The Finance Bill, 2017 is being discussed in Lok Sabha today. Generally, the Finance Bill is passed as a Money Bill since it gives effect to tax changes proposed in the Union Budget. A Money Bill is defined in Article 110 of the Constitution as one which only contains provisions related to taxation, borrowings by the government, or expenditure from Consolidated Fund of India. A Money Bill only needs the approval of Lok Sabha, and is sent to Rajya Sabha for its recommendations. It is deemed to be passed by Rajya Sabha if it does not pass the Bill within 14 calendar days.
In addition to tax changes, the Finance Bill, 2017 proposes to amend several laws such the Securities Exchange Board of India Act, 1992 and the Payment and Settlements Act, 2007 to make structural changes such as creating a payments regulator and changing the composition of the Securities Appellate Tribunal. This week, some amendments to the Finance Bill were circulated. We discuss the provisions of the Bill, and the proposed amendments.
Certain Tribunals to be replaced
Amendments to the Finance Bill seek to replace certain Tribunals and transfer their functions to existing Tribunals. The rationale behind replacing these Tribunals is unclear. For example, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) will replace the Airports Economic Regulatory Authority Appellate Tribunal. It is unclear if TDSAT, which primarily deals with issues related to telecom disputes, will have the expertise to adjudicate matters related to the pricing of airport services. Similarly, it is unclear if the National Company Law Appellate Tribunal, which will replace the Competition Appellate Tribunal, will have the expertise to deal with matters related to anti-competitive practices.
Terms of service of Tribunal members to be determined by central government
The amendments propose that the central government may make rules to provide for the terms of service including appointments, term of office, salaries and allowances, and removal for Chairpersons and other members of Tribunals, Appellate Tribunals and other authorities. The amendments also cap the age of retirement for Chairpersons and Vice-Chairpersons. Currently, these terms are specified in the laws establishing these Tribunals.
One may argue that allowing the government to determine the appointment, reappointment and removal of members could affect the independent functioning of the Tribunals. There could be conflict of interest if the government were to be a litigant before a Tribunal as well as determine the appointment of its members and presiding officers.
The Supreme Court in 2014, while examining a case related to the National Tax Tribunal, had held that Appellate Tribunals have similar powers and functions as that of High Courts, and hence matters related to their members’ appointment and reappointment must be free from executive involvement.[i] The list of Tribunals under this amendment includes several Tribunals before which the central government could be a party to disputes, such as those related to income tax, railways, administrative matters, and the armed forces Tribunal.
Note that a Bill to establish uniform conditions of service for the chairpersons and members of some Tribunals has been pending in Parliament since 2014.
Inclusion of technical members in the Securities Appellate Tribunal
The composition of the Securities Appellate Tribunal established under the SEBI Act is being changed by the Finance Bill. Currently, the Tribunal consists of a Presiding Officer and two other members appointed by the central government. This composition is to be changed to: a Presiding Officer, and a number of judicial and technical members, as notified by the central government.
Creation of a Payments Regulatory Board
Recently, the Ratan Watal Committee under the Finance Ministry had recommended creating a statutory Payments Regulatory Board to oversee the payments systems in light of increase in digital payments. The Finance Bill, 2017 seeks to give effect to this recommendation by creating a Payments Regulatory Board chaired by the RBI Governor and including members nominated by the central government. This Board will replace the existing Board for Regulation and Supervision of Payment and Settlement Systems.
Political funding
The Finance Bill, 2017 proposes to make changes related to how donations may be made to political parties, and maintaining the anonymity of donors.
Currently, for donations below Rs 20,000, details of donors do not have to be disclosed by political parties. Further, there are no restrictions on the amount of cash donations that may be received by political parties from a person. The Finance Bill has proposed to set this limit at Rs 2,000. The Bill also introduces a new mode of donating to political parties, i.e. through electoral bonds. These bonds will be issued by banks, which may be bought through cheque or electronic means. The only difference between cheque payment (above Rs 20,000) and electoral bonds may be that the identity of the donor will be anonymous in the case of electoral bonds.
Regarding donations by companies to political parties, the proposed amendments to the Finance Bill remove the: (i) existing limit of contributions that a company may make to political parties which currently is 7.5% of net profit of the last three financial years, (ii) requirement of a company to disclose the name of the parties to which a contribution has been made. In addition, the Bill also proposes that contributions to parties will have to be made only through a cheque, bank draft, electronic means, or any other instrument notified by the central government.
Aadhaar mandatory for PAN and Income Tax
Amendments to the Finance Bill, 2017 make it mandatory for every person to quote their Aadhaar number after July 1, 2017 when: (i) applying for a Permanent Account Number (PAN), or (ii) filing their Income Tax returns. Persons who do not have an Aadhaar will be required to quote their Aadhaar enrolment number indicating that an application to obtain Aadhaar has been filed.
Every person holding a PAN on July 1, 2017 will be required to provide the authorities with his Aadhaar number by a date and in a manner notified by the central government. Failure to provide this number would result in the PAN being invalidated.
The Finance Bill, 2017 is making structural changes to some laws. Parliamentary committees allow for a forum for detailed scrutiny, deliberations and public consultation on proposed laws. The opportunity to build rigour into the law-making process is lost if such legislative changes are not examined by committees
[i] Madras Bar Association vs. Union of India, Transfer Case No. 150 of 2006, Supreme Court of India, September 25, 2014 (para 89).
Recently, there have been multiple Naxal attacks on CRPF personnel in Chhattisgarh. Parliamentary Committees have previously examined the working of the Central Armed Police Forces (CAPFs). In this context, we examine issues related to functioning of these Forces and recommendations made to address them.
What is the role of the Central Armed Police Forces (CAPFs)?
Under the Constitution, police and public order are state subjects. However, the Ministry of Home Affairs (MHA) assists state governments by providing them support of the Central Armed Police Forces. The Ministry maintains seven CAPFs: (i) the Central Reserve Police Force, which assists in internal security and counterinsurgency, (ii) the Central Industrial Security Force, which protects vital installations (like airports) and public sector undertakings, (iii) the National Security Guards, which is a special counterterrorism force, and (iv) four border guarding forces, which are the Border Security Force, Indo-Tibetan Border Police, Sashastra Seema Bal, and Assam Rifles.
What is the sanctioned strength of CAPFs personnel compared to the actual strength?
As of January 2017, the sanctioned strength of the seven CAPFs was 10,78,514 personnel. However, 15% of these posts (1,58,591 posts) were lying vacant. Data from the Bureau of Police Research and Development shows that vacancies in the CAPFs have remained over the years. Table 1 shows the level of vacancies in the seven CAPFs between 2012 and 2017. 
The level of vacancies is different for various police forces. For example, in 2017, the Sashastra Seema Bal had the highest level of vacancies at 57%. On the other hand, the Border Security Force had 2% vacancies. The Central Reserve Police Force, which account for 30% of the sanctioned strength of the seven CAPFs, had a vacancy of 8%.
How often are CAPFs deployed?
According to the Estimates Committee of Parliament, the number of deployment of CAPFs battalions has increased from 91 in 2012-13 to 119 in 2016-17. The Committee has noted that there has been heavy dependence by states on central police forces even for day-to-day law and order issues. This is likely to affect anti-insurgency and border-guarding operations of the Forces, as well as curtail their time for training. The continuous deployment also leaves less time for rest and recuperation.
The Estimates Committee recommended that states must develop their own systems, and augment their police forces by providing adequate training and equipment. It further recommended that the central government should supplement the efforts of state governments by providing financial assistance and other help for capacity building of their forces.
What is the financial allocation to CAPFs?
Under the Union Budget 2018-19, an allocation of Rs 62,741 crore was made to the seven CAPFs. Of this, 32% (Rs 20,268 crore) has been allocated to the Central Reserve Police Forces. The Estimates Committee has pointed out that most of the expenditure of the CAPFs was on salaries. According to the Committee, the financial performance in case of outlays allocated for capacity augmentation has been very poor. For example, under the Modernization Plan-II, Rs 11,009 crore was approved for the period 2012-17. However, the allocation during the period 2013-16 was Rs 251 crore and the reported expenditure was Rs 198 crore.
What are the working conditions for CAPFs personnel?
The Standing Committee on Home Affairs in the year 2017 had expressed concern over the working conditions of personnel of the border guarding forces (Border Security Force, Assam Rifles, Indo-Tibetan Border Police, and Sashastra Seema Bal). The Committee observed that they had to work 16-18 hours a day, with little time for rest or sleep. The personnel were also not satisfied with medical facilities that had been provided at border locations.
In addition, the Standing Committee observed that personnel of the CAPFs have not been treated at par with the Armed Forces, in terms of pay and allowances. The demand for Paramilitary Service Pay, similar to Military Service Pay, had not been agreed to by the Seventh Central Pay Commission. Further, the Committee observed that the hard-area allowance for personnel of the border guarding forces was much lower as compared to members of the Armed Forces, despite being posted in areas with difficult terrain and harsh weather.
What is the status of training facilities and infrastructure available to CAPFs?
The Estimates Committee has noted that all CAPFs have set up training institutions to meet their training requirements and impart professional skills on specialised topics. However, the Committee noted that there is an urgent need to upgrade the curriculum and infrastructure in these training institutes. It recommended that while purchasing the latest equipment, training needs should also be taken care of, and if required, should be included in the purchase agreement itself. Further, it recommended that the contents of training should be a mix of conventional matters as well as latest technologies such as IT, and cyber security.
According to the Estimates Committee, the MHA has been making efforts to provide modern arms, ammunition, and vehicles to the CAPFs. In this regard, the Modernization Plan-II, for the period 2012-17, was approved by the Cabinet Committee on Security. The Plan aims to provide financial support to CAPFs for modernisation in areas of arms, clothing, and equipment.
However, the Committee observed that the procurement process under the Plan was cumbersome and time consuming. It recommended that the bottlenecks in procurement should be identified and corrective action should be taken. It further suggested that the MHA and CAPFs should hold negotiations with ordnance factories and manufacturers in the public or private sector, to ensure an uninterrupted supply of equipment and other infrastructure.
