TABLE OF CONTENTS
A.GS1 Related B.GS2 Related POLITY AND GOVERNANCE 1. President’s rule extended in Jammu & Kashmir 2. ‘One ration card’ scheme launch soon INTERNATIONAL RELATIONS 1. Trump promises ‘very big deal with India’ 2. Trade war makes India a haven for aluminium scrap dumping C.GS3 Related ECONOMY 1. RBI allows ARCs to buy financial assets from peers SCIENCE AND TECHNOLOGY 1. NASA to send a drone to Saturn’s largest moon D. GS4 Related E. Editorials ECONOMY 1. Even central banks need ‘capital’ infusion GEOGRAPHY 1. Things to do to avoid another water crisis POLITY AND GOVERNANCE 1. Boost for Marathas F. Tidbits G. Prelims Facts H. UPSC Prelims Practice Questions I. UPSC Mains Practice Questions
A. GS1 Related
Nothing here for today!!!
B. GS2 Related
The Lok Sabha has approved the extension of President’s rule in Jammu and Kashmir for six months, beginning July 3.
Article 356 (President’s Rule):
- President’s rule refers to the imposition of Article 356of the Constitution of India on a State whose constitutional machinery has failed.
- In the event that a State government is not able to function as per the Constitution, the State comes under the direct control of the central government.
- President’s Rule in a state can continue for a period of 6 months at a time and after this period it can be extended for another term with approval of both houses of Parliament (Lok Sabha and Rajya Sabha) but for a maximum period of 3 years.
- Governor’s rule was imposed on J&K in June last year, then President’s rule in December, and now, Union home minister has moved a statuary resolution in Parliament to extend President’s rule by another six months.
- The change in the status from Governor’s rule to President’s rule in Kashmir is different from the rest of the country. This is because while in the rest of India, the two are co-terminus as under Article 356 of the constitution, during President’s rule the Centre exercises direct control over a state through the centrally-appointed Governor.
- Jammu and Kashmir, on account of its special status, has a slightly different mechanism in place. Here the failure of governmental function results in Governor’s rule under Section 92 of the constitution of Jammu and Kashmir. The Governor later obtains the consent of the President of India. It is only when the Governor’s rule is not revoked for six months that the President’s rule is imposed in the state under Article 356.
- Hence, on the recommendation of Governor and having regard to the prevailing situation in the state, the President’s rule was imposed
- Currently, the powers of the legislature of the state is exercisable by or under the authority of parliament and all the decisions taken shall have a concurrence of the President under Article 74 (1)(i) under which council of ministers with the prime minister, at the head, will aid and advise the President.
- The present term of President’s rule is expiring on July 2 and the Governor has recommended that the President rule in the state may be extended for a further period of six months.
- Earlier it was decided that the Lok Sabha and assembly elections couldn’t be held together because of security considerations.
- It was said that the assembly elections in the state will be held as soon as the Election Commission announces the dates.
- The Home Minister also has given strict instructions to security forces for zero tolerance towards terrorism. The message was clear that there could be no compromise on national security.
- This continual delay in holding elections does no good to the troubled state.
- People of J&K have a right to governance by their own elected representatives.
- The Commission must keep regular check on the situation in J&K as well as take all necessary actions for conduct of elections in the state.
The Centre has decided to launch the ‘One nation, One ration card’ scheme to curb corruption and end the dependence on one Public Distribution System (PDS) shop.
- The ‘One nation, One ration card’ scheme will make sure that a beneficiary is able to avail herself of the Public Distribution System (PDS) – no matter which part of the country she may be in.
- Under the scheme, the food ministry will create a central depository of all the ration cards, which would help in eliminating duplication.
- Currently, the Integrated Management of PDS, under which beneficiaries can avail food grain from any district, is operational in several states such as Andhra Pradesh, Gujarat, Haryana, Jharkhand, Karnataka, Kerala, Maharashtra, Rajasthan, Telangana and Tripura, according to the statement from the Ministry of Consumer Affairs, Food and Public Distribution.
- It was announced that the other states will also implement the Integrated Management of PDS (IMPDS) soon.
- At present, over 75% of Fair Price Shops have been equipped with electronic PoS devices.
- Various issues pertaining to efficient implementation of the National Food Security Act, end-to-end computerisation, transparency in storage and distribution of foodgrains, and synergising of all FCI, CWC and SWC depots with the Depot Online System (DOS) would be addressed.
Merits of the scheme:
- The scheme, according to Union Minister of Consumer Affairs, Food and Public Distribution would ensure that all beneficiaries can access PDS across the nation from any shop of their choice.
- The biggest beneficiary of this, would be migrant labourers who move to other States to seek better job opportunities.
- The scheme would provide freedom to the beneficiaries as they will not be tied to any one PDS shop and reduce their dependence on shop owners.
- The objective is to ensure that this is implemented nationally in a time-bound manner.
- The process also, aims to do away with manual recordings of transactions, thereby ensuring clarity of record keeping.
On the side lines the G-20 summit in , Japan, on a host of issues, ranging from trade disputes to the crisis in the Gulf were discussed between Prime Minister Narendra Modi and U.S. President Donald Trump. Both the leaders came closer in resolving trade issues.
- Trump hinted before the talks that trade prospects were improving between the two countries and a big trade deal with India is underway.
- The leaders acknowledged the breadth and depth of bilateral ties, including economic, trade, energy, defence and security, counterterrorism and space.
- They also pledged to provide a “strong leadership” to the world to address pressing global challenges like terrorism.
- They discussed the technical and business opportunities and that this new area provides for cooperation between India and the US.
- The announcement assumes significance as the US president, championing his ‘America First’ policy, has been a vocal critic of India for levying “tremendously high” duties on US products.
- Such a development while the tensions are high between the two countries with respect to various issues such as withdrawal of benefits of GSP to India, Tariff on the U.S. goods by India etc., is seen as a respite.
India has overtaken China as the preferred destination for aluminium scrap with imports growing 18.8% in the January-March 2019 quarter compared with the same quarter of the previous year.
- This, according to industry players, this is seen as a direct result of the trade war between China and the U.S.
- The U.S. had imposed an import duty of 10% on aluminium in March 2018 and in response, China had implemented a 25% duty on the import of aluminium scrap from the U.S.
- While India’s imports grew 18.8% over this period, China’s declined by 32.1%.
- While other metals like zinc, copper, lead, and nickel all have the same import duties for their primary and scrap variants, this is not so for aluminium. Aluminium scrap imports are taxed at just 2.5%, while primary aluminium is taxed at 7.5%.
- The scrap being diverted and dumped in India is hurting the Indian industry.
- Impure scrap is being used in place of pure primary scrap in consumer-facing sectors such as consumer durables, utensils and also in sectors of national importance such as power transmission.
- China has not only put the duty on U.S. scrap, but they are also classifying aluminium scrap as a restricted import.
- India’s duty structure in place, must be revisit in the upcoming Budget.
- China has plans to ban all scrap by 2020. This would only increase the dumping. Therefore sufficient measures must be taken to keep a check on aluminium imports.
C. GS3 Related
The Reserve Bank of India (RBI) has allowed asset reconstruction companies (ARCs) to buy financial assets from other such entities.
Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (Sarfaesi) Act, 2002:
- Detailed provisions for the formation and activities of Asset Securitization Companies (SCs) and Reconstruction Companies (RCs) are given in the SARFAESI Act.
- Also, scope of their activities, capital requirements, funding etc. are given by the Act.
- This legislation helps financial institutions to ensure asset quality in multiple ways. The provisions of the Act give directives and powers to various institutions to manage the bad asset problem.
- The three processes for recovery of Non-Performing Assets under the SARFAESI Act are:
- Asset reconstruction
- Security Enforcement without court’s intervention
Asset Reconstruction Companies:
- Asset Reconstruction refers to conversion of non-performing assets into performing assets. There are multiple steps to reconstruct asset.
- These specialised institutions buy bad assets or the NPAs from banks and financial institutions in order to help them clean up their balance sheets.
- In view of amendment to the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, it has been decided to permit ARCs to acquire financial assets from other ARCs.
- The decision will help improve liquidity in the ARC market.
- However, the transfer of assets by one ARC to another would depend on certain conditions:
- All such transactions have to be settled in cash.
- Price discovery for such transaction shall not be prejudicial to the interest of security receipt holders,” the RBI further said
- It added that the ARC selling must utilise the proceeds so received for the redemption of underlying security receipts.
- The date of redemption of underlying Security Receipts and total period of realisation should not extend beyond eight years from the date of acquisition of the financial asset by the first ARC.
NASA the US space agency will fly a drone helicopter mission named Dragonfly on Saturn’s largest moon, Titan, in the 2030s.
- Saturn has many moons ranging from tiny moonlets less than 1 kilometer across to the enormous Titan.
- Titan is Saturn’s largest moon. It is the second largest natural satellite in the solar system.
- It is larger than planet Mercury.
- It is the only moon known to have a dense atmosphere.
- Titan has a substantial atmosphere and is viewed by scientists as an equivalent of very early-era earth.
- It is the only celestial body besides our planet known to have liquid rivers, lakes and seas on its surface, though these contain hydrocarbons like methane and ethane, not water.
- The Dragonfly mission, which will launch in 2026 and land in 2034, will send a rotorcraft to fly to dozens of locations across the icy moon.
- It was said that the vehicle would have eight rotors and fly like a large drone.
- During its 2.7-year baseline mission, Dragonfly will explore diverse environments from organic dunes to the floor of an impact crater where liquid water and complex organic materials key to life once existed together for possibly tens of thousands of years
- Its instruments will study how far prebiotic chemistry may have progressed.
- They also will investigate the moon’s atmospheric and surface properties and its subsurface ocean and liquid reservoirs.
- The instruments will search for chemical evidence of past or extant life.
- The craft will land first at the equatorial “Shangri-La” dune, exploring the region in short trips before building up to longer “leapfrog” flights of 8 km.
D. GS4 Related
Nothing here for today!!!
- It is important to note that the central bank of a country sits at the pinnacle of its financial system and is mandated with ensuring its stability.
- However, from time to time central banks are directly or indirectly involved in shoring up stressed commercial banks with capital infusion.
- Thus, it may appear odd to suggest that occasionally even the central bank may need some of its own medicine.
- After all, central banks make a surplus from their operations, and indeed pay a dividend to their governments. The puzzle is resolved, however, when we recognise that capital is not only funds but also ideas.
Reflecting on the role of the central bank:
- It’s time to reflect on the role of the central bank in India as we hear of impending changes in the higher echelons of the Reserve Bank of India (RBI).
- The fact that this issue is being brought up more than half a century after a central bank was instituted in India need not be interpreted as some weakness in the original conception.
- As a matter of fact, an economic arrangement once made cannot be treated as settled for all time to come.
- This also holds true for central banks, often considered venerable beyond querying.
(a) RBI and the Government acting in concert?
- The media coverage has focused on differences among some of its functionaries and the government of India but this is besides the point as there has been complete agreement between them on the role of monetary policy.
- Moreover for about five years now, the government and the RBI have, as though in concert, implemented a deflationary macroeconomic policy via fiscal contraction and monetary tightening, respectively.
- Further, one of Prime Minister Narendra Modi’s finance ministers claimed credit for the government for having ushered in a period of macroeconomic stability.
- However, what this achieved for the economy is a different matter.
(b) Prescriptions of the Washington Consensus:
- A combination of low inflation and small budget deficits was among the prescriptions of the Washington Consensus that reigned for about a decade and a half from the 1990s.
- Next, with the implosion of the former Soviet Union and the folding up of its east European satellites, this consensus had, via the clout of the U.S., placed a straitjacket on policy makers in the so-called emerging markets, like India.
- Experts reflect that in that moment of triumph it had been thought that the business cycle, or the oscillating trend in market economies, had been permanently tamed.
(c) Global Financial Crisis:
- The global financial crisis in 2008, which originated in the U.S. and soon spread across the world, including India was an important development wherein growth slowed and unemployment rose.
- The Obama Administration did not hesitate to intervene drastically, strongly supported by the Federal Reserve Bank.
- The fiscal deficit rose three-fold and the money supply ballooned. Interestingly, inflation did not rise.
(d) Prompting a rethinking in macroeconomics:
- The global financial crisis has led to a substantial re-thinking of macroeconomics.
- The main revisions are that monetary policy defined by inflation targeting can no longer be treated as the centrepiece of macroeconomic policy, that fiscal policy should be used to stabilise the economy when needed and that financial regulation is a must.
- As a matter of fact, the limitation of inflation targeting was understood when the ‘great moderation’, an extended period of low inflation in the west, ended in the financial crisis.
- It is this that has led to the view that light regulation of the financial sector, as advised by the then Governor of the Federal Reserve Alan Greenspan, can be a recipe for disaster.
- Finally, it has come to be recognised that assertions of the impotence of fiscal policy may be exaggerated.
- In fact, there could be times when the private sector is held back by the state of the economy.
- In a recession this would delay recovery. Now fiscal expansion would be necessary.
- Apart from theoretical demonstration of the stabilising potential of fiscal policy, the belief that the explosion of the U.S. fiscal deficit following the crisis actually saved the day has very likely contributed to the rethinking.
- The general consensus now is that there should be no going back to the pre-crisis practices of narrow inflation targeting, inflexible fiscal policy, and kid gloves for the financial sector.
Lessons to learn:
- It is hoped that the Reserve Bank of India and the economic policy-making establishment will take into account the evolving understanding of macroeconomics globally.
- It is unfortunate that policymaking in India has been stuck in the past.
- This would not have mattered if the consequences were benign.
- It is important to note that the government has taken credit for the attainment of macroeconomic stability, defined by low inflation, even as unemployment has been rising since 2011.
(a) Highlighting the perils of deviating from the path of fiscal consolidation:
- A continuously declining fiscal deficit has not restrained the RBI leadership from paying hawk-eyed attention to it, constantly lecturing the elected government of the perils of even the slightest deviation from the path of fiscal consolidation, when strictly it is not its business to do so.
- It should instead focus on putting its own house in order.
- Two instances of a failure to do so may be mentioned. These include the following:
- Ever since we have had de facto inflation targeting in India, from around 2013, the real policy rate has risen very substantially. This has been accompanied by declining borrowing in the formal sector likely affecting investment. Inflation has come down but it was already trending downward, possibly due to the slowing growth. Subsequent inflation reduction has been assisted by the declining price of oil.
- Evidence of the role of inflation targeting in reducing inflation in India is weak. This fact has been pointed out by a few experts. However, ironically, we have had in India the replay of a scene from the global financial crisis where a central bank focusing on inflation loses sight of brewing financial instability. It is important to point out that the crisis at IL&FS, with a group company defaulting on its payment obligations jeopardising the interests of hundreds of investors, banks and mutual funds is only a specific case in point. The larger story is of the steady rise in the non-performing assets (NPAs) of banks even as inflation was abating.
- A popular reading is that recently the RBI has had to face some pressure exerted by the government’s nominees.
- This may well have been the case.
- However, what we need is not just a central bank that is left to function independently, but also one that is not a slave to some defunct school of thought.
- In conclusion, a central bank has many mandated functions, among them ensuring an adequate supply of clean currency notes in denominations sought after by the ordinary Indian.
What’s in the news?
- Chennai has been reeling under its worst water crisis in decades with its four main reservoirs (Sholavaram, Chembarambakkam, Poondi and Red Hills) nearly empty. The city has not had rain in nearly 200 days; only over the past few days has the city seen light rainfall.
- Groundwater too has been over-extracted.
- The Tamil Nadu Chief Minister has announced that 10 MLD (million litres a day) of water will be transported to the city for the next six months from Jolarpettai, Vellore district.
- The Tamil Nadu government has also accepted Kerala’s offer to provide water.
Measures taken by the State Government in the past:
(a) Rain Water Harvesting (RWH)
- At the political level, rainwater harvesting (RWH) was initiated in the year 2000 at Sathyamurthy Bhavan.
- Subsequently the government under J. Jayalalithaa mandated RWH in Tamil Nadu, from 2003 onwards.
- This meant that building approval for new apartments and dwellings were not to be granted by the Chennai City Corporation unless the building plan included a RWH component.
- The order also mandated that all existing buildings in Tamil Nadu install RWH structures.
(a) Lack of Implementation:
- However, sixteen years later, we are back to square one.
- An audit by the non-governmental organisation Rain Centre has shown that most government buildings in Chennai do not have a functioning RWH structure.
- These include several police stations and municipality buildings.
- Now, the Greater Corporation of Chennai has ordered the inspection of RWH structures, much after the crisis.
(b) Issues with crisis management in India:
- The issue with any crisis in India is the fire-fighting strategy that we adopt as a response as opposed to systematised solutions.
- These stop-gap arrangements are soon forgotten when things temporarily go back to normal instead of making an attempt to deeply ingrain these practices in the system.
- This level of action, especially during the floods, is usually undertaken at the level of the National Disaster Management Authority and the National Disaster Response Force.
- Local follow-up measures that are necessary to sustain results are ignored.
- During the floods in Chennai in December 2015, the encroachment of wetlands was widely cited as a key issue. Vanishing catchment areas had resulted in floods.
- However, three-and-a-half years later, no formal mechanism has been put in place to check whether wetlands are being desilted and whether we can avoid a similar flood-like situation again.
Need for water governance:
- According to a recent NITI Aayog report, 21 Indian cities will run out of groundwater by 2020 if usage continues at the current rate.
- It is important to note that water governance in cities across India has been ad hoc.
- Learning their lessons from the Chennai crisis, other metropolitan cities should now set up urban water planning and management boards, a permanent body similar to urban development authorities, that regulate the supply, demand and maintenance of water services and structures.
- On the supply side, this authority should monitor and regulate groundwater in Chennai.
- Water supply by private tankers must also be regulated with pricing for their services having reached exorbitant levels.
- This year, a tanker of approximately 12,000 litres cost ₹6,000 in several places, almost seven times the cost of water supplied by Chennai Metro Water.
- In the year 2018, the same amount of water cost ₹2,000.
- Further, additional desalination plants should also be commissioned as this water can result in water prices reaching to below 6 paise a litre.
- Experts are of the opinion that the beds of existing lakes can be deepened for greater water storage and better water percolation.
- As a matter of fact, desalinated water is less expensive than water supplied by private tankers. However, since Chennai Metro Water charges a flat rate for use of this water, there is no incentive for judicious use.
- Thus, on the demand side of things, Metro Water and groundwater use should be measured and priced progressively, similar to the electricity tariff, where the quantity of use determines the price.
- The board can practise differential pricing and cross-subsidise those households with a lower per capita income use of water.
- However, for this to be implemented effectively, water meters are a must.
Need for Stakeholder coordination:
- The urban water management board should also oversee the desilting of lakes in the city on a regular basis.
- It is important to note that the management of lakes comes under the Public Works Department, which works in isolation from Chennai Metro Water. In fact, experts have pointed out that this lack of coordination leads to a water policy that operates in silos.
- The board must also have regulatory powers to monitor the maintenance of RWH structures at homes and in offices.
- In existing RWH structures, pipes are either broken or clogged, filtration equipment is not cleaned, bore pits have too much silt and drains are poorly maintained.
- The body also needs to work in coordination with governments on granting approvals to new mass working spaces.
- Lastly, it is important to note that water scarcity has resulted in the IT corridor in Chennai suffering, with most companies even asking employees to work from home.
- The myopic policies of the government in providing incentives to the IT corridor without looking at their water-use necessities and asking them to make provisions for this has cost them dearly.
- This is in contrast to the manufacturing sector around the Sriperumbudur-Oragadam belt, where a number of companies and large manufacturing units have been able to maintain production due to efficient water management practices.
- For example, in one unit, there is a rainwater harvesting pond and all buildings inside the complex are equipped with facilities for artificial ground water recharge.
- Finally, the scarcity of essential resources not only leads to economic losses but also social unrest; an extreme case in Chennai resulted in a woman being attacked over water troubles.
- We must also learn from the experiences of other cities across the world such as Cape Town, South Africa, where water saving is being driven through the concepts such as Day Zero, thus prompting better and more efficient use of water.
- In conclusion, a sustainable governance solution to this problem along with public participation is essential to ensure that our future generations do not suffer as a result of our failures.
- The Bombay High Court recently upheld the Maharashtra government’s decision to provide reservation to the Maratha community in government jobs and educational institutions.
- However, the court cut down on the quantum of 16 per cent approved by the government on the grounds that it was not “justifiable”.
- Chief Minister Devendra Fadnavis welcomed the high court order, terming it as proof of the state’s commitment for its people. He went on to add, “The verdict has proved that this Maharashtra legislative assembly is capable of devising a law. The court has also accepted the report of the Backward Class Commission.”
- It is important to note that the state legislature had passed a bill granting 16 per cent reservation in education and government jobs for the Marathas, declared a socially and educationally backward class by the administration, on November 30th, 2018. This was supposed to be in addition to the existing 52 per cent overall reservation in the state, thereby raising it to 68 per cent.
What prompted the Maharashtra Government to make this move?
- The Maharashtra government’s decision to provide reservation in government jobs and educational institutions to Marathas was spurred by a violent agitation taken out by the community through July and August last year (2018).
- The movement was called by the Sakal Maratha Samaj, an umbrella body of Maratha groups.
- Experts opine that the Bombay High Court verdict upholding reservation for Marathas in public employment and education must come as a major relief to the Maharashtra government, which has faced strident agitations from the community in the past for reservation benefits.
- As a matter of fact, when Maharashtra enacted special legislation to confer reservation benefits in education and public employment on the Maratha community last year (2018), a formidable legal challenge was expected.
- The law created a group called ‘Socially and Educationally Backward Class’ and included Marathas as the sole group under the category, and extended 16% reservation outside the existing quotas for Scheduled Castes and Tribes, and other tribes and backward classes.
Hurdles in the Way:
- The foremost hurdle was the fact that the additional Maratha component would take the reservation up to 68%, thus going beyond the limit of 50% imposed by the Supreme Court.
- Secondly, there were doubts whether one particular caste group could constitute a special class.
- It is important to note that the 487-page judgment is a brave effort at answering these difficult questions. Significantly, it has ruled that there were “exceptional circumstances and an extraordinary situation” to warrant the crossing of the 50% limit.
- It has upheld the government’s decision to accept the Maharashtra Backward Classes Commission’s report on the backwardness of the Maratha community. However, the Court has ordered that the quantum be lowered from 16 per cent to 12-13 per cent.
- As a matter of fact, the failure to treat this group as backward for decades has pushed its members deeper into social and educational backwardness.
- Thus, it says, an extraordinary situation has been created wherein the State had to treat them as a separate category.
Analyzing the reasoning given by the High Court:
- The High Court’s reasoning may not convince many.
- For one thing, it is doubtful whether a politically influential and dominant community can be treated as a special category in itself, even if it is educationally backward and under-represented in the services owing to lack of reservation benefits.
- Next, the uplift of the Marathas can be achieved by including it in the OBC list.
- If there were concerns about too large a population sharing too small a quota, the existing OBC reservation could have been expanded, instead of Marathas being given separate reservation.
- Further, Marathas have been classified as the only member of the newly created ‘SEBC’.
- The court seems to have ignored the fact that being socially and educationally backward is the constitutional reason for OBC reservation.
- It is befuddling how ‘SEBC’ can be a separate category outside the OBCs.
- Further, whether adequate grounds have been established to make an exception to the 50% limit will likely be examined by the Supreme Court closely.
- The mere expansion of the reservation pool is unlikely to be a constitutionally permissible reason for it.
Nothing here for today!!!
G. Prelims Facts
Nothing here for today!!!
H. Practice Questions for UPSC Prelims Exam
Q1. Consider the following statements with respect to saint Dnyaneshwar:
- He is one of the foundations of the Varkari Bhakti movement tradition of Hinduism in Maharashtra.
- His ideas reflected the Advaita Vedanta Philosophy.
- His work “Dnyaneshwari” is a commentary on the Bhagavad Gita.
- Saints Eknath, Tukaram were his contemporaries.
Which of the following statement/s is/are correct?
a. 1 only
b. 2 and 4 only
c. 1, 2 and 3 only
d. 1, 2, 3 and 4
Q2. Indravati National Park is located in:
c. Tamil Nadu
Q3. Which of the following is/are correct about the Hojagiri dance form?
- It is from the state of Tripura.
- It is performed by the Reang tribe.
Which of the given statement/s is/are correct?
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 nor 2
I. UPSC Mains Practice Questions
- Natural disasters are increasingly affecting large parts of India. The country has to design a holistic process of disaster response involving response, rehabilitation and rebuilding. Discuss. (15 Marks, 250 Words)
- Explain and illustrate the life-cycle of a temperate cyclone and also describe the weather associated with it. (15 Marks, 250 Words)
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