Poverty Line

How are poverty numbers calculated

Widespread poverty is the biggest challenge for India’s policymakers. The government has drawn criticism for its inability to tackle the menace despite high economic growth. Some estimates place the number of poor at 40% of the population. 

How is the poverty line defined?

The concept of poverty is associated with socially perceived deprivation with respect to basic human needs. Historically, India has followed a poverty line, which is based on a minimum number of calories that an individual should consume and a rupee amount was calculated on this basis. The existing rural and urban official poverty lines were originally defined in terms of per capita total consumer expenditure (PCTE) at 1973-74 market prices and is adjusted over time and across states for changes in prices.

The method still retains the original 1973-74 all-India reference poverty line baskets (PLB) of goods and services. These PLBs were derived separately for rural and urban areas, anchored in per capita calorie norms of 2400 (rural) and 2100 (urban) per day. People whose PCTE is below the required minimum are considered to be below the poverty line.

What is the international poverty line?

The common international poverty line is based on an income of around $1 a day. In 2008, the World Bank revised the figure to $1.25 at the 2005 purchasing power parity.

What is the new way to define the poor?

As the earlier estimates of poverty have been largely perceived as inadequate, a committee led by Suresh Tendulkar came up with a new way to define the poor. Tendulkar moved away from calorie anchor while testing the adequacy of actual food expenditure. The method uses same consumption basket for rural and urban poor, but applies different price levels of rural and urban areas to arrive at the poverty estimate. The major departure from the original method is the provision for including expenditure on health and education.

Does India need to redefine poor?

With India hitting a high growth trajectory, the living standards and consumption patterns in both urban and rural areas have changed, while existing data continues to use consumption baskets that reflect trends prevalent in 1973-74. Earlier poverty mechanisms also assumed that basic social services like health and education would be supplied by the state, therefore even as both were covered in base year 1973-74, no account was taken for the change in the proportion of expenditure in these services since then.

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Offshore Banking Unit

Offshore Banking Unit

What is offshore banking unit?

Offshore banking unit (OBU) is the branch of an Indian bank located in a special economic zone (SEZ), with a special set of rules aimed at facilitating exports from the region. As laws define it, it’s a “deemed foreign branch” of the parent bank situated within India, and it undertakes international banking business involving foreign currency denominated assets and liabilities.

The concept comes from the practice prevalent in several global financial centres. Here an OBU can accept foreign currency for business but not domestic deposits from local residents. This was conceived to prevent competition between local and offshore banking sectors.

What was the need for OBUs?

In addition to providing power, tax and other incentives to SEZs, policymakers felt a need to provide SEZ developers access to global money markets at international rates. So in 2002, RBI instituted OBUs, which would be virtually foreign branches of Indian banks. These would be exempt from CRR, SLR and few other regulatory requirements.

RBI regulations make it mandatory for OBUs to deal in foreign exchange, source their foreign currency funds externally, follow all prudential norms applicable to overseas branches and are entitled for IT exemptions. Thus in many respects, they are free from the monetary controls of the country.

What price, freedom from regulations?

In the eight years that they have been operational, concerns have been raised that, funding by OBUs to SEZs would lead to increase in external debt of India. Also, some have suggested that OBUs as vehicles for extending dollar loans have no use as long as they are restricted to doing business only in the zones in which are they located.

This would create an unnecessary regulatory arbitrage like booking business because there is some arbitrage advantage on offer. Anyways, ground realities could not be more different. Hardly a handful of banks have set up their OBUs, so the argument looks very far fetched.

SEZ, itself as a concept has been struggling, given the issues that SEZ developers have faced over acquiring land from farmers.

What is the future of OBUs?

Most international financial centres still house OBUs, so saying they are not required may be incorrect. However, some analysts have said OBUs are losing relevance at a time of increasing globalisation.

They say OBUs will be of no use after the economy opens up fully and the rupee is fully convertible. These experts argue for one or two OBUs, instead of having several of them spread across the country.

Mangalyaan (MARS ORBITER MISSION)

Mars Orbiter Mission is India's first interplanetary mission to planet Mars with an orbiter craft designed to orbit Mars in an elliptical orbit. The Mission is primarily technological mission considering the critical mission operations and stringent requirements on propulsion and other bus systems of spacecraft. 

Mission Objectives One of the main objectives of the first Indian mission to Mars is to develop the technologies required for design, planning, management and operations of an interplanetary mission. Following are the major objectives of the mission: A. Technological Objectives: Design and realisation of a Mars orbiter with a capability to survive and perform Earth bound manoeuvres, cruise phase of 300 days, Mars orbit insertion / capture, and on-orbit phase around Mars. Deep space communication, navigation, mission planning and management. Incorporate autonomous features to handle contingency situations. B. Scientific Objectives: Exploration of Mars surface features, morphology, mineralogy and Martian atmosphere by indigenous scientific instruments.

GM (Genetically Modified) Crops FAQs

Why make GM crops?

Traditionally, a plant breeder tries to exchange genes between two plants to produce offspring that have desired traits. This is done by transferring the male (pollen) of one plant to the female organ of another.

This cross breeding, however, is limited to exchanges between the same or very closely related, characteristics of species. It can also take a long time to achieve desired results and frequently interest do not exist in any related species.

GM technology enables plant breeders to bring together in one plant useful genes from a wide This range of living sources, not just from within the crop species or from closely related plants. powerful tool allows plant breeders to do faster what they have been doing for years – generate superior plant varieties – although it expands the possibilities beyond the limits imposed by conventional plant breeding.

Who produces GM crops?

Most of the research on GM crops has been carried out in developed countries, mainly in North America, Latin America, and Europe. Recently, however, many developing countries have also established the capacity for genetic engineering.

In developed countries, the new life sciences companies have dominated the application of GM technology to agriculture. These include Bayer CropScience, Dow AgroSciences, DuPont/Pioneer, Monsanto, and Syngenta.

What is a GM crop?

A GM or transgenic crop is a plant that has a novel combination of genetic material obtained through the use of modern biotechnology.

For example, a GM crop can contain a gene(s) that has been artificially inserted instead of the plant acquiring it through pollination.

The resulting plant is said to be "genetically modified" although in reality all crops have been "genetically modified" from their original wild state by domestication, selection, and controlled breeding over long periods of time.

Where are GM crops currently grown?

In 1994, Calgene's delayed-ripening tomato (Flavr-Savr™) became the first genetically modified food crop to be produced and consumed in an industrialized country. Since the recorded commercialization of GM crops in 1996 to 2011, several countries have contributed to 94-fold increase in the global area of transgenic crops.

The area planted to GM crops shot up from 1.7 million hectares in 1996 to 160 million hectares in 2011, with an increasing proportion grown by developing countries. In 2011, there were 29 biotech countries, 17 of which growing 50,000 hectares or more, 19 developing countries and 10 industrial countries; they were, in order of hectarage: USA, Brazil, Argentina, India, Canada, China, Paraguay, Pakistan, South Africa, Uruguay, Bolivia, Australia, Philippines, Myanmar, Burkina Faso, Mexico, Spain, Colombia, Chile, Honduras, Portugal, Czech Republic, Poland, Egypt, Slovakia, Romania, Sweden, Costa Rica, and Germany (James, 2011)

What are the potential benefits of GM plants?

In the developed world, there is clear evidence that the use of GM crops has resulted in significant benefits.  These include:

• Higher crop yields
• Reduced farm costs
• Increased farm profit
• Improvement in health and the environment

These “first generation” crops have proven their ability to lower farm-level production costs. Now, research is focused on “second-generation” GM crops that will feature increased nutritional and/or industrial traits.  These crops will have more direct benefits to consumers.  Examples include: 

• Rice enriched with iron, vitamin A and E, and lysine
• Potatoes with higher starch content, and inulin
• Edible vaccines in maize, banana and potatoes
• Maize varieties with low phytic acid and increased essential amino acids
• Healthier oils from soybean and canola
• Allergen-free nuts

How are GM crops made?

GM crops are made through a process known as genetic engineering. Genes of commercial interest are transferred from one organism to another. Two primary methods currently exist for introducing transgenes into plant genomes. The first involves a device called a ‘gene gun.’ The DNA to be introduced into the plant cells is coated onto tiny particles of gold or tungsten. These particles are then physically shot onto plant cells. Some of the DNA comes off and is incorporated into the DNA of the recipient plant. The second method uses a bacterium to introduce the gene(s) of interest into the plant DNA.

Are GM crops appropriate for developing countries?

While most of the debate over transgenic crops has taken place mainly in the developed nations in the North, the South stands to benefit from any technology that can increase food production, lower food prices, and improve food quality.

In countries where there is often not enough food to go around and where food prices directly affect the incomes of majority of the population, the potential benefits of GM crops cannot be ignored. It is true that nutritionally enhanced foods may not be a necessity in developed countries but they could play a key role in helping to alleviate malnutrition in developing countries.

Although the potential benefits of GM crops are large in developing countries, they would require some investments. Most developing countries lack the scientific capacity to assess the biosafety of GM crops, the economic expertise to evaluate their worth, the regulatory capacity to implement guidelines for safe deployment, and the legal systems to enforce and punish transgressions in law. Fortunately, several organizations are working to build local capacity to manage the acquisition, deployment, and monitoring of GM crops.

What are the potential risks of GM plants?

With every new emerging technology, there are potential risks. These include:

• The danger of unintentionally introducing allergens and other anti-nutrition factors in foods
• The likelihood of transgenes escaping from cultivated crops into wild relatives
• The potential for pests to evolve resistance to the toxins produced by GM crops
• The risk of these toxins affecting non-target organisms.

Where legislation and regulatory institutions are in place, there are elaborate steps to precisely avoid or mitigate these risks. It is the obligation of the technology innovators (i.e., scientists), producers, and the government to assure the public of the safety of the novel foods that they offer as well as their benign effect on the environment.

There are also those risks that are neither caused nor preventable by the technology itself.  An example of this type of risk is the further widening of the economic gap between developed countries (technology users) versus developing countries (nonusers). These risks, however, can be managed by developing technologies tailor made for the needs of the poor and by instituting measures so that the poor will have access to the new technologies.

Conclusion

Despite the current uncertainty over GM crops, one thing remains clear. This technology, with its potential to create economically important crop varieties, is simply too valuable to ignore. There are, however, some valid concerns. If these issues are to be resolved, decisions must be based on credible, science-based information.

Finally, given the importance people place on the food they eat, policies regarding GM crops will have to be based on an open and honest debate involving a wide cross-section of society.

WTO NORMS AND INDIAN AGRICULTURE

WTO NORMS AND INDIAN AGRICULTURE by L.S.N PRASAD

There are a number of articles in the WTO’s provisions that are useful to developing countries. There is a hue and cry against the World Trade Organization or the WTO.This is because interested politicians, intellectuals and sections of the media have been focussing on some negative aspects of the WTO’s rules and regulations. Earlier, there were others countries too which opposed the WTO including the USA and countries in the European Union. But they were successful in achieving their objectives to a large extent. There are a number of articles in the WTO’s provisions that are useful to developing countries. Among these are: Article XI: General elimination of quantitative restrictions on member states. Article XII: Restriction to safeguard the balance of payments of the member countries. Article XVI: Subsidies granted by the State. Article XIX: Emergency action on imports of a particular product. Article XXIV: Territorial application of frontier traffic and customs and free trade areas. Article XXVII: Modification schedule for tariff reduction. Article XXXVI: Trade and development. These articles are meant to curb the exploitation of one member by another. Unlike earlier GATT negotiations agriculture was introduced in trading negotiations because of the huge subsidies given by the European Union. There is an erroneous view in our country that the Uruguay Round (of GATT) forced our country to cut back the subsidies on agriculture and that by this agreement we were also forced to move away from food grains to large scale commercial crops which has no market domestically.

Agriculture Subsidies

Due to the Agreement on Agriculture (AOA), India can no longer remain aloof from the rest of the world. It had to join the WTO. This AOA has established a number of generally applicable rules with regard to agriculture and trade related matters. Most of the developed countries are providing huge subsidies to the agricultural sector. In these countries not more than 10% of the population is dependent on agriculture. The below table gives the information about the subsidies that are being given to agriculture by different countries and the percentage of the population depending on agriculture India provides only 2.33% subsidy to agriculture. It is very small when compared with other countries. The Aggregate Measure of Support (AMS) to agriculture will be 10 percent in India as against 5% in the developed world. The total subsidy on agriculture in the developed world works out to $150 billion and in the developing world $19 Billion. If the AMS exceeds 10 percent in any country, it has to reduce by 13% by 2004. According to the WTO the AMS in India, product subsidies is 7.5% and subsidy on non-product is minus 38.5%. So there is no question of losing any thing in our agriculture by accepting the AOA.

Subsidies to Agriculture

Country Subsidy per hectare %subsidies Population dependant on agriculture EEC $82 37% 8% USA $32 26% 5% japan $35 72% 4% China $30 34% 24% South Africa $24 60.67% 18% india $14 2.33% 60% Source: Compilations from WTO reports

Tariffs

The tariff on agricultural commodities have been consider-ably restructured to comply with WTO requirements. India is committed to reduce tariffs on 686 agricultural products. The average tariff on agricultural commodities was 115% before the agreement. After the agreement it has been reduced to 35%. Along with 686 commodities the tariff on 587 other commodities is on an average 50% less than the negotiated tariff. Only on 10 commodities is the tariff rate more than the negotiated tariff rate. We must recall, in this context that two decades ago India agreed at an international meeting to reduce the tariff either to zero or to a minimum level on the import of dairy products. In other words, India had accepted in principle the import of agricultural products many years ago. In the case of edible oils we agreed (binding) to impose a tariff of up to 150 percent but the bounded duty at present is ‘0’. With a duty reduction on edible oils as low as 25%, hundreds of oil mills have closed down, groundnut farmers are unable to get a minimum price and even compelled to dispose of their product at huge losses. Pulses were imported under OGL (Open General License) at zero interest rates. In July 1999 the Government of India sought to renegotiate the tariff on pulses. But the international community has not yielded.

The Challenge

Investment: Indian agriculture needs a lot of investment to have large-scale production. By this we can reduce production costs. But the problem is that large scale agriculture displaces persons who are dependent on agriculture. Instead of criticising WTO we have to think of an alternative system. Corporatisation of agriculture is seen to be inimical to social justice. Redistribution of land to the landless poor through the various land ceiling acts leads to fragmentation which will be a hurdle to improved production as well as productivity. Patent System: Plants such as neem, turmeric and products such as Basmati (scented rice) are patented or about to be patented by American companies. It is strange that in India these have been household plants used in cooking and for medicinal purposes since ancient times. The system of Ayurveda has existed since times immemorial. All medicinal products based on plants and plant products must be patented by Indian companies. Conceding the patent rights to an American based company is ridiculous and we have to take this up with the WTO’s Dispute Settlement Board (DSB) at Geneva.

Fishing in Indian Waters

There is another problem that has arisen as a result of our accepting WTO norms. Every country has to allow fishermen of other countries to catch fish in its territorial waters. India exports special grade fish (Tuna and Prawns) to other countries and earns substantial foreign exchange. Around 10 lakhs people are dependent on fishing. Deep sea fishing leads to exhausting not only fish resources, but also displacement of our people in fish catching, processing industries etc. This too is an issue that needs to be discussed at the appropriate WTO forum.

Conclusion

India is a reasonably efficient producer of agricultural products. But the problem lies with the employment of people who are displaced in agriculture. In this case instead of finding fault with international law we have to think how best to apply that law in our interests The problem identified in the existing agreement on patents, anti-dumping duties, subsidies, trade and textiles indicate that the developing countries are waking up to the need to ensure that India has to take the lead in ensuring the WTO regime is used to maximum advantage to protect the interests of developing countries. India can increase, in fact triple subsidies on agriculture without violating any international law. Fight in the DSB for the patenting rights of some of the medicinal plants Fight for plant breeder’s rights Restrict foreigners from fishing in our territorial waters to the extent possible. We can also increase our catch by importing the appropriate technology to fish in deep sea waters Use the articles in the WTO Constitution to fight the exploitation of one country by another in international trade. Dr. L. S. N. Prasad is an Economics Lecturer in Guntur College in Andhra Pradesh. He is the Secretary of the Indian Liberal Group, Andhra Pradesh.

MOST FAVOURED NATION STATUS IN WTO

 Most-favoured-nation (MFN): treating other people equally      Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members.

This principle is known as most-favoured-nation (MFN) treatment (see box). It is so important that it is the first article of the General Agreement on Tariffs and Trade (GATT), which governs trade in goods. MFN is also a priority in the General Agreement on Trade in Services (GATS) (Article 2) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) (Article 4), although in each agreement the principle is handled slightly differently. Together, those three agreements cover all three main areas of trade handled by the WTO.

Some exceptions are allowed. For example, countries can set up a free trade agreement that applies only to goods traded within the group —   discriminating against goods from outside. Or they can give developing countries special access to their markets. Or a country can raise barriers against products that are considered to be traded unfairly from specific countries. And in services, countries are allowed, in limited circumstances, to discriminate. But the agreements only permit these exceptions under strict conditions. In general, MFN means that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading partners — whether rich or poor, weak or strong.

Government Budget 1 in flowcharts

Government Budget

Fiscal Policy in flowchart

IPTV ( INTERNET PROTOCOL TELEVISION)

Internet Protocol television (IPTV) is a system through which television services are delivered using the Internet protocol suite over a packet-switched network such as the Internet, instead of being delivered through traditional terrestrial, satellite signal, and cable television formats.

IPTV services may be classified into three main groups:

• live television, with or without interactivity related to the current TV show;
• time-shifted television: catch-up TV (replays a TV show that was broadcast hours or days ago), start-over TV (replays the current TV show from its beginning);
• video on demand (VOD): browse a catalog of videos, not related to TV programming.
IPTV is distinguished from Internet television by its on-going standardization process (e.g., European Telecommunications Standards Institute) and preferential deployment scenarios in subscriber-based telecommunications networks with high-speed access channels into end-user premises via set-top boxes or other customer-premises equipment.

Definition

Historically, many different definitions of IPTV have appeared, including elementary streams over IP networks, transport streams over IP networks and a number of proprietary systems.
One official definition approved by the International Telecommunication Union focus group on IPTV (ITU-T FG IPTV) is:

"IPTV is defined as multimedia services such as television/video/audio/text/graphics/data delivered over IP based networks managed to provide the required level of quality of service and experience, security, interactivity and reliability."

Another more detailed definition of IPTV is the one given by Alliance for Telecommunications Industry Solutions (ATIS) IPTV Exploratory Group on 2005:

"IPTV is defined as the secure and reliable delivery to subscribers of entertainment video and related services. These services may include, for example, Live TV, Video On Demand (VOD) and Interactive TV (iTV). These services are delivered across an access agnostic, packet switched network that employs the IP protocol to transport the audio, video and control signals. In contrast to video over the public Internet, with IPTV deployments, network security and performance are tightly managed to ensure a superior entertainment experience, resulting in a compelling business environment for content providers, advertisers and customers alike."




In 1994, ABC's World News Now was the first television program to be broadcast over the Internet, using the CU-SeeMe videoconferencing software.
The term IPTV first appeared in 1995 with the founding of Precept Software by Judith Estrin and Bill Carrico. 

Elements

• TV head-end: where live TV channels are encoded, encrypted and delivered in the form of IP multicast streams.
• VOD platform: where on-demand video assets are stored and served when a user makes a request in the form of IP unicast stream.
• Interactive portal: allows the user to navigate within the different IPTV services, such as the VOD catalog.
• Delivery network: the packet switched network that carries IP packets (unicast and multicast).
• Home gateway: the piece of equipment at the user's home that terminates the access link from the delivery network.
• User's set-top box: the piece of equipment at the user's home that decodes and decrypt TV and VOD content and displays it on the TV screen.

Advantages

The Internet protocol-based platform offers significant advantages, including the ability to integrate television with other IP-based services like high speed Internet access and VoIP.

A switched IP network also allows for the delivery of significantly more content and functionality. In a typical TV or satellite network, using broadcast video technology, all the content constantly flows downstream to each customer, and the customer switches the content at the set-top box. The customer can select from as many choices as the telecomms, cable or satellite company can stuff into the “pipe” flowing into the home. A switched IP network works differently. Content remains in the network, and only the content the customer selects is sent into the customer’s home. That frees up bandwidth, and the customer’s choice is less restricted by the size of the “pipe” into the HOME This also implies that the customer's privacy could be compromised to a greater extent than is possible with traditional TV or satellite networks. It may also provide a means to hack into, or at least disrupt (see Denial of service) the private network.

Interactivity

An IP-based platform also allows significant opportunities to make the TV viewing experience more interactive and personalized. The supplier may, for example, include an interactive program guide that allows viewers to search for content by title or actor’s name, or a picture-in-picture functionality that allows them to “channel surf” without leaving the program they’re watching. Viewers may be able to look up a player’s stats while watching a sports game, or control the camera angle. They also may be able to access photos or music from their PC on their television, use a wireless phone to schedule a recording of their favorite show, or even adjust parental controls so their child can watch a documentary for a school report, while they’re away from home.

In order that there can take place an interaction between the receiver and the transmitter, a feedback channel is needed. Due to this, terrestrial, satellite, and cable networks for television do not allow interactivity. However, interactivity with those networks can be possible by combining TV networks with data networks such as the Internet or a mobile communication network.

Video-on-demand

IPTV technology is bringing video-on-demand (VoD) to television, which permits a customer to browse an online program or film catalog, to watch trailers and to then select a selected recording. The playout of the selected item starts nearly instantaneously on the customer's TV or PC.

Technically, when the customer selects the movie, a point-to-point unicast connection is set up between the customer's decoder (set-top box or PC) and the delivering streaming server. The signalling for the trick play functionality (pause, slow-motion, wind/rewind etc.) is assured by RTSP (Real Time Streaming Protocol).




 The most common codecs used for VoD are MPEG-2, MPEG-4 and VC-1.

In an attempt to avoid content piracy, the VoD content is usually encrypted. Whilst encryption of satellite and cable TV broadcasts is an old practice, with IPTV technology it can effectively be thought of as a form of Digital rights management. A film that is chosen, for example, may be playable for 24 hours following payment, after which time it becomes unavailable.

IPTV-based converged services

Another advantage of an IP-based network is the opportunity for integration and convergence. This opportunity is amplified when using IMS-based solutions. Converged services implies interaction of existing services in a seamless manner to create new value added services. One example is on-screen Caller ID, getting Caller ID on a TV and the ability to handle it (send it to voice mail, etc.). IP-based services will help to enable efforts to provide consumers anytime-anywhere access to content over their televisions, PCs and cell phones, and to integrate services and content to tie them together. Within businesses and institutions, IPTV eliminates the need to run a parallel infrastructure to deliver live and stored video services.

Limitations

IPTVIPTV is sensitive to packet loss and delays if the streamed data is unreliable. IPTV has strict minimum speed requirements in order to facilitate the right number of frames per second to deliver moving pictures. This means that the limited connection speed and bandwidth available for a large IPTV customer base can reduce the service quality delivered.

Although a few countries have very high-speed broadband-enabled populations, such as South Korea with 6 million homes benefiting from a minimum connection speed of 100 Mbit/s, in other countries (such as the UK) legacy networks struggle to provide 3–5 Mbit/s and so simultaneous provision to the home of TV channels, VOIP and Internet access may not be viable. The last-mile delivery for IPTV usually has a bandwidth restriction that only allows a small number of simultaneous TV channel streams – typically from one to three – to be delivered.

Streaming IPTV across wireless links within the home has proved troublesome; not due to bandwidth limitations as many assume, but due to issues with multipath and reflections of the RF signal carrying the IP data packets. An IPTV stream is sensitive to packets arriving at the right time and in the right order. Improvements in wireless technology are now starting to provide equipment to solve the problem.

Due to the limitations of wireless, most IPTV service providers today use wired home networking technologies instead of wireless technologies like 802.11. Service providers such as AT&T (which makes extensive use of wireline home networking as part of its U-Verse IPTV service) have expressed support for the work done in this direction by ITU-T, which has adopted Recommendation G.hn (also known as G.9960), which is a next-generation home networking standard that specifies a common PHY/MAC that can operate over any home wiring (power lines, phone lines or coaxial cables).

Latency

The latency inherent in the use of satellite Internet is often held up as reason why satellites cannot be successfully used for IPTV, but in practice latency is not an important factor for IPTV. An IPTV service does not require real-time transmission, as is the case with telephony or videoconferencing services.

KNOW YOUR CUSTOMER NORMS AND BANKS (KYC)

Money laundering by banks and insurance companies is more widespread than earlier thought, another expose by an online news website has revealed. This development is bound to force banks to undertake a fresh round of verification of the identity of almost all account holders, an exercise called ‘Know your Customer’. 

WHAT IS KYC?

Banks undertake this exercise to verify the identity of their customers. The KYC exercise aims to prevent banks from being used, intentionally or unintentionally by criminal elements, for money laundering.

DOES KYC APPLY TO ALL CUSTOMERS?

Yes. KYC is applicable to every individual who wants to have any business relationship with the bank. This means, any individual wanting to open an account (savings or current account and recurring or fixed deposit), get a draft, open a locker, receive any benefits on account of financial transactions, remittance or wire transfer, and apply for a loan.

DOES IT HAVE ANY LEGAL BACKING?

Yes. The KYC norm has been validated under Section 35A of the Banking Regulation Act, 1949, and Rule 7 of the Prevention of Money-Laundering Rules, 2005. Any violation of these norms could attract severe penalty under the BR Act.

WHAT IS NEEDED FOR A KYC CHECK?

KYC has two components: identity and address. While PAN and voter card, driving licence and any other identity document that satisfies the banks requirements serve as proof of identity, a copy of passport, electricity or phone bill or bank account statement are accepted as proof of address.

DO BANKS OPEN ACCOUNTS FOR THOSE WITHOUT AN ADDRESS PROOF?

Yes. But such individuals have to submit an identity document along with a utility bill of the relative with whom the prospective customer is living and a declaration from the relative that the said person is a relative.

CAN KYC NORMS BE RELAXED?

To ensure financial inclusion, a low-income group customer without identity and address proofs can open a bank account with an introduction from another account holder who has fulfilled the bank’s KYC procedure. However, the balance in all his accounts taken together is not expected to exceed 50,000 and the total credit in all the accounts taken together is not expected to exceed 1 lakh. The introducer’s account with the bank should be at least six months old and should show satisfactory transactions.

IS KYC COMPLIANCE A ONE-TIME EXERCISE?

No. Banks can ask customers to re-submit fresh identification and address proof to update their records. They can also ask for additional documents if they have doubts about some transaction in order to prevent the account from being used for money laundering, terrorist or criminal activities.

HAVE BANKS BEEN PENALISED  FOR KYC NORM VIOLATIONS?

Yes. The RBI has penalised HDFC Bank,  ICICI Bank, Citibank andStandard Chartered Bank.

FOOD SAFETY AND STANDARDS BILL 2005( Fully Explained, 360 degrees analysis)

HIGHLIGHTS OF THE BILL
(Read this section in detail)

• The Food Safety and Standards Bill, 2005 consolidates eight laws governing the food sector and establishes the Food Safety and Standards Authority (FSSA) to regulate the sector.
• FSSA will be aided by several scientific panels and a central advisory committee to lay down standards for food safety. These standards will include specifications for ingredients, contaminants, pesticide residue, biological hazards and labels.
• The law will be enforced through State Commissioners of Food Safety and local level officials.
• Everyone in the food sector is required to get a licence or a registration which would be issued by local authorities.
• Every distributor is required to be able to identify any food article to its manufacturer, and every seller to its distributor. Anyone in the sector should be able to initiate recall procedures if he finds that the food sold had violated specified standards.
KEY ISSUES AND ANALYSIS
(Read this section in detail)

• The organised as well as the unorganised food sectors are required to follow the same food law. The unorganised sector, such as street vendors, might have difficulty in adhering to the law, for example, with regard to specifications on ingredients, traceability and recall procedures.
• The Bill does not require any specific standards for potable water (which is usually provided by local authorities). It is the responsibility of the person preparing or manufacturing food to ensure that he uses water of adequate quality even when tap water does not meet the required safety standards.
• The Bill excludes plants prior to harvesting and animal feed from its purview. Thus, it does not control the entry of pesticides and antibiotics into the food at its source.
• The power to suspend the license of any food operator is given to a local level officer. This offers scope for harassment The food sector in India is governed by a multiplicity of laws under different ministries. A number of committees [2], including the Standing Committee of Parliament on Agriculture in its 12th Report submitted in April 2005 [3], have emphasized the need for a single regulatory body and an integrated food law.
  The Food Safety and Standards Bill, 2005, aims to integrate the food safety laws in the country in order to systematically and scientifically develop the food processing industry and shift from a regulatory regime to self-compliance. As part of the process of consolidation, the Bill proposes to repeal eight existing laws related to food safety*.
  Key features
  • Regulatory authority
    The Bill proposes to establish the Food Safety and Standards Authority of India (FSSA), which would lay down scientific standards of food safety and ensure safe and wholesome food. The FSSA would be assisted by a Central Advisory Committee, a Scientific Committee and a number of Scientific Panels in specifying standards. The standards would be enforced by the Commissioner of Food Safety of each state through Designated Officers and Food Safety Officers.
    Table: Composition of FSSA
    The FSSA would consist of a Chairperson and 18 members.
  
  
• The Chairperson would be either an eminent food scientist or a civil servant not below the rank of Secretary. Seven of the members would be ex-officio, not below the post of Joint Secretary, from various ministries. Five members would be appointed by rotation every three years from the states and Union Territories. The Authority would have two representatives each from the food industry and consumer organizations, one food technologist, and one member from a farmers organisations
• Standards for Food Articles
  The Bill prohibits the use of food additives, processing aid, contaminants, heavy metals, insecticides, pesticides, veterinary drugs residue, antibiotic residues, or solvent residues unless they are in accordance with specified regulations. Certain food items such as irradiated food, genetically modified food, organic food, health supplements and proprietary food cannot be manufactured, processed or sold without adhering to specific regulations.
  The Bill makes it mandatory for the distributor of a food article to identify the manufacturer and the seller to identify either the manufacturer or the distributor of a food item. Every packaged food product has to be labelled as per regulations in the Bill. The packaging and labelling of a food product should not mislead consumers about its quality, quantity or usefulness.
• Food Recall Procedures
  The Bill has special provisions for food recall procedures. If a food business operator (i.e., anyone owning or carrying out a business relating to food) considers that a food item is not in compliance with the specified standards, he has to initiate procedures to withdraw the food in question and inform the competent authorities.
• In order to judge cases related to breach of specified regulations, the state government has the power to appoint an Adjudicating Officer, not below the rank of Additional District Magistrate. Any person not satisfied by the decision of an Adjudicating Officer has the right to appeal to the Food Safety Appellate Tribunal (or to the State Commissioner until the Tribunal is constituted). The Tribunal enjoys the same powers as a civil court and decides the penalty in case of non-compliance with the provisions of the Act.
• Finances
  The Financial Memorandum of the Bill estimates that an expenditure of Rs 10 crore is required to establish the FSSA. The amount includes non-recurring capital expenditure of Rs 3 crore and further recurring expenditure of Rs 7 crore per annum towards salaries, allowances, rent for office accommodation etc.
PART B: KEY ISSUES AND ANALYSIS
• Objectives of the Bill
  The main objectives of the Bill are: (a) to introduce a single statute relating to food, and (b) to provide for scientific development of the food processing industry. The Bill aims to establish a single reference point for all matters relating to food safety and standards, by moving from multi-level, multi-departmental control to a single line of command. It incorporates the salient provisions of the Prevention of Food Adulteration Act 1954 and is based on international legislations, instrumentalities and Codex Alimentarius Commission [4] (Codex).
• Scope
  • Organised vs. Unorganised Sector
    
    
• Enforcement
  Every food business operator is required to have a licence in order to operate his food business. Petty manufacturers whohe Bill empowers the FSSA and State Food Safety Authorities* to monitor and regulate the food business operators. The Commissioner of Food Safety of each state appoints a Designated Officer (DO), not below the level of Sub-Divisional Officer, for a specific district whose duties include issuing or cancelling licences, prohibiting sale of food articles that violate specified standards, receiving report and samples of food articles from Food Safety Officers and getting them analysed. The DO also has the power to serve an 'improvement notice' on any food operator and suspend his license in case of failure in compliance with such a notice. The DO also investigates any complaint made in writing against Food Safety Officers. Food Safety Officers are appointed for a specified local area and their duties include taking samples of food articles, seizing food articles that are of suspect quality or inspecting any place where food articles are stored or manufactured.
  The State Commissioner, on the recommendation of the Designated Officer, decides whether a case of violation would be referred to a court of ordinary jurisdiction or to a Special Court. Cases relating to grievous injury or death for which a prison term of more than three years is prescribed are tried in Special Courts.
  The Bill provides for a graded penalty structure where the punishment depends on the severity of the violation. Offences such as manufacturing, selling, storing or importing sub-standard or misbranded food could incur a fine. Offences such as manufacturing, distributing, selling or importing unsafe food, which result in injury could incur a prison sentence. The sentence could extend to life imprisonment in case the violation causes death. Petty manufacturers who make their own food, hawkers, vendors or temporary stall holders could be fined up to Rs 1 lakh if they violate the specified standards.
  In order tomake their own food, hawkers, vendors or temporary stall holders do not require a licence. Instead, they need to get their businesses registered with the local municipality or Panchayat.he Bill empowers the FSSA and State Food Safety Authorities* to monitor and regulate the food business operators. The Commissioner of Food Safety of each state appoints a Designated Officer (DO), not below the level of Sub-Divisional Officer, for a specific district whose duties include issuing or cancelling licences, prohibiting sale of food articles that violate specified standards, receiving report and samples of food articles from Food Safety Officers and getting them analysed. The DO also has the power to serve an 'improvement notice' on any food operator and suspend his license in case of failure in compliance with such a notice. The DO also investigates any complaint made in writing against Food Safety Officers. Food Safety Officers are appointed for a specified local area and their duties include taking samples of food articles, seizing food articles that are of suspect quality or inspecting any place where food articles are stored or manufactured.
  The State Commissioner, on the recommendation of the Designated Officer, decides whether a case of violation would be referred to a court of ordinary jurisdiction or to a Special Court. Cases relating to grievous injury or death for which a prison term of more than three years is prescribed are tried in Special Courts.
  The Bill provides for a graded penalty structure where the punishment depends on the severity of the violation. Offences such as manufacturing, selling, storing or importing sub-standard or misbranded food could incur a fine. Offences such as manufacturing, distributing, selling or importing unsafe food, which result in injury could incur a prison sentence. The sentence could extend to life imprisonment in case the violation causes death. Petty manufacturers who make their own food, hawkers, vendors or temporary stall h
  olders could be fined up to Rs 1 lakh if they violate the specified standards.
  
  
  Scope
  • Organised vs. Unorganised Sector
    There could be a case for a separate regulation for the unorganised sector. Given that the unorganised sector includes a large number [5] of street food vendors, hawkers, temporary stall holders etc., application of the same law as for the large scale industries may be unrealistic, especially in the short term. Also, requirement of registration and powers given to local level officials to penalise infringement of required standards may lead to corruption. Some of the issues faced by vendors are addressed in the National Policy on Urban Street Vendors, 2004 formulated by the Ministry of Urban Development and Poverty Alleviation. [6]
    Food hawkers in India are generally unaware of food regulations and have no training in food-related matters. They also lack supportive services such as water supply of adequate quality and rubbish disposal systems, which hamper their ability to provide safe food. [7] If such facilities were provided to food vendors, as has been done in countries such as Malaysia and Singapore [8], India might be more successful in ensuring that this sector is able to maintain acceptable standards of hygiene and cleanliness.
    The Bill makes provision for graded penalties where offences like manufacturing, storing or selling misbranded or sub-standard food is punished with a fine and more serious offences with imprisonment. For instance, the penalty for manufacturing or selling sub-standard food extends to Rs 5 lakh, while for misbranded food, it extends to Rs 3 lakh. The Bill also makes provision for compensation in case of injury or death of the consumer. The street food vendors and hawkers c
  • • The fines might prove to be debilitating for the unorganised sector and small scale enterprises, whereas such penalties might not be an effective deterrent for large companies.
    • Potable water
      Though standards are specified for water used as an input in manufacture/preparation of food, the Bill does not require any specific standards for potable water (which is usually provided by local authorities). Thus, it is the responsibility of the manufacturer to ensure that clean and adequate quality water is used even when tap water does not meet the required safety standards. This could be a tall order given the scale of operation of small food enterprises and street food vendors. Cost of preparing food could also rise if each vendor or manufacturer has to invest in water purification systems.
  • Definitions
    Some terms in the Bill have not been defined. This could create confusion and require interpretation by the courts in case of dispute.
    The Preamble as well as Clause 16 (1) refer to 'safe and wholesome food' for human consumption. However, 'wholesome' or 'safe' have not been defined in the Bill.
    The Bill also mentions certain terms like 'Food Safety Management System' whose definition 
    calls for adoption of 'Good Manufacturing Practices', 'Good Hygienic Practices' and 'Hazard Analysis and Critical Control Point'. However, it is not clear from the Bill what these terms imply and whether the Codex definition of such terms is to be followed.
• In the Bill, 'Contaminant' is defined as 'any substance, whether or not added to food, but which is present in such food as a result of production, manufacture, processing, preparation'. The Codex guideline, on the other hand, defines contaminant as 'Any substance not intentionally added to food, which is present in such food as a result of the production' (emphasis added). The omission of the phrase 'not intentionally' from the definition in the Bill could result in cases where yeast added to bread might be called a contaminant.
• Implementation and enforcement
  • Managing Pesticide Residue
    The Bill excludes plants prior to harvesting and animal feed from its purview. Any harmful input (such as pesticides in vegetables or antibiotics in animal feed) that could affect the safety standards of food products are not effectively covered. Therefore, the onus for ensuring that pesticide residue is within acceptable levels lies with every manufacturer/vendor.
  • Traceability
    As per Codex guidelines, traceability covers the whole chain from the farm to the consumer. However, in India, many items such as grain and vegetables are sold at mandi (wholesale) markets. If a food product contains grain or vegetables with pesticides above the permitted level, it would not be possible to trace back the contaminant beyond the mandi. This makes it difficult to take any corrective action.
  • Testing Facilities
    The Bill states that samples of food articles would be sent for testing to various accredited laboratories. It also stipulates how many samples should be taken. However, shortage of testing laboratories and equipment [9] might hamper the implementation of the Bill. [See the section on Finances below].
  • Promote or Penalise
    The Bill aims to provide for a 'systematic and scientific development of the Food Processing Industry'. However, the thrust appears to be on penalising offenders of food safety standards rather than providing support to improve their systems. Given the limited capital of many small scale food processors, there is a possibility that noncompliance could be due to lack of technical standards. Thus, there may be a case to provide support for improving systems within a reasonable timeframe, failing which penal action may be initiated.
  • Penalty Provisions
    The DO has the power to issue an 'improvement notice' to any food operator, and suspend his license in case of non-compliance. Such power at the local level offers scope for harassment and corruption.
  • Consumer Safeguards
    The Bill provides a safeguard for consumers with a provision for Food Recall Procedure. It states that if a food business operator considers that a food item which it has 
  
  
  • processed, manufactured or distributed is not in compliance with the Act, it shall immediately initiate procedures to withdraw the food in question and inform the competent authority. The Bill however does not require the food business operator to inform consumers about a product recall, especially if some of the products have already been sold.
  • Safeguards for Food Businesses
    The Food Safety Officer, while taking food samples for analysis, has to give one part of the sample to the food business operator to make available to the authorities. Providing the food business operator with the right to get the sample tested independently from an accredited laboratory could reduce opportunities for harassment and corruption.
    Any customer can get an article of food examined by a Food Analyst. If this sample is found to be in violation of specified standards, penal action can be initiated. This power in the hands of the customer can be misused.
  • Labelling
    The B
  • • enough to be specified in the Bill such as labels identifying Genetically Modified food and labels detailing nutrition content in packaged food.
  • Composition of the FSSA
    There are two issues relating to the composition of the FSSA. The first issue relates to the representation of the Authority. One could argue that there should be a wider representation from various industry sectors (such as fruit and vegetables; meat and poultry products; milk and milk products; marine products; pickles and jams) as well as from restaurants and street vendors. A counterpoint is that a regulatory body should not have direct representatives from the businesses that it regulates in order to reduce possibility of conflict of interest, and there should be only independent experts and civil servants in the Authority (similar to regulatory bodies such as Securities and Exchange Board of India, Telecom Regulatory Authority of India, and Insurance Regulatory and Development Authority). Similar arguments can be made with respect to the composition of the Central Advisory Committee, which comprises two representatives each from the food industry, consumers, agriculture, and relevant research bodies in addition to all 35 state Food Commissioners.
    The second issue is whether all members should be whole time members, given the substantive nature of the responsibilities. This applies, in particular, to the central government representatives who are ex-officio members with additional responsibilities.
  • Finances
  
  
  
  
  • The Financial Memorandum of the Bill estimates non-recurring capital expenditure of Rs 3 crore and further recurring expenditure of Rs 7 crore per annum towards salaries, allowances, rent for office accommodation etc. The Bill mentions that the FSSA would charge a fee from licensed food operators and accredited food laboratories. However, the question remains whether the funds would be sufficient to maintain the infrastructure required to implement the provisions of this Bill, which include setting up laboratories, training food safety officers and running awareness/training programmes for food business operators and consumers.
    The Financial Memorandum does not specify whether the cost of implementing and enforcing the provisions of the Bill would be different from the existing system under the Prevention of Food Adulteration Act of 1954 (PFA Act). A comparison of the cost of enforcement under PFA Act and the new system proposed by this Bill would be useful in estimating the net cost implications of this Bill.
    It appears that the cost of enforcement would be borne by state/Union Territories governments. It would be useful to estimate the cost that would be incurred by state governments for setting up the required system. 
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