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Explainer: The Citizenship (Amendment) Bill, 2019

The Minister of Home Affairs introduced the Citizenship (Amendment) Bill, 2019 today in Lok Sabha.   It is scheduled to be taken up for discussion and passing by the House later today.  The Bill amends the Citizenship Act, 1955, and seeks to make foreign illegal migrants of certain religious communities coming from Afghanistan, Bangladesh, and Pakistan eligible for Indian citizenship.  In this blog, we look at the criteria for determining citizenship in India, discuss how the Bill proposes to change the criteria, and highlight other key changes proposed by the Bill. 

How is citizenship acquired in India?

In India, citizenship is regulated by the Citizenship Act, 1955.  The Act specifies that citizenship may be acquired in India through five methods – by birth in India, by descent, through registration, by naturalisation (extended residence in India), and by incorporation of territory into India. [1]  

Can illegal migrants acquire citizenship?

An illegal migrant is prohibited from acquiring Indian citizenship.  An illegal immigrant is a foreigner who either enters India illegally, i.e., without valid travel documents, like a visa and passport, or enters India legally, but stays beyond the time period permitted in their travel documents.  An illegal migrant can be prosecuted in India, and deported or imprisoned.   

In September 2015 and July 2016, the central government exempted certain groups of illegal migrants from being imprisoned or deported. [2]  These are illegal migrants who came into India from Afghanistan, Bangladesh, or Pakistan on or before December 31, 2014, and belong to the Hindu, Sikh, Buddhist, Jain, Parsi, or Christian religious communities.  

How does the Bill seek to change the criteria for determining citizenship?

The Bill proposes that the specified class of illegal migrants from the three countries will not be treated as illegal migrants, making them eligible for citizenship.  On acquiring citizenship, such migrants shall be deemed to be Indian citizens from the date of their entry into India and all legal proceedings regarding their status as illegal migrants or their citizenship will be closed.

The Act allows a person to apply for citizenship by naturalisation, if the person meets certain qualifications.  One of the qualifications is that the person must have resided in India or been in central government service for the last 12 months and at least 11 years of the preceding 14 years.  For the specified class of illegal migrants, the number of years of residency has been relaxed from 11 years to five years.  

Are the provisions of the Bill applicable across the country?

The Bill clarifies that the proposed amendments on citizenship to the specified class of illegal migrants will not apply to certain areas.  These are: (i) the tribal areas of Assam, Meghalaya, Mizoram, and Tripura, as included in the Sixth Schedule to the Constitution, and (ii) the states regulated by the “Inner Line” permit under the Bengal Eastern Frontier Regulations 1873.  These Sixth Schedule tribal areas include Karbi Anglong (in Assam), Garo Hills (in Meghalaya), Chakma District (in Mizoram), and Tripura Tribal Areas District.   Further, the Inner Line Permit regulates visit of all persons, including Indian citizens, to Arunachal Pradesh, Mizoram, and Nagaland.

Is the differentiation among the specified class of illegal migrants and all other illegal migrants reasonable?

The Bill makes only certain illegal migrants eligible for citizenship.  These are persons belonging to the six specified religious communities, from the three specified countries, who entered India on or before December 31, 2014, and do not reside in the Sixth Schedule areas or in the states regulated by the Inner Line Permit states.  This implies that all other illegal migrants will not be able to claim the benefit of citizenship conferred by the Bill, and may continue to be prosecuted as illegal migrants.  Any provision which distinguishes between two groups may violate the standard of equality guaranteed under Article 14 of the Constitution, unless one can show a reasonable rationale for doing so. [3]   The Bill provides differential treatment to illegal migrants on the basis of (a) their country of origin, (b) religion, (c) date of entry into India, and (d) place of residence in India.   The question is whether these factors serve a reasonable purpose to justify the differential treatment.  We examine this below. 

The Bill classifies migrants based on their country of origin to include only Afghanistan, Pakistan and Bangladesh.  While the Statement of Objects and Reasons (SoR) in the Bill reasons that millions of citizens of undivided India were living in Pakistan and Bangladesh, no reason has been provided to explain the inclusion of Afghanistan.  The SoR also states that these countries have a state religion, which has resulted in religious persecution of minority groups.  However, there are other countries which may fit this qualification.   For instance, two of India’s neighboring countries, Sri Lanka (Buddhist state religion) [4] and Myanmar (primacy to Buddhism) [5], have had a history of persecution of Tamil Eelams (a linguistic minority in Sri Lanka), and the Rohingya Muslims, respectively.[6], [7], [8]   

Further, there are other religious minorities from Pakistan, Afghanistan and Bangladesh, such as the Ahmadiyya Muslims in Pakistan (considered non-Muslims in that country) [9], and atheists in Bangladesh [10] who have faced religious persecution and may have illegally migrated to India.  Given that the objective of the Bill is to provide citizenship to migrants escaping from religious persecution, it is not clear why illegal migrants belonging to other neighbouring countries, or belonging to religious minorities from these three specified countries, have been excluded from the Bill.  

The Bill also creates further differentiation between the specified class of illegal migrants based on when they entered India (before or after December 31, 2014), and where they live in India (provisions not applicable to Sixth Schedule and Inner Line Permit areas).  However, the reasons provided to explain the distinction is unclear.  Note that certain restrictions apply to persons (both citizens and foreigners) in the Sixth Schedule areas and in the states regulated by the Inner Line Permit.  Once an illegal migrant residing in these areas acquires citizenship, he would be subject to the same restrictions in these areas, as are applicable to other Indian citizens.  Therefore, it is unclear why the Bill excludes illegal migrants residing in these areas. 

How does the Bill change the regulations for Overseas Citizens of India?

The Bill also amends the provisions on registration of Overseas Citizens of India (OCI). OCI cardholders are foreigners who are persons of Indian origin. For example, they may have been former Indian citizens, or children of current Indian citizens. An OCI enjoys benefits such as the right to travel to India without a visa, or to work and study here.  At present, the government may cancel a person’s OCI registration on various grounds specified in the Act.  In case of a cancellation, an OCI residing in India may be required to leave the country. The Bill adds another ground for cancelling OCI registration — violation of any law notified by the central government.  However, the Bill does not provide any guidance on the nature of laws which the central government may notify.  The Supreme Court has noted that this guidance is necessary to set limits on the authority’s powers and to avoid any arbitrariness in exercise of powers. [11]    Therefore, the powers given to the government under the Bill may go beyond the permissible limits of valid delegation. 

Note:  The blog has been updated to remove the following issue: “Second, the Bill delegates the power to notify laws and not offences.  This may result in the cancellation of OCI for minor violations.  For instance, the government may want to cancel the registration of an OCI who is found guilty of sedition, under the Indian Penal Code, 1861.  However, since the government cannot notify one offence, it will need to notify the entire Indian Penal Code, which would include minor offences such as rash and negligent driving.” 

[1].  Section 2(1)(b) of the Citizenship Act, 1955.

[2].  State of West Bengal vs Anwar Ali Sarkar, AIR 1952 SC 75.  

[3].  State of West Bengal vs Anwar Ali Sarkar, AIR 1952 SC 75.  

[4].  Article 9 of the Constitution of the Democratic Socialist Republic of Sri Lanka states: “The Republic of Sri Lanka shall give to Buddhism the foremost place and accordingly it shall be the duty of the State to protect and foster the Buddha Sasana, while assuring to all religions the rights granted by Articles 10 and 14(1)(e).”

[5].  Articles 361 and 362 of the Constitution of the Republic of the Union of Myanmar state the following.  “361. The Union recognizes special position of Buddhism as the faith professed by the great majority of the citizens of the Union. 362. The Union also recognizes Christianity, Islam, Hinduism and Animism as the religions existing in the Union at the day of the coming into operation of this Constitution.”

[6]. It is estimated that there are over a lakh Sri Lankan refugees in India, two-thirds of them in government camps.  See https://timesofindia.indiatimes.com/city/chennai/why-lankan-refugees-are-reluctant-to-go-back-home/articleshow/65591130.cms

[7]. “Myanmar Rohingya: What you need to know about the crisis”, BBC News, April 24, 2018, https://www.bbc.com/news/world-asia-41566561.

[8]. “Why India is refusing refuge to Rohingyas”, Times of India, September 6, 2017, https://timesofindia.indiatimes.com/india/why-india-is-refusing-refuge-to-rohingyas/articleshow/60386974.cms.

[9].  The Second Amendment to the Constitution of Pakistan passed in 1974 effectively declared Ahmaddiyas as non-Muslims. 

[11].  Hamdard Dawakhana and Anr., v. The Union of India (UOI) and Ors., AIR1960SC554; Confederation of Indian Alcoholic Beverage Companies and Ors. vs. The State of Bihar and Ors., 2016(4) PLJR369. 

Understanding recent amendments to the Arms Act, 1959

The  Arms (Amendment) Bill, 2019 was introduced in Lok Sabha recently and is scheduled to be passed in this Winter Session.  The Bill amends the Arms Act, 1959 which deals with the regulation of arms in India.  The Act defines arms to include firearms, swords, and anti-aircraft missiles.  The Statement of Objects and Reasons of the Bill noted that law enforcement agencies have indicated a growing connection between the possession of illegal firearms and criminal activities.  In this context, the Bill seeks to reduce the number of firearms allowed per person, and increases punishments for certain offences under the Act.   The Bill also introduces new categories of offences.  In this post, we explain key provisions of the Bill.  

How many firearms are allowed per person?

The Arms Act, 1959 allows a person to have three licenced firearms.  The Bill proposes to reduce this to one firearm per person.  This would also include any firearms that may have been given as inheritance or as an heirloom.  Excess firearms must be deposited at the nearest police station or licensed arms dealer within one year of the passing of the Bill.  The Bill also extends the duration of a licence from three years to five years.

Note that in 2017, 63,219 firearms were seized from across India under the Arms Act, 1959.  Out of these, only 3,525 (5.5%) were licenced firearms.  Further, 36,292 cases involving firearms were registered under the Act in 2017, of which only 419 (1.1%) cases involved licenced firearms. [1]  This trend persisted even at the level of specific crimes, where only 8.5% of the murders committed using firearms involved licenced firearms. [2]

What changes are being made to existing offences?

Presently, the Act bans manufacture, sale, use, transfer, conversion, testing or proofing of firearms without license.  The Bill additionally prohibits obtaining or procuring un-licensed firearms, and the conversion of one category of firearms to another without a license.  The latter includes any modifications done to enhance the performance of a firearm.

The Bill also proposes increased punishments for several existing offences.   For example, the Act specifies the punishment for: (i) dealing in un-licensed firearms, including their manufacture, procurement, sale, transfer, conversion, (ii) the shortening or conversion of a firearm without a licence, and (iii) import or export of banned firearms.   The punishment for these offences currently is between three years and seven years, along with a fine.  The Bill increases the minimum punishment to seven years and the maximum to life imprisonment.

The Act also punishes dealing in prohibited firearms (such as automatic and semi-automatic assault rifles) without a license, with imprisonment between seven years and life imprisonment, along with fine.  The Bill increases the minimum punishment from seven years to 10 years.  Additionally, the punishment for cases in which the usage of prohibited arms results in the death of a person has been revised.  The punishment has been updated from the existing punishment of death penalty to allow for death penalty or life imprisonment, along with a fine.

Are there any new offences being introduced?

The Bill adds certain news offences.  For example, forcefully taking a firearm from police or armed forces has been made a crime under the Bill.  The punishment for doing so is imprisonment between 10 years and life imprisonment, along with a fine.  Additionally, the Bill punishes the negligent use of firearms, such as celebratory gunfire during weddings or religious ceremonies which endanger human life or personal safety of others.  The proposed punishment in this case is imprisonment of up to two years, or a fine of up to one lakh rupees, or both.

The Bill also adds a definition of ‘illicit trafficking’.  It is defined to include the trade, acquisition, sale of firearms or ammunitions into or out of India where the firearms are either not marked as per the Act or violate the provisions of the Act.  The Bill makes illicit trafficking punishable with imprisonment between 10 years and life, along with a fine.

Does the Bill address issues of organised crime?

The Bill also introduces a definition of ‘organised crime’.  ‘Organised crime’ has been defined as continued unlawful activity by a person, either as a member of a syndicate or on its behalf, by using unlawful means, such as violence or coercion, to gain economic or other benefits.  An organised crime syndicate refers to two or more persons committing organised crime.

The Bill introduces harsher punishments for members of an organised crime syndicate.  For example, for the possession of an unlicensed firearm, the minimum term for an individual would be seven years, extendable to life imprisonment and liable to a fine.  However, the possession of unlicensed firearms by a member of a syndicate will be punishable with imprisonment between 10 years and life, along with a fine.  This increased punishment also applies to non-members contravening provisions of the Act on behalf of a syndicate.

[1] Crime in India 2017, National Crime Records Bureau, October 21, 2019,  http://ncrb.gov.in/StatPublications/CII/CII2017/pdfs/CII2017-Full.pdf.

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Tenure and salaries of CIC and ICs under the Right to Information Rules, 2019

The Right to Information (Amendment) Act, 2019 amended the Right to Information Act, 2005.  The RTI Act, 2005 specified the tenure, terms of service and salaries of the Chief Information Commissioner (CIC) and Information Commissioners (ICs) at the central and state levels, in the parent law.  The RTI (Amendment) Act, 2019 removed these provisions and stated that the central government will notify the term and quantum of salary through rules.[1],[2]  

The Right to Information Rules, 2019 were notified on October 24, 2019.[3]  These rules set out the tenure, terms of service and salaries of the CIC and ICs at the state and central levels.  Table 1 compares the provisions related to the tenure and salary of the CIC and ICs under the Right to Information Act, 2005 and the Right to Information Rules, 2019

Table 1:  Comparison of the provisions of the Right to Information Act, 2005 and the Right to Information Rules, 2019

Provision

RTI Act, 2005

RTI Rules, 2019

Term

The CIC and ICs (at the central and state level) will hold office for a term of five years. 

The CIC and ICs (at the central and state level) will hold office for a term of three years. 

Salary

The salary of the CIC and ICs (at the central level) will be equivalent to the salary paid to the Chief Election Commissioner and Election Commissioners (Rs 2,50,000 per month)

Similarly, the salary of the CIC and ICs (at the state level) will be equivalent to the salary paid to the Election Commissioners (Rs 2,50,000 per month) and the Chief Secretary to the state government (Rs 2,25,000 per month), respectively. 

The CIC and ICs (at the central level) shall receive a pay of Rs. 2,50,000 and Rs. 2,25,000 per month, respectively.

 

 

 

 

CICs and ICs (at the state level) shall receive a pay of Rs. 2,25,000 per month.

Source: The Right to Information (Term of Office, Salaries, Allowances and Other Terms and Conditions of Service of Chief Information Commissioner, Information Commissioners in the Central Information Commission, State Chief Information Commissioner and State Information Commissioners in the State Information Commission) Rules, 2019; The High Court and the Supreme Court Judges (Salaries and Conditions of Service) Amendment Act, 2017; Indian Administrative Services (Pay) Rules, 2016; PRS.

 

[1] Right to Information Act, 2005, https://rti.gov.in/rti-act.pdf.

[2] Right to Information (Amendment Act), 2019, file:///C:/Users/Dell/Downloads/The%20Right%20to%20Information%20(Amendment)%20Bill,%202019%20Text.pdf.

[3] The Right to Information (Term of Office, Salaries, Allowances and Other Terms and Conditions of Service of Chief Information Commissioner, Information Commissioners in the Central Information Commission, State Chief Information Commissioner and State Information Commissioners in the State Information Commission) Rules, 2019, http://egazette.nic.in/WriteReadData/2019/213438.pdf.

More Privatisation on the cards?

The core group of secretaries on disinvestment has recently  approved the disinvestment of five public sector undertakings (PSUs).  This includes the entire shareholding of the government in four PSUs: Bharat Petroleum Corporation (BPCL), Shipping Corporation of India (SCI), North Eastern Electric Power Corporation (NEEPCO) and THDC (operates and maintains the Tehri Hydro Power Complex), and 30% of the shareholding in Container Corporation of India Limited (Concor).  The government currently holds 54.8% of Concor, so the sale will reduce its stake below 25%.

Over the last few years, the government has removed legislative barriers towards privatisation of several other PSUs.  This raises the question whether the government plans to privatise them.

What was the Supreme Court’s order on privatisation of PSUs?

In 2003, a similar proposal had been raised by the government for the sale of its shareholding in HPCL and BPCL.  This proposal was challenged in the Supreme Court on the grounds that it would violate the provisions of the laws that transferred ownership of certain assets to the government (which later formed these PSUs).  For example, BPCL was formed by nationalising Burmah Shell in India through an Act of Parliament, and merging their refinery and marketing companies.   The  Court ruled that the central government cannot proceed with the privatisation of HPCL and BPCL (i.e., reduce its direct or indirect ownership below 51%) without amending the concerned laws.  So the government continues to hold majority stake directly in BPCL, and indirectly in HPCL ( through ONGC, another PSU).  

The five Companies approved for privatisation include BPCL and SCI (into which two nationalised companies, the Jayanti Shipping Company, and the Mogul Line Limited were merged).  The relevant nationalisation Acts have been repealed over the last five years.

How did the government remove the legislative barriers for privatisation?

Between 2014 and 2019, Parliament passed six Repealing and Amending Acts which repealed around 722 laws.  These included laws that had transferred the ownership of companies to the central government which later formed BPCL, HPCL, and OIL.  These also repealed the laws that had transferred ownership of the companies to the central government which were later merged with the SCI.  This implies that now the government can go ahead with the privatisation of these government companies as the conditions imposed by the Supreme Court’s order have been fulfilled.  These Repealing and Amending Acts also repealed several other nationalisation laws that were later formed into PSUs.  In the Table below, we have listed some of these companies.  Note that the  Law Commission of India (2014) had suggested the repeal of several of these laws (including the Esso Act, the Burmah Shell Act, the Burn Company Act) on the grounds that these laws do not serve any purpose with respect to the nationalised entity.   However, it had suggested that a study of all the nationalisation Acts should be done before repealing these Acts, and if necessary a savings clause should be provided in the repealing Act. 

Did Parliament scrutinise these Acts before passing them?

Many of these repeals were made through the Repealing and Amending Act, 2016.  These include the Acts relating to BPCL, HPCL, OIL, Coal India Limited, SCI, National Textiles Corporation, Hindustan Copper and Burn Standard Company Limited.   The Bill was not referred to a Parliamentary Standing Committee, and was passed after a cursory debate (50 minutes in Lok Sabha and 20 minutes in Rajya Sabha).  Similarly, the two Acts passed in 2017, that enable privatisation of SAIL, PowerGrid, and State Trading Corporation were not examined by a Standing Committee.

So what comes next?

The repeal of these Acts have cleared the legislative hurdle for privatisation of these companies.   That is, the government does not need prior approval of Parliament to sell its shareholding.  Therefore, it is now up to the government to decide whether it wishes to privatise these entities. 

A version of this article was published by the Business Standard on October 20, 2019.

Table 1: Some Nationalisation Acts repealed since 2014 (list not exhaustive)

Company

Act being repealed

Repealing Act

Shipping Corporation Of India (SCI)

The Jayanti Shipping Company (Acquisition of Shares) Act, 1971

Repealing and Amending Act, 2016

The Mogul Line Limited (Acquisition of Shares) Act, 1984

Bharat Petroleum Corporation Limited (BPCL)

The Burmah Shell (Acquisition of Undertakings in India) Act, 1976

Repealing and Amending Act, 2016

Hindustan Petroleum Corporation Limited (HPCL)

The Esso (Acquisition of Undertakings in India) Act, 1974

Repealing and Amending Act, 2016

The Caltex [Acquisition of Shares of Caltex Oil Refining (India) Limited and of the Undertakings in India of Caltex (India) Limited] Act, 1977

The Kosangas Company (Acquisition of Undertaking) Act, 1979

Coal India Limited (CIL)

The Coking Coal Mines (Emergency Provisions) Act, 1971

Repealing and Amending Act, 2016

The Coal Mines (Taking Over of Management) Act, 1973

The Coking Coal Mines (Nationalisation) Act, 1972.

Repealing and Amending (Second) Act, 2017

The Coal Mines (Nationalisation) Act, 1973.

Steel Authority of India Limited (SAIL)

The Bolani Ores Limited (Acquisition of Shares) and Miscellaneous Provisions Act, 1978

Repealing and Amending (Second) Act, 2017

The Indian Iron and Steel Company (Acquisition of Shares) Act, 1976

Power Grid Corporation of India Limited

The National Thermal Power Corporation Limited, the National Hydroelectric Power Corporation Limited and the North-Eastern Electric Power Corporation Limited (Acquisition and Transfer of Power Transmission Systems) Act, 1993.

Repealing and Amending (Second) Act, 2017

The Neyveli Lignite Corporation Limited (Acquisition and Transfer of Power Transmission System) Act, 1994.

Oil India Limited (OIL)

The Burmah Oil Company [Acquisition of Shares of Oil India Limited and of the Undertakings in India of Assam Oil Company Limited and the Burmah Oil Company (India Trading) Limited] Act, 1981

Repealing and Amending Act, 2016

State Trading Corporation of India Ltd. (STC)

The Tea Companies (Acquisition and Transfer of Sick Tea Units) Act, 1985

Repealing and Amending Act, 2017

National Textile Corporation Limited (NTC)

The Sick Textile Undertakings (Taking Over of Management) Act, 1972

Repealing and Amending Act, 2016

The Textile Undertakings (Taking Over of Management) Act, 1983

The Laxmirattan and Atherton West Cotton Mills (Taking Over of Management) Act, 1976

Hindustan Copper Limited

The Indian Copper Corporation (Acquisition of Undertaking) Act, 1972

Repealing and Amending Act, 2016

Burn Standard Co Ltd

The Burn Company and Indian Standard Wagon Company (Nationalisation) Act, 1976

Repealing and Amending Act, 2016

Indian Railways

The Futwah-Islampur Light Railway Line (Nationalisation) Act, 1985

Repealing and Amending Act, 2016

Braithwaite & Co Limited, Ministry of Railways

The Braithwaite and Company (India) Limited (Acquisition and Transfer of Undertakings) Act, 1976.

Repealing and Amending (Second) Act, 2017

The Gresham and Craven of India (Private) Limited (Acquisition and Transfer of Undertakings) Act, 1977

Andrew Yule & Co. Ltd.

The Brentford Electric (India) Limited (Acquisition and Transfer of Undertakings) Act, 1987

Repealing and Amending (Second) Act, 2017

The Transformers and Switchgear Limited (Acquisition and Transfer of Undertakings) Act, 1983

Repealing and Amending Act, 2019

Alcock Ashdown (Guj) Limited, Government of Gujarat Undertaking

The Alcock Ashdown Company Limited (Acquisition of Undertakings) Act, 1973.

Repealing and Amending Act, 2019

Bengal Chemicals & Pharmaceuticals Ltd. (BCPL)

The Bengal Chemical and Pharmaceutical Works Limited (Acquisition and Transfer of Undertakings) Act, 1980

Repealing and Amending (Second) Act, 2017

Organisations under Department of Pharmaceuticals

The Smith, Stainstreet and Company Limited (Acquisition and Transfer of Undertakings) Act, 1977

Repealing and Amending (Second) Act, 2017

The Bengal Immunity Company Limited (Acquisition and Transfer of Undertakings) Act, 1984.

Sources: Repealing and Amending Act, 2015; Repealing and Amending (Second) Act, 2015; Repealing and Amending Act, 2016; Repealing and Amending Act, 2017; Repealing and Amending (Second) Act, 2017; Repealing and Amending Act, 2019. 

Explaining the recent ban on e-cigarettes

On Wednesday, the government promulgated an Ordinance to ban electronic cigarettes in India.  In this context, we look at what are electronic cigarettes, what are the current regulations in place, and what the Ordinance seeks to do.

What are electronic cigarettes?

The Ordinance defines electronic cigarettes (e-cigarettes) as battery-operated devices that heat a substance, which may or may not contain nicotine, to create vapour for inhalation.  These e-cigarettes can also contain different flavours such as menthol, mango, watermelon, and cucumber.  Usually, e-cigarettes are shaped like conventional tobacco products (such as cigarettes, cigars, or hookahs), but they also take the form of everyday items such as pens and USB memory sticks.

Unlike traditional cigarettes, e-cigarettes do not contain tobacco and therefore are not regulated under the Cigarettes and Other Tobacco Products Act, 2003.  This Act regulates the sale, production, and distribution of cigarettes and other tobacco products in India, and prohibits advertisement of cigarettes. 

What are the international regulations for e-cigarettes?

India is a signatory to the WHO Framework Convention on Tobacco Control (WHO FCTC) which was developed in response to the globalisation of the tobacco epidemic.  In 2014, the WHO FCTC invited all its signatories to consider prohibiting or regulating e-cigarettes in their countries.  This was suggested due to emerging evidence on the negative health impact of these products which could result in lung cancer, cardiovascular diseases, and other illnesses associated with smoking.

Since then, several countries such as Brazil, Mexico, Singapore, and Thailand have banned the production, manufacture, and sale of e-cigarettes.  Recently, the states of New York and Michigan in USA banned the sale of flavoured e-cigarettes.  Whereas, in UK, the manufacture and sale of e-cigarettes has been allowed based on certain conditions.  Further, the advertisement and promotion, and the levels of nicotine in e-cigarettes is also regulated.

Prior to the Ordinance, were e-cigarettes regulated in India?

In August 2018, the Ministry of Health and Family Welfare had released an advisory to all states requiring them to not approve any new e-cigarettes and restrict the sale and advertisements of e-cigarettes.  Based on this advisory, 15 states including Delhi, Maharashtra, and Uttar Pradesh have since banned e-cigarettes.  However, this advisory was challenged in the Delhi High Court in March 2019, which subsequently imposed a stay on the ban.

What does the Ordinance do?

The Ordinance prohibits the production, manufacture, import, export, transport, sale, distribution and advertisement of e-cigarettes in India.  Any person who contravenes this provision will be punishable with imprisonment of up to one year, or a fine of one lakh rupees, or both.  For any subsequent offence, the person will be punishable with an imprisonment of up to three years, along with a fine of up to five lakh rupees.

Additionally, storage of e-cigarettes will be punishable with an imprisonment of up to six months, or a fine of Rs 50,000 or both.  Once the Ordinance comes into force (i.e., on September 18, 2019), the owners of existing stocks of e-cigarettes will have to declare and deposit these stocks at the nearest office of an authorised officer.  Such an authorised officer may be a police officer (at least at the level of a sub-inspector), or any other officer as notified by the central or state government. 

Note that, the Ordinance does not contain any provisions regarding possession or use of e-cigarettes.  The Ordinance will be in force for the next six months, and must be approved by Parliament within six weeks of the commencement of the next session of Parliament.  If it is not passed within this time frame, it will cease to be in force. 

The Importance of Parliamentary Committees

Last week, the Departmentally Related Standing Committees were reconstituted for the first year of the 17th Lok Sabha.  In this context, we discuss the functioning and role of Standing Committees.

The visible part of Parliament’s work takes place on the floor of the House.  Parliament meets for three sessions a year i.e., the Budget, Monsoon, and Winter Sessions.  This part of Parliament’s work is televised and closely watched.  However, Parliament has another forum through which a considerable amount of its work gets done.  These are known as Parliamentary Committees.  These Committees are smaller units of MPs from both Houses, across political parties and they function throughout the year.  These smaller groups of MPs study and deliberate on a range of subject matters, Bills, and budgets of all the ministries.

During the recently concluded first Session of the 17th Lok Sabha, Parliament sat for 37 days.  In the last 10 years, Parliament met for 67 days per year, on average.  This is a short of amount of time for MPs to be able to get into the depth of matters being discussed in the House.  Since Committees meet throughout the year, they help make up for this lack of time available on the floor of the House. 

Parliament deliberates on matters that are complex, and therefore needs technical expertise to understand such matters better.  Committees help with this by providing a forum where Members can engage with domain experts and government officials during the course of their study.  For example, the Committee on Health and Family Welfare studied the Surrogacy (Regulation) Bill, 2016 which prohibits commercial surrogacy, but allows altruistic surrogacy.  As MPs come from varying backgrounds, they may not have had the expertise to understand the details around surrogacy such as fertility issues, abortion, and regulation of surrogacy clinics, among others.  The Committee called upon a range of stakeholders including the National Commission for Women, doctors, and government officials to better their understanding of the issues, before finalising their report. 

Committees also provide a forum for building consensus across political parties.  The proceedings of the House during sessions are televised, and MPs are likely to stick to their party positions on most matters.  Committees have closed door meetings, which allows them to freely question and discuss issues and arrive at a consensus. 

After a Committee completes its study, it publishes its report which is laid in Parliament.  These recommendations are not binding, however, they hold a lot of weight.  For example, the Standing Committee on Health made several recommendations to the National Medical Commission Bill in 2017.  Many of these were incorporated in the recently passed 2019 Bill, including removing the provision for allowing a bridge course for AYUSH practitioners. 

There are 24 such Departmentally Related Standing Committees (DRSCs), each of which oversees a set of Ministries.  DRSCs were set up first in 1993, to ensure Parliament could keep with the growing complexity of governance.  These are permanent Committees that are reconstituted every year.  They consist of 21 Members from Lok Sabha, and 10 Members from Rajya Sabha, and are headed by a Chairperson.  The DRSCs primarily look at three things: (i) Bills, (ii) budgets, and (iii) subject specific issues for examination.  Other types of Standing Committees include Financial Committees which facilitate Parliament’s scrutiny over government expenditure.  Besides these, Parliament can also form ad hoc Committees for a specific purpose such as addressing administrative issues, examining a Bill, or examining an issue. 

To ensure that a Bill is scrutinised properly before it is passed, our law making procedure has a provision for Bills to be referred to a DRSC for detailed examination.  Any Bill introduced in Lok Sabha or Rajya Sabha can be referred to a DRSC by either the Speaker of the Lok Sabha or Chairman of the Rajya Sabha.  Over the years, the Committees have immensely contributed to strengthen the laws passed by Parliament.  For example, the Consumer Protection Act, 2019, overhauling the 1986 law, was recently passed during the Budget Session.  An earlier version of the Bill had been examined by the Committee on Food and Consumer Affairs, which suggested several amendments such as increasing penalties for misleading advertisements, making certain definitions clearer.   The government accepted most of these recommendations and incorporated them in the 2019 Act.

Besides Bills, the DRSCs also examine the budget.  The detailed estimates of expenditure of all ministries, called Demand for Grants are sent for examination to the DRCSs.  They study the demands to examine the trends in allocations, spending by the ministries, utilisation levels, and the policy priorities of each ministry.  However, only a limited proportion of the budget is usually discussed on the floor of the House.  In the recently dissolved16th Lok Sabha, 17% of the budget was discussed in the House. 

Committees also examine policy issues in their respective Ministries, and make suggestions to the government. The government has to report back on whether these recommendations have been accepted or not.  Based on this, the Committees then table an Action Taken Report, which shows status of the government’s action on each recommendation. 

While Committees have substantially impacted Parliament’s efficacy in discharging its roles, there is still scope for strengthening the Committee system.  In the 16th Lok Sabha, DRSCs examined 41 Bills, 331 Demands for Grants, 197 issues, and published 503 Action Taken Reports. 

However, the rules do not require that all Bills be examined by a Committee.  This leads to some Bills being passed without the advantage of a Committee scrutinising its technical details.  Recently, there has been a declining trend in the percentage of Bills being referred to a Committee.  In the 15th LS, 71% of the Bills introduced were referred to Committees for examination, as compared to 27% in the 16th Lok Sabha.

With the DRSCs now constituted for the first year of the 17th Lok Sabha, they will soon begin their meetings to select the subjects they are going to examine.  Some Committees already have Bills to examine that were referred to them during the 16th Lok Sabha.  Some of these Bills are: (i) the Cinematograph (Amendment) Bill, 2019, (ii) the Allied and Healthcare Professions Bill, 2018, and (iii) the Registration of Marriage of Non- Resident Indian Bill, 2019So far in the 17th Lok Sabha no Bill has been referred to a Committee yet.

 

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Ban on cryptocurrencies: Understanding the proposed legislation

In July, a Committee set up by the Ministry of Finance to study issues related to virtual currencies, submitted its report.  The Committee recommended that all private cryptocurrencies should be banned in India.  Correspondingly, the Committee proposed a draft Bill banning cryptocurrency in the country.  In this blog, we explain cryptocurrencies and how they are used, recommendations of the Committee with respect to cryptocurrencies and the regulatory framework for cryptocurrencies in India and other countries.

What are virtual currencies and what is their use?

Virtual currency is a digitally tradable form of value, which can be used as a medium of exchange, or a stored value which can be utilised later.  It does not have the status of a legal tender.  A legal tender is guaranteed by the central government and all parties are legally bound to accept it as a mode of payment.

Cryptocurrency is a specific type of virtual currency, which is decentralised and protected by cryptographic encryption techniques.  Bitcoin, Ethereum, Ripple are a few notable examples of cryptocurrencies.  Decentralisation implies that there is no central authority where records of transactions are maintained.  Instead, anyone can create a transaction.  This transaction data is recorded and shared across multiple distributor networks, through independent computers as shown in Figure 1.  This technology is known as Distributed Ledger Technology.

Figure 1: Distributed Ledger Technology

  The Committee noted that there are two principal ways in which cryptocurrencies are raising money.  First, through Initial Coin Offerings, where digital tokens are issued in exchange for other currencies.  Second, through using it as a means of exchange or a payment system.  As of February 2019, there were more than 2,000 cryptocurrencies across the world, with a market capitalisation of approximately USD 120 billion.

Why has the Committee recommended banning of cryptocurrencies?

The Committee noted various regulatory concerns around virtual currencies, and cryptocurrencies in particular.  These include:

Fluctuation in prices: Cryptocurrencies are subjected to market fluctuations and the lack of a centralised authority makes it difficult to regulate them.  For instance, in December 2017, the value of Bitcoin cryptocurrency was around USD 20,000 per coin, which reduced to USD 3,800 per coin by November 2018.  The Ministry of Finance, in a press statement, noted that the price of virtual currencies is a matter of mere speculation resulting in spurt and volatility in their prices.

Risk to consumers: The Committee also noted that there are several vulnerabilities in the design of cryptocurrencies which leave consumers open to risk of fraud.  These include phishing cyber-attacks and ponzi schemes.  For instance, a Rs 2,000 crore ponzi scheme was unveiled in April 2018.  Further, cryptocurrency transactions are irreversible, which means once a transaction is done, there is no way to remedy it.

Impact on power consumption: The Committee also observed that cryptocurrencies can have unfavourable consequences on India’s energy demand.  Validating transactions in a distributed network involves high electricity consumption and requires high computation power.  The Committee noted a study which estimated that 19 households in USA can be powered for one day by the electricity consumed in a single transaction of bitcoin cryptocurrency.

Potential use for criminal activity: The Financial Action Task Force, an intergovernmental organisation to combat money laundering, in its report (2014) observed that virtual currencies provide greater anonymity than traditional payment methods.  This makes them more vulnerable to money-laundering and illicit funding for terror financing.  The Committee noted that the decentralised nature and the anonymity which cryptocurrencies provide makes it difficult for law enforcement authorities to track down people involved in illicit activities.  

Is there any country which has permitted use of cryptocurrencies?

Different countries have adopted different regulatory frameworks with respect to cryptocurrencies.  Some countries have permitted the use of cryptocurrencies as a payment system while there is a complete ban on cryptocurrencies in some others.  Note that no country has allowed use of any virtual currency as legal tender.

Table 1: Regulatory framework for cryptocurrencies in different countries

Country

Regulatory Framework

Canada

Permitted as a payment system and as a form of investment, income from it is taxed

Switzerland

Permitted as a payment system (including consumer to government transactions) and as a form of investment

Japan

Permitted and regulated as a payment system

China

Use of cryptocurrency is banned for all purposes

What are the present regulations in India with respect to cryptocurrencies?

In the last few years, the Reserve Bank of India (RBI) has notified the potential financial, operational, legal and security risks related to cryptocurrencies on multiple occasions (December 2013, February 2017 and December 2017).  In December 2017, the Ministry of Finance issued a statement which clarified that virtual currencies are not legal tender and do not have any regulatory permission or protection in India.  Further, the investors and participants dealing with them are doing so entirely at their risk and should best avoid participating.  In the 2018-19 budget speech, the Finance Minister announced that the government does not consider cryptocurrencies as legal tender and will take all measures to eliminate their use in financing illegitimate activities or as a part of payment system.  In April 2018, RBI notified that entities regulated by it should not deal in virtual currencies or provide services for facilitating any person or entity in dealing with or settling virtual currencies.

How does the draft Bill proposed by the Committee change these regulations?

Currently, only the entities regulated by the central bank are prohibited from dealing in, or providing services for dealing in virtual currencies.  The draft Bill prohibits any form of mining (creating cryptocurrency), issuing, buying, holding, selling or dealing in cryptocurrency in the country.  Further, it provides that cryptocurrency should not be used as legal tender or currency in India.  The Bill allows for the use of technology or processes underlying cryptocurrency for the purpose of experiment, research or teaching. 

The Bill also provides for offences and punishments for the contravention of its provisions.  For instance, it states that mining, holding, selling, issuing or using cryptocurrency is punishable with a fine, or imprisonment up to 10 years, or both.  For individuals who might be in possession of cryptocurrencies, the Bill provides for a transition period of 90 days from the commencement of the Act, during which a person may dispose of any cryptocurrency in their possession, as per the notified rules.

Are there any areas where the Committee recommended use of cryptocurrencies?

According to the Committee, while cryptocurrencies or virtual currencies do not offer any advantages, the underlying technology behind them (Distributed Ledger Technology, DLT) has many potential applications, both in finance and non-finance sectors.  Some of these are listed in Table 2.  The Committee observed that DLT makes it easier to identify duplicate transactions, and therefore can be utilised for fraud-detection, processing KYC requirements, and claim management for insurance.  Further, it can be helpful for removing errors and frauds in land markets, if used for maintaining land records.  The Committee was also of the view that the idea of an official digital currency in India can be explored further, and that the government may setup a group to examine and develop an appropriate model of digital currency in India.

Table 2: Applications of Distributed Ledger Technology

Sector

Possible uses of DLT

Payments

Faster and cheaper cross-border payments

Reduced transaction cost for micro-payments

Identification

Storing personal records such as birth, marriage or death certificates

Removing duplicates in identification platforms such as KYC

Insurance

Fraud detection and risk prevention

Claims prevention and management

Ownership registries

Removing errors and frauds in land markets

Administrative ease of maintaining land records

Trade Financing

Reduced operational complexity and transaction costs