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  • A BIT of a reset, with a wider debate

    Why in the News

    India is revising its model bilateral investment treaty (BIT), and the revised text will soon be placed before the Union Cabinet. The Finance Minister signalled the intention to revamp the 2015 Model BIT in the Union Budget speech of 2025. The 2015 model was itself the product of an appraisal launched after several foreign investors sued India for treaty breaches. That appraisal produced two outcomes: unilateral termination of existing treaties, and a new model text as the basis for fresh negotiations. Debate on the current revision has concentrated almost entirely on what the treaty should say. The process by which the text is written has attracted almost no attention, and that is where the democratic deficit sits.

    What is the 2015 Model Bilateral Investment Treaty?

    1. What a model treaty is: A model bilateral investment treaty is the template text a country negotiates from when it concludes investment protection agreements with other countries.
    2. What such a treaty does: It grants legal protections to investors of one country investing in the other. It also gives those investors a route to bring a claim directly against the host state before an international arbitral tribunal.
    3. The two objectives it must balance: Investment treaties sit between investment protection at one end of the spectrum and the state’s right to regulate at the other.
    4. When India adopted it: India circulated a draft in 2015 and adopted the revised version in December 2015.

    Why has the 2015 model produced so few treaties?

    1. The record: India has concluded only a handful of treaties on the basis of the 2015 model in the last decade or so.
    2. The imbalance in the text: The model tilts heavily towards the state’s right to regulate and away from the protection of the investment.
    3. What capital exporting countries read into it: Countries that export capital to India doubt the legal protection available to their investments under such a text.
    4. What compounds the doubt: High regulatory risk, governance models that are not well developed, and a slow judicial system add to that concern.

    What legal changes are being proposed, and what is being left out?

    1. Easier access to arbitration: Experts have argued for making it easier for a foreign investor to take a treaty claim to international arbitration.
    2. Stronger substantive protections: The protections given to foreign investment in the text would be enhanced.
    3. Investment facilitation: The revised model would carry more measures aimed at facilitating investment rather than only protecting it.
    4. The half of the review that is missing: A treaty review has two components, the substantive and procedural changes to the law, and the process followed to make the outcome robust. Only the first has been deliberated.

    What is the democratic deficit in treaty making?

    1. The all-affected principle: International economic treaties have a conspicuous impact on citizens, which raises the question whether those affected should have a right to participate in the decision.
    2. What the term means: Democratic deficit refers to insufficient oversight of the technocrats, bureaucracies and political executive who negotiate treaty frameworks behind closed doors.
    3. Where it originated: The term originated in European debates on the accountability of decision making removed from elected legislatures.
    4. The first form the gap takes: Parliamentary supervision of the treaty making process is absent or inadequate.
    5. The second form: There is no external consultative process with other stakeholders, including subject matter experts and civil society organisations.

    What do other countries do before adopting an investment treaty text?

    1. United Kingdom and Australia: Both mandatorily place the text of a negotiated treaty on the floor of Parliament before ratification, so the legislature can express its views on it.
    2. Norway: Two rounds of public consultation were held on an updated draft model BIT, in 2008 and in 2015.
    3. Colombia: The country released its model BIT for public consultation.
    4. What the set demonstrates collectively: Consultation is applied to the model text itself and not only to a concluded treaty, which means the template a country negotiates from is treated as a public policy document rather than an internal instruction.

    What did India’s own 2015 consultation produce?

    1. The public comment stage: India circulated its draft 2015 model BIT for public comment in March 2015.
    2. The expert study it enabled: That opening allowed the Law Commission of India to assemble a team of experts to study the draft text.
    3. The report: The Law Commission’s 260th report made recommendations on how to improve the draft model treaty.
    4. What was carried through: Not all of the recommended changes were reflected in the version India finally adopted.

    What consultative process is proposed for the revision?

    1. What has presumably already happened: Intra-governmental deliberation on the model text has been undertaken inside government.
    2. A core team of external experts: Form a team outside government of international lawyers and economists drawn from universities, research institutions and think tanks, to act as a sounding board.
    3. Wider stakeholder engagement: Invite industry bodies, arbitrators, law firms and other civil society organisations to offer their views on the model text.
    4. A public draft: Prepare a draft and place it in the public domain, inviting comments from the public at large.
    5. Parliamentary scrutiny: Place the draft model treaty on the floor of Parliament for discussion, and rope in the relevant department related parliamentary committees.
    6. The standard the exercise must meet: The process must engage with dissenting views rather than run as a box ticking formality.

    Challenges to revising the Model Bilateral Investment Treaty

    1. A model text does not bind the counterparty: A model is a negotiating template, so a partner with stronger bargaining power will press its own text and the model’s provisions will be traded away one by one. Eg. Investment provisions have been among the unresolved items in India’s long running negotiations with the European Union.
      The Fix: Publish the provisions treated as non-negotiable separately from those open to trade-off, so a concluded treaty can be judged against a stated position rather than against the template.
    2. The local remedies requirement is long relative to the delay it addresses: The 2015 model requires an investor to pursue domestic remedies for five years before starting international arbitration, in a system whose delay is itself the investor’s complaint. Eg. White Industries Australia v Republic of India (2011), the first adverse award against India, arose from delay in Indian courts enforcing a commercial arbitration award.
      The Fix: Tie the domestic remedies condition to a defined procedural stage being reached rather than to a fixed number of years.
    3. Termination does not end exposure: A terminated treaty carries a survival clause that keeps protections alive for investments made before termination, so liability continues for years after the instrument goes. Eg. The 2020 Vodafone award was rendered under the India-Netherlands treaty after India had begun issuing termination notices in 2016.
      The Fix: Negotiate replacement treaties with express provisions displacing the survival clauses of the instruments they replace.
    4. Taxation is carved out of the model’s scope: The 2015 model excludes taxation measures from treaty protection, which removes the very category of dispute that produced India’s largest awards. Eg. The 2020 Cairn Energy award, made under the India-United Kingdom treaty, concerned a retrospective tax demand.
      The Fix: Bring expropriatory tax measures within the treaty’s scope while keeping bona fide tax policy outside it.
    5. Consultation without a legal basis is discretionary: No Indian law requires the executive to lay a treaty text before Parliament, so every consultation depends on the willingness of the government of the day. Eg. Treaties are concluded under executive power and reach Parliament only where implementing them requires a change in domestic law.
      The Fix: Enact a treaty scrutiny statute setting out which categories of treaty must be laid before Parliament and for how long before ratification.

    Conclusion

    The revision is being handled as a drafting exercise. The gap it does not close is that India has no settled procedure for producing a treaty text at all, so the quality of the next model rests on the discretion of whoever drafts it. A text written without external scrutiny will attract the same legitimacy objection whichever direction it moves the balance in. What to watch is whether the draft reaches the public domain and the floor of Parliament before the Union Cabinet clears it, or only after.

    Bilateral Investment Treaties in India

    1. What they are: A bilateral investment treaty is an agreement between two countries setting the terms on which each protects investors from the other in its own territory.
    2. How disputes under them are settled: Most such treaties allow an investor to bring a claim directly against the host state before an international arbitral tribunal, without routing it through its own government.
    3. India’s treaty stock: India signed its first such treaty with the United Kingdom in 1994 and went on to sign more than 80. From 2016 it began terminating them and moved to renegotiate on the 2015 model.
    4. What has been concluded since: Treaties concluded on the newer template include those signed with the United Arab Emirates and with Uzbekistan in 2024.

    Constitutional Framework Governing Treaty Making

    1. Article 246 with Entry 14 of the Union List: Places entering into treaties and agreements with foreign countries, and implementing them, within Parliament’s exclusive legislative field.
    2. Entry 13 of the Union List: Covers participation in international conferences and associations, and the implementing of decisions taken at them.
    3. Article 253: Empowers Parliament to make law for the whole or any part of India to implement any treaty, agreement or convention with another country.
    4. Article 73: Extends the Union executive’s power to every matter on which Parliament may legislate, which is the basis on which the executive concludes a treaty without prior legislative approval.

    Back2Basics: Law Commission of India

    1. What it is: A non-statutory executive body constituted by the Government of India to advise on law reform.
    2. How it is constituted: It is set up for a fixed term by an order of the Ministry of Law and Justice, and is chaired by a retired judge.
    3. What it does: It examines existing laws and specific references made by the government, and submits reports carrying recommendations.
    4. The weight its reports carry: Its recommendations are not binding, and a change in law follows only where the government accepts them.

    [2010] A great deal of Foreign Direct Investment (FDI) to India comes from Mauritius than from many major and mature economies like UK and France. Why?

    (a) India has preference, for certain countries as regards receiving FDI

    (b) India has double taxation avoidance agreement with Mauritius

    (c) Most citizens of Mauritius have ethnic identity with India and so they feel secure to invest in India

    (d) Impending dangers of global climate change prompt Mauritius to make huge investments in India

  • Taking heart from the GDP story, behind the headline number

    Why in the News

    The Chairman of the Economic Advisory Council to the Prime Minister and the Secretary, Ministry of Statistics and Programme Implementation have defended the 7.8 per cent real Gross Domestic Product (GDP) growth estimate for the first quarter of 2026-27. They argue that the estimate is corroborated by high frequency indicators across investment, consumption, credit and goods movement. The defence answers academic scepticism about the reliability of India’s national accounts methodology, raised after the first quarter release. The specific charge concerns the GDP deflator, the price index used to convert output measured at current prices into output measured at constant prices. Manufacturing recorded a negative implicit deflator for Gross Value Added (GVA), meaning the accounts imply falling prices in a sector at a time when consumer prices are rising. The dispute is therefore not about the growth rate. It is about whether the price correction behind that rate can be read at all.

    How does double deflation work?

    1. Single deflation, the discontinued method: Nominal Gross Value Added was divided by a single output price index to arrive at real Gross Value Added.
    2. Double deflation, the current method: Output and intermediate consumption are deflated separately, each by its own price index.
    3. The residual: Real Gross Value Added is then taken as the difference between real output and real intermediate consumption.
    4. Why it is the accepted practice: Input prices and output prices move differently, so deflating each by its own prices is the global standard in national accounting.

    What do the high frequency indicators show about the first quarter expansion?

    1. Freight and business demand: Commercial vehicle sales grew 18.3 per cent, as firms expanded fleets in anticipation of higher demand.
    2. The investment cycle: Capital goods production grew 15.2 per cent. Machinery and equipment imports grew 51.5 per cent.
    3. Construction inputs: Cement production, finished steel consumption and infrastructure and construction goods all expanded strongly in the quarter.
    4. Goods movement and tax collection: Electronic way bill generation stayed in double digit growth. Gross Goods and Services Tax collections rose 8.4 per cent despite substantial rate rationalisation.
    5. Consumption: Household vehicle registrations and three wheeler registrations point to firming discretionary demand.
    6. Credit: Non-food bank credit grew 18.3 per cent year on year at end June, up from 15.9 per cent in March, with growth across agriculture, industry and services.

    Why did the GDP deflator become hard to read?

    1. The price database changed: The revised National Accounts moved from the Wholesale Price Index (WPI) to the new Output Producer Price Index (PPI), which measures prices received by producers at the factory gate rather than prices struck in wholesale markets.
    2. The deflation method changed: The February 2026 revision discontinued single deflation. It adopted double deflation wherever feasible and volume based extrapolation otherwise.
    3. The two changes landed together: Simultaneous change in method and in price database made recent movements in the deflator less readily interpretable.
    4. The index switch itself was minor: Revisions arising from the move from WPI to PPI were relatively small, which supports the position that WPI had introduced no material anomaly. The two indices are conceptually close.
    5. The deflator is not a single index: Constant price GVA is built using over 300 producer prices and price indices across a disaggregated set of inputs and outputs, not from a headline price index.

    Why can a negative implicit manufacturing GVA deflator be statistically sound?

    1. The arithmetic: Nominal GVA growth falls below real GVA growth when input prices rise faster than output prices. The implicit deflator then turns negative even though input and output prices are both rising.
    2. What happened in the quarter: Higher raw material inflation relative to output inflation lowered the GVA deflator. Weak price growth in some services widened the gap from headline consumer and wholesale inflation.
    3. The leverage inside manufacturing: Intermediate consumption is roughly 81 per cent of manufacturing output, leaving 19 per cent as GVA. A small divergence between input and output prices therefore produces a disproportionate movement in real GVA.
    4. The domestic precedent: 2024-25 recorded the same outcome, with input price inflation exceeding output price inflation.
    5. Not unique to India: Advanced economies using double deflation have encountered similar outcomes.

    What is the appropriate comparison for manufacturing activity?

    1. The mismatch in the criticism: Commentaries have set manufacturing Index of Industrial Production (IIP) growth, a volume index of factory output, against real manufacturing GVA growth.
    2. The correct counterpart: A volume index should be compared with manufacturing Gross Value of Output at constant prices, which is also a measure of output rather than of value added.
    3. What the correct comparison shows: Real Gross Value of Output averaged 6.7 per cent growth over 2023-24 and 2024-25, against 6.6 per cent for IIP.
    4. When the loose comparison still holds: Comparing manufacturing IIP with manufacturing GVA yields defensible short term results only where input and output prices move together.
    5. A separate reading of the same ratio: The ratio of intermediate consumption to Gross Value of Output at constant prices has been declining gradually, which indicates improving efficiency in the use of inputs.

    What is contested about the synthetic comparison country study?

    1. The method: A recent study builds a comparison country by combining economies whose performance moved closely with India’s before 2014. It uses that historical co-movement to estimate how India’s per capita GDP might have evolved after 2014.
    2. The objection: The study treats its estimated performance gap as a lower bound on the assumption that Indian growth is overstated, without demonstrating the methodological flaw it assumes.
    3. The stated position on scrutiny: Specific, focused and actionable scrutiny of the GDP methodology is welcomed. Inferences drawn by quoting aggregate and disparate numbers together are rejected.

    Challenges to the revised GDP deflation framework

    1. The deflators cannot be independently reproduced: The disaggregated producer price series that enter the constant price estimates are not published for outside users, so an external researcher cannot rebuild the sectoral deflators. Eg. Delays in the national accounts Sources and Methods publication have repeatedly held up independent verification of official estimates.
      The Fix: Release the sectoral deflators used, along with the underlying producer price series, alongside each quarterly estimate.
    2. Services deflation remains the weakest link: India has no producer price index covering the range of services, so services output is deflated using consumer price components and dedicated indices. Eg. Financial, real estate and professional services drove roughly 45 per cent of services value added growth in 2024-25, and their prices are proxied rather than directly observed.
      The Fix: Extend the producer price framework to services, starting with the sub-sectors that contribute most to value added.
    3. The unincorporated sector is estimated rather than observed within the quarter: Quarterly manufacturing estimates for small unregistered enterprises rest on survey benchmarks carried forward by indicators. Eg. The Annual Survey of Unincorporated Sector Enterprises replaced proxy indicators for this segment only with the 2022-23 base year series.
      The Fix: Publish the unincorporated enterprises survey on a fixed calendar and use it to benchmark each year’s quarterly manufacturing estimates.
    4. A base revision breaks comparability across the join: The series was rebased from 2011-12 to 2022-23, so growth rates on either side of the break are not directly comparable. Eg. Construction of a back series after the previous rebasing became a prolonged dispute over pre-2011 growth rates.
      The Fix: Publish a fully reconciled back series at the same sectoral detail as the new series with every base revision.
    5. Confidence rests on the standing of the producing body: A statistical estimate is accepted on the credibility of the institution that releases it, and that credibility has been contested. Eg. Two members resigned from the National Statistical Commission in 2019 over the withholding of survey results.
      The Fix: Give the National Statistical Commission a statutory basis, as an independent statistical commission was recommended in 2001.

    Conclusion

    The argument between the statistical system and its critics is not about whether the economy grew. It is about whether an outside user can see inside the price correction that turns nominal output into real output. A revision that changed the price database and the deflation method in the same round has raised the burden of explanation on the agency, not lowered it. The marker to watch is whether the producer price series used inside the estimates are released as a public series, and whether the methodology volume for the revised base year appears alongside the next annual release rather than after it.

    What is national income accounting?

    1. About: National income accounting is the set of methods used to measure economic activity for an economy as a whole, yielding aggregates such as GDP, Gross National Product and National Income.
    2. Rationale: It supplies the aggregates that fiscal and monetary policy design, welfare planning, sectoral resource allocation and cross country comparison all rest on.
    3. The three methods it rests on:
    4. Income method: sums factor incomes, meaning rent, wages, interest, profit, mixed income and net income from abroad.
    5. Expenditure method: totals final spending on consumption, investment, government spending and net exports.
    6. Production method: sums value added at each stage across agriculture, industry and services.
    7. Why the production method matters here: India’s quarterly estimates are built up as sectoral value added, so every sector needs a price deflator of its own.

    Key Concerns Regarding National Income Accounting

    1. Separating final from intermediate goods: Value added can be double counted where the same good is both an input and a final product. Eg. Flour bought by a bakery is an input, while flour bought by a household is a final good.
    2. Undisclosed income: Parallel transactions kept off records are not captured, which understates measured output.
    3. Environmental blind spot: Resource extraction is counted as income while the depletion of natural capital is not deducted.
    4. Non-monetised and non-market activity: Subsistence farming, barter, volunteer work and the care economy go uncounted, understating true output.

    Key Facts about National Income Accounting

    1. New base year: The GDP base was revised from 2011-12 to 2022-23, with the new series released on 27 February 2026.
    2. Companion rebasing: The Consumer Price Index base was updated to 2024 and the Index of Industrial Production base to 2022-23 alongside the GDP revision.
    3. New data sources: Goods and Services Tax returns, the Public Financial Management System, e-Vahan vehicle registration data and the unincorporated enterprise and labour force surveys replaced earlier proxy indicators.
    4. International alignment: The series follows the System of National Accounts 2008, with transition to the 2025 standard planned by 2029-30.

    [2019, GS3, 10 marks] Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments.

  • Beyond GDP, brace for turbulence ahead

    Why in the News

    Long term government bond yields in the advanced economies have risen sharply, raising the risk free return foreign capital can earn without entering India. Official growth estimates for April to June, together with car, two wheeler and tractor sales and Goods and Services Tax (GST) collections, show the economy absorbing the energy supply shock caused by the West Asia war. Strong output data does not settle the financing question, since capital compares India’s expected return against an assured dollar return. The dollars India did attract came through Foreign Currency Non-Resident (Bank), or FCNR(B), deposits, priced at rates Indian banks could offer only because the Reserve Bank of India (RBI) carried the hedging cost.

    How does the FCNR(B) deposit and swap arrangement work?

    1. The deposit: An FCNR(B) deposit is a term deposit placed with an Indian bank by a non-resident Indian, held and repayable in foreign currency.
    2. The bank’s exposure: The bank owes repayment in that foreign currency, so a fall in the rupee raises what the deposit costs it in rupee terms.
    3. The swap facility: The RBI bore the hedging cost against currency fluctuation through a special dollar rupee swap facility.
    4. Where the risk now sits: The banks transferred the risk of rupee depreciation to the central bank, which is what allowed them to pay a high rate in foreign currency.

    What do bond yields in Japan, the United States and the United Kingdom demonstrate about the cost of capital?

    1. Japan: The ten year government bond yield crossed 3 per cent for the first time since 1996, and the thirty year yield stands at 4.1 per cent.
    2. The United States: The ten year Treasury yield is at 4.8 per cent and the thirty year at 5.3 per cent.
    3. The United Kingdom: The ten year yield is at 5.2 per cent and the thirty year at 5.9 per cent.
    4. Why these set the benchmark: These instruments are virtually risk free, issued by governments that have never defaulted on their debts, so an assured 4.8 per cent dollar return is the floor any Indian asset has to beat.

    What did India have to pay to bring in dollars?

    1. The deposit rate: Indian banks offered 6 to 6.5 per cent interest on FCNR(B) deposits.
    2. The volume raised: The window mobilised $127.2 billion.
    3. The direction of travel: Foreign money no longer comes cheap, and the path of global bond yields points to it turning more expensive.

    Why does a strong growth number not settle the external financing question?

    1. The two measures test different things: Output and consumption data measure domestic demand. The financing question is whether a foreign investor’s expected return here beats a risk free alternative abroad.
    2. Equity returns are the transmission channel: Long term foreign capital enters on growth prospects that translate into equity market returns, and those prospects must be compelling against elevated yields.
    3. A window is not a policy: A special forex swap window is a one time reprieve for the external sector and cannot substitute for durable intervention.

    What would durable resilience require?

    1. Fiscal consolidation: In a rising interest rate environment a government cannot run high fiscal deficits, which crowd out private sector and other productive borrowing.
    2. Keeping the external account financeable: Those deficits must not spill into current account deficits, which are difficult to finance when global capital flows turn volatile.
    3. Export promotion: Exports are to be raised through increased access to global markets.
    4. Cheaper inputs for exporters: Duties on imported raw materials and components are to be eliminated.
    5. Predictability: Policy stability for foreign investors is the fourth durable intervention, alongside consolidation, exports and input duty removal.

    Challenges to relying on the FCNR(B) swap route

    1. The liability matures: A term deposit has to be repaid or rolled over on a fixed date, so an inflow raised in months becomes an outflow risk on a known one. Eg. The 2013 FCNR(B) swap window raised about $26 billion, and its redemption was concentrated in late 2016.
      The Fix: Stagger maturities across the deposit book and pre-announce the redemption profile, so repayment does not bunch into a single quarter.
    2. The central bank absorbs the currency loss: A hedging cost carried by the RBI becomes a loss on its own books if the rupee falls further than the swap rate assumed. Eg. The rupee’s record low against the dollar has been reset repeatedly since 2022.
      The Fix: Disclose the swap facility’s cost to the central bank’s balance sheet, so the public subsidy inside the scheme is visible.
    3. Debt creating inflows substitute for equity: A deposit is a repayable liability while direct investment is not, so the same headline inflow leaves a different obligation behind. Eg. Non-resident Indian deposits are counted within India’s external debt, and foreign direct investment is not.
      The Fix: Cap the share of external financing met through deposit schemes, so a reserve build is not increasingly borrowed.
    4. The inflow is rate sensitive and reversible: Money that arrives for an interest differential leaves when that differential narrows. Eg. Foreign investors withdrew from Indian debt in 2013 once United States yields rose after the taper announcement.
      The Fix: Build the buffer through current account improvement and equity inflows, so the stock of reserves does not depend on a rate spread.
    5. A headline reserves figure hides its composition: Reserves assembled through a swap window signal less resilience than the same figure built from a trade surplus. Eg. India’s reserves crossed $700 billion while the current account remained in deficit.
      The Fix: Report the hedged and unhedged components of reserves separately in the weekly statistical supplement.

    Conclusion

    India’s external position looks strongest at the moment it is most borrowed. A large stock of foreign currency has been assembled by paying for it, and part of that bill sits on the central bank’s own books rather than on the banking system’s. The tension left unresolved is one of timing: the measures that would make foreign capital cheap again work over years, and the rate environment that made it expensive changed in months. What to watch is whether a second window is opened when the first one matures.

    “[2013] Which one of the following groups of items is included in India’s foreign-exchange reserves?

    (a) Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries

    (b) Foreign-currency assets, gold holdings of the RBI and SDRs

    (c) Foreign-currency assets, loans from the World Bank and SDRs

    (d) Foreign-currency assets, gold holdings of the RBI and loans from the World Bank

  • Thermal sector grapples with coal stock management

    Why in the News

    Thermal power generators that hold adequate coal inventories are disadvantaged when limited domestic supply is redirected to plants that have fallen below their prescribed stock norms. Those norms are plant specific and have run under the Central Electricity Authority (CEA) framework that took effect on 6 December 2021. The revised Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India (SHAKTI) policy, approved by the Central Government in May 2025, streamlined coal linkage allocation into two windows. Emergency redistribution keeps a low stock plant running and protects grid reliability. Repeating it removes the reason for any generator to carry stock at or above its norm, since the surplus is what gets moved.

    How is coal allocated to a thermal power plant?

    1. The linkage: A coal linkage is a long term assurance of supply from a specified source to a specified plant.
    2. The contract: A Fuel Supply Agreement (FSA) gives that linkage contractual form, fixing the quantity the coal company owes the generator.
    3. Window I: Central government owned generating companies and State utilities receive linkages at notified prices.
    4. Window II: Other eligible producers, including plants running on imported coal, procure coal through auctions at a premium over the notified price.

    Why does redistribution penalise the generator that stocked adequately?

    1. Compliance is measured plant by plant: The revised norms set a stocking level for each plant, so a generator is judged against its own requirement rather than a common one.
    2. Scarce coal moves toward the shortfall: When domestic supply is limited, deliveries are redirected to plants below their norms, and the generator that planned surrenders tonnage it had secured.
    3. The incentive runs backwards: Repeated redistribution removes any reason to carry stock above the norm, because the surplus is precisely what is taken.
    4. The proposed correction: A former Managing Director of PTC India, earlier the Power Trading Corporation of India, argued that coal inventory should be recognised as a system reliability service. Generators holding adequate or higher than normative stocks would be incentivised, and repeated shortfalls without genuine external cause would carry consequences.

    When is emergency redistribution justified?

    1. Grid stability and consumer supply: Assistance to plants at critically low stocks is defensible where consumer interests and grid stability are at risk.
    2. The distinction that decides it: Support must separate a genuine supply chain disruption from a persistent shortage caused by inventory mismanagement.
    3. The causes that qualify: Mine side constraints, railway bottlenecks, force majeure events and unexpected spikes in electricity demand are the genuine disruptions for which redistribution is meant.
    4. Where the framework came from: The Ministries of Coal, Power and Railways coordinate to monitor supplies and move coal, and the revised supply framework followed the COVID-19 pandemic, when all modes of transport came to a standstill.

    Is the problem a shortage of coal or a failure of logistics?

    1. Production has crossed a billion tonnes twice: Output reached 1,047.52 million tonnes in 2024-25 and 1,040.08 million tonnes in 2025-26.
    2. The current year’s run rate: Cumulative production through July stood at 302.04 million tonnes, and dispatches rose about 6 percent year on year to 354.7 million tonnes.
    3. Stock exists but sits in the wrong place: Thermal power plants held 34.55 million tonnes, with another 113 million tonnes at pitheads or in transit, a combined stock of about 148 million tonnes.
    4. Availability at the mine is not availability at the plant: Fuel security depends on the whole chain of production, loading, railway availability, transit, unloading and stockyard management.
    5. The binding constraint: The difficulty is how supplies are allocated, transported and converted into plant level inventories, not the national quantity of coal.

    Challenges to coal stock management in the thermal sector

    1. Rail capacity sets the replenishment ceiling: Coal moves mainly by rail, so rake availability decides how quickly a plant below its norm can be refilled. Eg. Passenger services were cancelled in 2022 to free rakes for coal movement to power stations.
      The Fix: Expand corridor capacity on the mine to plant routes and publish rake allocation in advance, so a generator can plan against a known schedule.
    2. Distance from the pithead is not priced into the norm: A plant far from its linked mine carries a longer transit and needs a larger buffer to hold the same days of cover. Eg. Plants in the western and southern States drawing from the Talcher and Mahanadi coalfields run multi day rail transits.
      The Fix: Set stocking levels by transit distance rather than by a uniform days of cover, so a distant plant is not judged on a pithead plant’s buffer.
    3. Grade slippage erodes the stock that is counted: A gap between the declared grade and the delivered grade means a tonne in the yard carries less heat than the norm assumes. Eg. Third party sampling of coal supplies was introduced after persistent grade slippage complaints from generators.
      The Fix: Express stocking norms in days of energy rather than days of tonnage, so quality shortfalls appear in the compliance number itself.
    4. Imported coal blending is abandoned when landed costs rise: Plants designed to blend imported coal cut back when the rupee weakens, which increases their draw on domestic supply. Eg. Blending directions issued to State generators in 2022 were resisted on cost grounds.
      The Fix: Allow the incremental fuel cost of a directed import to pass through in tariff automatically, so a blending direction does not sit on the generator’s balance sheet.
    5. Payment stress travels back up the chain: A generator owed money by distribution companies delays its own coal payments and cannot fund a larger inventory. Eg. Accumulated dues from State distribution companies prompted the Late Payment Surcharge Rules, 2022.
      The Fix: Enforce the existing payment security mechanism strictly, so working capital is not the reason a plant slips below its norm.

    Conclusion

    The dispute is not about how much coal the country digs out. It is about who absorbs the cost when a scarce delivery is moved from a plant that planned to one that did not. The tension is unresolved, because the authority that must keep a low stock plant running has no instrument to compensate the generator whose coal is diverted to it. Until a stocking norm carries a payment on one side and a consequence on the other, redistribution will keep shifting the cost of poor planning onto the generators that planned.

    Back2Basics: Central Electricity Authority

    1. What it is: The Central Electricity Authority is the technical advisory body of the Ministry of Power.
    2. Statutory basis: It functions under the Electricity Act, 2003, continuing the body first constituted under the Electricity (Supply) Act, 1948.
    3. Advisory role: It advises the Central Government on national electricity policy and prepares the National Electricity Plan.
    4. Technical role: It sets technical standards for the construction and operation of electrical plants and lines, and monitors daily coal stock positions at thermal stations.

    [2019] Consider the following statements:

    1. Coal sector was nationalized by the Government of India under Indira Gandhi.

    2. Now, coal blocks are allocated on lottery basis.

    3. Till recently, India imported coal to meet the shortages of domestic supply, but now India is self-sufficient in coal production.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 and 3 only

    (c) 3 only

    (d) 1, 2 and 3

  • No takers for govt’s ₹37,500-crore coal gasification scheme

    Why in the News

    The coal ministry’s ₹37,500 crore financial incentive scheme for surface coal and lignite gasification has drawn no application from any private or public player. The last date for submission is 7 September 2026, fixed by a Request for Proposal issued on 7 July 2026. The Union Cabinet had approved the scheme to gasify 75 million tonnes of coal and lignite and to cut imports of liquefied natural gas, urea and methanol. The ministry attributes the absence of bids to the time a project proposal of this scale takes to prepare. An incentive of this size drawing nothing at its first deadline points at the economics of a gasification project rather than at the paperwork.

    How does coal gasification work?

    1. From solid fuel to gas: Dry fuel is converted into synthetic gas, known as syngas.
    2. What syngas is used for: Syngas serves as an alternative fuel and as the feedstock for methanol, fertilisers, hydrogen and chemicals.
    3. The stated emissions gain: Converting coal into gas rather than burning it directly is counted as a reduction in carbon emissions.

    What was the scheme designed to achieve?

    1. A volume target: The programme is built around gasifying 75 million tonnes of coal and lignite.
    2. Import substitution: The scheme is aimed at reducing dependence on imports of liquefied natural gas, urea and methanol.
    3. Insulation from external shocks: Domestic production of these inputs is intended to shield the country from global price volatility and supply chain disruption.
    4. The instrument: A financial outlay of ₹37,500 crore was approved for surface coal and lignite gasification projects.

    How has the coal ministry explained the empty first round?

    1. Proposal preparation takes time: Given the scale of funds each project involves, the preparation of pre-feasibility reports and project proposals runs long.
    2. Interest without applications: Several industries have communicated their interest in participating, and none has filed.
    3. The count is not final: The number of applications cannot be stated before the deadline passes, since submission is entirely online.
    4. The window reopens: Application rounds are envisaged every two months, giving industry repeated opportunities to enter.

    Challenges to the coal gasification incentive scheme

    1. High ash domestic coal raises the cost: Indian coal carries a high ash content, which lowers gas yield per tonne and raises the capital cost of the gasifier. Eg. Gasifier designs proven on low ash imported coal need modification before they run on Indian coal.
      The Fix: Tie the incentive to a gasifier configuration demonstrated on high ash domestic coal, rather than to project cost alone.
    2. The output price is set by policy, not by the market: Urea sold to farmers carries a maximum retail price fixed by the Centre, so a coal based producer’s revenue depends on the subsidy regime. Eg. Urea remains outside the Nutrient Based Subsidy regime and continues to be sold at a controlled price.
      The Fix: Offer a long term offtake price for coal based urea and methanol, so a project’s revenue is known before financial closure.
    3. No assured buyer for the other outputs: Lenders fund a plant only where a committed purchaser exists for its methanol or hydrogen. Eg. India has no binding methanol blending obligation comparable to the dated targets under the ethanol blending programme.
      The Fix: Notify a methanol blending obligation with dated targets, so demand exists independently of the capital subsidy.
    4. A coal based route to a fuel sold as clean: The process begins with coal, so the emissions case rests on capturing the carbon dioxide the process concentrates. Eg. Coal to methanol carries higher lifecycle emissions than natural gas based methanol.
      The Fix: Make carbon capture capability a condition of the incentive rather than an optional addition.
    5. Clearances have to be assembled before a bid: A promoter needs a coal linkage, land and water in place before a proposal is fileable, and the incentive supplies none of them. Eg. The Talcher Fertilizers coal to urea project in Odisha has run well past its original commissioning timeline.
      The Fix: Bundle a coal linkage and a land allotment with the incentive award, so a bidder is not chasing clearances and funding at the same time.

    Conclusion

    The obstacle here is not the size of the incentive but the absence of a price and a buyer for what a gasification plant would make. A capital subsidy lowers the cost of building the plant. It does not tell the promoter what the output will sell for, or who is obliged to buy it. The marker to watch is whether the next round is paired with an assured offtake price or a blending obligation, and whether a public sector energy company files before any private promoter does.

    Back2Basics: Lignite

    1. What it is: Lignite is the lowest rank of coal, high in moisture and low in fixed carbon, also called brown coal.
    2. Why it is used near the mine: Its calorific value is lower than that of bituminous coal, so transporting it long distances is uneconomic and it is burned or gasified close to the pithead.
    3. Where India’s reserves lie: The bulk of the country’s lignite sits in Tamil Nadu, with further deposits in Rajasthan, Gujarat and Jammu and Kashmir.
    4. Who mines it: NLC India Limited, a central public sector enterprise under the Ministry of Coal, is the largest lignite producer in the country.

    [2025] Consider the following substances:

    I. Ethanol

    II. Nitroglycerine

    III. Urea

    Coal gasification technology can be used in the production of how many of them?

    (a) Only one

    (b) Only two

    (c) All three

    (d) None

  • Norms allowing e-comm cos to keep inventory notified by govt

    Why in the News

    The Department of Economic Affairs, in the Ministry of Finance, has amended the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 to let e-commerce entities hold inventory. The permission is confined to goods meant for export. Those goods must be manufactured or produced in India. Foreign Direct Investment (FDI) in inventory based e-commerce retailing remains barred, so a foreign funded platform still cannot own the stock it sells to Indian consumers. The change separates a platform’s right to own goods from its right to sell them in India.

    What is inventory based e-commerce, and how does it differ from the marketplace model?

    1. Inventory based model: The platform owns the goods it lists and sells them directly to the buyer.
    2. Marketplace model: The platform runs a digital facility connecting independent sellers to buyers. It does not own the stock it displays.
    3. The investment line between them: Foreign investment up to 100 percent under the automatic route is permitted in the marketplace model. Foreign investment in the inventory based model is not permitted.

    What has the amendment changed?

    1. A permission tied to export: An e-commerce entity may now maintain inventory where the goods are meant for export.
    2. A domestic origin condition: The goods so held must be manufactured or produced in India.
    3. The retail bar is untouched: Foreign investment in inventory based e-commerce retailing has not been permitted.
    4. The route taken: The Department of Economic Affairs inserted the provision into the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, which is the instrument that carries India’s foreign investment conditions in law.

    Why does an export only carve out change what a foreign funded platform can do?

    1. Ownership of stock becomes lawful for one purpose: A foreign funded platform may buy, own and warehouse Indian made goods, provided the buyer sits outside India.
    2. The domestic retail rationale survives: The bar exists to stop a platform holding foreign capital from selling its own stock to Indian consumers at prices small retailers cannot match. An export sale does not enter that market.
    3. Exports gain an aggregator: A small manufacturer without overseas logistics can sell to a platform that takes title to the consignment and ships it out.
    4. The test shifts from ownership to destination: Compliance now turns on where a consignment ends up, which is a harder thing to observe than who owns it.

    Challenges to the export only inventory permission

    1. Diversion into the domestic market: Stock held under the export permission can be sold at home unless each consignment is matched to a foreign buyer. Eg. Duty free inputs meant for export production have repeatedly been the subject of Directorate of Revenue Intelligence cases over domestic diversion.
      The Fix: Require the platform to reconcile inventory held under this permission against shipping bills filed with Customs, and treat an unreconciled balance as a contravention.
    2. No stated threshold for what counts as made in India: The condition turns on goods manufactured or produced in India, and a low value assembly operation meets that description. Eg. Domestic value addition has been a running dispute under the Production Linked Incentive scheme for electronics, where imported kits are assembled locally.
      The Fix: Attach a stated domestic value addition threshold to the permission, as the Production Linked Incentive schemes already do.
    3. Enforcement acts long after the sale: Contraventions under the Foreign Exchange Management Act, 1999 are penalised or compounded after the fact, so a breach is corrected once the goods have already moved. Eg. Proceedings against large foreign funded e-commerce platforms over foreign investment conditions have run for years without a settled outcome.
      The Fix: Require an annual statutory auditor’s certificate on compliance with the export condition, filed with the Reserve Bank of India.
    4. The marketplace disputes are left where they were: The standing complaints of small retailers concern preferential seller arrangements inside the marketplace model, which this permission does not touch. Eg. The Competition Commission of India’s investigation into preferred sellers and deep discounting on major platforms began in 2020.
      The Fix: Conclude the pending competition proceedings on preferential seller arrangements, so the marketplace conditions are enforced on their own terms.

    Conclusion

    India’s foreign investment rules now treat ownership of goods and sale of goods as two separate permissions. The carve out is drawn narrowly, so its practical worth depends entirely on how the export destination is verified rather than on the width of the wording. The marker to watch is whether operating conditions specifying that verification follow, and whether foreign funded platforms build export volumes large enough to make the permission material.

    Back2Basics: Foreign Exchange Management (Non-debt Instruments) Rules, 2019

    1. What they are: Rules made under the Foreign Exchange Management Act, 1999 governing investment by a person resident outside India in equity and other non-debt instruments.
    2. Who issues them: The Department of Economic Affairs in the Ministry of Finance notifies them.
    3. What they carry: Sectoral caps, entry routes and the specific conditions attached to foreign investment in each sector.
    4. Why they matter: A change announced as foreign investment policy takes legal effect only when these Rules are amended.

    Matching Previous Year Question

    “[2020] With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic? (a) It is the investment through capital instruments essentially in a listed company. (b) It is a largely non-debt creating capital flow. (c) It is the investment which involves debt-servicing. (d) It is the investment made by foreign institutional investors in the Government securities. ANSWER: (b)”

  • Restoration work on temple in Goa island unearths relics from 14th to 16th century

    Restoration work on temple in Goa island unearths relics from 14th to 16th century

    Why in the News

    Restoration work at the old site of the Saptakoteshwar temple on Divar island in Goa has uncovered relics dated between the fourteenth and the sixteenth centuries.

    What was recovered, and where?

    1. A guardian motif: A Kirtimukh motif is among the finds, and its presence marks a formal temple entrance rather than an open air shrine.
    2. A structural element: A carved capital of a temple pillar was also recovered, which is the load bearing head of a column and part of a built temple rather than a portable object.
    3. The find spot: Both were recovered along the old pathway running between Koti Tirth and Madhavachi Talli.
    4. The dating: The relics and remains have been dated to between the fourteenth and the sixteenth centuries.

    Why do the finds change the reading of the site?

    1. Distribution carries the argument: The elements sit along a pathway, so it is their placement rather than the value of any single object that supports the inference.
    2. A complex rather than a shrine: Architectural members of this kind, found together, indicate a temple complex rather than one isolated structure.
    3. A sacred corridor: The alignment links the site’s water body with its associated structures into a processional route.
    4. The extent is revised: The understood extent of the island’s pre Portuguese temple landscape is now larger than the surviving remains indicated.

    Why does Saptakoteshwar matter in Goa’s religious history?

    1. A principal Shaiva site: Saptakoteshwar is counted among Goa’s principal Shaiva sites and its deity is a form of Shiva.
    2. Kadamba patronage: The Kadamba rulers of Goa held Saptakoteshwar as their tutelary deity, and the name appears on their coinage.
    3. Displacement in the Portuguese period: The Divar temple was destroyed in the sixteenth century, and the deity was moved off the island to Narve in Bicholim, which lay outside Portuguese control at the time.
    4. A later rebuilding: The temple at Narve was rebuilt in 1668 by Chhatrapati Shivaji Maharaj, and worship has continued at that site since.

    Challenges to protecting incidental archaeological finds

    1. Restoration is not excavation: Material surfacing during repair work is lifted without the layer by layer record that dates it and relates it to what lies around it. Eg. The Divar elements were recovered along a pathway during restoration rather than from a documented trench.
      The Fix: Require a licensed archaeologist to supervise any ground disturbance at a historic temple site, with layer wise recording completed before material is moved.
    2. Most sites carry no legal protection: Statutory protection attaches only to monuments notified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 or a State equivalent, and everything else depends on local custody. Eg. The Archaeological Survey of India protects roughly 3,700 monuments, a small fraction of the country’s stock of historic sites.
      The Fix: Notify a newly evidenced site under the State protection list as soon as dated material is recovered, rather than waiting for an excavation to conclude.
    3. A living temple changes faster than it is recorded: A site in continuous worship is repaired and rebuilt by its own community, which removes earlier fabric in the process. Eg. Cement plaster and modern tiling at working shrines routinely cover older stone members.
      The Fix: Complete measured drawings and photographic documentation of a living temple before any restoration grant is released.
    4. Conservation capacity is thin: Trained conservators, epigraphists and conservation architects are few relative to the number of sites needing attention. Eg. State archaeology departments in the smaller States operate with a handful of technical posts.
      The Fix: Fund State conservation units jointly with university archaeology departments so field documentation has standing capacity behind it.

    Conclusion

    The value of these finds lies less in the objects than in the boundary they redraw around a site long assumed to end at its surviving shrine. Whether that reading holds depends on a systematic survey along the corridor rather than on further chance recovery during repair work. The step to watch is whether the pathway and its surroundings are brought under a protected category before restoration continues over them.

    Back2Basics: Kirtimukh

    1. What it is: Kirtimukh is a fierce swallowing face carved as an architectural motif, the name meaning face of glory.
    2. Where it is placed: It is set above temple doorways, over deity niches and at the apex of arches, as a guardian of the threshold.
    3. Its origin story: Puranic accounts describe a devouring being created by Shiva that consumes its own body at his command and is then placed at the entrance to be honoured first.
    4. Its reach: The motif runs across Hindu and Buddhist architecture in India and into Southeast Asia, so its presence signals a formal temple structure.

    [2018, GS1, 10 marks] Safeguarding the Indian art heritage is the need of the moment. Discuss.”

  • Inside Jharkhand & Bihar’s 25-year Sone river dispute

    Inside Jharkhand & Bihar’s 25-year Sone river dispute

    Why in the News

    Bihar and Jharkhand have signed an inter State memorandum of understanding dividing Sone river water, with 5.75 million acre feet (MAF, the volume that would cover a million acres to a depth of one foot) going to Bihar and 2 MAF to Jharkhand.

    Why did a 1973 allocation stop working after 2000?

    1. The river’s course: The Sone flows generally northward from its upper catchments in Madhya Pradesh, passes through Uttar Pradesh, runs along the Jharkhand Bihar boundary and joins the Ganga in Bihar.
    2. The original entitlement: The Bansagar Agreement of 1973, a tripartite agreement involving Madhya Pradesh and Uttar Pradesh, allocated 7.75 MAF of Sone water to undivided Bihar out of the total basin yield.
    3. Bifurcation split the basin unevenly: Jharkhand inherited the major upper catchment areas and the tributaries, and the lower riparian agricultural hubs stayed with Bihar.
    4. No formula followed the division: After the State was divided, no binding formula existed to apportion that allocation between the two successor States.
    5. Two decades of stalled mediation: Committees attempted mediation over the last two decades, and talks repeatedly broke down over reservoir height, land submergence and volumetric splits.

    What does the new agreement actually settle?

    1. Jharkhand’s concession: Jharkhand agreed to specified reservoir water levels to minimise land submergence, backed by clear rehabilitation provisions.
    2. Bihar’s gain: Bihar receives additional water from the Indrapuri Barrage to irrigate farmland in its existing command.
    3. Jharkhand’s return: The pact enables new canal networks in the drought prone Palamu and Garhwa districts.
    4. What it unblocks: Long delayed irrigation, reservoir and river linking projects in the drought prone regions of both States are expected to move forward.

    What does the pact unlock on the ground?

    1. The diversion structure: The Indrapuri Barrage across the Sone in Rohtas district, built in the late 1960s, is the primary structure diverting water into the canal system.
    2. The canal command: The Sone canal network irrigates the Shahabad agricultural belt of Rohtas, Bhojpur, Buxar and Kaimur districts.
    3. The southern belt: The agreement guarantees critical irrigation supplies to the Magadh belt of south Bihar, including Aurangabad.
    4. The constraint was legal, not physical: The barrage and its canals already existed, so what was holding back their full use was the missing share rather than any limit of the structure.

    Why did the dispute stay politically live?

    1. No formal confrontation: The two States never reached a major State level confrontation over the water.
    2. An election season issue in Bihar: Leaders across party lines in the Shahabad and Magadh belts targeted the State government over water shortages in the Sone canal system during the summer sowing season.
    3. A displacement issue in Jharkhand: Leaders from Palamu and Garhwa raised the fear that raising the Indrapuri Dam’s height would submerge agricultural land and displace thousands without fair compensation.

    Challenges to the Sone water sharing arrangement

    1. A memorandum is not an award: The States have signed an administrative understanding rather than obtained a tribunal award under the Inter-State River Water Disputes Act, 1956, so no adjudicated instrument stands behind it. Eg. The Punjab Termination of Agreements Act, 2004 showed that a State legislature can move to repudiate water sharing agreements it had signed.
      The Fix: Constitute a joint control board with gauged and publicly reported releases at the barrage, so compliance is a matter of record rather than of assertion.
    2. A fixed volumetric split against a variable yield: The shares are stated in absolute volume even though the Sone is rain fed and its annual yield swings with the monsoon. Eg. The parent entitlement was itself fixed on basin yield estimates made in the early 1970s.
      The Fix: Convert the split into proportional shares of the actual annual yield, with a stated rule for how a deficit year is shared.
    3. Canal efficiency decides who receives water: An allocation at the barrage does not survive conveyance losses, so tail end farmers get less than the head reach whatever the agreement says. Eg. The Sone canal system dates from the 1870s and still delivers through long unlined earthen channels.
      The Fix: Line and modernise the main and distributary canals and meter deliveries at outlet level before the new water is credited to the command area.
    4. Rehabilitation commitments outrun delivery: Submergence limits rest on rehabilitation provisions whose record in Indian reservoir projects is poor. Eg. Families displaced by the Sardar Sarovar project on the Narmada were still contesting resettlement decades after the dam was cleared.
      The Fix: Publish a dated rehabilitation schedule with land for land entitlements settled before reservoir levels are raised.
    5. Groundwater has filled the gap: Farmers in the command have substituted diesel pumped groundwater for unreliable canal supply, and the pact says nothing about that substitution. Eg. Water tables across south Bihar fall sharply in the summer months when canal supply is weakest.
      The Fix: Sequence canal restoration with conjunctive use planning so surface deliveries replace pumping instead of adding to it.

    Conclusion

    An administrative understanding has closed a gap that two decades of mediation could not, and it has done so without creating any body able to enforce it. Compliance now rests on the continued willingness of two State governments, which is the same condition under which the previous arrangement failed. The marker to watch is whether releases are gauged and published, since an unmeasured share is what allows a settled formula to unravel quietly.

    Back2Basics: Sone river

    1. Source and course: The Sone rises on the Amarkantak plateau in Madhya Pradesh, close to the source of the Narmada, and flows north east to meet the Ganga.
    2. Its rank: It is the second largest of the Ganga’s southern tributaries after the Yamuna.
    3. Its regime: The river is rain fed, so it carries heavy monsoon flow and shrinks sharply through the dry season.
    4. Its tributaries: The North Koel, the Rihand and the Kanhar are among its principal tributaries.

    [2024, GS3, 15 marks] What are the major challenges faced by Indian irrigation system in recent times? State the measures taken by the government for efficient irrigation management.

  • WMO warns of ‘very’ strong El Nino, to last until February 2027

    WMO warns of ‘very’ strong El Nino, to last until February 2027

    Why in the News

    The World Meteorological Organization (WMO) has warned of an impending very strong El Nino that is expected to strengthen and last until February 2027. Its Secretary General stated that El Nino is firmly established and has the potential to deliver a massive blow to communities and economies across the world.

    How does El Nino work?

    1. The mechanism: El Nino is a periodic warming of sea surface temperatures in the equatorial and eastern Pacific Ocean, caused by a weakening of the trade winds.
    2. Why it travels: The warming moves the region where heat and moisture rise into the atmosphere, which alters temperature and rainfall patterns far from the Pacific.
    3. Its rhythm: The phenomenon recurs every two to seven years and a single event lasts up to about twelve months.
    4. What it produces: It is known to trigger heatwaves, wet spells and extreme temperatures.

    How strong is this event, and how is that graded?

    1. The index used: Intensity is determined by the sea surface temperature averaged over three months in the Nino 3.4 region along the equatorial Pacific Ocean.
    2. The readings so far: The index surpassed 1.5 degrees Celsius above normal during May to July and crossed 2 degrees Celsius above normal in July.
    3. The persistence forecast: The likelihood of El Nino continuing through February 2027 is put at close to 100 percent, the first time the agency has forecast an event at that degree of certainty.
    4. A possible record: Exceptionally warm Pacific temperatures make this potentially the strongest El Nino since monitoring began.

    What does it mean for India this season?

    1. The monsoon largely escaped: The India Meteorological Department (IMD) confirmed that rainfall in the later half of August came under the influence of the developing El Nino. With three fourths of the season over, the monsoon has largely escaped it.
    2. A countervailing signal: A positive phase of the Indian Ocean Dipole is expected to develop during September to November, with a seasonal mean value of 0.9 degrees Celsius.
    3. Why the offset matters: A positive Dipole strengthens rainfall over the Indian region and can therefore work against El Nino’s drying influence.
    4. The offset is not assured: The Dipole swung briefly towards the positive phase in late August and then returned to neutral.

    What is the WMO doing about it?

    1. A mobilisation without precedent in the agency: The Secretary General described this as the largest mobilisation with National Meteorological and Hydrological Services in the WMO’s fifty year history.
    2. Why those agencies: National meteorological services are the bodies that convert a global seasonal outlook into forecasts and warnings people can act on.
    3. Impacts are already visible: Droughts and floods are already causing disruption, and the agency expects these to intensify as the event strengthens.
    4. The recent record: Europe recorded one of its hottest summers in recent decades this year, and August brought record temperatures in many parts of the globe.

    Challenges to acting on an El Nino warning

    1. A seasonal outlook is not a local forecast: El Nino shifts the odds of dry conditions across a season and cannot say what a particular district receives in a particular week. Eg. The 2023 monsoon closed about 6 percent below normal for India as a whole, and several subdivisions still recorded surplus rain.
      The Fix: Issue impact based forecasts at district level that translate the seasonal outlook into expected effects on sowing dates, reservoir filling and power demand.
    2. The Indian Ocean modifies the Pacific signal: El Nino’s effect on the Indian monsoon depends on the state of the Indian Ocean, so an El Nino year is not automatically a drought year. Eg. The 1997 event was among the strongest recorded and the Indian monsoon that year was normal.
      The Fix: Publish the El Nino and Dipole outlooks as one combined regional signal rather than as two separate advisories a user has to reconcile.
    3. Warnings stop short of the last mile: Early warning coverage remains uneven for small farmers and fishing communities who cannot act on a technical bulletin. Eg. The United Nations Early Warnings for All initiative exists because a large share of the world’s population is still not covered by any early warning system.
      The Fix: Route advisories through State agriculture extension and fisheries departments in local languages, tied to one specific recommended action.
    4. Reservoirs are operated on inflows, not on forecasts: Storage decisions respond to water already received, so a deficit is managed only after it has appeared. Eg. Southern region reservoirs stood far below their ten year average through the summer of 2024, after the previous year’s deficient monsoon.
      The Fix: Write seasonal forecasts into reservoir rule curves so storage is conserved in advance of a forecast dry season.
    5. The consequences outlast the monsoon: El Nino affects the rabi season and global crops, so the exposure continues well after the Indian monsoon withdraws. Eg. India restricted rice exports during the 2023 El Nino year on domestic supply concerns.
      The Fix: Set buffer stock and import cover decisions against the forecast horizon rather than against the harvest just completed.

    Conclusion

    The forecast has settled the question of whether the event arrives and left open only what is done before it peaks. India’s monsoon has escaped this season, so the exposure shifts to the rabi crop, to reservoir storage and to the summer that follows. The marker to watch is whether the Indian Ocean Dipole holds its positive phase long enough to blunt the Pacific signal over the region.

    Back2Basics: Indian Ocean Dipole

    1. What it is: The Indian Ocean Dipole is the difference in sea surface temperature between the western and the eastern parts of the tropical Indian Ocean.
    2. Positive phase: The western Indian Ocean is warmer than the eastern part near Indonesia, which favours stronger rainfall over the Indian subcontinent and East Africa.
    3. Negative phase: The eastern part is warmer, which suppresses rainfall over India and shifts it towards Indonesia and Australia.
    4. How it is tracked: It is measured as the Dipole Mode Index, the temperature gradient between the two poles of the ocean.

    [2017] With reference to ‘Indian Ocean Dipole (IOD)’ sometimes mentioned in the news while forecasting Indian monsoon, which of the following statements is/are correct?

    1. IOD phenomenon is characterized by a difference in sea surface temperature between tropical Western Indian Ocean and tropical Eastern Pacific Ocean.

    2. An IOD phenomenon can influence an El Nino’s impact on the monsoon.

    Select the correct answer using the code given below:

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

  • New Delhi to quantify ocean wealth, climate risks in new accounting push

    New Delhi to quantify ocean wealth, climate risks in new accounting push

    Why in the News

    The Ministry of Statistics and Programme Implementation (MoSPI) has issued a concept paper proposing to put a monetary value on India’s marine fish stocks and record them as a national asset.

    What is the System of Environmental Economic Accounting?

    1. About: SEEA is a United Nations statistical framework that records a country’s natural resources inside the same accounting structure used for its economy.
    2. The core idea: A natural resource is treated as a capital asset, and what is taken from it in a year is treated as a flow of economic benefit from that asset.
    3. Coverage in India: India has compiled environmental accounts since 2018 through the EnviStats India programme, covering assets such as land, water, forests, minerals and pollination.

    What do India’s current fisheries figures capture?

    1. Global standing: India is the world’s second largest fish producing country and accounts for 8 percent of global production.
    2. The inland and marine split: Total fish production in FY25 was 19.77 million metric tonnes, 77 percent of it from inland sources and 23 percent from the marine sector.
    3. Marine output has expanded: Marine fish production reached 46.15 lakh tonnes in 2024-25, against 34.43 lakh tonnes in 2013-14.
    4. Contribution to the economy: The sector contributed an estimated Rs 1.76 lakh crore in 2023-24, or 1.09 percent of national gross value added.
    5. Export volume and value: Marine product exports in FY25 were 1.7 million metric tonnes valued at Rs 62,408.45 crore, growing 3.11 percent a year in volume.
    6. Reach of the export basket: More than 350 varieties, including frozen fish, squid, cuttlefish and dried items, reach 130 international markets.

    Why do those figures not answer the sustainability question?

    1. Output says nothing about the stock: Aggregate production records how much was landed, not whether commercially important stocks can sustain similar production in future.
    2. Species and regions vanish into the total: A national tonnage figure hides the changing value of individual species and the condition of regional fish stocks.
    3. Fishing pressure leaves no trace: The long term effect of fishing pressure and environmental change does not register in an annual catch series.
    4. No blue economy series exists: India has no regular, comprehensive blue economy GDP series comparable with the series available for agriculture or manufacturing.
    5. Known potential carries a known risk: NITI Aayog puts the exclusive economic zone’s resource potential at about 7.16 million metric tonnes and warns that some deep sea resources are vulnerable to overexploitation.

    How far has this been attempted elsewhere?

    1. Only a handful of countries: The Organisation for Economic Cooperation and Development (OECD) notes that only a handful of countries currently compile monetary asset accounts for aquatic resources.
    2. The group India would join: Australia, the Netherlands, Norway, Canada, the United Kingdom, France, the United States and New Zealand are attempting to bring blue natural capital into national accounts.
    3. The contrast with land based assets: Valuation methods for forests and minerals are mature, and the aquatic equivalent remains at an experimental and pilot stage.
    4. The international guidance is dated: The SEEA-Fisheries conceptual guidance is outdated, so India is building on an incomplete standard rather than a settled one.

    How would a marine fish asset account be built?

    1. Define the accounting units: The first step selects the commercially, economically or ecologically important marine species the account will cover.
    2. Classify each stock: Species wise landing data for the preceding ten years serves as the initial proxy, and current landings are compared with historical peaks to mark a stock as regenerating, stable or depleting.
    3. Estimate the asset life: Each resource is assigned an asset life, which is the bridge between the fisheries science on the stock and its economic treatment.
    4. Calculate the resource rent: Resource rent is the income attributable to the natural resource after deducting labour, operating expenses, depreciation and a normal return on fishing vessels and other capital.
    5. Discount the future rents: Expected future resource rents are projected over the estimated asset life and discounted at a proposed 2 percent real rate to give a present value.
    6. The output: The result is a marine fish asset account, a statistical record carrying both the physical condition of a stock and its estimated economic value.

    What is riding on the outcome?

    1. Livelihoods: Fishing supports nearly 30 million livelihoods and is a cornerstone of the blue economy.
    2. Geography: India’s coastline runs about 11,100 km and carries rich marine biodiversity.
    3. The stated target: Available numbers put the blue economy at about 4 percent of GDP against a target of a $100 billion blue economy by 2030.
    4. Budget support: The latest Union Budget earmarked a record Rs 2,761.8 crore in total annual support, with the Pradhan Mantri Matsya Sampada Yojana (PMMSY) carrying Rs 2,500 crore in 2026-27.
    5. Competing claims on sea space: Fisheries compete with ports, tourism, offshore energy and coastal development for marine space. Integrated accounts give those trade offs one economic and environmental database.
    6. Investment decisions: A valuation would indicate whether to put money into additional fishing capacity, stock restoration or deep sea fisheries. It would also allow the economic cost of climate induced changes in marine resources to be estimated.

    Challenges to valuing marine fish stocks

    1. The asset is living and mobile: A fish stock changes in size and location continuously, which makes it harder to value at a point in time than a forest or a mineral deposit. Eg. Oil sardine landings along the Kerala coast collapsed through the 2010s and then partially recovered, moving the stock’s value within a single decade.
      The Fix: Anchor the account to periodic scientific biomass surveys by the Central Marine Fisheries Research Institute rather than to landing data alone.
    2. Landings measure effort as much as abundance: What boats bring ashore reflects fleet capacity, fuel prices and market demand alongside the size of the stock. Eg. Landings can rise as vessels mechanise and trips lengthen even as the underlying stock thins.
      The Fix: Report effort adjusted catch per unit effort alongside raw landings, so a rise in output is separated from a rise in fishing pressure.
    3. The discount rate decides the answer: A present value calculation is highly sensitive to the rate chosen, so the 2 percent assumption fixes how much weight future stocks carry. Eg. A higher rate values a stock mainly by what it yields in the next few years and makes long term depletion look cheap.
      The Fix: Publish the account across a range of discount rates so the valuation’s dependence on that single assumption is visible to the user.
    4. An account does not restrain a catch: Recording depletion changes no rule about who may fish, since marine fishing within territorial waters is regulated by coastal States under their own legislation. Eg. Monsoon fishing bans and mesh size rules are notified State by State along the coastline.
      The Fix: Require stock classifications from the account to feed directly into the fisheries management plans and catch limits of coastal States.

    Conclusion

    Valuing a fish stock changes what the national accounts can show, not what the fishing fleet is allowed to take. The account will report depletion only as accurately as the biological data underneath it, and that data is the weakest part of the exercise. The test is whether the numbers reach harvesting rules and coastal livelihood decisions rather than stopping at a statistical publication.

    Back2Basics: Exclusive Economic Zone

    1. Legal basis: The exclusive economic zone is established by the United Nations Convention on the Law of the Sea, 1982.
    2. Extent: It reaches up to 200 nautical miles from the baseline from which the territorial sea is measured.
    3. Rights it confers: The coastal State holds sovereign rights to explore, exploit, conserve and manage the living and non living resources of the zone.
    4. India’s zone: India’s exclusive economic zone covers over 2 million square km, which is larger than its land area.

    [2026] At the United Nations Ocean Conference (UNOC) held in June, 2025 in France, the Food and Agricultural Organization (FAO) of the United Nations demonstrated its leading voice on marine and ocean issues, especially on sustainable fisheries and aquaculture for resilient livelihood and ‘Blue Transformation’. Which of the following combinations about the ‘Four Betters’ proposed by FAO for ‘Blue Transformation’ is correct?

    (a) Better production, better nutrition, better environment and better ocean

    (b) Better production, better nutrition, better environment and better life

    (c) Better coral reefs, better nutrition, better environment and better life

    (d) Better estuaries, better nutrition, better environment and better mangrove vegetation

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