Gist of EPW August Week 3

The Economic and Political Weekly (EPW) is an important source of study material for IAS, especially for the current affairs segment. In this section, we give you the gist of the EPW magazine every week. The important topics covered in the weekly are analysed and explained in a simple language, all from a UPSC perspective.

1. Crisis in the Automobile Industry

Context

The slump in automotive sales points to a deepening structural crisis facing the industry.

Significance of Automobile Industry to Indian economy

• The automotive industry was one of the fastest growing industries as well as an important driver of the manufacturing sector.
• The industry’s turnover is close to half of the manufacturing GDP.
• They contributed 7% to India’s gross domestic product (GDP) in 2018,
• Also a major provider of direct and indirect employment due to its forward and backward linkages with other sectors.
• Industry accounts for about 11% of the entire GST revenues of the country.

Rate of slowdown

• The current sales of vehicles have been the lowest in the last 19 years, due to a drop in the domestic demand.
• There was a 26% dip in car sales in May 2019 versus last year
• In 2017–18, the sales of four-wheelers, which were growing at 14% are now down to 5%, while for two-wheelers, the decline has been from 15% to 5% over the same period.

Reasons for slump in automotive sales

• The automotive industry has been facing a slowdown worldwide.
• The crisis in the shadow banking sector has also been adversely affecting credit flows to dealers and consumers.
• With over three-fifths of the vehicles sold in the country being financed through loans, a squeeze in the supply of finance in the country since the last one and half years is bound to keep the growth rate of sales at lower levels.
• The industry also faces other challenges like the changes in regulatory and technological norms, and that of higher input prices.
• The environment of uncertainty has been aggravated by the implementation of various regulations that potentially affect the pricing structure.
• The forthcoming shift to the new emission standards under the Bharat Stage (BS) VI in April 2020 from the current BS IV standard. The new emission standards would require technological overhauling, particularly for the diesel cars.
• With the expected rise in the price of diesel cars, the overall share of diesel cars in total domestic sales is estimated to drop to 28% from the current 40%.
• But, the decline in diesel car sales has been underway since 2012–13, when this category was a market leader by constituting almost 60% of the sales.
• Growing competition from the pre-owned cars market is also pulling down sales of new vehicles.
• There is also a possibility that some customers are waiting to buy the latest Bharat Stage (BS)-VI emission standard compliant vehicles or
• They are waiting for more incentives from vehicle makers who will be looking to sell off their BS-IV compliant stocks before the April 1, 2020 deadline.
• Over FY19-21, vehicle prices are estimated to jump 13-30% due to safety, insurance and emission-related compliance costs.
• Too much focus on electric vehicles (EVs) by the government may also be encouraging buyers to postpone the purchase of petrol and diesel vehicles.

Consequesnces

• A slump in automotive sales—due to the cascading effect—thus, also affects sectors such as tyre, steel and steering manufacturers.
• The effect of low demand has hit the domestic component manufacturers the worst.
• Many small manufacturers have reported operating at around 70% of their potential efficiency level, either by adopting a staggered system of work when they want to retain their workforce, or by simply laying off workers.
• The cumulative impact of these factors has been taking a toll on jobs lately, especially contract and casual jobs.
• It is estimated that automakers, auto part manufacturers, and dealers taken together have laid off about 3,50,000 workers in the last three months.
• For labour, the long-term effects of the slowdown in automobile manufacturing, in which the share of jobs had doubled from 3% to 7% between 2000 and 2015, would be deleterious.
• Automation in the industry has been underway, with average robot density at 79 per 10,000 workers, which is higher than that in manufacturing.
• Thus, apart from the current downturn affecting mainly the temporary and casual workforce, technological changes had also necessitated restructuring, reskilling, and manpower adjustments.

Way Forward

• It is imperative that, given the adverse circumstances, the industry transforms with minimal disruptions by streamlining the automotive businesses.
• The industry’s demands include a reduction in GST to 18% from the current rate of 28%, which will help in an immediate price reduction.
• This demands innovative processes, especially when there is a policy push towards a transition to electric vehicles.
• A related problem is of acquiring and developing new skill sets for those manning the novel methods along with redeployment or creation of new earning opportunities for the replaced workforce.

2. In Deep Waters

Context

• The havoc that the floods wrecked this year with the lives and property of people of Maharashtra, Karnataka, and Kerala is much larger in scale than in the previous years.

Causes

• Heavy and relentless rains over a shorter window are becoming a regular phenomenon.
• Dam mismanagement and land degradation are the other two factors that have aggravated flood situations repeatedly in different parts of India.

Dam mismanagement

• All the rivers and their tributaries have dams built across them in the states of Maharashtra, Karnataka, Tamil Nadu and Kerala.
• Disputes and lack of coordination between different dam authorities as well as delayed discharges have proved fatal for these regions. Later the disaster gets transferred down the rivers.
• Heavy discharges from dams could cause inundation downstream. But the failure of timely release for the dams can result in submergence of the upstream areas.
• Some dams in the south had failed to regulate their storage, despite it being the monsoon season and having prior predictions of heavy rainfall.
• “Dam-made” floods strike in a sudden manner on the people in the downstream areas, catching them unawares, and they do not have the “rhythm” of natural floods with which people are more familiar.
• There has been an increase in flood damage, even as more and more areas are brought under “flood control” infrastructure projects such as dams and embankments.
• According to the Internal Displacement Monitoring Centre, India is a country with the highest level of disaster displacement.

Land degradation

• Structural changes in land use, diversion of forestlands, razing of mountain slopes, and blocked streams have led to a loss of seepage spaces and natural channels for drainage, resulting in the landslides and flash floods in the Western Ghats and in the Himalayan states.
• Human tampering with geomorphic integrity of land has led to increased instances of urban flooding, producing devastating consequences for urban dwellers.
• While rivers have been curtailed from sculpting the land due to structural interventions, real estate muscles in and encroaches upon any elbow room available to the rivers.
• The construction of even crucial public infrastructure such as airports (in Kochi, Chennai, Mumbai and even the upcoming one in Navi Mumbai) remains devoid of any such consideration for the rivers.
• Sealed floodplains, flattened ponds, mangroves, wetlands, and riverbeds prevent the natural mechanisms of land to absorb, contain in, and thus mitigate the impacts of heavy rainfall.
• It paves the way for flooding, further land degradation, and subsequent drought conditions.

Way Forward

• There is a compelling need for
  • Basin-level plans for efficient water management,
  • Eco-restoration of catchment areas
  • Maintenance of the natural drainage system
• These steps are acknowledged by concerned government authorities, but only to be ignored in favour of more “practical and convenient” arrangements.
• Unless steps are taken for “re-naturalising” river basins, the crisis of created, man-made floods is here to stay.
• There should be strong legislations and also steps taken by the government authorities. One of the best methods would be to act on Gadgil commission recommendations and also enact the River Basin Management Bill, 2018.

River Basin Management Bill, 2018

• The draft River Basin Management Bill proposes optimum development of inter-State rivers.
• This is done by facilitating inter-State coordination ensuring scientific planning of land and water resources taking basin/sub-basin as unit with unified perspectives of water in all its forms (including soil moisture, ground and surface water).
• It will ensure comprehensive and balanced development of both catchment and command areas.
• It is expected that enactment of the proposed legislation would result in optimum integrated development and management of inter-State River waters with basin approach and will result in change of environment from the one of conflicts to that of cooperation.

Gadgil Commission

• An environmental research commission is named after its chairman Madhav Gadgil. The commission is formally known as Western Ghats Ecology Expert Panel (WGEEP).
• The commission submitted the report to the Government of India in August 2011.

Western Ghats Ecology Expert Panel (WGEEP) Report

• Recommended that the entire stretch of the Western Ghats should be declared as Ecologically Sensitive Area (ESA).
• It recommended the division of region into three zones – ESZ1, ESZ2, ESZ3 and gave a broad outline of certain restrictions for each zone.
• The committee recommended the division of region into zones at the block/taluk level.
• It recommended that no new polluting industries (red and orange) were to be permitted in ESZ1 and ESZ2 and gradual phasing out of such existing industries by 2016. Complete ban on mining in ESZ1 and regulation of mining in ESZ-2.
• It was recommended that bottom to top approach be followed for conservation of Western Ghats.
• Western Ghats Ecological Authority was proposed to be set up as a statutory body and given powers under the Environment Protection Act 1986.

Criticisms of the report

• The report was not prepared keeping in mind the ground realities. If the report is implemented, the development and the energy requirements in the states coming within the boundary of Western Ghats would be adversely affected.
• There is no need to set up a new body while there are many such bodies for the protection of the environment.
• Following severe resistance to the implementation of the Gadgil Committee report, Kasturirangan Panel was set up in 2012 to advise the government on the Gadgil Committee Report.

Results of neglecting the report

• All landslide and flood-affected areas in the state of Kerala are in Ecologically Sensitive Zones (ESZ-1), as categorised by the Madhav Gadgil report.
• Illegal mining. The Shah Commission inquiring into illegal mining in Goa observes that mining beyond permissible limits has caused serious damage to water resources, agriculture and biodiversity.
• Scientific knowledge and advice has been continually disregarded. For instance, the project document of proposed Athirappilly hydroelectric project had seriously overestimated the availability of water.

Conclusion

• The wrong approach towards rivers and land— where it is assumed they exist to be tamed and consumed mindlessly in the interest of “development” has been a primary cause for the floods.
• The above approach also has a skewed focus on dealing with the impacts of disasters, rather than addressing the causal factors.
• Even while dealing with relief activities, there remains the want of a more humane and communitarian approach, especially in view of “sticker wars” on the food packets meant for reaching the affected people and “flood tourism” by the politicians.
• India’s Union Minister for Environment, Forest and Climate Change denied “climate change” as being a cause of deluge, other political leaders have resorted to making it an excuse for their business as usual approach.
• The climate risks and crises are manifesting with an unsettling speed, enormity, and ferocity, even as concerned public institutions appear to be caught in a time warp.

For more EPW articles, read “Gist of EPW”

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