The Union Budget 2013: A Specialist's Concerns

The Union Budget 2013: A Specialist's Concerns

i would like to point out, at the outset, that i’m not an economist. Since i haven’t followed the budget-making process or read the Economic Survey 2012-13, i will not attempt to comment, at this stage, on technical aspects of the budget.

However, i think it is crucial for those who work in various areas of poverty alleviation and governance to react to policies that the budget seeks to influence.

This is an assortment of points that i flagged while watching the Union Budget being presented and broadcast live on the Lok Sabha television channel. These caught my immediate attention from the point of view of my areas of expertise and experience. (Law and policy related to the equitabe access to natural resources).

Corporate Social Responsibility (CSR):

With reference to CSR, paragraph 76 of the speech reads as follows:

“Incubators play an important role in mentoring new businesses which start as a small or medium business. The new Companies Bill obliges companies to spend 2 percent of average net profits under Corporate Social Responsibility (CSR). I am glad to announce that the Ministry of Corporate Affairs will notify that funds provided to technology incubators located within academic institutions and approved by the Ministry of Science and Technology or Ministry of MSME will qualify as CSR expenditure.”

It is my opinion that the central solution to achieving sustainable development in a democracy lies in viewing (and dealing with the need for) corporate social responsibility from a different perspective.

As things stand today, companies are obliged to put aside a certain percentage of money for activities that count as “social responsibility”. While the government might regulate these activities to some extent, situations are bound to arise (and i think have been known to arise), where even aspects of decision-making that ought to, according to the Constitution, be the role of the government, are taken over by a company.

In the suggestion here in the budget, for example, it has been said that it is proposed that funds provided to technology incubators in academic institutions will be eligible to be considered to be the CSR component of a company’s work. It is true that it has been stated that this will have to be approved by one of the two ministries that have been mentioned. But unless there are clear specifications by the government, regarding the kinds of research that will be eligible, and unless these specifications are in consonance with a prioritized research agenda and policy of the government that has been debated and approved by the legislature (and not just through rules, notifications or orders), it is my view that it ought not to be allowed to be a part of CSR.

Having said this, the need of the hour is to actually take a deeper look at the meaning of corporate social responsibility.

The CSR component of a company’s work often contradicts the government’s constitutional decision-making mandate by delegating decision-making functions to non-state players.

Furthermore, the work thus delegated to companies is usually far removed from the company’s core competencies, capabilities and grasp.

It is necessary to ensure, through the mix of existing regulatory provisions that range from labour law, to land acquisition law, to taxation, to transparency, to natural resource allocation, for the government to further streamline the penalties, processes and disincentives for social IRRESPONSIBILITY.

Clearly, subjective terms such as social irresponsibility (or responsibility), allow for a great deal of nebulousness in areas where clarity of jurisdiction and law enforcement are essential. i hope these views are taken into consideration in the changes to the Companies Bill that is underway.

“Environment”

The section entitled “environment”, consists of three paragraphs that deal with waste-to-energy generation in the public-private partnership (PPP) mode; funds from the government’s Clean Energy Fund to IREDA for “viable” renewable energy projects; and allocation of rupees eight hundred crores to the Ministry of -and here, the speech has a typoligical error, i assume-, as it says “Ministry of Non Renewable Energy” (instead of Ministry of New and Renewable Energy MNRE), for generaion-based incentives for wind energy. Typological errors and innocuous technical glitches of this kind, in a legal document of the proportions of the Union Budget, must be meticulously avoided in the future and corrected immediately.

As far as the policy attempt to encourage cities and municipalities to take up waste-to-energy projects through the PPP mode goes, my word of caution would, once again, be for the government to ensure that all decision-making (ranging from planning processes to implementation processes), and profit-sharing (if any), be under the sole purview of democratically elected municipal bodies. This would have to be worked out by relevant authorities, and there should be no impositions and manipulations of local bodies’ powers through the central (or state) government’s financing structures.

Regarding the allocations from the Clean Energy Fund to IREDA for “viable” renewable projects, i would advise the cross-section of stakeholders, and especially NGOs working in these areas and in the social justice sector, to articulate their latest analyses of the clean energy fund, and to monitor the definition of what constitutes a “viable” renewable energy project.

Regarding the allocation of rupees eight hundred crores, presumably to the Ministry of New and Renewable Energy, for “generation-based incentives” for wind energy projects, my view is that a larger and more consultative process involving detailed discussions should be followed, on the direction required for renewable energy. The scope of off-shore wind energy generation is tremendous, and could be taken up by the public sector, keeping in view the security-related sensitivities of the coastal stretches.  Solar energy is the the sector with the undisputed and obvious scope for encouragement: not for individual solar appliances, but through large and small grids. This is the infrastructure that needs priority for generation and for transmission. Once again, the decision-making related to these facilities should be under the purview of urban and rural local bodies. (Conglomorates of local bodies would have to enter into agreements, and it is possible to work out these modalities under the existing legal framework for local bodies).

Backward Region Grants Funds:

It has been stated that the present criteria for determining “backwardness” of an area are based on terrain, density of population and length of international borders. The Finance Minister has said that he intends to evolve new criteria and reflect them in future planning and devolution of funds. These criteria should be evolved by the government through a wide consultative process involving parliament, all political parties, stakeholders, NGOs, experts and academics.

“Nutri-farms”

Paragraph 49 of the speech reads as follows:

“Eminent agricultural scientists have suggested that we start a pilot programme on Nutri-Farms for introducing new crop varieties that are rich in micro-nutrients such as iron-rich bajra, proteitn-rich maize and zinc-rich wheat. I propose to provide a sum of upto Rs. 200 crore to start the pilots. Ministry of Agriculture will formulate a scheme and I hope that agri businesses and farmers will come together to start a sufficient number of pilots in the districts most affected by malnutrition.”

Viewed as a piece of legal text, this paragraph could be interpreted in two extremely divergent ways:

Those who have been struggling for a revival of agricultural diversity (such as the growing of traditional millet crops in dryland areas), might be given to understand that this is a move to promote, in pockets, traditional varieties of crops that are indigenous, organically grown, nutritious with naturally present micro-nutrients, intrinsically drought-resistant, climate-change-durable etc. under already existing policies.

Converseley, the same paragraph can also be interpreted to mean that this is a new policy-level thrust to facilitate the easier introduction of genetically modified crops (GMOs) than the law allows today.

If it is the latter meaning that is intended, then the fact that the issue of GMOs is a hotly-debated one, and that in 2012, there was a report of a Parliamentary Standing Committee that heard a cross-section of people, and expressed concerns about many aspects of this technology cannot be overlooked with alacrity.

Much has been written on the subject, and i will not go into those details in this piece. i will be happy to recommend a reading list o anyone who needs to, or wishes to know more on the subject.

Environment-friendly vehicles

Under Indirect Taxes, paragraph 158 reads as follows: “To encourage manufacture of environment-friendly vehicles, I propose to extend the period of concession now available for specified parts of electric and hybrid vehicles upto 31.3.2015”.

While i have not specifically tracked the environment certification criteria of this particular manufacturing process, i would like to point out that the overall structures and systems for environmental certification are in need of review. Lessons need to be learnt, from the initial applications of these concepts. The “environmental standards” of products and processes should incorporate aspects of their impact on equitable access to natural resources for all. Adhering to such standards might prove to be expensive for the private sector. But this is what democratic governments will have to ensure. India might have to take the initiative.

V. Shruti Devi