9 PM Daily Brief – 1 December 2015

A brief of newspaper articles for the day bearing
relevance to Civil Services preparation

 

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National

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[1]. Call for pact on emission cuts

What has happened?

World leaders meeting at the Paris for the 21^st session of Conference of Parties, delivered statements at the leaders’ event held on 30^th Nov 2015.

What did U.S and China say?

U.S. President Barack Obama and his Chinese counterpart, Xi Jinping, representing the two top emitters of greenhouse gases in the world, made a firm commitment at the Paris Climate Change conference to work for change, and called for an agreement that would cut carbon emissions and pave the way for a global transition to a green economy.

French President called for a progressive tax on carbon use. So, what is carbon tax?

Carbon tax is one of the two major market based options to lower the emissions.

1. Carbon Tax
2. Cap and Trade schemes

 

Carbon tax

Carbon tax is a form of pollution tax. It levies a fee on the production, distribution or use of fossil fuels based on how much carbon their combustion emits. It is a form of carbon pricing. Carbon is present in every hydrocarbon fuel (coal, petroleum, and natural gas) and is released as carbon dioxide when they are burnt.

Since GHG emissions caused by the combustion of fossil fuels are closely related to the carbon content present in them, a tax on these emissions is levied by taxing the carbon content of fossil fuels at any point in the product cycle of the fuel.

Principle

Carbon tax is based on the economic principle of negative externalities.

Externality: It is a cost or benefit that affects a party who did not choose to incur that cost or benefit.

Types of externalities,

1. Negative
2. Positive
3. Positional
4. Inframarginal
5. Technological

 

We will talk only about negative externality here.

What is negative externality?

A negative externality (also called “external cost” or “external diseconomy”) is an economic activity that imposes a negative effect on an unrelated third party. It can arise either during the production or the consumption of a good or service.

For example: Pollution to the environment is also a negative externality. Environment didn’t choose to be polluted. Moreover, it is also not compensated for that externality.

Benefits of carbon tax

1. Shift to cleaner technology: As carbon content is taxed, it forces the businesses to shift to a cleaner alternative or to reduce the carbon content through proper technologies i.e. it would force the industry to increase its energy efficiency.
2. Cost-competitiveness: Carbon tax helps in making the clean energy alternatives more competitive and viable because in absence of such a tax, coal, for example, would always be cheaper than, say solar power.
3. Funds: Money raised through such tax can be channelled into environmental programs.

 

Carbon Tax and India

On July 1, 2010 India introduced a nationwide carbon tax of 50 rupees per metric tonne ($1.07/t) of coal both produced and imported into India.

In a budget speech on 2014, the finance Minister increased the Price to 100 rupees per metric tonne ( $1.60/t at $60.5 conversion)^. In India coal is used to power more than half of the country’s electricity generation.

With the new government in India under PM Narendra Modi, the carbon tax has been further increased form 100Rs per tonne to 200Rs per tonne in the Budget 2015-16.

National Clean Energy Fund (NCEF)

Using the carbon tax imposed in India from 2010-11, a National Clean Energy Fund was created.

Aim: Its purpose is to fund research and innovative projects in clean energy technologies of public sector or private sector entities, upto the extent of 40% of the total project cost.

[2]. Modi launches International solar alliance

What has happened?

India launched an International Solar Alliance (ISA) at the CoP21 Climate Conference

What is this ISA all about?

The new body, which has invited all countries located fully or partly between the tropics of Cancer and Capricorn to join, is to function from the National Institute of Solar Energy in India, Gurgaon. The Centre will provide land and $30 million to form a secretariat for the Alliance, and also support it for five years

The launch resolution of ISA says,

1. Helping member nations to reduce the cost of finance and technology needed to deploy solar power widely
2. Provide training,
3. co-operation in building institutions

 

[2]. New militant tactics draw army into long-drawn siege

What has happened?

Signalling a new insurgent strategy, at least three small militant groups have continued to engage the Army. These groups attack on security forces and then retreat into heavily forested ranges of Handwara, Kupwara and Bandipora. Operations against them have continued for weeks now.

Army has restrained them to the forested areas and is waiting for the winter to make their job easier. Terrorists are trying to cross over from the forest to the hinterland areas to protect themselves from harsh winter conditions which they would have to confront if they continue to stay in the forest.

Conflict

The continuous siege of populated areas, however has come under criticism from human rights activists and political leaders.

Local politicians are accusing army of the unnecessary crackdown due to which villagers are facing problems and education of children is also getting affected, as no one is being allowed to enter the restricted area.

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International

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[1]. IS taxes masses to swell its coffers

What has happened?

Across areas of Syria and Iraq, the Islamic Sate (IS), with the goal of building a credible government, has set up a predatory and violent bureaucracy that wrings every last U.S. dollar, Iraqi dinar and Syrian pound it can from those who live under its control, or pass through its territory.

IS is exacting money from,

1. Tolls and traffic tickets
2. Rent for government buildings
3. Utility bills for water and electricity
4. Taxes on income, crops and cattle
5. Fines for smoking or wearing the wrong clothes

Money from these collections is approaching around $10Billion a year.

Other sources of finance include,

1. Smuggling oil,
2. Plundering bank vaults,
3. Looting antiquities,
4. Ransoming kidnapped foreigners
5. Donations from wealthy supporters in the Persian Gulf

 

The biggest source of cash for IS appears to be the,

1. people it rules, and
2. the businesses it controls

 

Under ISIS

1. Office of services: In Raqqa, the Syrian city now serving as the de-facto Capital of IS a department called Diwan al-Khadamat, or the Office of Services, sends officials through the city markets to collect a cleaning tax — 2,500 to 5,000 Syrian pounds (about $7 to $14) per month.
2. A cut in business: Militants demand a cut in business. Businessmen pay either in money or in olive oil depending upon the profit
3. The group has also taken over the collection of car-registration fees and made students pay for textbooks

 

[2]. China hosts first BRICS media summit

What is BRICS?

BRICS is the acronym for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa. The grouping was originally known as “BRIC” before the inclusion of South Africa in 2010. The BRICS members are all developing or newly industrialised countries, but they are distinguished by their large, fast-growing economies and significant influence on regional and global affairs; all five are G-20 members

What has happened?

China has taken the initiative for creating an alternative media platform for the emerging economies by hosting the first media summit of countries belonging to the Brazil-Russia-India-China-South Africa (BRICS) grouping.

Who is behind this initiative?

China’s Xinhua news agency has been the initiator of the project.

Other media organisations that are a part of this initiative,

1. The Hindu group of publications,
2. The Brazil Communication Company,
3. Russia Today International News Agency,
4. South Africa’s Independent Media

 

What is being hoped to achieve through this new initiative?

1. Create a new institutional framework that would be tailored to benefit the media of five emerging economies
2. Yield an agenda-setting consensus among the BRICS media on coordinating the coverage of G-20 summits, in tune with the priorities of the emerging economies.

 
During the 1^st media summit following were proposed,

• Formation of a BRICS Media Foundation, supporting and protecting journalists belonging to the grouping

Formation of a liaison office for BRICS Media Summit, which will become an executive body responsible for the organisation and coordination of the Summit.

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Opinions & Editorials

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 [1]. Why government must hire more?

What the author is arguing in this article?

Author argues in favour of the recent pay hike recommended by the 7^th pay commission

 

What are his reasons?

1. To ensure a better governance, the government servants should be paid well
2. To reduce corruption: Better pay can certainly reduce corruption
3. Better pay shall prevent the good and honest from leaving the system for greener pastures

 

On the issue of maximum governance, minimum governance

Author says that the above expression doesn’t means that the number of people working for the government should be reduced. It means that the scope of what government does should be reduced not the quantity of the officials.

Low ratio of civil servants: Despite the perception that our government is overstaffed, the reality is that India has very low numbers of civil servants who are necessary to carry out the basic functions of government. The Seventh Pay Commission refers to this in its report, noting that in the United States, the federal government has 668 employees per 1,00,000 population. In comparison, the Union government employs 139. This is not even considering the fact that under India’s constitutional structure, the Union government has a bigger charter than its American counterpart.

Low ratio of government employees: Government employment ratios in the rich and better governed West are much higher: around 15 per cent in Scandinavian countries and 6-8 per cent in the U.S. and Western Europe. In India it is less than 1.5% as per a study by World Bank in 1990s.

Author says that better pay, perks and pensions are not enough.

 

Restructuring bureaucracy

Author says the recommendations of 2^nd ARC report should be implemented to affect any real change in the bureaucracy.

What is Administrative Reform Commission?

The Administrative Reforms Commission or ARC is the committee appointed by the Government of India for giving recommendations for reviewing the public administration system of India. The first ARC was established on 5 January 1966

Restructuring involves,

1. a review of what government employees do
2. What incentives they face
3. What type of people are attracted to the job

 

[2]. Losing the story in Nepal

Nepal-India crisis: How it started?

In the decade after 1996, Nepal in the grip of Maoist war took help from India wherein India facilitated an agreement between the Maoist party and the other national political parties in 2004.

The major point in the 12-point agreement was this,

• Future roadmap for the political development in Nepal

 

The unintended side-effect of this brokered deal was that it established India as a key political player in Nepal.

India’s influence has only grown since then. There is no national consensus in Nepal as to the role which India should play.

2008: The tensions amidst India and Nepal grew as Nepal began to act on its own. Constituent assembly was elected in Nepal in 2008, after which there was no real need for India to meddle in Nepal’s affairs but India continued to play its role. This lead to a general feeling that India is bullying its neighbour to secure its own interests like hydropower energy, development projects, business and trade.

India continued to tell Nepal what it should and should not do. This led to a cooling of relations between the Indian establishment and Nepali leaders. Tensions then ratcheted up in June, when Nepal’s leaders, challenged by the devastating earthquake, decided to expedite the process of promulgating the new constitution, after five years of delay. This was a collective decision by Nepal’s major parties, although it was not free from contention within Nepal.

Nepal’s new constitution

September 20^th 2015: After 10 years of post-conflict transition and two constituent assembly elections, Nepal finally adopted a constitution. The constitution was backed by more than 90% of the assembly.

India’s displeasure

India’s reaction was not of an excited neighbour, it was more like that of a passive bystander,

1. India felt that it was not given due respect when Nepal finally reached its momentous decision. On the day Nepal celebrated the new constitution; India merely took note of it and expressed concerns over tensions in the border regions. India was specifically indicating the ongoing protests by some Madheshis who felt that their concerns were not addressed in the constitution.

 

Why India reacted this way?

India said that Nepal’s constitution denies the rights of the Nepalese Madheshis living on India’s border, many of whom have close familial ties with Indians. A discontented Madhesh is of course an issue for India – after all, unrest in southern Nepal bordering India has the potential to destabilize the Indian side of the border. But India should have addressed these concerns by engaging with the central elected authority of Nepal.

Genuine Madheshi concerns

The new constitution does not really promise to end the longstanding political and cultural hegemony over the Madheshi people. It is also true that Nepal’s political leaders have failed to engage Madheshi communities and broaden ownership of the new constitution. Still, these are all internal issues for Nepal, and a process of constitutional amendment has already begun

Root of the Nepal crisis

1. The geopolitical crisis around the Nepal Constitution arose not simply because India wanted more of a role in Nepal. In making major decisions about the constitution, especially delineating the provinces of the new Nepal, many news reports and intellectuals argue that a Pahade (namely, related to the hill people who dominate Nepal’s national politics) hegemonic mentality dominated the decision, ignoring some of the genuine concerns of the Tharu and Madheshi peoples. The national political parties are dominated by hill Brahmins, followed by Chhetri and Newars, all of whom are of hills origin. The root of the crisis of representation is that these parties have failed to bring members of agitating groups into the national parties, at a time when inclusive governance was particularly critical in post-monarchy Nepal, as multiple communities suddenly became aware of their rights. This failure of the Kathmandu leaders provided a hotbed for agitation in Madhesh, whose people enjoyed the support of the Modi government.
2. The Madheshi agitation for rights is only the tip of the iceberg. The more serious issue of exclusion goes unspoken: the Dalits and landless people forced to work as bonded labor of the landed aristocrats in the Terai are not in the Madheshi movement. For this reason, even if the current Madheshi movement succeeds in negotiating power with the central authority in Nepal, it is very likely that Dalits and marginalized groups including women in the Madhesh will not receive their rights. If Nepalese politics seeks to ensure proportional representation of disadvantaged groups, then the pressing issue is not just Madheshi inclusion, but more importantly the Dalits of both Madesh and hill origins.

 

What is the situation now?

There is a general feeling in Nepal that India is behind the blockade. The blockade has given rise to serious humanitarian concerns in Nepal as shortage of medicines and other necessary supplies is being anticipated.

Many Nepalese believe that some of the Madheshis’ demands are actually framed in terms of India’s strategic interests. The demand for the creation of two states across Nepal Terai is a case in point. If heeded, two Madheshi provinces will run all of 800 kilometers long, but only 20-30 kilometers wide, forming a long strip on the southern plain of the country to India’s benefit and Nepal’s disadvantage. Particularly given the perception that India and the Madheshis have worked together to impose the blockade, many Nepalese believe that the establishment of two Terai provinces as a threat to Nepal’s integrity.

Ceding ground to Foreign countries

Its decisions to raise criticism of Nepal at the United Nations and the Human Rights Council, and to insert critical references to Nepal and Maldives into the joint statement with the U.K., have been hailed by the foreign office as evidence of support for India’s stand. However, conversely, it also denotes the insertion of the U.K. and other countries into India’s relations with its neighbours, one that may have a more long-standing impact. All of this denotes a disquieting desire to look for international approval for Indian actions, which comes at the cost of losing influence with the neighbouring countries being castigated.

Instead of forcing itself on its neighbour, India should employ a constructive bilateral engagement instead of an aggressive stands on the internal matters of Nepal and raising the matter internationally to its own detriment.

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Economic Digest

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[1]. Airtel to invest Rs.70, 000 crore in ‘Project Leap’

What has happened?

The country’s largest telecom services provider, Bharti Airtel, announced that it will invest Rs.60,000 crore over the next three-years to upgrade its networks to provide quality services amid increasing competition.

Context: The announcement from Airtel comes amid rising complaints of frequent call drops faced by the customers. The government had pointed out that lack of investments in networks by operators was the primary reason for poor quality of services.

 

What is Project Leap?

1. Under Project Leap, Airtel will deploy over 70,000 base stations in the current fiscal, its largest deployment in a single year since inception. Over three years, more than 160,000 base stations will be set up nationwide.
2. Airtel would expand its mobile broadband coverage to all towns and over 2,50,000 villages by March, and in three years, it plans to offer mobile broadband to over 500,000 villages in the country.

 

Articles to read:http://www.moneycontrol.com/news/buzzing-stocks/bharti-slips-4-credit-suisse-cuts-targetproject-leap_4397981.html

[2]. Unshackling the states from central schemes

Context: A Sub-group, under the aegis of NITI Ayog, on ‘Rationalization of Centrally Sponsored Schemes’ had been constituted on 8th February 2015.

27^th October, 2015: The sub-group submitted its report

The author in this article cites the recommendations of that sub-group and demands a fiscal devolution wherein the centrally sponsored schemes are reduced and States are given more freedom under the aegis of co-operative federalism.

Why is author in support of pruning CSS?

Author reasons that,

• Increasing number of CSS has curbed the autonomy of the states which goes against the spirit of co-operative federalism. More number of CSS means a major part of funds given to states by the centre is tied to the flagship schemes under CSS.

 

Sub-group’s recommendations,

1. The sub-group has recommended pruning the number of CSS down to 30 from 50 in 2015-16 and 66 the year before.
2. The sub-group has further asked the CSS to be divided into core schemes and optional schemes

 

Core schemes: The core schemes will require mandatory implementation by the states, and the centre will fund 100% share for the Union territories, 90% for the eight north-eastern (NE) and three Himalayan states, and 60% for the rest of the states.

 

Optional schemes: In the proposed structure, the states will have the flexibility of choosing the optional schemes they want to implement. The fund meant for the scheme opted out by any state can be used in other schemes. The states will be free to deselect some components of a scheme they are implementing

• Increasing the Flexi-funds: The sub-group also recommends increasing the flexi-funds—meant to provide greater flexibility to spend on diverse requirements under the overall objective of the scheme—from 10% to 25%

 

Implications of using the term 8NE and 3 Himalayan states

The use of the phrase “8 NE and 3 Himalayan states” instead of “special category states” has important implications if this report is accepted.

1. One, it means the generous terms of funding from the Union government for central schemes in these states is likely to be retained.
2. Two, the discontinuation of block grants undertaken in 2015-16 seems irreversible. The special category states were disproportionate beneficiaries of the block grants—including Normal Central Assistance, one-time Additional Central Assistance, Special Central Assistance and Special Plan Assistance
3. Three, the phrase “special category” may eventually be phased out. The formulation of these states as “8 NE and 3 Himalayan states” is a step in that direction.
4. Four, this will bring a much-needed end to the practice of states queuing up for special category status.

 

[3]. Pressing the GST pedal; where do we go from here?

What has happened?

PM has invited leaders of Congress party to discuss their concerns regarding the GST bill.

Concerns put forward by the Congress party,

• The first and the most important is the levy of 1% tax on inter-state transactions in goods and services.

 
Arguments for: This is a legitimate concern as levying of this tax would put unnecessary burden on consumers of less developed states. Moreover, it will bring additional complications when dealing with inter-state transactions and e-commerce.

What states say?

They say that they are levying 1% tax to compensate for infrastructural spending.

The argument that the levy is meant to compensate states for the spending on infrastructure is fallacious because infrastructure is created to accelerate growth in output and employment. Indeed, many states, in addition, give generous incentives to attract investments. Ironically, while exports to other countries are not taxed under GST, tax is sought to be levied on inter-state trade!

Capping the tax rate: Need to cap the rate of tax at 18% in the Constitution Amendment Bill. It is undesirable because it does not allow the Union and states to vary the rates as and when needed. This will erode the autonomy of the states further.

Dispute redressal mechanism: The third issue of disagreement relates to the dispute resolution mechanism. Given that the interests of the Union and states do not always coincide, leading to conflicts, it may not be possible to resolve the conflicts among them in the GST Council. Therefore, it may be worthwhile providing for a conflict resolution mechanism in the Bill. The modalities of having an acceptable mechanism can be left to the GST Council

[3]. The $100Billion-question

What is OECD?

The Organisation for European Economic Cooperation (OEEC) was established in 1948 to run the US-financed Marshall Plan for reconstruction of a continent ravaged by war. By making individual governments recognise the interdependence of their economies, it paved the way for a new era of cooperation that was to change the face of Europe. Encouraged by its success and the prospect of carrying its work forward on a global stage, Canada and the US joined OEEC members in signing the new OECD Convention on 14 December 1960. The Organisation for Economic Co-operation and Development (OECD) was officially born on 30 September 1961, when the Convention entered into force.

What has happened?

The OECD, in partnership with Climate Policy Initiative (OECD-CPI), recently released a paper ‘Climate Finance in 2013-14 and the $100 billion goal’.

The paper has claimed significant progress towards that goal. The preliminary estimates were that the mobilisation of climate change finance from developed to developing countries had reached $62 billion in 2014 and $52 billion in 2013, equivalent to an annual average over the two years of $57 billion.

Department of Economic Affairs secretary Shaktikanta Das has raised concerns regarding the credibility of the data and the report of OECD. He points out that,

1. The data is specious since it refers to pledges to climate funds, not actual disbursements;
2. It includes any existing multilateral aid that has even the slightest climate co-benefit, even debt flows at commercial/near-commercial terms and FDI

For example: Even a $22Billion dollar investment in India’s solar industry over a decade by SoftBank would be considered as developmental financing by OECD despite the fact that India is offering commercial returns to it.

India should tread with caution

India and other developing countries should tread cautiously before jumping the clean energy bandwagon to placate USs’ interests. In case of India, coal is the best bet as compared to expensive renewable sources of energy. India should focus on a global green-and-clean coal initiative maintaining absolute caution with the West’s’ move to phase out fossil fuels.

India should stand against this carbon imperialism.

What is carbon imperialism?

The opinion that West is putting undue pressure on developing countries to shift to cleaner fuels is seen as West’s imperialism wrt usage of carbon. The West gobbled up the carbon space and left very little for others and now it wants developing countries to shift to costlier cleaner energy alternatives without providing any assistance or a meagre assistance at the most.

The way forward for India

India has to push for far greater R&D in areas to help both prevent and adapt to climate change. Research on heat/drought/flood/saline-resistant foodgrain as also any technology that reduces the carbon-intensity of production also needs to be stepped up dramatically

By: ForumIAS Editorial Team