Schemes under Ministry of Finance

The Ministry of Finance is responsible for administration of finances of the Government. It is concerned with all economic and financial matters affecting the country as a whole including mobilisation of resources for development and other purposes. It regulates expenditure of the Government including transfer of resources to the states. 

This ministry comprises five departments, namely, 

1. Economic Affairs, 
2. Expenditure, 
3. Revenue, 
4. Disinvestment and 
5. Financial Services. 

Department of Economic Affairs 

The Department of Economic Affairs (DEA) inter alia monitors current economic trends and advises the Government on all matters having bearing on internal and external aspects of economic management including, prices, credit, fiscal and monetary policy and investment regulations. All the external, financial and technical assistance received by India, except through specialized international organizations like FAO, ILO, UNIDO and except under international bilateral specific agreement in the field of science and technology, culture and education are also monitored by this department.

 This department has ten divisions. The department is also responsible for preparation and presentation of Union Budget to the Parliament and the budget for the State Governments under President’s Rule and union territory administrations. 

The Directorate of Currency has the administrative control of the Security Printing and Minting Corporation of India Limited (SPMCIL), a wholly owned Government of India Corporation that manage Government of India Mints, Currency Presses, Security Presses and Security Paper Mill. In addition to formulating and executing policies and programmes relating to designs/ security feature of bank notes and coins and issue of commemorative coins, this directorate has also been mandated to conduct research and development activities in this area and indigenization of all materials required for production of bank note and others security products. 

Annual Budget 

The Union Budget of India, also called the General Budget, is presented each year on the last working day of February by the Finance Minister of India in Parliament. 

Annual Financial Statement 

Under Article 112 of the Constitution, a statement of estimated receipts and expenditure of the Government of India has to be laid before Parliament in respect of every financial year. This statement titled ‘Annual Financial Statement’ is the main budget document. The Annual Financial Statement shows the receipts and payments of Government under the three parts in which Government accounts are kept: 

1. Consolidated Fund(art.266.1), 
2. Contingency Fund(art.267)and 
3. Public Account(art.266.2). 

All revenues received by Government, loans raised by it, and also its receipts from recoveries of loans granted by it, form the Consolidated Fund. All expenditure of Government is incurred from the Consolidated Fund and no amount can be withdrawn from the fund without authorization from Parliament. 

Contingency fund of India:-

Occasions may arise when Government may have to meet urgent unforeseen expenditure pending authorization from Parliament. The Contingency Fund is an imprest placed at the disposal of the President to incur such expenditure. Parliamentary approval for such expenditure and for withdrawal of an equivalent amount from the Consolidated Fund is subsequently obtained and the amount spent from Contingency Fund is subsequently recouped to the fund. The corpus of the fund authorized by the Parliament, at present, is ₹ 500 crore. 

Public Account of India:-

Besides the normal receipts and expenditure of Government which relate to the Consolidated Fund, certain other transactions enter Government accounts, in respect of which, Government acts more as a banker, for example, transactions relating to provident funds, small savings collections and other deposits, etc. The moneys thus received are kept in the Public Account and the connected disbursements are also made there from. Parliamentary authorization for such payments from the Public Account is, therefore, not required. In a few cases, a part of the revenue of Government is set apart in separate funds for expenditure on specific objects like road development, primary education including mid-day meal scheme, etc. These amounts are withdrawn from the Consolidated Fund with the approval of Parliament and kept in the Public Account for expenditure on the specific objects. The actual expenditure proposed on the specific objects is, also submitted for vote of Parliament. 

Under the Constitution, the budget has to distinguish expenditure on revenue account from other expenditure. Government Budget, therefore, comprises :

 (i) Revenue Budget; and 

(ii) Capital Budget. 

Demands for Grants 

The estimates of expenditure from the Consolidated Fund included in the Annual Financial Statement and required to be voted by the Lok Sabha are submitted in the form of Demands for Grants in pursuance of Article 113 of the Constitution. Generally, one Demand for Grant is presented in respect of each ministry or department. However, in respect of large ministries or departments more than one Demand is presented. Each Demand normally includes the total provisions required for a service, that is, provisions on account of revenue expenditure, capital expenditure, grants to State and Union Territory Governments and also loans and advances relating to the service. 

In regard to union territories without legislature, a separate demand is presented for each of the union territories. Where the provision for a service is entirely for expenditure charged on the Consolidated Fund, for example, interest payments, a separate Appropriation, as distinct from a Demand, is presented for that expenditure and it is not required to be voted by Parliament. Where, however, expenditure on a service includes both ‘voted’ and ‘charged’ items of expenditure, the latter are also included in the Demand presented for that service but the ‘voted’ and ‘charged’ provisions are shown separately in that Demand. The Demands for Grants are presented to the Lok Sabha along with the Annual Financial Statement. 

Q. Does Union territory having no legislature possess a demand of grant in the union budget?

Finance Bill 

At the time of presentation of the Annual Financial Statement before Parliament, a Finance Bill is also presented in fulfilment of the requirement of Article 110 (1) (a) of the Constitution, detailing the imposition, abolition, remission, alteration or regulation of taxes proposed in the budget. A Finance Bill is a Money Bill as defined in Article 110 of the Constitution. It is accompanied by a Memorandum explaining the provisions included in it. 

Appropriation Bills 

After the Demands for Grants are voted by the Lok Sabha, Parliament’s approval to the withdrawal from the Consolidated Fund of the amounts so voted and of the amount required to meet the expenditure charged on the Consolidated Fund is sought through the Appropriation Bill. Under Article 114(3) of the Constitution, no amount can be withdrawn from the Consolidated Fund without the enactment of such a law by Parliament. 

Vote-on-Account 

The whole process beginning with the presentation of the Budget and ending with discussions and voting on the Demands for Grants requires sufficiently long time. The Lok Sabha is, therefore, empowered by the Constitution to make any grant in advance in respect of the estimated expenditure for a part of the financial year pending completion of procedure for the voting of the demands. The purpose of the ‘Vote on Account’ is to keep Government functioning, pending voting of ‘final supply’. The Vote on Account is obtained from Parliament through an Appropriation (Vote on Account) Bill. 

Sources of Revenue 

In accordance with the Constitution (18th Amendment) Act, 2000, which has been given retrospective effect from April 1, 1996, all taxes to in the Union List, except the duties and taxes referred to in Articles 268 and 260, respective surcharge on taxes and duties referred to in Article 271 and any cess levied for specific purpose under any law made by Parliament, shall be levied and collected by the Government of India and shall be distributed between the union and the states in such manner as may be prescribed by the President on the recommendations of the Finance Commission. For the period 2015-20, the manner of distribution between the centre and the states has been prescribed in Presidential Orders issued after considering the recommendations of the 14th Finance Commission. The main sources of union tax revenue are customs duties, union excise duties, service tax, corporate and income taxes. Non tax revenues largely comprise interest receipts, dividends/profits, fines and miscellaneous receipts collected in the exercise of sovereign functions, regulatory charges and license fees and user charges for publicly provided goods and services. 

Transfer Resources 

In the revised estimates of 2014-15, the devolution of tax receipts from the Union Government to the states as their share of taxes and duties was ₹ 3,37,808 crore. In BE 2015-16, this amount has been increased to ₹ 5,23,958 crore. Besides, total grants and loans to states and union territories was brought down marginally from ₹ 3,55,193 crore in RE 2014-15 to ₹ 3,28,277crore in BE 2015-16 eventual to increase of states’ share in union taxes/duties by 10 per cent from 32 per cent during 2014-15 to 42 per cent in 2015-16 in terms of accepted recommendations of the 14th Finance Commission. 

Public Debt and Other Liabilities 

Public debt of India is classified into three categories of Union Government liabilities into internal debt, external debt and other liabilities. Internal debt for Government of India largely consists of fixed tenure and fixed rate government papers (dated securities and treasury bills) which are issued through auctions. 

Internal debt:

1.Market loans(dated securities)

2.Treasury Bill(91,182 and 364 days)&14day treasury bills,which are given to state govt. only

3.Cash Management Bills and special securities issued to RBI

4. compensation and other bonds, non negotiable and non interest bearing rupee securities issued to international financial institutions and

5.Securities issued under Market Stabilisation Scheme.

External Debt:

External debt represents loans received from foreign governments and multilateral institutions. The Union Government does not borrow directly from international capital markets. Its foreign currency borrowing takes place from multilateral agencies and bilateral sources, and is a part of Official Development Assistance (ODA). 

Other Liabilities:

Other liabilities not a part of public debt, includes other interest bearing obligations of the Government, such as Post Office saving deposits, deposits under small savings schemes, loans raised through Post Office cash certificates, provident funds and certain other deposits. 

The total net liabilities of the Government of India in the BE 2015-16, is estimated at ₹ 68,94,691 crore as against Revised Estimates (RE) ₹ 62,78,554 crore at the end of 2014-15. The estimated public debt in BE 2015-16 includes Internal Debt of ₹ 52,98,217 crore, External Debt of ₹ 2,05,459 crore at Book Value and Other Liabilities of ₹ 13,91,015 crore. 

The Reserve Bank manages the public debt of the Central and the State Governments and also acts as a banker to them under the provisions of the Reserve Bank of India Act, 1934 (Section 20 and 21). The Reserve Bank also undertakes similar functions for the State Governments by agreement with the Government of the respective state (under Section 21 A). 

Fiscal Policy for 2015-16 

The fiscal policy of 2015-16 has been calibrated with two-fold objectives – first, to aid economy in growth revival; and second, to institutionalise the cooperative federal structure in light of emerging views on the Centre-state fiscal relations. 

The Fourteenth Finance Commission (FFC) Award has been one of the themes of the Budget 2015-16. By providing a quantum jump in the states’ share of taxes, FFC has enlarged the scope of development programme by sharing the onus between centre and states. As the first year of the Fourteenth Finance Commission Award period, with higher devolution of taxes to states, Budget 2015-16 is presented with lower tax resources at the disposal of the Centre. 

Overall, the budget size has increased by 5.7 per cent in BE 2015-16 over RE 2014-15. A growth of 8.2 per cent has been provided for non-Plan expenditure in BE 2015-16 over RE 2014-15 keeping in view requirements for defence, major subsidies, interest payments, Finance Commission grants and increase in salaries and pensionary payments. Despite shrinking resource base, in Budget 2015-16, outlay on plan expenditure has seen a marginal decrease of just 0.6 per cent over RE 2014-15. 

On resources side, gross tax revenues in BE 2015-16 are estimated to grow at 15.8 per cent over the gross-tax revenues in RE 2014-15 taking tax-GDP ratio at 10.3 per cent. Government approach of progressively bringing down the deficit has been retained in the Budget 2015-16 despite resource crunch following changes in the revenue sharing between Centre and states. 

The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 was amended in 2015 and as mandated under this Act, the date of achieving fiscal deficit target of 3.0 per cent of GDP shifted to March 31, 2018 from March 31, 2017 envisaged previously. It has been stated that, the additional fiscal space will go towards funding infrastructure investment. Continuing on the path of fiscal consolidation, fiscal deficit target has been set at 3.9 per cent of GDP for 2015-16 as compared to 4.1 per cent of GDP in RE 2014-15. Over the medium-term, fiscal deficit is projected to reduce to 3.5 per cent and 3.0 per cent of GDP at the end of 2016-17 and 2017-18 respectively. 

Sectoral Allocation-2015-16 

Education 

In 2015-16 the budget allocation for Education was decreased by 11.79 per cent to ₹ 69,074.76 crore. 

Health and Family Welfare 

In 2015-16, the budget allocation for Health and Family Welfare was decreased by 11.98 per cent to ₹ 33,282.17 crore. 

Agriculture 

Some of the initiatives taken in the Agriculture sector are:

 (i) steps taken to address the two major factors critical to agricultural production, that of soil and water; 

(ii) ‘Paramparagat Krishi Vikas Yojana’ to be fully supported;

(iii) ‘Pradhanmantri Gram Sinchai Yojana’ to provide ‘Per Drop More Crop’; 

(iv) 25,300 crore to support micro-irrigation, watershed development and the ‘Pradhan Mantri Krishi Sinchai Yojana’; 

(v) 25,000 crore rupees in 2015-16 to the corpus of Rural Infrastructure Development Fund (RIDF) set up in NABARD; ₹ 15,000 crore for Long Term Rural Credit Fund; ₹ 45,000 crore for Short Term Co-operative Rural Credit Refinance Fund; and ₹ 15,000 crore for Short Term RRB Refinance Fund; 

(vi) target of ₹ 8.5 lakh crore of agricultural credit during the year 2015-16; 

(vii) focus on improving the quality and effectiveness of activities under MGNREGA; and 

(viii) need to create a national agriculture market for the benefit farmers, which will also have the incidental benefit of moderating price rises. Government to work with the states, in NITI, for the creation of a unified national agriculture market. 

Good Governance 

Some of the initiatives taken in the Good Governance are: 

1. need to cut subsidy leakages, not subsidies themselves. To achieve this, Government committed to the process of rationalizing subsidies; and 
2. Direct Transfer of Benefits to be extended further with a view to increase the number of beneficiaries from 1 crore to 10.3 crore. 

From Jan Dhan to Jan Surakasha:

Some of the initiatives taken in the Jan Dhan to Jan Surakasha are: 

1. Government to work towards creating a functional social security system for all, specially the poor and the under-privileged; 
2. Pradhan Mantri Suraksha BimaYojna to cover accidental death risk of ₹ 2 lakh for a premium of just ₹ 12 per year; 
3. Atal Pension Yojana to provide a defined pension, depending on the contribution and the period of contribution. Government to contribute 50 per cent of the beneficiaries’ premium limited to ₹ 1,000 each year, for five years, in the new accounts opened before December 31, 2015; 
4. Pradhan Mantri Jeevan Jyoti BimaYojana to cover both natural and accidental death risk of ₹ 2 lakh at premium of ₹ 330 per year for the age group of 18-50; 
5. a new scheme for providing physical aids and assisted living devices for senior citizens, living below the poverty line; 
6. unclaimed deposits of about ₹ 3,000 crore in the PPF, and approximately ₹ 6,000 crore in the EPF corpus. The amounts to be appropriated to a corpus, which will be used to subsidize the premiums on these social security schemes through creation of a Senior Citizen Welfare Fund in the Finance Bill; and 
7. Government committed to the on-going schemes for welfare of SCs, STs and women. 

Tourism :

Some of the initiatives taken in the tourism sector are: 

1. resources to be provided to start work along landscape restoration, signage and interpretation centres, parking, access for the differently abled, visitors’ amenities, including securities and toilets, illumination and plans for benefiting communities around them at various heritage sites; and 
2. visas on arrival to be increased to 150 countries in stages. 

Green India :

Some of the initiatives taken in the Green India sector are:

 (i) target of renewable energy capacity revised to 1,75,000 MW till 2022, comprising 1,00,000 MW solar, 60,000 MW wind, 10,000 MW biomass and 5,000 MW small hydro; 

(ii) a need for procurement law to contain malfeasance in public procurement; 

(iii) proposal to introduce a Public Contracts (Resolution of Disputes) Bill to streamline the institutional arrangements for resolution of such disputes; and 

(iv) proposal to introduce a regulatory reform bill that will bring about a cogency of approach across various sectors of infrastructure. 

Skill India :

Some of the initiatives taken in the Skill India sector include: (i) a national skill mission to consolidate skill initiatives spread across several ministries to be launched; 

(ii) Deen Dayal Upadhyay Gramin Kaushal Yojana to enhance the employability of rural youth; 

(iii) a student Financial Aid Authority to administer and monitor the front-end all scholarship as well Educational Loan Schemes, through the Pradhan Mantri Vidya Lakshmi Karyakram; 

(iv) an IIT to be set up in Karnataka and Indian School of Mines, Dhanbad to be upgraded in to a full-fledged IIT; 

(v) new All India Institute of Medical Science (AIIMS) to be set up in Jammu and Kashmir, Punjab, Tamil Nadu, Himachal Pradesh and Assam. Another AIIMS like institution to be set up in Bihar; 

(vi) a post graduate institute of Horticulture Research and Education is to be set up in Amritsar; 

(vii) the National Optical Fibre Network Programme (NOFNP) to be further speeded up by allowing willing states to execute on reimbursement of cost basis; 

(viii) in spite of large increase in devolution to state sufficient fund allocated to education, health, rural development, housing, urban development, women and child development, water resources and cleaning of Ganga. 

Infrastructure:

Some of the steps taken in this sector include: 

1. sharp increase in outlays of roads and railways. Capital expenditure of public sector units also to go up; 
2. National Investment and Infrastructure Fund (NIIF), to be established with an annual flow of ₹ 20,000 crore to it; 
3. tax free infrastructure bonds for the projects in the rail, road and irrigation sectors; 
4. PPP mode of infrastructure development to be revisited and revitalised; (swiss challenge model and other investment Processes)
5. Atal Innovation Mission to be established in NITI to provide innovation promotion platform involving academicians, and drawing upon national and international experiences to foster a culture of innovation, research and development. A sum of ₹ 150 crore will be earmarked; 
6. Self-Employment and Talent Utilizations(SETU) to be established as techno-financial, incubation and facilitation programme to support all aspects of start-up business. ₹ 1,000 crore to be set aside as initial amount in NITI;
7. ports in public sector will be encouraged, to corporatize, and become companies under the Companies Act to attract investment and leverage the huge land resources and; 
8. five new Ultra Mega Power Projects, each of 4,000 MW, in the Plug-and-Play mode. 

Financial Market: 

In this sector steps taken include: 

1. Public Debt Management Agency (PDMA) bringing both external and domestic borrowings under one roof to be set up this year; 
2. enabling legislation, amending the Government Securities Act and the RBI Act included in the Finance Bill, 2015; 
3. Merging of Forward Markets commission with SEBI; 
4. Section-6 of FEMA to be amended to provide control on capital flows as equity will be exercised by Government in consultation with RBI; 
5. proposal to create a task force to establish sector-neutral financial redressal agency that will address grievance against all financial service providers; 
6. Introduction of India Financial Code in Parliament for consideration and; 
7. Government to bring enabling legislation to allow employees to opt for EPF or New Pension Scheme. For employees below a certain threshold of monthly income, contribution to EPF to be optional, without affecting employees’ contribution. 

Social Sector Programmes: 

The seven flagship programmes continue to receive high priority, viz., Sarva Shiksha Abhiyan; Mid-Day Meal Scheme; National Rural Health Mission; Integrated Child Development Services; Swachh Bharat Abhiyan; Mahatma Gandhi National Rural Employment Guarantee Scheme and 100 Smart Cities and Jawaharlal Nehru National Urban Renewal Mission. Total allocation under these seven flagship schemes were reduced from ₹ 1,39,471.80 crore in 2014-15 to ₹ 1,09,262.40 crore in 2015-16. 

Schemes for the Development of Scheduled Castes and Scheduled Tribes 

From Financial Year 2005-06, a separate statement on the schemes for the welfare of Scheduled Castes (SCs) and Scheduled Tribes (STs) was introduced in the budget document. From the Financial Year 2011-12, this statement is focussed only on plan schemes under ‘Scheduled Castes Sub Plan (SCSP)’ and ‘Tribal Sub Plan (TSP)’ exclusively for Scheduled Castes and Scheduled Tribes welfare schemes respectively. 

The allocations under SCSP/TSP Schemes, however, has been reduced marginally in BE 2015- 16 vis-à-vis RE 2014-15 on account of enhanced devolution of Union Taxes to states as recommended by the Fourteenth Finance Commission. It is estimated that any shortfall in SCSP/TSP on account of Fourteenth Finance Commission Award will be made up by the states from their enhanced resources. Therefore, the total resources available for SCSP/ TSP will remain unaffected. 

Benefit of Women (Gender Budgeting) 

In BE 2015-16, a total budget provision of ₹ 16,657.11 crore has been provided for 100 per cent women specific programmes and ₹ 62,600.76 crore for schemes where at least 30 per cent allocation is made for women specific programmes. 

Welfare of Children (Child Budgeting) 

A statement ‘Provision for schemes for the Welfare of Children’ was included from the Financial Year 2009-10. It indicates provision for educational outlays, provisions for Child protection, etc. The allocation for BE 2015-16 under ‘Welfare of Children’ is ₹ 57,918.51 crore. 

Foreign Exchange Reserves 

India’s, foreign exchange reserves comprise 

1. foreign currency assets (FCAs), 
2. gold, 
3. SDRs and
4. Reserve Tranche Position (RTP) in the IMF.                 Accretion to foreign exchange reserves is the outcome of absorption of excess of capital flows balance over the current account financing needs and valuation gain/loss. In the recent past, trade deficit witnessed moderation, reflecting the impact of lower crude oil prices, among others. The lower trade and current account deficit coupled with buoyant capital inflows resulted in the increase in foreign exchange reserves in 2013-14 and 2014- 15.

                  In the fiscal 2014-15, foreign exchange reserves remained in the range of US$ 310.9 billion to US$ 341.6 billion. Foreign exchange reserves stood at US$ 353.4 billion by July, 2015, showing an increase of US$ 11.8 billion over the level of US$ 341.6 billion by March, 2015. The RBI has shored up the country’s foreign exchange reserves to US$ 354.4 billion as on August 14, 2015. The country’s foreign exchange reserves are at a comfortable position to buffer any external shocks. 

Capital Market 

(a) Primary Markets 

The Securities Laws (Amendment) Act, 2014 :

The Securities Laws (Amendment) Act, 2014, inter-alia, has amended sub-section (8) of section 11C of the Securities and Exchange Board of India ‘SEBI’ Act, 1992 to provide that search and seizures can be conducted by SEBI after obtaining the approval from the Magistrate or Judge of such designated court in Mumbai. Further, the Securities Laws (Amendment) Act, 2014 inter-alia provides for establishment or designation of Special Court by the Central Government for the purpose of speedy trial of offences punishable under the SEBI Act, 1992;

Tax pass through for (Alternative Investment Fund) category I and II :

Under the SEBI Alternative Investment Fund (AIF) Regulations, 2012 various types of Alternative Investment Funds (AIFs) have been classified under three separate categories as Category I, II and III AIFs. 

Category I AIFs:

Category I AIFs are funds that invest in start-up or early stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the Government or regulators consider as socially or economically desirable. 

Category II AIFs:

Category II AIFs are funds including private equity funds or debt funds which do not fall in Category I and III and which do not undertake leverage or borrowing other than to meet day-to-day operational requirements. 

Category III AIFs

Category III AIFs are funds which employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. 

The Union Budget 2015-16, tax pass through has been provided for AIF Category I and Category II. 

Corporate Bond Market Developments 

In context of Indian economy a vibrant debt market will help in channelizing the flow of capital towards the areas where it is required most i.e. investments in infrastructure sector which has long gestation periods. Further, in a bank dominated financial system providing an alternate source of financing through debt markets is crucial. 

The SEBI has taken several steps in the development of the Corporate Bond Market. 

These are : 

1. simplified listing agreement; 
2. mandatory settlement of corporate bonds through clearing corporations; 
3. standardization of the application form and abridged prospectus for public issue of debt securities; 
4. standardized offer document/memorandum in public issue and listing of non- convertible debt as well as privately placed debt securities which are listed or proposed to be listed; 
5. online system for making application to public issue of Debt Securities;
6. centralized database;
7. SEBI on October 29, 2013 has specified several measures with regards to certain issues in debt market; 
8. amendment of ILDS for allowing filing of Shelf prospectus; and 
9. reporting and clearing and settlement of trades in Securitized Debt Instruments through exchange platform. 

RBI and other regulators have also taken several steps for the development of the Corporate Bond Market. 

These are: 

1. issuing of detailed guidelines on setting up of IDFs (Infrastructure Debt Funds) by banks and NBFCs, which are expected to enhance the flow of long-term debt in infrastructure development; 
2. providing banks an additional limit of 10 per cent of their investments in non-SLR securities as on the end of previous fiscal, to invest in unrated bonds of companies engaged in infrastructure activities within the overall ceiling of 20 per cent; 
3. allowing repo on corporate bonds for maturity less than one year; 
4. issuing of draft guidelines on allowing banks to provide Partial Credit Enhancements to bonds issued for funding infrastructure projects by Companies/Special Purpose Vehicles (SPVs); 
5. allowing investment in debt of 15 private sector companies which was earlier seven; 
6. extending the tenure of investments in AAA rated paper of public sector units (PSUs) to up to 25 years and for AA rated PSUs up to 15 years by EPFO; 
7. allowing Insurance Companies to take the Proprietary Trading Membership (PTM) of stock exchanges for trading in debt by IRDA; 
8. increasing the investment limit, in debt securities, for Government Sector NPS Schemes, upto 40 per cent, provided that they have three years of residual maturity and investment grade rating from at least one credit rating agency, subject to further due diligence by the fund managers by PFRDA. 

Financial Literacy 

The process of drafting a National Strategy for Financial Education was initiated by SEBI under the aegis of Financial Stability and Development Council (FSDC) in November 2011-12. With a vision of ‘a financially aware and empowered India’, National Strategy for Financial Education had been finalized under which various activities have been undertaken. 

The national level exam for school students, National Financial Literacy Assessment Test (NFLAT) had been conducted consecutively for the second year under the aegis of National Centre for Financial Education attached to National Institute for Securities Markets. As reported, the NFLAT for the year 2014-15 was held on December 6-7, 2014 and around a lakh students from all over the country appeared for the test held at more than 250 test centres across the country. SEBI had publicized NFLAT in various schools and colleges through ROs/LOs and provided necessary contribution. 

The portal, www.ncfeindia.org on various aspects of financial market including banking, pension, insurance and securities market with content inputs from various regulators including SEBI has been launched. 

(b) Secondary Markets 

SEBI (Prohibition of Insider Trading) Regulations, 2015 

The SEBI (Prohibition of Insider Trading) Regulations, 1992 were notified in 1992, which was framed to deter the practice of insider trading in the securities of listed companies. Since then there had been several amendments to the regulations. To ensure that the regulatory framework dealing with insider trading in India is further strengthened, SEBI sought review of the extant insider trading regulatory regime. The new regulations strengthen the legal and enforcement framework, align Indian regime with international practices, provide clarity with respect to the definitions and concepts, and facilitate legitimate business transactions. SEBI has notified the SEBI (Prohibition of Insider Trading) Regulations, 2015 on January 15, 2015 which has replaced the existing regulations of 1992 with effect from May 15, 2015. 

SEBI (Delisting of Equity Shares) (Amendment) Regulations, 2015 

To address concerns of market participants regarding existing SEBI (Delisting of Equity Shares) Regulation, 2009, and to make the delisting process less cumbersome, SEBI Board in its meeting held on November 19, 2014 and January 22, 2015 has approved certain proposals to review the existing regulatory framework on delisting for making it more effective by amending the SEBI (Delisting of Equity Shares) Regulations, 2009. The proposals approved, among others, includes conditions for the delisting to be successful, the process of the determination of offer price through reverse book building process, reducing timeline for completing the delisting process, etc. Consequent to such approval, SEBI has notified the SEBI (Delisting of Equity Shares) (Amendment) Regulations, 2015 on March 24, 2015. 

(c) External Markets 

The Government in association with all financial sector regulators has adopted measures to strengthen financial markets which is reflected through buoyant portfolio and direct foreign investment flows during 2014-15. However, the year 2015-16 has begun with net portfolio outflows in the wake of a reduction in global portfolio allocations to India. Global financial markets have been quite volatile, with risk-on risk-off shifts induced by changing perceptions of monetary policies in the advanced economies, and rising concerns over the Eurozone. Nevertheless, India’s foreign exchange reserves are around US$ 350 billion, providing a strong second line of defence to good macro-economic policies if external markets turn significantly volatile. 

Foreign Portfolio Investments 

The new SEBI Foreign Portfolio Investment Regulations which has come into effect from June 1, 2014 has enabled to rationalize/harmonize various foreign portfolio investment routes and to establish a unified, simple regulatory framework. As part of Risk based approach towards customer identity verification (KYC), Foreign Portfolio Investors (FPIs) have been categorized into three major categories; category I, II and III where the documentary requirements are simplest for category I and most stringent for category III. 

Recent developments regarding Foreign Portfolio Investment Policy 

Foreign Portfolio Investment (FPIs) are required to invest in Corporate Bonds having a minimum residual maturity of three years. FPIs have also been prohibited from investing in liquid and money market mutual fund schemes. Since commercial papers are short term instruments having maturities of less than one year, FPIs have also been prohibited from investing in commercial papers. 

FPIs have been permitted to invest in the coupons received on their investments in Government securities. Such investments shall be kept outside the applicable limit (currently USD 30 billion) for investments by FPIs in Government securities. 

Q.What is the upper limit for FPI investment in Government Securities? 

Q.What are Depository Receipts(D.R)?

A depositary receipt (DR) is a negotiable financial instrument issued by a bank to represent a foreign company's publicly traded securities. The depositary receipt trades on a local stock exchange. Depositary receipts facilitates buying shares in foreign companies, because the shares do not have to leave the home country.

Depositary receipts that are listed and traded in the United States are American depositary receipts (ADRs). European banks issue European depository receipts (EDRs), and other banks issue global depository receipts (GDRs).

New Depository Receipts Scheme 

The new Depository Receipts (DR) Scheme, 2014 formulated on the basis of M.S. Sahoo Committee Recommendations has come into effect from December 15, 2014. Enabling tax amendments pertaining to new DR Scheme have been provided vide Finance Act of 2015. The new DR Scheme allows:

 (i) issuance of Depository Receipts (DRs) against any underlying securities – equity or debt; 

(ii) issuance by any issuer – listed or unlisted; 

(iii) DRs can be issued both for capital raising through new shares or against existing/ secondary shares; 

(iv) issuance may be either sponsored or unsponsored; and 

(v) DRs will count as public shareholding if they have attached voting rights for holder. 

Deepening of Currency Derivatives Market 

A deep and liquid currency derivative market is essential in India to provide an opportunity for resident firms to hedge their foreign currency exposure. In June 2014, FPIs were permitted to participate in exchange traded currency derivatives (ETCD) markets and measures were adopted to bring parity between ETCD and OTC markets. Fresh measures adopted in February/March, 2015 include: 

1. rationalized documentation and other administrative requirements for hedging on ETCD markets; 
2. domestic entities and FPIs provided with greater flexibility while taking foreign currency positions in USD-INR, EUR-INR, GBP-INR and JPY-INR pairs; 
3. foreign portfolio investors (FPIs) have been allowed to take positions (long as well as short) in USD-INR pair up to USD 15 million per exchange in the Exchange Traded Currency Derivative (ETCD) segment; 
4. further, they have also been permitted to take long (bought) as well as short (sold) positions in EUR-INR, GBP-INR and JPY-INR pairs, all put together, up to USD 5 million equivalent per exchange; and 
5. beyond the above limits, FPIs can take long position in any exchange to hedge the underlying exposure. 

Establishment of International Financial Services Centre 

International Financial Services Centres (IFSC) are to be set-up/operationalized in India to provide avenues to finest financial minds in India to fully exhibit and exploit their strength to the country’s advantage and enable India to become a producer and exporter of international financial services. Pursuant to Budget 2015-16 announcements the following regulations have been released to operationalize IFSC in GIFT City, Gandhinagar, Gujarat: (i) Notification under SEZ Act; (ii) FEMA Amendment Regulation; (iii) RBI guidelines on IFSC banking units; (iv) amendment rules under Insurance Act Regulations issued by IRDA for Insurance Companies and; and (v) SEBI guidelines for capital market participants. 

External Commercial Borrowings Policy Reforms 

Foreign Currency Borrowing, popularly known as External Commercial Borrowing (ECB) refers to commercial loans in foreign currency availed by persons resident in India from non-resident lenders. Government in consultation with RBI aims to liberalize and streamline the extant ECB policy to enable Indian firms greater access to international capital markets. 

Total money raised through External Commercial Borrowings/Foreign Currency Convertible Bonds (ECB/FCCB) route during April, 2014-March, 2015 is USD 28,385 million. 

In May, 2015 to facilitate ECB lending denominated in INR by overseas lenders, such lenders have been allowed to enter into swap transactions with their overseas bank which shall, in turn, enter into a back-to-back swap transaction with any authorized dealer bank in India subject to specific terms and conditions. 

Amendments in FEMA 

The major amendment in Foreign Exchange Management Act (FEMA) enhanced the limit under Liberalized Remittance Scheme (LRS) from USD 1,25,000 to USD 2,50,000 with effect from May 26, 2015. 

Capital Account Controls is a policy rather than a regulatory matter. The Finance Act, 2015 has amended Section 6 (pertaining to Capital Account Transactions) and Section 46 (providing Central Government Power to make Rules) of FEMA, 1999 specifying that any class of debt instruments will be regulated by RBI and any class of non-debt instruments will be regulated by Government of India with provision for mutual consultations. 

Securities and Exchange Board of India 

SEBI is the regulator of the securities market in India. It was established in 1988 and given statutory powers in 1992 under the SEBI Act, 1992. The preamble of SEBI enshrines three statutory objectives: 

1. protecting the interest of investors in the securities market; 
2. promoting the development of securities market; and 
3. regulating the securities market Over the years, SEBI’s focus has been on development of a well regulated modern securities market in India by adoption of global standards and international best practices. The legal and regulatory framework put in place by SEBI and the disclosure based regime has enhanced the transparency of markets, improved governance standards and reduced the risks of default. 

Its major functions are: 

1. regulating the business in stock exchanges and any other securities markets; 
2. registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers and such other intermediaries who may be associated with securities markets in any manner; 
3. registering and regulating the working of venture capital funds and collective investment schemes, including mutual funds; 
4. promoting and regulating self-regulatory organizations; 
5. prohibiting fraudulent and unfair trade practices relating to securities markets; 
6. promoting investors’ education and training of intermediaries of securities markets; 
7. prohibiting insider trading in securities; 
8. regulating substantial acquisition of shares and takeover of companies; 
9. performing such functions and exercising such powers under the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), as may be delegated to it by the Central Government; 
10. levying fees or other charges for carrying out the purposes of this section; 
11. conducting research for the above purposes. 

Equity Derivatives 

The minimum contract size in equity derivatives segment was increased from ₹ 2 lakh to ₹ 5 lakh. Accordingly, the framework for determination of lot size for derivatives contracts specified vide SEBI circular dated January 8, 2010 was modified. 

Interest Rate Derivatives 

SEBI permitted stock exchanges to introduce cash settled Interest Rate Futures on six-year and 13 year security. The product specifications, position limits and risk management framework for both RF products were specified by SEBI. 

Currency Derivatives 

SEBI revised the transaction limit in exchange traded currency derivatives to $15 million, from $10 million previously, for both foreign and domestic investors without having to establish the existence of any underlying exposure. 

Depositories 

On basis of recommendation of Depository Systems Review Committee, SEBI issued risk management policy framework for the depositories. 

In order to ensure centralized record of all securities, including both physical and dematerialized shares, issued by the company and its reconciliation thereof, SEBI decided that the depositories shall create and maintain a database of distinctive numbers of equity shares of listed companies in respect of all physical shares. 

Mutual Funds 

SEBI has prescribed that as a part of the extant risk management framework, AMCs should have stress testing policy in place which mandates them to conduct stress test on all Liquid Fund and MMMF schemes. The stress test should be carried out internally at least on a monthly basis, and if the market conditions require so, AMC should conduct more frequent stress test. 

SEBI has made it mandatory for all mutual fund schemes to display the ‘Riskometer’, which is a visual representation of the level of risk involved in the particular scheme from July 1, 2015. 

FPI 

FPIs shall not be permitted to invest in liquid and money market mutual fund schemes. Change in investment conditions/restrictions for FPIs was specified. 

Retail Investors 

With a view to increase participation, resident individual investors were allowed to open a trading account and demat account by filling up a simplified Saral Account Opening Form. 

Investor protection has been the pivotal objective of SEBI. Towards this end, during 2014-15, it promptly and vigorously pursued entities raising monies illegally and took punitive and preventive actions against companies found to be falling within its purview. SEBI also issued caution notes to investors informing them not to subscribe to issues/ schemes floated by such companies against whom SEBI had taken action and also cautioning the companies not to issue securities/ mobilize monies from the public without complying with the relevant provisions of law. 

As per the World Bank report on ‘Doing Business 2015: Going Beyond Efficiency’, India ranks seventh with respect to protection of minority shareholders. SEBI has been taking various regulatory measures to expedite the redressal of investor grievances. SEBI Complaints Redressal System (SCORES) has helped investors in getting real time information about the status of their grievances. Alternatively, investors can also call the SEBI helpline to check the status of their grievances. 

Several new powers have been conferred to SEBI via Securities Laws (Amendment) Act, 2014 notified in August, 2014. The amendments included explicit power to disgorge ill-gotten gains and credit disgorgement amount to Investor Protection and Education Fund and its utilization, power to conduct search and seizure, explicit powers for settlement, special courts and public prosecutors, attachment and recovery, power of review of orders passed by Adjudicating Officers, enhanced powers in respect of Collective Investment Scheme (CIS). 

Various new regulations has been put in place by SEBI during 2014-15 which included inter alia, SEBI(Prohibition of Insider trading) Regulations, SEBI (Real Estate Investment Trusts) Regulations, SEBI (Research Analyst) Regulations, SEBI (Infrastructure Investment Trusts) Regulations and SEBI (Share based Employee Benefit) Regulations. 

Pursuant to the Financial Sector Legislative Reforms Commission recommendations, the Budget for 2015-16 proposed the merger of the regulator of the commodity futures market viz. Forward Markets Commission with SEBI, so as to strengthen regulation and development of the commodities derivative market. 

Securities Appellate Tribunal 

Securities Appellate Tribunal (SAT) is established under Section 15K of the Securities and Exchange Board of India Act, 1992, to exercise the jurisdiction, powers and authority conferred on the Tribunal under the SEBI Act, 1992, PERDA Act, 2013, Insurance Act, 1938 and other law for the time being in force. 

SAT comprises one Presiding Officer who is a sitting/retired Judge of the Supreme Court or a sitting/retired Chief Justice of a High Court; or a sitting or retired Judge of a High Court who has completed not less than seven years of service as a Judge in a High Court and two members who are persons of ability, integrity and standing and have shown capacity in dealing with problems relating to securities market and have qualification and experience of corporate law, securities law, finance, economics or accountancy. They are appointed by the Central Government for a term of five years and are eligible for re-appointment, subject to the age limit prescribed by Section 15N. 

SAT is not bound by procedure laid down by Code of Civil Procedure but is guided by principles of natural justice and has powers to regulate its own procedure, including the places at which it shall have its sittings. Appellant may appear in person or authorize chartered accountants, company secretaries, cost accountants and legal practitioners or any of its officers to present his or its case before the Securities Appellate Tribunal. 

Civil courts do not have jurisdiction to entertain any suit or proceeding in respect of any matter which SAT is empowered to determine and no injunction can be granted by any court or any other authority, in respect of any action taken or to be taken, in pursuance of any power conferred upon the tribunal under SEBI Act. Any person aggrieved by any decision/order of SAT may file an appeal to Supreme Court. SAT is empowered to review its own decision. It started functioning in 1997 as a single member tribunal and thereafter was reconstituted as a three member tribunal in 2003. 

Forward Market Commission 

Forward Markets Commission (FMC) headquartered at Mumbai, is a regulatory authority for commodity futures market in India. It is a statutory body set-up under Forward Contracts (Regulation) Act, 1952. The commission functions under the administrative control of the Ministry of Finance, Government of India. 

The Act provides that the commission shall consist of not less than two but not exceeding four members appointed by the Central Government, out of them one being nominated by the Central Government to be the Chairman of the commission. 

The functions of the Forward Markets Commission are: (a) to advise the Central Government in respect of recognition or withdrawal of recognition from any association or in respect of any other matter arising out of the administration of the Forward Contracts (Regulation) Act, 1952; (b) to keep forward markets under observation and to take such action in relation to them, as it may consider necessary, in exercise of the powers assigned to it by or under the Act; (c) to collect and whenever the commission thinks it necessary, to publish information regarding the trading conditions in respect of goods to which any of the provisions of the Act is made applicable, including information regarding supply, demand and prices, and to submit to the Central Government, periodical reports on the working of forward markets relating to such goods; (d) to make recommendations generally with a view to improving the organization and working of the forward markets; and (e) to undertake inspection of the accounts and other documents of any recognized association or registered association or any member of such association whenever it considers it necessary. 

Commodity Exchanges 

Currently six National Exchanges, viz., Multi Commodity Exchange of India Ltd., Mumbai (MCX); National Commodity and Derivatives Exchange Ltd., Mumbai (NCDEX); National Multi- Commodity Exchange of India Ltd., Ahmedabad (NMCE); Indian Commodity Exchange Ltd., Mumbai (ICEX); ACE Derivatives and Commodity Exchange, Mumbai; and Universal Commodity Exchange Ltd, Navi Mumbai (UCX) are recognized. Besides, there are six Commodity Specific Exchanges recognized for organizing forward trading in various commodities approved by the Commission under the Forward Contracts (Regulation) Act, 1952. 

The commodities traded at these exchanges comprise: (a) edible oilseeds complexes like mustard seed, soy oil etc.; (b) food grains – wheat, gram, bajra, maize etc.; (c) metals – gold, silver, copper, zinc, etc.; (d) spices – turmeric, pepper, jeera etc.; (e) fibres – cotton, raw jute, etc.;  and (f) others – gur, rubber, natural gas, crude oil, etc The liberalized markets witnessed a boom in the volume of commodities traded in the Commodity Futures Markets. 

Benefits to Farmers 

Farmers benefit from the price signals emitted by the futures markets even though they may not directly participate in its market. The futures markets lead to reduction in the amplitude of seasonal price variation and help the farmers realize a better price at the time of harvest. This also helps the farmer in planning his cultivation in advance as well as to determine the kind of crop which he would prefer to raise, by taking advantage of the advance information of the future price trends, and probable supply and demand of various commodities. By providing the manufacturers and the bulk consumers a mechanism for covering price-risks, the futures market induces them to pay higher price to the producers, as the need to pass on the price-risk to farmers is obviated. 

Regulatory Tools 

The commission has been keeping the commodity futures markets well regulated. In order to protect market integrity, the commission has prescribed the measures like: (i) limit on open position of individual members as well as clients to prevent over-trading; (ii) limit on price fluctuation (daily/weekly) to prevent abrupt upswing or downswing in prices; and (iii) special margins to be collected on outstanding purchases or sales to curb excessive speculative activity through financial restraints. 

Sometimes, extreme steps like skipping trading in certain deliveries of the contract, closing the markets for a specified period and even closing out the contract to overcome emergency situations are taken. The regulator also calls for daily reports from the exchanges and takes other pro-active steps to ensure that there is no market abuse and that the prices reflected on the exchange platform are governed by the demand and supply factors alone in the physical markets. Thus, to check excessive speculation and price volatility, the futures market in commodities is kept under constant watch and surveillance. 

Initiatives 

In the Commodity Futures Market, the futures and delivery-based forward contracts are traded. ‘Options’ are not permitted. In order to ensure that the stakeholders have a proper understanding of the functioning of commodity markets, the commission has undertaken various initiatives such as conducting awareness programmes, capacity building programmes and other activities for raising awareness about the commodity futures market and to build capacities among the stakeholders. 

To bring effective price discovery and efficiency in physical markets, delivery based transferable specific delivery and non-transferable specific delivery forward contracts were launched. Further, the commission revised the policy for Daily Price Limits (DPL) in agricultural futures contracts so as to enable the market to capture actual price movement. To enable National Exchanges to respond swiftly to market requirements, the commission has also allowed National Exchanges to modify most contract specifications of futures contracts. 

The exchanges have been directed to disclose the position of the top 10 clients in order of their open interest on daily basis and also disclose the names of top 10 clients who had given or taken deliveries 10 days after the settlement. All the Commodity Exchanges have also been directed to display the polled price collected from participants and spot price polling mechanism for every contract, prominently on their website. 

The commission decided that the National Exchanges shall not charge any fee to conduct audit of their members and that they should develop in-house capacity to conduct such audits. The exchanges should share information about defaulter/suspended/expelled members with other Commodity Exchanges. In case of expulsion of a member from one Commodity Exchange, such member would ipso facto stand expelled from all the exchanges where he is a member. 

The e-KYC service launched by UIDAI has been accepted by the Forward Market Commission, as an additional valid proof for KYC verification and made KYC form of the Commodity Derivatives Market identical to that prescribed by SEBI for the securities market, to enable uniform KYC registration process in the two markets. Participants of Commodity Market were enabled to avail services of KYC Registration Agencies (KRAs) for client registration and uploading and downloading of client data. This facilitates clients of commodity market to register and avoid duplication of paper work with various intermediaries. The commission revised the Guidelines on issue of Electronic Contract Notes (ECN) which include provisions on the use of digital signatures as provided in the Information Technology (IT) Act, 2000. 

In order to overcome the operational difficulties encountered by the trading members, the 

commission also revised the procedure for surrender of membership and the facility of refund of 

interest free deposit to the members surrendering membership was extended to members who had activated trading but never traded. 

The financial sector regulatory agencies are implementing the governance enhancing principles for enhanced consumer protection, greater transparency in their functioning on voluntary basis. With a view to facilitating the task of the regulators and help develop a uniform rationale based understanding about the non-legislative governance enhancing principles, a detailed ‘Guidance Handbook’ for implementing the same was provided to the regulators. A copy of the handbook has been placed on the website of the Ministry of Finance. 

The National Informatics Centre (NIC) in Department of Economic Affairs, has developed an MIS software for monitoring progress of implementation of the non legislative recommendations (NLRs). The MIS software was inaugurated in 2015. 

A Monetary Policy Framework Agreement between the Government of India and the Reserve Bank of India (RBI) has been signed on February 20, 2015, providing for flexible inflation targeting. The (FMC) and (SEBI) have been merged through the Finance Act 2015-16. 

Bankruptcy Law Reforms 

A committee was set up in 2014 for providing an entrepreneur friendly legal bankruptcy framework for India. It submitted an Interim Report in 2015. 

Infrastructure and Energy 

India has emerged among the few large economies with a promising economic outlook. Evidence based on the new series of National Accounts (with 2011-12 base) suggests that the positive growth signals that had unravelled in 2013-14 got strengthened in 2014-15, particularly in the industrial and services sectors. Factors like the steep decline in oil prices, plentiful flow of funds from the rest of the world and potential impact of the reform initiatives of the Government at the Centre along with its commitment to calibrated fiscal management and consolidation bode well for the growth prospects and the overall macro-economic situation. 

The growth rate in GDP at constant (2011-12) market prices in 2012-13 was 5.1 per cent, which increased to 6.9 per cent in 2013-14 and is estimated to further increase to 7.3 per cent in 2014-15 (Provisional Estimates). 

Infrastructure Development 

Growth of the Indian economy in the recent years has placed an increasing stress on the physical infrastructure, which already faces substantial deficit both in terms of capacities and efficiencies. 

According to the 12th Plan projections, India requires an investment of USD 1 trillion or ₹ 60,00,000 crore for funding its infrastructure needs during the period 2012-17. From this, private sector is likely to share about 50 per cent of the costs. 

Within the next three to four years, the country plans to attain a growth rate of 7-8 per cent through enhanced investments in infrastructure, focus on the creation of an investor-friendly environment, fostering social inclusion and fiscal consolidation. Budget 2014-15 and 2015-16 incorporate measures aimed at reviving the economy and accelerating growth, particularly the manufacturing sector, through renewed focus on infrastructure development. The highlights are summarized here: 

(a) Urban Renewal and Rural Development : (i) ‘Housing for All’ by 2022: A Mission on Low bonds, the Government has come up with the idea of ‘Tax Free Bonds’ to address the specific needs of infrastructure deficit, especially in sectors such as roads, railways and irrigation which are essential for economic growth in any country. Taking its commitment for infrastructure development, Government has approved issuance of tax free bonds of ₹ 40,000 crore through infrastructure CPSEs in Financial Year 2015-16. 

Debottlenecking of Stalled Projects 

With a view to putting in place an institutional mechanism to track stalled investment projects, both in the public and private sectors and to remove implementation bottlenecks in these projects, a cell in the nature of Project Monitoring Group (PMG) has been set up for all large projects, both public and private. Central e-PMS, a web enabled information system has also been put in place where in an entrepreneur can provide the details of his project having investments above ₹ 1,000 crore (USD 167 million) along with issues that are inhibiting its smooth implementation. As per information provided by PMG (as on July 17, 2015), all issues in 272 projects (Investment ₹ 9,44,692 crore) have been resolved. At present 314 projects (Investment ₹ 13,37,656 crore) including one resolved project opened for new issues, are under consideration of PMG. 

National Investment and Infrastructure Fund 

Government is to create a National Investment and Infrastructure Fund (NIIF) with the objective to maximize economic impact mainly through infrastructure development in commercially viable projects, both green field and brown field, including stalled projects. 

Initiatives for Promoting PPPs 

A dedicated PPP Cell was set up in Department of Economic Affairs, to serve as the secretariat for the various committees that appraise and approve central sector projects and for innovative interventions and financial support mechanisms for facilitating PPPs in the country, managing training programmes for capacity building for PPPs. 

The appraisal mechanism for the PPP projects has been streamlined to ensure speedy appraisal of projects, eliminate delays, adopt international best practices and have uniformity in appraisal mechanism and guidelines. The appraisal mechanism includes setting up of the Public Private Partnership Appraisal Committee (PPPAC) responsible for the appraisal of PPP projects in the central sector. The PPPAC has approved 287 central projects proposal with Total Project Cost (TPC) of ₹ 3,27,196.96 crore. These include projects in roads, ports, civil aviation, tourism infrastructure, housing, etc. During the year 2014-15, 18 projects were approved with TPC of ₹ 29,070.87 crore. 

A Viability Gap Funding Scheme for PPP projects was created. Infrastructure projects are often not commercially viable on account of having substantial sunk investment and low returns, they however continue to be economically essential. The scheme has been formulated which provides financial support in the form of grants, one time or deferred, to infrastructure projects undertaken through public-private partnerships with a view to make them commercially viable. It provides total Viability Gap Funding (VGF) up to twenty per cent of the total project. The Government or statutory entity that owns the project may, if it so decides, provides additional grants out of its budget up to further 20 per cent of the total project cost. 

Viability Gap Funding under the scheme is normally in the form of a capital grant at the stage of 

project construction. So far 183 projects have been granted ‘in-principle’ approval, with a total project cost of ₹ 95,138.68 crore and VGF of ₹ 16,731.55 crore in various sectors. During the year 2014-15, seven projects with TPC of ₹ 7,589.89 crore and VGF of ₹ 65.48 crore were granted ‘in- principle’ approval. Fifty-five projects with TPC of ₹ 31,608.91 crore and VGF of ₹ 5,246.01 crore have been granted ‘final approval’. During the year 2014-15, 11 projects with a TPC of ₹ 3,419.93 crore and VGF of ₹ 571.84 crore have been granted ‘final approval’. 

While quality advisory services are fundamental to developing well-structured, value-for- money PPPs, the costs of procuring PPPs, and particularly the costs of transaction advisors, are significant. Development of robust projects with a sound financial structure and optimal risk allocation is critical for evincing a market response in respect of the projects. The scheme for ‘India Infrastructure Project Development Fund’ (IIPDF) was launched to finance the cost incurred towards development of PPP projects. The IIPDF supports up to 75 per cent of the project development expenses. 

The Government has also set up India Infrastructure Finance Company Limited (IIFCL) with the specific mandate to play a catalytic role in the infrastructure sector by providing long-term debt for financing infrastructure projects. IIFCL funds viable infrastructure projects through long term debt, refinance to banks and financial institutions for loans granted by them, with tenor exceeding ten years or any other mode approved by the Government. 

Capacity Building and Mainstreaming of PPPs 

A dedicated website www.pppinindia.com for PPPs giving comprehensive and current information on the PPP initiatives and various knowledge resources and Government guidelines on PPPs has also been developed. 

As part of wide ranging efforts for knowledge dissemination on PPPs, the Department of Economic Affairs (DEA) has developed tool kits and knowledge products for use of PPP practitioners. These include online toolkits to help project authorities to design and develop projects and guidance material for post award contract management. A web enabled database www.infrastructureindia.gov.in has also been developed to provide information on infrastructure projects including PPPs. The database is a repository of information on infrastructure projects and their status of implementation across sectors and regions. 

Renegotiation of PPP Contracts 

The DEA has developed a report on the framework for renegotiation of PPP contracts, with a particular focus on the National Highway and Major Port Concessions. The report identifies issues and changes that may need to be made in the contractual and institutional arrangement post award of the projects. 

Contract Management 

The DEA has developed guidance material for improving the post-award management of PPPs, with particular focus on day-to-day monitoring and proactive management of key risks in a manner that best preserves the interests of the users of infrastructure services and the concessioning authority. The manuals have been developed for the highways sector on a step-by- step approach on various activities required to be undertaken at different stages of the project lifecycle. Manuals are also being developed for the port sector and the education sector. The web based online toolkits will be available in the public domain for easy access on www.pppinindia.com 

PPP Pilot Project Programme 

In the DEA is also a PPP Pilot Projects Programme where the process of structuring the PPP Project is hand held by the Central Government to develop demonstrable PPP Projects in challenging sectors. The objective of the initiative is to develop robust PPP projects and successfully bid them to establish their replication potential in the sectors concerned. Projects are being explored in the water supply sector, food storage, waste-to-energy, integrated development clusters, education, health, etc. 

3 P India 

An institution ‘3P India’ is proposed to be set up to provide support to mainstreaming PPPs for a more directed effort to scale up private investments in infrastructure and for developing a broad and diversified portfolio of PPP projects not only at the Central and the State Governments’ level but also at the level of local self governments. 3P India is envisaged to support the public sector in programmatic level activities, viz., policy implementation and regulatory support, as also provide advice and handholding services for delivery support at the project level. 

FDI Policy 

As per the extant policy, FDI up to 100 per cent is allowed under the automatic route in most of the sectors/activities. FDI under the automatic route does not require prior approval either by the Government of India or the Reserve Bank of India (RBI). Investors are only required to notify and file documents in the concerned Regional RBI office. Under the Government approval route, applications for FDI proposals are considered and approved by the Foreign Investment Promotion Board (FIPB). 

The FDI policy has been liberalized progressively through review of the policy on an ongoing basis and allowing FDI in more industries under the automatic route. Three major reviews were undertaken in the year 2000, 2006 and 2007-08. A major policy stance defining Indirect Investment was taken in 2009 which elaborated the counting of foreign Indirect Investment and guidelines for downstream investments by foreign owned or controlled companies as also guidelines for transfer of ownership from residents to non-residents in sensitive sectors. Table 13.5 details total foreign investment from April 2010 to April 2015. 

Recent Changes 

NIC Code: Mapping of the sector specific FDI Policy in Consolidated FDI Policy, 2014 in terms of National Industrial Classification (NIC)-2008 has been done with the objective of improving ease of doing of business in India.

Pharma Sector: In view of difficulties of investors, the Government allowed FDI up to 100 per cent under the automatic route for manufacturing of medical devices, which was earlier placed in the Government approval route. 

Insurance Sector: The Government in 2015 increased the FDI limit to 49 per cent (up to 26 per cent on automatic route and beyond 26 per cent to 49 per cent under approval route) in respect of insurance company, insurance brokers, third party administrators, surveyors and loss assessors and other insurance intermediaries appointed under the provisions of Insurance Regulatory and Development Authority Act (IRDA), 1999 subject to compliance of Insurance Act and necessary license from IRDA for undertaking insurance activities. Further, ownership and control of Indian Insurance Company should remain in the hands of resident Indian entities at all times. 

Pension Sector: The Government allowed in 2015 FDI in Pension Sector. FDI upto 26 per cent is allowed on automatic route whereas FDI above 26 per cent and upto 49 per cent is allowed under approval route. 

Pricing Guidelines: RBI in 2014 notified the revised pricing guidelines for issue/transfer of shares or convertible debentures for unlisted companies and clarified that the price can be worked out as per any internationally accepted pricing methodology on arm’s length basis. 

Enhancing the Limit of FIPB: The Government enhanced the approval limit of FIPB to ₹ 3,000 crore from the earlier provison of 2,000 crore. Proposal having foreign investment greater than ₹ 3,000 crore need to be approved by the Cabinet Committee on Economic Affairs. This will facilitate/expedite the process of considering/approving the foreign investment proposals. 

Relaxation of norms for Investment by Non Resident Indian on Non-repatriation basis: In 2015, the Government amended the definition of NRI under FEMA-20 and stated that the investment by NRI on Non-repatriation basis would be treated at par with investment made by residents. This will facilitate/attract investment from NRIs as sectoral caps and conditions, etc., which were earlier applicable to them, would not be applicable henceforth. 

Introduction of Composite Caps for simplification of FDI policy : In 2015, the Government simplified the FDI policy. Earlier, caps for FDI, FPIs/FIIs were indicated for each activity separately in most of the sectors. To remove ambiguity, the Government simplified the rules. In addition to the above, it is stipulated that investment by FPIs/FIIs up to 49 per cent in all sectors except Defence does not require FIPB approval. 

Ease of doing Business 

The extant FDI policy and FDI statistics are available on the website of DIPP (http://dipp.nic.in). For the ease of the investors, the process of applying for Industrial License and Industrial Entrepreneur Memorandum has been made online on 24x7 basis through eBiz portal (https://www.ebiz.gov.in/home/). Process of obtaining environmental clearances has also been made online (http://envfor.nic.in/). Investors can visit http://www.investindia.gov.in/ to know detailed procedure including for investment in India. They can get reply of their query as well through the website. 

Foreign Investment Proposals 

The Foreign Investment Policy Board (FIPB) is the Single Window clearance mechanism for the Foreign Investment Proposals in compliance with the FDI policy. The procedure for FIPB approval (application for approval of FIPB can be filed online through their newly user-friendly website: http://www.fipb.gov.in which is being simplified on an on-going basis with constant efforts for timely and quick action to consider FIPB proposals. The number of proposals approved in 2015 (from January 1, 2015 till August 13, 2015) so far 116 and the FDI amount approved was ₹ 21,202.07 crore. 

Foreign Investment Promotion Board 

The Foreign Investment Promotion Board (FIPB) is a single window clearance for FDI proposals and comprises the core Group of Secretaries of Department of Economic Affairs, Department of Industrial Policy and Promotion, Ministry of Small Scale Industries, Department of Revenue, Department of Commerce, Ministry of External Affairs and Ministry of Overseas Indian Affairs and co-opt other Secretaries to the Central Government and top officials of financial institutions, banks and professional experts of industry and commerce, as and when necessary. FIPB is chaired by the Secretary of the Department of Economic Affairs and its meetings are held regularly, within 3-4 weeks interval. 

FDI proposals seeking FIPB approval are handled in this department and proposals of NRI investment, foreign technology transfer trademarks agreement and FDI in 100 per cent EOUs are handled in the Department of Industrial Policy and Promotion (DIPP). The FDI Policy and FDI Data are also handled in the DIPP. 

During the Financial Year 2014-15, 11 meetings were held in which 173 proposals with FDI/NRI inflow of approximately ₹ 40,405.84 crore were approved. During the Financial Year 2015-16 (till August, 2015), seven meetings were held in which 112 proposals, with FDI/NRI inflow of approximately ₹ 23,384.34 crore were approved. 

National Investment and Infrastructure Fund 

The Government of India has put investment in infrastructure as one of the core elements of its economic programme. To maximize economic impact mainly through infrastructure development in commercially viable projects, both greenfield and brownfield, including stalled projects, National Investment and Infrastructure Fund (NIIF) has been created. 

NIIF would invest in the: (i) equity/quasi-equity support to those NBFCs/ FIs that are engaged mainly in infrastructure financing. These institutions will be able to leverage this equity support and provide debt to the projects selected; (ii) in funds engaged in mainly infrastructure sectors and managed by AMCs for equity/quasi-equity funding of listed/unlisted companies; and (iii) equity/ quasi-equity support /debt to projects, to commercially viable projects, both green field and brown field, including stalled projects. 

Gold Monetization Schemes and Sovereign Gold Bonds Scheme 

For the improvements of the country’s current account balance, the 80:20 scheme on the import of gold in India was withdrawn by RBI in 2014 and to manage the demand for gold in the country, two schemes were announced in Union Budget 2015-16, namely, Gold Monetization Schemes and Sovereign Gold Bonds Scheme. While the former aims at mobilizing the gold lying idle within the country for productive use, the objective of the latter is to reduce the demand for physical gold. 

Bilateral Investment Promotion or Protection Agreements or Bilateral Investment Treaties 

Bilateral Investment Promotion or Protection Agreements (BIPAs) or Bilateral Investment Treaties (BITs), were initiated as part of the economic reforms programme initiated in 1991. The aim of BITs is essentially to create a stable legal regime for espousal of claims of foreign investors as per international law. As on December 2014, the Government of India has signed BITs with 83 countries, out of which 73 treaties have entered into force. 

BITs have, so far, been negotiated on the basis of Model BIPA text adopted in 1993 with the approval of Screening Committee of Secretaries. In July, 2012, the Department of Economic Affairs began the process of reviewing the existing Model BIPA as per the directions of the Committee of Secretaries. 

Currency and Coinage 

The Department of Economic Affairs deals with policy formulation in respect of currency/bank notes and coins and oversees the production, planning and printing/minting of currency notes and coins. It is responsible for supervision and administrative control of the Security Printing and Minting Corporation of India Limited. Rules, regulations and approvals for design/security features of bank notes and coins and issue of commemorative coins are also handled by the department. 

Security Printing and Minting Corporation of India Ltd. (SPMCIL) is the only PSU under the Department of Economic Affairs. It was formed after corporatization of nine units, i.e. four mints, four presses (two currency note presses and two security presses) and one paper mill which were earlier functioning under the Ministry of Finance. The company was incorporated in 2006 under the Companies Act, 1956. It is engaged in the manufacture of security paper, minting of coins, printing of currency and bank notes, non-judicial stamp papers, postage stamps, travel documents, etc. The company supplies currency/bank notes and coins to RBI, non-judicial stamp papers to various State Governments; postal stationery and stamps to postal department; passports, visa stickers and other travel documents to Ministry of External Affairs. Other products include commemorative coins, MICR and Non-MICR cheques, etc. 

In addition, a Bank Note Paper Mill India Private Limited (BNPMIPL) at Mysore, a JV Company between Security Printing and Minting Corporation of India (SPMCIL) and Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), has been set up to increase self-reliance in bank note paper production with a total capacity of around 12,000 MT per annum. Estimated cost of project will be ₹ 1,696 crore approximately. As per the present status, the construction, erection of plant and machinery, utilities, etc., are nearing completion. 

Security Paper Mill, Hoshangabad, a Unit of SPMCIL, has successfully commissioned integrated new CWBN Paper manufacturing facilities with a state-of-art technology with capacity of 6,000 MT per annum and commercial production of CWBN paper of denominations ₹ 10, ₹ 20 and ₹ 1,000 bank note paper started from 2014. The new Bank Note Paper Line was inaugurated and the first consignment of ₹ 1,000 bank note paper made indigenously on this machine dispatched to currency note press, Nashik in 2015. 

The following commemorative coins have also been released during 2014-15: 

  

Department of Expenditure 

The Department of Expenditure is the nodal department for overseeing the public financial management system in the Central Government and matters connected with state finances. The principal activities of the department include pre-sanction appraisal of major schemes/projects (both Plan and non-Plan expenditure), handling the bulk of the Central budgetary resources transferred to states, implementation of the recommendations of the Finance and Central Pay Commissions, overseeing the expenditure management in the Central ministries/departments through the interface with the Financial Advisors and the administration of the Financial Rules/Regulations/Orders through monitoring of Audit comments/observations, preparation of Central Government Accounts, managing the financial aspects of personnel management in the Central Government, assisting Central ministries/ departments in controlling the costs and prices of public services, assisting organizational re-engineering through review of staffing patterns and O and M studies and reviewing systems and procedures to optimize outputs and outcomes of public expenditure. The department is also coordinating matters concerning the Ministry of Finance including Parliament-related work of the ministry. It has under its administrative control the National Institute of Financial Management (NIFM), Faridabad. 

Seventh Central Pay Commission 

The Seventh Central Pay Commission was set up in February, 2014. Its Resolution sets out the composition and Terms of Reference of the Commission and also envisages that it will submit recommendations within 18 months from the date of constitution of the commission. The term of the commission was extended upto December 2015. The commission, has however submitted its report to the Government in November, 2015. 

The Seventh Central Pay Commission comprises the following: Chairman – Justice Shri Ashok Kumar Mathur; Member – Shri Vivek Rae; Member-Dr. Rathin Roy; Secretary-Smt. Meena Agarwal. 

Procurement Policy 

A Public Procurement Cell (PPC) was set up in this department in June, 2011 to take follow up action on the Report of the Committee on Public Procurement (CoPP) and drafting of the Public Procurement Bill and other related matters such as drafting of rules and setting up of a Central Public Procurement Portal. The Cell was gradually strengthened and a division called Procurement Policy Division (PPD) was created. 

The division now deals with the following:- public procurement legislation and rules, notifications, orders thereunder; policies relating to public procurement including administration of General Financial Rules, 2005 on procurement of goods and services and contract management; policies relating to mandatory or preferential procurement; matters relating to standardization of procurement related documents; all matters related to Central Public Procurement Portal set up for publishing information relating to public procurement; matters relating to electronic procurement; professional standards to be achieved by officials dealing with procurement and suitable training and certification requirements for the same and interface with international bodies on matters relating to public procurement. 

Central Public Procurement Portal and e- Procurement 

Pursuant to the recommendations of the Committee on Public Procurement (CoPP), a Central Public Procurement Portal (CPP Portal) has been set up for providing comprehensive information and data relating to public procurement and is accessible at www.eprocure.gov.in. It is being used at present by various ministries/departments, CPSEs and autonomous/statutory bodies. E-publishing of tender enquiries, corrigenda thereto and details of contracts awarded thereon, on the portal, has been made mandatory in a phased manner from 2012. Further, it has also been decided to implement e-procurement in ministries/departments of the Central Government and instructions have also been issued to all ministries/departments to commence e-procurement in respect of all procurements with estimated value of ₹ 2 lakh or more in a phased manner. Use of e-procurement would enhance transparency and accountability and make procurement more efficient. This would also help in monitoring delays and reducing the procurement cycle. 

Controller General of Accounts 

The Controller General of Accounts (CGA) under the Department of Expenditure, is the principal accounts adviser to the Government of India and is responsible for establishing and maintaining a  technically sound management accounting system. Functions entrusted to the Controller General of Accounts are to formulate the policy relating to the general principles, form and procedure of accounting for the entire Central and State Governments; to formulate the policy relating to the general principles; to coordinate and oversee the payment, receipts and accounting matters in the Central civil ministries/departments through the set up of the Civil Accounts Organization; to coordinate and assist in the introduction of management accounts systems in ministries/departments with a view to optimising utilization of Government resources through efficient cash management and an effective Financial Management Information System; to administer banking arrangements for disbursements of Government expenditures and collection of Government receipts and interaction with the central bank for reconciliation of cash balances of the Union Government; to consolidate the monthly and annual accounts of the Central Government and put in place a robust financial reporting system in the overall endeavour towards the formulation and implementation of a sound fiscal policy by Government of India and to ensure Human Resource Management such as recruitment, development and career profile management of the requisite officers and staff both at the supervisory level and at the operational level within the Indian Civil Accounts Organization. 

O. W.: http://www.ccaind.nic.in Central Pension Accounting Officer 

The Central Pension Accounting Office (CPAO) was established from 1990 for payment and accounting of Central (Civil) pensioners and pension to Freedom Fighters, etc. CPAO is an attached office under the Controller General of Accounts. It has been entrusted with the responsibility of administering the scheme of payment of pension to Central Government (Civil) Pensioners through authorized banks. Its core functions are: issue of Special Seal Authorities (SSAs) to authorized banks; preparation of budget for the Pension Grant and accounting thereof; audit of pension disbursing banks; and as an interim arrangement, payment of provisional pension to the pensioners/family pensioners covered under New Pension Scheme as per the orders of Ministry of Finance. 

Chief Adviser Cost 

The Office of the Chief Adviser Cost (CAC) is responsible for advising the ministries and government undertakings on cost accounts matters and to undertake cost investigation work on their behalf. Office of Chief Adviser Cost is one of the divisions functioning in the Department of Expenditure. It is a professional body staffed by cost/chartered accountants. The Chief Adviser Costs’ Office is dealing with matters relating to costing and pricing, industry level studies for determining fair prices, studies on user charges, central excise abatement matters, cost-benefit analysis of projects, studies on cost reduction, cost efficiency, appraisal of capital intensive projects, profitability analysis and application of modern management tools evolving cost and commercial financial accounting for ministries/departments of Government of India. 

Direct Benefit Transfer 

To bring a paradigm shift in the delivery of services to the citizens, particularly common man and the under-privileged section of society of the country, the Government took a decision to start the Direct Benefit Transfer (DBT) Programme. This programme envisages a switch from the present electronic transfer of benefits to bank accounts of the beneficiary to transfer of benefits directly to Aadhar seeded bank accounts of the beneficiaries. 

 National Institute of Financial Management 

The National Institute of Financial Management (NIFM) was set up in 1993 as a registered society. It was envisaged that NIFM would be a training institution for officers recruited by the Union Public Service Commission (UPSC) through the annual Civil Services Examination and allocated to the various services responsible for managing senior and top management posts dealing with accounts and finance in the Government of India. The institute pursues an aim to develop as a centre of excellence in the areas of Financial Management and related disciplines, ‘not only in India but also in Asia’. 

The main objectives of the institute are:- to establish and administer the management of the Institute; to organize and provide training and continuing professional education to Group A officers of the participating services including organization of Refresher Courses at senior and middle levels; to establish the Institute as a centre of excellence in financial management for promoting the highest standards of professional competence and practice; to undertake and promote research/consultancy studies in the fields of accounting, audit, financial and fiscal management and related subjects; and to promote education in financial and fiscal management for officers of the associate services of Centre/State Governments and officers of public sector enterprises/institutions; and to organize international training programmes and to keep abreast with the progress made in the rest of the world in the area of finance and accounts, particularly in the Government and public sector institutions. 

O. W.: http://www.nifm.ac.in Department of Revenue 

The Department of Revenue exercises control in respect of matters relating to all the direct and indirect union taxes through two statutory boards namely, the Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs (CBEC). Each Board is headed by a Chairman who is also ex-officio Special Secretary. Matters relating to the levy and collection of all Direct taxes are looked after by the CBDT whereas those relating to levy and collection of Customs and Central Excise duties, Service Tax and other Indirect taxes fall within the purview of the CBEC. The two boards were constituted under the Central Board of Revenue Act, 1963. At present, the CBDT and CBEC has six members each. 

Taxes 

Value Added Tax 

Under Entry 54 of List II (State List) of the Seventh Schedule of the Constitution of India, ‘tax on sale or purchase of goods within a State’ is a state subject. Introduction of State VAT to replace the earlier Sales Tax systems of the states has been one of the important tax reform measures taken on Indirect tax side. VAT has been introduced by all the states/union territories, except the union territories of Andaman and Nicobar Islands and Lakshadweep. Sales Tax/VAT being a state subject, the Central Government played the role of a facilitator for successful implementation of VAT. 

Central Sales Tax 

The entry 92A of List-I (Union List) empowers the Central Government to impose tax on inter-state  sale of goods. Further, Article 269 (3) empowers the Parliament to formulate principles for determining when a sale or purchase of goods takes place in the course of inter-state trade of commerce. Similarly, Article 286 (2) of Constitution empowers the Parliament to formulate principles for determining when the sale or purchase of goods takes place outside a state or in the course of imports into or exports from India. Besides, Article 286(3) of Constitution authorizes the Parliament to place restrictions on the levy of tax by the states on sale or purchase of goods, declared by the Parliament by law to be goods of special importance in the inter-state trade or commerce. 

The Central Sales Tax (CST) Act, 1956 imposes the tax on inter-state sale of goods and formulates the principles and imposes restrictions as per the powers conferred by the Constitution. The Government of India has also framed the Central Sales Tax (Registration and Turnover) Rules, 1957 in exercise of powers conferred by section 13(1) of the CST Act, 1956. Though the Central Sales Tax Act, 1956 is a Central Act, the states collect and appropriate the proceeds of Central Sales Tax as per Article 269 of the Constitution of India. 

Central Government has further agreed, in principle, to release CST Compensation for the years 2010-11, 2011-12 and 2012-13 as per the recommendations made by the Empowered Committee of State Finance Ministers. In this regard EC has recommended for payment of 100 per cent CST compensation for the year 2010-11, 75 per cent CST compensation for the year 2011-12 and 50 per cent CST compensation for the year 2012-13 as per the Guidelines dated August 22, 2008. Accordingly, Budget Provision of ₹ 11,000 crore was made in Financial Year 2014-15 for the release of balance payment of CST Compensation for the year 2010-11. 

Goods and Services Tax 

The proposal to introduce a national level Goods and Services Tax (GST) by April 1, 2010 was first mooted by the Finance Minister in the Budget Speech for the Financial Year 2006-07. 

After a prolonged discussion with states, the Constitution (115th Amendment) Bill, to further amend the constitution to enable introduction of GST was introduced in the Lok Sabha on March 22, 2011. The bill, however, lapsed with the dissolution of the 15th Lok Sabha. Thereafter, several meetings have been held between the Central Government and the states to resolve the outstanding contentious issues on the introduction of GST. In terms of the broad consensus arrived at in the last few meetings, the Government introduced on December 19, 2014 the Constitution (122nd Amendment) Bill, 2014 in the Parliament for amending the Constitution of India to facilitate the introduction of Goods and Services Tax (GST) in the country. 

Central Board of Excise and Customs 

Central Board of Excise and Customs (CBEC) deals with the tasks of formulation of policy concerning levy and collection of Customs and Central Excise duties, Service Tax, prevention of smuggling and evasion of duties and all administrative matters relating to Customs, Central Excise and Service Tax formations. The Board discharges the various tasks assigned to it, with the help of its field formations namely, the Zones of Customs and Central Excise, Commissionerates of Customs and Central Excise and the Directorates. It also ensures that taxes on foreign and inland travel are administrated as per the law and the collection agencies deposit the taxes collected to the public exchequer promptly. 

Anti-Smuggling Unit 

The following measures have been introduced with a view to help detect and curb evasion of customs duty and frauds: (a) India has signed various customs mutual assistance agreements and memoranda of understanding with various countries to promote sharing of intelligence and provide investigation assistance to curb duty evasion; (b) customs Overseas Intelligence Network (COIN) provides actionable intelligence for facilitating seizures of offending goods and to detect evasion of customs duty; (c) use of National Import Database (NIDB) helps in detecting under- valuation of imported goods, which has been reported to be the used route for customs commercial frauds; (d) Intelligence Support System (ISS) provides for development of intelligence and for analysing macro-level inputs into macro-level workable intelligence. This system has resulted in detection of commercial fraud and evasion of customs duty; and (e) to disseminate information about new modus operandi, DRI shares details of important causes booked by it through circulars. These circulars are also used for targeting in the Risk Management Framework. The field formations and DRI also share the information/intelligence and details of cases with other agencies directly as well as by reporting to the Central Economic Intelligence Bureau (CEIB) and at Regional Economic Intelligence Councils (REIC) meetings. 

Directorate General of Inspection Customs and Central Excise 

This Directorate General of Inspection Customs and Central Excise was constituted in 1939, as part of the board office for conducting periodical inspections and for advising the board on technical questions and on standardization of organization and procedure in the Customs houses and the Central Excise Commissionerates. It was separated from the board on April 1, 1946 and given the status of an attached office. 

The main functions of the organization are:- to study the working of the Customs, Central Excise Departmental machinery throughout the country; to suggest measures for improvement of its efficiency and rectification of important defects in it through inspection and by laying down procedures for smooth functioning; to carry out inspection to determine whether the working of the field formation are as per Customs and Central Excise procedure and to make recommendations in respect to the procedural flaws, if any noticed; to suggest measures for improvement in functioning of the field formations and nodal office for implementation. 

Customs, Excise and Service Tax 

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) (earlier Customs Excise and Gold [Control] Appellate Tribunal) was created to provide an independent forum to hear the appeals against orders and decisions passed by the Commissioners of Customs and Excise under the Customs Act, 1962, Central Excise Act, 1944 and Gold (Control) Act, 1968. The Gold (Control) Act, 1968 has now been repealed. Presently Service Tax appeals have been included. The tribunal is also having appellate jurisdiction in anti-dumping matters and the special bench headed by the President, CESTAT, hears the appeals against the orders passed by the designated authority in the Ministry of Commerce. The headquarter as well as the Principal Bench of the tribunal is situated in Delhi and other regional benches are situated in Mumbai, Kolkata, Chennai, Bengaluru and Ahmedabad. Due to large number of pendency, Ministry of Finance has created additional six branches of CEST Appellate Tribunal in Chandigarh, Allahabad and Hyderabad besides one each in Delhi, Mumbai and Chennai. 

Customs and Central Excise Settlement Commission 

The Central Government has constituted the Customs and Central Excise Settlement Commission under Section 32 of the Central Excise Act, 1944. The commission consists of the Principal Bench presided over by the Chairman in New Delhi and three Additional Benches in Chennai, Mumbai and Kolkata presided over by Vice Chairman with two Members in each Bench. The commission functions in the Department of Revenue as an attached office of the Ministry of Finance. 

The basic objective in setting up of the Settlement Commission is to expedite payments of Customs and Excise duties involved in disputes, by avoiding costly and time consuming litigation process and to give an opportunity for tax payers who may have evaded payment of duty to come clean. Settlement Commission is, therefore, set up as an independent body, manned by experienced tax officers of ‘integrity and outstanding ability’, capable of inspiring confidence in the trade and industry and entrusted with the responsibility of defining and safeguarding ‘Revenue Interest.’ 

Central Board of Direct Taxes 

The Central Board of Direct Taxes (CBDT), created by the Central Boards of Revenue Act, 1963, is the apex body entrusted with the responsibility of administering Direct tax laws in India. The CBDT consists of a Chairman and six Members. It is the cadre controlling authority for the Indian Revenue Service and the controlling authority for the Income Tax Department. In its functioning, the CBDT is assisted by the following Directorates: (i) Principal Directorate General of Income Tax (Administration): (a) Directorate of Income Tax (PR, PPandOL); (b) Directorate of Income Tax (Recovery); (c) Directorate of Income Tax (Income Tax); (d) Directorate of Income Tax (TDS); and (e) Directorate of Income Tax (Audit); (ii) Principal Directorate General of Income Tax (Systems); (iii) Principal Directorate General of Income Tax (Logistics) (a) Directorate of Income Tax (Infrastructure); (b) Directorate of Income Tax (Expenditure Budget); (iv) Principal Directorate General of Income Tax (Legal and Research); (v) Principal Directorate General of Income Tax (Training); (vi) Principal Directorate General of Income Tax (HRD); (a) Directorate of Income Tax (HRD); (b) Directorate of Income Tax (OandMS); (vii) Principal Directorate General of Income Tax (Vigilance); and (viii) Directorate General. 

Tax Collections 

Revenue Collections 

The total Indirect tax collection during 2013-14 was ₹ 4,96,238 crore against the Budget Estimate (BE) of ₹ 5,65,003 crore and Revised Estimate (RE) of ₹ 5,19,520 crore. The overall growth in Indirect tax collection in 2013-14 was nearly 4.6 per cent over 2012-13. The tax head-wise details are given here: 

Customs Duty 

The RE was fixed at ₹ 1,75,056 crore against the BE of ₹ 1,87,308 crore in 2013-14. The actual collection during 2013-14 was ₹ 1,72,033 crore, represented a growth of 4.0 per cent over actual collection in 2012-13. 

Central Excise Duty 

In view of economic slowdown the RE was lowered to ₹ 1,79,537 crore against BE of ₹ 1,97,554 crore in 2013-14. The actual collection during 2013-14 was ₹ 1,69,469 crore, represented a decline growth of (-) 4.0 per cent over actual collection in 2012-13. 

Service Tax 

In view of low buoyancy in Service Tax, the RE was fixed at ₹ 1,64,927 crore against the BE of ₹ 1,80,401 crore in 2013-14. The actual collection of Service Tax during 2013-14 was ₹ 1,54,736 crore, represented a growth of 16.7 per cent over actual collection in 2012-13. 

Revenue collections 

The Budget Estimate (BE) for indirect tax revenue for Financial Year 2014-15 was ₹ 6,23,244 crore (exclusive of other cess, not administered by DoR). The total indirect tax collection during 2014-15 (April-December) was ₹ 3,77,648 crore, which shows a growth of 6.7 per cent growth over actual collection in the corresponding period of previous year. 

Department of Financial Services 

The mandate of the Department of Financial Services covers the functioning of banks, financial institutions, insurance companies and the national pension system. The functions of this department are: 

1. life and non-life segments of insurance industry, Insurance Regulatory and Development Authority (IRDA), Pension Reforms, National Pension System, Pension Fund Regulatory and Development Authority (PFRDA) and appointments of Chief Executives and Government nominee Directors/Non official directors on the boards of public sector insurance companies, coordination and establishment matters of the department ; 
2. priority sector lending, export credit, lending to MSMEs and housing, financing of infrastructure, microfinance, regional rural banks and matters relating to National Housing Bank (NHB), SIDBI, NABARD, IFCI, IIFCL and EXIM Bank including appointments of Chief Executives and Government nominee directors/Non official directors on the boards of these financial institutions; 
3. agriculture credit, network expansion of banking services, business correspondents/business facilitators, mobile banking, lead bank scheme and service area approach, district and State Level Bankers’ Committee(SLBC), Direct Benefit Transfer of subsidy to the beneficiaries through their bank accounts including convergence of UIDAI Aadhaar Number, vigilance matters and appointment of Chief Vigilance Officers(CVOs) in the public sector banks, insurance companies, financial institutions and financial regulators viz. RBI, IRDA and PFRDA; 
4. banking operations, setting of annual targets, pattern of accounting and final accounts in Public Sector Banks (PSBs), appointments of Chief Executives and Government nominee directors/Non official directors on the boards of public sector banks, dividend payable to Central Government by PSBs; scrutiny and follow up action of the annual financial reviews of PSBs conducted by RBI under Section 35 of the Banking Regulation Act, 1949, capital restructuring of PSBs and HR issues related to public sector banks. Issues related to recovery of bank dues, Issues relating to establishment of Debts Recovery Tribunals (DRTs) and Debt Recovery Appellate Tribunals (DRATs); 
5. customer service and grievances in PSBs, Insurance Companies, etc., analysis of monetary policy of RBI, coordinating material for Economic Survey, etc., coordinating matters relating to Union Budget and follow up on Budget Announcements, follow up on outstanding Audit Paras; overseeing the implementation of reservation policy of the Government of India in the public sector banks/Financial Institutions(FIs), and Insurances Companies and RBI, inspection of reservation rosters for SC/ST/OBC, physically handicapped and ex-servicemen in PSBs etc., and 
6. All Policy matters related to banking operation, such as licensing, amalgamation, reconstruction and acquisition of banks; overseas branches of Indian banks; operation of foreign banks in India, banking sector reforms, Deposit Insurance and Credit Guarantee Corporation. Legislative proposals relating to banks, non-banking financial companies, chit fund companies and payment and settlement systems. Policy matters related to Local Area Banks—Know Your Customer (KYC), Anti Money Laundering(AML) and Combating Financial Terrorism (CFT). Policy issues in international relations in the areas of Banking, Insurance and Pension Reforms; Financial Action Task Force; Opening of currency chests; Receipt and Payment work of Government. 

Bharatiya Mahila Bank Limited 

With a view to promoting gender equality and economic empowerment of women, Government took a decision to set-up India’s first Women’s Bank, to address the gender related aspects of financial access to all sections of women, empowerment of women and financial inclusion. To achieve economic empowerment, women need equal access to economic institutions and control of assets. Since both the components are interrelated, control over assets is essential to access finance and vice versa. Hence the first step towards economic empowerment is to provide equal access to financial services to women while addressing the problems of lack of collateral. This would help promote both asset ownership by women (control over resources) and entrepreneurship, which would increase employment opportunities for them. Government has infused an initial capital of ₹ 1,000 crore in the Bharatiya Mahila Bank Limited. The bank has been incorporated and RBI has already issued a banking license to the Bank. The bank has become functional from 2013. 

Regional Rural Banks 

Revitalizing Regional Rural Banks 

With the view to strengthening the Regional Rural Banks (RRBs) for playing a greater role in agriculture, rural leading and financial inclusion, the following measures were taken: 

Network of Regional Rural Banks 

The number of branches of RRBs increased from 16,909 as on March 31, 2012 to 17,861 as on March 31, 2013 taking the network of RRBs to 635 districts. During the year 2013-14, 438 new branches have been opened by RRBs up to December 31, 2013 taking the total number of RRB branches to 18,299 as on December 31, 2013. By March 31, 2014, 57 RRBs operated with a network of 19,081 branches. All branches of RRBs are on CBS Platform. 

Capital Infusion for Improving CRAR 

Dr. K.C. Chakrabarty Committee recommended recapitalization support to 40 RRBs to enhance their CRAR to 9 per cent. The amount of recapitalization was assessed to be shared by the stakeholders in proportion to their shareholding, i.e. 50 per cent (Central Government), 15 per cent (State Government) and 35 per cent (sponsor banks). The share of Central Government came to ₹ 1,100 crore. The recapitalization process was started in 2010-11. As per the approved scheme, the release of Central Government share was subject to release of the share by the respective State Government and Sponsor Banks. An amount of ₹ 468.92 crore was released to 21 RRBs in 2010-11 and 2011-12. Since all the State Governments did not release their share towards recapitalization, the scheme was extended up to March 31, 2014. An amount of ₹ 535.00 crore was released during 2012-13 to 19 RRBs and ₹ 82.78 crore was released to 4 RRBs during 2013-14 as share of recapitalization of the Central Government. Out of ₹ 82.78 crore, ₹ 48.46 crore was released to Central Madhya Pradesh Gramin Bank, which is an amalgamated entity after the amalgamation of Vidisha Bhopal Kshetriya Gramin Bank, on the recommendation of NABARD to meet the requirement of minimum CRAR of 9 per cent. With this ₹ 1,086.70 crore has been released up to March 31, 2014 to 39 RRBs including Central Madhya Pradesh Gramin Bank. The achievement is 98.79 per cent. 

Kisan Credit Card 

The Kisan Credit Card (KCC) scheme was introduced in 1998-99, as an innovative credit delivery system aiming at adequate and timely credit support from the banking system to the farmers for their cultivation needs including purchase of inputs in a flexible, convenient and cost effective manner. The scheme is being implemented by all Cooperative Banks, Regional Rural Banks (RRBs) and Public Sector Commercial Banks throughout the country. KCC is one of the most effective tools for delivering agriculture credit. NABARD monitors the scheme in respect of Cooperative Banks and RRBs and RBI in respect of Commercial Banks. A new scheme for KCC has been circulated by RBI and NABARD which provides for KCC as an ATM card which can be used at ATM/Point of Sale (POS) terminal. 

Rural Infrastructure Development Fund 

The Central Government established a fund to be operationalised by NABARD in the Union Budget 1995-96 namely, the Rural Infrastructure Development Fund (RIDF), which was set-up within NABARD by way of deposits from Scheduled Commercial Banks operating in India from the shortfall in their agricultural/priority sector/weaker sections lending. The fund has since been continued, with its allocation being announced every year in the Union Budget. Over the years, coverage under the RIDF has been broad based, in each tranche, and at present, a wide range of 34 activities are financed under various sectors. 

The annual allocation of funds announced in the Union Budget has gradually increased from ₹ 2,000 crore in 1995-96 (RIDF I) to ₹ 25,000 crore in 2014-15. 

Export Import Bank of India 

Export Import (Exim) Bank offers a comprehensive range of lending and service/advisory programmes, aimed at aiding the globalization efforts of Indian companies. This enables the bank to promote inclusion of a large cross section of Indian exporters, in the opportunities being thrown up by globalization. 

During Financial year 2013-14, the bank extended an aggregate of 24 Lines of Credit (LOCs) guaranteed by the Government of India, to 18 countries, with credits amounting to US$ 1.77 billion. 1.99 lacs to 63 countries with creditor amounting $12.19 billion are guaranteed by the Government of India. 

(O.W.: http://www.eximbankindia.in Rural Housing Fund 

The Rural Housing Fund was set up in 2008-09 to enable primary lending institutions to access funds for extending housing finance to targeted groups in rural areas at competitive rates. The corpus of the fund for 2008-09 was ₹ 1,778.18 crore, which was enhanced by ₹ 2,000 crore during 2009-10, another ₹ 2,000 crore for 2010-11, another ₹ 3,000 crore for 2011-12, another ₹ 4,000 crore for 2012-13 and another ₹ 6,000 crore for 2013-14 and further by ₹ 8,000 crore in 2014-15. Till June, 2014, total amount of ₹ 17,278 crore was received by the bank under the fund and the bank has deployed ₹ 16,338.72 crore towards refinance for rural housing for the target groups.  Further, for the year 2014-15 (July 1, 2014 to December 31, 2014) ₹ 1,999.22 crore has been received by NHB under the scheme and NHB has disbursed ₹ 601.75 crore. 

National Pension System 

With a view to providing adequate retirement income, the National Pension System (NPS) was introduced by the Government of India. It has been made mandatory for all new recruits to the Government (except armed forces) with effect from January 1, 2004 and has also been rolled out for all citizens with effect from May 1, 2009 on a voluntary basis. The features of the NPS design are: self-sustainability, portability and scalability. Based on individual choice, it is envisaged as a low-cost and efficient pension system backed by sound regulation. As a ‘pure defined contribution’ product, returns would be totally market driven. The NPS provides various investment options and choices to individuals to switch over from one option to another or from one fund manager to another, subject to certain regulatory restrictions. The NPS architecture is transparent and web enabled. 

The NPS architecture is transparent and web enabled. It allows a subscriber to monitor his/her investments and returns. The facility for seamless portability is designed to enable subscribers to maintain a single pension account throughout the saving period. Pension Fund Regulatory and Development Authority (PFRDA), set-up as a regulatory body for the pension sector, is engaged in consolidating the initiatives taken so far regarding the full NPS architecture and expanding the reach of NPS distribution network. The process of making NPS available to all citizens entailed the appointment of NPS intermediaries, including institutional entities as Points of Presence (POPs) that will serve as pension account opening and collection centres, a Centralized Record Keeping Agency (CRA) and Pension Fund Managers to manage the pension wealth of the investors. 

The Department of Posts has also been appointed as PoP in addition to other financial institutions which will expand the PoP-SP network by more than five times. While Tier-I, the non- withdrawable pension account under the NPS has been in operation since May 1, 2009. Tier-II, the withdrawable account has been made operational from December 1, 2009. These initiatives are expected to help realize the full potential of the NPS in terms of economies of scale and benefit the subscribers in terms of lower fees and charges and higher returns. 

Swavalamban Scheme 

To encourage the workers in the unorganized sector to save voluntarily for their old age, an initiative called Swavalamban Scheme was launched in 2010. It is a co-contributory pension scheme whereby the Central Government would contribute a sum of ₹ 1,000 per annum in each NPS account opened having a saving of ₹ 1,000 to ₹ 12,000 per annum. Government will provide contribution for five years to the beneficiaries who register in the year 2010-11, 2011-12 and 2012- 13. The scheme otherwise is extended up to the year 2016-17 on a yearly contribution basis from Government for the remaining years from 2013-14. The scheme operates through 76 Aggregators including some State Government(s), Public Sector Banks (PSBs), Regional Rural Banks (RRBs), MFIs, NBFCs and private sector entities. 

Insurance Sector 

Insurance, being an integral part of the financial sector, plays a significant role in India’s economy. Apart from protecting against mortality, property and casualty risks and providing a safety net for individuals and enterprises in urban and rural areas, the insurance sector encourages savings and  provides long-term funds for infrastructure development and other long gestation projects of the country. The development of the insurance sector is necessary to support its continued economic transformation. 

The Public Sector Insurance Companies operating in the sector are: 1. Life Insurance Corporation; 2. National Insurance Company Limited; 3. Oriental Insurance Company Limited; 4. United India Insurance Company Limited; 5. New India Assurance Company Limited; 6. General Insurance Corporation of India Limited (National Re-Insurer) and 7. Agriculture Insurance Company of India Limited. (Company floated by Non Life Public Sector insurance companies along with NABARD) 

Reforms in the Insurance Sector 

The insurance sector was opened up for private participation with the enactment of the Insurance Regulatory and Development Authority Act, 1999. The authority is functioning from its Head Office in Hyderabad, Andhra Pradesh. The core functions of the authority include (i) licensing of insurers and insurance intermediaries; (ii) financial and regulatory supervision; (iii) regulation of premium rates; and (iv) protection of the interests of the policy holders. With a view to facilitate development of the insurance sector, the authority has issued regulations on protection of the interests of policyholders; obligations towards the rural and social sectors; micro insurance and licensing of agents, corporate agents, brokers and third party administrators. IRDA has also laid down the regulatory framework for registration of insurance companies, maintenance of solvency margin, investments and financial reporting requirements. 

Life Insurance Corporation of India 

Life Insurance Corporation(LIC) of India was incorporated in 1956 by amalgamating 243 companies by an Act called Insurance Act, 1956. LIC is governed by the Insurance Act, 1938, LIC Act, 1956, LIC Regulations, 1956 and Insurance Regulatory and Development Authority Act, 1999. As on March 31, 2014, LIC has eight zonal offices, 113 divisional offices, 2,048 branch offices, 73 customer zones, 1346 satellite offices and 1,261 mini offices in the country. The corporation has branch Offices in Fiji, Mauritus and United Kingdom. It also operates through Joint Venture (JV) Companies in overseas Insurance Market, namely Life Insurance Corporation (International) BSC registered in Manama (Bahrain); Kenindia Assurance Company Ltd. registered in Nairobi; Life Insurance Corporation (Nepal) Ltd. registered in Kathmandu; Life Insurance Corporation (Lanka) Ltd. registered in Colombo and Saudi Indian Company for Co-operative Insurance (SICCI) registered in Riyadh. A wholly owned subsidiary, Life Insurance Corporation (Singapore) Pvt. Ltd. was established in April, 2012. Among the above two Joint Ventures (JVs) Kenindia Assurance Co. Ltd., Nairobi, Kenya and Saudi Indian Company for Co-operative Insurance (SICCI), Riyadh, Kingdom of Saudi Arabia are composite companies transacting life and non-life business; and two JVs -LIC (Nepal) Ltd. and SICCI are listed on their respective Stock Exchanges. 

Social Security Scheme-Aam Aadmi Bima Yojana 

For the benefit of the weaker sections of the society, Government of India has floated a highly subsidized insurance scheme, viz. Aam Admi Bima Yojana (AABY) which is administered through Life Insurance Corporation of India. Under this social security scheme below poverty line (BPL) and marginally above poverty line citizens are covered under 48 identified occupations. The scheme provides death cover of ₹ 30,000 /- in case of natural death. In case of death or total disability (including loss of two eyes/two limbs) due to accident, a sum of ₹ 75,000/- and in case of partial permanent disability (loss of one eye/limb) due to accident, a sum of ₹ 37,500/- is payable to the nominee / beneficiary. All these benefits are paid for a nominal premium of ₹ 200.00 per member per annum, out of which ₹ 100.00 is borne by Central Government through Social Security Fund maintained through LIC of India, and the balance premium of ₹ 100.00 is borne by the member and/ or nodal agency and/ or Central/State Government Department which acts as the nodal agency. In addition, there is an add-on benefit of scholarship at the rate of ₹ 1,200/- per annum per child for two children per family of the insured members studying from 9th to 12th standard (including ITI courses). 

Init iat ives 

New Social Security Schemes Atal Pension Yojana 

The Government of India launched the Atal Pension Yojana (APY) to implement the budget announcement 2015-16 relating to providing a defined pension system especially for the poor and the under-privileged depending on the contribution, and its period. The APY is primarily focused on all citizens in the unorganized sector, who join the National Pension System (NPS) administered by the Pension Fund Regulatory and Development Authority (PFRDA). However, all citizens of the country in the eligible category may join the scheme. The minimum age of joining APY is 18 years and maximum age is 40 years. Therefore, minimum period of contribution by any subscriber under APY would be 20 years or more. The APY has been implemented from June 1, 2015. 

The guaranteed minimum pension for the subscriber ranging between ₹ 1,000 and ₹ 5,000 would be available, if he joins and contributes between the age of 18 years and 40 years. The contribution levels would vary and would be low if subscriber joins early and increase if he joins late. 

Atal Pension Yojana is open to all bank account holders. The Central Government would also co-contribute 50 per cent of the total contribution of ₹ 1,000 per annum, whichever is lower, to each eligible subscriber account, for a period of five years, i.e., from Financial Year 2015-16 to 2019-20, who join the APY before December 31, 2015 and who are not members of any statutory social security scheme and who are not income tax prayers. The scheme will continue after this date but Government Co-contribution will not be available. However, the members of any statuary social security scheme who are income tax payers can also join APY and avail the benefit of minimum guaranteed monthly pension, but they will not receive any Government co-contribution. The prospective subscriber can have only one APY account in his name and hence opening of multiple accounts for the same beneficiary is not permitted. 

The Government co-contribution is payable into subscriber’s savings bank account at the end of Financial Year once the subscriber has made the entire contribution for the year and this co- contribution would be transferred to the APY account by the bank. 

The existing Swavalamban subscriber, if eligible, may be automatically migrated to APY with an option to opt out. For seamless migration to the new scheme, the associated aggregator will facilitate those subscribers for completing the process of migration. Those subscribers may also approach the nearest authorized bank branch for shifting their Swavalamban account into APY with Permanent Retirement Account Number (PRAN) details. However, the benefit of five years of Government co-contribution under APY would not exceed five years for all subscribers. This would imply that if, as a Swavalamban beneficiary, he has received the benefits of Government co- contribution of one year, then the Government co-contribution under APY would be available only four years and so on. Existing Swavalamban beneficiary opting out from the APY will be given Government co-contribution till 2016-17, if eligible, and the NPS Swavalamban account will continue till such people attend the age of exist i.e., 60 years under that scheme. 

Pradhan Mantri Jeevan Jyoti Bima Yojana 

The Pradhan Mantri Jeevan Jyoti BimaYojana (PMJJBY) is a one year life insurance scheme, renewable from year to year, offering coverage for death due to any reason and is available to people in the age group of 18 to 50 years (life cover upto age 55) having a savings bank account who give their consent to join and enable auto-debit. The risk cover on the lives of the enrolled persons has commenced from June 1, 2015. 

Under PMJJBY scheme, life cover of ₹ two lakh is available for a one year period stretching from June 1 to May 31 (has been extended upto August 31, 2015) at a premium of ₹ 330/- per annum per member and is renewable every year. It is offered/administered through LIC and other Indian private Life Insurance companies for enrolment banks have tied up with insurance companies. Participating bank is the Master policy holder. The assurance on the life of the member shall terminate on any of the following events and no benefit will become payable there under: (1) on attaining age 55 years (age near birth day) subject to annual renewal up to that date (entry, however, will not be possible beyond the age of 50 years); (2) closure of account with the bank or insufficiency of balance to keep the insurance in force; (3) a person can join PMJJBY with one insurance company with one bank account only; (4) individuals who exit the scheme at any point may re-join the scheme in future years by paying the annual premium and submitting a self- declaration of good health. In case of claim the nominees/heirs of the insured person have to contact respective bank branch where the insured person was having bank account. A death certificate and simple claim form is required to submit and the claim amount will be transferred to nominees’ account. 

Pradhan Mantri Suraksha Bima Yojana 

The Pradhan Mantri Suraksha Bima Yojana (PMSBY) is aimed at covering the uncovered population at an highly affordable premium of just ₹ 12 per year. The scheme will be available to people in the age group 18 to 70 years with a savings bank account who give their consent to join and enable auto-debit on or before May 31 for the coverage period June 1 to May 31 on an annual renewal basis. Under the scheme, risk coverage available will be ₹ two lakh for accidental death and permanent total disability and ₹ one lakh for permanent partial disability, for a one year period stretching from June 1 to May 31. It is offered by Public Sector General Insurance Companies or any other General Insurance Company who are willing to offer the product on similar terms with necessary approvals and tie up with banks for this purpose. The participating bank will be the Master policy holder on behalf of the participating subscribers. It will be the responsibility of the participating bank to recover the appropriate annual premium in one instalment, as per the option, from the account holders on or before the due date through ‘auto-debit’ process and transfer the amount due to the insurance company. Individuals who exit the scheme at any point may re-join the scheme in future years by paying the annual premium, subject to conditions. 

Under the scheme till June 18, 2015 the number of enrolled under PMSBY stands at 7.68 crore.  The scheme is expected to serve the goal of financial inclusion by achieving penetration of insurance down to the weaker sections of the society, ensuring their or their family’s financial security, which otherwise gets pulled to the ground in case of any unexpected and unfortunate accident. 

Pradhan Mantri Jan Dhan Yojana 

Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched in 2014 as a National Mission for financial inclusion to ensure access to financial services, namely, banking/savings and deposit accounts, remittance, credit, insurance, pension in an affordable manner. The scheme is aimed at ensuring that every family has at least one bank account. 

Its salient features include: to provide financial inclusion of the poor and rural population giving them dignity and financial independence; covering all households in the country with banking facilities and having a bank account for each household; preparing standardized financial literacy material in vernacular languages to create awareness about the yojana. It is estimated to cover 7.5 crore households with at least one account under this yojana. As a first step, every account holder gets a RuPay Debit Card with ₹ one lakh accident cover. Those opening accounts under PMJDY till January 26, 2015 would also get the insurance cover of ₹ 30,000. In due course, they are to be covered by other insurance and pension products. 

The mission mode objective of the PMJDY consists of six pillars. During the first year of implementation under Phase (I) August 15, 2014 to August 14, 2015), three pillars namely: (i) universal access to banking facilities; (ii) financial literacy programme; and (iii) providing basic banking accounts with overdraft facility of ₹ 5,000 after six months and RuPay Debit Card with inbuilt accident insurance cover of ₹ one lakh and RuPay Kisan Card, is to be implemented. 

Special Benefits under PMJDY Scheme are: (1) interest on deposit; (2) accidental insurance cover of up to ₹ one lakh; (3) no minimum balance required; (4) life insurance cover of ₹ 30,000; (5) easy transfer of money across India; (6) beneficiaries of Government schemes will get Direct Benefit Transfer in these accounts; (7) after satisfactory operation of the account for six months, an overdraft facility will be permitted; (8) access to pension, insurance products; (9) accidental insurance cover, RuPay Debit Card must be used at least once in 45 days; (10) overdraft facility up to ₹ 5,000 is available in only one account per household, preferably lady of the household; and (11) account can be opened in any bank branch or Business Correspondent (Bank Mitr) outlet with zero balance. However, if the account-holder wishes to get cheque book, he/she will have to fulfill minimum balance criteria. 

Milestones achieved under PMJDY include: 17.74 crore accounts have been opened with deposit of more than ₹ 22,000 crore; Aadhaar has been seeded in 41.82 per cent of account opened; more than 1.26 lakh Bank Mitras have been deployed with on-line devices capable of e-KYC based account opening and interoperable payment facility; 1,31,013 Mega Financial Literacy camps were organized by banks ‘in coordination with various agencies and 89,876 Financial Literacy counters to spread awareness on PMJDY, use of RuPay Cards, etc. 1,47,418 students in 2,567 schools college were imparted training on Financial literacy from September, 2014 to April, 2015. More than 10 lakh accounts have been found eligible for overdraft facility. Out of these overdraft facility has been availed by 1,64,962 account holders; 847 claims of life cover of ₹ 30,000 and 389 claims of accident insurance cover of ₹ one lakh have been successfully paid; and zero balance accounts have declined from 76 per cent to 45.7 per cent from September, 2014 to August 19, 2015. 

Banking Sector Initiatives 

Credit Guarantee Fund 

Credit Guarantee Funds for Education Loans, Skill Development and expanding the scope of Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) were set up to operate all credit guarantee schemes with the following features: (i) a corpus contribution of ₹ 3,500 crore for a period of five years beginning from Financial Year 2014 @ ₹ 500 crore in the initial year, which will be stepped up by ₹ 100 crore each year for guaranteeing education loans. Provisions of this fund will be made by the Ministry of Human Resources and Development (HRD) from its budget resources, who happen to be settler for the fund in this regard; and (ii) further, for guaranteeing skill development loans, total corpus of ₹ 1,000 crore with contribution of ₹ 500 crore each in Financial Year 2014 and 2015. Provisions for these funds will be made by the Department of Financial Services as settler of the fund from its budget resources. 

Credit Guarantee Fund Scheme for Education Loans 

To administer the Credit Guarantee Fund Scheme for Educational Loans, it is proposed to establish a Credit Guarantee Fund. The scheme shall be called the Credit Guarantee Fund Scheme for Education Loans (CGSEL). The scheme shall be confined to guaranteeing educational loans sanctioned by member banks of Indian Banks Association (IBA) or other banks/financial institutions as may be directed by Government of India. Through Ministry of Human Resource Development, Government of India as Settlor shall establish a fund for guaranteeing loans sanctioned under the Education Loan Scheme. Corpus contribution shall be made upfront by the Settlor to the fund each year. Deficit, if any, in the overall operations of the scheme shall be made good by the Government of India through budgetary grant to the fund. Any education loan which has been sanctioned by the lending institution with interest rate more than 2 per cent over the base rate of the lending institution will not qualify for guarantee cover. A nominal one time processing fee not exceeding 0.25 per cent and a guarantee fee not exceeding 1 per cent per annum of sanctioned loan at specified rates by the Management Committee of the Fund from time to time shall be paid by the institution availing the guarantee. In case of default and invocation of claim, the fund shall settle the claims after due diligence and 75 per cent of the guaranteed amount shall be payable as first instalment and the balance, if any, shall be paid after conclusion of recovery proceedings and ascertaining the net/final loss incurred by the lending institution. The proposal targets coverage of guarantees for approx. ₹ 75,000 crore for education loans over a period of five years with ₹ 10,000 crore in the first year of operations and 20 per cent growth rate in subsequent years. 

Credit Guarantee Fund Scheme for Skill Development 

The Credit Guarantee Fund Scheme for Skill Development (CGSSD) shall be confined to guaranteeing skill development loans sanctioned by member banks of Indian Banks Association (IBA) or other banks/financial institutions as may be directed by Government of India. Through Department of Financial Services, Ministry of Finance, Government of India as settlor shall establish a fund for guaranteeing loans sanctioned under the Scheme. Any skill development loan which has been sanctioned by the lending institution with interest rate more than 2 per cent over the base rate of the lending institution will not qualify for guarantee cover. A nominal one time processing fee and not exceeding 0.25 per cent and guarantee fee at a specified rates as may be decided by the Management Committee of the fund from time to time, not exceeding 1 per cent per annum of sanctioned loan shall be paid by the institution availing the guarantee. In case of default and invocation of claim, the fund shall settle the claims after due diligence and 75 per cent of the guaranteed amount shall be payable as first installment and the balance, if any, shall be paid after conclusion of recovery proceedings and ascertaining the net/final loss incurred by the lending institution. The extent of guarantee cover shall be 75 per cent. For skill development loans, where there is no detailed data readily available, it is estimated to cover approx. ₹ 2,500 crore in the first year. 

Pradhan Mantri MUDRA Yojana 

Micro Units Development and Refinance Agency Bank (MUDRA Bank), is a new institution set-up by the Government of India for development of micro units and refinance of MFIs to encourage entrepreneurship in India and provide the funding to the non corporate small business sector. 

Under the guidelines of Pradhan Mantri MUDRA Scheme, MUDRA Bank has launched its three initiative product and its name is Shishu, Kishor and Tarun to signify the stage of growth and funding needs of the micro units or entrepreneur. 

MUDRA Bank is refinancing through state level institutions, MUDRA will deliver the loan through NBFCs, MFIs, Rural Banks, District Banks, Nationalized Banks, Private Banks, Primary Lending Institutions and other intermediaries. Any Indian citizen who are involved in income generating activity such as manufacturing, processing, trading or service sector and whose credit need is less than 10 lakh can approach either bank, MFIs, financial institutions or NBFC for availing of MUDRA loans under Pradhan Mantri Mudra Yojana (PMMY). MUDRA Bank is not refinancing agriculture sector under PMMY but traders of vegetables and fruits are coverd under MUDRA Bank Schemes. 

There is no fix interest rate in MUDRA loan. According to source banks are charging around Base Rate + 1 per cent to 7 per cent minimum. The interest rate can be higher according to risk and customer profile and it can be different in all banks. So please check all nearest bank branches once before apply the MUDRA Bank Loan. 

There is no subsidy for the loan given under PMMY. However, if the loan proposal is linked to some Government schemes, wherein the Government is providing capital subsidy, it will be eligible under PMMY also. 

The usual terms and conditions of the lending agency may have to be followed for availing of loans under PMMY. The interest rates are as per the RBI guidelines issued in this regard from time to time. 

Insurance Sector Initiatives 

The Insurance Laws (Amendment) Bill, 2008 

The Insurance Laws (Amendment) Bill, 2008, which proposed amendments in the Insurance Act, 1938, the General Insurance Business (Nationalization) Act, 1972 and the Insurance Regulatory and Development Authority (IRDA) Act, 1999 was introduced in the Rajya Sabha on the 22nd December, 2008. The proposed amendments were aimed at removing archaic and redundant provisions in the legislations and incorporating certain provisions to provide IRDA with flexibility to discharge its functions more effectively. 

The Insurance Laws (Amendment) Bill, 2008, as still pending final passage of Parliment. 

Varishtha Pension Bima Yojana (VPBY) as a pension scheme for senior citizens 

The revived Varishtha Pension Bima Yojana (VPBY) was formally launched on August 14, 2014 and will be open during the window stretching from August 15, 2014 to August 14, 2015 for the benefit of citizens aged 60 years and above. The scheme will be administered by LIC. The subscription to the scheme is likely to create a corpus of more than ₹ 10,000 crore, and would thus also be a significant source of resource mobilization for the development of the country. Pension would be on immediate annuity basis in monthly, quarterly, half-yearly or annual mode, varying, respectively, between ₹ 500 to 5,000 (monthly), ₹ 1,500 to 15,000 (quarterly), ₹ 3,000 to ₹ 30,000 (half-yearly) and from ₹ 6,000 to ₹ 60,000 (annually), depending on the amount subscribed and the option exercised. The pay-out implies an assured return of 9 per cent on monthly payment basis, which amounts to an annualized return of 9.38 per cent. As on date 2,477 beneficiaries have registered and total amount received is 74.52 crore. 

Pension Sector 

Extension of Swavalamban Scheme until 2016-17 

The Government has started the co-contributory Pension Scheme – Swavalamban – from September, 2010 where an unorganized sector employee contributing between ₹ 1,000 and ₹ 12,000 per annum for retirement savings is eligible to receive a matching contribution of ₹ 1,000 per annum from the Government. As of February 2012, NPS Lite had over 8 lakh subscribers enrolled and over 5 lakh subscriber, eligible under Swavalamban. As of May 2012, the number of enrollments under NPS Lite has increased to 11 lakh. 

The Government aims to extend coverage of the Swavalamban Scheme to about 40 lakh of the population by Financial Year 2013-14 and increase the allocation to ₹ 2,800 crore with the intention of covering 70 lakh of the unorganized work force. Considering that over 90 per cent of workforce is unorganized 45 crore of the population) and the rising income levels of the lower middle class by 2015, the increase in co-contributory period from three to five years by the Government along with financial awareness campaigns would help further incentivize the unorganized sector for long term retirement savings. 

Department of Disinvestment 

The Statement of Industrial Policy of July 24, 1991 laid down the foundation for disinvestment of Central Public Sector Enterprises (CPSEs) in India. Accordingly, disinvestment started in the year 1991-92 with the sale of minority shareholding of CPSEs to select financial institutions like LIC, GIC and UTI. Later, in April 1993, Rangarajan Committee recommended that the percentage equity to be disinvested should generally be under 49 per cent for industries reserved for public sector. 

As part of the comprehensive package of economic reforms, various initiatives were taken to provide level playing field to CPSEs to access the capital market. CPSEs were also facilitated to enhance corporate governance and compete with the private sector. 

In this process, Government decided to list all profitable CPSEs on the stock exchanges. There are inherent advantages in the listing of shares as it triggers multilayered oversight mechanism to enhance corporate governance as well as provide for level playing field to CPSEs vis-a-vis private companies with regard to accessing the capital market. The process enhances shareholder value in the listed CPSEs. Listing also facilitates development of people-ownership of CPSEs, thus encouraging participation and sharing in the prosperity of CPSEs. 

Market capitalization of CPSEs reflects the market’s view about the management of CPSEs and is, thus, a good barometer of the efficiency of CPSEs and fall in the market capitalization exerts pressure on the management to perform better and to the expectations of the investors for higher wealth creation. 

The current disinvestment policy envisages only minority stake sale in profitable CPSEs while Government retains at least 51 per cent equity and the management control of the CPSE. Strategic sale in loss making CPSEs, when all efforts for their revival fail, is taken up on a case by case basis. 

The disinvestment of Government equity in Central Public Sector Enterprises (CPSCs) began in 1991-1992. Till 1999-2000 disinvestment was primarily carried out through sale of minority shareholding in small lots. From 1999-2000 till 2003-04, the emphasis of disinvestment changed in favour of strategic sale viz., sale of large block of shares along with transfer of management control to a Strategic Partner identified through a process of competitive bidding. After 2004-05, disinvestment realizations have been through sale of small portions of equity. 

Benefits of Disinvestment 

There are inherent advantages in the listing of shares of profitable CPSEs on the stock exchanges as it triggers multilayered oversight mechanism which enhances corporate governance as well as provides for level playing field to CPSEs vis-á-vis private companies in regard to accessing the resources through the capital market. 

The process enhances shareholder value in the listed CPSEs: (a) the listed companies are mandated by Company Law/SEBI/Stock Exchanges to comply with higher level of disclosures. This will bring greater transparency and credibility; (b) with the induction of independent directors, management accountability, competencies and performance are enhanced; (c) investor centric research provides on a regular basis third party professional assessment of risks as well as future prospects to management to help it benchmark its business model with the industry; (d) daily trading volume and prices work as a barometer for the management and operate as a concurrent source of feedback with regard to the impact of managerial decisions as well as shop floor developments. The higher levels of public scrutiny promotes ethical conduct of business and improves corporate culture; (e) expectations of investors (shareholders) will bring productive pressure upon the management to perform more efficiently to unlock the true value of the enterprise; (f) listing of profitable CPSEs on the stock exchanges with a mandatory public ownership of at least 25 per cent shareholding has been observed to increase significantly the value of the Enterprise and Government’s residual shareholding as well as that held by the public post- listing; (g) listing also provides development of people ownership of CPSEs, thus encouraging participation and sharing in the prosperity of CPSEs; (h) the process of listing of CPSEs on stock exchanges facilitates development and deepening of capital market and spread of equity culture; and (i) raise budgetary resources for the Government. 

Reform Measures and Policy Initiatives 

The following measures have been taken to improve the disinvestment process so as to better attain disinvestment objectives. A CPSE Exchange Traded Fund (ETF) comprising shares of listed CPSEs was launched in March, 2014. The Government realized an amount of ₹ 3,000 crore as disinvestment proceeds through CPSE-ETF; Earlier there was no reservation for retail investors in Offer for Sale (OFS) of Shares through Stock Exchange mechanism. However, in 2014 SEBI  mandated that a minimum 10 per cent of the offer size shall be reserved for retail investors in OFS and a discount has also been made admissible to them. Subsequent to this amendment in OFS Guidelines, Government has approved reservation of 10 per cent to 20 per cent of the offer size for retail investors and allocation of shares to them at a discount. In 2014, Government amended the minimum public shareholding norms for every listed CPSE whereby every listed CPSE has to increase its public shareholding to at least 25 per cent within a period of three years. 

Achievement s 

The Department of Disinvestment has no plan or non-plan scheme. The Budget Estimate (BE) for the financial year 2014- 15 for the Department is ₹ 50 crore and the proposed BE for 2015-16 is ₹ 44 crore. 

Disinvestment Transactions Completed 

(i) Steel Authority of India (SAIL): Government approved disinvestment of 10.82 per cent paid-up equity capital in SAIL out of Government shareholding of 85.82 per cent. Out of 10.82 per cent, disinvestment of 5.82 per cent shareholding was completed in March, 2013. The Government received an amount of ₹ 1,514.50 crore as disinvestment proceeds. The second tranche of disinvestment of remaining 5 per cent paid up equity of SAIL was made in December, 2014. The Government received an amount of ₹ 1,719.54 crore from the second tranche of disinvestment of SAIL. 

Other Disinvestment transactions approved and pending implementation include: 

(a) Rashtriya Ispat Nigam Ltd. (RINL) – Government approved disinvestment of 10 per cent paid- up equity capital in RINL. Fresh Draft Red Herring Prospectus (DRHP) was filed with SEBI on September 19, 2014. However, there is some damage to RINL Plant at Visakhapatnam due to Cyclone ‘Hudhud’. Management of RINL is assessing the damage and thereafter new timeline for the Initial Public Offering (IPO) will be drawn. 

(b) Coal India Ltd (CIL) – The Government approved disinvestment of 10 per cent paid up equity capital in Coal India Ltd (CIL) out of Government of India’s shareholding of 89.65 per cent through Offer of Sale (OFS). In compliance to the CCEA decision and based on the decision of the Alternative Mechanism the offer size was made for 5 per cent of paid up equity of Government of India (with an option to retain additional 5 per cent in case of over subscription). The Alternative Mechanism fixed floor price of ₹ 358 per share and the issue was launched on January 30, 2015. A proceed of ₹ 1,852.55 crore has been received from the Retail Investors, the largest in any OFS so far. The total receipt accruing to the Government from CIL disinvestment are ₹ 22,557.63 crore. 

(c) Hindustan Aeronautics Ltd. (HAL) – Government approved disinvestment of 10 per cent paid-up equity capital in HAL out of Government shareholding of 100 per cent through an IPO. The Book Running Lead Managers (BRLM), Legal Advisers and Registrar for the Issue have been appointed. The preparation of DRHP is on. 

(d) Hindustan Zinc Ltd (HZL) – CCEA has directed that the residual equity, i.e. 29.54 per cent, be disposed off in the open market. Valuer has been appointed. The valuation report is awaited. 

(e) BALCO — CCEA has decided that the Government’s residual shareholding of 49 per cent in BALCO be disposed off through any appropriate method as may be decided by Department of Disinvestment. The valuer has been appointed. The valuation report is awaited. 

(f) National Hydroelectric Power Corporation (NHPC) – The CCEA has approved disinvestment of 11.36 per cent paid up equity capital of NHPC Limited out of Government of India shareholding of 85.96 per cent. All the intermediaries for the NHPC OFS have been appointed. Preparation for disinvestment is on. 

(g) Power Finance Corporation (PFC)- The CCEA has approved disinvestment of 5 per cent paid up equity capital of PFC out of Government of India shareholding of 72.80 per cent. All the intermediaries for the PFC OFS have been appointed. 

(h) Rural Electrification Corporation (REC) – The CCEA has approved disinvestment of 5 per cent paid up equity capital of REC out of Government of India shareholding of 65.64 per cent. All the intermediaries for the REC OFS have been appointed. 

(i) Oil and Natural Gas Corporation Limited (ONGC) – The CCEA has approved disinvestment of 5 per cent paid up equity capital of ONGC out of Government of India shareholding of 68.94 per cent. ONGC OFS is tentatively scheduled to be completed during the current financial year. 

The budget target for disinvestment in the year 2014-15 has been kept at ₹ 51, 925 crore, comprising ₹ 36,925 crore by way of disinvestment of CPSEs and Rs 15,000 crore through disinvestment of Government stake in non-Government companies. The Government realized an amount of ₹ 1,719.54 crore as disinvestment receipts through disinvestment of 5 per cent paid up equity capital of SAIL out of Government of India’s shareholding in the CPSE.