09 Aug 2021: UPSC Exam Comprehensive News Analysis

B. GS 2 Related

Category: POLITY AND GOVERNANCE

1. Human rights at risk in police stations: CJI

Context:

• Chief Justice of India N.V. Ramana at the release of the National Legal Services Authority’s legal services app and vision statement, spoke on a couple of important aspects.

Details:

Custodial violence:

• Going by recent reports of custodial violence, the CJI noted how police stations pose a great threat to human rights and dignity.
• The CJI lamented that custodial torture and police atrocities still prevail despite constitutional guarantees of human rights and dignity.
• The lack of effective legal representation at police stations leads to a lack of accountability on the part of the police officers and this becomes a huge detriment to arrested or detained persons.

For more related information on the issue of custodial violence, refer to the following articles:

CNA dated Feb 7, 2020: Custodial Deaths

CNA dated Jul 4, 2020: Police violence and how some lives do not matter

Judicial accessibility:

• The CJI noted how the lengthy, expensive formal processes followed by courts dissuade the poor and the vulnerable and has kept them outside the system of justice.
• The digital divide has only further deepened the difficulty in access to justice. Rural and remote areas suffering from a lack of connectivity cannot make use of the e-judiciary services.
• The CJI called on his fellow judges to break these barriers and bridge the gap of accessibility to justice between the highly privileged and the most vulnerable. This he claimed was non-negotiable for a society governed by the rule of law where the socio-economic differences cannot be a reason for denial of rights.
• CJI has called to make ‘Access to Justice’ an unending mission for the judiciary and other wings of the government.

E. Editorials

Category: ECONOMY

1. Revisit the idea of ‘aging out’ India’s coal plants

Context:

• In the light of the growing calls for shutting down of old coal power plants in India, even in the current central government, the article analyzes the arguments both in favour of and against this proposal.

Arguments in favour of shutting down old coal power plants:

Environmental benefits:

• The old coal power plants are major contributors to Green House Gas emissions. The shutting down of these plants will thus aid the achievement of India’s Nationally Determined Contributions.
  • India aims to reduce the emissions intensity of its GDP by 33 to 35 per cent by 2030 from the 2005 level.
  • India also aims to achieve about 40 per cent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030.

Economic benefits:

• The replacement of older power plants with newer and more efficient coal-based power plants would lead to improved efficiencies, reduced coal usage, and hence, cost savings.
• Also, several studies have indicated that it would be uneconomical for old plants to install pollution control equipment required to meet the emission standards announced by the Environment Ministry. It would be more financially viable to close such plants.

Arguments against the shutting down of old coal power plants:

Other factors contributing to the cost of power produced:

• It is worth noting that given the large forward and backward linkages to power generation in coal-based power plants, higher efficiency does not naturally translate to savings.
• For example: given that the older plants are likely to be located closer to the coal source, reducing coal transport costs, they enjoy a locational advantage. Some of these older plants generate power at lower costs compared to the national average.

Negligible savings:

• As per the analysis conducted by the authors of this article, the total savings from shutting down plants older than 25 years would be negligible and inadequate to even pay for the fixed costs (such as debt repayment) that would have to be paid if the plants are prematurely retired.
• Also, the savings in coal consumption by replacing older plants with newer ones will likely be only in the 1%-2% range.

Necessary complement for renewable energy:

• There has been a growing share of the renewable energy mix in the Indian power sector. To support the intermittent renewable energy generation, there is the need for capacity that can provide flexibility, balancing, and ancillary services. Old thermal capacity, with lower fixed costs, can play this role until viable and affordable storage technologies develop.
• The old coal-based plants could be used to meet instantaneous peak load as well as meet load when renewable energy is unavailable.

Risks with retirement:

• Coal power plants older than 25 years make up around 20% of the total installed thermal capacity in India and hence play a significant role in the country’s power supply.
• Aggressive early retirement of coal-based capacity could result in real or perceived electricity shortage in some States and may lead to new investments in coal-based base-load capacity by State-owned entities. This would be unwelcome given that already the planned thermal capacity is in excess of what the country needs. Further addition of thermal power capacity will lead to stranded assets and locked-in resources issues.

Recommendations:

• Based on the above arguments, it is prudent that age should not be the only criterion to close coal-based power plants. There is the need for a more detailed analysis, considering the various technical, economic and operating characteristics of individual plants and units.

2. The sovereign right to tax is not absolute

Context:

• The recently introduced Taxation Laws (Amendment) Bill in the Lok Sabha aiming to nullify the provision for retrospective tax has brought to light the topic of bilateral investment treaties (BITs) and the sovereign right to tax.

For more information on the proposed amendment to taxation laws, refer to the following article:

CNA dated 8th Aug 2021: Why is retrospective tax being scrapped?

Background:

• The retroactive tax amendment of 2012 resulted in Vodafone and Cairn Energy suing India before Investor-State Dispute Settlement (ISDS) tribunals of India-Netherlands and India-UK. bilateral investment treaties (BITs).
  • Notably, India in its 2016 Model BIT carved out taxation measures completely from the scope of the investment treaty.
• Both the tribunals ruled against India’s retroactive amendment of tax laws.

Read more on the Cairn tax dispute in the link.

Details:

Sovereign right to tax:

• Several ISDS tribunals have held that the tax policy of a country is a matter relating to the sovereign power of the state, and thus the State has a sovereign right to enact the tax measures it deems appropriate at any particular time.

Limits on the right to tax:

• However, it should be noted that the state’s sovereign right to impose taxes are not absolute and there are limits to it.
• Two provisions of relevance in this regard are expropriation and the fair and equitable treatment provision.
  • The tax should not be discriminatory or arbitrary and it should not be confiscatory.
  • Fair and equitable treatment envisions a certain degree of legal certainty in taxation measures. Also, any legal changes such as amending the tax laws should be done in a reasonable and proportionate manner.

Conclusion:

• The biggest takeaway from the Cairns and Vodafone fiasco is that India should exercise its right to regulate while being mindful of its international law obligations, acting in good faith and in a proportionate manner.
• India’s right to tax in the public interest should be balanced with the investor’s interest of legal certainty.

3. Tightrope walk

Background:

Latest Monetary Policy Committee meeting:

• The Reserve Bank of India’s Monetary Policy Committee (MPC) has kept the repo rate unchanged at 4%.
• The majority of the members of the MPC also agreed to retain the accommodative stance as long as necessary to revive economic recovery from the economic shock of the COVID-19 pandemic.
• The benchmark interest rate has been kept at a decades-low rate as part of the central bank’s growth supportive actions. This will help ensure ample liquidity in the economy.

For more information on this topic, refer to the following article:

CNA dated Aug 7, 2021: RBI holds rates, MPC splits on stance

Concerns:

• The article expresses concerns over the MPC’s recent recommendations based on the following arguments.

Overlooking of the core mandate of MPC:

• The central bank seems to be overlooking its mandated function of inflation targeting and the benefits thereof by delaying steps to rein in inflation.
  • Stability in the inflation rate fosters the credibility of the monetary policy framework. This would help better anchor inflation expectations which in turn will help reduce uncertainty for investors, increases external competitiveness and would thus be growth-promoting.

Fears of stagflation:

• The central bank’s policies have failed to engender a meaningful recovery even as inflation continues to hover around the upper bound of the inflation target. This raises concerns about stagflation in the Indian economy.
  • MPC has lowered its growth projections and raised its fiscal-year inflation projection by 60 basis points to 5.7%.

Recommendations:

• The MPC may as well consider normalising rates to rein in the inflation levels in the economy.
• MPC must look to simultaneously preserve financial stability through controlled inflation rates and support a durable economic revival.

Q1. Consider the following pairs:

Q2. Which of the following statements about Pradhan Mantri Ujjwala Yojana is/are correct?

Q3. With reference to 8888 Uprising, which of the following statements is/are correct?

Q4. Island of Evia recently seen in news is part of which country?

Q5. Consider the following statements:

I. UPSC Mains Practice Questions

1. Closing down the old coal power plants using age as the only criteria can prove to be counter-productive. Analyse. (10 Marks, 150 Words)(GS Paper 3/Economy)
2. Indian students studying overseas and those seeking to go abroad face many COVID-related challenges. Discuss. (10 Marks, 150 Words)(GS paper 2/Education)

Read the previous CNA here.