Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- E-commerce to aid MSMEs
Facilitating manufacturing through MSMEs
- A significant major contributor to the India growth story is going to be manufacturing.
- Manufacturing by small units, cottage units and MSMEs, if effectively facilitated, will be the game changer.
- For MSMEs to be sustainable and effective, the need of the hour is not just better automation but also more channels for accessing greater markets and opportunities to become a part of the national and global supply chains.
- E-commerce marketplaces are today the best possible enablers for this transformation at minimal cost, innovation and investment.
Need to invest in digital transformation and technology
- China captured the world market through the traditional method of having guilds and business centres.
- Today, digital empowerment is the key differentiator.
- Without that, our MSMEs will not be future ready.
- E-commerce allows products even from hinterlands to get to the national market, thus, providing opportunities to artisans and small sellers from Tier-2/3 towns to sell online to customers beyond their local catchment.
- By investing in supply chains, the e-commerce sector provides opportunities for MSMEs to partner them in supply and delivery networks.
- Start-ups and young brands are also finding opportunities to build national brands and even going global.
- This leads to additional income generation through multiple livelihood opportunities.
- Many offline stores are also adopting e-commerce to leverage these opportunities and the traditional and modern retail models are moving towards more offline and online collaborations.
Challenges in building robust e-commerce sector
1) No GST threshold exemption
- Sellers on e-commerce marketplaces do not get advantage of GST threshold exemption (of Rs 40 lakh) for intra–state supplies.
- Online suppliers have to “compulsorily register” even though their turnover is low.
- Offline sellers enjoy this exemption up to the turnover threshold of Rs. 40 lakh.
2) Principal place of business issue
- Today, the sellers, as in offline, are required to have a physical PPoB which, given the nature of e-commerce, is not practical.
- The government would do well to simplify the “Principal Place of Business” (PPoB) requirement especially for online sellers by making it digital.
- Replace physical PPoB with Place of Communication.
- Eliminating the need for state specific physical PPoB requirement will facilitate sellers to get state-level GST with a single national place of business.
3) Support MSMEs to understand e-commerce
- MSMEs should be provided with handholding support to understand how e-commerce functions.
- The government can collaborate with e-commerce entities to leverage their expertise and scale to create special on-boarding programmes.
- These can be provided by state governments.
- There is need to examine the existing schemes and benefits for MSMEs, which were formulated with an offline, physical market in mind.
4) Build infrastructure
- There is a need to build infrastructure — both physical and digital infrastructure is important for digital transformation.
- The road and telecom network will facilitate access to the consumer and enable the seller from remote areas to enter the larger national market as well as the export market.
- A robust logistic network and warehouse chains created by e-commerce platforms enable similar access and reach.
- The National Logistics Policy should focus on e-commerce sector needs.
5) Skilling policies for e-commerce sector
- Dovetail the skilling policy and programmes with the requirements of the e-commerce sector to meet future demand of the sector.
6) Steps to increase export via e-commerce
- We need to take specific steps to increase exports via e-commerce.
- There is a need to identify products that have potential for the export market, connect e-commerce with export-oriented manufacturing clusters, encourage tie-ups with sector-specific export promotion councils, leverage existing SEZs to create e-commerce export zones.
- India Posts can play a significant role by creating e-commerce specific small parcel solutions at competitive rates, building a parcel tracking system, and partnering with foreign post offices to enable customs clearances.
Way forward
- There is an urgent need to create a consolidated policy framework for e-commerce exports.
- Policies like the upcoming Foreign Trade Policy needs to be fully leveraged.
- The Foreign Trade Policy should identify areas and include e-commerce export specific provisions in the revised policy that comes into effect in April this year.
Consider the question “E-commerce marketplaces can help MSMEs in accessing greater markets and provide opportunities to become a part of the national and global supply chains. In light of this, examine the opportunities provided by e-commerce also mention the challenge the sector faces in India.”
Conclusion
By facilitating and supporting e-commerce, we can leverage the potential of MSMEs in manufacturing which could help in the economic growth of the country by creating job opportunities.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: MMDR Amendment Bill, 2021
Mains level: Mining sector reforms
The coal and Mines Minister has introduced the Mines and Minerals (Development and Regulation) Amendment Bill, 2021 in Lok Sabha to streamline the renewal of the auction process for minerals and coal mining rights.
MMDR Amendment Bill, 2021
The Bill seeks to amend the Mines and Minerals (Development and Regulation) Act, 1957. The Act regulates the mining sector in India.
(1) Removal of restriction on end-use of minerals
- The Act empowers the central government to reserve any mine (other than coal, lignite, and atomic minerals) to be leased through an auction for a particular end-use (such as iron ore mine for a steel plant).
- Such mines are known as captive mines. The Bill provides that no mine will be reserved for particular end-use.
(2) Sale of minerals by captive mines
- The Bill provides that captive mines (other than atomic minerals) may sell up to 50% of their annual mineral production in the open market after meeting their own needs.
- The central government may increase this threshold through a notification. The lessee will have to pay additional charges for mineral sold in the open market.
(3) Auction by the central government in certain cases
- Under the Act, states conduct the auction of mineral concessions (other than coal, lignite, and atomic minerals).
- Mineral concessions include mining lease and prospecting license-cum-mining lease.
- The Bill empowers the central government to specify a time period for completion of the auction process in consultation with the state government.
- If the state government is unable to complete the auction process within this period, the auctions may be conducted by the central government.
(4) Transfer of statutory clearances
- Upon expiry of a mining lease (other than coal, lignite, and atomic minerals), mines are leased to new persons through auction.
- The statutory clearances issued to the previous lessee are transferred to the new lessee for a period of two years.
- The new lessee is required to obtain fresh clearances within these two years.
- The Bill replaces this provision and instead provides that transferred statutory clearances will be valid throughout the lease period of the new lessee.
(5) Allocation of mines with expired leases
- The Bill adds that mines (other than coal, lignite, and atomic minerals), whose lease has expired, may be allocated to a government company in certain cases.
- This will be applicable if the auction process for granting a new lease has not been completed, or the new lease has been terminated within a year of the auction.
- The state government may grant a lease for such a mine to a government company for a period of up to 10 years or until the selection of a new lessee, whichever is earlier.
(6) Rights of certain existing concession holders
- In 2015, the Act was amended to provide that mines will be leased through an auction process.
- Existing concession holders and applicants have been provided with certain rights.
- The Bill provides that the right to obtain a prospecting license or a mining lease will lapse on the date of commencement of the 2021 Amendment Act.
- Such persons will be reimbursed for any expenditure incurred towards reconnaissance or prospecting operations.
(7) Extension of leases to government companies
- The Act provides that the period of mining leases granted to government companies will be prescribed by the central government.
- The Bill provides that the period of mining leases of government companies (other than leases granted through auction) may be extended on payment of additional amount prescribed in the Bill.
(8) Conditions for lapse of mining lease
- The Act provides that a mining lease will lapse if the lessee: (i) is not able to start mining operations within two years of the grant of a lease, or (ii) has discontinued mining operations for a period of two years.
- However, the lease will not lapse at the end of this period if a concession is provided by the state government upon an application by the lessee.
- The Bill adds that the threshold period for lapse of the lease may be extended by the state government only once and up to one year.
(9) Non-exclusive reconnaissance permit
- The Act provides for a non-exclusive reconnaissance permit (for minerals other than coal, lignite, and atomic minerals).
- Reconnaissance means preliminary prospecting of a mineral through certain surveys.
- The Bill removes the provision for this permit.
Why such a move?
- The move would likely lead to greater transparency in the auction process.
- There is a perception that states governments may in some cases prefer some bidders, and try to delay or cancel mining rights if their preferred bidders do not win mining rights.
Could the amendment face legal challenges?
- The amendment, if passed, was likely to face legal challenges particularly from state governments.
- If an act is passed in which any state government’s discretionary power is taken away or their rights or benefits are infringed, it is likely to be challenged in the Supreme Court.
(With inputs from PRS)
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: CDRI
Mains level: India's leadership in Climate change mitigation
The Prime Minister has recently addressed the third edition of the annual conference of the Coalition for Disaster resilient Infrastructure (CDRI).
What is CDRI?
- The CDRI is an international coalition of countries, UN agencies, multilateral development banks, the private sector, and academic institutions that aim to promote disaster-resilient infrastructure.
- Its objective is to promote research and knowledge sharing in the fields of infrastructure risk management, standards, financing, and recovery mechanisms.
- It was launched by the Indian PM Narendra Modi at the 2019 UN Climate Action Summit in September 2019.
- CDRI’s initial focus is on developing disaster-resilience in ecological, social, and economic infrastructure.
- It aims to achieve substantial changes in member countries’ policy frameworks and future infrastructure investments, along with a major decrease in the economic losses suffered due to disasters.
Try this PYQ:
Q.Consider the following statements:
- Climate and Clean Air Coalition (CCAC) to Reduce Short Lived Climate Pollutants is a unique initiative of G20 group of countries
- The CCAC focuses on methane, black carbon and hydrofluorocarbons.
Which of the above statements is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Its inception
- PM Modi’s experience in dealing with the aftermath of the 2001 Gujarat earthquake” as the chief minister led him to the idea.
- The CDRI was later conceptualized in the first and second edition of the International Workshop on Disaster Resilient Infrastructure (IWDRI) in 2018-19.
- It was organized by the National Disaster Management Authority (NDMA), in partnership with the UN Office for Disaster Risk Reduction (UNDRR), the UN Development Programme, the World Bank, and the Global Commission on Adaptation.
Its diplomatic significance
- The CDRI is the second major coalition launched by India outside of the UN, the first being the International Solar Alliance.
- Both of them are seen as India’s attempts to obtain a global leadership role in climate change matters and were termed as part of India’s stronger branding.
- India can use the CDRI to provide a safer alternative to China’s Belt and Road Initiative (BRI) as well.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Mullaperiyar Dam
Mains level: Interstate river water disputes in India
The Supreme Court has warned the Tamil Nadu Chief Secretary against the failure to give information on the rule curve for Mullaperiyar dam.
Do you know?
The Mullaperiyar dam is located in Kerala on the river Periyar but is operated and maintained by the neighbouring state of Tamil Nadu.
What is the Rule Curve?
- A rule curve or rule level specifies the storage or empty space to be maintained in a reservoir during different times of the year.
- Here the implicit assumption is that a reservoir can best satisfy its purposes if the storage levels specified by the rule curve are maintained in the reservoir at different times.
- It decides the fluctuating storage levels in a reservoir.
- The gate opening schedule of a dam is based on the rule curve.
- It is part of the “core safety” mechanism in a dam.
Why such a move?
- During the high-voltage hearing, the Tamil Nadu government blamed Kerala for delaying the finalization of the rule curve for the 123-year-old dam.
- Kerala government has accused Tamil Nadu of adopting an “obsolete” gate operation schedule dating back to 1939.
About Mullaperiyar Dam
- Mullaperiyar Dam is a masonry gravity dam on the Periyar River in the Indian state of Kerala.
- It is located on the Cardamom Hills of the Western Ghats in Thekkady, Idukki District of Kerala.
- It was constructed between 1887 and 1895 by John Pennycuick and also reached an agreement to divert water eastwards to the Madras Presidency area (present-day Tamil Nadu).
- It has a height of 53.6 m from the foundation, and a length of 365.7 m.
- The Periyar National Park in Thekkady is located around the dam’s reservoir.
- The dam is built at the confluence of Mullayar and Periyar rivers.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Project RE-HAB
Mains level: Man-animal conflict
The forest authorities intend to mitigate human-elephant conflict by installing bee boxes along the periphery of the forest and the villages under the Project RE-HAB.
On similar lines, try this PYQ:
Q.The term ‘M-STrIPES’ is sometimes seen in the news in the context of:
(a) Captive breeding of Wild Fauna
(b) Maintenance of Tiger Reserves
(c) Indigenous Satellite Navigation System
(d) Security of National Highways
Project RE-HAB
- Project RE-HAB stands for Reducing Elephant-Human Attacks using Bees. It is an initiative of the Khadi and Village Industries Commission (KVIC).
- It intends to create “bee fences” to thwart elephant attacks in human habitations using honeybees.
- Bee boxes have been placed on the ground as well as hung from the trees.
- The boxes are connected with a string so that when elephants attempt to pass through, a tug causes the bees to swarm the elephant herds and dissuade them from progressing further.
- This idea stems from the elephants’ proven fear of the bees.
Areas covered by the project
- The pilot project was launched at four locations around Chelur village in the Kodagu district of Karnataka.
- These spots are located on the periphery of Nagarahole National Park and Tiger Reserve, known conflict zones.
Benefits offered
- The biggest advantage of Project RE-HAB is that it dissuades elephants without causing any harm to them.
- It is extremely cost-effective as compared to various other measures such as digging trenches or erecting fences.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Fiscal deficits
Mains level: Paper 3- State budgets belies the hopes of public spending led recovery
The article highlights the trends emerging from the State budgets which dashes the hopes of public-spending led economic recovery.
State-level budget trends
- Over the past few weeks, several state governments have presented their budgets for the financial year 2021-22.
- The states, put together, account for a larger share of general government spending than the Centre.
- States’ spending stance is pivotal to the hopes of a government spending-led economic recovery.
5 Broad trends from the state budgets
- The broad state-level budget trends are based on 11 states that account for a little over 60 per cent of India’s GDP.
1) Offsetting the additional spending by Centre
- There is a collapse in states’ revenues and transfers from the Centre.
- Along with it, there is a “reluctance” among some states to borrow more to spend.
- Thus, the aggregate level spending by these states in 2020-21 will end up being lower than what they had budgeted for before the onset of the pandemic.
- The revised estimates peg their total expenditure to decline by around 6 per cent in 2020-21 from their budget estimates.
- If these trends were to hold for the other states as well, then it would imply that the additional spending by the central government, over and above its budget estimate is likely to be offset by the decline in spending by states.
2) From revenue surplus to revenue deficit
- This year, states which typically run revenue surpluses will run revenue deficits.
- The collapse in revenues meant that states that usually borrow to finance capital expenditure have had to borrow to finance their recurring expenditure (revenue expenditure) as well.
- As a consequence, capital spending by states has been cut sharply.
- States, though, expect the situation to reverse in the coming fiscal year, with most projecting a return to revenue surpluses even as the Centre will continue to run revenue deficits.
- This anomaly is unlikely to be resolved unless the root cause of the situation — the nature of the fiscal compact between the Centre and the states — is addressed.
3) Reluctance by states to borrow
- The Centre had raised the ceiling on their market borrowings from 3 to 5 per cent of GSDP.
- Of this 2 percentage point increase in the borrowing limit, part was unconditional while the remaining was subject to fulfilling Centre-mandated reforms.
- As per ICRA’s estimate, 17 states qualified based on the One Nation One Ration Card reforms, 15 qualified based on the ease of doing business reforms, seven partially completed power sector reforms, while six had completed the urban local body reforms.
- But, it is only the low-income states of Bihar, Rajasthan and Madhya Pradesh with already stretched finances that seem to have availed the additional borrowing space.
- The high-income states of Gujarat, Maharashtra and Karnataka, all of whom had greater fiscal headroom going to the crisis, and were better placed to borrow more and spend, have not done so.
4) Aggressive fiscal consolidation
- As is the case with the Centre, states have, remarkably, budgeted for aggressive fiscal consolidation next year.
- The average fiscal deficit across these states is expected to fall by more than 1 percentage point of GSDP, more than twice the decline recommended by the 15th finance commission.
5) Ambitious revenue assumptions
- The aggressive consolidation next year is expected to be achieved not by expenditure compression, as is the case with the Centre, but by significant revenue enhancement.
- However, some revenue assumptions are quite ambitious, to say the least — some states have pegged their GST and VAT collections to grow far in excess of 30 per cent in 2021-22.
- A deterioration in fiscal marksmanship will mean that expenditure in the coming fiscal year will also end up being lower than what has been budgeted for.
Consider the question “The pandemic has upended the States’ fiscal space, which is evident in their budgets. In light of this, examine the trends emerging from the budgets of the States and their implications for the economy.”
Conclusion
Subdued general government spending during these tumultuous years heightens the risks to economic recovery. Considering the possibility of the economy exiting from this period with lower medium-term growth prospects, there is a strong case for greater government spending during these years.
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