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Banking And Finance

Banking:

Banking Regulation (Amendment) Bill, 2020

Context:
- Passed in Lok Sabha. The Bill replaces an ordinance to the same effect promulgated on June 26.
- The Bill proposes amendments to the Banking Regulation Act, 1949.
- With this new Bill, the central government aims to bring cooperative banks under the supervision of the Reserve Bank of India (RBI).
Key changes:
- Now, Provisions applicable to banking companies will also be applicable to cooperative banks. This ensures that cooperative banks are equally subject to better governance and sound banking regulations through the Reserve Bank of India (RBI).
- With the amendments, RBI will be able to undertake a scheme of amalgamation of a bank without placing it under a moratorium.
- It will help the central bank to develop a scheme to ensure the interest of the public, banking system, account holders in the bank, and banking company’s proper management, without disrupting any banking functionalities.
- The amendments also allow cooperative banks to raise money via public issues and private placements of equity or preference shares as well as unsecured debentures, with the central’s bank’s nod.
However, the changes will not:
1. Affect the existing powers of the state registrars of cooperative societies under state laws.
2. Apply to Primary Agricultural Credit Societies (PACS) or co-operative societies whose primary object and principal business is long-term finance for agricultural development, and which do not use the words “bank”, “banker” or “banking”.
Why this was necessary?
1. This was felt necessary in the wake of the recent Punjab & Maharashtra Cooperative (PMC) Bank crisis.
2. Cooperative banks have 8.6 lakh account holders, with a total deposit of about ₹5 lakh crore.
3. Besides, Urban cooperative banks reported nearly 1,000 cases of fraud worth more than ₹220 crores in the past five fiscal years.
How cooperative banks are regulated?
- Cooperative banks are currently under the dual control of the Registrar of Cooperative Societies and RBI.
- While the role of the registrar of cooperative societies includes incorporation, registration, management, audit, the supersession of board, and liquidation, RBI is responsible for regulatory functions such as maintaining cash reserve and capital adequacy, among others.

Contingency Fund (CF) of the central bank

Context:
- The Reserve Bank of India (RBI) has retained a whopping amount of Rs 73,615 crore within the RBI by transferring it to the Contingency Fund (CF) of the central bank.
- As a result, the CF has swelled to a new high of Rs 264,034 crore.
Under what provisions does the central government receive money from the RBI?
- As per Section 47 of the RBI Act, profits or surplus of the RBI are to be transferred to the government, after making various contingency provisions, public policy mandates of the RBI, including financial stability considerations.
- The RBI’s transfer this year is as per the economic capital framework (ECF) adopted by the RBI board last year.
What is the Contingency Fund (CF)?
- This is a specific provision meant for meeting unexpected and unforeseen contingencies.
- This includes depreciation in the value of securities, risks arising out of monetary/exchange rate policy operations, systemic risks and any risk arising on account of the special responsibilities enjoined upon the Reserve Bank.
- This amount is retained within the RBI.
RBI’s risk provision accounts:
- The central bank’s main risk provision accounts are Contingency Fund, Currency and Gold Revaluation Account (CGRA), Investment Revaluation Account Foreign Securities (IRA-FS), and Investment Revaluation
- Account-Rupee Securities (IRA-RS). Together now they amount to Rs 13.88 lakh crore.
What’s the CGRA account?
- The Currency and Gold Revaluation Account (CGRA) is maintained by the Reserve Bank to take care of currency risk, interest rate risk and movement in gold prices.
- Unrealised gains or losses on the valuation of foreign currency assets (FCA) and gold are not taken to the income account but instead accounted for in the CGRA.
- CGRA provides a buffer against exchange rate/ gold price fluctuations. It can come under pressure if there is an appreciation of the rupee vis-à-vis major currencies or a fall in the price of gold.
What are IRA-FS and IRA-RS accounts?
- The unrealised gains or losses on revaluation in foreign dated securities are recorded in the Investment Revaluation Account Foreign Securities (IRA-FS).
- Similarly, the unrealised gains or losses on revaluation is accounted for in Investment Revaluation AccountRupee Securities (IRA-RS).

Moratorium on Banks

Context:
- On November 17, the Centre, acting on the recommendation of the Reserve Bank of India, imposed a moratorium on Lakshmi Vilas Bank for a period of 30 days.
- The 94-year-old bank has been struggling with losses for three years.
What is a moratorium?
- The RBI has the power to ask the government to have a moratorium placed on a bank’s operations for a specified period of time.
- Under such a moratorium, depositors will not be able to withdraw funds at will.
- Usually, there is a ceiling that limits the amount of money that can be withdrawn by the bank’s customers.
- In the case of Lakshmi Vilas Bank, depositors cannot withdraw more than ₹25,000 during the one-month moratorium period.
- In most cases, the regulator allows for funds of a larger quantum to be withdrawn in case of an urgent requirement but only after the depositor provides the required proof.
- Often, the moratorium is lifted even before the originally stipulated deadline is reached.
How does a moratorium prevent a bank run?
- A moratorium primarily helps prevent what is known as a ‘run’ on a bank, by clamping down on rapid outflow of funds by depositors, who seek to take their money out in fear of the bank’s collapse.
- A moratorium gives both the regulator and the acquirer time to first take stock of the actual financial situation at the troubled bank. It allows for a realistic estimation of assets and liabilities, and for the regulator to facilitate capital infusion if it's necessary.
Protecting the interest of depositors:
- A key objective of a moratorium is to protect the interests of depositors. Even if they are temporarily handicapped by facing restricted access to their funds, there is a high probability that the bank would soon return to normal functioning once a bailout is arranged.
- The RBI had earlier this year bailed out Yes Bank through a scheme backed by the State Bank of India and other banks.
- One safety net for small depositors is the Deposit Insurance and Credit Guarantee Corporation (DICGC), an RBI subsidiary, which gives insurance cover on up to Rs 5 lakh deposits in banks.

Privatization of banks

Context:
- The banking landscape in India is set to change with the government’s decision to privatize two public sector banks.
Why were private banks nationalized in the first place?
- Then-Prime Minister Indira Gandhi decided to nationalize the 14 largest private banks on July 19, 1969.
- The idea was to align the banking sector with the socialistic approach of the then government.
- State Bank of India had been nationalized in 1955 itself, and the insurance sector in 1956.
Why there is a need for privatization now?
- Years of capital injections and governance reforms have not been able to improve the financial position of public sector banks significantly.
- Many of them have higher levels of stressed assets than private banks and also lag the latter on profitability, market capitalization, and dividend payment record.
- Privatization of two public sector banks will set the ball rolling for a long-term project that envisages only a handful of state-owned banks, with the rest either consolidated with strong banks or privatized.
- This will free up the government, the majority owner, from continuing to provide equity support to the banks year after year.
Are private banks doing better?
- Private banks’ market share in loans has risen to 36% in 2020 from 21.26% in 2015, while public sector banks’ share has fallen to 59.8% from 74.28%.
- Competition heated up after the RBI allowed more private banks since the 1990s.
- They have expanded the market share through new products, technology, and better services, and also attracted better valuations in stock markets — HDFC Bank (set up in 1994) has a market capitalization of Rs 8.80 lakh crore while SBI commands just Rs 3.50 lakh crore.
- Many committees had proposed bringing down the government stake in public banks below 51% — the Narasimham Committee proposed 33% and the P J Nayak Committee suggested below 50%.

Punjab and Maharashtra Cooperative (PMC) Bank

Context:
- RBI recently granted “in-principle” approval to Centrum Financial Services Ltd (CFSL) to set up a small finance bank (SFB), paving the way for it to take over the scam-ridden PMC Bank with its partner BharatPe, a digital payment firm.
About:

It is an Urban Cooperative Bank also called Primary Cooperative Bank.
In September 2019, RBI superseded the management of PMC bank because of financial irregularities and appointed an administrator.
RBI can supersede the management of the Urban Cooperative Banks (UCB), State Cooperative Banks (StCB), and District Central Cooperative Banks (DCCB) if RBI feels that the affairs of the bank are conducted in a manner detrimental to the interest of the depositors.
This is done as per the Banking Regulation Act 1949
Then RBI invited bids from private banks/financial companies to take over the PMC Bank.

On tap licensing for small finance banks:

In December 2019 RBI had released guidelines for “‘on tap’ Licensing of Small Finance Banks in the Private Sector”.
'On tap' means any financial services or few other fintech companies were allowed to apply/convert themselves into Small Finance Banks anytime by applying to RBI by meeting some minimum criteria
RBI has allowed that Urban (Primary) Cooperative banks can also apply for conversion into Small Finance Bank.
Even Payment banks have also been allowed to be converted into SFB.
So, PMC bank has been acquired by “Centrum Financial Services” in a joint venture with “BharatPe” and it has been converted into a “Small Finance Bank”.

Bad bank

Context:
- RBI Governor Shaktikanta Das indicated that the central bank can consider the idea of a bad bank to tackle non-performing assets (NPAs) and advised banks and non-banks to adopt appropriate compliance culture and identify risks early.
What is a bad bank?
- A bad bank buys the bad loans and other illiquid holdings of other banks and financial institutions, which clears their balance sheet.
- A bad bank conveys the impression that it will function as a bank but has bad assets to start with.
- Technically, a bad bank is an asset reconstruction company (ARC) or an asset management company that takes over the bad loans of commercial banks, manages them, and finally recovers the money over a period of time.
- The bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans.
- The takeover of bad loans is normally below the book value of the loan and the bad bank tries to recover as much as possible subsequently.

Basel III compliant bonds

Context:
- State Bank of India has raised ₹7,000 crores by issuing Basel III compliant bonds.
Key points:
- Bonds issued qualify as tier II capital of the bank and have a face value of Rs 10 lakh each.
- They bear a coupon rate of 6.24 percent per annum payable annually for a tenor of 10 years.
- There is a call option after 5 years and on an anniversary thereafter. The call option means the issuer of the bonds can call back the bonds before the maturity date by paying back the principal amount to investors.
What are the Basel guidelines?
- Basel guidelines refer to broad supervisory standards formulated by a group of central banks- called the Basel Committee on Banking Supervision (BCBS).
- The set of an agreement by the BCBS, which mainly focuses on risks to banks and the financial system is called the Basel accord.
- Basel is a city in Switzerland that is also the headquarters of the Bureau of International Settlement(BIS).
- The purpose of the accords is to ensure that financial institutions have enough capital on account to meet obligations and absorb unexpected losses.
BASEL-I:
- Introduced in 1988.
- Focused almost entirely on credit risk, it defined capital and structure of risk weights for banks.
- The minimum capital requirement was fixed at 8% of risk-weighted assets (RWA).
- India adopted Basel 1 guidelines in 1999.
BASEL-II:
- Published in 2004.
- The guidelines were based on three parameters:
- Banks should maintain a minimum capital adequacy requirement of 8% of risk assets.
- Banks were needed to develop and use better risk management techniques in monitoring and managing all the three types of risks that is credit and increased disclosure requirements. The three types of risk are- operational risk, market risk, capital risk.
- Banks need to mandatory disclose their risk exposure to the central bank.
Basel III:
- In 2010, Basel III guidelines were released. These guidelines were introduced in response to the financial crisis of 2008.
- Basel III norms aim at making most banking activities such as their trading book activities more capital-intensive.
- The guidelines aim to promote a more resilient banking system by focusing on four vital banking parameters viz. capital, leverage, funding, and liquidity.

The on-tap license of universal banks and small finance banks

Context:
- The Reserve Bank of India (RBI) unveiled the names of eight applicants for the ‘on-tap license of universal banks and small finance banks.
What is Universal banking?
- It is a system of banking where banks undertake a blanket of financial services like investment banking, commercial banking, development banking, insurance, and other financial services including functions of merchant banking, mutual funds, factoring, housing finance, insurance, etc.
- As per the on-tap licensing of universal banks guidelines issued in August 2016, resident individuals and professionals with 10 years of experience in banking and finance at a senior level too are eligible to promote universal banks.
- However, large industrial houses are excluded as eligible entities but allowed to invest.
What are Small finance banks (SFBs)?
- Small Finance Banks are the financial institutions that provide financial services to the unserved and unbanked region of the country.
- They are registered as a public limited company under the Companies Act, 2013.
- SFBs will be given scheduled bank status once they commence their operations, and are found suitable as per Section 42 of the Reserve Bank of India Act, 1934.
On tap licensing:

On tap licensing means the RBI window for granting banking licenses will be open throughout the year.

On March 22, the RBI set up the Standing External Advisory Committee (SEAC) — a five-member committee headed by former RBI Deputy Governor Shyamala Gopinath for evaluating applications for universal banks as well as small finance banks.
The applications for universal banks and small finance banks will be initially screened by the Reserve Bank to ensure the prima facie eligibility of the applicants.
SEAC comprising eminent persons with experience in banking, the financial sector, and other relevant areas, will evaluate the applications thereafter.
The tenure of this SEAC will be for three years.

Money transfer outside the banking system

Context:
- The RBI proposed to enable, in a phased manner, payment system operators like mobile wallets regulated by the central bank to take direct membership in RTGS and NEFT.
About the proposal:
- RBI's proposal is expected to minimize settlement risk in the financial system and enhance the reach of digital financial services to all user segments.
- These entities will, however, not be eligible for any liquidity facility from RBI to facilitate the settlement of their transactions in these centralized payment systems (CPSs).
- The facility will be subject to an overall limit of Rs 2 lakh for non-banks.
What are the implications?
- Opening the payment system to non-banks would increase digital transactions significantly.
- It will prepare a digital trail of all individuals doing digital transactions on channels outside the banking system, which could help the overall financial system.
- Until now, an individual’s credit profile was available primarily with the banks.
- With this opening up, one’s credit profile can also be tracked while taking a loan from a financial technology (FinTech) company, investing through it, or spending through it.
- A credit score will be built based on all financial touchpoints.
Who can now undertake online transfers?
- The RBI will now allow non-bank entities — Prepaid Payment Instrument (PPI) issuers, Card Networks, White Label ATM operators, Trade Receivables Discounting System (TReDS) platforms — to become members of CPS.
- Mobile wallets can provide NEFT and RTGS facilities to their customers.
- A transfer will be allowed only to KYC (know your customer)-compliant entities.
Are non-banks a threat to banks?

Traditional brick-and-mortar banking is slowly disappearing with non-banks entering the space.
The RBI says India is on the way to becoming Asia’s top FinTech hub with an 87% FinTech adoption rate against the global average of 64%.
The FinTech market in India was valued at Rs 1.9 lakh crore in 2019 and is expected to reach Rs 6.2 lakh crore by 2025.
As FinTech companies are playing a more active role, commercial banks must adapt to the technological changes and work in tandem with these entities so that in the future they are part of the ecosystem.

RBI and digital currency

Context:
- The government, which plans a law to ban private digital currencies, favors a digital currency backed by the Reserve Bank of India.
About:
- RBI had said central banks are exploring DLT (Distributed Ledger Technology) for application in improving financial market infrastructure and considering it as a potential technological solution in implementing central bank digital currency (CBDC).
- Experts argue cryptocurrency prices are too volatile to serve as a fiat currency (govt-issued currency which is not backed by gold or any commodity).
- However, proponents say volatility would ebb over time with greater acceptance.
- RBI had expressed concern over other cryptocurrencies, saying they can be used for illegal activities, and pose a threat to financial stability.
- In 2018, RBI banned banks and other regulated entities from supporting crypto transactions after digital currencies were used for fraud.
- In 2020, the Supreme Court struck down the ban as unconstitutional.
- One of the reasons it gave was that cryptocurrency, though unregulated, was not illegal in India.

RBI tightens oversight of NBFCs, UCBs

Context:
- RBI announced the introduction of risk-based internal audit norms for large urban cooperative banks (UCBs) and non-banking financial companies (NBFCs), as part of measures aimed at improving governance and assurance functions at supervised entities.
NBFC's:
- Nonbank financial companies (NBFCs) are financial institutions that offer various banking services but do not have a banking license.
- Generally, these institutions are not allowed to take traditional demand deposits—readily available funds, such as those in checking or savings accounts—from the public.
- The Reserve Bank has been given the powers under the RBI Act 1934 to register, lay down policy, issue directions, inspect, regulate, supervise and exercise surveillance over NBFCs that meet the 50-50 criteria of principal business.
Urban Co-operative Banks (UCBs):
- Refers to primary cooperative banks located in urban and semi-urban areas.
- Recently, the government announced its decision to bring Urban Co-operative Banks (UCBs) and Multi-State Co-operative Banks under the supervisory power of the Reserve Bank of India (RBI).
- RBI ‘regulates and supervises the banking functions of UCBs under the provisions of the Banking Regulation Act, 1949.
- RBI has been ‘vested powers to issues licenses to UCBs under Section 22 and 23 Banking Regulation Act, 1949 to carry on banking business and to open new places of business (branches, extension counters, etc.) respectively.

RBI issues draft on rupee IR derivatives

Context:
- RBI has released the draft version of Rupee Interest Rate Derivatives (Reserve Bank) Directions, 2020.
- They are aimed at encouraging higher non-resident participation, enhance the role of domestic market makers in the offshore market, improve transparency, and achieve better regulatory oversight.
Key directions:
- It seeks to allow foreign portfolio investors (FPIs) to undertake exchange-traded rupee interest rate derivatives transactions subject to an overall ceiling of Rs 5,000 crore.
- The net short position of an FPI on exchange-traded IRDs should not exceed its long position in government securities and other rupee debt securities.
- The purpose of offering Rupee IRD contracts to a user, the market-maker (entities that provide a bid and offer prices to users in order to provide liquidity to the market) should classify the user either as a retail user or as a non-retail user.
- Non-retail users, as per the draft, are entities regulated by RBI, SEBI, IRDAI or PFRDA; resident companies with a minimum net worth of Rs 500 crore; and non-residents, other than individuals.
What are IRDs?
- Interest Rate Derivatives (IRD) are contracts whose value is derived from one or more interest rates, prices of interest-rate instruments, or interest rate indices.
- These may include interest rate futures, options, swaps, swaptions, and FRA's.

Financial Stability Report (FSR) of the RBI

Context:
- Recently, the Reserve Bank released the 23rd issue of the Financial Stability Report (FSR).
About:
- FSR reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability and the resilience of the financial system in the context of contemporaneous issues relating to the development and regulation of the financial sector.
- RBI has cautioned that bad loans of the banking system are expected to hit 11.22% of the advances under a severe stress scenario.
- It also warned about the incipient signs of stress among medium and small units.
- Only 0.9% of the total loans were restructured.
- Banks’ resort to restructuring under the COVID-19 resolution framework was not significant and write-offs as a percentage of GNPA at the beginning of the year, fell sharply as compared to 2019-20, except for private banks.

Currency Swap Arrangement (CSA)

Context:
- The Reserve Bank of India has agreed to a $400 million currency swap facility for Sri Lanka till November 2022.
What is this Currency Swap Arrangement (CSA)?
- An arrangement between two friendly countries to involve in trading in their own local currencies.
- As per the arrangements, both countries pay for import and export trade at the pre-determined rates of exchange, without bringing in a third-country currency like the US Dollar.
- In such arrangements, no third country currency is involved, thereby eliminating the need to worry about exchange variations.
Significance of the agreement:
- Improves confidence in the Indian market.
- Enables the agreed amount of capital being available to India.
- Bring down the cost of capital for Indian entities while accessing the foreign capital market.
- Aids in bringing greater stability to foreign exchange and capital markets in India.

Special Liquidity Scheme for NBFCs and HFCs

Context:
- RBI announces a special liquidity scheme for NBFCs and HFCs through a Special Purpose Vehicle (SPV) to avoid any potential systemic risks to the financial sector.
Background:
- Finance Minister had announced on 13th March 2020, the launch of a Special Liquidity Scheme of Rs. 30,000 crore.
Key features of the scheme:
- RBI will provide funds for the Scheme by subscribing to government-guaranteed special securities issued by the Trust.
- The total amount of such securities issued outstanding shall not exceed Rs. 30,000 crores at any point in time.
- The government of India will provide an unconditional and irrevocable guarantee to the special securities issued by the Trust.
Who is eligible?
- NBFCs, including Microfinance Institutions that are registered with the RBI, under the Reserve Bank of India Act, 1934, excluding those registered as Core Investment Companies.
- Housing Finance Companies that are registered under the National Housing Bank Act, 1987.
Other eligibility criteria:
- CRAR/CAR of NBFCs/HFCs should not be below the regulatory minimum, i.e., 15% and 12% respectively as of March 31, 2019.
- The net non-performing assets should not be more than 6% as of March 31, 2019.
- They should have made a net profit in at least one of the last two preceding financial years (i.e. 2017-18 and 2018-19)
- They should be rated investment grade by a SEBI registered rating agency.
Implementation:
1. SBICAP which is a subsidiary of the State Bank of India has set up an SPV (SLS Trust) to manage this operation.
2. The SPV will purchase the short-term papers from eligible NBFCs/HFCs, who shall utilise the proceeds under this scheme solely for the purpose of extinguishing existing liabilities.
3. The instruments will be CPs and NCDs with a residual maturity of not more than three months and rated as investment grade.
Way ahead:
- The Scheme will remain open for 3 months for making subscriptions by the Trust.
- The period of lending (CPs/NCDs of NBFCs/HFCs for a short duration of up to 90 days) by the Trust shall be for a period of up to 90 days.
- The financing would be used by the NFBCs/HFCs only to repay existing liabilities and not to expand assets.

Retail Direct Gilt Account (RDG Account)

Context:
- Recently, RBI issued a scheme ‘RBI Retail Direct’, a one-stop solution to facilitate investment in government securities by individual investors.
About:
- The Reserve Bank of India’s (RBI’s) Retail Direct Gilt Account (RDG Account) opens a vista for retail investors to open an account directly with the central bank and access government securities (G-Secs) in retail lot sizes.
- As per the scheme, Government securities mean securities issued in form of stock by credit to SGL/CSGL account maintained with RBI.
- These include Government of India Treasury Bills; Government of India dated securities; Sovereign Gold Bonds (SGB); and State Development Loans (SDLs).
- No fee will be charged for opening and maintaining a ‘Retail Direct Gilt account’ with the RBI.
- However, the fee for the payment gateway, as applicable, will be borne by the registered investor.
- Accessibility: The advantage of an RDG Account is that the G-Sec market, which is currently wholesale or institutional because trading lot sizes are big, shall be brought within reach with affordable lot sizes.
- Credit quality: Gilt fund portfolios are as safe as investing in Gilts directly as they comprise mostly G-Secs.
- Expenses at RDG Accounts will be minimal or zero to nominal.

Asian Development Bank

Context:
- India to get USD177 million loan from Asian Development Bank for Maharashtra road improvements. The loan was sanctioned to upgrade 450 km of state highways and major district roads in the state of Maharashtra.
Key Points:
- The project will upgrade 2 major district roads and 11 state highways, with a combined length of 450 km, to 2-lane standard across seven districts of Maharashtra, and improve connectivity to national highways, interstate roads, seaports, airports, rail hubs, district headquarters, industrial areas, enterprise clusters, and agricultural areas.
- The project will also focus on training the Maharashtra Public Works Department project staff to build their capacity in climate change adaptation and disaster-resilient features in road design, road maintenance planning, and road safety

Asian Development Bank

Founded in 1966, the Asian Development Bank's (ADB) headquarters are in Manila, Philippines.
The Asian Development Bank's primary mission is to foster growth and cooperation among countries in the Asia-Pacific Region.
It raises capital through international bond markets. The ADB also relies on member contributions, retained earnings from lending, and the repayment of loans for the funding of the organization.
The two largest shareholders of the Asian Development Bank are the United States and Japan.
The Asian Development Bank provides assistance to its developing member countries, the private sector, and public-private partnerships through grants, loans, technical assistance, and equity investments to promote development.

Index-Linked Insurance Plans

Context:
- Insurance Regulatory and Development Authority (IRDA) revised product design draft guidelines for traditional products.
What is it?
- Insurance Regulatory and Development Authority (IRDA) revised product design draft guidelines for traditional products.
- The latest draft has paved way for a new category of product called ILIPs in the life insurance business.
- At present, life insurance has two categories of products—Traditional plans and unit-linked insurance plans (ULIPs).
Basic idea:
- Not the first time ILIPs have been introduced.
- Earlier, most plans were linked to 10-year G-Sec as benchmark rate and each year premium was linked to this index to arrive at a return for that particular year
- Now, ILIP will have a lock-in period of five years.
- The premium paying term will be the same—like that of a regular premium plan till the policy term or a single premium.
- According to IRDA draft, an ILIP will be promoted as an unbundled product which means it cannot be sold with any other financial product.
- Many insurance products are bundled with other products like online booking of air tickets, credit cards, vehicles, consumer durables, home loans or personal loans.
- There are multiple indices that can be offered other than reverse repo or 10-year G-sec paper.
- Some of the other indices include Nifty Long duration G-Sec Index, Nifty Long duration Bond Index, the Nifty 10 years SDL Index, and Nifty Bharat Bond Index.
Features:
- ILIP will operate like a bank account.
- An ILIP will operate more or less like a bank account, with each policyholder having a separately managed account, according to draft regulations.
- The account value will reflect the premium paid by the policyholder and the interest gained from the particular index to which the fund is linked.
- Insurance companies will be required to send a statement of policy account to the policyholder at the end of every reporting period.
- The minimum death benefit under the new plan will be 10 times the life cover or sum assured.

Corporate houses in Indian Banking

Context:
- An Internal Working Group of the Reserve Bank of India (RBI) has recommended that corporate houses be given bank licences.
- But, this has earned a lot of criticism from leading economists including Dr Vijay Kelkar, Arvind Subramaniam and others.
P.K Mohanty Committee:
- It has said “large corporates and industrial houses may be allowed as promoters of banks only after necessary amendments to the Banking Regulation Act, 1949”
Arguments in favour:
- It could enhance the field’s competitive intensity, spur performance and revitalize our credit market. In turn, if this step brings greater efficiency in capital allocation overall, it could do our economy a good turn over the years ahead.
- Globally, banking appears to be on the verge of a technology-led transformation. India too needs to step up with its share of FinTech players.
Why is it being criticised?
- Committee on Financial Sector Reforms (2008) headed by Dr. Raghuram Rajan had analysed this possibility. It observed, “The Committee believes it is premature to allow industrial houses to own banks. This prohibition on the ‘banking and commerce’ combine still exists in the United States today, and is certainly necessary for India till private governance and regulatory capacity improve.
- The main concerns are interconnected lending, the concentration of economic power, and exposure of the safety net provided to banks (through the guarantee of deposits) to commercial sectors of the economy.
- The Internal Working Group believes that before corporate houses are allowed to enter banking, the RBI must be equipped with a legal framework to deal with interconnected lending and a mechanism to effectively supervise conglomerates that venture into banking.
- RBI can only react to interconnected lending ex-post, that is after substantial exposure to the entities of the corporate house has happened. It is unlikely to be able to prevent such exposure.

Targeted Long-Term Repo Operations

Context:
- RBI has decided to bring the 26 stressed sectors identified by the Kamath Committee within the ambit of sectors eligible under on-tap Targeted Long-Term Repo Operations (TLTRO), providing more liquidity to the slowdown-hit economy.
About:
- LTRO is a tool that lets banks borrow one to three-year funds from the central bank at the repo rate, by providing government securities with similar or higher tenure as collateral.
- This helps banks get funds for a longer duration as compared to the short-term (up to 28 days) liquidity provided by the RBI through other tools such as liquidity adjustment facility (LAF) and marginal standing facility (MSF).
- Under TLTRO, the central bank wants banks opting for funds under this option to invest in specific sectors through debt instruments like corporate bonds, commercial papers, and non-convertible debentures (NCDs) to push the credit flow in the economy.
Benefits:
- Provide banks with access to cheaper capital from the RBI.
- This, in turn, encourages them to lend more and spur economic activity.
- They can also invest these long-term funds in assets that yield better returns to improve profitability.
- Also, as banks provide government securities as collateral, the demand for such government bonds increases and helps in lowering yield.

Mutual funds risk-o-meter

Context:
- In a move that will help investors to make a more informed investment decision, capital markets regulator Securities and Exchange Board of India (SEBI) has made it mandatory for mutual funds to assign a risk level to schemes, based on certain parameters.
About:
- SEBI’s decision on the “risk-o-meter”, which it announced on October 5, 2020, came into effect on January 1.
- In its circular issued on October 5, the regulator made it mandatory for mutual fund houses to characterize the risk level of their schemes on a six-stage scale from “Low” to “Very High”.
- The risk-o-meter must be evaluated every month.
- Fund houses are required to disclose the risk-o-meter risk level along with the portfolio disclosure for all their schemes on their own websites as well as the website of the Association of Mutual Funds in India (AMFI) within 10 days of the close of each month.
- Since the risk value and risk levels would be arrived at after taking into account critical parameters such as credit risk, interest rate risk, and liquidity risk in case of a debt scheme, and parameters such as market capitalization, volatility, and impact cost in case of an equity scheme, industry experts feel that the risk-o-meter will now provide a more objective assessment of the riskiness of a particular scheme to potential investors.

Small saving schemes

Context:
- The Government cut interest rates on various small savings schemes sharply by 40-110 basis points.
What are small savings schemes?
- Small savings schemes are a set of saving instruments launched by the government of India.
- They include instruments such as the Public Provident Fund (PPF), the National Savings Certificate (NSC), the Senior Citizens Savings Scheme (SCSS), and the Sukanya Samriddhi Scheme.
- In recent times, small savings have emerged as a key source of financing the government deficit.
- In 2021-22, borrowings through small savings have been pegged at Rs 3.91 lakh crore.
Recent cut in the interest rate and its impact:
- Interest rates on small savings schemes are reset quarterly, in line with the movement in benchmark government bonds of similar maturity
- Yields on benchmark government bonds have fallen over the last year as the Reserve Bank of India cut rates to support the economy.
- The reduction in small savings rates comes amidst inflation inching up in recent months.
- In light of this, some of the small savings products may not yield much in terms of real interest rates, which a saver receives after adjusting for inflation.

New SEBI rule for fund manager compensation

Context:
- The Securities and Exchange Board of India (SEBI) has said that a minimum of 20% of the compensation of mutual fund managers and other key personnel in an asset management company (AMC) should be in the form of units of the mutual fund schemes they manage.
- Key personnel here refers to the likes of chief executive officer, chief investment officer, research head, and their direct reports.
What’s new in this circular?
- The compensation of fund managers is linked to performance.
- What SEBI has done here is crystallize the rules and extend them beyond fund managers.
- Moreover, SEBI has specified the rules of allocation of this 20% by saying that it should be proportional to the assets under management of the schemes in which an employee has a role or oversight.
- SEBI has also specified that these units offered by way of compensation are locked in for three years.
What has led to such a decision from SEBI?
- The SEBI circular said this was to “align the interest of the key employees of the AMCs with the unitholders of the mutual fund schemes”.
- SEBI wants fund managers to demonstrate to investors that they have confidence in the schemes they manage.
How will this help retail investors?
- This move by SEBI will boost the transparency of fund manager compensation.
- It helps build accountability.
- It ensures that fund houses link the pay of fund managers to performance and go beyond lip service.
- Besides, since a whole lot of employees’ compensation is linked to how well a mutual fund is doing, it could encourage whistleblowing if wrongdoing is happening.

Emergency Credit Line Guarantee Scheme (ECLGS)

Context:
- The Finance Ministry expanded the scope of a government-guaranteed credit facility to healthcare and stressed sector companies that have loan dues for up to 60 days (or SMA-1 accounts), as against 30 days earlier (SMA-0).
About:
- ECLGS allows a company with loans outstanding above Rs 50 crore and below Rs 500 crore to access it to raise fresh credit without providing any additional collateral.
- Sanctions and disbursements under the facility are relatively faster since lenders have the Central government guarantee in case of default against these loans.
- SMA-1 borrowers in the healthcare sector and 26 other high-stress sectors (as identified by the Kamath Committee) are now eligible under ECLGS 2.0.
- This is expected to provide partial relief to stressed firms facing fresh uncertainty and business risks due to fresh restrictions being imposed by states.
- This is within the Rs 3-lakh-crore loan sanction limit set under the scheme, but it could be raised depending on the demand.
- The tenor of the additional credit availed under the scheme will be five years, including one year of a moratorium on principal repayment.
- Accounts that are classified as non-performing assets(NPA) or where overdue have crossed 60 days (SMA-II) are not eligible.

Regulations Review Authority (RRA 2.0)

Context:
- The RBI has decided to set up a new Regulations Review Authority (RRA 2.0) for one year from the date of its establishment.
About:

It is to review the regulatory prescriptions internally, as well as seeking suggestions from the RBI regulated entities and other stakeholders on their simplification and ease of implementation.
The RRA 2.0 will focus on streamlining regulatory instructions, reduce the compliance burden of regulated entities by simplifying procedures and reduce reporting requirements, wherever possible.
M Rajeshwar Rao, Deputy Governor, has been appointed as the Regulations Review Authority.
The Authority would be set up for one year from May 1, unless its tenure is extended by the RBI.

New Umbrella Entities (NUE)

Context:
- The Reserve Bank of India (RBI) is not in favor of having direct and supervisory control over the New Umbrella Entities (NUE) and instead wants agencies such as the National Payments Corporation of India (NPCI) or a newly formed body to take over the role.
- This might be because of the high cost of setting up a new division at the RBI
What are New Umbrella Entities (NUE)?
- Last year in August, the RBI had released a framework for setting up NUEs, which would be able to carry out various payment services, akin to the ones being provided by the NPCI right now.
- The purpose of allowing private companies and entities to apply for an NUE license was to expand the ambit and coverage of traditional and new financial instruments as well as allow applicants to “set up, manage and operate new payment system”.
RBI guidelines to setup NUE:
- As per the RBI guidelines, the umbrella entity applicants should have a minimum paid-up capital of Rs 500 crore, while no single promoter or promoter group can have more than 40% investment of capital.
- The NUE should maintain a minimum net worth of Rs 300 crore at all times, said the RBI guidelines.
- The central bank’s decision to allow companies to apply for an NUE has attracted considerable interest from banks and some other payment platforms.
- But this has also raised questions of conflict of interest as the NUE will be allowed to operate as a for-profit organization, while the NPCI is a not-for-profit entity.

Social Stock Exchanges (SSE)

Context:
- A technical group on Social Stock Exchanges (SSEs), constituted by the Securities and Exchange Board of India (SEBI), has submitted its report
About SSE:
- It is a platform for listing social enterprise, voluntary and welfare organizations
- The initiative aims to help social and voluntary organizations which work for social causes to raise capital as equity or debt or a unit of mutual fund
- It was mooted in the Union Budget 2019-20
- SSE already exists in countries such as Singapore, UK, Canada among others
- These countries allow firms operating in sectors such as health, environment and transportation to raise capital
Key recommendations of the Group:
- For-Profit Enterprise (FPE) and Not for Profit Organisation (NPO) will be eligible to tap the SSE if they can show their primary goals are social intent and impact
- Entities listed on SSE will have to disclose their social impact report on an annual basis
- Political and religious organizations, trade organizations as well as corporate foundations should not be allowed to raise funds through SSEs.

RuPay cards

Context:
- In a major thrust to RuPay’s increasing market share, the Ministry of Railways has advised its 12.54 lakh workforce to convert their Debit/ATM Cards to RuPay powered cards.
- The move is seen as a boost to Aatma Nirbhar Bharat and ‘Digital India' initiatives.
About RuPay card:

It is a product of the National Payments Corporation of India (NPCI), an umbrella organization that facilitates retail payments and is acclaimed to be India’s first-of-its-kind global card payment with wide acceptance across ATMs, e-commerce platforms, and POS machines.
It is a highly secure network that protects against anti-phishing.
The name, derived from the words ‘Rupee and ‘Payment’, emphasizes that it is India’s very own initiative for Card payments.
RuPay fulfils RBI’s vision of initiating a ‘less-cash economy'.
This could be achieved only by encouraging every Indian bank and financial institution to become tech-savvy and engage in offering electronic payments.

Benefits of RuPay Card
- Lower cost and affordability.
- Customized product offering.
- Protection of information related to Indian consumers.
- Provide electronic product options to untapped/unexplored consumer segments.
- Inter-operability between payment channels and products.
- Offers on RuPay Debit Card

Fiscal and monetary policy:

Gross Domestic Product (GDP)

Context:
- On May 31, important updates regarding India’s GDP growth and the Centre’s fiscal performance for 2020-21 became available.
- According to NSO’s provisional estimates for 2020-21, the annual contraction in real GDP turned out to be 7.3%
What is GDP?
- GDP is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific period.
- As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.
Advantages of GDP:
- GDP is a simple measure and can be calculated either through the expenditure, income, or value-added approach.
- GDP enables policymakers and central banks to judge whether the economy is contracting or expanding and promptly take necessary action.
- Economies of various countries can be easily compared.
- A country with high GDP can attract foreign investors.
Disadvantages of GDP:
- It emphasizes economic output without considering economic well-being.
- For example, a nation may be experiencing rapid GDP growth, but this may impose a significant cost to society in terms of environmental impact and an increase in income disparity.
- It does not account for the underground economy, as it relies on official data.
- It is geographically limited in a globally open economy.
- Gross National Product (GNP), which measures the output from the citizens and companies of a particular nation regardless of their location, is viewed as a better measure of output than GDP in some cases.

India’s public debt ratio

Context:
- As per the International Monetary Fund (IMF), India’s public debt ratio is projected to increase by 17% to almost 90% because of an increase in public spending due to Covid-19.
Key takeaways:
- The ratio is projected to stabilise in 2021.
- It will slowly decline up to the end of the projection period, in 2025.
- The pattern of public debt in India is similar to the pattern around the world.

For what Debt to GDP ratio use utilised?

This debt-to-GDP ratio is used to compare a country’s public debt to its GDP.
It is often expressed as a percentage.
By comparing what a country owes (debt) with what it produces (GDP), the debt-to-GDP ratio indicates a particular country’s ability to pay back its debts.
A country with a high debt-to-GDP ratio finds it difficult to pay off public debts.

Fiscal Deficit

Context:
- The fiscal deficit reaches 120% of the annual target, a result of lockdown-induced sluggishness in economic activities and poor revenue collection.
- The fiscal deficit or gap between the expenditure and revenue had breached the annual target in July this year. this gap has further widened.
What is a fiscal deficit?
- The fiscal deficit is the difference between the government‘s total expenditure and its total receipts excluding borrowing.
- Gross fiscal deficit = Total expenditure – (Revenue receipts + Non-debt creating capital receipts)
Impact of the fiscal deficit:
- Crowding out private borrowing
- manipulates capital structures and interest rates
- decreases net exports
- leads to either higher taxes, higher inflation, or both.
Measures to finance the deficit:
- Governments could borrow money from the market and increase spending as part of a targeted fiscal policy.
- Monetization of the fiscal deficit: RBI buys government bonds in the primary market and prints more money to finance the debt.
Escape clause of FRBM Act :
- The Fiscal Responsibility and Budget Management (FRBM) Act “clearly mentions that direct monetization of deficit can be used by the Government in certain exceptional circumstances.
- The escape clause refers to the situation under which the central government can flexibly follow the fiscal deficit target during special circumstances. This terminology was innovated by the NK Singh Committee on FRBM.
- The clause allows the govt to relax the fiscal deficit target for up to 50 basis points or 0.5 percent.
- In 2020, Finance Minister, Nirmala Sitharaman used the escape clause and revised the fiscal deficit for FY20 to 3.8 percent and pegged the target for FY21 to 3.5 percent.
- The government can over cross the targets in the following situations:
  1. National Security / Act of War
  2. National Calamity
  3. If agriculture output and farm incomes collapse
  4. Fall in real output, GDP growth rate beyond a certain point
  5. Structural reforms in the economy with unanticipated fiscal implications.

Monetary policy

Context:
- RBI Governor Shaktikanta Das announced the latest Monetary Policy Review.
Definition of 'Monetary Policy:
- Monetary policy refers to the policy of the central bank concerning the use of monetary instruments under its control to achieve the goals specified in the Act.
- The Reserve Bank of India (RBI) is vested with the responsibility of conducting monetary policy.
- This responsibility is explicitly mandated under the Reserve Bank of India Act, 1934.
- In May 2016, the Reserve Bank of India (RBI) Act, 1934 was amended to provide a statutory basis for the implementation of the flexible inflation-targeting framework.
- The Monetary Policy Committee (MPC) constituted by the Central Government under Section 45ZB determines the policy interest rate required to achieve the inflation target.
- The amended RBI Act also provides for the inflation target to be set by the Government of India, in consultation with the Reserve Bank, once every five years.
- Accordingly, the Central Government has notified 4% Consumer Price Index (CPI) inflation as the target with the upper tolerance limit of 6% and the lower tolerance limit of 2%.
Recent monetary policy review:
- The MPC kept key policy rates unchanged and decided to “continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis”.
- The RBI marked down India’s GDP growth forecast for the current financial year from 10.5% to 9.5% and marked up the inflation forecast for the year from 5% to 5.1%.
- Typically, faltering growth prompts the RBI to cut interest rates to spur economic activity.
- But rising inflation requires raising interest rates.
- And since the RBI is mandated by law to target inflation within the band of 2%–6%, the best it could do — and it has been doing this for several months now — is to maintain the status quo on interest rates.

National Financial Reporting Authority (NFRA)

Context:
- The audit regulator, the National Financial Reporting Authority (NFRA), has constituted a Technical Advisory Committee (TAC) under the Chairmanship of R Narayanaswamy, Professor, Indian Institute of Management, Bengaluru.
Composition:
- Seven members, including the Chairman.
Functions:
- Aid and advise the Executive Body of the NFRA on issues related to the drafts of accounting standards and auditing standards.
- Provide inputs from the perspectives of users, preparers, and auditors of financial statements.
About NFRA:
- National Financial Reporting Authority (NFRA) was constituted on 1st October 2018 under section 132 (1) of the Companies Act, 2013.
Why was it needed?
- In the wake of accounting scams, a need was felt to establish an independent regulator for the enforcement of auditing standards and ensuring the quality of audits so as to enhance investor and public confidence in the financial disclosures of companies.
Composition:
- The Companies Act requires the NFRA to have a chairperson who will be appointed by the Central Government and a maximum of 15 members.
Functions and Duties:
1. Recommend accounting and auditing policies and standards to be adopted by companies for approval by the Central Government;
2. Monitor and enforce compliance with accounting standards and auditing standards;
3. Oversee the quality of service of the professions associated with ensuring compliance with such standards and suggest measures for improvement in the quality of service;
4. Perform such other functions and duties as may be necessary or incidental to the aforesaid functions and duties.
Powers:
- It can probe listed companies and those unlisted public companies having paid-up capital of no less than Rs 500 crore or annual turnover of no less than Rs 1,000 crore.
- It can investigate professional misconduct committed by members of the Institute of Chartered Accountants of India (ICAI) for the prescribed class of body corporate or persons.

General Financial Rules

Context:
- The government has amended the General Financial Rules, 2017, imposing restrictions on public procurement from bidders of countries that share a land border with India, citing grounds of defence and national security.
- The central government has also directed state governments to implement this order for all public procurement.
As per the amendments:
- Bidders from these countries will be eligible only if they are registered with the Registration Committee constituted by the Department for Promotion of Industry and Internal Trade (DPIIT).
- They will also be required to take mandatory political and security clearance from the ministries of External Affairs and Home.
Exceptions:
- Relaxation will be provided for the procurement of COVID medical supplies until December 31.
- Also, the order for prior registration will not apply for countries to which the government extends lines of credit or provides development assistance, even if they share a land border with India.
Background:
- These measures follow a series of steps that have been taken in recent months to prevent the influx of Chinese products and investments into India.
- On June 23, the government made it mandatory for sellers on the Government e-Marketplace (GeM) portal to clarify the country of origin of goods when registering new products.
- In April, the government amended FDI rules mandating prior approval for investment by entities in countries that share land borders with India.
What are GFRs?
- They are a set of rules that deal with matters that involve public finances.
- They were first issued in 1947 bringing together all the existing orders.
- They are instructions that pertain to financial matters.
- They lay down the general rules applicable to Ministries / Departments, and detailed instructions relating to the procurement of goods are issued by the procuring departments broadly in conformity with the general rules while maintaining the flexibility to deal with varied situations.

The rise in India's forex reserves

Context:
- Forex reserves jumped by $4.34 billion to reach $581.21 billion during the week ended April 9, according to data from the Reserve Bank of India (RBI).
India's forex reserves:
- India's forex reserves comprise foreign currency assets (FCAs), gold reserves, special drawing rights (SDRs), and the country's reserve position with the International Monetary Fund (IMF).
- the functions as the custodian and manager of forex reserves.
- It allocates the dollars for specific purposes.
- For example, under the Liberalised Remittances Scheme, individuals are allowed to remit up to $2,50,000 every year.
- The central bank uses its forex kitty for the orderly movement of the rupee.
- It sells the dollar when the rupee weakens and buys the dollar when the rupee strengthens.
About the recent jump in forex reserves:
- The rise in forex reserves comes alongside the continuing high global liquidity and fund flow into the economy, which is likely to see relatively higher growth.
- During the reporting week of April 9, a rise in foreign currency assets (FCA) — a major component of the overall reserves — fuelled the rise in the forex kitty.
- Expressed in dollar terms, the FCA includes the effect of appreciation or depreciation of non-US currencies such as the euro, pound, and yen held in the overall reserves.
Advantages of the rise in forex reserves:
- The rising forex reserves could bring some comfort to the government and the RBI in managing the nation’s external and internal financial issues at a time when the economy is facing Covid stress once again.
- It is a big cushion in the event of any crisis on the economic front and enough to cover India’s import bill for a year.
- The rising forex kitty could also help strengthen the rupee against the US dollar.
- Higher reserves could bring confidence to markets that a country can meet its external obligations.
- It also assists the government in meeting its foreign exchange needs and external debt obligations and maintains a reserve for national disasters or emergencies.

Current account surplus

Context:
- India reports a current account surplus of 0.9% in pandemic-affected FY21, as against a deficit of 0.9% in FY20.
About the news:
- The current account is one-half of the balance of payments, the other half being the capital account.
- While the capital account measures cross-border investments in financial instruments and changes in central bank reserves, the current account measures imports and exports of goods and services, payments to foreign holders of a country's investments, payments received from investments abroad, and transfers such as foreign aid and remittances.
- The current account may be positive (a surplus) or negative (a deficit
- A country's current account balance, whether positive or negative, will be equal but opposite to its capital account balance.
- Exports are recorded as credits in the balance of payments, while imports are recorded as debits.
Factors Affecting the Current Account:
- Since the trade balance (exports minus imports) is generally the biggest determinant of the current account surplus or deficit, the current account balance often displays a cyclical trend.
- The exchange rate exerts a significant influence on the trade balance, and by extension, on the current account.
- An overvalued currency makes imports cheaper and exports less competitive, thereby widening the current account deficit or narrowing the surplus.
- An undervalued currency, on the other hand, boosts exports and makes imports more expensive, thus increasing the current account surplus or narrowing the deficit.

ESG funds

Context:
- The ESG funds are increasingly becoming popular in the mutual fund industry in India.
More Info:
- ESG is a combination of three words – Environment, Social, and Governance.
- It is a kind of mutual fund.
- Its investing is used synonymously with sustainable investing or socially responsible investing.
- The ESG fund focuses on companies with environment-friendly practices, ethical business practices, and an employee-friendly record while other funds don’t.
- The fund is regulated by the Securities and Exchange Board of India (SEBI).
Why are they so much in focus now?
- Companies with good ESG scores tick most of the checkboxes for investing, tend to mitigate environmental and social risks, and tends to have stronger cash flows, lower borrowing costs, and durable returns.
- Modern investors are re-evaluating traditional approaches and look at the impact their investment has on the planet.
- As a result of this paradigm change, asset managers have started incorporating ESG factors into investment practices.

Development Finance Institution (DFI)

Context:
- Centre to set up a development finance entity in 3-4 months.
What is a DFI?
- A Development Financial Institution (DFI) is an institution that provides long-term finance for development.
- The majority of DFIs are non-deposit taking institutions.
- DFIs can be either wholly or partially owned by the government.
- A few have majority private ownership.
- The shareholding pattern is largely determined by the nature of the activities being financed, and their associated risk-returns profile.
- There are some DFIs that are established directly by the statute.
- The statute prescribes the regulator for the institution.
- Currently, NABARD, NHB, SIDBI, and EXIM Bank are the only four statutory DFIs.
- The Reserve Bank of India regulates them under the Banking Regulation Act 1949.
- In the pre-liberalization era, the RBI printed money and refinanced DFIs.
- However, post-liberalization, DFIs have had to raise money from the market through bond offerings in the capital market and private placements.
- DFIs also benefit from permissions to issue tax-free bonds.
Recent development:
- The government plans to set up a Development Finance Institution (DFI) in the next three to four months to mobilize the ₹111 lakh crore required for funding of the ambitious national infrastructure pipeline.
- In her last Budget speech, Finance Minister Nirmala Sitharaman had proposed to set up DFIs for promoting infrastructure funding.
- About 7,000 projects have been identified under the National Infrastructure Pipeline with a projected investment of ₹111 lakh crore during 2020-25.
- We need a development financial institution as infra financing needs patient capital, and banks are currently not suited for lending for long-term projects which do not generate any cash for years.
- To provide funding, to enhance the credit rating of projects, a DFI is needed.
- The DFI will be a catalyst and would fund projects where others are not willing to enter because of the risks involved.

Criminal Finances

Context:
- Over 2,000 representatives from 132 countries attended the virtual 4th Global Conference on Criminal Finances and Cryptocurrencies organised by the Interpol, Europol, and the Basel Institute on Governance from November 18 to 19.
About the conference:
- The conference is an initiative of the Working Group on Cryptocurrencies and Money Laundering established in 2016 by Interpol, Europol, and the Basel Institute on Governance.
- It was launched with the objective of strengthening knowledge, expertise, and best practices for investigations into financial crimes and intelligence on virtual assets and cryptocurrencies.
- The conference served as an opportunity to underline the need for countries and jurisdictions to increase the exchange of tactical information and best practices.
- The conference’s agenda included trends and investigations on cryptocurrency-related offences, exploring criminal flows and operations in the dark markets, ransomware and sextortion case studies, money laundering involving virtual assets, and the transfer of drug proceeds using cryptocurrencies.
Basel Institute on Governance :
- Established in 2003, the Basel Institute on Governance is a not-for-profit Swiss foundation dedicated to working with public and private partners around the world to prevent and combat corruption. The Basel Institute is an Associated Institute of the University of Basel.
Europol:
- Headquartered in The Hague, the Netherlands, Europol supports the 27 EU Member States in their fight against terrorism, cybercrime, and other serious and organised forms of crime. They also work with many non-EU partner states and international organisations.
Interpol:
- The word 'INTERPOL' is the radiotelegraph code for the International Criminal Police Organization which consists of 188 member countries who have agreed to “ensure and promote the widest possible assistance between all criminal police authorities in the prevention and suppression of ordinary law crimes”. The Organization's headquarters is in Lyon, France.

Consumer Price Index-Industrial Workers

Context:
- The labour ministry has revised the base year of the Consumer Price Index-Industrial Workers (CPI-IW) from 2001 to 2016.
- It has given more weight to spending on housing, education, and health in the inflation index calculation.
Key takeaways:
- The revision in the base year will reflect the changing consumption pattern of the working-class population over the years.
- Following the change in the base year, the index will give 39% weight to food and beverage consumption of workers now as against 46.2% earlier.
- In contrast, spending on housing will get almost 17% weight compared to 15.2% earlier.

CPI-Industrial Workers (CPI-IW)

It is used as a benchmark for calculating dearness allowance for government employees, dearness relief for pensioners and wages for industrial workers in some sectors.
Though it may not impact the salary of industrial workers and DA of government staff immediately, it will have a cascading impact on salary, DA and DR of workers, and pensioners.

Four years since Demonetisation

Context:
- Four years after the government announced demonetisation on November 8, 2016, the currency with the public stood at a record high of Rs 26.19 lakh crore — 45.7 percent higher than the level of Rs 17.97 lakh crore on November 4, 2016.
Lockdown increased the cash flow:
- The pace of rising in currency with the public has been very sharp over the last 10 months as it has risen from Rs 21.79 lakh crore as of January 3, 2020, to Rs 26.19 lakh crore as of October 23, 2020.
- The jump was primarily driven by a rush for cash by the public between March and May as the government announced a stringent lockdown.
- As a result, people began accumulating cash to meet their grocery and other essential needs that were being mainly catered by neighborhood grocery stores.
What is the currency in circulation?
- As per the RBI definition, currency with the public is arrived at after deducting cash from banks from the total currency in circulation. Currency in circulation refers to cash or currency within a country that is physically used to conduct transactions between consumers and businesses.
Effects of demonetisation:
- Fall in demand
- businesses faced a crisis
- gross domestic product (GDP) growth declined to nearly 1.5 percent.
- Many small units were hit hard and shut shutters after the note ban.
- It also created a liquidity shortage.
Did it reduce the currency in circulation?
- According to an RBI study on digital payments, although digital payments have been growing gradually in recent years, both in value and volume terms across countries, the data suggests that during the same time currency in circulation to GDP ratio has increased in consonance with the overall economic growth.
- An increase in digital payments to GDP ratio over a period of time does not seem to automatically imply a fall in the currency to GDP ratio of the country.(RBI study)

Technical Recession

Context:
- Latest RBI bulletin projects contraction for a second consecutive quarter, which means the economy is in a ‘technical recession'.
- To better understand the term “technical recession”, one must distinguish it from two other phrases — a recession and a recessionary phase of an economy.
What is the recessionary phase?
- At its simplest, in any economy, a recessionary phase is the counterpart of an expansionary phase.
- In other words, when the overall output of goods and services — typically measured by the GDP — increases from one quarter (or month) to another, the economy is said to be in an expansionary phase.
- And when the GDP contracts from one quarter to another, the economy is said to be in a recessionary phase.
- Together, these two phases create what is called a “business cycle” in any economy. A full business cycle could last anywhere between one year and a decade.

How is the recession different?
- When a recessionary phase sustains for long enough, it is called a recession. In other words, when the GDP contracts for a long enough period, the economy is said to be in a recession.
- There is, however, no universally accepted definition of a recession — as in, for how long should the GDP contract before an economy is said to be in a recession.
- But most economists agree with the definition that the National Bureau of Economic Research (NBER) in the United States uses. According to NBER, “During a recession, a significant decline in economic activity spreads across the economy and can last from a few months to more than a year.
- The NBER’s Business Cycle Dating Committee typically looks at various variables — employment, consumption, etc — apart from GDP growth to arrive at a decision. It also looks at the “depth, diffusion, and duration” of decline in economic activity to determine whether an economy is in a recession or not.
- For example, in the case of the most recent dip in economic activity in the US, which started in February 2020 as a result of the Covid-19 pandemic, the drop in activity has been so great and so widely diffused throughout the economy that the downturn would have been classified as a recession even if it had proved to be quite brief.

What is a technical recession?
- The real quarterly GDP has come to be accepted as a measure of economic activity and a “benchmark” for ascertaining a “technical recession”.
- By this definition, as the data in the above table shows, India entered a recession at the end of September. The UK is in its third quarter of recession. Brazil and Indonesia are also in recession while South Africa has evaded it until now, but only marginally. China, where the pandemic began, has bucked the trend.
- Given the nature of the problem — the pandemic — as soon as the lockdown was announced in March, most economists expected the Indian economy to go into recession. In fact, most estimates expect the economy to contract for at least one more quarter — that is October to December, currently underway.
Recession vs Depression:
- Typically, recessions last for a few quarters. If they continue for years, they are referred to as “depressions”. But depression is quite rare; the last one was during the 1930s in the US.

Forex reserves

Context:
- In early June, India’s foreign exchange reserves crossed $600 billion for the first time.
About:
- The forex reserves are assets held by the central bank and comprise:
  - Foreign currencies
  - Bonds
  - Bank deposits
  - Gold
  - Special drawing rights (SDR)
  - Financial assets
- Foreign currencies, the largest constituent of Indian forex reserves, are held in the form of treasury and institutional bonds.
- Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units such as the euro, pound sterling and Japanese yen held in the forex reserves
Reasons for the recent increase in forex reserves:
- Sustained foreign direct investment (FDI) and foreign portfolio investor (FPI) inflows had led to the gains in forex reserves in the past few weeks
- RBI’s forex intervention
  - It is motivated by concerns about currency movements
  - RBI does not want the rupee to appreciate as that makes exports uncompetitive.
  - Hence it intervenes in the forex market to buy dollars
Benefits of rising forex reserves:
- The rising forex reserves could bring some comfort to the government as well as the Reserve Bank in managing the nation’s external and internal financial issues at a time when the economy is facing Covid stress once again
- Brings confidence to markets that a country can meet its external obligations
- Demonstrates the backing of domestic currency by external assets
- Assist the government in meeting its foreign exchange needs and external debt obligations
- Maintain a reserve for national disasters or emergencies
- It is a big cushion in the event of any crisis on the economic front and enough to cover India’s import bill for a year
- An increase in the forex kitty could also help strengthen the rupee against the US dollar.

Depreciation of Indian Rupee

Context:
- Recently, the Indian Rupee hit a nine-month low of 75.4 against the US Dollar.
What are the reasons for the decline of the Rupee?
- The Rupee came under severe pressure in line with the sharp rise in Covid-19.
- As several states are now considering more stringent lockdown measures, market participants are concerned about delays in the recovery of the economy.
- Besides, the strengthening of the dollar in line with expectations of better growth in the US economy has also put pressure on the Rupee.
- RBI’s announcement of the Government Securities Acquisition Programme (G-SAP) program to infuse liquidity has also put additional pressure on the Rupee.
- This is being read as a sort of quantitative easing policy the global central banks had followed, in which the RBI will support the government’s elevated borrowing program through the infusion of liquidity.
- Another factor that is putting additional pressure is the dwindling support of the foreign portfolio investors, who pumped huge inflows into Indian equity markets between October and February.
Issues associated with the decline of the Rupee:
- It will be a cause of concern for importers or other individuals who have planned expenditure in foreign currency.
- As imports become expensive, there are risks of inflation.

Atmanirbhar Bharat 3.0

Context:
- Centre rolls out ₹1.19 lakh-crore stimulus package for Atmanirbhar Bharat 3.0
Key highlights:

Atmanirbhar Bharat Rozgar Yojana

Context:
- The government on Thursday announced an employment incentive scheme, Atmanirbhar Bharat Rozgar Yojana, under which it will provide subsidy for provident fund contribution for adding new employees to establishments registered with the Employees’ Provident Fund Organisation (EPFO).
About the scheme:
- Under the scheme, the central government will pay PF contribution for workers with wages up to Rs 15,000.
- The contribution of 24 percent for both employers and employees for establishments employing up to 1,000 employees will be borne by the Centre and
- For establishments employing more than 1,000 employees, 12 percent of the employees’ share will be contributed by the government.
- The additional eligibility condition for the scheme specifies that the subsidy will be provided for the employment of two new employees if the establishment has 50 or fewer employees and will be paid for five new employees if establishments have more than 50 employees.
- The reference base for employees would be September 2020. The subsidy amount under the scheme, which will be operational till June 30, 2021, will be credited upfront only in the Aadhaar-seeded EPFO accounts (UAN) of new employees.

National Monetisation Pipeline

Context:
- The government’s proposing to monetize assets and proposes the idea of an independent commission to carry out the task of monetization.
About National Monetisation Pipeline:
- Finance Minister had introduced a roadmap for monetization of assets in the Union Budget.
- In the budget, the government proposed to launch a ‘National Monetisation Pipeline’ to assess the potential value of underutilized and unused government assets.
- A number of countries including the United States, Australia, Canada, France, and China have effectively utilized this policy.
- In India too, the concept was suggested by a committee led by Vijay Kelkar on the roadmap for fiscal consolidation in 2012.
- The committee had suggested that the government start monetization as a key instrument to raise resources for development.
- It asked the government to use these resources for financing infrastructure needs.
Why monetization?
- The global pandemic forced the government to increase spending.
- Thus, the total expenditure of the government has jumped to ₹34.50 trillion against the target of ₹30.42 trillion.
- On the flip side, the revenue of the government is shrinking.
- As a result, total borrowing has increased by 2.3 times, from ₹7.96 trillion to ₹18.49 trillion.
- An increase in borrowing also increases interest costs.
- The ratio of interest payment to revenue receipts was 36.3% in 2019-20.
- As per revised data, it has increased to 44.5% in the current fiscal year and is projected at an all-time high of 45.3% in 2021-22.
- Almost half of the revenue is going towards servicing old debts. To revive the economy, capital expenditure is indispensable.
Background:
- Against this backdrop, the government has already launched the National Infrastructure Pipeline (NIP), with 6,835 projects in December 2019.
- The project pipeline has been increased to 7,400.
- The NIP has its own specific target and the government is committed to achieving it in the coming years.
- It called for a major increase in funding.
- For 2021-22, the government has proposed to spend ₹5.54 trillion, which is 34.5% higher than the budgeted amount of 2020-21.
- Now, the government found that monetization of government- and public sector-owned assets would be an important financing option for new infrastructure construction.
Model for monetization of asset: REITs
- The government is looking at the Real Estate Investment Trusts (REITs) model for the monetization of assets.
- Under REITs, the land assets are transferred to a trust providing investment opportunities for institutional investors.
- The government has another option to lease or rent out the assets instead of going for monetization.
- The government expects monetization will generate ₹2.5 trillion in non-debt capital revenue.
- The objective of asset monetization is to raise resources for future investment into the sector.
- A pipeline monetization plan for Indian Oil, GAIL, and Hindustan Petroleum have been drawn up by the government.
- It is expected that the government will raise ₹0.17 trillion by selling stakes in these three companies.

Vivad se Vishwas

Context:
- Disputes worth Rs 97,000 crore have opted for resolution under the direct tax dispute resolution scheme Vivad se Vishwas.
- In terms of the number of cases, about a quarter of over 5.10 lakh tax disputes have opted for settlement under the scheme
About the scheme:
- The scheme provides for settlement of disputed tax, disputed interest, disputed penalty, or disputed fees about an assessment or reassessment order on payment of 100% of the disputed tax
- The Budget has now announced the setting up of the Dispute Resolution Committee (DRC) announced, which will take the Vivad se Vishwas Scheme further
- Under DRC, the further impetus is to be provided to resolve the litigations in the best interest of the small taxpayers in a Tax Lok Adalat format which would bring transparency and accountability in a faceless manner
- The taxpayer is granted immunity from levy of interest, penalty, and institution of any proceeding for prosecution for any offense under the Income Tax Act in respect of matters covered in the declaration.
- Vivad se Vishwas Scheme has received 15 times the response as against the responses received under the earlier Direct Tax Dispute Resolution Scheme, 2016 (DTDRS).

Business Responsibility and Sustainability Report

Context:

Recently, SEBI Introduced disclosure requirements under business responsibility and sustainability reporting, covering environmental, social, and governance perspectives.
The new report — Business Responsibility and Sustainability Report (BRSR)– will replace the existing Business Responsibility Report (BRR).

About:
- It will apply to the top 1,000 listed entities by market capitalization.
- Such entities need to disclose an overview of the entity's material ESG (environmental, social, and governance) risks and opportunities, approach to mitigate or adapt to the risks
- Environment-related disclosures cover aspects such as resource usage (energy and water), air pollutant emissions, green-house (GHG) emissions, transitioning to the circular economy, waste generated and waste management practices, bio-diversity.
- Social-related disclosures would cover the workforce, value chain, communities, and consumers.
- The move is expected to bring in greater transparency and enable market participants to identify and assess sustainability-related risks and opportunities.

New policy for central public sector enterprises (CPSEs)

Context:
- Finance Minister Nirmala Sitharaman, in her Budget speech for 2021-22, announced a new policy for central public sector enterprises (CPSEs), which she said will serve as a clear roadmap for disinvestment of government-owned firms across sectors.
About:
- The new public sector enterprises policy envisages that the strategic sectors have a limited number of players restricting it to a maximum of four public sector enterprises of the holding nature
- The strategic sectors are atomic energy, space and defense, transport and telecommunications, power, petroleum, coal and other minerals, and lastly, banking, insurance, and financial services.
- The remaining enterprises will be rationalized in terms of mergers, amalgamations, and privatization if feasible.
- The policy’s objective is to minimize the public sector’s role and create new investment space for the private sector, in the hope that the infusion of private capital, technology, and management practices will contribute to the growth and new jobs.
- The proceeds from the sale of these firms would finance various government-run social sector and developmental programs.

Borrowing by state governments

Context:
- The Finance Ministry has permitted additional borrowings of Rs 1.06 lakh crore as of March-end to those states which have carried out some key institutional reforms.
- Last October, the Central government had linked permission for additional borrowing of 1% of their GSDP (Gross State Domestic Product) to the implementation of four critical reforms.
About:

Article 293(3) of the Constitution requires states to obtain the Centre’s consent to borrow in case the state is indebted to the Centre over a previous loan.
This consent can also be granted subject to certain conditions under Article 293(4).
In practice, the Centre has been exercising this power following the recommendations of the Finance Commission.
Every single state is currently indebted to the Centre and thus, all of them require the Centre’s consent to borrow.
In the Aatmanirbhar economic stimulus package announced last May, the Central government announced support measures for states allowing them to raise their borrowing limit to 5% of the GSDP from 3%.
However, the Centre had attached conditions for the increased borrowing space.

Initial Public Offer (IPO)

Context:
- The Central government has started the process to launch the Initial Public Offer (IPO) of Life Insurance Corporation (LIC).
About LIC:
- It is an Indian government-owned insurance and investment corporation.
- It is under the ownership of the Ministry of Finance, Government of India.
- It was set up in 1956.
- It has the biggest share in India’s insurance business.
- The LIC IPO is expected to be the biggest in the Indian capital markets given the size and scale of LIC.
What is IPO?
- Generally, when companies wish to raise funds to fuel their growth, they sell a part of their stock on the stock market.
- This process is called an initial public offering, or IPO.
- So it is the selling of securities to the public in the primary market (a type of capital market).
- The primary market deals with new securities being issued for the first time. It is also known as the new issues market.
- It is different from the secondary market where existing securities are bought and sold. It is also known as the stock market or stock exchange.
- Under IPO, an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public.
- Through an IPO, an unlisted company can get listed on the stock exchange.
IPO grey market:
- IPO grey market is an unofficial market where IPO shares or applications are bought and sold before they become available for trading on the stock market.
- It is also termed a parallel market or an over-the-counter market
- Since it’s unofficial, inevitably, there are no regulations that govern it.

Emergency Credit Line Guarantee Scheme (ECLGS) 4.0

Context: Due to the second wave of the Coronavirus pandemic, the Centre recently expanded the scope of the Emergency Credit Line Guarantee Scheme (now known as ECLGS 4.0).

More about the ECLGS 4.0

The government has expanded the Rs 3-trillion Emergency Credit Line Guarantee Scheme to help businesses affected by the second wave of the Covid-19 pandemic (ECLGS).
It also included loans to hospitals and the civil aviation sector for on-site oxygen-producing plants.
The Centre has also increased the loan outstanding ceiling to Rs 500 crore. The maximum amount of additional loans they can take under the programme is 40 percent of their outstanding debt, or Rs 200 crore, whichever is less.
ECLGS 1.0 loans will be eligible for up to 10% additional assistance, bringing the total guaranteed loan to 30% of the outstanding amount by February 29, 2020.
The 100% guarantee cover for installing oxygen plants in hospitals, nursing homes, clinics, and medical institutes will be available for loans up to Rs 2 crore with a 7.5 percent interest rate maximum.

Significance of this move

By providing additional support to MSMEs, protecting livelihoods, and allowing a smooth return to business, it would boost the utility and effect of ECLGS.
These measures will make it easier for institutions to obtain finance at reasonable rates.
The Emergency Credit Line Guarantee Scheme was announced in 2020 as part of the Centre's Atma Nirbhar package to help micro, small, and medium enterprises (MSMEs) cope with the economic hardship caused by the COVID-19 pandemic by providing them with additional funding in the form of a fully guaranteed emergency credit line of up to Rs 3 lakh crore.

Consumer Confidence Survey

Context:
- RBI’s latest Consumer Confidence Survey shows the public assessment of the current situation at its lowest, and expectations low.
About:
- The RBI conducts this survey every couple of months by asking households in 13 major cities about their current perceptions and future expectations on a variety of economic variables.
- These variables include the general economic situation, employment scenario, overall price situation, own income, and spending levels.
- Based on these specific responses, the RBI constructs two indices: the Current Situation Index (CSI) and the Future Expectations Index (FEI).
- The CSI maps how people view their current situation (on income, employment, etc.) vis a vis a year ago. The FEI maps how people expect the situation to be (on the same variables) a year from now.
- By looking at the two variables as well as their past performance, one can learn a lot about how Indians have seen themselves fairing over the years.

Status of the economy

Context:
- In 2021, the rapid spike in Covid numbers coupled with reports of vaccine shortages could make things worse, especially for the poorer sections of the Indian economy.
GDP growth and base effect:
- Without the latest surge, the first half of the current financial year — that is, from April to September — was expected to register a “V-shaped” recovery.
- Because the GDP contracted by as much as 15% in the first half of the last financial year, the low base effect will ensure that the GDP growth rate looks very handsome in the first half of the current financial year.
- The low base effect is the tendency of a small absolute change from a low initial amount to be translated into a large percentage change.
- But, in terms of the absolute level of GDP (not its growth rate), India would not be adding as much.
Rising inequalities:
- The latest surge threatens not just the overall income levels but also its distribution.
- The past year saw a massive spike in income and wealth inequalities.
- While millions are expected to be pushed below the poverty line, the fortunes of the biggest companies and the richest Indians have soared.
- The latest Forbes annual list of billionaires found that India has the world’s third-highest number of billionaires.
Government’s approach to alleviating the economic stress:
- Indian government’s approach has been to incentivize the private sector to invest more.
- In India, not only is the direct fiscal expenditure much smaller but also the middle class and below cohort is also the one which is worst affected by rising inflation and poor purchasing power, thanks to high indirect taxes such as on fuel.
- With sustained policy support as shown in the latest credit policy review by the RBI and a faster rollout of vaccines, India can dodge the possibility of 2021 becoming a repeat of 2020.

15th Finance Commission report

Context:
- The Central Government has accepted several key recommendations issued by the 15th Finance Commission
- The Finance Commission’s report was submitted to the President on November 9, 2020
Key recommendations:
- 41% of the taxes collected by the Centre be shared with the states, compared to the present 42%
- The Commission felt that financial resources equivalent to 1% of the net proceeds of Union taxes should be retained with the Central Government for financing the requirements of the newly formed Union Territories of Jammu & Kashmir and Ladakh.
- Recommended to rationalize the number of Centrally Sponsored Schemes
- Creating non-lapsable defense fund – the Modernisation Fund for Defence and Internal Security
- It has recommended post-devolution revenue deficit grants amounting to about Rs. 3 trillion over the five years ending FY26.
- The Commission has recommended a grant of Rs 7,375 crore for nutrition in 2020-21.

Forecasts about Indian Economy

Context:
- Various global forecasting agencies like Oxford Economics, Moody's have released forecasts about the performance of the Indian Economy in the upcoming years.
Oxford Economics:
- Global forecasting firm Oxford Economics
- revised downwards its India growth forecast over the medium term to an average 4.5% over 2020-25, from its pre-pandemic projection of 6.5%.
- In a research note, it said India’s post-COVID-19 scars could be among the worst in the world.
- It said an adequate and well-designed fiscal stimulus would halve this impact by limiting deterioration in pre-COVID-19 headwinds.
- It also noted that” It’s likely that headwinds already hampering growth prior to 2020 — such as stressed corporate balance sheets, elevated non-performing assets of banks, the fallout in non-bank financial companies (NBFCs), and labour market weakness — will worsen”
Moody's:
- Moody’s Investors Service has revised its GDP projection for India in 2020-21 to a 10.6% contraction compared with an 11.5% drop it had estimated. The rating agency also marginally raised its forecast for 2021-22 GDP growth to 10.8%, from 10.6%.
- It termed the Centre’s November 12 package of stimulus measures ‘credit positive.’
- It expects India’s growth to reach 10.8% in fiscal 2021 [ending March 2022], and to settle around 6% in the medium term.

'V-shaped' economic recovery

Context:
- The Economic Survey 2020-21 has predicted a 'V-shaped' economic recovery for India and estimated FY22 GDP growth at 11%.
About:
- In a V-shaped recession, the economy suffers a sharp but brief period of economic decline with a clearly defined trough, followed by a strong recovery.
- V-shapes are the normal shape for a recession, as the strength of the economic recovery is typically closely related to the severity of the preceding recession.

K-shaped recovery

Context:
- Chief India Economist at JP Morgan, states the prospects of a K-shaped recovery from COVID are increasing both in India and across the world.
About:

Insolvency and Tax:

Insolvency process

Context:
- The National Company Law Tribunal (NCLT) has allowed the initiation of insolvency proceedings against Anil Ambani after two companies promoted by him failed to pay dues on Rs 1,200 crore that they had borrowed from the State Bank of India (SBI).
- The insolvency process will be initiated against Ambani as he had given a personal guarantee against the loans provided to his firms.
Personal insolvency:
- The case is significant as it is one of the first cases of insolvency against a major business group head.
- The rules for initiation of personal insolvency were notified last year in December.
What is the process for personal insolvency?
- As the NCLT has allowed the appointment of an interim resolution professional (IRP) in the matter, SBI will now approach the IRP with a list of the assets provided by Ambani as a personal guarantee when his companies had sought the loan.
- In the case of banks providing loans against the personal guarantee, the guarantor has to furnish a list of assets whose value is equivalent to the total amount of loan being given.
- In case of failure to pay these assets, these guarantees can be invoked.
What happens to Anil Ambani after the insolvency process is over?
- Like corporate insolvency processes, a businessperson is free to start with a clean slate after a personal insolvency case against them is over.
- The lenders will be eligible to recover their dues only from the collateral deposited or personal assets belonging to that person.
- However, any or all assets mentioned in the list provided at the time of sanctioning of the loan, even if transferred to someone else, can also be attached and sold.
- Ambani will be free to run other businesses that are not under insolvency, or which are able to service their debts and obligations on time.

Section 32 A of the Insolvency and Bankruptcy Code (IBC)

Context:
- In a recent judgment, SC upholds IBC’s Section 32A
What is section 32A?
- Section 32A provides immunity to the corporate debtor and its property when there is the approval of the resolution plan resulting in the change of management of control of the corporate debtor.
- This is subject to the successful resolution applicant being not involved in the commission of the offense.
About the judgment:
- The Supreme Court held that the successful bidders for a corporate debtor under the Insolvency and Bankruptcy Code (IBC) would be immune from any investigations being conducted either by any investigating agencies such as the Enforcement Directorate (ED) or other statutory bodies such as Securities and Exchange Board of India (SEBI).
- The court also said it was important for the IBC to attract bidders who would offer reasonable and fair value for the corporate debtor to ensure the timely completion of the corporate insolvency resolution process (CIRP).
- Such bidders, however, must also be granted protection from any misdeeds of the past since they had nothing to do with it.
- Such protection, the court said, must also extend to the assets of a corporate debtor, which form a crucial attraction for potential bidders and helps them in assessing and placing a fair bid for the company, which, in turn, will help banks clean up their books of bad loans.

Non-performing asset (NPA)

Context:
- After losses in two consecutive years, India’s scheduled commercial banks turned profitable in 2019-20.
About:
- Reserve Bank of India defines NPA as any advance or loan that is overdue for more than 90 days.
- “An asset becomes non-performing when it ceases to generate income for the bank,” said RBI in a circular form 2007.
When were NPAs at dangerously high levels?
- In March 2018, bad loans peaked at over ₹10 lakh crore — around 11.5% of all loans.
- What former Chief Economic Adviser Arvind Subramanian had called India’s ‘twin balance sheet problem’ in the Economic Survey for 2016-17, had sent banks down a slippery slope, beset by dangerously high levels of non-performing assets.
- A large part of the problem started in the latter half of the 2010s, as assumptions of persistently high economic growth made several large corporates overzealous in their investment ambitions, thus over-leveraging themselves in the process.
- And lenders, led by public sector banks, fuelled these plans through easy money on credit.
- The problem was particularly acute in the infrastructure sector, where high-stakes bets on several projects unravelled as growth (and demand) fizzled out following the global financial crisis of 2008.
- The stress from stretched corporate balance sheets infected banks’ own books and underwhelmed their capacity for fresh lending.
- This vicious cycle was interrupted to an extent by the IBC, which, along with tighter recognition norms for bad loans, helped correct the course over time.

Present status:
- “Given the uncertainty induced by COVID-19 and its real economic impact, the asset quality of the banking system may deteriorate sharply, going forward,” the RBI report stated.
- Had the central bank’s normal loan classification norms been followed instead of the COVID-19 relief measures, bad loans would have been higher, the RBI has argued.
- RBI also warned about large-scale loan defaults looming over housing finance companies, which have been hit by delays in the completion of housing projects, cost overruns due to reverse migration of labourers, and delayed investments by buyers in the affordable housing sector as incomes shrank and jobs were lost.

Insolvency resolution option for MSMEs

Context:
- The central government has promulgated an ordinance allowing the use of pre-packs as an insolvency resolution mechanism for Micro, Small, and Medium Enterprises (MSMEs) with defaults up to Rs 1 crore, under the Insolvency and Bankruptcy Code.
What are pre-packs?
- A pre-pack is the resolution of the debt of a distressed company through an agreement between secured creditors and investors instead of a public bidding process.
- Later, they seek approval of the resolution plan from the National Company Law Tribunal (NCLT)
- The approval of a minimum of 66% of financial creditors that are unrelated to the corporate debtor would be required before a resolution plan is submitted to the NCLT.
What are the benefits of pre-packs over the Corporate Insolvency Resolution Process (CIRP)?
- One of the key criticisms of the CIRP has been delays caused by prolonged litigations.
- The pre-pack in contrast is limited to a maximum of 120 days with only 90 days available to the stakeholders to bring the resolution plan to the NCLT.
- Another key difference is that the existing management retains control in the case of pre-packs while a resolution professional takes control of the debtor as a representative of financial creditors in the case of CIRP.
- This allows for minimal disruption of operations relative to a CIRP.
- The pre-pack mechanism allows for a swiss challenge for any resolution plans which proved less than full recovery of dues for operational creditors.
- Under the swiss challenge mechanism, any third party would be permitted to submit a resolution plan for the distressed company and the original applicant would have to either match the improved resolution plan or forego the investment.
- Thus it is ensured the provisions were not misused by errant promoters.

Bad Loans

Context:
- The Indian Banks’ Association (IBA) has begun identifying bad loans which can be transferred to the Centre’s proposed bad bank.
What’s a bad bank and how does it work?
- Technically, a bad bank is an asset reconstruction company (ARC) or an asset management company that takes over the bad loans of commercial banks, manages them, and finally recovers the money over a period of time.
- The bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans in
- The takeover of bad loans is normally below the book value of the loan (provides a certain margin to ARC).
- The bad bank subsequently tries to recover as much as possible using its expertise in stressed asset resolution.

The idea of Bad Bank:
Utility of Bad Bank:
Working of Bad Bank:
Support of Government:
- The bad bank concept is in some ways similar to an ARC but is funded by the government initially, with banks and other investors co-investing in due course.
- The presence of the government is seen as a means to speed up the clean-up process.
- US-based Mellon Bank created the first bad bank in 1988.

What has been the stand of the RBI with regard to resolving stressed loans?
- The first is a private asset management company (PAMC), which is said to be suitable for stressed sectors where the assets are likely to have an economic value in the short run, with moderate levels of debt forgiveness.
- The second model is the National Asset Management Company (NAMC), which would be necessary for sectors where the problem is not just one of excess capacity but possibly also of economically unviable assets in the short to medium terms.

Viral Acharya, when he was the RBI Deputy Governor, had said it would be better to limit the objective of these asset management companies to the orderly resolution of stressed assets, followed by a graceful exit.
Acharya suggested two models solve the problem of stressed assets.
While the RBI did not show much enthusiasm about a bad bank all these years, there are signs that it can look at the idea now. Recently, Governor Das indicated that the RBI can consider the idea of a bad bank.

Pre-packs

Context:
- The government is likely to amend the Insolvency and Bankruptcy Code (IBC) to introduce pre-packs as a resolution mechanism.
About pre-pack:
- A pre-pack is an agreement for a distressed company’s debt resolution between secured creditors and investors instead of a public bidding process, as under the Corporate Insolvency Resolution Process (CIRP) of the IBC.
- The mechanism that will need to be initiated after approval by the National Company Law Tribunal (NCLT) will allow 90 days for creditors to agree with a potential bidder and a further 30 days for approval by the NCLT
Benefits of pre-pack:
- Non-adherence of prescribed timelines under the IBC is a key criticism that the government is seeking to address through the inclusion of pre-packs under the IBC, with 1,442 of a total 1,942 ongoing insolvency proceedings having passed the 270-day mark.
- The inclusion of pre-packs should certainly help in expediting the insolvency resolution, which has significantly exceeded prescribed timelines in many cases under the CIRP
- Pre-packs may also offer an alternative for creditors to initiate insolvency proceedings as the government has suspended initiation of fresh cases for any defaults occurring post-March 24.
Criticism of pre-pack:
- Experts noted that the process is relatively opaque, compared to the CIRP – under which any eligible party is permitted to place a bid that is considered by a Committee of Creditors (CoC).
Sahoo committee recommendations:
- The Corporate Affairs Ministry, last year, formed a committee led by MS Sahoo, chairperson of the Insolvency and Bankruptcy Board of India, to look into including pre-packs as a resolution mechanism under the IBC.
- The Sahoo Committee report has recommended that all pre-pack agreements in which operational creditors are set to receive less than a full recovery be open to a Swiss challenge, under which any eligible third party would be permitted to offer an improved bid.
- The initial bidder would, in such cases, have the option to match the improved bid to get approval for the pre-packaged agreement.
- In cases where operational creditors are set to receive 100% recovery, however, the decision on whether to open the agreement to a swiss challenge will be left to the CoC, which would comprise financial creditors as in the case of the CIRP.
- The inclusion of the swiss challenge was likely aimed at preventing future litigation from operational creditors, who receive marginal recoveries under the insolvency resolution process.

Prompt Corrective Action Framework

Context:
- The Reserve Bank of India has taken IDBI Bank Ltd out of its prompt corrective action list after it found the state-run lender was not in breach of the central bank's parameters.
Background:
- IDBI Bank was placed under the so-called PCA framework in 2017 over its high bad loans and a negative return on assets, at a time when Indian lenders battled record levels of soured assets, prompting the RBI to tighten thresholds.
- Now, the bank has provided a written commitment that it would comply with the norms of minimum regulatory capital, Net NPA, and Leverage ratio on an ongoing basis and has apprised the RBI of the structural and systemic improvements that it has put in place which would help the bank in continuing to meet these commitments.
What is Prompt Corrective Action (PCA)?
- PCA is a framework under which banks with weak financial metrics are put under watch by the RBI.
- The RBI introduced the PCA framework in 2002 as a structured early-intervention mechanism for banks that become undercapitalised due to poor asset quality, or vulnerable due to loss of profitability.
- It aims to check the problem of Non-Performing Assets (NPAs) in the Indian banking sector.
- The framework was reviewed in 2017 based on the recommendations of the working group of the Financial Stability and Development Council on Resolution Regimes for Financial Institutions in India and the Financial Sector Legislative Reforms Commission.
When is the Prompt corrective action framework invoked?
- The PCA is invoked when certain risk thresholds are breached. There are three risk thresholds which are based on certain levels of asset quality, profitability, capital, and the like.
What are the types of restrictions?
- There are two types of restrictions, mandatory and discretionary. Restrictions on dividend, branch expansion, directors compensation, are mandatory while discretionary restrictions could include curbs on lending and deposit.
What will a bank do if PCA is triggered?
- Banks are not allowed to renew or access costly deposits or take steps to increase their fee-based income.
- Banks will also have to launch a special drive to reduce the stock of NPAs and contain the generation of fresh NPAs.
- They will also not be allowed to enter into new lines of business. RBI will also impose restrictions on the bank on borrowings from the interbank market.

Pre-packs under the present insolvency regime

Context:
- The Ministry of Corporate Affairs (MCA) has set up a committee to look into the possibility of including what is called “pre-packs” under the current insolvency regime to offer faster insolvency resolution under the Insolvency and Bankruptcy Code (IBC).
So, what is a pre-pack?
- Also called pre-packaged insolvency, It is an agreement for the resolution of the debt of a distressed company.
- It is done through an agreement between secured creditors and investors instead of a public bidding process.
- The process needs to be completed within 90 days so that all stakeholders retain faith in the system.
Benefits of a pre-pack:
1. Faster: This process would likely be completed much faster than the traditional Corporate Insolvency Resolution Process (CIRP) which requires that the creditors of the distressed company allow for an open auction for qualified investors to bid for the distressed company.
2. It would act as an important alternative resolution mechanism to the CIRP and would help lower the burden on the National Company Law Tribunal (NCLT).
3. In the case of pre-packs, the incumbent management retains control of the company until a final agreement is reached. This is necessary because Transfer of control from the incumbent management to an insolvency professional as is the case in the CIRP leads to disruptions in the business and loss of some high-quality human resources and asset value.
4. Also, a financially distressed company can continue its operations during the period leading to a formal default, and even thereafter, without the resultant reputational risks, business disruptions, or value erosion.
What are some of the drawbacks of pre-pack?
- Reduced transparency compared to the CIRP as financial creditors would reach an agreement with potential investors privately and not through an open bidding process.
- This could lead to stakeholders such as operational creditors raising issues of fair treatment when financial creditors reach agreements to reduce the liabilities of the distressed company.
- Unlike in the case of a full-fledged CIRP which allows for price discovery, in the case of a pre-pack, the NCLT would only be able to evaluate a resolution plan based on submissions by the creditors and the investor.
Do we need pre-packs?
- Yes. It is because slow progress in the resolution of distressed companies has been one of the key issues raised by creditors regarding the CIRP under the IBC.
- 738 of 2,170 ongoing insolvency resolution processes have already taken more than 270 days at the end of March.
- Under the IBC, stakeholders are required to complete the CIRP within 330 days of the initiation of insolvency proceedings.

Transparent Taxation – Honoring the Honest

Context:
- It is a new platform launched recently by PM Modi to further digitise the Income Tax Department’s functioning.
- The platform seeks to “reform and simplify our tax system.”
Key features of the platform:
- The platform has major reforms like faceless assessment, faceless appeal, and taxpayers charter.
- Faceless assessment and taxpayers charter has come into force. However, the facility of faceless appeal will be available from September 25.
Need for such initiatives:
- The number of taxpayers is significantly low with only 1.5 Crore paying taxes in a country of 130 Crore people.
- Therefore, it's time for people to introspect and come forward to pay Income taxes due on them to build an AtmaNirbharBharat.
- Besides, the country’s tax structure needed fundamental reforms as the earlier tax structure was developed from the one created during pre-independent times.
- Even the several changes made during the post-independent times did not alter its fundamental character. Thus, the complexity of the earlier system made it difficult to confirm.
Significance of the platform:
- Honest taxpayers of the country play a big role in nation-building. When the life of an honest taxpayer becomes easy then the country also develops.
- Therefore, the tax system should be seamless, painless, and faceless.
- The new facilities launched are a part of the Government’s resolve to provide maximum governance with minimum government.
Recent tax reforms:
1. The latest laws reduced the legal burden in the tax system where now the limit of filing cases in the High Court has been fixed at up to 1 crore rupees and up to 2 crores for filing in the Supreme Court.
2. Initiatives like the 'Vivaad Se Vishwas' Scheme pave the way for most of the cases to be settled out of court.
3. The tax slabs have also been rationalised as a part of the ongoing reforms where there is zero tax up to an income of 5 lakh rupees, while the tax rate has been reduced in the remaining slabs too.

Participatory Notes

Context:
- Investments through participatory notes (P-notes) in the domestic capital market soared to Rs 63,288 crore till July-end, making it the fourth consecutive monthly rise.
- Of the total money invested through the route till July, Rs 52,356 crore was invested in equities, Rs 10,429 crore in debt, Rs 250 crore in the hybrid securities, and Rs 190 crore in the derivatives segment.
What are Participatory Notes?
- Participatory Notes or P-Notes (PNs) are financial instruments issued by a registered foreign institutional investor (FII) to an overseas investor who wishes to invest in Indian stock markets without registering themselves with the market regulator, the Securities and Exchange Board of India (SEBI).
Key points:
- P-Notes are Offshore Derivative Investments (ODIs) with equity shares or debt securities as underlying assets.
- They provide liquidity to the investors as they can transfer the ownership by endorsement and delivery.
- While the FIIs have to report all such investments each quarter to SEBI, they need not disclose the identity of the actual investors.
What are the govt & regulator’s concerns?
- The primary reason why P-Notes are worrying is because of the anonymous nature of the instrument as these investors could be beyond the reach of Indian regulators.
- Further, there is a view that it is being used in money laundering with wealthy Indians, like the promoters of companies, using it to bring back unaccounted funds and to manipulate their stock prices.

Sin goods and sin tax

Context:
- Finance Minister recently said that two-wheelers are neither a luxury nor sin goods and so, merit a GST rate revision.
- Two-wheelers currently attract 28% GST.
Sin goods:
- Sin goods are goods which consider harmful to society.
- Examples of sin goods: Alcohol and Tobacco, Candies, Drugs, Soft drinks, Fast foods, Coffee, Sugar, Gambling and Pornography.
What is the sin tax?
- It is placed on goods that adversely affect health, most notably tobacco and alcohol.
- Three principal arguments are used to justify this type of taxation:
  1. It can reduce consumption through increased prices.
  2. Compensate society for things like increased health system costs.
  3. Increase resources for the health sector.
Regulation in India:
- According to the current GST rate structure, some of the sin goods that attract a cess include cigarettes, pan masala and aerated drinks. Apart from sin goods, luxury products like cars also attract cess.
Global examples:
- Countries such as the UK, Sweden and Canada impose Sin Taxes on a series of products and services, from tobacco and alcohol to lotteries, gambling and fuel, which chip in with sizeable revenues.
- Mexico imposed a Soda Tax in 2013.
Why is it important?
- That excessive consumption of tobacco, alcohol or empty calories heightens health risks such as cancer, heart conditions and obesity, is quite well-documented by now.
- Evidence from other countries that have imposed Sin Taxes shows the consumption of cigarettes and soft drinks has fallen significantly, after the new tax.
- The huge revenues many State governments in India rake in from liquor sales (and taxes) show that Sin Taxes can mean a bonanza for the State.

Retrospective taxation

Context:
- India has been ordered to return up to $1.4 billion to Cairn Energy PLC of the U.K. after an international arbitration overturned tax demanded retrospectively.
- India has challenged the Permanent Court of Arbitration's verdict in favor of British telecom giant Vodafone Group in a case involving a Rs 20,000 crore demand from the Indian income tax authorities, in Singapore.
2012 amendment:
- I-T Act was amended in 2012 with retrospective effect making offshore deals taxable in India.
- It allowed the country to retrospectively tax cross-border transactions in which the underlying assets are located in India.
- Under the amendment, all persons, whether resident or non-residents, having a business connection in India, will be required to deduct tax at source and pay it to the government even if the transaction is executed on foreign soil.
Case of Cairn Energy:
- In 2011, Cairn Energy sold its majority stake in Cairn India to Vedanta Ltd, reducing its stake in the Indian company to about 10 percent.
- In 2014, the Indian tax department had demanded Rs 10,247 crore ($1.4 billion) in taxes.
- Cairn had challenged the Indian government seeking taxes over an internal business reorganization using the 2012 retrospective tax law, under the UK-India Bilateral Investment Treaty.
- Cairn's claim was brought under the terms of the UK-India Bilateral Investment Treaty, the legal seat of the tribunal was the Netherlands, and the proceedings were under the registry of the Permanent Court of Arbitration.
- The three-member tribunal, which also comprised a nominee of the Indian government, unanimously ruled that India’s claim of ₹10,247 crore in past taxes over a 2006-07 internal reorganization of Cairn’s India business was not a valid demand.
- India “failed to accord Cairn Energy’s investments fair and equitable treatment” under the bilateral investment protection pact it had with the U.K., it said in a 582-page order.
Case of Vodafone:
- After the 2012 amendment, the onus to pay the taxes fell back on Vodafone.
- Later, Vodafone Group invoked Clause 9 of the Bilateral Investment Treaty (BIT) signed between India and the Netherlands in 1995.
- PCA at The Hague had ruled that:
  - India’s retrospective demand of Rs 22,100 crore as capital gains and withholding tax imposed on Vodafone for a 2007 deal was “in breach of the guarantee of fair and equitable treatment”.
  - India should not pursue the tax demand anymore against Vodafone Group.
What is the Bilateral Investment Treaty?
- The BIT was signed for the promotion and protection of investment by companies of each country in the other’s jurisdiction.
- The two countries would, under the BIT, ensure that companies present in each other’s jurisdictions would be “at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other”.

Goods and Services Tax (GST)

Context:
- India marked the fourth anniversary of the Goods and Services Tax (GST) on July 1, 2021.
- The date 1st July has been designated by the Central Government as ‘GST Day’, which is celebrated every year to mark the roll-out of the historic tax reform.
Goods and Services Tax (GST):
- GST is an indirect, multi-level, comprehensive tax levied on the supply of goods and services in India.
- On roll-out, GST subsumed almost all other domestic indirect taxes in the country (petroleum, alcoholic beverages, and stamp duty being the major exceptions) under one head, and is perhaps the biggest tax reform in the history of independent India.
- The GST is levied at every stage of the production process but is collected from the point of consumption, refunding all parties eventually other than the end consumer.
Success of GST
- India’s tax base has almost doubled from 66.25 lakhs to 1.28 crores in the last four years.
- GST revenue collection in India has been over the Rs 1 lakh crore mark for eight consecutive months in a row with as much as Rs 102,702 crore collected in May alone.
- This could happen even when many states remain under strict Covid-19 disease-enforced lockdown
- It also eased the compliance burden on taxpayers.
- *Detailed Post on GST is available at Samajho Corner*(Click Here)

GST

Context:
- All 28 states and three Union Territories have now accepted option-1 of the borrowing scheme meant to raise money for compensating states for the shortfall in protected GST revenue.
- The government has introduced mandatory physical verification of business premises to obtain GST registration.
GST compensation:
- The Centre has estimated Rs 1.1 lakh crore as the GST shortfall for states this fiscal from the level of protected revenue guaranteed to them under the law.
- States are assured of a 14 percent year-on-year growth in GST revenue which is met by their own revenue and any resultant shortfall is compensated from cess funds.
- The GST Council had earlier amended the law to extend the tenure of the compensation fund which was to lapse in 2022 — five years since the launch of the indirect tax regime.
- Asserting that it is under no obligation to make good any shortfall in the GST and that it is up to the GST Council to devise a solution, the Union government has proposed that the States borrow directly from the market by issuing debt under a special window coordinated by the Ministry of Finance.
- Under the Option 1 borrowing plan, states will borrow the shortfall arising out of GST implementation, estimated at Rs 97,000 crores approximately, through the issue of debt under a special window coordinated by the Ministry of Finance.
- The main feature of Option 1 is that both the interest and the principal will be repaid by the Central government on behalf of the states from the compensation cess levied on sin goods.
- Further, special borrowing permission will be given by the Centre under Article 293 for this amount, over and above any other borrowing ceilings eligible under any other normal or special permission notified by the Department of Expenditure.
GST registration:
- Now there must be in-person verification before registration is granted to an applicant.
- Further, in case an applicant opts for Aadhaar authentication, he will undergo biometric-based Aadhaar authentication at one of the facilitation Centres notified by the Commissioner.
- The GST Council Secretariat said that the move, aimed at controlling the menace of GST fake invoice frauds, was recommended by the Council’s law committee.
- Over the past month, a nationwide drive against fake GST invoices has led to the arrest of 164 fraudsters, including five chartered accountants, and 1768 cases being filed against 5,745 GSTIN entities.
Input tax credit (ITC):
- It is the tax that a business pays on a purchase and that it can use to reduce its tax liability when it makes a sale.
- At the time of paying tax on output, you can reduce the tax you have already paid on inputs and pay the balance amount.
- A business under a composition scheme cannot avail of the input tax credit.
- ITC cannot be claimed for personal use or exempt goods.
- Central Board of Indirect Taxes and Customs (CBIC) has introduced Rule 86B in Goods and Services Tax (GST) rules which restricts the use of input tax credit (ITC) for discharging GST liability to 99 percent.
- As per the new rule, Businesses with a monthly turnover of over ₹50 lakh will have to mandatorily pay at least 1 percent of their GST liability in cash.
- The idea remains to prevent the mis-utilization of credit by businesses taking fake credits.

Lottery, gambling, betting taxable under GST Act

Context:
- Recently, the Supreme Court held that lottery, gambling, and betting are taxable under the Goods and Services Tax (GST) Act.
About the judgment:
- Lottery, betting, and gambling are “actionable claims” and come within the definition of ‘goods’ under Section 2(52) of the Central Goods and Services Tax Act, 2017.
- Levy of GST on lotteries does not amount to “hostile discrimination”.
- State regulation, including taxation in one or form, on lottery, betting, and gambling, has been in existence for decades.
- Parliament had the absolute power to go for an “inclusive definition” of the term ‘goods’ to include actionable claims like the lottery, gambling, and betting.
- The power to make laws as conferred by Article 246A fully empowers the Parliament to make laws concerning goods and services tax and the expansive definition of goods given in Section 2(52) cannot be said to be not in accord with the constitutional provisions.
- The court accepted the government’s stand that the Parliament has the competence to levy GST on lotteries under Article 246A of the Constitution.
- Besides, the court said Section 2(52) of the GST Act was in line with the Constitution Bench judgment of the Supreme Court in the Sunrise Associates case, which had held that “the sale of a lottery ticket amounts to the transfer of an actionable claim”.

Sections 69 and 132 of the Central Goods and Service Tax (CGST) Act

Context:
- The Delhi High Court has upheld the controversial provisions in the Central Goods and Service Tax (CGST) Act that gives power to authorities to arrest any person if there is “reason to believe” that he has committed tax evasion.
About:
- The petitioners claimed that Section 69 being of criminal nature, could not have been enacted under Article 246A of the Constitution.
- However, the High Court ruled “…the pith and substance of the CGST Act are on a topic, upon which Parliament has the power to legislate as the power to arrest and prosecute are ancillary and/or incidental to the power to levy and collect Goods and Services Tax”.
- It opined that both Sections 69 and 132 of the CGST Act are “constitutional and fall within the legislative competence of Parliament”.
- The court remarked that the scope of Article 246A is “significantly wide” as it not only empowers both Parliament and State Legislatures to levy or enact GST Act but also grants the power to make all laws concerning GST.

GST shortfall

Context:
- The Centre has presented two options before the states to bridge their goods and services tax (GST) revenue shortfall. They are:
  1. States borrow Rs 97,000 crore, which is the estimated shortfall, only “on account of GST” under a special window to be facilitated in consultation with the Reserve Bank of India (RBI) at a ‘reasonable G Sec-linked interest rate’.
  2. They borrow the entire Rs 2.35 lakh crore. There also, arrangements could be made with the RBI and certain facilities could be provided.
  3. The loans will be serviced via the proceeds of the relevant compensation cess, which will apply on the specified demerit goods for a year or more beyond the current end date of FY22.
What’s the issue?
- The GST Compensation Act, 2017 guaranteed States that they would be compensated for any loss of revenue in the first five years of GST implementation, until 2022, using a cess levied on sin and luxury goods.
- However, the economic slowdown has pushed both GST and cess collections down over the last year, resulting in a 40% gap last year between the compensation paid and cess collected.
- States are likely to face a GST revenue gap of ₹3 lakh crore this year, as the economy may contract due to COVID-19, which Finance Minister Nirmala Sitharaman termed an unforeseen “act of God”.
What is compensation cess?
- The modalities of the compensation cess were specified by the GST (Compensation to States) Act, 2017.
- This Act assumed that the GST revenue of each State would grow at 14% every year, from the amount collected in 2015- 16, through all taxes subsumed by the GST.
- A State that had collected tax less than this amount in any year would be compensated for the shortfall. The amount would be paid every two months based on provisional accounts and adjusted every year after the State’s accounts were audited by the Comptroller and Auditor General. This scheme is valid for five years, i.e., until June 2022.
Compensation cess fund:
- A compensation cess fund was created from which States would be paid for any shortfall. An additional cess would be imposed on certain items and this cess would be used to pay compensation.
- The items are panned masala, cigarettes and tobacco products, aerated water, caffeinated beverages, coal and certain passenger motor vehicles.
- The GST Act states that the cess collected and “such other amounts as may be recommended by the [GST] Council” would be credited to the fund.
Challenges ahead:
- Most economists expect negative real GDP growth this year, and nominal GDP to be close to last year’s level.
- As indirect taxes are levied on the nominal value of transactions, this is likely to result in a significant shortfall for States from the assured tax collection.
- A key source of the problem is that the 2017 Act guaranteed a tax growth rate of 14%, which is unachievable this year. Whereas no one could have foreseen the pandemic and its impact on the economy, the 14% target was too ambitious to start with.
What needs to be done?
- The Central government is constitutionally bound to compensate States for loss of revenue for five years.
There are several possible solutions to this issue:
- The Constitution could be amended to reduce the period of guarantee to three years (thus ending June 2020). This would be difficult to do as most States would be reluctant to agree to this proposal. It could also be seen as going back on the promise made to States when they agreed to subsume their taxes into the GST.
- The Central government could fund this shortfall from its own revenue. States would be happy with this proposal. However, the Centre’s finances are stretched due to a shortfall in its own tax collection combined with extra expenditure to manage the health and economic crisis. It may not be in a position to give further support to the States.
- The Centre could borrow on behalf of the cess fund. The tenure of the cess could be extended beyond five years until the cess collected is sufficient to pay off this debt and interest on it.
- The Centre could convince States that the 14% growth target was always unrealistic. The target should have been linked to nominal GDP growth. If the Centre can negotiate with States through the GST Council to reset the assured tax level, it could then bring in a Bill in Parliament to amend the 2017 Act.

GST Compensation

Context:
- After Puducherry, Congress-ruled Rajasthan last week became the latest Opposition-ruled state to opt for a special borrowing window for meeting its compensation shortfall under Goods and Services Tax (GST).
What is the special window for borrowing?
- The Finance Ministry had said last month that the Centre would borrow from the market and then act as an intermediary to arrange back-to-back loans to pay the GST compensation shortfall of Rs 1.1 lakh crore to state governments. This arrangement will not reflect in the fiscal deficit of the Centre, and will appear as capital receipts for state governments.
- In August, the Centre gave two options to the states — either borrow Rs 97,000 crore from a special window facilitated by the RBI or borrow Rs 2.35 lakh crore from the market. The options have since been revised to Rs 1.10 lakh crore and Rs 1.8 lakh crore, respectively.
What is GST compensation?
- Goods and Services Tax (Compensation to States) Act,2017 was enacted to levy Compensation cess for providing compensation to the States for the loss of revenue arising on account of implementation of the goods and services tax.
- The compensation cess on goods imported into India shall be levied and collected in accordance with the provisions of the Customs Tariff Act, 1975.
- Compensation Cess will not be charged on goods exported by an exporter under bond and the exporter will be eligible for a refund of an input tax credit of Compensation Cess relating to goods exported.
- The compensation cess is a cess that will be collected on the supply of select goods and or services or both till 1st July 2022.
GST Council:
- Goods & Services Tax Council is a constitutional body for making recommendations to the Union and State Government on issues related to Goods and Service Tax.
- It is chaired by the Union Finance Minister and other members are the Union State Minister of Revenue or Finance and Ministers in charge of Finance or Taxation of all the States.
- As per Article 279A (4), the Council will make recommendations to the Union and the States on important issues related to GST, like the goods and services that may be subjected or exempted from GST, model GST Laws, principles that govern Place of Supply, threshold limits, GST rates including the floor rates with bands, special rates for raising additional resources during natural calamities/disasters, special provisions for certain States, etc.

Cess

Context:
- The Centre retained in the Consolidated Fund of India (CFI) more than ₹1.1 lakh crore out of the almost ₹2.75 lakh crore collected in 2018-19 through various cesses, instead of transferring the receipts to the specified Reserve Funds that Parliament had approved for such levies, the Comptroller and Auditor General (CAG) of India observed in a report.
Key Points:
- ₹1,24,399 crore collected as cess on crude oil over the last decade had not been transferred to the designated Reserve Fund — the Oil Industry Development Board.
- The Goods and Services Tax (GST) Compensation Cess, which has become a bone of contention between the States and the Centre, was also ‘short-credited’ to the relevant reserve fund to the extent of ₹40,806 crores in 2018-19.
- It is a form of tax levied or collected by the government for the development or welfare of a particular service or sector.
- It is charged over and above direct and indirect taxes.
- Cess collected for a particular purpose cannot be used for or diverted to other purposes.
- It is not a permanent source of revenue for the government, and it is discontinued when the purpose of levying it is fulfilled.
Examples:
- Education Cess, Swachh Bharat Cess, Krishi Kalyan Cess, etc.
What is the difference between tax and cess? What is Cess tax?
- Cess is different from taxes such as income tax, GST, and excise duty, etc as it is charged over and above the existing taxes.
- While all taxes go to the Consolidated Fund of India (CFI), cess may initially go to the CFI but has to be used for the purpose for which it was collected.
- If the cess collected in a particular year goes unspent, it cannot be allocated for other purposes. The amount gets carried over to the next year and can only be used for the cause it was meant for.

Priority Sector Lending (PSL)

Context:
- The Reserve Bank of India has assigned priority sector lending (PSL) status to India’s startup sector.
Significance of the move:
- RBI opening up more funds for lending to startups is a very positive step. Startups have not had easy access to debt, stymied by traditional lender metrics of creditworthiness. This is a huge booster as sufficient funding and user adoption are two primary challenges for Indian entrepreneurs.
- Besides, Startups have mostly relied on expensive venture debt. This move will help startups free up their equity and raise low-cost debt.
What is Priority Sector Lending?
- It means those sectors which the Government of India and Reserve Bank of India consider as important for the development of the basic needs of the country and are to be given priority over other sectors. The banks are mandated to encourage the growth of such sectors with adequate and timely credit.
RBI guidelines for PSL for scheduled commercial banks:
- 40% of the total net bank credit should go to priority sector advances.
  1. 10% of the priority sector advances or 10% of the total net bank credit, whichever is higher should go to the weaker section.
  2. 18% of the total net bank credit should go to agricultural advances. Within the 18 percent target for agriculture, a target of 8 percent of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher is prescribed for Small and Marginal Farmers, to be achieved in a phased manner.
  3. 7.5 of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher should go to Micro enterprises.
Priority Sector includes the following categories:
1. Agriculture
2. Micro, Small and Medium Enterprises (MSME)
3. Export Credit
4. Education
5. Housing
6. Social Infrastructure
7. Renewable Energy
8. Others
Priority Sector Lending Certificates (PSLCs):
- Priority Sector Lending Certificates (PSLCs) are a mechanism to enable banks to achieve the priority sector lending target and sub-targets by the purchase of these instruments in the event of a shortfall.
- This also incentivizes surplus banks as it allows them to sell their excess achievement over targets thereby enhancing lending to the categories under the priority sector.

Adjusted gross revenue (AGR)

Context:
- The Supreme Court has allowed telecom companies 10 years’ time to pay their adjusted gross revenue (AGR) dues to the government.
The judgment:
1. The National Company Law Tribunal (NCLT) should decide whether or not the spectrum can be sold under the Insolvency and Bankruptcy Code.
2. Due to the current Covid-19 situation, telcos should pay 10 percent of the total dues by March 31, 2021.
3. Telecom companies would also have to make payments on or before February 7 every year. The nonpayment of dues in any year would lead to the accrual of interest and invite contempt of court proceedings against such companies.
What’s the issue?
- An October 2019 judgment of the court in the AGR issue originally wanted the telcos to make the repayments in three months. The court had concluded that the private telecom sector had long reaped the fruits of the Centre’s liberalized mode of payment by the revenue sharing regime.
- Later, the government had proposed in court a 20-year “formula” for telcos to make staggered payments of the dues. But, the court observed that the period of 20 years fixed for payment is excessive.
- Even after part payment, the dues still run to ₹1.43 lakh crore.
What is AGR?
- Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT). It is divided into spectrum usage charges and licensing fees, pegged between 3-5 percent and 8 percent respectively.
How is it calculated?
- As per DoT, the charges are calculated based on all revenues earned by a telco – including non-telecom related sources such as deposit interests and asset sales.
What are the issues associated? When it all began?
- The telecom sector was liberalised under the National Telecom Policy, 1994 after which licenses were issued to companies in return for a fixed license fee.
- However, to provide relief from the steep fixed license fee, the government in 1999 gave an option to the licensees to migrate to the revenue sharing fee model.
- Under this, mobile telephone operators were required to share a percentage of their AGR with the government as annual license fee (LF) and spectrum usage charges (SUC).
- License agreements between the Department of Telecommunications (DoT) and the telecom companies define the gross revenues of the latter.
- The dispute between DoT and the mobile operators was mainly on the definition of AGR.
- The DoT argued that AGR includes all revenues (before discounts) from both telecom and non-telecom services.
- The companies claimed that AGR should comprise just the revenue accrued from core services and not dividend, interest income, or profit on the sale of any investment or fixed assets.

Equalisation levy on foreign e-com firms

Context:
- The government has said that it is not considering extending the deadline for payment of Equalisation Levy by non-resident e-commerce players.
What is Equalisation levy?
- Equalisation levy at 6% has been in force since 2016 on payment exceeding Rs 1 lakh a year to a non-resident service provider for online advertisements.
- The amendments to the Finance Act, 2020 had expanded the ambit of the equalisation levy for nonresident e-commerce operators involved in the supply of services, including the online sale of goods and provision of services, with the levy at the rate of 2% effective April 1, 2020.
- The tax applies to e-commerce transactions on websites such as Amazon.com.
What was the need for equalisation levy?
- The levy is seen aimed at taxing foreign companies which have a significant local client base in India but were billing them through their offshore units, effectively escaping the country’s tax system.
Penalty:
- As per law, late payment would attract interest at the rate of 1% per month or part of the month.
- Non-payment could result in a penalty equal to the amount of equalisation levy, along with interest.
What are the issues now?
- Tax experts point out that there are practical difficulties in getting PAN and many companies are not paying the equalisation levy as there is still considerable confusion and lack of clarity on the applicability of the same.
- It is believed that the requirement of having a PAN and an Indian bank account could cause administrative delays in remittance by non-residents.
- The levy has several issues that primarily include wide coverage (even non-e-commerce companies could be covered), lack of clarity on how consideration needs to be determined especially in cases where the income is minuscule compared to the transactions facilitated by the non-resident e-commerce operators.
- Even transactions between non-residents are covered and this according to tax experts would be an extraterritorial overreach along with practical difficulty in implementation.

National Asset Reconstruction Company Ltd. (NARCL)

Context:
- Banks have identified about 22 bad loans worth ₹ 89,000 crores to be transferred to NARCL in the initial phase.
About:
- The setting up of NARCL, the proposed bad bank for taking over stressed assets of lenders, was announced in the Budget for 2021-22.
- The plan is to create a bad bank to house bad loans of ₹ 500 crore and above, in a structure that will contain an asset reconstruction company (ARC) and an asset management company (AMC) to manage and recover dud assets.
- The new entity is being created in collaboration with both public and private sector banks.
How is NARCL different from existing ARCs?
- The proposed bad bank will have a public sector character since the idea is mooted by the government and majority ownership is likely to rest with state-owned banks.
- At present, ARCs typically seek a steep discount on loans. With the proposed bad bank being set up, the valuation issue is unlikely to come up since this is a government initiative.
- The government-backed ARC will have deep pockets to buy out big accounts and thus free up banks from carrying these accounts on their books.

Insurance Ombudsman

Context:
- The Insurance Regulatory and Development Authority of India (IRDAI) has advised public sector general insurers to appoint a nodal officer each for the 17 insurance ombudsman offices to ensure proper and timely disposal of complaints.
Ombudsman
- The Insurance Ombudsman scheme was created by the Government of India for individual policyholders to have their complaints settled out of the court's system in a cost-effective, efficient, and impartial way.
- There are at present 17 Insurance Ombudsman in different locations and any person who has a grievance against an insurer, may himself or through his legal heirs, nominee or assignee, make a complaint in writing to the Insurance Ombudsman within whose territorial jurisdiction the branch or office of the insurer complained against or the residential address or place of residence of the complainant is located.
You can approach the Ombudsman with a complaint if:
- You have first approached your insurance company with the complaint and
- They have rejected it
- Not resolved it to your satisfaction or
- Not responded to it at all for 30 days
- Your complaint pertains to any policy you have taken in your capacity as an individual and the value of the claim including expenses claimed is not above Rs 30 lakhs.
Appointment of Ombudsman:
- The Ombudsman is a person in the insurance industry, civil or judicial services, and is appointed by the insurance council.
- The serving term of the Insurance Ombudsman is three years.
Recommendation:
- The Ombudsman will act as mediator and
- Arrive at a fair recommendation based on the facts of the dispute
- If you accept this as a full and final settlement, the Ombudsman will inform the company which should comply with the terms in 15 days.

Innovation Regulatory Sandbox

Context:
- The International Financial Services Centres Authority (IFSCA) has introduced a Framework for Regulatory Sandbox to tap into innovative FinTech solutions.
Key takeaways
- Under this Sandbox framework, entities operating in the capital market, banking and insurance, and financial services space shall be granted facilities to experiment with innovative FinTech solutions in a live environment with a limited set of real customers for a limited time frame.
- These features shall be fortified with necessary safeguards for investor protection and risk mitigation.
- The Regulatory Sandbox shall operate within the IFSC located at GIFT City.
- The creation of an “Innovation Sandbox” is proposed as an additional step towards creating an innovation-centric ecosystem in the IFSC.
- The Innovation Sandbox will be managed and facilitated by the Market Infrastructure Institutions (MIIs) operating within the IFSC.
What is Regulatory sandbox?
- “Regulatory Sandbox”: Under this Sandbox framework, entities operating in the capital market, banking, and insurance and financial services space shall be granted certain facilities and flexibilities to experiment with innovative FinTech solutions in a live environment with a limited set of real customers for a limited time frame.
What is GIFT City
- GIFT CITY: Gujarat International Finance Tec located on the banks of the Sabarmati River is India's first operational smart city and international financial services centre.
- It was promoted by the Government of Gujarat as a Greenfield project. The city is designed for the walk to work concept and includes commercial and residential complexes.

Compound Interest waiver on Moratorium Loans

Context:
- Recently, the Government of India has announced the scheme for the waiver of compound interest that was payable by the borrower who had opted for a loan moratorium between 1st March 2020, and 31st August 2020.
Key takeaways:
- The RBI had offered a three-month moratorium on loans in March 2020.
- This enabled borrowers to defer repayments on EMIs and other loans.
- This was later extended by another three months, till 31st August 2020.
- The loan moratorium, and waiver of compound interest, was aimed at providing borrowers relief amid the economic impact of the Covid-19 pandemic.
- Under this, the government will grant eligible borrowers ex-gratia payment of the difference between the compound interest and simple interest for the six-month moratorium period.
- The scheme shall be applicable for loans availed by Micro, Small and Medium Enterprises (MSMEs) and loans to retail customers for education, housing, consumer durables, automobiles, provided a borrower has an aggregate outstanding loan of Rs. 2 crores or less, from all such loans.
- Ex-gratia payment is the money that is paid due to moral obligation and not due to legal obligation.

Negative yield Bonds

Context:
- China’s negative yield bonds are currently in demand.
What are negative-yield bonds?
- These are debt instruments that offer to pay the investor a maturity amount lower than the purchase price of the bond. These are generally issued by central banks or governments, and investors pay interest to the borrower to keep their money with them.
Why do investors buy them?
- Negative-yield bonds attract investments during times of stress and uncertainty as investors look to protect their capital from significant erosion. At a time when the world is battling the Covid-19 pandemic and interest rates in developed markets across Europe are much lower, investors are looking for relatively better-yielding debt instruments to safeguard their interests.
Why is there a huge demand?
- The fact that the 10-year and 15-year bonds are offering positive returns. As against minus —0.15% yield on the 5-year bond issued by China, the yields offered in safe European bonds are much lower, between –0.5% and —0.75%.
- while the majority of the large economies are facing a contraction in their GDP for 2020-21, China is one country that is set to witness positive growth in these challenging times: its GDP expanded by 4.9% in the third quarter of 2020.
- The key factor: the massive amount of liquidity injected by the global central banks after the pandemic began that has driven up prices of various assets including equities, debt, and commodities.
- In case the fresh wave of the Covid-19 pandemic leads to further lockdowns of economies, then there could be further negative pressure on interest rates, pushing yields down further, and leading to profits even for investors who put in money at the current juncture.

AT-1 Bonds

Context:
- The decision of the Securities and Exchange Board of India (Sebi) to slap restrictions on mutual fund (MF) investments in additional tier-1 (AT1) bonds has raised a storm in the MF and banking sectors.
- The Finance Ministry has asked the regulator to withdraw the changes as it could lead to disruption in the investments of mutual funds and the fund-raising plans of banks.
What are AT1 bonds? What’s the total outstanding in these bonds?

AT1 Bonds stand for additional tier-1 bonds.
These are unsecured bonds that have perpetual tenure. In other words, the bonds have no maturity date.
They have a call option, which can be used by the banks to buy these bonds back from investors.
These bonds are typically used by banks to bolster their core or tier-1 capital.
AT1 bonds are subordinate to all other debt and only senior to common equity.
Mutual funds (MFs) are among the largest investors in perpetual debt instruments and hold over Rs 35,000 crore of the outstanding additional tier-I bond issuances of Rs 90,000 crore.

What action has been taken by the Sebi recently and why?
- 100-year Instrument:
- Limit Ownership:
- Linkage with Yes Bank Crisis:
What is the impact of this decision?
- Increased Risk:
  - Typically, MFs have treated the date of the call option on AT1 bonds as the maturity date.
  - Now, if these bonds are treated as 100-year bonds, it raises the risk in these bonds as they become ultra long-term.
- Increases Volatility in Bond Prices:
- Push MF to engage in Panic Selling:
- Impacts Fund Raising Capability of Banks:
Why has the Finance Ministry asked SEBI to review the decision?
- The Finance Ministry has sought withdrawal of valuation norms for AT1 bonds prescribed by the SEBI for mutual fund houses as it might lead to mutual funds making losses and exiting from these bonds, affecting capital raising plans of PSU banks.
- The government doesn’t want a disruption in the fund mobilization exercise of banks at a time when two PSU banks are on the privatization block.
- Banks are yet to receive the proposed capital injection in FY21 although they will need more capital to face the asset-quality challenges in the foreseeable future.

Regulations of additional Tier 1 Bond

Context:
- Securities and Exchange Board of India has tightened its regulations of additional tier-1 bonds or AT-1 bonds and ensured that these risky instruments are less accessible to retail investors.
Changes:
- Banks can issue these bonds only on an electronic platform.
- Only institutional investors could subscribe to them.
- There shall be a minimum allotment size and trading lot size of ₹1 crore.
- (An institutional investor is a company or organization that invests money on behalf of other people. Mutual funds, pensions, and insurance companies are examples.)
What are AT1 bonds?
- Additional Tier 1 bonds, also called AT1in market parlance, are a kind of perpetual bonds without any expiry date that banks are allowed to issue to meet their long-term capital requirement. That’s why these bonds are treated as quasi-equity instruments under the law. RBI is the regulator for these bonds
Do these bonds pay interest?
- Yes. AT1 bonds are like any other bonds issued by banks and companies, which pay a fixed rate of interest at regular intervals. Usually, these bonds pay a slightly higher rate of interest compared to similar, non-perpetual bonds. However, the issuing bank has no obligation to pay back the principal to investors.
Are these bonds traded in the market?
- Yes. These bonds are listed and traded on the exchanges. So if an AT1 bondholder needs money, he can sell it in the market.
How are AT1 bonds redeemed?
- Investors can not return these bonds to the issuing bank and get the money. This means there is no put option available to its holders. However, the issuing banks have the option to recall AT1 bonds issued by them (termed call option).
- They can go for a call option five years after these are issued and then every year at a pre-announced period. This way the issuing banks can give an exit option to AT1 bondholders.

Bond yield

Context:
- Recently, India’s benchmark 10-year bond yield closed at its highest level in more than six weeks ending at 6.04%
About Bond yield:
- Bond yield means the returns an investor will derive by investing in the bond.
- The mathematical formula for calculating yield is the annual coupon rate divided by the current market price of the bond.
- Therefore, there is an inverse relationship between the yield and the price of the bond.
- As the price of the bond goes up, the yield falls; and as the price of the bond goes down, the yield goes up
Bond yield vs inflation:
- Inflation is a bond's worst enemy.
- Inflation erodes the purchasing power of a bond's future cash flows.
- The higher the current rate of inflation and the higher the (expected) future rates of inflation, the higher the yields will rise across the yield curve, as investors will demand this higher yield to compensate for inflation risk.

Sovereign Gold Bond (SGB) Scheme

Context:
- Recently, the Government of India, in consultation with the Reserve Bank of India, has decided to issue Sovereign Gold Bonds for 2021-22
About:
- SGBs are government securities denominated in grams of gold.
- They are substitutes for holding physical gold.
- Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity.
- The Bond is issued by Reserve Bank on behalf of the Government of India
- A person resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB
- Eligible investors include individuals, HUFs, trusts, universities and charitable institutions
Advantages:
- The quantity of gold for which the investor pays is protected
- The risks and costs of storage are eliminated
- Investors are assured of the market value of gold at the time of maturity and periodical interest
- SGB is free from issues like making charges and purity in the case of gold in jewellery form
- The bonds are held in the books of the RBI or Demat form eliminating the risk of loss of scrip etc
Disadvantage:
- There may be a risk of capital loss if the market price of gold declines
- However, the investor does not lose in terms of the units of gold that he has paid for.

Zero-coupon bonds for recapitalization

Context:
- The Centre, in the first move of its kind, has issued Rs 5,500 crore in zero-coupon bonds for recapitalizing Punjab and Sind Bank (P&SB).
What kind of bonds are these?
- These are “non-interest-bearing, non-transferable special GOI securities”.
- Have a maturity of 10-15 years.
- Issued specifically to Punjab & Sind Bank.
- Only those banks, whosoever is specified, can invest in them, nobody else.
- It is not tradable, it is not transferable.
- It is limited only to a specific bank, and it is for a specified period.
- It is held at the held-to-maturity (HTM) category of the bank as per the RBI guidelines.
- Since it is held to maturity, it is accounted at the face value (and) no mark-to-market will be there.
How do they differ from traditional bonds?
- Though zero-coupon, these bonds are different from traditional zero-coupon bonds on one account — as they are being issued at par, there is no interest
- Zero-coupon bonds by private companies are normally issued at discount, but since these special bonds are not tradable these can be issued at par.

The rise in bond yield

Context:
- The yield on 10-year bonds in India moved up from the recent low of 5.76% to 6.20% in line with the rise in US yields, sending jitters through the stock market.
Why do bond yields rise?
- Bond yield is the return an investor gets on that bond or particular government security.
- The major factors affecting the yield are the monetary policy of the Reserve Bank of India, especially the course of interest rates, the fiscal position of the government and its borrowing program, global markets, economy, and inflation.
- A fall in interest rates makes bond prices rise, and bond yields fall — and rising interest rates cause bond prices to fall, and bond yields to rise.
- In short, a rise in bond yields means interest rates in the monetary system have fallen, and the returns for investors (those who invested in bonds and govt securities) have declined.
How has the rise in yield affected stock markets?

The sudden rise in domestic and global bond yields recently moderated the enthusiasm of equity market participants around the world.
The “taper tantrum” of 2013 showed the relationship between bond yields and stock markets — a sudden rise in bond yields caused markets to slide, as mass bond selling was witnessed.
Bond yields are inversely proportional to equity returns
Traditionally, when bond yields go up, investors start reallocating investments away from equities and into bonds, as they are much safer.
As bond yields rise, the opportunity cost of investing in equities goes up, and equities become less attractive.
Also, a rise in bond yields raises the cost of capital for companies, which in turn compresses the valuations of their stocks.

How will the borrowing program and economy be impacted?
- When bond yields rise, the RBI has to offer a higher cut-off price/yield to investors during auctions.
- This means borrowing costs will increase at a time when the government plans to raise Rs 12 lakh crore from the market.
- However, RBI is expected to stabilize yields through open market operations and operation twists.
- Besides, as government borrowing costs are used as the benchmark for pricing loans to businesses and consumers, any increase in yields will be transmitted to the real economy.
Impact on the flow of foreign portfolio investment (FPI) funds:
- Bond yields play a big role in FPI flow.
- Traditionally, when bond yields rise in the US, FPIs move out of Indian equities.
- Also, it has been seen that when the bond yield in India goes up, it results in capital outflows from equities and into debt.

Green tax

Context:
- The central government approved a proposal to levy a “Green Tax” on old vehicles that are considered polluting to the environment.
About:
- The tax has been proposed to dissuade people from using vehicles that damage the environment, motivate them to switch to newer, less polluting vehicles, and reduce overall pollution levels, and make the polluters pay for it.
- The proposal will now go to the states for consultation before it is formally notified.
- “Revenue collected from the Green Tax to be kept in a separate account and used for tackling pollution, and for states to set up state-of-art facilities for emission monitoring,” a press release by the Ministry of Road Transport and Highways says.
- It is estimated that commercial vehicles, which constitute about 5% of the total vehicle fleet, contribute about 65-70% of total vehicular pollution.
- The older fleet, typically manufactured before the year 2000 constitutes less than 1% of the total fleet but contributes around 15% of total vehicular pollution.
- These older vehicles pollute 10-25 times more than modern vehicles.

Direct access to government gilt bonds

Context:
- The Reserve Bank of India’s proposal to provide direct access to retail investors to its government securities investment platform opens the door to this risk-free investment for retailers.
What has RBI announced?
- Terming it a “structural reform”, the RBI has proposed to allow retail investors direct access to its platform.
- RBI said retail investors can directly open their gilt accounts with the RBI through the Retail Direct facility to access both the primary market – where investors buy directly from the issuer — and secondary markets where trading takes place among investors.
- Until now, direct access was limited to institutional players such as banks, primary dealers, insurance companies, mutual funds, foreign portfolio investors, and high net worth individuals.
Benefits of the decision:

The move is aimed at deepening the government securities (G-sec) market and helping the smooth sailing of the government’s large yearly borrowing program of around Rs 12 lakh crore.
Apart from supporting the government’s expanding borrowing program, the move may also pose competition to fixed deposits of banks and other debt instruments in the market.
They also have a low reinvestment risk
While investors can earn interest income on G-Sec investment, they also get capital gains by trading.

Faceless tax scheme

Context:
- The government’s faceless tax assessment scheme, an attempt to remove individual tax officials’ discretion and potential harassment for income taxpayers, has managed to deliver about 24,000 final orders since its introduction in August 2020.
About:
- In the Union Budget 2019, the Finance Minister proposed the introduction of a scheme of faceless e-assessment.
- The scheme seeks to eliminate the human interface between the taxpayer and the income tax department.
- The scheme lays down the procedure to carry out a faceless assessment through electronic mode.
- It is an attempt to remove individual tax officials’ discretion and potential harassment for income taxpayers.
- The scheme allows for appropriate cases where a certain hearing is necessary, so then after following protocols, a hearing is given.
- The main objective is to remove physical interaction as much as possible.

National Company Law Tribunal (NCLT)

Context:
- The Supreme Court allowed National Company Law Tribunal (NCLT) proceedings in connection with the proposed ₹24,713-crore deal between Future Group and Reliance Industries to go on, but directed the Tribunal to refrain from passing any “final order of sanction of the scheme”.
About:

The Central Government has constituted National Company Law Tribunal (NCLT) under section 408 of the Companies Act, 2013.
It is a quasi-judicial body in India that adjudicates issues relating to Indian companies
All proceedings under the Companies Act, including proceedings relating to arbitration, compromise, arrangements, reconstructions, and the winding up of companies shall be disposed of by the National Company Law Tribunal.
The NCLT bench is chaired by a Judicial member who is supposed to be a retired or a serving High Court Judge and a Technical member who must be from the Indian Corporate Law Service, ICLS Cadre.
The National Company Law Tribunal is the adjudicating authority for the insolvency resolution process of companies and limited liability partnerships under the Insolvency and Bankruptcy Code, 2016.

Internal and extra-Budgetary resources (IEBR)

Context:
- With a shortfall in non-tax receipts, the concern is excess reliance on off-balance-sheet borrowing through internal and extra-Budgetary resources (IEBR), which is deployed by Central Public Sector Enterprises and departmental undertakings.
About:
- IEBR is an important part of the Central plan of the Government of India and constitutes the resources raised by the PSUs through profits, loans, and equity.
- In the last few years, the IEBR route has been increasingly used by the central government to finance even revenue expenditures such as the bills for the Food Corporation of India (FCI) for procurement purposes.
- While earlier the amount of capital spending through IEBR used to be lesser than the gross budgetary support, since 2014-15, this trend has reversed, with capital spending by CPSUs exceeding the amounts budgeted for capital expenditure.
- For 2019-20, IEBR was estimated at Rs 7.1 lakh crore, 16.9% higher than Rs 6.07 lakh crore raised in 2018-19.
- For 2020-21, the government has estimated it to come down by 5.3% to Rs 6.72 lakh crore.

Asset Reconstruction Companies (ARCs)

Context:
- According to the Reserve Bank of India (RBI), the growth of the ARC industry is not in line with the trends in non-performing assets (NPAs) of banks and non-banking financial companies (NBFCs).
About the Asset Reconstruction Company (ARC):
- It is a specialized financial institution that buys the Non-Performing Assets (NPAs) from banks and financial institutions so that they can clean up their balance sheets.
- This helps banks to concentrate on normal banking activities.
- Banks rather than going after the defaulters by wasting their time and effort can sell the bad assets to the ARCs at a mutually agreed value.
- The Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 provides the legal basis for the setting up of ARCs in India.
Trends in the ARC industry:

The ARC industry began with the establishment of the Asset Reconstruction Company India Ltd (ARCIL) in 2003,
After remaining subdued in the initial years of their inception, a jump was seen in the number of ARCs in 2008, and then in 2016.
Although the number of ARCs has risen over time, their business has remained highly concentrated.
Indian ARCs have been private sector entities registered with the Reserve Bank.

ARC proposed in the Budget:
- Centre has announced an asset reconstruction (ARC) and asset management company backed by a government guarantee to address the problem of NPAs with public sector banks
- It will be set up by state-owned and private sector banks, and there will be no equity contribution from the Centre.
- The ARC, which will have an Asset Management Company (AMC) to manage and sell bad assets, will look to resolve stressed assets of Rs 2-2.5 lakh crore that remain unresolved in around 70 large accounts.

Global Minimum Corporate Tax (GMCTR)

Context:
- Recently, Finance Ministers from the Group of Seven (G7) rich nations reached a landmark accord setting a GMCTR, an agreement that could form the basis of a worldwide deal.
About Base erosion and profit shifting:
- It refers to corporate tax planning strategies used by multinationals to “shift” profits from higher-tax jurisdictions to lower-tax jurisdictions, thus “eroding” the “tax-base” of the higher-tax jurisdictions.
- The Organisation for Economic Co-operation and Development (OECD) defines BEPS strategies as “exploiting gaps and mismatches in tax rules”.
Need for GMCTR:
- Major economies are aiming to discourage multinationals from shifting profits — and tax revenues — to low-tax countries regardless of where their sales are made.
- Increasingly, income from intangible sources such as drug patents, software, and royalties on intellectual property has migrated to these jurisdictions, allowing companies to avoid paying higher taxes in their traditional home countries.
- With its proposal for a minimum 15% tax rate, the Biden administration hopes to reduce such tax base erosion without putting American firms at a financial disadvantage, allowing competition on innovation, infrastructure and other attributes.
How would a global minimum tax work?
- The global minimum tax rate would apply to overseas profits.
- Governments could still set whatever local corporate tax rate they want, but if companies pay lower rates in a particular country, their home governments could “top-up” their taxes to the minimum rate, eliminating the advantage of shifting profits.
What about that minimum rate?

Talks are focusing on the U.S. proposal of a GMCTR of 15% – above the level in countries such as Ireland but below the lowest G7 level.
Any final agreement could have major repercussions for low-tax countries and tax havens.
The Irish economy has boomed with the influx of billions of dollars in investment from multinationals.
Dublin, which has resisted EU attempts to harmonize its tax rules, is unlikely to accept a higher minimum rate without a fight.
However, the battle for low-tax countries is less likely to be about scuppering the overall talks and more about building support for a minimum rate as close as possible to its 12.5% or seeking certain exemptions.

Taxes on fuel

Context:
- Reserve Bank of India Governor Shaktikanta Das expressed hope for a ‘coordinated and calibrated reduction’ in the taxes levied by the Centre and the States on fuel.
About:

Central and state taxes make up for over 61% of the retail selling price of petrol and about 56% of diesel.
Petrol and diesel do not come under the purview of goods and services tax (GST).
The union government levies Rs 32.9 per liter of excise duty on petrol and Rs 31.80 a liter on diesel.
State governments levy Value-added Tax (VAT), which changes from state to state.

Consumer and Business:

National Strategy for Financial Education 2020-2025 (NSFE)

Context:
- The Reserve Bank of India has released a national strategy for financial education to be implemented in the next five years.
- The multi-stakeholder led approach is aimed at creating a financially aware and empowered India.
- It is the second NSFE, the first one being released in 2013.
Basic objectives:
- The objectives include managing risk at various life stages through relevant and suitable insurance cover besides planning for old age and retirement through coverage of suitable pension products.
Who prepared it?
- The NSFE has been put together by the National Centre for Financial Education (NCFE) in consultation with the four financial sector regulators (Reserve Bank of India, Securities, and Exchange Board of India, Insurance Regulatory and Development Authority of India, and Pension Fund Regulatory and Development Authority) and other relevant stakeholders.
Highlights of NSFE: 2020-25- Key recommendations:
1. Adopt a ‘5 C’ – Content, Capacity, Community, Communication, and Collaboration – approach to achieve the financial well-being of all Indians.
2. It has suggested financial literacy content for school children (including curriculum and co-scholastic), teachers, young adults, women, new entrants at workplace/ entrepreneurs (MSMEs), senior citizens, persons with disabilities, illiterate people, etc.
3. Capacity development of various intermediaries, who can be involved in providing financial literacy.
4. Develop a Code of Conduct for financial education providers.
5. Community-led approaches should be evolved for disseminating financial literacy in a sustainable manner.
6. A specific period in the year needs to be identified to disseminate financial literacy messages on a large/ focused scale.
7. Integrate financial education content in the school curriculum, various professional and vocational courses (undertaken by the Ministry of Skill Development and Entrepreneurship) through their Sector Skilling Missions and B.Ed./M.Ed. programmes.
8. Adopt a robust ‘Monitoring and Evaluation Framework’ to assess progress made under the strategy.
Significance and expected outcomes:
- The strategy seeks to develop credit discipline and encourage availing of credit from formal financial institutions as per requirement.
- It wants to improve the usage of digital financial services in a safe and secure manner.
- The document wants the management of risk at various life stages through relevant and suitable insurance cover and plans for old age and retirement through coverage of suitable pension products.
About NCFE:
- National Centre for Financial Education (NCFE) is a Not for Profit Company promoted by the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI) and Pension Fund Regulatory and Development Authority (PFRDA).

Business Responsibility Reporting

Context:
- Ministry of Corporate Affairs (MCA) releases the Report of the Committee on Business Responsibility Reporting.
Key recommendations:
1. A new reporting framework called the ‘Business Responsibility and Sustainability Report (BRSR)’ has been recommended to better reflect the intent and scope of reporting on non-financial parameters.
2. The BRSR would be integrated with the MCA 21 portal.
3. The information captured through BRSR filings should be used to develop a Business ResponsibilitySustainability Index for companies.
4. The top 1000 listed companies are to undertake this reporting mandatorily.
5. The reporting requirement may be extended by MCA to unlisted companies above specified thresholds of turnover and/or paid-up capital.
What is Business Responsibility Reporting?
- It is a disclosure of the adoption of responsible business practices by a listed company to all its stakeholders.
- Business Responsibility Reporting is applicable to all types of companies including manufacturing, services etc.
Evolution of Business Responsibility Reporting in India:
1. Corporate Voluntary Guidelines in 2009;
2. Endorsement of United Nations Guiding Principles on Business & Human Rights by India in 2011;
3. MCA issued ‘National Voluntary Guidelines on Social, Environmental and Economical Responsibilities of Business’ which encourages reporting on the environment, social and governance issues in 2011;
4. SEBI mandates top 100 listed companies by market capitalization to file Business Responsibility Reports (BRR) based on NVGs in 2012;
5. SEBI extends BRR reporting to top 500 companies by market capitalization in 2015;
6. National Guidelines on Responsible Business Conduct (NGRBC) was released in 2019.
Why do we need Business Responsibility Reporting?
- At a time and age when enterprises are increasingly seen as critical components of the social system, they are accountable not merely to their shareholders from a revenue and profitability perspective but also to the larger society which is also its stakeholder.
- This is important considering the fact that these companies have accessed funds from the public, have an element of public interest involved, and are obligated to make exhaustive disclosures on a regular basis.

Entrepreneurs in Residence (EIR)

Context:
- The Department of Science & Technology (DST) secretary has launched a brochure featuring Entrepreneurs in Residence (EIR) under the National Initiative for Developing and Harnessing Innovations (NIDHI) programme.
About:
- It is one of the sub-programs introduced under the National Initiative for Developing and Harnessing Innovations (NIDHI) programme.
- To inspire the best talents to be entrepreneurs, to minimise the risk involved in pursuing start-ups, and to partially set off their opportunity costs of high paying jobs.
- Nodal Department is the Department of Science and Technology.
- It supports aspiring or budding entrepreneurs of considerable potential for pursuing a promising technology business idea over a period of up to 18 months with a subsistence grant up to Rs 30,000 per month with a maximum cap for total support of Rs 3.6 lakh.
NIDHI
- It was launched by the Department of Science and Technology as an umbrella scheme to support ideas and innovations (knowledge-based and technology-driven) into successful startups.
- Under NIDHI, PRAYAS (Promoting and Accelerating Young and Aspiring innovators & Startups) programme has been initiated in which established Technology Business Incubators (TBI) are supported with PRAYAS grant to support innovators and entrepreneurs with grants for ‘Proof of Concept’ and developing prototypes.

Business Reform Action Plan (BRAP) ranking of states

Context:
- 4th edition of the Business Reform Action Plan (BRAP) ranking of states announced recently by the Department of Industrial Promotion and Internal Trade (DPIIT).
About:
- The ranking of States is based on the implementation of the Business Reform Action Plan started in the year 2015.
- One “major change” in the current rankings is the government’s decision to link the state’s performance “exclusively” to user feedback.
The five-ten states under the State Reform Action Plan 2019 are:
1. Andhra Pradesh
2. Uttar Pradesh
3. Telangana
4. Madhya Pradesh
5. Jharkhand
What is BRAP?
- The Business Reform Action Plan 2018-19 includes 180 reform points covering 12 business regulatory areas such as Access to Information, Single Window System, Labour, Environment, etc.
Why are the states ranked on BRAP Implementation?
- The larger objective of attracting investments and increasing Ease of Doing Business in each State was sought to be achieved by introducing an element of healthy competition through a system of ranking states based on their performance in the implementation of the Business Reform Action Plan.
Significance and the need for these rankings:
- State rankings will help attract investments, foster healthy competition, and increase the Ease of Doing Business in each State.

Foreign Contribution (Regulation) Amendment Bill, 2020

Context:
- Introduced in the Lok Sabha.
- It seeks to make significant changes to the Foreign Contribution (Regulation) Act (FCRA).
Proposed amendments- the Bill:
- It seeks to prohibit ‘public servants’ from receiving any foreign funding.
- It proposes to reduce the use of foreign funds to meet administrative costs by NGOs from the existing 50 percent to 20 percent.
- It seeks to “prohibit any transfer of foreign contribution to any association/person”.
- It proposes to make Aadhaar cards a mandatory identification document for all office-bearers, directors, and other key functionaries of NGOs or associations eligible to receive foreign donations.
Controversial Provisions:
- To allow for the central government to hold a summary inquiry to direct bodies with FCRA approval to “not utilise the unutilised foreign contribution or receive the remaining portion of foreign contribution”.
- To limit the use of foreign funds for administrative purposes. This would impact research and advocacy organisations that use the funding to meet their administrative costs.
Main Criticisms:
- The Bill will enhance government power and restrict foreign-funded civil society to work in India. It can be used as a means to “target those who speak against the government”.
- It will curtail the ease of doing business for civil society organisations.
But, why these amendments are necessary?
- The need to strengthen the Act has arisen due to several organisations “misutilising or misappropriating” the funds leading to the government canceling 19,000 such registrations in the past few years.
- The annual inflow of foreign contribution has almost doubled between the years 2010 and 2019, but many recipients of foreign contribution have not utilised the same for the purpose for which they were registered or granted prior permission under the said Act.
- Criminal investigations also had to be initiated against dozens of such non-governmental organisations which indulged in outright misappropriation or mis-utilisation of foreign contribution.

Essential Commodities Bill

Context:
- The Lok Sabha recently passed this bill by a voice vote.
- The Bill is meant to replace an ordinance promulgated in June, in the wake of the COVID-19 lockdown.
Key provisions:
- It proposes to deregulate the production, storage, movement, and sale of several foodstuffs, including cereals, pulses, edible oils, and onions, except in the case of extraordinary circumstances.
What are the extraordinary circumstances mentioned in the Bill?
- (i) war, (ii) famine, (iii) extraordinary price rise, and (iv) natural calamity of grave nature.
Stock limit:
- The Ordinance requires that the imposition of any stock limit on agricultural produce must be based on price rise.
- A stock limit may be imposed only if there is: (i) a 100% increase in the retail price of horticultural produce; and (ii) a 50% increase in the retail price of non-perishable agricultural food items.
How is it calculated?
- The increase will be calculated over the price prevailing immediately preceding twelve months, or the average retail price of the last five years, whichever is lower.
Powers of Central Government under the Essential Commodities Act, 1955:
- The central government can designate certain commodities as essential commodities.
- The central government may regulate or prohibit the production, supply, distribution, trade, and commerce of such essential commodities.
Benefits:
- This will remove fears of private investors of excessive regulatory interference in their business operations.
- The freedom to produce, hold, move, distribute, and supply will lead to harnessing economies of scale and attract private sector/foreign direct investment into the agriculture sector.
- It will help drive up investment in cold storage and modernization of the food supply chain.

Labour Ministry notifies draft on minimum wages

Context:
- The Union Labour and Employment Ministry has published the draft rules framed for the implementation of the Code on Wages Act, 2019.
Highlights:
- The latest draft rules are similar to the preliminary draft published in November 2019 with one major change. The Ministry has changed the work requirement for eligibility for minimum wages and other benefits from nine hours to eight.
- The latest draft clarified the issue as the nine hours mentioned earlier included one hour of rest, which has now been mentioned separately from the eight working hours.
Criteria for determination of minimum wages:
- A net intake of 2,700 calories per day per consumption unit, 66 metre of cloth per year per standard working-class family, which includes a spouse and two children apart from the earning worker – an equivalent to three adult consumption units.
- Housing rent expenditure to constitute 10% of the food and clothing expenditure; fuel, electricity, and other miscellaneous items of expenditure to constitute 20% minimum wage and expenditure for children education, medical requirement, recreation, and expenditure on contingencies to constitute 25% of minimum wage.
- When the rate of wages for a day is fixed, then such amount shall be divided by eight for fixing the rate of wages for an hour and multiplied by twenty-six for fixing the rate of wages for a month and in such division and multiplication the factors of one-half and more than one-half shall be rounded as next figure and the factors less than one-half shall be ignored.
About the Code on Wages Act:
- The code will amalgamate the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976.
  1. The wage code universalises the provisions of minimum wages and timely payment of wages to all employees, irrespective of the sector, and wage ceiling.
  2. It ensures the “right to sustenance” for every worker and intends to increase the legislative protection of minimum wage from existing about 40% to 100% workforce.
  3. It also introduces the concept of statutory floor wage which will be computed based on minimum living conditions and extended qualitative living conditions across the country for all workers.
  4. While fixing the minimum rate of wages, the central government shall divide the concerned geographical area into three categories – metropolitan area, non-metropolitan area, and the rural area.
  5. Wages include salary, allowance, or any other component expressed in monetary terms. This does not include a bonus payable to employees or any travelling allowance, among others.
  6. The minimum wages decided by the central or state governments must be higher than the floor wage.
  7. Payment of wages: Wages will be paid in (i) coins, (ii) currency notes, (iii) by cheque, (iv) by crediting to the bank account, or (v) through electronic mode. The wage period will be fixed by the employer as either: (i) daily, (ii) weekly, (iii) fortnightly, or (iv) monthly.
Advisory boards:
- The central and state governments will constitute advisory boards.
  1. The Central Advisory Board will consist of: (i) employers, (ii) employees (in equal number as employers), (iii) independent persons, and (iv) five representatives of state governments.
  2. State Advisory Boards will consist of employers, employees, and independent persons. Further, one-third of the total members on both the central and state Boards will be women.
  3. The Boards will advise the respective governments on various issues including (i) fixation of minimum wages, and (ii) increasing employment opportunities for women.

Consumer Protection Act, 2019

Context:
- The Consumer Protection Act, 2019 has come into effect from July 20, replacing the earlier Consumer Protection Act, 1986.
- The Consumer Protection Bill, 2019 got the President's nod in August 2019.
Highlights of the legislation:
- 1. Definition of consumer:
  - A consumer is defined as a person who buys any goods or avails of service for consideration.
  - It does not include a person who obtains a good for resale or a good or service for commercial purposes.
  - It covers transactions through all modes including offline, and online through electronic means, teleshopping, multi-level marketing, or direct selling.
- 2. Six consumer rights have been defined in the act, including the right to:
  - Right to Safety.
  - Right to be Informed.
  - Right to Choose.
  - The right to be heard.
  - Right to seek Redressal.
  - Right to Consumer Education.
- 3. Central Consumer Protection Authority:
  - The central government will set up CCPA to promote, protect and enforce the rights of consumers.
  - It will regulate matters related to violation of consumer rights, unfair trade practices, and misleading advertisements.
  - The CCPA will have an investigation wing, headed by a Director-General, which may conduct an inquiry or investigation into such violations.
- 4. Increased compensation:
  - The CCPA may impose a penalty on a manufacturer or an endorser of up to Rs 10 lakh and imprisonment for up to two years for a false or misleading advertisement.
  - In case of a subsequent offence, the fine may extend to Rs 50 lakh and imprisonment of up to five years.
- 5. Consumer Disputes Redressal Commission:
  - CDRCs will be set up at the district, state, and national levels. A consumer can file a complaint with CDRCs in relation to:
    - Unfair or restrictive trade practices;
    - Defective goods or services;
    - Overcharging or deceptive charging; and
    - The offering of goods or services for sale which may be hazardous to life and safety.
- 6. Appeals:
  - Complaints against an unfair contract can be filed only at the State and National levels.
  - Appeals from a District CDRC will be heard by the State CDRC. Appeals from the State CDRC will be heard by the National CDRC.
  - The final appeal will lie before the Supreme Court.
- 7. Jurisdiction of CDRCs:
  - The District CDRC will entertain complaints where the value of goods and services does not exceed Rs one crore.
  - The State CDRC will entertain complaints when the value is more than Rs one crore but does not exceed Rs 10 crore.
  - Complaints with the value of goods and services over Rs 10 crore will be entertained by the National CDRC.
- 8. Mediation:
  - The act provides for reference to mediation by Consumer Commissions wherever scope for early settlement exists and parties agree for it.
  - Mediation Cells to be attached to Consumer Commissions. Mediation to be held in consumer mediation cells.
  - A panel of mediators to be selected by a selection committee consisting of the President and a member of the Consumer Commission.
  - No appeal against settlement through mediation.
- 9. Impact of Consumer Protection Act, 2019 on e-commerce platforms:
  - The e-commerce portals will have to set up a robust consumer redressal mechanism as part of the rules under the Consumer Protection Act, 2019.
  - They will also have to mention the country of origin which is necessary for enabling the consumer to make an informed decision at the pre-purchase stage on its platform.
  - The e-commerce platforms also have to acknowledge the receipt of any consumer complaint within forty-eight hours and redress the complaint within one month from the date of receipt under this Act.
- 10. Product Liability:
  - A manufacturer or product service provider or product seller will be held responsible to compensate for injury or damage caused by defective product or deficiency in services
Covered in detail in Samjaho's Corner: https://samajho.com/upsc/consumer-protection-act-2019/

International Financial Services Centres (IFSC)

Context:
- The National Stock Exchange (NSE) and Singapore Exchange (SGX) have entered into a formal agreement to cement the key terms for operationalising the NSE IFSC-SGX Connect.
- This will bring together international and Gujarat International Finance Tec-City (GIFT) participants to create a bigger liquidity pool for Nifty products in GIFT City.
- An IFSC caters to customers outside the jurisdiction of the domestic economy.
- Such centres deal with flows of finance, financial products, and services across borders.
- London, New York, and Singapore can be counted as global financial centres.
Services an IFSC can provide:
- Fund-raising services for individuals, corporations, and governments.
- Asset management and global portfolio diversification are undertaken by pension funds, insurance companies, and mutual funds.
- Wealth management.
- Global tax management and cross-border tax liability optimization, which provides a business opportunity for financial intermediaries, accountants, and law firms.
- Global and regional corporate treasury management operations that involve fund-raising, liquidity investment, and management and asset-liability matching.
- Risk management operations such as insurance and reinsurance.
- Merger and acquisition activities among trans-national corporations.
Can an IFSC be set up in a special economic zone (SEZ)?
- The SEZ Act 2005 allows setting up an IFSC in an SEZ or as an SEZ after approval from the central government.
IFSCs in India:
- The first IFSC in India has been set up at the Gujarat International Finance Tec-City (GIFT City) in Gandhinagar.

E-commerce sites must state ‘country of origin,’

Context:
- The Centre told the Delhi High Court that all e-commerce entities, including Amazon, Flipkart, and Snapdeal, have to ensure the mandatory declaration of country of origin of imported products sold on their site.
What’s the issue?
- The affidavit came in response to a petition which argued that the economy of the nation would suffer in the event the e-commerce websites continuing to not mention the manufacturing country or country of origin of products on their websites.
Legal provisions in this regard:
- The laws relating to the issue have been enacted under the Legal Metrology Act, 2009, and the Legal Metrology (Packaged Commodities) Rules, 2011.
- Enforcement of the provisions of the Act and Rules rested with the States and UTs governments.
- Whenever violations are observed, action is taken by the legal metrology officials of the States/ UTs governments in accordance with the law.
- The Consumer Protection Act 2019 also mandates to display of the ‘country of origin’ by the e-commerce entities.
What are the issues present?
- Many e-commerce sites say, they function as a ‘marketplace based e-commerce model in which they only act as an ‘intermediary.
- They have ensured that a data field pertaining to ‘country of origin’ is available on their system, which may be filled in by a seller when creating a new product listing.
- However, they have not made it mandatory, because the law does not mandate a disclosure of the ‘country of origin/manufacture/assembly’, in the case of India-manufactured goods.
- In many cases, finished goods sourced from different countries are packed together or assembled in a third country, prior to their shipment to India.
- Therefore, It could not be simply presumed that the Rules intended that the last country of export alone be declared as the “country of origin” unless the law was amended or clarified to expressly state so.

Singapore Convention on Mediation

Singapore Convention also is known as the United Nations Convention on International Settlement Agreements Resulting from Mediation as an international agreement regarding the recognition of mediated settlements.
The convention was adopted in December 2018 and opened for signature in August 2019.
As of September 1, 2020, the Convention has 53 signatories, including India, China, and the United States. Ecuador is the most recent country to ratify the Convention.
The convention helps businesses seeking enforcement of a mediated settlement agreement across borders to apply directly to the courts of countries that have signed and ratified the treaty instead of having to enforce the settlement agreement as a contract in accordance with each country’s domestic process.

K. V. KAMATH COMMITTEE

The Reserve Bank of India (RBI) constituted an expert committee under the chairmanship of veteran banker K.V. Kamath to make recommendations on norms for the resolution of COVID-19 related stressed loans.
The Indian Banks’ Association (IBA) will function as the secretariat to the committee and the committee will be fully empowered to consult or invite any person it deems fit.

Agriculture

FAO locust warning

Context:
- India should remain on high alert against locust attacks for the next four weeks, the Food and Agriculture Organization (FAO) has warned amid the country facing the worst locust attack in 26 years.
- Spring-bred locust swarms, which migrated to the Indo-Pakistan border and travelled east to northern states, are expected to return back to Rajasthan with the start of the monsoon in the coming days.
- The current locust attack (2019-2020) has been categorised as an upsurge.
Difference between a locust plague, upsurge, and outbreak:
- 1. Outbreak:
  - If good rains fall and green vegetation develop, Desert Locust can rapidly increase in number and within a month or two, start to concentrate, gregarize which, unless checked, can lead to the formation of small groups or bands of wingless hoppers and small groups or swarms winged adults.
  - This is called an OUTBREAK and usually occurs with an area of about 5,000 sq. km (100 km by 50 km) in one part of a country.
- 2. Upsurge:
  - If an outbreak or contemporaneous outbreaks are not controlled and if widespread or unusually heavy rains fall in adjacent areas, several successive seasons of breeding can occur that causes further hopper band and adult swarm formation.
  - This is called an UPSURGE and generally affects an entire region.
- 3. Plague:
  - If an upsurge is not controlled and ecological conditions remain favourable for breeding, locust populations continue to increase in number and size, and the majority of the infestations occur as bands and swarms, then a PLAGUE can develop.
  - A major plague exists when two or more regions are affected simultaneously.
- Outbreaks are common, but only a few result in upsurges. Similarly, few upsurges lead to plagues. The last major plague was in 1987-89 and the last major upsurge was in 2003-05.
- Upsurges and plagues do not occur overnight; instead, they take many months to develop.
What are ‘desert locusts’?
- Desert locusts (Schistocerca gregaria), which belong to the family of grasshoppers, normally live and breed in semi-arid or desert regions. For laying eggs, they require bare ground, which is rarely found in areas with dense vegetation.
How do they form swarms?
- As individuals, or in small isolated groups, locusts are not very dangerous. But when they grow into large populations their behaviour changes, they transform from ‘solitary phase’ into ‘gregarious phase’, and start forming ‘swarms’. A single swarm can contain 40 to 80 million adults in one square km, and these can travel up to 150 km a day.

Mega Food Park

Context:
- Zoram Mega food park was launched in Mizoram, to benefit 25,000 farmers and create 5,000 jobs.
- This is the first Mega Food Park operationalized in the state of Mizoram.
About Mega Food Parks scheme:
- Ministry of Food Processing Industries is implementing the Mega Food Park Scheme in the country since 2008.
- It aims at providing a mechanism to link agricultural production to the market by bringing together farmers, processors, and retailers.
- These food parks give a major boost to the food processing sector by adding value and reducing food wastage at each stage of the supply chain with a particular focus on perishables.
Funding:
- A maximum grant of Rs 50 crore is given for setting up an MFP, in a minimum of 50 acres of contiguous land with only a 50% contribution to the total project cost.
Mode of operation:
- The Scheme has a cluster-based approach based on a hub and spokesmodel.
- It includes the creation of infrastructure for primary processing and storage near the farm in the form of Primary Processing Centres (PPCs) and Collection Centres (CCs) and common facilities and enabling infrastructure at Central Processing Centre (CPC).
Implementation:
- Implemented by a Special Purpose Vehicle (SPV) which is a Body Corporate registered under the Companies Act.
- State Government, State Government entities, and Cooperatives are not required to form a separate SPV for implementation of the Mega Food Park project.
- Subject to the fulfilment of the conditions of the Scheme Guidelines, the funds are released to the SPVs.

Agriculture Infrastructure Fund

Context:
- Prime Minister Narendra Modi recently launched the financing facility of Rs 1 lakh crore under the Agriculture Infrastructure Fund via video conferencing.
- The fund has been launched as part of 'Atmanirbhar Bharat' (self-reliant India) to make farmers self-reliant.
About the Agriculture Infrastructure Fund:
- It is a new pan India Central Sector Scheme.
- The scheme shall provide a medium – long term debt financing facility for investment in viable
- projects for post-harvest management Infrastructure and community farming assets through interest subvention and financial support.
- The duration of the Scheme shall be from FY2020 to FY2029 (10 years).
Eligibility:
- Under the scheme, Rs. One Lakh Crore will be provided by banks and financial institutions as loans to Primary Agricultural Credit Societies (PACS), Marketing Cooperative Societies, farmer producer organisations (FPOs), SHGs, Farmers, Joint Liability Groups (JLG), Multipurpose Cooperative Societies, Startups, etc.
Interest subvention:
- All loans under this financing facility will have an interest subvention of 3% per annum up to a limit of Rs. 2 crores.
- This subvention will be available for a maximum period of seven years.
Credit guarantee:
- Credit guarantee coverage will be available for eligible borrowers from this financing facility under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for a loan up to Rs. 2 crores.
- The fee for this coverage will be paid by the Government.
- In the case of FPOs the credit guarantee may be availed from the facility created under FPO promotion scheme of the Department of Agriculture, Cooperation & Farmers Welfare (DACFW).
Management of the fund:
- It will be managed and monitored through an online Management Information System (MIS) platform.
- The National, State and District level Monitoring Committees will be set up to ensure real-time monitoring and effective feedback.
Benefits:
- All loans under this financing facility will have an interest subvention of 3% per annum up to a limit of Rs. 2 crores.
- This subvention will be available for a maximum period of seven years.
- Further, credit guarantee coverage will be available for eligible borrowers from this financing facility under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for a loan up to Rs. 2 crores. The fee for this coverage will be paid by the Government.
- In the case of FPOs, the credit guarantee may be availed from the facility created under the FPO promotion scheme of the Department of Agriculture, Cooperation & Farmers Welfare (DACFW).
- The moratorium for repayment under this financing facility may vary subject to a minimum of 6 months and a maximum of 2 years.
Modifications:
- Under the modification, eligibility has now been extended to state agencies/APMCs, National & State Federations of Cooperatives, Federations of Farmers Producers Organisations (FPOs), and Federations of Self-Help Groups (SHGs).
- If an eligible entity takes up projects in different locations, all such efforts will be eligible for 'interest subvention' for loans up to Rs.2 crore.
- However, there will be a maximum limit of 25 such projects for a private sector unit.

State of Food Security and Nutrition in the World 2020 (SOFI 2020)

About:
- The State of Food Security and Nutrition in the World is an annual flagship report jointly prepared by:
  1. Food and Agriculture Organization.
  2. International Fund for Agricultural Development.
  3. United Nations Children's Fund.
  4. World Food Programme.
  5. World Health Organization.
The objective of the report:
- To inform on progress towards ending hunger, achieving food security and improving nutrition, and to provide in-depth analysis of key challenges for achieving this goal in the context of the 2030 Agenda for Sustainable Development.
Context:
- The latest edition (SOFI 2020) was released on July 13th.
- A new feature of SOFI 2020 is a detailed analysis of the “cost and affordability of healthy diets around the world”.
India-specific observations:
1. Hundreds of millions of people in India above the international poverty line of $1.90 purchasing power parity (PPP) per person per day cannot afford a healthy or nutritious diet.
2. This analysis confirms the fact that the problem of poor nutrition in India is largely on account of the unaffordability of good diets, and not on account of lack of information on nutrition or tastes or cultural preferences.
3. Those we officially count as poor in India – with a cut-off that is lower than the international norm of $1.9 a day – cannot afford a nutrient-adequate diet let alone a healthy diet.
4. Overall, the report estimates that 18% of South Asians (numbering 586 million people) cannot afford the nutrient-adequate diet and 58% of South Asians (1,337 million people) cannot afford a healthy diet.
Concerns for India:
- The number of people who cannot afford a healthy diet has risen in the last three months, as employment and incomes collapsed for the majority of workers in the informal sector.
Need of the hour:
1. Redefine poverty line: The Indian poverty line of 2011-12, as defined by the Tendulkar Committee, amounted to ₹33 per day in urban areas and ₹27 per day in rural areas, and corresponded roughly to $1 a day at international PPP prices.
2. Affordability: If we want to reduce malnutrition and food insecurity, we have to address the problem of the affordability of healthy diets.
Prelims Concepts:
- Three types of diet are defined:
  1. “Basic energy sufficient” diet: In which the required calorie intake is met by consuming only the cheapest starchy cereal available (say, rice or wheat). A requirement of 2,329 Kcal for a healthy young woman of 30 years is taken as the standard reference.
  2. “Nutrient adequate” diet: One where the required calorie norms and the stipulated requirement of 23 macro-and micro-nutrients are met. This diet includes the least-cost items from different food groups.
  3. “Healthy diet”: This is one that meets the calorie norm and the macro-and micro-nutrient norm and also allows for consumption of a diverse diet, from several food groups.
Cost of these diets:
1. Energy-sufficient diet- $1.9 a day.
2. A nutrient-adequate diet costs $2.12 a day.
3. A healthy diet costs $4.07 a day.
What constitutes a healthy diet?
- It includes 30 gm of cereal, 30 gm of pulses, 50 gm of meat/chicken/fish and 50 gm of eggs, 100 gm of milk, 100 gm of vegetables and fruit each, and 5 gm of oil a day. In short, a balanced and healthy meal but not excessive in any way.
- The Indian recommendation for a healthy diet includes the consumption of items from six groups: starchy staples, a protein-rich food (legumes, meat, and eggs), dairy, vegetables, fruits, and fats.

Rashtriya Krishi Vikas Yojana

Context:
- Ministry of Agriculture funding start-ups under the innovation and agripreneurship component of Rashtriya Krishi Vikas Yojana in 2020-21.
Background:
- A component, the Innovation and Agri-entrepreneurship Development programme has been launched under Rashtriya Krishi Vikas Yojana in order to promote innovation and agripreneurship by providing financial support and nurturing the incubation ecosystem.
- These start-ups are in various categories such as agro-processing, artificial intelligence, digital agriculture, farm mechanisation, waste to wealth, dairy, fisheries, etc.
The following are the components of this scheme:
1. Agripreneurship Orientation – 2 months duration with a monthly stipend of Rs. 10,000/- per month. Mentorship is provided on financial, technical, IP issues, etc.
2. Seed Stage Funding of R-ABI Incubatees – Funding up to Rs. 25 lakhs (85% grant & 15% contribution from the incubator).
3. Idea/Pre-Seed Stage Funding of Agripreneurs – Funding up to Rs. 5 lakhs (90% grant and 10% contribution from the incubator).
About Rashtriya Krishi Vikas Yojana:
- RKVY scheme was initiated in 2007 as an umbrella scheme for ensuring the holistic development of agriculture and allied sectors.
- The scheme incentivizes States to increase public investment in Agriculture & allied sectors.
- The Cabinet has approved (as of 1st November 2017) for the continuation of the ongoing Centrally Sponsored Scheme (State Plans) – Rashtriya Krishi Vikas Yojana (RKVY) as Rashtriya Krishi Vikas Yojana- Remunerative Approaches for Agriculture and Allied Sector Rejuvenation (RKVY-RAFTAAR).
- The main objective of Rashtriya Krishi Vikas Yojana is to develop farming as the main source of economic activity.
Some of the objectives also include:
1. Risk mitigation, strengthening the efforts of the farmers along with promoting agri-business entrepreneurship through the creation of agri-infrastructure.
2. Providing all the states with autonomy and flexibility in making plans as per their local needs.
3. Helping farmers in increasing their income by encouraging productivity and promoting value chain addition linked production models.
4. To reduce the risk of farmers by focusing on increasing income generation through mushroom cultivation, integrated farming, floriculture, etc.
5. Empowering the youth through various skill development, innovation, and agri-business models.
Funding:
- RKVY-RAFTAAR will continue to be implemented as a Centrally Sponsored Scheme in the ratio of 60: 40 (Government of India and State Share respectively) except in the case of northeastern and hilly states where the sharing pattern is 90:10. For UTs the grant is 100% as Central share.

Krishi Megh

Context:
- Union Minister of Agriculture & Farmers’ Welfare virtually launched the Krishi Megh (National Agricultural Research & Education System -Cloud Infrastructure and Services).
What is it?
- Krishi Megh is the data recovery centre of ICAR (Indian Council of Agricultural Research).
Details:
- Krishi Megh has been set up under the National Agricultural Higher Education Project (NAHEP).
- The data recovery centre has been set up at the National Academy of Agricultural Research Management (NAARM), Hyderabad.
Significance and benefits of Krishi Megh:
- Built to mitigate the risk, enhance the quality, availability, and accessibility of e-governance, research, extension, and education in the field of agriculture in India.
- Krishi Megh is equipped with the latest artificial intelligence and deep learning software for building and deploying deep learning-based applications through image analysis, disease identification in livestock, etc.
- It enables the farmers, researchers, students, and policymakers to be more equipped with the updated and latest information regarding agriculture and research.
National Agricultural Higher Education Project (NAHEP):
- The project is funded by both the government of India and the World Bank.
- The overall objective of the project is to provide more relevant and high-quality education to agricultural university students that are in tune with the New Education Policy – 2020.

Organic farming in India

Context:
- In a world battered by the COVID pandemic, the demand for healthy and safe food is already showing an upward trend and hence this is an opportune moment to be captured for a win-win situation for our farmers, consumers and the environment.
Organic farming in India:
1. India ranks first in the number of organic farmers and ninth in terms of area under organic farming.
2. Sikkim became the first State in the world to become fully organic and other States including Tripura and Uttarakhand have set similar targets.
3. North East India has traditionally been organic and the consumption of chemicals is far less than the rest of the country.
4. Similarly, the tribal and island territories are being nurtured to continue their organic story.
5. The major organic exports from India have been flax seeds, sesame, soybean, tea, medicinal plants, rice, and pulses.
Government initiatives to support organic farming:
- Mission Organic Value Chain Development for North East Region (MOVCD) and Paramparagat Krishi Vikas Yojana (PKVY) launched in 2015 to encourage chemical-free farming.
- Both these schemes are promoting certification under Participatory Guarantee System (PGS) and National Program for Organic Production (NPOP) respectively targeting domestic and export markets.
What is organic farming?
- It is an agricultural process that uses biological fertilizers and pest control acquired from animal or plant waste.
- It is a unique production management system that promotes and enhances agro-ecosystem health, including biodiversity, biological cycles, and soil biological activity.

Bt Brinjal

Context:
- Experts have slammed a recent move of the Genetic Engineering Appraisal Committee (GEAC) giving its greenlight for biosafety research-level-II (BRL-II) field trials for Event 142, a new variety of genetically modified brinjal (Bt brinjal).
Why this is a matter of concern?
- This new variety of genetically modified brinjal was quietly given approval without any data in the public domain. This variety got approved even before the second season BRL-II and the biosafety report was out.
- This paved the way for crop developers and applicants to seek permission for commercial cultivation.
- There was no transparency in the manner when it came to reports regarding the biosafety of this variety of brinjal.
What is a GM crop?
- A GM or transgenic crop is a plant that has a novel combination of genetic material obtained through the use of modern biotechnology.
- For example, a GM crop can contain a gene(s) that has been artificially inserted instead of the plant acquiring it through pollination.
- The resulting plant is said to be “genetically modified” although, in reality, all crops have been “genetically modified” from their original wild state by domestication, selection, and controlled breeding over long periods of time.
What is the legal position of genetically modified crops in India?
- In India, the Genetic Engineering Appraisal Committee (GEAC) is the apex body that allows for the commercial release of GM crops.
Penalty:
- Use of the unapproved GM variant can attract a jail term of 5 years and a fine of Rs 1 lakh under the Environmental Protection Act,1986.
Why are farmers rooting for GM crops?
- Reduced costs:
  - The cost of weeding goes down considerably if farmers grow Ht Bt cotton and use glyphosate against weeds. In the case of Bt brinjal, the cost reduces as the cost of production is reduced by cutting down on the use of pesticides.
Concerns:
- Environmentalists argue that the long-lasting effect of GM crops is yet to be studied and thus they should not be released commercially. Genetic modification, they say, brings about changes that can be harmful to humans in the long run.

Centre should repeal ordinances: farmers

Context:
- All India Kisan Sangharsh Coordination Committee (AIKSCC) has announced a “Corporates Leave Farming” campaign across the country on August 9 against the Centre’s recent ordinances on agriculture and farmer issues.
What’s the issue?
- In June 2020, the Central government introduced three ordinances to bring in far-reaching agricultural ‘reforms’ in the country. They are:
  1. The Essential Commodities (Amendment) Ordinance, 2020.
  2. The Farmers’ Produce Trade And Commerce (Promotion And Facilitation) Ordinance, 2020.
  3. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services ordinance, 2020.
- But, activists have expressed disappointment saying that the reforms package will not solve the problems of farmers, instead will exacerbate them.
General concerns:
1. These are anti-farmer and will only result in reduced crop prices for farmers and undermine seed security even further.
2. Food security will be eroded as government intervention is eliminated.
3. These ordinances promote corporate control of the Indian food and farming systems.
4. They will also encourage hoarding and black marketing, in addition to the exploitation of farmers.
Let us now take up one by one;
- 1. The Essential Commodities (Amendment) Ordinance, 2020:
  - Key provision:
    - It allows for regulating the supply and stock limit of certain specified agricultural produce under extraordinary circumstances such as extraordinary price rise and natural calamity of grave nature, etc.
  - Issues:
    - The price range fluctuation allowed in this ordinance is narrow (100% increase in the retail price of horticultural produce and 50% increase in the retail price of non-perishable agricultural foodstuffs).
    - This stock limit regulation will not be applicable for value chain participants of any agricultural produce if their stock limit remains within their installed capacity.
    - It will also not apply to exporters if they can show demand for export.
- 2. The Farmers’ Produce Trade And Commerce (Promotion And Facilitation) Ordinance, 2020:
  - Key provision:
    - It seeks to effectively bypass the Agricultural Produce Market Committee (APMC) markets by providing for the freedom to trade in any area outside of private and APMC designated market yards.
  - Issues:
    - This leads to a situation where local farmers do not find adequate demand for their produce at MSP in the local market.
    - Since most farmers are small or marginal landowners, they do not have the wherewithal to transport their produce to large distances.
    - Hence, they are forced to sell them at a lower price than the MSP in the local market itself.
- 3. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services the ordinance, 2020:
  - Key provision:
    - It seeks to create a legal framework for contract farming in India.
  - There are two broader concerns here:
    1. First, one principle concern with contract farming has been regarding the negotiating power of the two parties involved. It seems likely that individual farmers might not find themselves equipped or powerful enough to negotiate with corporates or big-pocket sponsors to ensure a fair price for their produce.
    2. Second, the ordinance says that the quality parameters can be mutually decided by the two parties in the agreement. But the quality aspect will become crucial when a few corporates will try to usher in uniformity which might end up adversely impacting the already skewed agro-ecological diversity in the country.
Conclusion:
- The three ordinances will have far-reaching and varying impacts depending on the social, political, economic and cultural contexts of the respective states.
- But such bold and unilateral moves by the Centre fail to incorporate and give due consideration to the immense diversity in the country, not just between the states in terms of land ownership, cropping patterns, historical functioning of agricultural markets, etc. but also within them.
- Therefore, it is feared that the three ordinances rather than helping farmers, might end up being a source of distress for millions of small and marginal farmers in the country as having been observed in the past in cases of demonetization and COVID-19 related lock-downs.

Food System Vision Prize 2020

Context:
- The Rockefeller Foundation has selected Naandi Foundation (a Hyderabad based non-profit organisation), as one of the top 10 ‘Visionaries’ in the world for the Food System Vision 2050 Prize.
- Naandi was recognised for its Arakunomics model.
About:
- It is an invitation for organizations across the globe to develop a Vision of the regenerative and nourishing food system that they aspire to create by the year 2050.
- The prize awards a cash incentive of USD $200,000.
- It was launched by the USA-based ‘The Rockefeller Foundation’, in partnership with the other two organisations – SecondMuse and OpenIDEO- in 2019.
What is a Food System Vision?
- It is really a story about the future that addresses the following six interconnected themes:
  1. Environment
  2. Diets
  3. Economics
  4. Culture
  5. Technology
  6. Policy
What is Arakunomics?
- It is a new integrated economic model that ensures profits for farmers, quality for consumers through regenerative agriculture.
- This model is a tribute to the tribal farmers of the Araku region for the world-class coffee produced and launched in Paris in 2017 as well as for the high carbon landscape transformation they did in over 955 villages thereby planting 25 million trees.
Why Naandi was chosen?
- The success of Arakunomics in Araku region led to Naandi replicating the model to support the livelihood of farming communities in the villages of Wardha, Maharashtra, and later in New Delhi.
- Naandi hopes to expand its “food-print” by creating thousands of farm livelihoods by transforming their agriculture over one million acres spread across India.
Also, the Arakunomics model leads to Food Vision 2050 that follows an “ABCDEFGH” framework centering on:
1. Agriculture
2. Biology
3. Compost
4. Decentralised decision-making
5. Entrepreneurs
6. Families
7. Global Markets
8. Headstands or turning current approaches on their head.

National Food Security Act 2013

Context:
- Department of Food &Public Distribution issues directions to States/UTs to include all eligible disabled persons under the National Food Security Act 2013.
- It has also asked the states to ensure that they get their entitled quota of food grains under NFSA & Pradhan Mantri Garib Kalyan Anna Yojana.
Enabling provisions:
- Section 38 of the Act mandates that the Central Government may from time to time give directions to the State Governments for effective implementation of the provisions of the Act.
- Section 10 of the National Food Security Act, 2013 provides for coverage of persons under the Antyodaya Anna Yojana in accordance with the guidelines applicable to the said scheme and the remaining households as priority households in accordance with such guidelines as the States Government may specify.
- Disability is one of the criteria for the inclusion of beneficiaries under AAY households.
National Food Security Act (NFSA), 2013:
- The objective is to provide for food and nutritional security in the human life cycle approach, by ensuring access to an adequate quantity of quality food at affordable prices to people to live a life with dignity.
Key features:
1. Coverage and entitlement under Targeted Public Distribution System (TPDS): The TDPS covers 50% of the urban population and 75% of the rural population, with a uniform entitlement of 5 kg per person per month. However, the poorest of the poor households will continue to receive 35 kg per household per month under Antyodaya Anna Yojana (AAY).
2. Subsidised prices under TPDS and their revision: For a period of three years from the date of commencement of the Act, Foodgrains under TPDS will be made available at subsidised prices of Rs. 3/2/1 per kg for rice, wheat and coarse grains.
3. Identification of Households: The identification of eligible households is to be done by States/UTs under TDPS determined for each State.
4. Nutritional Support to women and children: Children in the age group of 6 months to 14 years and pregnant women and lactating mothers will be entitled to meals as per prescribed nutritional norms under Integrated Child Development Services (ICDS) and Mid-Day Meal (MDM) schemes. Malnourished children up to the age of 6 have been prescribed higher nutritional norms.
5. Maternity Benefit: Pregnant women and lactating mothers will also be receiving maternity benefits of Rs. 6,000.
6. Women Empowerment: For the purpose of issuing ration cards, the eldest woman of the household of age 18 years or above is to be the head of the household.
7. Grievance Redressal Mechanism: Grievance redressal mechanism available at the District and State levels.
8. Cost of transportation & handling of foodgrains and FPS Dealers’ margin: the expenditure incurred by the state on transportation of foodgrains within the State, its handling and FPS dealers’ margin as per norms to be devised for this purpose and assistance to states will be provided by the Central Government to meet the above expenditure.
9. Transparency and Accountability: In order to ensure transparency and accountability, provisions have been made for disclosure of records relating to PDS, social audits, and the setting up of Vigilance Committees.
10. Food Security Allowance: In case of non-supply of entitled foodgrains or meals, there is a provision for food security allowance to entitled beneficiaries.
11. Penalty: If the public servant or authority fails to comply with the relief recommended by the District Grievance Redressal Officer, the penalty will be imposed by the State Food Commission according to the provision.

National Bamboo Mission

Context:
- Recently Union Minister for Agriculture and Farmers’ Welfare has virtually inaugurated 22 bamboo clusters.
About NBM:
- The restructured NBM was launched in 2018-19 for the holistic development of the complete value chain of the bamboo sector and is being implemented in a hub (industry) and spoke model.
- It aims to connect farmers to markets so as to enable farmer producers to get a ready market for the bamboo grown and to increase the supply of appropriate raw material to the domestic industry.
- The Sector Skill Councils established under the National Skill Development Agency (NSDA) will impart skills and recognition of prior learning to traditional artisans, encouraging the youth to carry forward their family traditions.
- NBM also supports local artisans through locally grown bamboo species, which will actualize the goal of Vocal for Local and help increase the income of farmers, reducing dependency on imports of raw material.
Indian Forest Act and Bamboo cultivation:
- The Indian Forest Act 1927 was amended in 2017 to remove bamboo from the category of trees.
- As a result, anyone can undertake cultivation and business in bamboo and its products without the need for a felling and transit permission.
- Import policy has also been modified to ensure the progress of the bamboo industry in the country.

Rashtriya Gokul Mission

Context:
- PM recently inaugurated the following under Rashtriya Gokul Mission:
- Semen Station with state-of-the-art facilities in Purnea, Bihar. IVF lab was established at Animal Sciences University, Patna. Sex sorted semen in artificial insemination by Baroni Milk Union in Begusarai district of Bihar.
About Rashtriya Gokul Mission:
- It is regulated by the Ministry of Agriculture & Farmers Welfare.
- The aim is the conservation and development of indigenous breeds in a focused and scientific manner.
- It is a project under the National Programme for Bovine Breeding and Dairy Development.
- The objectives of this mission include the Conservation of indigenous breeds and their development to improve their genetic makeup, enhancing the milk productivity and distribution of disease-free high genetic merit bulls for natural service.
- Rashtriya Gokul Mission is being implemented through “State Implementing Agencies (SIA) viz Livestock Development Boards.
- The scheme is implemented on a 100% grant-in-aid basis and throughout the country.
It includes:
- Establishment of Integrated Indigenous cattle centres “Gokul Gram”.
- Establishment of Breeder’s societies “Gopalan Sangh”.
- Award to Farmers “Gopal Ratna” and Breeders’ societies “Kamadhenu”.
- Assistance to an institution that are repositories of the best germplasm.

Pesticides Management Bill, 2020

Context:
- Experts have warned that few provisions in this bill will hurt farmers’ livelihood. Therefore, they have called for wider consultations on the bill and asked it to place it before a select committee.
Key issues/provisions highlighted by experts:
- It would not allow the manufacture and export of pesticides not registered for use in India even if these are approved in other countries.
- The bill will increase the import of formulations and will damage the export of agro-chemicals.
- This is against the demands presented by the Ashok Dalwai Committee, constituted in 2018 to promote domestic and indigenous industries and agricultural exports from India. The committee had recommended a reduction in imports and dependence on imported formulations.
- The bill gives powers to Registration Committee (RC) to subjectively review the registration of a pesticide and then suspend, cancel or even ban its usage. This would be done without any scientific evaluation.
- It also provides for the re-registration of pesticides already registered under the erstwhile 1968 Act. This will bring instability to the pesticide industry.
Background:
- The Pesticides Management Bill, 2020 was approved by the Union Cabinet in February this year. It will replace the Insecticides Act, 1968.
Key provisions in the Bill:
- The Bill will regulate the business of pesticides and compensate farmers in case of losses from the use of agrochemicals.
  1. Pesticide Data: It will empower farmers by providing them with all the information about the strength and weaknesses of pesticides, the risk, and alternatives. All information will be available openly as data in digital format and in all languages.
  2. Compensation: The Bill has a unique feature in the form of a provision for compensations in case there is any loss because of the spurious or low quality of pesticides. If required, a central fund will be formed to take care of the compensations.
  3. Organic Pesticides: The Bill also intends to promote organic pesticides.
  4. Registration of Pesticide Manufacturers: All pesticide manufacturers have to be registered and bound by the new Act, once it is passed. The advertisements of pesticides will be regulated so there should be no confusion or no cheating by the manufacturers.

Buffer stock

Context:
- The Union government plans to release 40,000 tonnes of tur dal from its buffer stock into the retail market in small lots, in order to cool down the recent hike in pulses prices.
Key takeaways:
- Major consuming centres (Andhra Pradesh, Kerala, Maharashtra, Bihar and Tamil Nadu) of urad and tur dal have seen a 20% hike in prices recently.
- At an all-India level, the average retail prices of urad have shot up almost 40% in comparison to 2019, while the average retail prices of tur dal have increased by almost 24%.
- The Department of Consumer Affairs (DoCA) has introduced retail intervention.
- It is a mechanism to use the buffer stock of the National Agricultural Cooperative Marketing Federation of India (NAFED).
- For such retail intervention, offer prices are fixed on the basis of MSP itself.
- The DoCA has also decided to release 40,000 metric tonnes of tur from the buffer stock in Open Market Sale (OMS) Scheme in small lots so that the releases may reach the retail market sooner and help in cooling off rising prices.

National Agricultural Cooperative Marketing Federation of India

Registered under: Multi-State Cooperative Societies Act, 2002.
Set up in 1958
Objective: To promote cooperative marketing of agricultural produce to benefit the farmers.
Agricultural farmers are members of the General Body of NAFED, who participate in the decision-making process.

Minimum Support Price

It is the rate at which the government buys grains from farmers.
Objective: To counter the price volatility of agricultural commodities due to the factors like variations in the supply, lack of market integration and information asymmetry.
It is fixed on the recommendations of the Commission for Agricultural Costs and Prices (CACP).

Jute Bags

Context:
- The Cabinet Committee on Economic Affairs has approved that 100% of the food-grains and 20% of the sugar shall be mandatorily packed in diversified jute bags.
Key takeaways:
- The decision also mandates that initially 10% of jute bags for packing food grains would be placed through a reverse auction on the Gem portal.
- The Government has expanded the scope of mandatory packaging norms under the Jute Packaging Material (JPM) Act, 1987.
- The approval will benefit farmers and workers located in the Eastern and North-Eastern regions of the country particularly in West Bengal, Bihar, Odisha, Assam, Andhra Pradesh, Meghalaya, and Tripura.
More about Jute Crop:
- Jute is a rainy season crop.
- Jute requires a warm and humid climate with a temperature between 24° C to 37° C.
- Constant rain or water-logging is harmful.
- The new grey alluvial soil of good depth, receiving salt from annual floods, is best for jute.
- Jute is harvested any time between 120 days to 150 days when the flowers have been shed, early harvesting gives good healthy fibers.

Subsidised fertiliser bags

Context:
- The Centre to cap the number of subsidised fertiliser bags.
- The Centre is working on a plan to cap the number of subsidised fertiliser bags that individual farmers can buy in any cropping season.
Current Status:
- Currently, the government is following a “no-denial” policy: anybody, non-farmers included, can buy any quantity of fertiliser through POS machines.
- All they have to do is furnish their Aadhaar unique identity number.
- The quantities purchased, along with the person’s name and biometric authentication, are then registered on the POS device that is linked to the ‘e-Urvarak’ online platform of the Department of Fertilisers.
- The only restriction is that nobody can buy more than 100 bags of all fertilisers at one time.
- The subsidy on the total quantity of fertilisers sold to farmers through a retailer’s POS machine is transferred to the company concerned on a weekly basis.
- In the event of capping, the machine/platform will stop registering the extra bags that would perforce have to be retailed at the non-subsidised MRPs.

Accelerated Irrigation Benefits Programme (AIBP)

Context:
- Recently, the Public Accounts Committee submitted its report on the Accelerated Irrigation Benefits Programme (AIBP).
Accelerated Irrigation Benefits Programme (AIBP):
- Central Government launched the AIBP in the year 1996-97 to provide CentralAssistance to major/medium irrigation projects in the country.
- It is being implemented by the Ministry of Jal Shakti.
Objectives:
- To accelerate the implementation of such projects which were beyond the resource capability of the states.
- To focus on faster completion of ongoing Major and Medium Irrigation including National Projects.
About:
- After the launch of Pradhan Mantri Krishi Sinchai Yojana (PMKSY) in 2015-16, AIBP became a part of PMKSY.
- PMKSY aims to ensure access to some means of protective irrigation to all agricultural farms in the country, to produce ‘per drop more crop’, thus bringing much desired rural prosperity.
- AIBP component of PMKSY focuses on major and medium irrigation projects that involve an area of more than 2000 hectares.
- Since its inception, 297 Irrigation / Multi-Purpose Projects have been included for funding under AIBP.

National Food Security Act

Context:
- NITI Aayog had asked the Ministry of Statistics and Program Implementation (MoSPI) to undertake “an exercise of ascertaining the new State/UT-specific coverage ratios for rural and urban areas”.
Present Coverage:
- At present, NFSA covers up to 75 percent of the rural population and 50 percent of the urban population in the country. Based on this, state-wise coverage under NFSA was determined by the erstwhile Planning Commission—now NITI Aayog—by using the National Sample Survey Household Consumption Expenditure Survey data for 2011-12. Since then, the state-wise coverage ratio has not been revised.
Statewise coverage:
- Currently, Manipur has the highest coverage in rural areas across the country (88.56 percent), while Andaman & Nicobar Islands have the lowest (24.94 percent).
- Manipur is followed by Jharkhand (86.48 percent), Bihar (85.12 percent), and Chhattisgarh (84.25 percent).
Features of NFSA, 2013:
- Coverage and entitlement under Targeted Public Distribution System (TPDS): Upto 75% of the rural population and 50% of the urban population will be covered under TPDS, with a uniform entitlement of 5 kg per person per month. However, since Antyodaya Anna Yojana (AAY) households constitute the poorest of the poor, and are presently entitled to 35 kg per household per month, the entitlement of existing AAY households will be protected at 35 kg per household per month.
- State-wise coverage: Corresponding to the all India coverage of 75% and 50% in the rural and urban areas, State-wise coverage will be determined by the Central Government. Planning Commission has determined the State-wise coverage by using the NSS Household Consumption Survey data for 2011-12 and also provided the State-wise “inclusion ratios”.
- Subsidised prices under TPDS and their revision: Foodgrains under TPDS will be made available at subsidised prices of Rs. 3/2/1 per kg for rice, wheat, and coarse grains for a period of three years from the date of commencement of the Act. Thereafter prices will be suitably linked to Minimum Support Price (MSP).
- Identification of Households: Within the coverage under TPDS determined for each State, the work of identification of eligible households is to be done by States/UTs.
- Nutritional Support to women and children: Pregnant women and lactating mothers and children in the age group of 6 months to 14 years will be entitled to meals as per prescribed nutritional norms under Integrated Child Development Services (ICDS) and Mid-Day Meal (MDM) schemes. Higher nutritional norms have been prescribed for malnourished children up to 6 years of age.
- Maternity Benefit: Pregnant women and lactating mothers will also be entitled to receive maternity benefits of not less than Rs. 6,000.
- Women Empowerment: Eldest woman of the household of age 18 years or above to be the head of the household for the purpose of issuing ration cards.
- Grievance Redressal Mechanism: Grievance redressal mechanism at the District and State levels. States will have the flexibility to use the existing machinery or set up a separate mechanism.
- Cost of intra-State transportation & handling of foodgrains and FPS Dealers' margin: Central Government will provide assistance to States in meeting the expenditure incurred by them on transportation of foodgrains within the State, it's handling, and FPS dealers’ margin as per norms to be devised for this purpose.
- Transparency and Accountability: Provisions have been made for the disclosure of records relating to PDS, social audits, and the setting up of Vigilance Committees in order to ensure transparency and accountability.
- Food Security Allowance: Provision for food security allowance to entitled beneficiaries in case of non-supply of entitled foodgrains or meals.
- Penalty: Provision for a penalty on public servant or authority, to be imposed by the State Food Commission, in case of failure to comply with the relief recommended by the District Grievance Redressal Officer.

Agricultural exports

Context:
- Commodity-wise foreign trade data from the department of commerce shows exports of farm goods from India during April-September have grown amid an overall decline.
Key highlights:
- The star performer has been rice, with the value of shipments increasing by well over a third to $4.08 billion in April-September. The growth has come more from the non-basmati rather than the basmati segment.
- Another agri-commodity that is on course to post all-time-high exports in 2020-21 is sugar.
- A third commodity whose exports have done well this year, and the prospects also look good, is cotton. In the 2019-20 season (October-September), India exported 50 lakh bales of the natural fiber, compared to 42 lakh bales in the preceding year.

What led to a boost in Indian Agri exports?
- The recovery in global prices — courtesy a combination of demand revival from unlocks
- continuing supply chain disruptions (including from a shortage of shipping containers),
- Chinese stockpiling (in anticipation of a fresh corona outbreak during the winter)
- Dry weather in producer countries such as Thailand, Argentina, Brazil, and Ukraine.
Broader trend:
- The general story in most agri-commodities is that world prices, which were hardening in the months just before the pandemic and then crashed with lockdown measures imposed by most countries, have since resumed their earlier trajectory.
- This is captured by the UN Food and Agriculture Organization’s (FAO) Food Price Index which has risen every single month since June to touch 100.9 points in October.
FAO's Food Price Index:
- The FAO Food Price Index (FFPI) is a measure of the monthly change in international prices of a basket of food commodities.
- It consists of the average of five commodity group price indices weighted by the average export shares of each of the groups over 2014-2016.

Top 10 list of agricultural produce exporters

Context:
- India broke into the top 10 list of agricultural produce exporters in 2019 with a sizeable share in the export of rice, cotton, soya beans, and meat, according to a World Trade Organization (WTO) report on the trends in world agricultural trade in the past 25 years.
About:
- In 2019, Mexico and India, with 3.4% and 3.1% share in global Agri exports, respectively, replaced Malaysia (7th) and New Zealand (9th) as the largest exporters.
- The US, which topped the list in 1995 (22.2%), was overtaken by the European Union in 2019 (16.1%).
- The top rice exporters in 1995 included Thailand (38%), India (26%), and the US (19%).
- In 2019, India (33%) overtook Thailand (20%) to top the list.
- India is also the third-largest cotton exporter (7.6%), and the fourth-largest importer (10%) in 2019.
- In the largest traded Agri product, soya beans, India (0.1%) has a meagre share but was ranked ninth in the world.
- In the “meat and edible meat offal” category, India was ranked eighth in the world with a 4% share in global trade.
- While India was the seventh-largest wheat and meslin exporter in 1995, it does not feature in the top 10 list in 2019.
- However, India lagged as a value-added contributor to world Agri exports.
- India’s share of foreign value-added content in its Agri exports was also low at 3.8% primarily due to high tariffs on Agri imports to protect the domestic market.

Ethanol production

Context:
- The Union Cabinet approved a modified scheme for interest subvention for ethanol production, expanding the scheme to include grain-based distilleries and not just molasses-based ones.
About:
- The decision would encourage ethanol production from grains like barley, maize, corn, and rice.
- The expenditure on the scheme would be ₹8,470 crores.
- The government would bear interest subvention for five years including a one-year moratorium against the loan availed by project proponents from banks @ 6% per annum or 50% of the rate of interest charged by banks whichever is lower
- The scheme would boost production and distillation capacity to 1,000 crore liters and help in meeting the goal of 20% ethanol blending with petrol by 2030.
- The proposed intervention would enhance the production of 1G [first generation] ethanol from various feedstocks.
- It helps in achieving blending targets of ethanol with petrol and would promote ethanol as a fuel that is indigenous, non-polluting, and virtually inexhaustible.
- It would improve the environment and the eco-system and result in savings on Oil Import Bill.
- It will also ensure timely payment of dues to farmers.

Subsidy on sugar exports

Context:
- The government approved a subsidy of ₹3,500 crores to sugar mills for the export of 60 lakh tonnes of sweetener during the ongoing marketing year 2020-21 as part of its efforts to help them clear outstanding dues to sugarcane farmers.
About:
- The subsidy is approved by Cabinet Committee on Economic Affairs (CCEA).
- The subsidy amount will directly be given to farmers.
- The decision will benefit five crore farmers.
- The sugar industry as well as sugarcane farmers are in crisis because of high domestic production at 310 lakh tonnes as against the annual demand of 260 lakh tonnes.
- India, the world’s second-largest sugar-producing country, had to offer export subsidies during the last two years to reduce surplus stocks and help cash-starved sugar mills clear cane payment to growers
WTO’s Subsidies and Countervailing Measures (SCM) Agreement:
- Prohibits subsidies that are contingent upon export performance.
- According to the agreement, India was only exempt from this provision until its Gross National Product per capita per annum reached $1,000.

Apiculture

Context:
- Prices of raw honey had crashed like never before.
- 10 out of 13 honey brands fail ‘purity test’, finds CSE investigation
About:
- Apiculture is the scientific method of rearing honeybees for the production of honey and wax.
- India currently has 3.4 million bee colonies but has a potential of about 200 million bee colonies based on the area of cultivation.
- In India, honey standards are set by FSSAI.
- A recent study found that fructose and glucose imports from china are used as adulterants.
- Most of the brands passed muster but when subjected to one test, called Nuclear Magnetic Resonance (NMR, which can ascertain the composition of a product at the molecular level) that was done at a lab in Germany, only three brands (spanning six samples) passed.
- The NMR test is not required by Indian law for honey that is being marketed locally but is needed for export.

Only organic farming allowed in Lakshadweep

Context:
- The entire Lakshadweep group of islands has been declared as an organic agricultural area under the Participatory Guarantee System (PGS) of India.
Coconut farming:
- With the entire Lakshadweep group of islands being declared an organic agricultural area, the island administration is eyeing an expansion of the traditional business in coconut and coconut products through value addition, better marketing, and round-the-year processing.
- The total acreage under coconut is around 2,800 hectares.
- The nuts are processed now mostly for oil and the islands being declared an organic agricultural area will give a big boost to their business.
- The coconut processing industry also works only for about six months a year when the weather is dry.
‘One District One Product’ program:
- The island’s coconut farmers are also expected to benefit from the Union government’s ‘One District One Product’ program of food processing in which the entire island is being considered as a single district and coconut oil has been identified as the product.
- Financial support for the program will help augment the coconut industry on the island.
Participatory Guarantee System:
- PGS is a process of certifying organic products, which ensures that their production takes place following laid-down quality standards.
- It is implemented by the Ministry of Agriculture and Farmers’ Welfare.
- It is only for farmers or communities that can organize and perform as a group within a village or a cluster of contiguous villages, and is applicable only to farm activities such as crop production, processing, and livestock rearing, and off-farm processing “by PGS farmers of their direct products”.

Coffee production in India

Context:
- Untimely rains and hailstones that lashed plantations in the last six days causing large-scale berry dropping are expected to impact arabica and robusta coffee production by 30% for the 2020-21 crop year.
About:
- Coffee production in India is dominated in the hill tracts of South Indian states, with Karnataka accounting for 71%, followed by Kerala with 21%, and Tamil Nadu (5% of overall production with 8,200 tonnes).
- Indian coffee is said to be the finest coffee grown in the shade rather than direct sunlight anywhere in the world.
- Almost 80% of Indian coffee is exported.
- The two well-known species of coffee grown are the Arabica and Robusta.
- The first variety that was introduced in the Baba Budan Giri hill ranges of Karnataka in the 17th century

Deep-sea trawling

Context:
- The Kerala government has invalidated the Kerala Shipping and Inland Navigation Corporation’s (KSINC) controversial agreement with a U.S.-based firm, EMCC International, to build and operate a deep-sea trawling fleet to harvest the marine wealth off the coast of Kerala.
About:
- Trawlers are medium-sized ships with nets that sweep the ocean floors, scraping it off en masse with all life forms.
- Adding to this is the fine mesh size of the nets that do not let juveniles and sometimes even eggs and larvae escape.
- Trawlers are the main reason for turtle mortalities.
- They are either caught in nets and drown or get hit by propellers. Both cause fatalities
- Several conservationists and activists have called for a complete ban on trawl nets as they indiscriminately destroy all forms.
- India is amongst the biggest producers of fish in the world and yet we don’t have sound mechanisms to manage destructive gear like trawlers.

Conclusive land titling

Context:
- The Centre wants to reform the country’s land markets through a fundamental legal and procedural shift in how land titles are awarded.
What system is used in India?
- India currently follows a system of presumptive land titling.
- This means that land records are maintained, with information on possession, which is determined through details of past transactions.
- Ownership, then, is established based on current possession.
- Registration of land is the registration of transactions, such as sale deeds, records of inheritance, mortgage, and lease.
- Holding registration papers does not involve the government or the legal framework guaranteeing the ownership title of the land.
What is a conclusive land titling system:
- Under a conclusive land titling system, land records designate actual ownership.
- The title is granted by the government, which takes the responsibility for accuracy.
- Once a title is granted, any other claimant will have to settle disputes with the government, not the titleholder.
- Further, under conclusive land titling, the government may provide compensation to claimants in case of disputes, but the titleholder is not in any danger of losing ownership.
Why is conclusive land titling needed?
- The main advantage is that a conclusive system will drastically lower litigation related to land.
- Long-running court cases currently stifle the appetite for investment in many sectors of the economy.
- Land disputes and unclear titling also create hurdles for infrastructure development and housing construction, leading to costly delays and inefficiency.
- In cities, urban local bodies depend on property taxes that can be levied properly only if there is clear ownership data available.
- Ambiguity in ownership also results in a black market for land transactions, which deprives the government of taxes.
- In rural areas, the need is even more acute.
- Access to agricultural credit is dependent on the ability to use the land as collateral.
- Without being able to prove their ownership of land and access formal credit from banks, small and marginal farmers are often left at the mercy of unscrupulous moneylenders, entrenching themselves in a mountain of debt.
Benefits of the new system:
- Once conclusive titling is in place, investors who want to purchase land for business activities will be able to do so without facing the constant risk that their owners may be questioned and their entire investment may go to waste.
- The idea is to promote an active land market.

Labour issues in sugarcane producing states

Context:
- A recent study has raised the issue of “ambiguity about definitions of child labor and forced labor” related laws in India, especially for sugarcane-producing states.
Sugarcane production in India:
- In India, sugarcane is primarily grown and cultivated in Bihar, Karnataka, Maharashtra, Punjab, and Uttar Pradesh.
- Of these, Uttar Pradesh is the largest sugarcane producer and accounts for nearly 40% of the cash crop grown in the country.
- It is followed by Maharashtra and Karnataka, which account for 21% and 11% of the total domestic production.
About the recent study:
- The joint study, commissioned by the United Nations Development Programme (UNDP) and The Coca-Cola Company has noted that in some of the sugarcane producing states, such as Karnataka and Uttar Pradesh, authorities discounted underage child labor as “children helping parents in the field”.
- There are also issues of exploitation of migrant workers, depriving them of adequate livelihood.
- Forced/bonded labor is also another perennial issue that needs attention.
- Most of the interventions in the sugarcane sector were focused just on “improving farming techniques to ensure an increase in cane productivity”.

Fertilizer prices and subsidy

Context:
- The Centre has decided to extend the existing nutrient-based subsidy (NBS) rates of 2020-21 for the current fiscal as well.
Recent fertilizer price hike:
- Indian Farmers Fertiliser Cooperative (Iffco), the country’s largest nutrient seller raised its maximum retail price (MRP) for Diammonium phosphate (DAP) from Rs 24,000 to Rs 38,000 per tonne.
- This is because of the steep rise in international prices of fertilizers as well as raw materials.
What will be the impact of a non-urea fertilizer price hike?
- Indian farmers apply too much urea and too few other fertilizers.
- The current spike in prices of non-urea fertilizers may worsen this imbalance.
- The government should raise the subsidy rates on these nutrients and simultaneously hike urea prices.
Nutrient-Based Subsidy (NBS):
- The scheme, initiated in the year 2010, allows the manufacturers, marketers, and importers to fix the MRP of the Phosphatic and Potash fertilizers at reasonable levels.
- The government gives subsidies on each grade of phosphatic and potassic (P&K) fertilizer depending upon its nutrient content.
- The government also give additional subsidy on secondary and micro-nutrients.
- NBS policy intends to increase the consumption of P&K fertilizers so that optimum balance (N:P: K= 4:2:1 ) of NPK fertilization is achieved.
Fertilizer reforms needed:
- The provision for fertilizer subsidy during 2021-22 is kept at Rs 79,530 crore.
- According to Economic Survey FY16, as much as 24% of the subsidy is spent on inefficient producers, 41% is diverted to non-agricultural uses including smuggling to neighbouring countries, and 24% is consumed by larger, presumably richer farmers.
- That leaves a tiny 11% for small and marginal farmers who should be getting the maximum benefit.
- The Commission for Agricultural Costs and Prices (CACP), in its rabi report for the 2021-22 marketing year, has recommended giving Rs 5,000 per year to every farmer, having less than 2 hectares.

Production-linked incentive (PLI) scheme for food processing

Context:
- Recently, the cabinet cleared the Rs 10,900-crore PLI scheme for food processing.
Objectives of the Scheme:
- Support creation of global food manufacturing champions;
- Strengthen select Indian brand of food products for global visibility;
- Increase employment opportunities of off-farm jobs,
- Ensuring remunerative prices of farm produce and higher income to farmers.
Impact of the scheme:
- It would facilitate the expansion of processing capacity to generate processed food output of Rs 33,494 crore.
- Create employment for nearly 2.5 lakh persons by the year 2026-27.
Implementation of the Scheme:
- The Scheme would be monitored at Centre by the Empowered Group of Secretaries chaired by the Cabinet Secretary
- Ministry of Food Processing Industries would approve the selection of applicants for coverage under the scheme, sanction, and release of funds as incentives.
- The Ministry will prepare an Annual Action Plan covering various activities for the implementation of the scheme.
- A third-party evaluation and mid-term review mechanism would be built into the program.

National Programme for Organic Production (NPOP)

Context:
- India begins exports of organic millets grown in the Himalayas to Denmark
About the export:
- APEDA, in collaboration with Uttarakhand Agriculture Produce Marketing Board (UKAPMB) and Just Organik, an exporter, has sourced & processed ragi (finger millet), and jhingora (barnyard millet) from farmers in Uttarakhand for exports
- Millets are unique agricultural products from India which have significant demand in the global market
- The exports of millets to Denmark would expand exports opportunities in European countries
- The exports would also support thousands of farmers that are getting into organic farming
About NPOP:
- At present, organic products are exported provided they are produced, processed, packed and labeled as per the requirements of the National Programme for Organic Production (NPOP)
- The NPOP has been implemented by APEDA since its inception in 2001 as notified under the Foreign Trade (Development and Regulations) Act, 1992
- The NPOP certification has been recognized by the European Union and Switzerland which enables India to export unprocessed plant products to these countries without the requirement of additional certification
- NPOP also facilitates the export of Indian organic products to the United Kingdom even in the post Brexit phase
- NPOP has also been recognized by the Food Safety Standard Authority of India (FSSAI) for the trade of organic products in the domestic market
- Organic products covered under the bilateral agreement with NPOP need not be recertified for import in India.

India's Agriculture Trade (Summary for 2020-21)

Context:
- Recently, Secretary, Department of Commerce, Government of India Dr Anup Wadhawa said that Agriculture Exports have performed well during 2020-21.
About:

After remaining stagnant for the past three years, the export of agriculture and allied products during 2020-21 jumped to $ 41.25 billion, indicating an increase of 17.34%.
India’s agricultural and allied imports during 2020-21 are $ 20.67 billion.
Despite COVID-19, the balance of trade (exports minus imports) in agriculture in 2020-21 is $ 20.58 billion.
The largest markets for India’s agriculture products are the USA, China, Bangladesh, UAE, Vietnam, Saudi Arabia, Indonesia, Nepal, Iran, and Malaysia.
Among the key agriculture commodities exported from India were marine products, rice, buffalo meat, spices, etc.
The organic exports during 2020-21 were $ 1.04 billion against $ 0.69 million in 2019-20, registering a growth of 50.94%.
Organic exports include oil cake/ meals, oilseeds, cereals and millets, spices and condiments, tea, medicinal plant products, dry fruits, sugar, pulses, coffee, etc.

Black rice

Context:
- Chandauli in Uttar Pradesh is one of India’s four most progressed districts since the beginning of the Aspirational Districts Programme, according to the United Nations Development Programme (UNDP)’s latest appraisal report
- Among the best practices that pushed Chandauli’s progress was the black rice experiment in the district
Black rice origin and cultivation in India:
- Black rice is said to have roots in ancient China, where it is called ‘forbidden rice’ and was believed to be exclusive for royal consumption.
- In India, however, black rice or chak-hao (delicious rice) has been indigenous to Manipur for centuries.
- Until some years ago, the crop was mostly consumed locally with little export.
- But better price realization and growing international demand on account of numerous health benefits have attracted farmers across the country to cultivate black rice.
- There are also some difficulties in growing black rice as it’s completely organic requiring lots of manual labor
Black rice in Chanduali:

Chanduali started producing the ‘healthier’ black rice in 2018.
This commodity is now being exported to Australia and New Zealand, with options of other countries also being explored.
The project is being seen as a huge success due to high demand and good profit margin on black rice in global markets.
The cultivation of black rice in areas around Chandauli, which is called the ‘rice bowl of eastern UP’, received a major boost after it was branded and marketed the product in the neighboring district of Mirzapur as ‘Vindhya black rice’.
Moreover, its cultivation has been promoted under various schemes such as ‘One District-One Product’ and ‘Export Policy 2020-25’.
These schemes aim at doubling farmers’ income and increasing exports from various sectors including agriculture.
However, despite high returns, farmers in Chandauli are facing the problem of marketing black rice due to the non-availability of its GI (geographical indication) tag to the region.
Manipur was awarded the GI tag for black rice last year.

Benefits of black rice:

It contains a compound called ‘anthocyanins’, responsible for its black color and grants its powerful anti-inflammatory, antioxidant, and anti-cancer properties.
It also contains important carotenoids known for improving eye health.
Moreover, it is also naturally gluten-free and rich in protein, iron, vitamin E, calcium, magnesium, natural fiber, hence promoting weight loss.
It is known to be a natural detoxifier and its consumption helps in the prevention of ailments such as atherosclerosis, diabetes, Alzheimer’s, hypertension, among others.

Beed model of crop insurance

Context:
- Recently, Maharashtra Chief Minister met Prime Minister and asked him for state-wide implementation of the ‘Beed model’ of the crop insurance scheme Pradhan Mantri Fasal Bhima Yojana (PMFBY).
About PMFBY:
- Launched in 2016, the flagship PMFBY insures farm losses against inclement weather events.
- Farmers pay 1.5-2% of the premium with the rest borne by the state and central governments.
- It is a central scheme implemented by state agriculture departments as per central guidelines.
- For farmers, the low rate of premium and relatively decent coverage make the scheme attractive.
- Since 2020, it has been optional for all farmers.
Concerns regarding the scheme:
- Delay in claim settlement
- Failure to recognize localized weather events
- Stringent conditions for claims
- Alleged profiteering by insurance companies
Problems in the Beed region:
- Located in the drought-prone Marathwada region, the district of Beed presents a challenge for any insurance company.
- Farmers here have repeatedly lost crops either to failure of rains or too heavy rains.
- Given the high payouts, insurance companies have sustained losses.
- The state government had a difficult time getting bids for tenders to implement the scheme in Beed.
- During the 2020 Kharif season, tenders for implementation did not attract any bids.
Beed model:
- State Agriculture Department tweaked the guidelines for the district.
- The state-run Indian Agricultural Insurance Company implemented the scheme.
- Under the new guidelines, the insurance company provided a cover of 110% of the premium collected, with caveats.
- If the compensation exceeded the cover provided, the state government would pay the bridge amount.
- If the compensation was less than the premium collected, the insurance company would keep 20% of the amount as handling charges and reimburse the rest to the state government.
- In a normal season where farmers report minimal losses, the state government is expected to get back money that can form a corpus to fund the scheme for the following year.
- However, the state government would have to bear the financial liability in case of losses due to extreme weather events.

Minimum support price (MSP)

Context:
- Recently, center announced a hike in MSP for paddy, pulses, oilseeds
About the recent hike:
- In a bid to encourage crop diversification, there were slightly higher increases in the MSP for pulses, oilseeds, and coarse cereals.
- Concerted efforts were made over the last few years to realign the MSPs in favor of oilseeds, pulses, and coarse cereals to encourage farmers to shift to the larger area under these crops and adopt the best technologies and farm practices, to correct the demand-supply imbalance.
- The added focus on Nutri-rich Nutri-cereals is to incentivize its production in the areas where rice-wheat cannot be grown without long term adverse implications for groundwater table.
- This year, the MSP for bajra was set at 85% above the cost of production, while the MSP for urad and tur will ensure 60% returns.
- The MSPs for the remaining crops were mostly set around the stipulated 50% above the cost of production
About MSP:
- The MSP is the rate at which the government purchases crops from farmers, and is based on a calculation of at least 1.5 times the cost of production incurred by the farmers.
- MSP is recommended by Commission for Agricultural Costs & Prices (CACP) for 22 mandated crops and fair & remunerative price (FRP) for sugarcane.
- 14 crops of Kharif season, 6 crops of rabi season and 2 other commercial crops are mandated crops
- The decision will be taken by the Cabinet Committee on Economic Affairs
- It is not backed by law.
- Farm Unions have been demanding legislation to guarantee MSP for all farmers for all crops.

Madurai Malli

Context:
- GI certified Madurai Malli and other traditional flowers like button rose, Lilly exported to the USA and Dubai from the three districts of Tamil Nadu.
About:
- Madurai Malli, a popular jasmine flower known for its fragrance, was given GI recognition in 2013.
- GI protection prevents producers of similar flowers in other regions from using the specific tag and helps growers in the specific region preserve their identity in the local and global market.
Export of flowers during 2020-21
- During 2020-21, fresh jasmine and other traditional flower bouquets were exported to countries like the USA, UAE, Singapore, and many other countries, which valued around Rs. 66.28 crores.
- Out of which, Tamil Nadu managed to export the traditional flowers worth Rs. 11.84 crores through the major airports of Chennai, Coimbatore, and Madurai.
- Jasmine flower is very famous in Madurai and around Tamil Nadu.
- Madurai has also evolved as the 'jasmine capital' of India in recent times.
Impact of COVID-19 on Floriculture
- Amid the ongoing coronavirus pandemic, the floriculture sector is also badly affected due to the restrictions on religious places, social gatherings, and celebrations.
- According to ICAR data, the floriculture sector was expanding only at a rate of 7% while the trade in the sector was rising at a rate of 10% per annum earlier.
- Many farmers have the crops in the field as there is no labor, transport, or demand.

Pokkali farming

Context:
- Kochi-based Agronature mulls promoting organic rice planting through Pokkali farming
About:
- Pokkali is an integrated rice-fish rotational complementary farming system in the saline backwaters of Alappuzha, Ernakulam, and Thrissur.
- The rice varieties are salt-tolerant and adapted to submergence.
- The brand Pokkali already has bagged a geographical indication (GI) tag.
- Pokkali farming is more than preserving a farming heritage; it holds the clue to a sustainable and secure food future for India.
- It is of great interest to the responsible tourism community as well.
- Further, conserving this traditional variety also forms the basis for the efforts to address climate change-related issues such as sea-level rise and saline water intrusion.

MACS 1407- A high-yielding and pest-resistant variety of Soybean

Context:
- Scientists from MACS- Agharkar Research Institute (ARI) Pune in collaboration with the Indian Council of Agricultural Research (ICAR) have developed a variety of Soybean called MACS 1407
About:
- It is developed using the conventional cross-breeding technique which gives 39 quintals per hectare making it a high yielding variety and is also resistant to major insect-pests
- Its thick stem, higher pod insertion (7 cm) from the ground, and resistance to pod shattering make it suitable even for mechanical harvesting.
- It is suitable for rain-fed conditions of northeast India
- It is also suitable for cultivation in the states of Assam, West Bengal, Jharkhand, Chhattisgarh
- Its seeds will be made available to farmers for sowing during the 2022 Kharif season

The mission for Integrated Development of Horticulture (MIDH)

Context:
- The Ministry of Agriculture and Farmers Welfare has provided an enhanced allocation of Rs. 2250 Crore for the year 2021-22 for ‘Mission for Integrated Development of Horticulture (MIDH)
About the scheme:
- It is a Centrally Sponsored Scheme for the holistic growth of the horticulture sector
- The government of India (GoI) contributes 60% of the total outlay, 40% share is contributed by State Governments.
- In the case of the North-Eastern States and the Himalayan States, GoI contributes 90%.
- It is under Green Revolution – Krishonnati Yojana
- It is being implemented by the Ministry of Agriculture and Farmers Welfare with effect from 2014-15
The Mission includes the following sub-schemes:
- National Horticulture Mission (NHM)
- National Horticulture Board (NHB)
- Horticulture Mission for North East & Himalayan States (HMNEH)
- Coconut Development Board (CDB)
- Central Institute for Horticulture (CIH)
- National Bamboo Mission (NBM)

Minimum support price (MSP)

Context:
- Farmer unions protesting on Delhi’s borders are raising two fundamental demands. One of them is to provide a legal guarantee for the minimum support prices (MSPs) that the Centre declares for various crops every year.
What is MSP?
- The MSP is a minimum price guarantee that acts as a safety net or insurance for farmers when they sell particular crops.
- These crops are procured by government agencies at a promised price to farmers and the MSP cannot be altered in any given situation.
- The concept of MSP, therefore, protects the farmers in the country in situations where crop prices fall drastically.
- Wheat and rice are among the top crops that are procured by the government at MSP from the country’s farmers.
- A total of 22-23 crops are procured under MSP.
Who Sets MSP?
- The MSP is set by the central government for select crops, based on recommendations it receives from the Commission for Agricultural Costs and Prices (CACP).
How did MSP come into existence?
- MSP-based procurement by the government has its origin in the rationing system introduced by the British during World War II.
- A department of food came up in 1942.
- After Independence, it was upgraded into the ministry of food.
- Those were the times when India faced acute food shortages.
- When the Green Revolution started in the 1960s, India was actively looking to shore up its food reserves and prevent shortages.
- The MSP system finally started in 1966-67 for wheat and was expanded further to include other essential food crops.
- This was then sold to the poor under subsidized rates under the public distribution system.
MSP and law:
- MSP finds no mention in any law even if it has been around for decades.
- While the government does declare the MSP twice a year, there is no law making MSP mandatory.
- What this technically means is that the government, though it buys at MSP from farmers, is not obliged by law to do so.
- As a matter of fact, no law says that MSP can be imposed on private traders as well.
Present issue:
- The three farm bills that have been introduced by the government have little to do with MSP.
- Farmers are demanding a written promise on MSP from the government as they are afraid that corporates will start exploiting them in the absence of a minimum support price.

Wheat exports

Context:
- The US Department of Agriculture (USDA) upped its forecast of Indian wheat exports for 2020-21 (July-June) to 1.8 million tonnes (mt), as against its earlier estimate of one mt.
- That would be the highest ever in the last six years.
About:
- After rice, India is set to turn a major exporter of wheat as well – thanks to surging international prices from Chinese stockpiling and ultra-low interest rate money increasingly finding its way into agri-commodity markets.
- The trebling of shipments this year is mainly on the back of rising global prices.
The issue of MSP:
- Traders, however, believe that Indian wheat is still not competitive at the government’s minimum support price (MSP) of Rs 19,750 per tonne.
- The export price of wheat bought in Gujarat at that rate – after adding roughly Rs 1,200 towards the cost of cleaning, bagging, loading, and transport to Kandla or Mundra port – would be Rs 20,950 per tonne.
- That works out to $286 per tonne or $290-plus, after adding exporter margins.
- The above price is higher than the $275-280 that major exporters such as Australia, France, the US, Russia, and Canada are quoting for March-April shipments.
- In all, given our MSP, we are $25 or so per tonne costlier today.

World food price index

Context:
- World food prices rose for a seventh consecutive month in December, with all the major categories, barring sugar, posting gains last month, the United Nations food agency said.
About:
- The Food and Agriculture Organization’s (FAO) food price index is a measure of the monthly change in international prices of a basket of food commodities.
- It consists of the average of five commodity group price indices [cereal, vegetable, dairy, meat, and sugar], weighted with the average export shares.
- It is composed of 55 commodity quotations and is updated monthly.

Bhut Jolokia

Context:
- Recently, Bhut Jolokia, one of the hottest chilies in the world, was exported from Nagaland to London for the first time.
About:

Bhoot Jolokia is an interspecific hybrid chili pepper grown in Northeast India.
The term bhoot translates to ghost.
In Assam, chili is known as Jolokia.
The chili’s name denotes its extreme spiciness and heat.
It is also known as “Raja Mircha” or king chili from Nagaland, Bhut Jolokia got its GI certification in 2008
Bhut or Bhoot Jolokia is considered the world's hottest chili based on the Scoville Heat Units (SHU)
Because of their perishable nature, exporting the Bhut Jolokia proved to be a challenge.
To facilitate the export, APEDA, the apex body which promotes the export of agricultural products from the country, collaborated with the Nagaland State Agricultural Marketing Board.
It is a major boost to exports of Geographical Indications (GI) products from the north-eastern region
Used as food and spice in both fresh and dried forms, it is also known for its medical properties.

Bhalia wheat

Context:
- Recently, the first shipment of Geographical Indication (GI) certified Bhalia variety of wheat was exported to Kenya and Sri Lanka from Gujarat.
About:

The GI-certified wheat has high protein content and is sweet.
The crop is grown mostly across the Bhal region of Gujarat, including Ahmedabad, Anand, Kheda, Bhavanagar, Surendranagar, Bharuch districts.
The unique characteristic of the wheat variety is that grown in rainfed conditions and cultivated in about two lakh hectares in Gujarat.
The Bhalia variety of wheat received GI certification in July 2011.
The registered proprietor of GI certification is the Anand Agricultural University, Gujarat.
This is expected to give boost wheat exports, said a press release from the Agricultural and Processed Food Products’ Authority o India (APEDA).

Wheat exports:

In 2020-21, wheat exports witnessed a significant growth of 808%.
In US dollar terms, the exports rose by 778% to $ 549 million.
India exported a substantial quantity of grain to seven new countries – Yemen, Indonesia, Bhutan, Philippines, Iran, Cambodia, and Myanmar during 2020-21.
In the previous financial years, only small quantities of wheat were exported to these countries.

ICAR and NICRA

Indian Council of agricultural research (ICAR) is an autonomous body Responsible for coordinating agricultural education and research in India.
It reports to the Department of agricultural research and education, Ministry of agriculture.
The union minister of agriculture serves as its president.
It is the largest network of agricultural research and education institutes in the world.
National innovations of climate-resilient agriculture (NICRA) has been launched by ICAR in 2011.

Krishi Vigyan Kendra

The name means “farm Science Centre”.
The Centre serves as the ultimate link between the Indian Council of agricultural research and farmers.
The Centre is usually associated with a local agricultural University.
It aims to apply agricultural research and practical localised setting.
As of January 2020, there were approximately 716 KVKs throughout India.

Karan- 4

It is a sugar cane variety that has enhanced sugar recovery and has replaced traditionally grown varieties in Uttar Pradesh.

Kisanrath

It is an app launched by the Department of Agriculture, Cooperation, and Farmers Welfare.
Developed by the National Informatics Centre.
It will facilitate farmers and traders to identify suitable transport facilities for the movement of farm produce during coronavirus lockdown.
The App will allow transportation of farm produce from farm gate to mandi and from one to another mandi.
It will ensure seamless supply linkages between farmers, FPOs, APMC mandis and intra-state and interstate buyers.

Stevioside

It is a natural plant-based glycoside found in the leaves of Honey yerba.
It is widely used as a non-caloric natural sweetener.
Why in News?
Researchers recently found that Stevioside when coated on nanoparticles can increase the efficiency of Magnetic hyperthermia-mediated cancer therapy (MHCT).

Swarna Sub1

Farmers in flood-prone areas of Assam have been harvesting the water-resistant Swarna Sub1 rice variety, developed by the Indian Council of Agricultural Research and the Manila-based International Rice Research Institute, since 2009.

Pokkali variety of rice

The pokkali variety of rice is known for its saltwater resistance and flourishes in the rice paddies of coastal Kerala districts.
The uniqueness of the rice has brought it the Geographical Indication (GI) tag and is the subject of continuing research.
The organically-grown Pokkali is famed for its peculiar taste and its high protein content

Kisan Rail

Indian Railways will introduce “Kisan Rail”, a special Parcel Train from Devlali (Maharashtra) to Danapur (Bihar).
It is in pursuance of an announcement made by the Finance Minister in Union Budget 2020-21.
It is expected that the train will provide a seamless supply chain of Perishable produce, which will be a great help to the farmers.

Agricultural and Processed Food Products Export Development Authority (APEDA)

Established under the Agricultural and Processed Food Products Export Development Authority Act 1985.
The Authority replaced the Processed Food Export Promotion Council (PFEPC).
APEDA, under the Ministry of Commerce and Industries, promotes the export of agricultural and processed food products from India.
It has been mandated with the responsibility of export promotion and development of the scheduled products viz. Fruits, Vegetables and their Products, Meat and Meat Products etc.
In addition to this, APEDA has been entrusted with the responsibility to monitor the import of sugar.

Honey Mission

Launched by Khadi and Village Industries Commission (KVIC) in 2017.
It is aimed at creating employment for the Adivasis, farmers, unemployed youth, and women by roping them in beekeeping while also increasing India’s honey production.

Nuakhai Juhar

Nuakhai Juhar is an agricultural festival is also called Nuakhai Parab or Nuakahi Bhetghat.
Nuakhai is a combination of two words that signify eating new rice as ‘nua’ means new and ‘khai’ means eat.
It is one of the most ancient festivals celebrated in Odisha, Chhattisgarh and areas of neighbouring states to welcome the new crop of the season.
On this day, people worship food grain and prepare special meals. Farmers offer the first produce from their lands to Goddess Samaleswari, the famous ‘Mother Goddess’ of Sambalpur district of Odisha.

Infrastructure

Logistics Sector:

Privatisation of Railways

Context:
- Ministry of Railways has kick-started the process to allow private players to operate certain trains on its network by inviting Request for Qualifications (RFQ) for the operation of passenger train services on over 100 routes with 150 modern trains.
- The project will bring private sector investment of about Rs. 30,000 crore.
How does it work?
1. Train sets have to be brought by private operators and maintained by them.
2. Fares in private trains will be competitive and prices on other modes of transport like airlines, buses have to be kept in mind while fixing the fares
3. Private participation in passenger train operations will only be 5% of the total operations of Railways. 95% of trains will still be run by Indian Railways.
Objectives of the initiative:
1. To introduce modern technology rolling stock with reduced maintenance.
2. Reduce transit time.
3. Boost job creation.
4. Provide enhanced safety.
5. Provide world-class travel experience to passengers.
6. Reduce the demand-supply deficit in the passenger transportation sector.
Recommendations by Bibek Debroy Committee:
- The Bibek Debroy Committee, which was set up to suggest ways to mobilize resources for the Indian Railways and restructure the Railway Board, had favored privatization of rolling stock: wagons and coaches.
Pros:
- Improved Infrastructure – It will lead to better infrastructure which in turn would lead to improved amenities for travellers.
- Balancing Quality of Service with High Fares – The move would foster competition and hence lead to overall betterment in the quality of services.
- Lesser Accidents – Because private ownership is synonymous with better maintenance, supporters of privatization feel that it will reduce the number of accidents, thus resulting in safe travel and higher monetary savings in the long run.
Cons:
- Coverage Limited to Lucrative Sectors – An advantage of Indian Railways being government-owned is that it provides nationwide connectivity irrespective of profit. This would not be possible with privatization since routes that are less popular will be eliminated, thus having a negative impact on connectivity. It will also render some parts of the country virtually inaccessible and omit them from the process of development.
- Fares – Given that a private enterprise runs on profit, it is but natural to assume that the easiest way of accruing profits in Indian Railways would be to hike fares, thus rendering the service out of reach for lower-income groups. This will defeat the entire purpose of the system which is meant to serve the entire population of the country irrespective of the level of income.
- Accountability – Private companies are unpredictable in their dealings and do not share their governance secrets with the world at large. In such a scenario it would be difficult to pin the accountability on a particular entity, should there be a discrepancy.
Covered in detail in Samjaho's Corner: https://samajho.com/upsc/privatisation-of-indian-railways/

RORO service of South Western Railway

Context:
- The first-ever RORO service of South Western Railway from Nelamangla (near Bengaluru) to Bale (near Solapur) has been started.
About:
- Roll On-Roll Off (RORO) is a concept of carrying road vehicles loaded with various commodities, on open flat railway wagons.
- RORO services are a combination of the best features of road and rail transports and they offer door-to-door service with minimal handling transported by fat and direct rail link.
Advantages of RO-RO
- Faster movement of goods and essentials, reducing Time taken by trucks to reach destinations due to traffic congestion in between cities.
- Reduces congestion on the roads.
- Saves precious fuel.
- Reduces carbon footprint.
- Relief to the crew of the truck as it avoids long-distance driving.
The RO-RO train services were first introduced in Indian Railways on Konkan Railways in 1999.
India's first Roll On-Roll Off (Ro-Ro) ferry service between Ghogha in Bhavnagar district and Dahej in Bharuch district, which will facilitate vehicular and passenger ferry services across the Gulf of Cambay in Gujarat.

National Rail Plan

Context:
- The Government has issued the Draft Final Report of the National Rail Plan
About:
- The Plan aims at providing a long term perspective planning for augmenting the Railway Network
- NRPP is meant to increase the share of railways in freight, rectifying the pre-Independence and post-Independence bias, and develop the capacity that will cater to demand in 2050.

NHAI to Rank Roads for Quality Service

Context:
- NHAI has decided to undertake a performance assessment and ranking of the highways in the country.
- They are aimed to take corrective recourse, wherever needed, to improve the quality and provide a higher level of service to highway commuters.
How will it be undertaken?
- The criteria for the assessment have been broadly categorised in three main heads:
  1. Highway efficiency (45%)
  2. Highway safety (35%)
  3. User services (20%)
Other parameters:
- Additionally, important parameters like operating speed, access control, time are taken at the toll plaza, road signages, road markings, accident rate, incident response time, crash barriers, illumination, availability of
- Advanced Traffic Management System (ATMs), the functionality of structures, provision for grade-separated intersections, cleanliness, plantation, wayside amenities, and customer satisfaction will also be considered while conducting the assessment.
Significance:
- The score obtained by each Corridor in each of the parameters will provide feedback and corrective recourse for higher standards of operation, better safety, and user experience to improve existing highways.
- This will also help in identifying and filling gaps of design, standards, practices, guidelines and contract agreements for other NHAI projects.
Separate ranking for BOT, HAM, and EPC projects will also be done:
- 1. Build Operate and Transfer (BOT) Annuity model:
  - Under this, a developer builds a highway, operates it for a specified duration, and transfers it back to the government.
  - The government starts payment to the developer after the launch of the commercial operation of the project.
- 2. Engineering, Procurement, and Construction (EPC) Model:
  - Under this model, the cost is completely borne by the government.
  - The government invites bids for engineering knowledge from the private players. Procurement of raw materials and construction costs are met by the government.
- 3. The Hybrid Annuity Model (HAM):
  - In India, the new HAM is a mix of BOT Annuity and EPC models.
  - As per the design, the government will contribute to 40% of the project cost in the first five years through annual payments (annuity).
  - The remaining payment will be made on the basis of the assets created and the performance of the developer.
  - Here, the developer has to raise the remaining 60% in the form of equity or loans. There is no toll right for the developer.
  - Revenue collection would be the responsibility of NHAI.

Airfares

Context:
- The Ministry of Civil Aviation increased the minimum and maximum airfares across all bands, in a move that, on the one hand, would provide big relief to financially distressed airlines but, on the other, would make air travel costlier for passengers at least till March 31.
About:
- The lower and upper limits on airfares have been increased by 10-30%
- When the Centre reopened domestic air travel in May, it imposed fare restrictions, via bands, for flights to ensure that dynamic pricing does not hurt the consumer.
- Airline executives welcomed the move but said the government should soon do away with the restrictions.

Regional Connectivity Scheme UDAN

Context:
- The Civil Aviation Ministry has approved 78 new routes under the 4th round of the Regional Connectivity Scheme UDAN.
- So far, 766 routes have been sanctioned under the UDAN scheme.
About Regional Connectivity Scheme UDAN:
- UDAN, which stands for ‘Ude Desh Ka Aam Nagrik’, aims to make air travel affordable and widespread. The Ministry of Civil Aviation had launched the Regional Connectivity Scheme (RCS) on October 10 2016 to stimulate regional air connectivity and making air travel affordable to the masses.
- The scheme will be jointly funded by the central government and state governments.
- The scheme will run for 10 years and can be extended thereafter.
Viability Gap Funding (VGF):
- The scheme entails making the routes financially viable, without insisting on the financial viability of the regional airports, by lowering the cost of flight operations and through financial support in the form of Viability Gap Funding (VGF).
- VGF will be available to flight operators on specific routes for the first 3 years of operation.
UDAN 4.0:
- The 4th round of UDAN was launched in December 2019 with a special focus on North-Eastern Regions, Hilly States, and Islands.
- The airports that had already been developed by the Airports Authority of India (AAI) are given higher priority for the award of VGF (Viability Gap Funding) under the Scheme.
- Under UDAN 4, the operation of helicopters and seaplanes is also been incorporated.

Delhi government launches electric vehicle policy

Context:
- Delhi government has launched the Electric Vehicle Policy for the national capital.
- With this policy, the government aims to generate employment to give a boost to Delhi's economy and reduce pollution levels in the national capital.
Highlights of the policy:
1. The policy aims to constitute 25% electric vehicles by 2024, which is currently just 0.29% in the in the national capital.
2. The government will waive the registration fees and road tax.
3. It will give an incentive of up to ₹30,000 for two-wheelers, autos, e-rickshaws, and freight vehicles while for cars, it will provide an incentive of up to ₹1.5 lakh.
4. The government will also give low-interest loans on electric commercial vehicles.
5. An 'EV Cell' will be established to implement the Policy.
6. The government will also set up a 'State Electric Vehicle Board'.
7. 200 charging stations will be set up in a year to ensure that people driving these vehicles can get a charging station within a radius of three kilometers.
8. The Delhi government will give a ''scrapping incentive'' under the electric vehicle policy, which will be the first-of-its-kind in the country.
9. Youth will be trained so that they get jobs as the electric vehicle sector will need them at a large scale after the implementation of this policy.

Dedicated Freight Corridor

Context:
- Prime Minister Narendra Modi inaugurated a 351-km section between Khurja and Bhaupur in Uttar Pradesh for commercial operations of the Dedicated Freight Corridor.
What is the DFC?
- The total 2,843-km project — billed as the largest rail infrastructure being built in independent India — has been in the making since 2006 with little movement on the ground.
- It is finally ready to take off, albeit in phases.
- The DFC consists of two arms.
  - 1,839-km Eastern DFC: Starts at Sohnewal (Ludhiana) in Punjab and ends at Dankuni in West Bengal.
    - The majority is funded by the World bank.
  - 1,500-km Western DFC: From Dadri in Uttar Pradesh to JNPT in Mumbai, touching all major ports along the way.
    - Funded by the Japan International Cooperation Agency.
Why is it important?
- Around 70% of the freight trains currently running on the Indian Railway network are slated to shift to the freight corridors, leaving the paths open for more passenger trains.
- Tracks on DFC are designed to carry heavier loads than most Indian Railways.
- DFC will get track access charge from the parent Indian Railways, and also generate its own freight business.
- The rise in demand: Considering increased transport demands, overtly congested routes, and greenhouse gas (GHG) emissions associated with road transport, these freight corridors will help reduce the cost and allow faster transportation.
- Revenue generation: They will open new avenues for investment, as this will lead to the construction of industrial corridors and logistic parks along these routes.

SAROD-Ports

Context:
- ‘SAROD-Ports’ stands for Society for Affordable Redressal of Disputes – Ports.
- Launched by the Union Shipping Ministry.
About:
- It is an Affordable Dispute Redressal Mechanism for all kinds of disputes in the maritime sector.
- SAROD-Ports is established under the Societies Registration Act, 1860 with the following
Objectives:
1. Affordable and timely resolution of disputes in a fair manner.
2. Enrichment of Dispute Resolution Mechanism with the panel of technical experts as arbitrators.
Composition of society:
- SAROD-Ports consists of members from the Indian Ports Association (IPA) and the Indian Private Ports and Terminals Association (IPTTA).

National Transit Pass System (NTPS)

Context:
- It is an online transit pass generation system for timber, bamboo, and other forests produce.
- It was launched recently by the Union Environment Ministry.
- The pilot project will be functional in Madhya Pradesh and Telangana for now.
How does it work?
- An applicant has to register in the system, thereafter the applicant can apply for a transit pass.
- The application will move to the concerned range forest office. After following the state-specific procedure of verification, a transit pass will be issued.
- The applicant will receive a message of issuance and the transit pass can be downloaded and viewed.
Significance:
- It expedites the issuance of the transit pass system. A transit pass issued will be valid across India. This will enhance the seamless movement of forest produce.

First Multi-Modal Logistics park

Context:
- Assam to get the country’s first multi-modal logistics park
What is the Need?
- India is burdened with high logistics costs, which account for about 13% of the value of goods sold in the economy compared with 8% in other major economies.
- The average cost to export/import one container in India is about 72% higher than in China.
- LEEP, which is spearheaded by the MoRTH and NHAI, aims to enhance freight transport in India by reducing costs and time and improving the tracking and traceability of consignments through infrastructural, procedural, and information technology interventions.
What is MMLP?
- The government defines an MMLP as a freight-handling facility encompassing a minimum area of 100 acres (40.5 hectares), with various modes of transport access, and comprising mechanized warehouses, specialized storage solutions such as cold storage, facilities for mechanized material handling, and inter-modal transfer container terminals, and bulk and break-bulk cargo terminals.
Benefits of MMLP:
- Logistics parks will further provide value-added services such as customs clearance with bonded storage yards, quarantine zones, testing facilities, and warehousing management services. Provisions will also be made for late-stage manufacturing activities such as kitting and final assembly, grading, sorting, labeling and packaging activities, reworking, and returns management.
- It will provide direct air, road, rail, and waterways connectivity to the people.
- It will be developed under the ambitious Bharatmala Pariyojana.
- Ministry envisages developing 35 Multi-modal Logistics Parks (MMLPs) in the country.
- The first such MMLP is being made by NHIDCL in Jogighopa of Assam, which will be connected to the road, rail, air, and waterways.
- This is being developed in 317-acre land along the Brahmaputra.

Bharatmala Project

It was launched in 2017. It aims to improve road traffic can trade through road transportation.
The scheme aims to complete the following targets by 2022:
- National Highway development project works of Ten Thousand kilometres
- Economic corridor of 9000 kilometres
- Inter corridor roads of 6000 km
- Improve the efficiency of national corridors of 5000 km
- Border connectivity roads of 2000 kilometre
- Expressways of 800 km
- Post connectivity roads of 2000 km

National Logistics Portal

Context:
- The plan is to scale up the current Port Community System (PCS 1x) to create NLP-Marine.
- The Shipping Ministry is planning to develop a National Logistics Portal (Marine) to help exporters, importers, and service providers exchange documents seamlessly and transact business in a transparent and quick manner.
Who is planning it?
- The Indian Ports Association.
The Indian Ports Association:
- It is an apex body of state-owned major ports under the Shipping Ministry.
- It is a think tank for the country’s dozen state-owned ports, has invited bids for the design, development, integration, implementation, operation, and maintenance of the National Logistics Portal (Marine) Version 1.0.
- It has become a member of the International Port Community Systems Association (IPCSA) in a clear sign of the government’s focus on digitalisation of the maritime trade processes and enhances ease of doing business.
What’s the Purpose?
- To develop a revolutionary national maritime single window known as National Logistics Portal (NLPMarine) encompassing complete end-to-end logistics solutions.
- NLP-Marine will act as a single platform to perform all core activities of the importer, exporter, and Customs broker such as domestic tracking of the shipment with notifications at each stage, undertake Customs clearance on their own, online transaction with custodians, remote electronic data interchange (EDI) system package — for Bill of Entry and Shipping Bill checklist plus EDI file generation and document management system to store all the important documents securely on cloud storage.
- It will facilitate real-time information about the activities.
- It will also enable digital transactions for all the payments required.
- It will facilitate ease of doing business.

India’s first seaplane project

Context:
- India's first seaplane service in Gujarat is set to begin on 31 October, the anniversary of Sardar Vallabhbhai Patel, with the aim of providing air connectivity from the Sabarmati Riverfront in Ahmedabad to the Statue of Unity in Kevadia.
Key points:
- India's first seaplane service in Gujarat is set to begin on 31 October, the anniversary of Sardar Vallabhbhai Patel.
- It will connect Sabarmati Riverfront in Ahmedabad to the Statue of Unity in Kevadia.
- The service will be operated by Spicejet Airlines.
- Significance of seaplane projects and the potential:
- Given the large and small water bodies that dot the country, India provides an ideal opportunity for seaplane operations.
- Unlike a conventional aircraft, a seaplane can land both on a waterbody and on land, thereby opening up more opportunities for business and tourism.
- Such projects provide faster and hassle-free travel options for the long, treacherous, and hilly regions of the country.

Coastal Shipping Bill, 2020

Context:
- Recently, the Shipping Ministry has issued a draft 'Coastal Shipping Bill, 2020' for public consultation.
Provisions of the bill:
- Mandatory licensing for all foreign vessels.
- National Coastal and Inland Shipping Strategic Plan: It aims for the seamless integration of inland waterway routes with maritime coastal transport. The aim is to enable the transportation of goods solely via water-based modes of transport, from inland waterways to coastal shipping routes.
National Register of Coastal Shipping:
- It contains all information about the coasting trade of India. Such a register would ensure transparency of procedure and aid in information sharing between the regulators, industry, and other participants.
Schedule of Penalties:
- It enables the Central Government to revise fines without amending the Act and thus, makes it easier to revise fines to keep up.
Importance of the bill:
- Potential of India: Coastal shipping in India holds great potential owing to our vast coastline of around 7500 kilometers and proximity to important global shipping routes.
- Cost of transport and production: Currently, maritime transport handles around 70% and 90% of India’s trading in terms of value and volume respectively. It will further reduce transportation and production costs with the integration of coastal maritime transport with inland waterways.
- Policy prioritisation: Separate legislation on coastal shipping helps to recognize the policy priorities to meet the demands of India’s growing and evolving shipping industry.

National Common Mobility Card (NCMC)

Context:
- Prime Minister Narendra Modi launched the ambitious National Common Mobility Card (NCMC) service for the Delhi Metro’s Airport Express Line.
About:
- Dubbed as ‘One Nation One Card’, the inter-operable transport card would allow the holders to pay for their bus travel, toll taxes, parking charges, retail shopping, and even withdraw money.
- NCMC can be used at all transit locations making all new metro and transit payments interoperable via one card.
- The idea of NCMC was floated by the Nandan Nilekani committee set up by the Reserve Bank of India (RBI).
- NCMC will allow passengers with RuPay debit cards, issued in the last 18 months by 23 banks to be swiped for Metro travel.
- NCMC is an automatic fare collection system.
- It will turn smartphones into an inter-operable transport card that commuters can use eventually to pay for Metro, bus, and suburban railways services.

Silver Line project

Context:
- Kerala Government informs NITI Aayog that a semi high-speed rail Silverline from Kasaragod in the north to Kochuveli in the south is feasible.
Need for such a project:
- Kerala’s road networks are clogged and experience dense traffic during peak hours.
- According to data shared by experts, less than 10% of the state’s roads handle nearly 80% of the traffic. This also gives rise to accidents and casualties; in 2018, Kerala recorded 4,259 deaths and 31,687 grievous injuries.
- The current railway network is congested with a large number of trains, level crossings, and sharp curves. The fastest train, plying between Thiruvananthapuram and Kasaragod, takes nearly 12 hours to cover 532 km.
Benefits:
- Trains would complete the journey at four hours instead of 12, with a maximum speed of 200 km/h.
- The semi high-speed trains will traverse through 11 of the state’s 14 districts, Alappuzha, Wayanad, and Idukki being the exceptions.
- There are also plans to connect the corridor with the international airports at Kochi and Thiruvananthapuram
Who will implement it?
- The Kerala Rail Development Corporation (K-Rail), a joint venture between the Ministry of Railways and the Kerala government to execute projects on a cost-sharing basis, will be the nodal agency.

Maitri Setu

Context:
- Recently, the Prime Minister inaugurated Bharat Bangla Maitri Bridge in Tripura’s South district.
About:
- The bridge ‘Maitri Setu’ has been built over the Feni river which flows between the Indian boundary in Tripura State and Bangladesh.
- Feni originates in the South Tripura district. The river passes through Sabroom town on the Indian side and meets the Bay of Bengal after it flows into Bangladesh.
- The 1.9 Km long bridge joins Sabroom (in Tripura) with Ramgarh (in Bangladesh).
- The name ‘Maitri Setu’ symbolizes growing bilateral relations and friendly ties between India and Bangladesh.
- The construction was taken up by the National Highways and Infrastructure Development Corporation Ltd at a project cost of Rs. 133 crore.
- The National Highways and Infrastructure Development Corporation Limited is a fully owned company of the Government of India.
  - It is responsible for the development & maintenance of the National Highways & Strategic Roads of India.
Significance:
- Now Agartala (capital of Tripura) will become the nearest city to an international seaport in India.
- Tripura will become the ‘Gateway of North East’ with access to Chittagong Port of Bangladesh, which is just 80 km from Sabroom.
- Bangladesh and India have a long-standing and time-tested Protocol on Transit and Trade through inland waterways.
- It would serve as a new trade corridor between the two countries, helping the Northeast states grow. It will enhance people-to-people contact.

Chennai-Kanyakumari Industrial Corridor (CKIC)

Context:
- The Asian Development Bank (ADB) will provide a $484 million loan for Chennai-Kanyakumari Industrial Corridor (CKIC) in Tamil Nadu.
About:
- CKIC is part of India's East Coast Economic Corridor (ECEC), which stretches from West Bengal to Tamil Nadu and connects India to the production networks of South, Southeast, and East Asia.
- The Asian Development Bank is the lead partner of the Indian government in developing the East Coast Economic Corridor.
- In line with Strategy 2030, ADB''s long-term corporate strategy, the project emphasizes sustainability, climate change resilience, and road safety elements.
- Enhanced connectivity of industrial hubs with hinterland and ports will particularly help increase the participation of Indian manufacturing in global production networks and global value chains, thereby creating jobs along the corridor.
- The project will also strengthen road safety improvement programs through advanced technologies for road monitoring and enforcement.
- In addition, it will help improve the planning capacity of Tamil Nadu's Highways and Minor Ports Department.

Chenab bridge

Context:
- Recently, the Indian Railways completed the arch closure of the 1315m Chenab bridge.
About:

It is the world’s highest railway bridge.
359m above the river bed level, the bridge would be 35 meters higher than the Eiffel Tower in Paris.
The Chenab bridge is part of the Udhampur-Srinagar-Baramulla rail link project (USBRL) and completion of the steel arch is an important construction milestone.
This achievement is a major leap towards the completion of the 111-km-long winding stretch from Katra to Banihal.
The arch consists of steel boxes, which will be filled with concrete to improve stability.
The bridge can withstand high wind speed up to 266 km per hour.

Cargo container manufacturing

Context:
- In a First, India to Foray into Cargo Container Manufacturing to Steer Clear of Chinese Dependence: Report
Aim:
- The move is specifically aimed at freeing the country’s dependency on China and other foreign players in the logistics sector.
Background:
- Prior to this, all cargo containers in India were manufactured by foreign players, mainly Chinese. China is the global leader in cargo containers and routinely wins global tenders to manufacture and supply containers across the world, including in India.
- India’s external trade grew to USD 838.46 billion in the last financial year, and the increasing trade is translating into higher demand for containerization due to their efficiencies.
- A Hindu Business Line report says that India will require approximately 60,000 new containers between 2021 and 2026.
- The government’s move to produce shipping containers in India is part of the Atmanirbhar Bharat initiative and creates an import substitute for the new shipping containers.

Vehicle Scrappage Policy

Context:
- Auto majors have welcomed the new vehicle scrappage policy rolled out by Union Minister for Road Transport and Highways, saying it would encourage people to replace old vehicles while boosting the sector.
Objective:
- The objectives of the policy are to reduce the population of old and defective vehicles, achieve a reduction in vehicular air pollutants to fulfill India’s climate commitments, improve road and vehicular safety, achieve better fuel efficiency, formalize the currently informal vehicle scrapping industry and boost the availability of low-cost raw materials for automotive, steel and electronics industry.
- The ecosystem is expected to attract additional investments of around Rs. 10,000 Crore and 35,000 job opportunities.
- The Ministry shall, in the next few weeks, publish draft notifications, which shall be in the public domain for a period of 30 days to solicit comments and views of all involved stakeholders.
- The criteria for a vehicle to be scrapped is primarily based on the fitness of vehicles through Automated Fitness Centres in case of commercial vehicles and Non-Renewal of Registration in case of private vehicles.
- The criteria are adapted from international best practices after a comparative study of standards from various countries like Germany, the UK, the USA, and Japan.
- A Vehicle failing the fitness test or failing to get a renewal of its registration certificate may be declared as End of Life Vehicle. Criteria to determine vehicle fitness will be primarily emission tests, braking, safety equipment, among many other tests which are as per the Central Motor Vehicle Rules, 1989.
The Policy proposes the following:
- It is proposed that commercial vehicles be de-registered after 15 years in case of failure to get the fitness certificate.
- As a disincentive measure, increased fees for fitness certificates and fitness tests may be applicable for commercial vehicles 15 years onwards from the date of initial registration.
- It is proposed that Private Vehicles be de-registered after 20 years if found unfit or in case of a failure to renew the registration certificate.
- As a disincentive measure, increased re-registration fees will be applicable for private vehicles 15 years onwards from the date of initial registration.
- It is being proposed that all vehicles of the Central Government, State Government, Municipal Corporation, Panchayats, State Transport Undertakings, Public Sector Undertakings, and autonomous bodies with the Union and State Governments may be de-registered and scrapped after 15 years from the date of registration.
- The scheme shall provide strong incentives to owners of old vehicles to scrap old and unfit vehicles through registered scrapping centers, which shall provide the owners with a scrapping certificate.
- Some of these incentives include:
The tentative timeline for application of the Proposed Scrapping Policy is as follows:

Rules for Fitness Tests and Scrapping Centres: 01st October 2021
Scrapping of Government and PSU vehicles above 15 years of age: 01st April 2022
Mandatory Fitness Testing for Heavy Comm. Vehicles: 01st April 2023
Mandatory Fitness-Testing (Phased manner for other categories): 01st June 2024

Aim:

Reducing the population of old and defective vehicles, bringing down vehicular air pollutants, improving road and vehicular safety.

Provisions:

Fitness Test:
- Old vehicles will have to pass a fitness test before re-registration and as per the policy government commercial vehicles more than 15 years old and private vehicles which are over 20 years old will be scrapped.
- Old vehicles will be tested at the Automated Fitness Centre and the fitness test of the vehicles will be conducted according to international standards.
- Emission test, braking system, safety components will be tested and the vehicles which fail in the fitness test will be scraped.
- The Ministry has also issued rules for the registration procedures for scrapping facilities, their powers, and scrapping procedures to be followed.
Road Tax Rebate:
- The state governments may be advised to offer a road-tax rebate of up to 25% for personal vehicles and up to 15% for commercial vehicles to provide incentives to owners of old vehicles to scrap old and unfit vehicles.
Vehicle Discount:
- Vehicle manufacturers will also give a discount of 5% to people who will produce the ‘Scrapping Certificate’ and registration fees will be waived off on the purchase of a new vehicle.
Disincentive:
- As a disincentive, increased re-registration fees would be applicable for vehicles 15 years or older from the initial date of registration.

Significance:
- Creation of Scrap yards:
  - It will lead to the creation of more scrap yards in the country and effective recovery of waste from old vehicles.
- Employment:
  - In the new fitness centers, 35 thousand people will get employment and an investment of Rs 10,000 crores will be pumped in.
- Improved Revenue:
  - This will boost sales of heavy and medium commercial vehicles that had been in the contraction zone as a result of the economic slowdown triggered by the bankruptcy of IL&FS (Infrastructure Leasing & Financial Services) and the Covid-19 pandemic.
  - The government treasury is expected to get around Rs 30,000 to 40,000 crores of money through Goods and Services Tax (GST)from this policy.
- Reduction in Prices:
  - Prices of auto components would fall substantially with the recycling of metal and plastic parts.
  - As scrapped materials will get cheaper the production cost of the vehicle manufacturers will also reduce.
- Reduce Pollution:
  - It will help improve fuel efficiency and reduce pollution.
  - As older vehicles pollute the environment 10 to 12 times more and estimated that 17 lakh medium and heavy commercial vehicles are more than 15 years old.

Toll- Operate-Transfer (TOT) model

Context:
- National Highways Authority of India (NHAI) would offer 1,500 km — 32 projects — under the Toll-Operate-Transfer (TOT) model this financial year as it chalks out a fresh monetization plan
About:
- TOT is a model for monetizing operational national highway projects where investors make a lump sum payment in return for long-term toll collection rights backed by a sound tolling system.
- Under TOT, the highest bidder wins the right to operate and maintain operating road assets for 30 years, with rights to toll revenues from these assets until then.
- This model is more attractive for investors as they don’t have to build an infrastructure project from scratch.

Global Electric Vehicles Outlook 2021

Context:
- The International Energy Agency (IEA) recently released the Global Electric Vehicle Outlook
About the report:
- It is an annual report published by IEA
- The report looks at the latest EV trends
- Apart from that, it also looks at the drivers for road transport sector electrification around the world
What did the report say about India?
- Around 30% of new vehicle sales in 2030 will be Electric in India
- The Electric Vehicle penetration in the country will be led by electric three-wheelers and electric two-wheelers
- Electrification of buses will be lower
- It will be 15% of the total sale of vehicles by 2030
- This is mainly because of easier registration of two-wheelers and three-wheelers under the FAME II scheme
- Only 3% of allocated funds under the FAME II scheme has so far been used for 30,000 vehicles.

Global Electric Vehicles Outlook 2021

Context:
- The International Energy Agency (IEA) recently released the Global Electric Vehicle Outlook
About the report:
- It is an annual report published by IEA
- The report looks at the latest EV trends
- Apart from that, it also looks at the drivers for road transport sector electrification around the world
What did the report say about India?
- Around 30% of new vehicle sales in 2030 will be Electric in India
- The Electric Vehicle penetration in the country will be led by electric three-wheelers and electric two-wheelers
- Electrification of buses will be lower
- It will be 15% of the total sale of vehicles by 2030
- This is mainly because of easier registration of two-wheelers and three-wheelers under the FAME II scheme
- Only 3% of allocated funds under the FAME II scheme has so far been used for 30,000 vehicles

Energy:

Rewa solar project

Context:
- Inaugurated recently by Prime Minister Narendra Modi, it is Asia's largest 750 MW solar power project.
- It is located at Rewa in Madhya Pradesh.
- The Solar Park was developed by the Rewa Ultra Mega Solar Limited (RUMSL), a Joint Venture Company of Madhya Pradesh UrjaVikas Nigam Limited (MPUVN), and Solar Energy Corporation of India (SECI), a Central Public Sector Undertaking.
Significance:
- The Rewa project has been acknowledged in India and abroad for its robust project structuring and innovations.
  1. Its payment security mechanism for reducing risks to power developers has been recommended as a model to other States by MNRE.
  2. It has also received the World Bank Group President’s Award for innovation and excellence and was included in the book “A Book of Innovation: New Beginnings” released by the Prime Minister.
  3. The project is also the first renewable energy project to supply to an institutional customer outside the State, i.e. Delhi Metro, which will get 24% of energy from the project with the remaining 76% being supplied to the State DISCOMs of Madhya Pradesh.
  4. The Project also exemplifies India’s commitment to attaining the target of 175 GW of installed renewable energy capacity by the year 2022, including 100 GW of solar installed capacity.

India’s largest solar park

Context:
- State-run NTPC Ltd will set up India’s largest solar park of 4.75 gigawatts (GW) at Rann of Kutch in Gujarat from where it will also generate green hydrogen on a commercial scale.
About:
- Kutch region in Gujarat, the largest salt desert in the country and host to two of India’s largest coal-fired power plants, will now add another feather to its cap.
- NTPC’s park is part of the central government’s plan of making state-run companies build massive clean energy parks to help developers achieve economies of scale and further bring down solar and wind power tariffs.
- Gujarat government has identified the Kutch region for setting up 40 Gw of hybrid renewable energy projects in the region and has earmarked 60,000 hectares for the same.
- There are, however, environmental concerns for the region, as it is a prime spot of several bird species.
Five Major Solar Parks in India:
1. Bhadla Solar Park, Rajasthan
2. Pavagada Solar Park, Karnataka
3. Kurnool Ultra Mega Solar Park, Andhra Pradesh
4. NP Kunta Ultra Mega Solar Park, Andhra Pradesh
5. Rewa Ultra Mega Solar, Madhya Pradesh
Green hydrogen:
- It is a zero-carbon fuel made by electrolysis, using renewable power from wind and solar to split water into hydrogen and oxygen.
- NTPC’s pivot towards green energy comes at a time when India is considering a proposal to make it mandatory for fertilizer plants and oil refineries to purchase green hydrogen as part of plans to cut the nation’s dependence on fossil fuels.
UMREPP scheme:
- India’s largest power generation utility subsidiary NTPC Renewable Energy Ltd has received the go-ahead from the ministry of new and renewable energy (MNRE) under the ultra-mega renewable energy power parks (UMREPP) scheme.
- State-run companies present in the conventional power space, including NTPC, plan to build massive green energy parks under the UMREPP scheme in wind- and solar-resource rich states such as Jammu and Kashmir, Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu, and Telangana.

World's Largest Renewable Energy Park

Context:
- Prime Minister Narendra Modi laid the foundation stone of the world's largest renewable energy park in Gujarat's Kutch.
About:
- This 30,000-megawatt capacity hybrid renewable energy park will be built along the Indo-Pak border at Khavda using both wind and solar energy.
- Spread over 72,600 hectares of wasteland, the first of its kind energy project is expected to play a major role in fulfilling India's vision of generating 450 gw (4,50,000 MW) of power by 2030.
- There are two zones of this park.
  - The first zone will be a hybrid park on 49,600 hectares of land, which means it will use sunlight and wind to generate electricity.
  - The second zone will be spread over 23,000 hectares of land and will be wind power based only.
Strategic location:

The project site is about 25 km from Khavda, which is the last point that can be accessed by civilians in the area.
The exclusive wind park zone will come up within 1-6 km of the international border.
The hybrid park zone will be located 6 km from the Indo-Pak border.
This site has been chosen because this is a complete wasteland and windmills put near the border also act as a boundary.

Winter grade diesel for Ladakh

Context:
- Winter diesel is a specialised fuel that was introduced by IOCL last year specifically for high altitude regions and low-temperature regions such as Ladakh, where ordinary diesel can become unusable.
About:
- It contains additives to maintain lower viscosity. It has a higher cetane rating — an indicator is the combustion speed of diesel and compression needed for ignition— and lower sulphur content, which would lead to lower deposits in engines and better performance.
Significance:
- The new fuel has a pour point of – 33oC and does not lose its fluidity function even in the extreme winter weather of the region unlike the normal grade of diesel which becomes exceedingly difficult to utilise.
Need:
- Using the normal grade of diesel fuel becomes an arduous task for people in the winter months where temperatures fall to sub-zero temperatures of nearly –30 degrees Celsius.

Electricity (Rights of Consumers) Rules, 2020

Context:
- Union Government for the first time lays down Rights to the Electricity Consumers through “Electricity (Rights of Consumers) Rules, 2020”.
Some key provisions:
- Consumers have the option to apply for a new electricity connection and pay bills online.
- Consumers to get electricity connection in the prescribed timeline which is 7 days in Metro cities, 15 days in other cities, and 30 days in rural areas; Violations to result in penalties.
- It is the duty of every distribution licensee to supply electricity on request made by an owner or occupier of any premises in line with the provisions of the Act.
- It is the right of consumers to have minimum standards of service for the supply of electricity from the distribution licensee.
- No connection shall be given without a meter.
- The distribution licensee shall supply 24×7 power to all consumers.
- However, the Commission may specify lower hours of supply for some categories of consumers like agriculture.
- Consumer Grievance Redressal Forum (CGRF) to include consumer and prosumer representatives.

Electricity Amendment Bill 2020

Context:
- Aam Aadmi Party has sought permission from the Speaker to table a motion for repealing of the Centre’s three agriculture-related ordinances and Power Amendment Bill-2020.
- It is because AAP argues that these laws are contrary to the federal structure of the country, besides impinging on the rights of the States.
Contentious clauses in the Electricity Amendment Bill, 2020:
- Firstly, few states have accused the Centre of failure to consult the States on the Bill since electricity is on the Concurrent List. Other issues are:
  1. The Bill seeks to end subsidies. All consumers, including farmers, will have to pay the tariff and the subsidy will be sent to them through direct benefit transfer.
  2. States are worried about this clause because:
  3. This would mean people would have to pay a huge sum towards electricity charges while receiving support through direct benefit transfer later.
  4. This would result in defaults leading to penalties and disconnection.
  5. The Bill “divests” the States of their power to fix tariffs and hands over the task to a Central government-appointed authority.
  6. This is discriminatory since the tariff can be tweaked according to the whims and fancies of the Central government.
  7. The Bill also makes it compulsory for the State power companies to buy a minimum percentage of renewable energy fixed by the Centre.
- This would be detrimental to the cash-strapped power firms.
Other key provisions in the Bill:
- Renewable Energy: It delegates the Central Government with the power to prepare and notify a National Renewable Energy Policy “for promotion of generation of electricity from renewable sources”, in consultation with State Governments.
- Cross Border Trade: The Central Government has been delegated with the power to prescribe rules and guidelines to allow and facilitate cross border trade of electricity.
- Creation of Electricity Contract Enforcement Authority: It has been proposed to be given sole jurisdiction to adjudicate upon matters on the performance of obligations under a contract regarding sale, purchase, and transmission of electricity, which exclusion of this specialized authority’s jurisdiction on the determination of tariff or any other dispute regarding the tariff.

Gas-based economy

Context:
- Prime Minister inaugurated 450-km Kochi-Mangaluru natural gas pipeline.
About:
- The government has a concrete plan to move towards a gas-based economy that would be cheaper, convenient, and environment-friendly.
- Prime Minister said that as part of efforts to making India a natural gas-based economy, 10,000 more CNG (compressed natural gas) stations would be opened and several lakh PNG (piped natural gas) household connections given in the coming days.
- The plan was to increase the share of natural gas in the energy sector from the present 6% to 15% by 2030.
- While 15,000 km of LNG pipeline was laid between 1978 (when the first inter-State pipeline was commissioned) and 2014, work on 16,000 km of a new pipeline that started in 2014 would be completed in the next four years.
- As against 900 CNG stations between 1992 and 2014, 1,500 new stations were built thereafter and the numbers would increase to 10,000 soon.
- As against 25 lakh PNG connections till 2014, 72 lakh PNG connections were given till date.
- The Kochi-Mangaluru pipeline would provide another 21 lakh PNG connections.
About Kochi-Mangaluru natural gas pipeline:
- The facility was part of the government’s “one nation-one gas grid” policy.
- The new pipeline would have international importance, wherein the carbon footprint would get substantially reduced.
- It was a classic example of cooperative federalism.
Other initiatives related to energy:
- The government had definite plans for the future to make the country energy-sufficient and reduce expenditure on the foreign exchange through diversification of energy requirements.
- The focus was being given to increasing ethanol production to increase ethanol content in petrol to 20% from the present 5%.
- The world’s largest hybrid energy plant (wind and solar) was coming up in Gujarat.
- The electric mobility sector too was being encouraged.
- Through these, alternative, cheap and pollution-free fuel and energy would be made available to people.

Declining India’s oil and gas production

Context:
- India’s crude oil production fell by 5.2% and natural gas production by 8.1% in FY21.
About:
- Crude oil production in India is dominated by two major state-owned exploration and production companies, ONGC and Oil India.
- These companies are the key bidders for hydrocarbon blocks in auctions and were the only successful bidders in the fifth and latest round of auctions under the Open Acreage Licensing Policy (OALP) regime.
Reasons for the decline:
- While Covid-19 related delays are among the key reasons cited by producers behind lower production, India's crude oil and natural gas production have been falling consistently since 2011-12.
- Most of India’s crude oil and natural gas production comes from ageing wells that have become less productive over time.
- Interest from foreign payers in oil and gas exploration in India had been low
Why is there a lack of private participation?
- Delays in the operationalization of hydrocarbon blocks due to delays in major clearances including environmental clearances and approval by the regulator of field development plans.
- Internal maximum production levels set by oil and gas majors to address climate change had also lowered interest by oil majors to expand operations in India.
What is the impact of low oil and gas production?
- It makes India more reliant on imports.
- The share of imports as a proportion of overall crude oil consumption in India has risen from 81.8% in FY2012 to 87.6% in FY2020.
- Boosting oil and gas production has also been a key part of the government’s Aatmanirbhar Bharat initiative and its goal to boost the use of natural gas in India’s primary energy mix from the current 6.2% to 15% by 2030.

Natural Gas Under GST

Context:
- Major Global energy companies have called on the Government of India to bring natural gas under the GST regime at the India Energy Forum held recently.
- Currently, petrol, diesel, aviation turbine fuel, natural gas and crude oil fall outside India’s GST regime.
- Government officials have also indicated that the government is considering bringing natural gas under the ambit of the GST regime.
Benefits of bringing Natural gas under the GST regime:
- It would lead to a reduction in the cascading impact of taxes on industries such as power and steel, which use natural gas as an input.
- It would do away with the central excise duty and different value-added taxes imposed by states.
- This would lead to an increase in the adoption of natural gas which would be in line with the government’s goal to increase the share of natural gas in the country’s energy basket from 6.3% to 15%.

Gas infrastructure

Context:
- The government had planned a $60-billion investment for creating gas infrastructure in the country till 2024.
- The Petroleum and Natural Gas Regulatory Board (PNGRB) has notified a new tariff structure for 14 natural gas pipelines.
About the investment:
- The investment includes pipelines, LNG terminals, and CGD (city gas distribution) networks.”
- Centre aims to raise natural gas’s share from 6% to 15% by 2030.
- India’s first automated national-level gas trading platform was unveiled in June this year to promote and sustain an efficient and robust gas market and foster gas trading in the country.
- Coverage of CGD projects is being expanded to 232 geographical areas spread over 400 districts, with the potential to cover about 53% of the country’s geography and 70% of the population.
- The government is also adopting clean mobility solutions with greater use of LNG (liquefied natural gas) as a transportation fuel, including long-haul trucking.
- The government plans to have 1,000 LNG fuel stations across the country.
Gas in Krishna Godavari Basin:
- Two private companies are developing three deepwater gas projects in the region which together are expected to meet 15% of India’s gas demand by 2023.
- The field is located off the Kakinada coast and comprises a subsea production system.
- Located at a water depth of greater than 2,000 m, it is the deepest offshore gas field in Asia.
- The field is expected to reach plateau gas production of about 12.9 million standard cubic meters per day in 2021.
- Peak gas production from the fields is expected to be around 30 million standard cubic meters per day by 2023 which is expected to be about 25% of India’s domestic production and will help reduce the country’s dependence on imported gas.
New tariff structure:
- Under the new unified tariff structure, buyers will be charged a fixed tariff for the transport of gas within 300 km of a source and a fixed tariff for the transport of gas beyond 300 km on a single pipeline network.
- This, PNGRB says, would be significantly cheaper for buyers further away from the source of gas who were earlier charged based on the number of pipelines used and the distance from the source of gas.
- Therefore, a buyer using multiple pipelines in GAIL’s networks would likely benefit significantly from this change.
- This highlighted the government’s emphasis on boosting the consumption of natural gas in the country.

Oil imports from Saudi Arabia

Context:
- Saudi Arabia’s national oil company Saudi Aramco has raised the price of oil shipments to Asia by between 20-50 cents per barrel.
- It raised the total cost of Arab light crude for key Asian importers such as India to $1.8 over the benchmark price.
How important is Saudi Arabia as a source of crude oil for India?
- Saudi Arabia has consistently been the second-largest source of crude oil for India.
- A reduction in crude oil imports from Saudi Arabia would likely lead to increased imports from other gulf countries and the United States
- Saudi Arabia will, however, continue to be one of the largest sources for the import of crude oil for India due to its geographical proximity and India’s large crude oil requirements
Why raise shipping prices for Asia?
- Hike may be a signal to India, which has been looking to diversify supplies away from Saudi Arabia.
- India’s state-owned oil marketing companies are set to cut imports from Saudi Arabia in May in response to Saudi Arabia maintaining production cuts aimed at keeping oil prices elevated through April.
How have rising crude oil pieces impacted India?
- A consistent rise in crude oil pieces has led to the prices of petrol and diesel reaching a record high level across India, with the price of petrol crossing Rs 100 per litre in some parts of the country.
- Rising crude oil prices have also magnified the impact of central and state taxes on auto fuels which were hiked significantly in 2020 to boost revenues amid lower economic activity.
- High crude oil pieces were slowing down the economic recovery.

Oil refineries

Context:

PM says India set to double oil refining capacity in 5 years, earlier than expected

Why is this boost in capacity needed?

India’s current refining capacity of 249.9 million tonnes per annum exceeds domestic consumption of petroleum products which was 213.7 million tonnes in the previous fiscal.
However, India’s consumption of petroleum products is likely to rise to 335 million tonnes per annum by 2030 and to 472 million tonnes by 2040 according to government estimates. India needs to boost refining capacity to meet growing demand.

How will this be achieved?

The expansion in refining capacity will come from both brownfield and greenfield projects.
The new refinery project in Ratnagiri is one of the key projects in the planned expansion and has received investment from Saudi Arabia and the UAE’s national oil companies — Saudi Aramco and ADNOC respectively — which together own 50 percent of the project while the remaining 50 percent is owned by Indian PSUs, Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd., and Hindustan Petroleum Corporation Ltd.
Other key projects include a joint venture between HPCL and the Rajasthan government for a new refinery in Barmer Rajasthan with a refining capacity of 9 million tonnes per annum as well as the major expansion projects in existing refineries in Panipat, Paradip, and Koyali.

Association of Renewable Energy Agencies of States (AREAS)

Context:
- 6th Foundation Day of AREAS.
About AREAS:
- AREAS was formed by the Ministry of New and Renewable Energy (MNRE) for better coordination, interaction and sharing of best practices among the various state nodal agencies (SNAs) for renewable energy.
- The Union Minister for MNRE is the Patron of the Association.
- The MNRE Secretary is the ex officio President of the Association.

Green Term Ahead Market (GTAM)

Context:
- Green Term-Ahead Market Will Boost RE Trading in India.
Need:
- As a first step towards Greening the Indian short term power Market, pan-India Green Term Ahead Market (GTAM) was launched.
- The introduction of GTAM platform would lessen the burden on the RE-rich States and incentivize them to develop RE capacity beyond their own RPO.
- This would promote RE merchant capacity addition and help in achieving RE capacity addition targets of the country.
- GTAM platform will lead to an increase in the number of participants in the renewable energy sector. It will benefit buyers of RE through competitive prices and transparent and flexible procurement.
- It will also benefit RE sellers by providing access to the pan- India market.
- The Government of India’s target of 175 GW RE Capacity by 2022 is driving accelerated renewable penetration pan-India.
Green Term Ahead Market contracts will:
- Allow additional avenues to the RE generators for the sale of renewable energy
- Enable Obligated entities to procure renewable power at competitive prices to meet their Renewable Purchase Obligations (RPO)
- Provide a platform to environmentally conscious open access to consumers and utilities to buy green power.

Key features of GTAM

Transactions through GTAM will be bilateral in nature with clear identification of corresponding buyers and sellers, there will not be any difficulty in accounting for RPO.
GTAM contracts will be segregated into Solar RPO & Non-Solar RPO as RPO targets are also segregated.
Further within the two segments, GTAM contracts will have Green Intraday, Day Ahead Contingency, Daily and Weekly Contracts:
- Green Intraday Contract & Day Ahead Contingency Contract – Bidding will take place on a 15- minute time-block wise MW basis.
- Daily & Weekly Contracts – Bidding will take place on an MWh basis. Both buyers and sellers can submit the bid, however, the seller will provide a profile in terms of the 15-minute time block-wise quantity (MW) along with the price (Rs/MWh).
- After the contract gets executed scheduling will take place as per the profile.
- In the case of multiple buyers, the profile will get allocated on a pro-rata basis.
Price discovery will take place on a continuous basis i.e. price-time priority basis. Subsequently, looking at the market conditions open auctions can be introduced for daily & weekly contracts.
Energy scheduled through GTAM contract shall be considered as deemed RPO compliance of the buyer.

India Energy Modelling Forum

Context:
- India Energy Modelling Forum to facilitate the exchange of ideas- Niti Aayog
What is it?
- The India Energy Modelling Forum' will provide a platform to examine important energy and environmental related issues, and facilitate the exchange of ideas.
- In the joint working group meeting of the Sustainable Growth Pillar, India Energy Modeling Forum was launched.
- Sustainable Growth Pillar is an important pillar of India-US Strategic Energy Partnership co-chaired by NITI Aayog and USAID.
- The SG pillar entails energy data management, energy modelling, and collaboration on low carbon technologies as three key activities.
The India Energy Modelling Forum will accelerate this effort and aim to:
- Provide a platform to examine important energy and environmental-related issues;
- Inform decision-making process to the Indian government;
- Improve cooperation between modelling teams, government, and knowledge partners, funders;
- Facilitate the exchange of ideas, ensure production of high-quality studies;
- Identify knowledge gaps at different levels and across different areas;
- Build the capacity of Indian institutions.

Renewable Energy

Context:
- India’s renewable energy deployment plans for the coming decade are likely to generate business opportunities worth $20 billion a year: PM Modi
India's renewable energy sector:
- Indian renewable energy sector is the fourth most attractive renewable energy market in the world. India is ranked fourth in wind power, fifth in solar power, and fifth in renewable power installed capacity as of 2018.
Its contribution to economic growth:
- Embracing renewable energy can help India achieve its target of becoming a $5 trillion economy by 2024-25.
- As per findings of the World Bank, low-emission and resource-efficient greening of India’s economy is possible at a very low cost in terms of GDP growth.
- Positive impact on GDP: By attracting global and domestic investors, deploying renewable energy will have a positive effect on the GDP of our country.
- Moreover, the sector also received a total FDI equity inflow of $7.83 billion in the last ten years (April 2000- March 2019)With the government’s aspiring targets for the green energy sector, India has become very attractive from investors’ point of view, both domestic and foreign, and would continue to generate more investment in the future.
- Job creation: According to a report by the International Renewable Energy Agency (IRENA), the renewable energy industry in India accounted for almost 7,19,000 jobs in the year 2018. The further expansion of this sector would lead to the emergence of new employment opportunities in the country.
- People who are considered ineligible for several permanent and well-paid jobs can get maintenance and operations, installation, and sales jobs in this sector.

Government initiatives:
- In August 2020, the government announced plans to offer land near its ports to companies for building solar equipment factories.
- India plans to add 30 GW of renewable energy capacity along a desert on its western borders such as Gujarat and Rajasthan.
- Delhi Government decided to shut down a thermal power plant in Rajghat and develop it into a 5,000 KW solar park.
- Rajasthan Government, in Budget 2019–20, exempted solar energy from electricity duty and focussed on the utilization of solar power in its agriculture and public health sectors.
- A new Hydropower policy for 2018–28 was drafted for the growth of hydro projects in the country.
- The Government of India has announced plans to implement a US$ 238 million National Mission on advanced ultra-supercritical technologies for cleaner coal utilisation.
- The Ministry of New and Renewable Energy (MNRE) has decided to provide custom and excise duty benefits to the solar rooftop sector, which will lower the cost of setting up as well as generate power, thus boosting growth.
- Indian Railways is taking increased efforts through sustained energy efficient measures and maximum use of clean fuel to cut down emission levels by 33% by 2030.

Fuel price hike

Context:
- Diesel and petrol prices have hit record highs across the country.
Fuel price dynamics in India
- Retail petrol and diesel prices are in theory decontrolled — or linked to global crude oil prices.
- It means that if crude prices fall retails prices should come down too, and vice versa.
- But this does not happen in practice, largely because oil price decontrol is a one-way street in India.
- When global crude oil prices fall and prices slide, the government slaps fresh taxes and levies to ensure that it rakes in extra revenues.
- The consumer should have ideally benefited by way of lower pump prices, is forced to either shell out what she’s already paying or spend even more for every litre of fuel.
- The main beneficiary in this subversion of price decontrol is the government.
Why crude oil prices are rising now?
- Prices collapsed in April 2020 after the pandemic spread around the world, and demand fell away.
- But as economies have reduced travel restrictions and factory output has picked up, global demand has improved, and prices have been recovering.
- The controlled production of crude amid rising demand has been another key factor in boosting oil prices, with Saudi Arabia voluntarily cutting its daily output.
What is the impact of taxes on retail prices of auto fuels?
- The central government hiked the central excise duty on petrol to Rs 32.98 per litre during the course of last year from Rs 19.98 per litre at the beginning of 2020.
- It increased the excise duty on diesel to Rs 31.83 per litre from Rs 15.83 over the same period to boost revenues as economic activity fell due to the pandemic.
- A number of states have also hiked sales tax on petrol and diesel to shore up their revenues.
How will these hikes impact inflation?

Experts note that the impact of rising fuel inflation has been counterbalanced by declining food inflation, but that consumers with greater expenditure on travel are feeling the pinch of higher prices.
Rising fuel inflation may pinch consumers who have to travel further for work and have access to affordable cereals etc.
The urban population would be more impacted by rising fuel prices than the rural population — however, a weak monsoon may lead to rural India being hit as farmers are forced to rely more on diesel-powered irrigation.

Ethanol cheaper than petrol

Context:
- As ethanol turns cheaper than petrol, the sugar industry sees an opportunity.
Background:
- The government has set targets of 10% bioethanol blending of petrol by 2022 and to raise it to 20% by 2030 under the Ethanol Blended Programme (EBP).
- Many countries, including India, have adopted ethanol blending in petrol in order to reduce vehicle exhaust emissions and also to reduce the import burden on account of crude petroleum.
- Currently, the bioethanol blending in petrol stands at 5%.
Reasons for Ethanol Blending:
- It is estimated that a 5% blending can result in the replacement of around 1.8 million barrels of crude oil.
- As the ethanol molecule contains oxygen, it allows the engine to more completely combust the fuel, resulting in fewer emissions and thereby reducing the occurrence of environmental pollution.
- The renewable ethanol content, which is a by-product of the sugar industry, is expected to result in a net reduction in the emission of carbon dioxide, carbon monoxide (CO), and hydrocarbons (HC).
Challenges in Ethanol Blending:
- Less Production:
  - Currently, domestic production of bioethanol is not sufficient to meet the demand for bio-ethanol for blending with petrol at Indian OMCs.
  - Sugar mills, which are the key domestic suppliers of bio-ethanol to OMCs, were able to supply only 57.6% of the total demand.
  - Sugar mills do not have the financial stability to invest in biofuel plants.
  - There are also concerns among investors on the uncertainty of the price of bioethanol in the future as the prices of both sugarcane and bio-ethanol are set by the central government.
- Water Footprint:
  - While India has become one of the top producers of ethanol but it lags the top producers, the USA and Brazil, by a huge margin and remains inefficient in terms of water usage.
  - India's water requirements for producing ethanol are not met through rainwater and the groundwater is used for drinking and other purposes.
  - Water footprint, that is water required to produce a litre of ethanol, includes rainwater at the root zone used by ethanol-producing plants such as sugarcane, and surface, groundwater, and freshwater required to wash away pollutants.
- Limited Sugarcane Availability:
  - Sugarcane is another limited resource that affects ethanol blending in the country.
  - In order to achieve a 20% blend rate, almost one-tenth of the existing net sown area will have to be diverted for sugarcane production. Any such land requirement is likely to put stress on other crops and has the potential to increase food prices.
  - India’s biofuel policy stipulates that fuel requirements must not compete with food requirements and that only surplus food crops should be used for fuel production, if at all.
- Lack of Alternatives:
  - Producing ethanol from crop residue can be a good alternative but the annual capacity of biorefinery is still not enough to meet the 5% petrol-ethanol blending requirement.
  - Other biofuels such as Jatropha have often proven to be commercially unviable.
- Handling issues:
  - Ethanol being a highly flammable liquid marks obligatory safety and risk assessment measures during all phases of production, storage, and transportation, thus increasing the cost and risk factor.
Way Forward
- 2G bioethanol not only provided a clean source of energy but also helped to provide greater income to farmers and help meet the aim of doubling the farmer's income by 2020 and prevent them from having to burn agricultural waste which can be a major source of air pollution.
- The government could provide greater visibility on the price of bioethanol by announcing a mechanism by which the price of bio-ethanol would be decided.
- Setting a target that a certain percentage of ethanol blending be done using ethanol generated from 2G plants would help boost investment in the area.
- Also, alternatives like 3rd generation (derived from algae) and 4th generation biofuels (derived from specially engineered plants or biomass) should be encouraged.

Kochi-Mangalore pipeline

Context:
- The much-delayed Kochi-Mangalore natural gas pipeline project is finally ready for commissioning any day from now.
Why the delay?
- The company was working on the 540-metre river stretch since late April but got inordinately delayed as this stretch goes up to 8 metres deep in the river bed at some places and has an elevation difference of 148 metres, as the river flows down a deep valley, making it one of the rarest engineering projects for the entire pipeline network across the country.
- The project crosses as many as 96 water bodies south of the Chandragiri River.
- The problem with this stretch is that the river flows down through a valley to the Arabian Sea, forcing them to drill horizontally from under the river bed.
Benefits of the project:
- Today the pipeline supplies 3.8 million cubic metres of gas every day to industrial and residential customers in Kochi and is set to cross 4 million cubic metres soon in the city itself, while Mangalore has a potential of 2.5 million cubic metres per day.
- The pipeline is a big boost to the struggling Kochi LNT Terminal of Petronet which has a capacity of 5 million tonne annually but 90 percent of capacity has been idling due to the delay in completing the Kochi-Mangalore pipeline with the commissioning the capacity utilisation of the LNG terminal will go up to 25-30 percent.
- Apart from huge environmental gains, the state can also gain monetarily as it can get up to Rs 1,000 crore by way of taxes alone.
- Supplying to the Kochi region alone helps the state earn over Rs 340 crore annually in tax revenue.

External Sector and Employment:

Toy traders

Context:
- The toy industry in India has asked the government to suspend a Quality Control Order (QCO) issued in February, for at least a year, failing which the industry would be forced to shut shop.
What’s the issue?
- The complexity of Scheme-1 of the QCO and the challenges in adhering to its September 1, 2020 timeline “will have a devastating impact” on the industry. Hence, there is a need for further suspending the order.
Need of the hour:
- The government must constructively engage with all the stakeholders of the industry to formulate a comprehensive policy for domestic and overseas manufacturers based on the rules that are already in place since 2017.
Overview of the Toys (Quality Control) Order:
- This relates to the regulation of toys and/or materials for use in play by children under 14 years of age, or other products as notified by the Central Government.
- • The order has been issued by DPIIT, Ministry of Commerce & Industry.
The Order contains several important provisions for toy safety, including:
1. The requirement for toys to conform to the latest version of a list of Indian Standards.
2. The requirement for toys to bear the Standard Mark under a license from the Bureau as per Scheme-I of Schedule-II of Bureau of Indian Standards (Conformity Assessment) Regulations, 2018.
3. Directing the Bureau to be the certifying and enforcement authority.
Overview of the Scheme-I:
- Under this scheme, the ISI mark is granted to the factories (who is actually producing the goods) and products by the BIS which is the national standards body of India.
- The main objective of the BIS is to ensure that the products that are delivered to the end consumers are safe for their use and are in adherence with all the quality and safety standards set by them.
- In India, the ISI mark is the synonym for better quality and safety.
Need for safety:
- Safety and quality are fundamental concerns for parents who buy toys and other products related to children.
- It is imperative that not only the industry but the government should also assume an active role in enabling its adoption by a larger section of the society.
- The recent survey conducted by the Quality Council of India shows that 67% of imported toys are not safe for children.

Production linked incentive scheme for electronics manufacturers

Context:
- Global electronics giants such as Samsung, Pegatron, Flex, and Foxconn among others are in the final stages of negotiations to benefit from the Ministry of Electronics and Information Technology’s (MeitY) production linked incentive (PLI) scheme for making mobile phones and certain other specified electronic components.
About the PLI scheme:
- Notified on April 1 as a part of the National Policy on Electronics.
- It proposes a financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain.
Key features of the scheme:
1. The scheme shall extend an incentive of 4% to 6% on incremental sales (over a base year) of goods manufactured in India and covered under target segments, to eligible companies, for a period of five (5) years with financial year (FY) 2019-20 considered as the base year for calculation of incentives.
2. The Scheme is open for applications for a period of 4 months initially which may be extended.
3. The Scheme will be implemented through a Nodal Agency which shall act as a Project Management Agency (PMA) and be responsible for providing secretarial, managerial and implementation support and carrying out other responsibilities as assigned by MeitY from time to time.
Eligibility:
- According to the scheme, companies that make mobile phones which sell for Rs 15,000 or more will get an incentive of up to 6 percent on incremental sales of all such mobile phones made in India.
- In the same category, companies which are owned by Indian nationals and make such mobile phones, the incentive has been kept at Rs 200 crore for the next four years.
What kind of investments will be considered?
1. All electronic manufacturing companies which are either Indian or have a registered unit in India will be eligible to apply for the scheme.
2. These companies can either create a new unit or seek incentives for their existing units from one or more locations in India.
3. However, all investments done by companies on land and buildings for the project will not be considered for any incentives or determine the eligibility of the scheme.
Why do we need such a scheme?
- The domestic electronics hardware manufacturing sector faces a lack of a level playing field vis-à-vis competing nations.
- The sector suffers disability of around 8.5% to 11% on account of lack of adequate infrastructure, domestic supply chain and logistics; high cost of finance; inadequate availability of quality power; limited design capabilities and focus on R&D by the industry; and inadequacies in skill development.
- Therefore, to position India as a global hub for Electronics System Design and Manufacturing (ESDM), it is necessary to encourage and drive capabilities in the country for developing core components and create an enabling environment for the industry to compete globally.

Line of credit

Context:
- India announced a slew of new connectivity measures for the Maldives, including air, sea, intra-island, and telecommunications in an effort to help the Indian Ocean Islands deal with the economic impact of the COVID- 19 pandemics.
Initiatives announced:
1. Air connectivity “bubble” for travel.
2. A direct ferry service.
3. A submarine cable for telecom connectivity.
4. Assistance for the Greater Male Connectivity project (GMCP) to connect Male to three neighbouring islands- Villingili, Thilafushi, and Gulhifahu islands.
Background:
- India will support the implementation of the GMCP in the Maldives, through a financial package consisting of a grant of USD 100 million and a new Line of Credit (LoC) of USD 400 million.
- The GMCP would be the “largest civilian infrastructure project in the Maldives”.
What is Line of Credit (LOC)?
- The Line of Credit is not a grant but a ‘soft loan’ provided on concessional interest rates to developing countries, which has to be repaid by the borrowing government.
- The LOCs also helps to promote exports of Indian goods and services, as 75% of the value of the contract must be sourced from India.

Export Preparedness Index (EPI) 2020

Context:
- NITI Aayog in partnership with the Institute of Competitiveness has released the Export Preparedness Index (EPI) 2020.
- EPI is the first report to examine the export preparedness and performance of Indian states.
How were states ranked?
- The index ranked states on four key parameters – policy; business ecosystem; export ecosystem; export performance.
- The index also took into consideration 11 sub-pillars — export promotion policy; institutional framework; business environment; infrastructure; transport connectivity; access to finance; export infrastructure; trade support; R&D infrastructure; export diversification; and growth orientation.
Highlights of the report:
1. Top 3 states Gujarat, Maharashtra, and Tamil Nadu.
2. Among the landlocked states, Rajasthan has performed the best, followed by Telangana and Haryana.
3. Among the Himalayan states, Uttarakhand topped the chart, followed by Tripura and Himachal Pradesh.
4. Across Union Territories/ City-States, Delhi has performed the best, followed by Goa and Chandigarh.
5. On policy parameters, Maharashtra topped the index followed by Gujarat and Jharkhand.
6. On the business ecosystem parameter, Gujarat was ranked number one followed by Delhi and Tamil Nadu.
7. In the export ecosystem parameter, Maharashtra topped the Index followed by Odisha and Rajasthan.
8. On the export performance parameter, Mizoram led the index, followed by Gujarat and Maharashtra.
9. At present, 70 percent of India’s export has been dominated by five states – Maharashtra, Gujarat, Karnataka, Tamil Nadu, and Telangana.
Export promotion in India faces three fundamental challenges:
1. Intra- and inter-regional disparities in export infrastructure.
2. Poor trade support and growth orientation among states.
3. Poor R&D infrastructure to promote complex and unique exports.
What needs to be done?
- Joint development of export infrastructure.
- Strengthening industry-academia linkages.
- Creating state-level engagements for economic diplomacy.
- Revamped designs and standards for local products.
- Harness the innovating tendencies to provide new use cases for such products, with adequate support from the Centre.
Way ahead:
- The rapid growth of exports is a crucial component of long-term economic growth. A favourable ecosystem enables a country to contribute significantly to global value chains and reap the benefits of integrated production networks, globally.

National Infrastructure Pipeline (NIP)

Context:
- Finance Minister launches an Online Dashboard for the National Infrastructure Pipeline.
Key points:
- The online dashboard is envisaged as a one-stop solution for all stakeholders looking for information on infrastructure projects in New India.
- The dashboard is being hosted on the India Investment Grid (IIG) (www.indiainvestmentgrid.gov.in).
About NIP:
- When was it announced?
  - In the budget speech of 2019-2020, Finance Minister announced an outlay of Rs 100 lakh Crore for infrastructure projects over the next 5 years.
What is it?
1. NIP is a first-of-its-kind initiative to provide world-class infrastructure across the country and improve the quality of life for all citizens.
2. It will improve project preparation, attract investments (both domestic & foreign) into infrastructure, and will be crucial for attaining the target of becoming a $5 trillion economy by FY 2025.
3. Covers both economic and social infrastructure projects.
Report by Taskforce:
- The task force headed by Atanu Chakraborty on National Infrastructure Pipeline (NIP), in May 2020, submitted its final report to the Finance Minister.
Important recommendations and observations made:
1. Investment needed: ₹111 lakh crore over the next five years (2020-2025) to build infrastructure projects and drive economic growth.
2. Energy, roads, railways, and urban projects are estimated to account for the bulk of projects (around 70%).
3. The centre (39 percent) and state (40 percent) are expected to have an almost equal share in implementing the projects, while the private sector has a 21 percent share.
4. The aggressive push towards asset sales.
5. Monetization of infrastructure assets.
6. Setting up of development finance institutions.
7. Strengthening the municipal bond market.
The task force has recommended setting up of the following three committees:
1. Committee to monitor NIP progress and eliminate delays
2. Steering Committee at each Infrastructure ministry level to follow up on the implementation process
3. Steering Committee in DEA for raising financial resources for the NIP.

Spectrum auction

Context:
- The government has received bids worth ₹77,146 crores on the first day of the auction for telecom airwaves, exceeding its own pre-bid estimates of about ₹45,000 crores.
Background:
- Airwaves worth ₹3.92 lakh crore have been put up for sale across 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, and 2500 MHz frequency bands.
What are spectrum auctions?
- Devices such as cellphones and wireline telephones require signals to connect from one end to another. These signals are carried on airwaves, which must be sent at designated frequencies to avoid any kind of interference.
- The Union government owns all the publicly available assets within the geographical boundaries of the country, which also include airwaves.
- To sell these assets to companies willing to set up the required infrastructure to transport these waves from one end to another, the central government through the DoT auctions these airwaves from time to time.
- These airwaves are called a spectrum, which is subdivided into bands that have varying frequencies. All these airwaves are sold for a certain period of time, after which their validity lapses, which is generally set at 20 years.
- Spectrum refers to a range of radio waves that are used for communication purposes.
- India has telecom 22 circles.
- When the policy first came about, the telecom spectrum was linked to an operator's license – companies would be granted their license and they would also be allocated frequencies for a fixed number of years, after which they would have to bid to renew their license.
- New norms in 2011 delinked the spectrum from the license, so now when telecom operators ask to renew their licenses, they pay separately for frequencies.
- Like other natural resources, the spectrum is also supposed to be auctioned by the government to companies that can then use this to offer many services and recoup their investments.
- The first spectrum auction was for the 900MHz band, in 1994.
- Soon after, MTNL and BSNL entered the picture, and there were auctions in 1997, 2000, and 2001 (the last being for 1800MHz).
- After this, the government decided to switch to an administrative allocation model, where it would select the companies best suited for developing India's telecom infrastructure.
- However, the result of this was that the spectrum was being licensed at far lower rates than what was raised by auction.
- In 2008, spectrum in the 1800MHz band was again allocated, and in 2012, the Supreme Court asked the government to cancel most of the licenses citing irregularities.

Spectrum

Context:
- The National Company Law Appellate Tribunal (NCLAT) has said the wireless spectrum held by a telecom company undergoing insolvency cannot be treated as a ‘security interest’ by the lenders to the company, as the said spectrum is the property of the government and not the corporate debtor.
What Is Spectrum?
- Spectrum refers to a range of radio waves that are used for communication purposes.
- This includes the FM or AM radio broadcasts.
- In India, the Department of Telecommunications (DoT) conducts auctions of licenses for electromagnetic spectrum.
- According to, Ministry of Communications the spectrum auction 2021 fetched bids worth Rs 77,814.80 crore.
About the order:
- NCLAT held that though the spectrum, which is an intangible asset of the telecom company, can be subjected to insolvency or liquidation proceedings under the Insolvency and Bankruptcy Code (IBC), the telcos will not be considered the owner of the spectrum.
- All telecom service providers are granted only the right to “use the spectrum“.
- The license fee as well as deferred spectrum charges payable by telcos, therefore, will fall under the category of operational dues and the Department of Telecommunications (DoT) will be considered an operational creditor.
- Therefore, a telecom company cannot seek to initiate insolvency against itself under Section 10 of the IBC with a “malicious intent” of avoiding payment of license or spectrum usage charges to the DoT.

Submarine communications cable

Context:
- Prime Minister Narendra Modi recently inaugurated the Chennai-Andaman and Nicobar Island Submarine Cable System, which will provide better connectivity to the archipelago.
- The foundation stone for the project was laid by PM Modi in December 2018 at Port Blair.
Key points:
- About 2,300 km of submarine optical fibre cable (OFC) has been laid at a cost of about Rs 1,224 crore to provide better connectivity in the UT.
- The project envisages better connectivity from Chennai to Port Blair and seven other Islands — Swaraj Deep (Havelock), Long Island, Rangat, Hutbay (Little Andaman), Kamorta, Car Nicobar, and Campbell Bay (Great Nicobar).
- The project is funded by the government through the Universal Service Obligation Fund under the ministry of communications.
Who will benefit?
1. Better connectivity in the region will facilitate the delivery of e-governance services such as telemedicine and tele-education.
2. Small enterprises will benefit from opportunities in e-commerce, while educational institutions will utilise the enhanced availability of bandwidth for e-learning and knowledge sharing.
3. Business Process Outsourcing services and other medium and large enterprises too also benefit from better connectivity.
4. After the launch of the project by PM Modi, the internet bills in Andaman and Nicobar will also come down substantially.
What is the Submarine Communications cable?
- It is a cable laid on the sea bed between land-based stations to carry telecommunication signals across stretches of ocean and sea.
- The optical fiber elements are typically individually coated with plastic layers and contained in a protective tube suitable for the environment where the cable will be deployed.
Types of Submarine fiber cables:
- There are two types of Submarine fibre cables: unrepeated and repeated.
- Unregistered cables are preferred in short cable routes because it does not require repeaters, lowering costs; however, their maximum transmission distance is limited.
Importance of submarine cables:
- Currently, 99 percent of the data traffic that is crossing oceans is carried by undersea cables.
- The reliability of submarine cables is high, especially when multiple paths are available in the event of a cable break.
- The total carrying capacity of submarine cables is in the terabits per second, while satellites typically offer only 1,000 megabits per second and display higher latency.
Challenges:
- A typical multi-terabit, transoceanic submarine cable system costs several hundred million dollars to construct.

Telecom Licensing amendment

Context:
- The Department of Telecommunications (DoT) has amended licensing conditions for telecom companies.
Highlights:
- The norms include defense and national security as parameters in the purchase of telecom equipment for trusted sources.
- Starting June 15, telcos can use telecom products only from trusted sources in their network.
- Telcos must take permission from the designated authority if they plan to upgrade their existing network using telecom equipment that has not been designated as the trusted product.
- National Cyber Security Coordinator has been made the designated authority for deciding on the list of trusted and non-trusted telecom equipment sources and products.
- NCSC’s decisions will be made based on the approval of a committee headed by the Deputy National Security Advisor (NSA). The committee will also have members from other departments and ministries, and independent experts as well as two members from the industry.
Impact on Chinese companies:
- The move could potentially make it more difficult for Chinese telecom equipment vendors like Huawei and ZTE to supply equipment to Indian telecom players in the future.
National Cyber Security Coordinator:
- In 2014, the Prime Minister’s Office created the position of the National Cyber Security Coordinator.
- The NCSC office coordinates with different agencies at the national level for cybersecurity matters.

BharatNet Project

Context:
- The Bharat Broadband Network Limited (BBNL) has invited bids for the BharatNet project to roll out high-speed broadband services in rural areas across 16 states.
About:

BharatNet is the government's flagship project and is considered to be the backbone of ‘Digital India’ aiming to reduce the digital divide between urban and rural India.
The latest phase of BharatNet would be implemented through the Public-Private Partnership (PPP) model in 16 states, pushing the outlay of the project to Rs 61,109 crore.
BharatNet started as the National Optical Fibre Network in 2011, a “middle mile” project with a mandate to extend the existing optical cable fiber network from the Block Headquarters to 2.5 lakh Gram Panchayats (GP) in the country.
So far, 60% (1.57 lakh) of GPs have been made service-ready.
Just 34% (89,149) of these panchayats have been provided with a Fibre to the Home (FTTH) connection.
Once the GPs were provided with fiber optic connectivity, the government expected private players to lease bandwidth and provide internet services at the last mile — with speeds above 2 MBPS for as little as Rs 250.
However, in the decade since the BharatNet began, persistent delays and the unreliability of the Phase-I infrastructure, which is prone to faults and has poor maintenance, meant there were few private takers to lease the network and provide internet services.
The current Public-Private Partnership (PPP) Model makes the private concessionaire responsible for implementing all aspects of the project from end-to-end, including maintaining and operating it for 30 years, which is in line with what state-led models have done.
The provision of good end-to-end infrastructure could also stoke interest from private players for bandwidth, which was largely missing in the earlier model.

OTP rules

Context:
- At the beginning of March 2021, around 40 crore SMSes sent by banks, government authorities, e-commerce companies, etc. were not delivered to intended recipients. The SMSes included confirmations of registration, one-time passwords (OTPs), and transaction messages.
Why did this happen?
- This happened after telecom operators enforced a 2018 regulation issued by the sectoral watchdog. Around 100 crore commercial messages on average are sent by companies to customers every day.
What are ‘commercial messages’?
- A commercial message can contain both solicited and unsolicited content. Messages such as OTPs for financial transactions, notifications about a transaction, confirmations for registrations, or orders placed on e-commerce websites are solicited; promotional messages selling financial products and real estate deals, etc. may be seen as unsolicited commercial communications.
- Mobile phone users have for years complained about unsolicited “pesky” calls and messages.
What has TRAI done about spammy communications?
- Back in 2012, when mobile companies tried to monetize the popularity of SMSes by offering packs that allowed users to send unlimited free messages after buying a special tariff voucher, the telecom regulator had ruled that beyond 100 messages per day, every message would have to cost at least 50 paise.
- Last June, the regulator did away with this regulation, citing newer technology-based rules to curb spam messages.
- It also issued ‘do-not-disturb rules, under which consumers could choose the categories of commercial messages and calls they wished to receive and could complain if they received messages from a category they had not chosen.
- However, these rules did little to reduce unsolicited commercial communications.
What did the 2018 regulation do?
- In 2018, TRAI introduced The Telecom Commercial Communications Customer Preference Regulations (TCCCPR), which defined architecture with checkpoints at three ends — the sender of the SMS, the telecom operator, and the customer.
- To ensure effectiveness, it put in place technology-based requirements at each stage — including “scrubbing” of messages, a consent register to keep a record of the permission given by the customer, and a distributed ledger to maintain a record of all entities registered to carry out telemarketing-related functions.
What changed for senders of SMSes?
- Senders, typically commercial entities, would have to register themselves.
- This built upon an older requirement under which a message or call from an unregistered number would result in a ban on that number — the entity would now have to register not only itself but also the template in which its content was to be communicated.
What would happen at the telecom operators’ end?
- Operators would examine the list of numbers provided by the sending entity to check whether commercial communications can be sent to the customer after verifying the preference and the consent.
- This process would also ensure that the messages were being sent as per the registered template.
And what would change for customers?
- They could whitelist certain categories or entities from which they wished to receive commercial messages.
- However, telemarketers can still call through unregistered mobile or landline numbers — and while these can be banned post facto, a mechanism to fully restrict them is still lacking.

Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013

Context:
- Chief Justice of India (CJI) Sharad A. Bobde has questioned the infallibility of a land acquisition judgment delivered by a Constitution Bench, led by his former colleague, Justice Arun Mishra, saying the verdict had left things “unsaid”.
Important observations made by CJI:
- The order gifted the government “laxity” in several aspects, which even Parliament did not bother to provide under the Act of 2013.
- The verdict did not specify for how long the government could possess a land acquired without paying compensation.
Background:
- In March this year, the Supreme Court Constitution Bench had reaffirmed the February 2018 ruling on Section 24 on land acquisition compensation awards in the Indore Development Authority case.
What's the issue?
- The judgment of the Constitution Bench was interpreting Section 24 (2) of the 2013 Act, which dealt with the payment of compensation for land acquired by the government.
- It said the acquisition would not lapse as long as the government earmarked the compensation money by paying it into the treasury. In short, the money need not actually reach the farmer or the landowner.
- The acquisition would also not lapse just because the farmer refused the compensation and claimed higher.
- Similarly, there was no lapse in acquisition if the compensation had been paid but possession not taken of the land.
When would it lapse then?
- The judgment had declared that acquisition would only lapse if the government had neither taken possession nor paid the compensation due to the landowner for five or more years prior to January 1, 2014.

Infrastructure Funding

Context:
- Cabinet approved up to ₹6,000-crore of equity infusion into NIIF’s debt platform by 2021-22.
- This was one of the twelve key measures made by Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman, as part of the Government of India’s stimulus to the economy, under AatmaNirbhar Bharat 3.0.
Impact of this move:
- This will act as a catalyst in attracting more investments into the infrastructure sector as envisaged in the National Infrastructure Pipeline.
- This process will also help relieve the exposure of banks to infrastructure projects and free up space for new green-field projects and will support in enhancing the liquidity of infrastructure assets and lower the risks.
- A well-capitalized, well-funded, and well-governed NIIF debt Platform can play a major role in infrastructure financing and development of the Bond Market in India by acting as a AAA/AA-rated intermediary between the bond markets and infrastructure projects and companies.
National Investment and Infrastructure Fund (NIIF):
- It was set up as a sovereign wealth fund and is registered with the(SEBI) as a Category II Alternate Investment Fund (AIF).
- It provides long-term capital for infra-related projects.
- 1st ever Sovereign Wealth Fund of India.
- The government had set up the ₹40,000 crores NIIF in 2015 as an investment vehicle for funding commercially viable greenfield, brownfield, and stalled infrastructure projects.
- The Indian government is investing 49% and the rest of the corpus is to be raised from third-party investors (including foreigners) such as sovereign wealth funds, insurance, and pension funds, endowments, etc.
- NIIF’s mandate includes investing in areas such as energy, transportation, housing, water, waste management, and other infrastructure-related sectors in India.
- NIIF currently manages three funds each with its distinctive investment mandate. The funds are registered as Alternative Investment Fund (AIF) with the Securities and Exchange Board of India (SEBI).

Social Infrastructure

Context:
- The viability gap funding [VGF] provided for economic infrastructure will now be extended to social infrastructure.
More about the news:
- Now, under two new schemes, private sector projects in areas like wastewater treatment, solid waste management, health, water supply, and education, could get 30% of the total project cost from the Centre.
- States could chip in with another 30% and the rest can be private sector investments. These projects should entail full recovery of operating costs to qualify for the VGF.
- Separately, pilot projects in health and education, with at least 50% operational cost recovery, can get as much as 40% of the total project cost from the central government.
- The Centre and States would together bear 80% of the capital cost of the project and 50% of operation and maintenance costs of such projects for the first five years.
What is Social Infrastructure?
- Social infrastructure can be broadly defined as the construction and maintenance of facilities that support social services.
- Types of social infrastructure include healthcare (hospitals), education (schools and universities), public facilities (community housing and prisons), and transportation (railways and roads).
What is Viability Gap Funding?
- Means a grant one-time or deferred, provided to support infrastructure projects that are economically justified but fall short of financial viability.
- Government of India has notified a scheme for Viability Gap Funding to infrastructure projects that are to be undertaken through Public-Private Partnerships.
- It will be a Plan Scheme to be administered by the Ministry of Finance with suitable budgetary provisions to be made in the Annual Plans on a year-to-year basis.
- Support under this scheme is available only for infrastructure projects where private sector sponsors are selected through a process of competitive bidding.
- The project agreements must also adhere to best practices that would secure value for public money and safeguard user interests.
- VGF is disbursed only after the private sector company has subscribed and expended the equity contribution required for the project.

Core Industries

Context:
- The Office of Economic Adviser within the Department for Promotion of Industry and Internal Trade released the Index of Eight Core Industries (ICI) for September 2020.
Index of eight Core industries:
- The Office of Economic Adviser, Department for Promotion of Industry and Internal Trade has released it.
- This is an index of the eight most fundamental industrial sectors of the Indian economy and it maps the volume of production in these industries.
What are the core industries?
- The Eight Core Industries comprise 40.27 percent of the weight of items included in the Index of Industrial Production (IIP).
- Since these eight industries are the essential “basic” and/or “intermediate” ingredient in the functioning of the broader economy, mapping their health provides a fundamental understanding of the state of the economy.
Key highlights:
- Refinery Products have the largest weight while Cement has the lowest weight. Steel and Electricity are the other heavyweights.
- The September data shows the promise of an economy that may be extricating itself out of the Covid-induced downturn.

Manufacturing Sector

Context:
- India’s manufacturing sector rebounded from a 39.3% contraction in GVA (gross value added) in the April-June quarter to show a 0.6% growth in the second quarter and this has amazed many economists.
About the news:
- Despite being the worst affected sector in Q1 due to the lockdown, it is quite puzzling how manufacturing turned itself around.
- The observation is based on the study of Gross Value Added(GVA) and Index of Industrial Production(IIP).
What is Gross Value Added?
- In 2015, in the wake of a comprehensive review of its approach to GDP measurement, India opted to make major changes to its compilation of national accounts and bring the whole process into conformity with the United Nations System of National Accounts (SNA) of 2008.
- As per the SNA, gross value added, is defined as the value of output minus the value of intermediate consumption and is a measure of the contribution to GDP made by an individual producer, industry, or sector.
- At its simplest, it gives the rupee value of goods and services produced in the economy after deducting the cost of inputs and raw materials used.
- GVA can be described as the main entry on the income side of the nation’s accounting balance sheet, and from economics, perspective represents the supply side.
- Prior to this, India calculated GVA at ‘factor cost’ and it was the main parameter for measuring the country’s overall economic output.
- In the new series, in which the base year was shifted to 2011-12 from the earlier 2004-05, GVA at basic prices became the primary measure of output across the economy’s various sectors and when added to net taxes on products amounts to the GDP.
What is the Index of Industrial Production?
- Index of Industrial Production data or IIP as is an index that tracks manufacturing activity in different sectors of an economy.
- The IIP number measures the industrial production for the period under review, usually a month, as against the reference period.
- IIP is a key economic indicator of the manufacturing sector of the economy. There is a lag of six weeks in the publication of the IIP index data after the reference month ends.
- IIP index is currently calculated using 2011-2012 as the base year.
- Electricity, crude oil, coal, cement, steel, refinery products, natural gas, and fertilisers are the eight core industries that comprise about 40 percent of the weight of items included in the Index of Industrial Production. Mining, manufacturing, and electricity are the three broad sectors in which IIP constituents fall.
- IIP is used by various government agencies such as the Ministry of Finance, the Reserve Bank of India (RBI), private firms and analysts, among others for analytical purposes
- It is released by Central Statistical Organisation
IIP vs ASI
- While the IIP is a monthly indicator, the Annual Survey of Industries (ASI) is the prime source of long-term industrial statistics. The ASI is used to track the health of the industrial activity in the economy over a longer period. The index is compiled out of a much larger sample of industries compared to IIP.

Purchasing Managers' Index (PMI)

Context:
- After hitting 58.9 in October, the highest in over a decade, November’s manufacturing PMI marked a three-month low.
About PMI:
- It is an index of the prevailing direction of economic trends in the manufacturing and service sectors.
- The index is compiled by IHS Markit.
- It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting.
- The purpose of the PMI is to provide information about current and future business conditions to company decision-makers, analysts, and investors.

Health Infrastructure

Context:
- Finance panel for public-private partnerships to ramp up health infrastructure.
Health spending in India:
- The total spending of around 0.95% of GDP is not adequate both in relation to our peer groups and in relation to the commitments under the National Healthy Policy of 2017.

Recommendations of the 15th Finance Commission:
- The Fifteenth Finance Commission has mooted a greater role for public-private partnerships to ramp up the health infrastructure and scale up public spending on health from 0.95% of GDP to 2.5% by 2024.
- While public outlays should focus on primary health care at the panchayat and municipality level, private players should be relied on for speciality healthcare.
- Mr. Singh recommended substantial improvements in the working conditions for doctors in government hospitals, many of whom are hired on a contract basis by States, and the creation of an Indian Medical Service cadre as envisaged in the Civil Services Act of 1951.
- To achieve better healthcare parameters, public-private partnerships must be considered “in a holistic way” instead of the current situation where the government only turns to the private sector in times of emergency.

U.S. puts India on ‘currency manipulators’ monitoring list

Context:
- The U.S. Treasury labeled India to a watch list of countries it suspects of taking measures to devalue their currencies against the dollar.
About:
- Currency manipulator is a designation applied by United States government authorities to countries that engage in what is called “unfair currency practices”, by deliberately devaluing their currency against the dollar.
- The practice would mean that the country in question is artificially lowering the value of its currency to gain an unfair advantage over others.
- This is because the devaluation would
  - Reduce the cost of exports from that country
  - Artificially show a reduction in trade deficits as a result.
- The United States has once again included India in its monitoring list of countries with potentially “questionable foreign exchange policies” and “currency manipulation”.
- To be labeled a manipulator by the U.S. Treasury, countries must at least have
  - $20 billion-plus bilateral trade surplus with the U.S.
  - Foreign currency intervention exceeding 2% of gross domestic product, and a
  - Global current account surplus exceeding 2% of GDP.
Why is India back in the Monitoring List again?
- India, which has for several years maintained a “significant” bilateral goods trade surplus with the US, crossed the $20 billion mark, according to the latest report.
- Based on the central bank’s intervention data, India’s net purchases of foreign exchange accelerated notably in the second half of 2019.
- Following sales during the initial onset of the pandemic, India sustained net purchases for much of the first half of 2020, which pushed net purchases of foreign exchange to $64 billion–or 2.4% of GDP–over the four quarters through June 2020.
Impact:
- The designation of a country as a currency manipulator does not immediately attract any penalties but tends to dent the confidence about a country in the global financial markets.

Intellectual property MoU between India and the US

Context:
- India and the US signed a Memorandum of Understanding (MoU) on intellectual property cooperation.
What is the MoU about?:
- The agreement, between the Commerce Ministry’s Department for Promotion of Industry and Internal Trade and the United States Patent and Trademark Office (USPTO), aims to increase IP cooperation between the two countries.
- It will be a landmark step forward in India’s journey towards becoming a major player in global innovation and will further the objectives of the National IPR Policy, 2016.
How will this MoU increase IP cooperation between India and the US?
- The MoU will facilitate the exchange and dissemination of best practices, experiences, and knowledge on IP.
- It is also expected to encourage collaboration in training programs, exchange of experts, technical exchanges, and outreach activities.
- The MoU provides for the exchange of information and best practices on processes for registration and examination of applications for patents, trademarks, copyrights, geographical indications, and industrial designs, as well as the protection, enforcement, and use of IP rights.
- It also provides for the exchange of information on the development and implementation of automation and modernization projects.
- It is also expected to foster their cooperation to understand various issues related to traditional knowledge.

Trade agreements and Economic growth

Context:
- Recently the External Affairs Minister made a statement citing trade agreements as the reason for India's below-potential economic growth.
- But some other experts have cited other reasons like strong rupee policy, low ease of doing business, and underperformance of the manufacturing sector.
India's Export-led growth:
- According to EAM S. Jaishankar, trade has delivered high economic growth for the country.
- Between 1995 and 2018, India’s overall export growth averaged 13.4% (in dollars) annually. This is the third-best performance in the world among the top 50 exporters.
- Yet, this is low as compared to the actual potential, because India's share of global manufacturing exports is only 1.7%, marginally less than Vietnam’s, at 1.75%.

Impact of Exchange rate policy:
- According to some experts, the 'strong rupee policy' is is among the chief causes that have been shown to have slowed down exports.
- The real effective exchange rate has appreciated by about 20% since 2014. This is like a subsidy given by the Indian government to the exporters of other countries because Indian goods proved to be costlier than foreign goods.
  - The real effective exchange rate (REER) is the weighted average of a country's currency in relation to an index or basket of other major currencies.
- Also, imports — such as holidays and higher education overseas — have leaped and it is because the exchange rate has made them more affordable.

Ease of doing business:
- Studies of trade agreements by NITI Aayog show that Indian exporters suffer logistics, compliance, and transaction costs twice as high in other countries. This low ease of doing business relative to other exporting countries has further eroded the competitiveness of Indian exports.
The underperformance of the Manufacturing Sector:
- Between fiscal years 2006 to 2012, manufacturing-sector GDP grew by an average of 9.5% per year. India’s trade openness was at its peak during these years of high growth.
- But, over the next six years, manufacturing sector GDP growth declined to 7.4%, coinciding with the phase of corruption scandals, a severe banking crisis, demonetisation, and an ill-implemented Goods and Services Tax(GST).
- Some experts have supported India's trade high openness and also that it is a crucial factor to remove the Indian Economy from the menace of the pandemic.

Global Housing Technology Challenge

Context:
- Prime Minister Narendra Modi laid the foundation for six Light House Projects (LHPs) under the Global Housing Technology Challenge (GHTC) and distributed the Pradhan Mantri Awas Yojana (PMAY) Urban and ASHA India awards.
About:
- GHTC- India intends to get the best globally available innovative construction technologies through a challenging process.
- It seeks to demonstrate and deliver ready-to-live-in houses in a shorter time, with lower cost and quality construction in a sustainable manner.
- It also seeks to promote future technologies, to foster an environment of research and development in the country.
- The conventional system of housing construction is time-consuming as well as resource-intensive, there is a need to look for new emerging, disaster-resilient, environment-friendly, cost-effective, and speedy construction technologies.
- The shift in technology transition will also address the challenges of large-scale housing construction in minimum time and cost with optimum use of resources and environment-friendly practices.
- GHTC-India has been conceptualized to enable the paradigm shift required in the construction sector in the country.
- GHTC-India will bring change, both in the perception as well as how the construction of houses is done.
- The challenge has three components viz.
  1. Conduct of Grand Expo-cum-Conference
  2. Identifying Proven Demonstrable Technologies from across the world
  3. Promoting Potential Technologies through setting up incubation centers at selected IITs and organizing accelerator workshops under the Affordable Sustainable Housing Accelerators- India (ASHA-India) Program.

Eight core sectors

Context:
- The output from India’s eight core sectors hit a three-month low in November, contracting 2.6% in the festive month, with coal, fertilizers, and electricity the only sectors to record positive growth on a year-on-year basis, suggesting the economy is still not out of the woods.
Index of Eight Core Industries (ICI):
- It is a production volume index.
- ICI measures the collective and individual performance of production in selected eight core industries viz. Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement, and Electricity.
- It is compiled and released by the Office of the Economic Adviser (OEA), Department of Industrial Policy & Promotion (DIPP), and Ministry of Commerce & Industry.
- The weights of these eight industries are largely in alignment with the respective weight of these industries in the Index of Industrial Production (IIP).
- The base year of the ICI has been revised to 2011-12 from 2004-05 in alignment with the new series of IIP.
- The combined weight of these eight-core industries is 40.27% of IIP with base 2011-12.

National Investment and Infrastructure Fund(NIIF)

Context:
- The National Investment and Infrastructure Fund (NIIF) on December 21 announced that it completed raising funds for its NIIF Master Fund, achieving a size of $2.34 billion, exceeding its target of $2.1 billion.
About NIIF:
- The government had set up the ₹40,000 crores NIIF in 2015 as an investment vehicle for funding commercially viable greenfield, brownfield, and stalled infrastructure projects.
- NIIF’s mandate includes investing in areas such as energy, transportation, housing, water, waste management, and other infrastructure-related sectors in India.
- NIIF currently manages three funds each with its distinctive investment mandate.
- The funds are registered as Alternative Investment Fund (AIF) with the Securities and Exchange Board of India (SEBI).
- A collaborative investment platform for international and Indian investors, anchored by the Government of India and as the largest domestic infrastructure equity fund, NIIF is well-positioned to invest at scale in large infrastructure projects strategic to India’s development.
- NIIF Master Fund primarily invests in operating assets in core infrastructure sectors such as energy and transportation.
- It manages over $4.4 billion of equity capital commitments across its three funds—Master Fund, Fund of Funds, and Strategic Opportunities Fund, each with its distinct investment strategy.
- It has successfully anchored platforms in ports and logistics, renewable energy, smart meters, and road sectors.

Goa’s river casinos

Context:
- Goa cabinet headed granted a fresh six-month extension to offshore casinos in the Mandovi river off Panaji.
About:
- Local people in Panaji have complained for years now that the casinos that attract large numbers of tourists, cause traffic congestion on Dayanand Bandodkar Marg, the road running parallel to the riverfront.
- Tourists are ferried to the six glitzy casinos floating in the Mandovi in boats.
How much revenue does the government earn from the casinos?
- The government earns over Rs 320 crore in license fees on average from the casinos and about Rs 1,000 crore in taxes for allied businesses such as restaurants, hotels, tourist vehicles, etc.
- The casinos on the Mandovi also pay entry fees and local taxes to the corporation of the city of Panaji and about Rs 25 lakh for licenses to the excise department.
- The excise department also earns a consumption duty on every bottle of alcohol consumed in the casinos.
- The casinos that have become an integral part of Goa’s tourism are an important revenue generator for the state, drawing both Indian and international tourists.
- However, government officials said offshore casinos are far more popular among tourists than onshore ones.

New guidelines to regulate digital content

Context:
- Recently, the government notified guidelines that seek to provide a grievance redressal mechanism for users of digital platforms of all kinds — social media sites, messaging apps, over-the-top (OTT) streaming services, and digital news publishers.
About:
- The Information Technology (Guidelines for Intermediaries and Digital Media Ethics Code) Rules, 2021 mandate that social media and messaging platforms will have to adhere to new requirements in assisting investigative agencies of the government.
- They are a “soft-touch oversight” mechanism to deal with issues such as the persistent spread of fake news and other misinformation.
What do the new rules require digital platforms to do?
- The broad themes of the guidelines revolve around grievance redressal, compliance with the law, and adherence to the media code. Social media platforms like Google or Facebook, or intermediaries, for instance, will now have to appoint a grievance officer to deal with users’ complaints.
- The other key requirement is that such a social media intermediary would have to “enable the identification of the first originator of the information on its computer resource” as may be required by judicial order.
- The guidelines also require streaming services to classify content based on its nature and type.
What has changed from earlier?
- The scope of regulation of the digital space has been expanded.
- The new guidelines not only replace the Information Technology (Intermediaries Guidelines) Rules, 2011 but go a step further.
- They also regulate digital news publishers and streaming services, which was not the case earlier.
- The 2011 rules were a narrower set of guidelines for intermediaries.
- Under Section 79 of the Information Technology Act, the intermediaries are not liable for user-generated content, provided they adhere to the rules.
- These rules have been tightened now
Why are the rules being criticized?
- The Internet Freedom Foundation (IFF), a digital liberties organization, refers to the new rules as “excessive governmental control over digital news and OTT content”.
- IFF also criticized the requirement of traceability of the originator of a problematic message.
- Thus becomes difficult to encryption.
- The rules have also been criticized for increasing the potential for censorship and surveillance

Gig economy workers

Context:
- The UK Supreme Court ruled that Uber drivers were to be considered workers and not freelance contractors
About the ruling:
- The ruling makes them eligible for all employment-related benefits such as minimum wage, annual leaves, and insurance.
- Uber said it solely acted as a platform that connected willing drivers and service-seeking passengers, and that the contract as such was made between them.
- The UK Supreme Court, however, turned down this plea and that the lack of a legal agreement as such between Uber and the drivers on its platform would not impede it's being considered an employer.
- The purpose is to give protection to vulnerable individuals who have little or no say over their pay and working conditions because they are in a subordinate and dependent position about a person or organization which exercises control over their work
Impact of ruling on Uber’s services in India:
- With this ruling, Uber and other service providing platforms could also potentially face legal and regulatory challenges in India
- The central government has increased its focus on the differential treatment of workers associated with such a big tech platform in India compared to other countries of the world.
- The variation in terms of service offered by these platforms has also been under scrutiny by the central government.
- In one such instance, it has over the last fortnight, lashed out on global micro-blogging platform Twitter for the laxity of approach it took in India compared to the US.
Legal protection for gig economy workers in India:
- The budget for 2021-22 has already mandated that the law on minimum wages would now apply to workers of all categories including those associated with platforms such as Uber.
- Such workers would now be covered by the Employees State Insurance Corporation (ESIC), which mandates employers depositing a certain amount of money with the state insurer, the rest of which is paid by the government.
- November last year, the central government had come out with specific norms for ride-hailing apps such as Uber and Ola.
- Under the new rules, ride-hailing apps could charge a maximum of 20% commission per ride from driver-partners, while also capping the total number of working hours per day at 12.
- The new regulations also provided for the maximum fare that these platforms could charge customers even during high-demand peak hours and that they would have to provide drivers with insurance.

FDI limit in Insurance Sector

Context:
- Insurance Amendment Bill, 2021 was recently passed by Rajya Sabha.
Key features of the Bill:
- The Bill amends the Insurance Act, 1938 to increase the maximum foreign investment allowed in an Indian insurance company.
- The Bill increases the limit on foreign investment in an Indian insurance company from 49% to 74% and removes restrictions on ownership and control.
- While control will go to foreign companies, the majority of directors and key management persons will be resident Indians who will be covered by law of the land.
Significance:
- Insurance companies are facing liquidity pressure and the higher limit would help meet the growing capital requirement.
Background:
- Foreign investment in the insurance sector was first permitted in the year 2000 up to 26%.
- Subsequently, vide an Amendment Act of 2015, this limit was raised to 49% of the paid-up equity capital of such company, which is Indian owned and controlled.

Open Network for Digital Commerce (ONDC)

Context:
- The central government has recently set up an advisory council for Open Network for Digital Commerce (ONDC).
About:
- The Department for Promotion of Industry and Internal Trade (DPIIT) had announced ONDC to cater to the challenge of digital monopolies.
- It is to digitize e-commerce value chains, standardize operations, promote inclusion of suppliers, and derive efficiencies in logistics.
- This is another effort by the government to facilitate the creation of shared digital infrastructure, as it has previously done for identity (Aadhaar) and payments (Unified Payments Interface).
- Currently, e-commerce in India, which is likely to be worth $188 billion market by 2025 as per Grant Thornton, is led by Walmart’s Flipkart and Amazon India.
- Out of roughly 6.33 crore MSMEs in India, only a handful of enterprises sell goods and services online.
- This step would encourage easy digital adoption by small businesses that are yet to get onboard online commerce.
- ONDC is likely to make e-commerce more inclusive and accessible for consumers who can potentially discover any seller, product, or service by using any ONDC compatible application or platform, thus increasing freedom of choice for consumers.
- The initiative to integrate e-commerce platforms through a network based on open-source technology independent of any single or unique e-commerce platform has been tasked to the Quality Council of India (QCI).

India Industrial Land Bank (IILB)

Context:
- The India Industrial Land Bank will achieve pan-India integration by December 2021, said the Ministry of Commerce and Industry.
About:
- The India Industrial Land Bank, or IILB, is a GIS-based portal that acts as a one-stop repository of all industrial infrastructure-related information, including connectivity, infrastructure, natural resources and terrain, plot-level information on vacant plots, line of activity, and contact details.
- The system has been integrated with industry-based GIS systems of 17 states so that details can be updated on the portal on a real-time basis.
- Currently, the portal has approximately 4,000 industrial parks mapped across an area of 5.5 lakh hectares of land and serves as a decision support system for investors scouting for land remotely.
- The industrial land bank has grown in popularity, with its website registering a 30% increase in page views each month since April 2021.
- The land bank can be accessed via its website or a mobile application on Android and iOS.
- The application and portal do not require visitors to log in to access the information.

World Bank report on remittances

Context:
- World Bank, in its latest Migration and Development Brief, said despite COVID-19, remittance flows remained resilient in 2020, registering a smaller decline than previously projected
About:
- A remittance is a money sent to another party, usually one in another country.
- India is the world’s biggest recipient of remittances.
- Remittances bolster India’s foreign exchange reserves and help fund its current account deficit.
- India received over USD83 billion in remittances in 2020, a drop of just 0.2% from the previous year, despite a pandemic that devastated the world economy
- China, which received USD59.5 billion in remittances in 2020 is a distant second in terms of global remittances
- As COVID-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable
- Remittance outflow was the maximum from the United States (USD68 billion), followed by UAE (USD43 billion)

Foreign Direct Investment (FDI)

Context:
- India attracted the highest ever total FDI inflow of US$ 81.72 billion during 2020-21, 10% more than the last financial year
About:
- Foreign direct investment (FDI) is when a company takes controlling ownership in a business entity in another country.
- With FDI, foreign companies are directly involved with day-to-day operations in the other country.
- This means they aren’t just bringing money with them, but also knowledge, skills, and technology.
Trends in FDI inflow:
- In terms of top investor countries, ‘Singapore’ is at the apex with 29%, followed by the U.S.A (23%) and Mauritius (9%) for the F.Y. 2020-21
- Computer Software & Hardware has emerged as the top sector during F.Y. 2020-21 with around 44% share of the total FDI Equity inflow followed by Construction (Infrastructure) Activities (13%) and Services Sector (8%) respectively
- Gujarat is the top recipient state during the F.Y. 2020-21 with a 37% share of the total FDI equity inflows followed by Maharashtra (27%) and Karnataka (13%).

Development Economics DEC

Context:
- Recently, the World Bank has released the Migration and Development Brief which provides information regarding remittances received by various countries.

Prepared by:
- The report is prepared by the Migration and Remittances Unit, Development Economics (DEC)- the premier research and data arm of the World Bank.
- The report is produced twice a year.
Aim:
- The report aims to provide an update on key developments. Especially in the area of migration and remittance flows and related policies over the past six months.
- The report also provides medium-term projections of remittance flows to developing countries.
Findings Related to India:
- India has received the highest amount of remittances in 2020. This was followed by China, Mexico, the Philippines, Egypt, Pakistan, France and Bangladesh.
- India’s Remittances: India has received over USD83 billion in remittances in 2020. This was despite the pandemic that devastated the world economy.
- India’s remittances fell by just 0.2% in 2020. This was due to a 17% fall in remittances from the United Arab Emirates. However, this was offset by the resilient flows from the United States and other host countries.
- Remittances outflow from India in 2020 was USD7 billion. In 2019, it was around USD7.5 billion.
Remittances:
- Remittance is money usually sent to a person in another country. The sender is typically an immigrant and the recipient a relative back home.
- Remittances represent one of the largest sources of income for people in low-income and developing nations.
Other Reports and Publication of WB:
- Ease of Doing Business
- World Development Report
- Global Economic Prospects

Extradition of Nirav Modi

Context:
- The Westminster Magistrates' Court in London allowed India’s extradition request against businessman Nirav Modi, who is wanted in connection with the ₹13,758-crore Punjab National Bank fraud, ruling that a prima facie case had been made out.
About:
- Mr. Nirav Modi faces the allegation of siphoning off funds through fraudulently issued Letters of Undertaking and laundering them.
- The ED has accused him of diverting more than ₹, 4,000 crores using over a dozen shell entities based in Hong Kong and the United Arab Emirates.
- While his properties worth hundreds of crores have been attached in India and overseas, he has also been declared a fugitive economic offender by a special Mumbai court.
Fugitive Economic Offenders Act, 2018:
- The act empowers any special court (set up under the Prevention of Money Laundering Act, 2002) to confiscate all properties and assets of economic offenders who are charged in offenses measuring over INR 100 crores and are evading prosecution by remaining outside the jurisdiction of Indian courts.

Production Linked Incentive (PLI) Scheme

Context:
- The Union Cabinet approved the Production Linked Incentive (PLI) Scheme for the pharmaceuticals and IT hardware sectors, entailing an outlay of ₹15,000 crores and ₹7,350 crores, respectively.
PLI scheme for pharmaceuticals:

The PLI scheme for pharmaceuticals, whose duration will be for nine years from 2020-21 till 2028-29, will benefit domestic manufacturers, help create employment, and is expected to contribute to the availability of a wider range of affordable medicines for consumers.
The scheme is expected to bring in an investment of ₹15,000 crores in the pharmaceutical sector.
The scheme is expected to promote the production of high-value products in the country and increase the value addition in exports.
The scheme also aims to create global champions from India that have the potential to grow in size and scale using cutting-edge technology and thereby penetrate global value chains.
Further, it is expected to promote innovation for the development of complex and high-tech products including products for emerging therapies and in-vitro diagnostic devices as also self-reliance in important drugs, while improving accessibility and affordability of medical products, including orphan drugs, to the Indian population.

PLI Scheme for IT hardware:
- The cabinet also approved the PLI Scheme for IT hardware such as laptops, tablets, all-in-one PCs, and servers.
- The scheme, under which an incentive will be given on net incremental sales of goods manufactured in India for four years, will benefit five major global players and ten domestic champions in the field of IT hardware
- As per government estimates, the scheme has the potential to generate employment for more than 1,80,000 (direct and indirect jobs) over four years.
- The scheme will provide impetus to domestic value addition for IT hardware which is expected to rise to 20-25% by 2025.

Hallmarking of gold jewellery

Content:
- The government has made hallmarking of gold jewellery mandatory in India from June 16, 2021.
- This comes two decades after gold hallmarking was introduced in India voluntarily.
What is hallmarking of gold jewellery?
- This is a quality certificate issued by the Bureau of Indian Standards (BIS) guaranteeing the purity of gold in a certain piece of jewellery.
- This certificate will be issued to all registered jewellers based on purity tests at certificated centers.
- Hallmarking is allowed on 14-, 18- and 22-carat gold jewellery.
- Gold in additional carats, 20, 23, and 24, will also be allowed for hallmarking in due course.
- Under the hallmarking scheme of the BIS, jewellers need to be registered to sell hallmarked jewellery.
- BIS is the authorizing authority for the testing and hallmarking centers.
- BIS (Hallmarking) Regulations were introduced effective June 14, 2018, but now it has been made mandatory.
- India is the only country with significant gold consumption that did not have mandatory hallmarking of gold.
What is the need for hallmarking?
- Hallmarking will enable consumers/jewellery buyers to make authentic choices and save them from unnecessary confusion while buying gold.
- At present, only 30% of Indian gold jewellery is hallmarked.
- Consumer protection is another key priority that will be served in the process.
- This step, the government said it believed, would help develop India as a leading gold market center in the world.

Production Linked Incentive (PLI) Scheme on White Goods

Context:
- The application window for the Production Linked Incentive (PLI) scheme for white goods was recently opened.
What are 'White Goods'?
- They are large home appliances such as refrigerators, freezers, washing machines, tumble driers, dishwashers, and air conditioners, LED.
- They are (large) electrical goods for the house which were traditionally available only in white.
About the scheme:
- The PLI Scheme will be implemented within the overall financial limits of Rs. 6,238 Crores over 5 years.
- The objective of the scheme is to create a complete component ecosystem in India and make India an integral part of the global supply chains.
- With due consultations with industry and other stakeholders, DPIIT issued detailed Scheme Guidelines for effective operation and smooth implementation of the Scheme.
- The Scheme is expected to attract global investments, enhance manufacturing and generate large-scale employment opportunities.
- The Scheme is expected to be instrumental in achieving growth rates that are much higher than existing ones for AC and LED industries, develop complete component eco-systems in India, and create global champions manufacturing in India.

Right to repair movement

Context:
- In recent years, countries around the world have been attempting to pass effective 'right to repair' laws.
Initiatives
- US President Joe Biden signed an executive order calling on the Federal Trade Commission to curb restrictions imposed by manufacturers that limit consumers’ ability to repair their gadgets on their terms.
- The UK, too, introduced right-to-repair rules that should make it much easier to buy and repair daily-use gadgets such as TVs and washing machines.
What is the right to repair movement?
- Activists and organizations around the world have been advocating for the right of consumers to be able to repair their electronics and other products as part of the ‘right to repair’ movement.
- The movement traces its roots back to the very dawn of the computer era in the 1950s.
- The goal of the movement is to get companies to make spare parts, tools, and information on how to repair devices available to customers and repair shops to increase the lifespan of products and to keep them from ending up in landfills.
- They argue that these electronic manufacturers are encouraging a culture of ‘planned obsolescence’ — which means that devices are designed specifically to last a limited amount of time and to be replaced.
- This, they claim, leads to immense pressure on the environment and wasted natural resources.
- Right to repair advocates also argue that this will help boost business for small repair shops, which are an important part of local economies
Opposition:
- Large tech companies, including Apple, Microsoft, Amazon, and Tesla, have been lobbying against the right to repair.
- Their argument is that opening up their intellectual property to third-party repair services or amateur repairers could lead to exploitation and impact the safety and security of their devices.
- Tesla, for instance, has fought against right-to-repair advocacy, stating that such initiatives threaten data security and cybersecurity.

SWAMIH Fund

Context:
- Recently, Union finance minister Nirmala Sitharaman virtually handed over keys to 640 homebuyers under the central government’s ambitious ‘SWAMIH’ initiative, which completed its first project
About:
- SWAMIH stands for Special Window for Affordable & Mid-Income Housing
- It is a government-backed fund that was set up as a Category-II AIF (Alternate Investment Fund) debt fund registered with SEBI, launched in 2019
- It has been formed to complete construction of stalled, brownfield, RERA registered residential developments that are in the affordable housing / mid-income category, are networth positive, and require last-mile funding to complete construction.
- The Investment Manager of the Fund is SBICAP Ventures, a wholly-owned subsidiary of SBI Capital Markets, which in turn is a wholly-owned subsidiary of the State Bank of India.
- The Sponsor of the Fund is the Secretary, Department of Economic Affairs, Ministry of Finance, Government of India on behalf of the Government of India.

Report of Parliamentary Standing Committee on Commerce

Context:
- A Parliamentary Standing Committee on Commerce has flagged issues like India’s poor industrial performance, “distressingly high” logistics costs and high dependence of crucial manufacturing sectors on imports from countries like China as impeding the growth of these sectors
About:
- The committee had examined and discussed the opportunities and challenges for attracting investment, analyzed some of the issues affecting ease of doing business, and explored measures to make India a global manufacturing hub.
- According to the committee, healthy economic indicators are “vital” for attracting foreign investors and the government should make “concerted efforts” to revive the economy and recover from the current slump.
- The committee said that the main challenges faced by the country at present included administrative and regulatory hurdles, inadequate and costly credit facilities, “tedious” land acquisition procedures, inadequate infrastructure facilities, and the “large” unorganized manufacturing sectors like the toy industry.
- It has also expressed concern over the sharp contraction of India’s GDP during the first quarter of the 2020-21 financial year, stating that the Covid-19 pandemic and subsequent lockdown has exacerbated the trend of decline in the country’s growth trajectory.

Vaccine nationalism

Context:
- Various scholars have been urging international organisations like WTO, United Nations to intervene in the profit-seeking race of Covid vaccines and channelise it towards vaccine accessibility to all.
Mechanisms that can help:
- COVAX:
  - COVAX is one of three pillars of the Access to COVID-19 Tools (ACT) Accelerator, which was launched in April by the World Health Organization (WHO), the European Commission, and France in response to this pandemic.
  - Bringing together governments, global health organisations, manufacturers, scientists, the private sector, civil society, and philanthropy, with the aim of providing innovative and equitable access to COVID-19 diagnostics, treatments, and vaccines.
  - COVAX is co-led by Gavi, the Coalition for Epidemic Preparedness Innovations (CEPI), and WHO.
  - Its aim is to accelerate the development and manufacture of COVID-19 vaccines and to guarantee fair and equitable access for every country in the world.
- Treating the vaccine as a public good:
  - World Health Organization's Director-General, exhorted member countries to treat COVID-19 technologies as a “public good”.
  - A public good is a common property of the nation and such goods are not excludable and non-rivalrous.
  - If it is a public good, governments would have to step in to regulate its development, innovation, manufacture, sale, and supply ultimately to the public.
  - If there is public financing for technology development, there is no scope for grant of patent protection.
What is Compulsory Licensing?
- The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the Doha Ministerial Conference declaration, 2001 under WTO made provisions for compulsory licensing.
- It allows governments to license third parties (that is, parties other than the patent holders) to produce and market a patented product or process without the consent of patent owners.
- Any time after three years from the date of sealing of a patent, application for the compulsory license can be made, provided if:
- Reasonable requirements of the public have not been satisfied;
- The patented invention is not available to the public at a reasonably affordable price;
- The patented invention has not worked in India.
- The TRIPS Agreement does not specifically list the reasons that might be used to justify compulsory licensing.
- However, the Doha Declaration on TRIPS and Public Health confirms that countries are free to determine the grounds for granting compulsory licences and to determine what constitutes a national emergency.

Foreign direct investment (FDI)

Context:
- India has attracted the highest ever total FDI inflow of U.S.$81.72 billion during the financial year 2020-21 and it is 10 percent higher as compared to the last financial year 2019-20
About increased Inflows:
- The Reserve Bank of India (RBI) reported that the equity component of inflows was over the U.S.$61.4 billion, a 19% increase over the U.S.$51.7 billion received in 2019-20.
- Taken on their face value, these numbers are indeed creditable, especially given that global FDI inflows in 2020 had declined by 42% over the level in 2019, and inflows to developing countries had fallen by 12%.
- The credit for this record level of inflows was given to FDI policy reforms, investment facilitation, and ease of doing business.
- The highest FDI is coming from Singapore and the maximum FDI is received by the Gujarat state.
- A characteristic feature of foreign capital inflow in 2020-21 is:
  - Sizable repatriation of long term FDI capital
  - The large inflow of speculative capital i.e. FPI/FII
Issues associated:

The majority of the FDI is through the indirect acquisition of shares held by Reliance Industries without creating any productive asset.
The majority of FDI (more than 80%) is in the services sector and very less in the non-acquisition (mere transfer of shares) manufacturing sector
Three Reliance group companies like Jio Platform, Reliance Retail Venture and Reliance BP Mobility getting more than 50% of the FDI

Net International Investment Position (NIIP)

Context:
- The Reserve Bank of India (RBI) recently released data relating to India's International Investment Position as it stood at the end of March 2020
About NIIP:
- It measures the gap between a nation’s stock of foreign assets and a foreigner's stock of that nation's assets.
- Essentially, it can be viewed as a nation’s balance sheet with the rest of the world at a specific point in time
- It is an important barometer of a nation’s financial condition and creditworthiness.
- A nation with a positive NIIP is a creditor nation, while a nation with a negative NIIP is a debtor nation.
Recent data:
- The ratio of overseas financial assets to India's GDP in 2019-20 (at current market prices) moved up to 26.5% in March 2020 as compared to 23.4% a year ago
- International financial assets of Indian residents increased by USD 73.9 billion due to the rise in reserve assets and overseas direct investment
- Net claims of non-residents in India declined

India-China trade

Context:
- India’s trade with China in 2020 fell to the lowest since 2017, with the trade imbalance declining to a five-year low on the back of a slump in India’s imports from China.
About:
- Two-way trade in 2020 reached $87.6 billion, down by 5.6%.
- India’s imports from China accounted for $66.7 billion, declining by 10.8% year-on-year and the lowest figure since 2016.
- India’s exports to China, however, rose to the highest figure on record, for the first time crossing the $20 billion-mark and growing 16% last year to $20.86 billion.
- The trade deficit, a source of friction between India and China, declined to a five-year-low of $45.8 billion, the lowest since 2015.
- India’s biggest import in 2019 was electrical machinery and equipment, worth $20.17 billion.
- Other major imports in 2019 were organic chemicals ($8.39 billion) and fertilizers ($1.67 billion), while India’s top exports were iron ore, organic chemicals, cotton, and unfinished diamonds.

Financial Action Task Force (FATF)

Context:
- FATF had deferred its once-a-decade evaluation of India’s anti-money laundering regime scheduled for this year, citing the COVID-19 pandemic, and indicated that the onsite review to be conducted by global experts may now take place in early 2021.
Financial Action Task Force (FATF):
- The Financial Action Task Force is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering.
- In 2001, its mandate was expanded to include terrorism financing.
- The inter-governmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society.
- The FATF undertakes peer reviews of each member on an ongoing basis to assess the implementation of its recommendations and provides a detailed analysis of each country's system for preventing criminal abuse of the financial system.

Ninja UAVs

Indian Railways has started deploying “Ninja UAVs” (unmanned aerial vehicles) for establishing a drone-based surveillance system in a bid to intensify its security mechanism across its network.
A drone camera can cover a large area, which may require up to 10 RPF personnel.
The exercise may lead to a substantial improvement in utilisation of scarce manpower, said a note on drone surveillance issued by the ministry

Dedicated Freight Corridor Corporation of India Limited

DFCCIL under the Ministry of Railways is a special purpose vehicle tasked with planning and completing 3, Dedicated Freight Corridors (DFCs).
It has been registered as a company under the Companies Act 1956 on 30 October 2006.
In the first phase, the organisation is constructing the Western DFC (1504 Route km) and Eastern DFC (1856 route km) spanning a total length of 3360 route km.

Web Portal And App

ASEEM portal

The Ministry of Skill Development and Entrepreneurship (MSDE) has launched the ‘Aatmanirbhar Skilled Employee Employer Mapping’ (ASEEM) portal to help skilled people find sustainable livelihood opportunities.
The Artificial Intelligence-based ASEEM will provide employers with a platform to assess the availability of a skilled workforce and formulate their hiring plans.

India Cycles4Change Challenge

About:
- It is an initiative of the Smart Cities Mission, Ministry of Housing, and Urban Affairs to inspire and support Indian cities to quickly implement cycling-friendly initiatives in response to COVID-19.
- The Challenge aims to help cities connect with their citizens as well as experts to develop a unified vision to promote cycling.
Who can apply?
- Cities with a population of more than 5 lakh.
- Capital cities of states/UTs.
- Cities under the Smart Cities Mission.

ATL App Development Module

NITI Aayog’s Atal Innovation Mission (AIM) has launched the ‘ATL App Development Module ’for school children all across the country.
Launched in collaboration with Indian homegrown startup Plezmo.
It is an online course and is completely Free.

Mobile App “Mausam”

Ministry of Earth Sciences launches Mobile App “Mausam” for Indian Meteorological Department.
Users can access observed weather, forecasts, radar images and be proactively warned of impending weather events.
The mobile app has been designed and developed jointly by ICRISAT’s Digital Agriculture & Youth (DAY) team, the Indian Institute of Tropical Meteorology (IITM), Pune, and India Meteorological Department.

Swasthya Portal

Launched by Tribal Affairs Minister recently.
The online portal will act as a one-stop solution presenting all information pertaining to tribal health and nutrition-related to Scheduled Tribes.
The portal will be managed by the Ministry of Tribal Affairs’ Centre of Excellence (CoE) for Knowledge Management in Health and Nutrition.

Hari Path app

It is a mobile app launched recently by the National Highway Authority of India.
It will monitor plantations along national highways.
The app will monitor the location, growth, species details, maintenance activities, targets and achievements of each of the NHAI’s field units for each and every plant under all plantation projects.