Jharkhand comes out of the tripartite agreement - Daily Current Affair Article

References

Recently, the Government of Jharkhand has distanced itself from the tripartite agreement in which the Government of India and the Reserve Bank of India were also involved.

Introduction

  • The state of Jharkhand has pulled out of a tripartite agreement (TPA) between the Government of India (Reserve Bank of India) and the Reserve Bank of India (RBI). The agreement was used by RBI on the direction of the Government of India when the Jharkhand government was unable to pay its outstanding power supply dues to Damodar Valley Corporation. The Jharkhand government has said that the automatic deduction of Rs 1400 crore is not yet in line with the interests of Jharkhand.

What is a tripartite agreement?

  • This agreement was signed between the Government of India, RBI, and the Government of Jharkhand in 2017. The agreement was intended by the Government of Jharkhand to ensure the payment of the power supply.
  • According to this agreement, Damodar Valley Corporation will supply power to Jharkhand Energy Distribution Corporation Limited under the Government of Jharkhand and the Government of Jharkhand will pay in lieu thereof.
  • If the Government of Jharkhand is unable to pay energy, in this case, the Government of India will direct the Reserve Bank of India and the RBI will deduct the amount payable from the accumulated fund of Jharkhand.

Why the controversy increased?

  • In September 2020, Damodar Valley Corporation informed the Ministry of Power of India of due of about 5000 crores on JVNL. On which the Ministry of Power issued notice to the Government of Jharkhand for payment of dues, stating that if JBVNL fails to make payment within the period, the Central Government will invoke the provisions of TPA and directed to RBI for deduction of RS. . 1,417.50 crore from the State Government consolidated fund every quarter will recover the outstanding amount in four installments for obtaining the DCA loss.
  • Accordingly, RBI will be requested to debit Rs 1,417.50 crore from the State Government account being maintained by RBI in October 2020, January, April, and July 2021 and credit it to the Government of India account.
  • Recently, after the automatic deduction of Rs 1417 crore by RBI, the Government of Jharkhand has decided to separate itself from this agreement.

Stand of Jharkhand Government

  • The Jharkhand government refused to pay the amount of Rs 5000 crore and it was stated that during the meeting between JVNL and Damodar Valley Corporation in March 2020, this amount was adjusted quarterly to Rs 1152 crore. There was a doubt on the payment of the amount and the total amount was also around Rs 3900 crore instead of 5000 crores. Thus, there is a difference in the amount stated by the Government of India and the Government of Jharkhand.
  • The state government stated that the net outstanding of DVC is undisputed dues of Rs 3558.68 crore and JBVNL is currently facing the issue of strained financial situation and the epidemic lockdown has made the situation more serious.
  • The government of Jharkhand said that it has proposed a loan of Rs 1841 crore to JBVNL under self-reliant India. But this was later postponed by the cabinet.
  • Along with this, the Jharkhand government said that the state government was required to accumulate funds for the COVID pandemic and other welfare schemes, out of which the amount has been deducted on the instructions of the central government, in which case the state government has separated itself from this agreement.

The argument in favor of the decision of the Government of India

  • At present, the financial situation of power distribution companies is in a state of loss. In this situation, it is necessary to obtain the amount of power distribution companies.
  • This step is necessary from the point of view that the Government of India has to infuse about 90000 crores in the power sector under Aatmnirbhar Bharat.
  • Increased liquidity in the market is necessary to diagnose the economic effects of the corona, in which case this amount can be helpful.
  • The economic loss of power distribution companies further reduces the financial capacity of banks and causes a slowdown in the economy; this will reduce the Damodar Valley Corporation's liability to banks.
  • Sometimes the state of willful default occurs in the electric field, such harsh decisions help prevent willful default.

The argument against this decision

  • Consumption was reduced in Corona; in this situation the lack of revenue collection of GST has weakened the economic condition of the states. In this situation, this type of decision of the government has negatively affected the financial condition of the Jharkhand State Government.
  • It is also worth considering whether the central government is weakening the federal structure against the will of the states by taking money from their accumulated funds.
  • Such decisions will increase disputes between the state and the center.

The conclusion

The Corona period has affected the state and the center, so both the governments have their limits. In this situation, the state of Jharkhand distanced itself from this agreement citing welfare schemes for its residents, but the Indian government has also cut funds under the agreement, this does not affect federalism. Now the question arises as to how the remaining amount will be paid. Therefore, the Union Cabinet should approve a proposal for the loan of Rs 1841 crore to JBVNL under Self-reliant India.

General study paper 2
  • Polity

Mains Question:-

  • Discuss the key provisions of a tripartite agreement between the State of Jharkhand, the Government of India (Reserve Bank of India), and the Reserve Bank of India (RBI). How will enforcement of this agreement affect federalism in the post-CORONA economic situation?