Comprehensive News Analysis – 20 June 2016

Table of Contents:

A. GS1 Related:
B. GS2 Related:

1. Panel on education policy wants UGC Act to lapse

2. Kenya’s jurist made Commonwealth’s envoy to Maldives

3. Centre’s tribal welfare scheme to be launched in Maharastra June 25

C.GS3 Related:

1. New monetary policy committee likely soon

2. IIP has limitations as a representative of aggregate growth in manufacturing

3. China failed to make it to the MSCI Index

D. GS4 Related
E. Important Editorials : A Quick Glance

The Hindu

1. The cost of nuclear diplomacy

2. A strategic exit

3. India and the Brexit forecast

4. Letting them off easy

5. Chinks in the new aviation policy’s armour

The Indian Express

1. With humility, on farmer income

Others

1. PIB

2. The Financial Express:

a) Here’s what will add bite to new bankruptcy law

3. The Business Line:

a) Modern lending

4. The Economic Times:

5. Quick Bits and News from the states

a) Yoga becomes spearhead of India’s soft power push in southwest China

b) ‘Pakistan not against NIA team for Pathankot probe’

c) Poachers kill female rhino in Kaziranga

d) Jaishankar seeks details of action against 3 U.S. donors

e) NTPC’s compensation is inadequate, say villagers

f) Model for airport fees may increase passenger fares

g) Investment prospects remain subdued: Survey

h) Government plans to unleash ‘Blue Revolution’

F. Concepts-in-News: Related Concepts to Revise/Learn:
G. Fun with Practice Questions 🙂
H. Archives

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Useful News Articles

A. GS1 Related

 

B. GS2 Related

 

  1. Panel on education policy wants UGC Act to lapse

Topic: Education

Category: Governance

Location: The Hindu

Key points:

  • A high-power committee headed by former Cabinet Secretary T.S.R. Subramanian, tasked with drawing a blueprint for a new national education policy, has recommended that the law that set up the higher education regulator University Grants Commission (UGC) be allowed to lapse
  • The UGC’s mandate includes overseeing disbursal of grants to colleges and fellowships to students, and recognising and monitoring institutions.
  • “The Committee was informed that there are widespread irregularities in grant of approval of institutions and courses. There are serious concerns about the quality of education provided by a large number of colleges/universities; it is the responsibility of the UGC to monitor standards of education in higher education institutions and the UGC has not succeeded in ensuring this. The credibility of the UGC has been seriously dented by approvals given to a large number of sub-standard colleges and deemed universities,” says the report
  • The panel also suggests an alternative arrangement of a pruned UGC. “The UGC could be revamped, made considerably leaner and thinner, and could be the nodal point for administration of the proposed National Higher Education Fellowship Programme, without any other promotional or regulatory function.”
  • TheHari Gautam committee report had concluded that the UGC does not have the adequate number of personnel, of requisite quality, to be an effective regulatory force in the highereducation sector
  • TheYashpal Committee had suggested subsuming of various authorities like UGC and AICTE — the technical education regulator — within a bigger platform providing interaction between different areas of knowledge
  • The Subramanian-panel, however, believes that specialised functions should be undertaken by specialised bodies

 

2. Kenya’s jurist made Commonwealth’s envoy to MaldivesTopic:Maldives

Category: India’s Neighbourhood

Key points:

  • Willy Mutunga, who was Chief Justice of Kenya till now, has been made Commonwealth Secretary-General’s Special Envoy to Maldives
  • According to the Commonwealth, Dr.Mutunga would “act on behalf of the Secretary-General and will be independent of the government of Maldives. He will consult with all relevant stakeholders.”
  • Welcoming the appointment, the opposition Maldivian Democratic Party, in a statement, wanted the special envoy to urge the government to “urgently address” recommendations of the Commission of National Inquiry in Maldives (constituted in February 2012 to go into the exit of Mohamed Nasheed as President), especially the Commission’s calls for reform of the police and the judiciary.

 

3. Centre’s tribal welfare scheme to be launched in Maharastra June 25Topic:Tribal Affairs

Category: Governance

Key points:

  • The NALSA (Protection and Enforcement of Tribal Rights) Scheme, 2015, one of the seven social welfare schemes with legal services provision launched by the Centre, will be launched in Maharashtra on June 25 in Thane
  • National Legal Services Authority (NALSA), to facilitate the tribal people’s access to justice, social, economic and political as mentioned in our Constitution, created this scheme after constituting a committee and conducting deliberations

 

C. GS3 Related
  1. New monetary policy committee likely soon

Topic: Monetary Policy

Category: Economy

Key points

  • The government is expected to soon announce both, members of the monetary policy committee, as well as the successor to RBI Governor RaghuramRajan, according to sources
  • The Finance Bill, passed by the Parliament, has paved the way for the formation of the monetary policy committee
  • It is to have have six members — three of them, including RBI Governor, who will head the panel, will be from the RBI while the remaining three will be external members. RBI Governor will have the casting vote in case of an undecided vote
  • The formation of the monetary policy committee was mooted by the Urjit Patel committee which was set up by Mr. Rajan shortly after he took charge as Governor
  • The committee suggested that monetary policy be rule-based and not discretion-based. Targeting inflation is to be the core objective of the central bank, and it will be answerable to law-makers if it failed to achieve the target, the Patel committee had suggested
  • RBI has already moved to an inflation-targeting framework following an agreement signed with the government in 2015

 

2. IIP has limitations as a representative of aggregate growth in manufacturingTopic:IIP and GDP

Category: Economy

Key points

(Excerpts from interview with India’s Chief Statistician TCA Anant)

  • Output measurement the way it is done in the Index of Industrial Production uses the following: It takes a list of items, which it constructs in the base year. For each item, it identifies producing entities, which it also does in the base year
  • Whatever structure they fix, they then freeze. They start getting output figures from these entities month over month from that they construct the index. In IIP, this fixed basket of items and entities introduces a peculiarity
  • One, if exit of entities takes place their output falls to zero. But because the basket is frozen, new entities are not brought in, you can’t take account of new entities
  • Secondly, we fix the basket of items also in the base year. But the item baskets themselves are volatile. I may use, smart phones, simpler mobile phones, I may use desktops instead of mobile instruments
  • There may also be new items which come in. Maybe watch phones. I will be limiting myself to whatever was chosen in the base year. Something which goes out of fashion goes out. But something that has come in has not come in because the base year has not changed
  • The selection of item and producing entities has remained the same from many years. There will be implications. IIP growth will have a certain directional bias. The recommendation always has been: try to make it more dynamic
  • The recommendation was to revise it more frequently. So with that in mind the attempt has been to push forward the date of revision. We were earlier doing decade-wise revisions in 1993-94 and so on. Now we are targeting the revision within seven years
  • Ideally, we should go for more, quicker revisions. But revisions in a process where you have to physically collect data from entities and establish collection system, where no regular system of reporting production is available, is a cumbersome task. It is an institutional challenge

 

3. China failed to make it to the MSCI IndexTopic: Capital Market

Category: Economy

Key points

  • Morgan Stanley Capital International (MSCI), a widely-tracked global index provider and the world’s biggest index compiler, with more than $10 trillion in assets benchmarked to its productssaid it would not add China’s local currency shares to its benchmark emerging markets index
  • MSCI said investor concerns over the openness and transparency of Chinese markets, despite years of reform, convinced the index provider that China’s A shares weren’t ready for addition to the index
  • If China mainland shares were added into the emerging market index, India would have seen a drop in its weightage on the index and money flowing out its markets
  • Currently, India has a weightage of 8.1 per cent, which could have dropped to 6.4 per cent and seen an outflow of $1.5 billion, in the event of 100 per cent inclusion of Chinese A-shares

 

D. GS4 Related
E. Important Editorials: A Quick Glance

 

The Hindu

 

  1. The cost of nuclear diplomacy 

Topic: Indo-US Relations/Energy sector

Category: International Relations/Economy

Key points

  • In their recent joint statement, Prime Minister Narendra Modi and President Barack Obama “welcomed the start of preparatory work in India for six AP1000 reactors to be built by Westinghouse” Judging by the cost of similar reactors under construction in the U.S., these six reactors may cost as much as Rs.4 lakh crore. This makes the deal potentially the largest commercial contract in the offing between the two countries
  • There are several disturbing aspects to this agreement that deserve close public scrutiny. These include the arbitrary use of executive authority in selecting Westinghouse as a supplier, the international legal commitment made by the government to indemnify Westinghouse in the event of an accident, and the high expected cost of electricity from these reactors
  • In April, Toshiba, which acquired Westinghouse in 2006, announced a $2.3 billion write-down in its value, largely because of persistent concerns about the economic viability of Westinghouse’s AP1000 design. Of more than a dozen orders that Westinghouse expected from within the U.S. a decade ago, only four have materialised. Just last month, a utility called Florida Power and Light postponed its plans for two AP1000 reactors by at least four years. And in February, the Tennessee Valley Authority, a U.S. government company, cancelled its plans for two AP1000 reactors explaining that this was “the fiscally responsible action”
  • Likewise, the fiscally responsible action for India would be to cancel this deal. The two AP1000 reactors being built in the U.S. state of Georgia are now projected to cost Rs.1.4 lakh crore, which translates into a capital cost of about Rs.70 crore per megawatt of capacity. Even indigenous Indian nuclear reactors, which have struggled to be economically competitive, have capital costs that are seven times lower at about Rs.10 crore per megawatt
  • A more detailed calculation indicates that with these capital costs, the first year tariff on electricity from these reactors could be as high as Rs.25 per unit. In contrast, recent winning bids for solar power have projected tariffs of about Rs.5 per unit. The government claims that it can reduce construction costs in India by 25-30 per cent, but this is far from sufficient to make the AP1000 reactors cost-competitive
  • The joint statement suggested that these reactors would help India meet its commitments on climate change but this is misleading. Economists use a “price on carbon” to determine whether a given technology provides a cost-effective method of reducing greenhouse gas emissions; a commonly used European figure is about Rs.2 (0.03 euros) per kg of carbon dioxide. Since coal plants, which produce most of India’s electricity, emit about 1 kg of carbon dioxide per unit of electricity, the AP1000 reactors may have been attractive from this point of view if their tariffs had been within Rs.2 of the tariffs from coal-based plants. Since their projected tariffs are much higher than this, India could reduce greenhouse gas emissions more efficiently by investing the same resources in other green technologies
  • Nevertheless, the government has persisted in making concessions to Westinghouse. In February, it ratified the “Convention on Supplementary Compensation” (CSC) for Nuclear Damage that contradicts India’s domestic liability law and protects nuclear suppliers from liability for an accident. Now, in the event of a disaster, Indian courts may find it difficult to exercise jurisdiction over Westinghouse that is not based in India and could point to India’s international commitments under the CSC to block any potential claims against it
  • For example, Dow Chemicals has rebuffed attempts to make it contribute to a clean-up in Bhopal by arguing that Indian courts have “no jurisdiction over it”. And in a cautionary tale about how flawed international agreements can subvert the domestic legal system, in 2011, an international arbitration tribunal awarded White Industries Australia Ltd. AU$4 million under a bilateral investment treaty even as its dispute with the Indian government was sub judice in India’s Supreme Court
  • In the joint statement, Mr. Obama “re-affirmed that India is ready for membership” of the Nuclear Suppliers Group (NSG). But India’s engagement with the NSG is irrelevant for its energy problems. A 2008 NSG waiver allowed India to purchase uranium for its indigenous civilian reactors but these account for less than 1 per cent of the country’s total electricity generating capacity
  • NSG membership may additionally allow India to acquire enrichment and reprocessing technology. However, since India’s indigenous heavy water reactors do not use enriched uranium and imported light water reactors come with associated fuel contracts, this technology has little significance for India’s electricity sector
  • In his address to the U.S. Congress, Mr. Modi explained that the Indo-U.S. “relationship has overcome the hesitations of history”. In light of this, it is important to take a sober look at the recent nuclear deal. The Indian government has offered to spend lakhs of crores of public money on a loss-making American corporation, and has put its citizens in a position where they might have to pay high costs for electricity and will not be able to hold this corporation accountable for an accident

 

2. A strategic exitTopic:Monetary Policy

Category: Economy

Key points:

  • In choosing a successor to the RBI Governor, the Centre must remember that the central bank, by its very remit, is concerned about inflation and that the country needs a Governor with enough independence and authority to maintain a balance between the aspirations for growth and the concern about rising prices; it is also imperative that the new central bank chief has a free hand in charting a course to fix banks’ books so that they can begin lending again
  • A rubber stamp for rate cuts won’t do, and it is not such a bad thing if a healthy tension exists between the Reserve Bank of India and the Finance Ministry. As The RBI Governor himself once said, if the two always agreed, the public should be very worried

 

3. India and the Brexit forecastTopic: India and the UK

Category: International Relations

Key Points:

  • Unlike many other governments of countries with strong economic and historical ties with the United Kingdom, India has refrained from officially commenting on the crucial European Union (EU) membership referendum to be held on June 23
  • The Health Minister in his recent visit to the UK said that the agreements and commitments that have been made in the area of trade and investment as well as in science and technology would carry on regardless of whether Britain stayed or left the EU
  • That a government that wins a Brexit vote will foster existing ties with countries including India is a perfectly reasonable assumption. It is a promise that Brexit campaign leaders repeatedly make
  • At a recent debate on “Would Brexit Benefit India” at the House of Commons, a former Defence Minister and now Brexit supporter argued that the EU was the biggest obstacle to U.K.-India trade. “We should be doing much more business with India with its middle class of 200 million people, but we can’t because trade with India is part of what is known as an EU competence,” he said. “An EU trade deal with India is almost completely out of the question, and Britain will have to get out of the EU if we are going to tie up a bilateral trade deal with India which I am absolutely certain we can do.”
  • In the absence of any realistic projection on what a post-Brexit U.K. holds in store, such claims carry little authority. That said, India remains deeply vested in the outcome of the referendum for two reasons. The first concerns the welfare of a nearly three-million strong diaspora of Indian-origin U.K. citizens, while the second concerns the interests of a large moving population of Indians who come to Britain ever year as tourists, business people, professionals, students, spouses, parents and relatives
  • Will Brexit change the rules of doing business, or of access to higher education? Further, will it create new barriers for work visas or the visitation rights of relatives who have families here?
  • Indian industry in the U.K. is thriving. There are 800 Indian companies in the country — more than the combined number in the rest of Europe. According to the India Tracker 2016 commissioned by the Confederation of Indian Industry (CII), Indian companies generate 110,000 jobs. The number of Indian companies growing at more than 10 per cent — the key benchmark for inclusion on the list — has nearly doubled this year over the last
  • The total turnover of the fastest growing Indian companies in the U.K., especially in the fast growth sectors of technology, telecom, pharmaceuticals and financial services, rose by 18 per cent in 2016 — from £22 billion in 2015 to £26 billion this year, according to the Tracker
  • During trade talks held during the visit of Prime Minister Narendra Modi to the U.K. in November 2015, £9 billion worth of commercial deals were agreed upon
  • A post-Brexit government may not affect outbound investment into India, but will the robust growth of inward investment continue? The India Tracker report sounds a note of caution here, describing a potential Brexit scenario as one of “pressing concern”
  • “Uncertainty surrounding the U.K.’s impending EU referendum, and the possibility of ‘Brexit’ may have a bearing on both the UK economy and on Indian companies’ appetite for investing in the U.K., particularly those seeking access to the European market,” the survey notes, adding that “close personal ties that many Indian entrepreneurs have to the U.K., with strong family connections and children often educated at U.K. schools, may counterbalance other considerations.”
  • The CII, in a statement that spoke to a Brexit scenario underscored the importance of continued border-free access to European markets as a “key driver for Indian companies coming to the U.K
  • “Anything that lessens this attractiveness may have a bearing on future investment decisions,” he said
  • The Indian industrialist and philanthropist Lord Swraj Paul, head of the Caparo Group, sounded a strong warning on the perils for British industry from leaving the EU in respect of skilled labour supplies, free trade opportunities in Europe, and immigration restrictions
  • On the Brexit argument of “curbing unacceptable levels of immigration” into the U.K., he reiterated his long-held view that students coming to the U.K. to study must be “kept out of, and apart from, immigration quotas”. He cited the Commonwealth model, which “connects nations of various diverse cultures and histories” as “an experience [that] can inform our relationship with Europe”
  • Work-related visa restrictions have already resulted in a fall in the number of Indian students studying in British universities from 22,385 in 2012-13 to 18,320 in 2014-15, according to the U.K. Council for International Student Affairs (UKCISA). Given their tough stance on cutting immigration, a Brexit government could be expected to make such curbs more stringent.
  • According to Lord Karan Bilimoria, President of the UKCISA, the clutch of new visa rules that have impacted student flows from India — especially the withdrawal in 2012 of the post-study work visa — has had disastrous consequences. A Brexit vote would only exacerbate these. “Unlike other countries, Britain classifies overseas students as immigrants.” He argues that Justice Minister and Brexit advocate Michael Gove has recommitted to a post-Brexit government aiming to reach the Conservative party target of bringing immigration down to the “tens of thousands”. The latest immigration figures put the number of immigrants at between 330-350,000 in 2015, of which 180,000 are non-EU migrants
  • “Even assuming that they reduce EU immigration to zero, which is highly unlikely, they are still well above the 100,000 target. This suggests that they will reduce the numbers of international students, including Indian students, to reach their target,” Lord Bilimoria told
  • The “mango wars’ are a part of the Brexit arsenal used by the U.K.’s Employment Minister. Protectionist EU acts as a barrier to trade for the U.K., including from India, she argues, citing the EU-led ban on Indian mango shipments to the U.K. in May 2014 after fruit flies were found in consignments. The ban was lifted in early 2015, but not before Indian exporters and local traders suffered considerable losses. High European regulatory standards are a dampener on Indian exports, as the mango ban demonstrates
  • Indian businesses and financial institutions are however hedging their bets. According to a report by the State Bank of India’s Economic Research Department, Brexit may actually strengthen India’s position. “This referendum will have geopolitical implications and will affect the relation of the rest of the world with Europe. But, our take is that though such an exit brings up a lot of uncertainty within Europe, it definitely opens up opportunities for India,” the SBI report says
  • With only three days to go, the outcome of the referendum is unclear. The recent murder of a young and popular Labour MP by a man espousing a right wing, anti-immigrant ideology has shocked and appalled ordinary citizens. Whether this is a taster of what the extreme fringe of the Brexit campaign will bring to a post-Brexit scenario will only be known later — if and when a post-Brexit government takes the reins after June 23

 

4. Letting them off easyTopic: Conservation

Category: Environment

Key Points:

  • The Ministry of Environment, Forest and Climate Change (MoEF) has issued a draft notification seeking to amend the Environment Impact Assessment (EIA) of 2006, allowing those who violate this law to continue work with an Environment Supplement Plan (ESP)
  • The EIA process has its origins in the 1992 Rio Earth Summit where over 170 countries committed to balancing environmental concerns and economic needs. The EIA was a tool to do this. In India, it has been in place since 1994 and is also called the environment clearance process. It is the law that mandates that detailed studies be carried out before implementing projects that carry social risks and could damage the environment. The studies are discussed at public hearings before being evaluated by a set of identified experts who then recommend a decision to the Ministry or State government on the project
  • The EIA process has been the only official forum to bring to view the fact that land and water are not simply resources to be allocated to thermal power plants, ports, and mines. As more and more projects have been proposed on forests, common lands, coastal areas, and freshwater lakes over the years, citizens have brought to bear on this clearance process, values of aesthetics, attachment, sustenance, risk and trusteeship
  • Unsurprisingly, this complicates decision-making on big-ticket projects, and has earned this law many epithets such as ‘stumbling block’, ‘bottleneck’ and ‘green hurdle’. Political parties, irrespective of their ideological moorings, have failed to recognise its value, and the government no longer has any legitimacy or finesse to mediate these nuanced debates
  • As a result, cases have piled up in courts, especially at the National Green Tribunal (NGT) that was set up to look into complaints regarding the environment clearance process.
  • The government set up the TSR Subramanian and ShaileshNayak Committees. Their mandates included, among others, the revision of the EIA and Coastal Regulation Zone (CRZ) laws that deal with environmental approvals to large projects
  • In the newly proposed draft notification, the Ministry offers a way out to those who have violated environmental norms. It seeks to provide an ESP for projects that have already initiated construction activity and expansion before going through an EIA process. As a result, it seeks to “regularise” corporate illegalities
  • The ESP will draw up an assessment and cost of damages which the project developer is expected to pay up. This sounds less like an environmental fine — an important component among a slew of mechanisms to deter projects from violating environmental norms — and more like a crude form of ‘pay and use’ service
  • If violations are routinely struck off the Ministry’s register upon payment of money, where is the Ministry’s own stated goal of sustainable development? Those who have been working in the environment field will confirm that projects never pay up. Take the case of the fine of Rs.200 crore on the Adani SEZ in Gujarat, or Rs.5 crore for the Art of Living event on the Yamuna floodplains
  • Even if one were to be more optimistic about these collections, the government’s ability to use these resources to restore the environment, or provide justice to scores of affected people, is severely lacking. The example of crores of rupees collected to compensate for forest loss, and the Comptroller and Auditor General’s damning report on how these monies have been spent, will help change one’s mind
  • The Ministry states that this notification has its basis in two judgments, one by the NGT and the other by the Jharkhand High Court
  • The more than 200-page long judgments show that the Ministry has either been deliberately misled or is being dangerously disingenuous. In a long case involving a mining project, the State government and the Central government, the Jharkhand High Court judgment observed that any “alleged violation” should be investigated separately from the approval process. Neither does the judgment condone EIA violations in general nor does it prescribe a way out of these for erring companies
  • The NGT judgment actually quashed two office memoranda dated 12/12/2012 and 24/6/2013 of this Ministry in which it had tried to do precisely what it is doing through this notification. The NGT had observed that the office memoranda “provide benefits to the class of the project or activity owners who have started construction in violation of law, i.e. prior environment clearance.”
  • Environmental issues in India have been politicised by democratic ideals for good. By killing the EIA process, it is the government that will lose its claim to sustainable development

 

5. Chinks in the new aviation policy’s armourTopic:Aviation

Category:Governance

Key Points:

  • India’s first-ever National Civil Aviation Policy (NCAP) is aimed at achieving overall growth of the sector in a structured manner. However, several shortcomings, as pointed out by analysts, could derail the projected growth and objective
  • The policy has touched almost every aspect of civil aviation, but gives no direction for professionalising the Directorate General of Civil Aviation (DGCA) and Bureau of Civil Aviation Security (BACS), crucial entities that govern aviation safety and security in the country
  • Though measures have been announced to strengthen both these entities and bridge the deficit, the policy is silent on how to radically transform these organisations to meet modern-day challenges and to be process-driven to deliver world-class service
  • With around 20 per cent growth in the number of air passengers, what India needs is strong air safety and security regulators
  • The expected upside in helicopter operations, private flying and regional airlines will add to the pressure
  • The NCAP is silent on the formation of an independent Civil Aviation Authority (CAA)
  • Airports Authority of India (AAI) is another entity that needs complete transformation, yet NCAP falls short of addressing that
  • There is little clarity on the way forward for the AAI or about its listing in the stock exchanges. According to analysts, this is a big negative as India’s massive airport infrastructure development plans requires a strong entity to see the execution through
  • Analysts feel that the AAI focuses heavily on capital expenses
  • NCAP is silent on long-term plans for airport development. Industry observers expected directions on the hiving off Air Navigation Services (ANS) from the AAI and making it an independent, professional body
  • “Not addressing key and structural issues is a big disappointment. NCAP is ambitious about growth but has not focused on creating structures for managing growth,” says analysts
  • The policy also does not say what the government is doing with Air India and the way forward for the airline
  • Moving to 0/20 from the 5/20 rule in international flying is a compromise following hectic lobbying by incumbent airlines which struggled to fulfil the criteria of five years of domestic experience and 20 aircraft to fly abroad. The relaxation to just 20 aircraft without any domestic flying criteria will not help new carriers like Vistara and AirAsia India significantly as they cannot fast track expansion owing to a resource crunch
  • The NCAP gives no direction on removing the negative fiscal regime on Indian airlines which includes sales tax on ATF and other taxation measures. These have not been effectively addressed
  • The policy has not given any direction for improvement in regulatory and policy-making competence
  • There has been no direction on improving institutional capability in the Ministry of Civil Aviation
  • The helicopter industry will structurally change with the announced measures, but its success is dependent almost entirely on DGCA, BCAS and infrastructure development
  • Environmental clearances will pose a big challenge for helipad development. Moving to a hybrid till in airport development will end uncertainty and promote investment
  • The fiscal incentives granted for the Manufacture, Repair and Overhaul (MRO) sector is a big positive, says an analyst
  • The regional aviation policy is well-intentioned, but private capital is unlikely to flow to loss-making projects

 

The Indian Express

 

  1. With humility, on farmer income

Topic: Agriculture

Category: Economy

Key Points:

  • The government’s agenda for agriculture includes doubling of farmers’ income in five years,the Pradhan MantriFasalBimaYojana, Pradhan MantriKrishiSinchayeeYojana, soil health cards, organic farming, self-sufficiency in pulses and oilseeds, neem-coated urea, national agriculture market (eNAM), mobile app, and disaster relief.
  • A reality check would necessitate a rigorous scrutiny of each one of these points. But here we take up the issue of doubling farmers’ incomes in five years, which tops the Modi government’s agri-agenda
  • Let us first map the existing landscape of the Indian farmer’s income and later identify the associated challenges of doubling it. It is common knowledge that Indian farmer households do not depend solely on the cultivation of crops because they also earn incomes from farming animals, undertaking businesses in the non-farm sector and/or even from working as wage/salary earners within or outside agriculture
  • In terms of income sources, cultivation remains the main source for an average Indian agri-household and in the last 10 years, its contribution increased from 46 to 48 per cent. The contribution of income from the farming of animals showed the most change: From a 4 per cent share in 2002-03, it increased to 12 per cent in 2012-13, perhaps on account of rising livestock demand. The share of income coming from RNF and WS fell from 11 per cent and 39 per cent in 2002-03 to 8 per cent and 32 per cent in 2012-13, respectively
  • As far as dependence on farming animals and wages and salaries is concerned, it reduced with the rising size of landholding. About 67 per cent of India’s operational landholdings are smaller than 1 hectare and for them, the major source of income (about 70 per cent) is from farming of animals and daily wage employment
  • A state-wise analysis reveals that growth in nominal incomes varied between 17.5 per cent (Haryana) and 6.7 per cent (West Bengal) and that of real incomes varied between 8.3 per cent (Odisha) and minus 1.1 per cent (West Bengal).
  • What lessons can the Modi government learn from this decadal change for his vision of doubling farmers’ incomes in the next five years? With two-thirds of the country’s landholdings being marginal, the relevance of farming animals, rural non-farm activities, and wages and salary employment cannot be overstated. This means the future strategy for doubling incomes has to be bolder towards the livestock sector and towards RNF employment. Skilling farmers and agri-labour on a large scale will support this
  • As cultivation of crops still continues to contribute most to an agri-household’s income, combining a productivity-augmenting drive with diversification into high-value agriculture is more necessary than optional. Building value chains for fruits and vegetables, somewhat akin to what India did for milk — aggregation of the produce at the village-level, grading and packaging it, and using the modern logistic network to distribute it — can augment incomes in a sustainable manner. Mother Dairy’s “Safal” is another good model to keep in mind in this regard
  • In sum, unless the whole agri-system rises to the occasion, the dream of doubling farmers’ income in five years may remain a dream. And a farmer may still have to look up to the sky for any hope of revival, or even survival

 

Others:

 

  1. PIB

 

2. The Financial Express:

 

a) Here’s what will add bite to new bankruptcy law

Topic: Legislation

Category: Polity

Key Points

  • On June 1, 2016, the ministry of corporate affairs notified the constitution of the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT)
  • It was first introduced in the Companies (Amendment) Act, 2002, to adjudicate all matters culminating from the Companies Act, 1956, and vesting the powers exercised by the Company Law Board and High Courts to the NCLT and NCLAT
  • The same was challenged, on the Constitutional validity, by the Madras Bar Association before the Madras High Court, and later before the Supreme Court in the Union of India versus R Gandhi, President, Madras Bar Association case (2010). The Constitution Bench in the Union of India supra gave its approval insofar as Constitutional validity of the NCLT and NCLAT was concerned with certain modifications or corrections
  • In 2013, Parliament passed a new company law in the form of Indian Companies Act, 2013, which replaced the earlier Act of 1956. In this Act, substantive provisions have been made again with regard to the establishment of the NCLT and NCLAT. Moreover, the power and jurisdiction of the Board of Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (AIFR) are to be merged into the NCLT and NCLAT
  • Now, the ministry of corporate affairs has issued notifications, giving effect to the constitution of both the NCLT and NCLAT and 44 provisions wherein the NCLT has been vested with substantial powers, including power to adjudicate matters pertaining to mismanagement and oppression, class action suit, inspection, inquiry and investigation, and compounding of offences, etc. A class action suit—in which a large group of people collectively bringing a claim to court—is new for the Indian ecosystem, even though it is very popular in the US, the UK, Singapore and some European countries
  • Further, all the pending cases with the Company Law Board stand transferred, from the date of notification, to the NCLT. In addition to that, provisions relating to appeal from the order of the NCLT to the NCLAT have been issued. In simple words, provisions relating to merger and amalgamation, reduction of share capital and sick companies would be gradually transferred to the NCLT after consultation with the chairperson
  • Before the aforesaid notifications, there were only four benches of the Company Law Board, with three members—one technical and two judicial—and a chairperson
  • According to the new constitution, initially there will be 11 benches of the NCLT—two at New Delhi and one each at Ahmedabad, Allahabad, Bangalore, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai—while the location for the NCLAT is yet to be notified
  • The NCLT and NCLAT will be consolidated bodies which would adjudicate and decide all issues relating to companies in India, including, but not limited to, insolvency and bankruptcy, and cases pending before the various benches of the Company Law Board, BIFR, Debt Recovery Tribunal, all the company courts, AIFR and Debt Recovery Appellate Tribunal
  • The NCLT will also help in faster implementation of the bankruptcy code passed by Parliament last month; the NCLT is the adjudicating authority while the NCLAT is the appellate authority. Although the move to consolidate all proceedings relating to companies in India under the NCLT and NCLAT is an ambitious one, it is also much welcome by the industries

 

3. The Business Line:

 

a) Modern lendingTopic: Banking

Category: Economy

Key points:

  • The RBI has now called for discussion on a framework for enhancing credit supply for large borrowers through market mechanisms. While the intention of the central bank is to explore the evolution of other market mechanisms, mainly capital market-related options, it is also time to look at the credit delivery system in place in the banking system
  • Of late, the lines distinguishing between working-capital lenders and project-lenders have blurred. In a way, banks have successfully taken up the vacuum created by development financial institutions, stepping into their shoes and extending project loans
  • The concepts of multiple banking arrangement and consortium arrangement are slowly losing their significance in the modern context. Though the consortium arrangement insists on common documentation and pooling of cash flows to service debt of same corporate with various banks, it has failed in many counts as is evident with divergence in asset classification of the same loan by different banks under the consortium arrangement
  • The RBI should think of bringing in systems such as shared and national credit (SNC) prevalent in the US and other developed markets, especially for high-value credits in which many banks participate, along with development of secondary market for loans to infuse liquidity into loan market(A secondary marketis a market where investors purchase securities or assets from other investors, rather than from issuing companies themselves)
  • In an SNC system, relationship banks develop the lending model and finalise the terms governing the loan. As funding including working capital takes place by means of term loans, the debt market is more divided based on the tenor of the loan, than the purpose. Banks generally subscribe to shorter tenure loans and financial institutions such as pension, PF and insurance funds prefer longer tenure loans
  • Interestingly, individual investors can also take part based on their risk appetite. A meeting is arranged; lenders are invited and the case is presented. Banks and FIs carry out due diligence and take a call on participation within mandated time frame of generally 10 to 15 days, which is definitely quicker than turnaround times in India. Secured web-based service agents keep uploading supporting documents from time to time. Loan agreements are executed online saving lot of executive time and the whole process is closed within one or two months
  • Once the deal is subscribed and allocations are made, it opens up for secondary market trading, even before funding takes place and the market drives the price based on the yield, tenor, original discount offered, industry and credit metrics of the company. Participants can offload their exposure at any time due to the liquidity available in the market. All cash flows are captured in an escrow account at one place and are utilised for servicing of debt along with other corporate purposes
  • An important aspect of SNC is regulators carry out review at one place, i.e. with lead bank, and the outcome is sacrosanct on all participants saving lot of time, effort and cost for both the regulator and participants
  • Finally, it is advisable to develop debt market space based on tenure. Banks can take up short-term loans with average tenures up to seven years matching their short-term risk profile, and institutional investors can take up term loans with longer tenures and better yields as they have the bandwidth to assume such loans

Note: Escrow refers to money held by a third-party on behalf of transacting parties

 

4. The Economic Times:

 

5. Quick Bits and News from the states

 

a) Yoga becomes spearhead of India’s soft power push in southwest ChinaOfficials in Dujiangyan in Southwest China say that the insitutionalisation of a soft-power “package,” including powerful Indian and Chinese elements is required, to root stronger cultural ties between the two countries

A senior official of the Communist Party of China (CPC), in Dujiangyan, advocates the early establishment of a “cultural park” in India and China, which covers films, yoga, Tai chi and Traditional Chinese Medicine (TCM) within its ambit

 

b)  ‘Pakistan not against NIA team for Pathankot probe’
India said Pakistan had not refused to allow an NIA team to visit that country to probe the Pathankot airbase attack case and just sought “more time” even as it made it clear that talks and terror cannot go hand-in-hand.India asserted that it wants to resolve all vexed issues with Pakistan through talks which cannot go on if Pakistan does not take action to contain terror

 

c)  Poachers kill female rhino in KazirangaA female adult rhino was killed by poachers and its horn taken away in Kaziranga National Park (KNP) in Assam, taking the toll to 12 this year, a forest official said

 

d)  Jaishankar seeks details of action against 3 U.S. donorsDays after the Home Ministry put three influential American donors under the “prior permission category” for allegedly funding NGOs in India not registered under the Foreign Contribution Regulation Act (FCRA), the Foreign Ministry send a letter to the Ministry asking for the “circumstances” leading to the decision.The action was taken by the Home Ministry against Open Society Foundations (OSF), World Movement for Democracy (WMD) and National Endowment for Democracy (NED).

Home Ministry officials said the donors were put on the “watch list” due to adverse intelligence inputs. The move means that the donors will not be able to directly send money to NGOs in India and will require a clearance from the Home Ministry to do so

 

e)  NTPC’s compensation is inadequate, say villagersAbout 30,000 villagers in Hazaribagh district in Jharkhand may lose their land if the National Thermal Power Corporation (NTPC) goes ahead with its plans to acquire nearly 17,000 acres for its coal mining project.

The project, which will affect about 32 villages in the Keredari and Barkagaon block, has met with strong opposition

The public sector company was offering Rs. 20 lakh per acre when the farmers earned nearly Rs. 2 lakh a year just selling vegetables grown on the land.

The lands in the area were highly fertile and were cultivated three times a year, villagers said

 

f) Model for airport fees may increase passenger faresThe civil aviation policy’s adoption of a hybrid-till model for calculating airport fees could push up airfares, by raising airport charges for airlines instead of bringing them down as per the policy’s stated objective.The hybrid-till model, under which 30 per cent of airport operator’s non-aeronautical revenues would be used to subsidise airport costs.Under the single-till model, both aeronautical and non-aeronautical revenues are taken into account to calculate airport costs. Apart from its core operations, airports earn income from the non-aeronautical side which includes food and beverages, duty-free shops, advertising, car parking and hotels.

 

g)  Investment prospects remain subdued: SurveyAbout 35 per cent of the respondents in the FICCI Business Confidence Survey for June said that they expected higher investments over the period April-September 2016, compared to 41 per cent in the previous survey

“The companies remain cautious about undertaking fresh investments and about 46% respondents anticipated no change in investment levels,” the survey showed

 

h) Government plans to unleash ‘Blue Revolution’ Laying roads for ‘Blue Revolution’ through an ambitious target, the Centre has decided to work for increasing the country’s export earnings from fish and fish products from Rs 33,441 crore in 2014-15 to Rs 1,00,000 crore in the next five years.

The agriculture ministry will next month come out with a new national policy on fisheries, paving the way to achieve this target through implementation of an umbrella scheme for integrated development and management of fisheries

 

G. Fun with Practice Questions 🙂
Question 1: Which of the following national parks(NPs) is/are in Assam?
  1. Kaziranga NP
  2. Manas NP
  3. Namdapha NP
  4. Khangchendzonga National Park

a) 1 and 2

b) 2 and 4

c) 1,2 and 3

d) All the Above

 

Question 2: Which of the following was/were the outcomes of the Earth summit(1992)?
  1. Agenda 21
  2. The Convention on Biological Diversity
  3. The Commission on Sustainable Development
  4. UN Framework Convention on Climate Change

a) 1 and 2 only

b) 2 and 3 only

c) 1,2 and 3

d) All the Above

 

Question 3: Which of the following statements is/are correctabout the Monetary Policy Committee?
  1. It would consists of majority of RBI members according to the Finance Bill passed by the parliament
  2. The idea to set up a monetary policy committee was mooted by Nachiket Mor Committee

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Question 4: Which of the following statements is/are correct?
  1. Maldives consists of islands of volcanic origin
  2. Maldives is the lowest country in the world

a. 1 only

b. 2 only

c. Both 1 and 2

d. Neither 1 nor 2

 

Question 5: Which of the following statements is/are correct?
  1. RBI governor is chosen by a selection committee consisting of the Prime Minister, the Finance Minister and the leader of Opposition in the Lok Sabha
  2. The tenure prescribed for the RBI governor is 3 years as per the RBI Act,1934

a. 1 only

b. 2 only

c. Both 1 and 2

d. Neither 1 nor 2

 

Check Your Answers

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