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Type: Prelims Only

  • Who is a Chess Grandmaster?

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Various titles in Sports

    Mains level: NA

    India’s teenage chess grandmaster Rameshbabu Praggnanandhaa has won praise for a stunning victory over world number one Magnus Carlsen in an online championship.

    Why are we reading this?

    • UPSC had asked three questions on sports in CSP 2021. They were based on Laureus World Sports Award, Summer Olympics, and ICC World Test Championship.
    • Try to ace uncertainties. No one can memorize such facts.

    Grandmaster: Behind the Title

    • Grandmaster is the highest title or ranking that a chess player can achieve.
    • The Grandmaster title — and other chess titles — is awarded by the International Chess Federation, FIDE (acronym for its French name Fédération Internationale des Échecs).
    • It is the Lausanne-Switzerland-based governing body of the international game.
    • The title is the badge of the game’s super elite, a recognition of the greatest chess talent on the planet, which has been tested and proven against a peer group of other similarly talented players.

    Other (lesser) titles

    Besides Grandmaster, the Qualification Commission of FIDE recognises and awards seven other titles:

    1. International Master (IM)
    2. FIDE Master (FM)
    3. Candidate Master (CM)
    4. Woman Grandmaster (WGM), Woman International Master (WIM), Woman FIDE Master (WFM), and Woman Candidate Master (WCM) and so on .

    Titles are for life

    • All the titles, including that of Grandmaster, are valid for life, unless a player is stripped of the title for a proven offence such as cheating.

    Qualifications for Grandmaster

    • The qualifications for Grandmaster were changed several times, including in 1957, 1965, and 1970.
    • Currently, FIDE awards chess’s highest honour to a player who is able to achieve a FIDE Classical or Standard rating of 2,500, plus three Grandmaster norms.
    • Grandmaster norms are defined by a set of complex and rigorous rules regarding tournaments, games, and players, that are set out in the FIDE Title Regulations.
    • The current regulations were approved by the FIDE Council on October 27, 2021, and came into effect on January 1, 2022.
    • Each norm is very difficult to attain.
    • Broadly, a player must have a performance rating of 2,600 or higher in a FIDE tournament that has nine rounds.

    Who holds maximum titles?

    • FIDE has so far recognized fewer than 2,000 Grandmasters out of the millions who play the game around the world.
    • A vast majority of Grandmasters have been male. Russia (and the erstwhile USSR) has produced the most Grandmasters in the world, followed by the United States and Germany.

    Grandmasters in India

    • India became a chess powerhouse in the 2000s, and now has more than 70 Grandmasters.
    • In 2016, Praggnanandhaa had become the world’s youngest IM at age 10 years, 10 months, and 19 days.

    Try this question from CSP 2021:

    Q. Consider the following statements in respect of the Laureus World Sports Award which was instituted in the year 2000:

    1. American golfer Tiger Woods was the first winner of this award.
    2. The award was received mostly by ‘Formula One’ players so far.
    3. Roger Federer received this award maximum number of times compared to others.

    Which of the above statements are correct?

    (a) 1 and 2 only

    (b) 2 and 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

     

    Post your answers here.

     

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  • Corruption Challenges – Lokpal, POCA, etc

    What are Swiss Banks?

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Swiss Banks

    Mains level: Corruption and money laundering

    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.

     

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  • Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

    Who are the Angadias?

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Angadias

    Mains level: NA

    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.

     

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  • Electric and Hybrid Cars – FAME, National Electric Mobility Mission, etc.

    EV Battery Swapping Policy

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: EV Battery Swapping Policy

    Mains level: Electric mobility

    NITI Aayog is holding a consultation on the upcoming electric vehicle (EV) battery swapping policy.

    What is BaaS?

    • Battery-as-a-service (BaaS) is seen as a viable charging alternative.
    • Manufacturers can sell EVs in two forms: Vehicles with fixed or removable batteries and vehicles with batteries on lease.
    • If you buy an electric scooter with battery leasing, you do not pay for the cost of the battery—that makes the initial acquisition almost 40% cheaper.
    • Users can swap drained batteries for a fully charged one at a swap station. The depleted batteries are then charged on or off-site.
    • The advantages of swapping include low downtimes for commercial fleets, reduced space requirements, and lower upfront costs.
    • It is also a viable solution for those who don’t have parking spots at home.

    What is battery interoperability?

    • That’s when a battery is compatible across vehicles and chargers, so you can seamlessly swap a battery at any swap station. This can help achieve scale.
    • However, manufacturer and service providers say there are safety concerns around the ‘one-size-fits-all’ model and caution too much standardization can kill innovation.

    Why hasn’t BaaS taken off yet?

    • There are economic and operational constraints.
    • Energy service providers offering swapping solutions have to charge 18% goods and services tax (GST) for swapping, compared to 5% GST on the purchase of an EV.
    • Additionally, the government’s FAME-II incentives are not offered to vehicles sold with BaaS or swap station operators.
    • While these are economic disadvantages compared to direct charging solutions, the lack of a dense and interoperable battery swap infrastructure has also hindered the roll-out.
    • Manufacturers, on the other hand, are keen to create proprietary battery and charging systems.

    Issues with BaaS

    • There is a need for standardization of safety specifications  as well as  the battery.
    • Swapping in the various permutations and combinations of batteries at a station  where  they  have not been tested for compatibility could lead to safety hazards.
    • Also, mandating only one type of battery to  be eligible for  concessions  would be  disadvantageous  to  many  players.

    Who offers BaaS in India?

    • Bengaluru-based startup Bounce is the first e-two-wheeler maker to sell its scooters with BaaS, and claims to have achieved a million battery swaps.
    • Others like Ola Electric and Ather have stuck to direct charging solutions, while Hero Electric offers both fixed and removable batteries.
    • Many makers are working with energy service providers to offer battery swapping.
    • The global precedent is a mixed bag: Ample, which offers swaps in the US, has found success with commercial fleets, while most personal users charge at home.

    Why is Battery Swapping needed?

    • High Cost of EVs: An EV, by industry standards, is 1.5-2x costlier than IC Engine counterpart and at least half the cost is from the battery pack.
    • Cost reduction: Many manufacturers are offering batteries separately from a vehicle, reducing the cost. In that case, a fleet owner can buy vehicles without battery and utilize battery swapping.
    • Range Anxiety: Another major reason stopping people from buying EVs is range anxiety, or in simple terms, the fear of battery getting empty without finding a charging station.
    • Inadequate charging infrastructure: Unlike petrol pumps, EV charging stations are rare to spot and that further increases the range anxiety exponentially, especially while going on a road trip.
    • Hazard management: In case of a Swapping Station, one can simply locate a station, go and replace the empty battery with a new one.

     

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  • Indian Navy Updates

    What is Presidential Fleet Review?

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Fleet Review

    Mains level: Indian Naval Arsenal

    The President of India recently took part in the Indian Navy’s 12th Presidential Fleet Review.

    What is the President’s Fleet Review?

    • In simplest terms, it is the country’s President taking stock of the Navy’s capability.
    • It showcases all types of ships and capabilities the Navy has.
    • It takes place once under every President, who is the supreme commander of the armed forces.
    • The President is taken on one of the Naval ships, which is called the President’s Yacht, to look at all the ships docked on one of the Naval ports.
    • The yacht will be distinguished by the Ashoka Emblem on her side and will fly the President’s Standard on the Mast”.

    Importance of Presidential Fleet Review

    • A fleet review is usually conducted once during the tenure of the President.
    • So far, 11 Presidential Fleet Reviews have been conducted since Independence, of which two have been International Fleet Reviews, in 2001 and 2016.
    • In terms of significance, the Navy’s Presidential review is second only to the Republic Day Parade.
    • The President will be given a 21-gun salute before embarking on the yacht.

    Do all naval ships participate?

    • The idea is to showcase not all the Navy’s ships, but every type of ship — and the kind of capabilities it has at that time.
    • The review also includes merchant ships as well.

    What else happens in the fleet review?

    • In this most formal of naval ceremonials, each ship dressed in full regalia will salute the President as he passes.
    • The President will also be reviewing the Indian Naval Air Arm in a display of spectacular fly-past by several helicopters and fixed-wing aircraft.
    • In the final stage of the review, a mobile column of warships and submarines will steam past the Presidential Yacht.

    How many of these reviews have been held?

    • There have been 11 President’s Fleet Reviews since Independence.
    • The first was conducted in 1953, under Dr Rajendra Prasad.
    • The next one was done not by the President but by the then Defence Minister, Y B Chavan, in 1964.
    • Since then, it has been the President reviewing the fleet.
    • The longest gap between reviews was of 12 years — between 1989 (President R Venkatraman) and when 2001 (President K R Narayanan).
    • The last one was done in 2016, under President Pranab Mukherjee.

    Significance of the event

    • It is one of the most important events for the Navy, which is essentially showing its allegiance and commitment to defending the country.
    • It is a long-standing tradition followed by navies across the world, and according to Navy officials it is a strong bond that links seafarers of the world.
    • Historically, a Fleet Review is an assembly of ships at a pre-designated place for the purpose of displaying loyalty and allegiance to the Sovereign and the state.
    • In turn, the Sovereign, by reviewing the ships, reaffirms his faith in the fleet and its ability to defend the nation’s maritime interest.
    • It is perhaps conceived as a show of naval might. Though it still has the same connotation, assembling of warships without any belligerent intentions is now the norm in modern times.

     

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  • Judicial Reforms

    Sealed Cover Jurisprudence

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Sealed Cover Jurisprudence

    Mains level: Fair trial issue

    Some Parliamentarians and prominent figures have issued a statement expressing discontent over the Kerala High Court’s verdict upholding the transmission ban on a Malayalam news channel.

    What is the news?

    • The channel went off air as the Centre suspended its telecast over “security reasons”.
    • The High Court’s decision was based entirely on the assessment of documents presented by the MHA in a sealed cover.
    • The contents of which were not shared with the news channel.

    What is Sealed Cover Jurisprudence?

    • It is a practice used by the Supreme Court and sometimes lower courts, of asking for or accepting information from government agencies in sealed envelopes that can only be accessed by judges.
    • A specific law does not define the doctrine of sealed cover.
    • The Supreme Court derives its power to use it from Rule 7 of order XIII of the Supreme Court Rules and Section 123 of the Indian Evidence Act of 1872.

    Nature of the power: Upholding Secrecy

    • If the Chief Justice or court directs certain information to be kept under sealed cover or considers it of confidential nature, no party would be allowed access to the contents of such information.
    • There is an exception to this if the Chief Justice himself orders that the opposite party be allowed to access it.
    • It also mentions that information can be kept confidential if its publication is not considered to be in the interest of the public.
    • As for the Evidence Act, official unpublished documents relating to state affairs are protected and a public officer cannot be compelled to disclose such documents.

    Grounds of such secrecy

    Other instances where information may be sought in secrecy or confidence is when its publication:

    1. Impedes an ongoing investigation
    2. Details which are part of the police’s case diary or
    3. Breaches the privacy of an individual

    Prominent cases of sealed jurisprudence

    Sealed cover jurisprudence has been frequently employed by courts in the recent past.

    (1) Rafale Deal

    • In the case pertaining to the controversial Rafale fighter jet deal, a Bench headed by CJI Ranjan Gogoi in 2018, had asked the Centre to submit details related to deal’s decision making and pricing in a sealed cover.
    • This was done as the Centre had contended that such details were subject to the Official Secrets Act and Secrecy clauses in the deal.

    (2) Bhim Koregaon Case

    • In the Bhima Koregaon case, in which activists were arrested under the Unlawful Activities Prevention Act.
    • The Supreme Court had relied on information submitted by the Maharashtra police in a sealed cover.

    Criticism of such acts

    • Critics of this practice contend that it is not favorable to the principles of transparency and accountability of the Indian justice system.
    • It stands in contrast to the idea of an open court, where decisions can be subjected to public scrutiny.
    • It is also said to enlarge the scope for arbitrariness in court decisions, as judges are supposed to lay down reasoning for their decisions.
    • Besides, it is argued that not providing access to such documents to the accused parties obstructs their passage to a fair trial and adjudication.

    How has judiciary responded to this?

    • In the 2019 judgment in the case of P Gopalakrishnan V. The State of Kerala, the Supreme Court had said that disclosure of documents to the accused is constitutionally mandated.
    • This is possible even if the investigation is ongoing and said documents may lead to breakthrough in the investigation.

     

  • International Space Agencies – Missions and Discoveries

    Can dark matter be composed, even partly, of black holes?

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Dark Matters

    Mains level: NA

    A recent hypothesis says that dark matter comprises a large number of compact objects such as primordial black holes.

    What are Dark Matters ?

    • Astronomical observations suggest that a significant part of the universe is made up of dark matter which interacts with the rest of the universe only through the gravitational pull.
    • Many large lab experiments have tried to detect elementary particles that could be candidates for dark matter.
    • However, such dark matter particles have not been detected until now.
    • Several astronomical observations suggest that all galaxies are embedded in a “halo” of dark matter.
    • The “visible” galaxy is like a disc embedded in a dark matter halo that is much larger in size.

    What is the recent proposition?

    • When the universe was very young, hot and dense – soon after the Big Bang, it must have had quantum fluctuations of its density.
    • This, in turn, would have caused some regions to become extremely dense, and therefore, to collapse under their own gravity to form the primordial black holes.
    • While we have no conclusive evidence of spotting these objects, some of the binary black hole mergers detected by the LIGO gravitational wave detectors might be primordial black holes.
    • The question is open there is good reason to believe that primordial black holes did form in the young universe.

    Observing dark matter: Gravitational Lensing

    • The paper explores what happens when such objects get in the way of gravitational waves traveling towards the Earth from the distance.
    • It invokes a phenomenon called gravitational lensing that is used regularly in astronomy.
    • When light travels through space and passes near a massive or compact body – a star, a galaxy or a black hole, for example, the intense gravity of that body may attract the light towards it.
    • This causes bending it from its rectilinear (straight line) path.
    • This phenomenon is known as gravitational lensing and was first observed by Arthur Eddington in 1919.

    How intense are they?

    • Massive objects like galaxies can bend light significantly, producing multiple images, this is called strong lensing.
    • Lighter objects like stars or black holes bend light less, and this is called micro-lensing.
    • A similar lensing can happen to gravitational waves travelling towards the Earth, and this would leave signatures in the detected gravitational waves.
    • This can be used to detect the presence, or the existence, of primordial black holes.

    Assessing dark matter

    • Until now, individual black holes have not marked out these signatures on gravitational waves detected by the LIGO-VIRGO detectors.
    • However, if all of the dark matter is made of primordial black holes, they should have produced detectable signatures on the gravitational wave signals.
    • The researchers use the non-observation of the lensing signatures to assess what fraction of the dark matter could be made of black holes.

    Way ahead

    • This provides a new way of constraining the nature of dark matter.
    • The study concludes that black holes in the mass range from a hundred to a million solar masses can contribute only up to 50-80% of the dark matter in the universe.
    • This is an upper limit and the actual fraction can be much smaller.
    • These upper limits will get better and better with more and more observations.

     

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  • International Space Agencies – Missions and Discoveries

    Lucy Mission to probe Jupiter’s Trojan Asteroids

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Lagrange Points, Lucy Mission

    Mains level: NA

    NASA is set to send its first spacecraft to study Jupiter’s Trojan asteroids to glean new insights into the solar system’s formation 4.5 billion years ago.

    Lucy Mission

    • Lucy will fly by eight Jupiter asteroids—seven Trojans and one main-belt asteroid — over the next 12 years.
    • It is NASA’s first single spacecraft mission in history to explore so many different asteroids.
    • Lucy will run on solar power out to 850 million km away from the Sun.
    • This makes it the farthest-flung solar-powered spacecraft ever, according to NASA.

    What is Jupiter Trojan Asteroids?

    • Simply known as Trojans, they are a large group of asteroids that share Jupiter’s orbit around the Sun.
    • Thousands of such asteroids exist in a gravitationally stable space.
    • The swarms lead and follow the planet Jupiter along its orbit around the Sun.

    What exactly are Trojans?

    • Lucy’s Trojan destinations are trapped near Jupiter’s Lagrange (L) points, which are gravitationally stable locations — it is where the gravity from the Sun and from Jupiter cancel each other out.
    • This means their orbits are stable and the Trojans are trapped in the space between.
    • This also means that asteroids are as far away from Jupiter as they are from the Sun.
    • Jupiter’s leading and trailing Lagrangian points (L4 and L5) have been stable over the age of the solar system.
    • This means that their orbits have accumulated many, many asteroids.
    • It makes sense to call a Trojan a co-orbital object, which moves around one of the two stable Lagrangian points.

    When and how were they discovered?

    • It took many a scientist to understand Trojans, and subsequently, name them so.
    • A German astrophotographer in 1906 made an important discovery: An asteroid with a particularly unusual orbit. As Jupiter moved, this asteroid remained ahead of Jupiter.
    • It was observed that the asteroid was nearly 60 degrees in front of Jupiter.

    Students with engineering background would better understand who Lagrange was. Rest need not care.

    Lagrange’s propositions

    • This specific position of a particular behavior was predicted by the Italian-French mathematician Joseph-Louis Lagrange over 100 years earlier.
    • Lagrange had argued that if a small celestial body is placed at one of two stable points in a planet’s orbit around the Sun (the L4 and L5), the asteroid would remain stationary from the planet’s perspective.
    • This is due to the combined gravitational forces of the planet and the Sun.
    • Thus, Lagrange’s prediction acquired credibility. More such asteroids were discovered over subsequent months in Jupiter’s Lagrange point L5.

    Behind the name: Lucy

    • It is the fossil of a hominin that lived 3.2 million years ago.
    • She is known to be one of the most famous pre-human fossils in history.
    • Nearly 40 percent of the fossilized skeleton of this hominin was discovered in 1974 by a team of paleoanthropologists led by Donald Johanson.
    • The name was inspired from the famous Beatles song “Lucy in the Sky With Diamonds,” which Johanson’s team listened to at camp the night of their discovery.

    Back2Basics: Lagrange Points

    • Lagrange points are positions in space where objects sent there tend to stay put.
    • They are named after Italian-French mathematician Josephy-Louis Lagrange.
    • At Lagrange points, the gravitational pull of two large masses precisely equals the centripetal force required for a small object to move with them.
    • These points in space can be used by spacecraft to reduce the fuel consumption needed to remain in position.
    • There are five special points where a small mass can orbit in a constant pattern with two larger masses.

     

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  • Water Management – Institutional Reforms, Conservation Efforts, etc.

    Kerala plans to replace Mullaperiyar Dam

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Mullaperiyar Dam

    Mains level: Not Much

    Kerala plans to build a new dam to replace the 126-year-old Mullaperiyar dam in the Idukki district.

    Mullaperiyar Dam

    • It is a masonry gravity dam on the Periyar River in Kerala.
    • It is located on the Cardamom Hills of the Western Ghats in Thekkady, Idukki District.
    • It was constructed between 1887 and 1895 by John Pennycuick and also reached in an agreement to divert water eastwards to the Madras Presidency area.
    • It has a height of 53.6 m (176 ft) from the foundation, and a length of 365.7 m (1,200 ft).

    Operational issue

    • The dam is located in Kerala but is operated and maintained by Tamil Nadu.
    • The catchment area of the Mullaperiyar Dam itself lies entirely in Kerala and thus not an inter-State river.
    • In November 2014, the water level hit 142 feet for first time in 35 years.
    • The reservoir again hit the maximum limit of 142 feet in August 2018, following incessant rains in the state of Kerala.
    • Indeed, the tendency to store water to almost the full level of reservoirs is becoming a norm among water managers across States.

    The dispute: Control and safety of the dam

    • Supreme court judgment came in February 2006, has allowed Tamil Nadu to raise the level of the dam to 152 ft (46 m) after strengthening it.
    • Responding to it, the Mullaperiyar dam was declared an ‘endangered’ scheduled dam by the Kerala Government under the disputed Kerala Irrigation and Water Conservation (Amendment) Act, 2006.
    • For Tamil Nadu, the Mullaperiyar dam and the diverted Periyar waters act as a lifeline for Theni, Madurai, Sivaganga, Dindigul and Ramnad districts.
    • Tamil Nadu has insisted on exercising the unfettered colonial rights to control the dam and its waters, based on the 1886 lease agreement.

    Rule of Curve issue

    • A rule curve or rule level specifies the storage or empty space to be maintained in a reservoir during different times of the year.
    • It decides the fluctuating storage levels in a reservoir.
    • The gate opening schedule of a dam is based on the rule curve. It is part of the “core safety” mechanism in a dam.
    • The TN government often blames Kerala for delaying the finalization of the rule curve.

     

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  • Capital Markets: Challenges and Developments

    What are Participatory and Non-Participatory Funds?

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Participatory and Non-Participatory Funds

    Mains level: NA

    The amendment to Section 24 of the LIC Act, brought prior to commencing the IPO, segregated the previously single ‘Life Fund’ into the participatory and non-participatory fund.

    What are Participatory and Non-Participatory Funds?

    • Under a participatory policy, a policyholder can get a share of the profits of the company.
    • This is received as a bonus. Examples of such products offered by LIC include  Jeevan Labh and  Bachat Plus.
    • No such sharing of profits happens under non-participatory products, which under the LIC fold includes policies such as  Saral Pensionand  Nivesh Plus.
    • As all insurance companies do, LIC also reinvests premium monies that policyholders pay.
    • The profits or surplus that comes about, as a result, was till September last year held in one single fund. This was the Life Fund.
    • The surplus was divided in the 95:5 ratio between policyholders (in the form of bonuses) and shareholders (in the form of dividends).

    What has the Amendment changed?

    • But the amendment to Section 24 of the LIC Act has necessitated the segregation of the Life Fund into participatory and non-participatory funds, depending on the nature of the policies they support.
    • The amendment stipulates terms on how surplus is to be shared with respect to participatory and non-participatory funds.
    • As for non-participating funds, surplus from the non-participating business would be transferred to shareholders.
    • Surplus from participatory business, however, would be shared between policyholders and shareholders.

    How does this change impact the shareholder?

    • The change, especially the one that has enabled 100% of the surplus in non-participatory funds to flow to the shareholder, has led to a massive jump in the Indian Embedded Value, or IEV.
    • IEV is a measure of future cash flows in life insurance companies and the key financial gauge for insurers.
    • The embedded value will help establish the market valuation of LIC and determine how much money the government raises in the flotation.
    • That will be crucial for the government to help meet its divestment targets and keep its fiscal deficit in check.

    Why is it a risk, then?

    • LIC has stated in the document that a significant portion of its business premiums come from participating and single premium products.
    • It added, should the participating products generate lower than expected returns for policyholders, it could lead to increased surrenders.
    • This could also potentially bother their financial condition, operations, and cash flows.

     

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