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GS Paper: GS3

  • [pib] Market Intervention Scheme

    The Union Cabinet has approved the extension of Market Intervention Scheme (MIS) for apple procurement in Jammu and Kashmir (J&K) for the current season.

    UPSC can ask a question on the difference between MSP and MIP. All the agricultural and horticultural commodities for which Minimum Support Price (MSP) are not fixed and are generally perishable in nature are covered under Market Intervention Scheme (MIS).

    Market Intervention Scheme

    • MIS is a price support mechanism implemented on the request of State Governments for the procurement of perishable and horticultural commodities in the event of a fall in market prices.
    • It is implemented when there is at least a 10% increase in production or a 10% decrease in the ruling rates over the previous normal year.
    • MIS works in a similar fashion to Minimum Support Price based procurement mechanism for food grains but is an ad-hoc mechanism.
    • Its objective is to protect the growers of these horticultural/agricultural commodities from making distress sale in the event of the bumper crop.
    • Under MIS, support can be provided in some years, for a limited but defined period, in specified critical markets and by purchasing specified quantities. The initiative has to emerge from the concerned state.

    Commodities covered

    • The MIS has been implemented in case of commodities like apples, garlic, oranges, grapes, mushrooms, clove, black pepper, pineapple, ginger, red chillies, coriander seed, chicory, onions, potatoes, cabbage, mustard seed, castor seed, copra, palm oil etc.

    Remuneration under MIS

    • MIS provides remunerative prices to the farmers in case of the glut in production and fall in prices.
    • Proposal of MIS is approved on the specific request of State/UT Government, if they are ready to bear 50% loss (25% in case of North-Eastern States), if any, incurred on its implementation.
    • Further, the extent of total amount of loss shared is restricted to 25% of the total procurement value which includes the cost of the commodity procured plus permitted overhead expenses.

    Implementation of MIS

    1) Market Intervention Price (MIP)

    • The Department of Agriculture & Cooperation is implementing the scheme.
    • Under the MIS, a pre-determined quantity at a fixed MIP is procured by NAFED as the Central agency.
    • There are other agencies designated by the state government for a fixed period or till the prices are stabilized above the MIP whichever is earlier.
    • The area of operation is restricted to the concerned state only.

    2) Funds transfer

    • Under MIS, funds are not allocated to the States.
    • Instead, central share of losses as per the guidelines of MIS is released to the State Governments/UTs, for which MIS has been approved, based on specific proposals received from them.

  • SC asks govt to implement ‘interest waiver’ scheme at the earliest

    The article examines the implications of the Supreme Court order dealing with the loan waiver and ban on the recognition of the bad loan.

    Significance of common man as a depositor

    • India’s Rs 144 lakh crore in bank deposits make our Rs 110 lakh crore in bank loans possible.
    • The “common man” is more likely a depositor than a borrower; banks have 21 crore deposit accounts but only 2.7 crore loan accounts.

    Issues with the court order

    • The Supreme Court has weighed in on the waiver scheme and recognition of the bad loan.
    • Waiving interest dues or banning bad loan recognition is economically ignorant because more than 20 per cent of Indians are depositors while less than 2 per cent are borrowers.
    • It has nothing to with economic justice defined as the greatest good for the greatest number.
    • It sabotages economic justice because fiscally funding banking diverts money from education, health and skilling expenditure.
    •  It’s commercially ignorant because any “annualised effective rate” is adjusted for interest payment frequency.
    • Resources are finite with total central government expenditure at Rs 29 lakh crore, scarce as COVID creates a Rs 3 lakh crore GST shortfall and fragile our fiscal deficit may exceed 12 per cent.
    • Also, it is hardly what our Constitution imagined as the role of courts.
    • Our Constitution writers made a distinction between fundamental rights and directive principles was not a lack of ambition but a measured assessment of state capacity, resources and sequencing.
    • The Constitution also envisaged distinct roles for the judiciary, executive and legislature to balance samaj (society), bazaar (markets) and sarkar (government).
    • Courts have become less mindful of these two distinctions.

    Cost of credit and availability issue in India

    • One of the reasons for small size of Indian enterprises in the availability and cost of credit in India.
    • India’s credit-to-GDP ratio stands at dismal  50 per cent  — Bihar is 12 per cent and Arunachal is 1 per cent.
    • The MSME lending is stuck at Rs 20 lakh crore — needs to rise to 100 per cent.
    • Despite lower inflation and fiscal discipline, most borrowers don’t get globally competitive interest rates due to high bad loans and financial statement uncertainty.
    • The availability of credit will not rise and cost will not fall till our banking system has strong competition, consistent regulation, effective supervision and non-fiscal sustainability.

    Consider the question “How the crisis in the banking sector is different from the crisis in other sectors? Also, examine the issues with the Supreme Court order on the loan waiver and recongnition of bad loan ban?” 

    Conclusion

    Institutional immunity needs balancing of independence and accountability; rising citizen concern about mandates and appointments should trigger court introspection.

  • Issues with dilution of offset condition for defence procurement

    The ‘offset clause’ could help the country achieve the technological expertise and consequently self-reliance. However, India recently relaxed some norms in the policy. The article discusses the stated reasons for tweaking and its implications for the defence manufacturing industry in India.

    Context

    • Recently, the government diluted the “offset” policy in defence procurement, reportedly in response to a Comptroller and Auditor General (CAG) of India’s report tabled in Parliament last month.

    Let’s understand ‘offset’ policy

    •  In order to safeguard national interest, most countries restrict trade in defence equipment and advanced technologies.
    • Yet, for commercial gains and for global technological recognition, governments and firms do like to expand the trade through negotiated bilateral sales.
    • Restrictions are often imposed on the buyer country on use, modification and resale of such equipment and technologies.
    • The product and technology compel buyers to stick to them for: the advantages of bulk purchase, and dependence on the supplier for spares and upgrades.
    • The price and the terms of the contract often reflect the government’s relative bargaining strength and also domestic political and economic considerations.
    • Large buyers such as India seek to exercise their “buying power” to secure not just the lowest price but also try to acquire the technology to upgrade domestic production and build R&D capabilities.
    • The offset clause — used globally — is the instrument for securing these goals.

    Changes in the offset policy

    • Initiated in 2005, the offset clause has following requirements:
    • 1) Sourcing 30% of the value of the contract domestically.
    • 2) Indigenisation of production in a strict time frame.
    • 3) Training Indian professionals in high-tech skills, for promoting domestic R&D.
    • However, the policy has been tweaked many times since.
    • According to the recent CAG report,  between 2007 and 2018, the government reportedly signed 46 offset contracts worth â‚č66,427 crore of investments.
    • However, the realised investments were merely 8%, or worth â‚č5,457 crore.
    • Reportedly, technology transfer agreements in the offsets were not implemented, failing to accomplish the stated policy objective.
    • Recently, the government has changed this policy further so that the offset clause will not be applicable to bilateral deals and deals with a single (monopoly) seller, to begin with.

    Implications of the changes in offset policy

    • The dilution means practically giving up the offset clause, and a setback to India’s prospects for boosting defence production and technological self-reliance.
    • The government, however, has defended the decision by claiming a cost advantage.
    • Howver, price is but one of many factors in such deals, as explained above.
    • The higher (upfront) cost of the agreement due to the offset clause would pay for itself by: reducing costs in the long term by indigenisation of production and the potential technology spill-overs for domestic industry.
    • Hence, giving up the offset clause is undoubtedly a severe setback.

    How did offset policy work for aerospace industry?

    • Despite the heft of Hindustan Aeronautics Limited, India is a lightweight in global civilian aircraft manufacturing, as the public sector giant mostly devotes itself to defence production.
    • The National Civil Aircraft Development (NCAD) project — to come up with an indigenously designed Regional Transport Aircraft (RTA) — has remained a non-starter from day one.
    • However, with the introduction of the offset policy in 2005, things changed dramatically.
    • For contracts valued at â‚č300 crore or more, 30% of it will result in offsets, implemented through Indian offset partners.
    • As aerospace imports rose rapidly, so did the exports via the offsets, by a whopping 544% in 2007, compared to the previous year.
    • By 2014, exports increased to $6.7 billion from a paltry $62.5 million in 2005, according to the United Nations Comtrade Database.
    • The offset clause enabled India to join the league of the world’s top 10 aerospace exporters; the only country without a major domestic aerospace firm.
    • However, exports reduced after the offset clause was relaxed, primarily when the threshold for the policy was raised from the hitherto â‚č300 crore to â‚č2000 crore, in 2016.
    • The offset exports fell to $1.5 billion by 2019.
    • The 2005 policy helped promote a vibrant aerospace cluster, mostly micro, small and medium enterprises (MSMEs) around Bengaluru.

    Consider the question “How far has the offset clause been successful in enhancing the domestic capabilities of India in defence manufacturing? What are the challenges in achieving the objectives of the policy?”

    Conclusion

    There are successful examples to draw lessons from, as the aerospace industry episode demonstrates. India needs to re-conceive or re-imagine the offset clause in defence contracts with stricter enforcement of the deals, in national interest, and in order to aim for ‘Atma Nirbhar Bharat Abhiyaan’, or a self-reliant India.

  • Species in news: Lion-tailed Macaque

    The Union government allowed a geotechnical investigation that involved drilling of 12 boreholes inside Sharavathi Valley Lion-tailed Macaque Sanctuary in the Western Ghats in Karnataka.

    Try this PYQ:

    Which one of the following groups of animals belongs to the category of endangered species?

    (a) Great Indian Bustard, Musk Deer, Red Panda, Asiatic Wild Ass

    (b) Kashmir Stag, Cheetah, Blue Bull, Great Indian Bustard.

    (c) Snow Leopard, Swamp Deer, Rhesus Monkey, Saras (Crane)

    (d) Lion Tailed Macaque, Blue Bull, Hanuman Langur, Cheetah

    About Lion-tailed Macaque

    • Endemic to rainforests of the Western Ghats, the Lion-tailed Macaque (Macaca Silenus) is an Endangered species, according to IUCN assessment.
    • It is listed in Appendix 1 of the Convention on International Trade in Endangered Species.
    • It is a Schedule 1 species under WPA, 1972 and thereby, accorded the highest protection under the Indian law.
    • Their total (global) population is 2,500 mature individuals.

    Why in news?

    • Sharavathi is likely one of the most exploited rivers.
    • It flows for mere 132 km, but four major power projects on it produce 40 per cent of all hydroelectric power in Karnataka.
    • Yet, in an attempt to squeeze more power from the river flowing through the Western Ghats, a new pumped hydro-storage project has been proposed.
    • This will only intensify the cumulative adverse impact of previous projects on the biodiversity of the Sharavathi valley.
    • In particular, the impacts on the iconic Lion-tailed Macaque are likely to be huge.

  • Security implications of Doha Accord for India

    We have been spared of some unfortunate news of terrorist attacks in the recent past, however, it would be mistake to discount the threat posed by the terrorist organisations especially when we consider the backdrop of Doha Accord. The article deals with the threat of terrorism.

    Declining support

    • Terrorist organisations like Taliban, al-Qaeda, Islamic State, Lashkar-e-Taiba (LeT) and Jaish-e-Mohammed (JeM) have been dormant during a pandemic.
    • This is partly explained by the fact that open terror attacks have been reducing, presumably because:
    • 1) Terror outfits lack resources.
    • 2) Because of temporary loss of support from those normally hostile to the non-Islamic world and tolerant Muslims.
    • However, given their past resilience, they continue to pose threats to modern society, especially to India and its neighbourhood.

    But threat persists

    • These terrorist organisations continue to be attractive to misguided youth in India whose loyalties are extraterritorial.
    • Their numbers may not be formidable, but they can cause a ripple effect that cannot be underestimated.
    • Terrorist cells are probably engaged in the quiet process of collecting resources for future lethal assaults against India and other countries in the neighbourhood.
    • Once the pandemic eases, we may see a resurgence of terror.
    • The aggravation of poverty in developing nations due to COVID-19 could offer a fertile ground for recruitment.
    • The al-Qaeda and the Islamic State are carrying out their recruitment undiminished by the problems posed by the pandemic.
    • Only these two outfits have an impressive global reach backed by global ambitions.

    What are the implications of Doha Accord?

    • The Doha Accord signed this year between the Taliban and the U.S., which has brought about an improved relationship between the two.
    • The U.S. has agreed to a near-total withdrawal of its troops in return for the Taliban’s promise to preserve peace in Afghanistan.
    • The Taliban and the al-Qaeda need each other in many areas.
    • Both are friendly towards Pakistan and could pose a problem or two to India in the near future.
    • Many recent raids by the National Investigation Agency point to an al-Qaeda network in India.
    • Once the situation gets better, the al-Qaeda, in cahoots with other aggressive Islamic outfits in and around Pakistan, is bound to escalate the offensive against India.
    • This is one factor that makes the al-Qaeda and other terror outfits still relevant to India’s security calculus.

    Consider the question “What are the implications of Doha Acord for India’s security architecture?”

    Conclusion

    The threat posed by the changing geopolitical landscape is bound to increase in the coming days and hence India should prepare itself to tackle the challenge.

  • [pib] Framework for Regulatory Sandbox

    The International Financial Services Centres Authority (IFSCA) has introduced a framework for Regulatory Sandbox to tap into innovative Fin-tech solutions.

    Try answering this simple question:
    Q.What is Regulatory Sandbox? What are its salient features?

    Regulatory Sandbox

    • A regulatory sandbox usually refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may permit certain regulatory relaxations for the limited purpose of the testing.
    • The objective of the sandbox is to foster responsible innovation in financial services, promote efficiency and bring benefit to consumers.
    • It provides a secure environment for fintech firms to experiment with products under supervision of a regulator.
    • It is an infrastructure that helps fintech players live test their products or solutions, before getting the necessary regulatory approvals for a mass launch, saving start-ups time and cost.

    Its inception

    • The concept of a regulatory sandbox or innovation hub for fintech firms was mooted by a committee headed by then RBI executive director Sudarshan Sen.
    • The panel submitted its report in Nov 2017 has called for a regulatory sandbox to help firms experiment with fintech solutions, where the consequences of failure can be contained and reasons for failure analysed.
    • If the product appears to have the potential to be successful, it might be authorised and brought to the broader market more quickly.

    What is the new framework?

    • IFSCA has introduced a framework for “Regulatory Sandbox”.
      Under this Sandbox framework, entities operating in the capital market, banking, insurance and financial services space shall be granted certain facilities and flexibilities.
    • It will experiment with innovative FinTech solutions in a live environment with a limited set of real customers for a limited time frame.
    • These features shall be fortified with necessary safeguards for investor protection and risk mitigation. The Regulatory Sandbox shall operate within the IFSC located at GIFT City (Gandhinagar).
    • IFSCA shall assess the applications and extend suitable regulatory relaxations to commence limited purpose testing in the Sandbox.

    Other propositions

    • As additional steps towards creating an innovation-centric ecosystem, the IFSCA has proposed the creation of an “Innovation Sandbox”.
    • It will be a testing environment where Fin-tech firms can test their solutions in isolation from the live market.
    • This would be based on market related data made available by the Market Infrastructure Institutions (MIIs) operating in the IFSC.
    • The Innovation Sandbox will be managed and facilitated by the MIIs operating within the IFSC.

    Back2Basics: GIFT City, Gandhinagar

    • GIFT city is India’s first operational smart city and international financial services centre (much like a modern IT park).
    • The idea for GIFT was conceived during the Vibrant Gujarat Global Investor Summit 2007 and the initial planning was done by East China Architectural Design & Research Institute (ECADI).
    • Currently approximately 225 units/companies are operational with more than 12000 professionals employed in the City.
    • The entire city is based on concept of FTTX (Fibre to the home / office).The fiber optic is laid in fault tolerant ring architecture so as to ensure maximum uptime of services.
    • Every building in GIFT City is an intelligent building. There is piped supply of cooking gas. India’s first city-level DCS (district cooling system) is also operational at GIFT City.

  • Malabar Naval Exercise

    Upping the ante against China amid the ongoing LAC confrontations, Australia has formally accepted India’s invite for the upcoming Malabar Exercise.

    About Ex. Malabar

    • Exercise Malabar is a trilateral naval exercise involving the United States, Japan and India as permanent partners.
    • Originally begun in 1992 as a bilateral exercise between India and the United States, Japan became a permanent partner in 2015.
    • Past non-permanent participants are Australia and Singapore.
    • The annual Malabar series began in 1992 and includes diverse activities, ranging from fighter combat operations from aircraft carriers through Maritime Interdiction Operations Exercises.

    Significance of Australia’s inclusion

    • Earlier, India had concerns that it would give the appearance of a “quadrilateral military alliance” aimed at China.
    • Now both look forward to the cooperation in the ‘Indo-Pacific’ and the strengthening of defence ties.
    • This has led to a convergence of mutual interest in many areas for a better understanding of regional and global issues.
    • Both are expected to conclude the long-pending Mutual Logistics Support Agreement (MLSA) as part of measures to elevate the strategic partnership.

  • [pib] Asafoetida (Heeng) cultivation in Himalayan Region

    Farmers of the remote Lahaul valley in Himachal Pradesh are taking up cultivation of asafoetida (Heeng) to utilize vast expanses of waste land in the cold desert conditions of the region.

    Try this PYQ:
    Q.Which one of the following reflects back more sunlight as compared to other three?
    (a) Sand desert
    (b) Paddy crop land
    (c) Land covered with fresh snow
    (d) Prairie land

    Asafoetida cultivation in India

    • Asafoetida is one of the top condiments and is a high-value spice crop in India.
    • Raw asafoetida is extracted from the fleshy roots of Ferula assafoetida as an oleo-gum resin.
    • Although, there are about 130 species of Ferula found in the world, but only Ferula asafoetidais the economically important species used for the production of asafoetida.

    Why cultivate it?

    • Heeng is not cultivated in India.
    • Government data states that India imports about 1,200 tonnes of raw heeng worth Rs 600 crore from Iran, Afghanistan and Uzbekistan.

    Regions for its cultivation

    • Asafoetida best grows in dry and cold conditions.
    • The plant can withstand a maximum temperature between 35 and 40 degree, whereas during winters, it can survive in temperatures up to minus 4 degree.
    • During extreme weather, the plant can get dormant.
    • Regions with sandy soil, very little moisture and annual rainfall of not more than 200mm are considered conducive for heeng cultivation in India.

  • [pib] Buldhana Pattern of water conservation

    Maharashtra’s ‘Buldana Pattern’ of water conservation’ has won national recognition and the NITI Aayog is in the process of formulating National Policy on water conversation based on it.

    Refer this link to read more about traditional water conservations systems in India:

    https://geographyandyou.com/ten-traditional-water-conservation-methods/

    What is ‘Buldhana Pattern’?

    • It is based on the synchronization of national highway construction and water conservation.
    • It was achieved for the first time in Buldana district of drought-prone Vidarbha region, by using soil from the water bodies, nallas and rivers.
    • This consequently leads to the increase in capacity of water storage across the water-bodies in Buldana district and it came to be known as ‘Buldana Pattern’.
    • Creation of State Water Grid and adopting water Conservations works under this pattern will increase the agriculture production and bring prosperity in farmer’s economic life in Vidarbha.

  • [pib] Exercise SLINEX-20

    The Eighth Edition of annual Indian Navy (IN) – Sri Lanka Navy (SLN) bilateral maritime exercise SLINEX-20 is scheduled off Trincomalee.

    About SLINEX-20

    • SLINEX-20 aims to enhance inter-operability, improve mutual understanding and exchange best practices and procedures for multi-faceted maritime operations between both navies.
    • In addition, the exercise will also showcase the capabilities of our indigenously constructed naval ships and aircraft.
    • SLINEX series of exercise exemplifies the deep engagement between India and Sri Lanka which has strengthened mutual cooperation in the maritime domain.
    • Interaction between the SLN and IN has also grown significantly in recent years, in consonance with India’s policy of ‘Neighbourhood First’ and the vision of ‘Security and Growth for all in the Region (SAGAR)’.