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GS Paper: GS3

  • Places in news: Ningbo Port

    China has partially shut down the world’s third-busiest container port, the Ningbo Port, after a worker there tested positive for Covid-19.

    Port of Ningbo-Zhoushan

    • This port is the busiest in the world in terms of cargo tonnage.
    • It handled 888.96 million tons of cargo in 2015.
    • The port is located in Ningbo and Zhoushan, on the coast of the East China Sea, in Zhejiang province on the southeast end of Hangzhou Bay, across which it faces the municipality of Shanghai.
    • The port is at the crossroads of the north-south inland and coastal shipping route, including canals to the important inland waterway to interior China, the Yangtze River, to the north.
    • The port consists of several ports which are Beilun (seaport), Zhenhai (estuary port), and old Ningbo harbour (inland river port).

    What is the potential impact of the closure?

    • Despite the diversion of shipments to other terminals, experts are anticipating a backlog of consignments with average wait times being expected to rise.

    How is it likely to affect global trade?

    • In the aftermath of Covid-19, global supply chains have remained fragile mainly on account of closures and lockdowns that affected both the manufacturing and the logistical segments of the chain.
    • This has not only resulted in a growing backlog of shipments but has also caused freight charges to go up as demand outgrew the supply.
    • Extended closure of one of the biggest terminals at the third-busiest port in the world could further exacerbate the stress in global trade.

  • How e-RUPI can transform government’s welfare schemes

    Context

    Recently e-RUPI was launched by the Prime Minister.

    About e-RUPI

    • It is a digital prepaid, purpose, and person-specific payment utility. 
    • Built on the UPI platform, e-RUPI is easy to scale by the issuer.
    • At the point of presence, the verification code received by the beneficiary is shared with the service provider to authenticate and authorize the transaction: Contactless, real-time payment, and online settlement of funds into the service provider’s bank account.
    • Fourteen leading banks have already integrated it with their systems.
    • e-RUPI is almost custom-designed for school voucher programs.
    • The efficacy of these programs is well established in many countries. 

    Advantages

    The adoption of e-RUPI in various government programs will enhance business efficiency, simplicity, transparency, and accountability in these programs.

    1) e-RUPI can make cash transfer purpose and person-specific

    • Policymakers have debated whether direct cash transfers deliver benefits more efficiently than in-kind transfers like the Public Distribution System (PDS) and fertilizers.
    • e-RUPI could break the policy logjam with the following advantages:
    • 1) It will make cash transfers purpose- and person-specific.
    • 2) Freeing them from dependence on bank accounts.
    • 3) Providing visibility from the time of issue until redemption.

    2) e-RUPI can make PDS more efficient

    • The inefficiency of PDS is rooted in high overhead costs, leakages, exclusion, and inefficiencies.
    • A food-specific e-RUPI voucher will allow beneficiaries to buy rations from an outlet of their choice.
    • It will also help promote the One Nation, One Ration Card.
    • The move will also help in removing price distortion and the redemption of the voucher at market price by merchants within and outside the PDS network.

    3) Streamline fertilizer subsidy

    • e-RUPI will enable farmers to buy fertilizer at nominal prices with direct credit of the subsidy amount into the account of the authorised dealers.
    • As far back as 2011, a task force on direct transfer of subsidies on kerosene, LPG and fertilisers headed by Nandan Nilekani had suggested a roadmap for direct cash transfer of fertiliser subsidies in a phased manner.
    • The e-RUPI will allay apprehensions about creating an IT infrastructure, managing nearly 3,00,000 fertilizer sale points, the collapse of dealer network due to liquidity squeeze in the event of subsidy payments getting delayed, and a complex system of timely credit of subsidy into an estimated 129 million Aadhaar-linked bank accounts of farm households.

    4) Basic income support

    • The Covid-19 pandemic has revived interest in Universal Basic Income (UBI).
    • The lockdowns to contain the pandemic exposed the poor to acute distress, due to loss of means of livelihood.
    • e-RUPI can mitigate their stress by rapidly distributing food and cash vouchers at scale.

    5) Ayushman Bharat

    • In the Ayushman Bharat healthcare initiative beneficiaries can be given e-RUPI vouchers of designated value tenable at empanelled healthcare facilities, providing them portability and facility choice.
    • The service provider will benefit from the immediate payment.

    Way forward

    • Ownership agency: The Aadhaar experience suggests ownership must vest with a specific agency.
    • Make distribution and acceptance compatible: Making the distribution and acceptance of e-RUPI incentive-compatible is recommended, as demonstrated by the popularisation of prepaid telephony by the telecom industry.
    • Light regulation and competition promotion: Light regulation and the opening of e-RUPI to the competition will spur innovation and adoption.
    • All banks, small and big, NBFCs, non-bank PPI issuers, and telcos may be allowed to issue it later.

    Conclusion

    e-RUPI opens up a world of opportunities to the government, people, and businesses to provide, avail, and pay for services seamlessly.

  • General Insurance Business (Nationalization) Amendment Bill, 2021

    The General Insurance Business (Nationalization) Amendment Bill, 2021, was recently passed by both houses of parliament.

    What is the amendment?

    • The Bill seeks to amend the General Insurance Business (nationalization) Act, 1972.

    What is the GIB Act?

    • The 1972 Act set up the General Insurance Corporation of India (GIC).
    • The businesses of the companies nationalized under the Act were restructured in four subsidiary companies of GIC: (i) National Insurance, (ii) New India Assurance, (iii) Oriental Insurance, and (iv) United India Insurance.
    • The Act was subsequently amended in 2002 to transfer the control of these four subsidiary companies from GIC to the central government, thereby making them independent companies.
    • Since 2000, GIC exclusively undertakes the reinsurance business.

    Answer this PYQ:

    Microfinance is the provision of financial services to people of low-income groups. This includes both the consumers and the self-employed. The service/ services rendered under micro-finance is/are: (CSP 2011)

    1. Credit facilities
    2. Savings facilities
    3. Insurance facilities
    4. Fund Transfer facilities

    Select the correct answer using the codes given below the lists:

    (a) 1 only

    (b) 1 and 4 only

    (c) 2 and 3 only

    (d) 1, 2, 3 and 4

     

    [wpdiscuz-feedback id=”dq8yt6bg6b” question=”Please leave a feedback on this” opened=”1″]Post your answers here: [/wpdiscuz-feedback]

    Key highlights of the Amendment Bill

    • Government shareholding threshold: The Act requires that shareholding of the central government in the specified insurers (the above five companies) must be at least 51%.  The Bill removes this provision.
    • Change in definition of general insurance business: The Act defines general insurance business as fire, marine or miscellaneous insurance business.
    • Transfer of control from the government: The Bill provides that the Act will not apply to the specified insurers from the date on which the central government relinquishes control of the insurer.
    • Notifying terms and conditions: The Bill provides that schemes formulated by the central government in this regard will be deemed to have been adopted by the insurer.
    • Liabilities of directors: The Bill specifies that a director of a specified insurer, who is not a whole-time director, will be held liable only for certain acts.

    Significance of the bill

    • De-regulation: The move is part of the government’s strategy to open up more sectors to private participation and improve efficiency.
    • Capital infusion: Privatization will bring in more private capital in the general insurance business and improve its reach to make more products available to customers.
    • Insurance coverage: This will enhance insurance penetration and social protection to better secure the interests of policyholders and contribute to faster growth of the economy

    Concerns of the opposition

    • The Opposition is of the view that privatization will be detrimental to the interests of the public.
    • They wanted a proper discussion on the pros and cons of the Bill rather than passing it in a hurry.
    • They wanted an expert committee of the Cabinet to study the impact before passing the legislation.
    • They are worried about large-scale employee layoffs and short-term investors entering and exiting these entities once the Act comes into force.

    Also read:

    [Burning Issue] Divestment of LIC

  • What is the Sovereign Right to Taxation?

    Scrapping the retrospective levy is believed to provide clarity to investors by removing a major source of ambiguity on taxation laws, the government has stressed the need to establish its “sovereign right to taxation”.

    Defining a Tax

    • A document on the Ministry of Statistics and Programme Implementation website quotes the definition of tax as a “pecuniary burden laid upon individuals or property owners to support the government; a payment exacted by legislative authority”.
    • It states that a tax “is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority”.

    The ‘sovereign right to taxation’

    • In India, the Constitution gives the government the right to levy taxes on individuals and organizations but makes it clear that no one has the right to levy or charge taxes except by the authority of law.
    • Any tax being charged has to be backed by a law passed by the legislature or Parliament.

    Taxation in India

    • Taxes in India come under a three-tier system based on the Central, State, and local governments and the Seventh Schedule of the Constitution puts separate heads of taxation under the Union and State list.
    • There is no separate head under the Concurrent list, meaning Union and the States have no concurrent power of taxation, as per the document.

    Back2Basics:

    Taxation in India: Classification, Types, Direct tax, Indirect tax

  • Common survey to count India’s elephant and tiger populations

    From December, India will move to a system that will count tigers and elephants as part of a common survey.

    Common survey for elephants and tiger

    • Given that 90% of the area occupied by elephants and tigers is common, and once estimation methods are standardized, having a common survey can significantly save costs.
    • The tiger survey is usually held once in four years and elephants are counted once in five years.
    • According to the most recent 2018-19 survey, there were 2,997 tigers in India while in the last count in 2017, there were 29,964 elephants in India.

    Answer this PYQ:

    With reference to Indian Elephants, consider the following statements :

    1. The leader of an elephant group is a female.
    2. The maximum gestation period can be 22 months.
    3. An elephant can normally go on calving till the age of 40 years only.
    4. Among the States in India, the highest population is in Kerala.

    Which of the statements given above is/are correct ?

    (a) 1and 2 only

    (b) 2 and 4 only

    (c) 3 only

    (d) 1,3 and 4 only

     

    [wpdiscuz-feedback id=”8fqs423tt2″ question=”Please leave a feedback on this” opened=”1″]Post your answers here: [/wpdiscuz-feedback]

    Why need a common survey?

    • Based on sightings in camera traps and indirect estimation methods, tiger numbers are computed.
    • Elephant numbers largely rely on States directly counting the number of elephants.
    • In recent years, techniques such as analyzing dung samples have also been deployed to estimate birth rates and population trends in elephants.

    About All India Tiger Estimation

    • The tiger count is prepared after every four years by the National Tiger Conservation Authority (NTCA) provides details on the number of tigers in the 18 tiger reign states with 50 tiger reserves.
    • It is conducted by the NTCA and the Wildlife Institute of India (WII) in collaboration with the State Forest Departments.
    • The entire exercise spanned over four years is considered to be the world’s largest wildlife survey effort in terms of coverage and intensity of sampling.
    • Over 15, 000 cameras are installed at various strategic points to capture the movement of tigers.
    • This is supported by extensive data collected by field personnel and satellite mapping.

     

    Back2Basics: Asian Elephants

    • Asian elephants are listed as “Endangered” on the IUCN Red List of threatened species.
    • This has been done as most of the range States except India have lost their viable elephant populations due to loss of habitat, poaching, etc.
    • Current population estimates indicate that there are about 50,000-60,000 Asian elephants in the world.
    • More than 60% of the world’s elephant population is in India.

  • Exercise Al–Mohed Al–Hindi

    The maiden bilateral naval exercise between India and Saudi Arabia named ‘AL–Mohed AL–Hindi’ has got underway.

    Must read:

    [Prelims Spotlight] Various Defence Exercises in News

    Ex Al-Mohed AI-Hindi 2021

    • This is the first edition of a bilateral naval exercise between India and Saudi Arabia.
    • It comprises several shore and sea-based drills between the two navies.
    • It reflects the growing defense ties between the two nations in the wake of the Indian Army chiefs’ first visit to the West Asian country last year.
    • INS Kochi is the Indian warship participating in the exercise.
    • The exercise is being held against the backdrop of growing tensions in the Persian Gulf following a drone attack on the tanker MV Mercer Street off Oman.

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  • Privatizing Indian Railways

    Context

    On July 1, 2020, the Indian Railways launched the formal process of inviting private parties to run trains on the Indian railway system. Hopes of a large participation were belied as there were no bids for nine clusters and only two bids for three clusters.

    Why current model of inviting private players to run trains has failed?

    • Lack of equal relationship: IR wants the capital and technology without giving up control, while the concessioner wants a far more equal relationship to be moderated by a regulator.
    • Constraints on efficient decision-making: IR has imposed constraints that prevent efficient decisions and adopted an organisational design that does not take into account the characteristics and associated risks that will determine outcomes and investment decisions.
    • Lumpiness of investment: The biggest dampener is the lumpiness of investment before a single passenger can be carried.
    • High risk involved: Train sets have to be purchased without really knowing how much traffic the service will be able to attract in the face of rising competition from airlines.
    • IR does not guarantee the investor that, in case the concession fails, it will acquire the train sets.
    • Absence of regulator: The other big dampener is the absence of a regulator for resolving disputes.

    Suggestions

    1) Remove the lumpiness of investment by establishing rolling stock company

    • The central issue is how to align the three interests.
    • 1) India’s need to be capable of designing and manufacturing state-of-the-art rolling stock.
    • 2) IR’s need for private capital participation.
    • 3) Private capital’s necessity of earning a profit.
    • Establish a company to lease rolling stock: The above 3 interests can be aligned provided the lumpiness of investment in train sets can be eliminated by establishing a company that leases rolling stock not only to concessioners but also to IR.
    • The rolling stock company, apart from leasing train sets, can also be the window for bringing in new technology.
    • This will also enable reducing the concession period from 35 years to a more reasonable 10-15 years, bringing in competition.
    •  For starters, IRFC, which is already into leasing rolling stock, can be that company.

    2) Bring in new technology by opening IR’s rolling stock market to international manufacturers

    • There is need to move the rolling stock industry up the industrial value chain and bring about a structural change of the Indian economy.
    • Long term arrangement with suppliers: This can only be brought about by a vision that encourages long-term arrangements with rolling stock suppliers.
    • Open the market for global players: An arrangement that gives access to IR’s rolling stock market is the only way to compel global players to share technology and form joint ventures with Indian companies.

    3) Investment in research

    • Technology transfer requires understanding the critical elements of the technology and absorbing them into the design-production process.
    • This calls for the investment of large sums of money and the involvement of universities, research institutes and national laboratories.

    4) Make changes to attract private investors

    • For attracting private players, the risks for the concessioners needs to be reduced.
    • The period of the concession needs to be reduced to around 15 years.
    • Establish regulator: There is a need to establish a regulator and moderate charges like the amount for the maintenance of tracks and stations.

    Conclusion

    With these changes, the plan may still take off. However, the initiative will remain limited to just running trains if there is no long-term vision.

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  • Why central government schemes for discoms have not worked

    Context

    A recent report of Niti Aayog has assessed the losses of discoms to be about Rs 90,000 crore in 2020-21.

    Central government schemes for discoms

    • In 2001, the Accelerated Power Development Scheme was initiated.
    • This was followed by various other schemes with some differences between them.
    •  The government had launched the UDAY scheme in 2015.
    • UDAY did not involve any monetary assistance to the states, but only promised to help the states in reducing the cost of power through coal linkage rationalization, etc.
    • Recently, the government launched a new scheme with a total outlay of around Rs 3.03 lakh crore.
    • It seeks to improve the distribution infrastructure of the distribution companies (discoms) with the primary intention of improving their financial health.
    • The objective of the scheme is to bring down commercial losses in the range of 12-15 percent and also reduce the difference between the average cost of supply (ACS) and average revenue realized (ARR) to zero by 2024-25.
    • The problem with all these schemes (including UDAY) is that they have not been delivered and the financial position of the discoms has only worsened.

    Why did schemes fail to improve the financial health of discoms?

    • Reduction of loss is a managerial issue: Reduction of commercial losses is not really about improving infrastructure, it is more of a managerial issue.
    • The average loss (inclusive of technical and commercial) is about 22 percent today.
    • But several discoms have losses in excess of 40 percent.
    • It is possible to bring down losses from 40 percent to about 15 percent without any significant investments in infrastructure.
    • Investments, however, would be required to bring down losses further to a single-digit level.
    • The governance issues of the scheme is a complex issue.
    • The two most popular parameters which are monitored are the loss levels and the difference between the ACS and ARR.
    • There are inherent problems with these parameters since they keep fluctuating and it is very difficult to fathom their trend on a quarter-wise basis, rendering the release of funds to be tricky and cumbersome.
    • In the scheme now announced by the government, about 26 parameters will be taken into consideration and assigned a score.
    • For some of the parameters, it may be difficult to assign a score across discoms which may lead to some amount of subjectivity.

    Way forward: Alternate approach

    • Provide transitional financial support: An alternate approach that could be considered by the Centre (in lieu of such assistance schemes) is providing only transitional financial support to all discoms, which are privatized under the private-public partnership mode. 
    •  A transitional support of Rs 3,450 crore spread over five years proved to be exceedingly beneficial in the case of discoms in Delhi.
    • Promote privatization: Since in an earlier policy statement the government had mentioned that privatization of discoms is to be promoted, it would make sense to consider this transitional support as a catalyst.

    Conclusion

    Adopting this approach will ensure that the central government moves away from the micro-management of discoms, which inevitably happens if the release of funds is linked to reform-linked parameters on a quarter-wise basis.

     

  • Net-zero emission targets do little to retard carbon grab

    Context

    Earlier this week the Intergovernmental Panel on Climate Change (IPCC) reported on climate science, warning against the folly of a business-as-usual development model.

    What does science say about future pathways

    • Globally, average surface temperatures have already risen by 1.09°C between 1850-1900 and 2010-2019.
    • What happens next depends on our development and technological choices.
    • High fossil fuel use path: As per the the IPCC document, if we followed high fossil fuel development (doubling emissions by 2050), temperatures would rise by 4.4°C (range of 3.3-5.7°C) by 2100.
    • Sustainable pathways: If a more sustainable pathway were pursued average global temperature rise would be 1.4°C (range of 1.0-1.8°C).
    • Regardless, it is likely that the average rise in temperatures will breach the 1.5°C barrier within the next two decades.
    • If emissions are not mitigated rapidly, we are staring at rising climate risks and catastrophic impacts.
    • Human influence is very likely the main reason behind glacial retreat since the 1990s.
    • Since observations began, glaciers have lost the maximum mass during 2010-19.
    • Sea level rise: Even with warming restricted to 1.5°C, we are still on course for more than 2 metres of sea-level rise beyond this century.

    India’s vulnerability to climate change

    • If warming exceeds 4°C, India could see about 40% increase in precipitation annually, leading to extreme rainfall events.
    • Three-quarters of India’s districts are now hotspots of extreme weather events.
    • Since 1990, more than 300 such events have resulted in damages exceeding INR 5.6 lakh crore.

    Changes needed to stabilise temperature rise

    • The IPCC says that in order to stabilise rise in temperatures, two things have to happen:
    • 1) Anthropogenic emissions must become net-zero.
    • 2) In the interim cumulative emissions cannot exceed a global carbon budget.
    • Carbon Budget: To stay within the 1.5°C limit, starting in 2020 the remaining global carbon budget is 300-500 gigatonnes of carbon dioxide (GtCO2) (with a likelihood of 50%-83%).

    Unjust climate politics and net-zero emission targets

    • Of late, several large emitters have promised net-zero emission targets. 
    • CEEW analysts calculate that despite their self-laudatory targets, China would consume 87% of the global carbon space (if it reached net-zero in 2060) and the US would eat up 26% (if it reached net-zero in 2050).
    • Mere announcements of net-zero targets do little to retard the “carbon grab” of the largest emitters.
    •  Rich countries, as a whole, emitted ~25 gigatonnes of carbon dioxide equivalent (GtCO2eq) more than their estimated emission allowance during 2008-20, thanks to non-participation in pre-2020 climate agreements and misuse of accounting loopholes. 
    • Climate justice demands that developed countries now take steps to free up carbon space for others.

    Way forward for India

    • India must adopt a more climate-friendly development pathway for its own sake.
    • Its per capita incomes, energy consumption and carbon footprint are well below the global average but it must deliver high rates of economic growth within a shrinking carbon budget.
    • Shift discourse to economy: The discourse must shift from energy to the economy.
    • There are very few sunrise sectors that are not low-carbon.
    • India must tap new technology frontiers (green hydrogen), new business models (distributed and digitalised services, for distributed energy, EV charging, cold chains), new construction materials (low-carbon cement, recycled plastic), new opportunities in the circular economy of minerals, municipal waste and agricultural residue, and new practices for sustainable agriculture and food systems.
    • Policy and regulatory support: Many of above technologies and business models are proven but need policy and regulatory support.

    Conclusion

    The climate crisis is a strategic threat to our development prospects. It deserves sober, continuing analysis, deliberation and action. The headlines look bad; reality will get worse.

  • Unpacking the resiliency of global trade

    Context

    Past experiences suggest there is hope for global trade recovery in the post-COVID-19 world.

    Impact of pandemic on the global and Indian economy

    • In the last year, the devastating impact of COVID-19 pandemic has shrunk the world economy by 4.4% and global trade by 5.3%.
    • Job losses in the world have been estimated to be to the tune of 75 million.
    • India’s GDP contracted by 7.3% according to the National Statistical Office.
    • About 10 million jobs were lost in India according to the Centre for Monitoring Indian Economy Pvt. Ltd.
    • Around the world, countries have responded to pandemic-induced shortages with protectionist reactions and nationalist aspirations.
    • Such a response has the potential to disrupt complex cross-border supply chains.

    How economic shocks in the past laid foundation for institutional changes

    • The Second World War was responsible for the creation of the Bretton Woods Institutions such as World Bank and International Monetary Fund (IMF) and International Trade Organisation (ITO) were created to help rebuild the shattered post-war economy.
    •  The General Agreement on Tariffs and Trade (GATT) was negotiated in 1947 as a means to reducing barriers to international trade.
    • The oil shocks of the 1970s led to the establishment of the International Energy Agency (IEA) in 1974 and went on to create awareness on the need for global energy security.
    • The financial crisis of 2008 led to the G20 Leaders Summit, an elevation from the G20 Finance Ministers forum in 1999.
    • Increase in global trade: As a result of these developments global trade increased from a mere $60.80 billion in 1950 to $2,049 billion in 1980; $6,452 billion in 2000; $19,014 billion in 2019.

    Changes in the global trade in post-Covid world

    • Financial buffers due to stimulus package: Stimulus packages and forced savings in several countries in the last year have created financial buffers.
    • Resilient supply chain: Global supply chains are expected to be resilient to help revive manufacturing with lower production costs, induce investments and promote technology transfers.
    • Anti-dumping measures at WTO: In a post COVID-19 world, members of the World Trade Organization are expected to make rules to discipline errant nations that are known to dumping goods and erecting trade barriers through multilateral rules.
    • Deeper economic integration through trade arrangements: Mutually beneficial trade arrangements that seek deeper economic integration will be entered into at the bilateral and regional levels.
    • Dominance of technology: Countries that harness technology are expected to dominate international trade in future with a transformational impact on the global economy.
    •  Businesses will aim to harness data for innovation to remain ahead of the curve in a post-COVID-19 world.

    Way forward for India

    • The projections of the International Monetary Fund for India’s economic growth ahead are positive and in line with the general trends world-wide.
    • Focus on value-added manufacturing: Building an ecosystem that incentivises value-added manufacturing and technology-induced finished products should form a part of our long-term strategy.
    • Production Linked Incentive Scheme (PLI) schemes, if carefully nurtured, could lead the industry on that path.
    • Support MSMEs: Supporting MSMEs with cheaper input costs, including raw material and intermediate goods would help sustain them with job creation at the local level.
    •  Developing a synergistic relationship between the big industry and MSMEs is at the core of a successful Atmanirbhar Bharat.
    • Skill upgradation: Skills upgradation to global standards should form a part of India’s strategy in a post-COVID-19 world.

    Conclusion

    The patterns in the past leave much hope for optimism for global trade in the post-COVID-19 crisis in the collective belief that international trade is vital for development and prosperity.