This week, the centre issued two Ordinances to amend: (i) the Salary, Allowances, and Pension of Members of Parliament Act, 1954 to reduce the salaries of MPs by 30% for a period of one year, and (ii) the Salaries and Allowances of Ministers Act, 1952, to reduce the sumptuary allowance of Ministers by 30% for one year. The government also amended the rules notified under the 1954 Act to reduce certain allowances of MPs for one year, and suspended the MPLAD Scheme for two years. These changes are being made to supplement the financial resources of the centre to tackle the COVID-19 pandemic. These amendments raise larger questions on the effect they have on the capacity of the state to fight the pandemic, and the way in which salaries of MPs should be determined.
Overview of Amendments
The 1954 Act lays out the salary and various allowances that an MP is entitled to during their term in Parliament and also provides pension to former MPs. MPs receive a salary of one lakh rupees per month, along with compensation for official expenses through various allowances. These include a daily allowance for attending Parliament, constituency allowance and office expense allowance. Under the first Ordinance, the salaries of MPs are being reduced by 30%. Further, the constituency allowance and office expense allowance are being reduced by Rs 21,000 and Rs 6,000, respectively.
The 1952 Act regulates the salaries and other allowances of Ministers (including the Prime Minister). The Act provides for the payment of a monthly sumptuary allowance (for expenditure incurred in entertaining visitors) at different rates to the Prime Minister, Cabinet Ministers, Ministers of State, and Deputy Ministers. The second Ordinance is reducing the sumptuary allowances of Ministers by 30%.
Note that the 1952 Act pegs the salaries, and daily and constituency allowances of Ministers to the rates specified for an MP under the 1954 Act. Similar provisions apply to presiding officers of both Houses (other than Chairman of Rajya Sabha) who are regulated by a different Act. Therefore, the amendments to the salaries and constituency allowance of MPs will also apply to Ministers, Speaker and Deputy Speaker of Lok Sabha, and Deputy Chairman of Rajya Sabha. The salary of the Chairman of Rajya Sabha will continue to remain unaffected by the Ordinances (Rs 4 lakh per month).
Further, since 1993, MPs can also identify projects and sanction certain funds every year for public works in their constituencies under the Members of Parliament and Local Area Development (MPLAD) Scheme, 1993. Since 2011-12, each MP can spend up to Rs five crore per year under the scheme. The Union Cabinet has approved the suspension of the MPLAD Scheme for two years. Table 1 below compares the changes in salaries, allowances and MPLAD entitlements of MPs.
Table 1: Comparison of changes in the salaries, allowances and MPLAD entitlements of MPs
|
Feature |
Previous entitlement (in Rs per month) |
New entitlement (in Rs per month) |
Changes for the period of |
|
|
Salary |
1,00,000 |
70,000 |
One year |
|
|
Constituency allowance |
70,000 |
49,000 |
One year |
|
|
Office allowance |
60,000 |
54,000 |
One year |
|
|
Of which |
Office expenses |
20,000 |
14,000 |
- |
|
|
Secretarial assistance |
40,000 |
40,000 |
- |
|
Sumptuary allowance of Prime Minister |
3,000 |
2,100 |
One year |
|
|
Sumptuary allowance of Cabinet Ministers |
2,000 |
1,400 |
One year |
|
|
Sumptuary allowance of Ministers of State |
1,000 |
700 |
One year |
|
|
Sumptuary allowance of Deputy Ministers |
600 |
420 |
One year |
|
|
Funds under MPLAD Scheme |
5 crore |
NIL |
Two years |
|
Sources: 2020 Ordinances; Members of Parliament (Constituency Allowance) Amendment Rules, 2020; Members of Parliament (Office Expense Allowance) Amendment Rules, 2020; “Cabinet approves Non-operation of MPLADs for two years (2020-21 and 2021-22) for managing COVID 19”, Press Information Bureau, Cabinet, April 6, 2020; PRS.
Effect of amendments on resources to fight COVID-19
The proposed reduction to the salaries and allowances of MPs and Ministers amounts to savings of around Rs 55 crore, and the suspension of the MPLAD scheme is expected to save Rs 7800 crore. These measures comprise 0.03% and 4.5% respectively, of the estimated amount required to fight the immediate economic distress unleashed due to COVID. Government has estimated Rs 1.7 lakh crore as the requirement for COVID relief measures under the Pradhan Mantri Garib Kalyan Yojana. Therefore, such measures to decrease MP salaries and allowances toward increasing the pool of funds for fighting the pandemic are likely to have an almost negligible impact.
How might MP salaries be set
Each MP is required to represent the interests of his constituents, formulate legislation on important national matters, hold the government accountable, and ensure efficient allocation of public resources. The salary and office allowance of an MP must be assessed in light of the responsibilities expected to be discharged by them. Ensuring MPs are reasonably compensated in terms of salaries allows MPs the means to be able to discharge their duties devotedly, enables them to make decisions in an independent manner and guarantees that citizens from all walks of life can stand a chance of running for Parliament. The question remains – who decides what is reasonable compensation for MPs.
Currently, MPs in India decide their own salaries which is passed in the form of an Act of Parliament. MPs setting their own pay leads to a conflict of interest. A way to resolve this is by setting up an independent commission to determine that salaries of MPs. This is a practice followed in certain democracies, such as New Zealand and United Kingdom. In some other countries, it is pegged to annual wage rate index such as Canada. Table 2 lists various methods used in some other countries to set salaries for legislators.
Table 2: Methods for setting salaries in different democracies
|
Countries |
Process of determining salary of legislators |
|
India |
Parliament decides by passing an Act. |
|
Australia |
Remuneration Tribunal decides the salary. This is revised annually. |
|
New Zealand |
Remuneration Authority decides the salary. This is revised annually. |
|
UK |
Independent Parliamentary Standards Authority sets the pay annually as per the changes in average earnings in the public sector given by the Office for National Statistics. |
|
Canada |
Member’s pay is adjusted each year to federal government’s annual wage rate index. |
|
Germany |
Based on income of a judge of the highest federal court and adjusted annually by the Parliament. |
Sources: Various government websites of respective countries; PRS.
India has experience with appointing independent commissions to examine the emoluments of government officials. The central government periodically sets up pay commissions to review and recommend changes to the wage structure of government employees with a view to attract talent to government services. The latest Central Pay Commission was constituted in 2014 to decides the emoluments of central government employees, armed forces personnel, employees of statutory bodies, and officers and employees of the Supreme Court. Typically, the Commissions have been chaired by a former Judge of the Supreme Court, and have included members representing government service and independent experts.
Suspending MPLADS
In contrast to these amendments, the suspension of the MPLAD Scheme is a positive step.
The MPLAD Scheme (MPLADS) was introduced in December 1993 to enable legislators to address local developmental problems for their constituents. MPLADS allows legislators to earmark up to five crore rupees every year on public works projects in their constituency and recommend these projects to the district authorities for implementation. Typically, funds under the MPLADS are expended on construction or installation of public facilities (such as school buildings, roads, and electrical facilities), supply of equipment (such as, computers in educational institutions) and sanitation projects.
In 2010, a five-judge bench of the Supreme Court decided a challenge to the constitutionality of the MPLADS. It was argued that MPLADS violates the concept of separation of powers between the executive and the legislature since it provides the MP with executive powers on local public works. The Court ruled that there was no violation of the principle of separation of powers because the role of an MP in this case is recommendatory and the actual work is carried out by the local authorities.
However, the Scheme has undermined the role of an MP as a national-level policy maker. The role of an MP is to determine whether government’s budgetary allocations across development priorities are appropriate and once the money is sanctioned by Parliament is it being spent in an efficient and efficacious manner. However, focus on local administration-level issues, such as development of roads or sanitation projects, obscures the role of the MP in conducting oversight. Another fall out of having MPs responsible for MPLADS is that it skews the expectations of citizens have of their MPs – holding them accountable for resolving local development issues rather than broader policy and legislative decision making. The suspension of MPLADs will allow for MPs to focus on their role in Parliament.
The Ordinance route
Through these Ordinances, the executive has amended the salaries and allowances of MPs and Ministers. In principle, Parliament is discharged with law-making powers. In exceptional circumstances, the Constitution permits the executive to make laws through Ordinances if Parliament is not in session and immediate action is required. The two Ordinances will have to be ratified by Parliament within six weeks of its sitting in order to continue to have the force of law. Interestingly, India is one of the few countries, apart from Bangladesh and Pakistan, that vests the executive with authority to make laws, even if temporary in nature.
The Ordinance amending the salaries of MPs also raises a question on whether it is appropriate that the executive has the power to amend the emoluments of MPs – how would this affect the independence of the legislature which is tasked with holding the executive accountable.
On January 17, 2020, the Ministry of Health and Family Welfare acknowledged the emergence of a new coronavirus (COVID-19) that was spreading across China.[1] On March 11, 2020, the World Health Organisation declared the COVID-19 disease to be a global pandemic. As of April 7, 2020, there are 4,421 confirmed cases of COVID-19 in India.[2] Of these, 326 patients have been cured/discharged and 114 have died.1
As the spread increased and more information about the virus was uncovered, the central government announced several policy decisions to contain it. Further, measures were also announced to support citizens and businesses who were affected by such containment measures. In this blog post, we summarise some of the key measures taken by the central government in this regard as of April 7.
Source: Ministry of Health and Family Welfare, PRS.
Movement restrictions
21-day lockdown in the country
The Ministry of Home Affairs announced a 21-day lockdown to contain the spread of COVID-19 from March 25, 2020 to April 14, 2020.[3] During the lockdown, all establishments, other than those providing essential goods and services, and those involved in agricultural operations, have been closed. Essential goods include items such as food, medicine, and electricity. Essential services include banking services, telecommunications, and pharmaceuticals. Transportation of all goods (essential or non-essential) will remain functional. [4],[5],[6],[7],[8]
All state/UT governments have been directed to: (i) arrange for shelter and food for the needy, including migrant workers, (ii) quarantine migrant workers for at least 14 days, (iii) direct employers to pay wages during the lockdown, and (iv) ensure landlords do not demand rent from workers and students for one month.[9]
Financial aid
Pradhan Mantri Garib Kalyan Yojana to provide relief against COVID-19
On March 26, the Finance Minister announced a relief package of 1.7 lakh crore rupees under the Pradhan Mantri Garib Kalyan Yojana for the poor.[10] Key features of the package are:10,[11]
Insurance cover of Rs 50 lakh will be provided to health workers (such as doctors, nurses, paramedics and ASHA workers) who are treating patients of COVID-19.[12]
Five kilograms of wheat or rice and one kilogram of preferred pulses will be provided for free every month to poor families for the next three months.
Women account holders under the Pradhan Mantri Jan Dhan Yojana will get Rs 500 per month between April and June, and poor families will be given three free gas cylinders over the next three months.
Extension and relaxation in payment of taxes
The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 was promulgated on March 31, 2020.10 The Ordinance provides certain relaxations, such as extension of time limits and waivers of penalties, in relation to specified laws. These include the Income Tax Act, 1961 (IT Act), some Finance Acts, and the Prohibition of Benami Property Transactions Act, 1988. Key provisions under the Ordinance include:
Extension of time limits: The Ordinance extends the time limits (for the period between March 20, 2020 to June 29, 2020) for compliance of certain actions such as: (i) issuing notifications, completing proceedings, and passing orders by authorities and tribunals, (ii) filing of appeals, replies, and applications, and furnishing documents, and (iii) making any investment or payment for claiming deductions or allowances under the IT Act.
Interest and penalty: Payment of any tax, made before June 30, 2020 (or any further date specified by the government), will not be liable for prosecution or penalty. Also, the rate of interest payable for the delay in payment will not exceed 0.75% per month.
Donations to PM CARES Fund: Donations made by a person to the PM CARES Fund will be eligible for 100% tax deduction.
GST compliances: The central government may notify extension to time limits for various compliances under the Central Goods and Services Tax Act, 2017.
Measures by RBI to address the financial stress caused by COVID-19
The Reserve Bank of India (RBI) also announced several measures to address the stress in the economy caused by COVID-19.[13],[14],[15] Key measures are detailed below:
Cutting Policy Rates: The repo rate (the rate at which RBI lends money to banks) was reduced from 5.15% to 4.4%. The reverse repo rate (the rate at which RBI borrows money from banks) was reduced from 4.9% to 4.0%.
Liquidity management: Measures are being taken to expand liquidity in the market to ensure that financial markets and institutions can function normally. These measures include the reduction of the Cash Reserve Ratio (CRR) for all banks from 4% to 3% till March 26, 2021. CRR is the amount of liquid cash that banks have to maintain with the RBI, as a percentage of their total deposits. These steps are expected to inject total liquidity of Rs 3.74 lakh crore.
Relief to borrowers in repayment of loans: All banks and financial institutions (including NBFCs) are permitted to grant a moratorium of three months on payment of all term loan instalments (including agricultural, retail and crop loans) and interest on working capital loans (such as overdraft facilities), which are due between March 1, 2020 and May 31, 2020.
Short term credit to states
The Reserve Bank of India (RBI) has constituted an Advisory Committee to review the Ways and Means Advances (WMA) limits for states and UTs. WMA limits refer to temporary loans given by the RBI to state governments. Until the Committee submits its final recommendations, the WMA limit has been increased by 30% from the existing limit, for all states and UTs. The revised limits will be in force between April 1 and September 30, 2020.[16]
PM CARES Fund
The central government has set up a national fund to deal with emergencies like the COVID-19 pandemic. The public charitable trust known as the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) will provide relief to those affected by COVID-19. The trust is chaired by the Prime Minister and includes members such as the Defence Minister, Home Minister, and Finance Minister.[17]
Donations made by a person to the PM CARES Fund are 100% tax deductible.[18] Non-residents can also contribute to the Fund through foreign inward remittances.[19]
Health measures
COVID-19 testing
Currently, government facilities are offering free of cost diagnosis to all individuals with COVID-19 symptoms.[20] Further, the government has approved certain private laboratories to test individuals for COVID-19. The cost of screening in private labs may not exceed Rs 4,500.[21] As of April 7, there are 136 government testing centres for analysing samples of COVID-19 and 3 additional collection centres.[22] Further, there were 59 private labs offering testing in 12 states. These states are Delhi, Maharashtra, Kerala, West Bengal, Uttar Pradesh, Telangana, Tamil Nadu, Odisha, Karnataka, Haryana, Uttarakhand and Gujarat.[23]
The Ministry of Health and Family Welfare has also laid down guidelines for those who may be tested at these laboratories. These include: (i) symptomatic contacts of those who have tested positive for COVID-19, and (ii) symptomatic persons with a travel history to COVID-19 affected countries, (iii) symptomatic healthcare workers, and (iv) persons with severe respiratory diseases.21
Containment plan for large outbreaks
The Ministry of Health and Family Welfare has created a plan to contain the spread of the COVID-19 disease. Some of the measures suggested in the plan include:[24]
Geographic quarantine: This strategy requires the restriction of movement of people to and from a defined geographic area where there is a large outbreak.
Cluster Containment: This strategy will contain the disease within a defined geographic area by early detection of cases. Cluster containment will include geographic quarantine, social distancing, testing all suspected cases, and awareness amongst the public.
Restrictions on export of medicines and medical equipment
The central government placed restrictions on the export of certain medical equipment and medication so as to ensure its availability in India. For example, the export of ventilators, surgical masks, diagnostic kits, and medications such as paracetamol and hydroxychloroquine is restricted.[25],[26],[27],[28]
Travel restrictions
Domestic and international travel banned; issue of visas suspended
Civil Aviation: All passenger domestic air travel within the country is banned from March 24 till April 14, 2020.[29],[30] All international commercial passenger travel has been banned till April 14, 2020 (cargo and certain other flights are exempted).[31] All existing visas issued to nationals of any country except those issued to diplomats, officials, UN/international organisations, employment and project visas are suspended from March 13 till April 15, 2020.[32]
Railways: Indian Railways suspended all passenger trains till April 14, 2020.[33] Transportation of essential commodities will continue.[34] Railways has also made parcel vans available for quick transportation for e-commerce companies and other customers including state governments to transport certain goods. These include medical supplies, medical equipment, food, etc. in small parcel sizes.[35]
For a detailed summary of the main policy decisions taken by the central government with regard to COVID-19, please see here.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.
[1] Novel coronavirus outbreak in China, Ministry of Health and Family Welfare, January 17, 2020, https://www.mohfw.gov.in/pdf/TraveladvisorytotravelersvisitingChina17012020.pdf.
[2] Ministry of Health and Family Welfare website, last accessed on March 31, 2020, https://www.mohfw.gov.in/index.html.
[3] Order No. 1-29/2020-PP, National Disaster Management Authority, March 24, 2020, https://mha.gov.in/sites/default/files/ndma%20order%20copy.pdf.
[4] Order No. 40-3/2020-DM-I(A), Ministry of Home Affairs, March 24, 2020, https://mha.gov.in/sites/default/files/MHAorder%20copy.pdf.
[5] “Guidelines on measures to be taken by Ministries/Department of Government of India, State/Union Territory Governments and State/Union Territory Authorities for containment of COVID-19 Epidemic in the Country”, Ministry of Home Affairs, March 24, 2020, https://mha.gov.in/sites/default/files/Guidelines.pdf.
[6] Second Addendum to Order No. 40-3/2020-DM-I(A), Ministry of Home Affairs, March 24, 2020, https://mha.gov.in/sites/default/files/PR_SecondAddendum_27032020.pdf.
[7] “Consolidated Guidelines on the measures to be taken by Ministries/Departments of Government of India, State/Union Territory Governments and State/Union Territory Authorities for containment of COVID-10 Epidemic in the Country, as notified by the Ministry of Home Affairs on 24.03.2020 and further modified on 25.03.2020 and 27.03.2020”, Ministry of Home Affairs, https://mha.gov.in/sites/default/files/PR_ConsolidatedGuidelinesofMHA_28032020.pdf.
[8] D.O. No. 40-3/2020-DM-I(A), Ministry of Home Affairs, March 29, 2020, http://164.100.117.97/WriteReadData/userfiles/3rd%20Addendum%20to%20Lockdown%20Guidelines%20on%20exempted%20Goods%20and%20Services.pdf.
[9] Order No. 40-3/2020-DM-I(A), Ministry of Home Affairs, March 29, 2020, https://mha.gov.in/sites/default/files/MHA%20Order%20restricting%20movement%20of%20migrants%20and%20strict%20enforement%20of%20lockdown%20measures%20-%2029.03.2020.pdf.
[10] “Finance Minister announces Rs 1.70 Lakh Crore relief package under Pradhan Mantri Garib Kalyan Yojana for the poor to help them fight the battle against Corona Virus”, Press Information Bureau, Ministry of Finance, March 26, 2020.
[11] “Monetary and Fiscal policy response by Government of Indian and Regulators”, Department of Economic Affairs, Ministry of Finance, March 27, 2020, https://dea.gov.in/sites/default/files/India%20economic%20policy%20response%20on%20%20COVID%2019%20Fiscal%20and%20Monetary%20as%20on%2027032020.pdf.
[12] “Pradhan Mantri Garib Kalyan Package: Insurance Scheme for Health Workers Fighting COVID-19”, Press Information Bureau, Ministry of Health and Family Welfare, March 29, 2020.
[13] Seventh Bi-Monthly Policy Statement 2019-20”, Press Release, Reserve Bank of India, March 27, 2020, https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR2129F5E23A447E0F4A00955429716C53F5A2.PDF.
[14] “Statement on Developmental and Regulatory Practices”, Reserve Bank of India, Press Releases, March 27, 2020, https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=49582.
[15] “COVID-19 – Regulatory Package”, Notifications, Reserve Bank of India, March 27, 2020, https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11835.
[16] RBI announces further measures for dealing with the COVID-19 pandemic, Reserve Bank of India, April 1, 2020, https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR2167BA409AC37FA8460497BA0C9B283E5DD9.PDF.
[17] Appeal to generously donate to ‘Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund)’, Press Information Bureau, Prime Minister’s Office, March 28, 2020, https://pib.gov.in/PressReleseDetailm.aspx?PRID=1608851.
[18] The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, Gazette of India, Ministry of Law and Justice, March 31, 2020, http://www.egazette.nic.in/WriteReadData/2020/218979.pdf.
[19] Rupee Drawing Arrangement – Remittance to the Prime Minister’s Citizen Assistance and Relief in Emergency Situations (PM-CARES) Fund, Reserve Bank of India, April 3, 2020, https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/NOT2087A69F5158C174585A46C69B78BD96DBD.PDF.
[20] Strategy for COVID-19 testing in India, India Council for Medical Research, Ministry of Health and Family Welfare, March 17, 2020, https://www.mohfw.gov.in/pdf/LabTestingAdvisory.pdf.
[21] Guidelines for COVID-19 testing in private laboratories in India, Ministry of Health and Family Welfare, March 21, 2002 https://www.mohfw.gov.in/pdf/NotificationofICMguidelinesforCOVID19testinginprivatelaboratoriesiIndia.pdf.
[22] Government Approved Laboratories by ICMR, Ministry of Health and Family Welfare, April 7, 2020. https://icmr.nic.in/sites/default/files/upload_documents/Govt_Labs_functional_for_COVID19_testing_05042020.pdf.
[23] Private Approved Laboratories by ICMR, Ministry of Health and Family Welfare, April 7, 2020. https://icmr.nic.in/sites/default/files/upload_documents/Private_Labs_06042020.pdf.
[24] Containment Plan for Large Outbreaks, Ministry of Health and Family Welfare, April 4, 2020, https://www.mohfw.gov.in/pdf/3ContainmentPlanforLargeOutbreaksofCOVID19Final.pdf.
[25] S.O. 1171(E), Amendment in Export Policy of Masks, Ventilators and textile raw material for masks and coveralls, Ministry of Commerce and Industry, March 19, 2020, http://egazette.nic.in/WriteReadData/2020/218857.pdf.
[26] S.O. 955(E), Amendment in Export Policy of APIs and formulations made from these APIs, Ministry of Commerce and Industry, March 3, 2020, http://egazette.nic.in/WriteReadData/2020/216551.pdf.
[27] Notification no. 01/2015-2020, Amendment in Export Policy of Hydroxychloroquine, Ministry of Commerce and Industry, April 4, 2020, https://prsindia.org/files/covid19/notifications/1492.IND_Export_Restriction_Hydroxychloroquine_Apr_4.pdf.
[28] Notification no. 59/2015-2020, Amendment in Export Policy of Diagnostic Kits, April 4, 2020, https://prsindia.org/files/covid19/notifications/1491.IND_Export_Restriction_Diagnostic_Kits_Apr_4.pdf.
[29] AV. 11011/1/2020-US(AG) Office-MOCA, Ministry of Civil Aviation, March 23, 2020, https://www.civilaviation.gov.in/sites/default/files/Revised-%20COVID-19%20-%20Order%20under%20Section%208B.pdf.
[30] No.4/1/2020-IR, Director General of Civil Aviation, March 27, 2020, https://dgca.gov.in/digigov-portal/Upload?flag=iframeAttachView&attachId=130618666.
[31] No.4/1/2020-IR, Director General of Civil Aviation, March 26, 2020, https://dgca.gov.in/digigov-portal/Upload?flag=iframeAttachView&attachId=130618625.
[32] No.4/1/2020-IR, Director General of Civil Aviation, January 30 to March 17, 2020, https://dgca.gov.in/digigov-portal/Upload?flag=iframeAttachView&attachId=130617742.
[33] “Ministry of Railways extends Cancellation of Passenger Train Services till 2400 hrs of 14th April, 2020”, Press Information Bureau, Ministry of Railways, March 25, 2020.
[34] “Transportation of essential commodities to various parts of the country by Indian Railways continues at full speed”, Press Information Bureau, Ministry of Railways, March 30, 2020.
[35] “Indian Railways to run Special Parcel Trains for carriage of essential items in small parcel sizes during the complete lockdown in fight against COVID-19”, Press Information Bureau, Ministry of Railways, March 29, 2020.
