The News Editorial Analysis 24th Dec 2021

‘Population not the sole factor in J&K delimitation’

Officials rebut criticism of proposal

A provision in delimitation Acts from 1952 onwards, which says that other than population, factors like physical features, boundaries of administrative units, communication facilities and public convenience should be taken into account while drawing constituency boundaries, has led to the Opposition’s concerns over the ongoing delimitation exercise in Jammu and Kashmir.

While officials of the Delimitation Commission say they have followed the rule in recommending six additional seats in Jammu and one in Kashmir, the National Conference (NC) has objected to the proposal, terming it unacceptable. The increase in seats would tilt the balance of power towards Jammu and away from the Kashmir Valley.

Karnataka passes anti-conversion Bill

Assembly adopts it by voice vote amid protests by Congress, JD(S) members

The Karnataka Assembly on Thursday adopted the contentious, anti-conversion Karnataka Protection of Right to Freedom of Religion Bill, 2021 through a voice vote in the ongoing winter session, even as the Congress and Janata Dal-Secular (JD-S) members staged a dharna in the Well of the House.

While the BJP tried to turn the tables on the Congress with documents that showed that the Siddaramaiah-led government had in 2016 envisaged a similar Bill, Mr. Siddaramaiah, the Leader of the Opposition in the Assembly — initially taken aback by the revelation — argued that though there had been a draft, it was never brought before the Cabinet.

This exchange was followed by a discussion on the Bill, which the Congress members argued was inadequate. The arguments reached a flashpoint with a remark by Rural Development and Panchayat Raj Minister K.S. Eshwarappa about “cutting into pieces” whoever came in the way of protecting Hindus. This triggered angry reactions, followed by dharna in the Well.

Intervening in the chaos, former Chief Minister B.S. Yediyurappa urged Speaker Vishweshwar Hegde Kageri to adopt the Bill since Opposition members were attempting to stall the session. While Congress members raised high-decibel slogans and held placards in the Well, BJP members passed the Bill with a vociferous voice vote.

Needed, a public health data architecture for India

It would be better off with few comprehensive national surveys than being over-dependent on the omnibus NFHS

In a country perennially thirsty for reliable health data, the National Family Health Survey (NFHS) is like an oasis. It has a large volume of data that is openly accessible. The report of the fifth round of the NFHS was recently released (covering phase 2 States where data collection was delayed due to the novel coronavirus pandemic). Since then, we have had a spate of articles by journalists and scientists covering different aspects (malnutrition, fertility, domestic violence to name a few). It is the go-to source for many researchers and policy makers and is frequently used for various rankings by NITI Aayog.

Range and scope

For the uninitiated, the NFHS is a large survey conducted in a representative sample of households throughout India which started in 1992-93 and is repeated at an interval of about four to five years. It is the Indian version of the Demographic and Health Surveys (DHS), as it is known in other countries. Currently, the survey provides district-level information on fertility, child mortality, contraceptive practices, reproductive and child health (RCH), nutrition, and utilisation and quality of selected health services. The respondents are largely women in the reproductive age group (15-49 years) with husbands included. The fifth round covered 6,36,699 households, 7,24,115 women, and 1,01,839 men across the country. Each survey costs upwards of ₹250 crore and the funding for different rounds of NFHS has been provided by the United States Agency for International Development (USAID), the Department for International Development (DFID), the Bill and Melinda Gates Foundation (BMGF), UNICEF, the United Nations Population Fund (UNFPA), and the Ministry of Health and Family Welfare, Government of India.

Over the years its scope has been expanded to include HIV, non-communicable diseases, or NCDs (tobacco and alcohol use, hypertension, blood sugar, etc.), Vitamin D3. It has now become an omnibus train where anyone and everyone is free to climb into for a ride. It offers something for everyone. While there is a level of efficiency in adding some questions to an existing survey, this has been lost a long time ago in the NFHS. In NFHS-4, the household questionnaire had 74 questions, the women’s questionnaire was 93 pages long with 1,139 questions and the men’s questionnaire was 38 pages long with 843 questions. The NFHS-5 questionnaire was even longer. The size of the survey has obvious implications for data quality.

Other surveys and goals

The NFHS is coordinated by the International Institute for Population Sciences (IIPS Mumbai) and the actual survey is outsourced. There is an entrenched set of agencies which survive on this survey. Issues have been raised on the quality of these agencies and their workers. The NFHS is not the only survey that the Health Ministry conducts. In the last five years, it has conducted the National NCD Monitoring Survey (NNMS), the National Mental Health Survey (NMHS), the Global Adult Tobacco Survey (GATS), the alcohol survey, the Comprehensive National. Nutrition Survey (CNNS) and many others. Many of these have been implemented by premier academic institutions at costs below ₹25 crore, though none of these generated district-level estimates.

Some of these surveys are done to meet the global commitments on targets (NCDs, tobacco, etc.). However, the requirements for the monitoring of NCD targets are not met by the NFHS, as it covers an age group different than that needed for the global set of indicators. Yet, efforts to get the NNMS sanctioned met with stiff resistance as decision-makers felt that the NFHS was enough to answer those questions. As already said, for tobacco we have another vertical survey. Then why do we have questions on these in the NFHS? It is because we are confusing research with programme monitoring and surveillance needs. Questions on domestic violence and blood collection for vitamin D3 levels are good examples of this lopsided thinking.

Alignment is difficult

There have been previous attempts to align these surveys but they have failed as different advocates have different “demands” and push for inclusion of their set of questions. While the Department of Planning, Statistics and Programme Monitoring is supposed to take a final call, it lacks the technical capacity and the heft to do so and ends up using a “please-all” approach of accepting all requests with some effort at alignment. Everyone is happy, except perhaps the stakeholder with no power of negotiation — the household which is selected for the survey.

Another reason why these questions are not dropped altogether is that the NFHS is the only major survey that India has a record of doing regularly. One does not know if and when the other surveys will be repeated. For example, we do not have any surety that the second round of the NNMS will be conducted, though it is due. So, the general thinking is that “do whatever is possible, as something is better than nothing”. Multiple surveys also raise the problem of differing estimates, as is likely, due to sampling differences in the surveys. We noted this for example in tobacco, where differences in tobacco use estimates of the Global Adult Tobacco Survey (GATS) and the NNMS needed a lot of effort at reconciliation and explanation. Another example is the issue of wide divergence in sex ratio at birth reported by the NFHS and the Sample Registration System (SRS). The SRS is a better system for it as it continuously enumerates the population unlike the NFHS which is a cross-sectional survey well known for recall biases.

There must be purpose

It is time we questioned this rationale and end the over-dependence on one omnibus survey to provide all public health data for India. The experience of the NFHS and other surveys has conclusively demonstrated our capacity to conduct large-scale surveys with computer-assisted interviews and reasonable quick turnaround and cost. Can we now show that we have the capacity to plan the public health data needs for the country and ensure that these data are collected in an orderly and regular manner with appropriate budgetary allocation? This requires clarity of purpose and a hard-nosed approach to the issue. Some tough calls will have to be taken including questioning the need for vertical surveys, irrespective of national or international funding.

We have to identify a set of national-level indicators and surveys that will be done using national government funds at regular intervals. I propose just three national surveys — an abridged NFHS focusing on Reproductive and Child Health (RCH) issues, a Behavioral Surveillance Survey (focusing on HIV, NCD, water sanitation and hygiene (WASH)-related and other behaviours) and one nutrition-biological survey (entails collection of data on blood pressure, anthropometry, blood sugar, serology, etc.) done every three to five years in a staggered manner. We need to look at alternate models and choose what suits us best. This does not include data sources on mortality and the health system.

A road map

I also propose, as was done for the NNMS, that we take a national-level sample for such surveys and ask States to invest in conducting focused State-level surveys. States have to become active partners including providing financial contributions to these surveys. For a detailed understanding on some issues, each round of survey can focus on a specific area of interest. Other important public health questions can be answered by specific studies (which may or may not need a national-level study), conducted by academic institutions on a research mode based on availability of funding. It is also very important to ensure that the data arising from these surveys are in the public domain. This enables different analyses and viewpoints to be presented on the same set of data enriching the discussion and unlocks the full potential of the survey.

Are we ready to establish a public health data architecture that a country of our complexity needs? We have the technical capacity to do so. All it requires now is the political will.

This clean cooking fuel plan needs more firing up

Sustaining LPG adoption in rural India is a challenge but the goal must be a more sustainable energy basket per family

In the middle of November 2021, I met Leenu Biswal, who is in her early twenties, in Dandasingha gram panchayat of Deogarh district in Odisha. She lives with her in-laws and is pregnant with her second child. Her husband works in another district and visits home once in a few months. They have an Ujjwala connection but it has not been refilled for a long time. The Pradhan Mantri Ujjwala Yojana (PMUY) is ‘a flagship scheme of 2016, with an objective to make clean cooking fuel such as LPG available to the rural and deprived households which were otherwise using traditional cooking fuels such as firewood, coal, cow-dung cakes’.

Health and clean energy

When I ask her whether she likes cooking with gas, she nods with an emphatic yes. She also says that she wants a refill. I ask her if she has the sum of about ₹950 to pay for the refill of the large cylinder. It’s a yes, again. We go through her LPG customer book and call the LPG distributor to make a refill booking. The cylinder is delivered to her in two days.

There is a lesson in this. Kirk Smith, the eminent professor from Berkeley who passed away in 2020, was an expert who worked on indoor air pollution in India for over three decades, who talked about the high returns in terms of health gains by targeting pregnant women to have LPG access.

There is also Dr. Gargi who runs a rural health clinic in Udaipur with a non-governmental organisation, who recommends cooking with gas to tuberculosis patients who consult her. According to the recently released National Family Health Survey (NFHS)-5, there was a higher prevalence of TB in households that were using solid fuels when compared to those using clean cooking fuels in most States.

With the number of LPG distributors going up in the five years of Ujjwala, from 17,916 to 25,116, the number of administrative blocks which do not have an LPG distributor has come down drastically. There are hundreds if not thousands of villages where there was not a single LPG connection before the days of Ujjwala; hence the delivery of cylinders at the village level was unheard of.

Use of fuel stacking

In villages, I often see kitchens using multiple types of cooking stoves – LPG, fuelwood, induction or electric heater and even kerosene. An open firewood chulha is often used for bath water, cooking large quantities of parboiled rice and cattle feed. Some of these may not shift to LPG anytime soon.

This fuel stacking is similar to the practice of the poor — of having a basket of livelihood options instead of being reliant on a single source of income. This takes into account factors such as uneven cash flow, seasonal availability of biomass, and ambient heating requirement during winters.

During extreme weather events, LPG cylinders come to the rescue.

Data on LPG use

Over the five years, the average per capita consumption among Ujjwala customers has hovered around three cylinders per year (of 14.2 kg), rising to 4.2 (2020-21) when the full impact of free refills under the Pradhan Mantri Garib Kalyan Yojana was seen.

A paper in Nature (Kar et al.) showed that only 45% of non-Ujjwala rural consumers use five or more cylinders per year, while data from oil marketing companies show that from October 2020 to September 2021, 32% of Ujjwala households were using five cylinders or more in a year. Therefore, relatively poorer Ujjwala consumers are reaching the LPG consumption levels of relatively well-off non-Ujjwala rural consumers. LPG has earned its place in the cooking energy basket of the poor. It is also not a greenhouse gas (Intergovernmental Panel on Climate Change), assigned with a global warming potential (GWP) factor of zero. Solar, electric heater, improved biomass chulha and biogas also qualify to be a part of this energy basket.

Factors that helped

After completing the target of enlisting eight crore Ujjwala customers in late 2019, the three oil marketing companies which handle the distribution of LPG through their network of distributors have shifted their focus to reach out to low refill consumers.

A quick recap of what has made it possible for someone like Leenu to have an option to use LPG, is in order. It was the successful implementation of the Direct Benefit Transfer of LPG (DBTL) or PAHAL (Pratyaksh Hanstantrit Labh) scheme of 2014 which freed up the financial resources needed to dream of a large-scale programme for deposit-free LPG connections. Once Ujjwala was conceptualised and launched, enhanced availability of LPG was ensured. The next was to enhance various capacities such as of the ports for handling imports, of tanks for storage of LPG, of pipelines and trucks for transportation of gas, and of bottling plants for filling in more cylinders. Production of cylinders, pressure regulators, hose and affordable LPG stoves was also enhanced. New distributors/dealers were appointed to reach remote pockets.

In addition, then Petroleum Minister Dharmendra Pradhan also sustained enthusiasm for Ujjwala, creating avenues for local MPs and other elected representatives to support Ujjwala and its implementation.

A challenging phase

The novel coronavirus pandemic has resulted in LPG prices having gone up and governmental support focusing on other challenges. This development could derail the gains made by Ujjwala customers in terms of LPG adoption. It is time to get creative about how to sustain LPG adoption in these challenging times. Ujjwala also has the potential to deliver benefits on many fronts.

Overall, the push has to be such that every household moves toward adopting a more sustainable cooking energy basket. Improvements in regular and on-demand supplies of LPG, options for refill financing, alternative remunerative uses for cow dung and bio mass — possibly on the pattern of procurement of cow dung as is being done in Chhattisgarh — and a massive boost to women’s incomes through the National Rural Livelihoods Mission all have great potential to nudge women to choosing a more sustainable cooking mix.

Do Indians need insurance for bank deposits?

India needs to move to a risk-adjusted premium model so investors are more aware of the risks

At an event last week to mark the payment of over ₹1,300 crore to depositors in troubled cooperative banks, Prime Minister Narendra Modi flaunted his government’s revamped deposit insurance scheme. The scheme, which was upgraded through the Deposit Insurance and Credit Guarantee Corporation (DICGC) Amendment Bill, 2021, guarantees to compensate depositors up to a limit of ₹5 lakh within a period of 90 days from when a bank fails. At the same event, the Reserve Bank of India (RBI) Governor Shaktikanta Das warned depositors to be careful and avoid investing in risky banks just because they offer higher returns. In a conversation moderated by Prashanth Perumal J., Amiyatosh Purnanandam and Amol Agrawal discuss whether we need insurance for bank deposits. Edited excerpts:

What is the need to raise the value of the deposits that will be insured from ₹1 lakh to ₹5 lakh?

Amiyatosh Purnanandam: There are two parts to this answer. One is that if you look within India, the ₹1 lakh limit was set many decades ago. Now, if you do a simple calculation based on the inflation rate, the ₹1 lakh limit that was set in the 1990s has become extremely inadequate when adjusted for inflation. And two, if you look at international standards and compare the insurance limit, ours is still much lower than those of several comparable economies. For example, think about South Korea and Brazil. We are also way below the level that we see in the U.K. and the U.S. Of course, you cannot compare figures across countries in isolation given differences in purchasing power and all those things, but broadly speaking, we still have a lower amount of deposit insurance than other countries. So, by raising the limit to ₹5 lakh, we are going in the right direction.

We need deposit insurance because we want to give confidence to depositors that if a bank does go down, they don’t need to run to the bank. They can keep their money in the bank, and the bank can continue operating without any financial trouble. So, it’s a combination of these things.

Amol Agrawal: It is a step to try and infuse more confidence in the banking system. From a historical perspective, this whole discussion on deposit insurance began in India after we saw a number of bank failures that led to attempts to try and stabilise the banking system. In the 1930s, the U.S. set up deposit insurance. India set up deposit insurance in the 1960s to deal with bank failures. So, in several ways, there are history lessons here, too, that each time your banks fail in large numbers, the central bank does something about deposit insurance.

How does the deposit insurance system in India compare with those in other countries?

AP: I don’t think anyone has ever lost money in any scheduled commercial bank in India. So, what that means is that in India, de facto, there is 100% insurance. So, depositors do not lose money. It is just that the guarantee is not provided explicitly. And that leads to its own distortions. It’s a little bit of a nuanced answer. If you ask, hey, how does deposit insurance in India compare with other economies, the answer is that this limit of ₹5 lakh is much lower than in other countries — in the range of six to 10 times lower than what is the case in comparable economies. But in India, depositors don’t lose money. There may be a delay, and that can be pretty costly. So, there could be a lot of liquidity risk but no credit risk because the government always comes in and rescues banks.

If nobody loses their money, doesn’t it make depositors complacent? They have no incentive to do any due diligence before making a deposit. How do you address that problem?

AA: This whole thing of due diligence and trying to find out which bank is riskier… if you look at other financial products, you as an investor have to figure out ways to protect yourself. So, what is it about bank deposits that they need to be insured? Now, I understand that the stability of the banking system is important, but so is the stability of debt markets, equity markets and all sort of financial markets. And here we have an implicit insurance of 100% of deposits, so people are not really doing their due diligence and hence there is nothing disciplining investors. Even the premiums the banks pay to deposit insurance agencies is a flat premium. So, it basically means that whether you are a risky or a less risky bank, both pay the same premium. That doesn’t make sense. We need to move to a more risk-adjusted premium model. The sooner we get there, the better it is, because then somehow the information about risk will reach depositors sooner and they will be more wary of investing money.

AP: Absolutely. We need risk-based deposit insurance premiums, which is simply absent in India. When you don’t have that, then it’s too much to ask of a retail depositor to be prudent about which bank they invest in. If a bank offers a higher interest rate and there is a reasonable expectation that the government will effectively come in and bail them out, then investors will be tempted to go to that bank. So, I do not think that under the current policy, investors will be discerning enough to figure out the good banks. Investors, in fact, will eventually migrate towards banks offering higher interest rates knowing that at the end of the day, the government will bail them out in case of trouble. The way to address the distortion is to go with risk-based pricing. And second, there has to be some sort of restriction on risk-taking by banks itself. Otherwise, this is going to be a huge cost to the taxpayers. Anyway, I think it is too much to ask of depositors to be prudent when it comes to where they deposit their money. I don’t think that will work. What needs to be done is better monitoring.

How likely are private insurers to insure bank deposits? Will private insurance companies actually be willing to assume such a risk? Or would they be more discerning?

AP: Look, here’s the thing: who will insure the insurer? That is the whole idea behind deposit insurance. It comes into play when panic sets in, like in 2008, when everybody was panicking about the financial sector and wanted their money back, fueling a self-fulfilling crisis. Now, in that scenario, private insurance might not work because people might think that the private insurer will become bankrupt. This is where the might of the government comes in because the government has the ability to be the lender of last resort. So, unlike other insurance, like car insurance or health insurance, deposit insurance is about panic in the entire market. And when it’s about panic in the entire market, the thought that some other market participant will be able to assume the risk I think is too optimistic. In the U.S., you have some small pockets of private insurance but these are not at the scale we need.

AA: It’s too much to imagine that private insurance can provide confidence during a crisis. In times of panic, usually it’s the state which has to come in to bail people out. We saw in the 2008 crisis that the U.S., which is generally seen as a more market-driven financial system, had to be eventually bailed out by the government. And obviously, there is a fair bit of difference around this kind of thinking between the free-market Austrian school of economics and the more interventionist Keynesian school which thinks that the government can and should do the job. In India specifically, the RBI has done a done a decent job of regulating the system.

AP: I’m a firm believer in free-market economics, but I believe that when it comes to managing panic, it should be the government that should do it. But at the same time, the deposit insurance should be properly priced, and the risk should be properly monitored. See what happened with AIG in the 2008 financial crisis. It was insuring a bunch of financial products that were underwritten by Goldman Sachs and other private banks. In the end, AIG’s survival itself became very doubtful in 2008. Ultimately, the U.S. government had to come in and rescue them. So, if you look at the evidence, it always goes back to ‘who will insure the insurer?’ and we’ll always run that risk of the insurance company itself going bust. What happens then? I think it should be government’s job to manage this issue.

What exactly do you see as the role of the RBI in regulating banks given depositor complacency?

AA: The DICGC is basically owned by the RBI. So, there are quite a few RBI officials working in the DICGC, and there is a lot of discussion and thinking at the DICGC. But when it comes to bank failures, it is the RBI and not the DICGC that is playing a major role, so it is the RBI that comes under criticism when there’s trouble at a bank. In the U.S., in contrast, the Federal Deposit Insurance Corporation also plays a role in the resolution of troubled banks, with the Federal Reserve not playing an active role in the resolution process other than lending to the troubled institution. I think the RBI is running campaigns about financial literacy and all these things. I think it needs to also begin to drive home the point that not all banks are the same and people should be careful. But then, financial literacy campaigns are useful but only in a few pockets.

AP: What needs to be done, and where I think the RBI can do a lot more and can add a lot more value, is that it could stay a little bit ahead of the problem. So, when these bank failures happen, whether it is a cooperative bank or any other bank, there are a lot of signs of the failure that build up leading to the crisis. Often those warning signs are missed by the regulators. As I often like to say: regulators are always a few steps behind the banks. Banks innovate and they’re always ahead of the game creating new financial products. But regulators are still always playing the catch-up game in terms of figuring out the true level of risk that banks have taken. So, where I’m going with that is that the RBI and other regulatory agencies have to be really on top of the precise risk model, the disclosure of that information and quick action before a bank fails. This is hard because you need to have a good model to figure out which bank is under stress. So, depositors’ discipline has to go hand in hand with improvement in risk management system across the board.

‘Case cannot be quashed after prima facie proof’

FIR against main accused stands: SC

Criminal proceedings against an accused person cannot be quashed merely because the charge-sheet was not filed by the police against some of his co-accused in the case, the Supreme Court has clarified.

An accused person whose involvement in a crime has been prima facie proved during a thorough investigation cannot claim to be treated on a par with others against whom no material was found to be charge-sheeted, the court noted in a recent order.

“Merely because some other persons who might have committed the offences, but were not arraigned as accused and were not charge-sheeted cannot be a ground to quash the criminal proceedings against the accused who is charge-sheeted after a thorough investigation,” a Bench of Justices M.R. Shah and B.V. Nagarathna observed.

The order was pronounced in a case of criminal conspiracy, cheating and inducement to dishonestly deliver property involving a bank. The bank had filed the conspiracy case directly before the Court of Additional Chief Metropolitan Magistrate, Bengaluru.

The police investigated the complaint and filed a charge-sheet against the main accused but not two of the co-accused in the case. The main accused managed to get the case quashed by filing an appeal before the High Court, following which the bank approached the Supreme Court successfully.

RBI extends card tokenisation deadline by 6 months till June-end

The Reserve Bank of India (RBI) on Thursday extended the card-on-file (CoF) tokenisation deadline by six months to June 30, 2022, in view of various representations received from industry bodies.

Card-on-file, or CoF, refers to card information stored by payment gateway and merchants to process future transactions.

The earlier deadline was December 31, 2021.

“In light of various representations received in this regard, we advise…the timeline for storing of CoF data is extended by six months, ie., till June 30, 2022 and post this, such data shall be purged,” RBI said in a notification addressed to all payment system providers and payment system participants.

In addition to tokenisation, it said, “Industry stakeholders may devise alternate mechanism(s) to handle any use case (including recurring e-mandates, EMI option, etc.) or post-transaction activity (including chargeback handling, dispute resolution, reward/ loyalty programme, etc.) that currently involves/requires storage of CoF data by entities other than card issuers and card networks.”

Under tokenisation services, a unique alternate code is generated to facilitate transactions through cards.

The RBI in September prohibited merchants from storing customer card details on their servers with effect from January 1, 2022, and mandated the adoption of CoF tokenisation as an alternative to card storage.

Citing several operational challenges, industry associations ? Merchant Payments Alliance of India (MPAI) and Alliance of Digital India Foundation (ADIF) ? had requested the RBI to extend the December 31 deadline for implementation of norms related to tokenisation of card transactions.
MPAI is a consortium of merchants who accept digital payments and counts Microsoft, Netflix, Spotify, Zoom, BookMyShow, Disney+Hotstar, Policybazaar and Times Internet among its members.

Alliance of Digital India Foundation (ADIF) is a think-tank for digital start-ups, whose members include Paytm, Matrimony.com, GOQii and MapmyIndia.

Citing the convenience and comfort factor for users while undertaking card transactions online, many entities involved in the card payment transaction chain store actual card details.

Some merchants force their customers for storing card details.

Availability of such details with a large number of merchants substantially increases the risk of card data being stolen. In the recent past, there were incidents where card data stored by some merchants have been compromised/ leaked.

Any leakage of CoF data can have serious repercussions because many jurisdictions do not require an AFA for card transactions, the RBI said adding that stolen card data can also be used to perpetrate frauds within India through social engineering techniques.

The RBI had in March 2020 had stipulated that authorised payment aggregators and the merchants onboarded by them should not store actual card data with a view to minimise vulnerable points in the system. On a request from the industry, it extended the deadline to end-December 2021 as a one-time measure.

The News Editorial Analysis 23rd Dec 2021