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Subject: Economics

  • CDP-SURAKSHA Digital Platform for Horticulture Subsidies

    Why in the news?

    The government has introduced a new platform called CDP-SURAKSHA for disbursing subsidies to horticulture farmers under the Cluster Development Programme (CDP).

    India’s Horticulture Sector:

    • India’s horticulture sector contributes nearly 1/3rd to the agriculture GVA, making a substantial economic contribution.
    • The total production of horticulture crops has increased, from 240.53 million tonnes in 2010-11 to 334.60 million tonnes in 2020-21.

    What is CDP-SURAKSHA?

    • CDP-SURAKSHA is a digital platform acronym for “System for Unified Resource Allocation, Knowledge, and Secure Horticulture Assistance.”
    • It facilitates instant subsidy disbursal to farmers’ bank accounts using the e-RUPI voucher from the National Payments Corporation of India (NPCI).
    • It provides upfront subsidies during material purchase, and vendors receive payment only after farmers verify delivery.

    Key Features include database integration with PM-KISAN, cloud-based server space from NIC, UIDAI validation, eRUPI integration, LGD, content management system, geotagging, and geo-fencing.

    Operational Mechanism of CDP-SURAKSHA

    1. Farmer Interaction:
      • Farmers, vendors, implementing agencies (IA), cluster development agencies (CDAs), and National Horticulture Board (NHB) officials can access the platform.
      • Farmers can log in using their mobile number, place orders for planting material, and contribute their share of the cost.
    2. Subsidy Disbursement:
      • After raising the demand, farmers receive the subsidy amount automatically on the screen.
      • Upon paying their contribution, an e-RUPI voucher is generated and received by the vendor, who supplies the planting material.
      • Farmers verify the delivery through geo-tagged media, following which the IA releases payment to the vendor.

    Significance of e-RUPI

    • e-RUPI is a one-time payment mechanism redeemable without cards or digital payment apps, used for specific purposes.
    • It is shared with beneficiaries via SMS or QR code and accepted at merchants supporting e-RUPI.

    Old System vs. CDP-SURAKSHA:

    • Previously, farmers purchased planting materials independently and then approached officials for subsidy release.

    Cluster Development Program (CDP)

     

    • CDP, under National Horticulture Board (NHB), aims to leverage horticulture clusters’ geographical specialization for integrated development.
    • It is a Central Sector Scheme aimed at growing and developing identified horticulture clusters to make them globally competitive.
    • 55 clusters have been identified, with 12 selected for the pilot phase, covering 9 lakh hectares and 10 lakh farmers.
    • It provides government assistance based on cluster size—up to Rs 25 crore for mini clusters, Rs 50 crore for medium, and Rs 100 crore for mega clusters.

     

    PYQ:

    [2019]Among the agricultural commodities imported by India, which one of the following accounts for the highest imports in terms of value in the last five years?

    (a) Spices

    (b) Fresh fruits

    (c) Pulses

    (d) Vegetable oils

  • The ‘import restrictions’ on solar PV cells | Explained

    Context:

    The Finance Minister proposed the ₹19,500 crore PLI scheme in the Union Budget of 2022-23. 

    • This was to scale domestic manufacturing of the entire solar supply chain — from polysilicon to solar modules.
    • The government also introduced a steep 40% customs duty on PV modules and 25% on PV cells.

    BACK2BASICS

    What is the ALMM list?  

    • The Approved List of Models and Manufacturers (ALMM) is a list of models and manufacturers of solar photovoltaic (PV) modules approved by the Ministry of New and Renewable Energy (MNRE) in India.
    • Objective: The ALMM is used to ensure the quality of solar panels and the manufacturer’s reliability for government projects, government-assisted projects, projects under government schemes and programs, and open access and net-metering projects.
    • It is being re-implemented to boost domestic solar manufacturing against China’s dominance in the supply value chain of solar PV.

    Does India rely on Solar PV imports?

    • China’s Dominance in Imports: China is the leading supplier of solar cells and modules to India, accounting for a significant portion of India’s imports. As of January 2023-24, China accounted for 53% of India’s solar cell imports and 63% of solar PV module imports.
    • Manufacturing Capacity Disparity: China holds a dominant position in the manufacturing capacity for various components of solar panels, including polysilicon, wafers, cells, and modules. Rating agency ICRA estimates that China commands over 80% of the manufacturing capacity in these areas.

    Government Initiatives:

    • Notification of ALMM Order: The government initiated efforts to address import dependency in the solar sector by notifying the Approved List of Models and Manufacturers (ALMM) order in January 2019.
    • Introduction of PLI Scheme: The Finance Ministry proposed the Production Linked Incentive (PLI) scheme worth ₹19,500 crore in the Union Budget of 2022-23. This scheme was designed to incentivize domestic manufacturing across the entire solar supply chain, ranging from polysilicon to solar modules.
    • Imposition of Customs Duties on PV Modules and Cells: To further incentivize domestic manufacturing and curb imports, the government introduced steep customs duties on photovoltaic (PV) modules and cells. Initially, a 40% customs duty was imposed on PV modules, and a 25% duty was imposed on PV cells.

    Why is China a leading exporter?

    • Cost-Competitive Manufacturing: China is recognized as the most cost-competitive location for manufacturing all components of the solar PV supply chain.
    • Low Cost of Power: The lower cost of power supplied to the solar PV industry significantly contributes to China’s competitiveness.
    • Growing Domestic Demand: The significant and rapidly growing domestic demand for solar PV products in China has played a crucial role in driving economies of scale.
    • Economies of Scale: China’s large-scale production capacity allows manufacturers to benefit from economies of scale.
    • Continuous Innovation: Chinese government support and the competitive market environment have fostered continuous innovation throughout the solar PV supply chain.

    Future scope for Solar Energy in India:

    • Ambitious Targets:  The target of achieving 500 GW of installed capacity from non-fossil fuels by 2030 underscores the significant role solar energy will play in India’s energy mix.
    • Fastest Growth Rate in Electricity Demand: India accounts for the fastest rate of growth in electricity demand among major economies, according to the International Energy Agency (IEA).
    • Abundant Solar Potential: India possesses abundant solar resources, with an estimated solar power potential of 748.99 GW.

    Conclusion: The ALMM list, PLI scheme, and customs duties aim to boost domestic solar manufacturing in India to counter China’s dominance. With ambitious targets, fast-growing electricity demand, and abundant solar potential, solar energy holds significant promise for India’s energy transition.

    Mains question for practice 

    Q Discuss the initiatives undertaken by the Indian government to promote domestic manufacturing in the solar sector, particularly in light of China’s dominance.

  • [pib] National Green Hydrogen Mission

    Why in the news?

    • The Ministry of New & Renewable Energy has unveiled Guidelines for the implementation of an R&D Scheme under the National Green Hydrogen Mission.
    • The scheme aims to catalyze advancements in the production, storage, transportation, and utilization of green hydrogen, with a focus on affordability, efficiency, safety, and reliability.

    Hydrogen Energy: A Backgrounder

    • Hydrogen is an important source of energy since it has zero carbon content and is a non-polluting source of energy in contrast to hydrocarbons that have net carbon content in the range of 75–85 per cent.
    • Hydrogen energy is expected to reduce carbon emissions that are set to jump by 1.5 billion tons in 2021.
    • It has the highest energy content by weight and lowest energy content by volume.
    • As per International Renewable Energy Agency (IRENA), Hydrogen shall make up 6 per cent of total energy consumption by 2050.
    • Hydrogen energy is currently at a nascent stage of development, but has considerable potential for aiding the process of energy transition from hydrocarbons to renewable.

    About National Green Hydrogen Mission (NGHM)

    • The National Green Hydrogen Mission was launched in January 2023 to make India a ‘global hub’ for using, producing and exporting green hydrogen.
    • Earlier, the National Hydrogen Mission was launched on August 15, 2021, with a view to cutting down carbon emissions and increasing the use of renewable sources of energy.
    • The Ministry of New and Renewable Energy (MNRE) formulates the scheme guidelines for implementation of these missions.

    Key features of the NGHM

    • Power capacity: The mission seeks to promote the development of green hydrogen production capacity of at least 5 MMT per annum with an associated renewable energy capacity addition of about 125 GW in the country by 2030.
    • Job creation: It envisages an investment of over ₹8 lakh crore and creation of over 6 lakh jobs by 2030.
    • Reducing energy import bill: It will also result in a cumulative reduction in fossil fuel imports of over ₹1 lakh crore and abatement of nearly 50 MMT of annual greenhouse gas emissions by 2030.
    • Export promotion: The mission will facilitate demand creation, production, utilisation and export of green hydrogen.
    • Incentivization: Under the Strategic Interventions for Green Hydrogen Transition Programme (SIGHT), two distinct financial incentive mechanisms targeting domestic manufacturing of electrolysers and production of green hydrogen will be provided under the mission.
    • Green Hydrogen Hubs: Regions capable of supporting large-scale production and/or utilisation of hydrogen will be identified and developed as Green Hydrogen Hubs.

    Types of Hydrogen

    Hydrogen extraction methods are classified into three types based on their processes: Grey, Blue, and Green.

    1. Green Hydrogen: Green hydrogen is produced through water electrolysis, utilizing electricity generated from renewable energy sources.
    2. Grey Hydrogen: This type of hydrogen is obtained through coal or lignite gasification (black or brown), or by steam methane reformation (SMR) of natural gas or methane (grey). These processes are typically carbon-intensive.
    3. Blue Hydrogen: Blue hydrogen is derived from natural gas or coal gasification, coupled with carbon capture storage (CCS) or carbon capture use (CCU) technologies to mitigate carbon emissions.

     

    PYQ:

    [2010]Hydrogen fuel cell vehicles produce one of the following as “exhaust”:

    (a) NH3

    (b) CH4

    (c) H2O

    (d) H2O2

     

    [2023]With reference to green hydrogen, consider the following statements:

    1. It can be used directly as a fuel for internal combustion.

    2. It can be blended with natural gas and used as fuel for heat or power generation.

    3. It can be used in the hydrogen fuel cell to run vehicles.

    How many of the above statements are correct?

    (a) Only one

    (b) Only two

    (c) All three

    (d) None

     

  • [9 April 2024] The Hindu Op-ed: Indian aviation, a case of air safety at a discount

    PYQ Relevance:

    Mains: 

    Q) Examine the development of Airports in India through joint ventures under Public – Private Partnership (PPP) model. What are the challenges faced by the authorities in this regard? (UPSC CSE 2017) 

    Q) International civil aviation laws provide all countries 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 that this poses and suggest ways to contain the threat. (UPSC CSE 2014) 

    Note4Students: 

    Prelims: International Civil Aviation Organisation (ICAO);

    Mains: Economy and Infrastructure; Civil Aviation in India; 

    Mentor comments: To put in place long-term efforts for our safe and secure future, we must break down the barriers between ‘Development’ and ‘Humanitarian Response’. Air Transport plays a pivotal role in promoting Economy and Tourism in India. India has an extensive civilian air transportation network and is amongst the fastest-growing aviation markets in the world according to the International Air Transport Association (IATA). Presently, the Aviation Sector in India is facing serious safety concerns as Airline Management prioritizes commercial interests over passenger safety. 

    Let’s learn. 

    —

    Why in the News?

    The Civil Aviation Ministry and the DGCA need a more human-centric approach in airline management, addressing pilot shortages, and prioritizing safety over commercial interests is crucial for the Indian aviation sector to thrive.

    Challenges faced by Airline Services in India:

    • Technical and Safety Concerns: The safety of passengers is being gravely compromised due to the non-provision of the Runway End Safety Area. For example,  at Kozhikode’s Karipur Airport (Kerala).
      • Despite reassurances from the Civil Aviation Ministry and the DGCA, safety issues persist, such as the deferred regulations on pilot fatigue.
    • Resource Availability: The land resources needed by AAI [Airports Authority of India] for better landing and avoiding accidents are generally ignored or delayed by state governments.
    • Nexus between private players and government: Lack of Coordination between Airline owners and the Government for the implementation of safety policies needs to be resolved. For example, the present Flight Duty Time Limitations Regulations where the deadline for their implementation was June 1, 2024, were not taken seriously by private players.
    • Pilot Stress: Financial stress on pilots is also highlighted as a risk factor, with examples of past incidents linked to pilot suicide due to personal financial pressures.
      • Recognizing pilots as human beings who require time with their families, the importance of providing two days off per week for pilots is essential to ensure their well-being and maintain aviation safety.
    Global Scenario and System Overseas:

    The International Civil Aviation Organisation (ICAO) introduced the Fatigue Risk Management System (FRMS) as a mandatory requirement due to the significant impact of fatigue on aviation safety. 

    Studies have shown that sleep deprivation and impaired reaction times due to fatigue are major contributors to accidents and incidents. 

    Countries like Japan, Singapore, and the United Kingdom emphasize fatigue management and rest periods for flight crew to mitigate these risks. 

    Pilots in these countries typically have two days off every week to reset their body clock, especially after long-haul flights. 

    Way Forward:

    • Change the Priority: The Indian aviation sector faces critical safety issues due to a lack of prioritization of safety over commercial interests by airline management. The need for a more human-centric approach, addressing pilot shortages, and emphasizing safety is essential for the sector’s success.
    • Need for Humanitarian Code: India should adopt the ICAO Annex 1 Standard which allows experienced Indian pilots abroad to return to India and utilize the present retired pilots for training and checks. 
    • Need for Updating policy implementations: Overcoming corruption, revising outdated rules, and focusing on transparency and brand loyalty are crucial for the sector’s improvement and the success of airline mergers.

  • What is Consumer Confidence Survey?

    Why in the news?

    • The latest Consumer Confidence Survey conducted by the Reserve Bank of India in March 2024 reveals a significant boost in consumer confidence, particularly regarding future expectations.
    • It says consumer confidence has hit highest level in nearly 5 years.

    What is Consumer Confidence Survey (CCS)?

    • The RBI conducts a bi-monthly Consumer Confidence Survey to measure consumers’ perceptions of the prevailing economic situation.
    • It was started in 2015 with surveys in 13 major cities.
    • The survey is conducted across various cities and measures consumer confidence on parameters such as the economy, employment, price, income, and spending.
    • The survey consists of questions regarding consumers’ sentiments over various factors in the current situation and future.

    Here are a few parameters that help aggregate overall confidence:

    1. Spending: The consumer is asked about the willingness to spend on major consumer durables, purchasing vehicles, or real estate. This measures the overall spending scenario on necessities as well as luxuries for the next quarter.
    2. Employment: The consumer is asked about current and future ideas on employment situations, joblessness, job security, which reflects the sentiments of the current or expected employment in the country.
    3. Inflation: The consumer is asked about interest rates and levels of prices of all goods, tracking the price expected by consumers and their spending on basic necessities.

    Components of CCS:

    1. Current Situation Index (CSI): It measures overall consumer sentiment regarding the present economic situation.
    2. Future Expectations Index (FEI): It analyses consumer sentiment for the next 12 months.

    CSI and FEI are calculated based on people’s views about the economy, their income, spending, job opportunities, and prices compared to the previous year and expectations for the year ahead.

    Key Highlights of the recent report

    • Future Expectations Index (FEI) has climbed by 2.1 points to reach 125.2, marking its highest level since mid-2019, indicating heightened optimism among consumers for the year ahead.
    • Current Situation Index (CSI) has surged by 3.4 points to reach 98.5, marking its highest level since mid-2019.

    PYQ:

    [2018] As per the NSSO 70th Round “Situation Assessment Survey of Agricultural Households”, consider the following statements-

    1. Rajasthan has the highest percentage share of agricultural households among its rural households.

    2. Out of the total agricultural households in the country, a little over 60 percent belong to OBCs.

    3. In Kerala, a little over 60 percent of agricultural households reported to have received maximum income from sources other than agricultural activities.

    Which of the statements given above is/are correct?

    (a) 2 and 3 only

    (b) 2 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

  • Imposition of Anti-Dumping Duty on Sodium Cyanide

    Why in the news?

    The Directorate General of Trade Remedies (DGTR) has recently recommended the imposition of an anti-dumping duty on sodium cyanide (NaCN) imported from China, the European Union, Japan, and Korea.

    Sodium Cyanide and Its Applications

    • Sodium cyanide is a deadly toxic, white, crystalline compound with the chemical formula NaCN.
    • It is a water-soluble solid, mainly used in gold mining, electroplating, and in the synthesis of organic chemicals.
    • It is hygroscopice. it quickly absorbs water from the air.
    • In gold mining, sodium cyanide is used to dissolve and separate gold from its ores.
    • It plays a pivotal role in various industrial processes, electroplating, metal heat treatment, and the production of insecticides, dyes, pigments, and pharmaceuticals.

    What is Anti-Dumping Duty?

    • An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below the price at which it is sold in the exporters’ domestic market.
    • This is imposed with the rationale that these products have the potential to undercut local businesses and the local economy.
    • The World Trade Organization (WTO) operates a set of international trade rules for the regulation of anti-dumping measures.
    • In general, the WTO agreement permits governments to act against dumping “if it causes or threatens material injury to an established industry in the territory of a contracting party.

    Anti-Dumping Mechanism in India:

    • The Anti-Dumping mechanism in India is administered by the Directorate General of Anti-Dumping and Allied Dutites (DGAD) under the Ministry of Finance.
    • The anti-dumping law in India is covered under the Customs Tariff Act, 1975, and the Customs Tariff Rules, 1995.
    • The DGAD conducts anti-dumping investigations to determine if the domestic industry has been hurt by a surge in below-cost imports.

    How is Anti-Dumping Duty calculated?

    • The anti-dumping duty is calculated as the difference between the normal value and the export value of the product.
    • The normal value is the market value of the product in the domestic market, while the export value is the price at which the product is exported to India.
    • The anti-dumping duty is imposed to offset the price difference and prevent the domestic industry from being harmed by cheap imports.

     

    PYQ:

    [2015] In India, the steel production industry requires the import of-

    (a) Saltpetre

    (b) Rock phosphate

    (c) Coking coal

    (d) All of the above

  • Why RBI has been wary of declaring an early victory over inflation?

    Why in the news? 

    Recently, the Monetary Policy Committee (MPC), which met here from April 3 to 5, decided to keep the repo rate unchanged at 6.5% and maintain the policy stance of ‘withdrawal of accommodation’ in the monetary policy.

    • Withdrawal of accommodation means reducing the money supply in the system which will rein in inflation further. (Temporary Provision)

    Why the RBI has been wary of declaring an early victory over inflation?

    • Persistent Food Inflation: Despite expectations of moderation in inflation, food inflation has remained a concern, especially due to the high prices of food grains and vegetables. In February, food inflation was at 8.7%, with foodgrain inflation still high at 9.8%.
    • Inflation Gap between Bottom and Top of Urban Population: Food inflation disproportionately affects lower-income deciles more than higher ones. In February, the bottom 20% of the urban population faced 5.5% inflation compared to 4.7% for the top 20%. This pattern is similar in rural areas as well.
    • Management Issues: The RBI faces challenges in managing inflation while maintaining growth, especially when inflation persists due to Geopolitical conditions. While central bank policy moves cannot directly bring down supply shock-driven inflation, they can prevent high prices from spilling over.

     Why RBI has kept policy rates unchanged?

    • High Economic Growth: The RBI is focused on maintaining price and financial stability to sustain high growth. The central bank expects the Indian economy to grow at 7% in fiscal year 2024-25
    • Benign Core Inflation: Benign core inflation, which has declined steadily over the past months, indicates that strong growth has not been inflationary. The RBI finds comfort in the declining core inflation levels
    • Monetary Policy Stance associated with food inflation: The RBI is likely to maintain policy rates until October 2024 to assess evolving risks associated with food inflation. The central bank is cautious and prefers to adopt a risk-minimization mode to align inflation towards the target while supporting growth
    • Global Economic Conditions: The RBI is monitoring global economic trends and external factors that could impact domestic inflation and growth. The central bank is aware of the risks posed by geopolitical tensions, volatility in international financial markets, and geo-economic fragmentation

     

    BACK2BASICS

    The Monetary Policy Committee (MPC)

    • It is a key body responsible for formulating the country’s monetary policy. It  is a statutory body constituted as per Section 45ZB under the RBI Act of 1934 by the Central Government
    •  It is a six-member committee established under the amended Reserve Bank of India Act, of 1934. The MPC’s primary objective is to determine the policy rate required to achieve the inflation target set by the government. The committee consists of the following members:
      • RBI Governor (ex officio chairperson)
      • Deputy Governor in charge of monetary policy
      • An officer of the Bank nominated by the Central Board
      • Three members appointed by the central government
    • The MPC meets at least four times a year, and decisions taken by the committee are binding on the Reserve Bank of India.
    • The committee’s composition ensures a mix of expertise in economics, banking, finance, and monetary policy to effectively manage the country’s Monetary Policy Framework.

     

    Conclusion: The RBI has been cautious due to persistent food inflation impacting lower income groups, challenges in managing it, and the need to assess evolving risks. MPC’s unchanged policy rates reflect this caution amidst high growth and benign core inflation.

    Mains pyq 

    Q Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments. (UPSC IAS/2019)

    Source https://indianexpress.com/article/opinion/columns/why-rbi-wary-of-declaring-early-victory-over-inflation-9253330/

  • Next government must urgently fix ‘unnecessarily complex’, counter-productive GST: 13th Finance Commission chair

    Why in the news? 

    Recently Vijay Kelkar (chaired 13th Finance Commission) attributes frauds in Indirect Tax regimes to high GST rates; Moots switched to a single 12% rate like most other countries.

    Reason behind the need for a Single GST rate:

    • Simplification of the structure: A single GST rate would simplify the structure, making it easier for businesses to comply with the tax system and reducing the complexity of classification issues
    • Promotion of manufacturing and exports: A single GST rate could help promote manufacturing and exports by reducing the burden of multiple rates and making the tax system more predictable
    • Single GST rate in many countries: In many developed and emerging market economies, a single GST or VAT rate has been successful in optimizing tax revenue and minimizing tax disputes for example Singapore, New Zealand, the United Arab Emirates, and Japan, have opted for a single GST or VAT rate
    • Addressing GST frauds: High GST rates can make it lucrative for fraudsters to evade taxes. A single, lower GST rate could potentially reduce the incentive for tax evasion and make the system more transparent
    • Reducing litigation: A single GST rate could help reduce litigation related to classification issues and subjective interpretation of tax rates

    How does the Indian GST model compare with GST in other countries?

    Particulars India  Canada UK Singapore
    Name of GST in the Country Goods and Service tax Federal Goods and Service Tax & Harmonized Sales Tax Value Added Tax Goods and Service Tax
    Standard Rate 0% (for food staples), 5%, 12%, 18% and 28% (+cess on luxury items) GST 5% and HST varies from 0% to 15% 20 %Reduced rates- 5 %, exempt, zero rated 7% Reduced rates- Zero rated, exempt
    Threeshold Exemption Limit Rs.40 lakh or Rs.20 lakh, depending on the state and supply Canadian $ 30,000 £ 85,000 Singapore $ 1 million
    Liability arises on Accrual basis: Issue of invoice ORReceipt of payment-earlier Accrual basis: The date of issue of invoice OR the date of receiptof payment- earlier. Accrual Basis: Invoice OR PaymentOR Supply-earliestCash basis (T/O up to 1.35mn): Payment Accrual Basis: Issue of invoice OR Receipt of payment OR Supply – earliestCash basis: (T/O up to SGD$1mn): Payment
    Reverse Charge Mechanism Applies on goods as well as services Reverse charge applies to the importation of services andintangible properties Applicable Reverse charge applies to the supply of services
    Exempt Supplies Sale of land and completed buildings, certain healthcare and educational services, essential food items, etc. Real estate, financial services, rent (Residence), charities, health, education Medical, education, finance, insurance, postal services Real estate, Financial services, Residential rental

    Significance of sharing GST with local bodies:

    • Promoting Co-operative Fiscal-federalism: Sharing GST revenues with local bodies could promote fiscal federalism by ensuring a fair distribution of tax revenues among all tiers of government.
    • Strengthening of their Fiscal base: Equitable sharing of GST with the third tier of government, i.e., local bodies, would strengthen their fiscal base and enable them to undertake investments for vital infrastructure and high-quality public goods
    • Building Fairness and appropriateness: GST is a consumption tax, and taxpayers should see direct benefits accruing from their payment of taxes. An arrangement for sharing GST revenues with local bodies would be fair and appropriate
    • Improves Local governance: Sharing GST revenues with local bodies would bolster the quality of governance provided by local governments, as citizens’ demand for quality public goods will grow louder.

    BACK2BASICS:

    About Goods and Services Tax:

    • GST was introduced through the 101st Constitution Amendment Act, 2016. It is one of the biggest indirect tax reforms in the country.
    • It was introduced with the slogan of ‘One Nation One Tax’.The GST has subsumed indirect taxes like excise duty, Value Added Tax (VAT), service tax, luxury tax etc.
    • It is essentially a consumption tax and is levied at the final consumption point.
    • Tax Structure:
    • Central GST to cover Excise duty, Service tax etc, State GST to cover VAT, luxury tax etc. and Integrated GST (IGST) to cover inter-state trade.
    • IGST per se is not a tax but a system to coordinate state and union taxes.
    • It has a 4-tier tax structure for all goods and services under the slabs- 5%, 12%, 18% and 28%.

    Conclusion: Implementing a single GST rate streamlines compliance, promotes economic growth, and curbs fraud. Sharing GST revenue with local bodies strengthens fiscal bases, fosters fairness, enhances governance, and supports fiscal federalism for equitable distribution.

  • Why green hydrogen presents both major opportunities, significant challenges

    why in the news? 

    Recently, the Ministry of New and Renewable Energy (MNRE) has announced a Rs-496-crore (until 2025-26) scheme to support pilot projects that either test the viability of green hydrogen as a vehicle fuel or develop secure supporting infrastructure such as refuelling stations.

    Objecive of MNRE scheme 

    (i) validation of technical feasibility and performance of green hydrogen as a transportation fuel

    (ii) evaluation of the economic viability of green hydrogen-powered vehicles

    (iii) demonstration of safe operation of hydrogen-powered vehicles and refuelling stations.

    About Green , Blue and grey hydrogen

    The significance of hydrogen fuel vehicles, particularly hydrogen internal combustion engine (ICE) vehicles and hydrogen fuel cell electric vehicles (FCEVs)

    • Zero Carbon Emissions: Both hydrogen ICE vehicles and FCEVs produce zero carbon emissions during operation.
    • Energy Efficiency: While research suggests that burning hydrogen in an ICE vehicle may be less energy-efficient than using it in a fuel cell, FCEVs still offer high energy efficiency compared to traditional internal combustion engine vehicles, particularly those powered by fossil fuels like diesel and petrol.
    • Clean Energy Production: Hydrogen can be produced through various renewable energy sources, such as wind, solar, and hydroelectric power.
    • Lightweight and Increased Payload Capacity: Hydrogen FCEVs typically weigh less than battery electric vehicles (BEVs) due to the lighter weight of hydrogen and the fuel cell stack compared to EV batteries.
    • Long-haul Freight Applications: Research indicates that long-haul FCEVs can carry freight amounts similar to diesel trucks, while BEVs may suffer from a weight penalty due to heavier batteries.  .
    • Diversification of Energy Sources: Hydrogen fuel vehicles offer a viable alternative to battery electric vehicles, providing diversification in energy sources for transportation.

     Challenges 

    • Storage and Transportation Challenges: Developing specialized cylinders capable of safely storing high-pressure green hydrogen is essential. Existing cylinders designed for compressed natural gas (CNG) are not suitable for hydrogen storage
    • Fuel Costs and Infrastructure: Green hydrogen-powered vehicles face challenges in competing with battery electric vehicles (BEVs) due to higher fuel costs and the need for infrastructure development, including hydrogen refueling stations. The cost of establishing and maintaining hydrogen refueling infrastructure is significant, hindering the widespread adoption of hydrogen FCEVs.
    • Safety Concerns: Hydrogen is highly flammable, necessitating robust safety standards and protocols for handling and storing the fuel at refueling stations.

    Conclusion 

    Green hydrogen offers zero emissions, energy efficiency, and diversification in energy sources for transportation. However, challenges like storage, infrastructure costs, and safety concerns hinder widespread adoption, despite MNRE’s support scheme.

    Mains PYQ

    Q How is efficient and affordable urban mass transport key to the rapid economic development in India? (UPSC IAS/2019)

    Q Discuss in detail the photochemical smog emphasizing its formation, effects and mitigation. Explain the 1999 Gothenburg protocol.(UPSC IAS/2022)

  • RBI to launch Mobile App for Retail Direct scheme

    Why in the news?

    The RBI has decided to introduce a Mobile App of its RBI Retail Direct scheme aimed at facilitating seamless investment in government securities by retail investors.

    What is Retail Direct Scheme?

    • Retail Direct Scheme was rolled out in November 2021, giving access to individual investors to maintain gilt accounts with RBI and invest in government securities.
    • Using this app, investors can buy central and state government bonds as well as Treasury bills.
    • It enables investors to buy securities in primary auctions as well as buy/sell securities through the Negotiated Dealing System-Order Matching system (NDS-OM) platform.
    • A Gilt Account can be compared with a bank account, except that the account is debited or credited with treasury bills or government securities instead of money.

    Treasury Bills:

    • They are promissory notes issued by the RBI on behalf of the government as a short term liability and sold to banks and to the public.
    • The maturity period ranges from 14 to 364 days.
    • They are the negotiable instruments, i.e. they are freely transferable.
    • No interest is paid on such bills but they are issued at a discount on their face value.

     How does it work?

    • Under the scheme, small investors can buy or sell government securities (G-Secs), or bonds, directly without an intermediary like a mutual fund.
    • However, the same tax rules apply to income from G-Secs.
    • The minimum amount for a bid is ₹10,000 and in multiples of ₹10,000 thereafter.
    • Payments may be made through Net banking or the UPI

    Benefits of RDS

    • With the government being the borrower, there is a sovereign guarantee for the funds and hence zero risk of default.
    • Also, government securities may offer better interest rates than bank fixed deposits, depending on prevailing interest rate trends.

    How can individuals access G-Sec offerings?

    • Investors wishing to open a Retail Direct Gilt account directly with the RBI can do so through an online portal set up for the purpose of the scheme.
    • Once the account is activated with the aid of a password sent to the user’s mobile phone, investors will be permitted to buy securities either in the primary market or in the secondary market.

    PYQ:

    [2018] Consider the following statements:

    1. The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities.

    2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.

    3. Treasury bills offer are issued at a discount from the par value.

    Which of the statements given above is/are correct?

    (a) 1 and 2 only

    (b) 3 only

    (c) 2 and 3 only

    (d) 1, 2 and 3