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  • [4th August 2026] The Hindu OpED: Critical minerals, the foundation of strategic power

    Mentor’s Comment

    Critical minerals have moved from the margins of resource policy to the centre of industrial strategy and national security. China’s dominance in refining, sharpened by rare-earth export controls announced in 2025, has exposed how concentrated the global supply chain is and how vulnerable importing economies remain. India holds domestic reserves but lacks the processing and refining capacity that decides who actually controls supply.

    What are critical minerals?

    1. Definition: Critical minerals are metals and elements that are essential to modern technology and defence but face a high risk of supply disruption due to concentrated production. Lithium, cobalt, nickel, graphite, copper and rare earth elements are the core group.
    2. Why they matter now: They are foundational to electric vehicles, battery storage, renewable power, semiconductors, defence systems and advanced manufacturing. As decarbonisation and digitalisation accelerate, mineral security is becoming as strategically important as oil once was.

    Why is the global supply picture a strategic risk, not a commercial one?

    1. Refining is concentrated in a few countries: For copper, lithium, nickel, cobalt, graphite and rare earths, the average market share of the top three refining countries rose to 86% in 2024 from around 82% in 2020. Supply now depends on a handful of nodes.
    2. China leads across nearly all strategic minerals: China is the leading refiner in 19 of 20 strategic minerals, with an average market share of about 70%. This concentration turns minerals into geopolitical leverage rather than ordinary traded commodities.
    3. Processing is the true chokepoint: In 2024, China accounted for over 90% of rare earths and graphite processing, nearly 75% of cobalt and 70% of lithium chemicals. Control of the midstream, not the mine, confers power.
    4. Export controls have weaponised supply: China’s rare-earth export controls announced in 2025 raised alarm across energy, automotive, defence, aerospace, Artificial Intelligence and semiconductor sectors. A single supplier’s policy decision can now disrupt entire industries.

    What do foreign responses show about the value of processing capacity?

    1. European Union, mandated benchmarks: The Critical Raw Materials Act sets 2030 targets of 10% domestic extraction, 40% processing and 25% recycling, with no more than 65% of any strategic mineral sourced from a single country. It builds integrated supply chains through binding mandates.
    2. United States, mine-waste refining and defence dependence: Firms such as Phoenix Tailings use electrolysis to extract rare earths from mine tailings, backed by a USD 500 million Pentagon loan to expand separation and metallization, the weakest stage of the mines-to-magnets chain. Weapons such as Tomahawk cruise missiles, THAAD interceptors and F-35 jets fail without these inputs.
    3. United States, samarium bottleneck: The defence sector needs 50 to 100 tonnes of samarium each year, yet domestic capacity is tiny, forcing reliance on revived European sites. Solvay restarted separating rare earths at La Rochelle in France after China choked processed-material outflows in April 2025.
    4. United States, tungsten deadline: The Pentagon has set a January 2027 cut-off for China-sourced tungsten, but China controls roughly 80% of global mine supply and a larger share of downstream processing. Building domestic capacity will take years, forcing reliance on existing inventories.

    How is India positioned, and where is the gap?

    1. Reserves exist but supply security does not: India holds reserves of cobalt, copper, graphite and nickel, plus monazite deposits containing rare-earth oxides. It still imports lithium, cobalt and nickel.
    2. The critical gap is processing and refining: India has bulk-mineral experience but relies on imports for high-purity critical mineral products. Capacity and high-purity production remain constrained.
    3. Structural constraints slow progress: Exploration is shallow, regulatory clearances are time-consuming, private participation is limited and remote-region project economics are weak. Recycling cannot substitute for primary supply in the near term.
    4. Rising demand widens the exposure: Under a net-zero scenario, cumulative demand for critical energy-transition minerals could reach roughly 169 million tonnes by 2070, well above a current-policy pathway.

    What is India’s policy response since 2023?

    1. National Critical Mineral Mission: The government has identified 30 critical minerals and launched the Mission to support the value chain, targeting 1,200 domestic exploration projects by 2030-31, production of at least 15 critical minerals, and acquisition of 50 overseas mining assets.
    2. MMDR Act Amendment (2023): Amended the Mines and Minerals (Development and Regulation) Act to empower the central government to auction mining leases and composite licenses for 24 critical and strategic minerals (like lithium and cobalt).
    3. Overseas acquisition through KABIL: Khanij Bidesh India Limited (KABIL), a joint venture of state-owned firms for overseas mineral assets, has secured acreage in Argentina’s Catamarca province for lithium exploration.
    4. Domestic rare-earth corridors: The 2026-27 Budget proposed rare-earth corridors in Odisha, Kerala, Andhra Pradesh and Tamil Nadu.
    5. Diplomatic diversification: The India-United States critical minerals and rare earths framework signed in May 2026 provides an additional lever to diversify supply away from a single source.

    What are the challenges to India’s critical mineral security?

    1. Midstream absence: Without high-purity refining, India cannot participate meaningfully in supply-chain realignment even where it mines the raw ore.
    2. Import dependence for battery metals: Continued reliance on imported lithium, cobalt and nickel leaves electric-vehicle and storage ambitions exposed to external disruption. India imports more than 70% of its lithium-ion battery requirements from China and Hong Kong.
    3. Long lead times: Exploration, clearances and processing plants take years, so near-term vulnerability persists regardless of policy intent.
    4. Recycling feedstock is thin: Collection systems, feedstock volumes and technology remain limited, so recycling cannot yet offset primary shortfalls. Only 5% to 10% of digital waste in India is being systematically recycled, the rest is being wasted.
    5. No strategic stockpile in place: India has not yet operationalised buffer stocks for critical minerals, leaving it without a cushion against sudden export controls abroad.

    Conclusion

    Mineral security now defines India’s industrial and strategic trajectory, and the decisive gap is not reserves but processing and refining capacity. Individual measures are necessary but insufficient without a comprehensive strategy that sets mineral-specific risk thresholds, integrates recycling, builds strategic stockpiles and creates a coordinated institutional framework. The priority is to convert domestic potential into refining capability and reduce strategic vulnerability through sustained execution.

    Back2Basics

    National Critical Mineral Mission:

    1. Launched by the Union government to secure the critical mineral value chain, from exploration to recycling.
    2. Nodal ministry: Ministry of Mines.
    3. Minerals identified: 30 critical minerals notified for India.
    4. Key targets: 1,200 domestic exploration projects by 2030-31, production of at least 15 critical minerals, and acquisition of 50 overseas mining assets.
    5. KABIL: Khanij Bidesh India Limited, a joint venture of NALCO, Hindustan Copper and Mineral Exploration Corporation, tasked with acquiring strategic mineral assets abroad.
    6. Legal backing: The Mines and Minerals (Development and Regulation) Act, 1957 was amended in 2023 to empower the Central Government to auction leases for specified critical minerals.

    Strategic Critical Minerals Cooperation Framework (India and USA)

    1. India and the United States signed the Strategic Critical Minerals Cooperation Framework on May 26, 2026, in New Delhi.
    2. The agreement was finalized to secure supply chains, boost clean energy manufacturing, and reduce reliance on single-source monopolies like China.

    Key Goals of the Partnership

    1. Supply Chain Security: Protects sensitive mineral and rare earth networks from coercive market practices.
    2. Collaboration Areas: Focuses heavily on joint mining, advanced processing, recycling, and scrap management.
    3. Broader Alignment: Coordinates with plurilateral efforts like the Quad Critical Minerals Initiative and the Forum on Resource Geostrategic Engagement (FORGE).

    PYQ Relevance

    [UPSC 2025] Consider the following statements:

    I. India has joined the Minerals Security Partnership as a member. II. India is a resource-rich country in all the 30 critical minerals that it has identified. III. The Parliament in 2023 has amended the Mines and Minerals (Development and Regulation) Act, 1957 empowering the Central Government to exclusively auction mining lease and composite license for certain critical minerals.

    Which of the statements given above are correct? (a) I and II only (b) II and III only (c) I and III only (d) I, II and III

    Answer: (c)

  • Door opens for fee on UPI, RuPay debit card payment to big merchants

    Why in the News?

    The Ministry of Finance has proposed allowing banks and payment system providers to levy a Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) and RuPay debit card transactions made to large merchants (annual turnover above ₹50 crore).

    What is Merchant Discount Rate (MDR)?

    • Merchant Discount Rate (MDR): A fee paid by a merchant to its bank for processing digital payments.
    • The fee is shared among: Acquiring bank, Issuing bank, and Card/payment network.
    • Currently, UPI and RuPay debit card transactions have zero MDR.

    Key Proposal

    • MDR permitted for merchants with annual turnover above ₹50 crore.
    • Small and medium merchants remain exempt.
    • Aims to ensure the long-term sustainability of the digital payments ecosystem.

    Why is MDR Being Considered?

    • Zero MDR has created a funding gap for payment infrastructure.
    • Maintaining and expanding UPI networks involves significant operational costs.
    • The Standing Committee on Finance recommended a sustainable revenue model.

    Challenges

    • Large merchants may pass the cost on to consumers.
    • Could discourage UPI acceptance among some businesses.
    • Turnover-based implementation may increase compliance complexity.
    • May affect confidence in India’s zero-cost digital payment model.

    Back2Basics

    • UPI: Unified Payments Interface, a real-time payment system developed by the National Payments Corporation of India (NPCI).
    • RuPay: India’s domestic card payment network operated by NPCI.
    • NPCI: National Payments Corporation of India, the umbrella organisation for retail payment systems.
    • Regulator: Reserve Bank of India (RBI) under the Payment and Settlement Systems Act, 2007.

    National Payments Corporation of India (NPCI)

    • National Payments Corporation of India (NPCI) is an umbrella organization for operating retail payment and settlement systems in India.
    • Established in 2008 under the provisions of the Payment and Settlement Systems Act, 2007.
    • Promoted by the Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA).
    • Registered as a Not-for-Profit Company under Section 8 of the Companies Act, 2013 (earlier Section 25 of the Companies Act, 1956).

    [2018] Which one of the following best describes the term “Merchant Discount Rate” sometimes seen in news?

    (a) The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank.

    (b) The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services.

    (c) The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards.

    (d) The incentive given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machines and debit cards.

  • Climate whiplash, fire clouds: factors fuelling Europe’s wildfires

    Why in the News?

    Severe wildfires have swept across Greece, France, Spain, Portugal and Italy, driven by climate whiplash, pyrocumulonimbus (pyroCb) clouds, and prolonged heatwaves, highlighting the growing impact of climate change.

    Key Concepts

    Climate Whiplash

    • Rapid shift between extreme wet and dry conditions.
    • Wet periods promote vegetation growth, while subsequent heatwaves dry it into highly flammable fuel.

    Pyrocumulonimbus (pyroCb) Clouds

    • Fire-generated thunderstorm clouds formed by intense wildfire heat.
    • Can reach the stratosphere, generate lightning and strong winds, creating new fires.

    Sixth-Generation Wildfires

    • Extremely intense wildfires driven by heatwaves and prolonged drought.
    • Difficult to control using conventional firefighting methods.

    Why are Europe’s Wildfires Becoming More Severe?

    • Climate whiplash increases fuel availability.
    • PyroCb clouds spread fires through lightning and erratic winds.
    • Rural land abandonment has increased combustible vegetation.
    • Rising temperatures and prolonged droughts intensify fire conditions.

    Impacts

    • Loss of lives, forests and biodiversity.
    • Declining air quality across large regions.
    • Increased carbon dioxide (CO₂) emissions, accelerating climate change.
    • Annual economic losses of about €2.5 billion in the European Union (EU).

    [2026] Consider the following statements with reference to India’s response to climate change:

    I. India’s LT-LEDS is a crucial tool for achieving net-zero emissions by 2070.

    II. India’s BUR-4 (Dec 2024) recorded ~8% decrease in GHG emissions in 2020 over 2019.

    III. Climate-resilient development necessarily depends on quick and short-term achievement of emission reduction targets.

    Which of the following relationships is/are correct?

    1. Statement I is empirically supported by statement II

    2. Statement III contradicts the approach implicit in statement I

    3. Statement I and statement III together establish the premise of long-term sustainability

    (a) 1 only

    (b) 1 and 2

    (c) 2 and 3

    (d) 3 only

  • Parliamentary panel questions Meta and threatens Section 79 safe harbour

    Why in the News?

    The Parliamentary Standing Committee on Communications and Information Technology questioned Meta over the temporary removal of the Prime Minister’s Facebook post and warned of withdrawing safe harbour protection under Section 79 of the Information Technology Act, 2000.

    What is Section 79?

    • Grants safe harbour protection to intermediaries, shielding them from liability for third-party content.
    • Applies only if intermediaries:
      • Follow due diligence requirements.
      • Do not create or modify user content.
      • Comply with lawful government or court directions.

    Who is an Intermediary?

    • An entity that stores or transmits third-party content, such as Social media platforms, Internet Service Providers (ISPs), and Search engines
    • Hosts user-generated content without being its author.

    Key Findings

    • A Prime Ministerial Facebook post was temporarily restricted.
    • The Parliamentary Committee sought:
      • An explanation and audit trail from Meta.
      • Assurance against future recurrence.
    • The issue revived the debate on intermediary liability and platform accountability.

    Challenges

    • Withdrawal of safe harbour may encourage excessive content removal.
    • Risks chilling free speech and legitimate dissent.
    • Platforms cannot realistically pre-screen billions of posts.
    • Balancing accountability with freedom of expression remains difficult.

    Back2Basics

    • Information Technology Act, 2000: Governs cyber laws and intermediary liability in India.
    • IT Rules, 2021: Prescribe due diligence obligations for intermediaries.
    • Shreya Singhal v. Union of India (2015): Supreme Court held that content takedown under Section 79 generally requires a court order or government notification.

    [2017] In India, it is legally mandatory for which of the following to report on cyber security incidents?

    1. Service providers

    2. Data Centres

    3. Body corporate.

    Select the correct answer using the code given below:

    (a) 1 only

    (b) 1 and 2 only

    (c) 3 only

    (d) 1, 2 and 3.

  • Why has West Bengal cleared land for the BSF now?

    Why in the News?

    The West Bengal Cabinet approved the transfer of 31.905 acres of land at nine locations and 1.53 acres for three new Border Outposts (BOPs) to the Border Security Force (BSF) for border fencing and security infrastructure.

    Why Does the Centre Need State Approval for Border Fencing?

    • Although border security is a Union subject, the land on which fencing and Border Outposts are built is administered by the State Government under State List Entry 18.
    • Therefore, the Centre must rely on the State for:
      • Transfer of government land.
      • Acquisition of private land.
      • Revenue and environmental clearances.
      • Compensation and rehabilitation.
      • Support from district administration.

    Centre-State Disputes over BSF Jurisdiction

    • In 2021, the Centre extended the BSF’s jurisdiction from 15 km to 50 km inside Punjab, West Bengal, and Assam (while reducing it in Gujarat).
    • Some States opposed the move, citing federalism and State autonomy.
    • 2024 Supreme Court Judgment: Upheld the Centre’s notification, holding that it does not dilute the powers of State Police and is intended to strengthen border security.

    What is the Border Security Force (BSF)?

    • Border Security Force (BSF): A Central Armed Police Force (CAPF) under the Ministry of Home Affairs (MHA).
    • Guards India’s borders with Pakistan and Bangladesh during peacetime.
    • Prevents cross-border crimes and manages Border Outposts (BOPs).

    Key Highlights

    • Land transferred for border fencing and construction of three new BOPs.
    • Implements the Calcutta High Court’s January 2026 directive.
    • Aims to strengthen border surveillance and security.

    Why is West Bengal Important?

    • Shares 2,216.7 km of the 4,096.7 km India-Bangladesh border (about 54%), the longest among all States.
    • Around 569 km of the border remains unfenced, making it crucial for completing the national fencing project.

    Key Agreements

    • Coordinated Border Management Plan (CBMP), 2011: Framework for coordination between BSF and Border Guard Bangladesh (BGB).
    • Land Boundary Agreement (LBA), 2015: Resolved enclave exchange and adverse possession issues between India and Bangladesh.

    Challenges

    • Riverine and marshy terrain limits conventional fencing.
    • Land acquisition and environmental clearances delay projects.
    • Border communities face livelihood and mobility concerns.
    • Persistent issues of smuggling, illegal migration and human trafficking.

    [2016, GS3, 12.5 marks] Border management is a complex task due to difficult terrain and hostile relations with some countries. Elucidate the challenges and strategies for effective border management.
    [2026] Which of the following with reference to Indian States is/are not correct?
    1. Uttar Pradesh shares its boundary with the highest number of other Indian States.
    2. Rajasthan shares the longest international border among all Indian States.
    3. Sikkim is the only State that shares its boundary with just one other Indian State.
    Select the answer using the code given below :

    [A] 1 only

    [B] 1 and 2

    [C] 2 and 3

    [D] 3 only

  • Lok Sabha passes the Supreme Court (Number of Judges) Amendment Bill 2026

    Why in the news?

    The Lok Sabha passed the Supreme Court (Number of Judges) Amendment Bill, 2026, increasing the sanctioned strength of the Supreme Court of India from 34 to 38 judges (including the Chief Justice of India (CJI)) to address rising case pendency.

    Key Provisions

    • Increased Strength: Raises the sanctioned strength from 34 to 38 judges.
    • Replaces Ordinance: Converts the earlier ordinance into permanent law.
    • Objective: Improve disposal of cases and reduce judicial backlog.

    Constitutional Basis

    • Article 124: Empowers Parliament to determine the number of Supreme Court judges by law.
    • Governing Law: Supreme Court (Number of Judges) Act, 1956.

    Why is the Amendment Needed?

    • Over 92,000 cases were pending in the Supreme Court (as of 1 January 2026).
    • Growing gap between institution and disposal of cases.
    • Increasing litigation has added pressure on the Court.

    Challenges

    • Sanctioned posts must be filled promptly.
    • Delays in the Collegium appointment process.
    • More judges require additional infrastructure and staff.
    • Procedural delays and frequent adjournments remain unresolved.

    Back2Basics

    • Article 124: Establishes the Supreme Court and empowers Parliament to fix its strength.
    • Original Strength (1950): Chief Justice + 7 judges.
    • Appointment: By the President of India under the Collegium System.
    • Retirement Age: 65 years.
    • Evolution: Three Judges Cases
      • First Judges Case (1981): Executive had primacy in appointments.
      • Second Judges Case (1993): Introduced the Collegium System; judiciary gained primacy.
      • Third Judges Case (1998): Expanded the Collegium to the CJI plus four senior-most Supreme Court judges.

    [2014] The power to increase the number of judges in the Supreme Court of India is vested in?

    (a) The President of India

    (b) The Parliament

    (c) The Chief Justice of India

    (d) The Law Commission

  • New real-time national portal for organ transplants

    Why in the News?

    The National Organ and Tissue Transplant Organisation (NOTTO) has launched a real-time national portal and mobile application to streamline organ transplantation by creating a unified waiting list, enabling national swap donations, and improving transparency.

    Key Features

    • National Waiting List: Creates hospital, State, regional and national waiting lists.
    • Real-time Allocation: Enables transparent organ allocation across India.
    • National Swap Donor Pool: Matches incompatible donor-recipient pairs across the country.
    • Aadhaar-linked Organ Pledge: Links donor pledges with Aadhaar for better verification.
    • Outcome Tracking: Hospitals upload follow-up data to monitor transplant outcomes.

    How does the Portal Work?

    • Patients are registered by authorised transplant hospitals.
    • Allocation follows the sequence: Hospital → State → Regional → National pool.
    • Kidney Allocation: Donor hospital retains one kidney and sends the other to the nearest matching government hospital.
    • Supports super-urgent transplant requests through the portal.

    Significance

    • Improves transparency and equity in organ allocation.
    • Expands the pool for compatible donor matching.
    • Reduces dependence on manual coordination.
    • Creates a national transplant database for better monitoring.

    Challenges

    • Different States follow different organ allocation policies.
    • NOTTO cannot mandate uniform allocation rules.
    • Low deceased organ donation rates remain a major constraint.
    • Portal effectiveness depends on accurate hospital data entry.

    Back2Basics

    • NOTTO: National Organ and Tissue Transplant Organisation.
    • Parent Body: Directorate General of Health Services (DGHS), Ministry of Health and Family Welfare (MoHFW).
    • Legal Basis: Transplantation of Human Organs and Tissues Act, 1994 (THOTA).
    • Network: Works with Regional Organ and Tissue Transplant Organisations (ROTTOs) and State Organ and Tissue Transplant Organisations (SOTTOs).

    [2023] Consider the following statements:
    Statement-I: India’s public sector health care system largely focuses on curative care with limited preventive, promotive and rehabilitative care.
    Statement-II: Under India’s decentralized approach to health care delivery, the States are primarily responsible for organizing health services.
    Which one of the following is correct in respect of the above statements?

    [A] Both Statement-I and Statement-l are correct and Statement-II is the correct explanation for Statement-I.

    [B] Both Statement-I and Statement-II are correct and Statement-is not the correct explanation for Statement-l.

    [C] Statement-l is correct but Statement-II is incorrect.

    [D] Statement-I is incorrect but Statement-Il is correct.

  • Proof of life: reworking the law on delayed birth and death registration

    Why in the News?

    The Lok Sabha passed the Registration of Births and Deaths (Amendment) Bill, 2026, amending the Registration of Births and Deaths Act, 1969. It requires a Judicial Magistrate’s order for registration of births or deaths delayed by more than two years.

    Key Provisions

    • Judicial Approval: Delayed registration beyond 2 years requires approval from a Judicial Magistrate.
    • Existing Process Retained: Delays up to 2 years continue to require approval from an Executive Magistrate.
    • Objective: Strengthen verification and prevent fraudulent birth or death registrations.

    Why was the Amendment Needed?

    • The 2023 amendment made the birth certificate the primary proof of date and place of birth for: School admissions, Passports, Aadhaar, Voter rolls, Driving licences, and Government jobs
    • Higher importance of birth certificates increased the risk of fraudulent registrations.

    Significance

    • Enhances authenticity of delayed registrations.
    • Supports reliable digital civil registration records.
    • Reduces misuse of birth certificates for identity fraud.

    Challenges

    • Judicial process may increase costs and delays for genuine applicants.
    • Remote and vulnerable populations may face greater difficulty.
    • Adds workload to the lower judiciary.
    • No clear evidence supporting the two-year threshold.

    Back2Basics

    • Registration of Births and Deaths Act, 1969: Makes registration of every birth and death compulsory.
    • Registrar General of India (RGI): Nodal authority under the Ministry of Home Affairs (MHA).
    • Concurrent List: Both Parliament and State Legislatures can legislate on registration.
    • 2023 Amendment: Birth certificate became the primary document for proving date and place of birth.

    [2018] Consider the following statements:
    1.Aadhaar can be used as proof of citizenship and domicile.
    2.Once issued, the Aadhaar number cannot be deactivated or omitted by the issuing authority.
    Which of the statements given above is/are correct?

    [A] 1 only

    [B] 2 only

    [C] Both 1 and 2

    [D] Neither 1 nor 2

  • Why lab-grown diamonds are a sustainable alternative to mined stones

    Why in the News?

    With natural diamond reserves declining and concerns over environmental damage, conflict diamonds and forced labour, India is promoting Lab-Grown Diamonds (LGDs) through the India Centre for Lab-Grown Diamond (InCent-LGD) at Indian Institute of Technology (IIT) Madras.

    What is the Kimberley Process?

    • Kimberley Process Certification Scheme (KPCS): An international certification system launched in 2003 to prevent conflict (blood) diamonds from entering global trade.
    • Limitation: Difficult to trace the geographic origin of diamonds, enabling smuggling.

    Significance of Lab-Grown Diamonds

    • Lower water, land and environmental footprint.
    • Fully traceable and ethically sourced.
    • More affordable than mined diamonds.
    • Used in jewellery, cutting tools, drilling, semiconductors and quantum computing.

    India’s Initiative

    • Union Budget 2023-24 announced support for indigenous LGD production.
    • InCent-LGD established at IIT Madras with a ₹243 crore grant from the Ministry of Commerce and Industry.
    • Focuses on developing indigenous diamond seeds, machinery and manufacturing technology.

    [2018] Which one of the following foreign travellers elaborately discussed about diamonds and diamond mines of India?

    [A] Francois Bernier

    [B] Jean-Baptiste Tavernier

    [C] Jean de Thevenot

    [D] Abbe Barthelemy Carre

  • Rajya Sabha passes the MSME Development (Amendment) Bill 2026

    Why in the News?

    The Rajya Sabha passed the Micro, Small and Medium Enterprises (MSME) Development (Amendment) Bill, 2026, replacing the MSME Development Act, 2006. It aims to improve formalisation and liquidity by introducing a digital registration platform and mandatory invoice settlement through Trade Receivables Discounting System (TReDS).

    Key Provisions

    • National Digital Registration: Free, voluntary online registration for MSMEs.
    • Mandatory TReDS: Central Public Sector Enterprises (CPSEs) must settle MSME invoices through the Trade Receivables Discounting System (TReDS).
    • Updated Framework: Replaces the 2006 Act governing MSME classification, credit and delayed payments.
    • Objective: Improve timely payments while balancing business interests.

    What is TReDS?

    • Trade Receivables Discounting System (TReDS) is a Reserve Bank of India (RBI) regulated electronic platform where MSMEs sell approved invoices to financiers for immediate cash.
    • Process: MSME uploads invoice → financiers bid → MSME gets upfront payment → buyer pays financier on the due date.

    Why is the Amendment Needed?

    • Delayed payments reduce MSME working capital.
    • Easier registration promotes formalisation and access to credit.
    • Institutional credit has grown, but access remains uneven.

    Importance of MSMEs

    • Contribute 31% of Gross Domestic Product (GDP).
    • Account for 36% of manufacturing output.
    • Contribute 41% of exports.
    • Second largest employer after agriculture.

    Challenges

    • Voluntary registration may exclude many firms.
    • TReDS mandate covers only CPSEs.
    • Smaller firms may struggle to attract financiers.
    • Weak enforcement and digital literacy remain concerns.

    MSME Classification

    • Micro: Investment ≤ ₹2.5 crore; Turnover ≤ ₹10 crore
    • Small: Investment ≤ ₹25 crore; Turnover ≤ ₹100 crore
    • Medium: Investment ≤ ₹125 crore; Turnover ≤ ₹500 crore

    Key Initiatives

    • Udyam Registration Portal
    • MSME Samadhaan
    • Trade Receivables Discounting System (TReDS)
    • Priority Sector Lending (PSL)

    “[2023] Consider the following statements with reference to India:

    1. According to the ‘Micro, Small and Medium Enterprises Development (MSMED) Act, 2006’, the ‘medium enterprises’ are those with investments in plant and machinery between Rs. 15 crore and Rs. 25 crore.

    2. All bank loans to the Micro, Small and Medium Enterprises qualify under the priority sector.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2.

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