National Milk Day on November 26 commemorates the birth anniversary of âThe Milkman of Indiaâ, Dr Verghese Kurien, who was credited with making India self-reliant in milk production.
AboutNational Milk Day:
Details
⢠Observed on November 26 to honor Dr. Verghese Kurienâs contributions to Indiaâs dairy industry and the White Revolution.
⢠Celebrates Indiaâs transformation into the world’s largest milk producer.
Contributions made by Varghese Kurien
⢠Born on November 26, 1921, in Kozhikode, Kerala.
⢠Played a key role in establishing Amul (1949) and transforming it into a global dairy brand.
⢠Inaugural chairman of the National Dairy Development Board (NDDB).
⢠Led Operation Flood, which revolutionized India’s dairy industry and made it self-sufficient in milk production.
⢠Received numerous awards, including the Ramon Magsaysay Award for Community Leadership (1963).
About the White Revolution and Milk Production in India
⢠Initiated in 1970 through Operation Flood to increase milk production and reduce dependence on milk powder imports.
⢠Empowered dairy farmers by promoting a cooperative-based model for milk production.
⢠By the late 1990s, India became the worldâs largest milk producer, surpassing the US.
⢠Milk production grew threefold, from 21.2 million tonnes in 1968-69 to over 55 million tonnes by 1991-92.
⢠Helped build the infrastructure for milk supply chains, processing plants, and storage facilities, making milk more accessible.
⢠Significantly improved the income and livelihood of rural farmers, boosting employment and economic development.
India is ranked 1st in milk production, contributing 24% of global milk production, reaching 230.58 million tonnes in 2022-23.Â
Q) What are âSmart Citiesâ? examine their relevance for urban development in India. Will it increase rural-urban differences? Give arguments for âSmart Villagesâ in the light of PURA and RURBAN Mission.(UPSC CSE 2024)
Mentorâs Comment: UPSC Mains have focused on Urbanization with various dimensions across âPopulation and Pollution challengesâ (in 2024), and degradation in standard of living due to âUnavailability of Infrastructureâ (2016-18).
A recent World Bank report estimates that India will need approximately âš70 lakh crore by 2036 to address its urban infrastructure demands. However, current government investment in this sector is only about âš1.3 lakh crore annually, which is just over one-fourth of the required âš4.6 lakh crore per year.
Todayâs editorial focuses on the critical state of India’s urban infrastructure financing landscape. This content can be used while giving recommendations for âinnovative financing strategies and strengthen ULBs’ capacitiesâ.
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Let’s learn!
Why in the News?
India is experiencing rapid urbanization, with projections indicating that approximately 600 million people will reside in cities by 2036. This surge places immense pressure on urban infrastructure, necessitating substantial investments to meet the demands of this growing population.
What are the current financing gaps in urban infrastructure in India?
⢠India’s urban infrastructure requires an estimated $840 billion over the next 15 years, averaging $55 billion annually. ⢠Present Scenario: â Basic Municipal Services: Approximately $450 billion is needed for essential services such as water supply, sewerage, solid waste management, and urban roads. â Current Funding Sources: â State Governments: 48% â Central Government: 24% â Urban Local Bodies (ULBs): 15% â Public-Private Partnerships (PPP) and Commercial Debt: Remaining sources.
What are the key constraints hindering private investment in urban infrastructure?
Weak Financial Health of ULBs: Many urban local bodies struggle with chronic fiscal deficits and cannot raise adequate resources from internal budgets.
For example, in Kanpur and Lucknow, ULBs have reported deficits due to low revenue generation from property taxes and other local sources.
Limited Use of Commercial Financing: Although measures have been taken to enable commercial financing, its application remains minimal even in financially robust cities. Currently, commercial financing accounts for only 5% of urban infrastructure funding.
For example, Municipal bonds have been issued by some cities, such as Pune, to fund water supply projects; however, these instances are rare.
Low Service Charges: The low cost of municipal services undermines financial sustainability, making it difficult for ULBs to recover operational costs and invest in infrastructure improvements.
In many Indian cities, water supply charges are significantly lower than the actual cost of service delivery.
For instance, a study found that while the cost of providing water services in a city may be âš50 per kiloliter, ULBs often charge only âš10 per kiloliter.Â
Steps taken for Urban Funding: Urban Infrastructure Development Fund (UIDF)
Details
What is it?
⢠Established (budget speech for Financial Year 2023-24) to utilize priority sector lending shortfall for financing urban infrastructure projects. ⢠Managed by the National Housing Bank (NHB). ⢠Initial Corpus: âš10,000 crore. ⢠Modeled after the Rural Infrastructure Development Fund (RIDF), which supports rural infrastructure projects. ⢠Focus on developing Tier-2 and Tier-3 cities in India. Tier-2 Cities: Cities with populations between 50,000 and 1 lakh. Tier-3 Cities: Cities with populations below 50,000.
Aims and Objectives
⢠Support Urban Infrastructure: Provides funding for essential urban services such as water supply, sanitation, sewerage, and waste management. ⢠Sewerage, water supply, sanitation, drains, and solid waste management. ⢠Prioritizesprojects with significant improvements in urban services. ⢠Funds are allocated to Municipal Corporations and Urban Local Bodies (ULBs) for infrastructure development.
Structural Mandate and Implementation
⢠Coverage: Supports 459 Tier-2 cities and 580 Tier-3 cities in India. ⢠Loan Terms: Loans offered at Bank Rate minus 1.5% interest rate. ⢠Repayment Terms: Loan repayable in five equal annual instalments over seven years. ⢠Moratorium Period: Two years before repayment starts. ⢠Quarterly Interest Payments: Regular payments required during the loan period.
What policies and collaborations are required?
Enhancing the Creditworthiness of ULBs: ULBs must improve their financial practices and credit ratings to attract private investments.
For example, the strong financial standing allows Brihanmumbai Municipal Corporation (BMC) to attract PPPs and private funding more effectively than less financially stable ULBs.
Developing a Municipal Bond Market: Encouraging the issuance of municipal bonds can provide a significant source of funding for infrastructure projects.
For example, the Pune Municipal Corporation successfully raised âš2 billion through municipal bonds to partially fund a âš29 billion project to provide 24×7 water supply to its citizens.
Leveraging Public-Private Partnerships (PPP): Expanding the role of PPPs can mobilize private capital while sharing risks associated with large-scale infrastructure projects.
For example, the New Delhi Municipal Corporation (NDMC) has implemented a PPP model for constructing Public Toilet Utilities (PTUs).
Innovative Financing Structures: Implementing mixed financing approaches that combine government funding with private investments can create a more sustainable funding model for urban infrastructure. Pooled finance mechanisms have been introduced in states like Tamil Nadu and Karnataka.
Steps taken for Urban Development: Atal Mission for Rejuvenation and Urban Transformation (AMRUT)
⢠It is a flagship urban development scheme launched in June 2015. ⢠The mission is being operated as a Central Sponsored Scheme. ⢠Aim: To provide basic urban infrastructure to improve the quality of life in cities and towns. Objectives:  ⢠Ensure that every household has access to a tap with an assured water supply and a sewerage connection. Increase the green areas in the cities. ⢠Reduce pollution by promoting public transport and constructing facilities for non-motorized transport. ⢠Funding: It is divided among States/UTs in an equitable formula in which 50:50 weightage. ⢠It covers 500 cities including all cities and towns with a population of over 1 lakh with notified Municipalities.
Hence, with a projected investment need of $840 billion over the next 15 years, it is imperative for policymakers to adopt innovative financing strategies and strengthen ULBs’ capacities. By doing so, India can pave the way for resilient, inclusive cities that support economic growth and improve quality of life for its citizens.
Did you know about the new ‘AMRUT 2.0’ Policy?
Details
⢠Launched on 1st October 2021 as the continuation of AMRUT 1.0. ⢠Aims to enhance urban infrastructure in 500 cities by focusing on water supply, wastewater management, and rejuvenation of water bodies. ⢠The mission runs for five years (FY 2021-22 to FY 2025-26).
Salient Features and Mission
⢠Universal Coverage: Ensures coverage of water supply and sewerage in 500 cities and 4,900 statutory towns. ⢠Circular Economy: Focuses on water recycling, reuse of treated sewage, and water conservation. ⢠Technology Integration: Adopts global technologies for better water management. ⢠Pey Jal Survekshan: Survey to assess water distribution, wastewater reuse, and promote healthy competition among cities.
Its Implementation and Further Roadmap
⢠Project Approval: 8,998 projects approved with an estimated cost of âš1,89,458.55 crore. ⢠Funds Distribution: Funds released by MoHUA to States/UTs and then to Urban Local Bodies (ULBs). ⢠State Water Action Plan (SWAP): States/UTs must complete their SWAP and get approval within two years of the missionâs launch. ⢠Future Plans: Focus on sustainable water management and extension of AMRUT 1.0 benefits to more towns.
A 2019 tender by the Solar Energy Corporation of India (SECI) is now central to a US district court indictment alleging that Gautam Adani and others offered âš2,029 crore ($265 million) in bribes to Indian officials.
What specific allegations have been made regarding the SECI solar bid?
The US Department of Justice alleges that Gautam Adani and his associates offered approximately âš2,029 crore (US $265 million) in bribes to Indian government officials.
This was to facilitate the signing of power supply agreements (PSAs) between SECI and state electricity distribution companies (DISCOMs), which were initially reluctant to engage due to high energy prices following the tender bidding process.
Failure to Secure Agreements: After SECI awarded the tender, which included 12,000 MW of generation capacity and 3,000 MW of module manufacturing capacity, it struggled to finalize PSAs with DISCOMs.
This inability jeopardized the lucrative letters of award (LOAs) that Adani Green and Azure Power expected from the project.
How has SECI’s role in the solar bidding process been scrutinized?
SECI is a public sector entity under the Union Ministry of New and Renewable Energy, tasked with promoting renewable energy sources in India.
Its role as a facilitator in power procurement has come under scrutiny due to its inability to secure buyers for the power generated under this tender.
Challenges Faced: SECI’s difficulties in finding buyers stemmed from DISCOMs’ reluctance to commit to PSAs at higher tariffs when they anticipated further reductions in solar power prices due to market conditions.
This situation created a fertile ground for alleged corrupt practices as companies sought alternative means to secure contracts.
Impact on Credibility: The allegations have raised questions about SECI’s operational integrity and its effectiveness in managing large-scale renewable energy projects, potentially undermining public trust in governmental processes related to renewable energy procurement.
What are the potential repercussions for India’s renewable energy sector?
Investor Confidence: The indictment could deter foreign investment in India’s renewable energy sector, as potential investors may view the allegations as indicative of systemic corruption within the industry.
Regulatory Scrutiny: Increased scrutiny from regulatory bodies both domestically and internationally may lead to tighter regulations and oversight on bidding processes and contract awards in the renewable sector.
Market Dynamics: If proven true, these allegations could disrupt existing contracts and lead DISCOMs to reassess their engagement with solar projects, particularly if they fear further legal ramifications or reputational damage associated with such contracts.
Long-term Impact on Policy: The case could catalyze reforms aimed at improving transparency and accountability within government procurement processes for renewable energy projects, potentially reshaping how future tenders are conducted.
Way forward:Â
Rebuild Investor Confidence: The government must actively engage with international stakeholders, assuring them of corrective actions and fostering a business-friendly environment through improved governance and adherence to global best practices in renewable energy projects.
Strengthen Regulatory Frameworks: India should enhance transparency in renewable energy procurement by establishing robust anti-corruption mechanisms, independent oversight committees, and clear guidelines to prevent undue influence in tender processes.
Mains PYQ:
Q Explain the purpose of the Green Grid Initiative launched at the World Leaders Summit of the COP26 UN Climate Change Conference in Glasgow in November 2021. When was this idea first floated in the International Solar Alliance (ISA)? (UPSC IAS/2021)
The commission, headed by retired High Court judge John Michael DâCunha, has released a report investigating the irregularities in the procurement and management of COVID-19 resources in Karnataka.
Key Findings:
Among the major concerns are the procurement of ventilators under the PM CARES Fund and the inflated prices of PPE kits.
The report has raised alarms over the unnecessary procurement of ventilators and the questionable pricing of PPE kits sourced from Chinese companies.
What is the DâCunha Committee?
It was formed in August 2023 to investigate the alleged irregularities in COVID-19 procurements and management of medical supplies during the tenure of the erstwhile government in Karnataka.
It was headed by retired High Court judge John Michael DâCunha.
It was tasked with examining the procurement processes and the disbursement of funds under various schemes, particularly the PM CARES Fund, and identifying administrative lapses and corruption.
Recommendations given by the Committee:
Investigate Ventilator Procurement: Recommend a probe into the procurement of 130 ventilators on March 22, 2020, under questionable circumstances, despite similar supplies under PM CARES.
Review Undelivered Ventilators: Recommended action on payments made for ventilators that were undelivered or partially delivered.
Scrutiny of Price Variations: Called for an investigation into the vast price differences for ventilators, ranging from âš5 lakh to âš16.25 lakh.
Probe PPE Kit Purchases: Suggested further inquiry into inflated prices for PPE kits bought from Chinese firms despite cheaper local alternatives.
Formation of SIT: Recommended setting up a Special Investigation Team (SIT) for further probe into the Karnataka Medical Supplies Corporation Ltd. (KSMSCL).
Enhance Transparency: Urged improved procedures to ensure accountability in future procurements.
India’s ongoing trade deficit, where imports exceed exports, is often viewed as a sign of weakness in Indian manufacturing.
What is the nature of India’s trade deficit?
Trade Deficit in Goods: As of October 2024, India recorded a merchandise trade deficit of $27.1 billion, which narrowed from $31.5 billion in the same month the previous year.
Net Exporter of Services: India has established itself as a significant player in the global services market, with services exports constituting a substantial portion of its overall trade.
In FY 2023-24, India’s services exports amounted to approximately $309 billion, contributing significantly to offsetting the goods trade deficit
Foreign Capital Inflows: The trade deficit is often viewed positively as it correlates with India’s ability to attract foreign investment.
For instance, India’s current account deficit was about 1.1% of GDP in June 2024, indicating that capital inflows are necessary to balance this outflow.
Current Account Balance: The current account deficit (CAD) reached approximately $9.7 billion in the April-June 2024 quarter, reflecting the need for capital inflows to support economic growth and stability.
Indiaâs current account deficit has been maintained at around 2% of GDP, which is generally considered manageable within the context of its economic growth and investment strategies.
Why do we hold reserves?
Cushion Against Economic Shocks: Reserves are held as a safeguard against potential economic disruptions, such as sudden spikes in oil prices that could worsen the current account deficit.
For Cost Management: While holding reserves incurs costs (e.g., lower returns on reserves compared to returns on foreign investments), they are essential for maintaining economic stability and investor confidence.
Optimal Level of Reserves: India aims to maintain adequate reserves without excessive accumulation. This involves balancing the need for emergency funds against the costs associated with holding those reserves.
What are the Steps taken by the Government?Â
Make in India Initiative: Launched in 2014, this initiative aims to boost domestic manufacturing by encouraging both foreign and domestic companies to manufacture their products in India.
It focuses on sectors such as electronics, automobiles, and pharmaceuticals to increase production capabilities, reduce dependency on imports, and enhance export competitiveness.
Production-Linked Incentive (PLI) Scheme: Introduced in 2020, the PLI scheme provides financial incentives to manufacturers across various sectors, including electronics, textiles, and pharmaceuticals.
This program is designed to attract investments, promote local manufacturing, and increase exports by enhancing the global competitiveness of Indian products.
What strategies can mitigate the effects of the trade deficit? (Way forward)
Boosting Domestic Demand: Encouraging greater domestic consumption can help increase manufacturing output. Rising domestic demand can lead to higher production levels without necessarily increasing imports.
Enhancing Export Competitiveness: Focusing on sectors where India has a comparative advantage, such as pharmaceuticals and automobiles, can help increase export volumes and reduce the trade deficit.
Diversifying Import Sources: Reducing reliance on specific countries for imports (e.g., crude oil) by diversifying sources can help stabilize import costs and mitigate fluctuations in global prices.
Investing in Manufacturing Capabilities: Strengthening domestic manufacturing through policies supporting local industries can reduce import dependency and enhance export capacity.
Mains PYQ:
Q Craze for gold in India has led to a surge in the import of gold in recent years and put pressure on the balance of payments and the external value of the rupee. In view of this, examine the merits of the Gold Monetization scheme. (UPSC IAS/2015)
The Coffee Board of India has launched a 10-year roadmap with a goal to double the countryâs coffee production and coffee exports by 2034.
About Coffee Board of India:
Details
About
⢠Coffee cultivation in India began with the planting of 7 seeds of coffee during 1600 AD by saint Baba Budan, in the courtyard of his hermitage in Chikmagalur, Karnataka.
⢠Until1995, marketed the pooled supply of coffee.
⢠Post-1995, coffee marketing became a private-sector activity due to economic liberalisation.
Structural Mandate
⢠Managed by the Ministry of Commerce and Industry, established in 1942, headquartered in Bangalore.
⢠Comprises 33 members, including a Chairman appointed by the Government of India.
Functions of Coffee Board
⢠Enhancement of production, productivity & quality.
⢠Export promotion for achieving higher value returns for Indian Coffee.
⢠Supporting the development of the domestic market.
Coffee Industry in India – Imports/Exports
⢠Karnataka is the largest producer (70%), followed by Kerala and Tamil Nadu.
⢠India exports over 70% of its coffee production.
⢠India is the 8th largest coffee exporter (FAO) globally (by volume).
⢠Coffee exports peak from March to June.
Agro-climatic Conditions
⢠It is a tropical plant which is also grown in semi-tropical climate.
⢠16° â 28°C temperature, 150-250cm rainfall and well-drained slopes are essential for its growth.
⢠Low temperature, frost, dry weather for a long time and harsh sunshine are harmful for its plant.
⢠Coffee plants grow better in the laterite soils of Karnataka in India.
⢠Major Varieties Cultivated: Arabica, Robusta and Liberica.
⢠Arabica has high market value than Robusta coffee due to its mild aromatic flavor.
PYQ:
[2010] Though coffee and tea both are cultivated on hill slopes, there is some difference between them regarding their cultivation. In this context, consider the following statements:
Coffee plant requires a hot and humid climate of tropical areas whereas tea can be cultivated in both tropical and subtropical areas.
Coffee is propagated by seeds but tea is propagated by stem cuttings only.
Which of the statements given above is/are correct?
The âBhu-Neerâ Portal was digitally launched by Minister of Jal Shakti, during the India Water Week 2024.
About the âBhu-Neerâ Portal:
Details
About
⢠Centralized platform for managing groundwater withdrawal permits.
⢠Developed by the Central Ground Water Authority (CGWA) and National Informatics Centre (NIC). ⢠Aims to regulate groundwater usage across India efficiently, ensuring transparency and sustainability.
Features and Provisions
⢠User-friendly interface with PAN-based single ID, NOC with QR code, and streamlined processes.
⢠Improved version compared to its predecessor, NOCAP.
⢠Ensures groundwater compliance and promotes sustainable practices.
Implementation
⢠The portal is live and accessible for groundwater queries, tracking, and payments.
⢠Open to both project proponents and the general public for groundwater-related services.
Back2Basics: Central Ground Water Authority (CGWA)
It has the mandate of regulating groundwater development and management in the country.
It is constituted under the Environment (Protection) Act of 1986.
CGWA issues advisories, public notices and grant No Objection Certificates (NOC) for groundwater withdrawal.
PYQ:
[2020] Consider the following statements:
1. 36% of Indiaâs districts are classified as âoverexploitedâ or âcriticalâ by the Central Ground Water Authority (CGWA).
2. CGWA was formed under the Environment (Protection) Act.
3. India has the largest area under groundwater irrigation in the world.
Which of the statements given above is/are correct?
The Telangana government has decided to completely waive road tax and registration fees for people buying electric vehicles.
What are the key features of Telanganaâs EV policy?
100% Road Tax and Registration Fee Exemption: Electric two-wheelers, four-wheelers, and commercial vehicles (such as taxis, autorickshaws, electric light goods carriers, and buses) will be exempt from road tax and registration fees for the entire lifetime of the vehicle.
Exemption for Telangana State Road Transport Corporation (TSRTC): The exemption will apply to electric vehicles operated by TSRTC and buses owned by industries used for employee transport (not commercial purposes).
Validity Period: The exemption will be valid for two years, up to December 31, 2026, regardless of the number of vehicles registered.
Promotion of EV Awareness: The government is focused on spreading awareness about electric vehicle usage to reduce pollution levels and make Hyderabad pollution-free.
Support for Charging Infrastructure: Manufacturers of electric vehicles are encouraged to take the initiative in establishing charging stations to ensure convenience for users.
How will the government support the EV push?
The government will provide exemptions from road taxes and registration fees for various categories of electric vehicles to make them more affordable for consumers.
A meeting of the concerned departments (Transport, Home, HMDA, etc.) will be convened to ensure effective coordination and implementation of the EV policy.
Government representatives studied the policies of other states to come up with a policy tailored to Telanganaâs needs, reflecting the best practices for EV adoption.
Indiaâs New Electric Vehicle Policy 2024:
Duty Reduction: A customs duty of 15% is now applicable on imported EVs priced at $35,000 or above, significantly lower than the previous rates of 70-100%. This reduced rate will last for five years.
Import Limits and Investment Requirements: The policy allows for a maximum of 8,000 imported EVs per year, contingent on manufacturers investing at least âš4,150 crore (approximately $500 million) in local production. There is no upper limit on investment, encouraging substantial financial commitments in the sector.
Local Manufacturing Mandate: Companies must establish operational facilities within three years and achieve a minimum domestic value addition (DVA) of 25% by that time, increasing to 50% by the fifth year. This aims to enhance local manufacturing capabilities.
Increased Import Allowance for Larger Investments: If a manufacturer invests over $800 million, they can import up to 40,000 EVs, still capped at 8,000 per year, with the option to carry over unused limits.
Bank Guarantees: A bank guarantee is required, which will be returned only upon meeting the DVA target and investment criteria.
Why special EV Policy is needed?
Environmental Goals: The EV policy is part of an effort to reduce pollution levels in Telangana, especially in Hyderabad, to prevent the city from facing pollution issues similar to those in New Delhi.
Lack of Implementation in the Past: Although the previous government introduced an EV policy for 2020-30, it was not implemented effectively. The new policy addresses this gap and actively promotes EV adoption.
Growing Need for Awareness and Infrastructure: The policy also aims to spread awareness about EVs and address infrastructure challenges, such as the availability of charging stations, which are crucial to making electric vehicles a viable alternative.
Encouraging Wider Adoption: The policy aims to increase the percentage of electric vehicles in the state (currently 5 out of every 100 vehicles are EVs) by offering financial incentives and creating an ecosystem that supports EV users.
Conclusion: Expanding and improving the availability of EV charging stations across the state is crucial to ensure the seamless adoption of electric vehicles, especially in urban areas and key highways.
The CAG found that urban local bodies in 18 states, serving 241 million people, face a 42% gap between income and spending, with just 29% used for development work.
What are the key findings of the report?
Resource-Expenditure Gap: Urban local bodies (ULBs) in 18 states face a 42% gap between their income and expenditure, with only 29% of spending directed toward development work.
Revenue Dependence: ULBs generate only 32% of their revenue independently, relying heavily on Union and state government funds; they collect just 56% of their property tax demand.
Staff Shortages and Limited Recruitment Powers: ULBs operate with an average 37% staff vacancy rate, and 16 states provide them with limited or no recruitment autonomy.
Incomplete Implementation of the 74th Amendment: While 17 out of 18 functions have been devolved on average, compliance remains weak. Critical areas like urban planning and fire services are the least devolved.
What are the implications of the resource-expenditure gap?
Reduced Development Expenditure: With only 29% of expenditure directed toward programmatic and development work, the quality and quantity of essential urban services such as sanitation, housing, and infrastructure suffer.
Increased Dependence on Grants: Only 32% of urban local bodies’ (ULBs) revenue comes from their own sources, making them overly reliant on state and Union government transfers. This undermines their fiscal autonomy.
Poor Service Delivery: Insufficient resources hinder the ability of ULBs to meet growing urban demands, exacerbating issues like inadequate housing, poor waste management, and insufficient public health services.
Impact on Urban Planning: The resource crunch constrains investment in urban planning and critical services like fire safety, leading to unplanned growth and vulnerabilities.
How does the 37% staff vacancy rate impact government operations?
Operational Inefficiency: Vacant positions lead to delays in service delivery, poor maintenance of urban infrastructure, and inefficiencies in governance.
Overburdened Workforce: Existing staff must take on additional responsibilities, potentially leading to burnout and reduced productivity.
Limited Capacity for Resource Mobilization: Staff shortages in tax collection departments result in only 56% of property tax demand being realised, reducing revenue potential.
Weak Local Governance: Insufficient personnel to handle devolved functions hampers the implementation of policies and schemes meant for urban development.
What are the Urban Local bodies?
The establishment and functioning of ULBs are governed by the 74th Amendment to the Constitution of India, enacted in 1992.Â
This amendment provides a constitutional framework for urban self-governance and outlines the powers and responsibilities of ULBs, which include various functions related to public health, sanitation, urban planning, and infrastructure development.
ULBs are categorized into three main types: Municipal Corporations (for large cities), Municipalities (for smaller towns), and Nagar Panchayats (for transitional areas).
What measures can be taken to improve resource mobilisation and management? (Way forward)
Enhancing Own Revenue Generation: ULBs should focus on improving their revenue generation capabilities, particularly in property tax collection where they currently realize only 56% of demand.
Implementing technology-driven solutions like GIS for property assessments could enhance collection efficiency.
Financial Management Training: Providing training for ULB officials on financial management could improve budgeting practices, ensuring that funds are allocated more effectively towards development projects.
Strengthening Autonomy: Empowering ULBs with greater autonomy over recruitment and financial decisions would enable them to respond more effectively to local needs and improve service delivery.
Public-Private Partnerships (PPPs): Encouraging partnerships with private entities can help leverage additional resources for urban development projects while sharing risks associated with large-scale investments.
Community Engagement Initiatives: Involving citizens in budgetary processes can increase transparency and accountability, potentially leading to better resource allocation aligned with community priorities.
Mains PYQ:
Q Analyse the role of local bodies in providing good governance at local level and bring out the pros and cons merging the rural local bodies with the urban local bodies. Â (UPSC IAS/2024)
The RBI designated SBI, HDFC Bank, and ICICI Bank as Domestic Systemically Important Banks (D-SIBs) for 2024.
Current D-SIBs in India:
As of 2024, the State Bank of India (SBI), HDFC Bank, and ICICI Bank are classified as D-SIBs.
SBI was classified as a D-SIB in 2015, ICICI Bank in 2016, and HDFC Bank in 2017.
What are Domestic Systemically Important Banks (D-SIBs)?
D-SIBs are banks that are critical to the stability of a countryâs financial system.
They are often termed âToo Big To Failâ (TBTF) because their failure could lead to significant disruptions in the economy.
The RBI identifies D-SIBs annually.
The framework for recognizing these banks was issued in July 2014.
The RBI has been publishing an annual list of D-SIBs since 2015.
D-SIBs are placed in different buckets based on systemic importance scores. Higher bucket rankings require greater capital requirements to absorb losses.
SBI is in Bucket 4.
HDFC Bank is in Bucket 3.
ICICI Bank is in Bucket 1.
D-SIBs must maintain additional Common Equity Tier 1 (CET1) capital based on their bucket.
SBI: 0.80% of Risk Weighted Assets (RWAs).
HDFC Bank: 0.40%
ICICI Bank: 0.20%
Global Systemically Important Banks (G-SIBs):
On the global stage, G-SIBs are designated by the Financial Stability Board (FSB).
G-SIBs include large international banks such as JP Morgan Chase and HSBC.
Foreign banks in India that qualify as G-SIBs are required to hold additional CET1 capital in India, proportional to their global risk-weighted assets.
Benefits of D-SIB Classification
It ensures financial stability by requiring additional capital buffers for resilience during economic stress.
It increases public confidence through enhanced monitoring and regulation.
It receives improved supervisory attention, leading to better governance and controls.
It prepares D-SIBs for financial shocks with additional CET1 and stress-testing requirements.
It often benefits from higher credit ratings, lowering borrowing costs and improving access to capital.