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GS Paper: GS3

  • Solar Power Tariffs in India

    India’s solar power tariffs have hit a new record low of ₹2 per unit.

    Can you relate this?

    We have such a lower cost of solar energy. Then why do we rely on coal powered thermal power plants?

    Solar energy scenario in India

    • India has an ambitious target to increase its solar power base – by 2022, it wants to quadruple its current solar capacity to 100GW.
    • A number of industrial-scale solar energy plants have come up in the past few years.
    • The government-backed company Solar Energy Corp. of India (SECI) has been auctioning solar energy capacity to various private developers using a bidding process that favours the cheapest tariffs.

    Low tariff may seem lucrative

    • The record low solar tariffs are mainly due to the “reverse bidding” process, which selects the cheapest bidder.
    • India is now said to be considering a ceiling on solar tariffs – a cap of ₹2.5 ($o.035) and ₹2.68 ($0.038) per unit – for solar power companies that use both domestic and imported equipment.
    • India imports over 90 per cent of solar equipment including cells and modules from overseas, mainly from China and Malaysia.
    • The govt. now is in proves to impose a 25 per cent safeguard duty on solar equipment imports to protect domestic manufacturers, which could further put pressure on the razor margins of solar developers.

    Impacts of such low tariff

    • With the steep drop in prices, there are also concerns about the quality of the equipment being deployed, raising questions about future regulation and related costs.
    • The infrastructure of many solar plants in India didn’t meet many environmental stress factors and technical standards, according to a study.
    • India also has a target of increasing its rooftop solar capacity to 40,000 megawatts (MW) by 2022 similar to trends in many European countries.
    • But, here too, prohibitive costs of solar equipment have kept many residential property owners from switching to rooftop solar despite a government subsidy.

    Back2Basics: SECI

    • It is a company of the Ministry of New and Renewable Energy, Government of India, established to facilitate the implementation of the National Solar Mission (NSM).
    • It is the only Central Public Sector Undertaking dedicated to the solar energy sector.
    • The company’s mandate has been broadened to cover the entire renewable energy domain and the company will be renamed to Renewable Energy Corporation of India (RECI).
    • It is responsible for the implementation of a number of govt. schemes, major ones being the solar park scheme and grid-connected solar rooftop scheme etc.
    • It has a power-trading licence and is active in this domain through the trading of solar power from projects set up under the schemes being implemented by it.

    Reverse bidding Process

    In a reverse auction, the buyer puts up a request for a required good or service. Sellers then place bids for the amount they are willing to be paid for the good or service, and at the end of the auction the seller with the lowest amount wins.

  • NPCI caps UPI transactions on third-party apps at 30%

    The article deals with the recent NPCI decision to cap the number of transactions by third party application providers (TPAPs).

    Context

    • The National Payments Corp of India (NPCI), in its recent guidelines imposed a 30% volume-based cap on the share of transactions by TPAPs and payment service providers (PSPs), effective from January 2021.

     5 issues with the volume-based cap

    1) It undermines cashless economy

    • The growth and recognition of UPI would not have been possible had a cap been in place.
    • Typically, customers limit themselves to one or two TPAPs of their choice.
    • A transaction cap that forces users to use multiple apps may result in more transaction failures and dilute UPI’s popularity and impact.
    • Lack of accessibility and user-friendliness would push users away from UPI towards other payment methods, or even cash.

    2) It’s an anti-consumer decision

    • Open markets and user choice have been crucial factors in the exponential increase seen in UPI adoption and its transactions.
    • A volume-based cap would compel TPAPs to either limit the number of transactions on their platforms or stop enrolling new users, which in turn would restrict the customer’s use of UPI.
    • TPAPs will likely be forced to redact customer incentives like cashbacks, coupons and the like.
    • This could go against consumer interests by reducing choice.

    3) It will also make the Indian market less attractive for investors:

    • The cap would raise compliance and regulatory costs for players in the sector, which could deter new investors from entering.
    • It would also adversely affect the growth potential of existing UPI players.

    4) No regulatory impact assessment

    • The idea of a volume-based cap does not appear to have undergone an assessment of its impact on the sector.
    • As a general principle, before any such rule is imposed, an RIA (Regulatory Impact Assessment) needs to be undertaken.
    • Systemic risks are not restricted to UPI and are common in all financial systems; yet, a similar cap has not been suggested for, say, retail bank transactions.

    5) Impact on Atmanirbhar Bharat

    •  In order for Indian businesses to grow and compete at the global level, we need to integrate business processes with the global economy.
    • Indian start-ups, in particular, need tools and infrastructure that lets them gain an international edge.
    • Atmanirbhar Bharat envisions a self-reliant India that thrives on innovation, technology and entrepreneurship.
    • But this vision cannot be fulfilled if our policies restrain the growth of a cashless economy.

    Conclusion

    India’s UPI ecosystem is nascent, but has demonstrated significant growth and has had a positive impact on the economy by providing the backbone needed to move towards cashless commerce. Any policy decision by regulators at this point should aim at catalysing innovation in this space. Stifling it would serve India badly.

  • MQ-9B Sea Guardian Unarmed Drone

    The Indian Navy has inducted two MQ-9B Sea Guardian unarmed drones procured from the U.S. on lease.

    Try this question 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

    MQ-9B Sea Guardian

    • The Guardian, which is the maritime variant of the Predator MQ-9 UAV, has a maximum endurance of 40 hours and a maximum flying altitude of 40,000 feet.
    • It has 360-degree maritime surveillance radar and optional multimode maritime surface search radar.
    • The drone can perform over-the-horizon long-endurance, medium-altitude Intelligence, Surveillance and Reconnaissance (ISR) missions.
    • The recently released Defence Acquisition Procedure (DAP) 2020 has introduced an option for leasing military platforms.
    • The Basic Exchange and Cooperation Agreement for Geo-Spatial Cooperation (BECA) has simplified such high- technology cooperation.

    About BECA

    • BECA will help India get real-time access to American geospatial intelligence that will enhance the accuracy of automated systems and weapons like missiles and armed drones.
    • Through the sharing of information on maps and satellite images, it will help India access topographical and aeronautical data, and advanced products that will aid in navigation and targeting.
    • This could be a key to Air Force-to-Air Force cooperation between India and the US.
    • BECA will provide Indian military systems with a high-quality GPS to navigate missiles with real-time intelligence to precisely target the adversary.
    • Besides the sailing of ships, flying off aircraft, fighting of wars, and location of targets, geospatial intelligence is also critical to the response to natural disasters.

  • Allowing corporate houses in banking

    The article argues against the suggestion of allowing the corporate houses in the banking sector in India.

    Context

    • An Internal Working Group of the Reserve Bank of India (RBI) has recommended that corporate houses be given bank licences.

    Background of the idea

    • In February 2013, the RBI had issued guidelines that permitted corporate and industrial houses to apply for a banking licence.
    • No corporate was ultimately given a bank licence.
    • None of the applicants had met ‘fit and proper’ criteria.
    • In 2014, the RBI restored the long-standing prohibition on the entry of corporate houses into banking.
    • The RBI’s position on the subject has remained unchanged since 2014.

    Advantages

    • Corporate houses will bring capital and expertise to banking.
    • Moreover, not many jurisdictions worldwide bar corporate houses from banking.

    Risks involved

    • As the report notes, the main concerns are interconnected lending, concentration of economic power and exposure of the safety net provided to banks
    • Corporate houses can easily turn banks into a source of funds for their own businesses.
    • In addition, they can ensure that funds are directed to their cronies.
    • They can use banks to provide finance to customers and suppliers of their businesses.
    • Adding a bank to a corporate house thus means an increase in concentration of economic power.
    • Not least, banks owned by corporate houses will be exposed to the risks of the non-bank entities of the group.
    • If the non-bank entities get into trouble, sentiment about the bank owned by the corporate house is bound to be impacted.

    Suggestion by IWG and issues with them

    • The Internal Working Group (IWG) believes that before corporate houses are allowed to enter banking, the RBI must be equipped with a legal framework to deal with interconnected lending and a mechanism to effectively supervise conglomerates that venture into banking.
    • But there are following 4 issues with such suggestion-
    • 1) Tracing interconnected lending will be a challenge.
    • 2)The RBI can only react to interconnected lending ex-post, that is, after substantial exposure to the entities of the corporate house has happened.
    • It is unlikely to be able to prevent such exposure.
    • 3) Any action that the RBI may take in response could cause a flight of deposits from the bank concerned and precipitate its failure.
    • 4) Pitting the regulator against powerful corporate houses could end up damaging the regulator.

    Issues in allowing NBFC owning corporate house in banking

    • Under the present policy, NBFCs with a successful track record of 10 years are allowed to convert themselves into banks.
    • The Internal Working Group believes that NBFCs owned by corporate houses should be eligible for such conversion.
    • This promises to be an easier route for the entry of corporate houses into banking.
    • The Internal Working Group argues that corporate-owned NBFCs have been regulated for a while.
    • However, there is a world of difference between a corporate house owning an NBFC and one owning a bank.
    • Bank ownership provides access to a public safety net whereas NBFC ownership does not.
    • The reach and clout that bank ownership provides are vastly superior to that of an NBFC.
    • The objections that apply to a corporate house with no presence in bank-like activities are equally applicable to corporate houses that own NBFCs.

    Consider the question “What are the concerns and challenges in allowing the corporate houses in the banking sector in India?” 

    Conclusion

    India’s banking sector needs reform but corporate houses owning banks hardly qualifies as one. If the record of over-leveraging in the corporate world in recent years is anything to go by, the entry of corporate houses into banking is the road to perdition.

  • Desalination Plants and their Feasibility

    Maharashtra state govt. has announced the setting up of a desalination plant in Mumbai, becoming the fourth state in the country to experiment with the idea.

    Try this PYQ:

    Q.What is the role of ultraviolet (UV) radiation in the water purification systems?

    1. It inactivates/kills the harmful microorganisms in water.
    2. It removes the entire undesirable odour from the water.
    3. It quickens the sedimentation of solid particles, removes turbidity and improves the clarity of water.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 and 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

    What are Desalination Plants?

    • A desalination plant turns salt water into water that is fit to drink.
    • The most commonly used techniques used for the process is reverse osmosis where external pressure is applied to push solvents from an area of high-solute concentration to an area of low-solute concentration through a membrane.
    • The microscopic pores in the membranes allow water molecules through but leave salt and most other impurities behind, releasing clean water from the other side.
    • These plants are mostly set up in areas that have access to seawater.

    How widely is this technology used in India?

    • Desalination has largely been limited to affluent countries in the Middle East and has recently started making inroads in parts of the United States and Australia.
    • In India, Tamil Nadu has been the pioneer in using this technology, setting up two desalination plants near Chennai in 2010 and then 2013, while there are two more to come.

    Need for such plant

    • According to the projections, the population of Mumbai is anticipated to touch 1.72 crores by 2041 and accordingly, the projected water demand would be 6424 MLD by then.
    • Currently, BMC supplies 3850 MLD as against the requirement of 4200 MLD each day.

    Is it ecologically safe?

    • The high cost of setting up and running a desalination plant is one reason why the Maharashtra government has over the last decade been hesitant in building such a plant.
    • Desalination is an expensive way of generating drinking water as it requires a high amount of energy.
    • The other problem is the disposal of the byproduct — highly concentrated brine (saltwater) — of the desalination process.
    • While in most places brine is pumped back into the sea, there have been rising complaints that it ends up severely damaging the local ecology around the plant.

    Back2Basics: Osmosis and Reverse Osmosis

    • Osmosis is a phenomenon where pure water flows from a dilute solution through a semi-permeable membrane to a higher concentrated solution.
    • Semi-permeable means that the membrane will allow small molecules and ions to pass through it but acts as a barrier to larger molecules or dissolved substances.
    • As water passes through the membrane to the salt solution, the level of liquid in the saltwater compartment will rise until enough pressure, caused by the difference in levels between the two compartments, is generated to stop the osmosis.
    • This pressure, equivalent to a force that the osmosis seems to exert in trying to equalize concentrations on both sides of the membrane, is called osmotic pressure.
    • If pressure greater than the osmotic pressure is applied to the high concentration the direction of water flow through the membrane can be reversed.
    • This is called reverse osmosis. Note that this reversed flow produces pure water from the salt solution since the membrane is not permeable to salt.

  • What are Miyawaki Forests?

    Japan-inspired Miyawaki forests are emerging as a popular solution to restoring degraded habitats in the country.

    Try this question:

    Q.The Miyawaki Forests technique has to potential to revolutionize the concept of urban afforestation in India. Discuss.

    Miyawaki Forests

    • Doctor Akira Miyawaki, botanist and professor, is the inventor of the technique since 1980.
    • He is a recipient of the 2006 Blue Planet Prize, which is the equivalent of a Nobel Prize in ecology.
    • The approach is supposed to ensure that plant growth is 10 times faster and the resulting plantation is 30 times denser than usual.
    • It involves planting dozens of native species in the same area and becomes maintenance-free after the first three years.

    The technique

    • The method takes its inspiration directly from processes and diversity in nature: 15 to 30 different species of trees and shrubs are planted together.
    • This plant community works very well together and is perfectly adapted to local weather conditions.
    • The habitat thus created will get more complex over time and attract much biodiversity.
    • Vegetation becomes much denser than conventional plantations, and it has the structure of a mature natural forest. It is a multi-storey structure, where different levels of vegetation appear.
    • The forest thus structured delivers many benefits in the form of ecosystem services.
    • It would take about 200 years to let a forest recover on its own. With the Miyawaki method, a similar result is achieved in 20 years.

  • What are Negative-Yield Bonds?

    China recently sold negative-yield debt for the first time, and this saw high demand from investors across Europe.

    Try this PYQ:

    Q.Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly?

    (a) Certificate of Deposit

    (b) Commercial Paper

    (c) Promissory Note

    (d) Participatory Note

    What are Negative-Yield Bonds?

    • These are debt instruments that offer to pay the investor a maturity amount lower than the purchase price of the bond.
    • These are generally issued by central banks or governments, and investors pay interest to the borrower to keep their money with them.

    Why do investors buy them?

    • Negative-yield bonds attract investments during times of stress and uncertainty as investors look to protect their capital from significant erosion.
    • At a time when the world is battling the Covid-19 pandemic and interest rates in developed markets across Europe are much lower.
    • Hence, investors are looking for relatively better-yielding debt instruments to safeguard their interests.

    Why is there a huge demand?

    • While Europe, the US and other parts of the world are facing a second wave of Covid-19 cases, China has demonstrated that it has controlled the spread of the pandemic and is therefore seen as a more stable region.
    • Many feel that European investors are also looking to increase their exposure in China, and hence there is a huge demand for these bonds.
    • The fact that the 10-year and 15-year bonds are offering positive returns is a big attraction at a time when interest rates in Europe have dropped significantly.
    • As against minus —0.15% yield on the 5-year bond issued by China, the yields offered in safe European bonds are much lower, between –0.5% and —0.75%.

  • Chang’e-5 Lunar Probe

    China is preparing to launch an unmanned spacecraft to bring back lunar rocks, the first attempt by any nation to retrieve samples from the moon in four decades.

    Try this PYQ:

    Q.What do you understand by the term Aitken basin:

    (a) It is a desert in the southern Chile which is known to be the only location on earth where no rainfall takes place

    (b) It is an impact crater on the far side of the Moon

    (c) It is a Pacific coast basin, which is known to house large amounts of oil and gas

    (d) It is a deep hyper saline anoxic basin where no aquatic animals are found

    Chang’e-5 Probe

    • The Chang’e-5 probe, named after the mythical Chinese moon goddess, aims to shovel up lunar rocks and soil to help scientists learn about the moon’s origins, formation and volcanic activity on its surface.
    • The goal of the mission is to land in the Mons Rumker region of the moon, where it will operate for one lunar day, which is two weeks long.
    • It will collect 2 kg of surface material from a previously unexplored area known as Oceanus Procellarum — or “Ocean of Storms” — which consist of vast lava plain.
    • The original mission, planned for 2017, was delayed due to an engine failure in China’s Long March 5 launch rocket.
    • If successful, China will be only the third country to have retrieved samples from the moon, following the U.S. and the Soviet Union in the 1960s and 1970s.

    Significance of the mission

    • As per the Lunar and Planetary Institute, rocks found on the Moon are older than any that have been found on Earth and therefore they are valuable in providing information about the Earth and the Moon’s shared history.
    • Lunar samples can help to unravel some important questions in lunar science and astronomy, including the Moon’s age, its formation, the similarities and differences between the Earth and the Moon’s geologic features.
    • For instance, the shape, size, arrangement and composition of individual grains and crystals in a rock can tell scientists about its history, while the radioactive clock can tell them the rock’s age.
    • Further, tiny cracks in rocks can tell them about the radiation history of the Sun in the last 100,000 years.

  • Chinese dam projects on Brahmaputra and impact on downstream countries

    Scarcity of water in India and China

    • As India and China continue to grow demographically as well as economically amid increased consumption among its citizenry, both nations face water constraints.
    • China, which is home to close to 20 per cent of the world’s population, has only 7 per cent of its water resources.
    • Severe pollution of its surface and groundwater caused by rapid industrialisation is a source of concern for Chinese planners.
    • China’s southern regions are water-rich in comparison to the water-stressed northern part.
    • The southern region is a major food producer and has significant industrial capacity as a consequence of more people living there.
    • India is severely water-stressed as well.
    • Similar to China, India has 17 per cent of the world’s population and 4 per cent of water.
    • As in China, an equally ambitious north-south river-linking project has been proposed in India.

    Impact on downstream states

    • The construction of several dams along the Yarlung (Brahmaputra) river on the Chinese side has been a repeated cause for concern for Indian officials and the local people.
    • China has an ambitious plan to link its south and north through canals, aqueducts and linking of major rivers to ensure water security.
    • In pursuit of these goals, China, being an upper riparian state in Asia, has been blocking rivers like the Mekong and its tributaries, affecting Southeast Asian countries like Thailand, Vietnam, Laos and Cambodia.
    • It has caused immense damage to the environment and altered river flows in the region.
    • China sees these projects as a continuation of their historic tributary system as the smaller states have no means of effectively resisting or even significant leverage in negotiations.

    Challenges for India

    • There are now multiple operational dams in the Yarlung Tsangpo basin with more dams commissioned and under construction. These constructions present a unique challenge for Indian planners.
    • 1) Dams will eventually lead to degradation of the entire basin:
    • Silt carried by the river would get blocked by dams leading to a fall in the quality of soil and eventual reduction in agricultural productivity.
    • 2) The Brahmaputra basin is one of the world’s most ecologically sensitive zones.
    • It is identified as one of the world’s 34 biological hotspots.
    • This region sees several species of flora and fauna that are endemic to only this part of the world.
    • The river itself is home to the Gangetic river dolphin, which is listed as critically endangered.
    • 3) The location of the dams in the Himalayas pose a risk.
    • Seismologists consider the Himalayas as most vulnerable to earthquakes and seismic activity.
    • The sheer size of the infrastructure projects undertaken by China, and increasingly by India, poses a significant threat to the populations living downstream.
    • Close to a million people live in the Brahmaputra basin in India and tens of millions further downstream in Bangladesh.
    • 4) Damming Brahmaputra would result in water security in an era of unprecedented shifting climate patterns.
    • This security extends beyond water, as there is the potential to significantly change the flow rate during times of standoffs and high tensions.

    Way forward

    • Both sides must cease new constructions on the river and commit to potentially less destructive solutions.
    • Building a decentralised network of check dams, rain-capturing lakes and using traditional means of water capture have shown effective results in restoring the ecological balance while supporting the populations of the regions in a sustainable manner.

    Conclusion

    There are alternate solutions to solving the water crisis.  It is in the interest of all stakeholders to neutralise this ticking water bomb.

  • Understanding the interplay between subsidies and agri-pollution

    Agriculture’s contribution to air pollution

    • Agriculture’s contribution to air pollution runs deeper than what happens between crop seasons.
    • The Indo-Gangetic plain is also one of the world’s largest and rapidly-growing ammonia hotspots.
    • Atmospheric ammonia, which comes from fertiliser use, animal husbandry, and other agricultural practices, combines with emissions from power plants, transportation and other fossil-fuel burning to form fine particles.

    Impact of pollution on agriculture

    • It is important to note that agriculture is a victim of pollution as well as its perpetrator.
    • Particulate matter and ground-level ozone formed from industrial, power plant, and transportation emissions among other ingredients cause double-digit losses in crop yields.
    • Ozone damages plant cells, handicapping photosynthesis, while particulate matter dims the sunlight that reaches crops.
    • Agriculture scientist Tony Fischer’s 2019 estimates of the two pollutants’ combined effect suggest that as much as 30 per cent of India’s wheat yield is missing (Sage Journals, Outlook on Agriculture).
    • Earlier, B Sinha et al (2015), in Atmospheric Chemistry and Physics Discussions, found that high ozone levels in parts of Haryana and Punjab could diminish rice yields by a quarter and cotton by half.

    Role played by subsidies

    • The current system of subsidies is a big reason that there is stubble on these fields in the first place.
    • Free power — and consequently, “free” water, pumped from the ground — is a big part of what makes growing rice in these areas attractive.
    • Open-ended procurement of paddy, despite the bulging stocks of grains with the Food Corporation of India, adds to the incentives.
    • Subsidies account for almost 15 per cent of the value of rice being produced in Punjab-Haryana belt.
    • Fertiliser, particularly urea in granular form, is highly subsidised.
    • It is one of the cheapest forms of nitrogen-based fertiliser, easy to store and easy to transport, but it is also one of the first to “volatilise,” or release ammonia into the air.
    • This loss of nitrogen then leads to a cycle of more and more fertiliser being applied to get the intended benefits for crops.

    Way forward

    • We need to shift the nature of support to farmers from input subsidies to investment subsidies.
    • This could involve the conversion of paddy areas in this belt to orchards with drip irrigation, vegetables, corn, cotton, pulses and oilseeds.
    • All of the above consume much less water, much less power and fertilisers and don’t create stubble to burn.
    • A diversification package of, say, Rs 10,000 crore spread over the next five years, equally contributed by the Centre and states, may be the best way to move forward in reducing agriculture-related pollution.
    • The approach to diversification has to be demand-led, with a holistic framework of the value chain, from farm to fork and not just focused on production.
    • On the fertiliser front, it would be better to give farmers input subsidy in cash on per hectare basis, and free up the prices of fertilisers completely.

    Conclusion

    Taken together, these measures could double farmers’ incomes, promote efficiency in resource use, and reduce pollution — a win-win solution for all.