In a bid to rein in the gold imports and attract investors away from physical assets, PM Modi launches 3 Gold Schemes:
Gold Coin and Bullion scheme
Gold Monetisation Scheme
Gold Sovereign Bond Scheme
#1. India Gold Coin and Bullion scheme
The coin will be the first ever national gold coin minted in India and will have the National Emblem of Ashok Chakra engraved on one side and Mahatma Gandhi on the other side.
Initially, the coins will be available in denominations of 5 and 10 grams.
The Indian Gold coin is unique in many aspects and will carry advanced anti-counterfeit features and tamper proof packaging that will aid easy recycling.
#2. Gold Monetisation Scheme (GMS), 2015
Scheme allows you to earn some regular interest on your gold and save you carrying costs as well.
It replaced the existing Gold Deposit Scheme, 1999.
It offers option to resident Indians to deposit their precious metal and earn an interest of up to 2.5 per cent.
Who can make deposits?
Resident Indians (individuals, HUF, trusts, including mutual funds/exchange traded funds registered under Sebi norms) can make deposits under the scheme.
No maximum limit for deposit under the scheme and the metal will be accepted at the Collection and Purity Testing Centres (CPTC) certified by the Bureau of Indian Standards.
#3. Sovereign Gold Bond Scheme
Investors can earn an interest rate of 2.75 per cent per annum by buying paper bonds.
Sovereign Gold Bonds will be issued in multiple tranches subject to the overall borrowing limits.
The bond would be restricted for sale to resident Indian entities and the maximum allowable limit is 500 grams per person per year.
They can be used as collateral for loans and can be sold or traded on stock exchanges
Few more things to know
Minimum investment in the bond shall be 2 grams.
The bonds can be bought by Indian residents or entities and is capped at 500 grams.
The RBI has fixed the public issue price of sovereign gold bonds at Rs 2,684 per gram.
The borrowing through issuance of Bond will form part of market borrowing programme of Government.
The Bonds will be eligible for Statutory Liquidity Ratio (SLR).
Why was there a need for such schemes?
To lure tonnes of gold from households into banking system.
According to the World Gold Council, an estimated 22,000-23,000 tonnes of gold is lying idle with households and institutions in India.
Huge gold imports pushed India’s current account deficit (CAD) to a record $190 billion in 2013, prompting the hike its duty on imports to a record 10 percent.
The government wants to reduce the reliance on gold imports over time.
But, will these schemes succeed in bringing down Gold imports?
Experts who believe, investors will still find 8 percent offered for bank deposits as more attractive.
The present scheme will not bring out even 20 tonnes of gold.
Investors fear that the tax department will hound them questioning the source of gold.
Okay! But tell me how good are they from investing point of view?
A section of experts feels the interest rates being offered (on both deposits and bonds) are attractive.
For people who have gold as an investment asset, it is a good opportunity to gain some interest out of it.
Gold is always written off as a zero-yield instrument compared to equities, which give dividend and fixed income which gives fixed interest.
From now on, gold will not only be an instrument of security but will also give earnings and will become part of nation building.
FDI means where a foreign company, generally an MNC, may invest in a country in any of the following 3 forms:
#1. Setup a plant or project to manufacture a commodity- consumer goods, capital goods, automobile, aircrafts, ships etc. It may also engage itself in construction activity- highways, roads, bridges, ports, airports, real estate etc.
#2. Setup network for providing services- banking, insurance, shipping, telecom, software, civil aviation etc.
#3. Only provide technology by way of Technology Transfer through any company of the country. It can provide technology only or provide technology along with #1 & #2 above
Foreign Portfolio Investment (FPI):
It means that foreign investors, generally Foreign Institutional Investors in case of India (FIIs are very large investors who invest bulk amounts just like Mutual Funds), invest in country stock market by investing in shares, debentures, bonds, Mutual Funds etc.
The objective here is to make capital gains in the stock markets
Hence this is investment is also called ‘Hot Money’ or ‘Fly-by-Night Money’ as it has a tendency to move from one country to another in search of quick profit
Therefore it has a potential to cause volatility in those markets from where it leaves
FDI routes:
#1. Automatic
A foreign company wishing to invest in India doesn’t have to seek prior approval of any body/ agency in India
It can straight away bring in investments in India & has only to inform the RBI within 1 month of bringing its investment in a certain sector
This route is relatively hassle free due to which more than 55% of total FDI has come through this route
#2. Foreign Investment Promotion Board (FIPB)
It was established in 1992 (just after L-P-G reforms)
Investments upto Rs. 5000 crore from notified sectors have to go through its approval
#3. Cabinet Committee on Economic Affairs (CCEA)
This approves investments above Rs. 5000 crores from notified sectors
Merits of FDI:
Source: Dailymail
Adds to the productive capacity of a nation (by definition, as mentioned above)
Long term and stable- Because an MNC would continue to manufacture in a country, earn profits, engage in exports and thus spread its wings across the world as it enjoys a global name
No repayment obligation on part of the country where it is operating. This is the most important feature
Brings in capital and bolsters FOREX reserves
Brings in technology
Helps export promotion (because of global brands)
Generates employment
Expands markets (domestic as well as foreign)
International Best Practices- Brings in latest administrative and work culture
Infuses competition among domestic industries
What is the impact of FDI on Inflation?
Source: navroops.blogspot.in
FDI has been generally touted as a measure to dampen inflation. But this can NOT be concluded in all situations
The FDI’s impact on dampening the inflation is based upon the assumption that FDI would result in the developing of country’s back-end infrastructure and crack the supply bottlenecks. Practically, it may or may not happen
Economics has no rule to link FDI and Inflation because inflation may have many reasons behind it rather than only infrastructure and supply bottlenecks
Generally the FDI’s role in containing inflation is supported by the facts that- it improves infrastructure, improves supply chain, brings permanent investment
Demerits:
May threaten a country’s economic and political sovereignty (remember East
India Company which came to India just as a trader)
It may bring obsolete technology (this was true especially during 1950-90 because US and UK were the only countries bringing FDI. But now due to many countries bringing FDI, there is competition and this risk is reduced)
Focus on short term profit earning tactics rather than long term investments with a view of national industrial development
Indulging in cut-throat competition
Indulging in transfer pricing practices
Why Foreign Investors go for FDI?
To take advantage of cheaper wages in the country, special investment privileges such as tax exemptions offered by the country as an incentive
To gain tariff-free access to the markets of the country
To acquire lasting interest in enterprises operating in the target country.
What attracts FDI?
The growth rate of the source economy is an important determinant
The political and economic stability of the target region
How ‘open’ the economy is towards foreign trade (both imports and exports)
The policies, rules, regulations and loopholes incidental thereto
For example, Mauritius has been top FDI source for India due to the later (loophole) reasons
Recent FDI reforms (November 2015):
Source: Economic Times
#1. Townships, shopping complexes & business centres – all allow up to 100% FDI under the auto route
Conditions on minimum capitalisation & floor area restrictions have now been removed for the construction development sector
#2. India’s defence sector now allows consolidated FDI up to 49% under the automatic route
FDI beyond 49% will now be considered by the Foreign Investment Promotion Board
Govt approval route will be required only when FDI results in a change of ownership pattern
#3. Private sector banks now allow consolidated FDI up to 74%
#4. Up to 100% FDI is now allowed in coffee/rubber/cardamom/palm oil & olive oil plantations via the automatic route
#5. 100% FDI is now allowed via the auto route in duty free shops located and operated in the customs bonded areas
#6. Manufacturers can now sell their products through wholesale and/or retail, including through e-commerce without Government Approval
#7. Foreign Equity caps have now been increased for establishment & operation of satellites, credit information companies, non-scheduled air transport & ground handling services from 74% to 100%
#8. 100% FDI allowed in medical devices
#9. FDI cap increased in insurance & sub-activities from 26% to 49%
#10. FDI up to 49% has been permitted in the Pension Sector
#11. Construction, operation and maintenance of specified activities of Railway sector opened to 100% foreign direct investment under automatic route
#12. FDI policy on Construction Development sector has been liberalised by relaxing the norms pertaining to minimum area, minimum capitalisation and repatriation of funds or exit from the project
To encourage investment in affordable housing, projects committing 30 percent of the total project cost for low cost affordable housing have been exempted from minimum area and capitalisation norms
#13. Investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations will be deemed to be domestic investment at par with the investment made by residents
#14. Composite caps on foreign investments introduced to bring uniformity and simplicity is brought across the sectors in FDI policy
#15. 100% FDI allowed in White Label ATM Operations White Label ATMs? Answer in comments>
Crux of the reforms:
To further ease, rationalise and simplify the process of foreign investments in the country
To put more and more FDI proposals on automatic route instead of Government route where time and energy of the investors is wasted
Refining of foreign investment norms in construction is to facilitate the construction of 50 million houses for poor
Opening up of the manufacturing sector for wholesale, retail and e-commerce is aimed at motivating industries to Make In India and sell it to the customers here instead of importing from other countries
Sectoral caps:
Petroleum Refining by PSU (49%)
Teleports (setting up of up-linking HUBs/Teleports),Direct to Home (DTH), Cable Networks (Multi-system operators (MSOs) operating at national, state or district level and undertaking upgradation of networks towards digitalisation and addressability), Mobile TV and Headend-in-the-Sky Broadcasting Service (HITS) – (74%)
Cable Networks (49%)
Broadcasting content services- FM Radio (26%), uplinking of news and current affairs TV channels (26%)
Print Media dealing with news and current affairs (26%)
Air transport services- scheduled air transport (49%), non-scheduled air transport (74%)
Ground handling services – Civil Aviation (74%)
Satellites- establishment and operation (74%)
Private security agencies (49%)
Private Sector Banking- Except branches or wholly owned subsidiaries (74%)
Public Sector Banking (20%)
Commodity exchanges (49%)
Credit information companies (74%)
Infrastructure companies in securities market (49%)
Insurance and sub-activities (49%)
Power exchanges (49%) power exchanges? What are the issues with them? Hint- Economic Survey 2015-16 Chapter 11>
Defence (49% above 49% to CCS)
Pension Sector (49%)
Sectors which need Govt (FIPB/ CCEA) approval:
Tea sector, including plantations – 100%
Mining and mineral separation of titanium-bearing minerals and ores, its value addition and integrated activities -100%
FDI in enterprise manufacturing items reserved for small scale sector – 100%
Defence – up to 49% under FIPB/CCEA approval, beyond – 49% under CCS approval (on a case-to-case basis, wherever it is likely to result in access to modern and state-of-the-art technology in the country)
Teleports (setting up of up-linking HUBs/Teleports), Direct to Home (DTH), Cable Networks (Multi-system operators operating at National or State or District level and undertaking upgradation of networks towards digitisation and addressability), Mobile TV and Headend-in-the Sky Broadcasting Service(HITS) – beyond 49% and up to 74%
Broadcasting Content Services: uplinking of news and current affairs channels – 26%, uplinking of non-news and current affairs TV channels – 100%
Publishing/printing of scientific and technical magazines/specialty journals/periodicals – 100%
Print media: publishing of newspaper and periodicals dealing with news and current affairs- 26%, Publication of Indian editions of foreign magazines dealing with news and current affairs- 26%
Terrestrial Broadcasting FM (FM Radio) – 26%
Publication of facsimile edition of foreign newspaper – 100%
Airports – brownfield – beyond 74%
Non-scheduled air transport service – beyond 49% and up to 74%
Ground-handling services – beyond 49% and up to 74%
Satellites – establishment and operation – 74%
Private securities agencies – 49%
Telecom-beyond 49%
Single brand retail – beyond 49%
Asset reconstruction company – beyond 49% and up to 100%
Banking private sector (other than Branches) – beyond 49% and up to 74%, public sector – 20%
Insurance – beyond 26% and up to 49%
Pension Sector – beyond 26% and up to 49%
Pharmaceuticals – brownfield – 100%
All sectors other than these are under automatic route.
Sectors where FDI is prohibited:
Lottery Business including Government /private lottery, online lotteries, etc.
Gambling and Betting including casinos etc.
Chit funds
Nidhi company-(borrowing from members and lending to members only)
Trading in Transferable Development Rights (TDRs) <What are TDRs? Answer in comments>
Real Estate Business (other than construction development) or Construction of Farm Houses
Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
Activities/ sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than construction, operation and maintenance of
(i) Suburban corridor projects through PPP,
(ii) High speed train projects,
(iii) Dedicated freight lines,
(iv) Rolling stock including train sets, and locomotives/coaches manufacturing and maintenance facilities,
(v) Railway Electrification,
(vi) Signaling systems,
(vii) Freight terminals,
(viii) Passenger terminals,
(ix) Infrastructure in industrial park pertaining to railway line/sidings including electrified railway lines and connectivities to main railway line and
(x) Mass Rapid Transport Systems)
Services like legal, book keeping, accounting & auditing.
During his visit to the UK last week, Prime Minister Narendra Modi spoke about the Indian Railways issuing bonds and listing them on the London Stock Exchange.
Let’s explore the Bonds as a financial instrument and then dive deep into Masala Bonds.
What are Bonds?
Bonds are debt instruments which allow the companies or govt. to raise funds only by incurring debt and lender is guaranteed of a fixed repayment (Principle and Interest).
What are instrument available with Company to raise funds?
1. Issue Bonds – Companies will have to pay the fixed amount when the bond matures.
2. Issue Shares – Companies would like to raise money, but don’t want is as a debt, so company will issue shares.
Can you imagine who (Company/Investor) will prefer what (Debt/Shares)?
Companies will prefer to raise money through equities i.e. issuing shares because they will part a share of the company to the investors, while the investors will prefer to purchase bonds because bonds are more secured.
Shares may give higher returns in the long run. So, it is risk-return trade-off.
How the bonds are more secure than shares?
In case of liquidation of the company, the bond holders are the one who get their claim before the share holders.
Now, let’s get into main discussion on Masala Bonds
What’s new in the Masala Bonds?
Basically, overseas rupee bonds are known as Masala bonds.
Indian firms have earlier raised money abroad through bonds and other forms of borrowings, but always in foreign currency.
However, the first overseas rupee bonds were issued in 2013 by the International Finance Corporation, the World Bank’s private sector investment arm.
To raise funds for capital expenditure, the Indian Railway Finance Corporation will be issuing bonds denominated in rupees.
What are the risk associated Indian companies with foreign currency overseas bond?
An Indian company issuing a overseas bond(i.e. in other currencies specially dollar) runs into a risk on account of currency fluctuation.
If rupee weakens during the period of bond, then it add significantly to costs at the time of repayment, normally at the end of 5 years.
How Masala Bonds will benefit Indian companies?
If the issuer, issues bonds in rupees, then he gets rid of this risk (currency fluctuation) which passes on to the investor.
This bond brings a new and diversified set of investors for Indian companies, and more liquidity in foreign exchanges, apart from bank funding and the corporate bond market in India.
Does Masala bond offer something for foreign investors?
The investor who purchases a bond issued by an Indian entity is betting on India, in a hope that currency and inflation would be stable enough to ensure good returns after hedging for foreign exchange risks.
With India’s GDP or national income rising, and projected to grow at a reasonably fast clip over the next few years, many overseas investors would like to buy into such bonds to join the party and to earn higher returns compared to the US and Europe where interest rates are still low.
How does Govt. and RBI view Masala Bonds?
The local currency bond markets can contribute to financial stability by reducing currency mismatches and extending the duration of debt.
It will also be a sign of early acceptance of the Indian currency in trading and settlement overseas, showing the confidence of investors and can lead to internationalization of the currency over the medium- and long term.
Foreign investors prefer to hedge their risks overseas because there are limited products in the Indian market, especially for longer periods.
The other worry, if the overseas rupee bond market takes off, will be about the growth of the Indian corporate bond market and Indian banks as top companies shift to another market, impacting growth here.
Was such an approach adopted by any emerging economies in past?
China’s People’s Bank of China has previously issued yuan denominated bonds to raise funds at a little over 3%.
China had issued bonds in its own currency in Hong Kong dubbed dimsum bonds and plans to issue more as part of its plan to push its currency for global trade.
Unlike China, the Indian govt. has never borrowed abroad on its own, preferring to push its state owned firms, instead.
RBI, unlike the Chinese central bank, cannot issue debt with no legal sanction for it.
But these have been borrowings in dollar or other currencies. The Railways bond, on the other hand, will be denominated in rupees.
In a bid to rescue almost bankrupt state electricity retailers, the Cabinet recently approved this scheme for reviving power utilities having debt amounting to Rs 4.3 lakh crore.
What is Ujjwal Discom Assurance Yojana?
UDAY provides for the financial turnaround and revival of Power Distribution companies (DISCOMs), and importantly also ensures a sustainable permanent solution to the problem. It has ambitious target of making all discoms profitable by 2018-19.
The scheme will ease the financial crunch faced by power distribution companies, that has impaired their ability to buy electricity.
It is based on the premise that it is states’ responsibility to ensure that discoms become financially viable.
How UDAY will revive Discoms?
It has all the 3 elements —
Clear up the legacy issues of past losses and debt.
Provide a financial road map to bring tariffs in line with costs by FY19.
Provide enough deterrents for the state govt to not allow the state discoms to become loss ridden post FY18, as losses start to impact their FRBM limits.
The State govt. will takeover the discom liabilities over 2-5 year period.
This will allow discoms to convert their debt into State bond. These bonds will have a maturity period of 10-15 years.
It will allow transfer of 75% outstanding debts incurred by stressed discoms to States’ debt, 50% in 2015-16 and 25% in 2016-17.
The central government will not include the loans of the discoms in calculation of the state’s deficit till 2016-17.
Why are these Discoms so stressed?
There are various reasons that lead to Discoms becoming unsustainable over the period of time.
Politics of free power, repressed tariffs and power thefts leading high transmission losses.
Poor infrastructure and low standard of management.
Power subsidies are given to all, irrespective of rich/poor.
Discoms in states of Rajasthan, Tamil Nadu and UP are the most stressed ones.
Almost 25% T&D ( Transmission & Distribution) losses suffered by discoms. Remaining 75% is sold at a price much lower than discoms’ procurement costs. Wondering Why??
The most obvious reason is political interference, i.e. tariff is set by a group of largely political appointees.
Financially stressed DISCOMs are not able to supply adequate power at affordable rates, which hampers quality of life and overall economic growth and development.
What will be the impact of this scheme?
It is expected to help the banks in managing their bad loans.
It will relieve discoms who can push power distribution in right way.
It will allow states to align tariff costs, so that discoms run on a sustainable basis.
What are thrust areas of UDAY to turnaround discoms?
Improve operational efficiency.
Reduction in cost of power – By monitoring technical and commercial losses by smart metering and feeder separation.
Reduction in the interest cost of discoms.
Enforcing financial discipline on discoms through alignment with States’ finances.
What could be potential challenge to UDAY?
Electricity is not a central subject, states’ cannot be made to participate in the programme.
Finding buyers for such bonds might prove difficult, as these would enjoy the SLR status.
It has not laid down a specific performance-monitoring and compliance mechanism.
It does not cover inadequate investment in network & poor supply, which is essential for reliable and quality supply.
No central monetary assistance is provided, rather states’ will be provided subsidised funding from the central govt.’s power schemes as well as priority in supply of coal.
How is ease of doing business linked with the Insolvency and Bankruptcy Code?
In India, lack of resolution of insolvency is one of the significant factors for the failure of credit market in the country. The present legislations governing insolvency are fragmented, multi-layered and the adjudication of insolvency matters take place in multiple forum, resulting in an unpredictable regime.
The Insolvency and Bankruptcy Code has been hailed as an excellent reform for India that will pay a critical role in improving the ease of doing business.
Why does India need a Bankruptcy law?
Currently it takes, on an average, more than 4 years to resolve insolvency in India. The proposed Bankruptcy Code will replace over a century-old archaic insolvency act – The Presidency Towns Insolvency Act, 1909.
Delays in making decisions on the viability of business.
Sometimes, company promoters try to delay reorganisation or attempts to sell-off assets or change of management.
Delays in disposing off cases by Debt Recovery Tribunal.
Continued litigation at various levels and delays in appellate level.
Currently, there are 4 different agencies viz. the HC, the Company Law Board, the BIFR and the DRTs that handle insolvency-related cases.
How can a modern law help?
Speedy closure will help firms on the verge of brink in two ways, i.e. either restructure the firm or sell-off the assets to recover the money.
It will promote efficient allocation and greater availability of credits for businesses, as it frees up capital.
Development of financial markets such as bond market, due to clarity on repayment for debtors.
What is the international experience in this regard?
US Bankruptcy Code provides for fairly quick liquidation or reorganisation of the company.
In UK, once the cases are filed, then after 12 months, either the part of assets are discharged to pay-off debt or court-appointed administrators handle the case, if company can be turned around.
Was any committee formed to suggest Insolvency reforms?
The Bankruptcy Law Reform Committee (BLRC) was set up in August, 2014 under the chairmanship of Mr. T.K. Vishwanathan.
It was the first committee with the mandate of suggesting comprehensive and not incremental reforms.
The BLRC extensively studied the insolvency regime within India as well as various international jurisdictions.
What was the recommendation of the Committee?
The committee proposed an all-encompassing law for corporate and individual insolvency, reflecting the best practices from across the globe.
The corporates should assess the viability of an enterprise in the early stages of insolvency, such that the creditor and the debtors can negotiate a financial arrangement while preserving the economic value of the enterprise.
However, if the negotiations fail, then the enterprise is liquidated. The insolvency resolution is required to be done within a period of 180 days.
It also suggested fast track insolvency resolution for certain entities which is required to be completed within 90 days.
What are the provisions of draft Insolvency and Bankruptcy Code?
The code aims to bring modern framework to deal with bankruptcy and insolvency of variety of economic players, including individuals, but excluding financial firms.
It will restore some power to creditors, both financial and operational.
It will fast-track mechanism of insolvency resolution process may be applicable to certain categories of entities.
The corporate insolvency would have to be resolved within a period 180 days, extendable by 90 days.
It also provides for fast-track resolution of corporate insolvency within 90 days.
Debt Recovery Tribunals will be adjudicating authority over both individual & unlimited liability partnership firms.
National Company Law Tribunal will be adjudicating authority with jurisdiction over companies with limited liability.
It has a clause to provide for insolvency professionals who will specialize in helping sick companies. <These professionals will help revive control the management of distressed firm to revive it>
It also provides for information utilities that will collate all information about debtors to prevent serial defaulters from misusing the system
To setup Insolvency and Bankruptcy Board of India to act as a regulator for these utilities and professionals.
The bill also seeks to establish Insolvency and Bankruptcy Fund of India.
What about Financial Sector Insolvencies?
FSLRC recommended creation of a resolution corporation to monitor financial firms and intervene before they go bust.
The aim is to close-down the firms which can’t be revived or change their management to protect investors or depositors.
The reform is dubbed as 2nd most important reform after GST, as it will also improve the ease of doing business in India.
Launched by the central government in February 2015, the scheme is tailor-made to issue ‘Soil card’ to farmers which will carry crop-wise recommendations of nutrients and fertilizers required for the individual farms.
Agriculture as primary activity in India
Agriculture since ages is the mainstay of the Indian population.
The story of Indian agriculture has been a spectacular one, with a global impact for its multi-functional success in generating employment, livelihood, food, nutritional and ecological security.
Agriculture and allied activities contribute about 18% to the GDP of India (as of 2014-15). The green revolution had heralded the first round of changes.
India is the second largest producer of wheat, rice, sugar, groundnut as also in production of cash crops like coffee, coconut and tea.
What is the scope and focus of government in agriculture?
India is now eyeing second Green Revolution in eastern India.
The need for enhanced investment in agriculture with twin focus on higher quality productivity and welfare of farmers.
In the entire scenario, importantly the government has laid emphasis on the awareness campaign and enhanced agri knowledge for the farming community.
Why is there a need of awareness in assessing soil health position?
Awareness of soil health position and the role of manures would help in higher production of foodgrains in eastern India too and this would help tackle the decline in production in central and peninsular India.
The growth in foodgrains, rice and wheat, from eastern India would provide an opportunity to procure and create foodgrain reserves locally.
This would reduce the agricultural pressure on Punjab and Haryana as well.
Is it Gujarat’s model programme?
From 2003-04, Gujarat has been the first state to introduce Soil Health cards, to initiate the scientific measures for Soil Health care.
In Gujarat, over 100 soil laboratories were set up and the result of scheme was found quite satisfactory.
To start with, the agriculture income of Gujarat from Rs 14000 crore in 2000-01 had gone up to staggeringly high Rs 80,000 crore in 2010-11.
Why did government start taking effective action on soil health card initiative?
According to renowned expert and the ‘father of Green Revolution’, M S Swaminathan, there is need to opt for wide range of crops cultivation.
The awareness of soil health conditions would only make these operations easier and more result oriented. The government can help farmers adopt crop diversification.
The Soil Health Card mechanism definitely aims to help herald some essential revolutionary changes and salutary effect in country’s agricultural scene.
Farmers would understand the fertility factor of the land better and can be attracted towards value added newer crops.
This would help reduction in risk in farming and also the cost of overall cultivation process would get reduced.
Why has Soil Health Card portal been launched?
Some states are already issuing Soil Health Cards but, it was found that, there was no uniform norm for sampling, testing and distribution of Soil Health Cards across the states.
Taking a holistic view on these, the central government has thus rightly taken measures like launching of a Soil Health Card portal.
This would be useful for registration of soil samples, recording test results of soil samples and generation of Soil Health Card (SHC) along with Fertilizer Recommendations.
Soil Health Card portal aims to generate and issue Soil Health Cards based on either Soil Test-Crop Response (STCR) formulae developed by ICAR or General Fertilizer Recommendations provided by state Governments.
How will it be implemented by Union and State governments?
The scheme has been approved for implementation during 12th Plan with an outlay of Rs.568.54 crore.
For the current year (2015-16) an allocation of Rs.96.46 crore – only for the central government share-has been made.
The scheme is to be otherwise implemented on 50:50 sharing pattern between Government of India and state Governments.
In order to improve quality of soil and ultimately for better nutrient values and higher yields.
Experts say while at present, general fertilizer recommendations are followed by farmers for primary nutrients, the secondary and micronutrients are often overlooked.
Can proactive steps and such programs lead to efficient and effective agriculture? Really?
The government is effectively marching in quite ambitiously for a grand success of the Soil Health Card scheme and proposes to ensure that all farmers in the country have their respective Soil Health Cards by 2017.
In the first year of NDA regime 2014-15, a sum of Rs 27 crore was sanctioned and in 2015-16, there is an allocation of Rs 100 crore to all the states to prepare soil health cards.
In the Union Budget 2015-16, Finance Minister announced that the PPP mode of infrastructure development has to be revisited, and revitalized. In pursuance of this announcement, a Committee was constituted to look into the issues.
The proposals include a provision for monetisation of projects, revamp of the model concession agreement and creation of a new institutional mechanism.
What was committee asked to look into?
Review of the experience of PPP Policy.
Analyse risks involved in PPP projects in different sectors and suggest optimal risk sharing mechanism.
Propose design modifications in PPP based on international best practices and our institutional context.
Measure to improve capacity building in govt for effective implementation of the PPP projects.
Why is there need to reform PPP framework?
Background: PPP contracts are typically of very high-value, often with huge capital and operating costs.
The emergence of risks not foreseen at the time of signing the agreement exposes such projects to potential distress, making them unviable for the developers and prompting demands for a renegotiation of the original terms.
How to manage risks in PPP projects?
Optimal allocation of risks across PPP stakeholders to boost investment.
Sector specific model concession pacts to capture interest of all stakeholders.
What are the design modifications proposed by the committee?
The Kelkar panel has come out with clear-cut norms on resolving issues and clarifying norms on re-negotiation of contracts.
Formulate a national PPP policy and seeking Parliament’s backing for it to be effective.
It emphasised upon the need to establish independent sector regulators for faster implementation of infrastructure projects and swifter dispute resolution mechanisms.
The report stated that the PPP structure should not be adopted for small projects.
It added that the govt should encourage development of airports, ports and railways through PPP, by ensuring easier funding for projects with long gestation periods.
Let’s take a look at much deeper level about various specific dimensions of PPP framework and panel’s recommendation.
How to streamline the stalled projects?
Background: The Ministry of Statistics and Programme Implementation (MOSPI) says that 40% of all central govt infrastructure projects are behind schedule or have overshot their original cost estimates.
Panel’s view: Follow the example of the Ministry of Road Transport and Highways, and NHAI, which has taken several successful steps in reducing the number of stalled projects in the sector.
What are the institutions proposed in the report?
An Infrastructure PPP Project Review Committee be constituted.
It recommends creation of an Infrastructure PPP Adjudication Tribunal.
How to renegotiate the PPP contracts?
Background: More than 50% of PPP projects come up for renegotiation.
The panel has suggested extensive guidelines stipulating the reasons that form the basis for re-negotiation & those that should not be entertained as valid reasons.
The panel wants full disclosure of few items prior to the renegotiation:
Long-term costs
Risks and potential benefits
Financial implications for the govt
Panel has suggested formation of an independent body, like a renegotiation commission, which can oversee the renegotiation of model concession agreements across sectors.
What is panel’s view on Swiss Challenge method?
Swiss Challenge Method: It is a process of awarding contracts as any person with credentials can submit a development proposal to the govt, which will be made online and a second person can give suggestions to improve and beat that proposal.
The Panel wants Swiss Challenge method to be actively discouraged.
Reason: It brings information asymmetries in the procurement process and result in lack of transparency and in the fair and equal treatment of potential bidders in the procurement process.
Criticism: India’s ambitious plan to build new expressways across the country by adopting the ‘Swiss Challenge’ method has become uncertain.
Why report calls for changes in anti-corruption law?
The report calls for promptly amending the Prevention of Corruption Act, 1988
Reason: To differentiate between genuine errors in decision-making and plain corrupt practices.
What is panel’s view on 3P India?
Background: Finance Minister had announced the setting up of 3P India in 2014-15 budget with a corpus of Rs 500 crore.
The panel wants the revival of a defunct proposal to establish 3P India to support PPP projects. It can function as a centre of excellence, enable research, and review and roll out activities to build capacity
How to deal with private sector?
The private sector must be protected against the loss of bargaining power over long time spans. It has asked for comprehensive guidelines to be framed in this regard.
How to build capacity in PPP projects?
Strengthen 3 key pillars of PPP framework – governance, institutions and capacity.
Structured capacity building programmes for different stakeholders.
A national level institution to back institutional capacity building activities.
The report pitches for pragmatism, transparency and a business-like attitude for all stakeholders.
Recently, Gravitational waves, the cosmic ripples that distort space-time itself, have been directly detected for the first time. Let’s know about this unprecedented discovery!
What is so special about this eureka moment?
For the first time, scientists have observed ripples in the fabric of space-time called gravitational waves, arriving at the earth from a cataclysmic event in the distant universe
This confirms a major prediction ofAlbert Einstein’s 1915 general theory of relativity and opens an unprecedented new window onto the cosmos
Physicists have concluded that the detected gravitational waves were produced during the final fraction of a second of the merger of two black holes to produce a single, more massive spinning black hole
This collision of two black holes had been predicted but never observed
Let’s first know about Albert Einstein’s general theory of relativity?
In 1905, Albert Einstein determined that the laws of physics are the same for all non-accelerating observers, and that the speed of light in a vacuum was independent of the motion of all observers. This was the theory of special relativity
It introduced a new framework for all of physics and proposed new concepts of space and time
Einstein then spent 10 years trying to include acceleration in the theory and published his theory of general relativity in 1915
In it, he determined that massive objects cause a distortion in space-time, which is felt as gravity
[ Einstein’s mathematics showed that massive accelerating objects (such as neutron stars or black holes orbiting each other) would disrupt space-time in such a way that ‘waves’ of distorted space would radiate from the source ]
What are Gravitational waves?
Cataclysmic events, such as this artist’s rendition of a binary-star merger, are believed to create gravitational waves that cause ripples in space-time. Credits: NASA
Gravitational waves are distortions or ‘ripples’ in the fabric of space-time caused by some of the most violent and energetic processes in the Universe
These ripples would travel at the speed of light through the Universe, carrying with them information about their cataclysmic origins, as well as invaluable clues to the nature of gravity itself
What are the Sources of Gravitational Waves?
Any object with mass that accelerates (which in science means changes position at a variable rate, and includes spinning and orbiting objects) produces gravitational waves, including humans and cars and airplanes etc.
But the gravitational waves made by us here on Earth are much too small to detect
The strongest gravitational waves are produced by catastrophic events such as colliding black holes, the collapse of stellar cores(supernovae), coalescing neutron stars or white dwarf stars, the slightly wobbly rotation of neutron stars that are not perfect spheres, and the remnants of gravitational radiation created by the birth of the Universe itself
Not one but four types of Gravitational Waves!
In order to understand the types of gravitational waves, Laser Interferometer Gravitational Wave Observatory (LIGO) scientists have defined 4 categories of gravitational waves
These categories are: Continuous Gravitational Waves, Compact Binary Inspiral Gravitational Waves, Stochastic Gravitational Waves, and Burst Gravitational Waves
But, Why Detect Them?
This will open up a new window of study on the Universe, giving us a deeper understanding of these cataclysmic events, and usher in brand new cutting-edge studies in physics, astronomy, and astrophysics
More importantly, since gravitational waves don’t interact with matter (unlike electromagnetic radiation), they travel through the Universe completely unimpeded giving us a crystal clear view of the gravitational wave
This will provide astronomers and other scientists, first glimpses of previously unseen and unseeable wonders, and greatly adding to our understanding of the nature of space and time itself
So, How does LIGO come into the Picture?
LIGO( Laser Interferometer Gravitational Wave Observatory) is the world’s largest gravitational wave observatory and a cutting edge physics experiment
LIGO exploits the physical properties of lightand of space itself to detect and understand the origins of gravitational waves
LIGO has 2 widely separated identical detector sites working in unison as a single “observatory”: one in Hanford, southeastern Washington State and the other in rural Livingston, Louisiana
LIGO has a very close collaboration with the VIRGO collaboration that analyzes data from VIRGO, a 3 km gravitational wave interferometer located near Pisa, Italy
Data from LIGO and Virgo are combined and analyzed together by the LIGO and Virgo collaborations
Thus significantly increasing the capability of combined data for detecting and using gravitational waves to learn about nature
Is there any Way ahead for India?
Image – Locations of existing gravitational-wave detectors, and how far out a LIGO in India would be. Source: LIGO
Yes, because Union cabinet has approved a proposal to establish a state-of-the-art gravitational wave observatoryin India in collaboration with LIGO in the US
The project will bring unprecedented opportunities for scientists and engineers to dig deeper into the realm of gravitational wave and take global leadershipin this new astronomical frontier
This will also bring considerable opportunities in cutting-edge technology for the Indian industry which will be engaged in the construction of the 8-km long beam tube at ultra-high vacuum on a leveled terrain
With its establishment, India will join the global network of gravitational wave detectors
The establishment of an observatory in India assumes importance because the further the distance between the observatories, the greater will bethe accuracy in locating gravity waves
Maharashtra and Madhya Pradesh are among the states shortlisted for the experiment
Can we expect some answers from you guys?
#Q. Recently, Union cabinet has approved a proposal to establish a gravitational wave observatory, one of the mega science projects in India. Discuss, how will this project help India if it becomes a reality.
Challenges, opportunities & criticism of the Real Estate Regulatory Bill 2016
The Real Estate Regulatory Bill, 2016 is being hailed as a much-needed step to reform the real estate sector. It will help regulate the sector and bring in clarity for both buyers and developers.
What was the need for regulation in the real estate?
The real estate sector has some issues such as a lengthy process for project approvals, lack of clear land titles, and prevalence of black money
There wasn’t complete transparency as far as govt approvals were concerned
There were also instances when projects were sold without adequate clearances
The delayed projects, sometimes by up to 6 years and arbitrary changes in layout plans are rampant in the sector
How does the Bill seeks to regulate the sector?
The basic thrust of this Bill is to regulate thedelivery of projects to home buyers. It provides them a legal safeguard for their investment, and seeks to address timely delivery of houses. It seeks to enforce the contract between the developer and buyer and act as a fast track mechanism to settle disputes
It establishes state level regulatory authorities called Real Estate Regulatory Authorities (RERA)
The Bill establishes state level tribunals called Real Estate Appellate Tribunals. Decisions of RERAs can be appealed in these tribunals
It makes mandatory the disclosure of all information for registered projects like details of promoters, layout plan, land status, schedule of execution and status of various approvals
The Bill prohibits a developer from changing the plan in a project unless two-thirds of the allottees have agreed for such a change
It says that builders must specify the time-frame for completion of projects and stick to it, or be ready to pay penalties
The Bill mandates that 70% of the amount collected from buyers of a project be used only for construction of that project < This provision will effectively allow developers to continue their practice of diverting funds collected for a project towards land acquisition or other projects, and will work in their favour by also allowing them to grow their land and/or project portfolio>
How will the Real Estate Regulatory Authorities help improve the sector?
Residential real estate projects need to be registered with RERAs, except few
Promoters cannot book or offer these projects for sale without registering them
Real estate agents dealing in these projects also need to register with RERAs
On registration, the promoter need to provide details of the project to the RERA
Challenges ahead
The Bill will make life difficult for builders, as they would face more red-tapeism now, especially in procuring relevant approvals.
This Bill does not address the developers demand of a single-window clearance from the govt
The implementation of the Bill is up to the states, it leaves builders with greater chances of being harassed
Impact
Timely completion of projects would lead to a steady increase in supply of homes
It is expected that these measures will eventually bring down home prices and increase demand
It will be good for the overall economy too, as the housing sector has strong backward (cement, steel and other building material industries) and forward (furniture and furnishings, interior decoration, electrical and electronics) linkages with other industries
More number of job creation in the economy
Criticism
The builder lobbies argued that the bill should have a time-frame for municipal and other authorities to give timely approvals, because the delay in approvals lead to delays in handing over possession of apartments
In terms of pricing, which is governed by circle rates, it will be difficult to monitor
Future
The states’ support for faster clearances to projects will be required to make this Bill successful
Govt is also trying to bring in a National Urban Rental Housing Policy, which would take into account the requirements of tenancy hassles in modern days
Sagarmala Project: Smart ports for Blue Revolution in India
The Union Cabinet chaired by the Prime Minister Modi, on March,2015 gave its ‘in-principle’ approval for the concept and institutional framework of Sagarmala Project. Let’s take a glance on it.
What’s the prime objective of Sagarmala?
The prime objective of the Sagarmala project is to promote port-led direct and indirect development and to provide infrastructure to transport goods to and from ports quickly, efficiently and cost-effectively.
What’s the current issue and background of ports in India?
At present there are around 200 ports (small and big) in the country, of these, only 12 are major ports which are government owned ports, which handle about 58% of sea-borne traffic.
These major ports operate as Trusts under the Major Ports Trust Act, 1963, except for the Port of Ennore, which is a company under the Companies Act.
There are legacy issues with these govt owned major ports, they do not keep pace with emerging technology, requirements of international trade, emerging trends in containerisation, flexible rules, size of ships etc.
Which are the 12 Major Ports ?
These are Kolkata (including Dock Complex at Haldia), Visakhapatnam, Chennai, V.O. Chidambaranar (Tuticorin), Cochin, New Mangalore, Mormugao, Jawaharlal Nehru Port Trust (JNPT), Mumbai, Kandla and Ennore.
Just, Look back into the history?
In 2003, then PM Vajpayee proposed Project Sagarmala with following features:
Setup Sagarmala Development Authority (Similar to National highway authority of India).
It will get money via Maritime development cess. (5 paise per kg on cargo).
It will improve ports, shipping industry, inland water transport, coastal shipping.
PPP and FDI to gather more investment.
Then, which are the Key pillars to achieve Smart-development ?
Supporting and enabling Port-led Development through appropriate policy and institutional interventions.
Providing for an institutional framework for ensuring inter-agency and states’ collaboration for integrated development.
Port Infrastructure Enhancement, including modernization and setting up of new ports.
Efficient Evacuation to and from hinterland.
What are some of the measures to make Smart Ports?
Ports should be registered as Companies under Companies Act.
The port administration should only look after the provisions of infrastructure and safety and not day-to-day running of the port
There is still no regulation to control the trade practices.
Hence, there is a dire need to introduce a regulatory architecture that takes care of ex-ante declaration of rates of services.
Then, what’s the plan to implement such a vast initiative?
For a comprehensive and integrated planning for “Sagarmala”, a National Perspective Plan (NPP) for the entire coastline shall be prepared within six months.
It will identify potential geographical regions to be called Coastal Economic Zones (CEZ).
While preparing the NPP, synergy and integration with planned Industrial Corridors, Dedicated Freight Corridors, National Highway Development Programme, Industrial Clusters and SEZs would be ensured.
What are the suggestions for effective mechanism at state level?
Set up State Sagarmala Committee to be headed by CM / Minister in Charge of Ports.
Sagarmala Coordination and Steering Committee (SCSC) shall be constituted under the chairmanship of the Cabinet Secretary and others.
This Committee will provide coordination between ministries, state governments and agencies connected with implementation and review the progress of implementation of the National Perspective Plan.
How does it ensure the sustainable development in CEZ?
This would be done by synergising and coordinating with State Governments and line Ministries of Central Government through their existing programmes.
Such as those related to community and rural development, tribal development and employment generation, fisheries, skill development, tourism promotion etc.
In order to provide funding for such projects and activities that may be covered by departmental schemes a separate fund by the name ‘Community Development Fund’ would be created.
What’s the role of Institutional Framework ?
It has to provide for a coordinating role for the Central Government.
It should provide a platform for central, state governments and local authorities to work in tandem and coordination under the established principles of cooperative federalism.
What’s the role of NSAC?
A National Sagarmala Apex Committee (NSAC) is envisaged for overall policy guidance and high level coordination, and to review various aspects of planning and implementation of the plan and projects.
So, Is it Good to have smart ports on the line of Smart Cities?
Can you answer some questions?
#1. Can you examine the bottlenecks in Indian port infrastructure and list the initiative taken in recent times to address this issue?
#Q.2 Indian port infrastructure can be revamped by Sagarmala project by effective management? critically comment.
