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  • [pib] New ports and routes added under the Protocol on Inland Water Transit between India and Bangladesh

    India and Bangladesh have opened a new chapter in regional connectivity by expanding the scope of inland water transport mechanism that would enable to boost trade in the region.

    Note all the ports mentioned in the newscard and the image. Also, keep a tab on river systems of North east India.

    What is the news?

    • The Standing Committee on the Protocol and the Shipping Secretary level Talks are the institutional arrangements to discuss and make the Protocol more effective.
    • During the latest discussions key decisions were taken on the extension of protocol routes, the inclusion of new routes and declaration of new Ports of Call to facilitate trade between the two countries.

    New routes

    The number of Indo Bangladesh Protocol (IBP) routes is being increased from 8 to 10 and new locations are also added to the existing routes: –

    1) Inclusion of Sonamura- Daudkhandi stretch of Gumti river (93 Km) as IBP route:

    • It will improve the connectivity of Tripura and adjoining States with Indian and Bangladesh`s economic centres and will help the hinterland of both the countries.

    2) Rajshahi-Dhulian-Rajshahi Routes and its extension up to Aricha (270 km)

    • It will help the augmentation of infrastructure in Bangladesh as it would reduce the transportation cost of stone chips/aggregate to northern part of Bangladesh through this route. It will also decongest the Land Custom Stations on both sides.

    Ports of Call

    • Port of call means an intermediate stop for a ship on its scheduled journey for cargo operation or taking on supplies or fuel.
    • The following are existing Ports of Call in the two countries on Indo-Bangladesh Protocol (IBP) route:
    India Kolkata Haldia Pandu Karimganj Silghat Dhubri
    Bangladesh Narayanganj Khulna Mongla Sirajganj Ashuganj Pangaon
    • Newly added: Two more extended Ports of Call have been added
    • Inclusion of Jogigopha in India and Bahadurabad in Bangladesh as new Port of Call will provide connectivity to Meghalaya, Assam and Bhutan.

    About the Protocol on Inland Water Transit

    • Bangladesh and India have a long-standing and time-tested Protocol on Transit and Trade through inland waterways of both countries.
    • This Protocol, which was first signed in 1972 (immediately after independence of Bangladesh), is a reflection of shared history and friendship between the two countries.
    • It was last renewed in 2015 for five years with a provision for its automatic renewal for a further period of five years giving long term assurance to various stakeholders.

  • Rajiv Gandhi Kisan Nyaya Yojana in Chhattisgarh

    The Rajiv Gandhi Kisan Nyaya Yojana has been approved by the Chhattisgarh state govt. on 19th death anniversary of the former Prime Minister, yesterday.

    Practice question for Mains:

    Q. Various income support mechanisms for farmers are more of a populist measure with no impact on ground zero. Critically examine.

    Rajiv Gandhi Kisan Nyaya Yojana

    • It is a new income support programme under which Farmers in Chhattisgarh would get up to ₹13,000 an acre a year.
    • Rice and maize farmers would get ₹10,000 an acre while sugarcane farmers would get ₹13,000. The money would be distributed in four instalments.
    • In the first instalment, ₹1,500 crores would be distributed among 18 lakh farmers, more than 80% of the small and marginal.
    • The scheme would cover rice, maize and sugarcane farmers to begin with, and would expand to other crops later.

    Benefits of the scheme

    • This will help farmers through the agricultural cycle and hopefully help with extension activities.
    • The injection of cash among the rural population would generate a demand that shielded Chhattisgarh from the economic slowdown last year.
    • This will reduce distress migration, and enhance food security for the State.

  • Tracking Chinese diplomacy

    We are no stranger to the assertive nature of China in geopolitics. But had it always been the same? This article captures the transformation of the nature of Chinese diplomacy. Two personalities that had a profound impact on the nature of the diplomacy of that country are Zhou Enlai and Deng Xiaoping. Each of them imparted special characteristic to diplomacy. Now, that all seems lost from present China. Read the article to know about the contribution of two personalities and trends in Chinese diplomacy now.

    Zhou Enlai: Preference for Persuasion and compromise

    “All diplomacy is a continuation of war by other means.” – Zhou Enlai

    • If Mao Zedong represented the crude face of Chinese communism, then Zhou was the epitome of its refinement.
    • Zhou preferred to seduce his opponents through word and gesture in the pursuit of national self-interest.
    • Force was used rarely, and only when all other means of persuasion failed.
    • So, amid Korean War in 1950, when the U.S. Army crossed into North Korea, Zhou Enlai delivered message against crossing 38th Parallel through Indian Ambassador, instead publicly declaring this.
    • He chose to give diplomacy a chance.

    Role in First Indochina War

    • In 1954, the Chinese made their entry onto the world stage in Geneva.
    • The Vietnamese were winning against the French in the First Indochina War.
    • And the Americans were preparing to intervene fearing that another “domino” would fall to communism.
    • China’s self-interest lay in ending this war while denying the U.S. a foothold in its backyard.
    • Zhou’s strategy was to undermine western unity.
    • His watchwords were persuasion and compromise.
    • He even gave “face” to the French who had just lost to the Vietnamese in the battle of Dien Bien Phu, by travelling the “extra mile” to meet Prime Minister of France to secure the peace.

    Low profile at Afro-Asian Conference in Bandung

    • In 1955, at the Afro-Asian Conference in Bandung, Zhou used the same tactics to pursue another objective: Developing relations with leaders of the Afro-Asian countries.
    • He deliberately kept a low profile, allowing Prime Minister Jawaharlal Nehru and Indonesian President Sukarno to take the lead.
    • His tactic, he reported to Mao, was “not to be involved in provocative or disruptive debate”.
    • His guidance to his team was to “strive to expand the united front of the world peace force.“
    • He also instructed the team to create conditions for establishing diplomatic work or diplomatic relations between China and a number of Afro-Asian countries.

    So, how Zhou shaped China’s foreign policy?

    • Zhou’s style of diplomacy came to define Chinese foreign policy over the next half-century.
    • The strategy was consistent: avoid isolation, build solidarity with non-aligned countries, divide the West.
    • The tactics were called ‘united front’ — isolate the main threat by building unity with all other forces.
    • Under Zhou, diplomats of calibre kept handled the task of diplomacy with skill and held firm even in storms like the Cultural Revolution.
    • When the tide rose, these diplomatic fishermen gathered the fish — expanding China’s global presence and gaining international acceptability.
    • When it ebbed, they saw to it that the ship remained firmly moored.
    • They navigated the Cold War, playing the Soviets against the Americans.
    • To relieve pressure, Zhou opened border talks with the Soviets and channels to the U.S.
    • Public animosity did not deter him from turning on the full extent of his diplomatic skills on either Alexei Kosygin or Henry Kissinger.
    • In February 1972, he persuaded U.S. President Richard Nixon to abandon Taiwan.
    • It was a staggering act of diplomacy.

    Deng Xiaoping: hide our capacities and bide our time

    “Observe calmly; secure our position; cope with affairs calmly; hide our capacities and bide our time; be good at maintaining a low profile; and never claim leadership.”

    • In the 1980s, Deng Xiaoping took up the reins.
    • Deng supplemented Zhou’s strategy with a “24-Character Strategy” of his own(the above quote).

    Character of Chinese diplomacy in Deng Xiaoping’s time

    • “24-Character Strategy” became the ‘mantra’ of Chinese diplomacy.
    • Chinese diplomats measured their words and kept their dignity.
    • They projected power but rarely used more words than needed.
    • They were masters of their brief because Zhou had taught them that the real advantage in negotiations was to know more than the other side.
    • They flattered acquaintances, calling them “old friends”.
    • They built relationships by making it a point to engage the less friendly interlocutors with greater courtesies than friends.
    • Behind closed doors, they were tireless in reducing opposition through negotiation.
    • And skillfully in putting the onus of responsibility for failure on the other party.
    • And occasionally, they would hold out a veiled threat with a look of concern rather like an uncle anxious to save you from embarrassment.
    • But they rarely offended.

    Tumultuous period of 1980s and 1990s and entry into WTO

    • The 1980s and 1990s were the peak for Chinese diplomacy.
    • The U.S. President George Bush and Russian leader Mikhail Gorbachev visited China.
    • They normalised relations, settled borders and won hearts and minds through general financial help.
    • So effective was Chinese diplomacy that the Americans even broke their own sanctions imposed after the 1989 ‘Tiananmen Incident’, within a matter of four weeks.
    • A decade later, the U.S. and the European Union bought into Chinese assurances that it would soon transition to a market economy.
    • And helped steer China into the World Trade Organization.

    After Deng Xiaoping: Arrogance and threats in diplomacy

    • Deng died in 1997. China prospered just as Deng had imagined.
    • It began to occupy centre stage in world diplomacy, but the basics of Chines diplomacy started changing
    • A new generation of diplomats, with knowledge of the English language and a careerist mindset, has started to destroy the foundations set down by Zhou and Deng.
    • Arrogance has replaced humility.
    • Persuasion is quickly abandoned in favour of the stick when countries take actions contrary to Chinese wishes.
    • The Chinese pursue unilateralism instead of compromise in the South China Sea.
    • In place of ‘united front’ tactics, they are bent on creating irritations simultaneously with multiple China neighbouring countries.
    • Avenging the ‘Century of Humiliation’ that endured in the hands of western imperial powers from roughly 1839-1840 to 1949 is on their mind now.
    • To avenge that they adopt a one-size-fits-all approach.
    • But they forget that much of the world has done nothing to China and, indeed, shares a similar historical experience.
    • Statements of fact or reasoned opinion are seen by them as insult or humiliation.
    • Foreign governments are educated about their responsibilities in managing the media and the narrative, even as the Chinese manipulate the same media to serve their purposes.
    • They expect to receive gratitude for everything they do, including handling COVID-19, as if it was only done with the foreigner in mind.
    • The veneer of humility has thinned.
    • The reserves of goodwill are fast depleting. The ship seems to be adrift at sea.

    Questions related to China has been a recurrent theme in the UPSC papers. Consider the question asked in 2017  “China is using its economic relations and positive trade surplus as a tool to develop potential military power status in Asia. In light of this statement discuss its impact on India and her neighbours.”

    Conclusion

    In the post-pandemic world, India and the rest of the world will have to reckon the role played by China in the pandemic. In such a changing scenario India will do well to take note of the changing trends of Chinese diplomacy.

  • Exploring the avenues to fill the budgetary gaps

    What are the options available with the government to fill up the budgetary gaps created by the stimulus package? Well, one seems to be exercising its disinvestment or privatisations plans. But like always disinvestment comes with its own set of issues. The next could be raising the taxes and duties on the fuels. But this will defeat the very purpose of the package. Third option is borrowing. But borrowing in the external currency is another problem story. Let’s figure this all out with this article….

    Containing the fiscal deficit through privatisation

    • Government is apparently hopeful that money could come partly from the new privatisation programme.
    • Finance Minister recently said that privatisation — a policy that has already gained momentum in the last budget, would now be the order of the day.
    • According to the new Public Sector Enterprises Policy (PSEP), a list of strategic sectors will be notified where there will be no more than four public sector enterprises.
    • The PSEP is a strategic move intended to rationalise the public sector.
    •  Before the COVID-19 crisis, the government needed the privatisation money partly because its revenue from GST among other things was declining.
    • And this void could only partly be filled by alternative sources of tax revenues such as that on fuel.
    • Today, the government needs this money in order to contain the fiscal deficit.
    • So, the privatisation programme has suddenly been expanded.
    • The Centre has set a budget target of Rs 2.1 lakh crore from disinvestment in the current fiscal year.

    Progress made so far on disinvestment process

    • Towards the end of 2019, the government approved the privatisation of BPCL and the Shipping Corporation of India.
    • In addition to selling stakes in the Container Corporation of India, THDC and NEEPCO.
    • The government had initially planned to complete its “strategic disinvestment” in BPCL and Air India by the end of this fiscal year.
    • It now wants it completed earlier. Some estimate say that the government’s disinvestment in BPCL, SCI and CONCOR could fetch it Rs 78,400 crore.
    • Should India’s flying Maharaja also find a buyer, the government could raise over Rs 1,05,000 crore.

    Issues with privatisation

    • The revenue from privatisation is a one-off benefit and generally, only profit-making units are sold at a good price.
    • Privatisation is a two-way street — it requires a buyer and a seller. Who will be the buyers?
    • Excessive political interference with the private sector makes owning an ex-government entity risky.
    • A handful of Indian capitalists who are already at the helm of oligopolies may be in a position — financially and politically — to buy the big PSUs.
    • If they were allowed to grow even more by acquiring public entities, sectors of the economy would be under the influence of quasi-monopolies.
    • This could foster crony capitalism and may even result in the making of oligarchs.

    Where else can the government find the money it needs?

    1. Increasing tax and duties on fuel

    • Government has already increased the excise duty on petrol and diesel by Rs 3 per litre — the steepest hike since 2012.
    • The government imposed additional taxes while global crude oil prices fell.
    • As oil prices can only go up after the last round of negotiations between Russia and Saudi Arabia, the Indian government will not be in a position to use this source of revenue again.
    • Such a move would contradict the very idea of a relief and stimulus package anyway. Why?
    • An increase in the excise duty or tax would affect purchasing power, when the package is supposed to help the poor and to boost demand.
    • Low demand and lowest investment rate:  Even before the present crisis, industrialists complained that 25 per cent of their productive capacity was idle.
    • And that’s why their investment rate had never been this low, in the 21st century at least.

    2. Borrowing money and issues with it

    • Even if some privatisation helps India financially, it seems that the country will need to borrow money.
    • External borrowing, however, is problematic. There are three issues with external borrowing-
    • 1) The only way governments pay back external borrowings is by wisely using borrowed capital to drive high GDP growth and generating revenues.
    • Which is unlikely to happen any time soon as a recession is round the corner.
    • 2) The rupee is at its lowest level compared to the US dollar.
    • Any more devaluation will only make it harder for the government to pay back its debt.
    • Since external borrowings must be paid back in borrowed currency, exports and foreign reserves or gold reserves are generally the only two reliable options.
    • The third one being borrowing more to pay back the previous debts — a slippery slope to pay government debt.
    • However, India should account for the inevitable global slump in international demand and a consequent drop in its exports.
    • Other countries may also move towards “atmanirbharta” and over-regulate imports.
    • 3)  Indian industries are already a bit debt-laden.
    • Following factors compelled industries to resort to overseas borrowing-
    • i)The risk in the banking sector, tight liquidity in debt markets,
    • ii) Comparatively lower international borrowing rates
    • iii) The RBI’s ECB rationalising measures.
    • More overseas borrowing, combined with the industry’s high debt status, could lead to rating agencies downgrading India’s investment prospects — deterring foreign investments in the process.

    3. Foreign reserves and other options

    • On the positive side, India’s foreign reserves stand at an all-time high which could be strategically used to finance its needs.
    • The rest may have to come from privatisation, taxation, loans and more international aid.
    • Already, India is receiving more funds from the World Bank, the ADB and the Japanese ODA.
    • India may help others, but it needs aid too.

    Consider the question- “The government had to declare the relief and stimulus package in the wake of corona crisis. This expenditure leads to budgetary gaps. What are the options with the government to close this gap? Examine the issues associated with these options.”

    Conclusion

    The government must weigh each option with due consideration and explore all the possible avenues. Options like privatisation or borrowing must be exercised with caution. As these decisions could have severe consequences for the economy in the future.

     

     

     

     

     

     

     

  • Terrorism and its ideologies

    Pakistan is a unique country in the sense that it is both a victim and the perpetrator of terrorism. This article explains the situations which made Pakistan home to the terrorism. So, why some terrorist organisations turned against Pakistan? What are the ideologies followed by various terrorist organisation and how it makes a difference in their functioning? Read to know…

    Terrorism paradox of Pakistan: Both Victim and perpetrator

    • This Terrorism paradox can be traced to the deliberate policy of the Pakistani state to create and foster terrorist groups in order to engage in low-intensity warfare with its neighbours.
    • Pakistan first operationalised this strategy in regard to Afghanistan in 1973.
    • And intensified it with the cooperation of the U.S. and Saudi Arabia after the Marxist coup of 1978 after which USSR entered Afghanistan.

    Soviet withdrawal and rise in insurgency in Kashmir

    • The Soviet withdrawal in 1989 left the Pakistani military with a large surplus of Islamist fighters that it had trained and armed.
    • Islamabad decided to use this “asset” to intensify the insurgency in the Kashmir Valley.

    Radicalisation of Pakistani population

    • The decade-long Afghan “jihad” in Afghanistan had also radicalised a substantial segment of the Pakistani population.
    • Radicalisation was intense in the North-West Frontier Province and Punjab.
    • Sectarian divisions were also on the rise not only between Sunnis and Shias but also among various Sunni sects.
    • The division was intense between two Sunni sects-the puritanical Deobandis and the more syncretic and Sufi-oriented Barelvis.
    • In the process, a number of homegrown terrorist groups emerged that the Pakistan Army co-opted for its use in Kashmir and the rest of India.
    • But, it soon became clear that Pakistan had created a set of Frankenstein’s monsters some of whom turned against their creator.
    • The Musharraf government, under American pressure, decided to collaborate with the latter in the overthrow of the Taliban regime in Afghanistan.
    • This resulted in some of the terrorist organisation turning against Pakistan.

    Monsters who don’t spare even its creator

    • The Tehreek-e-Taliban Pakistan (TTP), which has ideological affinity with the Afghan Taliban.
    • The TTP and its affiliates have fought pitched battles with the Pakistan Army in the Federally-Administered Tribal Areas (FATA) and parts of the NWFP.
    • Also, the Jaish-e-Mohammad (JeM) has not hesitated to launch terrorist attacks on targets within Pakistan as well, especially against the Shias and Sufi shrines.

    Did all terrorist organisation turn against Pakistan?

    • No!
    • Consider the case of ‘loyalist’ LeT.
    • Lashkar-e-Taiba (LeT), is a classic example of a “loyalist” terrorist organisation that has played by the rules set by the Pakistani military.
    • It only launches attacks on targets outside Pakistan, primarily in India.
    • As the evidence in the case of the Mumbai carnage of 2008 clearly indicates LeT operations are coordinated with the Inter-Services Intelligence (ISI).
    • ISI provides it with intelligence and logistical support in addition to identifying specific targets.
    • This is why the LeT and its front organisations have continued to receive the military’s patronage and unstinting support.
    • Consequently, its leader, Hafiz Saeed, was until recently provided protection by the Pakistani state.

    Ideological differences

    • Both the LeT and the Jaish-e-Mohammed (JeM) have been engaged in attacks on Indian targets identified by Pakistan’s ISI.
    • The difference between LeT and JeM lies in the fact that while the LeT is more pragmatic and less ideological.
    • The JeM is highly ideological and sectarian.
    • JeM draws its ideological inspiration from a very extreme form of Deobandi puritanism.
    • That extreme form considers all those who do not believe in its philosophy beyond the pale of Islam.
    • For many JeM diehards, these include not only Shias and Barelvis but also the Pakistani state and the Pakistani military.
    • LeT on the other hand does not consider Muslims of different theological orientations as non-believers and therefore legitimate targets of attack.
    • This relatively “liberal” interpretation is related to the fact that LeT draws its ideological inspiration from the sect called the Ahl-e-Hadis, which composes only a small proportion of Pakistan’s Muslim population and cannot afford to engage in sectarian conflict.
    • Moreover, it draws its membership from different Muslim sects including the Sufi-oriented Barelvis and the puritanical Deobandis.
    • Both these factors drive LeT toward greater tolerance in sectarian terms and to eschew intra-Islamic theological battles.
    • Its primary goals are political; above all, driving India out of Kashmir.
    • This jells well with the objectives of the Pakistani military and makes LeT and Hafiz Saeed, favourites of the Pakistani establishment.

    Consider the question asked by UPSC in 2017-“The scourge of terrorism is a grave challenge to national security. What solution do you suggest to curb this growing menace? What are the major sources of terrorist funding?

    Conclusion

    The fact that using terrorist outfits for state objectives is a highly risky business whose blowback cannot be predicted and can have very negative consequences for the stability of the state itself.

     

  • Israel swears in ‘Unity Government’

    Israel’s Parliament swore in its new unity government led by PM Netanyahu and his former rival Benny Gantz, ending the longest political crisis in their nation’s history.

    The strategic location of Gaza strip, West Bank, Dead Sea etc. creates a hotspot for a possible map based prelims question.  Consider this PYQ from 2015 CSP:

    Q. The area known as ‘Golan Heights’ sometimes appears in the news in the context of the events related to:

    a) Central Asia
    b) Middle East
    c) South-East Asia
    d) Central Africa

    What is a Unity Government?

    • A national unity government, government of national unity (GNU), or national union government is a broad coalition government consisting of all parties (or all major parties) in the legislature.
    • Such a coalition is usually formed during a time of war or another national emergency.
    • A general coalition government is a form of government in which political parties cooperate, reducing the dominance of any one party within that “coalition”.

    Practice question for mains:

    Q. Discuss the role and significance of Leader of Opposition and the Opposition Party and their constructive criticism in a Parliamentary form of government.

    What is the Israeli deal?

    • Israel’s unity government starts work amid the coronavirus pandemic and after a political crisis that saw three inconclusive elections and left the country in political limbo for more than 500 days.
    • The coalition government was agreed last month between veteran right-wing leader Netanyahu and the centrist Gantz, a former army chief.
    • The incoming government has aimed to apply Israeli sovereignty over West Bank settlements.
    • The govt. now aims to push on with controversial plans to annex large parts of the occupied West Bank.

    Significance

    • Netanyahu said that it’s time to apply the Israeli law and write another glorious chapter in the history of Zionism citing the issue of Jewish settlements in the occupied Palestinian territory.
    • Such a move is seen likely to cause international uproar and inflame tensions in the West Bank.
    • The region is home to nearly three million Palestinians and some 400,000 Israelis living in settlements considered illegal under international law.

    Back2Basics

    West Bank Annexation plans

    U.S. Secretary of State Mike Pompeo met Israeli PM Benjamin Netanyahu to discuss plans to annex parts of the West Bank.

    The strategic location of Gaza strip, West Bank, Dead Sea etc. creates a hotspot for a possible map based prelims question.  Consider this PYQ from 2015 CSP:

    Q. The area known as ‘Golan Heights’ sometimes appears in the news in the context of the events related to:

    a) Central Asia
    b) Middle East
    c) South-East Asia
    d) Central Africa

    Where is West Bank Located?

    • The West Bank is located to the west of the Jordan River.
    • It is a patch of land about one and a half times the size of Goa, was captured by Jordan after the 1948 Arab-Israeli War.
    • Israel snatched it back during the Six-Day War of 1967 and has occupied it ever since.
    • It is a landlocked territory, bordered by Jordan to the east and Israel to the south, west, and north.
    • Following the Oslo Accords between the Israeli government and the Palestine Liberation Organization (PLO) during the 1990s, part of the West Bank came under the control of the Palestinian Authority.
    • With varying levels of autonomy, the Palestinian Authority controls close to 40 percent of West Bank today, while the rest is controlled by Israel.

    Back2Basics: Gaza Strip

    • The Gaza Strip is a small boot-shaped territory along the Mediterranean coast between Egypt and Israel.
    • A couple of years later in 2007, Hamas, an anti-Israel military group, took over Gaza Strip. The militia group is often involved in violent clashes with the Israeli Defence Forces.
    • While Palestine has staked claim to both territories — West Bank and Gaza Strip — Israel’s objective has been to keep expanding Jewish settlements in these regions.

  • Etalin Hydro Electric Project

    A group of conservationists has written to the Environment Ministry seeking rejection of the approved Etalin Hydro Electric Project in the Dibang Valley district of Arunachal Pradesh.

    Make a note of major dams in India along with the rivers, terrain, major Wildlife sanctuaries and national parks incident to these rivers.

    Etalin Hydro Electric Project

    • Etalin HEP is a 3097 MW project based on the river Dibang.
    • It is envisaged as a run of the river scheme on rivers Dri and Tangon in the Dibang Valley District of Arunachal Pradesh.
    • Dibang is a tributary of the Brahmaputra River which flows through the states of Arunachal Pradesh and Assam.
    • The project is being executed through the Etalin Hydro Electric Power Company Limited, a JV company of Jindal Power Limited and Hydro Power Development Corporation of Arunachal Pradesh Limited.
    • It is expected to be one of the biggest hydropower projects in India in terms of installed capacity.

    Issues with the Project

    • The Project falls under the richest bio-geographical province of the Himalayan zone and would be located at the junction of major biogeographic zones like Palaearctic Zone and Indo-Malayan Zone.
    • It would involve the clearing of 2.7 lakh trees in “subtropical evergreen broad-leaved forest and subtropical rain forests”.
    • Underscoring the inadequacy of the Environment Impact Assessment report on Etalin, the conservationists said observations by wildlife officials were ignored.
    • These include the threat to 25 globally endangered mammal and bird species in the area to be affected.

    Back2Basics: Biogeographic Zones

    • A biogeographic realm or ecozone is the broadest biogeographic division of Earth’s land surface, based on distributional patterns of terrestrial organisms.
    • These zones delineate the large areas of the Earth’s surface within which organisms have been evolving in relative isolation over long periods of time.
    • They are separated from one another by geographic features, such as oceans, broad deserts, or high mountain ranges that constitute barriers to migration.
    • Originally, six biogeographic regions were identified: Palearctic (Europe and Asia), Nearctic (North America), Neotropical (Mexico, Central and South America), Ethiopian/Afrotropic (Africa), Oriental/Indo-Malayan (Southeast Asia, Indonesia) and Australian (Australia and New Guinea).
    • Currently, eight are recognised since the addition of Oceania (Polynesia, Fiji and Micronesia) and Antarctica.

  • [pib] Star Ratings of Garbage Free Cities

    The Ministry of Housing and Urban Affairs (MoHUA) has released the Star rating of garbage-free cities for the assessment year 2019-2020.

    Practice question for mains:

    Q. Discuss how the Swachh Bharat Mission has become a people’s movement in India. Also, discuss how it has managed to instill a behavioural change amongst the citizens.

    About Star Rating Protocol

    • The Star Rating Protocol was launched by the MoHUA in January 2018 to institutionalize a mechanism for cities to achieve Garbage Free status and to motivate cities to achieve higher degrees of cleanliness.
    • The protocol has been devised in a holistic manner including components such as the cleanliness of drains & water bodies, plastic waste management, managing construction & demolition waste, etc.
    • While the key thrust of this protocol is on Solid waste management(SWM), it also takes care of ensuring certain minimum standards of sanitation through a set of prerequisites defined in the framework.
    • The new protocol considers ward-wise geo-mapping, monitoring of SWM value chain through ICT interventions like Swachh Nagar App and zone-wise rating in cities with a population above 50 lakh.

    Performance of cities

    • Accordingly, as per the 2020 survey, 6 cities have been graded 5 stars, 65 Cities rated 3 Star and 70 Cities rated 1 Star.

    5 Star Cities

    ULB Name State Final Rating
    Ambikapur Chhattisgarh 5 Star
    Rajkot Gujarat 5 Star
    Surat Gujarat 5 Star
    Mysore Karnataka 5 Star
    Indore Madhya Pradesh 5 Star
    Navi Mumbai Maharashtra 5 Star

    Assessment under the protocol

    • To ensure that the Protocol has a SMART framework, the MoHUA has developed a three-stage assessment process.
    • In the first stage, ULBs populate their progress data on the portal along with supporting documents within a particular timeframe.
    • The second stage involves a desktop assessment by a third-party agency selected and appointed by MoHUA.
    • Claims of cities that clear the desktop assessment are then verified through independent field-level observations in the third stage.

    Significance

    • This certification is an acknowledgement of the clean status of Urban Local Bodies and strengthened SWM systems as well as a mark of trust and reliability akin to universally known standards.

    Back2Basics: Swachh Bharat Mission (SBM)

    • SBM is a nation-wide campaign in India for the period 2014 to 2019 that aims to clean up the streets, roads and infrastructure of India’s cities, towns, urban and rural areas.
    • The objectives of Swachh Bharat include eliminating open defecation through the construction of household-owned and community-owned toilets and establishing an accountable mechanism of monitoring toilet use.
    • Run by the GoI, the mission aims to achieve an “open-defecation free” (ODF) India by 2 October 2019, the 150th anniversary of the birth of Mahatma Gandhi by constructing 90 million toilets in rural India.
    • The mission will also contribute to India reaching Sustainable Development Goal 6 (SDG 6), established by the UN in 2015.
    • It is India’s largest cleanliness drive to date with three million government employees and students from all parts of India participating in 4,043 cities, towns, and rural areas.
    • The mission has two thrusts: Swachh Bharat Abhiyan (“gramin” or ‘rural’), which operates under the Ministry of Drinking Water and Sanitation; and Swachh Bharat Abhiyan (‘urban’), which operates under the Ministry of Housing and Urban Affairs.

  • Where the “fiscal space” debate should focus?

    The article focuses on the “fiscal space” debate in India. So, what is this debate? This debate is focuses upon the size of the fiscal deficit this year in India, ways that could be used to finance it and upper limit of this deficit etc. But the author argues that we should focus on debt/GDP trajectory in the subsequent years. Besides this, he suggests what our policy intervention comprise.

    Monetary policy and fiscal policy: Efficacy Vs. Space debate

    • In response to the economic disruption caused by Covid-19, monetary policy has moved swiftly and aggressively in many economies.
    • But questions remain on its incremental efficacy.
    • With a high level of uncertainty around, risk-averseness is evident in the financial systems.
    • This risk-averse tendency reduces the efficacy of lower rates and higher liquidity.
    • So, while monetary policy may have space, how much efficacy will it have?
    • Fiscal policy i.e. spending by the governments can have much efficacy.
    • But how much space does it have? Therein lies the debate.

    Focus on Debt/GDP trajectory, not on level

    • The “fiscal space” debate in India has centred exclusively on this year’s deficit and how it will be financed.
    •  But a more holistic assessment of fiscal space should focus on two factors 1) the government’s inter-temporal budget constraint 2)  how India’s debt/GDP evolves in the coming years.
    • These two are the factors that rating agencies and foreign investors will eventually focus on.
    • Following are the question that debate should focus on.
    • How much will India’s debt/GDP jump up this year?
    • More importantly, what happens thereafter?
    • Will debt/GDP keep rising year after year? Or will it start declining?
    • As research has found, it’s typically the trajectory of debt/GDP — more than the level — that impacts future growth.

    Evolution of debt

    • The evolution of debt is essentially a function of three variables:
    • 1) The primary deficit.
    • 2) Nominal GDP growth
    • 3) The government’s cost of borrowing.
    • The higher is the difference between growth and cost of borrowing, the greater is the depreciation of the existing debt stock.
    • High growth allows countries to “grow out” of their debts.
    • In contrast, high primary deficits worsen the debt burden.

    Where does India stand?

    • India comes into COVID-19 with a debt/GDP of about 70 per cent.
    • A primary deficit across the Centre and states of about 2.5 per cent of GDP including the Centre’s extra-budgetary resources. — based on the Revised Estimates for 2019-20.
    • A weighted average sovereign borrowing cost of about 7.5 per cent (on the stock of debt) and an estimated pre-COVID nominal GDP growth of 7.5 per cent in 2019-20.
    • In other words, the favourable gap between growth and borrowing costs had closed.
    • With this backdrop, one can simulate what happens to debt/GDP in the coming years under different growth, fiscal and interest-rate scenarios.
    • What do we find?
    • Even under relatively benign scenarios –nominal GDP growth of 4 per cent and a fiscal expansion of 3 per cent of GDP this year- India’s debt/GDP will balloon towards 80 per cent by the end of the year.
    • But India will not be alone. Public debt is expected to balloon all over the world.
    • Instead, what will matter for sustainability is the trajectory of debt thereafter.
    • Does debt/GDP come down or keep going up in subsequent years?

     Fiscal space depends on potential growth in coming years

    • The subsequent trajectory of Debt/GDP depends overwhelmingly on medium-term growth.
    • Consider the following two scenarios and refer to the figure given below-
    • 1. Fiscal Deficit 6%
    • Consider that this year’s combined fiscal deficit widens by 6 per cent of GDP.
    • But the primary deficit is then consolidated back to 2 per cent of GDP in the next 3 years.
    • And as long as nominal GDP is 10 per cent in the medium term which corresponds to real GDP growth of 7 per cent.
    • Debt/GDP gets on to a constantly declining path after the third year.
    • This suggests a bigger fiscal intervention is sustainable but only if medium-term growth prospects are lifted in tandem.
    • 2. Fiscal Deficit 3%
    • Consider that this year’s deficit widens by “just” 3 per cent of GDP.
    •  But medium-term nominal GDP growth settles at 8 per cent that is, real GDP growth of 5 per cent.
    • Debt/GDP rises relentlessly for the next decade towards 90 per cent of GDP.

    Key takeaway: focus on medium-term growth

    • This suggests even a relatively-conservative fiscal response this year becomes unsustainable if medium-term growth prospects are diminished.
    • Small changes in medium-term growth have large implications for fiscal sustainability.
    •  How much fiscal space India has to respond in the crisis year will depend crucially on what potential growth is likely to be in the coming years.
    • The more that India’s policy response can preserve, protect and boost medium-term growth — both through the nature of the policy intervention this year and the accompanying reforms — the larger the fiscal response India can mount.
    • Put more starkly, the fiscal debate between “need” and “affordability” is endogenous.
    • The medium-term sustainability of any fiscal package this year will depend on the nature of growth-enhancing interventions and reforms that accompany it.

    So, what could the interventions comprise?

    1. Keep small business afloat

    • Policy must ensure that all viable enterprises can survive the pandemic.
    • If economically-viable but illiquid small and medium enterprises go under, the implications both for unemployment and India’s underlying production capacity could be severe.
    • The government’s credit-guarantee scheme is, therefore, very important and should hopefully induce banks to provide much-need working capital to keep small businesses afloat.

    2. Reforms in the finance sector

    • It is important to jump-start a risk-averse financial sector into funding an economic recovery, more broadly.
    • Last week’s bond market interventions which involved special liquidity and partial guarantee funds are important to ease conditions at the financial periphery.
    • Over time, however, liquidity must give way to capital and reform.
    • Following steps will be crucial to strengthening the financial sector-
    • 1)Pre-emptively recapitalising public sector banks for growth and resolution capital.
    • 2) Conducting an AQR for the NBFC sector after pandemic.
    • 3) Then converting well-run NBFCs into banks to avail of a stable deposit franchise.
    • 4) Modifying the incentives under which public sector banks operate.
    • Higher potential growth is only feasible if the financial sector is able to fund it.

    3. Reforms in the other sectors

    • Real reforms must accompany those in the financial sector.
    • The government’s announcement on unshackling agriculture — if carried through to its logical conclusion — is potentially game-changing for farmers and will be a landmark reform for the sector.
    • As COVID-19 hastens the reorganisation of supply-chains within Asia, India must seize the moment to integrate into the Asian supply chain.
    • Revisit a Special Export Zone (SEZ) model with the appropriate regulatory environment to avoid the pitfalls of the past.
    • Path dependence will be key. If the first one or two SEZs succeed, it would create a powerful demonstration effect both externally to help attract more firms into India.
    • And internally inducing different states to compete to create their own SEZs to drive jobs and investment.

    4. Social infrastructure and ways to pay for it

    • If the virus has taught the world anything, it’s the criticality of social infrastructure.
    • India will not be able to fundamentally alter its growth potential without crucial investments in health and education.
    • The government’s announcement to boost health spending is, therefore, very welcome.
    • But how will this be paid for? This is where policy must get creative.
    • Existing assets on the public sector balance sheet must be aggressively monetised to fund growth-enhancing investments in physical and social infrastructure.
    • This will simultaneously take the pressure off the fiscal and financial sectors, and deliver a productivity-enhancing swap on the public sector balance sheet.

    The article is helpful to consolidate the basic understanding of the macroeconomic parameters of economy. Consider the question asked by UPSC last year “Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments”

    Conclusion

    Higher potential growth is the antidote to many pressures, from incomes to jobs to debt sustainability. To the extent this unprecedented crisis creates political space and capital to reform, the opportunity must be seized.

    Back2Basics: Nominal GDP

    • Nominal gross domestic product is gross domestic product (GDP) evaluated at current market prices. 
    • GDP is the monetary value of all the goods and services produced in a country.
    • Nominal differs from real GDP in that it includes changes in prices due to inflation, which reflects the rate of price increases in an economy.

    Primary Deficit

    • Primary deficit refers to the difference between the current year’s fiscal deficit and interest payment on previous borrowings.
    • It indicates the borrowing requirements of the government, excluding interest.
    • It also shows how much of the government’s expenses, other than interest payment, can be met through borrowings.

    Debt/GDP ratio

    • The debt-to-GDP ratio is the metric comparing a country’s public debt to its gross domestic product (GDP).
    • By comparing what a country owes with what it produces, the debt-to-GDP ratio reliably indicates that particular country’s ability to pay back its debts.
    • Often expressed as a percentage, this ratio can also be interpreted as the number of years needed to pay back debt if GDP is dedicated entirely to debt repayment.

    AQR- Asset Quality Rating

    • An asset quality rating refers to the assessment of credit risk associated with a particular asset, such as a bond or stock portfolio.
    • The level of efficiency in which an investment manager controls and monitors credit risk heavily influences the rating bestowed.
    • And because asset quality is an important determinant of risk that profoundly impacts liquidity and costs, analysts go to great lengths to make sure they issue the most accurate evaluations possible.
    • After all, their pronouncements can greatly affect the overall condition of a business, bank, or portfolio for years to come.

  • Proposed amendments could harm DISCOMs

    Despite several policy measures, DISCOMs continue to suffer from various issues. This article focuses on the comprehensive proposal to amend the Electricity Act 2003. But here’s a catch, we will be discussing some issues with proposed amendment. Let’s dive into our DISCOMs analysis.

    Two-part tariff policy

    • At the core of DISCOM woes is the two-part tariff policy.
    • Two-part tariff policy was mandated by the Ministry of Power in the 1990s at the behest of the World Bank.
    • As more private developers came forward to invest in generation, DISCOMs were required to sign long-term power purchase agreements (PPA).
    • Under PPA, DISCOMs were committed to pay-  1) a fixed cost to the power generator, irrespective of whether the State draws the power or not, 2) a variable charge for fuel when it does.

    How Over-optimistic projection led to losses?

    • The PPAs signed by DISCOMs were based on over-optimistic projection of power demand estimated by the Central Electricity Authority (CEA).
    •  The 18th Electric Power Survey (EPS) overestimated peak electricity demand for 2019-2020 by 70 GW.
    • The 19th EPS published in 2017, by 25 GW, both pre-Covid 19.
    • Thus, DISCOMs were locked into long-term contracts, ended up servicing perpetual fixed costs for power not drawn.
    • Due to the CEA’s overestimates, the all-India plant load factor of coal power plants is at an abysmal 56% even before COVID-19.
    • This means that coal power plants are generating electricity only 56% of what maximum these power plants are able to generate.

    Renewable energy factor

    • Renewable impacted the power sector in the following 3 ways-
    • 1) From 2010, solar and wind power plants were declared as “must-run”.
    • This required DISCOMs to absorb all renewable power as long as there was sun or wind, in excess of mandatory renewable purchase obligations.
    • This means backing down thermal generation to accommodate all available green power.
    • This resulted in further idle fixed costs payable on account of two-part tariff PPAs.
    • 2)  Power demand peaks after sunset.
    • In the absence of viable storage, every megawatt of renewable power requires twice as much spinning reserves to keep lights on after sunset.
    • DISCOMs, especially in the southern region, have had to integrate large volumes of infirm power, mostly from solar and wind energy plants.
    • These renewable energy plants enjoy must-run status irrespective of their high tariffs.
    • The tariff is  ₹5/kwh in Karnataka and ₹6/kwh in Tamil Nadu for solar power.
    • All this even as the demand growth envisaged in the 18th EPS failed to materialise.
    • 3) In 2015 the Centre announced an ambitious target of 175 gigawatts of renewable power by 2022.
    • This followed with a slew of concessions to renewable energy developers, and aggravating the burden of DISCOMs.
    • Incidentally, China benefited by as much as $13 billion in the last five years from India’s solar panel imports.

    So, what are the proposals in the Electricity Act-2020?

    1. Sub-franchisees and  issues with it

    • The amendment proposes sub-franchisees, presumably private, in an attempt to usher in markets through the back door.
    • Issue:  Private sub-franchisees are likely to cherry-pick the more profitable segments of the DISCOM’s jurisdiction.
    • The Electricity Bill 2020 containing the proposed amendments is silent on whether a private sub-franchisee would be required to buy the expensive power from the DISCOM or procure cheaper power directly from power exchanges.
    • If it is the first, the gains from the move are doubtful since the room for efficiency improvements is rather restricted in the already profitable regions attractive to sub-franchisees.
    • If it is the second, DISCOMs will then be saddled with costly power purchase from locked-in PPAs and fewer profitable areas from which to recover it.

    2. Concession to renewable

    • The amendment proposes even greater concessions to renewable power developers.
    • This would have a cascading impact on idling fixed charges, impacting the viability of DISCOMs even more.

    3. Elimination of cross-subsidies

    • The most controversial amendment proposed, seeks to eliminate in one stroke, the cross-subsidies in retail power tariff.
    • This means each consumer category would be charged what it costs to service that category.
    • Rural consumers requiring long lines and numerous step-down transformers and the attendant higher line losses will pay the steepest tariffs.
    • The proposed amendments envisage that State governments will directly subsidise whichever category they want to, through direct benefit transfers.
    • Cross-subsidy is a fact of life in even private industries, soap, newspapers, or even utilities such as telecom.
    • But eliminating them in one stroke is bound to be ruinous to State finances.
    • There are also myriad problems with Direct Benefit Transfer.
    • This proposal is practically infeasible; if forcibly implemented, it will lead to chaos.

    4. Selection of the State regulator

    • State regulators will henceforth be appointed by a central selection committee.
    • The composition of which inspires little confidence in its objectivity.
    • This could result in jeopardising not only regulatory autonomy and independence but also the concurrent status of the electricity sector.

    5. Electricity Contract Enforcement Authority

    • Its members and chairman will also be selected by the same selection committee referred to above.
    • The power to adjudicate upon disputes relating to contracts will be taken away from State Electricity Regulatory Commissions and vested in this new authority.
    • This is being done ostensibly to protect and foster the sanctity of contracts.
    • This is also to ensure that States saddled with high-priced PPAs and idling fixed costs, yet forced to keep increasing the share of renewables in their basket, have no room for manoeuvre.

    Consider the question “Despite various policy interventions, DISCOMs continue to suffer from financial woes. Analyse the reasons for their woes. Examine the proposals in the Electricity Act (Amendment) Bill 2020.”

    Conclusion

    Beyond a doubt, the Electricity sector requires change but we must try to bring holistic and participatory approach to find solutions.

    Back2Basics: Electricity Act 2003

    • The act covers major issues involving generation, distribution, transmission and trading in power.
    • Before Electricity Act, 2003, the Indian Electricity sector was guided by The Indian Electricity Act, 1910 and The Electricity (Supply) Act, 1948 and the Electricity Regulatory Commission Act, 1998.
    • The Electricity Act 2003 consolidates the position for existing laws and aims to provide for measures conducive to the development of electricity industry in the country.
    • The act attempted to address certain issues that have slowed down the reform process in the country and consequently had generated new hopes for the electricity industry.