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  • Atlantic Meridional Overturning Circulation (AMOC)

    According to the IPCC’s Report (AR6), the Atlantic Meridional Overturning Circulation (AMOC), is losing its stability.

    What is AMOC?

    • The AMOC is a large system of ocean currents.
    • It is the Atlantic branch of the ocean conveyor belt or Thermohaline circulation (THC), and distributes heat and nutrients throughout the world’s ocean basins.
    • AMOC carries warm surface waters from the tropics towards the Northern Hemisphere, where it cools and sinks.
    • It then returns to the tropics and then to the South Atlantic as a bottom current. From there it is distributed to all ocean basins via the Antarctic circumpolar current.
    • Gulf Stream, a part of the AMOC, is a warm current responsible for mild climate at the Eastern coast of North America as well as Europe.

    What happens if AMOC collapses?

    • Colder Europe: Without a proper AMOC and Gulf Stream, Europe will be very cold.
    • Rainfall decline: Modelling studies have shown that an AMOC shutdown would cool the northern hemisphere and decrease rainfall over Europe.
    • El-Nino trigger: It can also have an effect on the El Nino.
    • Cooling of Atlantic: AMOC collapse could bring about large, markedly different climate responses: a prominent cooling over the northern North Atlantic and neighboring areas.
    • Weaker thermohaline: Freshwater from melting Greenland ice sheets and the Arctic region can make circulation weaker as it is not as dense as salt water and doesn’t sink to the bottom.

    Has the AMOC weakened before?

    • AMOC and THC strength has always been fluctuating, mainly if you look at the late Pleistocene time period (last 1 million years).
    • The extreme glacial stages have seen weaker circulation and slowdown in AMOC, while the glacial terminations have shown a stronger AMOC and circulation.
    • AMOC has been relatively stable until the late 19th century.
    • With the end of the little ice age in about 1850, the ocean currents began to decline, with a second, more drastic decline following since the mid-20th century.

    Why is the AMOC slowing down?

    • Climate models have long predicted that global warming can cause a weakening of the major ocean systems of the world.
    • Last month researchers noted that a part of the Arctic’s ice called “Last Ice Area” has also melted.
    • The freshwater from the melting ice reduces the salinity and density of the water. Now, the water is unable to sink as it used to and weakens the AMOC flow.

    Influence of Indian Ocean

    • Another study suggested that the Indian Ocean may also be helping the slowing down of AMOC.
    • As the Indian Ocean warms faster and faster, it generates additional precipitation.
    • With so much precipitation in the Indian Ocean, there will be less precipitation in the Atlantic Ocean, leading to higher salinity in the waters of the tropical portion of the Atlantic.
    • This saltier water in the Atlantic, as it comes north via AMOC, will get cold much quicker than usual and sink faster.
    • This acts as a jump start for AMOC, intensifying the circulation.

    Now try this:

    Q.With reference to Ocean Mean Temperature (OMT), which of the following statements is/are correct? (CSP 2020)

    1. OMT is measured up to a depth of 26ºC isotherm which is 129 meters in the south-western Indian Ocean during January-March.
    2. OMT collected during January-March can be used in assessing whether the amount of rainfall in monsoon will be less or more than a certain long-term mean.

    Select the correct answer using the code given below:

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

    Post your answers here:

    Back2Basics:  Ocean Currents

  • Government e-Marketplace (GeM) System

    The Government e-Marketplace (GeM) system has resulted in a 10% savings in public procurement costs in five years.

    Government e-Marketplace

    • GeM is an online platform for public procurement in India by various Government Departments / Organizations / PSUs.
    • The initiative was launched on August 9, 2016 by the Ministry of Commerce and Industry with the objective to create an open and transparent procurement platform for government buyers.
    • It is owned by GeM SPV (Special Purpose Vehicle) which is a 100 per cent Government-owned, non-profit company under the Ministry of Commerce and Industries
    • GeM aims to enhance transparency, efficiency and speed in public procurement.
    • It provides the tools of e-bidding, reverse e-auction and demand aggregation to facilitate the government users achieve the best value for their money.
    • The purchases through GeM by Government users have been authorized and made mandatory by Ministry of Finance.

    Note: The government has made it mandatory for sellers on the Government e-Marketplace (GeM) portal to clarify the country of origin of their goods when registering new products.

    Advantages for Buyers

    • Offers rich listing of products for individual categories of Goods/Services
    • Makes available search, compare, select and buy facility
    • Enables buying Goods and Services online, as and when required.
    • Provides transparency and ease of buying
    • Ensures continuous vendor rating system
    • Up-to-date user-friendly dashboard for buying, monitoring supplies and payments
    • Provision of easy return policy

    Advantages for Sellers

    • Direct access to all Government departments.
    • One-stop shop for marketing with minimal efforts
    • One-stop shop for bids / reverse auction on products / services
    • New Product Suggestion facility available to Sellers
    • Dynamic pricing: Price can be changed based on market conditions
    • Seller friendly dashboard for selling, and monitoring of supplies and payments
    • Consistent and uniform purchase procedures
  • [pib] PM-DAKSH Scheme

    Union Minister for Social Justice and Empowerment has launched the ‘PM-DAKSH’ Portal and ‘PM-DAKSH’ Mobile App.

    About PM-DAKSH Scheme

    • The PM-DAKSH stands for Pradhan Mantri Dakshta Aur Kushalta Sampann Hitgrahi (PM-DAKSH) Yojana.
    • It is being implemented by the Ministry of Social Justice and Empowerment from the year 2020-21.
    • Under this scheme, eligible target group are being provided skill development training programmes on (i) Up-skilling/Re-skilling (ii) Short Term Training Programme (iii) Long Term Training Programme and (iv) Entrepreneurship Development Program (EDP).
    • These training programs are being implemented through Government Training Institutes, Sector Skill Councils constituted by the Ministry of Skill Development and Entrepreneurship and other credible institutions.

    PM-DAKSH Portal/App

    • Any person can get all the information related to skill development training at one place by visiting the ‘PM-DAKSH’ Portal.
    • Also, with just one click, one can get information about skill development trainings happening near him/her and he/she can easily register himself/herself for skill training.

    Some of the features of this portal are as follows:

    • Availability of all information related to skill development at one place for Scheduled Castes, Backward Classes and Safai Karamcharis.
    • Facility to register for the training institute and program of their interest.
    • Facility to upload desired documents related to personal information.
    • Facility to register the attendance of the trainees through face and eye scanning during the training period.
    • Monitoring facility through photo and video clip during training etc.
  • [pib] Saansad Adarsh Gram Yojana

    The Ministry of Rural Development has taken several measures for the successful implementation of the Sansad Adarsh Gram Yojana (SAGY) Gram Panchayats.

    Saansad Adarsh Gram Yojana (SAGY)

    • SAGY is a village development project launched in October 2014, under which each Member of Parliament will take the responsibility of developing physical and institutional infrastructure in three villages by 2019.
    • SAGY aims at instilling certain values in the villages and their people so that they get transformed into models for others.

    These values include:

    • Adopting people’s participation as an end in itself – ensuring the involvement of all sections of society in all aspects related to the life of village, especially in decision- making related to governance
    • Adhering to Antyodaya – enabling the “poorest and the weakest person” in the village to achieve well being
    • Affirming gender equality and ensuring respect for women
    • Guaranteeing social justice
    • Instilling dignity of labour and the spirit of community service and voluntarism
    • Promoting a culture of cleanliness
    • Living in consonance with nature – ensuring a balance between development and ecology
    • Preserving and promoting local cultural heritage
    • Inculcating mutual cooperation, self-help and self-reliance
    • Fostering peace and harmony in the village community
    • Bringing about transparency, accountability and probity in public life
    • Nurturing local self-governance
    • Adhering to the values enshrined in the Fundamental Rights and Fundamental Duties of the Indian Constitution

    Identification of an Adarsh Gram

    • A Gram Panchayat would be the basic unit.
    • It will have a population of 3000-5000 in plain areas and 1000-3000 in hilly, tribal and difficult areas.
    • In districts where this unit size is not available, Gram Panchayats approximating the desirable population size may be chosen.
    • The MP would be free to identify a suitable Gram Panchayat for being developed as Adarsh Gram, other than his/her own village or that of his/her spouse.
    • Lok Sabha MP has to choose a Gram Panchayat from within his/her constituency and Rajya Sabha MP a from the rural area of a district of his/her choice in the State from which he/she is elected.
    • Nominated MPs may choose a Gram Panchayat from the rural area of any district in the country.
    • In the case of urban constituencies, (where there are no Gram Panchayats), the MP will identify a Gram Panchayat from a nearby rural constituency.
    • The newly elected MPs will have the option to select the GP of their choice.
  • [pib] Definition of Minority

    The Ministry of Minority Affairs has provided some useful information about various initiatives for minorities.

    A very interesting fact found in the article is that Minorities are identified by the States and not the Centre!

    Defining a minority community

    • The Central has notified minority communities at the national level in consultation with various stakeholders under Section 2 (c) of the National Commission for Minorities (NCM), Act,
    • The six communities notified as minority communities under Section 2(c) of the NCM Act, 1992 are Christians, Sikhs, Muslims, Buddhists, Parsis, and Jains.
    • Notification of any community-specific to a State as a minority community within a State comes under the purview of the State
    • Article 29 and 30 of the Constitution provide for the protection of interest of minorities which includes linguistic minorities also.

    Who are linguistic minorities?

    • Linguistic Minorities are group or collectivities of individuals residing in the territory of India or any part thereof having a distinct language or script of their own.
    • The language of the minority group need not be one of the twenty-two languages mentioned in the Eighth Schedule of the Constitution.
    • In other words, linguistic minorities at the State level mean any group or groups of people whose mother tongues are different from the principal language of the State, and at the district and taluka/tehsil levels, different from the principal language of the district or taluka/tehsil concerned.
    • The linguistic minorities are therefore identified by the respective States/UTs.
    • The State/UT wise, broad linguistic profile is available in the 52nd Report of the Commissioner for Linguistic Minorities(CLM).

    National Commission for Minorities

    • The Government has already enacted the National Commission for Minorities (NCM) Act, 1992 to constitute a National Commission for Minorities.
    • The NCM receives petitions/grievances from the aggrieved persons and the said petitions/grievances being received by Commission.
    • They are dealt with by calling for reports from the concerned authorities under the Union and State Governments.
    • On receipt of the reports, the Commission makes appropriate recommendations to the respective authorities for redressal of the grievances.
  • [Burning Issue] Ministry of Cooperation

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    The Union Government announced the formation of a separate Union Ministry of Cooperation, a subject that till date was looked after by the Ministry of Agriculture. This ‘historic move’ seeks to “provide a separate administrative, legal and policy framework for strengthening the cooperative movement,” apart from deepening a “true people-based movement,” an “economic development model” that will now have a ministry to streamline “ease of doing business” and enhance the multistate cooperative societies.

    What defines a Cooperative?

    • A cooperative is “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned enterprise”.
    • Cooperatives are democratically owned by their members, with each member having one vote in electing the board of directors.

    What will be the new Ministry’s objectives?

    • Ministry created to realize the vision of ‘sahkar se samriddhi’ (through cooperation to prosperity).
    • The Ministry of Cooperation will provide a separate administrative legal and policy framework for strengthening the cooperative movement in the country.
    • It will help deepen Co-operatives as a true people based movement reaching up to the grassroots.
    • In India, a Co-operative based economic development model is very relevant where each member works with a spirit of responsibility.
    • The Ministry will work to streamline processes for ‘Ease of doing business for co-operatives and enable development of Multi-State Co-operatives (MSCS).

    What is the cooperative movement?

    • Cooperatives are organizations formed at the grassroots level by people to harness the power of collective bargaining towards a common goal.
    • Village-level primary agricultural credit societies (PACSs) formed by farmer associations are the best example of grassroots-level credit flow.
    • These societies anticipate the credit demand of a village and make the demand to the district central cooperative banks (DCCBs).
    • State cooperative banks sit at the apex of the rural cooperative lending structure.
    • Given that PACSs are a collective of farmers, they have much more bargaining powers than an individual farmer pleading his case at a commercial bank.
    • There are also cooperative marketing societies in rural areas and cooperative housing societies in urban areas.

    Sectors in which Cooperative societies have outperformed

    (1) Agriculture:

    • In agriculture, cooperative dairies, sugar mills, spinning mills etc are formed with the pooled resources of farmers who wish to process their produce.
    • The country has 1,94,195 cooperative dairy societies and 330 cooperative sugar mill operations.

    (2) Dairy:

    • In 2019-20, dairy cooperatives had procured 4.80 crore litres of milk from 1.7 crore members and had sold 3.7 crore litres of liquid milk per day. (Annual Report, National Dairy Development Board, 2019-20).
    • In 1991, Manmohan Singh, then finance minister wanted to delicense the dairy sector as well, but there was stiff opposition from Verghese Kurien.
    • It was after 10 years in 2002 that the dairy sector was fully de-licensed. The competition between cooperatives and corporate dairy players has benefitted millions of farmers around the country.
    • With the entry of the private sector, the growth of the dairy sector accelerated at double the speed.
    • Today, both procure roughly the same quantities, and growth in the organised private sector is faster than in cooperatives.

    (3) Sugar Industries: Cooperative sugar mills account for 35% of the sugar produced in the country.

    (4) Banking and Finance: In banking and finance, cooperative institutions are spread across rural and urban areas.

    Performance of cooperative movement in India

    • India’s experience with the cooperative movement has produced mixed results — few successes and many failures.
    • There are cooperatives in the financial sector, be it rural or urban.
    • But the performance of these agencies when measured in terms of their share in overall credit, achievements in technology upgradation, keeping NPAs low or curbing fraudulent deals has been poor to average.
    • Sugar cooperatives of Maharashtra initially touted as exemplars of the movement, are in the doldrums now.
    • Many are being sold to the private sector.

    What laws govern cooperative societies?

    • Agriculture and cooperation are in the state list, which means state governments can govern them.
    • A majority of the cooperative societies are governed by laws in their respective states, with a Cooperation Commissioner and the Registrar of Societies as their governing office.
    • In 2002, the Centre passed a Multistate Cooperative Societies Act that allowed for registration of societies with operations in more than one state.
    • These are mostly banks, dairies and sugar mills whose area of operation spreads across states.
    • The Central Registrar of Societies is their controlling authority, but on the ground the State Registrar takes actions on his behalf.

    Provisions of Indian Constitution related to Cooperatives

    The Constitution (97th Amendment) Act, 2011 made following changes in Constitution

    • New Part IXB regarding the cooperatives working in India added. (Part IXA deals with Municipals)
    • In Art. 19(1)(c) the word “cooperatives” was added after “unions and associations”.  This enables all the citizens to form cooperatives by giving it the status of fundamental right of citizens.
    • A new Article 43B was added in the Directive Principles of State Policy (Part IV) regarding the “promotion of cooperative societies”.

    Retaining the federal character of cooperatives

    • The Supreme Court in Union of India v Rajendra Shah and Others (2021), has partly struck down the 97 constitutional amendments that sought to provide a clear framework for the administration of cooperatives across the country.
    • The courts adjudicated that the amendment violated the powers of state legislatures with respect to items in the state list, by legislating on a matter specifically contained in Item 32 of the state list under Schedule 7.
    • In what is a fillip towards the federal character of cooperatives, the Court clearly stated that cooperatives and any form of legislation pertaining to them are strictly within the domain of the state government and legislatures, and only in matters of multistate cooperatives does Parliament have sanction to legislate.

    Why Cooperatives are so important?

    • It provides agricultural credits and funds where state and private sectors have not been able to do very much.
    • It provides strategic inputs for the agricultural-sector; consumer societies meet their consumption requirements at concessional rates.
    • It is an organization for the poor who wish to solve their problems collectively.
    • It softens the class conflicts and reduces the social cleavages.
    • It reduces the bureaucratic evils and follies of political factions;
    • It overcomes the constraints of agricultural development;
    • It creates a conducive environment for small and cottage industries.

    Why was the new Ministry necessary?

    • In our country, a Co-operative based economic development model is very relevant where each member works with a spirit of responsibility.
    • It was necessary to restore the importance of the cooperative structure in the country. The cooperative structure has managed to flourish and leave its mark only in a handful of states like Maharashtra, Gujarat, Karnataka etc.
    • Under the new Ministry, the cooperative movement would get the required financial and legal power needed to penetrate into other states also.
    • Cooperative institutions get capital from the Centre, either as equity or as working capital, for which the state governments stand guarantee.
    • This formula had seen most of the funds coming to a few states such as Maharashtra, Gujarat, Karnataka while other states failed to keep up.
    • Over the years, the cooperative sector has witnessed drying out of funding. Under the new Ministry, the cooperative structure would be able to get a new lease of life.
    • This creation has signaled its deep commitment to community-based developmental partnerships.

    To what extent do the cooperative structure influence state and national politics?

    • Cooperative institutions, be it the village-level PACS or the urban cooperative housing societies, elect their leaders democratically, with members voting for a board of directors.
    • Thus, in states such as Maharashtra, cooperative institutions have served as schools for development of leadership.
    • In the present Maharashtra legislature, there are at least 150 legislators who have had some connection with the movement.
    • No matter which party is in power in a state like Maharashtra, the purse strings of the local economy always remain with the cooperative institution.

    Challenges

    • Mismanagement and Manipulation: A hugely large membership turns out to be mismanaged unless some secure methods are employed to manage such co-operatives. Money became such a powerful tool in the elections to the governing bodies that the top posts of chairman and vice-chairman usually went to the richest farmers who manipulated the organization for their benefits.
    • Lack of Awareness: People are not well informed about the objectives of the Movement, rules and regulations of co-operative institutions.
    • Restricted Coverage: Most of these societies are confined to a few members and their operations extended to only one or two villages.
    • Dearth of trained staff: The Co-operative Movement has suffered from inadequacy of trained personnel.

    Way forward

    • The new Ministry of Cooperation can work towards ironing out distortions in state price policies due to subsidization such as in Maharashtra and Karnataka milk prices.
    • New areas are emerging with the advancement of technology and cooperative societies can play a huge role in making people familiar with those areas and technologies.
    • The Ministry of Cooperation can give them soft loans for innovation and technology upgradation.
    • But such loans should also be extended to the private sector to ensure a level playing field.
    • The Ministry of Cooperation needs to ensure the least political interference in the operation of cooperatives.
    • To strengthen the cooperatives there should be market linkages for agricultural farmers as well as cooperative societies.

    Conclusion

    Critics argue that the Creation of a new cooperation ministry is an infringement upon the federal rights of the state governments. This is an intrusion into the authority of the state governments. This amounts to challenging the federal system of our country. However, the principle of the cooperative movement is to unite everyone, even while remaining anonymous. The cooperative movement has the capacity to solve people’s problems. The new Ministry of Cooperation can work towards bringing in professionalism in cooperatives and make them more competitive.


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  • STREAK TEST-1

    A dream does not become reality through magic; it takes sweat, determination, and hard work. 

    Dear Aspirants,
    We have covered almost 50% of Indian Polity and a MCQ based test is scheduled for tomorrow. The test will be conducted at 8 pm live. Keep a black ball pen and OMR sheet with you. Test will be uploaded to your portal.

    Zoom link will also be shared with you.

    So, let us look at Today’s activities.

    The schedule for today was:

    Center-State Relations, Inter-State Relations and Emergency provisions.

    Prelims Questions to attempt:

    Q1. Under the doctrine of Original Jurisdiction, the Supreme Court decides the disputes between different units of Indian Federation. Which of the following are covered under the said jurisdiction?

    1. Dispute between the Centre and Union Territories

    2. Dispute between the Centre and States

    Select the correct answer using the code given below

    A 1 only

    B 2 only

    C Both 1 and 2

    D None of them 

    Q2.  Which of the following statements are correct regarding 7th schedule?
    1.Where there is a conflict between the Concurrent List and the State List, it is the former that should prevail.
    2.In case of a conflict between the Central law and the state law on a subject enumerated in the Concurrent List, the Central law prevails over the state law.
    3.If the state law has been reserved for the consideration of the president and has received his assent, then the state law prevails in that state.

    4. If a subject lies in none of the list of 7th schedule, both Union and state are free to make laws over it.

    Select the correct answer from the codes given below:

    A 1, 2 and 3 only

    B 2, 3 and 4only

    C 1,3 and 4only

    D All of them 

    Q3. The Parliament can make any law for whole or any part of India for implementing international treaties

    (a) with the consent of all the States

    (b) with the consent of the majority of States

    (c) with the consent of the States concerned

    (d) without the consent of any State

    Q4. Consider the following statements with reference to Zonal Councils:

    1. They were formed on the recommendation of Sarkaria Commission for better coordination between states.
    2. Chief Ministers occupy the position of Vice Chairperson on rotation basis.

    Which of the statements mentioned above is/are correct?

    A 1 only

    B 2 only

    C Both 1 and 2

    D Neither 1 nor 2

    Q5. Which of the following statements regarding Inter-State Council is/are correct?

    1. The Parliament defines the nature of duties to be performed by the Council.
    2. It can deal with any controversy whether legal or non-legal.
    3. Its function is advisory in nature.

    Select the correct answer from the codes given below:

    A 1 only

    B 2 and 3 only

    C 1 and 3 only

    D 1, 2 and 3

    Q6. With reference to Financial Emergency in India, which of the following statements is/are correct?

    1. Under Article 360 Parliament is empowered to proclaim a financial emergency when the financial stability or credit of India or any part of its territory is threatened
    2. During Financial Emergency, the President may issue directions for the reduction of salaries and allowances the judges of Supreme Court while the Governor can do the same for judges of High Court.

    Select the correct answer from the code given below:

    A 1 only

    B 2 only

    C Both 1 and 2

    D Neither 1 nor 2

    Mains Questions to attempt:

    Q: Discuss the meaning of “breakdown of constitutional machinery”. What are its effects? (10)

    Q: What are the essentials of true federation? Analyze the nature of the Indian federation? (15)

    Video Discussion of Mains Questions by Sukanya Ma’am

    Video Discussion of Prelims Questions by Santosh Sir:

    Stay tuned with us for tomorrow’s targets.

    ———————————————————————————————

    Visit our course page for further details

  • India’s technical education: Issues and Suggestions

    Context

    This year, AICTE approved the closure of 63 engineering colleges across the country.

    Deterioration of quality

    • Tweaking with curriculum: Private entrepreneurs took the lead to meet the growing demand of the country in technical education in the mid-Eighties, but with little idea of the subject.
    • Subjects like materials, applied physics and thermodynamics which forms the building blocks of engineering became dispensable.
    • Because they were both tough to teach for the teachers and tough to pass for the students.
    • Expansion: This softening of subjects coupled with unfettered expansion in the early and mid-2000s, resulted in real dilution of the overall standards in the country.
    • Lack of adequate number of teachers, lack of quality in those available, inability of the management to make adequate investments in a dynamic environment, lack of employment opportunities, shelf life of skills coming down with every technology-related intervention and a constant experimentation with curriculum have all been the bane of quality in technical education.

    Issues

    • Engineering education suffers from regulatory gaps, poor infrastructure, lack of qualified faculty and the non-existent industry linkage that contributed to the abysmal employability of graduates from most of these institutes.
    • No linkage with Industry: Not a single industry body, be it CII, FICCI or ASSOCHAM has managed to effectively inform the education planners on the growth in different employment sectors.
    • No independent body to suggest AICTEC: The government also has not taken any tangible steps to set up an independent body to advise AICTE on this vital aspect.
    • Excessive changes: A constant fiddling with the curriculum, reducing total credits, giving multiple choices in the name of flexibility, dispensing with mathematics and physics at the qualification level, teaching in local languages may all be good arguments, but one must assess their utility and their effect on technical education in the long run.

    Way forward

    • Proactive: Rather than being reactive, institutions must proactively define the practicing elements of education.
    • Investment in teaching: The corrective measures for these shortfalls are technology intensive, are experiential, and need investments in teaching.
    • Quality assurance body: The ultimate measure of performance is embedded in quality assurance.
    • The need of the hour is to create a truly autonomous quality assurance body at an arms-length from the government, manned by eminent persons both from the industry as well as academia.

    Conclusion

    The education paradigm is staring at a large shift and technical education cannot remain immune to that change.

  • Complete PRELIMS REVISION For Absolutely FREE! Increase Your Accuracy And Score 130+ In Prelims || New Session on Habitat

    Complete PRELIMS REVISION For Absolutely FREE! Increase Your Accuracy And Score 130+ In Prelims || New Session on Habitat

    Current affairs, static, CSAT, Optionals, Ethics and Essays

    Dear aspirants,

    Prelims are almost here and your accuracy will be the most important factor if you want to score over 130 in Prelims. Polish your concepts, practice MCQs, and improve your accuracy immediately with daily sessions for ABSOLUTELY FREE!

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    5. Peer-based discussions

    Just join in, select the subject you want to study, and start engaging with our mentors immediately!

    What do you have to do?

    1. Join Habitat for absolutely FREE by clicking here.
    2. Go through the discussions going on in the GENERAL channel.
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  • The sovereign right to tax is not absolute

    Context

    A bill introduced in Parliament last week aims to nullify the 2012 amendment in the Income Tax Act which made the income tax law retroactively applicable on indirect transfer of Indian assets.

    Issue of taxation as a sovereign right of the state

    • Several  Investor-State Dispute Settlement (ISDS) tribunals have recognised the fundamental principle that taxation is an intrinsic element of the state’s sovereign power. 
    • The ISDS tribunals have also held that whenever a foreign investor challenges states’ taxation measures, there is a presumption that the taxation measures are valid and legal.
    • For instance, an ISDS tribunal in Renta 4 v. Russia said that when it comes to examining taxation measures for BIT breaches, the starting point should be that the taxation measures are a bona fide exercise of the state’s public powers.

    What are the limits on the taxation rights of a Country under BITs

    • The two most used BIT provisions to challenge a state’s taxation measures are expropriation and the fair and equitable treatment provision.
    • 1) Expropriation: In the context of expropriation, one of the key ISDS cases that explained the limits on the state’s right to tax is Burlington v. Ecuador.
    • In this case, the tribunal held that under customary international law, there are two limits on the state’s right to tax.
    • First, the tax should not be discriminatory.
    • Second, it should not be confiscatory.
    • 2) Fair and equitable treatment: In the context of the fair and equitable treatment provision, foreign investors have often challenged taxation measures as breaching legal certainty, which is an element of the fair and equitable treatment provision.
    • Although legal certainty does not mean immutability of legal framework, states are under an obligation to carry out legal changes such as amending their tax laws in a reasonable and proportionate manner.

    So, what happened in Cairn Energy v. India case?

    • The tribunal in Cairn Energy v. India said that taxing indirect transfers is India’s sovereign power and the tribunal would not comment on it.
    • Legal certainty: The tribunal said that India’s right to tax in the public interest should be balanced with the investor’s interest of legal certainty.
    • The tribunal held that the public purpose that justifies the application of law prospectively will usually be insufficient to justify the retroactive application of the law.
    • India argued that the 2012 amendment was to ensure that foreign corporations who use tax havens for the indirect transfers of underlying Indian assets pay taxes.
    • However, the tribunal held that this objective could be achieved by amending the income tax law prospectively, not retroactively.
    • The tribunal did not rule against retroactivity of tax laws per se but against the retroactive application that lacked public policy justification.

    Way forward

    • Carving out taxation from BITs: India in its 2016 Model BIT carved out taxation measures completely from the scope of the investment treaty.
    • Nonetheless, carving out taxation measures from the scope of the BIT does not mean that states are free to do as they please.
    • India should exercise its right to regulate while being mindful of its international law obligations, acting in good faith and in a proportionate manner.
    • ISDS tribunals do not interfere with such regulatory measures.

    Conclusion

    In sum, the debate never was whether India has a sovereign right to tax, but whether this sovereign right is subject to certain limitations. The answer is an emphatic ‘yes’ because under international law the sovereign right to tax is not absolute.


    Back2Basics:  Investor-State Dispute Settlement (ISDS) tribunal

    • ISDS is a mechanism included in many trade and investment agreements to settle disputes.
    • Settling these investor disputes relies on arbitration rather than public courts.
    • Under agreements which include ISDS mechanisms, a company from one signatory state investing in another signatory state can argue that new laws or regulations could negatively affect its expected profits or investment potential, and seek compensation in a binding arbitration tribunal.
    • The system only provides for foreign companies to sue states, not the other way around.

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