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  • Air India Disinvestment Deal

    After 68 years, Air India is all set to return to the Tata fold.

    What is the deal?

    • The Tatas will own 100% stake in Air India, as also 100% in its international low-cost arm Air India Express and 50% in the ground handling joint venture, Air India SATS.
    • Apart from 141 planes and access to a network of 173 destinations including 55 international ones, Tatas will also have the ownership of iconic brands like Air India, Indian Airlines and the Maharajah.

    History of Air India

    • Prominent industrialist JRD Tata founded the airline in 1932 and named it Tata Airlines.
    • As India gained Independence, the government bought 49% stake in AI.
    • In 1946, the aviation division of Tata Sons was listed as Air India, and in 1948, the Air India International was launched with flights to Europe.
    • In 1953, Air India was nationalised and for the next over four decades it remained the prized possession for India controlling the majority of the domestic airspace.

    Why was Air India sold?

    • End of Monopoly: With economic liberalisation and the growing presence of private players, this dominance came under serious threat.
    • Govt running an airline: Ideologically too, the government running an airline did not quite gel with the mantra of liberalisation.
    • Continuous losses: By 2007, AI (which flew international flights) was merged with the domestic carrier, Indian Airlines, to reduce losses.
    • Wastage of taxpayers money: But it is the mark of how poorly the airline was run that it has never made a profit since 2007.

    Why wasn’t it sold earlier?

    Ans. Fear over Operational Freedom

    • The first attempt to reduce the government’s stake — disinvestment — was made in 2001 under the then NDA government.
    • But that attempt — to sell 40% stake — failed.
    • In 2018, the government made another attempt to sell the government stake — this time, 76%. But it did not elicit even a single response.
    • In the latest attempt started in January 2020, the government has been able to finally conclude the sale.

    So how was it managed this time?

    • Govt gives up stakes: The mere fact that the government retained a partial stake. In other words, as long as the government kept a certain shareholding of AI, private players did not seem interested.
    • Operational freedom: That’s because the mere idea of government ownership, even if it was as little as 24%, made private firms wonder if they would have the operational freedom needed.
    • Debt sharing: In the past, the government expected the bidders to pick up a certain amount of the debt. This time, the government let the bidders decide the amount of debt they wanted to pick up.

    Significance of the deal

    [A] From the government’s perspective: A success

    • Disinvestment: It underscores govt commitment to reducing the its role in the economy.
    • Easing burden on taxpayers: This claims to have saved taxpayers from paying for daily losses of AI.
    • Economic reforms: Given the historical difficulties in AI’s disinvestment, or any disinvestment at all this is a significant achievement.

    [B] Business perspective: Still a failure

    • Missing the target: Purely in terms of money, the deal does not result in as big a step towards achieving the government’s disinvestment target of the current year.
    • Unresolved bankruptcy: The assets left with the government, such as buildings, etc., will likely generate Rs 14,718 crore. But that will still leave the government with a debt of Rs 28,844 crore to pay back.

    [C] Value perspective: Success for Tatas

    • Business success: From the Tatas’ perspective, apart from the emotional aspect of regaining control of an airline that they started, AI’s acquisition is a long-term bet.
    • Investment boost: The Tatas are expected to invest far more than what they have paid the government if this bet is to work for them.

    Conclusion

    • Complete liberalization: The privatisation of Air India is a message from the Government to the markets and global investors that it has the political will to bite the reform bullet.
    • Roadmap for economic reforms: The govt had to shed the “over-conservatism” that is typical of bureaucracy.
    • Future disinvestments: A transaction as “tough and complex” as Air India’s in an open, transparent and competitive bidding process, will boost future privatisation.

    Way forward

    • Other loss-making PSUs continue to drain taxpayers’ hard-earned money and get abused and fleeced in the name of social welfare.
    • The govt should imbibe this experience gained in future disinvestment biddings.

     

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  • India-ASEAN FTA

    The Commerce and Industry Minister has called for a renegotiation of the India-ASEAN free trade agreement (FTA).

    Why such move?

    • The MCI aims to prevent its misuse by ‘third parties’ and remove trade restrictions as well as non-tariff barriers that he said had hurt Indian exports disproportionately since the pact was operationalized in 2010.
    • The focus needed to be on new rules to eliminate misuse ‘by third parties outside ASEAN’, the minister said, hinting at China.
    • India had to deal with several restrictive barriers on exports in the ASEAN region, particularly in the agriculture and auto sectors.

    About ASEAN

    • Members:
    • Officially the Association of Southeast Asian Nations, ASEAN is an economic union comprising 10 member states in Southeast Asia.
    • It promotes intergovernmental cooperation and facilitates economic, political, security, military, educational, and sociocultural integration between its members and other countries in Asia.

    India-ASEAN Free Trade Agreement

    • The initial framework agreement for ASEAN–India Free Trade Area (AIFTA) was signed on 8 October 2003 in Bali, Indonesia.
    • The FTA came into effect on 1 January 2010.
    • The FTA had emerged from a mutual interest of both parties to expand their economic ties in the Asia-Pacific region.

    Background of the AIFTA

    • India’s Look East policy was reciprocated by similar interests of many ASEAN countries to expand their interactions westward.
    • After India became a sectoral dialogue partner of ASEAN in 1992, India saw its trade with ASEAN increase relative to its trade with the rest of the world.
    • Between 1993 and 2003, ASEAN-India bilateral trade grew at an annual rate of 11.2%, from US$2.9 billion in 1993 to US$12.1 billion in 2003.
    • Total Indian FDI into ASEAN from 2000 to 2008 was US$1.3 billion.

    Acknowledging this trend and recognising the economic potential of closer linkages, both sides recognised the opportunities to pave the way for the establishment of an ASEAN–India Free Trade Area (FTA).

    Structure of the AIFTA

    • The signing of the ASEAN-India Trade in Goods Agreement paves the way for the creation of one of the world’s largest FTAs – a market of almost 1.8 billion people with a combined GDP of US$2.8 trillion.
    • It sees tariff liberalisation of over 90 percent of products traded between the two dynamic regions, including the so-called “special products”.
    • The products include palm oil (crude and refined), coffee, black tea and pepper.

    Criticism

    While there are many benefits to the ASEAN-India FTA, there is concern in India that the agreement will have several negative impacts on the economy.

    • Opening-up its market: This FTA will allow them to increase the market access of their products.
    • No specific gains: It is criticised, however, that India will not experience as great an increase in market access to ASEAN countries as ASEAN will in India.
    • Export driven ASEAN: The economies of the ASEAN countries are largely export-driven. Considering India’s expansive domestic market, the ASEAN countries will look eagerly towards India as a home for its exports.
    • Huge trade deficit: Since the early 2000s, India has had an increasing trade deficit with ASEAN. It is feared that a gradual liberalisation of tariffs and a rise in imported goods into India will threaten several sectors of the economy.
    • Inaccessible Markets: As a dominant exporter of light manufacturing products, ASEAN has competitive tariff rates that make it difficult for India to gain access to the industry market in ASEAN countries.
    • Cheaper imports: The state of Kerala is an important exporter in the national export of plantation products. It fears that cheap imports of oil palm, rubber, coffee, and fish would lower domestic production, adversely affecting farmers and ultimately its economy.

     

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  • RBI suspends G-Sec Acquisition Programme (GSAP)

    The Reserve Bank of India (RBI) has decided to halt its bond-buying under the G-Sec Acquisition Programme (GSAP).

    Why such move?

    • The GSAP had succeeded in ensuring adequate liquidity and stabilising financial markets.
    • Coupled with other liquidity measures, it facilitated congenial and orderly financing conditions and a conducive environment for the recovery.

    What is GSAP?

    • The G-Sec Acquisition Programme (G-SAP) is basically an unconditional and a structured Open Market Operation (OMO), of a much larger scale and size.
    • G-SAP is an OMO with a ‘distinct character’.
    • The word ‘unconditional’ here connotes that RBI has committed upfront that it will buy G-Secs irrespective of the market sentiment.

    What are Government Securities?

    • These are debt instruments issued by the government to borrow money.
    • The two key categories are:
    1. Treasury bills (T-Bills) – short-term instruments which mature in 91 days, 182 days, or 364 days, and
    2. Dated securities – long-term instruments, which mature anywhere between 5 years and 40 years

    Note: T-Bills are issued only by the central government, and the interest on them is determined by market forces.

    Why G-Secs?

    • Like bank fixed deposits, g-secs are not tax-free.
    • They are generally considered the safest form of investment because they are backed by the government. So, the risk of default is almost nil.
    • However, they are not completely risk-free, since they are subject to fluctuations in interest rates.
    • Bank fixed deposits, on the other hand, are guaranteed only to the extent of Rs 5 lakh by the Deposit Insurance and Credit Guarantee Corporation (DICGC).

    Other decisions

    • The RBI, however, remained ready to undertake G-SAP as and when warranted by liquidity conditions.
    • It would also continue to flexibly conduct other liquidity management operations including Operation Twist (OT) and regular open market operations (OMOs).

    Answer this PYQ in the comment box:

    Q.Consider the following statements:

    1. The Reserve Bank of India manages and services the Government of India Securities but not any State Government Securities.
    2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.
    3. Treasury bills offer are issued at a discount from the par value.

    Which of the statements given above is/are correct?

    (a) 1 and 2 only

    (b) 3 Only

    (c) 2 and 3 only

    (d) 1, 2 and 3

     

    [wpdiscuz-feedback id=”43irc0tf58″ question=”Please leave a feedback on this” opened=”1″]Post your answers here:[/wpdiscuz-feedback]

     

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    Back2Basics: Open Market Operations (OMO)

    • OMOs is one of the quantitative monetary policy tools which is employed by the central bank of a country to control the money supply in the economy.
    • It is a part of the Market Stabilization Scheme (MSS) by the RBI.
    • OMOs are conducted by the RBI by way of sale or purchase of government securities (g-secs) to adjust money supply conditions.
    • The central bank sells g-secs to remove liquidity from the system and buys back g-secs to infuse liquidity into the system.

  • What is Palk Bay Scheme?

    The Union Government is considering increasing the unit cost of deep-sea fishing vessels under the Palk Bay scheme to make it more attractive to fisherfolk.

    Palk Bay Scheme

    • The Palk Bay Scheme is the official scheme for diversification of trawl fishing boats from Palk Strait into deep sea fishing boats.
    • It is aimed at encouraging fishermen to take up deep-sea fishing and put an end to disputes arising between the India and Sri Lanka.
    • The project helps fishermen in the Palk Straits, who are not exposed to deep-sea fishing, to venture deep into the Indian Ocean, Arabian sea and other deep-sea areas to look for fish like tuna that are in high demand.

    Why need such a scheme?

    • Bottom trawling, an ecologically destructive practice, involves trawlers dragging weighted nets along the sea-floor, causing great depletion of aquatic resources.

    Key components of the scheme

    • The project aims to replace all trawler boats and introduce over 2,000 deep sea fishing boats in a course of five years.
    • The scheme, under the aegis of Blue Revolution scheme – is funded by the Centre – 50 per cent and state government – 20 per cent for a boat costing Rs 80 lakh.
    • Of the balance 30 per cent, 10 per cent is contributed by the beneficiary (fisherman), and the remaining 20 per cent is funded by banks.

    Must read:

    [Burning Issue] India- Sri Lanka Fishermen Issues

     

     

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  • Challenges facing Indian Air Force

    Context

    A host of challenges greets India’s new Air Chief.

    Challenges

    • The challenges include the rewiring of India’s military into new theatre commands, the reservations expressed by the IAF about its “support” role and the visible depletion in operational air assets due to obsolescence and lack of new platforms.
    • The decline in platforms is stark and from a strength of 42 combat squadrons in 2002, the IAF now operates barely 30.
    • This shortfall in numbers would remain through this decade.
    • Even as there are plans to create new theatre commands and allocate existing air assets to the new formations, the depletion in numbers merits urgent review.

    Steps taken

    • The purchase of 83 Tejas Light Combat Aircraft (LCA) will be a fillip even as the sturdy MIGs are finally phased out.
    • In the next decade, the IAF hopes to induct the indigenous fifth-generation Advanced Medium Combat Aircraft (AMCA) and the Multi-Role Fighter Aircraft (MRFA) — a new platform that would be built in India with a foreign entity, the “original equipment manufacturer” (OEM), and thereby move up to 35 squadrons.
    • Issues: The AMCA is “under design” and India’s track record in the design and manufacture of indigenous fighter aircraft is cost- and time-intensive.
    • As regards the MRFA, the request for information for 114 jets has just been issued.
    • The Rafale experience and the long delays associated with it would suggest that speedy selection of an OEM will be elusive.

    Way forward

    • Air power is becoming technologically more refined with unmanned platforms, cyber-space linkages and AI advances.
    • The inherent trans-border nature of this military capability needs astute professional and political husbanding.
    • Acquiring credible aerospace power with a meaningful degree of indigenisation will need a greater degree of national resolve, professional integrity and resource allocation than is the case now.
    • China has demonstrated the degree of suasion and intimidation that airpower can bring to bear in relation to Taiwan.

    Conclusion

    A reality check about the quantity and quality of India’s air power and the roles it can undertake should precede its disaggregation to theatre commands in the run-up to India@75.

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  • NATO fires Russian Diplomats

    NATO has withdrew the accreditation of eight Russian officials to the military alliance in response to a rise in malign activities by Moscow.

    NATO

    • NATO is a military alliance established by the North Atlantic Treaty (also called the Washington Treaty) of April 4, 1949.
    • It sought to create a counterweight to Soviet armies stationed in Central and Eastern Europe after World War II.
    • Its original members were Belgium, Canada, Denmark, France, Iceland, Italy, Luxembourg, the Netherlands, Norway, Portugal, the United Kingdom, and the United States.
    • NATO has spread a web of partners, namely Egypt, Israel, Sweden, Austria, Switzerland and Finland.

    Why was it founded?

    Ans. Communist sweep in Europe post-WWII and rise of Soviet dominance

    • After World War II in 1945, Western Europe was economically exhausted and militarily weak, and newly powerful communist parties had arisen in France and Italy.
    • By contrast, the Soviet Union had emerged from the war with its armies dominating all the states of central and Eastern Europe.
    • By 1948 communists under Moscow’s sponsorship had consolidated their control of the governments of those countries and suppressed all non-communist political activity.
    • What became known as the Iron Curtain, a term popularized by Winston Churchill, had descended over central and Eastern Europe.

    Ideology of NATO

    • The NATO ensures that the security of its European member countries is inseparably linked to that of its North American member countries.
    • It commits the Allies to democracy, individual liberty and the rule of law, as well as to peaceful resolution of disputes.
    • It also provides a unique forum for dialogue and cooperation across the Atlantic.

    The Article 5

    • The heart of NATO is expressed in Article 5, in which the signatory members agree that an armed attack against one or more of them in Europe or North America shall be considered an attack against them all.

    Why in news now?

    • The relationship between NATO and Russia is at its lowest point since the end of the Cold War.
    • The NATO (rather US) sees their aggressive actions, not least against Ukraine, but also the significant military buildup and violations of important arms control agreements.
    • NATO suspended practical cooperation with Russia in 2014 after it annexed Ukraine’s Crimean Peninsula.

     

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  • [pib] River Ranching Programme

    The Union Minister for Fisheries, Animal Husbandry & Dairying, is set to launch the River Ranching Programme in Uttar Pradesh under the Namami Gange Programme.

    What is River Ranching?

    • River Ranching is a form of aquaculture in which a population of a fish species (such as salmon) is held in captivity for the first stage of their lives.
    • They are then released, and later harvested as adults when they return from the sea to their freshwater birthplace to spawn.

    Objective

    The key objectives of the program are:

    • To sustain and conserve the biodiversity in the river.
    • Facilitate regular stocking of fingerlings of cultivable carps to enhance productivity
    • Increase fish production
    • Enhance income and livelihood opportunities to communities’ dependent on these resources

    Why need such a program?

    • River ranching helps in achieving sustainable fisheries, reducing habitat degradation, conserving biodiversity, maximising social-economic benefits and would also remove factors causing pollution.
    • In this activity, different species of fish are released in the river, which destroy factors that increase the level of nitrogen.
    • These fishes will also aid in maintaining the cleanliness of the river as they feed on organic remnants.

    Where is the scheme being launched?

    • In Uttar Pradesh, about 15 lakh fish fingerlings of native carp species shall be simultaneously released into the river in 12 districts by the department.
    • These districts include Bulandshahr/Hapur, Hardoi, Bijnor, Amroha, Fatehpur, Kanpur, Badayun, Kaushambi, Prayagraj, Mirzapur, Varanasi and Ghazipur.
    • Four other states namely Uttarakhand, Orissa, Tripura and Chhattisgarh will also witness the launching of nationwide River Ranching program.

     

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  • [pib] National Digital Livestock Mission

    The Union Minister of State Fisheries, Animal Husbandry & Dairying unveiled the National Digital Livestock Mission Blueprint.

    National Digital Livestock Mission

    • The NDLM would be a digital platform developed by Dept. of Dairy and Animal Husbandry on the foundation of the existing Information Network for Animal Productivity and Health (INAPH).
    • It aims to create a farmer-centric, technology-enabled ecosystem where the farmers are able to realize better income through livestock activities with the right information.
    • The bedrock of NDLM will be the unique identification of all livestock, which will be the foundation for all the state and national level programmes including domestic and international trade.
    • The farmers will be able to effortlessly access the markets, irrespective of their location or holdings through this digital platform as a wide-range of stake-holders will be connected in this ecosystem.
    • This system will also include robust animal breeding systems, nutrition, disease surveillance, disease control programmes and a traceability mechanism for animals and animal products.

    Why need such mission?

    • The livestock sector has a unique combination of being the backbone of rural livelihood.
    • The growth would have been a lot better if there were concerted efforts to harmonise programmes across the country in order to create an ecosystem that is conducive for growth of the sector.
    • This has been the main idea behind the deployment of NDLM, keeping the welfare of the farmer at the core.

    Back2Basics: National Livestock Mission

    • National Livestock Mission is an initiative of the Ministry of Agriculture and Farmers’ Welfare.
    • The mission, which commenced from 2014-15, has the objective of sustainable development of the livestock sector.
    • NABARD is the subsidy channelising agency for following schemes, under Entrepreneurship Development & Employment Generation (EDEG) component of National Livestock Mission.
    1. Poultry Venture Capital Fund (PVCF)
    2. Integrated Development of Small Ruminants and Rabbit (IDSRR)
    3. Pig Development (PD)
    4. Salvaging and Rearing of Male Buffalo Calves (SRMBC)
    5. Effective Animal Waste Management
    6. Construction of Storage Facility for Feed and Fodder

     

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  • India joins High Ambition Coalition (HAC)

    India has officially joined the High Ambition Coalition for Nature and People, a group of more than 70 countries encouraging the adoption of the global goal to protect 30×30.

    High Ambition Coalition (HAC)

    Aim: To promote an international agreement to protect at least 30 % the of world’s land and ocean by 2030

    • The HAC is an informal group of approximately 61 countries within the UN Framework Convention on Climate Change (UNFCCC).
    • It is committed to advancing progressive proposals on climate ambition.
    • The HAC was founded by the Republic of the Marshall Islands in 2014 with the aim of ensuring the Paris Agreement, adopted in 2015, was as ambitious as possible.
    • The Republic of the Marshall Islands serves as the convener and secretariat of the HAC.
    • The global 30×30 goal is currently a centerpiece of the treaty.

    Members

    • HAC members currently include a mix of countries in the global north and south; European, Latin American, Africa and Asia countries are among the members.
    • India is the first of the BRICS bloc of major emerging economies (Brazil, Russia, India, China and South Africa) to join the HAC.

     

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  • Government asks Supreme Court to set norms for quota in promotions

    The Union government has urged the Supreme Court to do away with the requirement of collecting quantifiable data by the Centre and states to determine the representation of people belonging to Scheduled Castes (SCs) and Scheduled Tribes (STs) while implementing reservation in promotion.

    Supreme Court directive on Quota in Promotions

    Background

    • The top court has called it “disturbing” that the Union government did not discontinue reservation in promotion for people belonging to SC/STs.
    • It referred to their numbers exceeded the upper ceiling of 15% and 7.5% respectively, of positions in some classes of central government jobs.

    Quota in Promotions: A timeline

    What was the case?

    • The Union government has been pressing for reservation in promotion proportionate to the population of SCs and STs as per a 1995 judgment by the top court in the RK Sabharwal case.
    • It wants it to be left open to the Centre and states to decide on promotional avenues for SCs and STs.
    • It claims that the condition regarding collection of quantifiable data to show inadequacy of representation of SCs/STs is “vague”.
    • Advocates representing general category have contended that the reservation cannot be for an indefinite period and that it must stop as soon as the upper ceiling has been reached.
    • Further, they have emphasised that reservation in promotion should be cadre-based only after quantifiable data is collected and the creamy layer has been excluded.

    Defying the need for quantifiable data

    • Attorney General sought to convince the court that the roster system, based on the proportionate population of SCs/STs, has been working quite well in all government departments.
    • The condition of collecting quantifiable data on inadequacy of representation of SCs/STs may not be required at all.
    • He urged that there is no need to verify any further or collect quantifiable data after the roster system.

    Referring to the Nagraj Case

    • Article 16(4A) of Indian Constitution allows reservations to SCs and STs in promotions, as long as the government believes that they are not adequately represented in government services.
    • In 2006, a Constitution bench’s ruling in the M Nagaraj case made it incumbent upon the state to collect quantifiable data showing inadequacy of representation in public employment.
    • This was to be done in addition to maintaining overall administrative efficiency.

    Why such demand by the Centre?

    • The Attorney General has said that it is tough for a member of the SC/ST to reach the ‘Group A’ category jobs.
    • The time has come for the apex court to firm up and draw the basis for reservation in promotions for SC/ST candidates to fill up vacancies in top jobs.
    • The Bench referred to records filed before it to note that there was low representation of SC/ST category in Group A jobs.
    • Instead of improving the situation in the Group A ranks, the court said, efforts are on to ensure adequate representation in Groups B and C. This was not fair, it remarked.

    Must read:

    [Burning Issue] SC judgement on Reservation not being a Fundamental Right

     

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