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GS Paper: GS3

  • RBI’s accounting year

    The Reserve Bank of India (RBI) is aligning its July-June accounting year with the government’s April-March fiscal year in order to ensure more effective management of the country’s finances.

    • Accordingly, the next accounting year will be a nine-month period which starts from July 2020 and ends on March 31, 2021. Thereafter, all the financial years will start from April every year, the RBI said.
    • The Bimal Jalan Committee on Economic Capital Framework (ECF) of the RBI had proposed a more transparent presentation of the RBI’s annual accounts and change in its accounting year from July to June to April to March from the financial year 2020-21.

    How did the RBI’s July-June accounting year come to be?

    • When it commenced operations on April 1, 1935, with Sir Osborne Smith as its first Governor, the RBI followed a January-December accounting year.
    • On March 11, 1940, however, the bank changed its accounting year to July-June.
    • Now, after nearly eight decades, the RBI is making another switch: the next accounting year will be a nine-month period from July 2020 to March 31, 2021, and thereafter, all financial years will start from April, as it happens with the central and state governments.

  • State of India’s Birds 2020 (SoIB) Assessment

     

    State of India’s Birds 2020 (SoIB) assessment was recently released.

    Highlights of the report

     

     

    • The SoIB was produced using a base of 867 species (among 1,333 birds ever recorded in India), and analysed with the help of data uploaded by birdwatchers to the online platform, eBird.
    • Adequate data on how birds fared over a period of over 25 years (long-term trend) are available only for 261 species.
    • Current annual trends are calculated over a five-year period.

    Alarming declines

    • The SoIB assessment raises the alarm that several spectacular birds, many of them endemic to the sub-continent, face a growing threat from loss of habitat due to human activity, widespread presence of toxins including pesticides, hunting and trapping for the pet trade.
    • Diminishing population sizes of many birds because of one factor brings them closer to extinction because of the accelerated effects of others, the report warned.
    • Over a fifth of India’s bird diversity, ranging from the Short-toed Snake Eagle to the Sirkeer Malkoha, has suffered strong long-term declines over a 25-year period.
    • More recent annual trends point to a drastic 80% loss among several common birds.

    Various species mentioned

    • Of 101 species categorised as being of High Conservation Concern — 59 based on range and abundance and the rest included from high-risk birds on the IUCN Red List.
    • Endemics such as the Rufous-fronted Prinia, Nilgiri Thrush, Nilgiri Pipit and Indian vulture were confirmed as suffering current decline.
    • And all except 13 had a restricted or highly restricted range, indicating greater vulnerability to man-made threats.
    • Peafowl, on the other hand, are rising in numbers, expanding their range into places such as Kerala, which is drying overall, and areas in the Thar desert where canals and irrigation have been introduced. Stricter protection for peacocks under law also could be at work.

  • SUTRA PIC India Programme

     

    The government has unveiled SUTRA PIC programme to research on ‘indigenous’ cows.

    SUTRA PIC

    • SUTRA PIC stands for Scientific Utilization Through Research Augmentation-Prime Products from Indigenous Cows.
    • To be funded by multiple scientific ministries, the initiative, SUTRA PIC, is led by the Department of Science and Technology (DST).
    • It has the Department of Biotechnology, the CSIR, the Ministry for AYUSH (Ayurveda, Unani, Siddha, Homoeopathy) among others and the Indian Council of Medical Research as partners.
    • It has five themes:
    1. Uniqueness of Indigenous Cows,
    2. Prime-products from Indigenous Cows for Medicine and Health,
    3. Prime-products from Indigenous Cows for Agricultural Applications,
    4. Prime-products from Indigenous Cows for Food and Nutrition,
    5. Prime-products from indigenous cows-based utility items

    Aims and objectives

    The proposals under this theme aim to:

    • perform scientific research on the complete characterization of milk and milk products derived from Indian indigenous cows;
    • scientific research on nutritional and therapeutic properties of curd and ghee prepared from indigenous breeds of cows by traditional methods;
    • development of standards for traditionally processed dairy products of Indian-origin cow

    Other facts

    • In 2017, SEED constituted a National Steering Committee (NSC) for ‘Scientific Validation and Research on Panchgavya (SVAROP)’.
    • Panchgavya is an Ayurvedic panacea and is a mixture of five (pancha) products of the cow (gavya) — milk, curd, ghee, dung and urine.
    • Its proponents believe it can cure, or treat a wide range of ailments.

  • [pib] Soil Health Card Scheme

     

    The Soil Health Card Scheme has completed 5 years since its launch.

    Soil Health Card Scheme

    • Soil Health Card (SHC) is a Government of India’s scheme promoted by the Department of Agriculture & Co-operation under the Ministry of Agriculture and Farmers’ Welfare.
    • It is being implemented through the Department of Agriculture of all the State and Union Territory Governments.
    • A SHC is meant to give each farmer soil nutrient status of his/her holding and advice him/her on the dosage of fertilizers and also the needed soil amendments, that s/he should apply to maintain soil health in the long run.
    • The scheme was launched by PM on 19.02.2015 at Suratgarh, Rajasthan.

    Details on the SHC

    • SHC is a printed report that a farmer will be handed over for each of his holdings.
    • It contains the status of his soil with respect to 12 parameters, namely N,P,K (Macro-nutrients) ; S (Secondary- nutrient) ; Zn, Fe, Cu, Mn, Bo (Micro – nutrients) ; and pH, EC, OC (Physical parameters).
    • Based on this, the SHC also indicate fertilizer recommendations and soil amendment required for the farm.
    • It provides two sets of fertilizer recommendations for six crops including recommendations of organic manures. Farmers can also get recommendations for additional crops on demand.

    Other details

    • The State Government will collect samples through the staff of their Department of Agriculture or through the staff of an outsourced agency.
    • The State Government may also involve the students of local Agriculture / Science Colleges.
    • It will be made available once in a cycle of 3 years, which will indicate the status of soil health of a farmer’s holding for that particular period.
    • The SHC given in the next cycle of 3 years will be able to record the changes in the soil health for that subsequent period.
    • Soil samples will be drawn in a grid of 2.5 ha in irrigated area and 10 ha in rain- fed area with the help of GPS tools and revenue maps.

     Why needed such scheme?

    • Soil testing is developed to promote soil test based on nutrient management.
    • Soil testing reduces cultivation cost by application of right quantity of fertilizer.
    • It ensures additional income to farmers by increase in yields and it also promotes sustainable farming.

  • National Groundwater Management Improvement Programme

    The Government of India and the World Bank have signed a $450 million loan agreement to support the national programme to arrest the country’s depleting groundwater levels and strengthen groundwater institutions.

    About the Programme

    • The World Bank-supported programme will be implemented in the states of Gujarat, Maharashtra, Haryana, Karnataka, Rajasthan, Madhya Pradesh, and Uttar Pradesh and cover 78 districts.
    • These states span both the hard rock aquifers of peninsular India and the alluvial aquifers of the Indo-Gangetic plains.
    • They were selected based on several criteria, including degree of groundwater exploitation and degradation, established legal and regulatory instruments, institutional readiness, and experience in implementing initiatives related to groundwater management.
    • This programme will contribute to rural livelihoods and in the context of climatic shifts, build resilience of the rural economy.

    Objectives

    The programme will, among others, enhance the recharge of aquifers and introduce water conservation practices; promote activities related to water harvesting, water management, and crop alignment; create an institutional structure for sustainable groundwater management; and equip communities and stakeholders to sustainably manage groundwater.

    Particulars of the programme

    • The programme will introduce a bottom-up planning process for community-driven development of water budgets and Water Security Plans (WSPs).
    • Water budgets will assess surface and groundwater conditions (both quantity and quality) and identify current and future needs.
    • The WSP, on the other hand, will focus on improving groundwater quantity and incentivize selected states to implement the actions proposed.
    • Such community-led management measures will make users aware of consumption patterns and pave the way for economic measures that reduce groundwater consumption.
    • Crop management and diversification will be the other focus areas.

  • Let’s think afresh about how to govern India’s gig workforce

     Context

    The gig economy plays to employment patterns in India, where most of the workforce is engaged in “informal” jobs in the “unorganized” sector.

    Employment pattern in India

    • Non-contractual employment: A recent study of employment patterns over a 13-year period ended 2017 for the Prime Minister’s Economic Advisory Council finds that non-contractual employment grew by 68 million over the period.
      • And “has been a hero of employment generation growing by about 5% annually“.
      • There were 145 million people in non-contractual employment in 2017-18.
      • Professionals constituted the most rapidly growing occupations, with older, better educated and skilled witnessing higher growth.
    • Unorganised sector growing at much higher rate than organised sector: The study also found that unorganized sector employment grew by 65 million between 2004 and 2017, compared to only 27 million new jobs in the organized sector.
      • What does the asymmetric rate suggests? It suggests that businesses are finding it more convenient to sustain themselves when they are below the radar of the government.
    • Potential for growth of gig economy: As technology and business models take the gig economy across the country and implant it more deeply into the Indian economy, we can expect to see a lot more people find employment through online marketplaces and technology platforms.

    Regulation of labour laws and expanding the tax base

    • Social Security Code: In December, the government introduced legislation in Parliament that seeks to consolidate a number of labour laws into a Social Security Code.
      • Who will be covered in the code? The new statute encompasses self-employed professionals, freelancers and platform workers, such as those employed by taxi aggregators and food delivery companies.
    • Widening the tax base: The tax person is not far behind.
      • Recent reports suggest that revenue officials are leaning on platforms and aggregators to get gig workers registered with the goods and services tax (GST) network.
      • Need to reflect on how to govern the gig workforce? While it is just as well that the government is attempting to rationalize labour regulations and expand the country’s tax base, it is important to step back and reflect on how the gig workforce ought to be governed.

    The new approach to classification of jobs: Income and volatility

    • Classification on the basis of two fundamental characteristics: If we discard the mental model that has long classified jobs as formal and informal, and look at work afresh, we observe that jobs vary along with two fundamental characteristics:
      • The level of income they generate and-
      • The volatility of this income.
      • Example: A security guard at a company might earn a few thousand rupees a month, but with the assurance of a regular monthly paycheque.
    • More informative way: Instead of the old binary formulation of informal versus formal jobs, it is more informative to see jobs being distributed on a spectrum depending on how much they pay and how volatile the income flows they provide are.
      • Wherever a job lies in this spectrum, the objective of public policy ought to be to ensure a “trimurti”.

    Ensuring Trimurti

    • Frist-Providing dignified working conditions: Promoting dignified working conditions include-
      • Ensuring fairness.
      • Respect.
      • Safety.
      • Protection against exploitation and-
      • Arrangements for retirement.
      • Need to ensure the obligation from employers: This means that even as labour laws are rationalized to eliminate outdated and hard-coded regulations, it is necessary to ensure that all employers retain an obligation to promote the dignity of all their employees.
    • Second-Need to lower the barriers: Real wages grow not because the government imposes minimum wages, but when productivity rises.
      • Productivity growth occurs when barriers to trade, investment and travel are lowered.
      • A closed economy cannot be a successful gig economy.
    • Finally-A re-imagined social security system: A re-imagined social security system for the 21st century must tap government, corporate and social contributions for insurance and retirement accounts.
      • Such a multi-contribution system is possible today and the proposed Social Security Code is an opportunity to put in place such a future-proof framework.

    How to handle the dispute arising out of the gig economy

    • Start online dispute resolution system: The gig economy is perhaps the best place for India to start its first online automated dispute resolution system.
      • You can’t govern the 21st-century economy with 18th-century technology.

    Conclusion

    While ensuring the application of the labour code to the gig economy and bringing them in the tax net the government also ensure the conducive environment for the gig economy to flourish and contribute significantly in the growth of the country.

     

     

  • A crisis deferred

    Context

    Union budget missed the opportunity to undertake reforms in the grain management system and food security act.

    The massive reduction in food subsidy and its implications

    • Subsidy slashed by 75,552 crores: The revised estimates (RE) for food subsidy for 2019-20 have been slashed by a whopping Rs 75,552 crore -from the budgeted estimate (BE) of Rs 1,84,220 crore to Rs 1,08,668 crore (RE).
      • For the next fiscal year, the budget estimate has been kept at Rs 1,15,570 crore.
    • No major reforms in grain management system: One wonders whether any major reforms have been undertaken in the grain management system or in the National Food Security Act such that this massive reduction in budget estimates is feasible. But no such reforms are undertaken.
      • The Food Corporation of India (FCI) has been asked to borrow more from myriad sources, but most importantly from the National Small Savings Fund (NSSF).
      • An item that should have been in the budget, is now getting reflected as outstanding dues of FCI.
    • Implications of the move–postponing of the crisis:  In order to gauge how much is the effective food subsidy in the country, the budget numbers are becoming totally irrelevant.
      • One needs to add the actual subsidy numbers reflected in the budget to the outstanding dues of FCI.
      • Effective food subsidy: If one adds the due, the effective food subsidy turns out to be Rs 3,57,688 crore.
      • By not provisioning for it fully in the budget, and not undertaking any reforms in the foodgrain management system or the NFSA, the government is only postponing the crisis.

    Need to bring down the coverage: The Economic Survey

    • Bringing down the coverage at 20 %: While the Economic Survey clearly states that the coverage under NFSA needs to be revisited, and brought down to say 20 per cent of the population.
      • The budget did not bite this bullet.
      • Cost of procurement to go up: The expected cost of rice to FCI in 2020-21 is going to be about Rs 37/kg, and for wheat it will be Rs 27/kg.
      • The issue price, that covers 67 per cent of the population, is just Rs 3/kg and Rs 2/kg respectively.

    Excessive stock with the FCI

    • Actual stock in excess of buffer stocks: Compared to a buffer stock norm of 4 million tonnes, actual stocks with FCI (including unmilled paddy) were 3.5 times higher.
      • It speaks of a colossal waste of scarce resources, especially when tax revenues have been sluggish.
    • Stocks likely to increase further: Given that Skymet has predicted that the coming wheat crop is going to be one of the best in many years-the stocks is likely to touch 113 million tonnes.
      • With procurement prices being above global prices, the chances of wheat exports are bleak unless there is a subsidy for exports.
      • And that will be challenged in the WTO.
      • The FCI may run out of stock capacity: So, one should expect a piling up of grains stocks with a record procurement of wheat.
      • FCI may run out of storage capacity. Stock levels may touch 85-90 million tonnes, or even more, by July 1, 2020.

    Fundamental questions

    • First: Is the government ignorant of the impending crisis of plenty?
    • Second: Does it realise that the policy of procurement prices (50 per cent above cost A2+FL), without looking at the demand side, is likely to create more troubles for the government?
    • Third: Does the government have any plan to reform the public distribution system under NFSA?

    Way forward

    • Reforms in foodgrain management: Reforms in foodgrain management have to start with reforming the PDS system.
      • With moving gradually moving away from grains to cash transfers.
      • Think over implementing the Shanta Kumar Committee reports recommendations.
    • Stop open-ended procurement in Punjab-Haryana belt: The policy of procurement prices, with open-ended procurement in the Punjab-Haryana belt, is doing more damage by depleting the water table and not letting crop diversification take place.
      • This is very unfortunate as the “dead loss” in grain management runs to more than Rs 1,00,000 crore.
    • Rationalise the fertiliser subsidy: The other part related to this is the fertiliser subsidy, which is largely used in wheat and rice.
      • The budget estimates for 2020-21 show a reduction in the subsidy, while dues of the fertiliser industry keep on piling.
      • The fertiliser industry estimates that by April 2020, the dues will be roughly Rs 60,000 crore.
      • Demoralised fertiliser industry: While FCI has been asked to borrow, the fertiliser industry does not have that type of window.
      • It is feeling totally demoralised.
      • No private player wants to come and invest in this sector.

    Conclusion

    Instead of postponing the crisis by compelling the FCI to borrow, the government need to reform the foodgrain management system, rationalise the fertiliser subsidy and limit the coverage under the NFSA.

  • Why have LPG prices seen a sharp rise?

     

    Recently, LPG prices, which are revised on a monthly basis, went up yet again.

    What influences LPG prices in India?

    • Domestic prices of liquefied petroleum gas (LPG) are based on a formula — the import parity price (IPP), which is based on international LPG prices.
    • Saudi Aramco’s LPG price acts as the benchmark for the IPP and includes the free-on-board price, ocean freight, customs duties, port dues and the like.
    • This dollar-denominated figure is converted into rupees before local costs — such as local freight, bottling charges, marketing costs, margins for oil marketing firms and dealer commissions and the GST — are added.
    • This helps the government arrive at the retail selling price for LPG.
    • The government resets the LPG price every month, the decision being influenced by international prices and how the rupee has behaved against the dollar in the immediately preceding weeks.

    Who will the price rise affect?

    • The price increase will affect retail consumers who have given up the subsidy.
    • The government has said that for those who avail subsidy, the increase would be mostly absorbed by the rise in subsidy.
    • The Centre said the price of an unsubsidized cylinder would increase from ₹714 to ₹858.50 in Delhi, for example, and that the subsidy offered would go up from ₹153.86 to ₹291.48.
    • Of the 27.76 crore retail consumers, 26.12 crore consumers avail LPG subsidy. Likewise, for Ujjwala consumers, the subsidy would go up from ₹174.86 to ₹312.48 per cylinder.

    Does this help the government move to an open pricing regime?

    • Prior to the latest round of the price increase, the government had raised LPG cylinder prices by ₹62, starting from August 2019.
    • Compare this with the increase of ₹82 that had taken place over five years to mid-2019, indicating a penchant for increasingly lesser subsidy.
    • In the latest round, though, the Centre has sought to absorb much of the increase for those availing subsidy.
    • It looks like the most recent increase has been beyond its control and it is hence raising the subsidy levels to protect consumers, given that the economy is reeling from lack of consumer spending.

    What is the outlook?

    • With international crude prices on the downtrend, it is plausible the LPG prices too would see a slump.
    • Aramco has lowered its propane price for February to $505 per metric tonne.
    • Assuming we receive no surprises from the rupee-dollar tango, a softening of LPG prices in the domestic context may be expected.

    What are the implications for the broader economy?

    • At a time when consumer demand, in general, for goods and services in the country has slumped, more cash in the hands of the retail consumer may have helped spur demand.
    • It is ironic that the government has had to raise LPG prices now.
    • This sucks away even more disposable income from those consumers who pay market rates for LPG. As a result, household budgets are bound to go up, especially for those not availing the subsidy.
    • The increase in LPG price could spur headline inflation even further. As it is, the consumer price index inflation has seen a rise over the past few months.

  • Corporate Model of Indian Railways

     

    The Kashi Mahakal Express is the country’s third ‘corporate’ train after the two Tejas Express trains between Delhi-Lucknow and Mumbai-Ahmedabad started over the past few months.

    A new model

    • This is a new model being actively pushed by Indian Railways- to ‘outsource’ the running of regular passengers’ trains to its PSU, the Indian Railway Catering and Tourism Corporation (IRCTC).
    • This has been dubbed an ‘experiment’ as a natural extension of this model is to lease out 100 routes to private players to run 150 trains, something that is in the works.

    How does the model work?

    • In this model, the corporation takes all the decisions of running the service– fare, food, onboard facilities, housekeeping, complaints etc.
    • Indian Railways is free from these encumbrances and gets to earn from IRCTC a pre-decided amount, being the owner of the network. This amount has three components- haulage, lease and custody.
    • The haulage charge IRCTC is paying for the Tejas trains is in the range of Rs 800 per kilometer.
    • This includes use of the fixed infrastructure like tracks, signalling, driver, station staff, traction and pretty much everything needed to physically move the rake.

    Finances

    • On top of that IRCTC has to pay the lease charges on the rake as Indian Railways coaches are leased to its financing arm, the Indian Railway Finance Corporation (IRFC).
    • Added to that there is a per-day custody charge, of keeping the rake safe and sound while it is in the custody of the PSU.
    • Roughly each of these components works out to be around Rs 2 lakh per day for the New Delhi-Lucknow Tejas rake.
    • In other words, IRCTC has to pay Indian Railways a sum total of these three charges, roughly Rs 14 lakh for the Lucknow Tejas runs in a day (up and down) and then factor in a profit over and above this.
    • This money is payable even if the occupancy is below expectation and the train is not doing good business.

    What powers does IRCTC have?

    • Being a corporate entity with a Board of Directors and investors, IRCTC insists that the coaches it gets from Railways are new and not in a run-down condition, as is seen in many trains.
    • The quality of the coaches has a direct bearing on its business.
    • In this model, IRCTC has full flexibility to decide the service parameters and even alter them without having to go to Railway ministry or its policies.
    • To that end, the business of running trains can be run with the independence needed to run a business with profit motive.
    • This, policymakers believe creates the environment for enhanced service quality and user experience for the passengers.
    • IRCTC gets the freedom to decide even the number of stoppages it wants to afford on a route, depending on the needs of its business model.

    What is Indian Railways’ benefit from this model?

    • The bright side for Indian Railways is that it doesn’t have to suffer the losses associated with running these trains thanks to under-recovery of cost due to low fares and its own hefty overheads.
    • The lease on its coaches is also taken care of.

    Is this the same model for private train operators?

    • The model in which private train operators are sought to be engaged is different wherein along with haulage of Rs 668 per kilometer the operator needs to agree to revenue sharing with Railways.
    • The company willing to share the highest percentage of revenue will win the contract.
    • Private players may not need to pay lease and custody charges as it is expected that they will bring in their own rolling stock.
    • All this is because over the next five years, after the two dedicated freight corridors are operationalised and a lion’s share of freight trains move to the corridors, a lot of capacity will free up in the conventional railway lines for more passenger trains to run to cater to the demand.
    • The government wants private players and maybe also its own PSU, along with Indian Railways, to share the load of pumping in more trains into the system.

  • Supergiant star ‘Betelgeuse’

     

    Using the European Space Organization’s (ESO) Very Large Telescope (VLT), astronomers have noticed the unprecedented dimming of Betelgeuse.

     Betelgeuse

    • It is a red supergiant star (over 20 times bigger than the Sun) in the constellation Orion.
    • Along with the dimming, the star’s shape has been changing as well, as per recent photographs of the star taken using the VISIR instrument on the VLT.
    • Instead of appearing round, the star now appears to be “squashed into an ova”.

    Why is it significant?

    • Betelgeuse was born as a supermassive star millions of years ago and has been “dramatically” and “mysteriously” dimming for the last six months.
    • While Betelgeuse’s behaviour is out of the ordinary, it doesn’t mean that an eruption is imminent since astronomers predict the star to blast sometime (supernova explosion, which is the largest explosion to take place in space) in the next 100,000 years or so.