Brief of newspaper articles for the day bearing
relevance to Civil Services preparation
- GS PAPER 2
- Railways set to make revenue out of garbage {Governance}
- GS PAPER 3
- DRI unearths Rs. 2,240 cr. banking-hawala scam {Economy}
- Centre mulling raising FDI cap in newspapers, periodicals {Economy}
- RBI board flags risk of conflict of interest in MPC appointments {Economy}
- Divesting in RBI to recapitalize banks {Economy}
- Airlines, Centre lock horns over ‘passenger-centric’ rules {Economy}
GS PAPER 2
[1]Railways set to make revenue out of garbage
Context
In order to generate revenue apart from fares, railways has been considering proposals to sell garbage produced across various stations in the country.
Analysis
- Railways is considering a proposal sent to it by a waste management group which has offered Rs. 1.50/kg of garbage at railway stations.
- The garbage will be collected from the station round-the-clock. The collection of garbage and its disposal will be the responsibility of the waste management company.
- The railways has also set up a Non-Fare revenue directorate. This directorate has been tasked to find means from which railways can generate revenue apart from fares and freight.
Conclusion
This move seems like a win-win for both the railways. For railways it would entail cleaner railway stations while also earning money by cleaning them. The waste so collected can also be used to generate energy and manure.
GS PAPER 3
[1]DRI unearths Rs. 2,240 cr. banking-hawala scam
Context
A scam has been unearthed by Directorate of Revenue Intelligence whereby Public Sector Banks have illegally remitted Rs . 2240 crores abroad. Fake documents and false declaration of traded goods was used to do this.
News
- As many as 6 PSBs are found to be involved in the scam. Inflated export figures and non-existent imports were shown to claim duty drawbacks.
- Majority of these remittances were made by a Punjab National Bank’s branch in Mumbai. It alone remitted around Rs. 1398 crores without following any due diligence.
Foreign Exchange Management Act (FEMA) norms have also been violated. FEMA puts a limit on the amount that can be remitted abroad.
[2]Centre mulling raising FDI cap in newspapers, periodicals
Context
Another sector might see FDI liberalisation soon as the centre is planning to increase the FDI limit in newspaper and periodicals.
News
- Govt. is planning to increase the FDI limit in newspapers and periodicals to 49% .
- At present FDI of 26% is permitted in publishing of newspapers and periodicals dealing with news and current affairs, through government approval route.
- Recently the government has eased FDI norms in 8 sectors the major ones being defense, civil aviation, food processing. This relaxation is bound to attract more foreign capital for India.
[3]RBI board flags risk of conflict of interest in MPC appointments
Context
RBI board has pointed out at the conflict of interest which might arise out of the composition of Monetary Policy Committee(MPC) decided by the govt.
Analysis
- MPC will include the following members: Governor of RBI, Deputy Governor in-charge of monetary policy, Executive Director in-charge of monetary policy, 3 members appointed by the govt.
- Now the executive director (ED) of RBI reports to the Deputy Governor, also the performance appraisal of ED is done by the Deputy Governor. This might lead to conflict of interest and independence of ED may be compromised as he may have to toe in-line with the Deputy Governor.
Conclusion
This is a very pertinent issue which has been raised by the RBI board. For MPC to function properly it must be free from such conflicts and biases.
[4]Divesting in RBI to recapitalize banks
Context
In the present times, majority of the Public Sector Banks are wriggling under the burden of NPAs. There is an imminent need for the government to recapitalize these PSBs. For recapitalization, the govt needs money and such money can come from disinvesting some of it’s stakes in RBI.
Analysis
- There is no doubt the recapitalisation of PSBs who are struggling with the NPAs is the need of the hour. This recapitalisation can be financed in 3 ways:
i) Increasing the govt. Revenues
ii) Increasing the govt. Borrowings.
iii) Divesting in some assets and using the money to recapitalise PSBs.
- The third options seems to be a better and more practical approach than the other two. Economic Survey also advises to do the same.RBI is owned by the Govt. of India and its equity capital is much higher compared to international standards.
- Govt. can thus, afford to reduce its equity in RBI and use the resources generated to recapitalise PSBs.
However, the Governor of RBI has advised against this. Let us see both the scenarios where RBI governor might be right and where economic survey might be right.
1. How disinvestment may not be a good move?
- Let us assume that RBI buys back some of its shares from the govt. by giving up its govt. Bonds (say to the tune of 2 trillion). Now govt will have to sell these bond in the open market to households so that it can raise finance for recapitalization of PSBs.
- However, the assumption that households will buy such bonds to the tune of 2 trillion is unrealistic.Households do not have such big capacities , that is why in the first place such RBIs and PSBs are expected to hold govt bonds.
- So in a nut shell by this move, finances cannot be raised and PSBs cannot be recapitalised.
2. How disinvestment may be a good move?
Let us assume a similar situation as discussed in point 1 with a slight difference.
- RBI buys back some of its shares to the tune of say 25o billion instead of 2 trillion.
- In this case the govt can sell these bonds worth 250 billion in open market to households.
- Households will have the capacity to buy them and the finance generated can be used to recapitalise PSBs.
Conclusion
Avoiding disinvestment worth trillions in RBI and going for much practical disinvestment may actually work in generating finances for recapitalisation of PSBs. However, theories and analysis apart, the taste of the pudding is in the eating.
[5]Airlines, Centre lock horns over ‘passenger-centric’ rules
Context
Several passenger centric norms mooted by the Government have been opposed by the airlines citing reasons such as lack of viability.
What norms are being opposed and Why?
- The recent norm by DGCA which allows the passenger to carry 5 kg of extra baggage over and above the 15 kg free allowance at Rs. 100/kg has been opposed by the airlines. Before this norm the airline was charging Rs. 250-350 per kg.
- The airline says that passengers are being offered extra 7 kgs already as free cabin luggage. Also if this norm by DGCA ( of extra 5kg baggage at 100rs/kg) continues, the airlines will have to increase their ticket prices due to consumption of more fuel by carrying excess baggage.
- Another opposition by airlines is towards the proposal which disallows airlines to charge cancellation fees more than the base fare of tickets. Airlines want that they should be allowed a cancellation fee which includes the fuel charge component also along with the base fare.
- Other proposals such as providing higher compensations for cancellation of flight,delays and denial of boarding have also been opposed by airlines. Airlines feel that such proposal have not quantified the impact of such extra burden on the airlines.
- Airlines also do not want any penalties on them in case the cancellation of flight is due to limitations imposed by Air traffic control and inefficient infrastructure at airport.
Conclusion
While it may appear that airlines are opposing passenger centric norms for their own interests, it must be noted that many of their concerns are also genuine. The need of the hour is to weed out the problems by involvement of all the stakeholders and find a common ground.
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