48. PSBs, REFORMS & BANKS BOARD BUREAU | I.A.S. 2019 | 48TH GS EPISODE

48 PSBs, Reforms & Bank Board Bureau

Stiffer Challenges Await the New Banks Board Bureau

Concept of BBB

The BBB—an autonomous body—was intended to eventually transition into a Bank Investment Company (BIC) in line with the recommendations of the Committee to Review Governance of Boards of Banks in India headed by P J Nayak and was set up by the Reserve Bank of India (RBI) (Nayak 2014). The BIC, when formed, will hold the government’s stake in PSBs and function as an independent special purpose vehicle that would provide the banks greater autonomy.

First BBB

When the BBB began functioning in its initial form from 1 April 2016, the state of PSBs was much better though asset quality woes had engulfed the system. Banking sector reforms were reinforced when the government launched a set of measures, collectively titled Mission Indradhanush, after deliberations at the first Gyan Sangam, a meeting of the top leaders of banks that was conducted under the aegis of government and regulatory authorities in January 2015. Since then, the identification, selection, and nurturing of quality leadership for PSBs, as well as the continuity of said leadership, has been under greater focus, with primary responsibility for these tasks being entrusted to the BBB. Similarly, on the recommendation of the P J Nayak Committee, the position of chairperson was separated from that of managing director and chief executive officer (MD and CEO).

Eminent professionals were inducted for the post of non-executive chairperson, akin to the practice in private banks. A few private sector professionals were also inducted at the level of the MD and CEO in some large public banks to add talent to the PSB pool. The idea was to provide the chairperson a longer tenure to pursue a long-term vision for the bank, while the MD and CEO, a full-time bank executive, could demit office on superannuation as per the service conditions. This move had the potential to remove the limitations of the MD and CEO’s short-term residual service while enabling the non-executive chairperson to steer the bank to realise its long-term growth aspirations.

The recommendations were also designed to improve governance by identifying the right talent for top management positions that come with full-time board seats (chairperson, MD and CEO, and executive director). Succession planning for leadership roles, and the enforcement of codes of conduct and ethics were also a large part of the mandate. In the realm of business issues, coordinated action to mitigate asset quality woes, though not mandated, also stood out as an important and relevant task. The task of developing differentiated strategies for raising capital through innovative financial methods and instruments is a work in progress.

The limited tenure of two years, perhaps, proved inadequate for the first BBB to accomplish its ambitious goals and put PSBs on the desired growth trajectory while carving out a transition plan to move from government shareholding to a bank-holding company. But, it has provided the contours of a road map in its compendium of recommendations that can form the basis to take the process forward (Rai 2018). More importantly, the draft Governance, Reward and Accountability Framework (GRAF), designed to mitigate the dangers of high-risk-taking during good times and risk aversion during bad times, can provoke further thinking that will help adapt and improve it.

Second BBB

After the two-year term of the Banks Board Bureau (BBB) ended on 31 March 2018, the government reconstituted it with a new team. The new BBB has the potential to resurrect public sector banks (PSBs) and maintain continuity in its policy stances. It reinforces the government’s commitment to reform PSBs, particularly at a juncture when many of them are reeling under unprecedented operational stress. Given the challenging mandate, it has to reinvent its strategic role through greater coordination with all stakeholders, especially the Department of Financial Services (DFS). The revamped BBB assumes the responsibility of continuing to stay dominant in the banking space, with PSBs needing rejuvenation and moral support.

The new BBB has the distinct advantage of having a clear-cut goal due to the preparatory work that has been done in the past, though the challenges of PSBs have become aggravated and are more daunting now. It may need a different approach or a strategic shift in its stance. But, its biggest limitation will be the need to devise appropriate strategies to win the confidence of the DFS, its biggest stakeholder. The new BBB has to achieve full empowerment through better coordination and relationship-building to guide PSBs towards the goal. The task is made trickier by the fact that PSBs are already required to work under several regulators, each with a different mindset, and, at the same time, cater to the increased expectations of customers.

The new BBB may find PSBs in a weakened operational state from how the first BBB would have found PSBs. Guiding PSBs through such a weak state with the same level of empowerment could be difficult. Therefore, collaboration with the DFS for speedy structural changes and further strengthening—as well as serious introspection on the mandate—may be desired. This will require winning the confidence of mandarins on banking reforms. Therefore, it will be pertinent to discuss the current state of some of the PSBs and design well-calibrated remedial measures to resuscitate them, even though that may not be part of the current mandate.

Problems faced by Banks & Role BBB can play:

Prompt Corrective Action: In order to improve the performance of banks that have been identified to be weak and restore their operational efficiency, the RBI introduced the new Prompt Corrective Action (PCA) format with built-in rectification measures, effective from financial year (FY) 2018–19. The PCA measures the performance of banks using various parameters and classifies them into three risk thresholds. Each level denotes a degree of weakness ranging from risk thresholdI (less risky) to risk threshold III (very risky). Among others, PCA measures three key parameters: asset quality, net non-performing assets (NNPAs), and capital adequacy ratio. NNPAs breaching the 6% level or capital adequacy ratio getting close to the minimum threshold of 10.25% would be clear indicators of weakness. It also tracks concurrent negative rate of return on assets (ROA) ranging from two to four consecutive years. This results in banks posting losses after turning RoA negative.

Based on such metrics, the RBI has imposed PCA on 11 out of 21 PSBs so far. The guidance of the central bank and the reprioritisation of their business activities may hasten their revival. Such remedial measures, already imposed by the RBI, can be a good starting point for the new BBB to understand the operational state of PSBs. Many more PSBs may become subject to RBI surveillance under PCA when the operational results ofFY 2018–19 are finalised and made public. The PCA also clearly specified the consequences of the three risk thresholds and the action needed at each stage. So, a forward vision can be articulated depending on the progress in reviving PSBs. The remaining PSBs can test their performance parameters and improve on them in time to avert the imposition of PCA.

Asset quality: Asset quality has always been under focus, but it has been deteriorating rapidly ever since an Asset Quality Review was undertaken by the RBI in September 2015 to reduce the divergence between the banks’ classification of non-performing assets (NPAs) and the central bank’s assessment. As a result, NPA levels zoomed to a historic high. In order to provide an exit route to failed entities and speed up debt resolution, the Insolvency and Bankruptcy Code (IBC), 2016 was enacted, followed by the setting up of the Insolvency and Bankruptcy Board of India (IBBI). All stakeholders are now engaged in coordinated action to resolve debt and improve asset quality. Taking into consideration the stressed assets in the special mention account, SMA-2 (with money overdue beyond 61 days), stressed assets had reached ₹11.25 trillion by December 2017, which was close to 14% of total assets. PSBs hold 90% of such stressed assets. The state of asset quality will have far-reaching implications on the business efficiency of PSBs. Hence, the new BBB has to pitch in to coordinate the debt resolution process even though it is not part of the mandate. The revival of PSBs will rest, in large part, on how asset quality management gets streamlined.

Simplified debt resolution system: In order to simplify the debt resolution process, the RBI has introduced a new set of guidelines, effective on 1 March 2018, for the resolution of stressed assets worth ₹ 2,000 crore or more. The new stressed asset resolution framework may increase asset quality woes in the short run, but a stringent resolution process will be required in the long run. Having invoked the IBC, many PSBs are working in tandem with the RBI, the IBBI, debt resolution professionals, and committees of creditors to hasten debt resolution. But, many large stressed assets are entangled in prolonged litigation, which is stretching timelines. A lot of legal issues connected to the bidding process are yet to be sorted out. Foremost among these are the two amendments made to the IBC and the issue of special dispensation for stressed micro, small, and medium enterprises.

Implications of PNB fraud: The infamous Punjab National Bank (PNB) fraud, followed by a series of loan-related embezzlements, has highlighted the need to reinforce risk governance practices and to improve the effectiveness of systemic controls. The gaping holes that currently exist in operational risk management can jeopardise the sustainability of banks. With their fragile systemic controls and high susceptibility to frauds, PSBs will take a long time to win back public confidence. PNB is struggling with the intricacies of the fraud and RBI has granted the bank the special dispensation of one year to provision for the losses. Restoring normalcy will be a tedious journey. Meanwhile, PSBs are losing market share despite the fact that they continue to be the backbone of financial intermediation, especially in terms of their outreach to the hinterland. The revival of the economy, which is gradually limping back to normalcy after demonetisation and the implementation of the goods and services tax, could be debilitated if the role of PSBs is allowed to diminish further. Therefore, the sagging morale of PSB employees needs to be revived in order to enable the banks’ resurgence.

Private Banks

At a time when private sector banks were standing out as exemplars of best practices in corporate governance, the recent imbroglios at ICICI Bank and Axis Bank have flagged possible conflicts of interest in their conduct. They have added new dimensions to the weaknesses in the corporate governance of leading private banks. The ICICI Bank is classified by the RBI as a Domestic Systemically Important Bank, which makes the recent revelations a matter of great concern. In this context, the observations of Standard & Poor’s about the impact of weaknesses in the governance process on risk management need to be factored in.

In view of the weak operational state of PSBs, the new BBB cannot isolate these issues even though they are not listed in the mandate. Without getting involved in mitigating the risks of inherent weaknesses, it will be difficult to nurture and improve the effectiveness of the apex leadership. It has also to take up the task of appointing independent directors to the boards of PSBs to make them strong and effective. After appointing them, training them and conditioning their skill sets to meet emerging challenges will be essential.

Going by the experience of the first BBB, the bureau could face another formidable challenge in asserting its anchoring position in the driving of the PSBs’ futures. The DFS may be persuaded to fully support the BBB in transforming PSBs to derive the maximum potential benefit from the eminent people on the team. Even revising or modifying the mandate, which was flagged earlier, may be necessary to tackle the current spate of challenges.

Its immediate task will be to soothe the nerves of PSBs, which are caught between the pincers of prolonged debt resolution processes and the implications of gaping holes in their operational risk management. Maintaining the equilibrium between constantly evolving guidelines and the possibility of their implementation at the ground level requires a deep dive into the operational state of PSBs, failing which it may turn out to be another set of good intentions of key stakeholders without the desirable outcome. On the whole, a challenging task awaits the new BBB, where seeking government support, application of foresight, and adapting a flexible approach in grooming board functionaries of PSBs will be necessary to achieve its objectives.

47. SOCIAL AUDITS - RAJASTHAN, MNREGA & MEGHALAYA | I.A.S. 2019 | 47TH GS EPISODE

47 SOCIAL AUDIT

Institutionalising Social Audit in Meghalaya

MEANING OF AUDIT

Auditing is the process of verifying the accuracy of the records and accounts of public departments against acts of commission and omission for ascertaining whether public money has been spent according to the proposed plans and budgetary sanctions. State audit in India is carried out in two phases: central and local audits. A central audit is the examination of vouchers, accounts, and other records submitted to the office of the accountant general by different departments. A local audit or inspection is the examination of office registers and records for accuracy and completeness by resident audit officers. An audit is usually conducted at the end of the implementation cycle of any given programme for a particular financial year. Apropos to this, the concurrent audit is carried out while the implementation is in progress. This helps in suggesting course-correction measures for effective implementation of government programmes.

Auditing may also be classified according to its objectives. In this sense, there are three kinds of auditing: compliance, financial and performance audits. Compliance audits assess the extent to which law and regulations have been respected by public sector entities in the discharge of their functions. Financial audits present the financial situation of the entity being audited and assure that the financial statements are fair. Performance audits examine whether government programmes and public services have been implemented according to the principles of economy, efficiency, and effectiveness, and have achieved their intended objectives.

IMPORTANCE OF AUDIT

With the evolving nature of the Indian state, the objectives and orientation of audits have also evolved. In the early years of the Indian republic, the audits of the comptroller and auditor general were steered towards compliance with the law and focused on ensuring regularity and propriety of transactions. When the country moved into the developmental phase with greater economic choices and large-scale investments, the audits focused on deriving value for money by comparing the outcomes from different programmes. With the shift towards the people’s welfare, there was a greater emphasis on social audits, where audit reports were used for evaluating the performance of government programmes and the consequent improvement in the quality of life of the people (Das 2005: 129).

MEANING OF SOCIAL AUDIT

A social audit is defined as “the verification of the implementation of a programme or scheme and its results by the community with the active involvement of the primary stakeholder,” according to the report of the Joint Task Force on Developing Social Audit Standards, 2016 (MoRD 2017). The information in official records is verified by the people and the findings are read out at a public hearing, which is an essential element of the social audit procedure. At the public hearing, official records are compared with people’s testimonies and status of development works on the ground for determining “whether the money was spent properly and has made a difference to people’s lives” (MoRD 2017).

IMPORTANCE OF SOCIAL AUDIT

Social auditing in this manner promotes transparency and accountability in the implementation of public sector programmes by providing a platform for greater information sharing and collective monitoring of the government programmes and schemes by the people. Besides, it educates people on the rights and entitlements guaranteed to them under different government programmes, and facilitates expression of grievances such as delay in payment of wages, irregularities in the delivery of essential supplies, and denial of or discrimination in the delivery of entitlements in the domains of health, nutrition, housing, and educational programmes. It also ensures time-bound redressal of public grievances. This form of auditing of government programmes also builds the “political capacity” of the marginalised people (Jenkins and Manor 2017). “Political capacity” is characterised as a combination of political awareness, connections, skills, and confidence that strengthens people’s political participation and encourages them to participate in the institutions of local self-government. Social audits have now been institutionalised at the state level through the Meghalaya Social Audit Act, 2017.

JAN SUNWAIS IN RAJASTHAN

In the 1990s, a jan sunwai was organised for the first time by the members of the MKSS, where details of public expenditure on wages and materials from the official records were read out to the residents of a village panchayat in front of the government officials and the elected representatives. The people were invited to verify—individually or collectively—the accuracy of the expenditure details and receipt of entitlements by them. The objective was to redress people’s grievances by tracing the implementation process of public works and programmes, and finding out the source or point of delay. These jan sunwais marked the beginning of social audit in recent times. Amitabh Mukhopadhyay, a former accountant general, after attending a few initial public hearings convened by the MKSS identified the jan sunwai as similar to an audit process, albeit with people’s involvement. The Jan Sunwai mechanism of social audit is empowering, because people’s issues are audited by the people themselves. In this form of auditing, the social context, the process of local decision-making, and role of power equations within the community become visible (Dey 2017).

The jan sunwai in Rajasthan was a people’s initiative, supported by the members of the civil society. It was organised in two phases (1994–45 and 1997–2002) and began generating a culture of transparency and accountability in the villages of central Rajasthan. In the beginning, the government officers and elected representatives of village panchayats had reportedly shied away from jan sunwais. Once it became popular among the people, questions were raised on the authority of the village residents and civil society members to conduct a public audit, which was a preserve of the state officers. The success of the first two series of jan sunwais in exposing local-level graft prompted the Rajasthan government, in 2002, to undertake a government jan sunwai of the 10 highest spending panchayats in every district. The audit and public hearings were to be conducted in the presence of the block development officers and members of civil society aided the government team in the audit process. In the village panchayats of Bhim and Kumbhalgarh blocks in Rajsamand district, for example, the members of the MKSS were invited to assist the government audit teams in conducting the jan sunwai. The MKSS report on the government social audit had emphasised that attempts should be made to prevent jan sunwais from becoming a platform for political speeches/lectures, and that there ought to be greater awareness regarding the significance of public information. It also observed that in the absence of vigilant and unbiased participants, social audits will be ineffective (MKSS 2002).

The jan sunwai connects social auditing directly with redressing the grievances of the people and fixing the accountability of the public servants. People present at the hearing also learn about the options available for resolving different problems pertaining to roads, water supply, wages, the public distribution system, and so on. By staying true to the objectives of an effective social audit mechanism, the Meghalaya Social Audit Act provides for a public hearing towards sharing the audit findings with the people, and a forum for expression and redress of grievances. The act mandates time-bound redress of grievances, the timeline for which will be decided at the public hearing in the presence of all the stakeholders. The government officers present at the hearing will respond to the queries and grievances of the residents and the audit findings are read out by the social audit facilitators. These features of the act can be traced to the efforts of the people’s movements in Rajasthan for information, transparency and redress of grievances.

MNREGA AND SOCIAL AUDITS

In 2005, social auditing was institutionalised under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). The MGNREGA empowered the village residents and civil society members to conduct social audit of public works completed under this act and perform all the requisite activities such as collecting data, documentation, and information dissemination. The officers of the state, who were in charge of programme implementation, were also required to be present at the public hearing. The Meghalaya Social Audit Act takes this institutionalisation process a step further, and makes the state government responsible for conducting social audits regularly. The district social audit coordinator is now responsible for performing the functions that were earlier performed by the civil society members. These functions include planning the public hearing calendar and coordinating with the nodal officers for providing timely information to the social audit facilitators.

RIGHT TO BE HEARD LAW

The modus operandi of the public hearings and grievance redressal under the Meghalaya Social Audit Act, 2017 is also similar to those of the Rajasthan Right to Hearing (RTH) Act, 2012 (GoR 2012), which also follows the jan sunwai model for time-bound redress of grievances related to delay or denial of entitlements and services under government programmes and public services. The applicants are entitled to a public hearing in their panchayat in the presence of a government officer or the public hearing officer (PHO) within 15 days from the date of application, and a written response within the stipulated time period.

Both the legislations follow a “citizen-centric” approach for providing an opportunity for dialogue between the people and the public servants. However, there are key differences. The RTH Act is citizen-initiated, whereby the citizens can individually or collectively file a grievance application with the PHO and make a representation at the public hearing. The Meghalaya Social Audit Act, on the other hand, is government initiated, whereby the citizens may have to wait for social audit verification and public hearings in their villages before expressing their grievances related to government programmes.

The RTH Act mandates time-bound resolution of grievances and clearly defines the appellate authorities for reporting delay, denial, and dissatisfaction with grievances redressal and the penalty incurred by the erring PHOs. The Meghalaya Social Audit Act, even though it mandates time-bound redressal of grievances, does not provide a remedial mechanism for reporting delay in or denial of redressal.

A provision for the appointment of first and second appellate authorities, similar to the RTH Act, 2012 and the Right to Information Act, 2005, would empower the citizens of Meghalaya and ensure that the legislation fulfils its rationale.

NEW MEGHALAYA LAW

In April 2017, the Meghalaya state assembly passed the Meghalaya Community Participation and Public Services Social Audit Act, 2017, popularly referred to as the Meghalaya Social Audit Act. Its rationale is

[T]o review delivery of public services and implementation of government schemes and programmes through a participatory social audit by the government and the stakeholders; by ensuring a timely review and concurrent course-correction in the delivery of schemes and programmes, and to achieve realisation of desired development outcomes. (GoM 2017)

This is the first law at the state level that includes social audit of public programmes and services within the scope of government functions (Chishti 2017). The act secures the participation of village residents, including marginalised groups and women in the social audit process. This kind of social auditing would facilitate accountability and transparency in the governance of the tribal society in Meghalaya through its system of traditional village councils.

The Meghalaya Social Audit Act authorises civil society to conduct social audits and makes it binding on the government officers to assist the “people auditors.” This act provides a legal framework for securing people’s participation in the implementation of development programmes, ensuring concurrent social audit of public works and services at least once a year, as well as a grievance redressal mechanism at the very source of problems. As of now, 21 schemes under 11 departments have been identified, for which regular social audits will be carried out in a village or urban locality. An annual concurrent audit of a representative sample of these schemes will also be carried out in every district. The social audit, including the public hearing, will be conducted by the social audit facilitators comprising reputed members of non-governmental organisations, village self-help groups, and civil society experts. The social audit facilitators will receive direct assistance from the nodal officers identified by the line departments as well as by the village or locality social audit committees, which are responsible for spreading awareness about the public hearing in the village and mobilising the people to participate. The act mandates the creation of a State Social Audit Council (SSAC) as the supervisory body for monitoring the implementation of the Meghalaya Social Audit Act and for advising the state government on matters concerning implementation of the act.

The Programme Implementation Department is the nodal department responsible for implementing the provisions of the act and for preparing the necessary documents such as social audit reporting formats, resource material, guidelines, process maps that depict the workflow of the stages involved in planning, proposal, sanction and implementation of the schemes, and a complete list of entitlements under different schemes and programmes covered by Schedule I of the act. These documents are prepared in English and local languages such as Khasi, Pnar, Hajong and others, and are disseminated widely among the people as well as the social audit facilitators.

The line departments responsible for the implementation of a government scheme or programme, or the delivery of a public service covered under Schedule I of the act will identify a nodal officer at the state, district and block levels. The nodal officers will provide complete implementation and expenditure records for the public schemes to the social audit facilitators at least 15 days prior to the public hearing. Moreover, the nodal officers or their representatives have to be mandatorily present during the public hearings.

During the pilot social audits conducted in 18 villages in Meghalaya in November 2017, the corresponding nodal officers responded to the people’s grievances regarding the delay or denial of entitlements under a scheme, or flaws in the implementation of a public programme. The social audit reports along with the proceedings of the public hearing are published on the official website of the Meghalaya Society for Social Audit and Transparency (MSSAT).

The district social audit coordinator is responsible for appointing the social audit facilitators and recognising village-level social audit committees through a social agreement, preparing block-wise public hearings and a social audit calendar, coordinating with the nodal officers and ensuring the participation of line departments in the social audit process, ascertaining time-bound redress of grievances raised during the social audit and public hearings, as well as submitting the social audit reports and findings to the SSAC. The sequence, set of activities, and processes carried out under the Meghalaya Social Audit Act are similar to those that were tried and tested by the Mazdoor Kisan Shakti Sangathan (MKSS) when conducting jan sunwais(public hearings) in rural Rajasthan between 1994 and 2002.

46. DRAFT CRZ NOTIFICATION 2018: AN ANALYSIS | I.A.S. 2019 | 46TH GS EPISODE

46 COASTAL REGULATION ZONE

Contested Coasts

The Draft CRZ Notification, 2018

There have been efforts to protect the coastal areas of India since 1991. Till date, there have been two iterations of the Coastal Regulation Zone Notification (CRZ Notification)—in 1991 and 2011—which have themselves been amended, interpreted, and modified several times. The Ministry of Environment, Forest, and Climate Change (MoEFCC) has now proposed a new draft CRZ Notification to replace the existing legal framework, based on the recommendations of the Shailesh Nayak Committee.¹ 

CRZ NOTIFICATION 1991

One of the main criticisms of the 1991 notification was that the public had played a limited role in its formulation and implementation. It remained largely unimplemented, drawing the criticism of the Supreme Court, which observed that the 1991 notification had been ignored and violated with impunity (Indian Council for Enviro-Legal Action v Union of India 1996).

CRZ NOTIFICATION 2011

In contrast, the process leading up to the 2011 notification was appreciably more consultative. It included several rounds of public hearings before the drafting, and comments were invited from the public on a pre-draft and the draft notification. Consequently, both the process and the final version of the 2011 noti­fication signalled a strong belief in a participatory framework of governance (Sharma 2011).

The implementation, however, remained weak. This has been ascribed to three broad reasons: the delayed and insufficient demarcation of baselines and ecologically significant areas; the lack of institutional capacity; and the frequent dilution of the notification through amendments. The lack of engagement with a broad range of stakeholders and affected communities characterised all three points of failure of the 2011 notification.

The implementation of the coastal regulatory framework hinges on the demarcation of the high tide line (HTL) and low tide line (LTL), which form the baseline for regulated coastal areas. The National Centre for Sustainable Coastal Management (NCSCM), appointed by the MoEFCC, completed the process of demarcation of the HTL as recently as 2017. The minutes of the 32nd meeting of the National Coastal Zone Management Authority (held in November 2017) indicate that states are in the process of ratifying this demarcation. Notably, the demarcation process was not opened to the public at any stage. Where civil society organisations have been able to access the maps through right to information (RTI) filings, it has been pointed out that large stretches of ecologically sensitive areas (ESA) have been left out, possibly “erroneously” (Chaitanya 2018).

The 2011 notification also required the demarcation of ESA, critically vulnerable coastal areas (CVCA), and the hazard line, keeping in mind vulnera­bility to coastal threats and changes. These demarcations have not been completed till date.

There are other counts on which the 2011 notification has not been effective. The preparation of coastal zone management plans (CZMPs)—tied to the demarcation of the different categories under the notification—has not been comprehensive or complete.² In addition, the institutional capacity for the implementation of the 2011 noti­fication, particularly at the district

level, has been far from adequate (Menon et al 2015).

Simultaneously, the 2011 notification has also undergone several amendments. The tendency to insidiously pursue amendments without public consultation was evident in these instances as well. As one study indicates, there was not even a draft notification for eight of the 12 amendments to the 2011 notification (Kapoor and Dinesh 2017).

CRZ NOTIFICATION 2018

SHAILESH NAYAK COMMITTEE REPORT

2018 draft notification accepts the demarcation of the HTL by the NCSCM, Chennai. The uncritical acceptance of NCSCM’s HTL demarcation can possibly be explained by the fact that the HTL demarcation was conducted by a committee that was also chaired by Shailesh Nayak.

2018 draft notification does not address this. Rather, it omits any mention of the hazard line altogether, leaving a large area out of the regulatory purview of the proposed CRZ Notification. The omission of the hazard line in the 2018 draft notification is surprising as it is arguably a significant marker for climate and associated risks faced by coastal communities.

Given this state of affairs, it may be argued that the coastal regulatory framework needs to be re-examined. More than a decade ago, the 2006 National Environment Policy highlighted that the deeper causes for the degradation of coastal areas was the lack of institutional capacity and the non-participation of local communities in coastal governance. The draft notification does not just fail to address these concerns, it exacerbates them. A careful reading shows the deliberate exclusion of a wide range of stakeholders from the process of formulating the text of the final draft.

The Shailesh Nayak Committee has conducted four stakeholder meetings in all, and only with the officials and chief ministers of the coastal states. There was no other meeting or consultation to include any other viewpoint. Interestingly, not even representatives of the bodies responsible for implementation of the CRZ Notification at the state or district level were consulted.

Unsurprisingly, then, the changes in the proposed draft respond only to the needs flagged by the government officials of the coastal states. These are overwhelmingly in favour of shrinking the areas under protection and opening up coastal areas for more activities, with significantly diluted safeguards.

Ironically, most of these changes have been justified as “enhancing coastal livelihoods.” It is disappointing to note that this is at best lip service. In fact, by increasing the pressure on coastal areas by reducing existing safeguards, it is possible that livelihoods dependent on natural resources may be further disadvantaged. A contentious issue relating to coastal livelihoods has been the impact of polluting or poorly planned coastal projects. Coastal communities have been vocal in their concern about the impact of celebratory “monuments” that would restrict their navigation and reduce the availability of fish stocks (Chatterjee 2016). The draft notification implicitly allows such projects to go ahead, ignoring these concerns.

The draft notification also proposes specific changes that limit or remove the requirement to engage with the public and other stakeholders. Most significantly, the 2011 notification had a clearly outlined public consultation in the preparation of the CZMP; state governments have a specific responsibility to revise the draft CZMP after incorporating suggestions and objections received from stakeholders (Para 5[viii]). This provision has been omitted in the 2018 draft notification. Other provisions, like consulting the tradi­tional fishing community for construction of dwelling units (Para 8[III]A[ii]), or requiring a public hearing for specific projects in the CRZ area (Para 4[e]), have also been omitted.

WAY AHEAD

It is important and urgent to re-examine how we approach our coastal areas. These highly productive and extremely fragile ecosystems are increasingly crowded and contested social-ecological systems. A strong, well-informed, and participatory framework is essential for effective and equitable governance (Fung 2006). Before the existing framework is reworked, the underlying causes for the suboptimal implementation of the 2011 notification should be examined critically. Not only does the draft notification fail to address these issues, it poses a very real possibility of weakening even the existing safeguards and protections.

45. SPECIAL ECONOMIC ZONE: FAILURES, CHALLENGES, POTENTIAL | IAS 2019 | 45TH GS EPISODE

45 Special Economic Zones Face the WTO Test

Purpose of SEZ:

The Indian SEZ policy was designed with the intention of promoting exports, bringing in private investment in world-class infrastructure and global best practices in zone management, and creating employment opportunities. It is believed that firms operating in SEZs can gain efficiency and competitiveness through leveraging economies of agglomeration and scale. To promote these zones and to attract units to operate from them, the Government of India offered several fiscal incentives both to developers of SEZs as well as to the units operating from within the SEZs. The incentives granted by the central government are summarised in Table 1. Apart from these, SEZs may also be eligible for incentives from the states wherein they are located.

For the units located in SEZs, to avail these benefits, there is a mandatory requirement that they must be net foreign exchange (NFE) earners in a block of five years. The NFE is defined as the value of exports from a unit of an SEZ minus the value of total imports made by that unit of the SEZ.  

Weaknesses of Indian SEZ

Despite these facilities and fiscal incentives offered by the government, the performance of SEZs in India has not been very encouraging. Exports from SEZs have stagnated since 2012–13 and only in the last two years has there been some revival. Recent reports indicate that in 2017–18, total exports from SEZs have grown 15% in rupee terms (Moneycontrol 2018). However, one may also want to look at the import figures to understand the trend in net exports from SEZs. The performance of SEZs, in terms of generating employment and attracting foreign direct investment (FDI), has not been up to the desired mark. On the other hand, opportunistic use of the SEZ policy has resulted in controversies and corruption. Many SEZs have been criticised for their inability to attract global manufacturing units or develop global value chains, unlike countries such as China for being an instrument of land grab, being a conduit for huge amounts of revenue foregone, bad zone management, and, in some cases, smuggling (Reuters 2014). We have discussed these issues in more detail in Mukherjee et al (2016).

Procedural issues also clog the system. Even though SEZs are zero rated, the goods and services tax (GST) refund system (for domestic producers supplying to SEZs) remains a problem area and needs to be simplified. Fine-tuning GST procedures will help in raising competitiveness of the SEZs. Also, the general ease of doing business in India is low. As per the World Bank’s “Ease of Doing Business 2018” index, India was ranked 100, which was an improvement of 30 places from the previous year, but still lower compared to competing countries such as the Republic of Korea (4), Malaysia (24), Thailand (26), Vietnam (68), and China (78), which have successful SEZs.

Finally, things could have been better in Indian SEZs in terms of input cost. In many cases, power supply is erratic and the cost of power is much higher than in competing countries such as China. This increases cost of production. Firms in SEZs have to invest in power back-up systems. If companies had access to good quality power at cheaper rates, it would have benefited them more than those subsidies that fall under “actionable” or “prohibited” categories.

New Challenge from USA

Special economic zones (SEZs) in India are likely to face a spate of new challenges from some of India’s major trading partners. Recently, the United States (US) has submitted a request for consultation to the Chairperson of the Dispute Settlement Body (DSB) of the World Trade Organization (WTO).¹ In this document, the US has suggested that India is unfairly subsidising its exporters through various fiscal incentives and subsidy programmes. According to the United States Trade Representative (USTR), many of these subsidy programmes are prohibited by the Subsidies and Countervailing Measures (SCM) Agreement of the WTO. The subsidy schemes mentioned by the USTR include the fiscal incentives given by India to its SEZs. If the US manages to prove that these subsidies are indeed prohibited, as per the WTO definition, then India will have no option but to remove a large number of incentives given to SEZs. This may have serious implications for these SEZs.

India’s SEZ policy is facing charges from the US that the fiscal incentives given to SEZs in India are in fact subsidies and are non-compliant under the WTO’s SCM Agreement. An accompanying press release by the USTR (ustr.gov 2018) has alleged that

through these programmes, India provides exemptions from certain duties, taxes, and fees; reduces import duty liability; and benefits numerous Indian exporters, including producers of steel products, pharmaceuticals, chemicals, information technology products, textiles, and apparel. According to Indian Government documents, thousands of Indian companies are receiving benefits totalling over $7 billion annually from these programmes.

The document further says that through these policies, India is creating an uneven playing field in international trade which is subsequently harming domestic workers in the US. Therefore, the US would respond to this threat with all available tools, including petitioning the WTO.

This is a credible threat by the US. In the last few years, analysts have also raised questions on WTO compliance of India’s trade incentive policies.² If the US can prove in WTO that some of the export incentives provided by India are “prohibited subsidies,” then India will be forced to remove these subsidies according to the WTO rules. This will affect a large amount of merchandise exports from India.

India : No Longer LDC

Until 2017, India was insulated from these threats from other WTO members as it gained immunity under “Special and Differential Treatment” for developing countries and least developed countries (LDCs) under the SCM Agreement. Article 27.2 of the SCM Agreement exempts LDCs and developing countries with a per capita income of less than $1,000 from the prohibition of export subsidies. The list of countries which were eligible for this exception is given in Annex VII of the SCM Agreement. However, India has graduated from this list in 2017. Based on the notification issued by the Committee on Subsidies and Countervailing Measures dated 11 July 2017 (G/SCM/110/Add.14), India can no longer qualify for this exception which it earlier received as a developing country. Hence, after 2017, export-linked incentives given to Indian SEZs can now face action under the WTO rules.

Way Ahead

In the WTO SCM Agreement, there is a possible loophole that India is hoping to exploit. It allows an eight-year graduation period (from the date of entry into force of the WTO Agreement) for developing countries. During this period, developing countries are allowed to continue with their export subsidies without any threat of retaliation. This period has ended in 2003, as WTO was implemented in 1995. However, it is not explicitly mentioned in the agreement whether the Annex VII countries are eligible for this eight-year transition period after their graduation. India is arguing that after its graduation from the Annex VII list, it should get another eight years to phase out its export subsidies.⁴ It will not be easy to get this additional flexibility as it may require a possible amendment and modification of the original SCM Agreement. It will be difficult to get countries to agree to such an extension given that India is one of the top countries against which the maximum CVDs have been imposed. A report published by the Third World Network mentions that the US has opposed this idea. It reports that the US’s view is also supported by the European Union and Turkey.⁵ Moreover, minutes of an SCM committee meeting of the WTO published in January 2018 show that the US and Japan have asked India to remove its export subsidies.⁶ Given such opposition, it is unlikely that the eight-year extension sought by India would be allowed.

The second alternative can be to remove the export contingency clause of the incentives given to SEZs. In that case, these incentives will no longer be categorised as export subsidies. Instead, India can link the incentives to other performance indicators such as employment creation, technological upgradation, high-value manufacturing and services, and so on. Such benefits can still be “actionable” under the WTO law, but the importing country has to prove injury. Since Indian SEZs are not major exporters of manufactured goods, it may be difficult for the importing country to prove injury.

The third option can be to reorient subsidies exclusively towards services. Since the WTO is yet to develop a discipline on subsidies in services, subsidies given to services fall outside any WTO discipline. With increased “servicification” of manufacturing, services used by SEZ units can be subsidised. Subsidies can be given to compensate for the logistics services costs, labour transport costs, labour training costs, advertising and marketing costs, to name a few.

The fourth option is to focus on non-fiscal benefits and incentives. However, studies have shown that non-fiscal incentives enjoyed by Indian SEZ developers and units are far less than those offered by countries such as the Republic of Korea, China, the Philippines, and Bangladesh. For example, in the Philippines, economic zone enterprises registered with the Philippine Economic Zone Authority (PEZA) can employ non-resident foreign nationals in supervisory, technical, or advisory positions. The PEZA helps in visa processing, and foreign nationals in a PEZA-registered enterprise are given special non-immigrant visas with multiple-entry privileges. To encourage foreign investment and improve living conditions of foreign nationals, the Republic of Korea allows the establishment of foreign educational institutes and foreign hospitals in free economic zones (FEZs). Such facilities are not available in India. Such incentives are difficult to challenge in the WTO and are known as “smart” subsidies. Moreover, SEZs were proposed to receive single-window clearance for central and state-level approvals, which has not happened. Due to their inability to get non-fiscal incentives, companies in Indian SEZs are more dependent on fiscal incentives than companies located in SEZs of competing countries.

Summing Up

Exports from SEZs are facing a definite threat. It is important that for WTO compliance, greater emphasis is laid on the difference between export promotion practices that are prohibited and those that are merely actionable. It will be important to design smart policies to minimise “prohibited subsidies.” To reiterate, it is possible to subsist with measures that are merely “actionable,” but “prohibited subsidies” should be checked as much as possible. In this changing global environment, where protectionism is raising its head, continuing with the existing pattern of export incentive schemes will no longer be a viable policy option for India. A rethink of strategy is urgently required.

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Appendix – Meanings of ‘Subsidies’, ‘Specific Subsidies’, ‘Actionable Subsidies’, ‘Prohibited Subsidies’

The WTO SCM Agreement recognises that since certain subsidies are trade distorting, it is important to impose disciplines on these subsidies. To achieve this goal, the WTO has established a set of rules to govern subsidies and export incentives in its member countries.

The SCM Agreement defines the term “subsidy” based on three basic elements. To qualify as a subsidy, a measure must be (i) a financial contribution (or revenue foregone); (ii) it has to be made by a government or any public body within the territory of a member; and (iii) it should confer a benefit to the recipient.

All three criteria must be met for a subsidy to exist. However, even if a measure is a subsidy as defined in the SCM Agreement, it is not subject to the disciplines of the SCM Agreement unless the concerned subsidy is a “specific subsidy.” By “specific subsidy,” the SCM Agreement implies those subsidies that are specifically provided to an industry, a region, an enterprise or industry, or a group of enterprises or industries. In other words, the SCM Agreement will treat a subsidy as a “specific subsidy” if the granting authority limits access to the subsidy to certain enterprises or certain regions. Specific subsidies are “actionable” under WTO and countervailing duties (CVDs) can be imposed against exports that receive specific subsidies. However, to impose CVDs against “actionable subsidies,” a country, say, CountryA, must prove that subsidised exports from the concerned country, say, CountryB, is harming the domestic industries of CountryA. Proving such injury is complex and may take considerable time and resources.

But, in the WTO SCM Agreement, any subsidy which is export contingent is a “prohibited subsidy.”³ If a country is found to be giving “prohibited subsidies,” the concerned WTO member countries must go through a rapid dispute settlement process and, if found guilty, will have to remove these subsidies. This is the biggest difference between “actionable” and “prohibited subsidies.”

In discussing India’s SEZ policy, we mentioned that all the incentives given to SEZs are conditional on positive net foreign exchange earnings (NFE>0 for a five-year block). The US argues that this requirement implies that fiscal incentives given to SEZs are export contingent and, hence, are “prohibited subsidies.” Therefore, exports from Indian SEZs should face action from other WTO member countries.

44. CHILD SEXUAL ABUSE – CASES FROM BIHAR & U.P.

44. CHILD SEXUAL ABUSE – CASES FROM BIHAR & U.P.

When ‘Protectors’ Turn Perpetrators

Event

Sexual abuse at a CCI in Muzaffarpur, Bihar was exposed by a team from the Tata Institute of Social Sciences, which conducted a social audit in 2017. Of the 42 inhabitants of the CCI, 34 minor girls aged between 7 and 17 were found to have been physically and sexually abused. The audit also brought to light physical, sexual and mental abuse in 14 other CCIs in Bihar, and the deplorable living conditions and lack of basic freedoms in these shelter homes. What is disquieting is that seven of the accused in the Muzaffarpur case happened to be women “caregivers” and “counsellors.”

Another case of sexual abuse of minors in Deoria in Uttar Pradesh was revealed when a 10-year-old inhabitant of a CCI managed to escape. She reported to the police the violence and abuse that children were subjected to in the shelter home—from where 18 girls are still reportedly missing—which was reportedly being run without a valid registration.

The recent incidents of rampant physical and sexual abuse of minors and women in childcare institutions (CCIs) and shelter homes in Bihar and Uttar Pradesh reveal how the state as well as the civil society have failed in their role as protectors and watchdogs.

The Supreme Court, while hearing on the Muzaffarpur case, has expressed concern for the safety and welfare of children living in shelter homes. According to the NCPCR survey, there are presently 1,575 survivors of sexual abuse living in CCIs across India. These children have escaped sexual abuse only to fall victim to it again at these shelter homes.

Causes

In an unequal and patriarchal society, the social, cultural and economic conditions create a situation where vulnerable groups, like women and children, need protection from being victimised by perpetrators with predatory mindsets.

However, the welfare state and civil society, who are supposed to take on the role of protectors, have been unable to prevent the victimisation of the vulnerable within their own institutions.

This has happened despite the enactment of the Juvenile Justice (Care and Protection of Children) Act, 2015 (JJ Act) and the existence of the National Commission for Protection of Child Rights (NCPCR).

It is not a dearth of laws, but lack of monitoring and absence of inspection committees that have led to the current predicament. All CCIs are required to be registered under the JJ Ac         t and every district needs to have a child protection officer, a child welfare committee, and a juvenile justice board. However, in practice, their functioning has not been effective enough to prevent the widespread misuse of power and money by those running these institutions. An NCPCR survey has shown that only 32% of CCIs were registered under the JJ Act, while 33% were not registered with any authority. The Ministry of Women and Child Development, which provides funding to CCIs under the Integrated Child Protection Scheme, is duty-bound to carry out social audits in order to deter malpractices. However, either these institutions are allowed to function without any routine inspections, or, as in the case of the Muzaffarpur CCI, inspections by multiple state agencies over the years find nothing amiss despite widespread abuse being present.

While taking punitive action is necessary, often the government’s actions stop at just that, with any effort at alleviating the situation of these children and women and keeping checks on the functioning of shelter homes falling by the wayside once the furore over the issue dies down.

More often than not, children and destitute women who have been victims of violent and manipulative circumstances do not have a say in matters concerning their own welfare, and are at the mercy of those who wield power over them, be it the state and its officials and politicians, or the rest of society.

Consequences

In the short-term (up to two years), victims may exhibit regressive behaviors (e.g., thumb-sucking and bed-wetting in younger children), sleep disturbances, eating problems, behavior and/or performance problems at school, and unwillingness to participate in school or social activities

Longer-term effects may be wide-ranging, to include anxiety-related, self-destructive behaviors such as alcoholism or drug abuse, anxiety attacks, and insomnia.

Victims may show fear and anxiety in response to people who share characteristics of the abuser, i.e., the same sex as the abuser or similar physical characteristics. Victims may experience difficulties in adult relationships and adult sexual functioning

Survivors may feel anger at the abuser, at adults who failed to protect them, and at themselves for not having been able to stop the abuse.

Victims may feel betrayed and an inability to trust adults because someone they depended on has caused them great harm or failed to protect them.

Victims may feel powerless because the abuse has repeatedly violated their body space and acted against their will through coercion and manipulation.

Abusers may cause victims to feel stigmatized (i.e., ashamed, bad, deviant) and responsible for the molestation.

Victims of child sexual abuse have higher rates of revictimization (later sexual assaults) than non-victims.

Solutions

To bring about a transformation in the conditions of vulnerable groups under state protection, it is essential that the primitive and patriarchal mindset—which denigrates fellow human beings as unworthy of dignity and respect while perpetuating and reproducing violence against them—needs to change.

More importantly, these vulnerable groups need to be empowered by being treated as fully rights-bearing citizens and facilitated to playing an active role in addressing matters concerning them and their welfare.

The criminals running these institutions in the guise of protectors need to be weeded out of the systems of social protection and given due punishment.

Systematic vetting of those running such shelters needs to be carried out, before basic human rights and a sense of self-worth can be restored among the multitudes condemned to live in these institutions.

Although the NCPCR has now been ordered to complete social audits of all CCIs and the state governments have ordered probes, this has come too late for the numerous lives traumatised by their very “protectors.” The probes have led to the discovery of more incidents of abuse, and many more are expected to come to light.

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43. INDIAN ARMED FORCES - INTEGRATED THEATRE COMMAND ISSUE

43. Theatre Command Issue

Joint operations vs integrated command: Understanding a new way to fight wars

o   A committee appointed by the Defence Ministry has recommended creating 3 integrated theatre commands of the Indian armed forces —northern, western and southern — instead of the 17 in place currently.

o   The three integrated theatre commands — northern for the China border, western for the Pakistan border and southern for the maritime role.

o   It is expected to enhance the combat potential of the armed forces and to re-balance defence expenditure.

o   The concept of necking down India's many operational commands into four to five theatre commands under one theatre commander has been discussed since 1999.

o   Many committees have strongly recommended it. The Subrahmanyam Committee set up after the Kargil War also recommended restructuring of the armed forces.

What is an integrated theatre command?

o   An integrated theatre command envisages a unified command of the three Services, under a single commander, for geographical theatres that are of security concern.

o   The commander of such a force will be able to bring to bear all resources at his disposal — from the IAF, the Army and the Navy — with seamless efficacy.

o   The integrated theatre commander will not be answerable to individual Services, and will be free to train, equip and exercise his command to make it a cohesive fighting force capable of achieving designated goals.

o   The logistic resources required to support his operations will also be placed at the disposal of the theatre commander so that he does not have to look for anything when operations are ongoing.

o   This is in contrast to the model of service-specific commands which India currently has, wherein the Army, Air Force and Navy all have their own commands all over the country.

o   In case of war, each Service Chief is expected to control the operations of his Service through individual commands, while they operate jointly.

Does India have an integrated theatre command anywhere in its area?

Ø  Andaman and Nicobar Command(ANC)

o   Only one, which is the ANC. It was formed in 2001, following the Group of Ministers’ report on national security, after the Kargil War.

o   It is a very small command, with limited resources, and there has been a demand to revert the control of command permanently to the Navy.

Ø  Strategic Forces Command (SFC)

o   The other tri-service command, the SFC, looks after the delivery and operational control of the country’s nuclear assets.

o   It was created in 2003, but because it has no specific geographic responsibility and a designated role, it is not an integrated theatre command but an integrated functional command.

o    There has been a demand for other integrated functional commands, such as the cyber, aerospace and Special Operations commands, but the government is yet to approve any.

Arguments for an Integrated Command

Ø  Modern War and army

o   One, modern warfare, which is driven by technology, has transformed in two ways.

o    Instead of linear battlefields (either air-land, or air-sea), there are now six battlefields whose optimisation would determine the war outcome. These are land, air, sea, space, cyber and electronic.

o   Given these disparate battlefields, the Chinese focus has shifted to non-contact war with limited or no loss of lives to own troops.

o   Given this situation, in India, the air force and not the army would lead the land war.

Ø  Unity of Command

o   Modern warfare is all about speed, concerted action and mobility and optimally sequenced and synchronised use of force by deploying all assets in a planned manner is critical and can only be achieved by unity of command.

o   The requirement for single point control and responsibility of forces engaged in combat is inescapable, and there is no better person to perform this task than a theatre commander charged with the responsibility of fighting and winning a war against an adversary.

Ø  Practical Advantage

o   Having officers of equivalent ranks from different services commanding their own forces and responsible for battle in one geographical area is an outdated concept.

o    For instance, in eastern (including northeastern) India, in the event of a conflict with our neighbour (China), the army's eastern command commander-in-chief (C-in-C) and the IAF’s eastern command C-in-C have to work as one.

o   That will not happen and all serious decision making, especially about deployment of air assets, will have to be referred to the army and air headquarters in Delhi.

o    In the heat of the battle, differences between the two services will inevitably crop up and that can very seriously affect our effectiveness. Hence, a theatre command with one commander is the need of the hour.

Ø  Difference of Opinion

o   In actual battles, turf wars, egos and differences of perceptions as well as the narrow need to preserve the interests of their respective services crop up among even among the senior most officers.

o    A theatre commander with supreme authority in one theatre is the answer. We have to migrate to the one front, one commander format.

o   In a real conflict, decisions need to be taken very fast and that can happen only when you have one commander in one theatre.

Arguments against an Integrated Command

Ø  Viewpoint of Army

o   The Army believesthat the armed forces need to move away from a “service specific approach to operations towards a system which avoids duplication, ensures optimum utilisation of available resources, brings in greater jointness, leads to timely and mature decisions to developing situations and ensures flawless execution of orders to achieve success in battle”.

Ø  Insufficient resources of IAF

o   IAF assets, including special weapons, are limited in number and are distributed across the country, which require base-installation support.

o    It is not possible to triplicate or quadruplicate them to every Theatre Command.

o   Same is the case with skilled personnel and EW (electronic warfare) and C4ISR (command, control, computers, communications, intelligence and reconnaissance) equipment.

o   Moreover, the IAF has a serious shortfall in strength of combat squadrons

o    It believes that India is not geographically large enough to be divided into different theatres, as resources from one theatre can easily be moved to another theatre.

Ø  Current Model ideally suited for Navy

o   The Navy considers the current model of control by the Navy Headquarters ideally suited for its strategic role.

o   There are also underlying fears about the smaller Services losing their autonomy and importance. The Services are aware that 4-star ranks will be reduced if the current system is to be replaced by 3 commands.

Ø  Operational Chaos

o   In the present system, the three service chiefs sitting in Delhi are the highest operational commanders (who are directly involved in war-fighting).

o    Next, the commanders of the 19 different commands (referred to as commander-in-chief) are the highest operational commanders in their areas of responsibility.

o    In all previous conventional wars fought by India, a perennial problem has been the interference of service chiefs in the domains of concerned commanders-in-chief in how to run the war; this has led to confusion and undermining of authority.

o   Now, by adding another layer in the form of joint theatre commander, there would be three operational commanders.That would lead to further operational chaos.

Ø  Increase in Expenditure

o   In this present scenario, forming Theatre Commands would demand large increase in expenditure with doubtful returns.

o   Before we embark on a new organisation, the government must evaluate the efficacy of the current Integrated Defence Headquarters including the two joint commands — the Strategic Forces Command and ANC (Andaman and Nicobar Command).

o    The core issue to be addressed when considering the Theatre Command is whether the current structure helps the Services to coordinate and mount joint operations effectively.

Prerequisites for Theatre Command

Ø  Phased manner

o   The move towards integrating the different services commands into unified theatre commands has to be carried out in a phased manner.

o   First phase

§  In the first phase, he said, the AORs (Area of Responsibility)of the different commands of the three services should be redrawn to make them collinear and correspond to each other.

o   Second Phase

§  In the second phase, the headquarters of the regional commands of the three services should be co-located.

§  For instance,  the eastern army, navy and air force command headquarters should ideally be Kolkata. The army's southern command HQ at Pune should be moved further south to co-locate it ideally with the navy's southern command HQ at Cochin and the same ought to be done to the IAF southern command HQ, which is now at Thiruvananthapuram.

§  Such co-location has to be rational: in the south, the navy will have a major role to play since peninsular India is surrounded by the Bay of Bengal and Arabian Sea on two sides and the Indian Ocean in its south.

o   Third Phase

§  The third and final phase would be the integration of the services into unified theatre commands.

o   All this has to be done within strict timelines in order to ensure that the process is not delayed or derailed.

Ø  What else is required

o   Along with moving towards theatre commands, there are many other things that need to be done.

o   There has to be, greater integration between the Ministry of Defence (MoD) and the services headquarters.

o    India is the only major democracy where the service headquarters (the headquarters of the army, navy and air force) are away from the MoD, which has no presence of uniformed officers and is manned exclusively by civilians who have little or no knowledge of defence matters.

o   The three service chiefs are operational commanders instead of being chiefs of staff to the Defence Minister and the Prime Minister.

Ø  Self sufficiency in defence

o   India has to urgently move towards self-sufficiency in defence hardware.

o   India's armed forces are short of personnel, equipment and firepower.

o   The Army needs artillery guns and reliable rifles for its infantry. The Navy requires more submarines as replacements for its ageing fleet. The IAF is woefully short of fighter aircraft. We should have at least 45 frontline squadrons, but the current strength is around 30 squadrons.

o   War waging reserves (WWR) are running low and we need more aircrew.

o   India imports 75 per cent of its war weaponry and energy needs, inflow of which will become uncertain if sanctions or embargoes are imposed in the event of hostilities.

Ø  Functional Command

o   A beginning can be made.

o   Space, cyber and C4ISR could be the functional commands where the three services are integrated.

o   The Integrated Defence Staff should be the focal point for threat assessment, budget allocation and procurement.

o   With the experience gained and when the situation is more favourable, India could move to form theatre commands.

International Scenario

Ø  USA

o   The USA was the first nation to adopt the theatre command concept as part of a policy that encompassed the entire globe.

o   These ‘unified combat commands’ are organised either on geographical basis with a defined mission in a specific ‘area of responsibility’ somewhere on the globe or on a ‘functional’ basis.

o   The USA has six geographical combat commands and four functional commands comprising cyber command, special operations command, strategic command and transportation command.

o   Each combat command is fully equipped with necessary resources of land forces, air assets, naval vessels and Marine Corps elements.

o   They have integral C4ISR (command, control, communications, computers, intelligence, surveillance and reconnaissance) capabilities and can seek assistance from any of the functional commands when required.

o   They can conduct military operations independently. Each combat command has one commander - he or she could be from any service - who reports directly to the President of the USA through the Defence Secretary.

Ø  CHINA

o   There have been media reports about the Indian military reorganising itself into integrated ‘theatre commands’ as opposed to the current system of ‘individual service regional commands’.

o   The trigger for this proposed change could be the Chinese military creating five theatre commands, replacing the earlier seven ‘military regions’ in 2016 as part of the military reform that began in 2015.

o   China has successfully pursued a long-term comprehensive transformation of its military forces to improve its capabilities in power projection, anti-access and area denial.

o   China has laid down a time-bound three-step developmental strategy in modernising its national defence:

                                            i.            Lay a solid foundation by 2010.

                                           ii.            Make major progress by 2020.

                                          iii.            Achieve strategic goal of building ‘informatised’ (net-centric warfare enabled) armed forces capable of winning wars by 2050. 

o   The change to theatre commands is part of this long-term policy.

o   China waited till its military arsenal and defence production capability reached self-sufficiency.

o    China is not dependent on any other country for its military requirement. In fact, it is exporting high-end military products to many Asian and African nations.

Comparison

o   The USA spends $620 billion (3.5 per cent of its GDP) on the military while China’s military expenditure is $220 billion (2.3 per cent of its GDP).

o   India spends only  about $ 60 billion on defence, which is less than 2 per cent of its GDP.