💥UPSC 2026, 2027, 2028 UAP Mentorship (March Batch) + Access XFactor Notes & Microthemes PDF
Talk to mentor

Civilsdaily

Login

Type: op-ed snap

  • Foreign Policy Watch: India-Nepal

    India-Nepal relations in a new transition

    op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    India-Nepal Joint Commission meeting took place at a time when Nepal in going through a political turmoil. The article examines the issues discussed in the meeting and how its implications for the bilateral relations between the two countries.

    India-Nepal joint commission meeting amid political chaos in Nepal

    • Recently, the Minister for Foreign Affairs of Nepal visited New Delhi for the sixth meeting of the India-Nepal Joint Commission.
    • Nepal’s Prime Minister dissolved the House of Representatives in late December 2020, the move was termed ‘unconstitutional’ by the experts and the country’s Supreme Court is hearing writ petitions against the move.
    • As a unique characteristic, Nepal’s internal political fundamentals continue to shape its foreign policy choices. 
    • In such a scenario, any inbound or outbound delegation is seen from a different prism.

    Issues discussed in the meeting

    1) Progress on the development partnership front

    • On the development partnership front, the expansion of the Motihari-Amlekhganj petroleum products pipelines to Chitwan and the establishment of a new pipeline on the eastern side connecting Siliguri to Jhapa in Nepal formed a part of the discussions.
    • The operating procedures for commencement of train services of the first passenger railway line between India and Nepal from Jaynagar to Kurtha via Janakpurhave have been discussed.
    • Other cross-border rail connectivity projects, including a possible Raxaul-Kathmandu broad gauge railway line, were also discussed.
    • The joint hydropower projects, including the proposed Pancheshwar Multipurpose Project, should get positive momentum following this round of meetings.

    2) Facilitating the cross-border movement of people

    • The recently inaugurated Integrated Check Posts (ICPs) at Birgunj and Biratnagar have helped in the seamless movement of people and trade between the two countries.
    • The construction of a third integrated check post at Nepalgunj has already commenced, while the new integrated check post at Bhairahwa would begin shortly.
    • Since Nepal relies on India’s seaports in a big way for trading, and goods are transported by road, the integrated check posts are expected to ease trade and transit.

    3) Border issue

    • Nepali side’s demand to include the boundary in the Joint Commission Meeting.
    • However, India made it clear to find a fresh mechanism to resolve any such crucial long-pending issue.

    4) New direction to bilateral ties

    • India’s support for two more cultural heritage projects in Nepal, namely, the Pashupatinath Riverfront Development and the Bhandarkhal Garden Restoration in Patan Durbar is significant.
    • Nepal expressed support for India’s permanent membership of an expanded UN Security Council (UNSC) to reflect the changed balance of power.
    • The next meeting of the Joint Commission in Nepal should be crucial in giving a new direction to the bilateral ties, keeping a balance between change and continuity.

    India’s deepening engagement with all sections

    • There is growing disenchantment among the Nepali masses over the increased centralization of power, failure of the Provincial System in addressing the developmental issues, misuse of Presidential authority, and unprecedented corruption.
    • While the unusual developments are taking place in Nepal, there are many who still think that India is comfortable with some changes as its Nepal policy is heading very clearly towards a deeper engagement with all sections.

    Consider the question “How India-Nepal ties are affected by the internal political fundamentals in Nepal? What approach should be adopted by India in dealing with Nepal?” 

    Conclusion

    Nepal cannot afford to enter into another round of political instability, and those who have commanding authority to spearhead India-Nepal bilateral relations must give a humane consideration to it. At the crossroads, Nepal needs action and to come to terms with realities.

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Government Budgets

    Good economics must also make good politics

    op-ed snap | Economics | Mains Paper 3: Government Budgeting

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 3- Reforms for economic growth

    The article suggests the reforms that should be included in the next budget to boost the Indian economy.

    Need for further reforms

    • Government has leveraged the Covid-19 slowdown as an opportunity for introducing transformative reforms.
    • The recently introduced reforms include liberalising agricultural markets, diluting the onslaught of labour laws, credit guarantees for SME loans, and a liberal PLI to stimulate manufacturing.
    • These reforms have created a cautious optimism among investors worldwide awaiting the forthcoming Budget.
    • India’s reforms require further acceleration, and a consensus that good economics makes good politics.

    Reforms required to attract investment

    • Cost of acquiring land has increased substantially, which needs to be reduced.
    • The government must categorise 44 central laws into compensation, social security, industrial relations, and health and safety—and draft a unified model labour law to replace archaic laws for adoption by states.
    • India’s trade-to-GDP ratio must improve.
    • Having turned away from the RCEP, India needs to conclude trade agreements with the UK and other major economies. Announcing such intent would be welcome.
    • Effective corporate tax rate for domestic companies is 25.17%, while that for foreign firms is 43.68%, India should maintain tax parity across domestic and foreign companies.
    • With such parity, India will enhance investment attractiveness.
    • In view of the recent international arbitration rulings, India should discontinue retrospective taxation.
    • Defence FDI could be raised from 74% to 100% under automatic route.
    • The rationale to maintain FDI in the insurance sector at 49% now holds limited logic, India could increase it to a majority stake or even 100%.
    • Bottled-in-origin and bulk spirits attract a high basic customs duty (150%), deterring companies eyeing the Indian market, and depriving India of the corresponding FDI.
    • Phased reduction of duty on these products to 75% and finally to 30% is advisable.

    Areas that need increased spending

    • Spending on public healthcare needs to rise from 1.3% to 3% of GDP with Covid-19 exposing glaring inadequacies.
    • Revising the National List of Essential Medicines to exempt inexpensively-priced medicines from price controls would help investments in innovation and API manufacturing.
    • If the New Education Policy is to be implemented properly, public spend on education and skill development must rise from 3% to 4.5% of GDP.
    • The government must raise defence allocations to over 2.5% of GDP given India’s new threat perceptions and increase capital component of total fiscal allocations for defence could be increased from 34% to 40%.

    Other measures to boost the economy

    • Developing data adequacy agreements with the UK and other key countries would facilitate cross-border movement of personal data based on a mutual adequacy basis.
    • The online gaming industry should be supported by a model law, tax regime and self-regulation so that the government accrues tax revenues estimated at Rs 15,000 crore.
    • Most countries tax domestic corporate dividends at lower rates and, therefore, FPIs’ dividend income should be taxed at 10%.
    • Foreign banks must be brought at par with Indian banks with 8.5% deduction for NPA provisioning.
    • Excluding financial services from the e-commerce equalisation levy would be appropriate.
    • PSU disinvestments have slowed, and the Budget needs to announce measures for their acceleration as a privatisation push would be transformative for India in the long run.

    Consider the question”What are the hurdles in making India the more attractive to the investors? Discuss the measures to make India more attractive for investors.” 

    Conclusion

    As developed countries contemplate relocating their manufacturing supply chains to destinations besides China, a progressive Budget would send positive signals to overseas investors and would propel India’s rightful ambition to be the world’s next manufacturing workshop, in consonance with the Atmanirbhar Bharat vision.

    Source:

    https://www.financialexpress.com/opinion/union-budget-fy22-good-economics-must-make-good-politics/2173553/

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Coal and Mining Sector

    Issues with treating mineral sale proceeds as revenue or income

    op-ed snap | Economics | Mains Paper 3: Conservation, Environmental Pollution & Degradation, Eia

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: National Mineral Policy

    Mains level: Paper 3- Issues with our mining policies and changes needed to make them sustainable

    The rate at which we are extracting mineral and spending the proceeds from it without consideration for the future generation needs a rethink. The article deals with this issue.

    The principle of Intergenerational Equity

    • We cannot compromise the ability of future generations to meet their needs, and this is reflected in the aim for the sustainable economy.
    • The principle of Intergenerational Equity would make it imperative for us to ensure future generations inherit at least as much as we did.
    • If we are successful in abiding by intergenerational equity, our children will be at least as well off as we are.

    Issues with our mineral policy

    • India’s National Mineral Policy 2019 states: “natural resources, including minerals, are a shared inheritance where the state is the trustee on behalf of the people to ensure that future generations receive the benefit of inheritance.”
    • The extraction of oil, gas, and minerals is effectively the sale of this inheritance.
    • Unfortunately, governments everywhere treat the mineral sale proceeds as revenue or income which is basically a sale of inherited wealth.
    • This results in governments selling minerals at prices significantly lower than what they are worth, driven by lobbying, political donations, and corruption.

    Error in accounting

    • Proceeds received by the government are treated as “revenue” and spent.
    • This is just not sustainable.
    • There is growing empirical evidence of large losses in mining from around the world.
    • There is also growing evidence from the International Monetary Fund that many governments of resource-rich nations face declining public sector net worth, i.e., their governments are becoming poorer.
    • Due to the high profits involved, the extractors are keen to extract as quickly as possible and move on.
    • More mining would make a bad situation significantly worse.
    • The Government Accounting Standards Advisory Board needs to correct this error in the standards for public sector accounting and reporting for mineral wealth.

    Way forward

    • If we extract and sell our mineral wealth, the explicit objective must be to achieve zero loss in value; the state as trustee must capture the full economic rent.
    • Any loss is a loss to all of us and our future generations, and makes some rich; that is patently unfair.
    • India’s National Mineral Policy 2019 says: “State Governments will endeavor to ensure that the full value of the extracted minerals is received by the State.”
    • Like Norway, the entire mineral sale proceeds must be saved in a Future Generations Fund.
    • The Future Generations Fund could be passively invested through the National Pension Scheme framework.
    • The real income of a fund of this nature may be distributed only as a citizens’ dividend, equally to all as owners.
    • For the Indian economy, this is sustainable — capital has been maintained; the savings rate would rise, making available more long-term domestic capital; it diversifies risk while likely improving returns.

    Consider the question “What are the issues with our mining policies? Suggest the changes to make it more sustainable.”

    Conclusion

    Through these changes, let us be the generation that changes the course of history for the better, not the one that consumed the planet.

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Cyber Security – CERTs, Policy, etc

    New ideas needed for online privacy policies

    op-ed snap | Science Tech | Mains Paper 3: Awareness in various sc and tech fields

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Data Protection Bill provisions

    Mains level: Paper 3- Issues of informed consent to the online privacy policies

    The article discusses challenges posed by online privacy policies and suggests some ideas to make them more user friendly.

    Issues with online privacy policies

    • Such policies are not designed for easy reading.
    • These policies are full of legal jargon and most are difficult to read.
    • Most policies are exclusively in English, which is clearly inadequate in a country where no more than 12 per cent are comfortable with the language.
    • A human-centric study across India found that even people who couldn’t read or write, when made aware of what they were consenting to, cared deeply about it.
    • Online consent is, therefore, a false choice for most Indians.

    Importance of consent in data ecosystem

    • Consent is also the fulcrum of India’s fast-growing data ecosystem.
    • The Data Protection Bill under consideration by Parliament lists consent as a legal ground for data processing.
    • Last year, NITI Aayog sought public comments on the Data Empowerment and Protection Architecture (DEPA), a system that will connect an individual’s financial, health, telecom and other data so that it can be moved from one provider to another.
    • DEPA intends to use consent to ensure that users remain in control of their data.

    New ideas needed to give users greater control

    1) Business as steward of consumer trust

    • Businesses need to become more responsible stewards of consumer trust.
    • Experiments suggest that making consumers read privacy policies by getting them to stay on the “privacy policy” page for a few minutes, led to increased trust in businesses and greater data sharing.
    • Businesses can adopt such ideas to make users trust them more.

    2) Regulatory bodies need to guide consumers

    • Consumers do not have the time or knowledge to go through privacy policies.
    • The food regulator’s food safety certifications and the Bureau of Energy Efficiency (BEE)’s rating guides have become part of our everyday lives.
    • Similarly, a “privacy rating” for apps can help individuals make more informed choices about their data.
    • Such “rule of thumbs” can help them cut through the jargon, trust businesses more and share more data.

    3) Running awareness campaign

    • Governments and industry associations can play an enabling role by running innovative awareness campaigns that leverage local contexts, and relatable narrative styles.
    • The campaign should include awareness about messages logging off from public computers, and not sharing phone numbers easily.

    4) Some other ideas

    • The “burden of proof” on privacy should rest with providers rather than consumers.
    • Businesses should act as fiduciaries of user data and act in the best interest of the user than simply maximising profits.

    • Regulators can create a new class of intermediaries that warn consumers about dangerous practices, represent them, and seek recourse on their behalf.

    Consider the question “What are the issues with the consent to the online privacy policies? Suggest the measures to give users greater control over their digital destinies.

    Conclusion

    By educating and empowering every Indian, we will enable her to participate fully in India’s digital economy, and thereby create a meaningful digital life for every Indian. Only then will the true potential of Digital India be realised.

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

    Changes needed in India’s agri-food policy

    op-ed snap | Agriculture | Mains Paper 3: Issues Related To Farm Subsidies & Msp

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: FCI and MSP

    Mains level: Paper 3- Making India's agri-food policies optimal

    Basic parameters to design optimal agri-food policy

    • UN population projections (2019) indicate that India is likely to be the most populous country by 2027.
    • By 2030, the country is likely to have almost 600 million people living in urban areas, who would need safe food.
    • Indian agriculture has an average holding size of 1.08 hectares (2015-16 data) while engaging 42 percent of the country’s workforce.
    • Cultivable land and water for agriculture are limited and already under severe pressure.

    What should be the basic features of agri-policy

    • 1) It should be able to produce enough food, feed, and fibre for its large population.
    • 2) It should do so in a manner that protects the environment — soil, water, air, and biodiversity and achieves higher production with global competitiveness.
    • 3) It should enable seamless movement of food, keeping marketing costs low, save on food losses in supply chains and provide safe and fresh food to consumers.
    • 4) Consumers should get safe and nutritious food at affordable prices.

    Need to change from sub-optimal to optimal policies

    • Free electricity and highly subsidized fertilizers, especially urea, are damaging groundwater levels, especially in the Green Revolution states.
    • Sugar and wheat are being produced at prices higher than global prices, and these crops can’t be exported unless they are heavily subsidized.
    • Excessive stocks of wheat and rice with the Food Corporation of India (FCI) are putting pressure on the agency’s finances.
    • Rice remains globally competitive, but it should be remembered that in exporting rice we are also exporting massive amounts of precious water — almost 25-30 billion cubic meters, annually.
    • This is the water that is pumped for rice cultivation, enabled by the subsidized power supply.
    • In the marketing segment also, for most of our agri-commodities, our costs remain high compared to several other developing countries due to poor logistics, low investments in supply lines, and high margins of intermediaries.
    • All these are signs of sub-optimal agri-food policies.

    Policy changes required: On the production level

    • Green Revolution states of Punjab, Haryana, and western Uttar Pradesh require crop diversification.
    • This can be done by switching from the highly subsidized input price policy (power, water, fertilizers) and MSP/FRP policy for paddy, wheat, and sugarcane, to more income support policies linked to saving water, soil, and air quality.
    • The Agri-marketing segment is also in the need of reforms especially with respect to bringing about efficiency in agri-marketing and lowering transaction costs.
    • It is believed that developing countries should invest at least one percent of their agri-GDP in agri-R&D and extension.
    • India invests about half.
    • It needs to double with commensurate accountability of R&D organizations, especially the ICAR and state agriculture universities to deliver.

    Policy changes required: On the consumption level

    • The biggest challenge for the next 10 years is that of malnutrition, especially amongst children.
    • The public distribution of food, through PDS, that relies on rice and wheat, and that too at more than 90 percent subsidy over costs of procurement, stocking, and distribution, is not helping much.
    • It is increasing the finances of FCI, whose borrowings have touched Rs 3 lakh crore.
    • To address that, beneficiaries of subsidized rice and wheat need to be given a choice to opt for cash equivalent to MSP plus 25 percent.
    • The FCI adds about 40 percent cost over the MSP while procuring, storing, and distributing food.
    • This cash option will save some money and also lead to supplies of more diversified and nutritious food to the beneficiaries.

    Consider the question “What are the issues with India’s agri-food policies? Suggest the changes in agri-food policies so as to make them optimal.

    Conclusion

    What we need is to set agri-food policies on a demand-driven approach, protecting sustainability and efficiency in production and marketing, and giving consumers more choices for nutritious food at affordable prices.

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Higher Education – RUSA, NIRF, HEFA, etc.

    Problem of control and governance of knowledge in a globalised world

    op-ed snap | Governance | Mains Paper 2: Health & Education

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: UGC

    Mains level: Paper 2- Impact of UGC's criteria in evaluation of research on social sciences and humanities

    The article highlights the issues with the criteria applied by the UGC to evaluate the faculty research.

    Impact of UGC standardisation on social sciences and humanities research

    • UGC has been the regulatory body responsible for maintaining standards in higher education, while addressing challenges of globalisation.
    • Processes of UGC mandated standardisation have in particular impacted social sciences and humanities research in Indian universities.
    • Over the years, UGC has linked institutional funding to ranking and accreditation systems like NAAC and NIRF.
    • In order to evaluate institutions, these bodies have evolved  criteria, which rank universities based on faculty research measured by citations in global journal databases like SCOPUS.
    • In comparison, importance granted to research outputs like books or other forms is declining.

    Issues with the criteria

    • The insistence of publication in journals fails to distinguish between the varied trajectory of disciplines.
    • While in STEM (Science, Technology, Engineering, Management) disciplines, research is often highly objective and quantified.
    • In social sciences and humanities research is subjective, analytical and argumentative.
    • In disciplines like history, sociology, politics, philosophy, psychology and literature, researchers spend years writing books that engage with ideas in complex ways.
    • In devaluing books as authentic forms of research, UGC does major disservice to scholars of social sciences and humanities.
    • Due to emphasis on publication, teachers spend most of their productive time writing articles and getting them published, thereby missing out on quality engagement with pedagogy and research.

    Issues with the process of peer review

    • The process of peer review itself is subjective, and depends upon the knowledge, inclination and availability of time of the particular reviewer.
    • It is often quite challenging for scholars to meet peer-review standards of A-listed journals.
    • This has actually required the UGC to expand its own list, ending up including and subsequently deleting a large number of locally published journals.

    Issue of inaccessibility

    • Publication of research in paywalled journal databases makes research inaccessible for students as universities continue to cut down library budgets.
    • Students and teachers, access articles through pirated sites like Libgen and Scihub, prone to be shut down at any point of time as evident from the litigations.
    • Clearly, access to knowledge is structurally made inequitable in favour of the elite and/or moneyed institutions and their constituents.

    Way forward

    • The above arguments maintain for the possible multiplicity that can emerge as the end-result of research.
    • Interdisciplinary and practice-based research can throw up social and ecological experiments, artworks and performances, and numerous new outcomes yet to be conceived as research outputs.
    • While the UGC hopes to raise the standards to global levels, precarity of employment, longer teaching hours, a dismal student-teacher ratio, lack of sabbaticals, research and travel grants, access to research facilities and office space, adversely impact the research potential of teachers.
    • Regulating research needs to be replaced with facilitating research, allowing minds to think and gestate.
    • Regulations without facilitation will merely bureaucratise the governance of knowledge without generating any pathbreaking insights.

    Conclusion

    The UGC needs to widen its criteria which values publication of a book as much as a research paper in the mandated journal to widen the research in social sciences and humanities.

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Banking Sector Reforms

    Recapitalization of state-owned banks: Privatization should do it

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: CRAR

    Mains level: Paper 3- Recapitalisation of PSBs

    The article suggest the approach to deal with the problems banking in India faces.

    Banking sector under stress

    • Along with the other sectors, pandemic dealt a severe blow to the banking sector.
    • Stress tests reported in the Financial Stability Report (FSR) indicate that the low ratio of capital to risk-adjusted-assets (CRAR) is likely to decline further.
    • To revive the economy and resume sustained high growth, bold structural reforms will have to be combined with strong fiscal and monetary measures.

    Declining credit growth: monetary challenge

    • India’s credit-to-gross domestic product ratio is around 51%.
    • 51% not too low compared to other countries at comparable levels of per capita income.
    • However, the worry is that credit growth is declining rapidly.
    • It is mainly attributable to rising risk aversion among lenders, reflecting the high and rising level of NPAs.
    • Risk aversion spiked during the economic contraction.

    Rising NPA of Public Sector Banks

    • The FSR stress tests now indicate that the gross NPA ratio is likely to go up to as much as 13.5% by September 2021 in the report’s baseline case and 14.8% in the ‘severe stress’ case.
    • Within the banking sector, conditions are much worse in public sector banks (PSBs) compared to private banks (PBs) or foreign banks (FBs).
    • The gross NPA figure is forecast to rise to 16.2% for PSBs as compared to 7.9% and 5.4% for PBs and FBs in the baseline case.
    • Clearly, high NPAs are primarily a problem for PSBs, which still account for 60% of India’s total bank credit.

    Expanding banking sector: bypass PSBs and give a big push to private banking

    • The recent report on Ownership and Corporate Structure for Indian Private Sector Banks submitted by an RBI internal working group (IWG) espouses this approach.
    • The IWG’s main  recommendation is to enable large corporations and industrial houses to acquire banking licences.
    • The proposal has been strongly opposed by former governors and deputy governors of RBI, several former chief economic advisers, a former finance secretary, and, most significantly, all save one of the many experts the IWG consulted.

    Four issues with the push to private banking

    • 1) With an industry CRAR of only 12%, the proposed raising of the promoter share cap to 26% could potentially leverage the promoter’s investment by 32 times.
    • The very high risk appetite generated by such leveraging would subject depositors to a high level of systemic risk, given the limited deposit insurance provided in India.
    • 2) Excessive risk appetite would lead to imprudent lending, especially connected lending to group companies. Conglomerates always find ways around regulatory restrictions against such connected lending.
    • 3) Three, a conglomerate’s bank would have access to insider information on borrower companies that compete with its group companies.
    • 4) Conglomerate banks would lead to massive concentration of economic power and political influence against not just competing companies, but even the regulator.

    Way forward

    • A safer and cleaner option would be to help the country’s banking sector grow through simultaneous privatization and recapitalization of PSBs.
    • However, these options do not change the ownership and governance structure of PSBs, which is what primarily is to blame for their poor performance.
    • A better option is for PSBs to recapitalize themselves by raising fresh equity.
    • It would be more prudent financially and also more acceptable politically to test this approach with one or two small PSBs.

    Conclusion

    Government should try to adopt the approach which reduces the risks associated with giving push to private players in the banking sector while making the PSBs more efficient.

    Back2Basics: CRAR-Capital to risk-adjusted-assets

    •  The CRAR is the capital needed for a bank measured in terms of the assets (mostly loans) disbursed by the banks.
    • Higher the assets, higher should be the capital by the bank.
    • A notable feature of CRAR is that it measures capital adequacy in terms of the riskiness of the assets or loans given.

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • PPP Investment Models: HAM, Swiss Challenge, Kelkar Committee

    Hybrid Annuity Model(HAM) for the benefit of the road sector

    op-ed snap | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.,Investment Models

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Working of HAM

    Mains level: Paper 3- Hybrid Annuity Model and risks involved

    The article explains the working of Hybrid Annuity Model in the road construction and the risks involved in the model.

    Investment in road sector

    • The central government has set a target of increasing the investment in infrastructure to over Rs 111 lakh crore over the period FY20-FY25.
    • Within the transportation segment, projects worth Rs 36.7 lakh crore, constituting 55% of transportation infra, are for the road sector.
    • The large investments planned in the road sector signifies its importance—it has a multiplier effect on the economy and provides large employment opportunities.

    Models for the road sector

    • Out of HAM (Hybrid Annuity Model) and BOT (Build, Operate and Transfer)—toll developers prefer the relatively lower risk HAM model.
    • This is due to its various positives like lower equity requirements, provision for mobilisation advances, better right of way availability, inflation-linked adjustments for bid project cost, termination payments during the construction period and de-linking construction and operations.
    • These HAM features have garnered a favourable response and mix of HAM awards has increased from 10% in FY16 to 48% in H1FY2021.

    How HAM works and risks involved

    • During the operations period for a HAM project, the recovery from authority is in the form of fixed annuity payments along with interest on balance accumulated annuity payments (calculated @300 bps over prevailing bank rate)
    • The only major risk for HAM is the prevailing low bank rates adversely affecting the overall project viability and returns.
    •  Such interest receipts account for around 45% of total inflows.
    • Low bank rate would thus reduce the overall inflows for a HAM project, thereby adversely affecting its debt coverage metrics and returns to the investors.
    • The second problem is related to delayed and inadequate interest rate transmission—there is a transmission lag for the project loan (linked to MCLR of banks).

    Changes in model concession agreement

    • As per revised concession agreement dated November 10, 2020, interest rate on annuities will be equal to the average MCLR of top 5 scheduled commercial banks plus 1.25% instead of bank rate.
    • With the average MCLR replacing the bank rate, there will be a natural hedge between the annuity inflows and interest costs,
    • This will reduce the interest rate risks to a large extent, and that too without any delay.
    • The other major revision is the grant payment from the authority which will now be paid in 10 instalments instead of five.
    • The other major revision is the grant payment from the authority which will now be paid in 10 instalments instead of five.
    • Thus, the spacing between the payment milestones is reduced.
    • This will improve the cash conversion cycle for the contractors executing the HAM projects as their payments are back to back in nature.
    • However, these changes will be applicable for new awards, and the fate of the existing HAM projects is hanging in the balance.

    Conclusion

    With improved attractiveness, HAM is expected to remain the mainstay for public-private partnership projects in the road sector.

    Source:-

    https://www.financialexpress.com/opinion/hamsome-gains/2171329/

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Zoonotic Diseases: Medical Sciences Involved & Preventive Measures

    Covid-19 vaccine policy

    op-ed snap | Governance | Mains Paper 2: Health & Education

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Vaccines for Covid-19

    Mains level: Paper 2- Challenges in vaccination for Covid-19

    The article explains the challenge in the vaccination program for the Covid-19 vaccine.

    Issue of lack of data about the vaccine

    • In the COVID vaccine roll out, there is no clear data for either of the two vaccines proposed for use in the programme.
    • We do not know if they provide protection for life, for a year or six months, its efficacy among the elderly or the very sick or in stopping new infections.
    • Getting such data requires at least three years and cannot be obtained in a few months.

    Guidelines for implementing vaccine programme

    • Given these limitations, the government has drawn up strategic guidelines for implementing an vaccine programme covering 30 crore people by July.
    • The guidelines draw upon the knowledge of running national campaigns acquired over three decades of implementing the Universal Immunisation Programme.
    • These guidelines detail the skills, roles and responsibilities of the required human resources, logistics for delivering vaccines at point of use, physical infrastructure, monitoring systems based on digital platforms and feedback systems for reporting adverse events.
    • The approach involves 19 departments, donor organisations and NGOs at the national, state, district and block level.
    • The guidelines also mention the priority criteria — caregivers, front line workers of the departments of health, defence, municipalities and transportation; persons above the age of 50 and those below 50 having diabetes, hypertension, cancers and lung diseases.

    Issues with the guidelines

    • Of the 28,932 cold chain points, half are in the five southern states, Maharashtra and Gujarat.
    • Combined with poor human resources — doctors, nurses, pharmacists — a weak private sector, poor safety and hygiene standards, frequent power outages, poor infrastructure, the capacity to implement with the expected speed, quality and accuracy is daunting.
    • The immunisation can disrupt routine health service delivery — antenatal care, national programmes like those pertaining to TB or other immunisation drives.
    • While data for the above-50-year-olds is available in the electoral rolls, line listing of the under 50s with comorbidities can be challenging.
    • Not only are urban-rural variations substantial, but urban areas have weak public health infrastructure and a multiple number of private providers due to the poor implementation of the Clinical Establishment Act, 2010.
    • Patient tracking can be problematic.
    • The non-availability of efficacy data could also impact the procurement and supply of vaccines, result in huge wastage, and can introduce scope for errors and duplication.

    Way forward

    • Central to the success of the roll out will be the confidence of the people in the vaccines.
    • Coming out of this messy situation is necessary and one option — as adopted for the polio eradication programme — is to establish an independent team of experts under the aegis of the WHO to ensure the safety of the vaccine.
    • This will create confidence in the community and international authorities as well.

    Conclusion

    it is important to understand that vaccination is an incomplete solution to ending the epidemic, since the virus is mutating. Adopting safe behaviour is.

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now

  • Government Budgets

    Improving fiscal situation through budget

    op-ed snap | Economics | Mains Paper 3: Government Budgeting

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Kisan Credit Cards

    Mains level: Paper 3- Enhancing credit flow to small and marginal farmers

    The budget could be an opportunity to increase the consumption which has been impacted by the pandemic and still continues to show the declining trends.

    Continuing decline in consumption

    • The first advance estimates of GDP for 2020-21 are much better than the earlier market consensus.
    • The demand side, however, continues to be in a decline with private consumption falling by 9.5 per cent and its share in the overall GDP reducing by full 100 basis points.
    • Per capita private consumption has contracted by 10.4 per cent, while capital formation has contracted by 14.5 per cent, with imports and exports also contracting.
    • Only government consumption remains in positive territory.

    What should be the growth in nominal GDP for 2021-22?

    • In terms of specific numbers, the average growth in nominal GDP for the decade ending in 2013-14 was 15 per cent, but the average GDP deflator at 7.6 per cent far outpaced average real GDP at 6.8 per cent.
    • For the six year period ending in 2019-20, average nominal GDP growth was 10.4 per cent, with real GDP growth of 6.8 per cent far outpacing the GDP deflator at 3.6 per cent.
    • It is thus extremely important that we ensure that the current inflation trajectory is kept under control through policy interventions.

    Policy recommendations for the farmers

    1) Changing condition for renewal of loan on Kisan Credit Cards

    • Out of the outstanding bank credit of about Rs 12 lakh crore to the agriculture and allied activities sector, Rs 7 lakh crore is for Kisan Credit Cards.
    • The KCC portfolio of banks is under stress over the years due to a variety of factors like crop losses, unremunerated prices, debt waivers and the rigidity of the KCC product.
    • Currently, the renewal of KCC loans with payment of both principal and interest ensures interest subvention.
    • It is proposed that for renewal of KCC loans of small and marginal farmers and for loans of other categories of farmers for amounts up to Rs 3 lakh, the payment of interest must be a sufficient condition for renewal as with other loans.
    • The above measure has the potential to reduce the credit cost for banks considerably on KCCs as NPAs can be prevented more easily and the interest rate on KCC loans can be further reduced.

    2) Formalise tenancy and provide credit to tenant farmers

    • There are 11.5 crore farmers who are PM-KISAN beneficiaries — 6.5 crore farmers have KCC.
    • Thus, the remaining 4-5 crore could be land owning cultivators and at least 3-4 crore of such could be tenants/lessees/landless.
    • Currently, such tenant farmers are not formalised into the credit deliveries of scheduled commercial banks.
    • As of now, it requires state interventions for tenancy certificates which is only available in Andhra Pradesh.
    • Formation of a SHG model under the Deen Dayal Antodoya Yojana will formalise tenancy even without formal documentation of tenancy.
    • This will enable formal lending to take place to three crore landless farmers.

    3) Increasing investment in health and education

    • For health, it government could introduce medical savings account with a defined scheme to deduct interest from the savings account and pay towards a Mediclaim policy.
    • For the record, the size of the health insurance is Rs 32,000 crore and the savings bank interest is Rs 1.15 lakh crore.
    • The government should also consider exempting all retail and health insurance products from GST.

    Three suggestions on the fiscal situation

    • First,Withdraw all tax appeals.
    • Second, accept all domestic arbitration decisions against government departments/agencies.
    • Third, clear all outstanding dues to all parastatal agencies within a stipulated time.
    • This will be a milestone structural administrative change that could be even thought of as a one-time balance sheet entry recognising liabilities and paying them off.
    • As a consequence, we could jump multiple positions on the Ease of Doing Business rankings.

    Conclusion

    By implementing these steps in the budget the government could use this opportnity to stimulate the economy and aid the economic recovery.

    Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

    Attend Now