Front Page / NATIONAL
[1]China offers to rename OBOR to allay India’s fears
[2]Different offences cannot be boxed into one trial
[3]Push for private sector in defence production
Editorial/OPINION
[1]Towards a unique digital South Asian identity
Economy
[1]Centre to raise with U.S. non-tariff barriers
Indian Express
[1]Network is the key
Live Mint
[1]NPA resolution: Let’s try again
[2]India’s solar mission can cause new debt problems
Front Page / NATIONAL
The Hindu
Context
[1]China offers to rename OBOR to allay India’s fears
Outlines a four-point solution to ‘manage differences’
Backdrop
The Chinese Ambassador to India during a closed-door interaction at the United Services Institution, a military think-tank in Delhi
What has happened?
China is prepared to consider renaming the China-Pakistan Economic Corridor (CPEC) if it would end India’s reservations over its One Belt One Road (Or Belt and Road Initiative) passing through Pakistan-occupied Kashmir (PoK)
Other suggested measures
A new treaty on cooperation, restarting talks on a free trade agreement (FTA), an early resolution to the border issue and aligning the B&R with India’s “Act East policy.”
China has no intention to get involved in the sovereignty and territorial disputes between India and Pakistan
[2]Different offences cannot be boxed into one trial
Context
Says joint trial is an exception, the norm is separate trials for distinct offences
What has happened?
A general conspiracy which gives birth to a cascade of distinct offences committed in various places spread over several years and involving different accused persons cannot be boxed into one trial. This would lead to injustice
[3]Push for private sector in defence production
Context
Centre moots tie-up with global firm
What has happened?
The Government has accelerated efforts to finalise the ambitious Strategic Partnership (SP) model, which would give a major boost to private sector participation in defence manufacturing
Guidelines on the anvil
As part of the stepped up efforts, the Defence Ministry has scheduled consultations with the industry to get their feedback in the next couple of days.
The policy, which is part of the Defence Procurement Procedure (DPP) 2016, will set out guidelines on how major Indian private sector companies can tie up with global Original Equipment Manufacturers in critical military systems and platforms.
Editorial/OPINION
[1]Towards a unique digital South Asian identity
Context
Executed properly, Aadhaar could become a central pillar of India’s ‘neighbourhood first’ policy
What has happened?
The enthusiasm with which government agencies and businesses have embraced Aadhaar should prompt India’s foreign policy planners to deploy it abroad
Why?
A single, region-wide platform to authenticate residents of South Asia could integrate its markets, bring communities closer and allow governments to offer a wider range of governance services
Identity Schemes in Other Asian Countries
- Pakistan has the National Database and Registration Authority (NADRA), that for two decades has collected biometric information
- Nepal, meanwhile, intends to roll out biometrics-driven “national ID cards” to its citizens soon
- The Election Commission in Bangladesh began issuing such cards last year
Exporting Aadhar: Building Applications with Aadhar
Beyond collecting biometric data, however, South Asian governments have not been able to create digital ID-enabled applications. This is what Aadhaar has mastered, making it a very valuable foreign policy export. Its open application programming interface (API) layers — known as “India Stack” — set Aadhaar apart from other biometric ID programmes. India Stack APIs, which include the Unified Payment Interface (UPI) and Aadhaar e-KYC, allow applications to be built atop them
Strategic Benefits
Political and economic leverage
Aadhaar-like platforms catalyse innovation by tailoring Big Data for governments and businesses alike. The political and economic leverage India will accrue as a result of enabling such entrepreneurship will surpass fixed investments by China
India in Control, not China
Once a critical mass of Aadhaar-enabled applications has been created, interoperability standards for the digital ecosystem will be determined by the Unique ID programme. App developers, handheld manufacturers, and even Internet Service Providers will have to work around Aadhaar’s encryption standards and data protection guidelines
Concerns: Creating Data Protection Laws
South Asian countries that have not digitised their public databases fully can create secure ones to link to unique ID programmes. A national ID programme would also be a trigger for them to enact strong data protection laws
Conclusion
Aadhaar is a constitutional technology that can build whole new information and communication technology ecosystems. New Delhi should appreciate its foreign policy value and integrate the project into its neighbourhood agenda
[2]Being humane
Context
- A law against torture should enable ratification of the Convention barring custodial excesses
- Two decades after signing the UN Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, India is yet to ratify it
Why?
- India’s extradition requests pending due to absence any such law against torture, e.g. an extradition request relating to Purulia arms drop case suspect Kim Davy failed owing to the apprehension that he may be ill-treated in India
- India was subjected to close questioning during the Universal Periodic Review of its human rights obligations at the UN Human Rights Council in Geneva
Prevention of Torture Bill, 2010
- Prevention of Torture Bill, 2010, was passed by the Lok Sabha in 2010, but it was referred to a Select Committee in the Rajya Sabha
- In its report submitted in the same year, the committee recommended exhaustive amendments to the Bill to make it consistent with the language and intent of the Convention
- Thereafter the Bill lapsed
- The government now says it has referred the matter to the Law Commission for an authoritative view
Conclusion
It is imperative that a strong law that criminalises torture, imposes stringent punishment for it and contains liberal provisions for those suffering torture to complain against their perpetrators, prosecute them and be compensated and rehabilitated, is passed at the earliest
Economy
[1]Centre to raise with U.S. non-tariff barriers
Context
‘Curbs affecting exports of goods made in India’
What has happened?
India is planning to take up with the US administration the “barriers” imposed by the U.S., which are hurting Indian goods exports to that country in sectors including agriculture, pharmaceuticals and other industrial products
This issue would also be on the agenda of the next India-U.S. Trade Policy Forum (TPF) — the main bilateral platform for discussing and resolving trade and investment issues
Child labour
According to the Indian Commerce Ministry, the U.S. Department of Labor (DOL) has “arbitrarily” listed 23 items produced in India on the ‘List of Goods Produced by Child Labour or Forced Labour’ — which is in effect a ban on their import
Major NTB (Non-Tariff Barrier)
The Trade Expansion Act of 1962 of the U.S., allowing American manufacturers to petition for curbing imports from third nations on national security grounds without providing proof from industry
Pharma exports
Indian pharmaceutical exports to the U.S. are hit by the increase in registration fees, approval delays and low approval rates for registrations mandatory for sale of all new drugs in the U.S
The Ministry has also opposed the U.S. requirement of irradiation treatment and inspection of mangoes prior to shipping from India.
[2]‘Decision on NPAs still lies with banks’
Context
However, RBI scrutiny and committee advisories will help, says Ministry official
What has happened?
Banks would still be responsible for taking commercial decisions on non-performing assets weighing down their balance-sheets, including possible haircuts, but scrutiny from the Reserve Bank of India (RBI) and advisories from oversight committees on the processes they adopt should comfort bankers
New JLF norms
- As per the new norms for JLFs (joint lenders’ forum) notified by the RBI, just 60% of lenders by value of the loan have to reach a consensus on the course of action to be adopted for an NPA compared with a 75% consensus requirement earlier. The rest of the lenders are required to follow suit in such cases
- RBI is coming into the process but the commercial decision is still taken by the banks
Indian Express
[1]Network is the key
Context
India must ramp up its internal connectivity to counter China’s Belt and Road Initiative
What has happened?
India has turned its back on China’s celebration of President Xi Jinping’s “Belt and Road Initiative” (BRI) this week in Beijing
Why is India against it?
- China-Pakistan Economic Corridor (CPEC), an important part of the BRI, runs through a part of Jammu and Kashmir that is occupied by Islamabad
- BRI will massively strengthen China’s commercial, economic, political and security influence on India’s neighbourhood and marginalise Delhi’s regional primacy
- China is set to become the first non-Western power in the modern era to shape the geopolitics of Eurasia and the Indo-Pacific.
Japan also not in favor: Partnership for Quality Infrastructure
- It has already outlined a Belt and Road initiative of its own, called the Partnership for Quality Infrastructure
- While its propaganda might not be as effective as China’s, Japan has put up nearly $150 billion to support infrastructure projects all across the Indo-Pacific and Eurasia
What India should do?
- Ramp up its own internal connectivity: BRI was built on top of the internal “Go West” strategy that focused, over the last two decades, on unifying China’s domestic market and connecting its developed east coast with the interior provinces
- Delhi should modernize connectivity across its land and maritime frontiers with its neighboring countries
- India can work with nations like Japan and multilateral institutions in developing regional connectivity in the Subcontinent and beyond
Conclusion
Delhi’s urgent imperative is to recognise that China’s BRI is not a diplomatic problem for the foreign office to resolve. It is about mobilising the full resources of the Indian state and creating effective mechanisms — public and private — to purposefully address the long-term opportunities and challenges that China’s BRI presents.
Live Mint
[1]NPA resolution: Let’s try again
Context
New Ordinance empowering RBI to get more actively involved in the stalled resolution process
What has happened?
The government seems to be hoping that the Reserve Bank of India will solve what is essentially a collective action problem
Bad Loans
These bad loans—an estimated Rs9.64 trillion—are now the biggest single threat to Indian economic stability. The potential costs of a clean-up have also mounted
Previous Strategy of RBI
- It gave banks freedom to deal with distressed loans by allowing, for example, the lenders to convert debt into equity through strategic debt restructuring (SDR) or by helping companies rework repayment schedules through the scheme for sustainable structuring of stressed assets (S4A)
- Since India did not then have an effective bankruptcy law, the regulator sought to create a resolution system that resembles the out-of-court bankruptcy process
Now
The Indian central bank can now “issue directions to banking companies for resolution of stressed assets” and also “issue direction to any banking company to initiate insolvency resolution process in respect of a default, under the provisions of the Insolvency and Bankruptcy Code, 2016”
The choice of RBI as the agency to push for resolution is a strange one. Why?
- The international experience shows that central banks mainly intervene in banking crises by providing emergency liquidity
- It is the government that moves in to push for the resolution of distressed debt.
- It is hard to find any other recent example of a central bank being tasked with a banking sector clean-up. Chile is perhaps the only notable exception, in 1982
Two Alternatives to RBI
- The dormant Bank Boards Bureau (BBB) could have been used to provide cover to bankers scared of selling loans at discounts
- The Financial Sector Legislative Reforms Commission had recommended the setting up of a resolution corporation to deal with distress in financial firms
What Now?
The new ordinance may accelerate the resolution process, especially since the new bankruptcy law is now in place
Challenges
- To find buyers for the distressed debt that banks may want to sell or for assets if enterprises are wound down under the bankruptcy law
- Capital needs to be raised after banks take a knock with the inevitable loan write-downs; the combined bill for cleaning-up banks as well as meeting Basel III norms is around $100 billion
- To what extent corporate borrowers rather than taxpayers will bear the costs of bad loan resolution.
Conclusion
There is still a tough journey ahead for Indian banks
[2]India’s solar mission can cause new debt problems
Context
Indian solar project developers may find their projects unviable in the event of currency fluctuation or changes in China’s policy on solar cell and module export
What has happened?
- The recent decision of the Supreme Court not to allow a revision of the tariff charged by Tata Power Co. Ltd and Adani Power Ltd for their 4,000MW (megawatt) and 4,620MW Mundra ultra-mega power projects (UMPPs) based on Indonesian coal raises serious concerns about the viability of these projects
- A decision by the Indonesian government to link the price of coal exported from the country to a benchmark based on international prices of coal has toppled carefully laid plans
UMPPs
- In 2006, it was decided to build UMPPs to take care of India’s crippling power woes
- One of the reasons for the failure of UMPPs was that when the bids were submitted, coal prices were very low
- Subsequently, prices went up, making the projects unviable
- Power purchase agreements (PPAs) with tenures of 25 years were written without a provision for a revision of terms.
Issues
Heavy Dependence on China:
- India’s solar programme is heavily dependent on imported solar cells and modules, mainly from China
- China uses predatory pricing and dumps cheap thin film solar cells to capture the Indian market in the absence of any anti-dumping duty imposed by India
- The increased reliance on thin film technologies has augmented the dependence on specific elements like “rare earth” metals in which China has a near monopoly
Declining Output
In a recent study, Mike Bergin of Duke University along with others has found that dust and particulate matter might reduce the energy yield of solar power systems in north India by 17-25%
Auction Problem
In most cases lowest bidder wins
This can lead to a winner’s curse in industries characterized by high uncertainty, or projects with very high time durations
Solution
- Go for a dynamic auction format where bidders can start from a maximum tariff and go downwards, after observing the pattern of bidding by others
- This allows market information to become public, and reduces uncertainty for bidders.
- To adopt a counter-cyclical policy of tendering projects
- Better governance of public sector banks is urgently needed
Conclusion
In the absence of such measures, despite our best intentions, the experience of thermal power will only be repeated in our solar mission
[1]China offers to rename OBOR to allay India’s fears
Context
Outlines a four-point solution to ‘manage differences’
Backdrop
The Chinese Ambassador to India during a closed-door interaction at the United Services Institution, a military think-tank in Delhi
What has happened?
China is prepared to consider renaming the China-Pakistan Economic Corridor (CPEC) if it would end India’s reservations over its One Belt One Road (Or Belt and Road Initiative) passing through Pakistan-occupied Kashmir (PoK)
Other suggested measures
A new treaty on cooperation, restarting talks on a free trade agreement (FTA), an early resolution to the border issue and aligning the B&R with India’s “Act East policy.”
China has no intention to get involved in the sovereignty and territorial disputes between India and Pakistan
[2]Different offences cannot be boxed into one trial
Context
Says joint trial is an exception, the norm is separate trials for distinct offences
What has happened?
A general conspiracy which gives birth to a cascade of distinct offences committed in various places spread over several years and involving different accused persons cannot be boxed into one trial. This would lead to injustice
[3]Push for private sector in defence production
Context
Centre moots tie-up with global firm
What has happened?
The Government has accelerated efforts to finalise the ambitious Strategic Partnership (SP) model, which would give a major boost to private sector participation in defence manufacturing
Guidelines on the anvil
As part of the stepped up efforts, the Defence Ministry has scheduled consultations with the industry to get their feedback in the next couple of days.
The policy, which is part of the Defence Procurement Procedure (DPP) 2016, will set out guidelines on how major Indian private sector companies can tie up with global Original Equipment Manufacturers in critical military systems and platforms.
Editorial/OPINION
[1]Towards a unique digital South Asian identity
Context
Executed properly, Aadhaar could become a central pillar of India’s ‘neighbourhood first’ policy
What has happened?
The enthusiasm with which government agencies and businesses have embraced Aadhaar should prompt India’s foreign policy planners to deploy it abroad
Why?
A single, region-wide platform to authenticate residents of South Asia could integrate its markets, bring communities closer and allow governments to offer a wider range of governance services
Identity Schemes in Other Asian Countries
- Pakistan has the National Database and Registration Authority (NADRA), that for two decades has collected biometric information
- Nepal, meanwhile, intends to roll out biometrics-driven “national ID cards” to its citizens soon
- The Election Commission in Bangladesh began issuing such cards last year
Exporting Aadhar: Building Applications with Aadhar
Beyond collecting biometric data, however, South Asian governments have not been able to create digital ID-enabled applications. This is what Aadhaar has mastered, making it a very valuable foreign policy export. Its open application programming interface (API) layers — known as “India Stack” — set Aadhaar apart from other biometric ID programmes. India Stack APIs, which include the Unified Payment Interface (UPI) and Aadhaar e-KYC, allow applications to be built atop them
Strategic Benefits
Political and economic leverage
Aadhaar-like platforms catalyse innovation by tailoring Big Data for governments and businesses alike. The political and economic leverage India will accrue as a result of enabling such entrepreneurship will surpass fixed investments by China
India in Control, not China
Once a critical mass of Aadhaar-enabled applications has been created, interoperability standards for the digital ecosystem will be determined by the Unique ID programme. App developers, handheld manufacturers, and even Internet Service Providers will have to work around Aadhaar’s encryption standards and data protection guidelines
Concerns: Creating Data Protection Laws
South Asian countries that have not digitised their public databases fully can create secure ones to link to unique ID programmes. A national ID programme would also be a trigger for them to enact strong data protection laws
Conclusion
Aadhaar is a constitutional technology that can build whole new information and communication technology ecosystems. New Delhi should appreciate its foreign policy value and integrate the project into its neighbourhood agenda
[2]Being humane
Context
- A law against torture should enable ratification of the Convention barring custodial excesses
- Two decades after signing the UN Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, India is yet to ratify it
Why?
- India’s extradition requests pending due to absence any such law against torture, e.g. an extradition request relating to Purulia arms drop case suspect Kim Davy failed owing to the apprehension that he may be ill-treated in India
- India was subjected to close questioning during the Universal Periodic Review of its human rights obligations at the UN Human Rights Council in Geneva
Prevention of Torture Bill, 2010
- Prevention of Torture Bill, 2010, was passed by the Lok Sabha in 2010, but it was referred to a Select Committee in the Rajya Sabha
- In its report submitted in the same year, the committee recommended exhaustive amendments to the Bill to make it consistent with the language and intent of the Convention
- Thereafter the Bill lapsed
- The government now says it has referred the matter to the Law Commission for an authoritative view
Conclusion
It is imperative that a strong law that criminalises torture, imposes stringent punishment for it and contains liberal provisions for those suffering torture to complain against their perpetrators, prosecute them and be compensated and rehabilitated, is passed at the earliest
Economy
[1]Centre to raise with U.S. non-tariff barriers
Context
‘Curbs affecting exports of goods made in India’
What has happened?
India is planning to take up with the US administration the “barriers” imposed by the U.S., which are hurting Indian goods exports to that country in sectors including agriculture, pharmaceuticals and other industrial products
This issue would also be on the agenda of the next India-U.S. Trade Policy Forum (TPF) — the main bilateral platform for discussing and resolving trade and investment issues
Child labour
According to the Indian Commerce Ministry, the U.S. Department of Labor (DOL) has “arbitrarily” listed 23 items produced in India on the ‘List of Goods Produced by Child Labour or Forced Labour’ — which is in effect a ban on their import
Major NTB (Non-Tariff Barrier)
The Trade Expansion Act of 1962 of the U.S., allowing American manufacturers to petition for curbing imports from third nations on national security grounds without providing proof from industry
Pharma exports
Indian pharmaceutical exports to the U.S. are hit by the increase in registration fees, approval delays and low approval rates for registrations mandatory for sale of all new drugs in the U.S
The Ministry has also opposed the U.S. requirement of irradiation treatment and inspection of mangoes prior to shipping from India.
[2]‘Decision on NPAs still lies with banks’
Context
However, RBI scrutiny and committee advisories will help, says Ministry official
What has happened?
Banks would still be responsible for taking commercial decisions on non-performing assets weighing down their balance-sheets, including possible haircuts, but scrutiny from the Reserve Bank of India (RBI) and advisories from oversight committees on the processes they adopt should comfort bankers
New JLF norms
- As per the new norms for JLFs (joint lenders’ forum) notified by the RBI, just 60% of lenders by value of the loan have to reach a consensus on the course of action to be adopted for an NPA compared with a 75% consensus requirement earlier. The rest of the lenders are required to follow suit in such cases
- RBI is coming into the process but the commercial decision is still taken by the banks
Indian Express
[1]Network is the key
Context
India must ramp up its internal connectivity to counter China’s Belt and Road Initiative
What has happened?
India has turned its back on China’s celebration of President Xi Jinping’s “Belt and Road Initiative” (BRI) this week in Beijing
Why is India against it?
- China-Pakistan Economic Corridor (CPEC), an important part of the BRI, runs through a part of Jammu and Kashmir that is occupied by Islamabad
- BRI will massively strengthen China’s commercial, economic, political and security influence on India’s neighbourhood and marginalise Delhi’s regional primacy
- China is set to become the first non-Western power in the modern era to shape the geopolitics of Eurasia and the Indo-Pacific.
Japan also not in favor: Partnership for Quality Infrastructure
- It has already outlined a Belt and Road initiative of its own, called the Partnership for Quality Infrastructure
- While its propaganda might not be as effective as China’s, Japan has put up nearly $150 billion to support infrastructure projects all across the Indo-Pacific and Eurasia
What India should do?
- Ramp up its own internal connectivity: BRI was built on top of the internal “Go West” strategy that focused, over the last two decades, on unifying China’s domestic market and connecting its developed east coast with the interior provinces
- Delhi should modernize connectivity across its land and maritime frontiers with its neighboring countries
- India can work with nations like Japan and multilateral institutions in developing regional connectivity in the Subcontinent and beyond
Conclusion
Delhi’s urgent imperative is to recognise that China’s BRI is not a diplomatic problem for the foreign office to resolve. It is about mobilising the full resources of the Indian state and creating effective mechanisms — public and private — to purposefully address the long-term opportunities and challenges that China’s BRI presents.
Live Mint
[1]NPA resolution: Let’s try again
Context
New Ordinance empowering RBI to get more actively involved in the stalled resolution process
What has happened?
The government seems to be hoping that the Reserve Bank of India will solve what is essentially a collective action problem
Bad Loans
These bad loans—an estimated Rs9.64 trillion—are now the biggest single threat to Indian economic stability. The potential costs of a clean-up have also mounted
Previous Strategy of RBI
- It gave banks freedom to deal with distressed loans by allowing, for example, the lenders to convert debt into equity through strategic debt restructuring (SDR) or by helping companies rework repayment schedules through the scheme for sustainable structuring of stressed assets (S4A)
- Since India did not then have an effective bankruptcy law, the regulator sought to create a resolution system that resembles the out-of-court bankruptcy process
Now
The Indian central bank can now “issue directions to banking companies for resolution of stressed assets” and also “issue direction to any banking company to initiate insolvency resolution process in respect of a default, under the provisions of the Insolvency and Bankruptcy Code, 2016”
The choice of RBI as the agency to push for resolution is a strange one. Why?
- The international experience shows that central banks mainly intervene in banking crises by providing emergency liquidity
- It is the government that moves in to push for the resolution of distressed debt.
- It is hard to find any other recent example of a central bank being tasked with a banking sector clean-up. Chile is perhaps the only notable exception, in 1982
Two Alternatives to RBI
- The dormant Bank Boards Bureau (BBB) could have been used to provide cover to bankers scared of selling loans at discounts
- The Financial Sector Legislative Reforms Commission had recommended the setting up of a resolution corporation to deal with distress in financial firms
What Now?
The new ordinance may accelerate the resolution process, especially since the new bankruptcy law is now in place
Challenges
- To find buyers for the distressed debt that banks may want to sell or for assets if enterprises are wound down under the bankruptcy law
- Capital needs to be raised after banks take a knock with the inevitable loan write-downs; the combined bill for cleaning-up banks as well as meeting Basel III norms is around $100 billion
- To what extent corporate borrowers rather than taxpayers will bear the costs of bad loan resolution.
Conclusion
There is still a tough journey ahead for Indian banks
[2]India’s solar mission can cause new debt problems
Context
Indian solar project developers may find their projects unviable in the event of currency fluctuation or changes in China’s policy on solar cell and module export
What has happened?
- The recent decision of the Supreme Court not to allow a revision of the tariff charged by Tata Power Co. Ltd and Adani Power Ltd for their 4,000MW (megawatt) and 4,620MW Mundra ultra-mega power projects (UMPPs) based on Indonesian coal raises serious concerns about the viability of these projects
- A decision by the Indonesian government to link the price of coal exported from the country to a benchmark based on international prices of coal has toppled carefully laid plans
UMPPs
- In 2006, it was decided to build UMPPs to take care of India’s crippling power woes
- One of the reasons for the failure of UMPPs was that when the bids were submitted, coal prices were very low
- Subsequently, prices went up, making the projects unviable
- Power purchase agreements (PPAs) with tenures of 25 years were written without a provision for a revision of terms.
Issues
Heavy Dependence on China:
- India’s solar programme is heavily dependent on imported solar cells and modules, mainly from China
- China uses predatory pricing and dumps cheap thin film solar cells to capture the Indian market in the absence of any anti-dumping duty imposed by India
- The increased reliance on thin film technologies has augmented the dependence on specific elements like “rare earth” metals in which China has a near monopoly
Declining Output
In a recent study, Mike Bergin of Duke University along with others has found that dust and particulate matter might reduce the energy yield of solar power systems in north India by 17-25%
Auction Problem
In most cases lowest bidder wins
This can lead to a winner’s curse in industries characterized by high uncertainty, or projects with very high time durations
Solution
- Go for a dynamic auction format where bidders can start from a maximum tariff and go downwards, after observing the pattern of bidding by others
- This allows market information to become public, and reduces uncertainty for bidders.
- To adopt a counter-cyclical policy of tendering projects
- Better governance of public sector banks is urgently needed
Conclusion
In the absence of such measures, despite our best intentions, the experience of thermal power will only be repeated in our solar mission
Leave a Reply