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Subject: Economics

  • Is India’s sugar surplus leading to a crisis?

    What’s the news?

    • India’s top sugarcane-growing states rely heavily on groundwater for irrigation, leading to concerns over groundwater depletion.

    Central idea

    • India’s remarkable achievement of becoming the world’s top sugar producer in 2021-2022, surpassing Brazil, brings with it a significant challenge. The overcultivation of sugarcane has resulted in a sugar surplus and high exports, negatively impacting groundwater levels. To safeguard the agricultural sector and protect vital natural resources, addressing groundwater overuse in the sugar industry is of utmost importance.

    Factors Behind the Excess Sugar Production

    • Government Policies and Subsidies: The Indian government’s policies and subsidies play a significant role in encouraging farmers to cultivate sugarcane. The fair and remunerative price (FRP) scheme ensures that sugar mills pay a minimum price to sugarcane farmers, guaranteeing them fair profits for their crop.
    • Domestic Demand: India’s position as the world’s largest consumer of sugar creates a substantial demand for sugar and its by-products. To meet this demand, farmers increase sugarcane cultivation, leading to excess sugar production.
    • Export Incentives: The surplus sugar production in India has led to higher exports, and the government offers export subsidies to boost overseas sales.

    Impact of Excessive Sugarcane Cultivation on Groundwater

    • Water Depletion in Groundwater Reservoirs:
    • Excessive sugarcane cultivation contributes to the depletion of groundwater reserves.
    • In regions with inadequate rainfall, farmers heavily rely on groundwater from confined aquifers to sustain sugarcane crops.
    • This over-extraction of groundwater leads to a reduction in groundwater levels, depleting the available water resources.
    • Groundwater Stress and Drought Concerns:
    • The extensive use of groundwater for sugarcane cultivation puts immense stress on groundwater reservoirs. In regions already experiencing groundwater stress, the additional demand for water exacerbates the problem.
    • Moreover, sugarcane cultivation often occurs in areas prone to drought, and excessive water usage further exacerbates the vulnerability of these regions to water scarcity.
    • Environmental Impacts:
    • Groundwater depletion due to excessive sugarcane cultivation can have severe environmental consequences.
    • As groundwater levels decline, it affects the health of ecosystems dependent on groundwater sources, such as wetlands, rivers, and lakes. Reduced flow in rivers and streams can harm aquatic life and disrupt local ecosystems.
    • Impact on Farmers and Livelihoods: Groundwater depletion directly affects farmers who rely on it for irrigation. As water levels drop, farmers may face difficulties in accessing sufficient water for their crops, leading to reduced yields and economic losses. In areas where sugarcane is the dominant crop, groundwater depletion can impact the livelihoods of farming communities.
    • Long-Term Sustainability Concerns:
    • The continued excessive use of groundwater for sugarcane cultivation is not sustainable in the long run.
    • Depleting groundwater reserves can lead to permanent damage to aquifers and reduce the overall capacity to support agricultural activities in the future.

    Solutions to address the problem of excessive sugar production

    • Crop Diversification: Encourage farmers to diversify their crops and reduce their heavy reliance on sugarcane cultivation. Introducing fair and comprehensive subsidy schemes for a variety of crops can help farmers diversify their cultivation, preventing monocultures and reducing the strain on groundwater resources.
    • Sustainable Sugarcane Cultivation Practices: Promote environmentally responsible sugarcane cultivation practices that prioritize groundwater conservation. Encouraging the use of drip irrigation, which reduces water consumption by up to 70% compared to flood irrigation, can be made mandatory in sugarcane-growing regions. The government can also offer subsidies to farmers for setting up drip irrigation systems.
    • Water-Saving and Management Systems: Invest in water-saving and management systems such as rainwater harvesting, wastewater treatment, and canal irrigation networks. These initiatives can minimize stress on groundwater reservoirs as alternative water sources become available for irrigation.
    • Groundwater Research and Mapping: Invest in groundwater research and mapping to better understand groundwater availability and distribution. This data can help in devising effective strategies to manage groundwater resources more sustainably.
    • Review of Export Incentives: Review export incentives and subsidies to ensure they are not leading to excessive sugar production and environmental degradation. Striking a balance between domestic demand and exports will help manage sugar production more efficiently.
    • Public Awareness and Education: Create public awareness campaigns to educate farmers about the importance of sustainable water management and the impact of excessive sugarcane cultivation on groundwater. Providing training and guidance on adopting water-saving practices can facilitate better resource management.
    • Government Regulations and Policies: Implement regulations and policies to control groundwater extraction and prevent overexploitation. By enforcing responsible water use, the government can protect groundwater resources and ensure their sustainability.

    Conclusion

    • Balancing sugar production with responsible water management practices is vital for the well-being of farmers, the preservation of natural resources, and the long-term stability of the agricultural sector. By implementing a multi-faceted approach that encourages crop diversification and sustainable cultivation practices, India can pave the way for a greener and more resilient future.

  • Tree Felling Estimates for GNI Project

    gni project

    Central Idea

    • The ambitious ₹72,000-crore Great Nicobar Project, proposed by the Union government, is facing environmental scrutiny as the number of trees expected to be felled has been revised to 9.64 lakh, higher than the previously estimated 8.5 lakh

    What is GNI Project?

    • The GNI Project refers to the “Holistic Development of Great Nicobar Island,” a proposed mega project being piloted by NITI Aayog.
    • The project aims to develop the southern end of the Andaman and Nicobar group of Islands in the Bay of Bengal by constructing –
    1. Transhipment port
    2. Dual-use military-civil international airport
    3. Power plant and
    4. A township over a span of 30 years on more than 160 sq. km of land, of which 130 sq. km is primary forest

    Features of the Project

    • Transshipment hub of the East: The proposed port will allow Great Nicobar to participate in the regional and global maritime economy by becoming a major player in cargo transhipment.
    • Naval control: The port will be controlled by the Indian Navy, while the airport will have dual military-civilian functions and will cater to tourism as well.
    • Urban amenities: Roads, public transport, water supply and waste management facilities, and several hotels have been planned to cater to tourists.

    Significance of the Project

    The GNI Project holds both economic and strategic significance:

    • Economic Significance: It positions Great Nicobar as a transhipment hub in the East, strategically located along the East-West international shipping corridor. This can potentially boost revenue and make India a significant player in cargo transhipment.
    • Strategic Significance: The development of Great Nicobar has been deemed crucial for national security and consolidating India’s position in the Indian Ocean Region. The project serves as an oceanic outpost and addresses concerns over increased Chinese presence in the Indian Ocean.

    Challenges and Concerns

    • Biodiversity Threat: The project’s development, township construction, and influx of people may lead to habitat destruction and degradation, posing a threat to numerous species on the island.
    • Indigenous Tribes Displacement: The project could displace two isolated and indigenous tribes, the Shompen and the Nicobaris, jeopardizing their way of life and cultural heritage.
    • Deforestation Impact: Cutting down an estimated 9.64 lakh trees in prehistoric rainforests could significantly impact the island’s ecology and biodiversity.
    • Inadequate Environmental Assessments: Concerns have been raised about the haste in obtaining clearances and the adequacy of environmental and social impact assessments.
    • Fragile Topography: The region’s tectonic volatility and disaster vulnerability add to the challenges, particularly considering the 2004 Tsunami’s impact on tribal communities.

    Major Concerns

    • Tree Felling Estimate: Minister of State (Environment) Ashwini Kumar Choubey revealed that approximately 9.64 lakh trees may need to be cut down for the development in the Great Nicobar Project. However, there is a possibility that the actual number of trees felled could be lower.
    • Environmental Consequences: The forest earmarked for development on the Great Nicobar Island is an evergreen tropical forest with high biological diversity, housing nearly 650 species of flora and 330 species of fauna.
    • Compensatory Afforestation: To offset the tree felling, the government plans to carry out compensatory afforestation in Haryana. The state has agreed to provide an area of 261.5 square km for this purpose.
    • Tribal concerns: The island administration did not grant forest land ownership to local tribespeople as required under the Forest Conservation Rules, 2017, raising concerns about consent and rights recognition.
    • Inconsistencies with Stage-I Clearance: The approval process for the project faced delays, and claims over forest land under the FRA were not processed adequately.

    Conclusion

    • The Great Nicobar Project’s environmental concerns, including extensive tree felling, potential habitat destruction, and challenges related to tribal communities, call for a careful reconsideration of the project’s impact and approach.
    • Striking a balance between economic development and environmental conservation is crucial, emphasizing sustainable practices and preserving the island’s rich biodiversity and cultural heritage.

  • The new restriction on Personal Computers/laptop imports: Why the move, and its potential impact

    What’s the news?

    • The central government has placed restrictions on the import of laptops, tablets, and computers with immediate effect. As per the notification, the import would be allowed under a valid license for restricted imports.

    Central Idea

    • India has imposed restrictions on the import of personal computers, laptops, and other IT hardware from China to promote domestic manufacturing and reduce dependence on Chinese imports. This move is part of the government’s efforts to boost the electronics sector and strengthen India’s self-reliance in the production of IT hardware.

    What does the notification for the restriction on imports state?

    • Restricted Categories: The notification restricts the import of personal computers, laptops, palmtops, automatic data processing machines, microcomputers and processors, and large or mainframe computers falling under the HSN code 8471.
    • Import Against a Valid License: Imports of laptops, tablets, all-in-one personal computers, and ultra-small form factor computers and servers under HSN 8741 will be allowed only against a valid license for restricted imports.
    • Exemption for Research and Development: The government has granted exemption from import licenses for imports up to 20 items per consignment used for research and development, testing, benchmarking, evaluation, repair and re-export, and product development purposes. However, these imports can only be used for the stated purposes and not for sale.
    • Exemption for Repair and Return: The license for restricted imports is not required for the repair and return of goods that were repaired abroad, as per the Foreign Trade Policy.

    China’s Dominance in IT Hardware Imports

    • Increase in Electronic Goods Imports:
    • India has witnessed a significant increase in imports of electronic goods and laptops/computers in recent years.
    • During the April-June quarter, the import of electronic goods surged to $6.96 billion, accounting for 4–7 percent of the overall imports.
    • Dominance in the Personal Computers Category:
    • Among the seven categories of restricted imports, China holds a substantial share in the personal computer segment, which includes laptops and palmtops.
    • In the April-May period, imports of personal computers from China amounted to $558.36 million, representing roughly 70–80 percent of India’s total imports in this category.
    • Surge in imports from China:
    • While there was a decline in imports from China in the previous financial year, it is crucial to address the sharp surge in imports in the two preceding years (2021–22 and 2020–21).
    • In 2021–22, imports of personal computers and laptops from China saw a year-on-year increase of 51.5 percent, amounting to $5.34 billion.
    • Similarly, in 2020–21, there was a significant year-on-year increase of 44.7 percent, with imports totaling $3.52 billion.

    Reasons behind the restrictions

    • Boosting Domestic Production: India aims to strengthen its domestic production capabilities in the electronics sector. By restricting imports, the government wants to push companies to manufacture these goods locally in India.
    • Reducing Reliance on China: India has seen a significant increase in imports of electronic goods and laptops/computers from China in recent years. By imposing restrictions, India intends to reduce its reliance on Chinese imports and diversify its sources of electronic products.
    • Supporting the PLI Scheme: The move is seen as a direct boost to the Center’s production-linked incentive (PLI) scheme for IT hardware. The restrictions aim to encourage companies to participate in the scheme and invest in local production.
    • Addressing Trade Imbalance: India has faced a trade imbalance in the electronics sector with China. By limiting imports, India aims to address this imbalance and potentially improve its trade position.
    • Strengthening the Domestic Electronics Industry: The restriction is part of India’s broader strategy to develop and strengthen its electronics manufacturing sector. By promoting domestic production, India seeks to create job opportunities and enhance its industrial capabilities.

    Conclusion

    • India’s decision to restrict IT hardware imports from China aims to reduce import reliance on a single country. With the right incentives and measures in place, this restriction could pave the way for a robust and competitive domestic IT hardware industry in India.

  • Vivad se Vishwas II Scheme launched

    vivaad se vishwas

    Central Idea

    • The Centre has launched the Vivad se Vishwas II scheme, a one-time settlement scheme, to effectively resolve pending contractual disputes with vendors or suppliers to the government and its undertakings.

    Vivad se Vishwas II Scheme

    • The scheme was announced in the Union Budget 2023-24.
    • It aims to settle government and government undertakings’ contractual disputes wherein arbitral awards are challenged in courts.
    • The Vivad Se Vishwas I scheme was announced under Union Budget 2020 to reduce ongoing legal disputes under direct taxation.
    • Around 150,000 cases were resolved with the recovery of about 54 per cent of the amount under litigation.
    • The scheme was started in March 2020, and closed on March 31, 2021.

    Key details about the Scheme

    • Deadline and Guidelines: The scheme sets an October 31 deadline for firms to submit their claims for consideration. The Department of Expenditure had earlier issued guidelines for its operation in late May.
    • Eligibility: The scheme applies to domestic contractual disputes where one of the parties is either the Government of India or an organization working under its control.
    • Cut-off Dates: To be considered for settlement, an arbitral award must have been secured by the aggrieved party by January 31, 2023, while the cut-off date for court orders is set at April 30.
    • Graded Settlement Terms: The scheme offers graded settlement terms based on the pendency level of the disputes. For cases involving court awards, the settlement amount offered to the contractor can be up to 85% of the net amount awarded or upheld by the court. For arbitral awards, the threshold is “up to” 65% of the net amount.
    • Processing and Registration: Eligible claims shall be processed only through the Government e-Marketplace (GeM), which has developed a dedicated web-page for implementing this scheme. For Ministry of Railways’ contractors, claims can be registered on the Indian Railways E-Procurement System.

     

  • Law passed allowing Auction, Mining of Lithium Reserves

    Central Idea

    • The Union Cabinet approved amendments to the Mines and Minerals (Development and Regulation) Act to allow commercial mining of lithium and five more minerals.
    • This move is aimed at increasing the exploration and mining of these valuable resources from newly discovered mines by opening them to private sector participation.

    Mining of Critical Minerals

    • Minerals Removed from Atomic Minerals List: The law removes lithium, beryllium, titanium, niobium, tantalum and zirconium from the list of atomic minerals, which previously restricted their exploration and mining to state-run companies only.
    • Private Sector Participation: With the removal of these minerals from the atomic minerals list, private companies can now participate in the exploration and mining processes.

    Why such move?

    • New Lithium Reserves in J&K: Earlier this year, lithium reserves were discovered in the federally administered region of Jammu and Kashmir. The government plans to find more reserves later this year.
    • Expected Increase in Exploration and Mining: The government expects a significant increase in the exploration and mining activities of these minerals across the country due to private sector involvement.

    Significance of Private Sector Involvement

    • Force Multiplier: The involvement of private companies is seen as a “force multiplier” as it is expected to boost the production of these critical minerals, meeting the growing demands of the country.
    • Increased Production Capacity: The participation of private players is likely to lead to increased production capacity, enabling India to meet the rising demand for electric vehicle batteries and other industrial applications.

    Need for Vigorous Exploration and Production

    • Meeting Growing Demands: India’s increasing focus on electric vehicles and other technological advancements necessitates a robust supply of critical minerals. Vigorous exploration and production are crucial to fulfill the country’s requirements.

    Conclusion

    • The passage of the law by India’s Parliament marks a significant step towards increasing the exploration and mining of critical minerals, including lithium, for electric vehicle batteries and other industrial applications.
    • By allowing private sector participation, the government aims to bolster the production capacity and meet the growing demands of the country, ensuring a sustainable and technologically advanced future.

    Also read:

    Discovery of Lithium Deposits in J&K

  • In news: New GI Tags Awards

    Central Idea

    • The Geographical Indications Registry in Chennai recently granted the prestigious Geographical Indication (GI) tag to many distinctive products from across India.

    GI Tags for Rajasthani Crafts

    • Udaipur Koftgari Metal Craft: This traditional craft involves ornamenting weapons with intricate designs, gold and silver wire embedding, and polishing. The process results in exquisite and finely crafted metalware.
    • Bikaner Kashidakari Craft: Traditional craftspeople from the Meghwal community in Bikaner and nearby districts create this craft on cotton, silk, or velvet. The intricate fine stitches and mirror-work are mainly used for marriage-related objects and are believed to ward off the ‘evil eye.’
    • Jodhpur Bandhej Craft: Known for its vibrant and colorful appeal, Bandhej is an ancient Rajasthani art of tying and dyeing textiles. The fabrics, including muslin, silk, and voile, are tied with cotton thread before dyeing.
    • Bikaner Usta Kala Craft: Also known as gold nakashi or gold manauti work, this craft is characterized by the use of untreated raw camel hide. The skilled Dapgar community of leather craftspeople meticulously processes and molds the leather to create durable and golden-hued products.

    Other GI Tagged Products

    • Jalesar Dhatu Shilp (Uttar Pradesh): This craft from Jalesar in Uttar Pradesh’s Etah district involves making decorative metal craft and brassware, including ghungrus (anklets) and ghantis (bells). The Thatheras community, residing in the Hathuras locality, is responsible for creating these beautiful metal products.
    • Goa Mankurad Mango (Goa): Also known as malcorada, cardozo mankurad, corado, and Goa mankur, this variety of mango was granted a GI tag. The All Goa Mango Growers Association filed the application for this mango, which holds historical significance with its Portuguese-inspired name.
    • Goan Bebinca (Goa): Known as the ‘queen of Goan desserts,’ Bebinca is a traditional Indo-Portuguese pudding. The All Goa Bakers and Confectioners Association filed the application for the GI tag.
    • Kanniyakumari Matti banana (TN): It is a banana variety grown in the Kanniyakumari district of Tamil Nadu, India. It is known for its unique sweet taste and small size. It is cultivated in the southernmost part of India, and its retail market value has increased. The variety is in high demand, especially in the Thiruvananthapuram region of Kerala, where it is exported to Gulf countries. The banana is used in the making of “panchamirtham.”

    Back2Basics: Geographical Indication (GI)

    • A GI is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.
    • Nodal Agency: Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry
    • India, as a member of the World Trade Organization (WTO), enacted the Geographical Indications of Goods (Registration and Protection) Act, 1999 w.e.f. September 2003.
    • GIs have been defined under Article 22 (1) of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement.
    • The tag stands valid for 10 years.

  • MSP as a legal right: Pros and Cons

    What’s the news?

    • For years, farmers have been demanding a legal guarantee of the minimum support price (MSP), calculated according to the Swaminathan Commission formula.

    Central idea

    • The significance of MSP lies in its role in maintaining agricultural viability and preventing farmers from falling into debt and bankruptcy. However, the current MSP system falls short of its objectives, leaving most farmers without much-needed support. This op-ed emphasizes the need for a farmer-centric agricultural policy and a radical shift in approach to secure MSP with a legal guarantee.

    Minimum support price (MSP)

    • MSP is the price at which the government procures crops directly from farmers. It is calculated to be at least one-and-a-half times the cost of production incurred by the farmers.
    • The MSP serves as a minimum guaranteed price for specific crops that the government considers remunerative and deserving of support for farmers.

    Agriculture’s Role in the National Economy

    • Employment and Livelihood: Agriculture is the largest source of employment and livelihood for about 50 percent of the country’s population, especially in rural areas. It provides direct and indirect employment for millions of people.
    • Contribution to GDP: Agriculture contributes around 17–18 percent to India’s Gross Domestic Product (GDP). Although the share of agriculture in the overall GDP has been declining over the years due to the growth of other sectors, it remains a crucial component of the economy.
    • Food Security: The agricultural sector plays a critical role in ensuring food security for the nation. By producing a variety of food crops like rice, wheat, pulses, fruits, and vegetables, it caters to the dietary needs of the population and helps manage food inflation.
    • Source of Raw Materials: Agriculture is the primary source of raw materials for various industries, including textiles, sugar, jute, and vegetable oil. It provides the necessary inputs for industrial production, contributing to the overall industrial growth of the country.
    • Export Earnings: Agricultural exports, such as rice, spices, tea, coffee, and cotton, generate foreign exchange earnings for the country. This helps improve the balance of trade and supports economic growth.
    • Rural Development: The growth of agriculture has a significant impact on rural development. It improves rural infrastructure, raises the standard of living, and creates opportunities for the development of allied industries and services in rural areas.
    • Poverty Alleviation: Agriculture remains an essential tool in poverty alleviation as it provides income and employment opportunities to the rural population, which is often more susceptible to poverty.

    Important role of MSP

    • Ensuring Income Security: MSP provides a minimum guaranteed price for farmers’ produce. It protects them from price fluctuations and market risks, ensuring a stable income for their efforts and investment in farming.
    • Preventing Distress Sales: With MSP in place, farmers are less likely to resort to distress sales of their crops during times of market downturns.
    • Encouraging Crop Diversification: The MSP system covers a range of crops, including cereals, pulses, oil seeds, and more. By providing a remunerative price for diverse crops, it encourages farmers to adopt crop diversification, contributing to agricultural sustainability and food security.
    • Government Procurement: MSP sets a benchmark for government procurement of crops. The government procures crops at MSP through various agencies like FCI and state agencies, thereby supporting farmers and maintaining buffer stocks for food distribution.
    • Addressing Regional Imbalances: MSP implementation considers regional variations in production costs and helps bridge the income gap between farmers in different regions. It addresses regional imbalances and ensures equitable growth in the agriculture sector.

    Inadequacies of the MSP

    • Limited Coverage: The current MSP system leaves the majority of farmers without much-needed support. Only around 6% of farmers in the country benefit from MSP, while the remaining face challenges in accessing remunerative prices for their produce.
    • Debt and Bankruptcy: Despite MSP being introduced as a safety net, farmers still struggle with debt and bankruptcy. The average debt burden on a farmer’s family is over Rs 1 lakh, despite the subsidies provided by the government.
    • Natural Disasters and Market Risks: Farmers remain vulnerable to natural disasters and market forces, making their income uncertain and apprehensive. Climate change adds complexity to farming, and farmers cannot be left at the mercy of such unpredictable factors.
    • Insufficient Market Regulation: Middlemen exploit farmers, leading to a significant difference between the price at which farmers sell their produce and the price at which consumers buy the same produce. This lack of market regulation affects farmers’ income adversely.
    • Inadequate MSP Calculation: The MSP calculation method may not fully reflect the input costs, market trends, and other economic factors, leading to an ineffective MSP for farmers.
    • Rising Debt: The outstanding loan on farmers has increased significantly over the years, indicating the insufficiency of MSP and minimal increases in support prices.

    Swaminathan Commission Recommendations

    • Calculation of MSP: The Swaminathan Commission recommended that MSP be calculated by adding 50 percent profit to the C2 cost (comprehensive cost including imputed value of family labor) for crops. This method takes into account various input costs incurred by farmers, including labor, seeds, fertilizers, and other expenses.
    • Expanded Coverage: The Commission suggested expanding the scope of MSP to cover a wide range of agricultural produce, including crops like ginger, garlic, turmeric, chili, and all agricultural produce and horticulture.

    The Call for a Legal Guarantee of MSP

    • Addressing Rising Debts: The outstanding loan to farmers has significantly increased over the years, reaching Rs 23.44 lakh crore in 2021–22. Legalizing MSP would offer a sustainable solution, reducing farmers’ dependence on debt.
    • Fulfilling Promises: A legal guarantee makes MSP a binding obligation, ensuring farmers receive the promised prices for their crops and avoiding selling at lower rates.
    • Empowering Farmers: Legalized MSP enhances farmers’ bargaining power and enables informed decisions in cropping and marketing.
    • Supporting Sustainable Agriculture: MSP legislation promotes sustainable agriculture, diversification, and resilience against climate change.
    • Promoting Farmer-Centric Policy: A Legal Guarantee of MSP emphasizes a farmer-centric approach, safeguarding their rights, interests, and livelihoods.

    Way forward

    • Reforming Agribusiness and Ensuring Fair Compensation:
      1. Promote farmer producer organizations (FPO’s) and cooperatives.
      2. Facilitate direct market access to reduce dependence on intermediaries.
    • Adhering to the Swaminathan Commission’s Guidelines:
      1. Follow the MSP calculation as per the Swaminathan Commission’s recommendations.
      2. Consider comprehensive costs, including labor and input expenses.
    • Promoting Sustainable Agriculture Practices:
      1. Encourage the adoption of sustainable farming practices and climate-resilient crop varieties.
      2. Invest in agricultural research and extension services for modern technologies.
    • Ensuring Access to Credit and Insurance:
      1. Strengthen credit facilities for farmers.
      2. Provide insurance coverage to manage risks effectively.
    • Investing in Rural Infrastructure:
      1. Improve irrigation facilities, storage, and transportation networks.
      2. Reduce post-harvest losses and improve market access.
    • Promoting Agro-tourism and Direct Marketing:
      1. Encourage agro-tourism for additional income.
      2. Establish farmers’ markets and e-commerce platforms for direct marketing.

    Conclusion

    • The demand for a legal guarantee of MSP is a just and crucial step towards safeguarding the livelihoods of farmers. Providing farmers with a dignified life is not just a moral obligation but an economic imperative, as the growth of the agricultural sector directly impacts the nation’s prosperity.

  • Mapping India’s Chip Design Ecosystem

    chip

    Central Idea

    • The Indian government is considering a proposal to pick an equity stake in domestic chip design-making companies as part of the second phase of the Design-Linked Incentive (DLI) Scheme for the semiconductor industry.
    • The aim behind the scheme is to establish a stable ecosystem and promote the growth of “fabless companies” in India—entities that design chips but outsource manufacturing.
    • However, this policy requires a long-term strategy due to the capital-intensive nature of the semiconductor sector and the lengthy gestation periods for setting up design and fabrication units.

    What is DLI Scheme?

    What is Design Linked Incentive (DLI) Scheme? - Civilsdaily

    • DLI scheme is a program aimed at providing financial and infrastructural support to companies establishing semiconductor manufacturing plants in India.
    • Eligible participants who set up fabrication units in the country can receive fiscal support of up to 50% of the total cost.
    • Additionally, participants building compound semiconductors, silicon photonics, and sensors fabrication plants can avail fiscal support of 30% of the capital expenditure under this scheme.
    • Companies engaged in semiconductor design for integrated circuits, chipsets, system-on-chips, systems, and IP cores will receive incentives of 4% to 6% on net sales for a duration of five years.
    • The scheme is expected to promote the growth of at least 20 such companies, achieving a turnover of more than ₹1500 crore in the next five years.

    Present Chip Dynamics

    • Long Gestation Period: Setting up design and fabrication units in the semiconductor industry involves long gestation periods before the first product is launched. Returns on investment are not immediate.
    • Capital Intensive: The semiconductor industry requires significant investment for setting up fabrication units, up-scaling manufacturing capabilities, and research.
    • Cyclic Nature: The industry’s cyclic nature and changing functional requirements of chipsets make research and development challenging.
    • Supply Chain Disruptions: Supply chain disruptions, such as those experienced during COVID-related lockdowns, can dampen investor confidence in the sector.

    Domestic Chip Industry Scenario

    • Talent Pool: India has a highly-skilled talent pool of semiconductor design engineers, making up around 20% of the world’s workforce, working for global companies like Intel, Micron, and Qualcomm, among others.
    • IP Ownership: Despite a thriving talent pool, India owns a smaller portion of the intellectual property (IP) related to chip designs, which is mostly retained by global companies.
    • DLI Scheme for Chip Designing: The DLI scheme introduced in December 2021 aimed to indigenize innovations and support the growth of chip design companies with financial incentives.
    • Changing Landscape: The scheme has led to the establishment of over 30 semiconductor design startups in India, with some already receiving government support.

    Growing market in India

    • The semiconductor industry is growing fast and can reach $1 trillion dollars in this decade. India can grow fast and reach $64 billion by 2026 from $27 billion today.
    • Mobiles, wearables, IT, and industrial components are the leading segments in the Indian semiconductor industry contributing around 80% of the revenues in 2021.
    • The mobile and wearables segment is valued at $13.8 billion and is expected to reach $31.5 billion in 2026.

    Challenges and Considerations

    • Effectiveness and Efficiency: Some experts view the government’s plan to become a venture capital firm for chip design companies as ineffective and inefficient. Companies may prefer foreign buyers for higher valuations and global ecosystem connections.
    • Venture Capital Support: The lack of venture capitalists in the private sector focused on semiconductors is a challenge for the growth of design firms.
    • Equity Stake’s Impact: Offering an equity stake can align the interests of design companies with the project’s success, ensuring shared risk and reward. It may also help in selling chip-designing services more effectively and attracting a broader client base in the market.
    • IP and Value-Added Activities: The government must consider who can keep the IP and how investments can drive more innovation and employment generation. Moving up in the value chain and enabling the ecosystem is crucial.

    Conclusion

    • The proposal to take an equity stake in domestic chip design-making companies in India’s semiconductor industry aims to promote the growth of fabless companies and ensure a stable ecosystem.
    • However, it requires a long-term strategy and careful consideration of IP ownership, venture capital support, and value-added activities in chip design.
    • The success of the scheme will depend on effective implementation and alignment of interests between the government and promising design companies.

  • Need for Overhaul in UDAN Scheme

    udan

    Central Idea

    • Union Civil Aviation Ministry inaugurated a new phase of the Ude Desh Ka Aam Nagrik (UDAN) scheme, or UDAN 5.2, to improve last-mile connectivity in remote regions of the country through small aircraft.
    • There have been aspersions regarding the success of the UDAN regional connectivity scheme (RCS) since ONLY 11 of the 74 Greenfield airports are decently operational.

    Progress till now

    • Route Closures: Out of the 479 routes launched under RCS, 225 have ceased operations, leading to significant route closures.
    • Commercial Viability: Around 70 of the routes were found to be commercially unviable even with subsidies, leading airlines to discontinue their operations.
    • Three-Year Sustainability: The objective of RCS was for airlines to become self-sustaining after three years, but only 58 out of 155 routes completed this period successfully.
    • Incomplete Infrastructure: Some airports, such as Thanjavur, Moradabad, Saharanpur, and Ayodhya, were not ready for operations, leading to the discontinuation of 12 routes.

    What is UDAN Scheme?

    • UDAN Scheme, initiated in 2016, aims to enhance aviation infrastructure and air connectivity in Tier II and Tier III cities.
    • It was formulated based on the review of The National Civil Aviation Policy (NCAP)-2016, with the goal of fulfilling the aspirations of the common citizen.
    • The scheme, designed to last for 10 years, operates with a self-financing mechanism through the establishment of the Regional Connectivity Fund (RCF).
    • The RCF funds the viability gap funding (VGF) requirements of the scheme by levying certain domestic flights, thereby stimulating growth and development in the aviation sector.
    • As part of the scheme, the Airports Authority of India has waived the airport fee.

    Issues with the scheme

    • Route Discontinuance: Some routes launched under UDAN have been discontinued, raising concerns about their sustainability.
    • Challenges in Expansion: Efforts to improve connectivity to hilly regions and islands through helicopters and seaplanes have faced hurdles due to land unavailability and operational difficulties.
    • Unrecovered since the Pandemic: The COVID-19 pandemic has adversely affected the aviation industry, further impacting the sustainability of airlines.

    Various Challenges

    • Financial Constraints: Many smaller airlines struggle with insufficient funds, making it difficult to maintain aircraft, pay rentals, and provide staff salaries.
    • Maintenance Issues: Smaller players often have limited aircraft that are poorly maintained, and acquiring new planes is expensive.
    • Pilot Availability: The availability of pilots can be a challenge for smaller airlines, leading to higher costs when hiring foreign pilots.
    • Competition: Routes dominated by bigger domestic players like IndiGo and SpiceJet tend to see better success rates.

    Way Forward

    • Extended Subsidy Period: Airlines need an extension of the subsidy period to develop routes sustainably and achieve self-sufficiency.
    • Addressing Pandemic Impact: The impact of the COVID-19 pandemic on travel restrictions and passenger safety should be considered when evaluating the losses incurred by airlines.
    • Collaboration and Support: The government and stakeholders need to collaborate to address financial constraints and maintenance issues faced by smaller airlines.
    • Continuous Evaluation: Regular evaluation and necessary adjustments in the UDAN scheme are essential to overcome challenges and ensure successful implementation.

    Conclusion

    • While India has made significant strides in airport development, challenges related to commercial viability and infrastructure readiness must be addressed to ensure sustainable air connectivity across the nation.
    • Renewed focus on the UDAN scheme and optimizing airport infrastructure can pave the way for a robust aviation sector that benefits smaller cities and contributes to the overall growth of the nation’s economy.

  • Monsoon and food inflation: a status check

    Monsoon

    What’s the news?

    • As of July 30, the current month has witnessed a significant 15.7% above-normal rainfall, transforming the cumulative deficit into an overall 6% surplus for the period from June 1 to July 30.

    Central idea

    • The southwest monsoon made a tardy start, arriving seven days late this year, resulting in 52.6% below-normal rainfall during the first two weeks. By the end of June, there was a cumulative deficiency of 10.1%. However, the scenario changed dramatically from the last week of June, as the monsoon recovered remarkably, covering the entire country by July 2—six days ahead of schedule.

    The monsoon’s erratic behavior and its impact on agriculture

    • Delayed Crop Planting: The late arrival of the southwest monsoon raised concerns among farmers about their ability to sow crops on time, potentially affecting overall agricultural productivity.
    • Uneven Rainfall Distribution:
    • During the first two weeks of the monsoon, the country experienced a substantial rainfall deficit, with the overall rainfall being 52.6% below the normal long-period average.
    • Eastern and southern India, except Tamil Nadu and Maharashtra, were among the regions that received insufficient rainfall, which can lead to water stress and impact crop growth and yields.
    • Cumulative Deficiency: By the end of June, the cumulative rainfall deficiency stood at 10.1%. This cumulative deficit further intensified worries about agricultural output and food security, as it could affect the availability of water for crops during crucial growth stages.
    • Crop Recovery: Despite the abysmal start, the monsoon showed signs of recovery. This turnaround led to increased kharif crop plantings, including rice, which had been lagging behind last year’s levels until mid-July.
    • Positive Impact on Sowing: The monsoon’s recovery improved sowing conditions for most major agricultural regions, except for certain areas in Uttar Pradesh, Bihar, Jharkhand, and West Bengal, where rainfall remained deficient.
    • Subsequent Impact on Yields: While the monsoon’s recovery positively impacted crop sowing, the ultimate impact on yields would largely depend on the rainfall during August and September.

    El Niño Concerns

    • The Oceanic Niño Index (ONI) in June exceeded the El Niño threshold of 0.5 degrees, reaching 0.8 degrees Celsius.
    • Many global weather agencies predicted that El Niño would persist and strengthen through the 2023-24 winter.
    • El Niño’s potential strengthening raised concerns about its impact on India’s monsoon in the coming months, particularly during August.
    • El Niño is known to suppress rainfall in India, which could lead to a weakening of the monsoon during this crucial period.
    • A weakened monsoon can adversely affect crop growth, yields, and overall agricultural productivity.
    • If rainfall activity becomes progressively weaker due to El Niño’s influence, the implications can extend beyond the kharif season and impact the rabi winter-spring crops as well.
    • Rabi crops, dependent on stored rainwater, might be more vulnerable to a weakened monsoon, leading to potential losses and food production challenges.

    Prospects of food security: Food inflation and stock situation

    • Rice and Wheat Stocks: As of July 1, rice and wheat stocks in government godowns were reported to be at 71.1 million tonnes (mt). This stock level is the lowest in five years for this date.
    • Impact of the Delayed Monsoon on Rice Planting:
    • Due to the delayed monsoon, rice acreage initially picked up only after mid-July. It is unclear how much of this acreage is under short-duration varieties (around 125 days from seed to grain maturity).
    • If the rice belt had received rain on time, farmers might have planted more long-duration varieties (around 150–155 days), which yield higher at about 1–2 tonnes per hectare.
    • Re-transplanting in Punjab and Haryana: There are reports of farmers in Punjab and Haryana having to undertake paddy re-transplanting in large areas along the Beas, Sutlej, Ghaggar, and Yamuna rivers. This re-transplanting is likely for shorter duration varieties that usually yield less.
    • Sugar Stocks and Exports: The estimated sugar stocks with mills at the end of September 2023 are projected to be 6.3 mt, a six-year low. The Indian government has already banned exports of sugar to manage domestic supply.
    • Pulses and Edible Oil:
    • Among pulses, arhar (pigeon-pea) and urad (black gram) have registered a dip in acreage due to rain deficiency in Maharashtra, Karnataka, and Telangana. However, Rajasthan is expected to deliver a bumper crop of moong (green gram).
    • Chana (chickpea) has ample stocks due to government procurement, and masoor (red lentil) is being imported at rates below the government’s minimum support price.
    • Edible Oil Inflation: Edible oil inflation is likely to remain low, supported by imports projected to exceed 15 mt, a new all-time high, by the end of the current oil year in October 2023.
    • Milk Production and Prices: The supply of milk is expected to ease with buffalo calvings beginning from August. This will reflect in increased milk production, peaking during the winter and remaining high until next March-April.
    • Vegetables: Vegetable inflation has been on the rise, contributing to an unacceptably high consumer price index inflation number for July. However, with faster supply responses, vegetable inflation is expected to fall as easily as it rose.

    Way forward

    • Monitor Monsoon Developments: Continuously monitor the progress of the monsoon and its distribution across regions. Timely and accurate weather forecasting can help farmers make informed decisions about crop planting and irrigation.
    • Crop Diversification: Encourage farmers to diversify their crop choices to reduce dependence on water-intensive crops. Promote the cultivation of climate-resilient crops that require less water and are suitable for specific agro-climatic zones.
    • Strategic Buffer Stock: Maintain a strategic buffer stock of essential food commodities like rice and wheat to address any temporary supply shortages and stabilize food prices during periods of volatility.
    • Supply Chain Management: Improve supply chain logistics to ensure smooth transportation and distribution of agricultural produce. This will help prevent post-harvest losses and ensure the timely availability of food in the market.
    • Price Stabilization Measures: Implement effective price stabilization measures to control food inflation and prevent price volatility. These measures may include regulating exports, imports, and MSP (Minimum Support Price) mechanisms.
    • Encourage Pulses and Oil seed Production: Provide incentives and support to farmers for increasing pulses and oilseed production. This can reduce the country’s dependence on imports and stabilize prices.
    • Support the Dairy Sector: Extend support to the dairy sector to enhance milk production and improve the availability of dairy products. This can help stabilize milk prices and ensure food security.

    Conclusion

    • The monsoon’s erratic behavior has impacted crop sowing and food inflation in India. While the recovery has been promising, concerns over El Niño persist, making it vital for the government to monitor the agricultural sector closely and implement appropriate measures to ensure food security.