9 PM Daily Current Affairs Brief – July 10th, 2023
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GS PAPER - 2
Delhi’s Kyiv Calculations – on India-Ukraine relations
Contents
- 1 What are the issues with India and Ukraine bilateral relationship?
- 2 What has been India’s position on the Ukraine war?
- 3 What are potential bilateral relationships between India and Ukraine?
- 4 What are the challenges in Indian foreign policy approach towards Russia?
- 5 What is the way forward for India and Ukraine bilateral relationship?
Source– The post is based on the article “Delhi’s Kyiv Calculations” published in “The Times of India” on 10th July 2023.
Syllabus: GS2- Bilateral groupings and agreements
Relevance: India and Ukraine bilateral relationship
News- India’s MEA secretary (west) Sanjay Verma’s upcoming visit to Kyiv could potentially mark a turning point in Indo-Ukrainian ties.
What are the issues with India and Ukraine bilateral relationship?
Historically, the relations between India and Ukraine are based on the premise that Ukraine is a satellite of Russia. There were no efforts to innovate, rethink and revisit.
Whereas, Ukrainians feel that India has not done enough to stop Russian aggression. Today, Ukrainians use phrases like “India does not care” for India’s response towards Russia’s war against Ukraine.
There is a lack of high-level political visits. Ukraine hosted Indian Presidents in 1993 and 2005. But the only time the PM of India Indira Gandhi visited was in 1982, when Ukraine was a part of the USSR.
What has been India’s position on the Ukraine war?
PM Narendra Modi stated publicly in the presence of President Vladimir Putin, “this is not an era of war” at the SCO Summit in Samarkand. India also reiterated its support for territorial integrity, sovereignty and commitment to the UN Charter by member states.
However, India did not condemn Russian aggression openly.
What are potential bilateral relationships between India and Ukraine?
Policymakers in India realise the urgent need to overhaul India’s policy towards Ukraine. In this context, this visit will rekindle hope.
India was present at a summit on Ukraine in Copenhagen. This was the first ever presence of non-Western states like India, Saudi Arabia, Brazil and South Africa in such a format.
This summit is an established platform with almost 50 countries, based on the 10-point Peace Plan of the Ukrainian President.
The war has brought out the post-colonial identity of modern Ukraine. It shows the similarity with the nations in the southern hemisphere.
Ukraine is no longer a problem of Europe alone. So, India’s involvement is important to protect its national interest as a global player.
What are the challenges in Indian foreign policy approach towards Russia?
It is difficult to reshape India-Russia relations and remove the legacy of the Soviet era.
Russian strategists fully understand India’s strategic necessity to be closer to the US and the West, but it also expects that India holds no open objection to its closeness to China.
Countries of the Global South are becoming aware that Russia’s policies towards countries of the former Soviet Union are based on hegemony and sphere of influence. Russia is ignoring agency and representation of these countries.
After more than 30 years of sovereign Ukraine’s existence, Russia is apprehensive of India’s independent policies towards it.
What is the way forward for India and Ukraine bilateral relationship?
There is a need to widen people-to-people contacts and academic exchanges.
The war against Ukraine is an opportunity for India to get rid of its post-Soviet inertia and start afresh. India is expected to understand Ukraine from this standpoint.
Restoring the World Trade Organization’s crown jewel
Contents
Source: The post is based on the article “Restoring the World Trade Organization’s crown jewel” published in The Hindu on 10th July 2023.
Syllabus: GS 2 – Important International Institutions
Relevance: concerns associated with WTO’s dispute settlement system (DSS)
News: In June 2022, at the Geneva ministerial conference, the member-countries of the World Trade Organization (WTO) reached a crucial agreement.
Recently, an agreement was reached for revival of the WTO’s dispute settlement system (DSS) by 2024, also known as the “crown jewel” of the organization. DSS has been paralyzed due to the non-functioning of its appellate body since 2019.
What is the Dispute Settlement System of the WTO?
What are the reasons behind the non-functioning of the appellate body of the DSS?
The United States has blocked the appointment of appellate body members, making it inactive. It has criticized the appellate body of the WTO for exceeding its institutional mandate and engaging in judicial overreach.
One of the main concerns raised by the U.S. is that the appellate body has been creating binding precedents through its decisions, which goes against the WTO’s dispute settlement understanding (DSU).
It is well-established that there is no rule of stare decisis, i.e., no rule of precedent in international law. It is system followed by Courts under which Courts refer to the previous, similar legal issues to guide their decisions.
Further, the WTO’s DSU also makes this clear in Article 3.2 by stating that the appellate body rulings can neither add nor diminish the rights and obligations of WTO member-countries.
Therefore, the appellate body needs to ensure consistency in the interpretation and application of WTO agreements without establishing binding precedents.
However, the appellate body has encouraged WTO panels to consider previous interpretations, only in similar cases, while it has also departed from previous rulings which have cogent reasons.
Moreover, other appellate bodies, such as the International Court of Justice and the International Tribunal for the Law of the Sea also follow past decisions.
Why are other strategic reasons behind the United States blocking the appointment of DSS’s appellate body members?
The United States appears to have a larger strategy of de-judicializing trade multilateralism.
With the creation of the WTO, governments around the world accepted certain norms of international law to evaluate their actions and gave this authority to international courts, which resulted in the legalization of international relations.
It also led to judicialization of international relations, with the expansion of international courts and tribunals that dominated national decision-making.
This judicialization has raised concerns about the erosion of national sovereignty as countries delegate critical decision-making powers to international courts.
Therefore, the United States, facing the economic challenges posed by China, aims to regain full control over its trade policies by doing away with the judicial review of the WTO appellate body.
Note: According to Daniel Abebe and Tom Ginsburg, De-judicialization is the reverse phenomenon where countries weaken international courts to take back decision-making power.
Must Read: Dispute Settlement System of the WTO: Challenges and Solutions – Explained
What can be the way ahead?
It seems useless to try to restore the WTO’s appellate body through negotiations with the United States. Instead, other countries should try to elect the appellate body members by resorting to voting at the WTO’s General Council meeting.
What Data Protection Bill needs to do to actually protect
Contents
Source: The post is based on the article “What Data Protection Bill needs to do to actually protect” published in “Indian Express” on 10th July 2023.
Syllabus: GS 2- Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
News: India’s government is considering reintroducing the Digital Personal Data Protection Bill during the upcoming Parliament Monsoon session. The aim of this potential move is to better protect online users, referred to as ‘digital nagriks’ or digital citizens.
What is data portability?
Data portability is a provision that allows users to move their personal data from one digital platform to another. It’s designed to give individuals more control over their online data. For instance, a small business using a large e-commerce platform can take its user data and transfer it to another platform. This means that if the business is unhappy with the practices of the current platform, it can switch to a competitor without losing all the data it generated on the original platform. This empowers users and provides them with more control over their own data.
What is data interoperability?
Data interoperability refers to the ability of different digital platforms to work together and exchange information seamlessly. It would allow users who switch platforms to not only take their data with them, but also continue interacting with users from the original platform. This enhances the users’ flexibility and freedom, and also encourages cross-platform communication and interaction.
For instance, if data interoperability were implemented, a Twitter user could choose to leave Twitter for a rival platform, taking all her personal data with her. In addition, due to data interoperability, she would still be able to communicate with her contacts on Twitter, despite having switched platforms.
Should the Government Include Data Portability and Interoperability Provisions?
Given the benefits of data portability and interoperability, the government should include these provisions in the revised Digital Personal Data Protection Bill.
Such a move can significantly enhance user control over personal data and potentially stimulate India’s start-up ecosystem by fostering healthy competition. It’s a crucial step to transform and democratize digital experiences, making it more beneficial and empowering for users, while also encouraging innovative and responsible practices in data management by tech platforms.
Conclusion
In conclusion, incorporating data portability and interoperability into the Digital Personal Data Protection Bill could enhance user control, stimulate India’s start-up ecosystem, and revolutionize internet interaction, offering a critical step forward in our increasingly digital world.
Blurred lines – on US’s delivery of cluster munitions to Ukraine
Source: The post is based on the article “Blurred lines” published in “The Hindu ” on 10th July 2023.
Syllabus: GS 2 – International Relations (IR)
News: The Biden administration recently decided to send cluster munitions to Ukraine in the wake of the ongoing Russian invasion. It illustrates both the difficulties faced by Kyiv and its western allies in the protracted war, and the U.S.’s willingness to intensify the conflict.
About Convention on Cluster Munitions
Convention on Cluster Munitions, an international treaty, which was adopted by more than 100 countries on May 30, 2008, prohibited the manufacture, transfer, and use of cluster munitions. It entered into force on Aug. 1, 2010.
Is the U.S. contradicting its own criticisms of war crimes?
Even though the U.S. has not signed the Convention on Cluster Munitions, it has previously criticized Russia for using such munitions in the conflict, labeling it as war crimes. Yet, the U.S.’s change of stance, as part of its 42nd aid package to Ukraine, underlines the pressures Ukraine is enduring on the battlefield.
What are the factors behind this US’s Decision?
Ukraine’s dependency on the West for resources like artillery shells and ammunition stands in stark contrast to Russia’s undisturbed weapon supply. This discrepancy strains the Western reserves, leaving Ukraine in a disadvantageous position.
Initially, it was assumed that Ukraine’s swift victories would pressure Russia’s President Vladimir Putin. But, the strong defensive fortifications by the Russians along the front line present formidable obstacles. Ukraine’s minor territorial gains in the southeast came at high costs. Also, their aim of cutting off Putin’s land bridge in Zaporizhzhia remains unfulfilled.
This challenging reality led to the U.S.’s “difficult decision” of sending cluster munitions. Despite President Biden justifying it as aiding Ukraine’s self-defence, the decision to send these potentially civilian-targeting weapons to the battlefield blurs moral lines.
GS PAPER - 3
Numbers Game – on data collection methods for surveys
Source– The post is based on the article “Numbers Game – on data collection methods for surveys” published in “The Times of India” on 10th July 2023.
Syllabus: GS2- Government policies and interventions
Relevance– Issues related to data collection and statistics by government
News- In the last four months, three members of the PM’s economic advisory council have independently expressed concern about the quality of official statistics.
What are issues with government statistics and data collection?
The primary data generation process is hampered by the lack of adherence to set timelines. The census has been indefinitely postponed, creating a significant gap in the data system. In addition, surveys such as the consumer expenditure survey and the economic census are also experiencing delays.
Users have raised concerns over the quality of the data generated.
The National Statistical Commission (NSC), formed in 2006 to spearhead statistical activities and establish standards. It was intended to gain authority through legislation. However, even after seventeen years, the legislation has not been passed.
What is the way forward to strengthen the statistical system of the Indian government?
The NSC membership selection process should involve a committee comprising parliamentarians. It is crucial for shielding the statistical system from allegations of political bias.
A mechanism to ensure financial autonomy is necessary. An upgrade to the statistical system must be overseen by a technically equipped body that has statutory powers. Reliable data is an essential need.
India has built an impressive structure to capture administrative data by governments. However, this mode of data collection needs to be complemented by the official statistical system generating primary data through surveys to fill the gaps.
While India has developed a robust structure for collecting administrative data by the government. However, this data collection method needs to be balanced with the official statistical system’s primary data generation through surveys to cover the existing gaps.
Tomato challenge: Hoarding is not as bad as it sounds
Contents
Source– The post is based on the article “Tomato challenge: Hoarding is not as bad as it sounds” published in the “mint” on 10th July 2023.
Syllabus: GS3- Economy – Pricing and inflation
Relevance: Issues related to inflation
News- The ministry of consumer affairs announced a ‘Tomato Grand Challenge’ with the objective to ensure the availability of tomatoes at fair prices.
What is the popular perception about hoarding?
There is perception is that holding back supply causes the price to rise. People form an opinion based on what is visible today and ignore what is likely to happen tomorrow.
People cannot make much sense of year- on-year price changes. They tend to have a recency bias. People compare today’s prices with those of goods when last purchased.
What are impacts of high inflation on food items?
Relatively low-income families face the brunt of it in terms of household expenditure when these prices shoot up, and without notice.
In contrast, farmers face distress when prices collapse suddenly, resulting in severe losses.
Why hoarding is essential for producers?
Farmers have destroyed excess produce to avoid a price collapse. They should have an option to stock the extra produce.
The demand for food products is relatively stable. Variations in supply cause dramatic changes in these prices. Hoarding tends to reduce price volatility.
The release of hoarded produce also lowers tomorrow’s prices when tomorrow comes. This is called ‘invisible’ trade-offs because what happens tomorrow cannot be seen today.
What is the way forward?
There is need to develop cold storage options for cultivators. These should be accessible at reasonable prices. Cultivators should be allowed to decide when to bring their supply to the market.
There is ned for creative ideas for developing integrated supply chain. Innovative solutions to achieve low-cost cold storage of farm produce and develop an efficient food processing sector can be helpful.
Who can dethrone the US dollar?
Contents
Source: The post is based on the article “Who can dethrone the US dollar?” published in Business Standard on 10th July 2023.
Syllabus: GS 3 – Indian Economy – Growth & Development
Relevance: concerns associated with adopting alternatives payments system against dollars.
News: Countries around the world are taking measures for dedollarization and coming up with alternative transaction mechanisms. However, the factors that make the dollar an international currency must be considered.
What are the factors that make dollars an international currency?
Read – De-dollarisation of Trade
What have been the previous attempts to dethrone the dollar?
Japan: During the 1990s, Japan was the second-largest economy in the world, had good institutions, and it commanded confidence from the world on inflation, taxation, and capital controls.
It tried a big “industrial policy” push to establish the Japanese yen as a major international currency. However, the attempt failed.
Euro: After the failure of Japan, the euro emerged as a significant currency and the European Union (EU) began to rival the US as an economic powerhouse.
This gave the euro recognition as an international currency. However, the euro remains a minor player compared to the dominant position of the US dollar.
What measures are being taken by China?
The Chinese government is making efforts to promote the renminbi as a global currency. However, China faces more challenges compared to Japan.
China has strict capital controls, similar to India, which restrict the flow of money in and out of the country. The Chinese central bank primarily pegs the renminbi to the US dollar, which means it is not truly an independent exchange rate.
Further, China lacks confidence in managing inflation and taxation and it also does not have an appealing financial system that attracts non-resident investors or fundraisers Hence, this ambition of the Chinese state is likely to go unfulfilled.
What can be the way ahead for India?
First, India has the potential to become a major producer of internationalized financial services.
This can be achieved by implementing the recommendations of the Percy Mistry report on making Mumbai an international financial center and the Financial Sector Legislative Reforms Commission report by Justice Srikrishna.
Second, policymakers should aim to restore the pre-independence era where the rupee was widely trusted and used across South Asia, Southeast Asia, West Asia, and East Africa.
This requires maintaining good institutions over a period of 50 years, particularly regarding inflation, taxation, capital controls, and demonetization. In terms of inflation, the goal should be to sustain the 4 percent inflation target consistently over a 50-year period.
Express view on extreme weather: Heat is on
Contents
Source: The post is based on the article “Express view on extreme weather: Heat is on” published in Indian Express on 10th July 2023.
Syllabus: GS 3- Environment (Climate change)
News: Last week saw global average daily temperatures in a range never seen before. Last Monday, it reached above 17 degrees Celsius. This was the hottest day recorded in history. The record was beaten again on Tuesday, and then on Thursday. More records are expected to be broken in the coming days and weeks. 2023 is likely to be one of the hottest years ever.
How is climate change progressing?
Climate change is happening as predicted by scientists, but maybe a bit faster. It’s not just heat, but also heavy rain, floods, droughts, and wildfires. While these cannot be stopped instantly, governments can act to reduce their impact.
What can be done to tackle heat waves?
Simple interventions can significantly reduce deaths from heat waves. However, many local governments don’t have a heat action plan. No area can consider itself safe from heat waves due to their unpredictable nature.
How has heat wave exposure increased over the years?
In 2015, nine states experienced heat waves. By 2020, 23 states were affected. The number of heat wave days per year increased from seven in 2015 to 33 in 2020. Last month, eastern UP saw many people hospitalized, and several died due to heat-related diseases. These are the shocks that may repeat if local governments are not prepared.
Why heat waves in the rainy season?
It may seem strange to discuss heat waves during the rainy season. However, July is one of the four months when heat waves are expected. Recent trends suggest that heat waves could occur in subsequent months as well. Therefore, it’s an ideal time for local governments to prepare for heat emergencies.
The problem with battery electric vehicles
Contents
Source: The post is based on the article “The problem with battery electric vehicles” published in “Indian Express” on 10th July 2023.
Syllabus: GS 3 – Science and Technology- developments and their applications and effects in everyday life. & Environmental pollution.
News: Rowan Atkinson, known for his love of cars, expressed his skepticism about the push for electric vehicles (EVs). In a Guardian article, he raised concerns about the environmental impact of manufacturing EVs and the state support for them. He believes this focus on EVs could be problematic if replicated in India.
What are EVs?
Electric Vehicles (EVs) are vehicles that are powered by electricity, instead of traditional fuel sources like gasoline or diesel. They utilize an electric motor for propulsion, and the electricity that powers them is stored in rechargeable batteries. There are several types of EVs, including: Battery Electric Vehicles (BEVs), Hybrid Electric Vehicles (HEVs), Plug-in Hybrid Electric Vehicles (PHEVs), and Fuel Cell Vehicles (FCVs)
What are the Issues in promoting the adoption of Battery Electric Vehicles (BEVs)?
Upfront subsidy: The effectiveness of state subsidies for BEVs is debated. While they have worked in some markets like Norway, the U.S, and China, they primarily benefit middle and upper-middle classes, who are the typical buyers of BEVs.
Charging network: According to World Bank, Charging infrastructure plays a critical role in EV adoption. India currently has a limited number of public charging stations, making it difficult for BEV owners to find convenient charging options. For instances, as of mid-2022, India has only about 2,000 public charging stations, despite having over a million EVs.
Electricity source: In many countries, electricity for EVs is generated from renewable sources, like, Norway has 99% hydroelectric power. In India, most electricity is still generated from coal-fired thermal plants. Therefore, while BEVs may reduce emissions in cities, they still contribute to pollution at the power generation stage.
Value chain: India relies heavily on imports for the lithium required to produce Li-ion batteries for BEVs. This dependency presents supply chain risks and could impact the country’s ability to meet growing demand for BEVs. For example, demand for Li-ion batteries from India is projected to grow at a CAGR of more than 30% by volume up to 2030.
Note: More than 90% of the global Li production is concentrated in Chile, Argentina, and Bolivia alongside Australia and China, and other key inputs such as cobalt and nickel are mined in the Congo and Indonesia
Variety of technologies: There are other efficient vehicle technologies available apart from BEVs. Focusing too heavily on one technology might limit innovation and the potential benefits from other promising technologies.
What are the new technologies that would be helpful in the push for battery electric vehicles (BEVs)?
Hybrid vehicles: Hybrid technology, which combines an internal combustion engine (ICE) with an electric powertrain, can improve fuel efficiency and doesn’t require extensive charging infrastructure like BEVs. However, they still use Li-ion batteries, and their efficiency can drop when using air conditioning, which is often needed in India.
Ethanol and Flex Fuels: Flex fuel vehicles can run on more than one type of fuel, or a mixture of fuels like petrol and ethanol. This technology is currently under commercial deployment in countries like Brazil, Canada, and the US.
Hydrogen Fuel Cell Electric Vehicles (FCEVs) and Hydrogen ICE: Read here
Synthetic fuels: Porsche is developing a synthetic fuel made from carbon dioxide and hydrogen using renewable energy. This approach could extend the lifespan of ICE cars while making them virtually CO2-neutral. The fuel production is being tested in Chile. From 2026, Formula One will also use synthetic fuel.
What should be done?
To facilitate the transition to EVs, governments must focus on fair subsidy distribution, investing in charging infrastructure, and promoting local battery production. Researching alternative technologies, implementing robust policies, and raising public awareness are crucial. Intermediate technologies can bridge the gap, ensuring safety standards are met, while government and automaker partnerships can incentivize wider EV adoption.
Open Market Sale Scheme: Significance and recent changes
Contents
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Introduction
The Open Market Sale Scheme (OMSS) has been in the news recently. Apart from the distribution carried out under the National Food Security Act (NFSA), several states, including those governed by Opposition parties, have their own welfare schemes to provide subsidized or free grains to targeted segments of the population. For this, states rely on OMSS bulk sales for additional food grain procurement. However, the sudden changes to the scheme announced by the centre have drawn criticism from Opposition-ruled States such as Karnataka and Tamil Nadu.
What is OMSS and what are the objectives?
Open Market Sale Scheme (Domestic) [OMSS (D)] refers to selling of food grains by Food Corporation of India (FCI) at a predetermined prices in the open market from time to time.
Through the OMSS, the FCI sells excess food grains, particularly wheat and rice from the central pool, in the open market.
This is done through e–auctions, allowing traders, bulk consumers, and retail chains, among others, to purchase these surplus stocks.
Usually, states are also allowed to procure food grains through the OMSS without participating in the auctions, for their needs beyond what they get from the central pool to distribute to NFSA beneficiaries.
FCI utilizes the OMSS (D) to sell surplus stocks from the Central Pool at predetermined prices to achieve following objectives:
- To enhance the supply of food grains during the lean season and deficit regions
- To moderate the open market prices
- To offload the excess stocks
- To reduce the carrying cost of food grains
What are the advantages of OMSS?
Price stabilization: The OMSS is essentially a measure to curb food grain inflation. For example, earlier in 2023, the prices of Wheat declined by 19 percent in a period of 45 days due to FCI’s OMSS (D).
Reducing wastage: Every year, more than 1500 metric tonnes (MT) of food grains get wasted in FCI godowns, due to lack of storage facilities and unscientific methods of storing food grains. The scheme helps to prevent the wastage of excess food grains by offloading excess stocks in the open market.
Reduced carrying costs: A portion of the total food subsidy also goes towards meeting the carrying cost of the buffer stock as buffer subsidy. Timely OMSS reduces this cost by maintaining optimal buffer stocks.
What are the changes made to the OMSS?
The central government has made two major changes in the OMSS.
Firstly, the government has restricted the quantity that a single bidder can purchase in a single bid under the OMSS. Previously, buyers were allowed to buy a maximum quantity of 3,000 metric tonnes (MT) per bid. Now, it will range from 10-100 metric tonnes (MT).
Secondly, it has discontinued the sale of rice and wheat from the central pool under the OMSS to State governments.
What are the reasons for the changes?
For reducing bidding quantities:
The bidding quantities have been reduced to accommodate more small and marginal buyers and to ensure wider reach of the scheme.
The government has argued that it will allow the supplies to reach the general public immediately.
It is argued that by permitting smaller bids from small buyers, it will foster competition and break the monopolistic hold of bulk buyers.
Consequently, this is expected to control retail prices by encouraging more competitive bidding and ensuring a fairer market environment.
For discontinuation of OMMS grains to the states:
The central government has given three reasons for the discontinuation of OMSS for State governments:
One, it claims that the OMSS can be more successful in curbing the inflationary trend in food grains if the grain is released through the market rather than through States/the PDS.
Two, the government argued that it needs to maintain adequate food grain stock in the central pool as it expects lower procurement this year. This is because the output of some crops has been hit due to adverse weather events like untimely rains and high temperatures.
Three, the central government has cited its obligation towards consumers who are not covered by the NFSA but are affected by fluctuations in retail prices of food grains. It argued that while the state governments will allocate food grains to the NFSA beneficiaries, as well as for beneficiaries of state-specific schemes, the interest of general consumers has been ignored.
What are the critical arguments against the government’s actions?
Firstly, the critics argue that there is no difference in releasing the grain through the market or through the states. Price stabilization can happen in both cases. Also, there is concern that private traders who get OMSS rice at fixed prices will not pass on the benefits to consumers.
Secondly, the current buffer stock position is more than adequate. On average, for the past five years, stocks have been generally twice as high as the buffer stock norms.
Thirdly, if States are forced to go to the open market, rice and wheat prices are bound to go up. This will defeat the Centre’s objective behind restrictions on quantity sold through OMSS.
What should be done?
Expansion and diversification of the PDS: The Centre and the States should focus more on making the Public Distribution System foolproof than on expanding existing schemes. The centre should update PDS coverage by using the projected population for 2023. At the all-India level, the under-coverage results in the exclusion of an estimated 113 million people. Besides inadequate coverage, in most States, the PDS does not provide nutritious food items such as pulses and oil.
Seek alternative sources: When it comes to implementing State schemes in the food sector, the States must identify their own sources, and in a cost-effective manner. For example, Odisha and Chhattisgarh procure food grains locally to add on to PDS coverage.
Cooperative federalism: The centre should grant more freedom to state governments to design their own food security system because the state government machinery knows better about the requirement of their local population.
Sources: The Hindu (Article 1, Article 2 and Article 3) and Indian Express.
GS PAPER - 4
Corporate social responsibility projects demand expertise too
Source– The post is based on the article “Corporate social responsibility projects demand expertise too” published in the “mint” on 10th July 2023.
Syllabus: GS 4 – corporate governance
Relevance: Issues related to corporate Social Responsibility
News-The article is about concerns related to the money spent by companies on corporate social responsibility (CSR) activities.
Companies above a threshold level of profit, sales or net worth are mandated to invest 2% of their average profit for the last 3 years on CSR activities, which are defined.
What are the issues related to CSR spending?
Limited areas: There has been concentration in three activities. These are education, health and rural development. For example, 77% of the total amount spent between 2014-15 and 2020-21 was on these three areas.
Regional Inequity in spending: There has also been a concentration of spending in some large states: Maharashtra, Gujarat, Andhra Pradesh, Karnataka, Uttar Pradesh, Tamil Nadu, Rajasthan and Madhya Pradesh.
Companies do not have any core competence in these areas. Internal staff that are not competent to do this work. They are involved in low-effort exercises like distributing water coolers or laptops to schools.
Companies look for easy ways out by transferring the money to a centralized fund like the Prime Minister’s National Relief Fund to save the management time on CSR compliance.
What are the challenges faced by companies?
Most of the companies like to transfer the money to a centralized fund like the Prime Minister’s National Relief Fund. It is because companies are not meant to do social work. They need to allocate more resources in compliance with their CSR responsibility. Therefore, it should be the responsibility of the government to use CSR funds effectively.
What is the way forward?
Government can set up a separate organization to work on the deployment of these resources. NITI Aayog could be entrusted with this responsibility.
Centre can take the prerogative on how to deploy these funds. The amount can be paid by companies in a lump-sum manner to deploy based on their social-sector priorities.
Government can draw up a list of all CSR projects followed by directed or suggested CSR spending. Advice can be given routinely to firms on where money should be spent and for what exact activity.
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