đŸ’„Join UPSC 2027,2028 Mentorship (July Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

Subject: Economics

  • [pib] Unified Logistics Interface Platform (ULIP)

    National Logistics Portal (NLP) is set to be integrated with Unified Logistics Interface Platform (ULIP) to make the multi-modal logistics ecosystem more efficient.

    Unified Logistics Interface Platform (ULIP)

    • ULIP is designed to enhance efficiency and reduce the cost of logistics in India by creating a transparent, one window platform that can provide real-time information to all stakeholders.
    • It was also emphasized that the solution should have the visibility of multi-modal transport, and all the existing systems of various ministries, governing bodies, and private stakeholders should be integrated with the ULIP system.
    • This will create a National Single Window Logistics Portal which will help in reducing the logistics cost.
    • ULIP will provide real-time monitoring of cargo movement while ensuring data confidentiality with end-to-end encryption, comprehensive reduction in logistic cost resulting in competitive costing.

    There are three key components which are defining the ULIP platform:

    • Integration with existing data sources of ministries: As authorization, compliance and clearance are some of the critical activities of Logistics; the integration with data points of ministries shall enable a holistic view and interlink the handshaking points.
    • Data exchange with private players: To enable the private players, logistics service providers, and industries to utilize the data available with ULIP and at the same time share their data (transportation, dispatch, delivery, etc.) with ULIP, thereby streamlining the processes to bring better efficiency through data exchange.
    • Unified document reference in the supply chain: To enable a single digitized document reference number for all the documentation processes in a single platform.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • How Russia-Ukraine conflict will effect inflation in India

    Context

    With the Russia-Ukraine conflict flaring into a war, global commodity prices, especially that of crude oil and gas, are likely to see a strong surge. This poses a challenge not only for India to contain inflationary pressures but also the world at large.

    The problem of rising inflation

    • At 6 per cent, India’s consumer price index (CPI) inflation crossed the upper limit of RBI’s tolerance band in January 2022.
    • Implications: High inflation inflicts a large “inflation tax” on the general public whose bank savings earn an interest of less than 1 per cent.
    • This is robbing the general public in the name of fuelling growth.
    • India is not impervious to this tendency. Most of the major banks in the country offer interest rates between 3 to 4 per cent to depositors.
    • Both the finance ministry and the RBI are betting on revving up growth, at least for the time being.
    • This is fine as long as they can tame inflation within reasonable limits.
    •  If we want to do justice to the masses on whose deposits the entire banking system hinges, one must ensure positive real rates of interest.

    How to ensure lower rates of inflation

    • Given that food has a weight of more than 45 per cent in CPI in India, understanding the dynamics of food inflation is critical.
    • India imports roughly 60 per cent of its consumption of edible oils, and global prices of edible oils have gone up by more than 50 per cent over the last year.
    • Edible oil inflation in India was touching 35 per cent a few months back.
    • This has come down to 18 per cent after the reduction on import duties.
    • The Union Minister of Commerce has also recently claimed that they have brought down the inflation in pulses by imposing stock limits on traders and by lowering import duties and importing more pulses.
    • The Centre has also imposed stocking limits on domestic oil/oilseed traders. 

    Way forward:  Reform the grain-management-cum-food-subsidy system

    • Stock limit on wheat and rice with FCI:  As on January 1, it is saddled with stocks that are almost four times the buffer stock norms.
    • By unloading the excess grain in the open market, FCI could help in bringing down food inflation substantially as rice and wheat have a high weightage in CPI.
    •  In the name of the poor, India runs one of the largest but perhaps the most inefficient and corrupt public distribution system (PDS) in the world.
    • Stop competitive populism: Every political party promises freebies before elections.
    •  Unless the Election Commission comes down heavily on such promises or a public interest litigation is filed in the Supreme Court to stop this competitive populism, Indian policymaking cannot be growth-oriented.
    • Reduce the population coverage under PDS:  India’s food subsidy policy covers 67 per cent of the population and distributes rice and wheat at more than 90 per cent subsidy under the National Food Security Act of 2013.
    • Raise productivity: This should be combined with taking giant strides to raise productivity and producing more nutritious food while protecting the environment.
    • Focus on R&D in agriculture: It’s well-known agri-R&D gives a much higher return in terms of promoting growth with competitiveness, and reduces poverty by making food cheaper and controlling food inflation

    Conclusion

    It is important to reform the grain-management-cum-food-subsidy system to release precious resources for growth of agriculture.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Natural farming

    Context

    In her budget speech, Finance Minister Nirmala Sitharaman reaffirmed the Centre’s commitment to natural, chemical-free, organic and zero-budget farming.

    No specific allocation in Budget

    • No specific allocations have been made to the Ministry of Agriculture and Farmers Welfare.
    •  In fact, currently-operational schemes such as the Paramparagat Krishi Vikas Yojana and the National Project on Organic Farming did not find any mention in the budget.
    • The Rashtriya Krishi Vikas Yojana, which has received a 4.2-times (year-on-year) larger allocation of Rs 10,433 crore, will earmark some funds for the on-ground implementation of chemical-free farming.

    Suggestions

    • As the ministry plans the fund utilisation under RKVY, here are eight suggestions to scale up chemical-free farming.
    • 1] Focus on rainfed area: focus on promoting natural farming in rainfed areas beyond the Gangetic basin.
    • Home to half of India’s farmers, rainfed regions use only a third of the fertilisers per hectarecompared to the areas where irrigation is prevalent.
    • The shift to chemical-free farming will be easier in these regions. 
    • 2] Crop insurance:  enable automatic enrolment of farmers transitioning to chemical-free farming into the government’s crop insurance scheme, PM Fasal Bima Yojana (PMFBY).
    • 3] Promote microenterprise producing inputs:  promote microenterprises that produce inputs for chemical-free agriculture.
    • An often-cited barrier by farmers in transitioning to chemical-free agriculture is the lack of readily available natural inputs.
    • 4] Leverage NGOs:  leverage NGOs and champion farmers who have been promoting and practising sustainable agriculture across the country.
    • CEEW research estimates that at least five million farmers are already practising some form of sustainable agriculture and hundreds of NGOs are involved in promoting them.
    • 5] Upskill workers: Beyond evolving the curriculum in agricultural universities, upskill the agriculture extension workers on sustainable agriculture practices.
    • 6] Leverage community institution: Sixth, leverage community institutions for awareness generation, inspiration, and social support. In other words, the government should facilitate an ecosystem in which farmers learn from and support each other while making the transition.
    • 7] support monitoring and impact studies: Such assessments would ensure an informed approach to scaling up sustainable agriculture.
    • 8] Millet promotion: Dovetail the ambition on millet promotion with the aim to promote sustainable agriculture.
    • Instead of the two remaining in silos, why not promote chemical-free millets and create awareness about both?

    Conclusion

    India’s food system needs a holistic transformation in demand, production, and supply chains. Let’s hope 2022-23 is the inflection point when we convert intent into action in our journey towards achieving a chemical-free food system.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • New approach for India’s food systems

    Context

    The country faces the dual challenge of achieving nutrition security, as well as addressing declining land productivity, land degradation and loss of ecological services with change in land use. Not surprisingly, widespread concerns about poverty, malnutrition and the need for a second Green Revolution are being made in tandem.

     

    Challenges for India

    • Macro- and micronutrient malnutrition is widespread in India.
    • 18.7% of women and 16.2% of men are unable to access enough food to meet basic nutritional needs.
    • Over 32% of children below five years are still underweight as per the recently released fifth National Family Health Survey (2019-2021) phase 2 compendium.
    • India is ranked 101 out of 116 countries in the Global Hunger Index, 2021.
    • Although India is now self-sufficient in food grains production in the macro sense, it has about a quarter of the world’s food insecure people, a pointer to the amount of food necessary to allow all income groups to reach the caloric target (2,400 kcal in rural and 2,100 kcal in the urban set-up). 

    India needs to adopt ‘food systems’ for ‘sustainability’ and ‘better nutrition’

    • The UN Food Systems Summit called for action by governments in five areas: nourish all people; boost nature-based solutions; advance equitable livelihoods, decent work and empowered communities; build resilience to vulnerabilities, shocks and stresses; and accelerate the means of implementation.
    • Wholistic policy approach: In the context of the intensifying economic, environmental and climate challenges and crisis, the need of the hour is a good theory of transition encompassing the spatial, social and scientific dimensions, supported by policy incentives and mechanisms for achieving a sustainable, resilient and food secure agriculture.
    • Agro-climatic approach: An agro-climatic approach to agricultural development is important for sustainability and better nutrition.
    • Potential for crop diversification: Data compiled in the agro-climatic zones reports of the Indian Council of Agricultural Research and the erstwhile Planning Commission of India reveal enormous potential for crop diversification and precision for enhanced crop productivity based on soil type, climate (temperature and rainfall), and captive water resources.
    • The focus should be on improving farmers’ competitiveness, supporting business growth in the rural economy, and incentivising farmers to improve the environment.
    • Review of agro-climatic zones: It is assumed that a meticulous review of agro-climatic zones could make smallholders farming a profitable business, enhancing agricultural efficiency and socio-economic development, as well as sustainability.
    • Strengthening and shortening food supply chains, reinforcing regional food systems, food processing, agricultural resilience and sustainability in a climate-changing world will require prioritising research and investments along these lines.
    • A stress status of the natural resource base — soil and water in different agro-climatic zones — will help understand the micro as well as meso-level interventions needed with regard to technologies, extension activities and policies.
    • Infrastructure: Lastly, infrastructure and institutions supporting producers, agri-preneurs and agri micro, small and medium enterprises (MSMEs) in their production value chain are central to the transition.
    • Alignment with national and State policies: This should be aligned to the national and State policy priorities such as the National Policy guidelines 2012 of the Ministry of Agriculture for the promotion of farmer producer organisations, and the National Resource Efficiency Policy of 2019 of the Ministry of Environment, Forest and Climate Change.

    Conclusion

    Clearly, science, society and policy have a lot to gain from an effective interface encompassing the range of actors and institutions in the food value-chain and a multidisciplinary and holistic approach, along with a greater emphasis on policy design, management and behavioural change.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Budget falls short on green ambitions

    Context

    One can analyse the budget from three standpoints: Direct allocations for the environment sector, allocations for environment in non-environment sectors, and allocations for other sectors with environmental impacts.

    Analysing the Budget from an environmental standpoint

    1] Allocation for MoEFCC

    • There is a slight increase in the budget of the Ministry for Environment, Forests and Climate Change (MoEFCC) from 2021-22’s revised estimate of Rs 2,870 crore to Rs 3,030 crore.
    • This is a meagre 0.08 per cent of the total budgetary outlay.
    • While some sectors like forestry and wildlife have seen a healthy rise in allocation, the outlay for others like the National River Conservation Plan has declined.

    2] Focus on natural and organic farming

    • There is a welcome stated focus on natural and organic farming, and on promoting millets.
    • No details on allocation: There are no details on the allocations, including for linkages necessary to make such farming viable, such as manure and markets.
    • Also, given the major push for food processing in the budget, without making reservations for community-run businesses, there is a danger of big corporations capturing the organic space.
    • Missing focus on rainfed farming: Completely missing is a focus on rainfed farming that involves 60 per cent of the farming population and is ecologically more sustainable than artificially irrigated agriculture.
    • The FM announced the government’s support to “chemical-free farming throughout the country,” but she has also allocated a massive chemical fertiliser subsidy of Rs 1,05,222 crore.
    • A recent announcement that palm plantations are proposed in Northeast India and the Andaman Islands, both ecologically fragile, makes this a worrying prospect.

    3] Positive provisions on the climate front

    • On the climate front, there are several positive provisions — use of biomass for power stations, boost to batteries, energy-efficiency measures in large commercial buildings, and sovereign green bonds.
    • Renewable and “clean” energy has received substantially higher allocations.
    • But the focus remains on mega-parks in solar/wind energy, nuclear power, and large hydro that have serious ecological impacts. 
    • The additional budget for farm-level solar pumps and rooftop solar generation is welcome, but it’s minuscule compared to mega-projects.
    • Missed opportunity for decentralised renewable energy: Another chance to shift towards decentralised renewable energy with less ecological impacts and greater community access has been missed.
    • The budget does promise greater support for public transport, something demanded by citizens’ groups for decades.
    • Unfortunately, most of the allocation in this will go to metros that are extremely carbon-intensive in terms of construction.
    • The National Climate Action Plan gets an abysmally inadequate Rs 30 crore — the same as in 2021-22.
    • And there is no focus on a “just transition” that could help workers in fossil fuel sectors, like coal, to transition to jobs in cleaner, greener sectors.

    4] Concerns with focus on infrastructure in Budget

    • As highlighted by the FM, this is predominantly an “infrastructure budget”.
    • While investments in infrastructure for small towns and villages are urgently needed, much of what is proposed are mega-projects.
    • The proposed 25,000 km increase in highways will further fragment forests, wetlands, mountains, grasslands, agricultural lands and bypass most villages.
    • A shift in paradigm to decentralised, sustainable, and community-oriented infrastructure is missing.
    • Several specific allocations are of further concern. For instance, the Ken-Betwa river-linking project, given over Rs 40,000 crore, will submerge valuable tiger habitat.
    • The Deep Ocean Mission and the Blue Revolution allocations are oriented towards commercial exploitation rather than conservation and sustainable use. 

    5] Missed opportunity on green jobs

    •  The budget misses out on a major shift to “green jobs”.
    • This includes support to decentralised (including handmade) production of textiles, footwear, and other products.
    • Even the MGNREGS, which could have been used for regenerating two-thirds of India’s landmass that is ecologically degraded, has got reduced allocation.

    Conclusion

    Another chance to turn the economy towards real sustainability and equity — a real “Amrit Kaal” as India heads to a centenary of Independence — has been missed.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • India risks being left out of TRIPS waiver

    Context

    When the Covid-19 pandemic pounded the globe, India, with South Africa, piloted a proposal to waive key provisions of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement on Covid-19 vaccines.

    Significance of TRIPS waiver for Covid-19 related  medical products

    • The TRIPS agreement is part of the international legal order on trade enshrined in the World Trade Organization (WTO).
    •  The core idea behind the proposal is that intellectual property (IP) rights such as patents should not become a barrier in scaling up the production of medical products like vaccines, diagnostics and therapeutics essential to combat Covid-19.
    •  However, the WTO has failed to adopt a TRIPS waiver to date.
    • Geographically limited waiver: The developed world is talking of a TRIPS waiver that would be geographically limited and exclude India.
    • This is a failure of India’s economic diplomacy.
    • There are also attempts at limiting the waiver to vaccines alone, leaving out diagnostics and therapeutics.

    Domestic factors that affected India’s global campaign for TRIPS waiver

    1] India failed to use provisions under Indian Patent Act

    • During the entire pandemic, India rarely made use of the existing flexibilities under the Indian Patent Act, such as compulsory licences (CL), which are consistent with the TRIPS agreement, to increase the supply of Covid-19 medical products despite being nudged by the judiciary to do so.
    • On the contrary, during the peak of the second Covid wave, the central government filed an affidavit in the Supreme Court stating that the main constraint in boosting the production of key drugs is the unavailability of raw materials, not IP-related legal hurdles.
    • .This stand completely contradicted India’s argument internationally that views IP as an obstacle to augmenting the supply of Covid-19 medical products.

    2] Lack of national strategy

    • India did not proactively develop a national strategy to implement the TRIPS waiver as and when it is adopted.
    • In other words, a TRIPS waiver at the WTO would only be an enabling framework.
    • It would then require member countries to amend their domestic IP laws to implement the waiver.

    3] Failure to involve Indian pharma industry

    • The government failed to get the Indian pharmaceutical industry on board.
    • Pharmaceutical bodies are a divided lot with many Indian companies speaking against the waiver, thus denting India’s global campaign.

    4] Failure to walk the talk on indigenously developed Covaxin

    • India should have unlocked the technical know-how of Covaxin to the world.
    • While technology transfer agreements for Covaxin have been inked with domestic companies, making the vaccine technology available to anyone interested globally, at a minimal price.
    • This would have exhibited India’s resolve to walk the talk on the TRIPS waiver.

    Conclusion

    While India would oppose the attempted exclusion, the lesson is that for economic diplomacy to flourish, it should be backed by concrete actions on the domestic front.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • What are Swiss Banks?

    A whistleblower has leaked information on more than $100 billion held in 30,000 accounts of Zurich-headquartered Credit Suisse, one of the world’s most infamous banks which hold black money.

    What is the news?

    • The investigation refocused attention on Swiss banks and their famous, century-old culture of secrecy.
    • This swiss tradition is under pressure as countries around the world try to get their super-rich to pay legitimate taxes on their wealth.

    Swiss Banks: Defined by Secrecy

    • Since at least the beginning of the 18th century, Geneva had become a favoured destination of French royalty and other European elites seeking discreet havens to stash their wealth.
    • In 1713, Swiss government authorities announced laws prohibiting bankers from giving out information about their customers.
    • Thus began a powerful culture of silence and secrecy that went on to become the defining feature of Swiss banking.
    • In 1934, Switzerland passed the Federal Act on Banks and Savings Banks, commonly known as the Banking Law of 1934 or the Swiss Banking Act.

    What’s behind this upmost secrecy?

    • Article 47 made it a crime to reveal details or information of customers to almost anyone — including the government — without their consent and in the absence of a criminal complaint.
    • Violators can get five years in prison; Article 47 lies at the heart of some of the most stringent banking secrecy laws anywhere.

    Why are they favourite destination to park black money?

    • As wealth became easily mobile across international borders, the safety and stability of Swiss banks, located in a peaceful country presented an irresistible attraction for the super-rich.
    • Switzerland itself is a politically neutral country.
    • Swiss bank accounts are attractive to depositors because they combine low levels of risk with very high levels of privacy.
    • The Swiss economy is extremely stable, and the banks are run at very high levels of professionalism.
    • Almost any adult in the world can open an account in a Swiss bank. Opening an account is not difficult, and requires not much more than basic KYC, including a proof of identity such as a passport.

    Question of ‘black money’

    • “Black money” allegedly stashed away by Indians in Swiss banks is a political issue in India, and parties and political functionaries have often made promises to “bring it back”.
    • Swiss authorities have maintained that they cooperate with the Indian government to fight tax evasion and fraud.

    Indian motives and moves

    • The two countries have had a system of automatic exchange of information in tax matters since 2018.
    • Under this, detailed financial information on all Indian residents with accounts in Swiss financial institutions was provided for the first time to Indian authorities in September 2019.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Who are the Angadias?

    An FIR has been registered against some Mumbai Police officials last week for allegedly threatening Angadias and extorting money from them in south Mumbai.

    Who are Angadias?

    • The Angadia system is a century-old parallel banking system in the country where traders send cash generally from one state to another through a person called Angadia that stands for courier.
    • It is by and large used in the jewellery business with Mumbai – Surat being the most popular route as they are two ends of the diamond trade.
    • The cash involved is huge and it is the responsibility of the Angadia to transfer cash from one state to another for which they charge a nominal fee.
    • Generally, it is the Gujarati, Marwari and Malbari community that are involved in the business.

    How does the system work?

    • The Angadia system works completely on trust as large sums, at times in crores, are involved.
    • Generally, traders have the same Angadias for decades together.
    • If a trader from Zaveri Bazaar in south Mumbai wants to pay a diamond trader in Surat, he will send an Angadias who usually delivers the money within 24 hours.
    • They also have fixed trains that leave from Mumbai at night and reach Gujarat by early morning.
    • Usually, to verify authenticity, the trader will, for example, will give a Rs 10 note to the Angadia and provide the number of the note to the recipient.
    • It is only after the recipient confirms the note number that the Angadia will hand over the money to the person.
    • After making the payment, the Angadias return to Mumbai the same day.

    Is the system legal?

    • While the Angadia system per se is legal, there hangs a cloud over the activity as it is suspected that a lot of times it is used to transfer unaccounted money.
    • Since the business deals in cash and there is no account maintained for the same, there have been suspicions that it is also used for transfer of black money like the hawala.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Issues with corporate governance in the context of NSE scam

    Context

    Over the past 10 days, the revelations about the functioning of the National Stock Exchange (NSE) during the tenure of Chitra Ramkrishna as Managing Director and Chief Executive Officer (CEO) have raised questions about the governance.

    Managerial misconduct at NSE

    •  There was managerial misconduct at NSE.
    • An effective board of directors: That is why we need checks on management such as an effective board of directors.
    • After the board was informed about the irregularities in Mr. Subramanian’s appointment, it discussed the matter but chose to keep the discussions out of the minutes on grounds of confidentiality and the sensitivity of the matter.
    • Second, despite being aware of Ms. Ramkrishna’s transgressions, it allowed her to resign and on generous terms instead of taking action against her.
    • Third, the Public Interest Directors (PIDs) failed to keep SEBI informed about the goings-on at the NSE.

    Issues with corporate governance

    • In the corporate world, much is forgiven on grounds of performance.
    • When a performing CEO chooses to unduly favour a particular individual or individuals, boards see that as a forgivable infirmity.
    • As for dysfunctional or ineffective boards, these remain the norm despite numerous regulations, seminars and papers over the past four decades.
    • In case of the the NSE, the problem is structural.
    • Selection and absence of penalty: It has to do partly with the way board members are selected and partly with the absence of penalties where directors do not live up to their mandate.
    • Board members are selected by top management (or, in India, by the promoter who is also top management).
    • Board members have every incentive to nod their heads to whatever the management wants to be done.

    Way forward

    • 1] Diversity in the selection of board members: As long as the top management selects all board members or can influence their selection, there is little hope of any active challenge to management.
    • The top management must be allowed to choose not more than 50% of the independent directors.
    • The rest must be chosen by various other stakeholders — financial institutions, banks, small shareholders, employees, etc.
    • 2] Accountability of board members: A second thing that needs to happen is holding board members accountable for lapses.
    • Regulators act against directors where there is financial malfeasance.
    •  This must change. Regulators must penalise errant directors through a whole range of instruments — strictures, financial penalties, removal from boards and a permanent ban from board membership.
    • 3] Accountability of regulator: Regulators themselves must be held to account.
    • In the NSE affair, questions have been asked of SEBI.
    •  For instance, why did SEBI not seek the help of the cyber police to ascertain the identity of the yogi?
    • SEBI needs to explain itself.

    Conclusion

    Convulsions of outrage after particular episodes will not take us very far. We need significant institutional reform if corporate governance is not to remain an illusion.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • How uniform power cost and electricity duty can achieve higher growth

    Context

    Electricity prices vary not just among end users, but also between states, where a complex patchwork of different taxes and subsidy regimes can leave consumers in some states paying five times more for their electricity than their counterparts in neighbouring states.

    Deprivations faced by Low Income States in India

    • The low-income States (LIS) are deprived on many fronts.
    • They have low accessibility to credit, low investments, low power availability and accessibility, and high energy costs.
    • The high-income States (HIS), on the other hand, have a big share in industry and commerce because they are not deprived on the same fronts.
    • The six HIS (Maharashtra, Tamil Nadu, Gujarat, Karnataka, Andhra Pradesh and Telangana) together account for 56.4% of factories and 54.3% of the net value added to the country, while their share in population is only 32.3%.
    • Among other reasons, this is because they have higher credit and financial accessibility (55% of total institutional credit and 56% of total industrial credit went to these five HIS) at the credit-deposit ratio.
    • On the other hand, the six LIS (Bihar, Jharkhand, U.P., M.P., Odisha, and Rajasthan) access only 15% of total institutional credit and barely 5% of total industrial credit, while their share in population is 43%.
    • The maximum benefit of the Atmanirbhar package (â‚č20 lakh crore) also went to the HIS as they have a higher share in industry.

    Role of power supply in disparity among states

    • Among other reasons, the availability of adequate quality power at the cheapest rate attracts investments, either private or public, in a particular location.
    • Due to a complex patchwork of different taxes and subsidy regimes, electricity prices vary not just among end users, but also between states.
    • This can leave consumers in some states paying five times more for their electricity than their counterparts in neighbouring states.

    Solutions

    •  Energy India Outlook 2021 provides two solutions.

    1] Eliminate price discrimination by synchronising all regional grids

    • The power-producing States have the advantage of power,  being available at lower prices.
    • This problem can be addressed by synchronising all the regional grids.
    •  This will help the transfer of energy (without compromising quality).
    • The idea is of ‘One Nation, One Grid, One Frequency’.
    • Further, this will pave the way for establishing a vibrant electricity market and facilitate the trading of power across regions through the adoption of the ‘one tariff’ policy.
    • The Central Electricity Regulatory Commission is in the process of implementing a framework of the Market-Based Economic Dispatch and moving towards ‘One Nation, One Grid, One Frequency, One Price’.

    2] Include electricity duty in GST

    • Apart from uniform cost, the power sector also needs uniformity in electricity duty charged by different States.
    • In general, the association between income and electricity consumption is direct.
    • Thus, only 32% of the population used 50% of power.
    • Contrary to this, six backward States got only 25% of the power though their share of the population is 43%.
    • Therefore, it is clear that the substantial proportion of the power cost incurred in HIS is also borne by the LIS which buy those industrial products, as the input cost of power has already been included in the product’s price.
    •  Further, this situation justifies the fact that the final costs of power consumption are also borne by other States.
    • Thus, the electricity duty should be redistributed among the States under the ambit of GST equally shared by the CGST and SGST.

    Conclusion

    In order to attain higher economic growth, the States should raise the issue of uniform energy tariff and inclusion of electricity duty under the ambit of GST.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)