Last month, the Pension Fund Regulatory and Development Authority (PFRDA) issued revised guidelines for the registration of the Pension Fund Managers (PFMs). These guidelines are for the PFMs to manage the National Pension System (NPS) in the non-governmental and private sector. See here. The NPS was implemented in 2004 for all government employees and later extended to the private sector in 2009. The guidelines bring about the following changes in the NPS:
Although NPS was made accessible on a voluntary basis to non-government employees and those working in the private sector since 2009, the subscription to the schemes under NPS was lower than expected. In August 2010, a committee was set up under the chairmanship of Mr. G.N. Bajpai to review the implementation of NPS in the informal sector. The Committee noted that since NPS was opened to the general public there were only 50,000 private sector subscribers until May 2011. According to the Committee, the low subscription was due to the low-to-negligible distribution incentive to the PFMs to distribute the different schemes to the subscribers to invest their funds. The Committee thus recommended that PFRDA should consider revising the structure of the NPS so as to increase subscription. It suggested making the fee structure dynamic for PFMs. The Committee had also suggested that there should be some revision in the bidding as well as the selection process for the PFMs to increase competition and thereby incentivise them to distribute the schemes. These changes, as suggested by the Bajpai Committee and now notified by the PFRDA, are different from the original design of the NPS. The Old Age Social and Income Security (OASIS) Report of 2000, which had initially suggested the establishment of pension system for the unorganised sector in the country, had recommended a low-cost structure for the pension system. The Report had stated that the choice of PFMs should be based on a bidding process where the lowest bidder should be made a PFM under the NPS. The rationale for the auction base for the PFMs was that it would provide a system to the subscribers whereby they could make investments for their old age by paying a minimal fee. A set uniform fee was meant to eliminate the large marketing expenses which would ultimately get passed on to the subscibers. In addition, the intent behind keeping the fund managers from the distribution and marketing of the schemes was to prevent any mis-selling (misleading an investor about the characteristics of a product) that may happen. Recent newspaper reports have raised doubt if these new rules would help in increasing the penetration of the NPS in the markets. However, the chairman of PFRDA, Mr. Yogesh Agarwal, in a recent interview explained that it was important to bring about changes in the structure of the NPS. According to him a scheme which was mandatory for the government sector could not be expected to perform as well in the private sector (where it is voluntary) without any changes made to its structure. He also stated that the NPS should be able to compete with other financial products such as insurance and mutual funds in the market. See here for the PRS Legislative Brief on the PFRDA Bill, 2011. Notes: The seven PFMs are LIC Pension Fund Ltd., UTI Retirement Solutions Ltd., SBI Pension Funds Pvt. Ltd., IDFC Pension Fund Management Co. Ltd., ICICI Prudential Pension Funds Management Co. Ltd., Kotak Mahindra Pension funds Ltd., and Reliance Capital Pension Fund Ltd..
A recent news report stated that the Planning Commission has advocated putting in place a “proper regulatory mechanism” before permitting the use of genetic modification in Indian crops. A recent Standing Committee report on genetically modified (GM) crops found shortcomings in the regulatory framework for such crops. The current framework is regulated primarily by two bodies: the Genetic Engineering Appraisal Committee (GEAC) and the Review Committee on Genetic Manipulation (RCGM). Given the inadequacy of the regulatory framework, the Standing Committee recommended that all research and development activities on transgenic crops be carried out only in containment (in laboratories) and that ongoing field trials in all states be discontinued. The blog provides a brief background on GM crops, their regulation in India and the key recommendations of the Standing Committee. What is GM technology? GM crops are usually developed through the insertion or deletion of genes from plant cells. Bt technology is a type of genetic modification in crops. It was introduced in India with Bt cotton. The debate around GM crops has revolved around issues of economic efficacy, human health, consumer choice and farmers’ rights. Some advantages of Bt technology are that it increases crop yield, decreases the use of pesticides, and improves quality of crops. However, the technology has also been known to cause crop loss due to resistance developed by pests and destruction of local crop varieties, impacting biodiversity. Approval process for commercial release of GM crops
Committee’s recommendations for strengthening the regulatory process The Standing Committee report found several shortcomings in the regulatory framework, some of which are as follows:
Note that over the last few sessions of Parliament, the government has listed the Biotechnology Regulatory Authority Bill for introduction; however the Bill has not been introduced yet. The Bill sets up an independent authority for the regulation of GM crops. For a PRS summary of the report and access to the full report, see here and here.
