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How will the ‘One Nation One Ration Card’ scheme be carried out? What are the challenges?

The story so far: The Bharatiya Janata Party government is showcasing the rollout of the ‘One Nation One Ration Card’ scheme as one of the biggest achievements of its first 100 days in power. The launch of the nationwide food security net is scheduled for June 2020, but several challenges remain before migrants can take advantage of full portability.

What is the scheme about?

India runs the world’s largest food security programme, distributing more than 600 lakh tonnes of subsidised food grain to more than 81 crore beneficiaries every year. This is done through a vast network of more than five lakh ration or fair price shops. Under the National Food Security Act (NFSA), each beneficiary is eligible for five kg of subsidised grains per month at the rate of ₹3/kg for rice, ₹2/kg for wheat and ₹1/kg of coarse cereals.

However, until recently, this has been a location-linked benefit, leaving crores of migrant workers and families out of the food safety net. Each household’s ration card is linked to a specific fair price shop and can only be used to buy rations in that particular shop. Over the last few years, 10 States (partially in one) have implemented the Integrated Management of Public Distribution System, which allows beneficiaries to buy rations from any fair price shop within that State.

The Centre is now in the process of expanding these efforts into a nationwide portability network which is called the ‘One Nation One Ration Card’ scheme. It is scheduled to come into full effect by June 2020, after which a ration card holder can buy subsidised grain at any fair price shop in the country.

What are the benefits? Who will gain the most?

The main beneficiaries of the scheme are the country’s migrant workers. According to data from the Census 2011, there are more than 45 crore internal migrants in India, of whom more than half have not completed primary education, while 80% have not completed secondary education. Lower levels of education are linked to lower income, which would make a large percentage of these migrants eligible for NFSA benefits. Registering for ration cards at their new location is an arduous process, especially if some members of the household still remain in their original home. Apart from this, field studies estimate that four crore to ten crore people are short-term migrants, often working in cities, but not moving there permanently. Women who change locations after marriage also find it difficult to start accessing ration benefits using a new household’s card.

The Centre hopes that allowing ration card portability will also curb corruption and improve access and service quality by removing monopolies. Under the old system, beneficiaries were dependent on a single fair price shop and subject to the whims of its dealer. Under the new system, if they are denied service or face corruption or poor quality in one shop, they are free to head to a different shop.

The scheme is also driving the faster implementation of initiatives to digitise and integrate the food storage and public distribution system.

What is needed to make it work?

The scheme involves the creation of a central repository of NFSA beneficiaries and ration cards, which will integrate the existing databases maintained by States, Union Territories and the Centre. Aadhaar seeding is also important as the unique biometric ID will be used to authenticate and track the usage of ration by beneficiaries anywhere in the country. Currently, it is estimated that around 85% of ration cards are linked to Aadhaar numbers.

For the scheme to work, it is critical that all fair price shops are equipped with electronic point-of-sale machines (ePoS), replacing the old method of manual record-keeping of transactions with a digital real-time record. On the back-end, the Food Corporation of India’s Depot Online System is integrating all warehouses and godowns storing subsidised grain in an attempt to create a seamless flow of online information from procurement until distribution.

What is the progress so far?

Two pairs of States — Andhra Pradesh-Telangana and Maharashtra-Gujarat — became the first to begin implementing portability between their States last month. From October 1, two more pairs — Kerala-Karnataka and Rajasthan-Haryana — will join the experiment. By January, all eight States and at least three others which already implement intra-State portability will form the first national grid for the ‘One Nation One Ration Card’ scheme.

What are the difficulties ahead?

There are only 4.32 lakh ePoS machines which have been installed in more than 5.3 lakh fair price shops. Apart from much of Northeast India, much of that gap comes from three States: Bihar, West Bengal and Uttarakhand. Given that they are major source States for migrants, Bihar (only 15% coverage) and West Bengal (70% coverage) must speed up ePoS installation for the system to work smoothly. In some rural and remote areas, ePoS connectivity also remains erratic, jeopardising smooth functioning.

In Jharkhand, a State which was an early adopter of digitisation and Aadhaar-based biometric authentication in 2016, there have been widespread complaints of denial of food due to system failures. A 2017 study in Ranchi district — which was relatively well-connected — found that 20% to 40% of beneficiaries had been unable to buy their rations. Right to Food activists have blamed at least 20 deaths from September 2017 to June 2019 on hunger caused by irregularities in the PDS system.

In other States, the challenge comes from the difference between ration benefits offered by the State in comparison to the Central entitlement. Tamil Nadu, for example, offers 20 kg of free rice per month to almost 2 crore ration card holders, as well as subsidised sugar, pulses and oil, over and above the NFSA benefits. The State government has made it clear that it will not be offering these benefits to migrant workers, as the Centre will cover the costs of NFSA benefits only.

Another issue could arise if the members of a single household are split between two different locations. The scheme’s guidelines only permit purchase of half the subsidised grain at one time in an effort to prevent one member of the household taking the entire ration for the month, leaving family members in a different location stranded without food.

The biggest challenge may lie in the lack of any concrete data on inter-State migration trends, especially short-term migration. The allocation of food grains to States will have to be dynamic to allow for quick additional delivery to cover any shortfalls in States with large migrant populations. Currently, Food Corporation of India godowns stock grains up to three months in advance. Food Ministry officials acknowledged that there is a “steep learning curve” ahead to ensure that movement of grain matches migration flows.

What does the rearrangement mean for the banking sector? Is increased credit growth essential for India to achieve the target of becoming a $5-trillion economy?

The story so far: Finance Minister Nirmala Sitharaman recently announced that 10 banks owned by the Government of India will be merged into four larger banks; thus the total number of state-owned banks in the country will have come down from 27 (in 2017) to 12. According to the plan outlined by the government at a press meet late last month, Punjab National Bank will be merged with Oriental Bank of Commerce and United Bank of India; Canara Bank with Syndicate Bank; Union Bank of India with Andhra Bank and Corporation Bank; while Indian Bank will amalgamate with Allahabad Bank. The government also announced an infusion of ₹55,250 crore to help these newly merged banks extend more loans to their customers and meet crucial regulatory norms. Just last year, the government proposed the merger of three banks — Vijaya Bank and Dena Bank with Bank of Baroda — to create a larger bank. Earlier in 2017, State Bank of India, the country’s largest lender, was merged with five of its associate banks.

What is a merger and why are so many state-owned banks being consolidated?

A merger is simply the combining of two business entities to form a larger one but with no explicit change in ownership. This is in contrast to an acquisition where one business entity takes ownership control over another by paying for the ownership privilege in cash, stock, or other means. In the case of state-owned banks that are being merged now, where the government is the majority shareholder, there will be no change in ownership but merely a restructuring of how these banks are organised.

There are various reasons cited by the government for its decision to merge state-owned banks. One of them is that large banks will be able to lend more money and help revive the slowing economy. The government also believes that increased credit growth is essential in order to achieve its target of growing India into a $5-trillion economy in the next few years. It is also of the view that the merger will lead to increased operational efficiency that will help these banks lower their costs, thus enabling them to lower their lending rates.

State-owned banks have been reeling under a bad loan crisis for years now. According to the government, the size of gross non-performing assets of state-owned banks stood at ₹7.9 lakh crore,as of March 31, 2019. Although the government has not projected the present merger as a measure to tackle bad loans, bank mergers in the past have been carried out simply to bail out struggling banks.

Will the move help make banks stronger?

The banks that have been merged by the government exhibit varying financial strength. Banks such as Indian Bank and Punjab National Bank are stronger than the smaller banks that they are being merged with under the plan. Indian Bank, which is considered to be the strongest financially among the 10 banks, for instance, has a net NPA ratio of 3.8%; it is 5.2% for Allahabad Bank So the merger is expected to adversely affect the health of Indian Bank. Not surprisingly, the shares of Indian Bank and other relatively strong banks witnessed a steep fall on the first day of trading (Tuesday) after the announcement of the merger (Friday). It remains to be seen whether the operational benefits that the government believes will come about through the merger will compensate for the deterioration in the financials of the stronger banks.

But if the reaction of investors on Tuesday is anything to go by, it seems quite unlikely that the merger of state-owned banks will create any significant value for shareholders. Private businesses typically merge their operations when they believe that the merged entity will help increase their profits. Critics doubt whether the government has any similar incentive to look for synergies that can boost the profits of its banks. Interestingly, Ms. Sitharaman has assured banks that jobs will not be lost due to the merger. Many see this as a compromise to avoid any trouble from powerful bank employee unions. Given this, it seems unlikely that state-owned banks will be able to become more efficient after the merger by getting rid of redundant labour. More importantly, the merging of healthy banks with weak banks may not really improve the health of the banking system as a whole. In fact, many believe, by diluting the management of strong banks, forced mergers may lead to a significant deterioration in the overall health of the banking system. Last but not least, if the managers of efficient banks are punished for their good performance by being asked to share the burden of weaker banks, many fear that there will be fewer incentives for managers to manage well. This can further negatively affect the long-term performance of state-owned banks.

Will it address the bad loans crisis and help kick-start economic growth?

The merger of banks per se will not lead to a decrease in the absolute size of bad loans in their books. The size of bad loans in bank books can drop only if banks manage to improve the recovery of these loans, or if these loans are written off their balance sheets. The bad loan recovery process remains slow due to the inefficient judicial system in the country and banks have been unwilling to aggressively write off bad loans since that would require recognising greater losses. Mergers do not address these serious structural problems.

The present merger, many believe, also does not address the issue of political interference in the management of state-owned banks that is at the root of the bad loan crisis. The stated purpose of the nationalisation of banks in 1969 was to use bank credit to fund the various development goals of the government. Towards this end, over the years, various state-owned banks have been forced to extend loans under political pressure even though such loans did not always make business sense. This is in contrast to private banks that are allowed to operate simply as pure businesses seeking profits.

In her presentation on Friday, the Finance Minister announced some governance reforms, such as strengthening the power of bank boards, but not many really believe that they will effectively address the fundamental issue of political interference in state-owned banks. Finally, when it comes to funding the growth needs of the economy, large banks may be able to lend more money than smaller banks due to the size of their capital base. Punjab National Bank, for instance, when merged with United Bank of India and Oriental Bank of Commerce will be the second-largest bank in the country carrying out business to the tune of around ₹18 lakh crore. However, some argue that large banks may not really be essential when it comes to funding big-ticket business projects. In the past, several smaller banks have come together to extend large loans. Further, companies themselves might prefer to seek funds from multiple sources. Overall, the infusion of additional capital by the government can temporarily help banks troubled by bad loans to extend loans more confidently without the fear of going bankrupt due to their precarious capital position. But most economic analysts believe that the merger does not really address the root structural causes behind the woes facing state-owned banks in the country.

What needs to be done to implement the Tamil Nadu government order banning sex normalisation surgeries on intersex children and infants?

The story so far: A short while before the first anniversary of the verdict that invalidated Section 377 (September 6, 2018) to jubilant celebrations among the LGBTQI community, in a nondescript courtroom in Madurai at the Bench of the Madras High Court, equally significant history was written. In April this year, Justice G.R. Swaminathan, did a deep dive into the complex and nuanced question of gender identity and sex, to emerge with a judgment that turned the ingrained ideas of gender or sex as a binary — male and female — on its head. He expanded the scope of a petition filed by a transwoman and her husband, making a plea to instruct authorities to register their marriage. While allowing this plea, the judge went on to ban sex reassignment surgeries on intersex infants and children, directing the government to file a compliance report. The Tamil Nadu government passed an order on August 13 banning sex normalisation surgeries in intersex children and infants, except in life threatening circumstances.

What does intersex mean?

Intersex refers to people born with physical and biological characteristics that are more diverse than stereotypical definitions of male or female bodies. Gopi Shankar, a Madurai-based activist/anchor of the student movement Srishti Madurai, whose petition to the National Human Rights Commission on the subject the court leaned heavily on, says there are differences between gender, sexual identity and sexual orientation. While gender identity is assigned at birth based on the anatomy (male or female sexual organs, both internal and external), sexual identity is what one sees oneself as, and sexual orientation is the sex a person is attracted to. Mr. Gopi claims that every year there are 10,000 babies born with intersex conditions, when it is difficult to classify the reproductive organs as male or female. Genetically, the male is invested with XY chromosomes and the female, XX. In intersex there are at least 40 different variations. But this is key: there is no one intersex experience.

A senior medical geneticist from Hyderabad, Anuradha Udumudi, who was consulted while framing the government order, explains that sexual development is a complex process.

In the last decade with huge leaps in the field of medical genetics, it is now apparent to scientists that gender assignment is not merely the function of the X and Y chromosomes. She says hundreds of genes have been identified, mutations or changes in them lead to a ‘different kind of development’, impacting the gender of the foetus. There are several metabolic developments involved in these pathways. Significantly, not all of these differences can be detected at the time of birth. Doctors and parents only have their radar up when the baby exhibits ambiguities in gross anatomical features, for instance, the presence of both male and female genitalia, or two different genders for internal and external reproductive organs.

Why are sex selective surgeries performed on infants?

When these differences are apparent at birth, parents are eager to resolve the question of the gender of the baby and pick a gender, possibly ignorant of the fact that the child will have to pick a sexual identity in the process of growing up. Surgery to correct the genitalia is then performed on the child which could lead to physical trauma, emotional turmoil and problems arising out of confusion about identity.

The court observed that the consent of the parent cannot be considered the consent of the child. The government order specifies that such surgeries can only be performed in case there is a life-threatening situation. It adds that this call would be made by a team that includes paediatric surgeons/urologists, endocrinologists, a social worker/intersex activist and a government representative.

What happens next?

Tamil Nadu’s order comes as the second such move made by any State on gender and sexual identity; the Parliament of the island of Malta adopted the Gender Identity, Gender Expression and Sex Characteristics Act in April 2015. There is no room for complacence, though. If the proof of the pudding is in the eating, the mark of the State’s commitment to its intersex babies would be in how well the order is implemented.

Dr. Udumudi says, a great deal of awareness is necessary even for the medical community to recognise the possibilities of gender ambiguity. Parents will have to be counselled well into accepting their children as they are. Mr. Gopi adds, “Readymade answers are not available, parents do need to wait. Give your baby space, allow gender identity to be fluid, if it is indeed so, and let them choose.” After all, the binaries are not everything.

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