India holds the position of the second-largest agricultural producer globally however, it only accounts for 2.4% of global agricultural exports, ranking eighth worldwide due to the post-harvest loss.
A closer look at India’s post-harvest loss:
Economic Impact: India faces annual post-harvest losses amounting to approximately ₹1,52,790 crore, significantly impacting farmer incomes and the agricultural economy.
Perishable Commodities: The biggest losses occur in perishable commodities like livestock produce (22%), fruits (19%), and vegetables (18%). Export processes further add to these losses, particularly at the import-country stage.
Supply Chain Inefficiencies: There is Inefficiencies in storage, transportation, and marketing, alongside a lack of assured market connectivity, contribute to significant post-harvest losses. Small and marginal farmers, who make up 86% of the farming community, struggle with economies of scale and market access.
Initiatives taken by the Railways Department:
Truck-on-Train Service: Indian Railways introduced the truck-on-train service, allowing loaded trucks to be transported on railway wagons. This service has been expanded following successful trials with commodities like milk and cattle feed.
Parcel Special Trains: During the COVID-19 pandemic, the Railways introduced parcel special trains to transport perishables and seeds between producers and markets, ensuring timely delivery and reducing post-harvest losses.
The DFI (Doubling farmers’ income) committee recommends streamlining loading and unloading processes to minimize transit times and address staffing shortages through recruitment and training initiatives.
Kisan Rail Scheme: It was launched to connect production surplus regions with consumption regions. This scheme facilitates the transportation of perishables (including milk, meat, and fish) more efficiently.
Specialized Wagons and Facilities: Investment in specialized wagons for temperature-controlled transport and establishing rail-side facilities for safe cargo handling are essential steps taken by the Railways.
Way for Untapped Opportunities:
Enhanced Environmental Benefits: Rail transport generates up to 80% less carbon dioxide for freight traffic compared to road transport.
Public-Private Partnerships: The private sector can play a crucial role in enhancing operational efficiency and strengthening rail infrastructure through public-private partnerships, thereby improving the overall logistics ecosystem for agricultural produce.
Budgetary Support and Infrastructure Development: The budgetary allocation for agriculture in 2024 aims to bridge the farm-to-market gap with modern infrastructure and value-addition support.
Technology Integration: Incorporating advanced technologies like real-time tracking, temperature monitoring, and automated loading/unloading systems.
Way forward:
Expand climate-controlled storage facilities and cold storage capacity to accommodate a larger share of agricultural produce.
Provide small and marginal farmers access to storage facilities through cooperatives or subsidies.
Invest in specialized rail wagons for temperature-controlled transport and establish rail-side cargo handling facilities.
Mains PYQ:
Q How do subsidies affect the cropping pattern, crop diversity and economy of farmers? What is the significance of crop insurance, minimum support price and food processing for small and marginal farmers? (UPSC IAS/2017)
The Finance Ministry has announced new rules under the General Finance Rules (GFR) to give scientific Ministries more flexibility in importing and buying research equipment.
These changes address scientists’ concerns about strict rules have slowed down research.
Changes introduced in GFR
The limit for buying goods without needing a tender has been raised from ₹25,000 to ₹1,00,000.
For goods priced between ₹25,000 and ₹250,000, a committee of three members must check the market for the best value and quality.
This limit has been raised from ₹1,00,000 to ₹10,00,000.
Note: These changes only apply if the goods are NOT available on the Government e-Marketplace (GeM).
What are General Finance Rules (GFR)?
The General Finance Rules (GFR) are a set of rules issued by the Government of India to regulate financial matters in public administration.
They provide a framework for financial management, ensuring accountability, transparency, and efficiency in the use of public funds.
The GFR were first issued in 1947, post-independence.
The rules have been revised multiple times, with significant updates in 1963, 2005, and the latest in 2017.
The GFR applies to all central government departments, ministries, and organizations funded by the government.
Key Provisions:
General System of Financial Management: Guidelines on budgeting, accounting, and auditing.
Procurement of Goods and Services: Rules for procurement, emphasizing transparency and competition.
Contract Management: Procedures for awarding, managing, and terminating contracts.
Inventory Management: Guidelines for managing government inventories and assets.
Grants-in-Aid: Procedures for providing grants to institutions and individuals.
Major Highlights:
Emphasis on e-procurement to enhance transparency and efficiency.
Use of the Government e-Marketplace (GeM) for procurement of common use goods and services.
Requirement for performance security in government contracts to ensure compliance and reduce risk.
Strengthening of internal controls and audit mechanisms to ensure compliance with rules and regulations.
Back2Basics:Government e-Marketplace (GeM)
The GeM is a one-stop National Public Procurement Portal to facilitate online procurement of common use Goods & Services required by various Government Departments / Organizations / PSUs.
It was launched in 2016 by the Ministry of Commerce and Industry.
It was developedby the Directorate General of Supplies and Disposals (under MCI) with technical support from the National E-Governance Division (MEITy).
Mains: Q.1) How have the recommendations of the 14th Finance Commission of India enabled the States to improve their fiscal position? (UPSC IAS/2021) Q.2) How is the Finance Commission of India constituted? What do you know about the terms of reference of the recently constituted Finance Commission? Discuss. (UPSC IAS/2018)
Prelims: With reference to the Finance Commission of India, which of the following statements is correct? (UPSC IAS/2011) (a) It encourages the inflow of foreign capital for infrastructure development (b) It facilitates the proper distribution of finances among the Public Sector Undertakings (c) It ensures transparency in financial administration (d) None of the statements (a), (b). and (c). given above is correct in this context.
Note4Students:
Prelims: Powers and Functions of Finance Commission;
Mains:Challenges to Fiscal Federalism;
Mentor comments: Fiscal devolution (Horizontal and Vertical), the transfer of fiscal powers and resources from the central government to state/local governments, is a crucial aspect of fiscal federalism. Fiscal devolution increases the financial resources and decision-making powers of state governments, allowing them to better address local needs and priorities. This strengthens fiscal federalism by empowering states to be more fiscally responsible and accountable to their citizens. It also helps in fostering competition among states to attract investments and provide better public services, driving overall economic development. This eventually contributes to macroeconomic stability. Further, the Fiscal devolution to local bodies (Municipalities and Panchayats) by State FC empowers them to undertake development activities and provide public services more efficiently. Hence it is a key pillar of cooperative and competitive fiscal federalism, promoting fiscal autonomy, equitable development, and overall macroeconomic stability in a federal polity like India.
Let’s learn!
Why in the News?
The fiscal devolution between the Union and States, as well as the distribution formula among states, is an ongoing debate with concerns about maintaining the balance of fiscal federalism and equitable development across generations within states.
The Finance Commission (FC) is responsible for recommending the distribution of net tax proceeds between the Union and the States every five years: • The 15th FC recommended a 41% share of central taxes for the states, which is lower than the 42% share recommended by the 14th FC. • The actual share of states in central taxes has been lower than the FC recommendations due to the increasing share of cess and surcharges levied by the Union government, which are not part of the divisible pool. • The horizontal distribution formula among states prioritizes equity (income gap, population, area, forest cover) over efficiency (demographic performance, tax effort). This has led to concerns about accentuating intergenerational inequity within states.
Intergenerational fiscal equity
It refers to a situation where every generation pays for the public services it receives and does not burden the future generation through borrowings. It is also the principle of providing equal opportunities and outcomes to every generation.
There are only two ways for any government to raise its revenue:
Tax: If, in a period, the tax revenue equals the current expenditure of the government, then the current taxpayers pay for the public services they receive.
Borrowing: If the government finances the current expenditure through borrowing, it means the future generation is going to pay higher taxes to repay this borrowing and interest. In other words, borrowing to meet the current expenditure of the government amounts to intergenerational inequity.
According to the Ricardian Equivalence Theory, whenever the government depends on borrowing to finance its current expenditure, households react through higher savings and thus enable the future generation to pay higher taxes as well as keep aggregate demand in the economy constant over different periods.
Presently, the current generations worldwide pay taxes less than the value of the current public services they receive, and thus it saves too. Whereas in our Indian present federal situation, this is not the case.
Condition of Developed States: The households in developed States pay taxes that are not entirely used within the specific States, thus compelling such States to borrow more or curtail current expenditures.
Condition of Developing States: The households in developing States pay taxes much less than the value of current expenditure and fill the gap by receiving higher financial transfers from the Union government.
Issues with Intragenerational Equity:
Low-income States (Bihar, Uttar Pradesh, Madhya Pradesh, Rajasthan, Odisha, and Jharkhand) finance a smaller portion of their revenue expenditure with their own tax revenue and also receive larger amounts of Union financial transfers.
The own tax revenue (collection from GST, VAT Excise, Stamp Duty, and Motor Vehicle Tax) financed up to 59.3% of revenue expenditure in high-income States, while in low-income States, their own tax revenue was financed only 35.9%.
High-income States (Tamil Nadu, Kerala, Karnataka, Maharashtra, Gujarat, Haryana) finance a substantial portion of their revenue expenditure with their own tax revenue but receive too few Union financial transfers.
The Revenue Expenditure to GSDP(Gross State Domestic Product) ratio for high-income States was 10.9%, which is lower than the similar ratio of 18.3% for low-income States.
Nearly 57.7% of revenue expenditure in low-income States was financed by Union financial transfers, and only 27.6% of revenue expenditure was financed by Union financial transfers in high-income States.
Government can also deduce that the high-income States had to incur a deficit of 13.1%, and the low-income States ended up with a deficit of only 6.4% of revenue expenditure.
Thus, the high-income States raise higher amounts of their tax revenue and curtail their revenue expenditure, yet incur higher deficits because of lower Union financial transfers compared to low-income States.
Address the Impacts and Conflicting Equities
Issue with Indicators Used by FC: The indicators presently used by the FC are per capita income, population, and area to reflect differences in demand for public services and revenue availability among states which carries a larger weight to assure equitable distribution of Union transfers.
Efficiency indicators like tax effort and fiscal discipline have smaller weightage to reward the fiscal efficiency of states.
Impact of Lower Transfers: States have Fiscal Responsibility Acts restricting deficit and debt but the reduced Union transfers compel some states to breach these legal limits.
Larger weight to fiscal indicators and incentivizing tax effort and expenditure efficiency through higher transfers can ensure intergenerational fiscal equity and sustainable debt management by states
Way Forward:
Balancing intragenerational and intergenerational equity is crucial to balancing equity and efficiency in the tax devolution formula.
Incentivize tax effort and expenditure efficiency through higher Union transfers
The Finance Commission (FC) should assign larger weight to fiscal indicators.
Next Generation Aviation Professionals (NGAP): Addresses anticipated aviation professionals shortage
No Country Left Behind (NCLB): Assists states in implementing ICAO standards and policies
Publications and Resources
Annexes to the Chicago Convention: SARPs across civil aviation domains
ICAO Journal: Quarterly publication
Global Aviation Safety Plan (GASP) and Global Air Navigation Plan (GANP): Strategic documents for aviation safety and navigation improvements.
Regional Offices
Seven offices in Bangkok, Cairo, Dakar, Lima, Mexico City, Nairobi, and Paris
Standards
Annex 1: Personnel Licensing
Annex 6: Operation of Aircraft
Annex 8: Airworthiness of Aircraft
Annex 17: Security
Annex 19: Safety Management
Global Impact
Harmonizes international aviation policies and procedures
Contributes to safe, secure, and sustainable growth of global air transport
About Asia Pacific Ministerial Conference on Civil Aviation
The conference aims to strengthen regional collaboration and develop a future-focused vision for the region, emphasizing innovation and safety.
The inaugural conference took place in February 2018 in Beijing.
39 member states of the UN aviation safety body, the International Civil Aviation Organisation (ICAO), from the Asia Pacific region are expected to attend.
The conference focuses on making aviation travel sustainable, resilient, and adaptive to the changing needs of a globally interconnected community.
This region accounts for 33.41% of global flight departures, the highest of any region worldwide.
Passenger numbers are expected to increase from 4.5 billion this year to 11.5 billion by 2050.
PYQ:
[2014] International civil aviation laws provide all countries with complete and exclusive sovereignty over the airspace above their territory. What do you understand by ‘airspace’ What are the implications of these laws on the space above this airspace? Discuss the challenges which this poses and suggest ways to contain the threat.
The government has implemented a uniform Integrated Goods and Services Tax (IGST) rate of 5% on all aircraft and aircraft engine parts.
Background:
Prior to the implementation of GST in 2017, the taxation of aircraft and aircraft parts was complex, with different central and state taxes being levied.
Under the pre-GST regime, aircraft parts attracted a range of taxes, including excise duty, VAT, and additional customs duties, leading to a cascading effect and higher costs for the aviation industry.
IGST Harmonization for MRO Boost:
This move is aimed at boosting Maintenance, Repair, and Overhaul (MRO) activities in India.
Previously, GST rates on aircraft components varied between 5%, 12%, 18%, and 28%, causing several issues.
MRO Industry in India
The Indian MRO industry is projected to become a $4 billion industry by 2030.
Currently, India represents only 1% of the global MRO market, which is worth US$45 billion.
The industry is divided into airframe maintenance, engine maintenance (50-55% of work value), components maintenance, and line maintenance (weekly checks).
Commercial airlines spend 13-15% of their revenues on maintenance, primarily outsourcing heavy maintenance.
What is Integrated Goods and Services Tax (IGST)?
The IGST is a component of the GST system in India.
It is levied by the central government on:
Inter-state /UT supply of goods and services;
Imports of goods and services;
Supply of goods and services to/by SEZ units;
Deemed exports (certain transactions where goods supplied do not leave the country but are treated as exports under GST law).
IGST is calculated by adding the applicable Central GST (CGST) and State GST (SGST) rates.
One thing to remember in IGST is that the importing state gets the accrued benefit of taxes.
Rationale for the Uniform 5% IGST Rate
Simplification of Tax Structure: A uniform 5% IGST rate on aircraft and engine parts simplifies tax compliance and eliminates classification complexities.
Cost Efficiency: A lower IGST rate reduces overall tax burden on aviation industry, enhancing affordability of aircraft acquisition and maintenance.
Global Alignment: Aligns India’s tax policy with global standards, fostering competitiveness and attractiveness for international aviation investments.
Promotion of Aviation Services: Encourages aircraft leasing and MRO activities, supporting India’s aspiration to become a hub for these services.
PYQ:
[2017] What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)’?
It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.
It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves.
It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future.
Select the correct answer using the code given below:
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
The Reserve Bank of India (RBI) has broadened the regulations governing remittances to International Financial Services Centres (IFSCs) under the Liberalised Remittance Scheme (LRS). The RBI’s circular authorizes “authorised persons” to facilitate remittances for all permissible purposes under LRS to IFSCs.
About Liberalised Remittance Scheme (LRS)
LRS is governed by the Foreign Exchange Management Act (FEMA) 1999, regulated by the Reserve Bank of India (RBI).
The scheme was introduced by the RBI in 2004 to facilitate outward remittances from India.
LRS allows resident individuals, including minors, to remit a specified amount of money abroad each financial year (April – March).
Currently, individuals are allowed to remit up to USD 250,000 per financial year under LRS.
Funds remitted under LRS can be used for permissible current or capital account transactions, or a combination of both.
Permissible Uses:
Expenses related to travel (private or for business).
Medical treatment abroad.
Payment of fees for education abroad.
Gifts and donations.
Maintenance of close relatives.
Investment in shares, debt instruments, and immovable properties overseas.
Accounts: Individuals can open and maintain foreign currency accounts with banks outside India for transactions permitted under LRS.
Exclusions: LRS is NOT available to corporations, partnership firms, Hindu Undivided Families (HUFs), trusts, etc.
Prohibited Transactions:
Remittances for activities prohibited under Schedule-I of FEMA, such as purchase of lottery tickets, sweepstakes, proscribed magazines, etc.
Trading in foreign exchange abroad.
Remittances to countries identified as non-cooperative by the FATF.
Remittances to individuals/entities identified as posing a terrorism risk by the RBI.
Significance of the move
The RBI’s decision reinforces GIFT IFSC’s position as a prominent international financial services hub.
By broadening the scope of LRS, GIFT IFSC aims to attract more diverse investments and transactions, contributing to the growth of India’s financial sector.
The Household Consumption Expenditure Survey Data provides an opportunity to analyze the effects of social transfers.
About Public Distribution System (PDS):
The Public Distribution System (PDS) aims to ensure food security by providing subsidized foodgrains to economically vulnerable sections of society. Under the National Food Security Act (NFSA), 2013, up to 75% of the rural population and 50% of the urban population are eligible for subsidized foodgrains.
Foodgrains procured by the Food Corporation of India (FCI) are distributed through a network of Fair Price Shops (FPS).
Its structural mandate:
Procurement and Distribution: The PDS operates through the procurement of foodgrains by the Food Corporation of India (FCI) from farmers at Minimum Support Prices (MSP). These foodgrains are then allocated to states and union territories based on their requirements and distributed to Fair Price Shops (FPS), which deliver subsidized foodgrains to eligible beneficiaries.
Identification and Subsidy: Beneficiaries are identified based on the Socio-Economic and Caste Census (SECC) data, classifying households into Priority Households and Antyodaya Anna Yojana (AAY) households. Under the National Food Security Act (NFSA), 2013, eligible households receive rice at ₹3 per kg, wheat at ₹2 per kg, and coarse grains at ₹1 per kg. The system aims to ensure that food security is maintained for the economically vulnerable sections of society.
Observations made by the HCES:2022-23 report
The Household Consumption Expenditure Survey (HCES) 2022-23 provides insights into the coverage of social welfare programs, including the Public Distribution System (PDS).
The survey highlights discrepancies between administrative data and survey estimates due to inclusion and exclusion errors, offering detailed characteristics of households benefiting from these programs.
Imputation of values for food and non-food items
Note: Imputation of values for food and non-food items refers to the process of assigning a monetary value to items received by households for free or at a subsidised rate through social welfare programs like the Public Distribution System (PDS) in India.
Purpose: Imputation is done to estimate the total consumption expenditure of households more accurately. It accounts for the fact that households receive goods (such as foodgrains from PDS) without directly paying for them, thus impacting their overall consumption.
Methodology: The National Sample Survey Office (NSSO) and other agencies use statistical methods to assign a value to these items. This involves determining the modal (most common) or percentile prices of the items received, which may vary by state and rural/urban classification.
Types of Items Imputed: Imputation covers both food and non-food items. In the context of the PDS, it primarily includes foodgrains but can extend to other essential commodities provided through government schemes.
Data Sources: Data for imputation can come from surveys like the HCES, where households report receiving these items. NSSO surveys typically provide detailed guidelines on how imputation values are derived and applied in their reports.
Impact on Analysis: Imputing values allows analysts to compute metrics like the Monthly Per Capita Consumption Expenditure (MPCE) accurately, reflecting the true economic status and welfare impact of households.
Implications for Poverty
Economic Relief for Poorer Households: By providing foodgrains at highly subsidized rates, the PDS reduces the financial burden on poorer households, allowing them to allocate their limited resources to other essential needs.
Enhanced Measurement of Poverty: Imputing the value of free or subsidised items received through programs like the PDS allows for a more comprehensive assessment of household consumption. Including these imputed values in poverty measurements provides a more accurate reflection of the economic well-being of households.
Policy Insights and Targeting: Understanding how imputed values impact poverty metrics helps policymakers in targeting social welfare programs more effectively.
Diversification of Diet: Access to subsidized foodgrains from the PDS allows households to free up resources, potentially enabling them to purchase a more diverse range of nutrient and protein-rich foods such as vegetables, milk, pulses, eggs, fish, and meat
Way forward:
Enhancing Efficiency and Targeting: Improve the identification and targeting of beneficiaries through updated and accurate data collection methods. Continuous validation and updating of Socio-Economic and Caste Census (SECC) data can help in reducing inclusion and exclusion errors.
Promoting Nutritional Security and Health Outcomes: Expand the scope of subsidized items beyond basic grains to include more nutritious food options like pulses, edible oils, and fruits.
Mains PYQ:
Q What are the major challenges of Public Distribution System (PDS) in India? How can it be made effective and transparent? (2022)
Q Food Security Bill is expected to eliminate hunger and malnutrition in India. Critically discuss various apprehensions in its effective implementation along with the concerns it has generated in WTO. (2013)
The National Gopal Ratna Award (NGRA) 2024 has been awarded by the Department of Animal Husbandry and Dairying.
The awards are conferred annually on National Milk Day, which is celebrated on 26th November.
What is the National Gopal Ratna Award (NGRA)?
NGRA is an initiative under the Rashtriya Gokul Mission, launched by the Department of Animal Husbandry and Dairying.
Objective: The award aims to promote the conservation and development of indigenous bovine breeds, which are crucial for the sustainability of the dairy sector in India.
Categories: NGRA is awarded in several categories:
Best Dairy farmer rearing indigenous cattle/buffalo breeds.
Best Dairy Cooperative Society (DCS)/ Milk Producer Company (MPC)/ Dairy Farmer Producer Organization (FPO).
Best Artificial Insemination Technician (AIT).
Other aspects of the Award
Special Recognition: In recent years, a special award category has been included for the North Eastern Region (NER) states to encourage dairy development activities in these regions.
Nomination and Recognition: Nominations for the NGRA are submitted online through the National Award portal.
Award Details:
NGRA 2024 will confer awards in 1st, 2nd, and 3rd ranks, and one Special Award for the NER States in each category.
Cash prizes for Best Dairy Farmer and Best DCS/FPO/MPC categories:
Rs. 5,00,000/- (1st rank)
Rs. 3,00,000/- (2nd rank)
Rs. 2,00,000/- (3rd rank)
Rs. 2,00,000/- (Special Award for NER).
Best AIT category: Certificate of merit and a memento, without any cash prize.
Back2Basics: Rashtriya Gokul Mission
Details
About
Implemented for development and conservation of indigenous bovine breeds since December 2014.
Continued under the umbrella scheme Rashtriya Pashudhan Vikas Yojana from 2021 to 2026 with a budget of Rs.2400 crore.
Nodal Ministry
Ministry of Fisheries, Animal Husbandry and Dairying
Objectives
Enhance productivity of bovines and increase milk production sustainably using advanced technologies.
Propagate the use of high genetic merit bulls for breeding purposes.
Enhance artificial insemination coverage by strengthening the breeding network and providing services at farmers’ doorsteps.
Promote indigenous cattle & buffalo rearing and conservation in a scientific and holistic manner.
PYQ:
[2015] Livestock rearing has a big potential for providing non-farm employment and income in rural areas. Discuss suggesting suitable measures to promote this sector in India.
The Swadeshi Jagran Manch (SJM), affiliated with the Rashtriya Swayamsevak Sangh (RSS), wants a ‘robot tax’ to help employees who lose their jobs because companies are using Artificial Intelligence (AI).
SJM’s Proposals and Suggestions
Robot Tax Proposal: SJM proposes a ‘robot tax’ to create a fund supporting workers displaced by AI adoption to upskill and adapt to new technologies.
Tax Incentives for Job Creation: Suggestions include tax incentives for industries based on their employment-output ratio to encourage job creation.
Fund for Worker Upskilling: Emphasizes the need for economic measures to cope with the human cost of AI. SJM suggests using a ‘robot tax’ to fund worker upskilling programs.
Additional Budgetary Recommendations
Incentivise job creation: SJM suggests tax incentives for industries generating more employment, based on an employment-output ratio.
Subsidies for Small Farmers: SJM proposes subsidies for micro irrigation projects to boost productivity among small farmers.
SJM recommends that micro-irrigation projects be made eligible for funding via CSR by adding them to Schedule VII of the Companies Act, 2013.
Wealth tax on Vacant Lands: SJM suggests a wealth tax on “vacant land” to discourage unnecessary landholding for future requirements.
What is a Robot Tax?
A robot tax is a proposed tax on companies that use automation and artificial intelligence (AI) technologies to replace human workers.
The idea behind this tax is to generate revenue that can be used to support workerswho lose their jobs due to automation.
This can include retraining programs, unemployment benefits, and other forms of social support.
Need for a Robot Tax
Job Displacement:
Automation Impact: AI and automation can lead to significant job losses in various industries as machines and software perform tasks previously done by humans.
Worker Support: A robot tax can provide financial resources to support displaced workers, helping them transition to new roles or acquire new skills.
Economic Inequality:
Wealth Distribution: Automation tends to concentrate wealth among those who own the technology, leading to increased economic inequality.
Redistribution: Taxing companies that benefit from automation can help redistribute wealth more fairly across society.
Funding for Public Programs:
Social Safety Nets: Revenue from a robot tax can fund social safety nets such as unemployment benefits, retraining programs, and other social services.
Infrastructure: It can also support public infrastructure projects and other initiatives that benefit society as a whole.
Incentivising Human Employment:
Employment Decisions: By imposing a tax on automation, companies might be more inclined to consider human workers over robots for certain tasks.
Balanced Approach: This can help maintain a balance between technological advancement and human employment.
Examples and Proposals
Bill Gates’ Proposal: Bill Gates in 2022 advocated for a robot tax, suggesting that the revenue could fund job retraining and other social benefits.
European Parliament: In 2017, the European Parliament considered a robot tax as part of broader regulations on AI and robotics, though it was ultimately not implemented.
Criticisms and Challenges
Implementation: Determining how to effectively implement and enforce a robot tax can be challenging.
Innovation Stifling: Critics argue that a robot tax could hinder innovation and technological progress.
Global Competition: There are concerns that companies might relocate to countries without such a tax, affecting global competitiveness.
Conclusion
A robot tax is a controversial yet potentially beneficial approach to addressing the economic and social impacts of AI and automation.
It aims to provide support for displaced workers, reduce economic inequality, and ensure that the benefits of technological advancements are shared more broadly across society.
The government plans to expand its EV policy to include retrospective benefits, incentivizing entities that have already invested, with a formal announcement expected in August.
Why is the government considering extending the EV policy?
Retrospective Effect: To include a retrospective effect, extending benefits to entities that have already made investments, aiming to reward and encourage early movers in the EV sector.
Encouraging Global Players: The policy seeks to prompt global players to localize production and invest in the domestic ecosystem.
Inclusive Incentives: Earlier, entities were eligible for incentives only if they set up local facilities within three years of receiving approval. The extension aims to make these incentives more inclusive.
EV Policy of India:
FAME Scheme: The Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) scheme is India’s flagship program to incentivize EV adoption. FAME-II, the current phase, provides incentives of:
₹15,000 per kWh for 2-wheelers, up to 40% of the vehicle cost
₹10,000 per kWh for 3-wheelers and 4-wheelers
₹20,000 per kWh for electric buses
Phased Manufacturing Program (PMP): To boost local manufacturing, the government has implemented a Phased Manufacturing Program that gradually increases import duties on EV components over time, incentivizing domestic production.
About the New EV Policy 2024:
The key highlights of the new EV policy announced in 2024 include:
Reduced customs duty of 15% on imported EVs with a minimum CIF value of $35,000
A cap of 8,000 imported EVs per year
Requirement for manufacturers to invest at least ₹4,150 crore (~$500 million) and achieve 25% domestic value addition within 3 years, escalating to 50% in 5 years
Duty waiver capped at the investment made or ₹6,484 crore (equal to the PLI scheme incentive), whichever is lower.
How does the revised policy align with India’s goals of enhancing local manufacturing and technology adoption in the EV industry?
Domestic Value Addition: The policy mandates that half of the value addition in manufacturing be done domestically within five years, boosting local manufacturing.
Import Duty Reduction: Reducing import duty on EVs with a minimum CIF value of $35,000 from 70%-100% to 15% to make the transition commercially viable.
Strengthening EV Ecosystem: By encouraging local production and investment, the policy aims to strengthen the entire EV ecosystem in India.
Global Leadership: Positioning India as a leader in the global transition from internal combustion engines to electric vehicles by fostering a sustainable and technologically advanced manufacturing environment.
In what ways can the policy’s focus on localization and production volume increase competition and lower costs?
Economies of Scale: Higher volumes of production can lead to economies of scale, reducing the per-unit cost of EVs.
Healthy Competition: Encouraging competition among EV players to innovate and improve efficiency, thereby lowering production costs and prices for consumers.
Cost Reduction: Achieving higher production volumes and localized manufacturing will contribute to a significant decline in production costs, making EVs more affordable for Indian consumers.
Comprehensive Ecosystem: The focus on localization ensures the development of a robust supply chain and after-sales service network, further enhancing the viability and attractiveness of EVs in India.
Way forward:
Support Local Manufacturers: Provide incentives and support for domestic manufacturers to produce critical EV components such as batteries, motors, and controllers. This will reduce dependency on imports and enhance self-reliance.
R&D Investment: Increase investment in research and development to drive innovation in EV technology, ensuring that India remains at the forefront of advancements in the industry.
Mains PYQ:
Q ‘Clean energy is the order of the day.’ Describe briefly India’s changing policy towards climate change in various international fora in the context of geopolitics. (UPSC IAS/2022)
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