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GS Paper: GS3

  • [pib] 15th Finance Commission submits report on Agricultural Exports

    The High-Level Group on Agricultural Exports set up by the Fifteenth Finance Commission has submitted its report to the Commission.

    Try this PYQ from CSP 2019

    Q.In India, which of the following reviews the independent regulators in sectors like telecommunications, insurance, electricity, etc.?

    1. Ad Hoc Committees set up by the Parliament
    2. Parliamentary Department Related Standing Committees
    3. Finance Commission
    4. Financial Sector Legislative Reforms Commission
    5. NITI Aayog

    Select the correct answer using the code given below.

    (a) 1 and 2

    (b) 1, 3 and 4

    (c) 3, 4 and 5

    (d) 2 and 5

    Why focus on Agri-exports?

    • India’s agricultural export has the potential to grow from USD 40 billion to USD 70 billion in a few years.
    • The estimated investment in agricultural export could be in the tune to USD 8-10 billion across inputs, infrastructure, and processing and demand enablers.
    • Additional exports are likely to create an estimated 7-10 million jobs.
    • It will lead to higher farm productivity and farmer income.

    Highlights of the report

    (A) The HLEG has made its recommendations, major among which are:

    • Focus on 22 crop value chains – demand-driven approach.
    • Solve Value Chain Clusters (VCC) holistically with a focus on value addition.
    • Create a State-led export plan with participation from stakeholders.
    • Private Sector should play an anchor role.
    • The centre should be an enabler.
    • The robust institutional mechanism to fund and support implementation.

    (B) State-led Agri Exports

    The Group has recommended a State-led Export Plan –  a business plan for a crop value chain cluster. It will lay out the opportunity, initiatives and investment required to meet the desired value chain export aspiration.

    The Group has also said that for its success, the following factors needed to be considered:-

    • Plans should be collaboratively prepared with private sector players and Commodity Boards.
    • Leveraging of state plan guide and value chain deep dives.
    • The private sector should play an anchor role in driving outcomes and execution.
    • The centre should enable state-led plans.
    • Institutional governance should be promoted across the state and centre.
    • Funding through the convergence of existing schemes, Finance Commission allocation and private sector investment.

    Back2Basics: Finance Commission (FC)

    • The FC is a constitutionally mandated body that decides, among other things, the sharing of taxes between the Centre and the states.
    • Article 280 (1) requires the President to constitute, “within two years from the commencement of this Constitution.
    • And thereafter constitute FC at the expiration of every fifth year or at such earlier time as the President considers necessary.
    • An FC “which shall consist of a Chairman and four other members”.

    Divisible Pool of Taxes

    • Under Article 280(3) (a) the FC must make recommendations to the President “as the distribution between the Union and the States of the net proceeds of taxes which are to be, or maybe, divided between them under this Chapter and the allocation between the States of the respective shares of such proceeds”.
    • Accordingly, the FC determines a formula for tax-sharing between the states, which is a weighted sum of the states’ population, area, forest cover, tax capacity, tax effort and demographic performance, with the weights expressed in percentages.
    • This crucial role of the Commission makes it instrumental in the implementation of fiscal federalism.

  • How aerial seeding is helping plantation in hard-to-access Aravalli regions?

    The Haryana Forest Department has started aerial seeding across the state on a pilot basis with special focus on the Aravalli region.

    Do you know?

    The Aravalli range is considered the “lungs” of the polluted National Capital Region.

    What is Aerial Seeding?

    • Aerial seeding is a technique of plantation wherein seed balls – seeds covered with a mixture of clay, compost, char and other components.
    • They are sprayed on the ground using aerial devices, including planes, helicopters or drones.

    How does this technique work?

    • Seeds balls or seed pellets are dispersed in a targeted area by the low-flying drones, falling to the ground with the help of the coating of clay, compost, char and other material.
    • Coating provides the required weight for seeds to drop on a predetermined location rather than disperse in the wind.
    • These pellets will then sprout when there is enough rain, with the nutrients present within them helping in the initial growth.

    Why Aravallis?

    • Aravallis these days is severely inundated due to heavy mining and has undergone rapid development and construction activities.

    What are the advantages of this technique?

    • Areas that are inaccessible, have steep slopes, are fragmented or disconnected with no forest routes, making conventional plantation difficult, can be targeted with aerial seeding.
    • Furthermore, the process of the seed’s germination and growth is such that it requires no attention after it is dispersed – the reason why seed pellets are known as the “fire and forget” way of the plantation.
    • They eliminate the need for ploughing and digging holes in the soil and the seeds do not need to be planted, since they are already surrounded by soil, nutrients, and microorganisms.
    • The clay shell of these pellets along with the other items in the mixture also protects them from birds, ants and rats.

    What kind of species can be dispersed using aerial seeding?

    • The species selected have to be native to the area and hardy, with seeds that are of an appropriate size for preparing seedballs and have to have a higher survival percentage.
    • It is critical that the timing of the seeding be correct in order for the plantation to be successful.

    Can this replace conventional plantation methods?

    • Seeding should be done only on a pilot basis to evaluate the effectiveness of the technology and the dispersal mechanism.
    • Conventional methods of afforestation cannot be replaced but supplemented with areal seeding.
    • In this case, the technique will allow plantation in sections of the Aravallis that are either difficult to access or inaccessible altogether.

    Back2Basics: Aravalli Range

    • The Aravalli Range is a mountain range running approximately 692 km in a south-west direction, starting near Delhi, passing through southern Haryana and Rajasthan, and ending in Gujarat.
    • The highest peak is Guru Shikhar at 1,722 metres (5,650 ft).
    • The Aravalli Range, an eroded stub of ancient mountains, is the oldest range of Fold Mountains in India.
    • The natural history of the Aravalli Range dates back to times when the Indian Plate was separated from the Eurasian Plate by an ocean.
    • Aravalli, being the old fold mountains, have stopped growing higher due to the cessation of upward thrust caused by the stopping of movement of the tectonic plates in the Earth’s crust below them.
    • In ancient times, Aravalli was extremely high but since have worn down almost completely by millions of years of weathering, whereas the Himalayas being young fold mountains are still continuously rising.

  • Dassault Rafale Fighter Jets

    The five Rafale fighter jets that landed in Ambala will resurrect the Number 17 Golden Arrows squadron of the Indian Air Force (IAF).

    Try this PYQ from CSP 2018:

    Q.What is “Terminal High Altitude Area Defense (THAAD)”, sometimes seen in the news?

    (a) An Israeli radar system

    (b) India’s indigenous anti-missile programme

    (c) An American anti-missile system

    (d) A defence collaboration between Japan and South Korea

    Dassault Rafale

    (Refer image for specifications)

    • The state-of-the-art 4.5 Generation Rafale jet can reach almost double the speed of sound, with a top speed of 1.8 Mach.
    • With its multi-role capabilities, including electronic warfare, air defence, ground support and in-depth strikes, the Rafale lends air superiority to the Indian Air Force.

    Armed with modern arms

    • Each aircraft has 14 storage stations for weapons. The jets come with one of the most advanced Meteor air-to-air missiles.
    • The 190-kg missile has a Beyond Visual Range (BVR) of over 100 km, travelling at a top speed of Mach 4.
    • The Rafale jets also come with SCALP, the air-to-ground cruise missile with a range over 300 km. It is a long-range deep strike missile.
    • The MICA air-to-air missile on Rafale is for both, close-quarter dogfights, and for BVR.
    • IAF has also asked for HAMMER (Highly Agile and Manoeuvrable Munition Extended Range), which is an air-to-ground precision-guided missile that can be used against bunker-type hardened targets within the range of 70 km.

    What is so special about Rafale fighter jet?

    1. India in September 2016 inked a direct deal with the French government to purchase 36 new Rafale fighter jets in a 7.87 billion euro deal that is likely to bring major work to the Indian private sector in terms of offsets under the make in India policy.
    2. The Rafale deal for 36 jets includes over 3 billion euros of work for the Indian industry over the next 7-8 years.This has a huge potential to develop direct and indirect employment opportunities.
    3. High-end technology like engine know-how, major structural assembly is also likely in India, besides a chunk of avionics work.
    4. India will also get latest weapons like the Meteor and Scalp missiles as part of the contract, besides a 5 year support package that assures high availability of the fighter.
    5. India will pay a 15 % advance and deliveries are to start in three years.

    India Specific enhancements

    The Rafale deal caters to specific Indian air force needs. The fighter jet will be modified by France to meet the following:

    • Helmet mounted sights and targeting system to give the pilots lightening quick ability to shoot off weapons.
    • Ability to taken off from high altitude airbases like Leh on a ‘cold start’ – for quick reaction deployment
    • radar warning receiver to identify hostile tracking systems
    • A towed decoy system to thwart incoming missile attacks
    • French industrial support for fighter for 50 years

    VITAL Stats

    • 7.87 billion Euro: Deal cost. This includes weapon systems, five year support, training, infrastructure and warranties. 15% to be paid in advance.
    • 91.7 million euros: as per contract, if other costs like weapons, training etc not counted, per unit price of single seat Rafale is 91.7 million euros
    • 75 % availability: French side will ensure that at any given point, at least 75 percent of the fleet is combat worthy. Failing which, heavy penalities to be invoked.
    • 67 months delivery: All aircraft ordered to be delivered within 67 months with first one coming in by 36 months
    • 50% offsets: Indian industry to get major boost as French side will invest half of deal value in Make in India products or technology transfer. Indian Partners to be firmed up within a year.
    • 328 million Euros: Saved by negotiation efforts by the Indian side on the Rafale deal, according to defence ministry sources.
    • 28/8: according to deal, India to get 28 single seater jets and 8 twin seaters for training.

    For an edge over China

    • While China’s J20 Chengdu jets are called fifth-generation combat jets, compared to 4.5 generation Rafale, the J20 have no actual combat experience.
    • Whereas the Rafale is combat proven, having been used by the French Air Force for its missions in Afghanistan, Libya and Mali.
    • It has also been used for missions in Central African Republic, Iraq and Syria. Rafale can also carry more fuel and weapons than the J20.

  • Will capping the bank CEO tenure make difference

    The article examines the utility of the proposed limit on the banks CEO tenure.

    Context

    • Last month, the Reserve Bank of India released a discussion paper on governance in commercial banks in India.
    • It has a proposal to cap the tenure of bank CEOs.

    Details of the proposed limit and rationale

    • The paper proposes to cap the maximum tenure of a promoter/major shareholder of a bank as a CEO or a Whole Time Director (WTD) at 10 years.
    • This move aims to separate ownership from management.
    • The rationale offered is that 10 years is an adequate period for a promoter/major shareholder of a bank as CEO/WTD to stabilise its operations and to transition the managerial leadership to professional management.
    • The corresponding limit for a CEO who is not a promoter/major shareholder is 15 consecutive years. T
    • Thereafter, that individual is eligible for re-appointment as CEO or WTD only after the expiration of three years.

    Why banks are different from other companies: 3 Reasons

    • Ordinary corporate governance norms exhort managers to run a company in the interest of shareholders but it may not be suitable approach for all types of banks.
    • 1) Banks are highly leveraged, creating powerful incentives for shareholders to engage in risky strategies at great risk to creditors, including retail depositors.
    • 2) Bank failure could involve systemic risk, which could result in a government bail-out.
    • This moral hazard creates even more high-powered incentives for shareholders to engage in risky strategies.
    • 3) Financial assets held by a bank are hard to monitor and measure.
    • Consequently, external scrutiny of a bank by depositors and creditors is difficult.
    • These unique factors are likely to encourage bank managers to take excessive risks to maximise shareholder value.

    Purpose of Bank governance

    • Bank governance seeks to curb such excessive risk-taking discussed above.
    • It encourages prudent risk-taking such that shareholders’ interests are secondary to depositors’ interests.
    • This is the main logic as suggested in the Basel Committee on Banking Supervision guidelines and the Financial Stability Board principles respectively.

    Will capping the CEO tenure help

    • It is unclear whether imposing a maximum cap on CEO tenure would encourage prudent risk-taking by the management.
    • For Indian banks, the limited empirical evidence seems to suggest that bank performance improves with increasing CEO tenure.
    • A paper published in International Journal of Financial Studies finds that an increase in CEO tenure is associated with significant improvements in asset quality and performance of the bank.
    • The effect of CEO tenure increases rapidly with the year of CEO tenure.
    • Concerning public sector banks (PSBs), the P J Nayak Committee report had identified shorter tenure of chairmen and executive directors as a key reason for weaker empowerment of their boards.
    • These findings seem to be at odds with RBI’s suggestion to cap CEO tenure.

    Consider the question “Examine the factors that justify the application of stricter governance principle for the banks. What would be the impacts of the RBI’s proposed limit on the CEO term of the banks on governance?

    Conclusion

    It may be prudent for the RBI to publish an empirical study on the impact of CEO tenure on bank performance before translating this proposal into an enforceable regulation.

  • Production Linked Incentive (PLI) Scheme for electronics manufacturers

    Global electronics giants are set to expand their presence in India under the Production Linked Incentive (PLI) Scheme for making mobile phones and certain other specified electronic components.

    Try this question for mains:

    Q. What is the Production Linked Incentive (PLI) Scheme? Describe its various features and benefits.

    What is the PLI scheme?

    • As a part of the National Policy on Electronics, the IT ministry had notified the PLI scheme on April 1 this year.
    • The scheme will, on one hand, attract big foreign investment in the sector, while also encouraging domestic mobile phone makers to expand their units and presence in India.
    • It would give incentives of 4-6 per cent to electronics companies which manufacture mobile phones and other electronic components.
    • A/c to the scheme, companies that make mobile phones which sell for Rs 15,000 or more will get an incentive of up to 6 per cent on incremental sales of all such mobile phones made in India.
    • In the same category, companies which are owned by Indian nationals and make such mobile phones, the incentive has been kept at Rs 200 crore for the next four years.

    Tenure of the scheme

    • The PLI scheme will be active for five years with financial year (FY) 2019-20 considered as the base year for calculation of incentives.
    • This means that all investments and incremental sales registered after FY20 shall be taken into account while computing the incentive to be given to each company.

    Which companies and what kind of investments will be considered?

    • All electronic manufacturing companies which are either Indian or have a registered unit in India will be eligible to apply for the scheme.
    • These companies can either create a new unit or seek incentives for their existing units from one or more locations in India.
    • Any additional expenditure incurred on the plant, machinery, equipment, research and development and transfer of technology for the manufacture of mobile phones and related electronic items will be eligible for the incentive.
    • However, all investment done by companies on land and buildings for the project will not be considered for any incentives or determine the eligibility of the scheme.

  • Turkey enacts Social Media Law

    Turkey’s parliament approved a law that gives authorities greater power to regulate social media despite concerns of growing censorship.

    Unregulated social media promotes misinformation, hate speech, defamation, and threats to public order, terrorist incitement, bullying, and anti-national activities.

    Turkey: The forerunner of cyber policing

    • Turkey leads the world in removal requests to Twitter, with more than 6,000 demands in the first half of 2019.
    • More than 408,000 websites are blocked in Turkey, according to The Freedom of Expression Association.
    • Online encyclopedia Wikipedia was blocked for nearly three years before Turkey’s top court ruled that the ban violated the right to freedom of expression and ordered it unblocked.
    • The country also has one of the world’s highest rates of imprisoned journalists, many of whom were arrested in a crackdown following a failed coup in 2016.

    Features of the Law:

    1) Appointing representatives:

    • The law requires major social media companies such as Facebook and Twitter to keep representative offices in Turkey to deal with complaints against content on their platforms.
    • If the social media company refuses to designate an official representative, the legislation mandates steep fines, advertising bans and bandwidth reductions.

    2) Bandwidth reductions

    • Bandwidth reductions mean social media networks would be too slow to use.
    • With a court ruling, bandwidth would be reduced by 50% and then by 50% to 90%.

    3) Privacy protection

    • The representative will be tasked with responding to individual requests to take down content violating privacy and personal rights within 48 hours or to provide grounds for rejection.
    • The company would be held liable for damages if the content is not removed or blocked within 24 hours.

    4) Data storage

    • A most alarming feature of the new legislation is that SM companies would require social media providers to store user data in Turkey.
    • The government says the legislation was needed to combat cybercrime and protect users.
    • This would be used to remove posts that contain cyberbullying and insults against women.

    Turkey seems to have given an attempt to regulate social media amidst the chaos. It lags on various fronts, making it realizable for India not to go hastily for such a regulation.

    Concerns over the law

    • Hundreds of people have been investigated and some arrested over social media posts.
    • The opposition is pointing that the law would further limit freedom of expression in a country where the media is already under tight government control and dozens of journalists are in jail.

  • [pib] Atal Innovation Mission launches ‘AIM-iCREST’

    NITI Aayog’s Atal Innovation Mission (AIM), has launched AIM iCREST – an Incubator Capabilities enhancement program for a Robust Ecosystem, focused on creating high performing Startups.

    Note the following things about AIM-iCREST

    1) Meaning of the acronym as it gives the central idea of the initiative

    2) Aims and objective

    3) Technological partners

    AIM-iCREST

    • AIM iCREST, as the name suggests, has been designed to enable the incubation ecosystem and act as a growth hack for AIM’s Atal and Established incubators across the country.
    • Under the initiative, the AIM’s incubators are set to be upscaled and provided requisite support to foster the incubation enterprise economy that will help them to significantly enhance their performance.
    • This will be complemented by providing training to entrepreneurs, through technology-driven processes and platforms.
    • The program aims at going beyond incubator capacity building.  This is a first of its kind initiative for advancing innovation at scale in India.

    Various partners

    • AIM has joined hands with Bill & Melinda Gates Foundation and Wadhwani Foundation – organizations that can lend credible support and expertise in the entrepreneurship and innovation space.
    • These partnerships will provide global expertise and showcase proven best practices to the AIM’s incubator network.

    An initiative for incubators

    • India needs world-class incubators fostering world-class startups leveraging the tremendous innovation talent of our country.
    • For the first time in the Government, the Incubator capacity development program is being extended to the entire portfolio of supported Atal incubators.
    • This programme is unique also in its design – it is a combination of interactive practices in the field of incubation; enabling the incubators to support sustainable and successful startups.

    Back2Basics: Atal Innovation Mission

    • Atal Innovation Mission (AIM) is NITI Aayog’s flagship initiative to promote a culture of innovation and entrepreneurship in India
    • AIM has been established to create and promote an ecosystem of innovation and entrepreneurship in a holistic manner through various initiatives at school, university and industry levels
    • The Atal Innovation Mission has thus two core functions:
    1. Innovation promotion: to provide a platform where innovative ideas are generated.
    2. Entrepreneurship promotion: Wherein innovators would be supported and mentored to become successful entrepreneurs at Incubation Centres.

  • What are Pre-packs under the present insolvency regime?

    The Ministry of Corporate Affairs (MCA) has set up a committee to look into the possibility of including what is called “pre-packs” under the current insolvency regime to offer faster insolvency resolution.

    Practice question for mains:

    Q.What are the key features of the Insolvency and Bankruptcy Code? Discuss how operationalization of IBC is hindered by the slower resolutions of insolvency cases. Suggest measures for faster resolution.

    What is Pre-pack?

    • A pre-pack is an agreement for the resolution of the debt of a distressed company through an agreement between secured creditors and investors instead of a public bidding process.
    • This system of insolvency proceedings has become an increasingly popular mechanism for insolvency resolution in the UK and Europe over the past decade.

    Why need Pre-packs?

    • Slow progress in the resolution of distressed companies has been one of the key issues raised by creditors regarding the Corporate Insolvency Resolution Process (CIRP) under the IBC.
    • Under the IBC, stakeholders are required to complete the CIRP within 330 days of the initiation of insolvency proceedings.

    A case for India

    • In India’s case, such a system would likely require that financial creditors agree on terms with potential investors and seek approval of the resolution plan from the National Company Law Tribunal (NCLT).
    • This process would likely be completed much faster than the traditional CIRP which requires that the creditors of the distressed company allow for an open auction for qualified investors to bid for the distressed company.
    • The process needs to be completed within 90 days so that all stakeholders retain faith in the system and cases that take more than this time should be taken through the normal CIRP.

    What are the other key benefits of a pre-pack?

    • Pre-packs would mostly be used for businesses that are running; the investors would likely need to maintain good relations with operational creditors.
    • In the case of pre-packs, the incumbent management retains control of the company until a final agreement is reached.
    • The transfer of control from the incumbent management to an insolvency professional as is the case in the CIRP leads to disruptions in the business and loss of some high-quality human resources and asset value.

    Some limitations

    • The key drawback of a pre-packaged insolvency resolution is the reduced transparency compared to the CIRP.
    • Financial creditors would reach an agreement with a potential investor privately and not through an open bidding process.
    • This could lead to stakeholders such as operational creditors raising issues of fair treatment when financial creditors reach agreements to reduce the liabilities of the distressed company.

  • What is Green-Ag Project?

    The Union government has launched the Green-Ag Project in Mizoram, to reduce emissions from agriculture and ensure sustainable agricultural practices.

    Note the following things about Green-Ag Project:

    1)Core objective

    2)Implementing agencies

    3)Regions of Implementation

    Green-Ag Project

    • The Green-Ag project is designed to achieve multiple global environmental benefits in at least 1.8 million hectares (ha) of land in five landscapes, with mixed land-use systems.
    • It aims to bring at least 104,070 ha of farms under sustainable land and water management.
    • The project will also ensure 49 million Carbon dioxide equivalent (CO2eq) sequestered or reduced through sustainable land use and agricultural practices.

    Implementing agencies

    • The project is funded by the Global Environment Facility, while the Department of Agriculture, Cooperation, and Farmers’ Welfare (DAC&FW) is the national executing agency.
    • Other key players involved in its implementation are the Food and Agriculture Organization (FAO) and the Environment Ministry (MoEF&CC).

    Regions of implementation

    The project has been launched in high-conservation-value landscapes of five States namely

    • Madhya Pradesh: Chambal Landscape
    • Mizoram: Dampa Landscape
    • Odisha: Similipal Landscape
    • Rajasthan: Desert National Park Landscape
    • Uttarakhand: Corbett-Rajaji Landscape

  • Ammonia Pollution in Yamuna River

    For the second time in a week, the Delhi Jal Board (DJB) had to reduce water production capacity by 25 per cent after high levels of ammonia were detected in the Yamuna River.

    Try this PYQ from CSP 2019:

    Q. Consider the following statements:

    1. Agricultural soils release nitrogen oxides into the environment.
    2. Cattle release ammonia into the environment.
    3. Poultry industry releases reactive nitrogen compounds into the environment.

    Which of the statements given above is/are correct?

    (a) 1 and 3 only

    (b) 2 and 3 only

    (c) 2 only

    (d) 1, 2 and 3

    What is Ammonia and what are its effects?

    • Ammonia is a colourless gas and is used as an industrial chemical in the production of fertilizers, plastics, synthetic fibres, dyes and other products.
    • Ammonia occurs naturally in the environment from the breakdown of organic waste matter, and may also find its way to ground and surface water sources through industrial effluents or through contamination by sewage.
    • If the concentration of ammonia in water is above 1 ppm it is toxic to fishes.
    • In humans, long term ingestion of water having ammonia levels of 1 ppm or above may cause damage to internal organs.

    A cause of concern

    • The level of ammonia in raw Yamuna water was 1.8 parts per million (ppm).
    • The acceptable maximum limit of ammonia in drinking water, as per the Bureau of Indian Standards, is 0.5 ppm.

    Where does Ammonia come from?

    • Ammonia is produced for commercial fertilizers and other industrial applications.
    • Natural sources of ammonia include the decomposition or breakdown of organic waste matter, gas exchange with the atmosphere, forest fires, animal and human waste, and nitrogen fixation processes.

    How is it treated?

    • The DJB at present does not have any specific technology to treat ammonia.
    • The only solution it adapts is to reduce production at its water treatment plants.
    • In addition to this, the board mixes raw water that carries a high concentration of ammonia with a fresh supply.
    • The amount of chlorine added to disinfect raw water is also increased when high levels of ammonia are detected.

    What is the long-term solution to the problem?

    • Stringent implementation of guidelines against dumping harmful waste into the river, and making sure untreated sewage does not enter the water are two things pollution control bodies are expected to do.
    • But, a more organic method agreed upon by environmentalists and experts is to maintain a sustainable minimum flow, called the ecological flow.
    • This is the minimum amount of water that should flow throughout the river at all times to sustain underwater and estuarine ecosystems and human livelihoods, and for self-regulation.
    • The lack of a minimum ecological flow also means an accumulation of other pollutants.