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  • Bad bank

    The article suggests drawing the lessons from China’s experience with the bad bank as India India gets ready to operationalise a new bad bank.

    Bad bank in China and issues

    • In the aftermath of the Asian financial crisis, China set up dedicated bad banks for each of its big four state-owned commercial banks.
    • These bad banks were meant to acquire non-performing loans (NPLs) from those banks and resolve them within 10 years.
    • In 2009, their tenure was extended indefinitely.
    • Chinese banks can currently transfer NPLs only to the national or local bad banks.
    • One of China’s biggest bad banks is the China Huarong Asset Management Co. Ltd. (Huarong).
    • The Chinese government is its principal shareholder.
    • Recently this bad bank stoked financial stability concerns when it skirted a potential bond default.
    • An incentive to conceal: Recent research at the National University of Singapore and others highlights that Chinese bad banks effectively help conceal Non-Performing Loans.
    • The banks finance over 90 per cent of NPL transactions through direct loans to bad banks or indirect financing vehicles.
    • The bad banks resell over 70 per cent of the NPLs at inflated prices to third parties, who happen to be borrowers of the same banks.
    • The researchers conclude that in the presence of binding financial regulations and opaque market structures bad bank model could create incentives to hide bad loans instead of resolving them.
    • Broadening of tenure: In case of Huarong, the main source of the problem appears to be the gradual broadening of the original mandate and tenure of Chinese bad banks.

    Four lessons for India

    • India is about to operationalise a new bad bank, the National Asset Reconstruction Company Ltd. (NARCL).
    • The Chinese experience holds four important lessons for India.

    1) Finite tenure of bad bank

    • A centralised bad bank like NARCL should ideally have a finite tenure.
    • Such an institution is typically a swift response to an abrupt economic shock (like Covid) when orderly disposal of bad loans via securitisation or direct sales may not be possible.
    • The banks could transfer their crisis-induced NPLs to the bad bank and focus on expanding lending activity.
    • The bad bank in turn can restructure and protect asset value.
    • Over time, it could gradually dispose of the assets to private players.

    2) Narrow mandate

    •  A bad bank must have a specific, narrow mandate with clearly defined goals.
    • Transferring NPLs to a bad bank is not a solution in itself.
    • There must be a clear resolution strategy.
    • Otherwise, allowing a bad bank to exist in perpetuity risks a potential mission creep, which might in the long run threaten financial stability itself.

    3) Diversify the sources of funds for ARC

    • Indian banks remain exposed to these bad loans even after they are transferred to asset reconstruction companies (ARCs).
    • The RBI Bulletin (2021) notes that sources of funds of ARCs have largely been bank-centric.
    • The same banks also continue to hold close to 70 per cent of the total security receipts (SRs).
    • To address this problem, RBI has tightened bank provisioning while liberalising foreign portfolio investment norms.

    4) Resolution of bad loans should be through market mechanism

    • In a steady state, the resolution of bad loans should happen through a market mechanism and not through a multitude of bad banks.
    • In India, the Narasimham Committee (1998) had envisaged a single ARC as a bad bank.
    • Yet, the SARFAESI Act, 2002 ended up creating multiple, privately owned ARCs.
    • As a result, regulations have treated ARCs like bad banks, although functionally they are closer to stressed asset funds registered as Alternative Investment Fund Category II (AIFs).
    • With the setting up of NARCL as a centralised bad bank, the regulatory arbitrage between ARCs and AIFs must end.
    • While AIFs should be allowed to purchase bad loans directly from banks and enjoy enforcement rights under the SARFAESI Act.
    • ARCs should be allowed to purchase stressed assets from mutual funds, insurance companies, bond investors and ECB lenders.
    • ARC trusts should be allowed to infuse fresh equity in distressed companies, within IBC or outside of it.
    • Lastly, the continued interest of the manager/sponsor of ARCs should be at par with AIFs, that is, at least 2.5 per cent in each scheme or Rs 5 crore, whichever is lower.

    Conclusion

    The Chinese experience should nudge Indian policymakers to limit the mandate and tenure of NARCL, while facilitating market-based mechanisms for bad loan resolution in a steady state.

  • 25th June 2021 | Prelims Daily with Previous Year Questions

    [WpProQuiz 687]

    [WpProQuiz_toplist 687]

  • 25th June 2021| Daily Answer Writing Enhancement(AWE)

    Topics for Today’s questions:

    GS-1   Social empowerment, communalism, regionalism & Secularism.

    GS-2  Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

    GS-3   Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment; 

    GS-4  Case Study.

     

    Questions:

    Question 1)

     

    Q.1) Though Secularism as a concept has Western origin but Indian Secularism is much more than the religion-state separation. Explain (10 Marks)

     

    Question 2)

    Q.2) As an array of external partners seek to broaden and deepen their relations with Africa, India needs to assess and gain insights into these developments. In light of this, assess India’s relations with African countries and suggest a way forward to deepen this relationship. (15 Marks)

    Question 3)

    Q.3) What is a bad bank? Critically examine their utility in dealing with the challenge of non-performing assets faced by the banks and suggest the ways to make bad banks effective. (10 Marks)

    Question 4)  

    Q.4) You are a Secretary in a government department. The Minister in-charge has proposed an unemployment grant, which is expected to cost the public exchequer heavily. Having already taken the decision, he asks you to come up with research to support the scheme. Despite your best efforts, you fail to find socio-economic benefit in it. You approach the Minister with relevant facts and studies and ask him to reconsider his decision. Instead, he asks you to suppress the negative impacts and actively promote the scheme through mass media as the perceived social impacts are more important than economic impacts. Elections are due in a short time and the political party currently in power is seeking power for another term. You are also due for promotion at the same time. You are expected to fully cooperate in the situation and make the scheme a success, however flawed its foundations may be. (a) List the different stakeholders in the above situation and mention their prospective interests. (b) Discuss the ethical dilemma which you face in this situation. (c) what are the options you have to handle the situation ? Evaluate all of them and suggest the best course of action, giving reasons for it. (20 marks)

     

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  • [Burning Issue] India and Israel-Palestine conflict

    Content

    When it comes to mediating international crises, India’s track record is a mixed bag. In recent decades, India has been unwilling or unable to be effective in resolving some of the conflicts in its immediate neighborhood. The recent 11-day Israel-Hamas conflict has encouraged some journalists, foreign policy elites, academics, and retired diplomats to flag India’s candidacy as a possible mediator.

    India Israel relations

    Background

    • Both nations became independent almost at the same time, in the late 1940s, following a long struggle against British Colonialism.
    • They both follow the democratic form of governance in a neighborhood where democracy is either frail or non-existent.
    • India announced its recognition of Israel on September 17th, 1950, following which the Jewish Agency established an immigration office in Bombay. This later became a Trade Office and subsequently a Consulate.
    • The diplomatic relationship between India and Israel was previously based on popular consensus and only much later became official.
    • However, while Israel had tried to forge close ties with India, the latter was reluctant to respond in kind.
    • This was because during that time India was a young state that needed to take into account Arab states’ numerical impact at the United Nations.
    • Furthermore, it could not afford to antagonize its Muslim population by establishing ties with a Jewish state. Sympathizing the Palestinian cause is a by-product of these motives.
    • In 1961, India is one of the founders of the Non-Aligned Movement along with President Nasser of Egypt. This significantly complicated India’s ties with the Jewish state.
    • Another hurdle that prevented the bilateral ties was India’s close ties with the Soviet Union while Israel inclined towards the US.

    India’s shift towards Israel

    Though India voted against a UN resolution for the creation of Israel, once Israel is created, India officially recognized Israel (in 1950). But full diplomatic ties were established only in 1992.

    The reasons for this tectonic shift in the foreign policy stand were:

    • During these years, the popular perception of Israel was negative as it was a state formed on religion and analogous to Pakistan. However, the formation of an Organisation of Islamic Cooperation (OIC) in 1969 which neglected the sentiments of Indian Muslims by blocking of India’s membership to this group by Pakistan is one of the primary triggers for the change instance. (Even today India is not a member of OIC).
    • India has received no backing from the Arab countries on Kashmir Issue. There have been no serious attempts by the Arab world to put pressure on Pakistan to reign in the cross-border insurgency in Kashmir.
    • Israel supported India during the Indo-Pak wars even before full diplomatic ties were established.
    • With the collapse of the Soviet Union and the rise of the US as a superpower, India started aligning itself with the US, and this further added to our improved relations with Israel.
    • After decades of Non-Alignment and Pro-Arab policy, in 1992 India changed its stance and established full diplomatic ties with Israel.

    Collaborations between India and Israel

    Military collaboration

    • India and Israel have increased collaboration in military ventures since the establishment of diplomatic relations. The rise of Islamic extremist terrorism has helped both the countries to join hands against the global threat of terrorism.
    • India is the largest buyer of Israeli military equipment and Israel is the second-largest defense supplier to India after Russia.
    • In February 2014, India and Israel signed three important agreements on Mutual Legal Assistance in Criminal Matters, Cooperation in Homeland Security, and Protection of Classified Material.
    • Four working groups in areas of border management, internal security and public safety, police modernisation and capacity building for combating crime, crime prevention and cybercrime were established.
    • IAI is developing the Barak 8 missile for the Indian Navy and Indian Air Force which is capable of protecting sea vessels and ground facilities from aircraft and cruise missiles.
    • In 2016, the Indian government approved the purchase of two more Phalcon AWACS. India and Israel are also planning to hold their joint military exercise soon.

    Political collaboration

    • Since the up-gradation of relations in 1992, defense and agriculture have become the two main pillars of the bilateral engagement.
    • The political ties have become especially cordial under the Modi Government.
    • In 2017, Prime Minister Modi became the first-ever Indian Prime Minister to visit Israel.
    • During this visit, the diplomatic relationship was upgraded to a strategic level and seven agreements/MoUs were signed in the areas of R&D, innovation, water, agriculture and space.
    • In 2018, the Israeli Prime Minister visited India, during which Government to Government (G2G) agreement on cybersecurity, oil and gas cooperation, film cooperation and air transport were signed, along with five other semi-government agreements.
    • An increase in the high-level exchanges in recent times has expanded cooperation in areas like trade, agriculture, science and technology and security.

    Agriculture collaboration

    • India has chosen Israel as a strategic partner (G2G) in the field of agriculture.
    • This partnership evolved into the Indo-Israel Agricultural Project (IIAP), under the Indo Israel Action Plan, based on a MOU signed by Indian and Israeli ministers of Agriculture in 2006.
    • The partnership aim to introduce crop diversity, increasing productivity & increasing water use efficiency. 
    •  IIAP is implemented via establishment of Centers of Excellence (CoE), in which Israeli Technologies and know-how are disseminated tailored to local Indian conditions. 
    • India has a lot to learn from dryland agriculture of Israel. The Economic Survey 2016-17 batted for Indo-Israel cooperation in drip-irrigation technologies.
    • Israel has mastered water conservation techniques and India can learn from it.  It helps India to face its water stressed condition.
    • Another area of potential cooperation is cleaning polluted rivers.

    Space collaboration

    • India and Israel have signed a cooperative agreement promoting space collaboration between both nations. 
    • The two countries have also signed an agreement outlining the deployment of TAUVEX, an Israeli space telescope array, on India’s GSAT-4, a planned navigation and communication satellite.
    • In 2008, TecSAR was successfully inserted into orbit by India’s PSLV. One of TecSAR’s primary functions is to monitor Iran’s military activities.

    Economic collaboration

    • The bilateral merchandise trade stood at $5.02 billion (excluding defense) in 2016-17.
    • While exports from India were $3.06 billion, the import to India from Israel was $1.96 billion.
    • The diamond trade constitutes more than 53% of the bilateral trade.
    • India is Israel’s third-largest trading partner in Asia after China and Hong Kong.
    • In recent years, bilateral trade has diversified to include several sectors like pharmaceuticals, agriculture, IT and telecom and homeland security.
    • Major exports from India to Israel include precious stones and metals, chemical products, textiles and textile articles etc.
    • Major imports from Israel include chemicals and mineral products, base metals and machinery and transport equipment. Potash is a major item of Israel’s exports to India.

    Challenges in INDO-Israel relations

    Sticky Points in the Relations:

    1. Bilateral Trade and investment still below potential: From just $200 million in 1992, bilateral trade (excluding defense) peaked at about $5 billion in 2012 but since then it has dropped to about $4 billion. Also, bilateral trade has not diversified much—diamonds and chemicals still make up for the large chunk of the pie.
    2. Private Sector still finding feet: Indian companies like Sun Pharma and ATG, a specialty tyre-maker, have big interests in Israel. But perhaps unsurprisingly, the Chinese are streets ahead of us in bilateral trade and their companies are investing heavily in Israel’s cutting-edge start-ups.
    3. Connectivity between two countries still poor with just one direct flight from Mumbai 3 times a week and no direct flights from Delhi.
    4. Historical retrenchment: India’s consistent support for a sovereign, independent, viable and united Palestinian state with East Jerusalem as its capital, living within secure and recognized borders, side by side and at peace with Israel and Pro-Arab stance has been a sticky point.
    5. Limited People to People ties and cultural differences: Israelis and Indian approach business differently and often find it difficult to get on the same page. Though formal ties were established in 1992, the ideological divide resurfaces time and again.

    India- Palestine Relations

    Background

    • The relationship with Palestine was almost an article of faith in Indian foreign policy for over four decades. 
    • At the 53rd UN session, India co-sponsored the draft resolution on the right of the Palestinians to self-determination. 
    • In the 1967 and 1973 wars, India lashed out at Israel as the aggressor. 
    • In the 1970s, India rallied behind the PLO (Palestine Liberation Organisation) and its leader Yasser Arafat (received as Head of State) as the sole and legitimate representative of the Palestinian people.
    • In 1988, when the PLO declared an independent state of Palestine with its capital in East Jerusalem, India granted recognition immediately. 
    • India opened a Representative Office in Gaza on 25 June 1996 which was later shifted to Ramallah in 2003.
    • India has thus consistently supported the legitimate right of the Palestinian people to a State and the consequent imperative need for a just, comprehensive and lasting peace in the region.

    Reasons for India siding with Palestine 

    • India’s own Partition along religious lines (Historical basis)
    • Solidarity with the Palestinian people who would be dispossessed (HR Perspective)
    • To ward off Pakistan’s plan to isolate India over Kashmir (Geopolitical reason) 
    • Later, India’s energy dependence on the Arab countries also became a factor (Economic & Pragmatism)
    • To appeal to the sentiments of India’s own Muslim citizens (Domestic Politics)

    Changes after 1991- Pragmatism

    • The opening of an Indian embassy in Tel Aviv in January 1992 marked an end to four decades of giving Israel the cold shoulder.
    • India’s decision to normalize ties with Israel in 1992 came against the backdrop of the break-up of the Soviet Union, the need for economic pragmatism (i.e. access to Israeli technology), common threats of terrorism and massive shifts in the geopolitics of West Asia on account of the first Gulf War in 1990. 
    • The India-Israel relationship continued to grow, mostly through defense deals, and in sectors such as science and technology and agriculture.
    • There were few high-profile visits, and they all took place when the BJP-led NDA-1 under Prime Minister Atal Bihari Vajpayee was in office.

    Balancing act with Palestine

    • India voted in favour of a resolution in the General Assembly opposing the Trump administration’s recognition of Jerusalem as the Israeli capital.
    • At the UNHRC’s 46th session in Geneva earlier this year, India voted against Israel in three resolutions – 
      • one on the right of self-determination of the Palestinian people 
      • A second on Israeli settlement policy, and
      • A third on the human rights situation in the Golan Heights.
    • In the current context of violence, India in its official statement appears to implicitly hold Israel responsible for triggering the current cycle of violence by locating its beginnings in East Jerusalem rather than from Gaza. 
    • The statement was also emphatic that “the historic status quo at the holy places of Jerusalem including the Haraml al Sharif/Temple Mount must be respected. (The site, administered by Jordan, is revered in both Islam and Judaism. Jewish worshippers are not allowed inside, but have often tried to enter forcibly)

    Recent Israel-Palestine dispute and India’s stand on it

    Recently Israeli armed forces have penetrated Al-Aqsa Mosque in the Haram esh-Sharif in Jerusalem. Hamas retaliated by firing rockets on Israel. In retaliation, Israeli airstrikes targeted the Gaza Strip. This invoked the Indian response to the Israel-Palestine dispute once again. The India’s stand can be observed by following points,

    • Not resolutely standing with Israel: Recently, the Israeli Prime Minister mentioned the 25 countries that support Israeli actions. The countries include United States, Albania, etc. But India was not among the list of 25 countries.
    • Concern towards Palestine: India expressed deep concern over the violence in Jerusalem. Especially on Haram esh-Sharif/Temple Mount that too in the holy month of Ramzan.
    • Advocating Status-quo: India urged both sides to “refrain from attempts to unilaterally change the existing status quo”. Further, India also demanded, “the historic status quo at the holy places of Jerusalem, including Haram esh-Sharif/Temple Mount must be respected“.
    • Respecting the sentiments of both Israel and Palestine: India in its official statement mentioned both the “Haram esh-Sharif and Temple Mount”. This is a symbol of mutual respect by India on the religious sentiments of Israel and Palestine.
    • According to the Palestinian narrative, they only maintain Haram esh-Sherif. I.e. exclusive Islamic control and ownership.
    • On the other hand, the Israelis mention only Temple Mount. I.e. exclusive control and ownership of Jews.
    • All these signifies India’s commitment towards its de-hyphenation policy on Israel and Palestine

    India’s de-hyphenation policy on Israel and Palestine

    As a part of the Link West Policy, India has de-hyphenated its relationship with Israel and Palestine. It means India’s relationship with Israel will depend upon its own merits. Also, it will be independent and separate from India’s relationship with the Palestinians. In simple terms, it means, India will have its bilateral strategic ties with Israel irrespective of its political stance on the Israel-Palestine issue. Instead, India will treat both countries as mutually independent and exclusive. The developments under this phase are:-

    • No Indian PM has visited Israel supporting the Palestinian cause. But the de-hyphenation policy enabled the first Indian PM visit to Israel in 2017. During the visit, both countries signed 7 MoUs. This includes sectors such as Agriculture, Water Conservation, India-Israel Industrial Research and Development and Technological Innovation Fund (I4F), etc.
    • To commemorate 25 years of Indian-Israeli relations, the Israeli Prime Minister visited India in 2018. During that, he honoured the Indian soldiers who perished in the Battle of Haifa during World War I.
    • So far India has maintained the image of a historical moral supporter for Palestinian self-determination.  At the same time, the policy of de-hyphenation allowed India to engage in the military, economic, and other strategic relations with Israel.
    • India voted for a resolution criticising the U.S. for recognizing Jerusalem as the Israeli capital. This reassured India’s principle on long-standing policy on Palestine.

    Way Forward

    • Continuation of approach: Given the constraints faced by opponents to government policy, it is unlikely that India is going to change course regarding its approach towards Israel and the Palestinians. The political establishment is broadly supportive of the direction which began under Congress in the 1980s-90s and which has sharpened under Modi and the BJP since 2014.
    • Balancing Act: As the UN vote over Jerusalem demonstrated, Indian policymakers believe that they can accommodate both the demands of the international community to maintain previous commitments regarding Jerusalem (and the Palestinians) while also developing more extensive ties with Israel. They therefore pursue what they believe is a balanced approach without regard for the underlying dynamics and structural disparities between the conflict parties.
    • In sum, Indian policy appears to be guided primarily by strategic considerations. In a context in which India has developed a strategic partnership with the United States — Israel’s foremost ally — it seems highly unlikely that New Delhi will embrace the role of a peacemaker, no matter how many times it votes to uphold prior international commitments regarding the status of Jerusalem or the Palestinian question. 

  • 60 Years of Antarctic Treaty

    The 1959 Antarctic Treaty (wef 1961) recently celebrated its 60th anniversary.

    Antarctic Treaty

    • The Antarctic Treaty and related agreements are collectively known as the Antarctic Treaty System (ATS).
    • It regulates international relations with respect to Antarctica, Earth’s only continent without a native human population.
    • For the purposes of the treaty system, Antarctica is defined as all of the land and ice shelves south of 60°S latitude.
    • The treaty entered into force in 1961 and currently has 54 parties.
    • The treaty sets aside Antarctica as a scientific preserve, establishes freedom of scientific investigation, and bans military activity on the continent.
    • The treaty was the first arms control agreement established during the Cold War.
    • India is a signatory of this treaty since 1983.

    Why is it significant?

    • Negotiated during the middle of the Cold War by 12 countries with Antarctic interests, it remains the only example of a single treaty that governs a whole continent.
    • It is also the foundation of a rules-based international order for a continent without a permanent population.

    Key provisions

    • The treaty is remarkably short and contains only 14 articles.
    • Principal provisions include promoting the freedom of scientific research, the use of the continent only for peaceful purposes, and the prohibition of military activities, nuclear tests and the disposal of radioactive waste.

    What the treaty says about territorial claims

    • The most important provision of the treaty is Article IV, which effectively seeks to neutralise territorial sovereignty in Antarctica.
    • For the Antarctic territorial claimants, this meant a limit was placed on making any new claim or enlargement of an existing claim.
    • Likewise, no formal recognition was given to any of the seven territorial claims on the continent, by Argentina, Australia, Chile, France, New Zealand, Norway and the United Kingdom.
    • Russia, the United States and China — signatories with significant Antarctic interests who have not formally made territorial claims — are also bound by the limitations of Article IV.
    • And one sector of Antarctica is not subject to the claim of any country, which effectively makes it the last unclaimed land on earth.
    • The treaty also put a freeze on any disputes between claimants over their territories on the continent.

    How the treaty has expanded

    • Though the compact has held for 60 years, there have been tensions from time to time.
    • Argentina and the UK, for instance, have overlapping claims to territory on the continent.
    • When combined with their ongoing dispute over the nearby Falkland (Malvinas) Islands, their Antarctic relationship remains frosty.
    • Membership of the treaty has grown in the intervening years, with 54 signatories today.

    Where to from here?

    • While the Antarctic Treaty has been able to successfully respond to a range of challenges, circumstances are radically different in the 2020s compared to the 1950s.
    • Antarctica is much more accessible, partly due to technology but also climate change.
    • More countries now have substantive interests in the continent than the original 12.
    • Some global resources are becoming scarce, especially oil.

    Answer this PYQ:

    Q.The term ‘IndARC’, sometimes seen in the news, is the name of:

    (a) An indigenously developed radar system inducted into Indian Defence

    (b) India’s satellite to provide services to the countries of Indian Ocean Rim

    (c) A scientific establishment set up by India in Antarctic region

    (d) India’s underwater observatory to scientifically study the Arctic region

    Back2Basics: Indian Antarctic Program

    • The Indian Antarctic Program is a multi-disciplinary, multi-institutional program under the control of the National Centre for Polar and Ocean Research, Ministry of Earth Sciences.
    • It was initiated in 1981 with the first Indian expedition to Antarctica.
    • The program gained global acceptance with India’s signing of the Antarctic Treaty and subsequent construction of the Dakshin Gangotri Antarctic research base in 1983 superseded by the Maitri base from 1989.
    • The newest base commissioned in 2012 is Bharati, constructed out of 134 shipping containers.

    Various missions

    In 1981 the Indian flag unfurled for the first time in Antarctica, marking the start of Southern Ocean expeditions under the environmental protocol of the Antarctic Treaty (1959).

    (1) Dakshin Gangotri

    The first permanent settlement was built in 1983 and named Dakshin Gangotri. In 1989 it was excavated and is being used again as supply base and transit camp. It was decommissioned in the year 1990 after half of it got buried under the ice.

    (2) Maitri

    The second permanent settlement, Maitri, was put up in 1989 on the Schirmacher Oasis and has been conducting experiments in geology, geography and medicine. India built this station close to a freshwater lake around Maitri known as Lake Priyadarshini.

    (3) Bharati

    Located beside Larsmann Hill at 69°S, 76°E, Bharati is established in 2015.  This newest research station for oceanographic research will collect evidence of continental breakup to reveal the 120-million-year-old ancient history of the Indian subcontinent.

    (4) India Post Office in Antarctica

    It was established in the year 1984 during the third Indian expedition to Antarctica. It was located at Dakshin Gangotri. This post office was indeed situated in a stunning location and it was more than just a post office. An interesting fact about this place is that as many as 10,000 letters were posted and canceled in this post office in total in the first year of its establishment.

  • Proposal for Integrated Theatre Commands

    The Chief of Defence Staff has held a meeting with the Vice Chiefs of the Army, the Navy and the Air Force, and others in the backdrop of concerns about the proposed model of the integrated theatre commands.

    What are integrated theatre commands?

    • In the simplest words, it is a unified command under which all the resources of the Army, the Navy and the Air Force are pooled, depending on the threat perception.
    • The commands could be geographical — like looking at a border with a particular country — or thematic, like a command for all maritime threats.
    • Several nations in the world have theatre commands, including the United States and China.

    Is theatre commands a new idea?

    • The idea of creating an integrated tri-Services command in India is not new — it had been recommended at various levels after the Kargil conflict.
    • When Gen Rawat was appointed Chief of Defence Staff in January 2020 with a mandate to raise such commands within his three-year tenure, the idea was finally brought to the design table.
    • After his appointment, Gen Rawat had commissioned studies within each of the armed forces to come up with ideas of what these commands could look like.
    • These were headed by the Vice Chiefs of the forces.
    • Last year, Gen Rawat had suggested that the first of these commands, the Air Defence Command, could come up by the end of 2020.
    • However, the process has been delayed due to multiple factors, including the Covid-19 pandemic.
    • Officials are now suggesting that some of the new commands could be rolled out by the end of this year.

    What is the proposal under discussion?

    • A model with four to five integrated tri-Services theatre commands is under discussion, with each command headed by a three-star officer.
    • This officer, the theatre commander, will report to the Chiefs of Staff Committee (COSC), which, as the name suggests, includes the three Service Chiefs, and is headed by the CDS as its permanent chairman.
    • This brings in a major change — the Service chiefs currently have all the operational control over their forces; operational powers will now move to the COSC.
    • Each of these commands will have the needed assets from all the three forces. Operational control over all of those assets, regardless of the force, will lie with the commander of that theatre.

    The proposed commands are:

    • A Maritime Theatre Command, which will take care of all the maritime security needs of the country on both the eastern and the western seaboards, and will include air strike assets and amphibian forces of the Army.
    • An Air Defence Command, which will be mandated with air defence across the country and beyond. The fighter jets will have reconnaissance and surveillance assets as well.
    • Two or three land-based commands are proposed. If there are two commands, there will be one each for India’s borders with China and Pakistan.
    • But there is also a proposal to have another command looking at India’s borders with Pakistan and China in Jammu and Kashmir, and Ladakh.
    • There will be a Logistics Command, which will have the logistics of all the Services under one person; and there will be a Training and Doctrine Command, so that all Services work under a common doctrine and have some basic common training.

    What will be the role of the Services, if not operational?

    • As of now, the Services have to speak to each other in times of need and urgency to request their assets to conduct a particular operation.
    • The proposal is to have a theatre commander who will have operational control of the assets under his command, thus enhancing jointness among the forces, and also reducing duplication of resources.
    • However, this would leave the Service chiefs with no direct control over their assets operationally.
    • This does not mean their roles will be made redundant. Now the Services will have the core tasks to Raise, Train and Sustain their respective forces.
    • Also, as each chief will be a member of the COSC and an expert of his/her domain, his or her inputs will be necessary for all operational decisions.

    Readiness of the services

    • Sources within the Services and the Defence Ministry have mentioned that while the Army and the Navy are on board with the proposal, the Air Force has certain reservations.
    • One, the Air Force does not want the Air Force chief to lose operational control of Air assets, according to the sources.
    • Two, the Air Force is concerned that all of its assets might be divided within these integrated theatres.
    • Sources in the Air Force said that all such concerns need to be addressed before such a significant transformation of the defence set-up takes place.

    How many commands are there now; are any of them tri-Service commands?

    As of now, the three forces have 17 commands between them.

    • The Army has seven commands: Northern, Eastern, Southern, Western, Central, Southwestern and Army Training Command (ARTRAC).
    • The Air Force has seven as well: Western, Eastern, Southern, Southwestern, Central, Training, and Maintenance commands.
    • The Navy has three: Western, Eastern and Southern, of which Southern is largely about training.
    • Even if these commands operate in the same region, they are not co-located, and their areas of operational responsibility are not necessarily the same.
    • There are two existing tri-Service commands as well — the Andaman and Nicobar Command (ANC), which is headed by rotation by officers from the three Services.

  • GIMAC: India’s first maritime arbitration centre

    The Gujarat Maritime University signed a Memorandum of Understanding (MoU) with the International Financial Services Centres Authority in GIFT City to promote the Gujarat International Maritime Arbitration Centre (GIMAC).

    What is GIMAC?

    • The GIMAC will be part of a maritime cluster that the Gujarat Maritime Board (GMB) is setting up in GIFT City at Gandhinagar.
    • The Maritime Board has rented about 10,000 square feet at GIFT House which is part of the Special Economic Zone (SEZ) area with clearance from the development commissioner.
    • This will be the first centre of its kind in the country that will manage arbitration and mediation proceedings with disputes related to the maritime and shipping sector.
    • The centre is expected to be ready by the end of August.

    Why is such a centre needed?

    • It is required because, for instance, the ship owners belong to a different country and the person leasing the ship is from another country.
    • Any dispute arising between them can be resolved within this centre.
    • There are over 35 arbitration centres in India. However, none of them exclusively deals with the maritime sector.
    • The arbitration involving Indian players is now heard at the Singapore Arbitration Centre.
    • The idea is to create a world-class arbitration centre focused on maritime and shipping disputes that can help resolve commercial and financial conflicts between entities having operations in India.
    • Globally, London is the preferred centre for arbitration for the maritime and shipping sector.

    What is the current status of the project?

    • The process of recruiting staff for the arbitration centre is currently underway.
    • A 10-member advisory board for GIMAC, consisting of international experts and professionals, has been created, which will help in the framing of rules for the arbitration centre and in empanelling arbitrators.

  • National Anti-Profiteering Authority (NAA)

    The National Anti-Profiteering Authority (NAA) has directed GST officials across the country to ensure that the tax rate cuts notified on some COVID-19-related essentials are passed on to consumers.

    What is National Anti-Profiteering Authority (NAA)?

    • The NAA has been constituted under Section 171 of the Central GST Act, 2017 to ensure that the reduction in the rate of tax or the benefit of the input tax credit is passed on to the recipient by way of commensurate reduction in prices.
    • The decision about the formation of the NAA came in the background of a rate reduction of a large number of items by the GST Council in its 22ndmeeting at Guwahati.
    • At the meeting, the Council reduced rates of more than 200 items including goods and services.
    • This has made a tremendous price reduction effect and the consumers will be benefited only if the traders are making the quick reduction of the prices of respective items.
    • There was a concern that traders are reluctant to make price cuts so that they can make a profit.

    Answer this PYQ in the comment box:

    Q. Consider the following items:

    1. Cereal grains hulled
    2. Chicken eggs cooked
    3. Fish processed and canned
    4. Newspapers containing advertising material

    Which of the above items is/are exempt under GST (Goods and Services Tax)?

    (a) 1 only

    (b) 2 and 3 only

    (c) 1, 2 and 4 only

    (d) 1, 2, 3 and 4

    What is profiteering?

    • Profiteering means unfair profit realized by traders by manipulating prices, tax rate adjustment etc.
    • In the context of the newly launched GST, profiteering means that traders are not reducing the prices of the commodities when the GST Council reduces the tax rates of commodities and services.
    • Conventionally, several traders will have a strong tendency to quickly increase the price of a commodity whose tax rate has been increased.
    • But on the opposite side, they may delay the price reduction of a commodity whose tax rate has been cut by the government.
    • A delayed or postponed price reduction helps business firms to make a higher profits. The losers here are the consumers.

    Functioning of NAA

    • The Authority’s main function is to ensure that traders are not realizing unfair profit by charging high prices from the consumers in the name of GST.
    • Traders may charge high prices from the consumers by naming the GST factor.
    • Similarly, they may not make quick and corresponding price reductions when the GST Council makes a tax cut. All these constitute profiteering.
    • The responsibility of the NAA is to examine and check such profiteering activities and recommend punitive actions including the cancellation of licenses.

    Steps were taken by the NAA to ensure that customers get the full benefit of tax cuts:

    • Holding regular meetings with the Zonal Screening Committees and the Chief Commissioners of Central Tax to stress upon consumer awareness programs;
    • Launching a helpline to resolve the queries of citizens regarding registration of complaints against profiteering.
    • Receiving complaints through email and the NAA portal.
    • Working with consumer welfare organizations in order to facilitate outreach activities.

  • Places in news: Yellowstone National Park

    A new assessment of climate change in the Yellowstone National Park shows that it has lost a quarter of its annual snowfall.

    Yellowstone National Park

    • Yellowstone NP is an American national park located in the western United States, largely in the northwest corner of Wyoming and extending into Montana and Idaho.
    • Yellowstone was the first national park in the US and is also widely held to be the first national park in the world.
    • The park is known for its wildlife and its many geothermal features, especially Old Faithful geyser, one of its most popular.
    • While it represents many types of biomes, the subalpine forest is the most abundant. It is part of the South Central Rockies forests ecoregion.
    • The area also represents the one point where the three major river basins of the western U.S. converge.
    • The rivers of the Snake-Columbia basin, Green-Colorado basin, and Missouri River Basin all begin as snow on the Continental Divide as it weaves across Yellowstone’s peaks and plateaus.

    Impact of climate change

    • Since 1950, average temperatures in the Greater Yellowstone Area have risen 1.3°C and potentially, more importantly, the region has lost a quarter of its annual snowfall.
    • The loss of snow there has repercussions for a vast range of ecosystems and wildlife, as well as cities and farms downstream that rely on rivers that start in these mountains.
    • It is home to the southernmost range of grizzly bear populations in North America and some of the longest intact wildlife migrations, including the seasonal traverses of elk, pronghorn, mule deer and bison.

    Answer this PYQ in the comment box:

    Q.Consider the following pairs:

    River                              Flows into

    1. Mekong –                   Andaman Sea

    1. Thames –                     Irish Sea
    2. Volga –                     Caspian Sea
    3. Zambezi –                  Indian Ocean

    Which of the statements given above is/are correct? (CSP 2020)

    (a) 1 and 2 only

    (b) 3 only

    (c) 3 and 4 only

    (d) 1,2 and 4 only

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