28 Mar 2019: UPSC Exam Comprehensive News Analysis

A. GS1 Related

B. GS2 Related

Context:

India and the U.S. signed an inter-government agreement for the automatic exchange of country-by-country (CbC) reports, which will reduce the compliance burden for Indian subsidiary companies of U.S. parent companies.

Details:

Sub-section (4) of Section 286 of the Income-tax Act, 1961 requires that a constituent entity of an international group, resident in India, other than a parent entity or an alternate reporting entity of an international group, resident in India, shall furnish the Country-by-Country (CbC) Report in respect of the said international Group for a reporting accounting year within the period as may be prescribed, if the parent entity of the said International Group is resident of a country or territory,—

• where the parent entity is not obligated to file the CbC Report;
• with which India does not have an agreement providing for exchange of the CbC Report; or
• where there has been a systemic failure of the country or territory and the said failure has been intimated by the prescribed authority to such constituent entity.

What is CbC report?

The Base Erosion and Profit Shifting (BEPS) Action Plan adopted by the Organisation for Economic Co-operation and Development (OECD) and G20 countries in 2013 recognised that the way forward to mitigate risk from base erosion and profit shifting was to enhance transparency.

The Base Erosion and Profit Shifting (BEPS) Action 13 report (Transfer Pricing Documentation and Country-by-Country Reporting) provides a template for multinational enterprises (MNEs) to report annually and for each tax jurisdiction in which they do business the information set out therein. This report is called the Country-by-Country (CbC) Report.

What is a constituent entity?

A constituent entity is a separate business unit of the MNE group that is included in the consolidated group for financial reporting purposes. This includes a permanent establishment if a separate income statement is prepared for regulatory, financial, internal management or tax purposes.

What is BEPS?

Base erosion and profit shifting refers to the activities of multinational corporations to shift their profits from high tax jurisdictions to lower tax jurisdiction, thereby eroding the tax base of the high tax jurisdictions and depriving them of tax revenue. In order to combat this, many countries entered into agreements to share tax information with each other to enhance transparency and make such profit shifting that much harder.

Bilateral agreement between India and USA:

• The absence of an Agreement between India and USA till now had entailed a possibility of local filing of CbC Reports in India.
• However, a Bilateral Competent Authority Arrangement, along with an underlying Inter-Governmental Agreement, for exchange of CbC Reports between India and the USA has now been finalized.
• This would enable both the countries to exchange CbC Reports filed by the ultimate parent entities of International Groups in the respective jurisdictions, pertaining to the financial years commencing on or after 1st January, 2016.
• As a result, Indian constituent entities of international groups headquartered in USA, who have already filed CbC Reports in the USA, would not be required to do local filing of the CbC Reports of their international groups in India.
• This is a key step in making India compliant with the Base Erosion and Profit Shifting (BEPS) project, of which it is an active participant.

Context:

• The ‘Banning of Unregulated Deposit Scheme Ordinance’, was promulgated by President Ram Nath Kovind during the last week of February 2019 to save gullible investors from losing money to Ponzi and fake deposit schemes.
• The Centre’s recent ordinance will not affect the ongoing monthly schemes operated by jewellery and chit fund firms, said tax practitioners.

Details:

What is unregulated deposit scheme?

• A deposit-taking scheme is defined as unregulated if it is not registered with the regulators.
• Currently, nine regulators oversee and regulate various deposit-taking schemes. For example, RBI regulates deposits accepted by non-banking financial companies, SEBI regulates mutual funds, state and union territory governments regulate chit funds, among others. All deposit-taking schemes are required to be registered with the relevant regulator.

Why was the ordinance promulgated?

• Popular chit funds and gold schemes usually escape the purview of government regulators.  These schemes exploit existing regulatory gaps and lack of strict administrative measures. Such schemes widely affect the poor and the financially illiterate.
• The Saradha chit fund scam is one such example of a financial crime.
• This ordinance is meant to take on fraudulent individuals and unregistered partnership firms from accepting deposits or services from gullible investors either in the form of advance or loan with or without interest.
• This would also include monthly chits and Diwali gift schemes among others.
• Thus, to protect the investors from losing their money, the deposit ordinance was promulgated.

Conclusion:

However, the ordinance must ensure that it should not derecognise genuine deposit schemes that offer useful financial services to customers in the unorganised sector. Also, the government should ensure legitimacy of various deposit schemes by conducting the necessary due diligence of every regulated deposit schemes.

Issue:

The Election Commission of India (ECI) has told the Supreme Court that the electoral bonds, wreck transparency in political funding.

In its affidavit submitted to the Supreme Court, the EC pointed to the amendments made to key laws, with dangerous consequences.

Background:

Read more about Electoral Bonds

Details:

• Coupled with the removal of cap on foreign funding, electoral bonds invite foreign corporate powers to impact Indian politics, Election Commission said in an affidavit filed in the apex court.
• Besides detailing how donations received through electoral bonds would cause a “serious impact” on transparency in funding of political parties, The ECI ripped apart amendments made to various key statutes through the two consecutive Finance Acts of 2016 and 2017.
• It opined that these amendments would pump in black money for political funding through shell companies and allow unchecked foreign funding of political parties in India which could lead to Indian politics being influenced by foreign companies.
• The Election Commission of India has time and again voiced the importance of declaration of donations received by political parties and also about the manner in which those funds are expended by them for better transparency and accountability in the election process.
• It said the amendments made in 2017 virtually derailed ECI guidelines of August 29, 2014, requiring political parties to file reports on contributions received, their audited annual accounts and election expenditure statements.

Amendments:

• The Finance Act of 2017 amends various laws, including the Representation of the People (RP)Act of 1951, the Income Tax Act and the Companies Act. The Finance Act of 2016 makes changes in the Foreign Contribution (Regulation) Act of 2010.
• The amendment to the RP Act allows political parties to skip recording donations received by them through electoral bonds in their contribution reports to the ECI.
• “This is a retrogade step as far as transparency of donations is concerned,” ECI said.
• The ECI has no way to ascertain whether the donations were received illegally by the political party from government companies or foreign sources.
• The ECI said the amendment introduced by the government in the Income Tax Act allows anonymous donations. Donors to political parties need not provide their names, address or PAN if they have contributed less than Rs. 20,000.
• Now, “many political parties have been reporting a major portion of the donations received as being less than the prescribed limit of Rs. 20,000…” the ECI affidavit told the Supreme Court.
• The ECI extends its critique to the Finance Act of 2016, highlighting how it had amended the FCRA 2010 to “allow donations to be received from foreign companies having majority stake in Indian companies…”
• ECI also mentioned how the amendment in the Companies Act “opens up the possibility of shell companies being set up for the sole purpose of making donations to political parties…”

The Supreme Court has listed the case for hearing on the issue of electoral bonds, unlimited corporate funding and transparency in political funding.

Context:

The Ministry of Home Affairs (MHA) issued five prosecution sanction orders last year under the Official Secrets Act (OSA), 1923.

What is Official Secrets Act?

• Official Secrets Act (OSA), 1923 was enacted by the British to curb espionage. The Act states that one can’t approach, inspect or even pass through a prohibited site used by the government.
• It was mainly enacted to curb the espionage which may help the enemy state against India.
• The section-3 of the act talks about the penalties if the person is persecuted under the act.
• “(1) If any person for any purpose prejudicial to the safety or interests of the State”….. “obtains collects, records or publishes or communicates to any other person any secret official code” …… “shall be punishable by imprisonment up to fourteen years and in other case to three years.”

What is the issue?

• The Act criminalizes disclosure of information which might be directly or indirectly useful to an enemy (Section 3).
• As per the interpretation given to the provision by the Supreme Court in Sama Alana Abdullah y. State of Gujarat AIR 1996 SC 569, the information need not be even ‘secret’, and if it is likely to be useful to an enemy, the offence is said to have been committed.
• Therefore, there is a lot of subjectivity involved here, as conviction could be based on an arbitrary and uncertain test of information being useful to an enemy.
• It criminalizes disclosure of information which is likely to affect sovereignty and integrity of India, the security of state or friendly relation with foreign states’. This provision also punishes persons voluntarily receiving and possessing such documents.
• Official Secrets Act has been misused to clip the wings of press reportage.
• Another issue is that the OSA does not define “secret” or “official secrets”. Public servants could deny any information terming it a “secret” when asked under the RTI Act.
• The Second Administrative Reforms Commission (SARC) report stated that as the OSA’s background is the colonial climate of mistrust of people and the primacy of public officials in dealing with the citizens, it created a culture of secrecy.
• It said that the Act should be substituted by a chapter in the National Security Act that incorporates the necessary provisions.

Do other nations have similar laws?

• Several countries including the United Kingdom, Malaysia, Singapore, and New Zealand continue to use the legislation to protect state secrets.
• In 2001, Canada replaced its OSA with a Security of Information Act. The “official secrets” come under the Espionage Act in the U.S.

C. GS3 Related

Context:

• Prime Minister Narendra Modi announced that the DRDO-developed anti-satellite system A-SAT successfully destroyed a live satellite in the Low Earth Orbit.
• With this test, dubbed as Mission Shakti, India is only the fourth country after the U.S., Russia and China to have the technology.

What are anti-satellite (ASAT) weapons?

• They are missile-based systems to attack moving satellites. So far the United States, China and Russia were the only ones who’ve reported the ability to shoot down space objects from ground or airborne sources.
• The development of such systems has a long history — fuelled by the Cold War between the United States and the former Soviet Union
• In the Cold War/Space Race era, 1985 was the last time that the United States had used an anti-satellite system to destroy its P-781 satellite that had instruments aboard to study solar radiation.

Why was the test done now?

• The test was done to verify that India has the capability to safeguard our space assets. It is the Government of India’s responsibility to defend the country’s interests in outer space.
  • Satellites are extremely critical infrastructure of any country these days. A large number of crucial applications are now satellite-based.
  • These include navigation systems, communication networks, broadcasting, banking systems, stock markets, weather forecasting, disaster management, land and ocean mapping and monitoring tools, and military applications.
  • Destroying a satellite would render these applications useless. It can cripple enemy infrastructure, and bring it down on knees, without causing any threat to human lives.
• The tests were done after India acquired the required degree of confidence to ensure its success, and reflects the intention of the government to enhance India’s national security.
• The test, however, can be carried out only on one’s own satellite. There are a large number of satellites currently in space, many of which have outlived their utility and orbiting aimlessly. One such satellite was chosen for the test.

Steps taken by India to conduct the test:

• As is mandatory for any missile test, India did issue a Notice to Airmen (NOTAM) to airline authorities across the world informing them about an impending missile test. This notice does not have to specify the kind of missile being tested, only the flight path and the region affected, so that airborne systems are able to avoid it.
  • NOTAM: It is a notice filed with an aviation authority to alert aircraft pilots of potential hazards along a flight route or at a location that could affect the safety of the flight

Examples:

• Anti-satellite weapons came back into popular currency after China conducted an anti-satellite missile test in 2007.
  • The target was a Chinese weather satellite — the FY-1C – that sailed at an altitude of 865 kilometres (537 mi).
• The United States launched ‘Operation Burnt Frost,’ the code name to intercept and destroy a non-functioning U.S. National Reconnaissance Office (NRO) satellite named USA-193.

What are India’s capabilities so far?

• While ‘Mission Shakti’ may have targeted an object in outer space, India has long developed the ability to intercept incoming missiles.
• In 2011, a modified Prithvi missile, mimicked the trajectory of a ballistic missile with a 600-km range. Radars at different locations swung into action, tracking the “enemy” missile, constructing its trajectory and passing on the information in real time to the Mission Control Centre (MCC) to launch the interceptor, an Advanced Air Defence (AAD) missile.
• It had a directional warhead to go close to the adversarial missile before exploding to inflict damage on it.

What are Low-Earth Orbit satellites?

• The Indian satellite that was shot down was a Low-Earth Orbit (LEO) satellite. These are satellites roughly at an altitude of 2,000 kilometres from the earth and that’s the region where majority of satellites are concentrated.
• A database from the Union of Concerned Scientists, a non-government organization based in the United States, says that there are at least 5 known Indian satellites in LEO: India PiSat, Resourcesat 2, Radar Imaging Satellites 1 and2 and SRMsat.

Does the test create space debris?

• The test was done in the lower atmosphere to ensure that there is no space debris. Whatever debris that is generated will decay and fall back onto the earth within weeks.

Is India entering into an arms race in outer space?

• India has no intention of entering into an arms race in outer space. India has always maintained that space must be used only for peaceful purposes. India is against the weaponization of Outer Space and support international efforts to reinforce the safety and security of space based assets.
• India believes that Outer space is the common heritage of humankind and it is the responsibility of all space-faring nations to preserve and promote the benefits flowing from advances made in space technology and its applications for all.
• India is a party to all the major international treaties relating to Outer Space. India already implements a number of Transparency and Confidence Building Measures(TCBMs) – including registering space objects with the UN register, pre-launch notifications, measures in harmony with the UN Space Mitigation Guidelines, participation in Inter Agency Space Debris Coordination (IADC) activities with regard to space debris management, undertaking SOPA (Space Object Proximity Awareness and COLA (Collision Avoidance) Analysis and numerous international cooperation activities, including hosting the UN affiliated Centre for Space and Science Technology Education in Asia and Pacific. India has been participating in all sessions of the UN Committee on the Peaceful Uses of Outer Space.
• India supported UNGA resolution 69/32 on No First Placement of Weapons on Outer Space. India’s sees the No First Placement of weapons in outer space as only an interim step and not a substitute for concluding substantive legal measures to ensure the prevention of an arms race in outer space, which should continue to be a priority for the international community.
• India supports the substantive consideration of the issue of Prevention of an Arms Race in Outer Space (PAROS) in the Conference on Disarmament where it has been on the agenda since 1982.

What is the international law on weapons in outer space?

• The principal international Treaty on space is the 1967 Outer Space Treaty. India is a signatory to this treaty, and ratified it in 1982. The Outer Space Treaty prohibits only weapons of mass destruction in outer space, not ordinary weapons.
• India expects to play a role in the future in the drafting of international law on prevention of an arms race in outer space including inter alia on the prevention of the placement of weapons in outer space in its capacity as a major space faring nation with proven space technology.
• India is not in violation of any international law or Treaty to which it is a Party or any national obligation.

Is this the only way to target enemy satellites?

• Countries have explored alternative options of making enemy satellites dysfunctional, options which do not involve direct destruction of the target or creation of the debris. For example, technologies have been developed to jam the communication from the satellites by interfering with its radio signals. This can be attempted during the uplink or the downlink.
• Another option that has been explored is the possibility of sending satellites that could just approach a target close enough to deviate it from its selected orbit, without destroying it. Several countries and organisations including China, Japan, Russia and the European Space Agency are said to be working on developing these ‘close proximity’ anti-satellite technologies.
• The third option is the possible use of ground-based lasers to ‘dazzle’ the sensors of the satellites and make them at least “partially blind” so that they are unable to work efficiently.

Significance:

• The use of ASAT is seen as crossing new frontier just like India’s 1998 nuclear tests. The technology is aimed at destroying, if necessary, satellites owned by enemy countries.
• The fact that this anti-satellite technology is indigenously developed adds to India’s credentials, given that for many decades India was kept away from acquiring key technologies, forcing the country to develop its own space and nuclear capabilities.
• The anti-satellite space technology shows India’s focus on security challenges, emanating beyond Pakistan.
• The acquisition of this technology is expected to have spin-offs that India can exploit for commercial use, both domestic and globally.

• It is a species of lizard found in the Indonesian islands of Komodo, Rinca, Flores, Gili Motang, and Padar
• IUCN Red list: Vulnerable
• It is the largest living species of lizard, growing to a maximum length of 3 metres
• Their unusually large size has been attributed to island gigantism, since no other carnivorous animals fill the niche on the islands where they live
• The dragon has venom glands that are loaded with toxins that lower blood pressure, cause massive bleeding, prevent clotting, and induce shock. They bite down with serrated teeth and pull back with powerful neck muscles resulting in huge gaping wounds. The venom then quickens the loss of blood and sends the prey into shock.

D. GS4 Related

E. Editorials

Note to Students:

Issues concerning Article 35A and Article 370 of the Constitution of India have repeatedly featured in the news time and again. We at BYJU’S have covered a detailed video-based analysis of these articles as part of our YouTube video release, available on the below link:

Why in the news?

• On March 1, 2019, the 77th and 103rd constitutional amendments were extended to Jammu and Kashmir (J&K) by a presidential order, with the concurrence of the J&K Governor.
• These relate to reservations in promotions for Scheduled Castes and Scheduled Tribes in the State services and special provisions for the advancement of economically weaker sections, respectively. However, on March 18, this was challenged before the J&K High Court.

Editorial Analysis:

Larger Background and status quo:

• The constitutional relationship between J&K and the Indian Union has been the subject of numerous discussions in recent times. This has rekindled the long-standing debate on the continued relevance of Article 370.
• As in Article 370, the provisions of the Indian Constitution do not automatically apply to J&K. To extend constitutional provisions and amendments to the State, a presidential order to that effect has to be passed.
• This order requires the concurrence of the State government, where the subject matter does not relate to the subjects specified in the Instrument of Accession (defence, external affairs, and communications). For other cases, only consultation is required.
• Accordingly, a 1954 presidential order extended various provisions of the Indian Constitution to J&K. This order was made with the concurrence of the State government and also ratified by the State Constituent Assembly.
• After the J&K Constitution came into effect in 1957, the State Constituent Assembly was dissolved. Since then, more than 40 such orders have been made, through which most constitutional provisions have been extended to the State.
• Some experts take the view that the sheer number of such orders, as well as the circumstances under which they were made, have considerably eroded J&K’s special status under Article 370.
• Having said this, it is also important to note that the state of J&K is not unique; there are special provisions for several States which are listed in Article 371 and Articles 371-A to 371-I.

A gradual decline: Different Stages of dilution 

1. First Stage of Dilution

• From the 1950s there has been a gradual dilution of the procedural norms followed by these presidential orders.
• In passing the 1954 order, procedural propriety was followed in the fullest possible sense as the requisite concurrence was obtained not only from an elected State government but also the State Constituent Assembly.
• The presidential orders made after the dissolution of the State Constituent Assembly — except a 1986 order extending Article 249, and the present 2019 order — can be seen as the first level of dilution.
• This is so because for all these orders, while the concurrence of an elected State government was obtained, the State Constituent Assembly did not exist and, therefore, could not give its ratification.
• Further, although the Supreme Court upheld this practice in the Sampat Prakash case (1968), it has been criticised as being beyond the scope of Article 370.

2. Second Stage of Dilution 

• The 1986 order represents a second level of dilution.
• This is because it was made when J&K was under Governor’s rule as per Section 92 of the J&K Constitution.
• In the absence of an elected council of ministers, the Governor could not have validly given the requisite concurrence to the presidential order.
• It is important to note that even if the Governor acting without a popularly elected government can be considered as a “state government” for the purposes of concurrence, the Governor must at least have had some nexus with the State and some independence from the Centre.
• However, this is not the case in practice, since the Governor is not only an unelected nominee of the Central Government but also holds office during the latter’s pleasure. Not surprisingly, the 1986 order was challenged in the J&K High Court; it is still pending.

3. Third Stage of Dilution

• Some experts point out that if the 1986 order was problematic, the third level of dilution brought about by the 2019 order is almost the final blow.
• In December 2018, the President assumed all the functions of the State government and the Governor through a proclamation under Article 356.
• In an order passed on the same day, the President directed that all powers assumed by him would be exercisable by the Governor as well, “subject to the superintendence, direction, and control of the President”.
• This is the main point of distinction between the 1986 and 2019 orders.
• During Governor’s rule, as was the case in 1986, the Governor is at least on paper expected to act independently.
• However, in the present case involving President’s rule, the Governor is reduced to a mere delegate of the Centre and is expected to act as per the aid and advice of the Central Government.
• It is important to note that a presidential order made through obtaining such a Governor’s concurrence is tantamount to the Centre talking into a mirror and makes a mockery of Article 370.

The spirit of federalism: Concluding Remarks

• The manner in which the 2019 order was made also goes against the spirit of federalism, which is a salient constitutional principle.
• President’s rule is an exception to the general constitutional scheme that envisages representative government at the State level to accommodate regional aspirations.
• Extending constitutional provisions to the State during this exceptional state of affairs is suspicious.
• Some experts take the view that if the Centre had legitimate intentions, it should have waited until the formation of an elected government in J&K.
• In the absence of popular will backing it, the 2019 order clearly falls foul of the principles of constitutional and political morality.
• Commenting on the 1986 order, the Sarkaria Commission had observed that “every action which is legally permissible may not be necessarily prudent or proper from the political stand-point”.
• In conclusion, not only is the recent presidential order against federalism generally and the spirit of Article 370 in particular but it also violates the letter of the Constitution.

2. Slow on sanitation

Q1. “Abhedya” recently seen in news is:

Q2. Consider the following statements about Fag/Phag festival:

Q3. World Energy Outlook is published by 

Q4. Global Energy Transition Index is released by

Q5. Consider the following statements about the seals found in Harappan civilisation: