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Subject: Economics

  • Nobel Prize in Economics, 2024

    Why in the News?

    The Nobel Memorial Prize in Economics for 2024 was awarded to Daron Acemoglu, Simon Johnson, and James A. Robinson for their research into why some nations are more prosperous than others.

    What is the Nobel Economics Prize?  

    • Officially called the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, established in 1968.
    • It is not part of the original Nobel Prizes created by Alfred Nobel in 1895.
    • Created by the Swedish central bank to honor Alfred Nobel’s legacy.
    • Although not an original Nobel Prize, it is presented alongside the other Nobel Prizes on December 10, the anniversary of Nobel’s death.
    • Includes a diploma, gold medal, and a one-million-dollar prize for the laureates.

    This Year’s Nobel for Economics:

    • The 2024 Nobel awardees’ research focused on the role of societal institutions in determining a country’s economic prosperity.
    • The laureates distinguished between inclusive institutions, which promote democracy, rule of law, and protection of property rights, and extractive institutions, where power is concentrated and resources are exploited for the benefit of a few.
    • Their study explains how inclusive institutions foster long-term economic growth by providing stability and incentives, while extractive institutions undermine growth by discouraging investment and innovation.
    • The researchers also explored how European colonization shaped current economic disparities by establishing either inclusive or extractive institutions, with decisions influenced by factors such as mortality risks during colonization.

    Significance of the study

    • The study highlights the critical role of societal institutions in determining a country’s prosperity.
    • It distinguishes between inclusive institutions that foster growth and extractive institutions that hinder it.
    • It explains how colonial history shaped modern economic disparities.
    • The research offers policy insights for building inclusive institutions to promote long-term prosperity.
    • It has global implications for reducing inequality and promoting sustainable development.

    PYQ:

    [2019] The long-sustained image of India as a leader of the oppressed and marginalised nations has disappeared on account of its new found role in the emerging global order.’ Elaborate.

  • NABARD Survey on Rural Financial Inclusion

    Why in the News?

    The National Bank for Agriculture and Rural Development (NABARD) has published findings from its second All India Rural Financial Inclusion Survey (NAFIS) 2021-22.

    About the NAFIS 2021-22

    • The survey gathered primary data from 1 lakh rural households across 28 states and Union Territories of Jammu & Kashmir and Ladakh.
    • The first NAFIS survey was conducted for the agricultural year 2016-17, with results released in 2018.
    • This survey provides valuable information on rural economic and financial indicators, especially in the post-COVID period.

     

    Key Highlights from NAFIS 2021-22:

    Details
    1. Increase in Average Monthly Income • Average monthly income increased by 57.6% from Rs. 8,059 in 2016-17 to Rs. 12,698 in 2021-22, indicating a nominal CAGR of 9.5%.
    • Agricultural households earned slightly more, with an average income of Rs. 13,661, compared to Rs. 11,438 for non-agricultural households.
    • Salaried employment was the largest income source for all households, accounting for approximately 37% of total income.
    • For agricultural households, cultivation was the main income source, contributing about one-third of their monthly earnings.
    • For non-agricultural households, government/private services contributed 57% of the total household income.
    2. Rise in Average Monthly Expenditure • Average monthly expenditure increased from Rs. 6,646 in 2016-17 to Rs. 11,262 in 2021-22.
    • Agricultural households had higher expenditure at Rs. 11,710, compared to Rs. 10,675 for non-agricultural households.
    • In states like Goa and Jammu & Kashmir, monthly household expenditure exceeded Rs. 17,000.
    • Overall, agricultural households demonstrated both higher income and expenditure levels than non-agricultural households.
    3. Increase in Financial Savings • Annual average financial savings rose to Rs. 13,209 in 2021-22 from Rs. 9,104 in 2016-17.
    • 66% of households reported saving money in 2021-22, up from 50.6% in 2016-17.
    • 71% of agricultural households reported savings, compared to 58% of non-agricultural households.
    • States with 70% or more households saving money include Uttarakhand (93%), Uttar Pradesh (84%), and Jharkhand (83%).
    • States with less than half of households reporting savings are Goa (29%), Kerala (35%), Mizoram (35%), Gujarat (37%), Maharashtra (40%), and Tripura (46%).
    4. Kisan Credit Card (KCC) Usage • 44% of agricultural households possessed a valid Kisan Credit Card (KCC).
    • Among those with land holdings greater than 0.4 hectares or who had taken agricultural loans from banks in the past year, 77% had a valid KCC.
    5. Insurance Coverage • Households with at least one member covered by any form of insurance increased from 25.5% in 2016-17 to 80.3% in 2021-22.
    • 80.3% means that four out of every five households had at least one insured member.
    • Agricultural households had higher insurance coverage than non-agricultural households by about 13 percentage points.
    • Vehicle insurance was the most prevalent, with 55% of households covered.
    • Life insurance coverage extended to 24% of households, with agricultural households showing slightly higher penetration (26%) compared to non-agricultural ones (20%).
    6. Pension Coverage • Households with at least one member receiving any form of pension increased from 18.9% in 2016-17 to 23.5% in 2021-22.
    • Overall, 54% of households with at least one member over 60 years old reported receiving a pension.
    • Pensions included old age, family, retirement, or disability pensions, highlighting their importance in supporting elderly members of society.
    7. Financial Literacy • Respondents demonstrating good financial literacy increased from 33.9% in 2016-17 to 51.3% in 2021-22, a rise of 17% points.
    • Individuals exhibiting sound financial behavior increased from 56.4% to 72.8% during the same period.
    • When assessed on financial knowledge, 58% of rural respondents and 66% of semi-urban respondents answered all questions correctly.

    Key aspects that contribute to Rural Empowerment

    • The survey shows significant progress in rural financial inclusion since the first survey in 2016-17.
    • Rural households have seen improvements in income, savings, insurance coverage, and financial literacy.
    • Government schemes like Pradhan Mantri Kisan Samman Nidhi, MGNREGS, and PMAY-G have contributed to the improvement in the lives of rural people.

    PYQ:

    [2015] Pradhan Mantri Jan-Dhan Yojana was launched by the Prime Minister of India Narendra Modi on 28 August 2014. What is the main objective of the scheme?

    (a) To provide housing loan to poor people at cheaper interest rates

    (b) To promote women’s Self Help Groups in backward areas

    (c) To promote financial inclusion in the country

    (d) To provide financial help to marginalised communities

  • What is the Samsung worker’s strike in Chennai about?

    Why in the News?

    Approximately two-thirds of workers at Samsung’s flagship factory in Chennai have been on strike for a month, demanding higher wages, an eight-hour workday, improved conditions, and union recognition.

    What are the main demands of the striking workers?

    • Higher Wages: Workers are demanding increased salaries to improve their financial conditions.
    • Eight-Hour Work Day: The employees seek the implementation of an eight-hour workday to ensure better work-life balance.
    • Better Working Conditions: Strikers are advocating for improved health and safety standards in the workplace.
    • Recognition of Labour Union: The workers want formal acknowledgment of their recently formed union, the Samsung India Workers Union (SIWU).

    What is Samsung’s union policy?

    • Historically, Samsung has maintained a strict no-union policy for over 80 years, resisting any collective bargaining efforts by employees.
    • In July 2021, the company began to recognize unions after successful negotiations at Samsung Display and Samsung Electronics, allowing for some degree of collective bargaining.
    • Samsung now has various unions representing its workforce globally, with significant representation in South Korea.

    Why was SIWU unrecognised? 

    • Registration Challenges: SIWU’s registration has been opposed by Samsung management, citing trademark violations due to the use of the name “Samsung” in the union’s title.
    • Legal Precedents: SIWU argues that trademark issues should not apply, as their activities do not involve commercial undertakings that could infringe on the trademark.
    • Pending Legal Review: The case regarding SIWU’s registration is pending further court hearings, with the government examining objections raised by the management.

    What has been the govt.’s response?

    • Indifferent Stance: SIWU and the Centre of Indian Trade Unions (CITU) have accused the Tamil Nadu government of being indifferent and supportive of Samsung management, which the government denies.
    • Support for Workers’ Rights: The government claims it considers the registration application in light of Samsung’s objections and aims to ensure fair treatment of both workers and management.
    • CITU’s Position: Union leaders assert that government intervention in favor of management undermines the rights of workers and can deter unionization efforts, despite evidence showing that unions can benefit both employees and companies.

    Present Legislation in India:

    • Notice Period and Conditions for Strikes: Under the Industrial Relations Code, 2020, workers must provide a 14-day notice before striking, which cannot exceed a maximum of 60 days.
    • Strike definition: The definition of a strike now includes “mass casual leave,” where over 50% of employees taking leave can be classified as a strike.
    • Increased Flexibility for Employers: The code has increased the threshold for layoffs from 100 to 300 workers, allowing companies to lay off employees without government approval.
    • This change aims to give employers greater flexibility in managing their workforce, which has raised concerns among labor unions about job security and workers’ rights.

    Way forward: 

    • Facilitate Dialogue and Mediation: Establish a formal dialogue between the workers, Samsung management, and government representatives to address grievances, negotiate demands, and work towards a mutually beneficial agreement.
    • Strengthen Legal Framework for Union Recognition: Amend or clarify existing labor laws to ensure timely and transparent registration processes for unions, protecting their rights and enabling effective collective bargaining.

  • Fairwork India report highlights the absence of local living wage for gig workers, aggregators turning their back to collectivization

    Why in the News?

    The ‘Fairwork India Ratings 2024’ highlights that platform aggregators in India fail to ensure local living wages and resist recognizing the collective rights of workers.

    Who are the Gig Workers?

    • Gig workers are individuals who take up short-term, flexible work assignments, typically managed via digital platforms. In the Indian context, gig workers operate in various sectors such as food delivery, ride-hailing, logistics, and personal/domestic care services. 
    • These workers are not considered employees in the traditional sense and often lack the benefits associated with full-time employment, such as job security, healthcare, and social protection.
    • Examples of platforms using gig workers include Swiggy, Zomato (food delivery) Uber, Ola (transportation), etc.

    Key highlights as per the report: 

    • No Platform Scored Perfectly: No digital labor platform scored more than 6 out of 10 points, and none met all criteria across the five principles — Fair Pay, Fair Conditions, Fair Contracts, Fair Management, and Fair Representation.
    • Fair Pay: Only BigBasket and Urban Company ensured a minimum wage, but no platform met the criteria for guaranteeing a living wage after work-related costs.
    • Fair Conditions: Several platforms (e.g., Amazon Flex, Swiggy, Zepto) provided safety equipment and training, but only a few offered comprehensive accident insurance and income loss compensation.
    • Fair Contracts: BigBasket, Swiggy, and others made contracts accessible and comprehensible, and provided data protection for workers.
    • Fair Management: Platforms like BluSmart and Zomato implemented processes for addressing grievances and preventing discrimination.

    Present Status of Gig Economy  in India:

    • Growth of the Gig Economy: India is witnessing rapid growth in the gig economy, with millions of workers depending on digital platforms for their livelihoods.
      • The rise of app-based platforms such as Uber, Zomato, and Urban Company has driven the expansion of gig work across urban areas.
    • Government Focus: Recent years have seen increasing political and legislative attention to gig worker welfare. Karnataka and Jharkhand are examples of states that have proposed new legislation to regulate platform work and protect gig workers’ rights.
    • Worker Conditions: Despite the expansion of gig work, platforms in India still lag in ensuring fair pay, safety, and management of gig workers.
      • The Fairwork India Ratings 2024 reveal that no platform scored above 6 out of 10, signaling considerable gaps in adhering to key labor standards.

    Challenges faced by the Gig Economy

    • Low Wages and Unstable Earnings: Many platforms fail to ensure a local living wage for workers after accounting for work-related costs. Only a few platforms like Bigbasket and Urban Company guarantee the local minimum wage, but none meet the standard of ensuring a living wage.
    • Lack of Social Security and Benefits: Most gig workers lack access to benefits such as healthcare, insurance, and paid leave. While a few platforms provide accident insurance, broader social security protections remain elusive.
    • Poor Working Conditions: Platforms often do not ensure adequate safety training or measures. While some like Swiggy, Zomato, and Zepto offer basic safety equipment and training, broader protections, especially in terms of income loss and sick leave, are limited.
    • Inflexible Contracts: Contracts on platforms are frequently unclear, lengthy, and not always comprehensible for workers, making it difficult for them to fully understand their rights and obligations.
    • Management Issues and Bias: Workers face arbitrary decisions and discipline without proper recourse. Though some platforms have mechanisms for workers to appeal decisions, few have adopted policies to ensure fairness in work allocation.
    • Collectivization Challenges: Platforms resist recognizing gig workers’ right to form unions or collective bodies. Despite the growing movement for gig worker collectivization, no platform showed evidence of supporting or acknowledging these efforts.

    Way forward: 

    • Strengthen Legal Protections and Social Security: Introduce comprehensive legislation ensuring gig workers receive fair wages, social security benefits like healthcare and insurance, and clear, comprehensible contracts.
    • Promote Worker Representation and Fair Management: Encourage platforms to recognize collective bodies of gig workers, ensuring their right to unionize. Implement transparent and bias-free management practices, along with grievance redressal mechanisms, to improve working conditions and fairness.

  • Why is the textile industry struggling to perform better?

    Why in the News?

    Union Minister announced the Indian textile sector’s $350 billion business target by 2030, aiming to generate 3.5 crore jobs, despite recent challenges affecting the projected 10% CAGR.

    Present Status:

    • The Indian textile and apparel industry is currently valued at $153 billion (2021), contributing significantly to India’s GDP (2.3%) and manufacturing GVA (10.6%).
    • The industry employs around 105 million people and is highly dependent on global markets, with 80% of its capacity in MSMEs.
    • India was the third largest textile exporter in FY22, but faced a slowdown in FY23 and FY24, with significant drops in exports and domestic demand.

    What caused the slump in the Indian textile sector in the last two financial years?

    • Geopolitical Tensions: Global geopolitical issues reduced demand in key export markets.
    • High Raw Material Prices: Cotton and Man-Made Fibre (MMF) prices surged, hurting competitiveness.
    • Import Duties: A 10% import duty on cotton made Indian cotton more expensive than global prices.
    • Supply Chain Disruptions: Quality control measures affected the availability and price stability of MMF, further straining production.

    What are the other challenges?

    • Evolving Business Models: The rise of e-commerce and direct-to-consumer retailing is reshaping traditional business systems in the textile industry.
    • Sustainability Standards: Global brands are increasingly focusing on ESG (Environmental, Social, and Governance) criteria, forcing Indian manufacturers to adopt sustainable practices.
    • Changing Consumer Preferences: Growing demand for comfort wear, athleisure, and multi-brand outlets is shifting consumer behavior, impacting smaller or less-known brands.
    • Labour Costs and Productivity: Labour constitutes 10% of production costs, and the industry faces pressure to improve productivity through technology adoption and workforce skilling.

    Way forward: 

    • Enhance Global Competitiveness: The government should consider reducing import duties on key raw materials like cotton and stabilize supply chains by aligning domestic prices with international markets, ensuring competitiveness in global exports.
    • Invest in Technology and Sustainability: The industry should focus on adopting advanced technologies to improve productivity and meet global ESG sustainability standards, while simultaneously upskilling the workforce to handle these technological advancements effectively.

  • [pib] ‘Humsafar Policy’ for Wayside Amenities along the National Highways

    Why in the News?

    The Ministry of Road Transport and Highways has launched the ‘Humsafar Policy’ in New Delhi to improve travel convenience on National Highways and boost the development of Wayside Amenities.

    About the ‘Humsafar Policy’

    • The Humsafar Policy is an initiative launched by the Ministry of Road Transport and Highways to enhance the convenience and experience of travelers on National Highways (NHs).
    • It focuses on developing Wayside Amenities along highways to provide a range of facilities for highway users, ensuring smooth, safe, and comfortable journeys.
    • The policy also emphasizes environmental sustainability by incorporating eco-friendly practices like water conservation, solar energy, and waste recycling.

    Features of the Humsafar Policy

    • Wayside Amenities: Includes food courts, fuel stations, EV charging stations, parking, toilets, ATMs, and pharmacies.
    • Standardized Facilities: Ensures well-maintained and hygienic services for commuters.
    • Visibility for Service Providers: Featured on the ‘Rajmarg Yatra’ app, with signage space and renewal fee waivers for high-rated providers.
    • Monitoring & Inspection: Regular third-party checks to maintain service quality, with alerts for low-rated facilities.
    • Green Focus: Encourages solar energy, water conservation, and waste recycling.

    Significance

    • Better User Experience: Enhances travel with high-quality facilities.
    • Economic Impact: Creates jobs and supports local communities.
    • Standardization: Ensures consistent quality and accountability.
    • Technological Integration: The ‘Rajmarg Yatra’ app gives real-time facility info and allows feedback from users.

  • How high-performance buildings are the next step towards a sustainable future?

    Why in the News?

    Due to rapid urbanization, India is facing the challenge of exceeding global energy efficiency and carbon benchmarks. High-performance buildings (HPBs) offer resilient, adaptive, and self-sufficient designs, promoting healthier indoor environments and better air quality.

    What are High-Performance Buildings (HPBs)?

    • These are structures designed to achieve peak levels of energy efficiency, sustainability, and occupant comfort.
    • They go beyond standard building practices by integrating advanced technologies and smart design strategies to minimize environmental impact, optimize resource use, and improve overall performance.
      • For example, Unnati (Greater Noida) and Indira Paryavaran Bhawan (New Delhi) showcase smart designs like sun-optimized facades and advanced HVAC systems, reducing energy use.

    Key features of HPBs include:

    • Energy Efficiency: HPBs use cutting-edge technologies like energy-efficient HVAC systems, smart lighting controls, and advanced insulation to reduce energy consumption.
    • Water Conservation: Techniques like greywater recycling and rainwater harvesting help HPBs minimize water usage.
    • Sustainable Materials: HPBs use eco-friendly, durable materials to reduce their carbon footprint and increase building longevity.
    • Site-Specific Design: HPBs leverage natural lighting, ventilation, and terrain-specific water management to enhance thermal efficiency and reduce energy demand.
    • Building Management Systems (BMS): HPBs employ BMS to monitor real-time performance metrics such as energy usage, water consumption, and indoor air quality, ensuring continuous optimization of resources.

    How can HPBs help Indian cities?

    • Resource Efficiency: HPBs help reduce energy consumption and promote water conservation, addressing India’s resource scarcity and fluctuating energy markets.
    • Urban Resilience: By being energy-efficient and self-sufficient, HPBs can help cities adapt to rising temperatures and urbanization pressures.
    • Healthier Environments: HPBs enhance indoor air quality, thermal comfort, and occupant well-being through intelligent systems like air filtration, natural lighting, and smart temperature control.
    • The strain on Infrastructure: HPBs can relieve pressure on public infrastructure by minimizing resource usage, making them crucial for fast-growing cities.
    • Sustainable Growth: HPBs are key to driving India’s transition to a low-carbon economy, supporting sustainable urbanization, and enhancing property value through long-term cost savings.

    Way Forward: 

    • Scaling Adoption of HPBs: Promote widespread implementation of HPBs through government incentives, regulations, and public-private partnerships, aligning with SDG Goal 11 (Sustainable Cities and Communities) to foster inclusive, safe, and resilient urban spaces.
    • Innovation and Capacity Building: Encourage innovation in building technologies and workforce training to develop HPBs, contributing to SDG Goal 7 (Affordable and Clean Energy) by ensuring energy efficiency and reducing carbon emissions in cities.

  • On the need for a different framework for passive Mutual Funds

    Why in the News?

    On September 30, the Securities and Exchange Board of India (SEBI) launched the liberalized Mutual Funds Lite (MF Lite) framework specifically for passively managed schemes.

    What is a Passive Mutual Fund? 

    • A Passive Mutual Fund is a type of investment fund that follows a market index, like Nifty50, trying to match its performance.
    • They can be easily tracked, whereas, Active Mutual Funds need expert fund managers to actively monitor them and make investments in securities of their choice accordingly.
    • Since there’s no need for constant research, analysis, or active trading the costs are lower.

    Key highlights of the liberalized Mutual Funds Lite (MF Lite) framework:

    • Separate Framework for Passive Funds: It is tailored for passively managed schemes, which are less risky and require minimal active management.
    • Relaxed Entry Requirements: Lowered net worth requirement (₹35 crore), simplified criteria for sponsor eligibility (profitability, track record).
    • Encouraging New Players: It provides easier entry for new AMCs (Asset management companies) and market players in the passive fund segment.
    • Governance Flexibility: It has reduced oversight for trustees; operational responsibilities shifted to AMC boards, focusing on fees, expenses, and tracking error.
    • Cost Efficiency Focus: It emphasizes on lowering Total Expense Ratio (TER) and minimizing tracking error for better returns.
    • Simplified Disclosures: The Scheme Information Documents (SID) are simplified to focus on key metrics like benchmark index, TER, and tracking error.
    • Risk Management: Audit committees of AMCs can handle risk management duties due to the lower risk profile of passive funds.

    Why a Separate Framework for MF Lite is Needed?

    • Lower Risk Profile: Passively managed funds are generally less risky because they track established benchmarks like BSE Sensex or Nifty50, reducing the need for active decision-making.
    • Minimal Asset Manager Discretion: Unlike actively managed funds, asset managers of passive funds have limited discretion in asset allocation and investment objectives. They simply mirror the performance of the benchmark index.
    • Inapplicability of Existing Regulations: The current framework is designed primarily for actively managed funds, which involve more risks and require more oversight. It is less suitable for passive funds, which operate with predefined, transparent rules.
    • Cost-Effective Market Entry: To encourage new players and make the passive fund industry more competitive, SEBI introduced relaxed regulations regarding eligibility, net worth, and profitability.

    What about risks and disclosures? 

    • Success depends on Total Expense Ratio (TER) and tracking error. Lower costs and minimal deviation from the benchmark are crucial for performance.
    • Scheme Information Documents (SID) focus on key metrics like the benchmark name, TER, and tracking error, leaving out complex strategies.
    • Risk management responsibilities are streamlined, allowing the audit committee of the AMC to handle oversight, reflecting the lower risks of passive funds.

    Way forward: 

    • Enhance Investor Education: Develop targeted educational initiatives to inform retail investors about the benefits, risks, and operational aspects of passive mutual funds, fostering informed investment decisions.
    • Ongoing Regulatory Evaluation: Establish a framework for periodic assessment and adaptation of the MF Lite regulations to ensure they remain effective and relevant, promoting competition while safeguarding investor interests.

  • Farmers to receive aid under Rythu Bharosa

    Why in the News?

    After the completion of the loan waiver, the Telangana government will provide Rythu Bharosa assistance to support farmers further.

    About the Rythu Bharosa Scheme:

    Details
    Scheme Name Rythu Bharosa Scheme (Farmer’s Investment Support Scheme – FISS)
    Launch Year 2018-19 Kharif season (Telangana Govt’s Navratna Scheme)
    Objective To support the initial investment needs of farmers by providing financial aid for agriculture and horticulture crops.
    Benefits ₹5,000 per acre per season as a grant for input purchases, with no cap on the number of acres owned by farmers.
    Eligibility
    • Farmers must be residents of Telangana.
    • Must own agricultural land.
    • Small and marginal farmers are eligible.
    • Farmers cultivating land with Record of Forest Rights (ROFR) document (mainly from Scheduled Tribe communities).
    Ineligible Farmers
    • Commercial farmers.
    • Farmers working on a rental contract or tenant farmers.

    Significance of the move

    • Financial Relief for Farmers: By waiving loans of up to ₹2 lakh per farmer, the scheme provides significant financial relief, helping farmers manage their debt and invest in future agricultural activities.
    • Boost to Agricultural Sector: The waiver will enable farmers to focus on improving productivity and crop yields without the burden of debt, potentially boosting the state’s agricultural output.
    • Reduction in Farmer Distress: This move will alleviate distress among farmers, especially those affected by unpredictable weather and fluctuating crop prices, reducing the risk of farm-related suicides and financial instability.

    PYQ:

    [2020] Under the Kisan Credit Card scheme, short-term credit support is given to farmers for which of the following purposes?

    1. Working capital for maintenance of farm assets
    2. Purchase of combine harvesters, tractors and mini trucks
    3. Consumption requirements of farm households
    4. Post-harvest expenses
    5. Construction of family house and setting up of village cold storage facility

    Select the correct answer using the code given below:

    (a) 1, 2 and 5 only
    (b) 1, 3 and 4 only
    (c) 2, 3, 4 and 5 only
    (d) 1, 2, 3, 4 and 5

  • CERC steps in to tackle sudden Surges in Power Demand

    Why in the News?

    India’s power regulator, the Central Electricity Regulatory Commission (CERC), has appointed a Single Member Bench to assess the challenges of a sudden surge in power demand.

    Projected Power Demand for October 2024

    • India’s projected peak power demand for October 2024 is 230 Gigawatts (GW).
    • After factoring in Inter-State Transmission System (ISTS) losses, the demand is expected to rise to 232.2 GW.
    • To meet this demand, an additional 12.60 GW of generation resources is required.

    Concerns over Power System Operation:

    • The steep rise in electricity demand, without enough generation sources, could pose a risk to power system operations.
    • The Regional Load Despatch Centres (RLDCs) and State Load Despatch Centres (SLDCs) are responsible for conducting operational planning to manage this surge, especially due to seasonal variations.

     

    About Central Electricity Regulatory Commission (CERC):

    Details
    Establishment It was constituted on July 24, 1998, under the Electricity Regulatory Commissions Act, 1998, and later brought under the Electricity Act, 2003.
    Type Statutory body with quasi-judicial status under Section 76 of the Electricity Act, 2003.
    Ministry Functions under the Ministry of Power, Government of India.
    Primary Functions – Regulates tariffs of power generation companies (owned/controlled by the Government of India).
    – Regulates interstate transmission tariffs.
    – Issues licenses for interstate transmission and trading.
    Key Role in Tariff Evolution – Introduced a Two-Part Tariff in 1992.
    – Introduced Availability Based Tariff (ABT) in 2000 to improve grid stability.
    Advisory Role – Contributes to National Electricity Policy and Tariff Policy.
    – Promotes competition, efficiency, and investment in the electricity sector.
    Licensing – Issues licenses for electricity transmission and interstate trading.
    Grid Operation Standards Enforces standards under the Indian Electricity Grid Code (IEGC) to improve grid stability and power quality.
    Dispute Resolution Adjudicates disputes involving power generation companies and transmission licensees.
    Collaboration Signed a MoU with the U.S. Federal Energy Regulatory Commission (FERC) in 2009 for enhancing power market regulation and grid reliability.
    First Chairman Mr. S.L. Rao (1998–2001).

     

    PYQ:

    [2016] Which one of the following is the purpose of ‘UDAY’, a scheme of the Government?

    (a) Providing technical and financial assistance to start-up entrepreneurs in the field of renewable sources of energy

    (b) Providing electricity to every household in the country by 2018

    (c) Replacing the coal-based power plants with natural gas, nuclear, solar, wind and tidal power plants over a period of time

    (d) Providing for financial turnaround and revival of power distribution companies