UPSC Exam Comprehensive News Analysis Oct09

A. GS1 Related
B. GS2 Related
POLITY AND GOVERNANCE
1. SC tags Tripura NRC plea with Assam case
SOCIAL JUSTICE
1. Three petitions challenge Sabarimala ruling in SC
C. GS3 Related
ECONOMY
1. Amazon, Flipkart to add 80,000 jobs
2. Rupee hits fresh low of 74.06 vs dollar
ENVIRONMENT
1. India faces threat of deadly heat waves: UN report
HEALTH
1. Twenty-two Zika cases confirmed in Rajasthan
D. GS4 Related
E. Editorials
ENVIRONMENT AND ECOLOGY
1. The diaspora and disasters (Kerala Floods)
ECONOMY
1. Power politics at play (Electricity/Power Infrastructure)
F. Tidbits
G. Prelims Fact
1. Nobel Economics Prize awarded to William D. Nordhaus, Paul M. Romer
H. UPSC Prelims Practice Questions
I. UPSC Mains Practice Questions 

A. GS1 Related

B. GS2 Related

Context

• The Supreme Court recently issued a notice to the government on a public interest litigation to update the National Register of Citizens (NRC) in Tripura, as is being done in Assam, in order to detect and deport the “illegal immigrants” from Bangladesh.
• A three-judge Bench led by Chief Justice of India Ranjan Gogoi directed the court registry to tag the petition, filed by the Tripura People’s Front and some others, along with petitions in the Assam NRC case.
• The petition contended the “influx” of illegal immigrants into Tripura amounted to ‘external aggression’ under Article 355 of the Constitution. The Union is bound to protect the State from this, it said.
• “The presence of illegal immigrants violates the political rights of the citizens of Tripura,” the petition said.
• “Uncontrolled influx of illegal migrants from Bangladesh to Tripura has caused huge demographic changes in Tripura… Tripura was a predominantly tribal State, but now it has become a non-tribal State… Indigenous people who were once the majority have now become a minority in their own land,” it claimed.

What is the National Register of Citizens?

• It is a register containing the list of bona fide (genuine/real) Indian citizens. Those failing to enlist their names in the register would be deemed, illegal migrants.
• The first list was made in 1951, covering the whole of India, as per the census of that year.
• Currently, the list has been updated for the first time, and only in Assam.

Context

• Three separate petitions recently asked the Supreme Court to review its September 28 judgment allowing women of all ages entry into the Sabarimala temple.

Background of the issue

• A Constitution Bench of the court, in a majority of 4:1, upheld the 12-year-old PIL petition filed by Indian Young Lawyers Association challenging the prohibition of women aged between 10 and 50 from undertaking the pilgrimage.
• The Bench found that a restriction on a woman solely based on her menstrual status was a smear on her individual dignity.
• The court said, “treating women as the children of a lesser God is to blink at the Constitution”.
• It was a “form of untouchability” abolished decades ago and the ban on women was derogatory to equal citizenship, the Supreme Court held.

Arguments of the petitioners

• ‘Reform’ does not mean rendering a religious practice out of existence on the basis of a PIL filed by “third parties” who do not believe in the Sabarimala deity.
• The lifting of the prohibition at the instance of third parties, in spite of opposition by a large section of women worshippers, is anomalous.

What are the issues involved in the case?

• Gender Discrimination – When everyone is equal in the eyes of God and the Constitution, why are only women banned from entering certain temples?
• Religion is a personal choice – Our Constitution guarantees an individual the freedom to choose his/her religion. Therefore, praying in a temple/mosque/church or at home must be the choice of the individual.
• Custom Vs Liberty – The Constitution has provisions to protect the customs and religious practices of the people. At the same time, it guarantees liberty and religious freedom to the individual.
• Temple as public place Vs religion as private choice – Temple, managed by trusts, are public places. The representatives of the Sabarimala trust say that it has its own customs and traditions which have to be respected. Just like there are rules for other public places.

C. GS3 Related

Context

• The battle between retail giant Amazon and homegrown e-commerce firm Flipkart is getting intense to tap the upcoming festive season. Walmart-backed Flipkart said it had added 30,000 direct jobs in its supply chain and logistics arm.
• The company is expecting its seller partners to have added an estimated more than five lakh indirect jobs at their locations. The jobs were created for its festive season sale ‘The Big Billion Days’ (TBBD).
• “By generating employment and enabling our sellers to scale their businesses now, we’re playing an important role in driving the industry and subsequently the economy,” said Flipkart CEO Kalyan Krishnamurthy.
• All hired personnel undergo training in supply chain processes for their respective functions. They are also trained to handle point-of-sale machines, scanners, mobile applications and business process software, the firm said.
• Flipkart’s rival Amazon said it had created more than 50,000 seasonal positions across its network of fulfilment centres, sorting centres, delivery stations and customer service sites this festive season. These have been created in Hyderabad, Chennai, Bengaluru, Pune and other cities.
• India has struggled to convert its high rates of economic growth into good jobs, according to a report by the Centre for Sustainable Employment of the Azim Premji University. Currently, a 10% increase in GDP results in less than 1% increase in employment. The rate of unemployment among the youth and higher educated has touched 16%.

Reasons behind the Jobless growth

• In India, growth is attributed to service sector, whereby both employment and wages have seen a rise. But as figures say, the biggest employing sector in India is the Agriculture sector, employing 45% of the population but contributing 15% to the GDP, whereas Service sector is the biggest contributor to the GDP but employs less than 30%.
• IT and Financial services are drivers of service sector growth in last 2 decades however both of these sectors are not employment intensive.
• Labour –intensive manufacturing sector did not become the engine of growth in India. In fact, it was the knowledge-intensive services sector which along with some segments of capital intensive manufacturing was the engines of growth in India. But these sectors by their nature were not employment-intensive.
• Excess rigidity in the formal manufacturing labour market and rigid labour regulationshas created disincentives for employers to create jobs
• Industrial Disputes Act has lowered employment in organized manufacturing by about 25% (World Bank Study)
• Stringent employment protection legislation has pushed employers towards more capital intensive modes of production, than warranted by existing costs of labour relative to capital. Therefore, the nature of the trade regime in India is still biased towards capital-intensive manufacturing.
• The nature of Indian manufacturing is not employment-friendly. Most of them are automated and any employment is highly skilled. Thus they have contribute to growth, but not necessarily to employment.
• The labour intensity of MSME is four times higher than that of large firms, but they are not treated well in India they have poor access to credit and they are plagued by many serious problems which has limited there growth potential.
• Impediments to entrepreneurial growth in small firms (such as high costs of formalisation) along with a long history of small scale reservation policy which has prohibited the entry of large scale units in labour intensive industries
• The tax incentives, subsidies, depreciation allowance all are solely linked to the amount invested and not to the number of jobs created.
• Sluggish process in education and skill levels of workers.

Context

• The rupee continued to weaken for the fifth straight session as it hit a fresh closing low on Monday amid strengthening of the dollar and in the absence of aggressive intervention by the Reserve Bank of India.
• The rupee opened 14 paise lower compared with its previous close of 73.76 as the dollar strengthened against all major currencies. The currency touched day’s low of 74.10 before closing at an-all time low of 74.06 a dollar, down 30 paisa. On Friday, after the monetary policy announcement by the RBI that decided to keep the interest rate unchanged, the rupee plunged to a historic low of 74.22 a dollar.
• Market participants were expecting steps from the central bank to support rupee. However, the RBI maintained it does not target any particular level of the rupee and went on to say the rupee’s depreciation was moderate as compared with other emerging market currencies.

What happens when the rupee falls?

• Country’s imports become more expensiveand exports cheaper.
• It takes more rupees to pay for the same quantum of imports and fewer dollars for a buyer to pay for the same quantity of exports.
• More expensive imports are likely to drive inflation upward, especially in India where input products constitute a large part of our imports.
• It impacts the oil import bill since it costs more rupees per barrel of oil, which plays its own part in pushing inflation up.
• GDP growth– On the one hand, costlier inputs and the subsequent increase in the prices of finished goods should have a positive impact on GDP. But the consequent decrease in demand due to higher prices could nullify this. ‘Household consumption of goods and services’ plays a big role here.
• Domestic tourism could growas more tourists visit India since their currency now buys more here. In the medium term, export-oriented industries may also create more jobs.

Context

• If the average global temperature rises by more than one degree Celsius from the present, India could “annually” expect conditions like the 2015 heat wave that killed at least 2,000, according to the ‘Special Report on Global Warming of 1.5°C,’ commissioned by the Intergovernmental Panel on Climate Change (IPCC).
• The report was put together by about 91 authors and review-editors from 40 countries, who had convened in Incheon, South Korea, last week, to assess the feasibility of keeping the average global temperature from rising beyond 1.5 degree Celsius from pre-industrial times.

Details of the Report

• Achieving this would require “rapid, far-reaching and unprecedented changes in all aspects of society,” the IPCC said in the assessment.
• The 2015 agreement in Paris, considered a landmark achievement, had the world agree to keep temperatures below 2 degrees Celsius and “pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels.”
• With the U.S. withdrawing from the accord, the chances of such an ambitious target were significantly weakened.
• The report stated that capping the rise in temperature to 1.5 degrees Celsius would require “rapid and far-reaching” transitions in land, energy, industry, buildings, transport and cities.
• The global net human-caused emissions of carbon dioxide (CO2) would need to fall by about 45% from 2010 levels by 2030, reaching ‘net zero’ around 2050. This means any remaining emissions would need to be balanced by removing CO2 from the air.
• However, allowing the global temperature to temporarily exceed the 1.5°C target would mean a greater reliance on techniques that remove CO2 from the air, if the aim is to return the rise in global temperature to below 1.5°C by 2100.
• Many of these techniques, such as carbon capture and storage, were unproven on a global scale and some carried significant risks for sustainable development, the report said.

Possible impacts of Global Warming

• Climate change is expected to have a significant influence on terrestrial biodiversity at all system levels – ecosystem, species and genetic diversity.
• According to World Meteorological Organization, climate change can adversely impact global environment, agricultural productivity and the quality of human life. More importantly in developing countries, it will be difficult for farmers to carry on farming in the increased temperatures.
• The monsoon accounting for 75% of India’s rainfall significantly impacts country’s agriculture and livelihood of tens of millions of small farmers.
• Climate change, more particularly harsher weather conditions, will have impact on the quality, productivity, output and viability of fish and aquaculture enterprises, thereby affecting fishing community.
• Rising sea levels owing to climate change would force communities in low-lying coastal areas and river deltas to move to higher ground level.
• Glaciers the world over are thinning and shrinking as the planet warms, and glaciers in the Himalayas are receding faster than anywhere else
• Increasing global temperatures will lead to higher maximum temperatures, more heat waves, and fewer cold days over most land areas.
• Changes in the greenhouse gas concentrations and other drivers alter the global climate and bring about myriad human health consequences.
• Environmental consequences of climate change, such as extreme heat waves, rising sea-levels, changes in precipitation resulting in flooding and droughts, intense hurricanes, and degraded air quality have impact directly and indirectly on the physical, social, and psychological health of humans.

Context

• Cases of the Zika virus disease have been reported in Jaipur, Rajasthan. The outbreak was detected through the Indian Council of Medical Research surveillance system, said a release issued by the Union Health Ministry on Monday.
• Till date, a total of 22 positive laboratory-confirmed cases have been detected.

Zika Virus

• Zika virus is the virus that causes the infection known as zika fever or zika virus disease.
• The virus is a member of the Flaviviridae virus family and the genus Flavivirus.
• It was named ‘zika’ because the virus was isolated for the first time in the Zika Forest which is in Uganda.
• The zika virus is related to yellow fever, dengue, West Nile and the Japanese encephalitis viruses.
• The zika virus, because it is a Flavivirus, is icosahedral and enveloped. It has a single-stranded and non-segmented, positive-sense RNA genome. It belongs to the Spondweni serogroup.

D. GS4 Related

E. Editorials

Note to the Students:

• • This particular topic as it reads falls under the domain of GS Paper III, wherein, it can be mapped to multiple subject areas- such as Environment and Ecology and Disaster Management.

• In particular, this article talks about the role which the Malayali diaspora of Kerala can play in rebuilding the state.

• We have covered the gist of this article under the heading “Editorial Analysis”.  

• The issue of the Kerala Floods has been featured in The Hindu over the past few weeks now. This issue has multiple dimensions to it, starting from the rehabilitation and reconstruction work, to some of the causative factors of the floods, to finally the role which the diaspora can take in helping to rebuild the state.
• In fact, this is a very relevant topic for students to prepare from the perspective of Disaster Management. Here we have suitably signposted the Editorial Analysis into multiple headings.

• “Larger Background”: This particular section talks about the broader background of the issue, taking into consideration specific points that may have been featured in previous editions of The Hindu. The thought process behind including this section is to give a ‘storyline’ approach to an aspirant when he/she goes through this topic.

• “Editorial Analysis”: This particular section gives an insight towards the specific points covered in the specific editorial that is the subject of our study.

• “The Way Forward/Concluding Remarks”: This section gives aspirants concluding points that are taken from the article in question as well as some forwarding looking points taken from other articles, as and when required.

The important aspect to note here is that the issue being discussed in the news assumes priority over just the article.

Larger Background:

• This article assumes importance in the wake of the devastating floods that affected the state of Kerala.

• The Western Ghats is regarded as one of the eight ‘hottest’ biodiversity hotspots in the world.
• Kerala accounts for nearly 18% of the biodiversity-rich Western Ghats.
• It is important to note that there were allegations of ‘human blunders’ while the government said that it couldn’t have done anything more.
  The fact of the matter is that India has not learnt its lessons from recent floods, in the states of Assam, Bihar and Tamil Nadu. Crucially, without addressing the underlying causes, history will repeat itself in another state of our country, if not in Kerala.   

The Underlying Causes:

• The first cause is that of ‘Reluctant dam managers’.
• In the state of Kerala, as is with the case of other states, more flooding was caused by emergency releases from dams that were full.
  In fact, according to a World Bank analysis, while preparing the National Hydrology Project (NHP) in 2015 showed that although weather forecasts are more accurate now, dam managers, who are especially bureaucrats are reluctant to authorise advance controlled releases.

Why is this so?

• Experts believe that this is partly because of the fact that operating schedules are not based on predicted rainfall.
• Currently, the world has moved to dynamic reservoir operations based on weather forecasts.
• It is important to also mention that the political leadership and the bureaucracy too do not tolerate mistakes. As a consequence of this, dam managers are reluctant to risk their careers and order controlled releases in advance.
• The National Hydrology Project (NHP) is improving hydro-meteorological and weather forecasting systems across India. Having said this, it is felt that unless dam managers feel free to take credible risks, these will not be used for dynamic reservoir operations.
• It is increasingly felt by many experts that a ‘plan B’ is also needed for water scarcities such as basin-scale water modelling and analysis supporting contingency planning (inter-basin transfers, linking canals to intermediate storage structures, and water re-allocation to higher-priority uses). Unfortunately, none of these exist in India today.

The second cause is that of Blocked waterways.

• Unfortunately, the story across Kerala is that roads, railway lines and housing colonies are being laid and built without regard for natural waterways, but with formal planning permission.
• Further, the State Department of Inland Waterways focuses on large waterways while district and local panchayats have no mandate or interest in maintaining these to reduce flood risk. The State Disaster Management Agency also ignores them.

The third is Unprepared populations.

• In spite of the fact that India is a signatory to the UN’s Sendai Framework for Disaster Risk Reduction, unfortunately, little has changed on the ground.
• In Kerala, most people were caught unawares by the ferocity of the flooding.
• Had information been disseminated and absorbed earlier, disaster risks could have been greatly reduced.

A Note on the Gadgil Panel:

• • In the past, the Centre had constituted a panel known as the Western Ghats Ecology Expert Panel (WGEEP).
  • This panel was a 14-member panel under the chairmanship of noted ecologist, Madhav Gadgil.
  • This panel was tasked to look into measures to arrest the ecological devastation from human activities in the Western Ghats.

• It is important to note that the 1600-km-long mountain range of Western Ghats is a fragile ecosystem.

• The Gadgil panel submitted its report in 2011.

Some of the Key Recommendations:

• The Gadgil Committee divided the Western Ghats into three ecologically sensitive zones (ESZ).
• These are the highest (ESZ1), high (ESZ2) and moderate sensitivity (ESZ3) zones.
• This is in addition to the Protected Areas managed under acts such as the Wildlife Protection Act.
• It suggested that ESZ1 and ESZ2 would be largely ‘no-gone’ zones.
• So mining, polluting industries as well as large-scale development activities, including new railway lines are restricted.
• It also objected to new dams, thermal power stations or massive windmill farms or new townships in ESZ1.
• The panel however gave importance to the local communities and gram sabhas.
• They were given a larger say in deciding on matters relating to the ecology of these regions.
• It also called for the following:

1. Stricter regulation on tourism.
2. Phasing out of plastics and chemical fertilisers.
3. A ban on diversion of forest land into non-forest applications.
4. A ban on conversion of public lands into private lands.

What followed the recommendations of the Gadgil Committee has been the subject of much debate.  

• The Gadgil panel report was rejected by the then Union Environment Minister.
• The Gadgil report was also unacceptable to any of the six Western Ghats States.
• These states included that of Kerala, Karnataka, Tamil Nadu, Goa, Maharashtra and Gujarat as well as Pondicherry (UT).
• A year later, the government appointed a new committee under the chairmanship of K Kasturirangan.
• It is believed that the Gadgil panel faced stiff resistance from all political parties, particularly in Kerala. Further, a large part of the ecologically sensitive zones belonged to private citizens.

A Brief Note on the Kasturirangan Committee Recommendations:

• The Kasturirangan committee did away with the graded approach in terms of ecological sensitivity.

• It committee divided the Western Ghats into cultural lands (where there are currently human settlements) and natural lands.
• It recommended declaring cultural lands into ecologically sensitive area (ESA).
• This spanned around 60,000 sq-km or 37% of the total area.
• Recently, the Environment Ministry notified an area of around 56,000 sq km in the Western Ghats as ESA.
• In Kerala, the Kasturirangan committee had proposed an area of 13,000 sq km as ESA. However, under pressure from the Kerala government, the notified area was brought down to less than 10,000 sq km.

International Perspective:

• Weather disasters are being affected by climate change, which is in turn, being caused by humans.
• As a consequence of this, the devastation is worsened by the collective failure of governments and businesses to invest in building resilience despite the evidence on runaway climate change.
• From a historical perspective, we learn lessons from the recent Kerala floods, Hurricane Harvey (Houston, U.S., 2017) and Typhoon Haiyan (the Philippines, 2013).
  What we must take note of is that responses to disasters must be proactive, not just reactive.
• Most modern cities have elaborate flood management plans (underground flood basins and spare riverbeds in the Netherlands).

Editorial Analysis:

• • Between August 8th and 20th, 2018,  the devastating floods in Kerala claimed nearly 500 lives. Further, the floods displaced over a million people, and directly affected over a sixth of the State’s total population.
  • As a matter of fact,  the State government’s latest report estimates the losses to be more than the State’s annual plan.
  • It is important to note that this was the worst flood in Kerala since 1924.
  • In the floods that occurred in 1924, the State received 650 mm of rain compared to 2,344 mm this time. However, the impact was similar.
  • Currently, the difficult task of rebuilding the state of Kerala has begun.
  • Contributions to the Chief Minister’s Distress Relief Fund (CMDRF) have crossed more than ₹1,680 crore. The Chief Minister of Kerala is confident that the State would be able to overcome the shortage of funds by mobilising its own resources and through support from different quarters.

• However, for the state of Kerala, the most important support system is the Malayali diaspora across the world.

A Note on the Malayali Diaspora:

• Currently, there are over 2.1 million Malayali emigrants globally and 1.3 million return migrants.
• The advantage that the state of Kerala has at this point, is to engage with its migrants and diaspora who have been instrumental in rebuilding the destination economies after natural calamities and economic crises.
• In the wake of the floods in Kerala, the state of Kerala has received extraordinary support from other sovereign states with large diaspora populations such as in West Asia, multinational corporations employing Malayalis, and by the diaspora itself.

Role of Diaspora (An International Perspective):

• After the earthquake in 2010 in Haiti, ‘the Haitian diaspora in the U.S. served as a conduit for doctors, nurses, engineers, educators, advisers and reconstruction planners.
• As a matter of fact, Haitian-Americans continue to be vital in long-term recovery. They have been instrumental in supplies, remittances, sharing human and financial resources, lobbying governments, international organisations and corporations for disaster relief and redevelopment funding, and in facilitating eased travel restrictions.
• Another example worth mentioning here is from the state of Nepal. In Nepal, after the 2015 earthquake, the Non-Resident Nepali Association collected $2.69 million, mobilised over 300 volunteers including doctors and nurses, and pledged to rebuild 1,000 disaster resilient houses.

The scope of a Healthy Diaspora:

• • In the state of Kerala, the migrant community and diaspora moved swiftly to organise an Internet-driven response.
  • By sharing and re-sharing vital information on affected regions and people, supplies, and precautionary measures (on social media platforms), they were instrumental in expanding the flow of information that would later be used by politicians, private and military rescue operations, and relief workers.
  • It is important to note that successful diaspora groups are among the largest contributors to the CMDRF.

• These diaspora groups will be invaluable in mobilising resources, talent, and knowledge which will be integral in rebuilding the State.

• For example, in a recent report, the Kerala Health Department has made it clear that there will be a 100% increase in the demand for pharmaceutical drugs.
• These pharmaceutical drugs can be sourced quickest through transnational diaspora networks. As the diaspora is one of the greatest assets of Kerala, communities should improve relations with diaspora groups. Return migrants should also act as liaison agents.

Concluding Remarks:

Regarding Contribution from the Diaspora:

• With the depreciation of the Indian rupee, the State can relaunch foreign currency deposit schemes.
• An example of such a scheme was the hugely successful India Millennium Deposit Scheme which was introduced in 2000 by the Centre to leverage higher values of foreign currencies so as to overcome financial and economic crises.
• A few questions need to be answered: For example- Kerala has close to 3 million migrants from other States to replace Keralites who left to West Asia (also known as replacement migration). Have they been affected by the floods? Are they likely to participate in the reconstruction of the economy of Kerala or leave for their home States for better opportunities?  We as a society should ask ourselves what the future of emigration, return emigration, internal migration and remittances from Kerala will be in the coming years.

Regarding Reconstruction:

• Firstly, reconstruction efforts must involve rebuilding in a better way.
• Experts believe that climate proofing in Kerala calls for structures to be built with wind- and water-resistant materials. It should be noted that the higher cost will be more than offset by avoided repairs. Secondly, people need to relocate out of harm’s way.
• Thirdly, early warning is vital. The importance of this is highlighted by the fact that because of investments in these systems, Cyclone Phailin (2013) claimed less than 40 lives in Odisha, whereas the super-cyclone in 1999 in the State had killed 10,000 people.
• Unfortunately, in Kerala, there was no timely forecast from national weather services. Experts believe that the State needs a reliable flood forecasting capability.
• Fourthly, there needs to be tougher implementation of logging and mining regulations in fragile ecologies. It is important to note that deforestation worsened the effects of Kerala’s floods and mudslides, as the report of the Western Ghats ecology expert panel 2011 had warned.

Usage of New Technologies and Certain Corrective Measures:

• Further, it is suggested that River-basin specific flood inundation modelling with climate change simulations is a necessary first step to understand the full impact of potential unprecedented flooding.
• River-basin specific flood inundation modelling with climate change simulations includes worst-case scenarios such as twice the maximum historical rainfall.
• The next important aspect is that the local community should co-manage water resources with the government. This can be done by planning intermediate storage, drainage and emergency responses.
• Further, there must be massive awareness generation, to ensure that airports are not extended into river floodplains. This is an unfortunate situation witnessed with the  Chennai airport and the Adyar river.
• It is important to address issues such as  deforestation, encroachment and unplanned construction.
• India must use the best-available information for decision-making. This would include,
  a) improved hydromet systems and weather forecasts,
  b) robust modelling of catchment water flows with simulations of different climate-related scenarios,
  c) international norms for safety factors and building codes.
• India must also prioritise buffers, flexibility and adaptability. This includes:
  1. reviewing safety criteria of dams and canals,
  2. re-building these with higher safety factors,
  3. creating new intermediate storages, and introducing dynamic reservoir management.

• The Kerala floods are estimated to have cut off about 2.2% of the State’s GDP.
• Bolstering resilience must be made central to recovery.
• Lastly, multilateral agencies including the World Bank and Asian Development Bank may be well-positioned to provide financing. This is vital when budgets are stretched.
• We must also reduce the vulnerability of the poor who pay a disproportionately higher cost in calamities.

Note to the Students:

• This particular topic as it reads falls under the domain of GS Paper III, wherein, it can be mapped to the specific topic areas under the study of Indian Economy, known as Infrastructure.

The News:

• • The Central government has proposed a set of changes to the Electricity Act 2003.

• This development takes place just a few months before the next general election.

• The proposed amendments seek to enable a market transformation in electricity.

• It is important to note that the link between political power and electrical power is widely known. Further, it promises important political currency.

What does this bill aim to do?

• • The changes to the Electricity Act 2003 are intended to increase reliability and reduce risk in the power sector.
  • In particular, the problem of failing on power purchase agreements (PPAs) is being taken up.

• It is important to note that a power purchase agreements (PPA) is a contract between the one who generates electricity and one which is looking to purchase it.

• Further, power purchase agreements (PPAs) are sometimes broken or renegotiated by distribution companies. These distribution companies are known as discoms.
• This has led to changes in the cash flow of power plants, rendering them unprofitable.
• In a few cases, this has led to investments in generation turning into non-performing assets.
• This is, in turn, contributing to the ongoing bad loans crisis in public sector banks.
• It is important to note that in India, consumers are not often charged the amount that their power actually costs.

A Quick look at some of the Proposed Amendments:

• The draft amendments suggest penalties for failing to honour PPAs.
• It prescribes up to Rs 10 million a day, and the suspension or even cancellation of a licence. It is also proposed that cross subsidisation of power be phased out.

What is Cross-subsidisation?

• Cross-subsidisation refers to discoms charging higher prices from certain users to make up for under-charging others.
• For example: Cross subsidies of household consumers by industrial purchasers of power

Editorial Analysis:

• It is important to note that historically, there has been a scarce expenditure of political capital on this issue.

• Further, bringing in competition and choice in supply for the final consumer has long been an aim of electricity reform and remains central to these amendments.
• The central idea here is that while a single public utility will run the wires through which electricity flows, multiple supply licensees (both public and private) will be allowed to compete for consumers.
• The intent behind this is that the discipline of competing for customers will lead to improved supply and lower bills. However, the global track record on this approach is far from definitive.

Possible Negatives:

• As a consequence to this initiative, India could have an electricity distribution sector with pockets of competition for wealthy consumers in a sea of monopoly inhabited by the poorest.
• Further, private suppliers could cherry-pick profitable locations and consumers, while the state-owned incumbent supplier will be left with the obligation to serve low-paying consumers.

Some more Specifics:

• Some of the concerns expressed above can be overcome. This can be done if there were a mechanism to support the second group.
• This currently happens through ‘cross-subsidy’ from wealthier customers. However, the idea of ‘cross-subsidy’ as well is being changed under the amendments.
• This leaves only the possibility of direct support from States. If these transfers are not forthcoming, or late, the cash-starved incumbent supplier will be locked into a cycle of poor quality of service for its customers who have no ‘exit’ option, leading to more bill evasion, and further financial deterioration.
• It is important to note that the proposed legislation makes subsidy to the poor the collective responsibility of the States and the Centre.
• So far this has only been the responsibility of each State. Notably, the Centre may have access to enhanced tax revenues from electricity because it stands to gain from additional tax revenue from profitable new wires companies and private suppliers. Thus, as a consequence, the Centre could become a new fulcrum of redistribution from wealthy areas in wealthy States, to needy customers that are concentrated in a few States.
• There is another side to the coin that needs to be discussed as well. This would provide greater control to the Centre and limit the States’ and regional political parties’ capability to make electoral use of electricity pricing.
• Thus, the politics of power prices will shift from sub-national to national electoral politics.

A Look at the Indian Context:

• • It is important to note that India has among the highest electricity tariffs for industry. The costs borne by industries, bears the burden of low-performance and losses among other consumers, impacting their global competitiveness.
  • However, this shift could be highly disruptive if the profit-making side is allowed to flee, without devising a transition pathway for the loss-making side of electricity.
  • It is important to note that subsidies will not be allowed across consumer categories like industry and agriculture, but will be allowed across consumption categories. Thus, arising from this, big consumers can subsidise small ones.
  • Further, big industrial consumers will see no effective change, although small business consumers will escape payment of subsidy.

• It is important to note that the whole idea of making pricing system fairer, more rational, and more predictable is crucial to develop a sustainable power sector.

• The central idea behind the Bill is essentially to end cross subsidies, which would, in turn, rationalise power consumption and pricing.
• It will force an increase in the tariffs that are charged to lower-end households and to farmers.

A Few Open Questions:

• Some open questions arise. For example: Where is support for poorer customers going to come from? The amendment recognises the need to subsidise the poor, but mandates this be done through direct benefit transfers. However, identifying and targeting beneficiaries remains a challenge.
• Moreover, with these changes, the mechanism of support for poorer customers will shift from the electricity customer to the taxpayer. Cross-subsidies are certainly distorting.
• However, the solution requires the electricity sector to assert its claims for support in competition.  

A Centralizing Tendency?

• The amendments have a few centralising dimensions.
• For example: the amendment proposes a re-formulation of the selection committee for State regulators, from a majority of State representatives to a majority of Central representatives.
• The Centre will also gain more oversight on capacity addition. This oversight on capacity addition will be gained through the requirement of detailed project report submission to the Central Electricity Authority.
• It is important to note that although there is no doubt that State performance has been poor on both fronts. But experts believe that the amendments reflect a clear choice of solution: re-direct responsibility to the Centre instead of fixing the process in the States.
• On a positive side, the amendments include many other provisions, most notably around making the Act more up to date with regard to renewable energy, which is a worthy objective.
• However, in terms of the big questions, it places its bets on more competition, subsidy reform, a steering role for the Centre and throwing a lifeline to generators.

Concluding Remarks:

• There is no doubt that the status quo is unsatisfactory.
• Currently, India’s electricity sector remains fraught with problems.
• In conclusion, disruptive change in Indian electricity may be needed, even inevitable. But the amendments risk placing the cost of disruption on the backs of the poorest, and shifts the potential for remedial measures to the hands of the Centre, rather than the States.

F. Tidbits

G. Prelims Fact

Context

• The Royal Swedish Academy on October 8, 2018, decided to award the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2018 to William D. Nordhaus and Paul M. Romer, for “integrating innovation and climate with economic growth.”
• Nordhaus was the first person to create “an integrated assessment model, i.e. a quantitative model that describes the global interplay between the economy and the climate”.
• Romer “laid the foundation of what is now called endogenous growth theory. The theory is both conceptual and practical, as it explains how ideas are different to other goods and require specific conditions to thrive in a market.”
• Both Dr. Nordhaus and Dr. Romer are American. The Academy also stated that the contributions by the two economists provided us “with fundamental insights into the causes and consequences of technological innovation and climate change.
• This year’s Laureates do not deliver conclusive answers, but their findings have brought us considerably closer to answering the question of how we can achieve sustained and sustainable global economic growth.”

What is Climate Change?

• Climate change’ as a change of climate which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere and which is in addition to natural climate variability observed over comparable time periods.
• The major characteristics of climate change include rise in average global temperature, ice cap melting, changes in precipitation, and increase in ocean temperature leading to sea level rise.

H. Practice Questions for UPSC Prelims Exam

Question 1. Global Human Capital Index, recently in news, is published by

 

1. World Bank
2. World Economic Forum
3. The International Economic Association
4. Economic Development Organisation

Question 2. With reference to “the Inter-American Court of Human Rights (IACHR), recently in 
news, which of the following statement(s) is/are correct?

 

1. The IACHR is an independent, multinational court that handles the human rights cases of people affected by the laws of countries that are members of the Organisation of American States (OAS).
2. It is a temporary body which monitors the general human rights and publishes country-specific human rights reports.

Question 3. Recently, the government decided to impose a safeguard duty on the import of solar 
cells from:

I. Practice Questions for UPSC Mains Exam