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  • [pib] Initiatives launched on International Day of Biodiversity

    In a virtual celebration of the International Day for Biological Diversity 2020, Union Minister of Environment, Forest and Climate Change (MoEFCC) has launched key initiatives towards conservation of biodiversity.

    Possible prelim question:

    The ‘Not all Animals Migrate by Choice’ campaign recently seen in news is an initiative by __________.

    About the International Day for Biological Diversity

    • This Day is a United Nations-sanctioned international day for the promotion of biodiversity issues.
    • It is currently held on May 22.
    • The year 2020 is also the “Super Year for Biodiversity”, as the Strategic Plan for Biodiversity with 20 global Aichi targets adopted in 2010 ends in 2020.

    1) Biodiversity Samrakshan Internship Programme

    • The program proposes to engage 20 students with postgraduate degrees for a period of one year through an open, transparent, online competitive process.
    • It has the National Biodiversity Authority (NBA) and the UN Development Programme (UNDP) as a nodal agency.

     2) ‘Not all Animals Migrate by Choice’ campaign

    • It is a United Nations Environment Programme (UNEP) Campaign launched by the Wildlife Crime Control Bureau on Illegal Trafficking of Endangered Species.
    • It aims to curb illegal trade in wildlife which carries the risk of spreading dangerous pandemics.

    Back2Basics: Aichi Targets

    • The ‘Aichi Targets’ were adopted by the Convention on Biological Diversity (CBD) at its Nagoya conference.
    • The short term plan provides a set of 20 ambitious yet achievable targets, collectively known as the Aichi Targets.
    • The IUCN Species Programme provides advice to Parties, other governments and partners on the implementation of the Strategic Plan for Biodiversity and it’s Aichi Biodiversity Targets (2011 – 2020) and is also heavily involved in work towards the Target.

  • What are General Financial Rules (GFR)?

    The union government has notified amendments to General Financial Rules (GFR) to ensure that goods and services valued less than Rs 200 crore are being procured from domestic firms, a move which will benefit MSMEs.

    Possible mains question:

    Q. Discuss how the nationwide lockdown to control the coronavirus outbreak has led to the resurfacing of inherent bottlenecks in India’s MSME Sector.

    What are the General Financial Rules (GFRs)?

    • The GFRs are a compilation of rules and orders of the Government of India to be followed by all while dealing with matters involving public finances.
    • They are instructions that pertain to financial matters.
    • They lay down the general rules applicable to Ministries / Departments, and detailed instructions relating to the procurement of goods.
    • They are issued by the procuring departments broadly in conformity with the general rules while maintaining the flexibility to deal with varied situations.

    Also read:

    [Burning Issues] Fiscal Push for MSME Sector of India (Part I)

  • In news: International Tea Day

    The ‘International Tea Day’ gets thumbs up from the UN. Tea is the most consumed drink in the world, second only to water.

    It would be no surprise to expect a question based on worldwide tea production:

    Q. Among the following, which one is the largest exporter of rice in the world in the last five years? (CSP 2019)

    (a) China

    (b) India

    (c) Myanmar

    (d) Vietnam

    International Tea Day

    • While the UN has been aware of the popularity of the drink, May 21, 2020, became the first time when it recognized and gave an official nod to International Tea Day.
    • The UN General Assembly proclaimed May 21 as International Tea Day.
    • The day is aimed at promoting sustainable production, consumption and trade of tea.
    • As part of the celebrations, key players in tea production come together and make systematic plans for expansion of demand for tea, particularly in tea producing countries where per capita consumption is relatively low.
    • This day also reminds all actors at global, regional and national levels to ensure that the tea sector continues to play a role in reducing extreme poverty, fighting hunger and safeguarding natural resources.

    Tea

    • Tea is an aromatic beverage commonly prepared by pouring hot or boiling water over cured leaves of the Camellia sinensis, an evergreen shrub native to East Asia.
    • After water, it is the most widely consumed drink in the world.
    • There are many different types of tea; some, like Darjeeling and Chinese greens, have a cooling, slightly bitter, and astringent flavour.
    • Tea has a stimulating effect in humans primarily due to its caffeine content.
    • China is the leading producer of tea in the world. (Ref.)

    Its significance

    • In 2018, over 50 lakh tonnes of tea was consumed globally, according to Food and Agriculture Organization (FAO) of the UN.
    • The origin of tea plantations dates back to 5,000 years. Like many cultures, tea enjoys a special space in Indian culture.
    • With more than 100 varieties being consumed in the country, India is among the top four producers of tea.
    • Currently, tea is grown in more than 35 countries and supports 1.3 crore people including smallholder farmers around the globe.

    Back2Basics: Tea cultivation in India

    • India is the second producer of tea in the world and second in terms of land devoted to tea growing as well.
    • Much of India’s tea production is concentrated in the areas of Darjeeling, Nilgiri, Dooars, and Assam, which is the single largest tea growing region in the world. The top 5 growing states in India, ranked by production, are:

    1) Assam

    2) West Bengal

    3) Tamil Nadu

    4) Kerala

    5) Karnataka

  • [Burning Issues] Atmanirbhar Abhiyan Package

     

    Today we decode parts of the “20 lakh crore” Economic Package.

    Fair warning though. It’s a long  journey to walk!

    • The COVID-19 pandemic and the prolonged national lockdown have brought the Indian economy to a standstill.
    • The various announcements made by the Finance Minister concluded the relief measures undertaken in five tranches by the government as part of the economic package announced by PM Modi for ‘Atmanirbhar Bharat’.

    Impacts of COVID-19 on Economy: Broad Picture

    Given an uncertain future for the rest of the year, it can be clearly seen that the Indian economy is contracting.

    • That is, it will produce less in 2020-21 than it did in 2019-20. This means the Gross Value Added across sectors — agriculture, industry and services — will fall.
    • As incomes fall, three things will happen.
    • One, individuals will cut down their expenditure. In particular, all discretionary expenditure — be it an additional pack of cigarettes or a new car or a house — will come down sharply.
    • Two, seeing overall demand fall, businesses, which were already not investing, will likely postpone their investments further.
    • Three, the government revenues will take a massive hit. This means that if the government wants to maintain its level of fiscal deficit (the gap between what it earns as revenues and what it spends), it will have to cut its overall expenditure this year.
    • These three types of “expenditures” — by individuals, businesses and government — essentially make up the GDP of India.
    • There is a fourth component called net exports (that is, the net of exports and imports), but with the global demand plummeting as well, this too is unlikely to help matters.

    Atmanirbhar Bharat: With a special package

    • PM has announced a special economic package and gave a clarion call for Self-reliant India.
    • This package, taken together with earlier announcements by the government during COVID crisis and decisions taken by RBI, is to the tune of Rs 20 lakh crore, which is equivalent to almost 10% of India’s GDP.
    • The package will also focus on land, labour, liquidity and laws. It will cater to various sections including cottage industry, MSMEs, labourers, middle class, and industries, among others.

    Complete details of the package

    First Tranche: Rs 5,94,550 crore

    • The first set of relief measures announced by Nirmala Sitharaman focused on enabling the Indian economy’s backbone – MSMEs that employ around 11 crore people and have a GDP share of approximately 29 per cent.
    • Out of the 16 announcements made by the minister, six were dedicated to the MSME segment to infuse liquidity.
    • This included Rs 3 lakh crore collateral-free loans and Rs 50,000 crore equity infusions for MSMEs through Fund of Funds.
    • Liquidity relief measures worth Rs 30,000 crore were also announced for NBFCs, HFCs etc. and Rs 90,000 crore for power distribution companies.
    • The minister also advised states and regulatory authorities for extending the registration and completion date of real estate projects under RERA to de-stress developers and ensure completion of projects for home buyers to get their booked houses on time.

    Second tranche – Rs 3,10,000 crore

    • FM’s second tranche of measures catered to migrant workers and street vendors.
    • The minister introduced ‘one nation one ration card’ to allow migrant workers to buy ration from any depot in the country.
    • A special credit facility of Rs 5,000 crore was announced to support around 50 lakh street vendors who will have access to an initial Rs 10,000 working capital.
    • The minister also said that close to Rs 2 lakh crore will be given to farmers through Kisan credit cards while 2.5 crore farmers, including fishermen and animal husbandry farmers, would be able to get institutional credit at a concessional rate.
    • The government allowed states to fund the food and shelter facilities to migrant workers from the disaster response fund that would cost Rs 11,000 crore to the centre.

    Third tranche – Rs 1, 50,000 crore

    • The third tranche of the measures worth Rs 1.5 lakh crore focused on the agriculture and allied sectors including dairy, animal husbandry and fisheries as the government announced steps to strengthen the overall farm sector.
    • Sitharaman announced Rs 1 lakh crore agriculture infrastructure funds for farm-gate infrastructure including using it for setting up cold chains and post-harvest management infrastructure.
    • Other key announcements made by the minister included Rs 20,000 to be provided to fishermen through PM Matsya Sampada Yojana, and Rs 10,000 crore to formalize micro food enterprises.
    • Rs 4,000 crore for herbal cultivation, a Rs 15,000 crore Animal Husbandry Infrastructure Development Fund, Rs 500 crore for bee-keeping related infrastructure development were other packages announced by the minister.

    Fourth and fifth tranches – Rs 48,100 crore

    • The fourth instalment comprised of reforms for sectors including coal, minerals, defence production, air space management, airports, MRO, distribution companies in UTs, space sector, and atomic energy.
    • She announced easing utilization of the Indian air space to reduce air travel cost.
    • The minister also announced the commercial mining in the coal sector and privatizing discoms in metros to streamline their functions for better accountability.

    • The minister allocated an additional Rs 40,000 crore for the MGNREGA for job creation in India’s hinterland. The government had earlier allocated Rs 61,000 crore in the budget for this financial year.
    • She also announced the formulation of a new Public Sector Enterprises Policy that would allow for consolidation of the PSU firms in strategic sectors.
    • Each sector would have up to four such firms while state-owned enterprises will be privatized.

    Is this a new package?

    • The PM did not give the details, but he specified that this calculation of Rs 20 lakh crore includes what the government has already announced and the steps taken by the RBI.
    • This means the total amount of additional money — that is over and above what the government would have spent even in the absence of a COVID crisis — will not be Rs 20 lakh crore. It would be substantially less.
    • PM has included the actions of RBI, India’s central bank, as part of the government’s “fiscal” package, even though only the government controls the fiscal policy and not the RBI (which controls the ‘monetary’ policy).
    • A rough estimate suggests that the RBI’s decisions have provided additional liquidity of Rs 5-6 lakh crore since the start of the Covid-19 crisis.

    What is the approach adopted?

    • The measures taken up are largely in line of –

    1) Giving a strong supply-side push by boosting the availability of capital on easy terms

    2) Keeping income and wage support schemes to the minimum

    3) Empowering constituencies ranging from farmers and workers to businesses

    • Above all, the government seems to be keen on keeping the damage to the fiscal as low as possible.
    • The fiscal impact of the Rs. 20-lakh crore packages is estimated by economists at between 2-3% of GDP.
    • This includes withdrawals from provisions already made in the Budget for this fiscal.

    Idea behind the Atmanirbhar

    • The pillar on which the package rests is liquidity support so that businesses can be revived. This, in turn, is expected to set the economic cycle back in motion.
    • The option of a demand-side stimulus through a resort to deficit financing seems to be reserved for a future date.
    • This could be in case if the infection does not subside or a second wave begins prompting another lockdown.

    Significance of self-efficiency and self-reliance

    • Global supply chains have been disrupted and all nations have become preoccupied with meeting their own challenges.
    • The importance of local manufacturing, local market and local supply chains was realized during the pandemic time. All our demands during the crisis were met ‘locally’.
    • Now, it was a ripe time to be vocal about the local products and help these local products become global.
    • For instance, the supply chain and global manufacturing controlled by Chinese economy got disrupted due to COVID. Thus there is a need to become self-reliant for essential goods and service like N95 masks, ventilators etc.
    • Restrictions on travel and mobility have meant tight controls over the flow of goods, services and labour across international, state and district borders.
    • The international economic order is changing; the possibility of greater economic cooperation is diminishing. So the emphasis should be on the need to leverage India’s inner potential.
    • The Self-Reliance neither signifies any exclusionary or isolationist strategies but involves the creation of a helping hand to the whole world.
    • This is neither an economic nationalism or a rejection of globalization, but a call for a new form of globalization — from profit-driven to people-centric which takes into account the needs of labours, vulnerable and have nots.

    Positives of the package

    In the numbers provided, the government has tried to project a ‘maximum bang for minimum buck’ approach.

    Most support measures have translated into forms of regulatory relief, broader liquidity support or are reflected in its contingent liabilities, rather than in the form of explicit budgetary support.

    It seems the Union government has very craftily used the COVID-19 pandemic crisis to plough through long pending, deep-rooted structural reforms. That should be welcomed.

    Other welcome moves

    • The government has done well in increasing the budget for MGNREGA by two-thirds, adding another Rs. 40,000 crore.
    • With migrants now returning to their villages, MGNREGA can be leveraged to keep them occupied with meaningful work.
    • The demand of States for higher borrowings limit has also been granted but with clear reform milestones that they have to meet.
    • The government has also used the opportunity to unleash some much-needed reforms in agriculture marketing.
    • The measures also include –

    1) opening up more sectors for private participation

    2) enhancing foreign direct investment in defence

    3) corporatizing the monolith Ordnance Factory Board, and so on

    On contract farming

    • ‘The Centre is considering introducing a law on contract farming under the Contract Act of 1872 to enable farmers to directly engage with processors, aggregators, large retailers and exporters in a fair and transparent manner.
    • It would allow private players to invest in inputs and technology in the agricultural sector.

    Criticisms of the package

    • Yet, many have openly questioned the ability of this economic package to either provide adequate immediate relief to the most distressed sections of the economy or indeed stem the rapid decline in India’s GDP growth.
    • There are multiple fronts where this package is seen as inadequate. Let us discuss that-

    1) Old demand met with conditions

    • The package contains several generic announcements which should ideally, has been a part of a normal economic agenda.
    • The industry has been demanding a package to the tune of 7% to 8% of India’s GDP of over $2.8 trillion since a long time.
    • There was nothing unusual given that similar packages have been announced by other countries to mitigate the damage done to their economies.
    • So, a package of the size of almost 10% of the GDP was offered like a masterstroke but without coming clear on the source of funding and oversight provision.

    2) Bluff over MSMEs

    • Since MSMEs have been the hardest hit, being the main employers of industrial workers, their plight is grim.
    • It is small businesses that give traction to entrepreneurial activities in the unorganised sector where migrants from rural India mostly work.
    • The redefinition of MSMEs has been long-pending and cannot be called a reform.
    • There is nothing for the States to look forward to that can serve the immediate purpose.

    3) No stakeholders consulted

    • Ideally, after the first round of an insufficient package, the government should have begun consultations with parliamentarians, states and industry representatives to prepare a well-thought-out relief package.
    • States which have been at the forefront of the war against COVID-19 have not been given the required funds to help them cope with the public health emergency.
    • They have however shouldered the high influx of returning migrant labourers from industrial locations.

    4) Job losses unaddressed

    • India’s great middle class, which is also suffering, has found no solace either; nor is it likely that they will get anything substantial from this package.
    • A large number of workers in the organised sector are facing heavy pay cuts, job losses, a sharp fall in income, and uncertainty.
    • The expansion of MGNREGA, has a negative aspect, as it could impact labour availability, as rural migrants may not rush back for jobs (construction, transport most impacted).

    5) Farmers’ plight ignored

    • The package nowhere mentions resuming normal procurement operations.
    • Farmers are finding it difficult to get the minimum support price (MSP) for their produce; a majority of them are in debt and face many obstacles.
    • Many APMCs are shut with no signs to begin normal operations. Middlemen and Adhatiyas are plunging in to purchase the produces far below the MSP.

    6) Migrant workers ignored

    • The first national lockdown was announced in the most dramatic manner late in the evening and without adequate notice.
    • This created panic among migrants and painful displacement began which could have been avoided by offering the industry a timely financial package on the eleventh hour.
    • Economic desperation might leave poor workers with no choice but to return to work. But many of them are truly worried about getting infected.
    • Though Shramik Express trains were flagged off from certain destinations to take back migrant workers to their home States, but there was another shock — the charges levied by the Indian Railways.
    • Now India faces the loss of lives and livelihoods against the backdrop of the ruling dispensation’s apathy towards the poor and the disadvantaged.

    7) Healthcare needs more attention

    • Our healthcare delivery system in most States is extremely fragile.
    • One wonders, for instance, whether Bihar can handle the consequences if the virus begins to spread with the return of millions of migrant workers back to the State.
    • Many other States also face a similar plight given the poor state of primary healthcare facilities.
    • The pandemic has exposed a hard truth: most private healthcare providers seem to be incapable of and unwilling to help even during a national crisis.

    8) Undue pressure on Banks

    • Indian MSMEs have little access to risk capital, and hence raise it from banks, calling it loans. RBI has lent billions to banks to refinance those loans.
    • It will never get its money back. The FM has, for the first time, showing some awareness of the problem.
    • But the solution is weird. GoI will facilitate— whatever that means — provision of Rs 20,000 crore as subordinate debt. That is debt that does not have to be paid until all other loans have been repaid.
    • In other words, banks will be asked to give loans with an informal guarantee that they are gifts unless the bankrupt firm starts making huge profits someday.

    9) Broader reforms lack the spark

    • India’s self-reliance package to match global stimulus numbers is perhaps the driver for the claim of a large package (USD 280bn, 10% of GDP).
    • India does not have fiscal buffers hence a large fiscal stimulus would have been a bold bet – as that could have impacted ratings and currency, if not executed properly.
    • Not much was discussed on land, labour reforms, tax rationalization or on any coherent plan to invite foreign manufacturing.
    • The government’s defence indigenization plan is not new and has been poorly executed in the past and that is also the case with commercial mining for coal.

    10) Ignoring demand stimulus

    • The problem with this approach is that there is now a desperate need for demand stimulus; the government has focussed on supply-side push.
    • A strategy to drive consumption may have worked better under prevailing conditions.
    • The options could have been suspending GST for a couple of months or at least cutting rates temporarily, combined with a liquidity boost.

    What needs to be done at this immediate hour?

    1) Food and cash transfers first

    • The immediate need is to provide free food and cash transfers to those rendered incomeless.
    • Putting money in the hands of the poor is the best stimulus to economic revival, as it creates effective demand and in local markets.
    • Hence, an immediate programme of food and cash transfers must command the highest priority.

    2) Revamp MGNREGA work

    • Millions of migrant workers have endured immense hardships to trudge back home, and are unlikely to return to towns in the foreseeable future.
    • Employment has to be provided to them where they are, for which the MGNREGS must be expanded greatly and revamped with wage arrears paid immediately.
    • And permissible work must include not just agricultural and construction work, but work in rural enterprises and in care activities too.
    • The revamped MGNREGS could cover wage bills of rural enterprises started by panchayats, along with those of existing rural enterprises, until they can stand on their own feet.

    3) The urban focus

    • In urban areas, it was absolutely essential to revive the MSMEs.
    • Simultaneously, the vast numbers of workers who have stayed on in towns have to be provided with employment and income after our proposed cash transfers run out.
    • The best way to overcome both problems would be to introduce an Urban Employment Guarantee Programme, to serve diverse groups of the urban unemployed, including the educated unemployed.
    • Urban local bodies must take charge of this programme and would need to be revamped for this purpose.

    4) The ‘care’ economy

    • The pandemic has underscored the extreme importance of a public health-care system, and the folly of privatization of essential services.
    • The post-pandemic period must see significant increases in public expenditure on education and health, especially primary and secondary health including for the urban and rural poor.
    • The “care economy” provides immense scope for increasing employment. Vacancies in public employment, especially in such activities, must be immediately filled.
    • Anganwadi and Accredited Social Health Activists/workers who provide essential services to the population, including during this pandemic, are paid a pittance and treated with extreme unfairness.

    5) Increasing revenue

    • All the tasks mentioned in the package could be financed by printing money. But in the medium term, public revenues must be increased.
    • This is not because there is a shortage of real resources which, therefore, has to take from other existing uses through taxation.
    • Rather, since much-unutilized capacity exists in the economy, the shortage is not of real resources; the government has to just get command over them.
    • A combination of wealth and inheritance taxation and getting multinational companies to pay the same effective rate as local companies through a system of unitary taxation will garner substantial public revenue.

    6) Looping in foreign capital

    • It would be argued that this might cause large financial outflows, which the country can ill-afford.
    • Contrarily, even foreign capital is more likely to be attracted to a growing economy than one in sharp decline because of a lack of stimulus.
    • Also, a fresh issue of special drawing rights by the IMF (which India has surprisingly opposed along with the United States) would provide additional external resources.

    Conclusion

    • The coronavirus disease pandemic has offered India a valuable lesson on the importance of self-reliance and self-sufficiency that we must aspire to attain the twin goals.
    • Self-reliance will prepare the country for tough competition in the global supply chain, and it is important that the country wins this competition.
    • It will not only increase efficiency in various sectors but also ensure quality.
    • In sum, the package has several notable features not all of which are COVID-19 relief. But, the government has clearly refused to borrow and spend more on boosting demand.
    • If the strategy of boosting supply works, it is fine. However, if it does not work on expected lines, the government will be faced with a bigger problem down the line.

    Way Forward

    • Several bold reforms are needed to make the country self-reliant so that the impact of crisis such as COVID can be negated in future.
    • These reforms include supply chain reforms for agriculture, rational tax system, simple and clear laws, capable human resource and a strong financial system.
    • These reforms will promote business, attract investment, and further strengthen Make in India.
    • Local Governments should be playing a key role in supporting the government’s outreach in vast belts of rural India to spread awareness about the coronavirus disease.
    • Local governments can undertake door-to-door campaigns; stitched masks; made hand sanitisers for local populations; and provided support to the local administrative and security machinery in both providing basic services to residents and enforcing the lockdown.

    Try this:

    Q. The palpable unsustainability of the earlier globalisation surfaced after the COVID outbreak means that growth in India in the coming days will have to be sustained by the home market. Examine.

     

    References

    https://www.hindustantimes.com/india-news/stimulus-package-a-lost-opportunity-bernstein/story-dedaae4OQjenIjk9oLjm7H.html

    https://indianexpress.com/article/explained/explainspeaking-why-the-atmanirbhar-bharat-abhiyan-economic-package-is-being-criticised-6414905/

    https://www.thehindu.com/opinion/op-ed/where-is-health-in-the-stimulus-package/article31609611.ece

    https://www.thehindu.com/news/national/coronavirus-package-will-migrant-workers-benefit-from-the-centres-measures/article31603590.ece

    https://www.thehindu.com/opinion/editorial/a-matter-of-relief-on-economic-stimulus-package/article31617547.ece

    https://www.financialexpress.com/economy/breakup-of-the-rs-20-lakh-crore-economic-stimulus-package-by-fm-sitharaman/1961843/

    https://thewire.in/political-economy/modis-stimulus-package-is-a-gigantic-confidence-trick-played-on-the-people-of-india

    https://economictimes.indiatimes.com/news/economy/policy/why-india-needs-to-go-vocal-for-local-stores/articleshow/75812730.cms?from=mdr

    https://www.thehindu.com/opinion/editorial/local-motif-the-hindu-editorial-on-modis-call-for-self-reliance/article31577225.ece

  • Structural issues in agri-marketing

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

    What is the issue?

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

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

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

    Why do farmers sell their produce outside APMC mandis?

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

    But, do we have enough mandis?

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

    Regulatory reforms in mandis needed

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

    Perils of complete deregulation: Example of Bihar

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

    Benefits of limited degree of regulation: MP and Karnataka example

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

    Issue of intermediation

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

    Issue of re-regulation and new barriers to entry

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

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

    Conclusion

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

     

     

  • Ensuring MGNREGA lives up to its potential

    With migrant workers returning home, work demand under MGNREGA is bound to rise. Sensing that the government increased the allocation to MGNREGA. This article suggests some steps to make the MGNREGA more effective in catering to this surge in the wake of the pandemic. Some issues that plague the scheme are also examined at the end. So, what are the suggestion? and what are the issues? Read to know….

    Acknowledgement of the importance of MGNREGA

    • The government made an allocation of an additional Rs 40,000 crore as part of the stimulus package.
    • This is an acknowledgement of the importance of MGNREGA.
    • The most important part of MGNREGA’s design is its legally-backed guarantee for any rural adult to get work within 15 days of demanding it.
    • This demand-based trigger enables the self-selection of workers and gives them an assurance of at least 100 days of wage employment.

    Let’s put allocation in context of World Bank recommendations

    • Since 2012, an average of 18 per cent of the annual budgetary allocation for MGNREGA has been spent on clearing pending liabilities from the previous years.
    • Even this financial year began with pending wage and material liabilities of Rs 16,045 crore.
    • An allocation of Rs 1 lakh crore for FY 2020-21 would mean that approximately Rs 84,000 crore is available for employment generation this year.
    • This will still be the highest allocation for MGNREGA in any year since the passage of the law.
    • However, the allocation, which amounts to 0.47 per cent of the GDP continues to be much lower than the World Bank recommendations of 1.7 per cent for the optimal functioning of the programme.

    Some immediate steps to ensure the MGNREGA lives up to its potential

    • First, state governments must ensure that public works are opened in every village.
    • Workers turning up at the worksite should be provided work immediately, without imposing on them the requirement of demanding work in advance.
    • Second, local bodies must proactively reach out to returned and quarantined migrant workers and help those in need to get job cards.
    • Third, at the worksite, adequate facilities such as soap, water, and masks for workers must be provided free of cost. For reasons of health safety, MGNREGA tools should not be shared between workers.
    • The government should provide a tool allowance to all workers — some states are already providing such an allowance.
    • Fourth, procedures for implementing MGNREGA must be simplified but not diluted.
    • The pandemic has demonstrated the importance of decentralised governance.
    • Gram panchayats and elected representatives need to be provided with adequate resources, powers, and responsibilities to sanction works, provide work on demand, and authorise wage payments to ensure there are no delays in payments.
    • Fifth, as per a study by the RBI, more than half the districts in the country are under-banked.
    • The density of bank branches in rural India is even more sparse.
    • At this time, payments need to not only reach bank accounts on time, but cash needs to reach the workers easily and efficiently.
    • The limited coverage of bank infrastructure in rural areas must not be made a hurdle.
    • Attempts to distribute wages in cash, sans biometric authentication, must be rolled out.
    • Sixth, there needs to be flexibility in the kinds of work to be undertaken, while ensuring that the community and the workers are the primary beneficiaries.

    Issuse with MGNREGA

    • Over the last few years, MGNREGA had begun to face an existential crisis.
    • Successive governments capped its financial resources, and turning it into a supply-based programme.
    • Workers had begun to lose interest in working under it because of the inordinate delays in wage payments.
    • With very little autonomy, gram panchayats had begun to find implementation cumbersome.
    • Barring a few exceptions, state governments were only interested in running the programme to the extent funds were made available from the Centre.
    • Allocating work on demand, and not having enough funds to pay wages on time was bound to cause great distress amongst the workers and eventually for the state too.
    • As a result, state governments had begun to implement MGNREGA like a supply-driven scheme, instead of running it like a demand-based guarantee backed by law.

    Consider the question “With migrant workers returning to villages in the wake of corona pandemic, demand for work is likely to increase. In light of this, discuss the utility of MGNREGA and challenges it may face.”

    Conclusion

    With nearly eight crore migrant workers returning to their villages, and with an additional allocation for the year, this could be a moment for the true revival of MGNREGA. A revival led by workers themselves.

    Mahatma Gandhi National Rural Employment Guarantee Act, 2005

    • The Act aims at enhancing the livelihood security of people in rural areas by guaranteeing hundred days of wage employment in a financial year to a rural household whose adult members (at least 18 years of age) volunteer to do unskilled work.
    • The central government bears the full cost of unskilled labour, and 75% of the cost of material (the rest is borne by the states).
    • It is a demand-driven, social security and labour law that aims to enforce the ‘right to work’.
    • Ministry of Rural Development (MRD), Government of India in association with state governments, monitors the implementation of the scheme.

  • Explained: Contract Farming and its benefits

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

    Practice question for mains:

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

    Moving on with Odisha’s law

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

    What is Contract Farming?

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

    Some business models in CF

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

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

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

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

    Advantages of Contract Farming:

    To the farmers:

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

    To the Client:

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

    Limitations

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

    Also read

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

    With inputs from Vikaspedia

  • Rising incidences of Chinese Transgressions

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

    Chinese Transgression:

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

    •  Implications of Increased Number of Transgressions:

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

    Concerns

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

    Way Forward

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

    Practice question for mains:

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

  • Demo-2 Mission by SpaceX

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

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

    Try this:

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

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

    Select the correct answer using the code given below.

    a) 1 only

    b) 2 and 3 only

    c) 1 and 3 only

    d) 1, 2 and 3

    Demo-2: What is the mission?

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

    About the Commercial Crew Program

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

    Back2Basics: SpaceX

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

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

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

    Note:

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

    What is a ‘sonic boom’?

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

    Impacts

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

    Supersonic flights

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

    Back2Basics: Traverse of sound

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

    Mach number

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

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