venezuela to renege on its debt, Russia to sink deeper into recession, Nigeria to impose capital controls, Iran to suffer a political upheaval and the Gulf countries to cut back on public expenditure, the returns on these investments would be at risk, remittances from Indian workers would slow down, and our strategic and trading relationships may have to be reviewed.
At the sectoral level, it will be increasingly difficult to attract risk capital into oil and gas exploration. This is because most oil companies have pared down their exploration budgets. The government is reportedly planning to announce a new licensing round for bidding. If so, and if it is keen to attract international companies, it will have to abandon all thoughts of replacing the current cost-recovery production-sharing model (where companies have first call on production to recover costs) with a revenue-sharing model (where revenues are shared with the government even before costs have been recovered).
The oil price decline raises two questions. First, does it offer acquisition opportunities? After all, many international companies with attractive assets are hugely leveraged and face a cash crunch. They may well need to sell at significant discounts. Indian companies with deep pockets and/ or sovereign backing should perhaps investigate.
Second, at what point and under what circumstances will prices start to climb again? That they will is a lesson from history. In anticipation, the government should develop scenarios that describe alternative futures under different, albeit higher, price points and be ready with its policy response.
The writer is executive director, Brookings India and senior fellow, Brookings Institution
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Municipal Bonds

Municipal Bonds, also known as Munis, are tax saving investments offered by the municipal bodies to raise funds from the community for local area development. In view of the plan towards Smart Cities, the Government of India has proposed to use Munis in a few select cities in view of the following benefits it yields:
1. They help in saving tax for the individual, hence increased participation
2. Since the money invested is being used in the development of the local area, the direct impact can be felt by the investors and hence greater accountability
3. It balances authority and responsibility at the community level, thus making the process of development more effective and inclusive 
4. Viable alternative source of funding, given the central funds are already under pressure with “Make in India”
Municipal Bonds are being planned to be issued in the following manner:
1. Select five to six Tier II and Tier III cities, including smaller capitals and satellite owns, to issue munis in
2. Issue a fixed number of bonds to the people of the given municipality (75% of the population), for a fixed period (3 years) and at a fixed rate of interest (8%). The people would be decided on first come first serve basis.
3. The issuing authority must fund a minimum of 20% of the Project Cost from the munis, and incase is unable to reach minimum subscripion, must refund to the applicants within 12 days
4. Depending on the success of Munis in the first phase, the option will be extend to other towns as well. Some of the constraints that Munis might face in the first phase are:
a. Better alternative available for people with higher rate on interest
b. Absentia of Municipal Bodies causing lack of trust in them by people
c. Techno-managerial capacity of the municipal bodies
If Municipal Bonds are able to perform as expected, they will display an extraordinary route of development
investment in India at the community level. The democracy would truly be functioning BY the people and FOR the people.

Municipal bonds

Days after the Securities and Exchange Board of India (Sebi) proposed new rules for issuance of municipal bonds, thehas asked its urban development counterpart to identify five or six cities, and specific infrastructure projects in those cities, for which those civic bodies could issue such bonds.

Municipal are instruments issued by municipal bodies, or by states on these bodies’ behalf, to raise capital for infrastructure projects. After Finance Minister in the Union Budget for 2014-15 announced the intention to develop 100 smart cities, the government deliberated on various ways to finance the infrastructure for such cities and decided reviving the dormant municipal bonds could be one of the ways.

“The urban development ministry has been asked to identify five to six cities and specific projects within these cities for which the municipal bonds will be issued. This will only be the start. There will be more cities identified for infrastructure funding, to develop those into smart cities,” a senior government official told Business Standard.

According to the plan, these will be Tier-II and -III cities and include smaller state capitals and satellite towns around larger metros. The official added the urban development ministry was expected to come up with specific names within a week.

On December 30, had released a concept paper on the issue and trading of such bonds on exchanges and invited comments from the public. The concept paper said the civic body issuing these bonds would have to obtain ratings from credit rating agencies and would have a minimum tenure of three years.

The market for municipal bonds has existed in India since 1998, when Ahmedabad became the country’s first city to issue such bonds. But 25 municipal bond issues in the past 16 years have garnered only about $300 million, according a report by Mukul Asher, professor at the National University of Singapore, and Shahana Sheikh of New Delhi’s Centre for Policy Research. The amount raised so far is only a fraction of those raised by developed markets like the US, where the municipal bond market is worth more than $3 trillion.

Analysts and policy watchers say the market for such bonds has not picked up in India for a number of reasons. These include the lack of interest among investors, the sorry state of finances at many municipal bodies, shoddy accounting of their books, bureaucratic hurdles, lack of interest at the central and state levels, and the issue of who will guarantee these bonds. Besides, there also is local political interference in these civic bodies.


Lexicon of democratic literacy / Aruna Roy

When the literacy drive was in full force, I happened to visit a village in Ajmer district with a friend who was a civil servant. There was bold graffiti on a prominent school wall, which said:Saksharta ki kya pehchan? Upar chaddi, niche baniyan (How do you recognise literacy? The shorts above and the vest below). My puzzled officer-friend asked the villagers what prompted the graffiti. They replied, “You don’t run schools for our children; teachers are absent because they don’t want to stay in the village. Your transport system does not function. Our eager children remain illiterate. But later when we are tired and worn out, you come to teach us literacy. Please run our schools.”
Successive Rajasthan governments did not listen to these voices, perhaps because the children of the ruling elite study in expensive private schools. But the present government topped them all when it decided to shut down 17,000 schools, almost all in remote villages. As people protested and demanded that they be reopened, they were told that those who never got an opportunity to go to school will now be debarred from standing for elections.
Debarred from contesting
This fiat through ordinance that requires passing class 8 and 10 as eligibility criteria for standing for elections came just days before the elections for sarpanch and panchayat samiti members. It has shocked and angered most of rural Rajasthan, including supporters of the ruling party. This decision will disqualify 95 per cent of rural women and 80 per cent of the electorate from standing for election. This arbitrary step has raised many questions. Perhaps the answer to all of them is that this is a deliberate move to ensure elite capture of grass-roots democracy. In one stroke, this decision lays the blame and burden of education on the people and ensures the continuance of power in the hands of a few. Governments need to take all voices into consideration. The punishment for failure of delivery cannot be inflicted once again on the victim. Women, Dalits and tribals, who are at the bottom of the pile, will be the most affected.
I have been trained for 40 years of my life, particularly in democracy, ethics, and governance, by illiterate but highly educated people in rural India. We have traded skills. Naurti, now Sarpanch of Harmara (Ajmer district), is “illiterate,” but learnt to use the computer at the age of 50 and teaches middle and high school dropouts how to use the computer. She has no class 8 certificate, but uses the website of the Ministry of Rural Development. Who is more skilled between us is debatable. I would not advocate that Naurti head the Ministry of Human Resource Development or that she teach me Shakespeare, but in matters of governance in the panchayat she is heaps better. My informal learning about the invention of scientific thought, of Galileo and Kalidasa, have provided a worldview worth the learning. But I am not equipped like Naurti to understand the nitty-gritty of getting a panchayat quorum to take a difficult and just decision when faced with a contentious issue. I do not know if I could face the ire and possibility of violence for standing against sati, without caste or money on my side, as she did. She will not be trapped into a situation by unethical, unjust people; nor will she be trapped by the writing on a paper that she cannot understand.
Illiteracy is not merely from lack of schooling. It can come from ignorance of highly specialised modes of governance which even an M.A. degree cannot address. But governance in rural Rajasthan needs ethics and guts — values not determined by class 8 certificates — which, incidentally, can often be obtained illegally, especially by the ruling elite in the area.
An essential tool
Of course literacy is an essential tool, which is why the state has a responsibility to ensure that people have the right to education. But literacy cannot be made more important than intelligence and ethics, which are native to the human species. A quick review of unintelligent and violent acts that have travelled out of Rajasthan, or the renewal of traditional methods of feudal control, have actually been led by literate individuals. Promoters of sati were highly literate men who led a massive demonstration by drawing on caste loyalties and values of the feudal elite. Rape, corruption, cheating and injustice have not occurred because of illiteracy. Honour killings, the revival of witch hunting, the development of modern methods of corruption, together with primitive public punishments such as stripping and parading women have not come from illiteracy; they have come from the misuse of traditional and official power to retain elite control — a deadly combination. Protests against such acts have come from ordinary people who are brave enough to take cudgels. Many of them are illiterate, but they are courageous and ethical. It is frightening because this is not a result of tradition or lack of exposure alone, but of impunity from accountability. Literacy has not changed the balance of power. It is unquestioned power that flouts ‘good governance.’
I remember Beelan, 65, scoffing at me 35 years ago saying I had nakal (copying by writing) whereas she had  akal (mind). I could not remember figures and money spent, but many of my illiterate friends remembered details to the last paisa. A weaver of Ikat in Odisha is a mathematician — not only in simple arithmetic but in the intricate art of dividing numbers to form patterns. There are different kinds of literacy required at different times. Passing class 8, in this case, is more for show than substance. The bureaucratic system needs to be reformed to ensure accountability so that there is a proper balance of power between the technocratic executive and the elected representative.
We need schools for democratic literacy, which will encourage accountability in leaders and bolster courage to face oppression and inequality. Citizens need opportunities to spend time understanding governance; of being able to identify loopholes and how they can be plugged. The requirement of a class 8 certificate will further deny access to power for those who are likely to demand universal equality of access. Or may be that is the intention.
The cherry on the cake is that the State government as well as the Centre proudly tout formal learning as an unnecessary criterion for choosing Ministers. In reality, 90 per cent of their work is through the written word, unlike that of the sarpanch who deals with the human condition. This can only prompt us to say with irony, “Democracy is dead but long live literacy.”

(Aruna Roy is a social and political activist, Mazdoor Kisan Shakti Sangathan . )