2018-CGS-29: Mains Revision-17: Secondary Sector of Economy


The union government is also proposing amendments to the MSME act to empower the central government to vary these limits in future by simply issuing a notification but the revised limits shall not be more than thrice the limits mentioned above.

Significance of these changes

  • The new system of classifying enterprises based on annual turnover will be more reliable, transparent and objective as the qualifying criteria will be verifiable with reference to the data available in the Goods and Services Tax network.
  • Reduces transaction costs as it will no more be necessary to carry out any inspection.
  • The more realistic criterion linked with annual turnover may bring many companies which currently does not fall under the ambit of MSME act. This would enable them to avail the benefits provided by the government.
  • This will also give push to make in India project and hence aiding employment generation.

The new classification together with enhancing ease of doing business enhances ease of regulation. The new criterion is more of compliance based with ease of verification. This upholds the motto of minimum government and maximum governance. [IDSA]

 Vehicle Scrapping Policy

The central government’s ambitious vehicle scrapping policy will become compulsory for all commercial vehicles from 2020 onwards.

Features of the Policy

The features of the policy include

  • The life of the commercial vehicles would be capped at 20 years.
  • Incentivising the new vehicles. The plan is to try and get the GST Council to consider a lower goods and services tax on new commercial vehicles bought against a scrapped one, from the current rate of 28% to between 12% and 18%.
  • Vehicle manufacturers will also be offered a discount on purchases against scrapped vehicles.

Importance of the Policy

  • There are 700,000 trucks, buses and taxis manufactured before 31 December 2000 that contributes 15-20% of vehicular pollution as per data from Central Pollution Control Board and Union road ministry’s emission norms.
  • The government expects 350,000 vehicles to be scrapped in the next two to three years as part of mission to promote clean transport.
  • The vehicle scrapping policy alternatively will also boost the automobile sector in the country.

India can learn from similar initiative of china wherein it managed to remove 340,000 vehicles that were over 10 years old from its roads in 2016 by providing monetary incentives to owners to replace them with new ones. [Mint]

Price Capping Of Drugs

Current scenario in India

The National Pharmaceutical Pricing Authority (NPPA) is a government regulatory agency that controls the prices of pharmaceutical drugs in India. The NPPA regularly publishes lists of medicines and their maximum ceiling prices.

Challenges with NPPA

Various issues pointed out at NPPA include

  • The decisions by the NPPA, including price ceilings, have led to intense discussions. It is said that the long-term ramifications were ignored by the agency in assessing the right way forward for the fragile, wobbling healthcare system of our country.
  • Capping market prices has become the go-to solution in India. Price ceilings are far from a panacea. The unmethodical price regulation will be detrimental to India’s healthcare system. Price ceilings cannot be a policy tool to correct perennial systemic problems in our formal healthcare system.
  • A recent empirical study by the Advanced Medical Technology Association (AdvaMed), which comprises nearly 300 global medical technology companies, found that the price cap on stents led neither to better accessibility of angioplasty procedures, nor to affordability for patients bearing out-of-pocket expenses. Therefore there is a lack of evidence based approach in capping of the prices by NPPA.

Adverse impacts of price capping?

  • Indian patients miss out on half of the new medicines that are launched in other countries by at least five years because of a failure to embrace dynamic competition.
  • According to WHO and Health Action International, more than 50% of the end price of medicine is contributed by components other than the manufacturer’s selling price. Drug price regulation is ineffective if the design of the price-control mechanism is detached from all the other components identified by WHO.

Is Price capping a sustainable policy?

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