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  • Hits and misses: India’s Solar Power Energy Targets

    India is likely to miss its 2022 target of installing 100 gigawatts (GW) of solar power capacity a/c to a report. This is because of rooftop solar lagging behind, the authors say.

    India’s Solar Policy

    • Since 2011, India’s solar sector has grown at a compounded annual growth rate (CAGR) of around 59% from 0.5GW in 2011 to 55GW in 2021.
    • The Jawaharlal Nehru National Solar Mission (JNNSM), also known as the National Solar Mission (NSM), was commenced in January 2010.
    • It marked the first time the government focussed on promoting and developing solar power in India.
    • Under the scheme, the total installed capacity target was set as 20GW by 2022.
    • In 2015, the target was revised to 100GW and in August 2021, the government set a solar target of 300GW by 2030.

    Solar energy: India among the peers

    • India currently ranks fifth after China, U.S., Japan and Germany in terms of installed solar power capacity.
    • As of December 2021, the cumulative solar installed capacity of India is 55GW, which is roughly half the renewable energy (RE) capacity (excluding large hydro power) and 14% of the overall power generation capacity of India.
    • Within the 55GW, grid-connected utility-scale projects contribute 77% and the rest comes from grid-connected rooftop and off-grid projects.

    What does the new report say?

    • As of April, only about 50% of the 100GW target, consisting of 60GW of utility-scale and 40GW of rooftop solar capacity, has been met.
    • Nearly 19 GW of solar capacity is expected to be added in 2022 — 15.8GW from utility-scale and 3.5GW from rooftop solar.
    • Even accounting for this capacity would mean about 27% of India’s 100GW solar target would remain unmet.
    • A 25GW shortfall in the 40GW rooftop solar target, is expected compared to 1.8GW in the utility-scale solar target by December 2022.
    • Thus, it is in rooftop solar that the challenges of India’s solar-adoption policy stick out.

    What is Solar Rooftop?

    • A solar photovoltaic (PV) system mounted on a rooftop of a building is a mini-power requirement or feed into the grid.
    • The size of the installation varies significantly depending on the availability of space, amount of electricity consumed by the property and the ability or willingness of the owner to invest the capital required.
    • In December 2015, the government launched the first phase of the grid-connected rooftop solar programme to incentivise its use in residential, institutional and social areas.
    • The second phase, approved in February 2019, had a target of 40GW of cumulative rooftop solar capacity by 2022, with incentives in the form of central financial assistance (CFA).
    • As of November 2021, of the phase 2 target of 4GW set for the residential sector, only 1.1GW had been installed.

    Reasons for rooftop solar adoption not meeting targets

    • In its early years, India’s rooftop solar market struggled to grow, held back by lack of consumer awareness, inconsistent policy frameworks of the Centre/ State governments and financing.
    • Factors impeding rooftop-solar installation include:
    1. Pandemic-induced supply chain disruption to policy restrictions
    2. Regulatory roadblocks
    3. Limits to net-metering (or paying users who give back surplus electricity to the grid)
    4. Taxes on imported cells and modules
    5. Unsigned power supply agreements (PSAs) and banking restrictions
    6. Financing issues plus delays in or rejection of open access approval grants and
    7. The unpredictability of future open access charges

    Other issues: India’s storage capacity

    • About 34 GW / 136 GWh of battery storage is expected to be installed by 2030, according to the Central Electricity Authority of India.
    • This capacity would be used for RE integration, demand-side and peak load management services.

    Present state of progress

    • Recently, there has been a sharp rise in rooftop solar installations due to falling technology costs, increasing grid tariffs, rising consumer awareness and the growing need for cutting energy costs.
    • These factors are expected to persist giving a much-needed boost to this segment.
    • Going ahead, rooftop solar adoption is expected to proportionally increase as land and grid-connectivity for utility solar projects are expected to be hard to come by.

    Significance of solar power to India’s commitment

    • Solar power is a major prong of India’s commitment to address global warming according to the terms of the Paris Agreement, as well as achieving net zero, or no net carbon emissions, by 2070.
    • PM at the COP Glasgow, in November 2021, said India would be reaching a non-fossil fuel energy capacity of 500 GW by 2030 and meet half its energy requirements via renewable energy by 2030.
    • To boost the renewable energy installation drive in the long term, the Centre in 2020 set a target of 450GW of RE capacity to be achieved by 2030, within which the target for solar was 300GW.
    • Given the challenge of integrating variable renewable energy into the grid, most of the RE capacity installed in the latter half of this decade is likely to be based on wind solar hybrid (WSH).

    Way forward

    • Supportive policies and innovative technological approaches are needed for the sector to achieve its potential.
    • Indian policymakers need to plan for rooftop solar plus storage, rather than rooftop solar alone with the grid as storage (net / gross metering).
    • The declining cost of storage solutions, along with that of rooftop solar solutions, is likely to change the future of the Indian power sector.
    • Several countries such as Australia, the United States, Germany, among others have already endorsed solar power with battery storage.
    • Energy storage, therefore, represents a huge economic opportunity for India.
    • The creation of a conducive battery manufacturing ecosystem on a fast track could cement India’s opportunity for radical economic and industrial transformation in a critical and fast-growing global market.

    Also read:

    [Sansad TV] Global Solar Grid

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  • Looming Power Crisis in India

    Temperatures have shot up across many parts of the country with the early onset of summer, leading to a rise in the demand for power. Instances of power outages have been reported in several states.

    Why is there a concern around power supply?

    • The demand for power has soared.
    • Several states, including Andhra Pradesh, Madhya Pradesh, Punjab, Haryana, Telangana, and Maharashtra, are facing power outages.
    • The coal stock with power generation companies (gencos) is not adequate to meet the rising demand.

    How bad is the coal shortage?

    • Normally, a power plant must maintain 26 days of coal stock.
    • However, at present, several power plants are reporting critical levels of coal stock.
    • Data from the Central Electricity Authority (CEA) shows that 97 power plants out of the 173 that the CEA tracks have critical levels of coal inventory.
    • Of the 173, there are 155 non-pithead plants or power plants that are not near coal mines.
    • These have an average of 28% of the stock compared to the normal scenario.
    • The 18 plants that are near coal mines have an average stock of 81% of the normal requirement.

    Note: Non-pithead plants are power plants where the coal mine is more than 1,500 kilometres away.

    Is coal shortage the only reason for a power crisis?

    • The lack of railway rakes to transport coal is also a major problem.
    • The state power distribution companies (discoms) have also not been able to clear their dues to power generation companies.
    • The covid-19 pandemic has now weakened the finances of many states, raising doubts about the ability of state-owned discoms to clear their dues.

    What has led to the coal shortage?

    • Several factors have led to the shortage, including the stagnation of production by Coal India Ltd (CIL) after the bumper production in FY15 and FY16.
    • There seems to be a tussle between the Centre and coal-rich states, which delay environment and land acquisition clearances.
    • High dues of discoms towards gencos and the eventual delay in gencos paying CIL has complicated the scenario.

    How has the Centre responded?

    • CIL has made efforts to raise supply to the power sector by reducing its dispatch to other industries.
    • The power ministry said that to avoid long-distance transport, a ‘tolling’ facility would be allowed.
    • In this system, state gencos can allow other thermal power plants near a coal mine to utilize their coal linkages to generate and transmit power back.
    • This is an easier alternative compared to transportation.
    • Further, the states need to ensure that imported coal-based plants operate at reasonable tariffs.

    Try answering this PYQ:

    Consider the following statements:

    1. Coal sector was nationalized by the Government of India under Indira Gandhi.
    2. Now, coal blocks are allocated on lottery basis.
    3. Till recently, India imported coal to meet the shortages of domestic supply, but now India is self- sufficient in coal production.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 and 3 only

    (c) 3 only

    (d) 1, 2 and 3

     

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

     

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  • Why are vaccines administered into the upper arm?

    Almost everyone vaccinated for Covid-19 over the last 16 months will remember that he or she received a quick prick in the upper arm.

    Why vaccines are generally administered into muscle?

    • This is because most vaccines, including those for Covid-19, are most effective when administered through the intramuscular route into the upper arm muscle, known as the deltoid.
    • There are several reasons, but the most important one is that the muscles have a rich blood supply network.
    • This means whenever a vaccine carrying an antigen is injected into it, the muscle releases the antigen, which gets dispersed by the muscular vasculature, or the arrangement of blood vessels in the muscle.
    • The antigen then gets picked up by a type of immune cells called dendritic cells, which function by showing antigens on their surface to other cells of the immune system.
    • The dendritic cells carry the antigen through the lymphatic fluid to the lymph node.

    Role of T Cells

    • T Cells also called T lymphocyte, type of leukocyte (white blood cell) that is an essential part of the immune system.
    • T cells are one of two primary types of lymphocytes—B cells being the second type—that determine the specificity of the immune response to antigens (foreign substances) in the body.
    • Through the course of research over the years, it is understood that the lymph nodes have T cells and B cells — the body’s primary protector cells.
    • Once this antigen gets flagged and is given to the T cells and B cells that is how we start developing an immune response against a particular virus.
    • It could be any of the new viruses like SARS-CoV-2, the virus that causes Covid-19, or the previous viruses which we have been running vaccination programs for.

    Other options for vaccination

    • Conversely, if the vaccine is administered into the subcutaneous fat tissue [between the skin and the muscle], which has a poor blood supply, absorption of the antigen vaccine is poor and therefore one may have failed immune response.
    • Similarly, the additives which could be toxic, could cause a local reaction.
    • The same thing could happen when the vaccine is administered intradermally (just below the outermost skin layer, the epidermis).
    • Hence, the route chosen now for most vaccines is intramuscular.
    • Also, compared to the skin or subcutaneous tissue, the muscles have fewer pain receptors, and so an intramuscular injection does not hurt as much as a subcutaneous or an intradermal injection.

    But why the upper arm muscle in particular?

    • In some vaccines, such as that for rabies, the immunogenicity — the ability of any cell or tissue to provoke an immune response — increases when it is administered in the arm.
    • If administered in subcutaneous fat tissues located at the thigh or hips, these vaccines show a lower immunogenicity and thus there is a chance of vaccine failure.

    Why not administer the vaccine directly into the vein?

    • This is to ensure the ‘depot effect’, or release of medication slowly over time to enable longer effectiveness.
    • When given intravenously, the vaccine is quickly absorbed into the circulation.
    • The intramuscular method takes some time to absorb the vaccine.
    • Wherever a vaccination programme is carried out, it is carried out for the masses.
    • To deposit the vaccine, the easiest route would be the oral route (like the polio vaccine).
    • However, for other vaccines that need to be administered intravenously or intramuscularly (enabling wider field-based administration), the intramuscular route is chosen from a public health perspective over the intravenous route.

    Which vaccines are administered through other routes?

    • One of the oldest vaccines that for smallpox, was given by scarification of the skin.
    • However, with time, doctors realised there are better ways to vaccinate beneficiaries.
    • These included the intradermal route, the subcutaneous route, the intramuscular route, oral, and nasal routes.
    • There are only two exceptions that continue to be administered through the intradermal route.
    • These are the vaccines for BCG (Bacillus Calmette–GuĂ©rin) and for tuberculosis because these two vaccines continue to work empirically well when administered through the intradermal route.

     

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  • Big Tech’s privacy promise could be good news and also bad news

    Context

    In February, Facebook stated that its revenue in 2022 is anticipated to reduce by $10 billion due to steps undertaken by Apple to enhance user privacy on its mobile operating system.

    Move towards more privacy-preserving options

    • Apple introduced AppTrackingTransparency feature that requires apps to request permission from users before tracking them across other apps and websites or sharing their information with and from third parties.
    • Through this change, Apple effectively shut the door on “permissionless” internet tracking and has given consumers more control over how their data is used.
    • Privacy experts have welcomed this move because it is predicted to enhance awareness and nudge other actors to move towards more privacy-preserving options, leading to a market for “Privacy Enhancing Technologies”.
    • Google’s Privacy Sandbox project is a case in point, though it remains to be seen whether it will be truly privacy-preserving.

    Big Tech dominance and issues related to it

    • Privacy and acquisitions: One standout feature of the Big Tech dominance has been the non-price factors such as quality of service (QoS) in general and privacy and acquisitions in particular.
    • Acquisitions to kill competition: Acquisitions by Big Tech are regular and eat up big bucks, not always to promote efficiency but to eliminate potential competition, described evocatively as “kill zone” by specialists.
    • According to a report released by the Federal Trade Commission, between 2010 and 2019, Big Tech made 616 acquisitions.
    • In the absence of a modern framework, competition law continues to rely on Bork’s theory of consumer welfare which postulated that the sole normative objective of antitrust should be to maximise consumer welfare, best pursued through promoting economic efficiency.
    • Market structure thus became irrelevant and conduct became the sole criterion for judgement.
    • Conduct now predominantly revolves around QoS which, like much else surrounding digital platforms, is pushing competition authorities to fortify their existing regulatory toolkits.

    Privacy as a metric of quality

    •  Companies such as Apple and DuckDuckGo (with its slogan “the search engine that doesn’t track you”) are employing enhanced user privacy as a competitive metric.
    • It has been shown that “websites which do not face strong competition are significantly more likely to ask for more personal information than other services provided for free”.
    • In 2018, OECD accepted that privacy is a relevant dimension of quality despite the low quality that may be prevalent due to lack of market development.
    • Regulators across the globe are recognising privacy as a serious metric of quality.
    • For instance, the Competition Commission of India (CCI) in 2021 took suo moto cognisance of changes to WhatsApp’s “take-it” or “leave-it” privacy policy that made it mandatory for every user to share data with Facebook.
    • In its prima facie order, the CCI inter alia observed that this amounts to degradation of privacy and therefore quality.

    Way forward

    • Privacy and competition have overlapping boundaries.
    • If privacy becomes a competitive constraint, then companies will have the incentive to create privacy-preserving and enhancing technologies.
    • Barriers for new entrants: On the other hand, care must be taken so that Big Tech, aka the gatekeepers in the EU’s Digital Markets Act, do not misuse privacy to create barriers for newer entrants.
    • Restricting third-party tracking is not novel and other browsers such as Mozilla Firefox and Microsoft’s Edge have already done so.
    • But Google, which owns 65 per cent of the global browser market, is different.
    • By disabling third parties from tracking but continuing to use that data in its own ad tech stack, Google harms competition.
    • The use of privacy as a tool for market development, therefore, has to tread this tightrope between enabling and stifling competition.

    Conclusion

    An approach that balances user autonomy, consumer protection, innovation, and market competition in digital markets is a real win-win and worth investing in.

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  • IRMS

    Context

    A recent Gazette notification regarding the creation of the Indian Railway Management Service (IRMS) marks a paradigm shift in the management of one of the world’s largest rail networks.

    About the merger and IRMS

    • A nearly 8,000 strong cadre of the erstwhile eight services is now merged into one.
    • Eight out of 10 Group-A Indian Railway services have been merged to create the IRMS.
    • The merged services are: Indian Railway Traffic Service (IRTS), Indian Railway Personnel Service (IRPS), Indian Railway Accounts Service (IRAS), Indian Railway Service of Electrical Engineers (IRSEE), Indian Railway Service of Signal Engineers (IRSS), Indian Railway Service of Mechanical Engineers (IRSME), Indian Railway Service of Civil Engineers (IRSE) and Indian Railway Stores Service (IRSS).
    • Aims of the restructuring: Besides removing silos, this restructuring also aims at rationalising the top-heavy bureaucracy of the Indian Railways.

    Way forward: Training

    • Training the future leaders of India’s public transporter in the rapidly evolving logistics sector of the country is the most important task ahead.
    • The UPSC will recruit a few hundred IRMS officers each year from now, they will remain much less in number when compared to already serving officers for a long time to come.
    • Training of the existing cadre of officers: The fact remains that even after the creation of the IRMS, the 8,000 strong (already serving) officers of the Indian Railways will need to work in coordination and not in silos, as they will be serving in the organisation for decades to come.
    • This highlights the importance of training of the existing cadre of officers as they will have to deliver on the ambitious Gati-Shakti projects.
    • The task of training such a dynamic talent pool assumes importance in view of India’s aspirations of becoming a $5 trillion economy.
    • All this will require a massive revamp of the capacity building ecosystem of the Indian Railways.
    •  Redesign the training: The merger of services provides an opportunity to redesign the training for newly recruited IRMS officers to make them future-ready. Initial training along with mid-career training programmes may be reoriented.
    • The IRMS training needs to be designed based on the competencies required for different leadership roles.
    • Mission Karmayogi of the Government of India provides for competencies based postings of officers.
    • The Integrated Government Online Training (iGOT) programme of the Government of India will be instrumental in shaping the career progression of IRMS officers.

    Conclusion

    Future IRMS officers should be ready to face the challenges of working in an organisation that is involved in round the clock and round the year operations, has substantial social obligations to meet and, at the same time, which must earn for itself.

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  • Addressing Duty Anomalies in Trade Deals

    India has long suffered the anomaly of imported raw material being taxed more than the finished product. Economists call it the inverted duty structure. A spate of free trade agreements (FTAs) in the past have not helped. Are the new ones any better?

    What is the inverted duty structure?

    • An inverted duty structure comes up in a situation where import duties on input goods are higher than on finished goods.
    • In other words, the GST rate paid on purchases is more than the GST rate payable on sales.

    Why is it a problem?

    • When manufacturers cannot set off the taxes paid on raw materials against the tax on the final product, the excess tax paid on inputs gets built into the price of the product.
    • This makes an Indian-made product more expensive than the imported finished product, affecting the competitiveness of Indian makers.
    • The issue is acute in sectors like textiles and apparels.
    • Correcting duty anomalies is key to attracting investments in manufacturing.

    Will new FTAs worsen the problem?

    • Looks unlikely. The FTAs under negotiations are structurally very different from those signed a decade ago.
    • The FTAs signed in the early 2000s were with manufacturing hubs like the 10-nation ASEAN which includes the Philippines, Vietnam, South Korea, and Japan.
    • Most of these countries directly compete with India in a host of manufacturing sectors including apparel, electronics, and engineering goods.
    • They largely produced the same goods as India.
    • By contrast, the new FTAs being signed by India are with countries like the United Arab Emirates (UAE) that share complementarities with India with respect to trade interests.

    How is India addressing duty anomalies?

    • India has been increasing import duties since 2014-15 to correct the inverted duty structure for non-FTA countries and the average tariff rose from 13.5% in 2014 to 15% in 2020.
    • In fact, the last two budgets sought to correct it by removing duty exemptions and lowering the duty on raw materials.

    How did the earlier FTAs impact India?

    • In old FTAs, India agreed to lower or eliminate duties on finished goods. But import duty on raw materials remained high.
    • That made it cheaper to import the final product than make them in India, hurting domestic manufacturers.
    • This can be seen from the fact that the share of ASEAN in India’s total imports has grown from 8.2% in FY11 to 12% in FY21, while exports have stagnated at 10%.
    • The share of South Korea rose from 2.83% in FY11 to 3.23% in FY21, while exports are up marginally from 1.5% to 1.6% during the same period.

    And how are the new FTAs different?

    • The UAE, for example, is a services, oil, and gold-led economy rather than a manufacturer. India benefits from duty-free access for mobile phones, which the UAE does not make.
    • Australia, which signed a pact with India last week is again not a major manufacturing economy, but a services one with key interests in wines and minerals, pears, oranges, etc.
    • Besides, this time around, the government is holding consultations with the industry during the FTA talks, doing a SWOT analysis to ensure FTAs benefit India’s exports.

     

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  • Understanding Software Copyright and Licences

    This newscard is an excerpt from the original article published in The Hindu.

    Does software have copyright? Even more specifically, is the Internet free inspite of software copyright? Are software programming languages free of cost? How does copyright apply to software?

    Software licensing

    • A copyright gives a creator the legal right to own, distribute and profit from his or her creative work.
    • There are different kinds of software licences that allow free use of software:

    (1) Proprietary License

    • There is proprietary software which is to be purchased as a one-time transaction or as yearly licences.
    • A popular example is Microsoft Windows which is purchased along with the computer or Microsoft Office which typically has a yearly licence that has to be renewed upon payment.

    (2) Creative Commons licence (CC)

    • There is the Creative Commons licence (CC) which is public domain: any software or work that is in CC can be used and distributed free of cost.
    • For example, Wikipedia is under CC and hence its contents can be used freely with the condition that attribution is made to Wikipedia (this is called ‘Creative Commons – Attribution-ShareAlike).

    (3) Permissive Software licence

    • Another form of free software licence is Permissive Software licence which is popular in the software developer community and in the commercial world.
    • This licence allows free use and modification of software. There are further specific licences under this category, like the Apache licence and MIT licence.

    (4) Apache licence

    • The Apache licence is maintained by the Apache Software Foundation which is a non-profit entity.
    • Many popular and powerful softwares like Spark (used in Big Data) have been developed under Apache licence.
    • MIT licence is maintained by the Massachusetts Institute of Technology and it covers hundreds of software packages including GitLab and Dot NET.

    What are Open Software?

    • All free and permissive software licences are similar to Free and Open Source Software (FOSS).
    • This is a set of rules and free software brought under one umbrella in the 1980s by Richard Stallman, a famous computer scientist and activist.
    • FOSS maintains its own licence, called GNU GPL (Gnu’s Not Unix General Public Licence) to govern and distribute free software but it comes with restrictions that its adoption and modification be for free use.
    • In the software community, ‘open source’ means any of the above non-proprietary licences.

    Who maintains open source softwares?

    • Open source software packages are developed and maintained by programmers from around the world.
    • Until the mid-1990s, the idea of the general public collaborating to create software for free seemed to be unrealistic and confined to small, elite communities.
    • However, with the success of a free operating system like Linux (which is under GNU GPL licence), many were convinced that open source could create sophisticated solutions because of access to top programmers around the world.

    Is the Internet free?

    • To access and to create content on the internet, there are costs involved such as infrastructure costs like network cost and the cost to host and maintain the content.
    • However, the core of the internet itself is free: it is free to use ideas like linking contents on the internet, transferring them with a network software protocol and adopting the associated standards like maintaining the website address (Uniform Resource Locator-URL).

    Are programming languages free of cost?

    • Until the 1980s, popular programming languages had a price but with the advent of Java in the 1990s and thanks to the initiatives of Richard Stallman and his Free Software Foundation in the 1980s, many languages, especially modern ones like Go or popular ones like Python are free.
    • Java is somewhere in the middle where there are free implementations of the language that most software developers use but there are also paid implementations provided by Oracle.
    • In general, the realisation in the software community is that a free language has widespread adoption and leads to the availability of an expert pool of programmers.
    • The last two decades have seen a proliferation of open source software and the future is even more exciting.

     

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  • Places in news: Nadabet- the Wagah of Gujarat

    As part of the Seema Darshan project, Union Home Minister inaugurated an Indo-Pakistan border viewing point in Nadabet in Gujarat, around 188 km from Ahmedabad.

    Where is Nadabet?

    • Located in the Rann of Kutch region, Nadabet is also known as the ‘Wagah of Gujarat’.
    • It is connected by a narrow bitumen road cutting across mudflats that get inundated during high-tide.
    • The biggest attraction of the Seema Darshan Project is the access provided to civilians to view the fenced international border with Pakistan at ‘Zero Point’.
    • This is guarded round the clock by the Border Security Force (BSF) in Banaskantha district of Gujarat.
    • Pakistan is around 150 metres from the border pillar 960 at Nadabet.
    • Though the BSF conducts a parade similar to the one held at Attari-Wagah border in Punjab every evening during sunset, there won’t be anyone present across the border on the Pakistani side.

    What is the Seema Darshan Project?

    • The Seema Darshan project is a joint initiative of the tourism department of the Gujarat state government and the BSF Gujarat Frontier.
    • The focus is to develop border-tourism in the region which has a sparse population and even sparser vegetation.
    • The project aims to boost tourism as well as restrict migration from the villages across the border to the Indian side.

    Role of Nadabet in 1971 Indo-Pak War

    • Nadabet played a key role in the 1971 Indo-Pakistan War.
    • It was in this region that the BSF not only stalled the enemy trying to invade from the west, but also captured 15 enemy posts.
    • During the war, the BSF had captured 1,038 square km of Pakistan territory in Nagarparkar and Diplo areas.
    • The area was returned to Pakistan after the Shimla Agreement was signed.

     

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  • Challenges in RBI’s inflation management

    Context

    The first bi-monthly meeting of the Reserve Bank of India’s Monetary Policy Committee (MPC) for the current financial year reaffirmed its focus on inflation management.

    Towards the normalisation of monetary policy

    • The MPC voted to keep the policy rate unchanged at 4 per cent and retained its accommodative stance.
    • However, the wording was changed to “remain accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.”
    • This statement sets the stage for a shift to a neutral stance in the next meeting and policy rate hikes in subsequent meetings.
    • RBI has announced the withdrawal of some of the steps taken during the pandemic to support the economy.
    • These will foster the normalisation of monetary policy.

    Inflation challenge

    • The central bank has acknowledged that the disruptions caused by the Russia-Ukraine crisis have upended their growth and inflation outlook.
    • It has steeply revised its inflation projection from 4.5 per cent earlier to 5.7 per cent now for the current financial year.
    • The projection is based on an average global crude oil price of $100 per barrel.
    • The Food and Agriculture Organisation’s (FAO’s) Food Price Index, a gauge of global food prices, posted a record growth of 12.6 per cent from February.

    Formalisation of Liquidity Adjustment Framework (LAF)

    • The RBI has been managing liquidity infused into the system during the pandemic through the Variable Rate Reverse Repo Auctions (VRRR) to withdraw liquidity and Variable Rate Repo auctions to inject liquidity.
    • RBI has now formalised the Liquidity Adjustment Framework (LAF).
    • The LAF is a framework to absorb and inject liquidity into the banking system.
    • The LAF is now a symmetric corridor with a width of 50 basis points.
    • The policy repo rate is at the centre of the corridor, with the MSF 25 basis points above the policy rate and the SDF 25 basis points below the policy rate.

    What is a Standing Deposit Facility

    • The RBI has introduced the Standing Deposit Facility (SDF) as the lower bound of the LAF corridor to absorb liquidity.
    • The idea of the SDF was first mooted by the Urjit Patel Committee report on the monetary policy framework.
    • The RBI Act was amended through the Finance Act of 2018 to allow RBI to use this instrument.
    • The SDF will be a facility available to banks to park their funds.
    • The SDF will serve as the standing liquidity absorption facility at the lower end of the LAF corridor.
    • At the upper end of the corridor is the Marginal Standing Facility (MSF) to inject liquidity.
    • Through the SDF, the RBI can absorb liquidity without placing government securities as collateral, hence it will give greater flexibility to the central bank.
    • The change also marks a shift away from reverse repo being the effective policy rate.

    Key takeaways

    • While on the face of it, there are no rate hikes, the shift from the reverse repo rate to the SDF signals a tightening of monetary policy.
    • There is a 40 basis points increase in the floor rate.
    •  In the medium run, the call money rate would move towards the new LAF corridor, thus bringing orderly conditions in the money market.
    • As RBI begins to normalise liquidity in a calibrated manner, its ability to manage bond yields will likely be limited.
    • Yields on bonds are likely to inch up and remain above the 7 per cent mark.
    • Going forward, the trade-off between managing inflation and the borrowing programme of the government will become challenging.

    Conclusion

    For now the RBI has rightly decided to place top priority on inflation management. This will help in maintaining the credibility of the inflation targeting framework.

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  • NITI Aayog publishes Energy and Climate Index List

    Gujarat has topped the list for larger States in the NITI Aayog’s State Energy and Climate Index–Round 1 that has ranked States and Union Territories (UTs) on certain parameters.

    State Energy and Climate Index

    • The States have been categorized based on size and geographical differences as larger and smaller States and UTs.
    • The index is based on 2019-20 data.
    • It ranks the states’ performance on 6 parameters, namely
    1. DISCOM’s Performance
    2. Access, Affordability and Reliability of Energy
    3. Clean Energy Initiatives
    4. Energy Efficiency
    5. Environmental Sustainability; and
    6. New Initiatives
    • The parameters are further divided into 27 indicators. Based on the composite SECI Round I score.
    • The states and UTs are categorized into three groups: Front Runners, Achievers, and Aspirants.

    Performance by the states

    • Gujarat, Kerala and Punjab have been ranked as the top three performers in the category of larger States, while Jharkhand, Madhya Pradesh and Chhattisgarh were the bottom three States.
    • Goa emerged as the top performer in the smaller States category followed by Tripura and Manipur.
    • Among UTs, Chandigarh, Delhi and Daman & Diu/Dadra & Nagar Haveli are the top performers.
    • Punjab was the best performer in discom performance, while Kerala topped in access, affordability and reliability category.
    • Haryana was the best performer in clean energy initiative among larger States and Tamil Nadu in the energy efficiency category.

     

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