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GS Paper: GS3

  • West Nile Virus outbreak in Russia

    Russia warned of a possible increase in West Nile virus infections this autumn as mild temperatures and heavy precipitation create favorable conditions for the mosquitos that carry it.

    West Nile virus (WNV)

    • WNV is mainly transmitted through mosquito bites and can lead to fatal neurological diseases in humans, although most people infected never develop any symptoms.
    • Cases of WNV occur during mosquito season, which starts in the summer and continues through fall.

    Its origin

    • Originally from Africa, the WNV has spread to Europe, Asia, and North America.
    • It was first isolated in a woman in the West Nile district of Uganda in 1937.
    • It was identified in birds in the Nile delta region in 1953.
    • Before 1997, WNV was not considered pathogenic for birds.
    • Human infections attributable to WNV have been reported in many countries for over 50 years.

    Symptoms

    • Infected persons usually have no symptoms or mild symptoms.
    • Some of the symptoms include fever, headache, body aches, skin rash, and swollen lymph glands.
    • They can last a few days to several weeks and usually, go away on their own.
    • Prolonged illness may cause inflammation of the brain, called encephalitis, or inflammation of the tissue that surrounds the brain and spinal cord, called meningitis.

    Treatment

    • There is no vaccine against the virus in humans although one exists for horses, the WHO says.

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  • Nationally Determined Contributions

    Context

    Despite accomplishments, global pressures are intensifying on India to commit more towards the Conference of the Parties (COP26), scheduled for November 2021 in Glasgow.

    India’s accomplishments

    • At the fifth anniversary of the Paris Agreement on Climate Change (December 2020), India was the only G20 nation compliant with the agreement.
    • India has been ranked within the top 10 for two years consecutively in the Climate Change Performance Index.
    • The Unnat Jyoti by Affordable LEDs for All (UJALA) scheme is the world’s largest zero-subsidy LED bulb programme for domestic consumers.
    •  India provided leadership for setting up the International Solar Alliance, a coalition of solar-resource-rich countries, and the Coalition for Disaster Resilient Infrastructure.

    Why it is unfair to pressure India on climate action

    We can attempt to answer the question by comparing the achievements of other countries vis-à-vis India’s performance.

    • Historical perspective: World Bank data for CO2 emissions (metric tons per capita) over two decades since the Kyoto protocol informs that at the current rate, both China and the U.S. could emit five times more than India in 2030.
    • The U.K.’s emission levels could be more than 1.5 times that of India.
    • Brazil, with its dense forests, may end up at similar levels.
    • Latest efforts: Last year, China, the world’s largest GHG emitter, joined the ‘race to zero’ and targets carbon neutrality by 2060.
    • Interestingly, it hopes to peak CO2 emissions by 2030 for bending the emissions curve.
    • Recently, the U.S. rejoined the Paris Agreement and committed to reducing emissions by 50%-52% in 2030 and reaching net-zero emissions economy-wide by 2050.
    • The French government, during the novel coronavirus pandemic, set green conditions for bailing out its aviation industry.
    • However, the analysts say that no baseline for reducing emissions from domestic flights was fixed.
    • In Australia, complicated domestic politics prevented them from addressing the problem, despite the country being vulnerable, and stretches of the famous Great Barrier Reef having died in recent years.

    India’s performance

    • Exceeding the NDC commitment: India is on track (as reports/documents show) to meet and exceed the NDC commitment to achieve 40% electric power installed capacity from non-fossil fuel-based sources by 2030.
    • Reduction in emission intensity of GDP: Against the voluntary declaration for reducing the emission intensity of GDP by 20%-25% by 2020, India has reduced it by 24% between 2005-2016.
    • More importantly, we achieved these targets with around 2% out of the U.S.$100 billion committed to developing nations in Copenhagen (2009), realised by 2015.
    • Renewable energy expansion: India is implementing one of the most extensive renewable energy expansion programmes to achieve 175 GW of renewable energy capacity by 2022 and 450 GW by 2030.
    • Investment in green measures: As part of the fiscal stimulus after the pandemic, the Government announced several green measures, including:
    • a $26.5-billion investment in biogas and cleaner fuels,
    • $3.5 billion in incentives for producing efficient solar photovoltaic (PV)
    • and advanced chemistry cell battery, and $780 million towards an afforestation programme.
    •  India’s contribution to global emissions is well below its equitable share of the worldwide carbon budget by any equity criterion.

    Conclusion

    To sum up, India has indeed walked the talk. Other countries must deliver on their promises early and demonstrate tangible results ahead of COP26.

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  • The National Monetisation Pipeline may not help realise the best value for assets

    Context

    The Government has launched a National Monetisation Pipeline, or NMP  to sell the revenue streams of public assets over the next four years.

    About NMP

    • Financing infrastructure: As outlined in the Union Budget, the NMP aims to mobilize resources for financing infrastructure.
    • Type of assets: The pipeline mostly includes railway stations, freight corridors, airports, and renovated national highway segments amounting to â‚č6-lakh crore, or 3% of GDP in 2020-21.
    • The other two methods of raising resources are: setting up a development finance institution (DFI) and raising the share of infrastructure investment in the central and State Budgets.

    Concerns

    1) Not different from Disinvestment-Privatisation (D-P)

    • Asset monetization as defined in NMP is the same as the net present value (NPV) of the future stream of revenue with an implicit interest rate (whether it is a sale or lease of the asset).
    • Missed targets: Since D-P proceeds (revenues) have seriously missed the targets almost every year, how believable are the NMP targets? And how are they likely to perform differently?
    • If the NMP attempt to shore up public finances, such distress (fire) sale would find it difficult to obtain a “fair value” for public assets.
    • Would the market not factor in the dire state of the economy in beating down the prices, as in any distress sale?
    • The NMP document seems silent on how to overcome past mistakes.

    2) PPP mode of implementation

    • The NMP outlines mainly two modes of implementing monetization: public-private partnership (PPP) and “structured financing” to tap the stock market.
    • PPP in infrastructure has been a financial disaster in India, as evident from what happened after the economic boom of 2003-08.
    • After the 2008 financial crisis, many PPP projects failed to repay bank loans leading to the piling up of non-performing assets (NPAs) of banks.
    • Further, the bulk of the lending was too politically connected to corporate houses and firms.
    •  India is still reeling from the legacy of that period without any easy and credible solutions in sight.

    3) Stock market crash threatens the success of InvIT

    • An Infrastructure Investment Trust (InvIT) is being mooted as an alternative means of raising finance from the stock market.
    • In principle, InvIT is much like a mutual fund, whose performance is largely linked to stock prices.
    • The disinvestment process began in 1991 in which the bundles of shares of public sector enterprises (PSEs) were sold by UTI in the booming secondary stock market to realize the best price.
    • However, as the market crashed in the wake of the Harshad Mehta scam, stalling and discrediting the disinvestment process for almost the entire decade.
    • Hence, it may be worth learning the lessons from the historical missteps before exploring the idea all over again by the current stock market boom
    • At present, the U.S. Fed committed to reducing its assets purchase program (known as quantitative easing), the “hot money” inflow that has fuelled Indian stock prices may dry up throwing up nasty surprises.

    Thus, it seems unwise to anchor the acutely needed investment revival strategy on a discredited PPP model or on fickle Foreign Institutional Investors (FII) investment in a frothy stock market.

    Suggestion: Monetise debt

    • With the financial system flush with liquidity with no takers for bank credit, finance the proposed investment — as envisaged in the Budget — by government borrowing.
    • With a negative 0.4% real interest rate (real interest rate is nominal interest rate minus inflation rate), domestic borrowing in home currency is a steal.
    • No Crowding out: Chances of crowding-out private investments are remote with a liquidity overhang in the market.
    • Low inflation risk: Inflation risk is also limited with little aggregate demand pressures (barring temporary bottlenecks due to localized lockdowns).
    • Rating downgrade risk:  If the debt is productively used to expand GDP (the denominator), rating downgrade risk due to the rising Debt-GDP ratio seems minimal.
    •  Moreover, rising external debt by fickle portfolio investors perhaps carries a greater risk to external instability.

    Consider the question “How the National Monetisation Pipeline seeks to implement the asset monetisation? What are the challenges in asset monetisation?”

    Conclusion

    If reviving investment demand quickly is the real goal, debt monetisation seems a better option than asset monetisation.

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  • India becomes 4th largest forex reserves holder globally

    India’s foreign exchange reserves rose by $835 million to touch a record high of $612.73 billion in the week ended July 16, 2021, the Reserve Bank of India (RBI) data showed.

    Forex Reserves

    India’s forex reserves cover:

    • Foreign Currency Assets (FCAs) (rose by $463 million to $568.748 billion)
    • Special Drawing Rights (SDRs) (up by $1 million at $1.548 billion)
    • Gold Reserves (up by $377 million to $37.333 billion)
    • Reserve position with the International Monetary Fund (IMF) (up by $1 million at $1.548 billion)

    (Note the descending order of the shares of various components of forex reserves. UPSC can go factual here.)

    What is Foreign Exchange Reserve?

    • Foreign exchange reserves are important assets held by the central bank in foreign currencies as reserves.
    • They are commonly used to support the exchange rate and set monetary policy.
    • In India’s case, foreign reserves include Gold, Dollars, and the IMF’s quota for Special Drawing Rights.
    • Most of the reserves are usually held in US dollars, given the currency’s importance in the international financial and trading system.
    • Some central banks keep reserves in Euros, British pounds, Japanese yen, or Chinese yuan, in addition to their US dollar reserves.

    Countries with the highest foreign reserves

    Currently, China has the largest reserves followed by Japan and Switzerland. India has overtaken Russia to become the fourth largest country with foreign exchange reserves.

    1. China – $3,349 Billion
    2. Japan – $1,376 Billion
    3. Switzerland – $1,074 Billion
    4. India – $612.73 Billion
    5. Russia – $597.40 Billion

    Why are these reserves so important?

    • All international transactions are settled in US dollars and, therefore, required to support India’s imports.
    • More importantly, they need to maintain support and confidence for central bank action, whether monetary policy action or any exchange rate intervention to support the domestic currency.
    • It also helps to limit any vulnerability due to sudden disturbances in foreign capital flows, which may arise during a crisis.
    • Holding liquid foreign currency provides a cushion against such effects and provides confidence that there will still be enough foreign exchange to help the country with crucial imports in case of external shocks.

    Initiatives taken by the government to increase forex

    • To increase the foreign exchange reserves, the Government of India has taken many initiatives like AatmaNirbhar Bharat, in which India has to be made a self-reliant nation so that India does not have to import things that India can produce.
    • Other than AatmaNirbhar Bharat, the government has started schemes like Duty Exemption Scheme, Remission of Duty or Taxes on Export Product (RoDTEP), Nirvik (Niryat Rin Vikas Yojana) scheme, etc.
    • Apart from these schemes, India is one of the top countries that attracted the highest amount of Foreign Direct Investment, thereby improving India’s foreign exchange reserves.

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  • Leaded Petrol is officially eradicated

    The use of leaded petrol has been eradicated from the globe, a/c to the UN Environment Programme (UNEP).

    What is Leaded Petrol?

    • Tetraethyl-lead (TEL) is a petro-fuel additive, first being mixed with petrol beginning in the 1920s as a patented octane rating booster that allowed engine compression to be raised substantially.
    • This in turn caused increased vehicle performance and fuel economy.
    • The practice of adding tetraethyl lead to petrol had spread widely to all countries soon after its anti-knock and octane-boosting properties were discovered.
    • TEL is still used as an additive in some grades of aviation gasoline.

    Issues with leaded petrol

    • Lead is toxic, affects multiple body systems and is particularly harmful to young children.
    • It affects the brain, liver, kidneys, and bones. Lead is measured in the blood to understand exposure.
    • Lead in bone is released into the blood during pregnancy and becomes a source of exposure to the developing foetus.
    • More recent research has indicated that lead can damage the infant brain even at blood levels as low as 5 microunits per decilitre (ÎŒ/dl).

    India’s tryst with leaded petrol

    • India was among those countries that took early action to phase out leaded petrol. The process of phase down that had started in 1994, got completed in 2000.
    • Initially, low-leaded petrol was introduced in Delhi, Mumbai, Kolkata and Chennai in 1994, followed by unleaded petrol in 1995.
    • The entire country got low-leaded petrol in 1997 while leaded fuel was banned in the National Capital Territory of Delhi.
    • The final introduction of unleaded petrol in the entire country was mandated in April 2000.
    • This decision was also catalyzed by the Supreme Court order that had directed the introduction of unleaded petrol to enable the adoption of catalytic converters in petrol cars.

    Significance of phasing out

    • It is a milestone that will prevent more than 1.2 million premature deaths and save world economies over $2.4 trillion annually.
    • It has taken 100 years to stop the use of leaded fuel finally.

    Try answering this PYQ:

    Q.Lead, ingested or inhaled, is a health hazard. After the addition of lead to petrol has been banned, what still are the sources of lead poisoning? (CSP 2012)

    1. Smelting units
    2. Pens pencils
    3. Paints
    4. Hair oils and cosmetics

    Select the correct answer using the codes given below:

    (a) 1, 2 and 3 only

    (b) 1 and 3 only

    (c) 2 and 4 only

    (d) 1, 2, 3 and 4

     

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

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  • What is Milky Sea Phenomenon?

    Some researchers would use satellites to study the elusive milky sea phenomenon.

    What is the Milky Sea?

    • Milky seas, also called mareel, is a luminous phenomenon in the ocean in which large areas of seawater appear to glow translucently (in varying shades of blue).
    • Such occurrences glow brightly enough at night to be visible from satellites orbiting Earth.
    • They are a rare nocturnal phenomenon in which the ocean’s surface emits a steady bright glow.

    Why do they glow?

    • Luminous bacteria cause the particles they colonize to glow.
    • The purpose of this glow could be to attract fish that eat them.
    • These bacteria thrive in the guts of fishes, so when their populations get too big for their main food supply, a fish’s stomach makes a great second option.

    How do they occur?

    • It is typically caused by Noctiluca scintillans (popularly known as “sea sparkle”), a dinoflagellate that glows when disturbed and is found in oceans throughout much of the world.
    • Once their population gets large enough – about 100 million individual cells per millilitre of water – a sort of internal biological switch is flipped and they all start glowing steadily.

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  • Free and Open Source Software

    Context

    Recognising its potential, in 2015, the Indian government announced a policy to encourage open source instead of proprietary technology for government applications. However, the true potential of this policy is yet to be realized.

    Advantages of FOSS

    • Free and Open Source Software (FOSS) today presents an alternative model to build digital technologies for population scale.
    • Freedom to modify: Unlike proprietary software, everyone has the freedom to edit, modify and reuse open-source code.
    • Reduced cost and innovation: This results in many benefits — reduced costs, no vendor lock-in, the ability to customise for local context, and greater innovation through wider collaboration.
    • Use in public service delivery: We have seen some great examples of public services being delivered through systems that use FOSS building blocks, including Aadhaar, GSTN, and the DigiLocker.
    • FOSS communities can examine the open-source code for adherence to data privacy principles, help find bugs, and ensure transparency and accountability.

    Challenges in adoption by government in GovTech

    • In 2015, the Indian government announced a policy to encourage open source instead of proprietary technology for government applications.
    • Several misconceptions remain in the understanding of FOSS, especially for GovTech.
    • Trust issue: “Free” in FOSS is perceived to be “free of cost” and FOSS is often mistaken to be less trustworthy and more vulnerable, whereas FOSS can actually create more trust between the government and citizens.
    • However, Many solutions launched by the government including Digilocker, Diksha, Aarogya Setu, Cowin — built on top of open-source digital platforms — have benefited from valuable inputs provided by volunteer open-source developers.
    • Such inputs have immensely helped in improving solutions and making them more robust.
    • Accountability issue: In the case of FOSS, there appears to be an absence of one clear “owner”, which makes it harder to identify who is accountable.
    • While this concern is legitimate, there are ways to mitigate it.
    • For example, by having the government’s in-house technical staff understand available documentation and getting key personnel to join relevant developer communities.

    Way forward for greater adoption of FOSS in GovTech

    • Here is a four-step path to make this vision a reality.
    • 1) Incentivise FOSS in government: The government’s policy requires all tech suppliers to submit bids with open source options.
    • Suppliers also need to justify in case they do not offer an open-source option
    • Sourcing departments are asked to weigh the lifetime costs and benefits of both alternatives before making a decision.
    • While this serves as a good nudge, the policy can perhaps go a step further by formally giving greater weightage to FOSS-specific metrics in the evaluation criteria in RFPs, and offering recognition to departments that deploy FOSS initiatives, such as, a special category under the Digital India Awards.
    • 2) Create a repository of GovtTech ready solutions: a repository of “GovTech ready” building blocks that are certified for use in government and audited for security compliances is needed.
    • Creating a repository of ready-to-use “GovTech-ised” building blocks can help departments quickly identify and deploy FOSS solutions in their applications.
    • 3) Encourage FOSS innovation: FOSS innovations can be encouraged through “GovTech hackathons and challenges”, bringing together the open-source community to design solutions for specific problem statements identified by government departments.
    • One such challenge — a #FOSS4Gov Innovation Challenge — was recently launched.
    • 4) Create an institutional mechanism: A credible institutional anchor is needed to be a home for FOSS-led innovation in India.
    • Such an institution can bring together FOSS champions and communities that are scattered across India around a shared agenda for collective impact.
    • Kerala’s International Centre for Free & Open Source Software (ICFOSS) is a great example of such an institution.

    Conclusion

    With an IT workforce of more than four million employees, what we need is a concerted push to harness the biggest promise that FOSS holds.

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  • Biofortified food can lead India from food security to nutrition security

    Context

    On August 15, Prime Minister Narendra Modi announced that, by 2024, rice provided to the poor under any government scheme — PDS, mid-day-meal, anganwadi — will be fortified.

    Need for nutrition security in India

    • 15.3 per cent of the country’s population is undernourished.
    • India has the highest proportion of “stunted” (30 per cent) and “wasted” children (17.3 per cent) below five years of age, as per the FAO’s recent publication, ‘The State of Food Security and Nutrition in the World, 2021’.
    • These figures indicate that India is at a critical juncture with respect to nutritional security.
    • Other factors: Other factors like poor access to safe drinking water and sanitation, low levels of immunization and education, especially of women, contribute equally to this dismal situation.

    India’s journey towards nutrition security

    • As per the ICAR website, they had developed 21 varieties of biofortified staples including wheat, rice, maize, millets, mustard, groundnut by 2019-20.
    • These varieties are not genetically modified.
    • These biofortified crops have 1.5 to 3 times higher levels of protein, vitamins, minerals, and amino acids compared to the traditional varieties.
    • A research team at the National Agri-Food Biotechnology Institute in Mohali has also developed biofortified colored wheat (black, blue, purple) that is rich in zinc and anthocyanins.
    • The HarvestPlus program of the Consultative Group for International Agricultural Research (CGIAR) has been working closely with ICAR, to improve the access of the poor in India to iron-rich pearl millet and zinc-rich wheat.
    • Globally, more than 40 countries have released biofortified crops, benefitting over 48 million people.
    • Leveraging science to attack the complex challenge of malnutrition, particularly for low-income and vulnerable sections of society, can be a good intervention.

    Challenges in securing nutrition security

    • Access to nutritious food is only one of the determinants of nutrition.
    • Other factors like poor access to safe drinking water and sanitation, low levels of immunization and education, especially of women, contribute equally to this dismal situation.
    • Need for a multi-pronged approach: In the long run, India needs a multi-pronged approach to eliminate the root cause of this complex problem.

    Way forward: Multi-pronged approach

    1) Focus on mother’s education

    • There is a direct correlation between a mother’s education and the well-being of children.
    • Targeted programs for improving the educational status of girls and reducing school dropout rates need to be promoted.
    • The Global Nutrition Report (2014) estimates that every dollar invested in a proven nutrition program offers benefits worth 16 dollars.

    2) Scale-up innovation in biofortified food by supporting policies

    • Innovations in biofortified food can alleviate malnutrition only when they are scaled up with supporting policies.
    • This would require increasing expenditure on agri-R&D and incentivizing farmers by linking their produce to lucrative markets through sustainable value chains and distribution channels.
    • The government can also rope in the private sector to create a market segment for premium-quality biofortified foods.
    •  For instance, trusts run by the TATA group are supporting different states to initiate fortification of milk with Vitamin A and D. 

    3) National awareness drive

    • A national awareness drive on the lines of the “Salt Iodisation Programme” launched by the government in 1962 can play an important role at the individual and community levels to achieve the desired goals of poshan for all. 
    • Branding, awareness campaigns, social and behavioral change initiatives, can promote the consumption of locally available, nutrient-dense affordable foods among the poor and children.

    Consider the question” Access to nutritious food is only one of the determinants of nutrition, and fortified food can play important role in this direction. Suggest the other measures to ensure nutrition safety in India.” 

    Conclusion

    Biofortified food is a step in the right direction, however, other factors should also be given equal attention in securing national security in India.

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  • Poultry Farm Establishment Rules

    Small and marginal poultry farmers in India will now have to take measures similar to their bigger counterparts to prevent environmental pollution, according to new guidelines issued recently by Central Pollution Control Board (CPCB).

    What are the new guidelines?

    (A) Establishment

    • Consent to Operate: The new guidelines state that for establishing and operating a medium-sized poultry farm of 25,000-100,000 birds, a farmer will have to obtain a certificate of Consent. Permission will be valid for 15 years.
    • Designated Authority: This will have to be taken from the State Pollution Control Board or Committee under the Water Act, 1974, and the Air Act, 1981. The Animal Husbandry Department will be responsible for implementing the guidelines at the state and district level.
    • Location: A farm should be set up 500 metres away from a residential area, 100 metres from rivers, lakes, canals, and drinking water sources, 100 metres from national highways, and 10-15 metres from village footpaths and rural roads.

    (B) Operational directives

    • Ventilated farms: The guidelines state that the poultry farm should have a ventilated room to reduce the gaseous pollution from the birds.
    • Wastewater management: Also, care should be taken so that poultry feces do not mix with running water or any other pesticide.
    • Manure generation: Farmers of small- and medium-sized poultry farms will have to arrange for manure. After use, the water from a poultry farm must be collected in a tank. The guidelines suggest using it in horticulture.
    • Disposal of deads: Emphasis has also been given to the daily removal of birds that die, through burial, without harming the environment. Burial should be done three metres above the groundwater level.

    (C) Large/ Small Farmer

    The new guidelines have defined who is a ‘large’ or ‘small’ poultry farmer in India.

    • Those who have 5,000-25,000 birds are small farmers.
    • Those who have more than 25,000 and less than 100,000 birds are medium farmers.
    • Those who have more than 100,000 birds are large farmers.

    Why need such regulation?

    • Poultry, hatchery and piggery were considered ‘green’ by the Central Pollution Control Board (CPCB) in its guidelines of 2015.
    • This meant they were exempt from the air, water, and environmental protection laws.
    • Gaseous emissions and waste are major problems in poultry farming.
    • The feces of poultry birds emit gaseous ammonia, hydrogen sulfide, and methane, all of which produce odors.

    Poultry sector of India

    • According to the 20th Livestock Census 2020, there are 851.8 million poultry birds in India.
    • About 30 percent (250 million) of this is ‘backyard poultry’ or small and marginal farmers.
    • According to the 19th Livestock Census, the number of such farmers is about 30 million.
    • Chickens, turkeys, ducks, geese, etc, are reared in poultry farms for meat and eggs. Chickens that are reared for eggs are called ‘laying hens’ or ‘layers’. Those reared for meat are called ‘broilers’.

    According to the 20th Livestock Census, Tamil Nadu (120 million), Andhra Pradesh (107 million), Telangana (79 million), West Bengal (77 million), Maharashtra (74 million), Karnataka (59 million crores), Assam (46 million) and Kerala (29 million) have the highest poultry populations.

    Try answering this PYQ:

    Consider the following statements:

    1. Agricultural soils release nitrogen oxides into environment.
    2. Cattle release ammonia into environment.
    3. Poultry industry releases reactive nitrogen compounds into environment.

    Which of the statements given above is/are correct?

    (a) 1 and 3 only

    (b) 2 and 3 only

    (c) 2 only

    (d) 1, 2 and 3

     

    [wpdiscuz-feedback id=”gv4dtzo9jr” question=”Please leave a feedback on this” opened=”1″]Post your answers here.[/wpdiscuz-feedback]

     

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  • Why is there a push for Asset Monetization?

    Finance Minister has recently announced the framework for the National Monetization Pipeline (NMP) and its process is under discussion.

    What is Asset Monetization?

    • Asset Monetization involves the creation of new sources of revenue by unlocking of the value of hitherto unutilized or underutilized public assets.
    • Internationally, it is recognized that public assets are a significant resource for all economies.
    • Many public sector assets are sub-optimally utilized and could be appropriately monetized to create greater financial leverage and value for the companies and of the equity that the government has invested in them.
    • This helps in the accurate estimation of public assets which would help in the better financial management of government/public resources over time.

    What is the National Monetization Pipeline?

    • The NMP names a list of public assets that will be leased to private investors.
    • Only brown-field assets, which are assets that are already operational, are planned to be leased out under the NMP.
    • So, to give an example, an airport that is already operational may be leased out to an investor.
    • Assets that are yet to be developed, such as an undeveloped piece of land, for example, may not be leased out.
    • Importantly, there won’t be any transfer of ownership from the government to the private sector when assets are leased out.
    • The government only plans to cede control over its assets for a certain period of time, after which the assets must be returned to the government unless the lease is extended.

    Will NMP help the economy?

    • Better control and utilization: Economists generally believe that scarce assets are better managed and allocated by the private sector than by the government. So to the extent that the NMP frees assets from government control, it can help the economy.
    • Freeing Capital: The government believes that leasing out public assets to private investors will help free capital that is stuck in these assets.
    • Infra generation: The government can use this money, in turn, to build fresh infrastructure under the National Infrastructure Pipeline (NIP).
    • Economic boost: In fact, the proceeds from the NMP are expected to account for about 14% of the total outlay for infrastructure under the NIP. The government believes all this spending will boost economic activity.
    • A perfect model: Analysts also believe that the government has now through the NMP found the right model for infrastructure development.
    • Source of finance: The government, they say, is best suited to tackle the ground-level challenges in building infrastructure, while the private sector can operate and offer indirect finance to these projects through the NMP.

    For example, say the government has invested thousands of crores in a road project. It may take the government decades to recover its investment through the annual toll revenues.  Instead, the government can recover a good chunk of its investment by leasing out the right to collect toll for the next 30 years to a private investor.

    What are the risks?

    • Political lobbying: The allocation of assets owned by governments to private investors is often subject to political influence, which can lead to corruption. In fact, many in the Opposition allege that the NMP will favour a few business corporations that are close to the government.
    • Burden of opportunity cost: The expected boost to economic activity due to higher government spending may also need to be weighed against the opportunity costs. For one, the money that the government collects by leasing out assets comes from the pockets of the private sector. So higher government spending will come at the cost of lower private spending.
    • Legal uncertainties: The NMP also does not address the various structural problems such as legal uncertainty and the absence of a deep bond market that hold back private investment in infrastructure.
    • Sheer Privatization: There are also concerns that the leasing of airports, railways, roads and other public utilities to private investors could lead to higher prices for consumers. If the government merely cedes control of public utilities to private companies without taking steps to foster greater competition, it can indeed lead to poor outcomes for consumers.
    • Policy compulsion: The government’s past disinvestment projects such as the sale of Air India did not catch the fancy of investors owing to the stringent conditions set by the government. In the case of Air India’s sale, the buyers were supposed to possess a certain minimum net worth and stay invested in the airline for at least three years.

    What lies ahead?

    • The success of the NMP will depend on the demand for brown-field government assets among private investors.
    • Many analysts also believed that the government was expecting buyers to pay too much for a debt-ridden Air India.
    • The pricing of assets and the terms of sale will thus determine the level of interest that private investors show for assets leased under the NMP.
    • In the past, doubts have been raised about the allocation of airports and other assets to certain private business groups (say Adani Group).
    • So the process that the government adopts this time to allocate assets may come under scrutiny. There is likely to be a demand for an open, competitive auction of assets.

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