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GS Paper: GS3

  • What to consider before India takes ‘net-zero’ pledge

    There are several issues with the adoption of net zero-emission targets. One of the most important being the lack of equity. This article deals with this issue.

    About net-zero emission targets

    • The “net zero” idea is inspired by an IPCC report that calls for global net emissions – GHG emissions minus removal of GHGs through various means to reach zero by mid-century.
    • This builds on a clause in the Paris Climate Agreement, calling for a balance between sources and sinks of emissions by the second half of the century.
    • It is worth underscoring that none of this implies that each country has to reach net-zero by 2050.
    • Net-zero announcements signals a progressive direction of travel and has the apparent merit of presenting a simple and singular benchmark for assessing the performance of a country.

    3 Issues with net zero targets

    • First, it potentially allows countries to keep emitting today while relying on yet-to-be-developed and costly technologies to absorb emissions tomorrow.
    • Second, its focus on long-term targets displaces attention from meaningful short-term actions that are credible and accountable.
    • Third., it calls into question concerns of equity and fairness.

    Balancing the concerns of developing and developed countries

    • The Paris Agreement, while urging global peaking as soon as possible, explicitly recognises that peaking will take longer for developing countries.
    • The Paris Agreement calls for achieving balance in developing and developed nation “on the basis of equity” and in the context of “sustainable development and efforts to eradicate poverty”.
    • Therefore, the Paris Agreement does not advocate uptake of net-zero targets across developed and developing countries, as currently being advocated by many countries.
    • Rather, the emphasis in the agreement on equity, sustainable development and poverty eradication suggests a thoughtful balancing of responsibilities between developed and developing countries.

    Factors India should consider before taking zero-emission target

    • Our first nationally determined contribution (NDC) submitted under the Paris Agreement has been rated by observers as compatible with a 2 degrees Celsius trajectory.
    • We are ahead of schedule in meeting our contribution.
    • Now, India will need to decide whether to join a growing number of countries (over 120 at last count) that have pledged to reach “net zero” emissions by 2050.
    • But it is not clear that enhancing mitigation action can definitively deliver net-zero emissions by 2050, given that our emissions are still rising, and our development needs are considerable.
    • There is a possibility that a not fully thought-through mid-century net-zero target would compromise sustainable development.
    • Moreover, such a major shift in our negotiating position will have implications for the future, including our ability to leverage additional finance and technology to help shift to low-carbon development pathways.
    • Our 2 degrees Celsius compatible NDC, bolstered by the Prime Minister’s announcement in 2019 that we would achieve 450 GW of renewables by 2030, could be strengthened.
    • Building on this track record suggests an alternate and equally, if not more, compelling, way to indicate climate ambition in the future than uncritically taking on a net-zero target.

    Way forward

    • We would benefit from taking stock of our actions and focusing on near-term transitions.
    • This will allow us to meet and even over-comply with our 2030 target while also ensuring concomitant developmental benefits, such as developing a vibrant renewable industry.
    • We can start putting in place the policies and institutions necessary to move us in the right direction for the longer-term and also better understand the implications of net-zero scenarios before making a net-zero pledge.
    • It would also be in India’s interest to link any future pledge to the achievement of near-term action by industrialised countries.
    • That would be fair and consistent with the principles of the UNFCCC.

    Consider the question “Growing number of countries have been setting net-zero emission target. In light of this, examine the issues India should consider before setting itself the net zero emission targets.”

    Conclusion

    India, like others, have a responsibility to the international community, we also have a responsibility to our citizens to be deliberate and thoughtful about a decision as consequential as India’s climate pledge.

  • Amendments to the Forest (Conservation) Act, 1980

    The Union Ministry of Environment, Forest and Climate Change has proposed several amendments to the Forest (Conservation) Act, 1980 (FCA), which may enable infrastructure projects to come up in the forest areas more easily.

    What are the amendments?

    • They propose to grant exemptions to railways, roads, tree plantations, oil exploration, wildlife tourism and ‘strategic’ projects in forests.
    • The proposal also aims to empower state governments to lease forest land to private individuals and corporations.
    • If the proposed amendments come into force, they would dilute the provisions of the landmark 1996 decision of the Supreme Court in Godavarman

    The amendments, however, propose two changes to strengthen the applicability of the FCA, according to the documents accessed:

    1. To complete the process of forest identification in a time-bound manner
    2. To enable the creation of ‘no-go’ areas, where specific projects would not be allowed

    The Forest (Conservation) Act, 1980

    The FCA is the principal legislation that regulates deforestation in the country.

    • It prohibits the felling of forests for any “non-forestry” use without prior clearance by the central government.
    • The clearance process includes seeking consent from local forest rights-holders and from wildlife authorities.
    • The Centre is empowered to reject such requests or allow it with legally binding conditions.
    • In a landmark decision in 1996, the Supreme Court had expanded the coverage of FCA to all areas that satisfied the dictionary definition of a forest; earlier, only lands specifically notified as forests were protected by the enforcement of the FCA.

    The FCA is brief legislation with only five sections of which-

    • Section 1 defines the extent of coverage of the law,
    • Section 2 restrictions of activities in forest areas and the rest deals with the creation of advisory committees, powers of rule-making and penalties.

    Key propositions of the Amendment

    The proposed amendments seek to make additions and changes to Section 1 and 2.

    (1) Concessions to survey and exploration

    • In the proposed new section 1A, a provision has been added to exempt the application of FCA on forest land that is “used for underground exploration and production of oil and natural gas through Extended Reach Drilling (ERD) originating outside forest land.”
    • The exemption is subject to terms and conditions laid down by the central government.
    • A new explanation added to Section 2 says that “survey, reconnaissance, prospecting, exploration or investigation” for future activity in the forest will not be classified as a “non-forestry activity”.
    • This means such survey works would not require any prior permission from the government.

    The only exception is if the activity falls within a wildlife sanctuary, national park or tiger reserve.

    (2) Exemptions to Railways and roads inside forests

    • Land acquired by the railways for establishing a rail line or a road by a government agency before 25.10.1980 (the day the FCA was passed) would be exempted from seeking a forest clearance — if they put the land to the same use for which it was acquired.
    • This is included in a provision in the proposed section 1A.
    • The exemption is subject to terms and conditions that the central government will lay down through guidelines, which include planting trees to compensate for the loss of forests.

    (3) Leases on forest land

    • Section 2(iii) of the FCA requires the central government’s approval before assigning forest lands on lease to any private person/corporation/organisation not owned or controlled by the central government.
    • This clause, however, has purportedly been deleted in the proposed amendment.
    • This may mean that state governments can issue leases for the use of forest land without the Centre’s prior approval.

    (4) Exemptions to plantations

    • A new explanation to Section 2 proposes to exempt plantation of native species of palm and oil-bearing trees from the definition of “non-forest purpose”.
    • Since the FCA applies to the conversion of forest land to “non-forest purpose”, this proposed amendment would effectively mean that anyone who wants to clear a natural forest to raise such plantations would not require any approval from the government.
    • The government will only impose conditions for compensatory afforestation and payment of other levies and compensations.

    (5) Exemptions to wildlife tourism, training infrastructure

    • The FCA classifies activities related to wildlife conservation as “non-forestry” purposes, which means such activities — building checkpoints, communication infrastructure, fencing, boundary, etc — which include do not need a forest clearance.
    • The proposed amendment claims to add to this list “forest and wildlife training infrastructure” and the “establishment of zoos and safaris” managed by the government or any authority under the Wildlife Protection Act, 1972.
    • It may also add ecotourism facilities approved under the Forest Working Plan or Working Scheme approved by the central government.

    (6) States may grant forest clearance for strategic / security projects

    • The proposed Section 2A may empower the central government to provide for state government approval for projects on forest land for “strategic” or security projects of “national importance”, according to the documents accessed.
    • There is no clarity on the scope of these terms, or on the determination of national importance, or illustrative examples of such projects.

    Limiting the coverage of the Supreme Court’s decision

    • The Supreme Court in Godavarman Case 1996 had held that the meaning of “forest” under the FCA would include not only statutorily recognised forests.
    • It would include any area recorded as forest in government records, regardless of ownership.
    • The restrictions in the FCA would, therefore, be applicable to both de jure and de facto

    The proposed amendment purportedly seeks to reduce the scope of this judgment by limiting the applicability of the FCA to only such land that has been:

    • Declared or notified as forest under the Indian Forest Act, 1927
    • Recorded as forest land in the government record prior to 25 October 1980, with the exception of such land if its use has been changed from forest to non-forest purpose prior to 12 December 1996
    • Identified as “forest” by a state government expert committee up to one year from the date of the amendment.

    The judgment interpreted the Act as it stood then. The addition of a specific definition thus limits the scope of the judgment. De facto forests are, therefore, excluded from the purview of the FCA.

    Creation of ‘No-Go’ areas

    • The proposed amendment inserts a new Section 2B, which will allow the central government to delineate forest areas where conversion to specific non-forest uses would not be permitted for a fixed period of time.
    • The delineation would be based on the basis of pre-defined criteria.
    • This could mean, for instance, that a certain dense forest would not be allowed to be converted to a coal mine for the next 30 years, but it could be allowed to be cleared for a thermal power plant.
    • In the Godavarman case, the Supreme Court had directed states to set up expert committees to draw up a list of forests that were not notified under the Indian Forest Act, 1927 (IFA), but deserved to be protected by the FCA.
    • Several states are yet to comply with this requirement.

    Impact

    • The proposed Section 1A(ii) excludes from the purview of the FCA those forests which were described as such in government records (but not notified under the IFA).
    • The Karnataka High Court recently dealt with a matter wherein the state government had passed several orders to de-notify lands classified as “state forest” (but not notified under IFA), and to divert them for non-forest purposes.
    • The lands were then allotted for the rehabilitation of displaced people. The state government completed this process of dereservation of reserved forests in 2017.
    • On March 4, 2021, the high court struck down actions of the state government for not taking “prior approval of the central government” as required under Section 2 of the FCA.
    • It recommended criminal action against any officers responsible for allowing non-forest use of forest land.

    What lies ahead?

    • If the proposed amendment is enacted, the insertion of Section 1A(ii) would exempt the application of the FCA to the land which was converted to non-forest use by the Karnataka government.
    • The exemption of zoos and safaris from “non-forest purpose” comes a year after the government proposed to open a zoo in Mumbai’s Aarey forest and a tiger safari in Madhya Pradesh led to objections from biologists.
    • While state governments may certainly continue to seek dilution of the FCA during enforcement, the removal of the requirement of central government approval is a step towards a dilution of restrictions on forest land use.

  • Learning economic lessons from Bangladesh

    The article examines the key driving factors of Bangladesh’s stellar economic progress and draws lessons for India.

    Overview of Bangladesh’s economic achievements

    • Bangladesh’s GDP growth in 2019 was an enviable 8.4 per cent — twice that of India’s during that year.
    • It is one of the few countries to have maintained a positive growth rate during the COVID-19 pandemic.
    • Its GDP per capita is just under $2,000 — almost the same as India’s.
    • In five years, by 2026, Bangladesh will drop its least developed country tag, and move into the league of developing countries — on a par with India.

    Parallels between Vietnam and Bangladesh’s progress

    • Vietnam instituted market and economic reforms in 1986, which enabled it to achieve rapid economic growth and industrialisation.
    • It began with the manufacturing of textiles and garments and moved into making mobiles and electronics.
    • As supply chains diversify from China, Vietnam is a beneficiary.
    • It is now the “+1” in the “China +1” strategy of multinationals.
    • Vietnam has signed trade agreements and inserting itself into global supply chains.
    • Bangladesh has followed a similar strategy.
    • Its rise is directly connected with the textiles and garments industry, which accounts for 80 per cent of the country’s exports.
    • Bangladesh also enjoys preferential trade treatments with the European Union, Canada, Australia, and Japan with negligible or zero tax.
    • With India too, Dhaka has a zero-export duty on key products like readymade garments.
    • Like Vietnam, its foreign investment regime is investor-friendly.
    • For instance, Bangladesh’s liberal FDI policy allows 100 per cent equity in local companies and no limits on repatriation of profits in most sectors. 
    • Indian companies are increasingly present in Bangladesh, and Indian products are popular — an outcome of a strong cultural affinity.

    Women in workforce and microfinance

    • The world’s most successful and pioneering microfinance organisations like Grameen and BRAC have aided small businesses in the country, and regionally.
    • Many of these schemes, over the years, were directed at women.
    • This has paid dividends not just in financial independence, but also in encouraging them to work outside the home.
    • Consequently, Bangladesh’s workforce in its textiles sector is almost all women — 95 per cent women in an industry which is 80 per cent of Bangladesh’s exports.

    Role of government schemes

    • This, along with government schemes like Pushti Apas (Nutrition Sisters) and community health clinics has helped Bangladesh in the development indices.
    • Bangladesh fares better on infant mortality, sanitation, hunger and gender equality than many countries including India.

    Key lessons for India

    • Increasing women in the workforce, liberalising internal and external trade, and making micro lending accessible, are some of the lessons.
    • But so is the goal of being a global hub for the sub region, building special economic zones which requires infrastructure, connectivity and a welcoming environment for investors both domestic and foreign.
    • both countries have suffered since 1947, without connectivity, at huge cost.
    • It is time to integrate our power systems, think about free trade, liberalise the visa regime.

    Conclusion

    India need not always carry the burden of South Asia’s development alone. It now has a partner with whom to collaborate effectively towards achieving that goal.

  • How fiscal stimulus in the U.S. will impact emerging economies

    The article highlights how the faster recovery of the U.S. economy aided by the faster vaccination and stimulus packages may pose a policy challenge to the emerging economies.

    About the fiscal stimulus in the U.S.

    • With the recent passage of Biden’s $1.9 trillion coronavirus relief package, the cumulative fiscal stimulus amounts to 25 per cent of GDP. 
    • This reliance on fiscal stimulus is in sharp contrast to the policy response in the aftermath of the 2008 global financial crisis (GFC) when monetary policy was the main tool.
    • The over reliance on fiscal measures is because of the “liquidity trap” — interest rates are already treading close to zero.

    So, what does this mean for the US and emerging economies?

    • From the US perspective, this is good news.
    • The U.S. economy is expected to converge to the pre-pandemic GDP projection after the third quarter of 2021, exceeding it by 1 per cent in the fourth quarter.
    • The impact on emerging economies is less certain.
    • A booming US economy generally bodes well for global growth as higher demand “spills over” to the rest of the world.
    • However, the sectoral contribution to US growth presents a different picture this time.
    • Private consumption of goods (tradable) is already back to pre-pandemic levels, while consumption of services remains significantly below pre-pandemic levels.
    • As the vaccination drive gathers pace in the US and the economy slowly opens up, it should be fair to assume that the non-tradable sector would be driving growth.
    • But given the expected nature of the underlying growth, the positive impact on emerging economies will perhaps be softer.
    • With smaller fiscal stimulus in emerging economies and the slower vaccine roll, the US recovery largely being led by the non-tradable sector will result in a divergence in growth between the US and emerging countries.

    Policy challenge for emerging economies which is different from GFC

    • Post-GFC, a combination of zero interest rates and quantitative easing in advanced economies led to a significant surge in capital inflows to emerging countries in search of higher yield leading to an appreciation of their currencies.
    • Now, the situation is exactly the opposite.
    • The differential rate of recoveries has already led to capital outflow from emerging economies.
    • The rise in yield in the U.S. may further fuel capital outflows in coming days leading to tighter monetary conditions in emerging markets.

    What should be India’s policy response

    • As far as India is concerned, the macro-economic fundamentals are much stronger than during the taper-tantrum days.
    • The foreign exchange reserves remain at historically high levels, the current account situation is comfortable and the inflation rate remains within the target band of the RBI.
    • In the event of capital outflows, the RBI should let the currency depreciate as the first line of defence to preserve India’s external competitiveness and intervene only to smoothen out extreme volatility.
    • It should avoid the temptation to increase interest rates at the risk of hurting the pace of economic recovery.

    Consider the question “Uneven economic recovery on the global level poses a policy challenge to India. In this context, discuss the possible impact of uneven recovery and suggest the policy measures to deal with it.”

    Conclusion

    Uneven recovery at the global level demands an unconventional policy approach. The policy approach of India should be based on this premise.

    Back2Basics: Taper Tantrum

    • The phrase, taper tantrum, describes the 2013 surge in U.S. Treasury yields, resulting from the Federal Reserve’s (Fed) announcement of future tapering of its policy of quantitative easing.
    • The Fed announced that it would be reducing the pace of its purchases of Treasury bonds, to reduce the amount of money it was feeding into the economy.
    • The ensuing rise in bond yields in reaction to the announcement was referred to as a taper tantrum in financial media.

  • Why privatising public assets is poor economics

    The article highlights the issues with government expenditure driven by the selling of public sector assets.

    How public asset selling could affects private investment decisions

    • Public sector assets are not bought by reducing consumption or investment.
    • Current investment expenditure depends on decisions taken in the past and is more or less pre-determined.
    • Investment decisions that are taken today for fructification tomorrow that may be scaled down by such a purchase.
    • However, if investment decisions taken today are scaled-down, then it results in crowding out and such a strategy should be avoided anyway.
    • This implies that selling public sector assets therefore does not release any resources from private use for government spending.

    How selling public asset has same macroeconomic effect as fiscal deficit

    • In case of fiscal deficit, the government puts its bonds in private hands; in sale of a public asset, the government puts its equity held in public sector assets in private hands.
    • The macroeconomic consequences of a fiscal deficit on the economy are no different from those of selling public assets.
    • However, finance capital, and institutions like the IMF treat the sale of public assets on a different footing from a fiscal deficit, for ideological — not economic — reasons, because they ideologically favour a dismantling of the public sector.

    How fiscal deficit leads to wealth inequality

    • In a situation of demand-constraints, where unutilised capacity and unemployed workers exist aplenty, if an appropriate monetary policy is pursued, it can have no adverse effects whatsoever, except one: It increases wealth inequality.
    • The government expenditure financed by the fiscal deficit creates additional aggregate demand that increases output and incomes until the additional savings generated out of such incomes exactly match the fiscal deficit.
    • These additional savings accrue to the savers without their having to reduce their consumption, compared to the initial situation (that is, prior to government expenditure increase).
    • Since savings represent additions to wealth, this amounts to putting extra wealth into the hands of the rich.
    • Selling public assets puts into private hands public assets, and that too at prices well below the capitalised value of earnings.
    • This increases wealth inequality for two reasons:
    • First, it does so exactly as a fiscal deficit does.
    • Second, the public asset it puts in private hands is under-priced.

    Why tax financed government spending should be preferred

    • If the same government expenditure is financed by taxation, no matter who was taxed, then there would be no addition to private wealth and hence no increase in wealth inequality.
    • Which is why tax-financed government expenditure should always be preferred to fiscal-deficit-financed government expenditure.

    What alternative government have

    • The obvious one is wealth taxation.
    • Taxing away the private wealth created by a fiscal deficit leaves private wealth inequality unchanged at its initial level; it does not exacerbate it.
    • If the government is unwilling to impose higher wealth or profit taxes, it can raise GST rates on several luxury goods.

    Consider the question “How fiscal deficit financed government spending differs in its impact on weath inequality from the tax-financed government spending?”

    Conclusion

    Thus, selling public assets to finance government spending is both undesirable and unnecessary.

  • Inter-state Tiger Relocation Project

    Sundari — a tigress shifted as part of India’s first inter-state translocation project in 2018 from Madhya Pradesh to Odisha has returned home.

    What is the news?

    • The five-year-old tigress Sundari spent 28 months in captivity in Satkosia Tiger Reserve, Odisha.
    • The two states lingered on the process for her relocation despite the National Tiger Conservation Authority (NTCA) shelving off the much-vaunted inter-state tiger translocation drive.

    What was the Tiger Relocation Project?

    • The tiger relocation project was initiated in 2018 wherein two big cats, a male (Mahavir) from Kanha Tiger Reserve and a female (Sundari) from Bandhavgarh from MP were relocated to Satkosia Tiger Reserve in Odisha.
    • The relocation was meant to serve two purposes
    1. to reduce the tiger population in areas with excess tigers to majorly reduce territorial disputes and
    2. to reintroduce tigers in areas where the population has considerably reduced due to various reasons

    How were Mahavir and Sundari chosen for the project?

    • Both the big cats were selected for the translocation project as per the NTCA guidelines and in collaboration with the Wildlife Institute of India and the GoI.
    • Two key factors were considered for choosing the animal — first, a dispersing young animal which is to find a new and second, an adult transient which was yet to establish any territory.

    What is the Satkosia Tiger Reserve and why was it chosen?

    • Encompassing an area of 963.87 sq km, the Satkosia Tiger Reserve spreads across four districts and has as its core area 523 sq km.
    • According to NTCA, Satkosia falls under reserves where “there is a potential for increasing tiger populations”.
    • Declared as a Tiger Reserve in 2007, Satkosia had a population of 12 tigers then. The numbers reduced to two in 2018.
    • The purpose of the relocation was to repopulate tigers in the reserve areas.

    Try this PYQ from CSP 2020:

    Q.With reference to India’s Desert National Park, which of the following statements is correct?

    1. It is spread over two districts.
    2. There is no human habitation inside the Park.
    3. It is one of the natural habitats of Great Indian Bustard.

    Select the correct answer using the code given below:

    (a) 1 and 2 only

    (b) 2 and 3 only

    (c) 1 and 3 only

    (d) 1,2 and 3

    Unexpected outcomes of the project

    The project ran into trouble within weeks of initiation.

    • The arrival of the tigers was followed by severe protests by villagers living on the fringes of the reserve and the matter eventually snowballing into a poll issue.
    • Forest department officials were attacked and their offices burnt down by irate villagers most of whom were tribals.
    • The villagers feared the big cats would endanger their livelihoods, lives and livestocks. They also alleged that they were not consulted or informed prior to the translocation.
    • The major reason which contributed to the failure of the project was the lack of confidence and trust-building between the forest department and the villagers.
    • Within months of the translocation, Mahavir was found dead and was killed in poaching.

  • Places in news: Zabarwan Mountains

    Prime Minister has asked tourists to visit the tulip garden, located at the foothills of the Zabarwan range in Jammu and Kashmir.

    Try this PYQ from CSP 2020:

    Q.Siachen Glacier is situated to the

    (a) East of Aksai Chin

    (b) East of Leh

    (c)North of Gilgit

    (d) North of Nubra Valley

    Zabarwan Mountains

    • The Zabarwan Range is a short sub-mountain range between Pir Panjal and the Great Himalayan Range in the central part of the Kashmir Valley.
    • Specifically, the range is known to be what overlooks the Dal Lake and holds the Mughal gardens of Srinagar.
    • The Shankaracharya Temple is built on the edge of the central part of the Zabarwan Range.
    • The highest peak of this range is Mahadev Peak at 13,013 feet (3,966 m), which forms the distant background of the eastern mountain wall.
    • On the northern slopes of the central part of the range, there are three Mughal gardens built by Emperor Shah Jahan.
    • These include Chashma Shahi, Nishat Bagh and Shalimar Garden alongside the Pari Mahal (the fairy palace).
    • The Dachigam National Park is the main feature of the range which holds the last viable population of Kashmir stag (Hangul) and the largest population of black bear in Asia.

  • Applying the policy of self-reliance to health, infrastructure and green technologies

    The article highlights how Atmanirbhar Bharat policies can play important role in India’s post-pandemic recovery.

    Decline of trade-led catch-up growth

    • The Asian Development Bank identifies India as an outlier, with the country’s GDP growth likely to range between eight and 10 per cent — as against 7.7 per cent for China and seven per cent for the Asian region.
    • The convergence between the rich and poor countries in the 1990s and 2000s was founded on high relative growth rates driven by globalisation and export-led growth.
    • The World Bank and many international think tanks are now projecting a process of de-globalisation, reduction in exports, and reduced service exports from the tourism, travel and hospitality sector in response to COVID.
    • So, the phenomenon of trade-led catch-up growth is declining.

    How Atmanirbhar Bharat is different from past strategies

    • India’s import substituting growth strategy of the 1960s did not succeed because the high protective customs barriers led to the growth of non-competitive industries.
    • The current Atmanirbhar Bharat project is different because tariffs are low and public investment is focused on non-tradable infrastructure rather than commodity production.

    1) Atmanirbhar in heath: Atmirbhar Swasth Bharat

    • Atmanirbhar Swasth Bharat is a domestic non-trade dependent initiative which will invest over Rs 64,000 crore in setting up 17,800 rural and 11,000 urban health and wellness centres and 602 critical care hospitals in the country’s districts.
    • Today India has 29 health workers per 10,000 population, while we need 60 such professionals per 10,000 people, as per WHO norms.
    • Creating such a cadre will mean nearly four million new jobs, which can be self-paying.

    2) Infrastructure

    • China and emerging markets like Russia and Brazil have a fairly advanced transport and energy infrastructure.
    • India has a huge potential to renew its railways and highways and shift to solar energy from its current dependence on coal.
    • In fact, the country’s long-neglected fourth largest rail network in the world is undergoing rapid transformation.
    • While rail track coverage expanded by 5,000 km during 2010 to 2014-15, nearly 7,000 km of tracks were added between 2015 and 2020.
    • The Railways now aim to lay 9.5 km of track daily and have raised adequate capital for the same by leveraging domestic insurance funds.
    • Railways are also aiming for 100 per cent electrification and zero carbon footprint by 2024.
    • Electrified track has doubled from 20,000 km in 2012/13 to nearly 40,000 km in 2020.
    • The Centre’s decision to invest heavily in urban mass transit systems since 2014 has led to the rapid expansion of such services.
    • The resolution of financial problems of blocked PPP projects and smooth land acquisition process has increased the pace of construction of national highways.
    • Pace of construction of the national highway increased from 3,330 km per year during 2009-20014 to nearly 9,450 km in 2020-21.

    3) Renewable energy

    • Today over 55 per cent of India’s energy comes from coal but the share of renewable has been steadly increasing.
    • Starting with only 10 MW of solar power in 2010, India has installed nearly 35 GW of solar power by 2020.
    • This has been propelled by economic reforms which drove solar power prices down from Rs 17 per unit in 2010 to Rs 2.44 per unit in 2020.
    • The target of reaching 100 GW by 2022 can drive growth further.
    • Currently nearly 25 per cent of India’s electricity is used for pumping underground water for irrigation.
    • Providing irrigation energy from decentralised solar grids — solar power can be generated at the points on consumption.
    • This will reduce huge transmission losses and the associated carbon footprint of non-renewable energy sources.

    4) Privatising public sector outfits

    • The Centre’s shift towards privatising public sector outfits including banks, insurance companies and other PSUs can fund the growth of rail, road and energy infrastructure.
    • This will also foster efficiency in India’s credit system.
    • China achieved supernormal growth in infrastructure without access to international financing in the initial decades.
    • Recent studies have revealed that China’s financial decentralisation and commercial exploitation of state-owned lands was critical for the success.
    • In India, too, regional development authorities like the Mumbai Metropolitan Regional Development Authority and Maharashtra Industries Development Corporation have financed the metro, trans-harbour links and industrial infrastructure through a similar commercial land allocation model.
    • This model can be extended throughout the country to finance infrastructure expansion.

    Consider the question “How Atmanirbhar Bharat policies differ from the past import-substituting growth strategy? Examine the role Atmanirbhar Bharat can play in the post-pandemic recovery?” 

    Conclusion

    In such a way, Atmanirbharta with its various facets will pave the road of post-pandemic recovery.

  • Vehicles scrappage policy: A step forward but a missed opportunity

    The much-awaited draft policy on vehicle scrappage is finally out. But the draft policy also misses an opportunity: Of designing the policy as an effective stimulus programme for green recovery in the sector to achieve deeper and quicker air quality benefits.

    Background

    • The policy outlines the criteria for defining end-of-life vehicles and scrapping them.
    • It also makes provision for scrapping facilities for safe disposal of waste and material recovery.
    • This is an important step forward towards building infrastructure for organised and scientific scrapping of old vehicles.

    The proposal

    • This proposed policy seeks to phase out unfit vehicles to reduce vehicular pollution, meet the climate commitments, improve road safety and fuel efficiency, formalize informal vehicle scrapping industry and recover low-cost material for the automotive, steel and electronics industry.
    • The policy expects to spin jobs and attract investment as well.
    • It is a big positive for supporting a network of well-equipped scrappage facilities with adequate environmental safeguards to stop unsafe dismantling that contaminates the environment.

    Must read:

    New Vehicle Scrappage Policy

    Issues with the policy

    (1) Advisory nature

    • This policy has only ‘advised’ the state governments and the automobile industry to provide voluntary incentives to the owners of old vehicles.
    • The central government has not committed to make it a fiscal stimulus strategy for quicker renewal of ageing, heavy-duty vehicle fleet with BS-VI vehicles — or to link other segments with targeted electrification.

    (2) Achieving fleet renewal

    • The focus on targeted fleet renewal for maximum emissions gains is still weak.
    • The proposed policy puts the entire onus of incentivizing fleet renewal on the state governments.
    • They have been advised to waive off a big chunk of road tax and registration fees on replacement vehicles.
    • These are important sources of state revenue, and the reaction of the state governments is still not known.

    (3) No stimulus

    • The more compelling question is whether the central government would consider a centrally supported stimulus programme for post-pandemic green recovery.
    • This is the global trend wherein governments have been giving conditional bailouts or tax support linked to emissions targets.

    What can be an effective strategy?

    (1) Transportation vehicles

    • For heavy-duty vehicles, the policy can take a more nuanced approach.
    • Consider that some truck owners may want to only dispose of the very old trucks without replacing them. But others may want to scrap and replace the older trucks.
    • In that case, a rebate can be given to the owners of end-of-life vehicles who are interested in ‘only scrapping’ the vehicle without immediately replacing them.
    • And this rebate can be given based on a scrappage certificate from authorized scrappage centres.
    • Old trucks with more economic life left can get a comparatively higher incentive as that will give higher emissions benefits.

    (2) Personal vehicles

    • For these vehicles, the central incentive can be linked with replacement with electric vehicles.
    • This can be added to the normal scrapping of end-of-life vehicles as already proposed in the draft policy. This can maximise air quality gains.
    • Personal vehicles are numerous and general public support for their fleet renewal can divert a lion’s share of the allocated budget from the priority heavy-duty segment.
    • Therefore, the public support for the personal vehicle segment can be linked only with voluntary electrification.

    Build-in manufacturers’ responsibility

    • The new policy also needs to align with the mandate for the manufacturers to meet targets for recyclability of material.
    • Make this mandatory as part of the scrappage policy.

    We have AIS 129

    • It is encouraging that the Automotive Industrial Standard-129 (AIS 129) on reuse, recycling and material recovery from vehicles were framed in 2015.
    • This requires 80-85 per cent of the material used in vehicle manufacturing by mass to be recoverable/recyclable/reusable at the end of life.
    • AIS-129 also restricts the use of heavy metals including lead, mercury, cadmium, hexavalent chromium, etc, and asks for the coding of plastics to inform dismantlers.
    • The requirement of recyclability should be extended to 85-95 per cent to maximise material recovery as well as energy recovery from residual waste like used oil, non-recyclable rubber etc.

    Way forward

    • This first-ever formal scrappage policy in India is urgently needed to help build infrastructure for safe disposal and material recovery to minimise environmental hazards.
    • But India would be adopting scrappage policy during these unprecedented pandemic times, so it is necessary to leverage this targeted fleet renewal with well-designed central support for a post-pandemic green deal.

  • Bad bank is good move

    The article explains the important role bad bank can play in cleaning up the balance sheets of the banks.

    How India banks dealt successfully with pandemic

    • Indian banks were written off in the early days of the pandemic due to expectations of an exponential jump in non-performing assets.
    • Only after the banks consistently talked about the lower number of restructuring requests, and the higher provision coverage ratios that the markets began to get convinced.
    • What finally turned the corner were the budget announcements related to the financial sector
    • There are several reasons for this good performance by the banks.
    • First, banks in India and globally were much better capitalised prior to the pandemic.
    • Second, Indian banks had built up a sizeable buffer to provide for bad assets negating any surprise on balance sheets during and even after the pandemic.
    • Third, independent research shows that as the size of the middle class grows to about two-thirds of Asian households.
    • Banks in Asia, including in India, have begun to adjust for this steady growth in the size of pie by experimenting with new business models, rationalising costs and providing faster and superior customer digital experience, as was clear during pandemic.
    • Fourth, Indian banks and the RBI brought about financial discipline much before the pandemic.

    Creation of Bad Bank

    • The budget this year has the provision for reation of a bad bank.
    • The proposed structure envisages setting up of a National Asset Reconstruction Company (NARC) to acquire stressed assets in an aggregated manner from lenders, which will be resolved by the National Asset Management Company (NAMC). 
    • A skilled and professional set-up dedicated for Stressed Asset Resolution will be ably supported by attracting institutional funding in stressed assets through strategic investors, AIFs, special situation funds, stressed asset funds, etc for participation in the resolution process.
    • The net effect of this approach would be to build an open architecture and a vibrant market for stressed assets.

    How it will work

    • Banks may first transfer those assets to the proposed bad bank with a 100 per cent provision on its book and then based on the experience they will decide on transferring assets with less than 100 per cent provisioning at a later date.
    • It is also being speculated that of the total amounts recovered, a specified percentage will be in the form of security receipts.
    • These receipts will reside in the bank balance sheets, but will carry a zero-risk weight, with full government guarantees for a specified period of time.

    How it will benefit the banks

    • The benefits of this process includes the recovered value, and significant lending leverage because of three factors:
    • One, capital being freed up from less than fully provisioned bad assets.
    • Two, capital freed up from security receipts because of a sovereign guarantee.
    • Three, cash receipts that come back to the banks and can be leveraged for lending, also freeing up provisions from the balance sheet.
    • There are several international success stories of a bad bank accomplishing its mission and there is no reason to believe why India cannot accomplish its objective.
    • The current Indian approach will drive consolidation of stressed assets under the AMC for better and faster decision making.
    • This will free up management bandwidth of banks enabling them to focus on credit growth, leading to an enhancement in their valuations.
    • Governance of the AMC and its independence is central to its successful functioning, there are multiple suggestions to make.
    • These include keeping majority ownership in the private sector, putting together a strong and independent board, a professional team, and linking AMC compensation to returns delivered to investors.

    Consider the question “What is a bad bank? How its creation could help the banking sector?”

    Conclusion

    The creation of a bad bank will help the banking sector contribute more in the growth of the country