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GS Paper: GS3

  • A miracle cure against HIV

    There is considerable excitement in the world of medicine after scientists reported that a woman living with HIV (Human Immunodeficiency Virus) and administered an experimental treatment is likely ‘cured’.

    What is HIV/AIDS?

    • HIV (human immunodeficiency virus) is a virus that attacks cells that help the body fight infection, making a person more vulnerable to other infections and diseases.
    • First identified in 1981, HIV is the cause of one of humanity’s deadliest and most persistent epidemics.
    • It is spread by contact with certain bodily fluids of a person with HIV, most commonly during unprotected sex, or through sharing injection drug equipment.
    • If left untreated, HIV can lead to the disease AIDS (acquired immunodeficiency syndrome).
    • The human body can’t get rid of HIV and no effective HIV cure exists.

    Treating HIV

    • However, by taking HIV medicine (called antiretroviral therapy or ART), people with HIV can live long and healthy lives and prevent transmitting HIV to their sexual partners.
    • In addition, there are effective methods to prevent getting HIV through sex or drug use, including pre-exposure prophylaxis (PrEP) and post-exposure prophylaxis (PEP).

    What is the new breakthrough?

    • US researchers have described the case of a 60-year-old African American woman who was diagnosed with an HIV infection in 2013.
    • She was started on the standard HIV treatment regimen of anti-retroviral treatment (ART) therapy consisting of tenofovir, emtricitabine, and raltegravir.
    • She was given cord blood, or embryonic stem cells, from a donor with a rare mutation that naturally blocks the HIV virus from infecting cells.
    • She was also given blood stem cells, or adult stem cells, from a relative.

    What actually worked?

    • The adult stem cells boosted the patient’s immunity and possibly helped the cord blood cells fully integrate with the lady’s immune system.
    • Now she has no sign of HIV in her blood and also has no detectable antibodies to the virus.
    • Embryonic stem cells are potentially able to grow into any kind of cell and hence their appeal as therapy, though there is no explanation for why this mode of treatment appeared to be more effective.

    Is this treatment the long-sought cure for AIDS?

    • Not at all. While this approach is certainly a welcome addition to the arsenal of treatments, stem cell therapy is a cumbersome exercise and barely accessible to most HIV patients in the world.
    • Moreover, this requires stem cells from that rare group of individuals with the beneficial mutation.
    • Anti-retroviral therapy, through the years, has now ensured that HIV/AIDS isn’t always a death sentence and many with access to proper treatment have lifespans comparable to those without HIV.
    • A vaccine for HIV or a drug that eliminates the virus is still elusive and would be the long-sought ‘cure’ for HIV/AIDS.

    What is the prevalence of HIV/AIDS in India?

    • As per the India HIV Estimation 2019 report, the estimated adult (15 to 49 years) HIV prevalence trend has been declining in India since the epidemic’s peak in the year 2000 and has been stabilizing in recent years.
    • In 2019, HIV prevalence among adult males (15–49 years) was estimated at 0.24% and among adult females at 0.20% of the population.
    • There were 23.48 lakh Indians living with HIV in 2019.
    • Maharashtra had the maximum at 3.96 lakh followed by Andhra Pradesh (3.14 lakh) and Karnataka.
    • ART is freely available to all those who require and there are deputed centers across the country where they can be availed from.

     

     

  • After the Budget’s ‘crypto signal’, India awaits reform

    Context

    In the Union Budget speech, Finance Minister Nirmala Sitharaman announced a 30% flat tax rate levied on any gains made from the transfer of virtual assets including cryptocurrencies and Non-Fungible Tokens (NFTs).

    What is cryptocurrency?

    • Cryptocurrency (crypto) consists of a digital denomination designed to work as a medium of exchange through a distributed computer network (a blockchain) that is not reliant on any central authority such as a government or a bank for its upholding and maintenance.
    • Legal status: The announcement of the tax by the Finance Minister now leads to the assumption that crypto is legal in India.
    • Foreseeable are changes that would, down the road, legitimize and formally legalize the activities of crypto start-ups and enable them to access the necessary support system which might not have been available previously.

    What are the implications of taxing cryptocurrencies in India?

    • While critics are right in observing that the 30% flat tax rate is a harsh rate, this is a premium and price well-worth paying in exchange for what is effectively a ruling-out of prospects for a total ban on crypto by the central government.
    • Scope for innovation: The high tax rate would inevitably hamper the willingness of investors to convert cryptocurrencies into national fiat, this may, in turn, open up more doors for technologically savvy and innovation-minded investors.
    •  The extremely high tax rate and the fact that the losses cannot be offset would invariably propel investors to turn to alternative means of storing and undertaking transactions in cryptocurrencies, without foregoing the significant losses involved as they “switch” back into the rupee.
    • An inadvertent upside of this, then, is the prospective conversion and reallocation of crypto-funds from one form to another.
    • Such transformations would involve DeFi (Decentralised Finance) activities such as staking, lending, and providing liquidity, among others.

    Scope for DeFi in India

    • DeFi (or “decentralized finance”) is “an umbrella term for financial services on public blockchains.
    • With DeFi, one can do most of the things that banks support — earn interest, borrow, lend, buy insurance, trade derivatives, trade assets, and more — but it is faster and does not require paperwork or a third party. 
    • DeFi is global, peer-to-peer (meaning directly between two people, and not routed through a centralised system), pseudonymous, and open to all.
    •  The processes highlighted above would drive innovation in the field of Indian DeFi.

    Concerns

    • Low participation due to high rate: The community of small and medium-sized enterprises (SMEs) and lower-end high net-worth individuals are going to find it most difficult to access the ecosystem given the substantial barriers posed by the tax rates.
    • Lack of clarity: Additionally, when it comes to India’s crypto policy at large, there is a fundamental lack of clarity in aspects other than taxation.
    • There appears to be a push to treat crypto as purely an asset class than a currency.
    • The consolation offered by the Government in the form of the Reserve Bank of India’s CBDC, or Central Bank Digital Currency, will definitely help in pushing for the adoption of digital currencies, but, equally, defeats the fundamental purpose of cryptocurrency, which is decentralization.

    Suggestion

    • Reduce the tax rate:  There is a need to reduce tax rates in the future, though this must be weighed against considerations concerning government revenue and the need to curb speculative bubbles surfacing in relation to the currency.
    • Incorporation of insights: The second reform constitutes the incorporation of insights from seasoned partners from international communities, the key should rest with engaging these individuals for their insights and advice on the best practices associated with cryptocurrency policymaking.

    Consider the question “What is DeFi (decentralised finance)? What are the implications levying high tax on the cryptocurrencies?”

    Conclusion

    Systemic reforms are by no means easy, but they are critical as an amplifier of the successes that India has already accrued in the field and as an accelerator of India’s advancement in the sphere of crypto finance and blockchain social policymaking.

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  • Renewable Purchase Obligations (RPO).

    Telangana CM in harsh words has criticized the Prime Minister over Renewable Purchase Obligations (RPO).

    Why such a gesture by Telangana CM?

    • Telangana has been particularly vocal about the “increasing burden” forced upon states by the Centre on account of the clean energy cess imposed on coal and the RPOs (Renewable Purchase Obligation).

    What are RPOs?

    • Renewable Energy Certificates (REC) is a policy instrument to catalyze the development of renewable energy.
    • It is a market-based mechanism that will help the states meet their regulatory requirements (such as RPOs) by overcoming the geographical constraints on existing renewable potential in different states.
    • Under RPO, power distribution companies purchase a certain percentage of their requirements from renewable energy sources.

    REC Mechanism

    • REC mechanism is a market-based instrument to promote renewable energy and facilitate compliance of renewable purchase obligations (RPO).
    • It is aimed at addressing the mismatch between availability of RE resources in state and the requirement of the obligated entities to meet the RPO.
    • 1 REC is treated as equivalent to 1 MWh.

    How many types of RECs are there?

    There are two categories of RECs, viz., solar RECs and non-solar RECs.

    1. Solar RECs are issued to eligible entities for the generation of electricity based on solar as a renewable energy source.
    2. Non-solar RECs are issued to eligible entities for the generation of electricity based on renewable energy sources other than solar.

    Issues highlighted by Telangana

    • Mandatory purchase: The CM has raised the issue of mandatory purchase of renewables reducing the Plant Load Factor (PLF) for existing thermal power projects.
    • Only solar RPO: The CM questioned the mandate to procure a certain percentage of power from solar energy noting that Telangana had hydropower projects producing over 2,500 MW of power from rivers.
    • Not all states have ample renewables: States have thus far not been able to meet RPO targets, with over a dozen states and UTs achieving less than 60% of RPOs.
    • Penalty for non-compliance: There is a (small) penalty for not meeting RPO obligations. The Centre has proposed to increase penalties on states for non-compliance with RPOs in the draft electricity amendment bill.

    Clarification from the centre

    • States were free to hold their own bids and buy green energy from any developer instead of procuring power based on bids by the SECI.
    • They can choose to have their own bids.

     

     

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  • The myth of the trickle-down

    Context

    There is fear that the way the money will be used by the Centre will disempower the states further, just when they must do most of the heavy lifting on public welfare.

    Wealth creation and trickle-down

    • Failure of trickle-down: Evidence from around the world is that the economic policy paradigm, of first increasing the overall size of the pie by reducing taxes at the top and then “redistributing” the wealth, has not delivered benefits to people.
    • Gandhiji had declared that he was not against wealth creators. He lauded wealth creation.
    • However, it must not be at the cost of workers and welfare.
    • Wealth creators must be trustees of the wealth they create, not its exclusive owners.

    The demand-side problem of the Indian economy

    • The Indian economy is suffering from a chronic “demand-side” problem that is becoming worse with misguided economic policies.
    • Young people who have been getting educated in larger numbers than before, even learning vocational skills, cannot find jobs.
    •  If people don’t earn, demand will not increase, and investments in businesses will not be attractive.
    • Moreover, frustrated youth are tinderboxes for social unrest.

    Financial globalization and its impact on India

    • Around the world, there is a reaction to the financial globalization of the last 30 years.
    • In his book, Davos Man, Peter Goodman explains how the wealthiest people have influenced economic policies in democratic countries from the 1990s to make themselves wealthier.
    • Thomas Piketty has documented how wealth inequalities have increased alarmingly.
    • Wealth has accumulated at the top, with regressive tax policies along with deregulation.
    • Government expenditure on social reforms has been crimped.

    Way forward

    • The global economy must move on from hyper-financial, deregulated capitalism, which has given easy money too much freedom.
    • They must move out from their ideological ruts.
    • Invest in human capital: Until the economy grows there will be no resources to invest in human development — whereas China invested in human development before its economic take-off.
    • Protection to industrial sector: That an unprepared industrial sector will thrive in global free trade — whereas the UK and US (and Japan and China too), grew their industrial sectors behind walls of protection, and then demanded that the rest open their markets to the might of their enterprises.
    • Inclusive growth: Political divisions by religion and caste are tearing India’s social fabric again. The Indian economy must grow inclusively to repair it.

    Conclusion

    Indian policymakers must urgently discover India’s own, contextually appropriate model of development and shed defunct economic theories.

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  • Time to rationalise fuel taxes

    Context

    The disconnect between retail and wholesale inflation suggests that the two measures are driven by distinct and unrelated shocks.

    The disconnect between retain inflation and wholesale inflation

    •  In the months between April 2020 and November 2020, retail inflation remained above 6%, while average wholesale inflation was -0.20%.
    • During the financial crisis (2008-2009) wholesale inflation came down significantly as commodity prices crashed after a boom, but retail inflation kept rising.
    • Correlation: This disconnect is reflected in the contemporaneous correlation between these two measures of inflation, which we find to be very low (0.04), and not significant.

    Understanding the reasons for the disconnect

    •  We cannot rule out feedback from wholesale inflation to retail inflation.
    • To better explore this, it helps to understand the driving forces behind retail and wholesale inflation. 
    • Driving factors for CPI: Retail inflation is closely linked to food and beverage prices, partly because of their higher weightage in the consumer price index (CPI).
    • The dominance of supply shocks: High retail inflation in 2020 was primarily due to the rising prices of food and beverages.
    • The surge was likely led by the usual supply shocks—rainfall, agricultural productivity, or Covid-19-induced supply shocks.
    • This suggests two important features of Indian retail inflation: it is predominantly led by supply shocks (food inflation shock) and it is transitory in nature.
    • Driving factor for WPI: High wholesale inflation in recent months was mainly due to rising prices in fuel and power and manufacturing, which together comprise around 77% of the wholesale price index (WPI).
    • Rising fuel and energy prices in India were a result of the recent increase in global oil prices.

    Takeaways

    • High wholesale inflation should not warrant any immediate policy responses as the two inflation measures seem to reflect different things.
    • Overall, the high correlation between world energy inflation and India’s wholesale inflation (0.88) indicates that India’s wholesale inflation is predominantly driven by world commodity prices.
    • On the other hand, the low correlation between India’s retail inflation and world energy inflation (-0.13, and not significant), suggests that India’s retail inflation is primarily driven by domestic food prices.
    • Higher wholesale inflation implies a higher profit margin for producers, which acts as an incentive for investment
    •  There are, in fact, some early signs of a revival in investment in recent quarters, and policy must be careful not to derail this.

    Policy options

    • Given the pass-through of wholesale inflation into retail inflation, if the ongoing commodity boom persists, then the fuel and power component of the WPI is likely to raise retail inflation directly.
    • At that point, there would be some urgency to increase the interest rate, which may be premature and could dampen the revival of growth prospects.
    • To avoid the interest rate response, the best option going forward would be to rationalise fuel taxes, to reduce the pass-through of global commodity prices into wholesale prices and ultimately into retail inflation.

    Conclusion

    The correct fiscal-monetary coordination requires fiscal policy not to be inflationary, so that the RBI can support growth by keeping interest rates low.

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    Source:

    https://www.financialexpress.com/opinion/time-to-rationalise-fuel-taxes-oil-is-a-major-input-in-production-hence-a-tax-on-it-is-highly-inflationary/2430635/

  • India’s geospatial sector

    Context

    Last year new guidelines took effect to completely de-regulate the geospatial sector for Indians.

    Potential of India’s geospatial sector

    • India has a robust ecosystem in geospatial, with the Survey of India (SoI), the Indian Space Research Organisation (ISRO), remote sensing application centres (RSAC)s, and the National Informatics Centre (NIC) in particular, and all ministries and departments, in general, using geospatial technology.
    • However, the full benefits have yet to percolate to the public; neither is there much contribution to the nation’s GDP.
    • The Prime Minister’s speech during Independence Day and mention of geospatial in the Union Budget have created the necessary buzz.
    • The last year has also witnessed some activity on the ground.
    • The most noticeable was the over subscription of the initial public offering of MapmyIndia.
    • The other noticeable activity was the launching of a city mapping programme by Genesys International in India.
    • Such an aggressive stance by investors for geospatial was not seen in the earlier regime; it is certain that the new guidelines have played a role.

    Challenges

    • Lack of demand: There is no demand for geospatial services and products on a scale linked to India’s potential and size.
    • This is mainly due to the lack of awareness among potential users in government and private.
    • Lack of skilled manpower: The other hurdle has been the lack of skilled manpower across the entire pyramid.
    • Unavailability of foundation data: The unavailability of foundation data, especially at high-resolution, is also a constraint.
    • Lack of clarity on data sharing: The lack of clarity on data sharing and collaboration prevents co-creation and asset maximisation.
    • Lastly, barring a few cases, there are still no ready-to-use solutions especially built to solve the problems of India.

    Suggestions

    •  Despite one year since the new guidelines came into effect, users are still not fully aware of things.
    • Publish policy document: First and foremost is the need to publish the entire policy document and make government and private users aware of things.
    • Data sharing protocol: The data available with government departments should be unlocked, and data sharing should be encouraged and facilitated.
    • Standards: The Government needs to invest in developing standards and must mandate the adoption of standards
    • Foundation data: While different types of data will be produced on a project-to-project basis, there is a need to generate foundation data across India.
    • This should include the Indian national digital elevation model (InDEM), data layers for cities, and data of natural resources.
    • Local technology and solutions should be promoted, and competition should be encouraged for quality output.
    • As the new guidelines prevent high-accuracy data being stored in overseas clouds, there is a need to develop a geospatial data cloud locally and facilitate a solution as service.
    • Professionals: Unlike the West, India lacks a strata of core professionals who understand geospatial end-to-end. India should start a bachelor’s programme in geospatial also in the Indian Institutes of Technology and the National Institutes of Technology.
    • Besides these, there should be a dedicated geospatial university.

    Conclusion

    The geospatial sector in the country is rightly positioned for investment. However, clarity on the issues discussed and the creation of an enabling ecosystem are essential.

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  • Prevention of Money Laundering Act (PMLA)

    The Supreme Court is looking into allegations of the metamorphosis of the Prevention of Money Laundering Act (PMLA), brought to sniff out drug money, into a potent weapon to raid rivals and deny rights.

    What is meant by money laundering?

    • Money laundering is the process of making significant amounts of money obtained through criminal activities, such as drug trafficking or terrorist funding, appear to have come from a legitimate source.
    • Large profits are made by illegal arms sales, drug trafficking, smuggling and prostitution rings, insider trading, bribery, and computer fraud schemes.
    • As a result, it provides an incentive for money launderers to “legitimize” their ill-gotten gains through money laundering.
    • The money generated is referred to as ‘dirty money,’ and money laundering is the act of converting ‘dirty money’ into ‘legitimate’ money.

    Money Laundering Procedure:

    It is a 3-stage process. They are:

    • Placement: The first stage involves the injection of crime money into the formal financial system.
    • Layering is the second stage, money injected into the system is layered and spread over various transactions in order to conceal the money’s tainted origin.
    • Integration: In the third and final stage, money enters the financial system in such a way that the initial association with the crime is sought to be erased, and the money can then be utilized as clean money by the offender.

    Some of the most Common Money Laundering Methods:

    • Bulk cash smuggling, cash-intensive businesses, round-tripping,trade-based laundering, shell companies and trusts, bank capture, gambling, real estate, black salaries, fictional loans, hawala, and false invoicing

    Prevention of Money Laundering Act (PMLA)

    • PMLA, 2002 is an Act of the Parliament of India enacted by the NDA government to prevent money laundering and to provide for confiscation of property derived from money laundering.
    • It was enacted in response to India’s global commitment (including the Vienna Convention) to combat the menace of money laundering.
    • PMLA and the Rules notified there under came into force with effect from July 1, 2005.
    • The act was amended in the year 2005, 2009 and 2012.

    Objectives of PMLA

    The PMLA seeks to combat money laundering in India and has three main objectives:

    1. To prevent and control money laundering.
    2. To confiscate and seize the property obtained from the laundered money; and
    3. To deal with any other issue connected with money laundering in India.

    Key definitions

    • Payment System: A system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them. It includes the systems enabling credit card, debit card, smart card, money transfer or similar operations.
    • Money-laundering: Whosoever directly or indirectly attempts to indulge or assist other person or actually involved in any activity connected with the proceeds of crime and projecting it as untainted property.
    • Attachment: Prohibition of transfer, conversion, disposition or movement of property by an appropriate legal order.
    • Proceeds of crime: Any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence.

    Salient features

    • Punishment and Jail term: The Act prescribes that any person found guilty of money laundering shall be punishable with rigorous imprisonment from three years to seven years. The maximum punishment may extend to 10 years instead of 7 years.
    • Powers of attachment of tainted property: The Director or officer above the rank of Deputy Director with the authority of the Director, can provisionally attach property believed to be “proceeds of crime”.
    • Adjudicating Authority: It is the authority appointed by the central government which decides whether any of the property attached or seized is involved in money laundering.
    • Presumption in inter-connected transactions: Where money laundering involves two or more inter-connected transactions. It is presumed that the remaining transactions form part of such inter-connected transactions.
    • Burden of proof: A person, who is accused of having committed the offense of money laundering, has to prove that alleged proceeds of crime are in fact lawful property.
    • Appellate Tribunal: It is given the power to hear appeals against the orders of the Adjudicating Authority and any other authority under the Act. Its orders are not final and can be challenged.
    • Establishment of Special Court: To ensure speedy trial.

    Issues with PMLA

    • Misuse of central agencies: PMLA is being pulled into the investigation of even ordinary crimes by the Enforcement Directorate.
    • Seizing of assets: Assets of genuine victims have been attached. The ED could just walk into anybody’s house.
    • Politically motivated raids: In all this, the fundamental purpose of PMLA to investigate the conversion of “illegitimate money into legitimate money” was lost.
    • Opacity of charges: Petitioners pointed out that even the Enforcement Case Information Report (ECIR) – an equivalent of the FIR – is considered an “internal document” and not given to the accused.
    • Vagueness over evidences: The accused is called upon to make statements that are treated as admissible in evidence.
    • Harassment: The ED begins to summon accused persons and seeks details of all their financial transactions and of their family members.
    • Against individual liberty: The initiation of an investigation by the ED has consequences that have the potential of curtailing the liberty of an individual.

    Way ahead

    • It is unlikely that corruption can be substantially reduced without modifying the way government agencies operate.
    • The fight against corruption is intimately linked with the reform of the investigations.
    • Therefore the adjudicating authorities must work in cooperation and ensure the highest standards of transparency and fairness.

     

     

  • MHA recommends ban on 54 Chinese Apps

    The Ministry of Home Affairs has recommended a ban on 54 Chinese mobile applications that pose a threat to the country’s security.

    Legal basis of app ban

    • The ban has been enforced under Section 69A of the Information Technology Act, 2000.
    • This act empowers to issue directions for blocking for public access of any information through any computer resource.
    • This is done in the interest of –
      1. sovereignty and integrity of India
      2. defense of India, security of the State
      3. friendly relations with foreign states
      4. public order (or)
      5. for preventing incitement to the commission of any cognizable offense relating to above

    Why MHA has put such a ban?

    • Most of these apps were operating as clones or shadow apps of the apps that had earlier been banned by the government.
    • There was stealing and secretly transmitting users’ data in an unauthorized manner to servers that have locations outside India.
    • These apps largely impact the psychosocial abilities of the users.
    • The immediate decision has been taken in a specific strategic and national security

    Implications of the ban

    • India’s offensive: The move comes as an exercise of coercive diplomacy with China amid the heated exchange of words during the diplomatic boycott on the winter Olympics.
    • Hurting china’s ambitions: The ban may affect one of China’s most ambitious goals, namely to become the digital superpower of the 21st century.
    • Data nationalization: The ban is also based on the recognition that data streams and digital technology are a new currency of global power.

    Issues with the ban

    • Not only China: Data privacy and data security concerns are not limited only to Chinese apps.
    • Harm already caused: The apps that were banned were very popular in India and the move to block them comes after these apps had already amassed hundreds of millions of users in India.
    • Further dependency on China: The ban on Chinese mobile apps is a relatively soft target, as India remains reliant on Chinese products in several critical and strategically sensitive sectors.

    Way Forward

    • There is a strong case to revise the key legislations and sync them to change the digital environment.
    • Data privacy and security remain to be major challenges emanating from the ongoing digital revolution.
    • Thus, a data protection law is long overdue.
    • India must speed up indigenization, research, and development, and frame up a regulatory architecture to claim data sovereignty.

     

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  • ‘climate smart’ agriculture

    Context

    In the backdrop of the 2070 carbon neutrality target set by India at the CoP26 in Glasgow, the Union Budget for 2022-23 has listed “climate action” and “energy transition” as one of the four priorities for the Amrit Kaal.

    Climate related announcement in Budget 2022-23

    • An additional allocation of Rs 19,500 crore for solar PV modules has been made.
    • The finance minister also talked of co-firing of 5-7 per cent of biomass pellets in thermal power plants, “sovereign green bonds” and a “battery-swapping policy”.
    • These are positive steps towards making the energy and transport sectors less polluting.

    How agriculture impact environement

    • Agriculture contributes 73 per cent of the country’s methane emissions. 
    • Third largest emitter: India has kept away from the recent EU-US pledge to slash methane emissions by 30 per cent by 2030, despite the country being the world’s third largest emitter of methane.
    • As per the national GHG inventory, the agriculture sector emits 408 MMT of carbon-dioxide equivalent and rice cultivation is the third highest source (17.5 per cent) of GHG emissions in Indian agriculture after enteric fermentation (54.6 per cent) and fertiliser use (19 per cent).
    • Paddy fields are anthropogenic sources of atmospheric nitrous oxide and methane, which have been reckoned as 273 and 80-83 times more powerful than carbon dioxide in driving temperature increase in 20 years’ (Sixth Assessment Report IPCC 2021).
    • Moreover, paddy fields require about 4,000 cubic metres of water per tonne of rice for irrigation.
    •  There is scientific evidence that intermittent flooding reduces water and methane emissions but increases nitrous oxide emissions.
    • Thus, lowering of methane emissions through controlled irrigation does not necessarily mean net low emissions. 
    • Role of subsidies and procurement policies: The environmental damage caused by agriculture is largely a result of the various kinds of subsidies — on urea, canal irrigation and power for irrigation — as well as the minimum support prices (MSP) and procurement policies concentrated on a few states and largely on two crops, rice, and wheat.

    Excess rice and wheat stock

    • As of January 1, the stocks of wheat and rice in the country’s central pool were four times higher than the buffer stocking requirement.
    • Rice stocks with the Food Corporation of India (FCI) are seven times the buffer norms for rice.
    • The financial value of these excessive grain stocks is Rs 2.14 lakh crore, of which Rs 1.66 lakh crore is because of excess rice stocks — as per the economic cost of rice and wheat given by the FCI.
    • All this does not just reflect inefficient use of scarce capital, the amount of greenhouse gases (GHG) embedded in these stocks is also large.

    Way forward

    • Carbon tax: According to the IMF, the world needs a carbon tax of $ 75 per tonne by 2030 to reduce emissions to a level consistent with a 2 degree Celsius warming target.
    • India does not have an explicit carbon-price yet, but many countries have begun to implement carbon pricing.
    • Revisiting policies: The Economic Survey 2021-22 points out that the country is over-exploiting its ground water resource (see map), particularly in the northwest and some parts of south India.
    • This calls for revisiting policies to subsidise power and fertilisers, MSP and procurement and reorient them towards minimising GHG emissions.
    • Farmer groups and the private sector can be mobilised to develop carbon markets in agriculture, both at the national and international levels, which can reward farmers in cash for switching from carbon-intensive crops to lower GHG emissions.

    Consider the question “Elaborate on the impact of agriculture on the environment. Suggest the changes needed in Indian agriculture policies to reduce the impact.”

    Conclusion

    Such a move towards “net-zero” agriculture will give India a “climate smart” agriculture in Amrit Kaal. And, if we can protect productivity levels with a low-carbon footprint, it will help India to access global markets too.

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  • Back in news: LIC Disinvestment

    The Union government has filed a draft document with the stock market regulator for selling 5% of its shares in the Life Insurance Corporation (LIC) of India.

    Details of the IPO

    • The IPO is a 100% OFS [offer for sale] by the Government of India and entails no fresh issue of shares by LIC.
    • 6 Crore shares are on offer representing 5% of the government’s equity in the firm.
    • As much as 10% of the offer could be reserved for LIC policyholders, as per the regulatory filing, and another 5% of the shares may be reserved for employees.

    About Life Insurance Corporation of India (LIC)

    • LIC is an Indian state-owned insurance group and investment corporation owned by the Government of India.
    • It was founded in 1956 when the Parliament of India passed the Life Insurance of India Act that nationalized the insurance industry in India.
    • Over 245 insurance companies and provident societies were merged to create the state-owned LIC.

    Why LIC?

    • LIC is India’s largest financial institution.
    • When listed on stock exchanges, it could easily emerge as the country’s top listed company in terms of market valuation, overtaking current leaders Reliance and TCS.
    • It is also the largest investor in government securities and stock markets every year.
    • On average, LIC invests Rs 55,000 crore to Rs 65,000 crore in stock markets every year and emerges as the largest investor in Indian stocks.
    • LIC also has huge investments in debentures and bonds besides providing funding for many infrastructure projects.

    Impacts of listing of LICs

    • Profit-making for govt: The government is trying to make the most of the brand value of LIC, given that it is one of the few remaining profit-making entities owned by the state.
    • Better returns: Listing will boost LIC’s efficiency and thereby policy returns.
    • Reforming the insurance sector: LIC will also become more competitive. This will put pressure on its peers to innovate, benefitting policyholders in terms of pricing, product features, and services.
    • Better financial position: Less govt interference will be a positive for LIC’s financial health.
    • Risk-free: As long as a sovereign guarantee over the maturity proceeds and the sum assured to continue, policyholders won’t perceive any risk.

    Various challenges

    • Structural challenges: LIC can even evolve into a bank like many of its global peers like Axa, Berkshire, and Munich Re.
    • Market hurdles: LIC’s own issues are not the only challenge the company would face in going public. It also remains to be seen if the Indian share market is ready to absorb such a large public issue.
    • Impact on growth: The size of the IPO will determine the extent of liquidity it will suck out, but Indian markets do not have the depth to take the issue of a very size.
    • Fears of disclosure: The Company’s books and operations have been opaque for far too long but it is trusted by 250 million policyholders.
    • Investors trust at risk: Being one of the biggest financial institutions of the country, the move to privatize LIC will shake the confidence of the common man and will be an affront to our financial sovereignty.

    Way Forward

    • Over the years, LIC has become the lender of last resort to the Government of India.
    • Confronted with an unprecedented fiscal deficit and worried by an economy in crisis, the government has to find resources.
    • This disinvestment is also a preferred option for ideological and practical reasons.
    • The government could utilize the money gained by selling off its stakes to improve services in public goods like infrastructure, health, and education.

     

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