9 PM Daily Brief -20 June 2016

20-june

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

What is 9 PM brief?


GS PAPER 2


[1]Parliamentary panel to review election code, suggests ways to curb freebies

The Hindu

Context

  • A parliamentary committee is reviewing the Model Code of Conduct to suggest how to prevent the use of money and other freebies which are used to attract the voters during elections.

News

  • The parliamentary committee has started this by visiting 3 states and talking to the stakeholders from these states. Later, it would visit other states to consider their opinion.
  • The same panel had earlier also recommended to reduce the time between the enforcement of Model Code of Conduct and the day of polling. It recommended that the model code should be enforced right from the day when the elections are notified and not when the poll schedule are announced.

Conclusion

  • This step has been taken after the cancellation of polls in some constituencies of Tamil Nadu due to the use of cash and gifts to lure the voter. Use of money power in elections is the biggest blot that can happen in a democracy and the move to check it and ensure fairness is a welcome move.

[2] Scared of students

Indian Express

Context

  • TSR Subramaniam panel which is set up to advice on the new National education policy has proposed to restrict the political activities in the college campuses.

What did the panel propose?

  • The panel has proposed that colleges and universities should consider derecognizing student political groups which are based on caste and religion.

Why this recommendation?

  • This recommendation has been made because the panel thinks that agitations, movements, gheraos etc. have become a regular affair on the campus and they interfere with the normal academic activities of the colleges/universities.

Analysis

  • Campus politics in India has been a nursery for future leadership and it is not right to stop them for being an active participant in politics.
  • Also, just because many parties use caste and religion for their own benefits does not mean that political groups based on these entities should be discouraged. In fact caste and religion based politics has many a times provided a great platform to the disprivileged sections assert their voice and interests.
  • The recommendation by the report has come out because of various unrests in the campus in the recent times. Campuses like JNU, FTII and Hyderabad Central University have been the centre of these unrests. These unrests have to been seen from a positive eye. They have triggered very relevant social debates ranging from freedom of expression and nationalism.

Conclusion

  • Political activities and debates on such inequalities (caste and religion based) in campuses should be promoted rather than being curbed. Campus movements has given India some great politicians and for the rosy future of our country in politics, we must reform but not condemn these activities.

[3]The cost of nuclear diplomacy

The Hindu

Issue

  • The author has raised questions over the viability of a civil nuclear deal that India has signed with Westinghouse,a US based company.

Deal

  • The preparatory work for six AP1000 reactors to be built by Westinghouse has begun.
  • These six reactors may cost as much as Rs.4 lakh crore.
  • The first year tariff on electricity from these reactors could be as high as Rs.25 per unit.

Reputation of Westinghouse in US

  • There are persistent concerns about the economic viability of Westinghouse’s AP1000 design.
  • Of more than a dozen orders that Westinghouse expected from within the U.S. a decade ago, only four have materialised.
  • A utility called Florida Power and Light postponed its plans for two AP1000 reactors by at least four years.
  • A U.S. government company has cancelled its plans for two AP1000 reactors explaining that this was “the fiscally responsible action”.

Why India is taking a fiscally irresponsible action?

  • There are no merits in such a deal.
  • But as per the expert opinion , as the former chairperson of the Atomic Energy Commission, Anil Kakodkar, explained, India had “to keep in mind the commercial interests of foreign countries and of the companies there” and was obliged to purchase these reactors in return for U.S. diplomatic support on other issues.
  • The government should cancel this deal as this is financially imprudent.

Government’s actions with regard to this deal

  • The government claims that it can reduce construction costs in India by 25-30 per cent, but this is far from sufficient to make the AP1000 reactors cost-competitive.
  • The Indian government has offered to spend lakhs of crores of public money on a loss-making American corporation, and has put its citizens in a position where they might have to pay high costs for electricity and will not be able to hold this corporation accountable for an accident.
  • The joint statement suggested that these reactors would help India meet its commitments on climate change but this is misleading.
  • But  their projected tariffs are much higher than compared to coal based plants, India could reduce greenhouse gas emissions more efficiently by investing the same resources in other green technologies.
  • The government has ratified the “Convention on Supplementary Compensation” (CSC) for Nuclear Damage that contradicts India’s domestic liability law and protects nuclear suppliers from liability for an accident. Instead of cancelling the deal, it has made concessions to the company.

What India has gained or will gain from this deal?

  • India has gained some nice words said by US President for India.
  • He has re-affirmed that India is ready for membership of the Nuclear Suppliers Group (NSG).
  • But India’s engagement with the NSG is irrelevant for its energy problems.
  • NSG membership may additionally allow India to acquire enrichment and reprocessing technology. However, since India’s indigenous heavy water reactors do not use enriched uranium and imported light water reactors come with associated fuel contracts, this technology has little significance for India’s electricity sector.

What India should do?

  • As there are no tangible benefits, instead it is a financially imprudent decision, it will be in India’s interest that it should cancel the deal as soon as possible.

[4] Hypocritical to block India at the NSG

Livemint 

Issue

  • The author has exposed the hypocrisy of China. China alleges that it is blocking India’s membership because it considers itself a true votary of  non-proliferation.
  • But the reality is that if India get membership into NSG, then only it will lead to non proliferation as the author has suggested.
  • For background and comprehensive coverage of NSG, refer to Editorial Today #44- Nuclear Suppliers Group.

Arguments given by China to block India’s membership

  • It is not a signatory to the Nuclear Non-Proliferation Treaty (NPT).
  • India’s behavior does not meet the present standards of NSG members, nor does it believe in the NSG’s basic non-proliferation motivations, including efforts to prevent the spread of nuclear fuel cycle technologies to others that could be used for a nuclear weapons programme.
  • India has refused to accept disarmament responsibilities and practices followed by the NSG nuclear-armed states, including a commitment to not conduct nuclear tests, halt fissile material production, and reduce its nuclear and missile arsenal as well as support nuclear weapon-free zones.
  • India’s Additional Protocol (AP) agreement with the International Atomic Energy Agency (IAEA), which allows the agency access to all civilian nuclear facilities and activities, is weaker than those of the other NSG nuclear-armed states.

China’s own behaviour with regard to international obligations

  • It  maintained a small nuclear arsenal before joining the NPT in 1992 and the NSG in 2004.
  • It began to qualitatively and quantitatively improve its nuclear weapons and missiles after joining the NPT and NSG in contravention of its legal treaty obligations.
  • China’s AP agreement with the IAEA was criticized by the US as being restrictive, limited in its declarations and eliminating almost all IAEA access.
  • It has not only blocked reports on North Korea’s proliferation activities in the UN Security Council but has also challenged NSG provisions in dealing with Pakistan.

Limitations of NSG

  • NSG is unlikely to curtail or restrict the weapons programme of its nuclear-armed members or nuclear-armed aspirant members like India.
  • Indeed, the pace and progress of weapons programmes of all nuclear-armed states will be determined by the unfolding geopolitical competition, particularly between the US and China, rather than their legal obligations.
  • At best, the NSG can try and become more effective in preventing further horizontal proliferation among the NPT non-nuclear armed states.

But here NSG faces a dilemma with regard to India. Should it make that exception or not?

  • India’s application for NSG membership provides details on how India can strengthen non-proliferation norms and practice.
  • India has also expressed its desire to play a greater global governance role.
  • This is a sound basis both for its membership and for strengthening the group’s objectives.
  • India’ membership into the NSG will lead to the victory for  the cause of non-proliferation.
  • So, in the interest of global governance, India’s entry should not be blocked into the NSG.

 

 


GS PAPER 3


[1]Chinks in the new aviation policy’s armour

The Hindu 

Context

  • Although National Civil Aviation Policy(NCAP) has been announced with a lots of cheers and applause, there are certain concerns in the aviation sector which it failed to address.

Concerns which NCAP failed to address:

  1. Professionalizing the Directorate General of Civil Aviation (DGCA) and Bureau of Civil aviation securIty (BCAS)
    NCAP has given no instructions to professionalize DGCA and BCAS. These bodies are concerned with the safety and security with respect to aviation. No doubt their role has been strengthened but the policy does not spell out the ways to gradually transform these bodies to meet the growing challenges of the modern times.
  2. Transformation of Airport Authority of India (AAI)
    Transforming AAI is another area which NCAP did not address.Many experts feel that AAI should be listed on stock exchange. Also, it was expected that the policy would separate the Air Navigation Services (ANS) from AAI and make it an independent body. NCAP is silent on these aspects.
  3. Change in international flying norms
    NCAP has changed international flying norm. 5/20 rule has been changed to 0/20 rule. Under 5/20 rule, Indian carriers were required to complete 5 years of domestic operations and have a fleet of 20 aircrafts to be considered for international operations. Now, under 0/20 rule, the 5 year of domestic operations clause has been removed and any airline having 20 aircrafts or 20% of capacity in domestic operations will qualify for international operations.
    This although is expected to be a boon for new carriers like Vistara and Air Asia but in reality this would hardly benefit them as building a capacity of 20 aircrafts will take quite some time for them.
  4. ATF still the same
    NCAP does not deal with removing negative tax regime in the aviation sector, the most prominent being the service tax on aviation turbine fuel (ATF)
  5. No improvement in Institutional Capability
    NCAP does not touch on the aspects of improving the institutional capabilities of bodies like Ministry of Civil Aviation.

Conclusion

  • There is no doubt that NCAP is a strong new beginning and has been successful in weeding out many problems which have marred India’s aviation sector but there are many areas which must simultaneously be addressed to make the aviation industry better off than what it is right now.

[2]P2P lending: towards easy funding

Livemint

Issue

  • Analysis of the guidelines issued by the Reserve Bank of India (RBI) on peer-to-peer (P2P) lending.

What is P2P lending?

  • To bridge the gap of unavailability of proper formal credit, an aggressive breed of loan providers has emerged in India, called peer-to-peer (P2P) lending.
  • The concept is not new—it is basically an individual, who is not a financial institution, lending money to another individual.
  • P2P lending is similar to a friend lending to you, but in this case, you have to pay an interest on the loan and the lender is a stranger.
  • Online P2P lending companies work as marketplaces that bring individual borrowers and lenders together for loan transactions without the intervention of traditional financial institutions such as banks and NBFCs.
  • Through partnerships with leading banks, P2P lending is now moving towards offline channels.

RBI guidelines

RBI has proposed following key areas to frame the regulatory guidelines around P2P lending.

(1) permitted activity; (2) reporting, (3) prudential and governance requirements; (4) business continuity planning and (5) customer interface.

Analysis by the author

Scope of permitted activites:-

  • The scope of permitted activities needs to be defined clearly, especially in view of the aggressive expansion plans of P2P players.
  • For instance, what kind of advertisements can be displayed on the websites of these portals.

Regulation of Guarantees

  • The aggressive lending plans of P2P players may lead to questionable practices such as credit enhancement or other financial incentives offered by the P2P platform.
  • If these platforms are allowed to give guarantees, then some prudential norms need to be put in place.
  • Alternatively, P2P lenders could also take the benefit of availing specific products, such as credit risk protection from a registered Indian insurance company.
  • There is a possibility that many lenders could get duped into investing because of the guarantee, which may be difficult to meet at a later date.
  • Perhaps, their performance should be observed before the RBI allows them to continue with their guarantees and if approved, then provide them with an insurance against it.

Differentiation is required

  • There needs to be clarity on the maximum ticket size of transaction that can be serviced by a P2P lender to clearly differentiate them from other lenders, such as microfinance institutions and banks.

Periodic assessment of the lending pool

  • There should be a periodic assessment of the lending pool by an independent credit rating agency.

“Brick-and-Mortar” presence in India.

  • The compulsion for P2P lenders to set up an office will enable personal scrutiny of records, but could result in operational inefficiencies.
  • Instead, RBI could take a cue from the ‘online only’ foreign banks. Mandating disclosure requirements on their websites can increase efficiency and improve transparency of the model.

Protect the stakeholders

  • The interests of stakeholders, especially lenders, in case the platform goes bankrupt, should be protected.
  • There needs to be clarity on whether all contracts will continue to stay enforceable and how will investors be serviced.

Conclusion

  • The guidelines should strike a balance between overregulation and leaving too many loopholes. If guidelines are too strict and harsh, it will bring down the P2P market.
  • If P2P isn’t well regulated and things get ugly, the government will come back with heavy restrictions.
  • But, in any case, the guidelines will bring awareness about the sector and more individual lenders will come on board.
  • To conclude, P2P lending has the potential to be disruptive. Hence, its platform guidelines should not promise extraordinary returns to lenders

[3] Model for airport fees may increase passenger fares

The Hindu

Issue

  • Hybrid till model vs Single till model

Context

The civil aviation policy has adopted  a hybrid-till model for calculating airport fees.

Hybrid-till model

  • Under the hybrid-till model,  30 per cent of airport operator’s non-aeronautical revenues would be used to subsidise airport costs.
  • Under single-till, airport developers’ return remains the same even if non-aero was nil.
  • This, in turn, will mean that airport will have to increase aeronautical charges. Thus, in long run single-till can lead to higher aero charges as compared to hybrid till

Single till model

  • Under the single-till model, both aeronautical and non-aeronautical revenues are taken into account to calculate passenger fee.
  • Apart from its core operations, airports earn income from the non-aeronautical side which includes food and beverages, duty-free shops, advertising, car parking and hotels.
  • Airports Economic Regulatory Authority (AERA),  a tariff regulator has adopted the single-till model for determining aeronautical tariffs that can be set by airports, wherein passengers and airlines are charged less.
  • Airlines prefer a single-till model as it reduces their charges and passenger fees. The move to switch to hybrid-till may revive private developer interest in running airports as the model increases their revenue.

Assurance from the government

  • The civil aviation ministry has ensured that airport charges won’t rise too much.
  • NCAP 2016 clearly lays down that in years of high expenditure, the additional tariff thereof will be spread out over future years, so as to have a smooth tariff curve.

 


Comments

2 responses to “9 PM Daily Brief -20 June 2016”

  1. i cannot find history and culture quiz and also maths quiz. please help

  2. Siddhartha Singh Avatar
    Siddhartha Singh

    Awesome coverage

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