Water equity: On Cauvery verdict

(The Hindu and Business Standard)

 

Case histories: On National Health Protection Scheme

(The Hindu)

 

Not a prescription for the poor

(The Hindu)

 

The little-revenue tax

(The Indian Express)

Water equity: On Cauvery verdict

(The Hindu and Business Standard)

Synoptic line: It throws light on the issue of Cauvery river verdict.

(GS paper III)

Overview

 

 

  • The Supreme Court verdict on Cauvery water dispute is out, and it is Karnataka that appears to have won the final round of legal battle. The Cauvery River is a south Indian river which flows through the states of Karnataka and Tamil Nadu.

 

 

Background

 

 

  • The dispute began with Karnataka’s demand of ‘equitable sharing of the waters’ after it expanded farming activities in the Cauvery basin. It claimed that the previous agreements, which happened between erstwhile Madras Presidency and Kingdom of Mysore in 1924, were highly skewed to what is present day Tamil Nadu. According to reports, Tamil Nadu used to get about 602 TMC of the total water, leaving only about 138 TMC for Karnataka.

 

 

  • Despite the multi-round of talks, two southern states couldn’t decide the share acceptable to both the parties. In 1990, the union government set up a Cauvery Water Disputes Tribunal or CWDT to look into inter-state river water disputes. In 2007, the Tribunal came out with its order.

 

  • The Tribunal found the total water of the river 740 thousand million cubic feet (TMC) which it divided (majorly) in Karnataka  (270) and Tamil Nadu (419 TMC). Rest of the water was divided into two other states and several other basins.

 

  • The CWDT also directed Karnataka to release 192 TMC of Cauvery water in normal monsoon year. Karnataka government wasn’t satisfied with the Tribunal’s order. It moved to the Supreme Court claiming for 312 TMC of water. In between, Karnataka stopped releasing water to Tamil Nadu on various occasion, citing shortage.

 

  • During the course of the pendency of appeals, the highest court passed several orders directing Karnataka to release Cauvery water to Tamil Nadu. On September 30, 2016, the Supreme Court had pulled up Karnataka for not complying with the order and said no one would know when the wrath of the law would fall on it.

 

  • Later, Karnataka had moved a review petition in the apex court against its three orders on the issue. It said grave miscarriage of justice was caused to it following the three apex court orders of September 2016. In all these orders, Karnataka was directed to release Cauvery water to Tamil Nadu.

 

The verdict

 

  • The Supreme Court has boosted the prospects of a viable water-sharing arrangement among the riparian States; it has slightly modified the approach of the Cauvery Water Dispute Tribunal. As it has reduced the Tribunal’s allocation for Tamil Nadu and raised Karnataka’s share does detract from the fairness of the decision. This reduction will have a marginal impact on Tamil Nadu because the quantum of reduction is small.

 

  • It has underscored that no single State has primacy in accessing water resources and that rivers are national assets. This is a significant recognition of the principle of equitable distribution of inter-State rivers. The Supreme Court’s message is that the Centre should get down to creating a legal and technical framework to implement the Tribunal’s award, as modified by the judgment.

 

  • Tamil Nadu, as a State that has seen agrarian distress in its delta districts, ought to be satisfied with any prescribed allocation being met as per a schedule. Karnataka can take heart from the reduction in its mandatory release target and the additional share for Bengaluru. Neither State, in any case, should be aggrieved by the stipulation that equity is at the heart of a water-sharing arrangement.

 

Way ahead

 

 

  • Resolving an inter-State water dispute is mainly about balancing the competing genuine demands and interests of each State and coming up with a pragmatic sharing arrangement. It will be unfortunate if the States and the Centre are reluctant to accept this verdict and refuse to acknowledge its finality.

 

 

Question- Critically analyse how the Cauvery verdict might encourage new water conflicts to emerge in India and why Supreme Court should remain prepared to deal with them?

Case histories: On National Health Protection Scheme

(The Hindu)

Synoptic line: It throws light on the issue of public health care and NHPS.

(GS paper II)

Overview

 

  • Recently the Finance Minister announced that the government will launch flagship National Health Protection scheme intended to cover 10 crore poor and vulnerable families and 50 crore beneficiaries. Under the scheme, 10 crore families will be provided Rs 5 lakh cover per family annually for treatment. The programme is being touted as the world’s largest health protection scheme.

 

  • The government’s intention to launch the world’s largest health insurance programme, the National Health Protection Scheme, raises an important issue. 

 

Issues

 

Should the focus be on the demand side of health-care finance when the supply side, the public health infrastructure, is in a shambles?

 

    • Both the Centre’s Rashtriya Swasthya Bima Yojana (RSBY) and Andhra Pradesh’s Rajiv Aarogyasri, show how demand side interventions can miss the mark. While the RSBY and Aarogyasri did improve access to health-care overall, they failed to reach the most vulnerable sections.

 

  • At times they led to unnecessary medical procedures and increased out-of-pocket expenditure for poor people, both of which are undesirable outcomes. These showed that unless the public health system can compete with the private in utilising funds from such insurance schemes, medical care will remain elusive for those who need it most.

 

  • Both RSBY and Aarogyasri are cashless hospitalisation schemes. While both benefited people living below the poverty line, over-reliance on private hospitals and poor monitoring watered down their impact.

 

Case studies

 

    • According to one Gujarat-based study, a majority of RSBY insured patients ended up spending about 10% of their annual income during hospitalisation, because hospitals still charged them, unsure as they were when they would be compensated.

 

  • A study in Andhra Pradesh found that beneficiaries spent more from their own pockets under Aarogyasri. They spent most of their money on outpatient care, and Aarogyasri didn’t tackle this adequately.
  • The problem with over-reliance on the private sector is that it limits the reach of such programmes. Evidence from RSBY and Aarogyasri shows that as distance from empanelled hospitals grew in Andhra and Gujarat, fewer people benefited from them most empanelled hospitals are private and urban. 

 

 

Way ahead

 

  • The NHPS can produce many gains if it is views as the first step towards universal health care, rather than a panacea to all of India’s health-care woes.  A long-awaited, step is to reform the public health system. Without

 

Question Without reform of the public health system, insurance schemes are but a band-aid solution, explain in the context of newly launched National health protection scheme.

Not a prescription for the poor

(The Hindu)

Synoptic line: It throws light on the issue of critical analysis of National Health Protection Scheme (NHPS).

(GS paper II)

Overview

 

 

  • Through the National Health Protection Scheme (NHPS), the government brought the nation into the next generation of health security. The only real way to judge the potential of the NHPS is to review the empirical evidence pertaining to some of the existing publicly-funded health insurance schemes, particularly the Rashtriya Swasthya Bima Yojana (RSBY).

 

 

The Rashtriya Swasthya Bima Yojana (RSBY)

 

 

  • The RSBY which was launched in 2008 was initially designed to target only the Below Poverty Line (BPL) households. However, even after nine years of its implementation, only half the BPL families have been covered, according to government data.

 

 

 

  • Further, there is a huge discrepancy between the coverage figures in government data and estimates from surveys. In the 71st round of the National Sample Survey (NSS), 11.1% of the population was covered by the RSBY and State health insurance schemes in 2014 but according to the Insurance Regulatory and Development Authority, the population coverage of these schemes was 16.4%.

 

 

  • A key reason for this discrepancy is the creation of bogus beneficiaries by insurance companies to earn premium subsidies from the government. Another reason is that while insurance companies have been given the premium subsidy for covering all eligible households in the respective States, the insurer reached out to only a fraction of the eligible population.

 

  • For example, in 2016, only 2.45% eligible families were enrolled under Maharashtra’s Mahatma Jyotiba Phule Jan Arogya Yojana (MJPJAY) in 2016. Enrolment was also found to be very low in the Chief Minister’s Comprehensive Health Insurance Scheme, in Tamil Nadu, as shown in the NSS data.

 

  • According to the NSS data for 2014, among the poorest quintile, 12.7% of households received RSBY coverage, which accounted for 25.9% of all the RSBY enrolled households. On the other hand, about 36.52% of households enrolled in the RSBY were actually drawn from the richest 40% of the sample households. 

 

  • According to the programme data, the hospitalisation rate was found to be as low as 1% among RSBY-insured individuals, compared to a national average of 2.6% for the general population as of 2014. The RSBY is not an exception in this regard. The utilisation rate of other insurance schemes is also very low. For example, the MJPJAY recorded a utilisation rate (calculated as the proportion of eligible persons with at least one in-patient claim during the year) of just 0.12% in 2013-14 and 0.18% in 2014-15.

 

  • There is no evidence that the RSBY/NHPS has caused a reduction in out-of-pocket expenditure. Two very recent impact evaluation studies have reported that the RSBY has hardly had any impact on financial protection. Proponents of the NHPS might argue that the insurance coverage was limited in the RSBY, leading to patients incurring payments for hospitalisations. So, in ‘Modicare’, the benefit package has increased coverage substantially. However, the increase in allocations is unlikely to effectively address the problem of out-of-pocket expenditure.

 

There are two reasons

 

  • First, international experience in publicly funded health insurance in unregulated private health-care markets suggests that in countries where the benefit package was expanded by raising only the insurance limit, private hospital care providers responded by substantially increasing the price of services. 
  • Second, given the fact that out-patient care, the single largest contributor to out-of-pocket spending, is not included in the benefit package of the NHPS, the increase in the insurance limit will not be of much help. 

 

Question With out-patient costs outside its purview, the National Health Protection Scheme is unlikely to help those it wants to. Critically analyse.

 

The little-revenue tax

(The Indian Express)

Synoptic line: It throws light on the issue how LTCG formulation is not only flawed in design, but also likely to yield very little tax revenue.

(GS paper III)

Overview

 

  • Long-term capital gains (LTCG) tax has been proposed in the Budget on equity-oriented mutual funds, besides gains on equity. Equity markets have been in a tizzy ever since Union Budget 2018 imposed the 10.4% tax including the cess and indexation on long-term capital gain (LTCG) on equity mutual fund schemes and direct equities.

 

  • It had been argued that the imposition of a long-term capital gains tax (LTCG) was not a good idea because the tax revenue obtained from its imposition was not likely to be large, but according to various methods, the LTCG formulation is not only flawed in design, but also likely to yield very little tax revenue.

 

Problems

 

 

  • The legitimate problem of stock price manipulation and the evasion of taxes. There is a well-known promoter-operator network which manipulates the prices of penny stocks, drives the price upward, and the operator-promoters then cash out at a higher price, and pay no tax. There is thus an element of double corruption involved. There is very little data available on the exact magnitude of this manipulation/tax avoidance but it is something that should be handled by the tax authorities in a better manner than “punishing” 99.9 per cent of investors because of the corruption of very few.

 

 

  • The stock market gained an average amount of only 3.9 per cent in FY17 (or assessment year 17-18), the year for which the taxman claims to have lots of exempted capital gain income.  The best tax policy for the taxman is one that maximises tax revenue, and not one that maximises his morality, or his employment, or his discretionary powers.

 

The imposition of the LTCG tax

 

  • The stock market gained an average amount of only 3.9 per cent in FY17 (or assessment year 17-18), the year for which the taxman claims to have lots of exempted capital gain income. The Ministry of Finance has provided detailed income data for all taxpayers for the four years 2011/12 through 2014/15.

 

  • The accumulated STCG (short-term capital gains) income, for these four years, was just Rs 125 thcr, yielding an annual tax revenue of 4,700 crore. But what percentages of stock market gains are short-term and hence what proportion is long-term?

 

  • There is an alternative long-term calculation. The Kelkar Direct Taxes task force of 2002 that the long-term tax revenue being foregone in 2002/3 via the elimination of a 20 per cent tax rate on LTCG was Rs 1,000 crore. This implies that the estimated LTCG income in 2002/3 would have been Rs 5000 crore. Hence, the imposition of a 10 per cent LTCG tax rate is unlikely to yield more than Rs 5000 crore in tax revenue.

 

  • If the new LTCG tax is implemented, there will be an additional category under set-off — long-term capital losses. In any case, it is revealing that after accounting for set-offs, the MoF has gained, on average, just Rs 3000 crore a year.

 

  • The 2002 Kelkar report had advocated the abolishment of LTCG tax, the abolishment of dividend tax, the retention of short-term tax to 10 per cent and the introduction of the Securities Transaction Tax STT.

 

  • It is clear is that there is no historical data which suggests that exempted long-term capital gains amount to anything close to the Rs 367 thcr figure claimed by the MoF for 2016/17. It would seem prudent for the ministry to withdraw this tax proposal and state that they will act once the Arbind Modi report becomes available.

 

Question The best policy for the taxman is one that maximizes revenue, not one that maximizes his morality, or his employment, or discretionary powers. Explain in the context of long-term capital gains tax.