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Subject: Economics

  • Cryptos and a CBDC are not the same thing

    Context

    Cryptocurrency will be discouraged via taxation and capital gains provisions. This was the message from the Finance Minister during the Budget discussion in Parliament.

    Growing worry about the cryptocurrencies

    • The Governor of the Reserve Bank of India, in February, highlighted two things.
    • First, “private cryptocurrencies are a big threat to our financial and macroeconomic stability”.
    • Second, “these cryptocurrencies have no underlying (asset).
    • Clearly, statements from the RBI indicate a growing worry since the proliferation of cryptos threatens the RBI’s place in the economy’s financial system.
    • This threat emerges from the decentralised character of cryptos based on blockchain technology which central banks cannot regulate and which enables enterprising private entities to float cryptos which can function as assets and money.
    • The total valuation of cryptos recently was upward of $2 trillion — more than the value of gold held globally.
    • Challenges in banning it: Cryptos which operate via the net can be banned only if all nations come together.
    • Even then, tax havens may allow cryptos to function, defying the global agreement.

    Crypto as currency

    • A currency is a token used in market transactions. 
    • Historically, commodities (such as copper coins) have been used as tokens since they themselves are valuable.
    • But paper currency is useless till the government declares it to be a fiat currency.
    • Paper currency derives its value from state backing.
    • Cryptos are a string of numbers in a computer programme. And, there is no state backing. 
    • Their acceptability to the well-off enables them to act as money.
    • So, cryptos acquire value and can be transacted via the net.
    • This enables them to function as money.
    • Solving the problem of double spending:  Fiat currency has the property that once spent, it cannot be spent again except through forgery, because it is no more with the spender.
    • But, software on a computer can be used repeatedly.
    • Blockchain and encryption have solved the problem by devising protocols such as ‘proof of work’ and ‘proof of stake’. 

    Why CBDC is not a solution

    • A Central Bank Digital Currency (CBDC) will not solve the RBI’s problem since it can only be a fiat currency and not a crypto.
    • Blockchain enables decentralisation.But, central banks would not want that.
    • Further, central bank would want a fiat currency to be exclusively issued and controlled by them.
    • But, theoretically everyone can ‘mine’ and create crypto.
    • So, for the CBDC to be in central control, solving the ‘double spending’ problem and being a crypto (not just a digital version of currency) seems impossible.
    • Validating transaction: A centralised CBDC will require the RBI to validate each transaction — something it does not do presently.
    • Once a currency note is issued, the RBI does not keep track of its use in transactions.
    • Keeping track will be horrendously complex which could make a crypto such as the CBDC unusable unless new secure protocols are designed.

    Conclusion

    CBDCs at present cannot be a substitute for cryptos that will soon begin to be used as money. This will impact the functioning of central banks and commercial banks.

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  • RERA

    The Supreme Court has asked the Chief Secretaries of the States to respond to queries raised by the Centre on the implementation of rules framed under the Real Estate (Regulation and Development) (RERA) Act, 2016 in their respective jurisdictions.

    What is RERA, 2016?

    • The Real Estate (Regulation and Development) Act, 2016 seeks to protect home-buyers as well as help boost investments in the real estate industry.
    • It establishes a Real Estate Regulatory Authority- RERA in each state for regulation of the real estate sector and also acts as an adjudicating body for speedy dispute resolution.
    • It was enacted under Entry 6 and 7 (dealing with contracts and the transfer of property) of the Concurrent List.
    • It is followed by the principle “buyer is the king and builders will have to ensure compliances to avoid punishment”.
    • Its main objective is to reduce delay in the work or timely delivery of the project without compromising the quality.

    Objectives of this Act

    It has the following objectives:

    • To protect the interest of the allottees and ensure their responsibility
    • To maintain transparency and reduce the chances of fraud
    • To implement Pan-India standardization and bring about professionalism
    • To enhance the flow of correct information between the home buyers and the sellers
    • To impose greater responsibilities on both the builders and the investors
    • To enhance the reliability of the sector and thereby increase confidence amongst the investors

    Key Provisions of RERA Act

    • Compulsory registration: According to the central act, every real estate project (where the total area to be developed exceeds 500 sq mtrs or more than 8 apartments is proposed to be developed in any phase), must be registered with its respective state’s RERA.
    • Establishment of state level regulatory authorities: It provides for State governments to establish more than one regulatory authority such as RERA to:
    1. Register and maintain a database of real estate projects; publish it on its website for public viewing
    2. Protection of interest of promoters, buyers and real estate agents
    3. Development of sustainable and affordable housing
    4. Render advice to the government and ensuring compliance with its Regulations and the Act
    • Establishment of Real Estate Appellate Tribunal: Decisions of RERAs can be appealed in these tribunals.
    • Mandatory Registration: All projects with plot size of a minimum 500 sq.mt or eight apartments need to be registered with Regulatory Authorities.
    • Deposits: Developers needs to keep 70% of the money collected from a buyer in a temporary pass through account held by a third party (escrow account) to meet the construction cost of the project.
    • Liability of the developer: A developer’s liability to repair structural defects would be for 5 years.
    • Cap on Advance Payments: A promoter cannot accept more than 10% of the cost of the plot, apartment or building as an advance payment or an application fee from a person without first entering into an agreement for sale
    • Carpet Area over super built-up: Clearly defines Carpet Area as net usable floor area of flat. Buyers will be charged for the carpet area and not super built-up area.
    • Punishment for non-compliance: Imprisonment of up to three years for developers and up to one year in case of agents and buyers for violation of orders of Appellate Tribunals and Regulatory Authorities.

    Which projects can get RERA approval?

    • Commercial and residential projects including plotted development.
    • Projects measuring more than 500 sq mts or 8 units.
    • Projects without Completion Certificate, before the commencement of the Act.
    • The project is only for the purpose of renovation/repair / re-development which does not involve re-allotment and marketing, advertising, selling or new allotment of any apartments, plot or building in the real estate project, will not come under RERA.
    • Each phase is to be treated as standalone real estate project requiring fresh registration.

    Benefits offered by the RERA Act

    Industry

    Developer

    Buyer

    Agents
    • Governance and transparency
    • Project efficiency and robust project delivery
    • Standardization and quality
    • Enhance the confidence of investors
    • Attract higher investments and PE funding
    • Regulated Environment
    • Common and best practices
    • Increase efficiency
    • Consolidation of sector
    • Corporate branding
    • Higher investment
    • Increase in organized funding
    • Significant buyers protection
    • Quality products and timely delivery
    • Balanced agreements and treatment
    • Transparency – sale based on carpet area
    • Safety of money and transparency on utilization
    • Consolidation of the sector (due to mandatory state registration)
    • Increased transparency
    • Increased efficiency
    • Minimum litigation by adopting best practices

     

     

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  • The Process of Cartelisation

    This newscard is an excerpt from the original article published in TH.

    What is a Cartel?

    • According to CCI, a “Cartel includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services”.
    • The three common components of a cartel are:
    1. an agreement
    2. between competitors
    3. to restrict competition

    What is Cartelization?

    • Cartelization is when enterprises collude to fix prices, indulge in bid-rigging, or share customers, etc. But when prices are controlled by the government under law, that is not cartelization.
    • The Competition Act contains strong provisions against cartels.
    • It also has the leniency provision to incentivize a party to a cartel to break away and report to the Commission, and thereby expect total or partial leniency.
    • This has proved a highly effective tool against cartels worldwide.

    Philosophy behind

    • Cartels, which involve a group of businesses colluding to keep prices high, have been viewed by economists as a significant threat to the market economy.
    • When businesses cooperate with each other rather than compete against each other, there could be many adverse consequences to consumers.
    • For one, consumers will have to pay higher prices for goods and services.
    • It should be noted that the way cartels keep prices high is by limiting the supply of their output. Further, in the absence of any threat from competition, cartels also have very little reason to innovate or cater to consumers in better ways.
    • In other words, they essentially act like a monopoly.
    • The Organization of the Petroleum Exporting Countries (OPEC) is the most well-known international cartel that influences the price of oil globally through coordinated efforts to limit supply.

    How do they work?

    • Four categories of conduct are commonly identified across jurisdictions (countries). These are: price-fixing, output restrictions, market allocation and, bid-rigging
    • In sum, participants in hard-core cartels agree to insulate themselves from the rigors of a competitive marketplace, substituting cooperation for competition.

    How do cartels hurt?

    • They not only directly hurt the consumers but also, indirectly, undermine overall economic efficiency and innovations.
    • A successful cartel raises the price above the competitive level and reduces output.
    • Consumers choose either not to pay the higher price for some or all of the cartelized product that they desire, thus forgoing the product, or they pay the cartel price and thereby unknowingly transfer wealth to the cartel operators.

    Are there provisions in the Competition Act against monopolistic prices?

    • There are provisions in the Competition Act against abuse of dominance.
    • One of the abuses is when a dominant enterprise “directly or indirectly imposes unfair or discriminatory prices” in the purchase or sale of goods or services.
    • Thus, excessive pricing by a dominant enterprise could, in certain conditions, be regarded as abuse and, therefore, subject to investigation by the Competition Commission if it were fully functional.
    • However, where pricing is a result of normal supply and demand, the Competition Commission may have no role.

    What is the penalty for cartelization?

    • The Competition Act calls for a penalty on each member of the cartel, which is up to three times its profit for each year of anti-competitive behavior, or 10% of turnover for each year of its continuance, whichever is higher.
    • However, in case of a leniency petition, CCI can waive the penalty depending on the timing and usefulness of the disclosure  and  full cooperation  in  the  probe.

    How might cartels be worse than monopolies?

    • Monopolies are bad for both individual consumer interests as well as society at large.
    • Monopolist completely dominates the concerned market and, more often than not, abuse this dominance either in the form of charging higher than warranted prices or by providing lower than the warranted quality of the good or service in question.

    How to stop the spread of cartelization?

    • Strong deterrence to those cartels that are found guilty of being one.
    • Typically this takes the form of a monetary penalty that exceeds the gains amassed by the cartel and it is not always easy to ascertain the exact gains from cartelization.
    • The threat of stringent penalties can be used in conjunction with providing leniency — as was done in the beer case.

    Back2Basics: Competition Commission of India (CCI)

    • The CCI is the chief national competition regulator in India.
    • It is a statutory body within the Ministry of Corporate Affairs.
    • It is responsible for enforcing The Competition Act, 2002 in order to promote competition and prevent activities that have an appreciable adverse effect on competition in India.

     

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  • What are Oil Bonds?

    Over the last one year, as retail prices of petrol, diesel and other petroleum products have surged, the government has attracted criticism.

    Finance Minister has sought to counter such criticism by claiming that the current government cannot bring down taxes (and, as a consequence, prices) because it has to pay for the oil bonds issued by the previous regime.

    What are oil bonds?

    • An oil bond is an IOU (I owe you), or a promissory note issued by the government to the OMCs, in lieu of cash that the government would have given them so that these companies don’t charge the public the full price of fuel.
    • An oil bond says the government will pay the oil marketing company the sum of, say, Rs 1,000 crore in 10 years.
    • And to compensate the OMC for not having this money straightaway, the government will pay it, say, 8% (or Rs 80 crore) each year until the bond matures.
    • Thus, by issuing such oil bonds, the government of the day is able to protect/ subsidise the consumers without either ruining the profitability of the OMC or running a huge budget deficit itself.

    Why were they issued?

    • When fuel prices were too high for domestic consumers, governments in the past often asked oil marketing companies (OMCs) to avoid charging consumers the full price.
    • But if oil companies don’t get paid, they would become unprofitable.
    • To address this, the government said it would pay the difference.
    • But again, if the government paid that amount in cash, it would have been pointless, because then the government would have had to tax the same people to collect the money to pay the OMCs.
    • This is where oil bonds come in.

    How much of fuel prices is tax?

    • There are two components to the domestic retail price — the price of crude oil itself, and the taxes levied on this basic price.
    • Together they make up the retail price.
    • The taxes vary from one product to another. For instance, as of now, taxes account for 50% of the total retail price for a litre of petrol, and 44% for a litre of diesel.

    How much of the UPA-era oil bonds has the NDA government paid back?

    • There are two components of oil bonds that need to be paid off: the annual interest payment, and the final payment at the end of the bond’s tenure.
    • By issuing such bonds, a government can defer the full payment by 5 or 10 or 20 years, and in the interim just pay the interest costs.
    • Table 1 shows that between 2015 and 2021, the NDA government has fully paid off four sets of oil bonds — a total of Rs 13,500 crore.
    • Each year, the BJP government had also had to pay the interest rate on all bonds that have not matured. Chart 1 shows the amount paid towards interest payment each year.
    • Between 2014 and 2022, the government has had to spend a total of Rs 93,686 crore towards interest as well as the principal.

    Still, isn’t it a bad idea to issue such bonds?

    • Former PM Manmohan Singh was correct in noting that issuing bonds just pushed the liability to a future generation.
    • But to a great extent, most of the government’s borrowing is in the form of bonds.
    • This is why each year the fiscal deficit (which is essentially the level of government’s borrowing from the market) is so keenly tracked.
    • Further, in a relatively country like India, all governments are forced to resort to the use of bonds of some kind.
    • Take the current NDA government itself, which has issued bonds worth Rs 2.79 lakh crore (twice the amount of oil bonds) to recapitalise public sector banks.
    • These bonds will be paid by governments till 2036.

     

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  • Hits and misses: India’s Solar Power Energy Targets

    India is likely to miss its 2022 target of installing 100 gigawatts (GW) of solar power capacity a/c to a report. This is because of rooftop solar lagging behind, the authors say.

    India’s Solar Policy

    • Since 2011, India’s solar sector has grown at a compounded annual growth rate (CAGR) of around 59% from 0.5GW in 2011 to 55GW in 2021.
    • The Jawaharlal Nehru National Solar Mission (JNNSM), also known as the National Solar Mission (NSM), was commenced in January 2010.
    • It marked the first time the government focussed on promoting and developing solar power in India.
    • Under the scheme, the total installed capacity target was set as 20GW by 2022.
    • In 2015, the target was revised to 100GW and in August 2021, the government set a solar target of 300GW by 2030.

    Solar energy: India among the peers

    • India currently ranks fifth after China, U.S., Japan and Germany in terms of installed solar power capacity.
    • As of December 2021, the cumulative solar installed capacity of India is 55GW, which is roughly half the renewable energy (RE) capacity (excluding large hydro power) and 14% of the overall power generation capacity of India.
    • Within the 55GW, grid-connected utility-scale projects contribute 77% and the rest comes from grid-connected rooftop and off-grid projects.

    What does the new report say?

    • As of April, only about 50% of the 100GW target, consisting of 60GW of utility-scale and 40GW of rooftop solar capacity, has been met.
    • Nearly 19 GW of solar capacity is expected to be added in 2022 — 15.8GW from utility-scale and 3.5GW from rooftop solar.
    • Even accounting for this capacity would mean about 27% of India’s 100GW solar target would remain unmet.
    • A 25GW shortfall in the 40GW rooftop solar target, is expected compared to 1.8GW in the utility-scale solar target by December 2022.
    • Thus, it is in rooftop solar that the challenges of India’s solar-adoption policy stick out.

    What is Solar Rooftop?

    • A solar photovoltaic (PV) system mounted on a rooftop of a building is a mini-power requirement or feed into the grid.
    • The size of the installation varies significantly depending on the availability of space, amount of electricity consumed by the property and the ability or willingness of the owner to invest the capital required.
    • In December 2015, the government launched the first phase of the grid-connected rooftop solar programme to incentivise its use in residential, institutional and social areas.
    • The second phase, approved in February 2019, had a target of 40GW of cumulative rooftop solar capacity by 2022, with incentives in the form of central financial assistance (CFA).
    • As of November 2021, of the phase 2 target of 4GW set for the residential sector, only 1.1GW had been installed.

    Reasons for rooftop solar adoption not meeting targets

    • In its early years, India’s rooftop solar market struggled to grow, held back by lack of consumer awareness, inconsistent policy frameworks of the Centre/ State governments and financing.
    • Factors impeding rooftop-solar installation include:
    1. Pandemic-induced supply chain disruption to policy restrictions
    2. Regulatory roadblocks
    3. Limits to net-metering (or paying users who give back surplus electricity to the grid)
    4. Taxes on imported cells and modules
    5. Unsigned power supply agreements (PSAs) and banking restrictions
    6. Financing issues plus delays in or rejection of open access approval grants and
    7. The unpredictability of future open access charges

    Other issues: India’s storage capacity

    • About 34 GW / 136 GWh of battery storage is expected to be installed by 2030, according to the Central Electricity Authority of India.
    • This capacity would be used for RE integration, demand-side and peak load management services.

    Present state of progress

    • Recently, there has been a sharp rise in rooftop solar installations due to falling technology costs, increasing grid tariffs, rising consumer awareness and the growing need for cutting energy costs.
    • These factors are expected to persist giving a much-needed boost to this segment.
    • Going ahead, rooftop solar adoption is expected to proportionally increase as land and grid-connectivity for utility solar projects are expected to be hard to come by.

    Significance of solar power to India’s commitment

    • Solar power is a major prong of India’s commitment to address global warming according to the terms of the Paris Agreement, as well as achieving net zero, or no net carbon emissions, by 2070.
    • PM at the COP Glasgow, in November 2021, said India would be reaching a non-fossil fuel energy capacity of 500 GW by 2030 and meet half its energy requirements via renewable energy by 2030.
    • To boost the renewable energy installation drive in the long term, the Centre in 2020 set a target of 450GW of RE capacity to be achieved by 2030, within which the target for solar was 300GW.
    • Given the challenge of integrating variable renewable energy into the grid, most of the RE capacity installed in the latter half of this decade is likely to be based on wind solar hybrid (WSH).

    Way forward

    • Supportive policies and innovative technological approaches are needed for the sector to achieve its potential.
    • Indian policymakers need to plan for rooftop solar plus storage, rather than rooftop solar alone with the grid as storage (net / gross metering).
    • The declining cost of storage solutions, along with that of rooftop solar solutions, is likely to change the future of the Indian power sector.
    • Several countries such as Australia, the United States, Germany, among others have already endorsed solar power with battery storage.
    • Energy storage, therefore, represents a huge economic opportunity for India.
    • The creation of a conducive battery manufacturing ecosystem on a fast track could cement India’s opportunity for radical economic and industrial transformation in a critical and fast-growing global market.

    Also read:

    [Sansad TV] Global Solar Grid

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  • Looming Power Crisis in India

    Temperatures have shot up across many parts of the country with the early onset of summer, leading to a rise in the demand for power. Instances of power outages have been reported in several states.

    Why is there a concern around power supply?

    • The demand for power has soared.
    • Several states, including Andhra Pradesh, Madhya Pradesh, Punjab, Haryana, Telangana, and Maharashtra, are facing power outages.
    • The coal stock with power generation companies (gencos) is not adequate to meet the rising demand.

    How bad is the coal shortage?

    • Normally, a power plant must maintain 26 days of coal stock.
    • However, at present, several power plants are reporting critical levels of coal stock.
    • Data from the Central Electricity Authority (CEA) shows that 97 power plants out of the 173 that the CEA tracks have critical levels of coal inventory.
    • Of the 173, there are 155 non-pithead plants or power plants that are not near coal mines.
    • These have an average of 28% of the stock compared to the normal scenario.
    • The 18 plants that are near coal mines have an average stock of 81% of the normal requirement.

    Note: Non-pithead plants are power plants where the coal mine is more than 1,500 kilometres away.

    Is coal shortage the only reason for a power crisis?

    • The lack of railway rakes to transport coal is also a major problem.
    • The state power distribution companies (discoms) have also not been able to clear their dues to power generation companies.
    • The covid-19 pandemic has now weakened the finances of many states, raising doubts about the ability of state-owned discoms to clear their dues.

    What has led to the coal shortage?

    • Several factors have led to the shortage, including the stagnation of production by Coal India Ltd (CIL) after the bumper production in FY15 and FY16.
    • There seems to be a tussle between the Centre and coal-rich states, which delay environment and land acquisition clearances.
    • High dues of discoms towards gencos and the eventual delay in gencos paying CIL has complicated the scenario.

    How has the Centre responded?

    • CIL has made efforts to raise supply to the power sector by reducing its dispatch to other industries.
    • The power ministry said that to avoid long-distance transport, a ‘tolling’ facility would be allowed.
    • In this system, state gencos can allow other thermal power plants near a coal mine to utilize their coal linkages to generate and transmit power back.
    • This is an easier alternative compared to transportation.
    • Further, the states need to ensure that imported coal-based plants operate at reasonable tariffs.

    Try answering this PYQ:

    Consider the following statements:

    1. Coal sector was nationalized by the Government of India under Indira Gandhi.
    2. Now, coal blocks are allocated on lottery basis.
    3. Till recently, India imported coal to meet the shortages of domestic supply, but now India is self- sufficient in coal production.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 and 3 only

    (c) 3 only

    (d) 1, 2 and 3

     

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  • Big Tech’s privacy promise could be good news and also bad news

    Context

    In February, Facebook stated that its revenue in 2022 is anticipated to reduce by $10 billion due to steps undertaken by Apple to enhance user privacy on its mobile operating system.

    Move towards more privacy-preserving options

    • Apple introduced AppTrackingTransparency feature that requires apps to request permission from users before tracking them across other apps and websites or sharing their information with and from third parties.
    • Through this change, Apple effectively shut the door on “permissionless” internet tracking and has given consumers more control over how their data is used.
    • Privacy experts have welcomed this move because it is predicted to enhance awareness and nudge other actors to move towards more privacy-preserving options, leading to a market for “Privacy Enhancing Technologies”.
    • Google’s Privacy Sandbox project is a case in point, though it remains to be seen whether it will be truly privacy-preserving.

    Big Tech dominance and issues related to it

    • Privacy and acquisitions: One standout feature of the Big Tech dominance has been the non-price factors such as quality of service (QoS) in general and privacy and acquisitions in particular.
    • Acquisitions to kill competition: Acquisitions by Big Tech are regular and eat up big bucks, not always to promote efficiency but to eliminate potential competition, described evocatively as “kill zone” by specialists.
    • According to a report released by the Federal Trade Commission, between 2010 and 2019, Big Tech made 616 acquisitions.
    • In the absence of a modern framework, competition law continues to rely on Bork’s theory of consumer welfare which postulated that the sole normative objective of antitrust should be to maximise consumer welfare, best pursued through promoting economic efficiency.
    • Market structure thus became irrelevant and conduct became the sole criterion for judgement.
    • Conduct now predominantly revolves around QoS which, like much else surrounding digital platforms, is pushing competition authorities to fortify their existing regulatory toolkits.

    Privacy as a metric of quality

    •  Companies such as Apple and DuckDuckGo (with its slogan “the search engine that doesn’t track you”) are employing enhanced user privacy as a competitive metric.
    • It has been shown that “websites which do not face strong competition are significantly more likely to ask for more personal information than other services provided for free”.
    • In 2018, OECD accepted that privacy is a relevant dimension of quality despite the low quality that may be prevalent due to lack of market development.
    • Regulators across the globe are recognising privacy as a serious metric of quality.
    • For instance, the Competition Commission of India (CCI) in 2021 took suo moto cognisance of changes to WhatsApp’s “take-it” or “leave-it” privacy policy that made it mandatory for every user to share data with Facebook.
    • In its prima facie order, the CCI inter alia observed that this amounts to degradation of privacy and therefore quality.

    Way forward

    • Privacy and competition have overlapping boundaries.
    • If privacy becomes a competitive constraint, then companies will have the incentive to create privacy-preserving and enhancing technologies.
    • Barriers for new entrants: On the other hand, care must be taken so that Big Tech, aka the gatekeepers in the EU’s Digital Markets Act, do not misuse privacy to create barriers for newer entrants.
    • Restricting third-party tracking is not novel and other browsers such as Mozilla Firefox and Microsoft’s Edge have already done so.
    • But Google, which owns 65 per cent of the global browser market, is different.
    • By disabling third parties from tracking but continuing to use that data in its own ad tech stack, Google harms competition.
    • The use of privacy as a tool for market development, therefore, has to tread this tightrope between enabling and stifling competition.

    Conclusion

    An approach that balances user autonomy, consumer protection, innovation, and market competition in digital markets is a real win-win and worth investing in.

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  • IRMS

    Context

    A recent Gazette notification regarding the creation of the Indian Railway Management Service (IRMS) marks a paradigm shift in the management of one of the world’s largest rail networks.

    About the merger and IRMS

    • A nearly 8,000 strong cadre of the erstwhile eight services is now merged into one.
    • Eight out of 10 Group-A Indian Railway services have been merged to create the IRMS.
    • The merged services are: Indian Railway Traffic Service (IRTS), Indian Railway Personnel Service (IRPS), Indian Railway Accounts Service (IRAS), Indian Railway Service of Electrical Engineers (IRSEE), Indian Railway Service of Signal Engineers (IRSS), Indian Railway Service of Mechanical Engineers (IRSME), Indian Railway Service of Civil Engineers (IRSE) and Indian Railway Stores Service (IRSS).
    • Aims of the restructuring: Besides removing silos, this restructuring also aims at rationalising the top-heavy bureaucracy of the Indian Railways.

    Way forward: Training

    • Training the future leaders of India’s public transporter in the rapidly evolving logistics sector of the country is the most important task ahead.
    • The UPSC will recruit a few hundred IRMS officers each year from now, they will remain much less in number when compared to already serving officers for a long time to come.
    • Training of the existing cadre of officers: The fact remains that even after the creation of the IRMS, the 8,000 strong (already serving) officers of the Indian Railways will need to work in coordination and not in silos, as they will be serving in the organisation for decades to come.
    • This highlights the importance of training of the existing cadre of officers as they will have to deliver on the ambitious Gati-Shakti projects.
    • The task of training such a dynamic talent pool assumes importance in view of India’s aspirations of becoming a $5 trillion economy.
    • All this will require a massive revamp of the capacity building ecosystem of the Indian Railways.
    •  Redesign the training: The merger of services provides an opportunity to redesign the training for newly recruited IRMS officers to make them future-ready. Initial training along with mid-career training programmes may be reoriented.
    • The IRMS training needs to be designed based on the competencies required for different leadership roles.
    • Mission Karmayogi of the Government of India provides for competencies based postings of officers.
    • The Integrated Government Online Training (iGOT) programme of the Government of India will be instrumental in shaping the career progression of IRMS officers.

    Conclusion

    Future IRMS officers should be ready to face the challenges of working in an organisation that is involved in round the clock and round the year operations, has substantial social obligations to meet and, at the same time, which must earn for itself.

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  • Addressing Duty Anomalies in Trade Deals

    India has long suffered the anomaly of imported raw material being taxed more than the finished product. Economists call it the inverted duty structure. A spate of free trade agreements (FTAs) in the past have not helped. Are the new ones any better?

    What is the inverted duty structure?

    • An inverted duty structure comes up in a situation where import duties on input goods are higher than on finished goods.
    • In other words, the GST rate paid on purchases is more than the GST rate payable on sales.

    Why is it a problem?

    • When manufacturers cannot set off the taxes paid on raw materials against the tax on the final product, the excess tax paid on inputs gets built into the price of the product.
    • This makes an Indian-made product more expensive than the imported finished product, affecting the competitiveness of Indian makers.
    • The issue is acute in sectors like textiles and apparels.
    • Correcting duty anomalies is key to attracting investments in manufacturing.

    Will new FTAs worsen the problem?

    • Looks unlikely. The FTAs under negotiations are structurally very different from those signed a decade ago.
    • The FTAs signed in the early 2000s were with manufacturing hubs like the 10-nation ASEAN which includes the Philippines, Vietnam, South Korea, and Japan.
    • Most of these countries directly compete with India in a host of manufacturing sectors including apparel, electronics, and engineering goods.
    • They largely produced the same goods as India.
    • By contrast, the new FTAs being signed by India are with countries like the United Arab Emirates (UAE) that share complementarities with India with respect to trade interests.

    How is India addressing duty anomalies?

    • India has been increasing import duties since 2014-15 to correct the inverted duty structure for non-FTA countries and the average tariff rose from 13.5% in 2014 to 15% in 2020.
    • In fact, the last two budgets sought to correct it by removing duty exemptions and lowering the duty on raw materials.

    How did the earlier FTAs impact India?

    • In old FTAs, India agreed to lower or eliminate duties on finished goods. But import duty on raw materials remained high.
    • That made it cheaper to import the final product than make them in India, hurting domestic manufacturers.
    • This can be seen from the fact that the share of ASEAN in India’s total imports has grown from 8.2% in FY11 to 12% in FY21, while exports have stagnated at 10%.
    • The share of South Korea rose from 2.83% in FY11 to 3.23% in FY21, while exports are up marginally from 1.5% to 1.6% during the same period.

    And how are the new FTAs different?

    • The UAE, for example, is a services, oil, and gold-led economy rather than a manufacturer. India benefits from duty-free access for mobile phones, which the UAE does not make.
    • Australia, which signed a pact with India last week is again not a major manufacturing economy, but a services one with key interests in wines and minerals, pears, oranges, etc.
    • Besides, this time around, the government is holding consultations with the industry during the FTA talks, doing a SWOT analysis to ensure FTAs benefit India’s exports.

     

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  • Places in news: Nadabet- the Wagah of Gujarat

    As part of the Seema Darshan project, Union Home Minister inaugurated an Indo-Pakistan border viewing point in Nadabet in Gujarat, around 188 km from Ahmedabad.

    Where is Nadabet?

    • Located in the Rann of Kutch region, Nadabet is also known as the ‘Wagah of Gujarat’.
    • It is connected by a narrow bitumen road cutting across mudflats that get inundated during high-tide.
    • The biggest attraction of the Seema Darshan Project is the access provided to civilians to view the fenced international border with Pakistan at ‘Zero Point’.
    • This is guarded round the clock by the Border Security Force (BSF) in Banaskantha district of Gujarat.
    • Pakistan is around 150 metres from the border pillar 960 at Nadabet.
    • Though the BSF conducts a parade similar to the one held at Attari-Wagah border in Punjab every evening during sunset, there won’t be anyone present across the border on the Pakistani side.

    What is the Seema Darshan Project?

    • The Seema Darshan project is a joint initiative of the tourism department of the Gujarat state government and the BSF Gujarat Frontier.
    • The focus is to develop border-tourism in the region which has a sparse population and even sparser vegetation.
    • The project aims to boost tourism as well as restrict migration from the villages across the border to the Indian side.

    Role of Nadabet in 1971 Indo-Pak War

    • Nadabet played a key role in the 1971 Indo-Pakistan War.
    • It was in this region that the BSF not only stalled the enemy trying to invade from the west, but also captured 15 enemy posts.
    • During the war, the BSF had captured 1,038 square km of Pakistan territory in Nagarparkar and Diplo areas.
    • The area was returned to Pakistan after the Shimla Agreement was signed.

     

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