# 19 Mar 2018: UPSC Exam Comprehensive News Analysis

A. GS1 Related
B. GS2 Related
C. GS3 Related
SCIENCE AND TECHNOLOGY
1. Army to buy air defence system
ECONOMY
1. Power’ of choice for consumers
2. Measuring manufacturing
ECOLOGY AND ENVIRONMENT
1. The presence of plastics in drinking water
D. GS4 Related
E. Editorials
INTERNATIONAL RELATIONS
1. Treatment of Diplomats: India and Pakistan
F. Prelims Fact
G. UPSC Prelims Practice Questions
H. UPSC Mains Practice Questions


A. GS1 Related

Nothing here for today!!!

B. GS2 Related

Nothing here for today!!!

C. GS3 Related

1. Army to buy air defence system

• The Army is set to begin contract negotiations in the multi-billion dollar deal for the very short-range air defence system or VSHORAD.
• The request for proposal was first issued in October 2010 for over 5,000 missiles, 258 single launchers and 258 multi-launchers, estimated to cost Rs. 6,400 crore.

System configuration

• The system should have a maximum range of 6 km and an altitude of 3 km, besides all-weather capability. It will replace the IGLA.
• Early last year, the Defence Ministry cancelled a second air defence tender for a short-range surface-to-air missile and decided to go for two more regiments of the indigenous Akash systems.

1. Power’ of choice for consumers

Why in news?

• Last month, six energy producing companies won rights to set up wind power projects in Gujarat and sell power to the State’s utility firm.
• In the auctions, where those who offer to sell electricity at the least prices are the winners, four companies quoted Rs. 2.44 a unit of electricity, and two others quoted a paisa more.
• Similarly, in the previous auctions, several wind and solar companies have come forward to sell electricity at prices well under Rs. 3.

Electricity Act, 2003

• The push to make such deals possible came in the form of the Electricity Act in 2003. The central idea of the Act, which is still hailed as a ‘landmark legislation’ for the power sector, was the creation of an open market for electricity, where anyone could produce power anywhere and sell it to anyone else at mutually agreed prices.
• In developed countries, consumers can switch suppliers over the laptop. But in India, a decade and half after the legislative framework came into being, a free and open market for power, as it exists for instance, for telecom, is still elusive.
• The reason is that State governments, through the electricity distribution companies (discoms) owned by them, are still a monopoly, and exhibit monopolistic tendencies — their instinct is to make their customers pay for their inefficiencies.
• In an open market, the customers who are thus made to pay more would go to other suppliers if they find them economical. But in a monopoly, the monopolist would not let the customer deal directly with the supplier.
• While on paper, there is scope for a large consumer of power to directly purchase power from a supplier, by-passing over the State discom, in practice this has proved to be difficult because the owner of the discom, viz., the State government, has control over such direct transactions.
• State governments use the respective State Load Dispatch Centre (which routes the power) as the instrument of control.
• State governments have often seized upon a certain provision (Section 11) in the Electricity Act, which allows them to force a power producer in that State not to supply outside the borders.
• The provision was meant for use in rare circumstances of emergency-like power shortage, but many States (Tamil Nadu, Odisha, Andhra Pradesh and Rajasthan, for example) have taken liberties with the interpretation.
• Perhaps the clearest case of States putting the kibosh on free market is that of the ‘cross-subsidy surcharge’ (CSS). This is a surcharge that a discom levies on a customer for defraying costs of free or subsidised power to some sections of the society.
• Ideally, the costs of such subsidies should come from the State government’s own funds, but other customers are made to pay for it.
• A ‘consultation paper’ on open access produced by the Ministry of Power in August last year sums up the position of the State government, seeking a rise in CSS.
• This is happening even when there is recognition that CSS is not quite the way to provide free or subsidised power to some sections of society — incidentally, some of whom, such as rich farmers, do not at all deserve the freebie.
• The National Tariff Policy of 2016 is clear on that point. In Section 8.3, it says direct subsidy is a better way to support the poorer categories of consumers than the mechanism of cross subsidising the tariff across the board.
• Add to this the ‘additional surcharge’ which is meant to compensate discoms for the fixed cost of their long-term contracted capacity, which is stranded as a result of consumers moving to Open Access (OA).
• For this, the discoms have to “conclusively demonstrate” that the assets are stranded due to consumers moving out, but often this is not done. In some States, additional surcharge has is as high as Rs. 1.60.
• These charges, collectively known as ‘open access charges’ have made a free market economically unviable. In several of its presentations, the Indian Energy Exchange, which is one of the two energy exchanges in the country, speaks of open access charges being set high in order to restrict open access.
• With the rise of renewables, increased market dynamics and tighter grid operation rules, utilities (discoms) have started restricting or tightening rules around open access.
• For their part, the discoms have their own defence for why they frown at open access. Customers leaving them has adverse financial implications, at a time when they are hard up on cash. On the flip side, whether they do enough to improve their efficiencies and keep their house in order, is moot.
• There are structural issues in improving discom efficiencies. A case in point is the instance in Karnataka, where the unions stopped substation automation because it would render staff surplus, requiring them to be transferred.

‘Centre-State mismatch’

• At the heart of the the absence of a free market for electricity is the mismatch of perception of the central and State governments. While the Centre wants a vibrant, 24-by-7 market, the States are more concerned about their immediate finances and electoral issues.
• Development of a shared perspective or vision for the sector by the Centre and the States is highly desirable.
• On top of all this is the proposed New Electricity Act which proposes to separate carrier and content, meaning the transmission lines will be like tolled highways for use by anybody, while the power itself could be supplied by anybody, so that the consumer will have a choice to switch seamlessly between suppliers. The draft of the legislation is gathering dust in the Parliament.

2. Measuring manufacturing

There are two key parameters that the government and private sector analysts use to gauge the level of activity in the manufacturing sector — the Index of Industrial Production (IIP) and the Manufacturing Purchasing Managers’ Index (PMI). While a lot has been written about the IIP, less has been said about the PMI.

What is manufacturing PMI?

• There are two main points of difference between the PMI and the IIP. The first is that the PMI is a private sector survey while the IIP is gauged by the government.
• The second difference is in what is being measured. While the IIP is a measure of output, PMI, as the name suggests, measures activity at the purchasing or input stage.
• Together the two indices provide a composite and reasonably comprehensive information about the formal manufacturing sector. As with the IIP, the PMI suffers from the lacuna of not measuring informal sector activity.
• Another factor to be kept in mind is that both the PMI and the IIP are based on surveys and hence, represent only a sample of the entire formal manufacturing sector.
• In addition, as with all surveys, the two are also susceptible to sampling errors, errors in assigning weights to various indicators and errors that creep in due to inaccurate responses.

How is the PMI survey conducted?

• The Nikkei India Manufacturing PMI is based on data compiled from monthly survey responses by purchasing managers in more than 400 manufacturing companies.
• The manufacturing sector is divided into eight broad categories — basic metals, chemicals and plastics, electrical and optical, food and drink, mechanical engineering, textiles and clothing, timber and paper and transport.
• The survey responses are meant to reflect month-to-month changes based on the data collected mid-month. For each of the indicators, the report shows the percentage reporting each response, the difference between the number of higher or better responses and lower or worse responses and something called a ‘diffusion’ index.
• Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change.
• The Nikkei India Manufacturing PMI is composite index based on five individual indices with their own weightages — new orders (weightage 0.3), output (0.25), employment (0.2), suppliers’ delivery times (0.15), stock of items purchased (0.1) and the delivery times index inverted so that it moves in a comparable direction.
• Once the overall number for the month is computed, the score is arrived at. A score above 50 denotes expansion while one below 50 signifies contraction.

What has the PMI been saying for India?

• The Manufacturing PMI for India has been gradually declining from December when it was 54.7, the highest it has been in more than a year. Since then, it has declined to 52.4 in January and to 52.1 in February.
• Growth in the manufacturing component of the IIP accelerated in January compared with the level in the previous month. Overall, the last three months have witnessed manufacturing growing at a rate faster than what has been recorded in about two years.
• One important advantage the PMI has over the IIP is how quickly the data for any reporting period comes out.
• The manufacturing PMI report for any given month comes out either on the last day of that month or on the first day of the next month.
• So, for example, the next data release will be for March 2018 and will come out either on March 31 or April 1.
• The IIP, however, comes out after considerable delay. The data for a given month comes out almost one and a half months later. The next release will be for February 2018 and will come out on April 12.

1. The presence of plastics in drinking water

Why in news?

• Plastics are now widely present in the environment, as visible waste along coastlines, in lakes and rivers, and even in the soil.
• The recent finding that microplastic particles are found even in ‘safe’ bottled water indicates the magnitude of the crisis.
• There is little doubt that the global production of plastics, at over 300 million tonnes a year according to the UN Environment Programme, has overwhelmed the capacity of governments to handle what is thrown away as waste.

What are Microplastics?

• Microplastics are particles of less than 5 mm that enter the environment either as primary industrial products, such as those used in scrubbers and cosmetics, or via urban waste water and broken-down elements of articles discarded by consumers.
• Washing of clothes releases synthetic microfibres into water bodies and the sea.

What is the health impact?

• The health impact of the presence of polypropylene, polyethylene terephthalate and other chemicals in drinking water, food and even inhaled air may not yet be clear, but indisputably these are contaminants.
• Research evidence from complementary fields indicates that accumulation of these chemicals can induce or aggravate immune responses in the body. More studies, as a globally coordinated effort, are necessary to assess the impact on health.
• WHO has come forward to commission a review of the health impact of plastics in water.

What is the solution?

• Last December in Nairobi, UN member-countries resolved to produce a binding agreement in 18 months to deal with the release of plastics into the marine environment.
• The problem is staggering: eight million tonnes of waste, including bottles and packaging, make their way into the sea each year. There is now even the Great Pacific Garbage Patch of plastic debris.

Indian Context

• India has a major problem dealing with plastics, particularly single-use shopping bags that reach dumping sites, rivers and wetlands along with other waste.
• The most efficient way to deal with the pollution is to control the production and distribution of plastics. Banning single-use bags and making consumers pay a significant amount for the more durable ones is a feasible solution.
• Enforcing the Solid Waste Management Rules, 2016, which require segregation of waste from April 8 this year, will retrieve materials and greatly reduce the burden on the environment. Waste separation can be achieved in partnership with the community, and presents a major employment opportunity.
• The goal, however, has to be long term. As the European Union’s vision 2030 document on creating a circular plastic economy explains, the answer lies in changing the very nature of plastics, from cheap and disposable to durable, reusable and fully recyclable.
• There is consensus that this is the way forward. Now that the presence of plastics in drinking water, including the bottled variety, has been documented, governments should realise it cannot be business as usual.

D. GS4 Related

Nothing here for today!!!

E. Editorials

1. Treatment of Diplomats: India and Pakistan

• There is an urgent need for India and Pakistan to address allegations of harassment of each other’s diplomats and interference in High Commission work.
• While surveillance of diplomats by intelligence agencies in New Delhi and Islamabad is not new, matters have escalated in the past month, and the treatment of diplomatic officials by both sides has dropped to new lows.
• The spark for this round of ‘tit-for-tat’ actions appears to be an incident in February, when alleged ISI agents roughed up Pakistani construction workers headed for the Indian mission’s new building site in Islamabad.
• While Pakistan’s foreign office claimed they did not have security clearance to enter the diplomatic zone, India saw it as an attempt to stop the work, adding that power and water connections were tampered with.
• Then, the Pakistan High Commission in Delhi claimed that Indian security personnel warned repairmen and electricians against entering its premises. Both missions said personnel were being targeted on the road, with cars stopped and drivers intimidated.
• The timing is clearly more than just coincidence, and the incidents mark a deliberate policy by India and Pakistan to give their intelligence agencies a carte blanche to target the other side.
• It is unfortunate that things have come to such a pass, weeks after the two countries agreed to humanitarian measures for prisoners, with Pakistan Foreign Minister Khawaja Asif accepting External Affairs Minister Sushma Swaraj’s proposals on the issue.
• The allegations of harassment are more serious than just shadow-boxing, and must be checked in order to avoid a further slippage in ties. They constitute technical violations of the Vienna Convention on Diplomatic Relations (1961) and the subsequent Vienna Convention on Consular Relations (1963), which clearly state that a diplomatic agent’s person, premises and property are inviolable and must be respected and protected by the “receiving state”.
• The fear is that as a next step in this spiral, India and Pakistan may even take stronger measures, including sending back diplomats or scaling down their missions.
• India had declared Islamabad a non-family post in the wake of the terror attack on an army school in Peshawar; Pakistan may now follow suit by withdrawing its families from Delhi.
• At a time when bilateral dialogue has been stalled for years, and ceasefire violations are becoming the norm on the Line of Control, any escalation will impact the few lines of communication that remain.

F. Prelims Fact

Nothing here for today!!!

G. Practice Questions for UPSC Prelims Exam

Question 1. Consider the following statements about Electricity Act, 2003:
1. Creation of an open market for electricity.
2. In an open market, anyone could produce power anywhere and sell it to anyone else at mutually agreed prices.

Which of the statements are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. None of the above

See

Question 2. Consider the following statements about Index of Industrial Production (IIP) and the
Manufacturing Purchasing Managers’ Index (PMI):
1. PMI is a private sector survey while the IIP is gauged by the government.
2. While the IIP is a measure of output, PMI, as the name suggests, measures activity at the purchasing or input stage.

Which of the statements are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. None of the above

See

Question 3. Consider the following statements about Cross-subsidy surcharge (CSS):
1. This is a surcharge that a discom levies on a customer for defraying costs of free or subsidised power to some sections of the society.
2. The Electricity Act allows CSS.

Which of the statements are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. None of the above

See

Question 4. Which of these is India’s biggest gas marketing firm?
1. GAIL
2. BPCL
3. IOC
4. ONGC

See

H. UPSC Mains Practice Questions

General Studies III (Economy)

1. Although Open Market in Electricity was envisaged by the Electricity Act, 2003, it is still far from reality. Discuss.

General Studies II (IR)

1. Although India and Pakistan face hurdles in bilateral relations, there should be a continuous engagement at the diplomatic level. Critically evaluate.

Also, check previous Daily News Analysis

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