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GS Paper: GS3

  • Global shortage of Semiconductor Chips

    Worldwide carmakers have slashed production due to an abrupt and cascading shortage of semiconductors.

    Semiconductor Chips

    • Semiconductors — also known as integrated circuits (ICs), or microchips — are most often made of silicon or germanium, or a compound like gallium arsenide.
    • It’s the thing that makes electronic items smart and faster.
    • Made from a material, usually silicon, that “semi-conducts” electricity, the chip performs a variety of functions.
    • Memory chips, which store data, are relatively simple and are traded like commodities.
    • Logic chips, which run programs and act as the brains of a device, are more complex and expensive.

    Reasons for shortages

    • Stay-at-home shift: This pushed chip demand beyond levels projected before the pandemic. Lockdowns spurred growth in sales of smartphones, laptops etc to the highest in a decade
    • Fluctuating forecasts: Automakers that cut back drastically early in the pandemic underestimated how quickly car sales would rebound.
    • Stockpiling: Chinese smartphone industry dominates the global market for 5G networking gear — began building up inventory to ensure it could survive US sanctions.

    How is the chip crisis playing out in geopolitics?

    • The global chip crisis and geopolitical tensions with China have shifted focus back on semiconductors.
    • The US, which was once a leader in chip manufacturing, wants the crown back.
    • The protectionist US is looking to bring manufacturing back to America and reduce its dependency on a handful of chipmakers mostly concentrated in Taiwan and South Korea.
    • China’s renewed aggression on Taiwan is also being seen in light of the chip crisis.

    Impact of semiconductor shortages

    • Chip shortages are expected to wipe out $210 billion of sales for carmakers this year, with the production of 7.7 million vehicles lost.
    • Broadband providers were facing delays of more than a year when ordering internet routers.

    Why is it so hard to compete?

    • Manufacturing advanced logic chips requires extraordinary precision, along with huge long-term bets in a field subject to rapid change.
    • Plants cost billions of dollars to build and equip, and they have to run flat-out 24/7 to recoup the investment.
    • A factory also consumes up enormous amounts of water and electricity and is vulnerable to even the tiniest disruptions, whether from dust particles or distant earthquakes.

     

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  • The functioning of INSACOG

    The Indian SARS-CoV-2 Consortium on Genomics (INSACOG) has sequenced about 1,00,000 samples.

    What is INSACOG?

    • INSACOG is a consortium of 10 labs and 18 satellite labs across India tasked with scanning COVID samples from patients and finding the variants that has led to spike in transmission.
    • The institutes involved include the laboratories of the Department of Biotechnology, Council of Scientific and Industrial Research, Indian Council of Medical Research, and the Health Ministry.
    • Its work began in January 2020, by sequencing all samples with a history of travel from the U.K. and a proportion of positive samples in the community.

    Tasks of INSACOG

    • The NCDC is tasked with coordinating collections of samples from the States as well as correlating disease with certain mutations.
    • It is mainly involved in genomic sequencing which is done by isolating the genetic material of the coronavirus samples.
    • It is also tasked with tracking certain combinations of mutations that become more widespread in India.

    What has it found so far?

    • The INSACOG sequenced about 1,00,000 samples as of early December 2021 when this data was last made publicly available.
    • The bulk of its effort has been focussed on identifying international ‘variants of concern’ (VoC) that are marked out by the WHO as being particularly infectious or pathogenic.
    • International travellers who arrive in India and test positive are the ones whose samples usually get sent to INSACOG for determining the genomic variant.

    Why is genome sequencing useful?

    • Understanding mutations: The purpose of genome sequencing is to understand the role of certain mutations in increasing the virus’s infectivity.
    • Immune response: Some mutations have also been linked to immune escape, or the virus’s ability to evade antibodies, and this has consequences for vaccines.
    • Effectiveness of vaccines: Labs across the world, including many in India, have been studying if the vaccines developed so far are effective against such mutant strains of the virus.
    • Evolution of viruses: Studies such as this have shown that Omicron, for instance, has evolved to evade antibodies much better than the Alpha or Delta variant. This prompted the push towards booster doses.

    How is it done?

    • Genomic sequencing is done by isolating the genetic material (RNA) of the coronavirus samples.
    • RNA consists of millions of nucleotide bases and genomic sequencing is about identifying and comparing the sequence in a given sample to a reference sample.
    • Changes in the sequence are clues to mutations that show that the virus may have undergone distinct changes at some key locations.
    • There are several approaches to genome sequencing — whole genome sequencing, next-generation sequencing — that have different advantages.
    • It has now evolved to a stage where large sequencers can process even thousands of samples simultaneously.

    Various challenges that INSACOG faces

    • Geographical variations: Given that COVID-19 is spreading, mutating and showing geographical variations, the original aim of the group was to sequence at least 5% of COVID-19 samples.
    • Shortage of funds: But only 1% has been achieved yet, primarily due to a shortage of funds, insufficient reagents and tools necessary to rapidly scale up.
    • Red-tapism: The INSACOG, in spite of being peopled by expert scientists, is ultimately within the Central government’s communication structure.
    • Infrastructure lacunae: Not all INSACOG labs have the same quality of equipment and manpower and therefore a surge or spike in some cities can mean difficulties in processing.

     

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  • GST Council defers Tax Rate increase on Textiles

    Hours before the new GST rate was to take effect, the GST Council  has decided to temporarily roll back the increase in tax rate for the textiles sector.

    What was the proposal?

    • The GST Council had recommended making certain rate changes for footwear and textiles to correct the inverted duty structure.

    What is Inverted Duty Structure?

    • An inverted duty structure arises when the taxes on output or final product is lower than the taxes on inputs.
    • This creates an inverse accumulation of input tax credit which in most cases has to be refunded.

    A loss for the govt

    • Inverted duty structure has implied a stream of revenue outflow for the government prompting the government to relook the duty structure.
    • For footwear, the government refunds around Rs 2,000 crore in a year.

    What is the present rate of GST on textiles?

    • At present, tax rate on manmade fibre, yarn and fabrics is 18%, 12% and 5%, respectively.
    • Apparel and clothing up to Rs 1,000 per piece currently attracts 5% GST.

    Issues with the tax increase

    • This decision has created a negative impact resulting in drop in demand and recession.
    • The new rate structure would cause closure of around 1 lakh textile units and losses of 15 lakh jobs nationally.

     

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  • Chisumle- Demchok: Worlds’ Highest Motorable Road

    Ladakh’s Chisumle-Demchok Road, when it crosses the Umling Pass, is now the world’s highest motorable road.

    Chisumle- Demchok Road

    • The project to build the road through the pass — a part of Border Roads Organization (BRO) Project Himank — had been completed in 2017, after which vehicles had started playing on the route.
    • The road is in south Ladakh. It passes through Umling La Pass, which is at a height of over 19,000 feet.
    • The height of the pass makes it the highest motorable road in the world, and was recently recognized as such by Guinness World Records.
    • The 52-km road ‘black-top’ tarmac road from Chisumle to Demchok betters the previous record of a road in Bolivia, which connects the volcano Uturuncu at 18,953 feet.
    • The road was built under extremely challenging conditions, as temperatures in the region can fall to below minus 40 degrees Celsius, and oxygen levels go down to 50 per cent below normal.

    Top of the world

    • At the pass, the road is higher than both the base camps for the climb to Mount Everest, the world’s highest mountain.
    • The South Base Camp in Nepal is at a height of 17,598 ft, while North Base Camp in Tibet is at 16,900 ft.
    • The Chisumle-Demchok road is also higher than the Siachen Glacier, which is situated at 17,700 feet.
    • Khardung La in Leh, which at one time was among the highest roads in the world, is at an altitude of 17,582 feet.

    Military significance of the road

    • This road provides a direct route from Chisumle, which lies on the major road coming from Leh, Karu and Nyoma.
    • All of these stations have important military stations which are close to the Line of Actual Control.
    • Demchok has been an India-China flashpoint earlier, the site of a standoff between the two armies in 2016.
    • In the current standoff in eastern Ladakh, which began in May 2020, Demchok has come up as a point of contention.

    Other benefits offered

    • The new axis will be helpful for the armed forces, making it easier to mobilize troops and equipment, including rations.
    • The road will not only enable faster movement of armed forces to the region but will also boost tourism and improve the socio-economic condition of the local people in the region.

    Certain limitations

    • Since the road goes through such a high pass, road transport will be unfeasible during the winter, when the armed forces rely on air support.

     

     

     

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  • What are Solid-State Batteries?

    After Twitter CEO Parag Agrawal, now another Indian origin is in the headline is Jagdeep Singh, CEO and founder of a US battery startup. The reason for his recent buzz for his breakthrough battery technology.

    About QuantumScape

    • QuantumScape Corp is a battery startup backed by Volkswagen AG.
    • Its solid-state battery — lithium metal with a solid electrolyte separating the two electrodes — is seen as an exceptionally bright prospect in E-Vehicle industry.

    What are Solid-state batteries?

    • A solid-state battery is a battery technology that uses solid electrodes and a solid electrolyte, instead of the liquid or polymer gel electrolytes found in lithium-ion or lithium polymer batteries.
    • Such batteries can provide potential solutions for many problems of liquid Li-ion battery, such as flammability, limited voltage, unstable solid-electrolyte interphase formation, poor cycling performance and strength.

    What are Li-ion Batteries?

    • Lithium-ion batteries use aqueous electrolyte solutions, where ions transfer to and fro between the anode (negative electrode generally made of graphite) and cathode (positive electrode made of lithium), triggering the recharge and discharge of electrons.
    • The energy density of lithium-ion cells used in today’s mobile phones and electric vehicles is nearly four times higher than that of older-generation nickel-cadmium batteries.

    Its limitations

    • Low energy density: Despite improvements in technology over the last decade, issues such as long charging times and weak energy density persist.
    • Small appliances: While lithium-ion batteries are seen as sufficiently efficient for phones and laptops, they still lack the range that would make EVs a viable alternative.
    • Extreme reactivity: One major problem is that lithium metal is extremely reactive.
    • Corrosion of cells: The main form of lithium corrosion is dendrites (branched lithium structures) that grow out from the electrode and can potentially pierce the separator short-circuiting the cell.
    • Fire hazard: In current lithium-ion batteries, in which the electrolyte is a flammable liquid, dendrite formation can trigger a fire.

    What is the breakthrough?

    • QuantumScape claims to prevent dendrites formation.
    • It uses a solid-state separator technology that eliminates the side reaction between the liquid electrolyte and the carbon/graphite in the anode of conventional lithium-ion cells.
    • The replacement of the separator enables the use of a lithium-metal anode in place of the traditional
    • The lithium metal anode is more energy-dense than conventional anodes, which allows the battery to store more energy in the same volume, according to the company.

    Key advantages of QuantumScape Battery

    • The advantages of the solid-state battery technology include higher cell energy density (by eliminating the carbon anode), lower charge time (by eliminating the need to have lithium diffuse into the carbon particles in conventional lithium-ion cells).
    • It has the ability to undertake more charging cycles and thereby a longer life, and improved safety.
    • Lower cost could be a game-changer, given that at 30 per cent of the total cost, battery expenses are a key driver of the vehicle costs.

    India’s battery push

    • The centre is working on a blueprint for a project of around 4,000 MWh of grid-scale battery storage system at the regional load dispatch centres that control the country’s power grid, primarily to balance the vagaries of renewable generation.
    • Reliance Industries Ltd has announced plans to set up an Energy Storage Giga factory; state-owned NTPC Ltd has floated a global tender for a grid-scale battery storage project.
    • The Ministry of Heavy Industries issued a request for proposal for setting up manufacturing facilities for Advanced Chemistry Cell (ACC) battery storage in India.

     

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  • States demand extension of GST compensation for another 5 years

    Many states have demanded that the GST compensation cess regime be extended for another five years and the share of the Union government in the centrally-sponsored schemes be raised as the COVID-19 pandemic has impacted their revenues.

     What is GST?

    • GST, being a consumption-based tax, would result in loss of revenue for manufacturing-heavy states.
    • GST launched in India on 1 July 2017 is a comprehensive indirect tax for the entire country.
    • It is charged at the time of supply and depends on the destination of consumption.
    • For instance, if a good is manufactured in state A but consumed in state B, then the revenue generated through GST collection is credited to the state of consumption (state B) and not to the state of production (state A).

    Compensation under GST regime: GST Compensation Cess

    • Due to the consumption-based nature of GST, manufacturing states like Gujarat, Haryana, Karnataka, Maharashtra and Tamil Nadu feared a revenue loss.
    • Thus, GST Compensation Cess or GST Cess was introduced by the government to compensate for the possible revenue losses suffered by such manufacturing states.
    • However, under existing rules, this compensation cess will be levied only for the first 5 years of the GST regime – from July 1st, 2017 to July 1st, 2022.
    • Compensation cess is levied on five products considered to be ‘sin’ or luxury as mentioned in the GST (Compensation to States) Act, 2017 and includes items such as- Pan Masala, Tobacco, and Automobiles etc.

    Why is the compensation necessary?

    • States no longer possess taxation rights after most taxes, barring those on petroleum, alcohol, and stamp duty were subsumed under GST.
    • GST accounts for almost 42% of states’ own tax revenues, and tax revenues account for around 60% of states’ total revenues.
    • Finances of over a dozen states are under severe strain, resulting in delays in salary payments and sharp cuts in capital expenditure outlay amid the pandemic-induced lockdowns and the need to spend on healthcare.

    Distributing GST compensation

    • The compensation cess payable to states is calculated based on the methodology specified in the GST (Compensation to States) Act, 2017.
    • The compensation fund so collected is released to the states every 2 months.
    • Any unused money from the compensation fund at the end of the transition period shall be distributed between the states and the centre as per any applicable formula.

    Try this question from CSP 2018:

    Q. Consider the following items:

    1. Cereal grains hulled
    2. Chicken eggs cooked
    3. Fish processed and canned
    4. Newspapers containing advertising material

    Which of the above items is/are exempt under GST (Goods and Services Tax)?

    (a) 1 only

    (b) 2 and 3 only

    (c) 1, 2 and 4 only

    (d) 1, 2, 3 and 4

     

    [wpdiscuz-feedback id=”7c72z5efcv” question=”Please leave a feedback on this” opened=”1″]Post your answers here.[/wpdiscuz-feedback]

     

    Also read:

    [Burning Issue] GST Compensation

     

     

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  • Reining in the Direct Selling Industry

    The Government has notified the Consumer Protection (Direct Selling) Rules, 2021, that prohibits all direct selling entities from promoting pyramid schemes or money circulation schemes, while also providing for a mechanism for redressal of consumer complaints.

    What is Direct Selling?

    • In Direct Selling, goods or services are directly sold to consumers through sellers who act as individual representatives of the direct selling entities, instead of a retail premises.
    • For example: Brands such as Amway, Herbalife , Oriflame and Modicare etc. directly sell their products through outlets. They are generally expensive.

    What are the new rules?

    • The new Rules were primarily introduced to prohibit the promotion of pyramid and money circulation schemes by the direct selling industry.
    • Apart from that, entities are now required to be registered in the country.
    • Further, to provide a redressal mechanism for consumers, the Rules mandate that direct selling entities appoint grievance redressal officers who will put up their contact details on the website.
    • Direct selling entities that are not established in India, but offer goods or services to consumers here, will also need to comply with the newly notified rules.

    How big is the Indian Direct Selling industry?

    • As per a report, the number of active direct sellers in the country stood at around 7.4 million in 2019-20.
    • The two big categories were ‘wellness & nutraceuticals’ – which accounted for 57% of the sales, followed by cosmetics and personal care which contributed 22% to the sales.

    Whom do these Rules apply?

    • These Rules apply on all models of direct selling and all goods and services bought or sold through direct selling.
    • Direct selling entities that are not established in India, but offer goods or services to consumers in India, will also need to comply with the newly notified Rules.

    Why have they been notified now?

    • Fraud prevention: The guidelines aim for preventing fraud and protecting consumer interest. Earlier, these were not regulated under enforceable law.
    • Costly products: A direct selling entity or a direct seller cannot refuse to take back “spurious goods or deficient services” and provide a refund, or charge consumers any entry fee or subscription fee.
    • Coercive persuasion: They often tend to persuade consumers to make a purchase based upon the representation that they can reduce or recover the price by referring prospective customers.
    • Providing legitimacy to DS: The Rules provide legitimacy to the industry and also help attract more foreign direct investment (FDI).

    What do the rules say?

    • Registration: Every direct selling entity with operations in India needs to be registered in the country, and have a minimum of one physical location as its registered office within India.
    • Self-declaration: The entities will need to make a self-declaration that it is in compliance with these Rules and is not involved in any pyramid scheme or money circulation scheme.
    • Data storage within India: Additionally, such entities are required to store sensitive personal data within India and take steps to ensure the protection of such data.
    • Grievance redressal: The Rules mandate that direct selling entities appoint one or more grievance redressal officers and put up their details such as name, telephone number and email address, on their website.
    • Officer to ensure compliance: Every direct selling entity will need to appoint a nodal officer who will be responsible for ensuring compliance with the provisions of the Act.
    • Restricted visits: A direct seller will not visit a consumer’s premises without identity card and prior appointment or approval, or provide any literature to a prospect, which has not been approved by the direct selling entity.

     

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  • Odisha radio-tags rescued Indian Pangolin

    The Odisha Forest and Environment Department has completed its first-ever radio-tagging of the Indian pangolin in an attempt to standardize the rehabilitation protocol for the animal in the State.

    Why radio-tagging?

    • The radio-tagging aims to know its ecology and develop an effective conservation plan for it.
    • The radio-tagging is part of a joint project by the department and non-profit, the Wildlife Conservation Trust (WCT) that also involves the species’ monitoring apart from other activities.

    About Pangolin

    IUCN status: Endangered

    • India is home to two species of pangolin.
    • While the Chinese Pangolin (Manis pentadactyla) is found in northeastern India, the Indian Pangolin is distributed in other parts of the country as well as Sri Lanka, Bangladesh and Pakistan.
    • Both these species are protected and are listed under Schedule I Part I of the Wild Life (Protection) Act, 1972 and under Appendix I of the Convention on International Trade in Endangered Species (CITES).
    • Commonly known as ‘scaly anteaters’, the toothless animals are unique, a result of millions of years of evolution.
    • Pangolins evolved scales as a means of protection. When threatened by big carnivores like lions or tigers they usually curl into a ball.
    • The scales defend them against dental attacks from predators.

    Pangolin in China

    • Pangolin meat is considered a delicacy in China and Vietnam.
    • Their scales which are made of keratin, the same protein present in human nails — are believed to improve lactation, promote blood circulation, and remove blood stasis.
    • These so-called health benefits are so far unproven.

    What makes pangolins the most trafficked animals in the world?

    • Their alleged health benefits in traditional Chinese medicines prompted a booming illicit export of scales from Africa over the past decade.
    • Officials quote the trafficking price of Pangolin and its scale anywhere between Rs 30,000 and Rs 1 crore for a single animal.
    • Conservation of pangolins received its first shot in the arm when the 2017 Convention on International Trade in Endangered Species (CITES) enforced an international trade ban.

     

     

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  • Rythu Bandhu: Telangana DBT scheme for farmers’ assistance

    The total funds disbursed under Rythu Bandhu, Telangana government’s direct benefit transfer scheme for farmers, will soon touch Rs 50,000 crore in the coming days.

    What is Rythu Bandhu?

    • Rythu Bandhu is a scheme under which the state government extends financial support to land-owning farmers at the beginning of the crop season through direct benefit transfer.
    • The scheme aims to take care of the initial investment needs and do not fall into a debt trap.
    • This in turn instills confidence in farmers, enhances productivity and income, and breaks the cycle of rural indebtedness.

    DBT under the Scheme

    • Each farmer gets Rs 5,000 per acre per crop season without any ceiling on the number of acres held.
    • So, a farmer who owns two acres of land would receive Rs 20,000 a year, whereas a farmer who owns 10 acres would receive Rs 1 lakh a year from the government.
    • The grant helps them cover the expenses on input requirements such as seeds, fertilizers, pesticides, and labour.

    How much does it cost the state exchequer?

    • Since the Kharif season of 2018, the state government has been crediting Rythu Bandhu assistance to farmers.
    • As of date, it has credited Rs 43,036.64 crore into the bank accounts of beneficiaries.
    • This season, the state government will disburse another Rs 7638.99 crore, taking the total sum disbursed so far to over Rs 50,000 crore.

    Comparing with the PM-KISAN scheme

    • The state government has often said that the Centre’s PM-KISAN (Pradhan Mantri Kisan Samman Nidhi) scheme is a “copy” of Rythu Bandhu.
    • Under PM-KISAN, a land-holding family receives an income support of 6,000 per year in three equal installments.
    • Rythu Bandhu is based on anticipated input expenditure for each acre of land and there is no restriction on the number of acres owned by a farmer.
    • PM-KISAN only provides support to the family and not to the farm units.

    Criticisms of the Rythu Bandhu Scheme

    • The scheme does not cover the landless or tenant farmers.
    • Farmer bodies have been demanding that the state government should extend the agriculture assistance to tenant farmers as well.
    • They have pointed out that those who work on lands taken on lease from landowners also need government assistance at the beginning of a crop season.
    • It is difficult to bring tenant farmers under the ambit of the scheme because of the informal nature of the agreements they enter into.

     

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  • What are Blockchain Funds?

    The Securities and Exchange Board of India (SEBI) has ruled that Indian mutual funds (MFs) cannot invest in crypto-related products until government regulations on are clear.

    What are Blockchain Funds?

    • Blockchain is a digital ledger system that facilitates the process of recording transactions and tracking assets in a network.
    • It is possible to have blockchain without crypto, but in practice the two are highly interlinked.
    • Cryptocurrency tends to power the resources needed for a public blockchain network.
    • Unlike specific crypto-based investments, blockchain funds invest in multiple companies that are driving sustainable earnings from blockchain businesses.
    • Some key companies in this ecosystem are US-based Coinbase Global Inc and Advanced Micro Devices Inc, and Japan’s GMO internet Inc.

    Why has SEBI blocked Blockchain funds?

    • Absence of regulations: SEBI concerns stem from unclear regulations around cryptocurrencies in India.
    • Unclear future: While investing, trading and holding crypto assets are allowed in India as of now, the laws are still not clear as to how they are regulated and taxed.
    • Possible ban: There is a possibility that the government may ban trading in crypto altogether or come up with stringent thresholds for investors to delve into this new asset.
    • Taxing the gains: For taxation purposes, short-term capital gains from individual crypto investing are taxed at personal taxation rates, however, there are no clear guidelines for fund investing.

    Are blockchain funds good investments?

    • The technology is creating value by revolutionizing the way assets and digital records are managed and transferred.
    • Many companies, particularly in financial services, are investing millions of dollars in researching and building Blockchain infrastructure.
    • Although the technology is still in the nascent phase in India, its potential across the board is huge.

    Back2Basics: Mutual Funds

    • A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt.
    • The combined holdings of the mutual fund are known as its portfolio. Investors buy shares in mutual funds.
    • Each share represents an investor’s part ownership in the fund and the income it generates.

    Mutual funds are a popular choice among investors because they generally offer the following features:

    • Professional Management. The fund managers do the research for you. They select the securities and monitor the performance.
    • Diversification or “Don’t put all your eggs in one basket.” Mutual funds typically invest in a range of companies and industries. This helps to lower your risk if one company fails.
    • Affordability. Most mutual funds set a relatively low dollar amount for initial investment and subsequent purchases.
    • Liquidity. Mutual fund investors can easily redeem their shares at any time, for the current net asset value (NAV) plus any redemption fees.

    Risks with MFs

    • With mutual funds, one may lose some or all of the money invested because the securities held by a fund can go down in value.
    • Dividends or interest payments may also change as market conditions change.
    • The more volatile the fund, the higher the investment risk.

     

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