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India, with a population of over 1.3 billion, has seen tremendous growth in the past two decades. Gross Domestic Product has increased 4.5 times and per capita consumption has increased 3 times. Similarly, food grain production has increased almost 2 times. However, despite phenomenal industrial and economic growth and while India produces sufficient food to feed its population, it is unable to provide access to food to a large number of people, especially women and children.

In recently published the Global Hunger Index (GHI), India has slid down, falling behind its South Asian neighbors to rank 101 out of 116 countries. The government has dismissed the report’s ‘unscientific’ methodology.

Poverty and hunger have been a universal and increasing menace to humankind. Let us learn about these issues in detail.

Hunger

• Hunger is the condition where both adults and children cannot access food constantly and have to decrease food intake, eat poor diets, and often go without any food. (Dillon and Marquand, 2011).
• According to Amartya Sen, the real cause for hunger is the lack of ability to pay for food.

Root causes of hunger

• World hunger has many annoying factors and major causes, such as insufficient economic systems, misinformation, and climate changes.
• But the main unbearable factor is poverty as poverty always has led to people going without regular meals because they cannot afford to eat.
• There are majority of people in developing countries such as Kenya, Uganda, and Ethiopia that are in desperate need of food. With the growth of population, the number of hungry people also increases at an uneven rate.
• Climate change is also a major issue for world hunger.
  • With the amount of rain that a country gets increases, it can possibly lead to serious flooding. Flooding adversely affects how much food is produced and available to the impoverished and raises the costs.
• Among numerous issues, Hunger and malnutrition are closely associated in Indian scenario.
  • The Global Study revealed that 42% children in India are underweight and 58% of children are stunted by two years of age.
  • Malnutrition occurs when a person’s body receives little or no nutrients. People who are malnourished get sick more often and as a result in many cases die.
  • Malnutrition is consequently the most important risk factor for the problem of disease in developing countries.
  • It is the direct cause of about 300,000 deaths per year and is indirectly responsible for about half of all deaths in young children.
• It can be said that world hunger must be taken seriously and should be approached with all deliberate and instant policies.
• There are different issues of world hunger but the three main ones are poverty, climate changes, and also feeble economies.

Poverty

• In India, 21.9% of the population lives below the national poverty line in 2011.
• In India, the proportion of the employed population below $1.90 purchasing power parity a day in 2011 is 21.2%.
• For every 1,000 babies born in India in 2017, 39 die before their 5th birthday.
• Poverty is a condition characterized by lack of basic needs such as water, health care, foods, sufficient access to social and economic services, and few opportunities for formal income generation.
• Poverty is often described in terms of the income level below which people are unable to access sufficient food for a healthy working life.
• Hunger and food insecurity are the most serious forms of extreme poverty.
• Progress in poverty reduction has been concentrated in Asia and especially East Asia. In other areas, the number of people in extreme poverty has increased especially in sub-Saharan Africa.
• Poverty in India is primarily due to improper government policies and the misuse of the financially weaker section by the wealthier community.
• The main outcome of poverty is hunger. Hunger’s seriousness can be understood easily from the fact that every year, 5.8 million children die from hunger related-causes around the world (FAO Hunger Report 2008).
• Poverty involves more than the lack of income and productive resources to ensure sustainable livelihoods. Its manifestations include hunger and malnutrition, limited access to education and other basic services, social discrimination and elimination as well as the lack of participation in decision-making.

Poverty in India and other developing countries

Reports of the World Bank revealed that India is one of the poorest countries in the world.  Some of the main issues associated with prevalent poverty in India are poor health services, and insufficient education and training. Almost half of India’s population drops out of school by the age of thirteen and only one in ten people receive some form of job training.

• Poor health services: It has been observed that People of India have less access to good health services as compared to industrialized nations. The relationship between poverty and access to health care can be seen as part of a larger cycle, where poverty leads to ill health and ill health maintains poverty.
• Child malnutrition: The occurrence of under-nutrition in India is amongst the highest levels found in any country in the world and in spite of the development in food production, disease control and economic and social development; India is facing an acute problem of child malnutrition.
• Insufficient education and training: In developing countries, children do not have access to basic education because of inequalities that originate in sex, health and cultural identity. It has been revealed in reports that illiteracy and lack of education are common factor that lead to poverty.
  • Governments of developing countries often cannot have enough money to provide for good public schools, especially in rural areas.
  • Poor people also often sacrifice schooling in order to concentrate on making a minimal living.
  • Additionally, developing countries tend to have few employment opportunities, especially for women. As a result, people do not want to attend school.
• Corruption and warfare: Political power is unreasonably centralized. This often causes development problems. In these situations politicians make decisions about places that they are unaware with, lacking sufficient knowledge about the context to design effective and appropriate policies and programs.
  • Another issue related with poverty is corruption often accompanies centralization of power, when leaders are not accountable to those they serve. Corruption hinders development.
  • Warfare also lead to entrenched poverty by diverting scarce resources allocated for reducing poverty to maintaining a military.
• Environmental degradation: It is also a major issue in increasing poverty.
  • In the developing world, the poor communities depend on natural resources to fulfill their basic needs.
  • Therefore, the depletion and impurity of water sources directly impend the livelihoods of those who depend on them.
• Inequality: One of the more deep-rooted sources of poverty around the globe is social inequality that stems from cultural ideas about the relative worth of different genders, races, ethnic groups, and social classes.
• Other causes include:
  1. Population Rise
  2. Low Productivity in Agriculture
  3. Under-Utilized Resources
  4. Low Rate of Economic Development
  5. Price Rise
  6. Unemployment
  7. Shortage of Capital and Able Entrepreneurship
  8. Social Factors

Global Hunger Index (GHI)

The Global Hunger Index is a peer-reviewed annual report, jointly published by Concern Worldwide and Welthungerhilfe.

• It determines hunger on a 100-point scale, where 0 is the best possible score (no hunger) and 100 is the worst.
• It is designed to comprehensively measure and track hunger at the global, regional, and country levels.
• The aim of the GHI is to trigger action to reduce hunger around the world.

For each country in the list, the GHI looks at four indicators:

1. Undernourishment (which reflects inadequate food availability): calculated by the share of the population that is undernourished (that is, whose caloric intake is insufficient)
2. Child Wasting (which reflects acute undernutrition): calculated by the share of children under the age of five who are wasted (that is, those who have low weight for their height)
3. Child Stunting (which reflects chronic undernutrition): calculated by the share of children under the age of five who are stunted (that is, those who have low height for their age)
4. Child Mortality (which reflects both inadequate nutrition and unhealthy environment): calculated by the mortality rate of children under the age of five

India’s (poor) performance

• India is among the 31 countries where hunger has been identified as serious.
• Only 15 countries fare worse than India.
• Some of these include Afghanistan (103), Nigeria (103), Congo (105), Mozambique (106), Sierra Leone (106), Timor-Leste (108), Haiti (109), Liberia (110), Madagascar (111) and Somalia (116).
• India was also behind most of the neighbouring countries.
• Pakistan was placed at 92 rank, Nepal at 76 and Bangladesh also at 76.

Reasons for such poor performance

• Poor maternal health: Mothers are too young, too short, too thin and too undernourished themselves, before they get pregnant, during pregnancy, and then after giving birth, during breast-feeding.
• Poor sanitation: Poor sanitation, leading to diarrhoea, is another major cause of child wasting and stunting.
• Food insecurity: Low dietary diversity in India is also a key factor in child malnutrition.
• Poverty: Almost 50 million households in India are dependent on these small and marginal holdings.
• Livelihood loss: The rural livelihoods loss after COVID and lack of income opportunities other than the farm sector have contributed heavily to the growing joblessness in rural areas.

Issues with GHI

• The GHI is largely children-oriented with a higher emphasis on undernutrition than on hunger and its hidden forms, including micronutrient deficiencies.
• The first component — calorie insufficiency — is problematic for many reasons.
• The lower calorie intake, which does not necessarily mean deficiency, may also stem from reduced physical activity, better social infrastructure (road, transport and healthcare) and access to energy-saving appliances at home, among others.
• For a vast and diverse country like India, using a uniform calorie norm to arrive at deficiency prevalence means failing to recognise the huge regional imbalances in factors that may lead to differentiated calorie requirements at the State level.

Understanding the connection between stunting and wasting and ways to tackle them

• India’s wasting prevalence (17.3%) is one among the highest in the world.
• Its performance in stunting, when compared to wasting, is not that dismal, though.
• Child stunting in India declined from 54.2% in 1998–2002 to 34.7% in 2016-2020, whereas child wasting remains around 17% throughout the two decades of the 21st century.
• Stunting is a chronic, long-term measure of undernutrition, while wasting is an acute, short-term measure.
• Quite possibly, several episodes of wasting without much time to recoup can translate into stunting.
• Effectively countering episodes of wasting resulting from such sporadic adversities is key to making sustained and quick progress in child nutrition.
• Way forward: If India can tackle wasting by effectively monitoring regions that are more vulnerable to socioeconomic and environmental crises, it can possibly improve wasting and stunting simultaneously.

Low child mortality

• India’s relatively better performance in the other component of GHI — child mortality — merits a mention.
• Studies suggest that child under nutrition and mortality are usually closely related, as child under nutrition plays an important facilitating role in child mortality.
• However, India appears to be an exception in this regard.
• This implies that though India was not able to ensure better nutritional security for all children under five years, it was able to save many lives due to the availability of and access to better health facilities.

Initiatives by Government to Curb Poverty in India

Ending poverty in all its forms is the first of the 17 Sustainable Development Goals (SDGs) of the 2030 Agenda for Sustainable Development.

The government of India took several initiatives to eradicate poverty from the country.

1. Saansad Aadarsh Gram Yojana (SAGY) – Ministry of Rural development initiated the scheme in 2014. The scheme aims to develop five ‘Adarsh Villages’ or ‘Model Villages’ by 2024.
2. National Rural Livelihood Mission (NRLM) – Ministry of Rural Development started NRLM 2011 to evolve out the need to diversify the needs of the rural poor and provide them jobs with regular income on a monthly basis.
3. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) – In 2005 Ministry of Rural Development initiated MGNEREGA to provide 100 days of assured employment every year to every rural household. One-third of the proposed jobs would be reserved for women.
4. National Urban Livelihood Mission (NULM) – In 2013, NULM was commenced by the Ministry of Housing and Urban Affairs focusing on organizing urban poor in Self Help Groups, creating opportunities for skill development leading to market-based employment, and helping them to set up self-employment ventures by ensuring easy access to credit.
5. Pradhan Mantri Jan Dhan Yojana (PMJDY) – the Ministry of Finance in 2014 initiated PMJDY that aimed at direct benefit transfer of subsidy, pension, insurance, etc., and attained the target of opening 1.5 crore bank accounts. The scheme particularly targets the unbanked poor.

Hunger and Poverty are the biggest challenges for good governance in India still today. Evaluate how far successive governments have progressed in dealing with these humongous problems. Suggest measures for improvement. (250 words)

Post your answers in comments below.

Initiatives by Government to fight against Hunger in India

The Government of India took several initiatives to fight against hunger across the nation.

1. National Nutrition Mission (NNM), Poshan Abhiyan – NNM was started in 2018 by the Ministry of Women and Child Development to reduce the level of under-nutrition and also enhance the nutritional status of children in the country.
2. National Food Security Mission – Ministry of Agriculture initiated NFSM in 2007 to increase the production of rice, wheat, pulses, and coarse cereals through area expansion and productivity enhancement in a sustainable manner.
3. Zero Hunger Programme – launched on October 16, 2017 with the aim to make farm inventions, organizing the farming system for nutrition, setting up genetic gardens for biofortified plants and initiating zero hunger training.

4. Eat Right India Movement: An outreach activity organized by the Food Safety and Standards Authority of India (FSSAI) for citizens to nudge them towards eating right.
5. Pradhan Mantri Matru Vandana Yojana: A centrally sponsored scheme executed by the Ministry of Women and Child Development, is a maternity benefit programme being implemented in all districts of the country with effect from 1st January, 2017.
6. Food Fortification: Food Fortification is the addition of key vitamins and minerals such as iron, iodine, zinc, Vitamin A & D to staple foods such as rice, milk and salt to improve their nutritional content.
7. National Food Security Act, 2013: It legally entitled up to 75% of the rural population and 50% of the urban population to receive subsidized food grains under the Targeted Public Distribution System.
8. Mission Indradhanush: It targets children under 2 years of age and pregnant women for immunization against 12 Vaccine-Preventable Diseases (VPD).

Global Initiative against Poverty and Hunger

Food is at the core of the Sustainable Development Goals (SDGs). Goal 2 of SDG deals with Zero Hunger. Given below are some global level initiatives to fight poverty and hunger-

1. The End to Poverty Initiative – This Centenary Initiative is designed specifically as the vehicle to take forward the ILO’s work in implementing the 2030 Agenda for Sustainable Development to alleviate poverty.
2. Zero Hunger By World Food Programme – with humanitarian food assistance, provide nutritious food to those in urgent need. Meanwhile, the complementary programs address the root causes of hunger and build the resilience of communities.
3. Fight Hunger First – With a vision to have a world without hunger and poverty, Welthungerhilfe- WHH has been implementing several initiatives in rural areas of India and Bangladesh. It was set up by a UN agency FAO.
4. Zero Hunger Challenge (Save Food) by FAO – The 2012 United Nations Conference on Sustainable Development, also known as Rio+20, launched the Zero Hunger Challenge which includes addressing the sustainability of all food systems and the vision of zero food loss and waste (FLW).

Conclusion

Food insecurity remains an alarming issue due to such entitlement failures in India. While the government has rejected the findings of the Global Hunger Index as “unscientific”, we cannot ignore the dismal ground realities. India faces a malnutrition challenge that is not only large but worsening. It is time for the government to face up to these inconvenient truths and pursue the means and mechanisms needed to improve the situation. A safe and bright future for our children will translate into a safe and bright future for the country. And that’s the message we want every fellow citizen to internalize — Sahi Poshan, Desh Roshan.

There is a growing divergence in the relationship between poverty and hunger in India. The shrinking of social expenditure by the government is forcing the poor to spend more on non-food essential items squeezing their food budget. Elucidate. (250 words)

Post your answers in comments below.

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India has achieved its long-pending goal of 100% electrification of its villages. But there is still a long way to go in providing electricity to all households in the country. According to Central Electricity Authority (CEA), a village is considered electrified only if the Gram Panchayat certifies that the basic infrastructure has been provided to the inhabited area, including Dalit hamlets, and 10% of the households are electrified.

Rural Electrification in India

• Rural electrification is considered to be the backbone of the rural economy.
• The electricity generation capacity in India is the fifth largest in the world.
• India is the sixth largest consumer of electricity and accounts for 3.4 percent of the global energy consumption.
• The year 2022, has been earmarked for achieving the target of ‘24×7 Power for All’.

Rural electrification has five major facets:

1. Setting up of Rural Electricity Infrastructure
2. Providing connectivity to households
3. Adequate supply of desired quality of power
4. Supply of electricity at affordable rates
5. Providing clean, environmentally benign and sustainable power in efficient way

When a village is called an Electrified Village?

Prior to October 1997

A Village should be classified as electrified if electricity is being used within its revenue area for any purpose whatsoever.

After October 1997

A village will be deemed to be electrified if the electricity is used in the inhabited locality, within the revenue boundary of the village for any purpose whatsoever.

As per the new definition, a village would be declared as electrified, if:

• Basic infrastructure such as Distribution Transformer and Distribution lines are provided in the inhabited locality as well as the Dalit Basti hamlet where it exists.
• Electricity is provided to public places like Schools, Panchayat Office, Health Centers, Dispensaries, Community centers etc.
• The number of households electrified should be at least 10% of the total number of households in the village.

What is Rural Electrification provides for?

1. Increase in agriculture yield.
2. Business of Small and household enterprises shall grow resulting into new avenues for employment.
3. Improvement in Health, Education, Banking (ATM) services.
4. Improvement in accessibility to radio, telephone, television, internet and mobile.
5. Betterment in social security due to availability of electricity.
6. Accessibility of electricity to schools, panchayats, hospitals and police stations.
7. Rural areas shall get increased opportunities for comprehensive development.

Energy source and Percentage Share in installed capacity

National Electricity Policy 2005

• In compliance with section 3 of the Electricity Act 2003 the Central Government notified the National Electricity Policy.
• The National Electricity Policy aims at laying guidelines for accelerated development of the power sector, providing supply of electricity to all areas and protecting interests of consumers and other stakeholders keeping in view availability of energy resources, technology available to exploit these resources, economics of generation using different resources, and energy security issues.
• The National Electricity Policy was evolved in consultation with and considering views of the State Governments, Central Electricity Authority (CEA), Central Electricity Regulatory Commission (CERC) and other stakeholders.

The aims and objectives of the policy

1. Access to Electricity – Available for all households in next five years
2. Availability of Power – Demand to be fully met by 2012. Energy and peaking shortages to be overcome and adequate spinning reserve to be available.
3. Supply of Reliable and Quality Power of specified standards in an efficient manner and at reasonable rates. Per capita availability of electricity to be increased to over 1000 units by 2012.
4. Minimum lifeline consumption of 1 unit/household/day as a merit good by year 2012.
5. Financial Turnaround and Commercial Viability of Electricity Sector.
6. Protection of consumers’ interests.

National Rural Electrification Policy, 2006

1. Goals include provision of access to electricity to all households by the year 2009, quality and reliable power supply at reasonable rates, and minimum lifeline consumption of 1 unit/household/day as a merit good by year 2012.
2. For villages/habitations where grid connectivity would not be feasible or not cost effective, off-grid solutions based on stand-alone systems may be taken up for supply of electricity. Where these also are not feasible and if only alternative is to use isolated lighting technologies like solar photovoltaic, these may be adopted. However, such remote villages may not be designated as electrified.
3. State government should, within 6 months, prepare and notify a rural electrification plan which should map and detail the electrification delivery mechanism. The plan may be linked to and integrated with district development plans. The plan should also be intimated to the appropriate commission.
4. Gram panchayat shall issue the first certificate at the time of the village becoming eligible for declaration as electrified. Subsequently, the Gram Panchayat shall certify and confirm the electrified status of the village as on 31st March each year.
5. The state government should set up a committee at the district level within 3 months, under the chairmanship of chairperson of the Zilla Panchayat and with representations from district level agencies, consumer associations, and important stakeholders with adequate representation of women.
6. The district committee would coordinate and review the extension of electrification in the district and consumer satisfaction, etc.
7. Panchayat Raj institutions would have a supervisory / advisory role.
8. Institutional arrangements for backup services and technical support to systems based on non-conventional sources of energy will have to be created by the state government.

National policy for renewable energy-based micro and mini-grids

• Introduced by Ministry of New and Renewable Energy
• It targets setting up of at least 10,000 projects with a minimum capacity of 500MW by 2021
• The draft policy proposes to extend energy services beyond lighting

Draft National Electricity Policy 2021

• NEP 2021 covers multiple areas– grid operation, power markets, regulatory process, energy efficiency, optimal generation mix, transmission, distribution and many more.
• The draft talks about the creation of Electric Vehicle charging stations, Smart meters, power markets, environment and more.
• Ministry of Power has created a committee of experts to submit suggestions to the draft NEP 2021 within two months of the release of the draft.
• The members of the committee include members from state governments, the Ministry of New and Renewable Energy (MNRE), NITI Aayog, and the Central Electricity Authority.

Areas of improvement:

• It lacks a fair and coherent approach to energy transition from coal to renewable.
• It mentions the addition of coal capacity, despite the clear writing on the wall that thermal power is becoming unviable.
• New coal capacity should be considered only if shown essential based on rigorous modelling studies.
• Since many coal plants are going to retire, NEP should give policy directions to generating companies to take responsibility post-retirement for waste management as well as restoration of the land, water bodies and air quality in their project areas.
• Prevention of electricity accidents requires focus, the current NEP has provisions for efforts to build consumer awareness, but this is sadly missing in the new draft. 

What is the actual scenario of rural electrification?

• Recently Union government announced it has achieved 100% rural electrification.
• The definition of electrification was limited to the provision of basic infrastructure such as transformers, of electricity in public places like schools and panchayats, and electrification of at least 10% households in the village.
• India continues to harbour energy poverty with 31 million rural households and about five million urban households still unconnected to the electricity grid.
  • A significant portion of connected rural households are yet to get adequate quantity and quality of supply.

What are the plans of the government on electrification?

• Union government under Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) and Integrated Power Development Scheme (IPDS) planning to provide universal electrification.
• By which it has an ambitious target of connecting all remaining households by the end of March 2019 and made budgetary allocations to cover the cost of electrification.
• As part of a Centre-State joint initiative on 24×7 ‘Power for All’, State governments have already committed to ensuring round-the-clock supply to all households from April 2019.

What are the challenges for India’s electrification target?

• Regional imbalances in electricity access is persisting in seven States namely Uttar Pradesh, Bihar, Odisha, Jharkhand, Assam, Rajasthan and Madhya Pradesh, which account for 90% of un-electrified households.
• Coincidentally, these States are ranked poorly in social development indices and house about two-thirds of the population living below the poverty line.
• There are a range of implementation shortcomings in universal electrification by state governments due to sluggish finance structure of the union government.
• Most of the Indian power distribution companies (discoms) in these states are bankrupt and are unable to purchase power and provide it to consumers.
• As a result, discoms don’t have the capacity to sign power purchase agreements (PPAs).
• Add to this the issue of aggregate technical and commercial (AT&C) losses, heightened by the rampant problem of power theft.
• Given the context, it is uncertain whether the goal of electrifying all ‘willing households’ by March 2019 would translate into universal access to electricity.

Related Schemes

(1) Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY)

Aim

• To ensure electrification of all the un-electrified villages by 2017 in mission mode
• The Scheme draws its inspiration from the similar pioneering scheme implemented by the Government of Gujarat
• It will enable to initiate much awaited reforms in the rural areas

Objectives

• To provide electrification to all villages
• Feeder separation to ensure sufficient power to farmers and regular supply to other consumers
• Improvement of Sub-transmission and distribution network to improve the quality and reliability of the supply
• Metering to reduce the losses

 (2) Pradhan Mantri Sahaj Bijli Har Ghar Yojana –“Saubhagya”

• The Saubhagya is a scheme to ensure electrification of all willing households in the country in rural as well as urban areas.
• It was launched in September 2017.
• The Rural Electrification Corporation Limited (REC) is the nodal agency for the operationalization of the scheme throughout the country.

Objective

• To provide energy access to all by last mile connectivity and electricity connections to all remaining un-electrified households in rural as well as urban areas
• To achieve universal household electrification in the country

Beneficiaries of the project

• The beneficiaries for free electricity connections would be identified using Socio-Economic and Caste Census (SECC) 2011 data.
• However, un-electrified households not covered under the SECC data would also be provided electricity connections under the scheme on payment of Rs. 500 which shall be recovered by DISCOMs in 10 installments through electricity bill.
• The solar power packs of 200 to 300 Wp with battery bank for un-electrified households located in remote and inaccessible areas, comprises Five LED lights, One DC fan, One DC power plug.
• It also includes Repair and Maintenance (R&M) for 5 years.

Expected outcomes of the scheme

What are the issues involved?

1. Definition: Only 1 in 10 households need to have electricity supply for the village to be officially electrified. According to 2011 census, only 55.3% of all rural households had access to electricity
2. Quality: Around 67% of electrified villages suffer from erratic and unreliable power supply. Low voltage was widely reported.
3. The distribution transformers catering to villages had the capacity to support the load of only 10% of the households and thus the instances of overloading and transformer breakdowns are significant.
4. Only 7%–10% rural locations receive supply during the full evening hours (5 pm to 11 pm).
5. In Bihar, Jharkhand and UP, more than one-third of electrified households received less than four hours of supply during the day and voltage fluctuations are also common.
6. Metering: More than 28% electrified villages reported overcharging and ad-hoc billing. One-time connection charges also differed from village to village.
   • There are also instances of billing delays, particularly in issuing the first bill after connection. This increases the likelihood of payment defaults leading to disconnection of supply.
7. Accountability: 52% villages face issues with contractors, repair persons and power distribution companies. Either no one turns up to address complaints or repairs are done after paying bribes or residents get repairs done at their own cost.
8. Inaccessibility: Geographical terrain is posing a problem to grid expansion in at least 13% of all villages.
9. NPA: Banks do not lend to mini-grid developers due to poor recovery of loans
10. Kerosene dependence: Despite having electricity connection.
11. Affordability: Among the most energy deprived states, while most villages and more than two-thirds of the households had electricity connections, less than 40 per cent had meaningful access to electricity.
12. Financial Issues: High upfront cost is the major reason behind consumer disinterest in taking up and sustaining  an electricity connection.
13. Implementation and operational roadblocks: Network investments for rural electrification have been slower than planned. Lack of timely network investments jeopardizes the provision of reliable, affordable power supply.
14. Operational issues: In the first phase of RGGVY, rural franchisees were expected to manage distribution operations in newly electrified areas. However, most of them are not operational and DDUGJY does not envisage such franchisees.

Way forward

• Metering and data management using ICT: Use information technology to monitor metering at feeder and distribution transformer levels to allow proper auditing of power supply.
  • Parameters such as DT failure rate, hours of supply (especially during evening hours), metering and billing information, information on consumer disconnections, new connections for entrepreneurial use, electrification of rural institutions., could be tracked and reported on the national dashboards on a monthly basis for every district or division.
  • With usage technology to monitor hours of supply, the duration of supply and interruptions can be recorded without manual intervention and tracked at a disaggregated level. This information can be used by SERCs and consumers to make DISCOMs more accountable for power supply.
• Expansion:
  • The first step towards the target would be to provide new connections to un-electrified households and legalising existing illegal connections.
  • Improving uptake of connections by addressing financial hurdles and awareness barriers is to be taken up.
  • Financial constraint: While BPL households already receive a free connection under the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY), APL families could be given a low-cost EMI based connection.
• Awareness: Empowering and encouraging local authorities to organise awareness campaigns and enrolment camps in habitations exhibiting limited awareness are also essential.
• Best practice: Bihar has currently evolved a good model both awareness campaigns subsidy for APL families.
• Supply situation: Improving the supply situation for already electrified households is to be done.
• DISCOM reforms: DISCOMs need to better plan for their infrastructure, factoring in near-term increase in demand, strengthening maintenance, and improving supply.
• Innovative Business: As managing rural customers, particularly in remote areas, is a challenge innovative business models need to be explored.
• Accountability: There is a need to hold DISCOMs accountable for monitoring of supply quality and operation and maintenance efforts in rural areas in order to ensure uninterrupted supply.
• Tariff changes:
  • In many states, small industrial and commercial consumers pay tariff rates comparable to large industrial units and commercial complexes. There needs to be innovation in tariff design to encourage home-based or small enterprises in newly electrified villages
  • Currently, supply of one unit of power costs the DISCOMs about Rs. 7 and this cost will most likely increase at a rate of more than 4% per unit in the coming years. As such costs will be unaffordable for many consumers, and with the contribution of cross-subsidies reducing, substantial subsidy support will be necessary.
• Research:
  • Even after the targets of connections are met, there is a need for a national institution, with rural electrification as its key focus.
  • Its mandate need not be to operate the rural distribution businesses but to provide knowledge and financial support to DISCOMs for maintaining and strengthening the rural network and ensuring supply.
  • Success mainly depends on curbing DISCOM losses and ensuring consumer honesty. It is hoped that electrification would lead to improved consumer satisfaction, as electricity truly becomes an enabler of prosperity in rural India.
  • Concerted efforts to monitor supply hours for rural, remote and newly electrified households are needed.

Discuss how the rural electrification has the potential to become a driver of rural economic growth. (250 words)

Post your answers in comments below.

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With rising power demands in the domestic sector, Indian utilities are facing a severe shortage of coal, which is the primary fuel powering 70 percent of India’s energy consumption. More than half of the country’s 135 coal-fired power plants are running on fumes – as coal stocks run critically low. India’s thermal power plants currently have an average of four days worth of coal stock against a recommended level of 15-30 days, with a number of states highlighting concerns about blackouts as a result of the coal shortage.

Coal has become a priceless commodity of late in a white-hot market with an over 100 percent jump in prices, which is driven mainly by China and India – the two largest consumers of thermal coal globally.

What is the extent of the current coal crisis?

A number of states including Delhi, Punjab, and Rajasthan have raised concerns about potential blackouts as a result of low coal inventory at thermal power plants and have already reported load shedding. India is the world’s second-largest importer of coal despite also being home to the fourth-largest coal reserves in the world.

Increase in power demand

• The shortage in coal is a result of a sharp uptick in power demand as the economy recovered from the effects of the pandemic.

Global factors

• A sharp increase in the international prices of coal due to a shortage in China have also contributed to the coal shortage.
• Unseasonal rains in Indonesia, Covid-induced production cuts in Australia have ensured a once-in-a-lifetime bull run in coal prices.
• A balance is possible if and when the global supply chain – both in terms of prices as well as availability – improves.
• China consumes nearly half of the coal produced globally and Indonesia and Australia happen to be two of the largest exporters.
• India sources 43 per cent of its imported coal from Indonesia and 26 per cent from Australia.

Low accumulation of stocks by Thermal power plants

• Low accumulation of stock by thermal power plants has contributed to the coal shortage in India.
• Heavy rains in coal bearing areas had also led to a slowdown in the supply of coal to thermal plants.
• Coal and lignite fired thermal power plants account for about 54 per cent of India’s installed power generation capacity but currently account for about 70 per cent of power generated in the country.

Increase in the price of the other fuels

• Incidentally, the demand for coal has also gone up because other sources of generating power – natural gas, for instance – have become even costlier.
• The price of natural gas, too, has increased nearly 100 per cent in 2021 alone.
• This has hampered the plan to grow the share of renewable energy as well.

Legacy issues

• Legacy issues of heavy dues of coal companies from certain states viz., Maharashtra, Rajasthan, Tamil Nadu, UP, Rajasthan and Madhya Pradesh also contributed to this coal shortage.
• Power plants that usually rely on imports are now heavily dependent on Indian coal, adding further pressure to already stretched domestic supplies.

Why is the demand for natural gas surging?

• Nations across the world are committed to reducing carbon emissions. China has committed to becoming carbon neutral by 2060.
• To reduce its emissions, China needs to give up coal, reduce consumption of other dirty fossil fuels and adopt cleaner energy such as natural gas and renewables.
• The country is also taking harsh measures to reduce pollution in Beijing before the February 2022 Winter Olympics and thus display its commitment to decarburization.
• The targets China has set for itself is seen to have escalated the current energy crisis in the nation where two-thirds of the electricity was generated from burning coal.
• European Union has targeted to become carbon neutral by 2050 and reduce greenhouse gas emissions by 55% by 2030 compared to 2005 levels.

Why are prices between domestic and global coal widening?

• Domestic coal prices in India are largely decided by Coal India. An increase in coal prices generally has a knock on effect on power prices and inflation..
• Coal India has kept prices steady over the last year despite global coal prices rising steeply in the same period.
• Meanwhile, Asia’s coal price benchmarks have hit record highs in the recent times, buoyed by global demand for power generation fuels as economies open up.
• A major power crisis in China is the latest event driving global demand for the fuel.

Why are utilities unable to pass on higher costs?

• India’s power tariffs, set by the respective states, are among the lowest in the world as state-run distribution companies have absorbed higher input costs to keep tariffs steady.
• This has left many of these companies deeply indebted, with cumulative liabilities running into billions of dollars.
• This triggered delayed payments to power producers, often affecting cash flows and disincentivising further investment in the electricity generation sector.
• Indian power producers locked in long-term agreements with distribution utilities often cannot pass on higher input costs unless clauses are included in their contracts.

What does the deepening energy crisis mean for India?

• The sharp rise in global coal prices came as a boon for domestic suppliers such as Coal India.
• As the supply crunch in the key overseas markets grew and prices soared, the demand for coal from domestic sources climbed. Coal India and other producers increased output, yet supply remains quite tight.
• Over 70% of India’s power is generated from burning coal while the share of natural gas is just about 5%. Thus, rising natural gas prices had a limited impact on the cost of power generation in India.
• India, however, suffered a scare when the inventory of coal with power plants reached critically low levels, as demand surged about 11%. The situation was resolved by diverting coal away from non-power uses.
• The power demand is set to climb higher when more restrictions are eased, including those on cinema halls and multiplexes.
• While efforts are on to provide an uninterrupted supply of coal to power plants, non-power users are likely to suffer.
• Indian households were more affected by the rise in prices of petroleum products as consumption of cooking gas, petrol and diesel grew.

What does it mean for global recovery?

• Higher fuel prices are only one part of the problem. Temporary closures of factories in China will slow the repair of global value chains that broke down last year when countries locked down their economies.
• These shutdowns will lead to another round of disruption in the supply of parts to makers of various goods across the globe.
• The temporary shutdowns also mean missed deadlines for delivery of merchandise ahead of the November-January holiday season sales in many parts of the world.
• When power rationing was ordered, factories in China were racing to meet the global and domestic demand for everything from apparel to mobile phones and other gadgets.
• Higher fuel prices and shortages will add to inflationary pressures in the global economy and hurt the recovery of demand in lower-income economies.

What are the recent Reforms in Coal Sector?

• Commercial mining of coal allowed, with 50 blocks to be offered to the private sector.
• Entry norms will be liberalized as it has done away with the regulation requiring power plants to use “washed” coal.
• Coal blocks to be offered to private companies on revenue sharing basis in place of fixed cost.
• Coal gasification/liquefaction to be incentivized through rebate in revenue share.
• Coal bed methane (CBM) extraction rights to be auctioned from Coal India’s coal mines.

Challenges posed

• The desire to cut its reliance on heavily polluting coal burning power plants has been a major challenge for the government in recent years.
• The question of how India can achieve a balance between meeting demand for electricity from its almost 1.4bn people has to be answered.

Way Forward

Ramp-up domestic coal production

• The efforts are being taken to fill the shortage of coal from domestic mines and to do so the government is working closely with coal producing companies to ramp up domestic production of coal.

Reduce demand-supply mismatches

• Load shading is not new to India. Rationing of power supply in rural and semi-urban areas will be the immediate solution for the power distress in industrial areas.

Rationalize the coal imports

• India will need to amplify its imports despite the financial cost. The gap in the coal demand after domestic production has to be filled by the imports from Indonesia and Australia.

Focus on Hydro-power generation and natural gal

• India has the immense potential in the Hydro-power generation and is among the most important sector for generating electricity after thermal power plants.
• The sector performs at its peak around the rainy season which typically extends from June to October.
• There could be a larger role for natural gas to play, even with global prices currently surging.

Increasing the share of Renewable energy

• Experts advocate a mix of coal and clean sources of energy as a possible long-term solution.
• It’s not completely possible to transition and it’s never a good strategy to transition 100% to renewables without a backup.
• Long term investment in multiple power sources aside a crisis like the current one can be averted with better planning.

Increased coordination

• There is need for closer coordination between Coal India Limited – the largest supplier of coal in the country and other stakeholders.
• For now, the government is working with state-run enterprises to ramp up production and mining to reduce the gap between supply and demand.

Decentralized power generation

• The main issue is that we are dependent on large, centralized power generation.
• The only way our power sector can absorb shocks better is if large power plants are augmented by decentralized generation sources at village level.
• This can be a template for better resilience to future power crises.

Coal stocking norms

• To avoid such a crisis situation in future, the Ministry of Power has worked out a strategy which includes tweaking the coal stocking norms. If the power plants do not follow them, then there will be a penal provision.
• To overcome the storage issue in the generation of electricity from renewable sources, the government is working on a provision for creating more storage facilities in the grid.

Conclusion

India can learn a lesson from Europe’s power crisis. While Europe has gas power plants to stand in, India doesn’t have similar options. As we move more towards greening our power sources, we need to provision for paying for standby thermal generation to avoid a mega-crisis. Adequate liquidity for backup reserve capacity needs to be planned and provisioned for.

Probably, the present situation is a good opportunity to rethink and fine-tune the energy policy without further delay. Bits and pieces reforms will not work anymore, as the chain has to been broken and a complete overhaul is required.

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Global elites continue to exploit the cracks in tax laws and the lax jurisdiction in tax havens to ring-fence their assets, through complex offshore structures, from scrutiny by authorities. The leak of financial documents, called the Pandora Papers, follows similar such exposés in the past, for instance, the Panama Papers and the Paradise Papers. While the earlier revelations had forced governments to tighten the regulatory architecture, owing to worries over these channels being used to launder money and evade taxes, the uncovering of this trove of 12 million documents now only underlines the challenges that the authorities continue to face.

There are at least 300 persons of Indian nationality in the Pandora Papers. The papers consist of as many as 12 million documents from 14 companies in offshore tax havens with details of ownership of 29,000 offshore companies and Trusts.

Let us look at the issue in detail.

What is Pandora papers leak?

• The Pandora Papers show that over 300 Indians have set up such offshore structures. It is the largest trove of leaked data exposing tax haven secrecy in history.
• It includes over 11.9 million leaked files from 14 global corporate services firms which set up about 29,000 off-the-shelf companies and private trusts in not just obscure tax jurisdictions.
• Such structures are typically used to not pay taxes, to launder money gotten through illegal means, and to sequester assets.
• They provide a rare window into the hidden world of offshore finance, casting light on the financial secrets of some of the world’s richest people.
• Businessmen, who have declared themselves bankrupt before recovery tribunals, hold billions through such offshore entities. Some have set up offshore trusts to hold assets.
• The use of such structures may not necessarily be illegal; they do raise questions over the nature of the transactions.
• These documents relate to the ultimate ownership of assets ‘settled’ (or placed) in private offshore trusts and the investments including cash, shareholding, and real estate properties, held by the offshore entities.

What do these papers reveal?

• They reveal how the rich, the famous and the notorious, many of whom were already on the radar of investigative agencies, set up complex multi-layered trust structures for estate planning.
• This is particularly in jurisdictions that are loosely regulated for tax purposes, but characterized by air-tight secrecy laws.
• The purposes for which trusts are set up are many, and some genuine too.

But a scrutiny of the papers also shows how the objective of many is two-fold:

1. Tax Avoidance: to hide their real identities and distance themselves from the offshore entities so that it becomes near impossible for the tax authorities to reach them and,
2. Tax Evasion: to safeguard investments — cash, shareholdings, real estate, art, aircraft, and yachts — from creditors and law enforcers.

How is Pandora different from the Panama Papers and Paradise Papers?

• The Panama and Paradise Papers dealt largely with offshore entities set up by individuals and corporates respectively.
• The Pandora Papers investigation shows how businesses disguised as Trusts have created a new normal with rising concerns of money laundering, terrorism funding, and tax evasion.

What is a Trust?

• A trust can be described as a fiduciary arrangement where a third party, referred to as the trustee, holds assets on behalf of individuals or organizations that are to benefit from it.
• It is generally used for estate planning purposes and succession planning.
• It helps large business families to consolidate their assets — financial investments, shareholding, and real estate property.
• A trust comprises three key parties:
  1. Settlor — one who sets up, creates, or authors a trust;
  2. Trustee — one who holds the assets for the benefit of a set of people named by the ‘settlor’; and
  3. Beneficiaries — to whom the benefits of the assets are bequeathed.
• A trust is not a separate legal entity, but its legal nature comes from the ‘trustee’.
• At times, the ‘settlor’ appoints a ‘protector’, who has the powers to supervise the trustee, and even remove the trustee and appoint a new one.

Is setting up a trust in India or one offshore/outside the country illegal?

• The Indian Trusts Act, 1882 gives legal basis to the concept of trusts.
• While Indian laws do not see trusts as a legal person/ entity, they do recognize the trust as an obligation of the trustee to manage and use the assets settled in the trust for the benefit of ‘beneficiaries’.
• India also recognizes offshore trusts i.e., trusts set up in other tax jurisdictions.

If it’s legal, what’s the investigation about?

• There are legitimate reasons for setting up trusts — and many set them up for genuine estate planning.
• A businessperson can set conditions for ‘beneficiaries’ to draw income being distributed by the trustee or inherit assets after her/his demise.
• For instance, while allotting shares in the company to say, four siblings, the father promoter set conditions that a sibling can get the dividend from the shares and claim ownership of the shares.
• This could be to ensure ownership of the enterprise within the family.
• But trusts are also used by some as secret vehicles to park ill-gotten money, hide incomes to evade taxes, protect wealth from law enforcers.

Why are the trusts set up overseas?

Overseas trusts offer remarkable secrecy because of stringent privacy laws in the jurisdiction they operate.  From the investigation, some key tacit reasons why people set up trusts are:

(1) Maintain a degree of separation

• Businesspersons set up private offshore trusts to project a degree of separation from their personal assets.

(2) Hunt for enhanced secrecy

• Offshore trusts offer enhanced secrecy to businesspersons, given their complex structures. The Income-Tax Department can get information only with the financial investigation agency or international tax authority.

(3) Avoid tax in the guise of planning:

• Businesspersons avoid their NRI children being taxed on income from their assets by transferring all the assets to a trust.
• Further, the tax rates in overseas jurisdictions are much lower than the 30% personal I-T rate in India plus surcharges, including those on the super-rich (those with annual income over Rs 1 crore).

(4) Prepare for estate duty eventuality

• There is pervasive fear that estate duty, which was abolished back in 1985 when Rajiv Gandhi was PM, will likely be re-introduced soon.
• Setting up trusts in advance, business families have been advised, will protect the next generation from paying the death/ inheritance tax, which was as high as 85 per cent.

(5) Flexibility in a capital-controlled economy

• India is a capital-controlled economy. Individuals can invest only $250,000 a year under the Reserve Bank of India’s Liberalized Remittance Scheme (LRS).
• To get over this, businesspersons have turned NRIs, and under FEMA, NRIs can remit $1 million a year in addition to their current annual income, outside India.

(6) The NRI angle

• Offshore trusts, as noted earlier, are recognised under Indian laws, but legally, it is the trustees — not the ‘settlor’ or the ‘beneficiaries’ — who are the owners of the properties and income of the trust.
• An NRI trustee or offshore trustee taking instructions from another overseas ‘protector’ ensures they are taxed in India only on their total income from India.

Can offshore Trusts be seen as resident Indians for tax purposes?

• There are certain grey areas of taxation where the Income-Tax Department is in contestation with offshore trusts.
• After the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, came into existence, resident Indians — if they are ‘settlors’, ‘trustees’, or ‘beneficiaries’ — have to report their foreign financial interests and assets.
• NRIs are not required to do so — even though, as mentioned above, the I-T Department has been sending notices to NRIs in certain cases.

What are the grey areas of Indian taxation

• There are certain grey areas of taxation where the Income-Tax Department is in contest with offshore trusts.
• After the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, came into existence, resident Indians have to report their foreign financial interests and assets.
• NRIs are not required to do so.
• The I-T Department may consider an offshore trust to be a resident of India for taxation purposes if the trustee is an Indian resident.
• In cases where the trustee is an offshore entity or an NRI, if the tax department establishes the trustee is taking instructions from a resident Indian, then the trust may be considered a resident of India for taxation purposes.

What are the government initiatives on Indian Taxation?

(1) Legislative Action

• The Fugitive Economic Offenders Act, 2018

It seeks to confiscate properties of economic offenders who have left the country to avoid facing criminal prosecution or refuse to return to the country to face prosecution.

• The Central Goods and Services Tax Act, 2017

Uniform SGST and IGST rates will reduce the incentive for evasion by eliminating rate arbitrage between neighboring States and that between intra and inter-state sales.

• The Benami Transactions (Prohibition) Amendment Act, 2016
  • It is designed to curb black money and passed by parliament in came into effect.
  • Persons indulging in benami transactions may face up to 7 years’ imprisonment and fine.
  • Furnishing false information is punishable by imprisonment up to 5 years and fine.
  • Properties held benami are liable for confiscation by government without compensation.
  • Initiating Officer may pass an order to continue holding property and may then refer case to Adjudicating Authority which will then examine evidence and pass an order.
  • Appellate Tribunal will hear appeals against orders of Adjudicating Authority. High Court can hear appeals against orders of Appellate Tribunal.
• The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
  • It penalizes the concealment of foreign income and provides for criminal liability for attempting to evade tax in relation to foreign income.
  • The Act gave a one-time opportunity to Indian residents to declare undisclosed foreign income and assets.
  • The concerned person had to pay tax at the rate of 30% and an equal amount by way of penalty if found having undisclosed overseas wealth.
  • However, in case of non-declaration, the provisions included slapping of tax at the rate of 30% along with a penalty equal to three times the amount of tax evaded or 90% of the undisclosed income or the value of the asset.
  • The Act provides for punishment of jail for 3-10 years for the willful evasion.
• Prevention of Money Laundering Act, 2002
  • The PMLA was enacted in 2002 and it came into force in 2005. The chief objective of this legislation is to fight money laundering, that is, the process of converting black money into white.
  • The Act enables government authorities to confiscate property and/or assets earned from illegal sources and through money laundering.
  • Under the PMLA, the burden of proof lies with the accused.

(2) International cooperation

• Double Taxation Avoidance Agreements (DTAAs): India is proactively engaging with foreign governments with a view to facilitate and enhance the exchange of information under Double Taxation Avoidance Agreements (DTAAs)/Tax Information Exchange Agreements (TIEAs)/Multilateral Conventions.
• Automatic Exchange of Information: India has been a leading force in the efforts to forge a multilateral regime for proactive sharing of financial information known as Automatic Exchange of Information which will greatly assist the global efforts to combat tax evasion.
• Foreign Account Tax Compliance Act of USA: India has entered into an information sharing agreement with the USA under the act.

Way Forward

• In the current running economy, the measures taken by the governments are not sufficient enough to solve the problems of over growing scams and other economic crimes.
• There is need of strict provisions to deal with such problems.
• The governments are required to bring out certain reforms to overcome these issues such as to govern the crimes of economics the government should revamp the laws since the existing laws are not so harsh.
• Also the enforcement agencies should try to keep bars on the benefits arising out of such crimes by the offenders or scam.
• Side by side, all the private or public agencies such as income tax department, custom offices, police departments, SEBI, etc. should work in a coordination to quickly get rid of these economics crimes.

Conclusion

• It is clearly evident from the aforementioned cases that the occurrence and re – occurrence of such scams can only be attributed to the weak financial regulations and a failure of corporate governance in finance.

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