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GS Paper: GS3

  • Structural issues in agri-marketing

    The article discusses the structural issues that may not go away with the reforms announced by the government recently. Issues like inadequacies in APMC infrastructure, regulation of APMCs need are discussed in detail.

    What is the issue?

    • The Union government signalled the intention to enact a new central law.
    • The new law would override existing state regulations that restrict the farmer from legally selling to anyone other than a buyer licensed by the local Agricultural Produce Marketing Committee (APMC).
    • The decision to push for a central law comes after dissatisfaction with two decades of partial and uneven reforms by different states.

    So, will the change in the law solve the marketing problem?

    •  This will be overstating the power of legal reform in guaranteeing economic freedom and outcomes.
    • The problems farmers face are of two type-
    • 1) Problems that are a result of vested, monopolistic interests.
    • 2) Problems that are rooted in larger structural conditions that significantly weaken their terms of engagement in agricultural markets.
    • Type 1 may be addressed by regulatory intervention.
    • But type 2 will need location-specific policies, well-directed investment, and well-functioning agricultural institutions.
    • So, solving either of these problems require consensus, coordination and capacity in which the states will need to play a major role.

    Why do farmers sell their produce outside APMC mandis?

    • The dominant narrative is that farmers are forced to sell their produce only to licensed APMC traders.
    • But the reality is that even today the majority of Indian farmers sell their produce to small-scale and largely unlicensed traders and intermediaries.
    • This is true, especially of small and marginal cultivators.
    • But, if farmers are bound by law to sell in APMC mandis, why are so many of them selling outside?

    But, do we have enough mandis?

    • At least part of the answer to the question of why farmers sell outside mandis is that India still doesn’t have enough mandis.
    • Over the decades, most states in general, and specific regions in particular, have hugely under-invested in the basic infrastructure required to create viable, primary wholesale markets within easy physical reach of farmers.
    • The 2017 Doubling Farmers Income Report estimates that in addition to the current 6,676 principal and sub-market yards under APMCs India needs over 3,500 additional wholesale markets.
    • Approximately 23,000 rural periodic markets (or haats) have also suffered long-standing neglect.
    • So, the new allocation towards market infrastructure must be fully utilised to build up an appropriately designed physical marketing ecosystem, especially in remote regions.
    • Most importantly, unlike in the past, this process should engage deeply with farmers and traders in each location to avoid misdirected and misplaced infrastructure and assets.

    Regulatory reforms in mandis needed

    • Where APMC mandis do exist and have established themselves as dominant market sites, mandi committees have typically done everything in their power to restrict competition.
    • Obtaining a licence for a new entrant — has most often proved to be a bureaucratic nightmare and a costly affair.
    • This is where regulatory reform to remove conflicts of interests, enable the entry of new buyers, and facilitate the flow of trade both within and outside the mandi system is absolutely crucial.
    • No state has done enough in this direction, but here too there are cautionary lessons.

    Perils of complete deregulation: Example of Bihar

    • Complete deregulation, as we have seen in the decade following Bihar’s repeal of its APMC Act in 2006, does not necessarily transform agricultural markets and spur competition.
    • Even after all restrictions were lifted, there was little uptake in direct procurement by formal players in the state.
    • When corporations entered the maize market in a big way, they chose to buy from larger traders and aggregators and not from farmers.
    • Most farmers have seen little change in marketing practice and continue to sell to village traders as they had done before the repeal.
    • Where private markets have emerged — mainly for horticultural produce — they are constituted and run by local traders and commission agents.
    • But across the system, traders complain about deteriorating infrastructure.
    • And the regulatory vacuum has led to the proliferation of brokers to deal with counter-party risk in growing and dynamic commodity markets such as maize.

    Benefits of limited degree of regulation: MP and Karnataka example

    • Madhya Pradesh and Karnataka have undertaken some degree of regulatory reform instead of repeal.
    • In these states, we do observe, at least to some extent, the fruits of competition.
    • In the early 2000s, MP granted ITC a licence to set up procurement hubs outside mandi yards.
    • Establishment of ITC procurement hubs not only resulted in price competition, but also from electronic weighing and quick payments, as mandis upgraded in response.
    • But ITC’s procurement channel was understandably restricted to select commodities (and qualities), seasons and farms within its own commercial strategy.
    • These limitations revealed the mandi’s comparative advantage as a permanent multi-buyer, multi-commodity market for all local producers.
    • The key lesson to draw from studies of direct procurement and contracting is the need for a regulatory architecture that enables both new and existing systems to respond, adapt, and compete.

    Issue of intermediation

    •  Small traders and intermediaries exist — and persist — because they are able to respond — in cash, credit, time and place — to the multiple needs of farmers and firms across the interconnected domains of production, marketing, processing and consumption.
    • This is not to say that they do not exploit farmers when the opportunity arises.
    • So, the organised and technologically driven procurement and marketing systems will only work if they manage to address the real constraints that farmers face on the ground, especially access to credit, inputs, storage, transport, and timely payments.
    • Most of these constraints originate in the relations of land ownership and access and the limits and exclusions they impose on smallholding farmers and landless cultivators.
    • Simply put, farmers will not be in a position to exercise any newly granted regulatory freedom in the market if they cannot overcome these constraints.
    • Equally, while increasing competition for intermediaries is desirable, their elimination is a misguided — and indeed dangerous — objective if one does not respect or replace the roles and risks that they cover.

    Issue of re-regulation and new barriers to entry

    • Agriculture is at the very heart of the essential economy and our food system runs on the backs of small-scale producers, traders, commission agents, processors, wholesalers, retailers, and labourers.
    • Regulatory reform to increase competition must not degenerate into re-regulation that unduly favours large-scale consolidation and channel control by erecting new barriers to entry and operation for agro-commercial MSMEs.

    The UPSC asked a direct question about the APMC Act in 2014- ” There is also a point of view that Agriculture Produce Market Committees (APMCs) set up under the State Acts have not only impeded the development of agriculture but also have been the cause of food inflation in India. Critically examine.”

    Conclusion

    While going for the reforms government must consider the issues underlying the problems and try to address them. We must recognise and strengthen the diversity, dynamism, enterprise, and resilience of India’s agricultural markets.

     

     

  • Explained: Contract Farming and its benefits

    The Odisha government has promulgated an ordinance allowing investors and farmers to enter into an agreement for contract farming in view of the continuing uncertainties due to the pandemic.

    Practice question for mains:

    Q. What is Contract Farming? Examine its potentials and feasibility from the perspective of farmers’ interests.

    Moving on with Odisha’s law

    • The Odisha ordinance is aimed at facilitating both farmers and sponsors to develop mutually beneficial and efficient contract farming system.
    • It is argued that the new system will lead to improved production and marketing of agricultural produce and livestock while promoting farmers’ interest.
    • The agreement will be entered into between the contract farming sponsor, who offers to participate in any component or entire value chain including preproduction, and the contract farming producer (farmers), who agree to produce the crop or rear the livestock.
    • Both the loans and advances given by the sponsor to the producer can be recovered from the sale proceeds of the produce.
    • And in no case realized, recovery can be through the sale or mortgage or lease of the land in respect of which the agreement has been entered into.

    What is Contract Farming?

    • Contract farming (CF) can be defined as agricultural production carried out according to an agreement between a buyer and farmers, which establishes conditions for the production and marketing of a farm product or products.
    • Typically, the farmer agrees to provide agreed quantities of a specific agricultural product.
    • These should meet the quality standards of the purchaser and be supplied at the time determined by the purchaser.
    • In turn, the buyer commits to purchase the product and, in some cases, to support production through, for example, the supply of farm inputs, land preparation and the provision of technical advice.

    Some business models in CF

    1) Informal model – This model is the most transient and speculative of all contract farming models, with a risk of default by both the promoter and the farmer. However, this depends on the situation: interdependence of contract parties or long-term trustful relationships may reduce the risk of opportunistic behaviour.

    2) Intermediary model – In this model, the buyer subcontracts an intermediary (collector, aggregator or farmer organisation) who formally or informally contracts farmers (a combination of the centralised/ informal models).

    3) Multipartite model – This model can develop from the centralised or nucleus estate models. It involves various organisations such as governmental statutory bodies alongside private companies and sometimes financial institutions.

    4) Centralized model – In this model, the buyers’ involvement may vary from minimal input provision (e.g. specific varieties) to control of most production aspects (e.g. from land preparation to harvesting). This is the most common CF model.

    Advantages of Contract Farming:

    To the farmers:

    • It helps in skilling of farmers as they learn to use various resources efficiently like fertilizer, pesticides and get in touch with new technology in some cases.
    • Farmers get the opportunity for diversification of crops.
    • Price risk is drastically reduced as many contracts specify prices in advance.
    • Contract farming can open up new markets which would otherwise have been unavailable to small farmers. The farmers can also get easy credit from the Bank under contractual agreements.
    • In the case of agri-processing level, it ensures a consistent supply of agricultural produce with quality, at the right time and lesser cost.

    To the Client:

    • They get uninterrupted & regular flow of raw material of high quality which helps in protection from fluctuation in market pricing.
    • Long term planning of business is possible as they have a dedicated supplier base of raw material.
    • Concept of contract farming can be extended to other crops also which helps to generate goodwill for the organisation.

    Limitations

    • Contract farming arrangements are often criticized for being biased in favour of firms or large farmers while exploiting the poor bargaining power of small farmers.
    • Problems faced by growers like an undue quality cut on produce by firms delayed deliveries at the factory, delayed payments, low price and pest attack on the contract crop which raised the cost of production.
    • Contracting agreements are often verbal or informal in nature, and even written contracts often do not provide legal protection in India that may be observed in other countries. Lack of enforceability of contractual provisions can result in a breach of contracts by either party.
    • Single Buyer – Multiple Sellers (Monopsony).
    • Adverse gender effects – Women have less access to contract farming than men.

    Also read

    What is contract farming? Critically analyze the features of the draft “Model Contract Farming Act – 2018”. (150 W)

    With inputs from Vikaspedia

  • Rising incidences of Chinese Transgressions

    As tensions remain high between Indian and Chinese soldiers, the number of recorded Chinese transgressions across the disputed India-China border surged by 75 per cent in Ladakh in 2019, and the Chinese forays into Indian Territory in the first four months of the current year have also witnessed an increase compared to the same period last year.

    Chinese Transgression:

      • The border between India and China is not fully demarcated and the Line of Actual Control (LAC) is neither clarified nor confirmed by the two countries.
      • This leads to different perceptions of the LAC for the two sides while soldiers from either side try to patrol the area.
      • Observation Methods: Use of surveillance equipment, face-offs by patrols, reliable indications by locals, or evidence left by the Chinese in the form of wrappers, biscuit packets etc. in an unmanned area.
      • Official data shows that 80% of Chinese transgressions across the LAC since 2015 have taken place in four locations of which three are in eastern Ladakh in the western sector.
        • These areas of eastern Ladakh are Pangong Tso, Trig Heights and Burtse.
        • The fourth area is the Dichu Area/Madan Ridge area (Arunachal Pradesh) of the Eastern sector.

    •  Implications of Increased Number of Transgressions:

      • It is an indicator of increased Chinese assertiveness.
      • Even if there are no major incidents, it should not be taken lightly.
      • So far, there has been no major standoff between the two sides after the 73-day Doklam standoff on Sikkim-Bhutan border in 2017.

    Concerns

    • India is worried about the tensions at Naku La in Sikkim and at Galwan river and Pangong Tso in Ladakh.
    • The increased transgressions lead to more tensions between both countries which are already struggling to contain the Covid-19 pandemic.
    • Nepal’s recent behaviour on the Mansarovar Link Road raising the border map issue also raises Indian concerns.
    • The constant accusations on each other also cause tensions and disrupt the peace on borders.
      • Recently, Chinese media accused India of building defence facilities in the Galwan Valley region of the contested Aksai Chin area.
    • India and China are both nuclear-armed countries with strong militaries and the constant border conflicts are not a desirable thing.

    Way Forward

    • In the Wuhan and Mahabalipuram summits, both China and India had reaffirmed that they will make efforts to ensure peace and tranquility in the border areas.
    • On 1st April, 2020 India and China completed their 70 years of diplomatic relations.
    • Both countries have resolved border issues peacefully in the past four decades which gives the hope that the tensions will subside soon.
    • Establishment of peace between the two big powers of such an important geopolitical region is essential for their own growth and development as well as for maintenance of global peace.

    Practice question for mains:

    Q. Clear demarcation of the national borders is the need of the hour. Discuss.

  • Demo-2 Mission by SpaceX

    NASA’s SpaceX Demo-2 test flight will lift off for International Space Station (ISS) becoming the first crewed flight to launch from American soil since the conclusion of the space shuttle era in 2011.

    We can get a match the pair type question in prelims asking various space missions and their purposes. Make note of similar space missions from here.

    Try this:

    Q. Which of the following pair is/are correctly matched? (CSP 2014)

    Spacecraft Purpose
    1. Cassini-Huygens Orbiting the Venus and transmitting data to the Earth
    2. Messenger Mapping and investigating the Mercury
    3. Voyager 1 and 2 Exploring the outer solar system

    Select the correct answer using the code given below.

    a) 1 only

    b) 2 and 3 only

    c) 1 and 3 only

    d) 1, 2 and 3

    Demo-2: What is the mission?

    • The Demo-2 mission is part of NASA’s Commercial Crew Program with the aim of developing reliable and cost-effective access to and from the ISS.
    • Essentially, the lift-off is a flight test to certify if SpaceX’s crew transportation system can be used to ferry crew to and from the space station regularly.
    • After its launch, the Crew Dragon will perform a series of phasing manoeuvres to gradually approach and autonomously dock with the ISS.
    • After docking, the two astronauts will go aboard the ISS. They will perform tests of the Crew Dragon and conduct research with Expedition 63, the space station crew currently in residence at ISS.

    About the Commercial Crew Program

    • The main objective of this program is to make access to space easier in terms of its cost, so that cargo and crew can be easily transported to and from the ISS, enabling greater scientific research.
    • Secondly, by encouraging private companies such as Boeing and SpaceX to provide crew transportation NASA wants to focus on building spacecraft and rockets meant for deep space exploration missions.
    • Boeing and SpaceX were selected by NASA in September 2014 to develop transportation systems meant to transfer crew from the US to the ISS.

    Back2Basics: SpaceX

    • Space Exploration Technologies Corp., trading as SpaceX, is a private American aerospace manufacturer and space transportation Services Company headquartered in Hawthorne, California.
    • It was founded in 2002 by Elon Musk with the goal of reducing space transportation costs to enable the colonization of Mars.
    • SpaceX has developed several launch vehicles and the Dragon spacecraft.

  • What is the ‘Sonic Boom’ that rattled Bengaluru city?

    The ‘loud sound’ heard in Bengaluru a few days back, which puzzled lakhs of city dwellers, was revealed to have emanated from an IAF test flight involving a supersonic profile. The sonic boom was probably heard while the IAF aircraft was decelerating from supersonic to subsonic speed between 36,000 and 40000 feet altitude.

    Note:

    We often get to hear about updates in  India’s missile programme. UPSC may ask a basic physics question asking fundamental differences between various Mach number and its differences.

    What is a ‘sonic boom’?

    • Sound travels in the form of waves which are emitted outwards from its source.
    • In air, the speed of these waves depends on a number of factors, such as the temperature of the air and altitude.
    • When an aircraft travels at supersonic speed – meaning faster than sound (>1225 kmph at sea level) – the field of sound waves moves to the back of the craft.
    • A stationary observer thus hears no sound when a supersonic flight approaches since the sound waves are at the rear of the latter.
    • At such speeds, both newly created as well as old waves, are forced into a region at the aircraft’s rear called a ‘Mach cone’, which extends from the craft and intercepts the Earth in a hyperbola-shaped curve, and leaves a trail called the ‘boom carpet’.
    • The loud sound that is heard on the Earth when this happens is called a ‘sonic boom’ (resembles bomb-blast sound).

    Impacts

    • When such aircraft fly at a low altitude, the sonic boom can become intense enough to cause the glass to crack or cause health hazards.
    • Overland supersonic flights have thus been banned in many countries.

    Supersonic flights

    • In 1947, the American military pilot Chuck Yeager became the first to breach the sound barrier, flying the Bell X-1 aircraft at 1127 kmph.
    • Since then, many supersonic flights have followed, with advanced designs allowing speeds of over Mach 3, or three times the speed of sound.
    • According to the IAF website, India’s fastest jets include the Sukhoi SU-30 MKI (Mach 2.35) and the Mirage-2000 (Mach 2.3).

    Back2Basics: Traverse of sound

    • From a stationary source, such as a television set, sound waves travel outwards in concentric spheres of growing radii.
    • When the source of sound is moving – e.g, a truck– the successive waves in front of the truck get closer together, and the ones behind it spread out.
    • This is also the cause of the Doppler effect– in which bunched waves at the front appear at a higher frequency to a stationary observer, and spread out waves that are behind are observed at a lower frequency.
    • As long as the source of the sound keeps moving slower than the speed of sound itself, this source– say a truck or a plane – remains nested within the sound waves that are travelling in all directions.

    Mach number

    • The ratio of the speed of the aircraft to the speed of sound in the gas determines the magnitude of many of the compressibility effects.
    • Because of the importance of this speed ratio, aerodynamicists have designated it with a special parameter called the Mach number in honour of Ernst Mach, a late 19th-century physicist who studied gas dynamics.
    • Subsonic conditions occur for Mach numbers less than one, M < 1.
    • As the speed of the object approaches the speed of sound, the flight Mach number is nearly equal to one, M = 1, and the flow is said to be transonic.
    • Supersonic conditions occur for Mach numbers greater than one, 1 < M < 3.
    • For speeds greater than five times the speed of sound, M > 5, the flow is said to be hypersonic.
    • The Space Shuttle re-enters the atmosphere at high hypersonic speeds, M ~ 25. Under these conditions, the heated air becomes ionized plasma of gas and the spacecraft must be insulated from the high temperatures.

  • [pib] Certification of ‘Quantum Entanglement’

    Indian scientists have developed a novel protocol to find out whether a pair of electrons are in an entangled state so that they can be safely used as resources for facilitating quantum information processing tasks.

    Trending in news this year is the Quantum Technology, (As it used to be until last year were- the Internet of Things (IoT) CSP 2019, Artificial Intelligence (AI) etc.)

    Must read all this news in a loop:

    National Mission on QC

    Quantum Coin

    Quantum Supremacy

    What is Quantum Entanglement (QE)?

    • QE is the name given to a special connection between pairs or groups of quantum systems, or any objects described by quantum mechanics.
    • It is one of the biggest parts of quantum mechanics that makes it hard to understand in terms of the everyday world.
    • When we look at particles, we usually say that each particle has its own quantum state. Sometimes, two particles can act on one another and become an entangled system.
    • When a pair or group of particles can only be described by the quantum state for the system, and not by individual quantum states, we say the particles are “entangled”.

    Going bit technical here-

    • It is the physical phenomenon that occurs when a pair or group of particles is generated; interact, in a way such that the quantum state of each particle of the pair or group cannot be described independently of the state of the others.
    • Entangled states are key resources to facilitate many quantum information processing tasks and quantum cryptographic protocols.

    Why decode the Entanglement?

    • Entanglement is fragile and is easily lost during the transit of photons through the environment.
    • Hence it is extremely important to know whether a pair of photons are entangled, in order to use them as a resource.
    • Verification of entanglement requires the use of measurement devices, but such devices may be hacked or compromised.

    How to secure QE?

    • Device-independent self-testing (DIST) is a method that can be used in order to overcome such a possibility.
    • This method enables the verification of entanglement in an unknown quantum state of two photons without having direct access to the state, or complete trust in the measurement devices.
    • The theory relies on the application of the quantum uncertainty principle while implementing full device independence is a difficult task.

    Back2Basics: Quantum Mechanics

    • Quantum mechanics (QM) is a fundamental theory in physics which describes nature at the smallest scales of energy levels of atoms and subatomic particles.
    • It is the body of scientific laws that describe the wacky behaviour of photons, electrons and the other particles that make up the universe.

  • [pib] Alternative Dwarfing Genes in Wheat

    Scientists at Pune based Agharkar Research Institute (ARI) an autonomous institute of the Department of Science and Technology has mapped two dwarfing genes Rht14 and Rht18 in wheat that can reduce stubble volume.

    Note: One may wonder why the name of research institution has not been skipped here!

    Q. With reference to the Genetically Modified mustard (GM mustard) developed in India, consider the following statements:

    1. GM mustard has the genes of a soil bacterium that give the plant the property of pest-resistance to a wide variety of pests.
    2. GM mustard has the genes that allow the plant cross-pollination and hybridization.
    3. GM mustard has been developed jointly by the IARI and Punjab Agricultural University.

    Which of the statements given above is/are correct? (CSP 2018)

    (a) 1 and 3 only

    (b) 2 only

    (c) 2 and 3 only

    (d) 1, 2 and 3

    Rht14 and Rht18

    • The researchers have mapped the dwarfing genes on chromosome 6A in durum wheat, and DNA-based markers were developed for a better selection of these genes in wheat breeding lines.
    • These genes are associated with better seedling vigour and longer coleoptiles (sheath protecting the young shoot tip).
    • These DNA based markers are being used at ARI for marker-assisted transfer of these genes in Indian wheat varieties, so as to make them suitable for sowing under rice stubble-retained conditions and dry environments.
    • Wheat lines with these alternative dwarfing genes, apart from reducing crop residue burning, can allow deeper sowing of wheat seeds to avail advantage of residual moisture in the soil under dry environments.
    • Wheat lines with these alternative dwarfing genes, apart from reducing crop residue burning, can allow deeper sowing of wheat seeds to avail advantage of residual moisture in the soil under dry environments.

    Significance

    • In India, close to twenty-three million tonnes of leftover rice residues are annually burnt by farmers to get rid of the straw and prepare their fields for sowing wheat, which is the next crop, resulting in air pollution.
    • Burning of leftover rice crop residue has serious implications for the environment, soil, and human health.
    • Therefore, there is a need to include alternative dwarfing genes in wheat improvement programs.
    • The dwarfing genes Rht14 and Rht18 in wheat conferred a plant height reduction comparable to the Rht1 alleles while retaining early vigour in wheat seedlings, but do not affect coleoptile length and seedling shoot length.
    • These can, therefore, be utilized as an alternative dwarfing gene to Rht1 for deep sowing conditions or in fields with retained stubble.
    • The improved wheat lines which are being developed at ARI will help reducing stubble burning incidences under the rice-wheat cropping system.
    • These lines will also allow deeper sowing of wheat seeds to avail advantage of residual moisture in the soil, therefore, saving valuable water resources and reduce the cost of cultivation to farmers.

  • ‘Agappe Chitra Magna’ kit for COVID diagnosis

    Agappe Chitra Magna, a magnetic nanoparticles-based RNA extraction kit has been commercially launched.

    The peculiarity of the name ‘Agappe Chitra Magna’ creates a possibility of a prelims question. One may confuse it with any sort of Artform.

    Agappe Chitra Magna (ACM) Kit

    • The ACM kit is developed by the Sree Chitra Tirunal Institute for Medical Sciences and Technology (SCTIMST) and manufactured by Kochi-based Agappe Diagnostics Ltd.,
    • It uses innovative technology for isolating RNA using magnetic nanoparticles to capture the RNA from the patient sample.
    • The magnetic nanoparticles beads bind to the viral RNA and, when exposed to a magnetic field, give a highly purified and concentrated RNA.
    • As the sensitivity of the detection method is dependent on getting an adequate quantity of viral RNA, this innovation enhances the chances of identifying positive cases.
    • The commercial launch of the kit is a major step to make India self-reliant in detecting COVID-19 and can help increase the rate of testing and bring down its costs, a crucial step for combating the pandemic.

    Significance of the kit

    • The commercial launch of the kit is a major step to make India self-reliant in detecting COVID-19 and can help increase the rate of testing and bring down its costs, a crucial step for combating the pandemic.
    • The RNA isolation kit will reduce the dependence on imported kits and make COVID testing more cost-effective.

  • Towards self-reliance in defence manufacturing

    External dependence for defence equipment could turn out to be the chink in the armour of any country, literally. As one of the major importer of defence equipment, India has been struggling to wean itself away from this vulnerability. This article discusses the recent changes announced by the finance minister in defence procurement and manufacturing policy. So, what are the changes and how will these changes benefit us? Read to know more…

    Promoting self-reliance: Addressing strategic and national security concern

    • Recently the Finance Minister announced measures to promote self-reliance in defence production.
    • This address long-standing strategic and national security concerns about the extent of India’s external dependence for its defence-preparedness.
    • For most of the past decade, India had the dubious distinction of being the world’s largest arms importer.
    • India accounted for about 12% of global arms imports.
    • Saudi Arabia jumped to first place in 2018 and 2019, but India still takes over 9% of global imports.
    • This external dependence for weapons, spares and, in some cases, even ammunition creates vulnerabilities during military crises.
    • COVID-19 has, once again, focused minds on the impact of supply chain disruptions on both civil and defence sectors.
    • With its security environment, its great power ambitions and its technological capacities, India should have a robust defence manufacturing capacity.
    • New Defence Procurement Procedures (DPP) 2020 are under formulation.
    • We now have a Chief of Defence Staff (CDS) tasked with promoting indigenous equipment in the armed forces.

    Following are some of the moves declared by the government and their significance for the country

    1. Encouraging  private manufacturers

    • The decision i) to notify a list of weapons systems for sourcing entirely from Indian manufacturers, ii) the promise to progressively expand this list iii) a separate Budget provision for domestic capital procurement- will encourage our private defence manufacturers.
    • The research capacities, technological skills and quality commitment of our private defence manufacturer are often better appreciated by foreign clients for whom they are subcontractors.
    • There is a range of platforms and subsystems, developed in India and qualified in trials, some of which face hurdles to their induction by our armed forces because of foreign competition.
    • These include missile systems such as Akash and Nag, the Light Combat Aircraft and the Light Combat Helicopter, artillery guns, radars, electronic warfare systems and armoured vehicles.

    2. Time-bound procurement

    • The government has promised i) a time-bound defence procurement process, ii) overhauling trial and testing procedures iii) establishing a professional project management unit.
    • To understand the significance of the above measures consider the fact below-
    • Over the past five years, the Indian government has approved over 200 defence acquisition proposals, valued at over ₹4 trillion.
    • But most are still in relatively early stages of processing.
    • Of course, this delay now provides the opportunity to re-examine them and to prioritise those with indigenous research and development.
    • The CDS could also examine them from a tri-service angle, to avoid redundancy of capacities across the services.

    3. Corporatisation of Ordnance Factory Board

    • Over the decades, our ordnance factories have been the backbone of indigenous supplies to our armed forces.
    • Their structure, work culture and product range now need to be responsive to technology and quality demands of modern armed forces.
    • Corporatisation, including public listing of some units, ensures a more efficient interface of the manufacturer with the designer and end-user.
    • The factories would be better integrated into the larger defence manufacturing ecosystem.

    4. Realistic specifications of desired weapon platforms

    • Our defence planners will frame “realistic” specifications for their desired weapons platforms.
    • These specifications should be based on the requirements of India’s defence strategy, rather than on aspirational considerations which, the Finance Minister said, may lead to a single foreign vendor.
    • It is also imperative that when we import weapon systems, we should plan for the ammunitions and spares for them to be eventually manufactured in India.
    • This will ensure that we are not driven to seek urgent replenishments from abroad during crises.
    • The same goes for repair, maintenance and overhaul facilities and, at the next level, the upgrade of weapons platforms.

    5. FDI limit increased to 74% by automatic route

    • The liberalisation of foreign direct investment in defence manufacturing, raising the limit under the automatic route to 74%, should open the door to more joint ventures of foreign and Indian companies for defence manufacturing in India.
    • It would also sustain domestic industrial activity in the research, design and manufacture of systems and sub-systems.
    • Our companies would now get the opportunity to directly contribute to Indian defence manufacturing.

    Way forward

    • The development of a thriving indigenous defence industry needs an overhaul of existing regulations and practices.
    • A long-term integrated perspective plan of the requirements of the armed forces should give industry a clear picture of future requirements.
    • DPP 2020 should incorporate guidelines to promote forward-looking strategic partnerships between Indian and foreign companies.
    • This partnership should be with a view to achieving indigenisation over a period of time for even sophisticated platforms.
    • Cost evaluation has to evolve from mechanical application of the L1 (lowest financial bid) principle to prioritising indigenous content.
    • The definition of indigenisation itself needs to privilege technology over value or volume.
    • Investment, Indian or foreign, will be viable only if the door to defence exports is opened, with a transparent policy.
    • To give private industry a level playing field for developing defence technologies, conflicts of interest, created by the role of our Defence Research and Development Organisation (DRDO) as the government’s sole adviser, developer and evaluator of technologies have to be addressed.

    Consider the question, “India has been aspiring to reduce its external dependence for defence equipment but has not succeeded in doing so. Examine the challenges in the way of self-sufficiency in this area. How effective will be the recent policy changes made in meeting the goal?”

    Conclusion

    The government has rightly clarified that self-reliance would not be taken to overzealous extremes. The thrust for indigenous research and development will coexist with the import of cutting-edge military technologies to obviate near-term defence vulnerabilities. Of the key components of any major reform — money, method and mindset — mindset is the most critical and the most intractable. It takes a crisis to change it.

     

     

     

     

  • Stimulus package aims to turn the crisis into opportunity

    Economic disruption caused by the corona crisis stems from both-demand side and supply side. So, the stimulus package announced was expected to address the issues on both sides. This article breaks downs the various elements of the package in demand-side as well as supply-side measures. We also know aggregate demand is not just consumption demand. So, this fact was also considered while deciding the demand-side measures.

    Twin mantra of stimulus package

    • 1) To ensure that human cost of the crisis is minimised, especially for those at the bottom of the pyramid.
    • 2) To convert this crisis into an opportunity by implementing bold structural reforms.
    • Such reforms will go beyond repairing the damage to the production capacities and enhance the overall supply response capabilities of the economy.

    Impact on demand side as well as supply side

    • The present crisis is far worse than both the Asian financial crisis of the late Nineties as well as the global financial crisis of 2008-09.
    • It has seriously impacted both the supply and demand side of the economy.
    • The government’s response has been to effectively address both these aspects.

    Government’s four-fold response to address supply-side problems

    1. Ensuring food security

    • To ensure that the government declared agriculture and all related activities as essential services.
    • This permitted the successful harvesting and efficient procurement of the critical Rabi crop.
    • It also implied pumping in Rs 78,000 crore as new purchasing power in the hands of the farmers.

    2. Preventing cash/liquidity crunch

    • Preventing the pressing cash/liquidity crunch was necessary to avoid insolvencies and bankruptcies.
    • An immediate moratorium was announced on their debt servicing obligations to commercial banks.
    • This measure was reinforced for MSMEs, for whom an additional credit line of Rs 3 trillion without any fresh collateral was extended.
    • MSMEs could also avail of new equity from the Rs 50,000 crore fund of funds and take advantage of the subsidiary debt facility announced by the FM.
    • These measures provided succour to a large number of businesses, especially those in the services sectors like hospitality, entertainment and retail.
    • The Rs 90,000 crore credit package made available to state discoms should also be included in this set of measures.
    • It will prevent bankruptcies of state electricity utilities and the power producers, which would have had disastrous results.

    3. Reforms in agriculture and manufacturing sector

    • The third set of measures were directed to significantly improve the ecosystem for private producers, both in agriculture and manufacturing.
    • Long-pending reforms to give farmers the much-needed freedom to choose their clients and for traders and exporters of agro-products to maintain necessary stocks have now been announced.
    • Defence production and exports will get a new fillip with the liberalisation measures.
    • Greater space will be given to private businesses in sectors in which public sector enterprises hitherto had either a monopoly or a predominant presence.

    4. Credit to street vendors

    • Finally, this is a measure that does not have a large fiscal footprint, but touches the lives and livelihoods of more than 50 lakh families.
    • Under which street vendors all over the country have been given a credit of Rs 10,000 each for re-stocking and use as working capital.

    Understanding the aggregate demand

    •  It is important to point out that aggregate demand is made up of- i) consumption, ii) investment iii) demand for intermediate goods.
    • So,  the cash-in-hand of consumers is not the only means for reversing the declining demand in the economy.
    • Therefore, additional credit lines provided to MSMEs, vendors or farmers will contribute to the strengthening of aggregate demand.

    Government’s response to address demand-side problems

    • A significant number of measures were announced to hike consumption demand directly as well.
    • Among these are:
    • Rs 1.73 lakh crore for improving the incomes and welfare of the most vulnerable, including the 20 crore female Jan Dhan account holders who will receive monies directly into their bank accounts.
    • Rs 50,000 additional incomes in the hands of those whose TDS and TCS were reduced by 25 per cent.
    • Rs 40,000 crore additional allocation for MNREGA, which will provide jobs and succour to those returning to their villages from metros and cities.
    • Rs 30,000 crore for construction workers.
    • Rs 17,800 crore transferred to 12 crore farmers and Rs 13,000 crore transferred to states to finance the costs of running quarantine homes and shelters for migrant workers.
    • These measures, which will directly benefit different categories of individuals, will surely raise the flagging demand — the necessary condition for triggering a fast-paced recovery in economic activity.

    Consider the question “The stimulus package announced by the government in the wake of pandemic sought to address both the demand side as well as supply-side problems. Examine the various components of package and other reforms announced in the economy.”

    Conclusion

    Combined with the significant number of bold structural reform measures, which hold the potential to make Indian firms attain global scales and competitiveness and give the much-needed freedoms, flexibility and financial strength to our beleaguered farmers, “the package” promises to promote India’s economic recovery in the post-COVID-19 period.