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GS Paper: GS3

  • After US Fed and others, will RBI also raise interest rates in Oct?

    Why in the News

    The Federal Open Market Committee (FOMC), the rate setting panel of the US central bank, has raised the federal funds rate target range by 25 basis points to 3.75% to 4%, its first increase in three years. The decision reversed the expectation that a new Chair at the helm of the Federal Reserve would push forward the US President’s agenda of lower interest rates, and all 12 FOMC members, including the new Chair, voted for the increase. The move is one of several, with the European Central Bank, the UAE and Bahrain all raising rates within days. The tension now sits with India. The Reserve Bank of India (RBI) is mandated to hold consumer price inflation at 4%, retail inflation has run above target for three straight months, and its Monetary Policy Committee (MPC) meets from 5 to 7 October.

    What is the Monetary Policy Committee (MPC)?

    1. What it is: The statutory committee of the Reserve Bank of India that decides the repo rate, the rate at which the central bank lends to commercial banks against government securities.
    2. Its mandate: It is required to target consumer price inflation of 4%, within a tolerance band of 2% to 6%.
    3. How the rate works: A higher repo rate raises the cost of funds for banks, which passes into lending rates and is intended to compress demand and with it price pressure.

    Why did the US Federal Reserve raise rates?

    1. The stated inflation reason: The FOMC said “inflation remains elevated” and that the decision to increase rates will support a “timelier return” to the 2% inflation target, closing with the line that the Committee “will deliver price stability”.
    2. The growth reading behind it: The FOMC described US economic activity as expanding at a “solid” pace, with domestic spending resilient, productivity growth strong and capital investment robust.
    3. The labour market reading: Job gains have kept pace with the workforce and the unemployment rate has changed little, which removes the usual argument against tightening.
    4. The political objection: The White House called the decision “rather unfortunate” and said it was not backed by a “particularly compelling economic case”, which the unanimous vote nonetheless overrode.

    What does the wider round of rate decisions show?

    1. The Gulf economies: The central banks of the UAE and Bahrain both raised their main interest rates by 25 basis points, to 3.9% and 4.5% respectively, mirroring the US decision.
    2. Japan at a three decade high: The Bank of Japan is widely expected to raise interest rates to 1.25%, the highest in 31 years, on the reading that risks to Japanese inflation are skewed to the topside.
    3. The drivers named for Japan: A weak yen raising import prices, no resolution in sight to the West Asia conflict or to traffic through the Strait of Hormuz, and strong artificial intelligence demand adding to goods and services prices.
    4. The euro area: The European Central Bank raised interest rates by 25 basis points, noting that upward price pressures caused by the West Asia conflict are set to keep inflation “well above target for an extended period”.
    5. The exception: The Bank of England left its policy rate unchanged at 3.75%, so the tightening round is broad rather than universal.

    What is happening to prices in India?

    1. Across every measure: In August, inflation for households, wholesalers and producers all increased, so the pressure is not confined to the retail basket.
    2. The headline number: The Consumer Price Index (CPI) rose 4.82% in August, the third straight month above the 4% target, though still inside the tolerance band.
    3. The near term projection: Some economists see CPI inflation jumping to 5.7% in September.
    4. The central bank’s own path: The RBI expects CPI inflation to average 4.7% in July to September, 5.9% in October to December, 5.5% in January to March 2027 and 5.3% in April to June 2027, so its own forecast breaches the upper tolerance band in the current quarter.

    Has price pressure become generalised, and does the MPC accept that?

    1. The MPC’s August reading: The Committee said in August that there were “little signs of” a generalisation of price pressures, which is the reading that supported holding the rate.
    2. The contrary assessment: The Group Chief Economic Adviser of the State Bank of India holds that the process of generalisation of price pressures has already started.
    3. The projected peak on that view: CPI inflation may cross the 6.5% mark before dropping to less than 6% in early 2027, which places it outside the tolerance band rather than merely above target.
    4. The prescription that follows: A 25 basis point increase at each of the October and December MPC meetings, followed by a pause to take stock against incoming data.

    Challenges to a rate hike by the RBI

    1. Supply driven price pressure: The increase is coming through imported energy and the West Asia conflict, and a policy rate acts on domestic demand rather than on an external supply shock. Eg. Retail inflation in India spiked in 2022 after crude and edible oil prices rose, and the repo rate was raised by 250 basis points over the following year without the shock itself abating.
      The Fix: Pair the rate action with supply measures on the affected commodities, such as duty adjustments and buffer releases, so the instrument matches the source of the pressure.
    2. Transmission lag: Policy rate changes reach lending and deposit rates over several quarters, so an October increase acts on prices well after the projected peak has passed. Eg. Banks repriced external benchmark linked loans within a quarter during the 2022 tightening while deposit rates moved far more slowly.
      The Fix: Expand the share of loans linked to an external benchmark so the increase reaches borrowers in the quarter it is announced.
    3. Cost to growth and to borrowers: A higher repo rate raises the cost of housing and working capital loans at a time when the price shock is already compressing household budgets. Eg. Home loan instalments rose across banks through the 2022 to 2023 tightening cycle.
      The Fix: Sequence the increase in two smaller steps with a stated pause, so borrowers and firms can price the path rather than the level alone.
    4. Limited currency benefit: Raising rates while major central banks are raising theirs leaves the interest differential roughly unchanged, so the rupee gains little support from the move. Eg. The rupee weakened through 2022 despite repeated repo rate increases, because the Federal Reserve was tightening faster.
      The Fix: Rely on reserve management and rupee settlement arrangements for exchange rate support, rather than loading that job onto the policy rate.

    Conclusion

    The question is no longer whether India is an exception to a global tightening round, since every major central bank except one has moved in the same direction within a week. It is whether the MPC accepts that price pressure has generalised, which is the reading it rejected in August and which its own forecast for October to December now strains. The decision window is 5 to 7 October, and a 25 basis point increase would be the first in three and a half years and would take the repo rate to 5.5%.

    Back2Basics: Federal Open Market Committee (FOMC)

    1. What it is: The monetary policy body of the US Federal Reserve System, which sets the target range for the federal funds rate.
    2. Composition: Twelve voting members, comprising the seven members of the Board of Governors, the President of the Federal Reserve Bank of New York, and four other regional Reserve Bank presidents serving on rotation.
    3. Frequency: It holds eight scheduled meetings a year and issues a statement with each decision.
    4. What the federal funds rate is: The rate at which US banks lend reserve balances to each other overnight, which anchors short term borrowing costs across the dollar system.

    Matching Previous Year Question

    “[2017] Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? 1. It decides the RBI’s benchmark interest rates. 2. It is a 12-member body including the Governor of RBI and is reconstituted every year. 3. It functions under the chairmanship of the Union Finance Minister. Select the correct answer using the code given below: (a) 1 only (b) 1 and 2 only (c) 3 only (d) 2 and 3 only Answer: (a)”

  • PM pitches India as trusted base for chip manufacturing

    Why in the News

    The Prime Minister has said the world needs “new and trusted locations” for semiconductor manufacturing and that India is readying itself to meet that requirement, while inaugurating SEMICON India 2026 in New Delhi. He said India has entered the second phase of its semiconductor journey, moving beyond policy announcements and plant construction toward commercial production of chips. The pitch answers a specific market condition, that chip companies are looking to diversify their global supply chains away from a narrow set of manufacturing locations. The tension is between the pitch and the base it rests on. India’s semiconductor demand is projected at $110 billion by FY30, while domestic manufacturing remains at a nascent stage and imports have grown at a compound annual rate of 23%.

    What is the India Semiconductor Mission?

    1. What it does: It is the central programme that provides fiscal support to semiconductor projects in India, covering fabrication, packaging and other parts of the chip value chain.
    2. Phase one scale: Twelve semiconductor projects were approved under the first phase, spanning fabrication, packaging and other value chain segments.
    3. Phase two scope: The programme has moved to Semicon 2.0, a Rs 1.27 lakh crore programme that widens the focus beyond large chip factories.

    Why is India pitching itself as a trusted location now?

    1. Supply chain diversification: Chip companies are looking to spread manufacturing across more countries, which creates an opening for a location that is not already in the established set.
    2. The trust framing: The pitch was made as a claim about reliability rather than cost, on the stated ground that the world’s trust in India is increasing alongside its economic growth.
    3. The supporting economic markers: The claim was anchored on 7.8% quarterly GDP growth, a recent sovereign rating upgrade by a Japanese credit rating agency, and the New Delhi Declaration adopted at the BRICS Summit India hosted this month.
    4. The stated pace: India has achieved in about four years what generally takes countries around a decade to build, though semiconductor manufacturing was described as a journey with no end point.

    What has the first phase actually delivered?

    1. Projects in production: Five of the twelve approved projects have already started commercial production, which is the marker separating phase one from phase two.
    2. Memory output from Gujarat: Micron Technology has begun shipping DRAM (Dynamic Random Access Memory) and NAND memory products to customers globally from its Sanand facility in Gujarat.
    3. The scale up path there: The plant is expected to assemble and test tens of millions of chips this year, scaling to hundreds of millions next year.
    4. Design and engineering presence: Infineon Technologies, a German chipmaker, now has over 2,800 employees in India, and has said India has potential to strengthen its position across the global semiconductor value chain as its domestic market and technology capabilities expand.

    What does Semicon 2.0 change about the approach?

    1. Beyond the fab: The programme extends support to semiconductor equipment, materials, design, research and development, supply chains and skilled manpower, rather than to large chip factories alone.
    2. The ecosystem logic: A fabrication plant depends on a surrounding base of tool makers, chemical and gas suppliers and trained engineers, which the first phase did not fund directly.
    3. Project count: The next phase is expected to see the number of approved projects increase further.

    How large is the demand gap the mission is chasing?

    1. Projected demand: India’s semiconductor demand is projected to reach $110 billion by FY30 and to exceed $200 billion by FY35.
    2. The import bill so far: The country spent almost $150 billion on semiconductor product imports between FY17 and FY25.
    3. The trajectory if nothing changes: Imports grew at a compound annual growth rate of 23% over that period, and on the same trend annual imports could reach $240 billion by 2035.
    4. The policy conclusion drawn: Building a comprehensive semiconductor ecosystem has been identified as an urgent national priority on the strength of that gap.

    Challenges to the India Semiconductor Mission

    1. Utility reliability at fab sites: A fabrication plant needs continuous ultrapure water and uninterrupted power, and an interruption of either scraps the wafers in process. Eg. Taiwan’s chip plants cut water use and trucked in supplies during the 2021 drought when the island’s reservoirs fell to record lows.
      The Fix: Ring fence dedicated water recycling plants and captive power capacity for each approved site as a condition of disbursal.
    2. Fabrication workforce depth: India’s semiconductor engineers sit in design centres rather than in fabrication and process engineering, which is a different skill base. Eg. Design centres of global chipmakers have operated in Bengaluru and Hyderabad for over two decades without a commercial fabrication plant alongside them.
      The Fix: Tie a share of the incentive to process engineer placements trained through partnerships with operating fabs abroad.
    3. Equipment and materials import dependence: The tools and high purity inputs a fab consumes come from a handful of global suppliers, so domestic assembly does not by itself reduce external exposure. Eg. Extreme ultraviolet lithography machines are produced by a single company, ASML of the Netherlands.
      The Fix: Anchor equipment and materials suppliers in India through long term purchase commitments from the approved plants rather than through subsidy alone.
    4. Competition at mature nodes: India’s approved capacity targets older process nodes, where large capacity additions elsewhere can push prices below the level a new entrant needs. Eg. Sustained capacity expansion in China at 28 nanometre and older nodes has driven down prices for legacy chips.
      The Fix: Condition support on secured long term offtake contracts rather than on installed capacity alone.

    Conclusion

    The pitch is that trust and diversification, rather than cost, are what bring chip manufacturing to India. The measurable claim behind it is narrower, five plants in commercial production against a demand curve heading for $200 billion. Semicon 2.0’s widening into equipment, materials and skills is the part that decides whether the fabs have a supply base around them, and the count of projects approved under it is the next thing to watch.

    Matching Previous Year Question

    “[2025, GS3, 15] India aims to become a semiconductor manufacturing hub. What are the challenges faced by the semiconductor industry in India? Mention the salient features of the India Semiconductor Mission.”

  • Who has to pay MDR on UPI and who stands to gain the most?

    Why in the News

    The National Payments Corporation of India (NPCI) has released a circular allowing a Merchant Discount Rate (MDR) to be levied on certain Unified Payments Interface (UPI) payments from 15 October. The charge falls on person to merchant (P2M) payments above Rs 2,000 and is paid by merchants to payment processors and banks rather than by consumers. The circular follows a long public argument over whether UPI would be charged at all, which the Ministry of Finance answered with a press release saying banks have been advised to ensure merchants do not pass the charge on to customers, and that UPI application providers are expressly prohibited from imposing platform fees or hidden charges on users. The tension is over incidence. The Opposition argues the charge will raise prices for consumers, while the government argues it will not, and that even the impact on merchants will be minimal.

    What is the Merchant Discount Rate (MDR)?

    1. Definition: MDR is a fee for using UPI that is paid by the merchant to the payment processors and the banks that carry the transaction. Consumers do not pay it directly.
    2. Who it is collected from: It is deducted from the merchant’s receipts, so the merchant receives less than the amount the customer sent.
    3. Coverage on UPI: It applies only to person to merchant payments above a value threshold, not to transfers between two individuals.

    What does a merchant actually pay, and on which transactions?

    1. The standard rate: Mid to large sized merchants receiving UPI payments in excess of Rs 2,000 per transaction pay 0.4% of the transaction value.
    2. The absolute cap: For transactions of Rs 75,000 and above, the MDR is capped at Rs 300 per transaction, so the charge stops rising with the ticket size.
    3. Essential and thin margin sectors: Transactions of Rs 2,000 or more in railways, telecommunications, insurance, fuel and agricultural inputs attract a flat Rs 5 per transaction. The stated purpose is cost certainty for critical public services and for businesses operating on narrow margins.
    4. Capital market payments: Payments to mutual funds, stockbrokers, dealers and for equities attract 0.02%, capped at Rs 300 per transaction, a lower rate justified as support for retail participation in formal financial markets.

    How much of UPI escapes the charge altogether?

    1. Person to person transfers: All P2P transactions remain free regardless of amount, under the specification that no transaction fee, platform fee or other charge may be imposed on individuals for sending or receiving money through UPI. P2P is about 37% of total UPI transaction volume.
    2. Small ticket merchant payments: Payments to merchants of up to Rs 2,000 remain free of MDR, and these are another 60.5% of all UPI transactions by volume.
    3. The combined exemption: Taken together, 97.5% of all UPI transactions remain free, since P2M payments above Rs 2,000 are just 2.5% of volume.
    4. Small merchants and street vendors: Merchants receiving up to Rs 1 lakh per month through UPI QR codes under the Person to Person Merchant (P2PM) category are exempt, which pushes the charged share below 2.5%.

    How large is the revenue pool, and how is it divided?

    1. Value concentration: P2M transactions above Rs 2,000 are only 2.5% of volume but 20% of all UPI transactions by value.
    2. The monthly ceiling: Of the Rs 29.8 lakh crore transacted over UPI in August 2026, P2M payments above Rs 2,000 were Rs 5.99 lakh crore, so the absolute maximum collectible is about Rs 2,400 crore a month. The caveats, exemptions, flat rates and caps mean the actual receipts will be lower.
    3. The split: The payer’s bank takes about 40%, because it holds the customer’s account and bears the core authorisation, security and settlement costs. The merchant’s bank takes 30% for managing the merchant relationship, QR code deployment and merchant settlements.
    4. The technology layers: The UPI app or Third Party Application Provider (TPAP) receives 20%, and the Payment Service Provider that links the technology partner bank to the central network switches receives the final 10%.
    5. The promotion fund: A dedicated fund to promote UPI adoption among small merchants will receive an amount equal to 5% of total MDR collections. The circular does not specify which payment system player contributes that 5%.

    Which institutions stand to gain the most?

    1. Yes Bank on both legs: It is the payer bank in more than 50% of all UPI transactions and the payee bank in about 55%, so it collects the largest share of both the 40% and the 30% pools.
    2. The next largest banks: ICICI Bank is the second largest payer bank at 18.3%, and Axis Bank is the second largest payee bank at about 19%.
    3. The two dominant apps: PhonePe accounts for about 46% of UPI transactions by volume and Google Pay another 32%, so the TPAP pool flows overwhelmingly to two applications.

    Challenges to the MDR on UPI

    1. Pass through to consumers: The instruction that merchants must not recover the fee from customers is an advisory rather than an enforceable term, so the cost can surface as a higher listed price. Eg. Surcharging on card payments continued at fuel outlets and small retailers for years after similar advisories were issued.
      The Fix: Write the no pass through condition into the merchant onboarding agreement of the acquiring bank, with a customer complaint route attached to it.
    2. Structuring below the threshold: A hard cut off at Rs 2,000 rewards splitting a single large payment into several smaller ones, which costs the payment system volume without collecting revenue. Eg. Cash dealings were routinely broken up below the Rs 2 lakh limit introduced under Section 269ST of the Income Tax Act, 1961 in 2017.
      The Fix: Charge on the merchant’s monthly aggregate receipts above a threshold rather than on each transaction, so splitting yields no saving.
    3. The cliff at the small merchant limit: The P2PM exemption ends abruptly once monthly receipts cross Rs 1 lakh, so a marginal increase in turnover removes the exemption from the whole of a merchant’s qualifying receipts. Eg. A vendor receiving Rs 1.05 lakh a month loses the exemption entirely rather than on the excess alone.
      The Fix: Taper the charge above the limit so only receipts beyond Rs 1 lakh attract MDR.
    4. Reinforcement of app concentration: A revenue stream keyed to transaction share rewards the applications that already hold most of the market. Eg. NPCI’s cap limiting any third party application to 30% of UPI volume has been deferred repeatedly since it was first framed in 2020.
      The Fix: Weight the small merchant promotion fund toward applications below a defined market share, so the subsidy runs against concentration rather than with it.

    Conclusion

    The charge is deliberately narrow in reach and wide in value. Almost all of UPI stays free, yet the fifth of transaction value that is charged sits with a small set of banks and two applications, which is where the revenue will settle. Whether the advisory against pass through holds is the thing to watch once the framework takes effect on 15 October.

    Back2Basics: National Payments Corporation of India (NPCI)

    1. What it is: An umbrella organisation for retail payments and settlement systems in India, incorporated in 2008.
    2. Legal and institutional basis: It was set up as a not for profit company under the guidance of the Reserve Bank of India and the Indian Banks’ Association, and operates under the Payment and Settlement Systems Act, 2007.
    3. Systems it runs: UPI, RuPay, the Immediate Payment Service, the National Automated Clearing House, FASTag and the Aadhaar Enabled Payment System.
    4. Rule making role: It sets the operating circulars, pricing rules and participation norms that member banks and third party applications must follow on these systems.

    Matching Previous Year Question

    “[2018] Which one of the following best describes the term “Merchant Discount Rate” sometimes seen in news? (a) The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank. (b) The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services. (c) The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards. (d) The incentive given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machines and debit cards. Answer: (c)”

  • NITI Aayog: Trade Watch Quarterly

    NITI Aayog: Trade Watch Quarterly

    Why in the News?

    NITI Aayog released the 9th edition of Trade Watch Quarterly for Q1 FY27 (April-June 2026), analysing global and Indian trade trends with a special focus on metals and ores.

    Key Highlights

    • Global goods trade: $13.7 trillion in H1 2026, up 12.5% YoY.
    • Global services trade: grew 10.5%.
    • India’s total trade: $506.9 billion in Q1 FY27, up 15.5% YoY.
    • India saw strong merchandise exports in:
      • Mineral fuels
      • Electrical machinery
      • Nuclear reactors
      • Iron and steel
      • Vehicles

    Metals and Ores

    • Metals exports: $34.8 billion (2025).
    • Iron and steel, articles of iron and steel, and aluminium contributed around 78% of metals exports.
    • Metals and ores imports rose from $32.2 billion (2015) to $60.5 billion (2025).
    • Key import-dependent minerals include:
      • Copper
      • Lithium
      • Cobalt
      • Nickel

    Digitally Delivered Services

    • Exports increased from $277 billion (2024) to $317 billion (2025).
    • India became the 4th-largest DDS exporter, after the US, UK and Ireland.

    Trade Diversification

    • Tanzania and South Africa emerged among India’s top 10 export markets.
    • Imports from Latin America and West Africa increased.
    • Northeast Asia, West Asia-GCC and ASEAN together account for around half of India’s imports.
    • Exports to FTA partners increased 36.3%, while imports rose 10%.

    Policy Significance

    • MMDR Amendment Act, 2026 can support exploration and investment in critical minerals.
    • EU CBAM increases the need for competitive, low-carbon steel and aluminium exports.
    • Priorities include:
      • Domestic mineral exploration
      • Recycling of critical minerals
      • Value addition
      • Renewable energy access
      • Lower logistics and financing costs
      • Export-market diversification

    Important Full Forms

    • NITI: National Institution for Transforming India
    • DDS: Digitally Delivered Services
    • FTA: Free Trade Agreement
    • MMDR: Mines and Minerals (Development and Regulation)
    • CBAM: Carbon Border Adjustment Mechanism
    • GCC: Gulf Cooperation Council

    Prelims Quick Revision

    • Trade Watch Quarterly: NITI Aayog publication.
    • Latest edition: 9th edition, Q1 FY27.
    • India’s total trade: $506.9 billion.
    • Metals and ores imports: $60.5 billion in 2025.
    • India: 4th-largest digitally delivered services exporter.
  • CSIR Transfers Technologies for Sustainable Industry and Safer Roads

    CSIR Transfers Technologies for Sustainable Industry and Safer Roads

    Why in the News?

    CSIR transferred indigenous technologies developed by CSIR-CLRI and CSIR-CRRI to industry, focusing on waste valorisation, circular economy, road safety and sustainable infrastructure.

    Key Technologies

    1. Protein-based Syntans from Chrome Shavings

    • Developed by CSIR-CLRI, Chennai.
    • Converts collagen-rich chrome shavings from leather waste into protein-based syntans.
    • Syntans can be reused in leather retanning.
    • Demonstrated at 100-200 kg pilot scale and validated at 1,500 kg commercial scale.
    • Can reduce Total Dissolved Solids (TDS) in post-tanning wastewater by up to 50%.

    2. Spent Pickling Acid Valorisation

    • Recovers iron and chloride from spent pickling acid.
    • Produces pigment-grade iron oxide and ammonium chloride.
    • Converts hazardous industrial waste into useful products.
    • Supports circular economy and waste utilisation.

    3. ClariVisor

    • Developed by CSIR-CRRI, New Delhi.
    • In-vehicle glare mitigation device for four-wheelers.
    • Designed to fit within the footprint of the vehicle’s original OEM sun visor.

    4. Two Pack Onsite Pothole Filling Mix

    • Cold-application road repair technology.
    • Two components are mixed on-site before application.
    • Does not require a hot-mix plant or heating.
    • Reduces energy consumption and emissions.
    • Enables faster pothole repair and reopening of roads.

    Important Full Forms

    • CSIR: Council of Scientific and Industrial Research
    • CLRI: Central Leather Research Institute
    • CRRI: Central Road Research Institute
    • DSIR: Department of Scientific and Industrial Research
    • TDS: Total Dissolved Solids
    • OEM: Original Equipment Manufacturer
    • SDGs: Sustainable Development Goals

    Prelims Quick Revision

    • CSIR-CLRI: Chennai, leather research.
    • CSIR-CRRI: New Delhi, road research.
    • Chrome shavings: Used to recover collagen-based material for syntans.
    • Spent pickling acid: Can yield iron oxide and ammonium chloride.
    • Two Pack Pothole Mix: Cold application, no heating required.
    • ClariVisor: Glare mitigation for four-wheelers.

  • Delhi ranks first, only 2 large states among top performers in EV list

    Why in the News

    NITI Aayog has released the India Electric Mobility Index (IEMI) 2025, which ranks States and Union Territories on the development of the electric mobility ecosystem and on the adoption of electric vehicles (EVs). Delhi topped the index, followed by Maharashtra and Karnataka. Those two are the only large States among the top performers, out of seventeen. The index therefore records a concentration rather than a diffusion: the territories doing best are small, dense and administratively compact, while most of the country’s population lives in States that the index places in its middle tiers.

    What is the India Electric Mobility Index?

    1. What it measures: It is a composite index assessing the policy framework and the implementation outcomes for electric mobility at the State level.
    2. Who built it: NITI Aayog developed the index in collaboration with World Resources Institute (WRI) India.
    3. Its three themes: Transport electrification progress carries 50% weight, charging infrastructure readiness 30%, and EV research and innovation status 20%.
    4. Coverage: It scores all 36 States and Union Territories on a common 100 point scale.

    What does the overall ranking show?

    1. The spread: Composite scores range from 10 to 84, with a median of 40, so half the country sits at or below two fifths of the achievable score.
    2. The leaders: Delhi scored 84, followed by Maharashtra at 78, Karnataka at 73, Chandigarh at 71 and Goa at 65.
    3. Movement against the 2024 index: Delhi and Maharashtra held the top two positions, Karnataka moved to third by overtaking Chandigarh, and Goa climbed ten places to fifth.
    4. The largest single gain: Madhya Pradesh moved from twenty third rank to seventh.

    How have the large States performed?

    1. Only two in the top tier: Maharashtra and Karnataka are the only large States among the top performers, out of seventeen large States assessed.
    2. The frontrunner band: Eight large States scored between 50 and 64, namely Tamil Nadu, Madhya Pradesh, Odisha, Andhra Pradesh, Telangana, Haryana, Rajasthan and Uttar Pradesh.
    3. The emerging band: Seven large States scored between 35 and 49, namely Chhattisgarh, West Bengal, Bihar, Kerala, Jharkhand, Punjab and Gujarat.
    4. What the distribution implies: The States carrying the largest vehicle populations sit in the middle bands, so national electrification outcomes are decided where the index scores are weakest.

    Where do the three themes diverge?

    1. Transport electrification, the heaviest theme: Delhi, Chandigarh and Maharashtra were the only territories qualifying as top performers on it. It evaluates market absorption, consumer acceptance and demand side momentum, meaning how effectively electric vehicles are actually being adopted.
    2. Charging readiness has a different leader: Karnataka recorded the highest score nationwide at 97, followed by Goa at 92 and Maharashtra at 91.
    3. What charging readiness captures: The charger to vehicle ratio, subsidies for charging infrastructure, building bye laws for charging, and power availability.
    4. Research and innovation: Delhi achieved the top score of 94 on this theme.
    5. The divergence matters: A State can lead on chargers and trail on adoption, since infrastructure readiness is scored independently of vehicles actually registered.

    Challenges to State led electric mobility

    1. Distribution company capacity: Charging load falls on distribution utilities already carrying losses, so sanctioned load and feeder capacity cap how fast chargers can be added. Eg. Several State distribution companies carry aggregate technical and commercial losses above 20%.
      The Fix: Ring fence a concessional EV charging tariff and fund feeder upgrades from the State electric mobility policy corpus.
    2. Subsidy dependence: Registrations track State and central purchase incentives and fall when a scheme window narrows. Eg. Electric two wheeler sales dipped after the FAME II demand incentive was reduced in mid 2023.
      The Fix: Shift from an upfront purchase subsidy to a road tax and registration fee waiver that runs for the life of the vehicle.
    3. Geographic concentration of chargers: Chargers cluster in a few metropolitan pockets, leaving intercity corridors and smaller towns unserved. Eg. The index’s leading territories are small and dense, where covering the whole jurisdiction is far easier than across a large State.
      The Fix: Make charging points at fixed intervals a condition of national and State highway concession agreements.
    4. Battery supply and end of life handling: Cells and the lithium, cobalt and nickel behind them are largely imported, and recycling capacity remains thin. Eg. India imports the overwhelming share of the lithium ion cells it consumes.
      The Fix: Enforce the recycling and extended producer responsibility targets under the Battery Waste Management Rules, 2022 alongside domestic cell manufacturing incentives.
    5. Generation mix limits the climate gain: An electric vehicle’s emissions follow the electricity that charges it, so the benefit shrinks where coal dominates supply. Eg. Coal still supplies close to three quarters of India’s electricity generation.
      The Fix: Align charging tariffs to time of day slots that coincide with solar generation hours.

    Conclusion

    The index measures readiness, and readiness is not the same as transition. Its top ranks are held by territories small enough for a single administration to cover with chargers and incentives, which is not the problem a large State faces. The unresolved tension is that the States with the most vehicles to convert have the least fiscal room to subsidise the conversion and the weakest distribution utilities to power it. Watch whether the next edition shows movement in the frontrunner band of large States, because that band is where the national outcome is actually decided.

    Back2Basics

    1. World Resources Institute India: An independent research organisation working on climate, energy, cities, water and sustainable mobility, operating as the India arm of a global research body.
    2. Role here: It provided the research collaboration for the composite index, including the indicator design behind the three themes.
    3. Urban mobility work: It supports Indian cities on bus transport planning, road safety and electric mobility transition programmes.

    Matching Previous Year Question

    “The adoption of electric vehicles is rapidly growing worldwide. How do electric vehicles contribute to reducing carbon emissions and what are the key benefits they offer compared to traditional combustion engine vehicles?”

  • Rs 2.5 cr as carbon credits: In a first, farmers reap harvest of good practices

    Why in the News

    Farmers in India have received carbon credit payments for improved agricultural practices for the first time. About 2,500 farmers, roughly 1,400 of them in Punjab and the rest in Haryana, were paid for practices that cut greenhouse gas emissions and retain carbon in the soil. The payment is attributed to verified credits rather than to the acreage a farmer holds, which is what separates it from an area based subsidy. The programme puts a price on practice change that regulation and penalties have tried to compel for years, and whether that price is large enough to hold the change in place is now the open question.

    How does an agricultural carbon credit work?

    1. The unit: A carbon credit represents one tonne of carbon dioxide equivalent either kept out of the atmosphere or stored, and it is sold to a buyer seeking to offset its own emissions.
    2. What generates it on a farm: Credits arise from a documented change in practice that lowers emissions or raises carbon held in the soil, measured against what the farmer would otherwise have done.
    3. Payment basis: The payout follows the number of verified credits attributed to a farmer, not the area cultivated, so two farmers with the same holding can be paid differently.

    Which practices earned the credits?

    1. Direct seeded rice: Sowing paddy directly into the field instead of transplanting seedlings into puddled soil cuts water use and the methane released from flooded fields.
    2. Zero and reduced tillage: Disturbing the soil less keeps carbon stored in it rather than releasing it on ploughing.
    3. Residue management: Handling paddy straw instead of burning it removes a direct emission source and returns organic matter to the soil.
    4. Efficient fertiliser use: Applying nitrogen to soil test recommendations cuts nitrous oxide release from over application.
    5. Why these fit Punjab: All four are directly relevant to the rice and wheat based cropping system that dominates the State.

    How were the claims verified?

    1. Remote sensing: Satellite and remote sensing systems monitor fields and detect residue burning across the season.
    2. Geo-fencing: A digital boundary drawn around a registered field ties the observed activity to the specific farmer claiming the credit.
    3. Soil sampling: Sampling assesses changes in soil properties, including soil organic carbon, which is the stock the credit claims to have raised.
    4. Institutional backing: The programme runs with technical guidance from the Indian Council of Agricultural Research (ICAR), and the ICAR-Agricultural Technology Application Research Institute (ATARI), Ludhiana has a memorandum of understanding with the agri-technology firm operating it.
    5. The stated role of the public institution: Its function is to educate farmers and to ensure practices are documented and verified through field evidence and technology.

    What did farmers actually receive?

    1. The aggregate: Over 50,000 carbon credits were generated across thousands of acres, with payments totalling around Rs 2.50 crore.
    2. The individual range: Farmers received between about Rs 3,000 and Rs 15,000 each.
    3. Payments track practice history, not size: A farmer with about 13 acres in Bathinda who stopped burning paddy residue seven to eight years ago received Rs 5,700, while two others in the same village received Rs 19,000 and Rs 14,000.
    4. Larger holdings, moderate payouts: A farmer cultivating about 20 acres near Jagraon received Rs 6,070 and one farming about 90 acres in Sirsa using ex-situ residue management received Rs 12,000.
    5. The floor: Two farmers, in Ludhiana and in Sirsa, received Rs 3,000 each, and an 8.5 acre farmer in Bathinda using soil testing and recommended fertiliser received Rs 9,075.
    6. Design as a continuing process: The programme is structured as a recurring payment for continued adoption rather than a one time transfer.

    What is the wider policy context this sits in?

    1. Origins: The programme was initiated by an agri-technology firm in 2019, so the first payouts follow six years of building the practice and verification base.
    2. Farm fires have already fallen: Punjab recorded a decline in farm fire incidents from over 83,000 in 2020 to fewer than 5,000 in 2025, according to ICAR.
    3. A parallel State scheme exists: Punjab has paid farmers since August 2024 for raising and maintaining trees on agricultural land under an agroforestry based carbon credit programme.
    4. Its terms differ: Under that scheme farmers must maintain trees for at least five years, with the carbon benefit linked to tree growth and the subsequent use of the wood in paper, furniture and plywood.
    5. The multilateral layer: The recent BRICS Summit in New Delhi adopted a declaration establishing a BRICS Network of Centres of Excellence on Agroecology and Regenerative Agriculture for Climate Resilience and Productivity, and a BRICS Network on Digital Agriculture.

    Challenges to farm carbon credit programmes

    1. Price volatility in the voluntary market: Payments depend on voluntary market prices for credits, which move with corporate offset demand rather than with farm economics. Eg. Voluntary carbon credit prices fell sharply after 2023 as buyers questioned offset quality.
      The Fix: Contract a floor price with farmers for the full crop cycle rather than passing through spot credit prices.
    2. Additionality: A farmer already following the practice is paid for abatement that would have happened anyway, which produces no new emission reduction. Eg. Several payouts went to farmers who had not burnt paddy residue for five to eight years.
      The Fix: Set the baseline against district level practice adoption rather than against the individual farmer’s own past.
    3. Soil carbon measurement: Soil organic carbon changes slowly and varies within a single field, so the sampling design decides the credit count. Eg. Gains from zero tillage can take several seasons before they register above sampling error.
      The Fix: Fix a permanent monitoring grid per cluster and re-measure at set intervals before credits are issued.
    4. Permanence: Carbon stored in soil returns to the atmosphere the moment the farmer resumes deep tillage or burning. Eg. One season of deep ploughing can release carbon accumulated over years of zero tillage.
      The Fix: Hold back a share of each payout in a buffer pool released only after repeated years of verified compliance.
    5. Switching costs exceed the payment: The sums are small against the machinery and the yield risk that practice change requires. Eg. Direct seeded rice needs a seed drill and far tighter weed control than transplanted paddy.
      The Fix: Stack the credit payment on top of State machinery subsidy so the two together cover the cost of switching.
    6. Coverage: A few thousand farmers in two States is a fraction of the rice and wheat belt the practices are meant to change. Eg. Punjab alone has over ten lakh operational holdings.
      The Fix: Aggregate smallholders through Farmer Producer Organisations so they clear the minimum volume verification requires.

    Conclusion

    The significance of this payout is not its size but its direction. Public policy on residue burning has worked through penalties and machinery subsidy, and this is the first time the same behaviour has been rewarded through a market. What remains unsettled is whether the reward survives a bad credit price year or a season when direct seeded rice underperforms, because a farmer who switched for the money will switch back for the same reason. Watch whether the second round of payments reaches farmers outside the Punjab and Haryana pilot and whether a floor price is written into the contracts.

    Back2Basics

    1. Indian Council of Agricultural Research: An autonomous body under the Department of Agricultural Research and Education (DARE), Ministry of Agriculture and Farmers’ Welfare, established in 1929.
    2. Mandate: It coordinates, guides and manages agricultural research and education across horticulture, fisheries and animal sciences.
    3. Field network: It runs Krishi Vigyan Kendras at district level and the Agricultural Technology Application Research Institutes that coordinate them zonally.
    4. Scale: It is among the largest national agricultural research systems in the world, with institutes and All India Coordinated Research Projects across crops and regions.

    Matching Previous Year Question

    “Regarding “carbon credits’’, which one of the following statements is not correct?”

  • Centre bans Pak-based Shahzad Bhatti terror network under UAPA

    Why in the News

    The Ministry of Home Affairs has declared the Pakistan-based Shahzad Bhatti Network (SBN) a terrorist organisation under the Unlawful Activities (Prevention) Act, 1967. A gazette notification invoked Section 35 of the Act to add the network to the First Schedule, which lists banned terrorist organisations. The notification records that the network draws gullible youth and local criminals into smuggling arms, explosives and narcotics from across the border, and that it uses digital communication platforms to circulate provocative messages. The designation follows a nationwide crackdown on an alleged SBN linked network last month, in which security agencies detained 253 people across 14 States. The question it raises is what a domestic ban adds against a syndicate whose leadership, funding and handlers all sit outside Indian jurisdiction.

    How does a Section 35 designation under the UAPA work?

    1. The power: Section 35 empowers the Central Government to add an organisation to the First Schedule by notification in the Official Gazette, where it believes the organisation is involved in terrorism. The listing is what makes the organisation a terrorist organisation in law.
    2. The threshold: An organisation is treated as involved in terrorism where it commits or participates in acts of terrorism, prepares for them, promotes or encourages terrorism, or is otherwise concerned in it. The present notification records that the network has participated in various acts of terrorism in India.
    3. The consequences: Membership, support, fundraising and arranging meetings for a listed organisation become distinct punishable offences under the Act. The listing therefore reaches the domestic support structure rather than the organisation’s leadership abroad.
    4. The remedy: A listed organisation may apply to the Central Government for removal from the Schedule, and a refusal goes to a Review Committee headed by a sitting or retired High Court judge. That committee is the only statutory check on the designation.

    What is the network accused of doing?

    1. Cross border smuggling: The network is accused of moving arms, explosives and narcotics across the border using local conduits. The notification treats the smuggling as the resource base for the terrorist activity rather than as a separate crime.
    2. Recruitment of petty criminals: The stated method is to offer allurements to gullible youth and local criminals, motivate them for anti-national activity and mobilise resources through them. Recruitment runs through the criminal economy rather than through an ideological cadre.
    3. Online radicalisation and propaganda: The network published hateful digital content and used communication platforms to circulate provocative messages. The stated targets are India’s democratic structure and communal harmony.
    4. Espionage and reconnaissance: The network is suspected of paying local conduits to conduct reconnaissance and install CCTV cameras for surveillance of police, defence and religious sites. It is also linked to grenade, improvised explosive device and petrol bomb attacks and to targeted killings.
    5. Attribution to a named handler: Shahzad Bhatti is accused of using social media to recruit young people, and is suspected of a link to the grenade attack at the residence of a YouTuber in Jalandhar in March last year.
    6. State backing: The network is described as a Pakistan-based syndicate backed by the Inter-Services Intelligence (ISI), Pakistan’s military intelligence agency. That characterisation is what moves it from an organised crime case to a national security one.

    What did the crackdown recover?

    1. Scale of the operation: Security agencies detained 253 people across 14 States days before Independence Day. The geographic spread indicates a recruitment base well beyond the border States.
    2. Ordnance recovered: Recoveries included improvised explosive devices, grenades bearing Pakistan Ordnance Factory markings, pistols and live cartridges. State factory markings on recovered grenades are the material link between the network and an official supply chain.
    3. Surveillance equipment: CCTV cameras allegedly installed for espionage were among the recoveries. The presence of surveillance hardware alongside weapons indicates a network doing target development, not only delivery.

    Why does the crime and terror linkage change the security problem?

    1. Self financing structure: Narcotics trafficking funds weapons movement, so the network does not depend on transfers through the formal financial system. Financial intelligence tools built for tracing bank flows have little purchase on a cash and contraband economy.
    2. Deniable local execution: Using petty criminals rather than trained cadre gives the handlers distance from the act and makes attribution harder after an arrest. The person caught rarely knows the chain above him.
    3. Shared border infrastructure: The same tunnels, drone routes and courier networks serve both narcotics and weapons consignments. Eg. Drone borne consignments recovered along the Punjab border have carried both heroin and small arms in the same drop.
    4. Broader footprint than a conventional outfit: A syndicate built on crime scales through existing criminal markets in the interior rather than through ideological recruitment. That explains a detention footprint across 14 States for a single network.

    Challenges to the UAPA designation route

    1. No reach over handlers abroad: A domestic listing criminalises support inside India and does nothing to a leadership operating under state protection across the border. Eg. Individuals designated globally under the United Nations Security Council’s 1267 sanctions regime have continued to operate from Pakistan for years.
      The Fix: Pair every domestic listing with a dossier submitted for designation under the 1267 Committee and under partner countries’ national sanctions lists.
    2. Designation is not conviction: Proscription restricts an organisation and still requires the ordinary burden of proof in each prosecution that follows. Eg. Cases registered under the Act routinely run for years before trial concludes, and conviction rates recorded in them are low.
      The Fix: Resource the National Investigation Agency’s prosecution capacity and set internal timelines for filing charge sheets, so a listing converts into completed trials.
    3. Renaming and reconstitution: A proscribed network can resume operations under a fresh name, which requires a fresh notification each time. Eg. Front organisations of banned outfits have repeatedly reappeared under new banners after a ban.
      The Fix: Notify successor and front entities in the same instrument that lists the parent organisation, so a name change does not restart the process.
    4. Civil liberties objections to the statute: Section 43D(5) bars bail where the accusation is prima facie true, so pre-trial custody can extend for years. Eg. In Union of India v. K.A. Najeeb (2021) the Supreme Court held that prolonged incarceration with no prospect of an early trial permits bail despite that bar.
      The Fix: Fix a statutory outer limit for filing the charge sheet in listed organisation cases, after which the bail bar lapses.
    5. Weak seizure of assets: A ban restricts an organisation’s property in law, and the proceeds of narcotics trafficking sit in cash and in benami holdings that are hard to attach. Eg. Terror funding investigations frequently record hawala transfers with no identifiable account holder at either end.
      The Fix: Route listed organisation cases through the Prevention of Money Laundering Act, 2002 machinery in parallel, so attachment proceedings run alongside the terror prosecution.

    Conclusion

    The Shahzad Bhatti Network now sits in the First Schedule, and the immediate effect is to make support for it inside India a separate offence. The designation lands on the domestic layer of the network, which is the layer the August detentions had already reached. Whether the ban changes anything depends on what follows it: charge sheets against those detained, attachment of the assets the smuggling generated, and a listing request carried into international forums. The point to watch is the first prosecution filed against a person charged as a member, since that is where the notification is tested rather than announced.

    Matching Previous Year Question

    “Indian government has recently strengthened the anti-terrorism laws by amending the unlawful activities (Prevention) Act (UAPA), 1967 and the NIA Act. Analyze the changes in the context of prevailing security environment while discussing the scope and reasons for opposing the UAPA by human rights organizations.”

  • Hog in the limelight

    Why in the News

    The Assam government has praised a captive breeding programme for lifting the State’s pygmy hog population over the last three decades. The species was believed extinct by the mid twentieth century, and a few individuals rediscovered in 1971 prompted the conservation effort that the Pygmy Hog Conservation Programme formalised in 1995. The recovery in captivity has outpaced the recovery of the habitat. Numbers held in breeding centres can be raised on a schedule, while the alluvial floodplain grasslands the species needs in the wild continue to fragment, which is what decides whether released animals survive.

    What is the pygmy hog?

    1. Sole surviving species of its genus: The pygmy hog is the only living species of the genus Porcula and the world’s smallest wild suid (a member of the pig family).
    2. Grassland dependence: It relies on dense grassland to feed, to conceal itself and to reproduce, so it cannot persist where tall cover is removed.
    3. Range: Its surviving distribution is confined to the alluvial floodplain grasslands of Assam.

    Why does the pygmy hog work as an indicator species?

    1. Distress signals habitat degradation: Decline in an animal that lives inside dense grassland is read directly as degradation of the floodplain that produces that grassland.
    2. Protection carries other species with it: Securing the grassland the pygmy hog needs also extends protection to the Bengal florican, the hispid hare, the hog deer and the greater one horned rhinoceros.
    3. The unit of conservation is the ecosystem: Survival in the wild depends on the survival of a specific ecosystem rather than on the numbers held in any one facility.

    How was the species brought back from presumed extinction?

    1. The original cause of decline: Floodplains were converted for farms, tea plantations and flood control infrastructure, then degraded by invasive plants and altered flood cycles, with unscientific burning of grasslands fragmenting what remained.
    2. Rediscovery and programme: A few individuals found in 1971 prompted an early conservation effort, and the current work descends from the Pygmy Hog Conservation Programme begun in 1995.
    3. The measured gain: Captive breeding raised the pygmy hog population in Assam 32-fold over the last three decades.
    4. What breeding from a small stock demands: Conservationists must track pedigree, follow biosafety protocols because suids are highly susceptible to swine diseases, and condition individuals before release.

    Why is the recovery still not secure?

    1. Numbers remain small: The Durrell Wildlife Conservation Trust records some 250 individuals in early 2025.
    2. Counting is unreliable: The animals are difficult to spot and count, so how many exist in the wild cannot be stated with confidence.
    3. One natural population is left: The last surviving natural population sits in the Panbari grasslands area of Manas National Park.
    4. Insurance is not a guarantee: Captive individuals form the insurance group against loss in the wild, and the long term evolutionary fitness of that group is not assured.

    Challenges to pygmy hog recovery

    1. Genetic bottleneck: Breeding from a small founder stock accumulates harmful gene variants and holds genetic diversity low. Eg. Researchers working on the programme flag both as limits on the captive group’s long term fitness.
      The Fix: Manage the captive population as a single studbook with planned pairings and periodic exchange between breeding centres.
    2. Disease susceptibility: Pigs carry high susceptibility to swine diseases, so one outbreak can erase decades of breeding in a single season. Eg. African swine fever outbreaks in Assam from 2020 killed domestic pigs across multiple districts.
      The Fix: Hold breeding stock at physically separated centres under enforced biosafety protocols rather than at one site.
    3. Fire used as grassland management: Widespread dry season burning carried out to ‘save’ grasslands destroys the dense cover the species feeds and breeds in. Eg. Fires set across whole grassland blocks remove the tall cover in a single sweep.
      The Fix: Move to mosaic burning on a rotation that leaves unburnt refuge patches in every season.
    4. Woody encroachment: Suppressing ecological processes altogether allows trees and shrubs to convert grassland into woodland. Eg. Embankments and flood control works on the Brahmaputra floodplain have cut the natural flooding that renews grassland.
      The Fix: Restore periodic flooding and controlled disturbance so grassland succession is held in check.
    5. Habitat fragmentation: Protected grasslands survive as disconnected blocks, so released animals cannot disperse or recolonise adjoining areas. Eg. Fragmentation of protected grassland in Rupahi and Kanchanbari separates the sites Assam is relying on for release.
      The Fix: Reconnect the fragments and restore buffer zones around Manas and Orang National Parks and the Sonai Rupai Wildlife Sanctuary.
    6. Invasive plants: Introduced species change grassland structure and displace the native grasses the species depends on. Eg. Invasive growth has spread through degraded floodplain grassland alongside altered flood cycles.
      The Fix: Fund sustained mechanical removal at release sites as a recurring operation rather than a one time clearance drive.

    Conclusion

    Assam plans to raise the wild pygmy hog population to 300 by 2040. That target is a grassland target rather than a breeding target. Captive numbers can be scaled inside a facility, and the constraint sits outside it, in whether protected grassland is reconnected and buffer zones around the northern Assam parks are restored fast enough to receive the animals. Watch whether grassland restoration is funded as a standing operation, because the breeding side of the programme has already shown what it can deliver on its own.

    Back2Basics

    1. Manas National Park: Located in Assam along the foothills of the Bhutan Himalaya, on the Manas river, a tributary of the Brahmaputra.
    2. Designations: It is a UNESCO World Heritage Site, a tiger reserve, an elephant reserve and a biosphere reserve.
    3. Contiguity: It adjoins the Royal Manas National Park in Bhutan, forming a transboundary conservation landscape.
    4. Species: It holds the last natural pygmy hog population and is also known for the Bengal florican, the hispid hare and the golden langur.

    Matching Previous Year Question

    “Consider the following : 1.Star tortoise 2.Monitor lizard 3.Pygmy hog 4.Spider monkey Which of the above are naturally found in India?”

  • What lies beyond India’s E20 push

    Why in the News

    India has scaled up the E20 petrol blend this year as crude prices rose following the closure of the Strait of Hormuz. A written reply to the Lok Sabha by the Road Transport and Highways Minister has conceded that E20 reduces fuel economy by “2% to 6% depending on vehicle category and vintage”, citing a joint study by the Automotive Research Association of India, the Society of Indian Automobile Manufacturers and Indian Oil Corporation Limited. The blend was introduced in 2023 on three stated claims: savings for the consumer, lower carbon emissions, and foreign exchange savings. All three rest on mileage holding steady, and the admitted loss in mileage puts each of them in question.

    What is the E20 blend?

    1. Composition: A litre of E20 petrol is 80% motor gasoline and 20% anhydrous ethanol (ethanol with water removed, so it mixes with petrol without separating).
    2. Rollout: Public sector oil marketing companies began selling E20 at select outlets in February 2023, and supply has since widened across the country.
    3. Energy content: Ethanol releases less energy per litre burnt than pure gasoline, so a litre of E20 carries a vehicle a shorter distance than a litre of the earlier E10 blend.

    Why has E20 been pushed now, and on what claims?

    1. Crude price trigger: The scale up followed rising crude prices after American action against Iran and the closure of the Strait of Hormuz in response.
    2. Three stated benefits: The case for the blend rests on cheaper fuel for households, lower carbon emissions per kilometre, and a smaller oil import bill.
    3. The admitted qualifier: The government’s own position records a fuel economy loss of 2% to 6%, varying with vehicle category and vintage.
    4. Engine damage is unquantified: Owners of vehicles of 2022 vintage and earlier report mileage loss beyond 6% along with damage to engines and fuel tanks, and the scale of that damage cannot be measured from available data.

    Has E20 saved Indian households money?

    1. The savings claim: A higher ethanol share substitutes a cheaper input for expensive crude, which is argued to lower the household fuel bill and hold inflation down.
    2. What the claim omits: The claim prices the input and ignores the distance travelled per litre, which is what a household actually pays for.
    3. The arithmetic at the pump: E20 was introduced while keeping the pump price unchanged from E10. A car averaging 15 km per litre on E10 with a 6% mileage loss needs 1.06 litres for the same 15 km, so Rs 106 buys what Rs 100 previously covered.
    4. The aggregate burden: An investigation by The Reporters Collective estimates that Indian consumers spent an additional Rs 88,234 crore over three years because of the mileage loss, with the burden rising every year.
    5. Alternative price instruments exist: Holding pump prices down when crude rises can be done through indirect tax policy in the short run, without shifting the cost onto mileage.

    Do carbon emissions actually fall with E20?

    1. Lower carbon per litre: E20 embodies less carbon per litre than E10, at 2.23 kgCO2 per litre against 2.32 kgCO2 per litre, drawn from United States Environmental Protection Agency figures.
    2. Mileage cancels the gain: More litres burnt for the same distance offsets the lower carbon content of each litre.
    3. The break even point is 4%: Emissions fall only where the mileage loss is under 4%. Across the 4% to 6% range the Minister himself stated, emissions rise rather than fall.
    4. The excess at 6%: A 6% mileage loss produces 2.37 kgCO2 against 2.32 kgCO2 for 15 km travelled, an excess of about 50 gCO2.
    5. The fleet mix decides the average: Newer vehicles built for E20 lose less mileage and emit less, older vehicles emit more, so emissions per kilometre across the country depend on the weight of each vintage on the road.

    What does ethanol blending do to foreign exchange and to crops?

    1. The forex logic: Oil is a large share of the import bill, so any substitution away from crude does save foreign exchange.
    2. Mileage offsets part of it: A fall in mileage raises the volume of fuel consumed, which cancels part of the import saving.
    3. Feedstock is diverted from food: Sugarcane and maize are the two main sources of ethanol, so blending targets translate into crop diversion and into a long term adjustment in what is grown.
    4. The sugar consequence: Exports were banned in 2023 and again this year as ethanol diversion pushed up domestic demand, cutting dollar earnings from sugar exports.
    5. The maize consequence: Maize export earnings fell sharply over the last two years as its share in ethanol production rose, and India became a net importer of maize last year.
    6. The trade channel closes the loop: A demand and production mismatch in an agricultural commodity is settled through higher prices, through trade management, or both. Lower exports and higher imports are themselves a loss of foreign exchange.

    Challenges to the E20 blend

    1. Legacy fleet incompatibility: Vehicles built before E20 compatibility norms carry the sharpest mileage loss and face corrosion risk in fuel lines and seals. Eg. Cars and motorcycles of 2022 vintage and earlier run on the same blend with no alternative offered at the pump.
      The Fix: Keep E10 available at fuel outlets so owners of older vehicles can buy the blend their engine was built for.
    2. Feedstock concentration: Ethanol supply rests on two water and land intensive crops, so a blending target transmits directly into cropping choices. Eg. Sugarcane in Maharashtra draws heavily on irrigation in water stressed districts.
      The Fix: Scale second generation ethanol from crop residue and other non food feedstock so blending stops competing with the food chain.
    3. Absence of consumer choice: A single blend at the pump removes the buyer’s ability to weigh a mileage loss against a price. Eg. The Chief Economic Adviser has argued that consumers should at least be given a choice between E10 and E20.
      The Fix: Require outlets above a set throughput to dispense both blends.
    4. Unused fiscal instrument: Excise duty on petrol can absorb a crude price spike, which is the task the blend has instead been asked to perform. Eg. Central duty relief was used to hold pump prices down until recent State elections were over.
      The Fix: Set a rule based countercyclical excise band so duty falls automatically once crude crosses a stated threshold.
    5. Transport demand left untouched: Blending changes what a vehicle burns and not how many vehicle kilometres are travelled, so total fuel use and pollution keep rising. Eg. Vehicle registrations in large Indian cities continue to grow faster than public transport capacity.
      The Fix: Build reliable subsidised public transport with last mile connectivity, alongside cycling and walking infrastructure.

    Conclusion

    The blend is settled policy and the fleet running on it is not. Two questions remain open. The first is whether a household gets to choose the blend its engine was designed for, rather than absorbing the mileage loss silently at an unchanged pump price. The second is whether ethanol demand can be met without pulling sugarcane and maize out of the food and export chain. Watch the feedstock mix reported for the next Ethanol Supply Year (the twelve month period over which ethanol supply contracts to oil marketing companies are counted) and whether E10 stays on sale.

    Back2Basics

    1. Ethanol Blended Petrol Programme: Administered by the Ministry of Petroleum and Natural Gas, it requires oil marketing companies to sell petrol blended with ethanol to cut crude imports and support sugar and grain producers.
    2. National Policy on Biofuels, 2018: It set the blending pathway and was amended in 2022 to advance the 20% ethanol blending target to the Ethanol Supply Year 2025-26 from 2030.
    3. Permitted feedstock: The policy widened eligible raw material beyond sugarcane molasses to sugarcane juice, damaged foodgrain, surplus rice and maize.
    4. Second generation ethanol: Produced from crop residue and other lignocellulosic waste rather than from food crops, it is supported through the Pradhan Mantri JI-VAN Yojana.

    Matching Previous Year Question

    “Consider the following statements: Statement I: Of the two major ethanol producers in the world, i.e., Brazil and the United States of America, the former produces more ethanol than the latter. Statement II: Unlike in the United States of America, where corn is the principal feedstock for ethanol production, sugarcane is the principal feedstock for ethanol production in Brazil. Which one of the following is correct in respect of the above statements?”