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1. Ease Of Doing Business

More about the report

  • The Doing Business report ranks countries on the basis of distance to frontier (DTF), a score that shows the gap of an economy to the global best practice.

  • The World Bank has recognised India as one of the top improvers for the year. This year, India features among the report’s list of top 10 improvers for the second year in a row and only one in BRICS to feature in this list.

  • India is seeking to reach the 30th position by 2020, according to an output-outcome framework document prepared by the government.

  • It will help India maintain its goal of strong and sustained economic growth, attract more FDI, achieve sound living standards and moderate inflation.

  • The Doing Business 2019 report bases the rankings on field surveys and interviews with corporate lawyers and company executives in Delhi and Mumbai.

 

Reasons for Improvement

  • Improving MSME sector: India’s strong reform agenda to improve the business climate for small and medium enterprises is bearing fruit.

  • Faster registration process: Starting a business was made easier through consolidation of multiple application forms and introduction of a goods and services tax (GST), while getting electricity was made faster and cheaper.

  • Infrastructural Development and fiscal reforms: Government focus on logistics and supply chain centred initiatives and fiscal reforms like Insolvency and Bankruptcy Code has helped in promoting trade and business.

  • Reduction in Corruption: Many initiatives such as Aadhaar, making registration online, acceptance of main amendments in Companies Amendment (Ordinance), 2018

  • Shifting of jurisdiction of 16 types of corporate offences from the special courts to in-house adjudication, which is expected to reduce the case load of Special Courts by over 60%, thereby enabling them to concentrate on serious corporate offences.

  • The penalty for small companies and one person companies has been reduced to half of that applicable to normal companies.

  • Instituting a transparent and technology driven in-house adjudication mechanism on an online platform and publication of the orders on the website.

  • Strengthening in-house adjudication mechanism by necessitating a concomitant order for making good the default at the time of levying penalty, to achieve the ultimate aim of achieving better compliance.

  • Declogging the NCLT by vesting the Central Government the power to approve cases of conversion of public companies into private companies.

  • Electronic signatures etc. has been taken. In fact, there has been a considerable year-on-year fall in the number of companies that viewed ‘corruption’ as a major barrier – from 51% in 2015 to 25% in 2017.

  • Improvement in construction permits: It was improved by implementing the single-window clearance system in Delhi and the online building permit approval system in Mumbai.

  • Improvement in trading across borders: It was achieved by reducing the time and cost to export and import through various initiatives, including the implementation of electronic sealing of containers, upgrading of port infrastructure and allowing electronic submission of supporting documents with digital signatures under its National Trade Facilitation Action Plan 2017-2020.

 

Recent Government Initiatives for Promotion of Ease of Doing Business

  • Ease of Doing Business Grand Challenge: The objective of this challenge is to invite innovative ideas based on Artificial Intelligence, Internet of Things, Big Data Analytics, Blockchain and other cutting edge technology to reform Government processes. The platform for the Grand Challenge is the Startup India Portal.

  • Companies Amendment (Ordinance), 2018: The Ordinance, which has been promulgated is based on the recommendations of the Committee appointed by the Government to review offences under the Companies Act, 2013.

  • Industrial Park Rating System: Under this Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce & Industry has undertaken the exercise to rate the industrial parks on parameter such as: internal infrastructure, external infrastructure, business services and facilities, environment, safety management and connectivity.

  • Relaxation in Building Norms:

  • The Ministry of Environment, Forest and Climate Change (MoEFCC) issued a notification easing the green norms for the building and construction sector, wherein residential projects up to 1.5 lakh square metres (built-up area) will not require ‘prior environmental clearance’.

  • Urban local bodies such as municipalities will now have the power to grant building permission, directly benefiting the EoDB ranking for the housing and construction sector.

 

Challenges

  • Challenges like fluctuating commodity prices and exchange rates, and lack of basic infrastructure continue to persist.

  • Doing business in a country like ours, with its cultural, geographical, demographical diversity is not an easy endeavor.

  • There remain significant complaints about around the lack of transparency around business approvals, particularly in the case of statutory approvals for investments.

  • The extent of digitalisation, however, varies markedly across sectors, as does corruption, with those engaging in infrastructure projects still reporting significant issues relating to corruption.

  • The key issue for those outside India is increasingly market demand for their products and services relative to government and bureaucracy-related barriers.

  • Those currently doing business in India cite ‘taxation issues’ as a consistent barrier, whilst those looking to enter the Indian market understandably rate ‘identifying a suitable partner’ as their most salient issue after a considerable decline in ‘legal and regulatory impediments’ from 2017 to 2018.

  • Relaxing Building norms for EoDB has sent ripples of fear and anticipation among environmentalists and green activists across the nation considering the extent of corruption in municipalities across the nation.

 

Way Forward

  • Cooperation: As highlighted by the Economic Survey, addressing deep-rooted problems will only be possible through extensive cooperation between the organs of the government—“cooperative separation of powers”.

  • Need for Strong Contract Enforcement:

  • A sound contract enforcement mechanism is essential for maintaining business confidence, reducing uncertainty and promoting fair play in the economy.

  • The Economic Survey 2017-18 tried to highlight the impact of this problem by drawing attention to the costs of stalled projects and legal fees.

  • Ease of Taxation & Improvements in GST: Further simplification of returns processes, addressing concerns for India’s huge MSME/SME sectors etc. are necessary steps that need to be taken to reap the kind of benefits envisioned during GST inception.

  • Simplified Infrastructure and Government frameworks: Better roads and transportation facilities speed up the transportation of goods and brings up the efficiency of the business. Introduction of E-Way bills and changing regulatory frameworks around inter/intra state bill movements for instance is a good example of unified policies that will help in further building the right frameworks.

  • Enhanced Cross Border Functionalities across the varied business segments: For example, we can further integrate registration processes into a single form by converging GST with PAN/TAN registration.

  • Further Technology Enhancement: Interlinking of existing technologies to boost up business in different industries like healthcare, tourism, education etc.

  • Registering Property: Digitization of land records and maps and transparency on encumbrances will ease the process of registering property.

  • Resolving Insolvency: Increased usage will lead to recognition; the indicator will improve as more insolvent companies opt for reorganization plans instead of liquidation.

 

2. World Development Report

Background

  • Since, Industrialization (18th century) there is concern of joblessness among individual as machine can replace human from many routine task and ought to eliminate many low-skill jobs. However, they have created more prosperity than they have destroyed.

  • Technology through innovation, generates new sectors and new tasks, which provides opportunities to create new jobs, increase productivity, and deliver effective public services

 

Finding of the report

  • Technology is blurring the boundaries of the firm: Using digital technologies, entrepreneurs are creating global platform–based businesses that differ from the traditional production process in which inputs are provided at one end and output delivered at the other.

  • Technology reshaping the skills: There is an increasing demand for three types of skills i.e advanced cognitive skills such as complex problem-solving, socio-behavioral skills such as teamwork, and skill combinations that are predictive of adaptability such as reasoning and self-efficacy.

  • Change in Nature of Employment: There is a shift in employment from manufacturing to services in high income countries while in some developing countries, it’s increasing in manufacturing sector.

  • High Informality in developing countries: A large number of workers remain in low-productivity jobs, often in informal sector firms whose access to technology is poor.

  • Societal Crisis: Inequality of opportunity or a mismatch between available jobs and skills, can lead to migration or societal fragmentation. eg: Europe Refugee Crisis etc.

  • Inefficient Social Security Structure of Developing Countries: It found that systems that depend on contributions from employers and employees, to finance old-age security, are not a good fit for developing countries.

  • Tax Evasion: Digital economy is making it easier for corporations to avoid taxation, as it’s easier to shift profits to low-tax jurisdictions.

 

Suggestion in report to Improve Human Capital

  • Improving Social Investment: Investing in human capital, particularly early childhood education, to develop high-order cognitive and socio-behavioral skills in addition to foundational skills.

  • Enhancing social protection: A guaranteed social minimum (Universal basic income) and strengthened social insurance, complemented by reforms in labor market rules in some emerging economies is must for developing a just and equitable society.

  • Creating fiscal space for public financing of human capital development and social protection by imposing property taxes in large cities, excise taxes on sugaror tobacco, carbon taxes etc to increase a government’s revenue.

  • Optimizing taxation policy and improving tax administration to increase revenue by eliminating the tax avoidance techniques used by firms to increase their profits.

  • Developing countries: They will need to take rapid action to ensure they can compete in the economy of the future and harness the benefits of technological disruptions.

 

Human Capital Index

About HCI

  • The HCI measures the amount of human capital that a child born today can expect to attain by age 18. It conveys the productivity of the next generation of workers compared to a benchmark of complete education and full health.

  • HCI is part of the World Development Report (WDR). As part of this report, the World Bank has launched a Human Capital Project (HCP).

  • Human Capital Project (HCP): A program of advocacy, measurement, and analytical work to raise awareness and increase demand for interventions to build human capital. The HCP has three components:

  • Cross-country metric—the Human Capital Index (HCI).

  • Program of measurement and research to inform policy action.

  • Program of support for country strategies to accelerate investment in human capital.

 

Finding

  • Global Performance: Singapore topped the list while, India was placed at 115th position out of 157 countries, lower than neighboring Nepal, Sri Lanka, Myanmar and Bangladesh.

  • State Of Human Capital In India

  • Human Capital Index: A child born in India today will be 44 % as productive when she grows up as she could be if she enjoyed complete education and full health.

  • Probability of Survival to Age 5: 96 out of 100 children born in India survive to age 5.

  • Expected Years of School: In India, a child who starts school at age 4 can expect to complete 10.2 years of school by her 18th birthday.

  • Harmonized Test Scores: Students in India score 355 on a scale where 625 represents advanced attainment and 300 represents minimum attainment.

  • Learning-adjusted Years of School: Factoring in what children actually learn, expected years of school is only 5.8 years.

  • Adult Survival Rate: Across India, 83 % of 15-year olds will survive until age 60. This statistic is a proxy for the range of fatal and non-fatal health outcomes that a child born today would experience as an adult under current conditions.

  • Healthy Growth (Not Stunted Rate): 62 out of 100 children are not stunted. 38 out of 100 children are stunted, and so at risk of cognitive and physical limitations that can last a lifetime.

 

3. Non-Banking Financial Companies (Nbfcs)

More About News

  • Credit enhancement means improving the credit rating of a corporate bond. For example, if a bond is rated BBB, credit enhancement, which is basically an assurance of repayment by another entity, can improve the rating to AA.

  • This is done to provide an additional source of assurance or guarantee to service the bond.

  • The move comes at a time when NBFCs and HFCs have requested the government and regulators to ensure that confidence returns to the market.

 

About NBFCs

  • Definition: A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business.

  • It does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.

  • Systemically important NBFCs: NBFCs whose asset size is of ₹ 500 cr or more are considered as systemically important NBFCs. Example. Power Finance Corporation Limited (PFCL), Rural Electrification Corporation Limited (RECL), IL&FS, etc.

  • Difference between banks & NBFCs:

  • NBFCs cannot accept demand deposits (but some can accept Time deposit and such NBFCs are called Deposit taking NBFC).

  • Unlike banks, CRR does not apply on any NBFCs while a lower SLR of 15% applies only to Deposit taking NBFC.

  • NBFC do not form part of the payment and settlement system and cannot issue cheques drawn on itself.

  • NBFCs get license under Companies Act, 1956 and Banks under Banking regulation Act.

  • Deposit insurance facility is not available to depositors of NBFCs

 

Current problems with NBFCs

  • Multiple regulatory bodies: RBI doesn’t regulate all the NBFC. Other institutions such as NHB (National Housing Bank), SEBI, Insurance Regulatory and Development Authority (IRDAI), etc. are also involved depending on the type of NBFC.

  • Difficulties in access to credit

  • There is a reversal of interest rate cycle as interest rates are now going up both domestically and also in the international market. The RBI has steadily hiked interest rates in the recent months.

  • Another fundamental issue is the asset-liability mismatch in the operations of NBFCs as these firms borrow funds from the market — say for 3 or 5 years — and lend for longer tenures — 10 to 15 years. It has led to a situation where the NBFCs are facing a severe liquidity crunch in the short term.

  • The mutual fund is among the biggest fund provider to NBFCs via commercial papers and debentures. These investors are getting reluctant to lend post the IL&FS crisis.

  • Riskier Lending Pattern:

  • Unlike banks, NBFCs are less cautious while lending. For example NBFCs have grown their portfolio of small and micro loans in a big way where there are risks of lack of credit history, scale and historically high NPAs.

  • The unsecure loan segment is also on the rise in the NBFC segment.

  • Cascading effect of Infrastructure Leasing and Financial Services (IL&FS) default: Default followed by downgrade of IL&FS recently has created a liquidity squeeze for the entire non-banking financial company (NBFC) sector.

  • Delayed Projects: Many infrastructural projects financed by NBFCs are stalled due to various reasons like delayed statutory approvals, problems of land acquisition, environmental clearance, etc. which has impacted their financial health.

 

Way Forward for NBFC sector

  • Better Regulatory Regime: The Financial Sector Legislative Reform Commission (FSLRC) recommendation of creating a body with powers to monitor risk-cutting across sectors should be implemented.

  • Timely Project clearances: Ensuring timely clearances, especially to infrastructural projects is a must to minimise cost inflation of these projects. Expanding the “Plug and Play” approach to other sectors can be a possible solution.

 

Suggestions for RBI:

  • Recent Steps Taken For IL&FS crisis:

  • Change in Management: The board of IL&FS was superseded with six new directors after the government moved a petition in the NCLT (National Company Law Tribunal) to remove the previous board of directors.

  • Investigation: Government has also ordered Serious Fraud Investigation Office (SFIO) to investigate into the crisis.

  • For enhancing Liquidity

  • Relaxation of the Liquidity Coverage Ratio by 2%: It means that banks now have an additional 2% of their deposit base freed up for lending

  • Open Market Operations: The RBI later also enhanced liquidity into the system by purchasing government bonds from the market.

  • Relaxing Asset Securitisation Norms: The RBI has allowed NBFCs to sell or securitise their loan of more than five-year maturity after holding those for six months (Earlier they had to hold these assets for at least one year to do so).

  • RBI must encourage non-banking financial companies to securitise their assets that can be purchased by banks.

  • RBI must revisit lending restrictions placed on banks under Prompt Corrective Action and consider allowing them lending to NHB.

  • RBI may also open special window for mutual funds to get refinance against collateral.

  • A coordinated and consultative approach at this point of time to address the various problems of the sector is critical to national economic health and stability.

 

4. Capital Conservation Buffer (Ccb)

​​What is Capital Conservation Buffer (CCB)?

  • It is the mandatory capital that financial institutions are required to hold above minimum regulatory requirement.

  • According to CCB norms, banks will be required to hold a buffer of 2.5% Risk Weighted Assets (RWAs) in the form of Common Equity, over and above Capital Adequacy Ratio of 9%.

  • CCB currently stands at 1.875% and remaining 0.625% was to be met by March 2019.

 

Significance of CCB

  • Types of Bank Capital

  • Tier I capital (Core Capital): It consists of money kept as Statutory Liquidity Ratio (SLR), in physical cash form & as share capital and secured loans. At least 6% of CAR must come from Tier 1 capital. This capital can absorb losses without bank ceasing its trading operations.

  • Tier II capital (supplementary capital): It includes after tax income, retail earnings of the bank, capital in the form of bonds/hybrid instruments & unsecured loans (getting serviced).

  • Tier III capital: Includes Non-Performing Assets (NPAs), subordinated loans (not getting serviced) & undisclosed reserves from the balance sheet.

  • It is designed to ensure that banks build up capital buffers outside periods of stress which can be drawn down, as losses are incurred.

  • Regulations targeting the creation of adequate capital buffers are designed to reduce the procyclical nature of lending by promoting the creation of countercyclical buffers as suggested Basel III norms. During credit expansion, banks have to set aside additional capital, while during the credit contraction, capital requirements can be loosened. Systematically important banks are subject to higher capital requirements.

  • The capital buffers increase the resilience of banks to losses, reduce excessive or underestimated exposures and restrict the distribution of capital. These macro-prudential instruments limit systemic risks in the financial system.

 

Why banks are unable to adhere to CCB norms?

  • Mounting pile of stressed assets has resulted into low credit growth, deterioration in asset quality, low profitability of Indian banks & over-reliance on capital infusion from the Government. In order to protect their margins & first meet the basic capital ratios i.e. CRAR of 9%, banks have slowed down the adoption of CCB Basel III norms.

 

Capital Adequacy Ratio (CAR)

  • CAR = (Tier I + Tier II Capital)/Risk Weighted Assets

  • Expressed as a percentage of a bank's risk weighted credit exposures.

  • Measure of bank's financial strength to ensure that banks have enough cushions to absorb losses before becoming insolvent and losing depositors' funds.

  • CAR is required to be 9% by RBI (based on BASEL III norms), where 7% has to be met by Tier 1 capital while the remaining 2% by Tier 2 capital.

 

Provisioning requirement

  • Setting aside a portion of profits, in proportion of risk weighed loans given, to compensate a probable loss due to incomplete loan recovery is called provisioning.

  • Like CCB & CAR requirements, provisioning is one of the contingency measures to contain risk.

  • Different types of assets have different risk profiles e.g. Government debt has 0% risk weight

  • A high-risk weight discourages lending by increasing the capital requirement for lenders.

 

About BASEL norms

  • Basel Committee on Banking Supervision is an international committee formed in 1974 to develop standards for banking regulation.

  • It consists of central bankers from 27 countries and the European Union. It is headquartered in the office of Bank for International Settlements (BIS) in Basel, Switzerland.

  • It developed a series of policy recommendations known as Basel Accords, which suggested minimum capital requirements to keep bank solvent during the times of financial stress.

 

Way Forward

  • While relaxation of the buffer norms and capital infusion by the government are welcome steps in the time of exigency, it must be ensured that good money is not thrown after bad money. Improving credit discipline and risk management systems are the need of the hour for public sector banks. The governance issues of the banks and their over-enthusiastic lending in the past needs to be addressed.

  • The government should initiate long-pending reforms (recommended by the P.J. Nayak Committee):

  • Cede control of nationalized banks and cut its stake below 51%.

  • Form an independent Banking Investment Company (BIC) for corporatized governance of PSBs.

  • Performance related pay structure and incentives for upper management functionaries.

 

5. CREDIT RATING AGENCIES

More About News?

  • The rating agencies will now need to disclose the liquidity position of the company being rated and also check for asset-liability mismatch. This would lead to timely availability of information about the company. This would include parameters such as: Liquid investments or cash balances, Liquidity coverage ratio, Access to unutilized credit lines and adequacy of cash flows for servicing debt obligation.

  • CRAs would also need to disclose the source and rationale if the company is expecting additional funds to deal with its debt.

  • In order to promote transparency and to enable the market to best judge the performance of the ratings, the CRA should publish information about the historical average rating transition rates across various rating categories, so that investors can understand the historical performance of the ratings assigned by the CRAs. The transition rate indicates the number of instances when credit ratings have changed over a specified period.

 

Issues with Credit Rating Agencies

  • Conflict of interest: The CRA Regulations in India currently recognise only the issuer-pays model, under which, the rating agencies charge issuers of bond and debt instruments a fee for providing a ratings opinion. Thus, this model has an inbuilt conflict of interest.

  • Another example of conflict of interest is non-rating services such as risk consulting, funds research and advisory services given to issuers for which ratings have been provided.

  • Rating shopping: It is the practice of an issuer choosing the rating agency that will either assign the highest rating or that has the most lax criteria for achieving a desired rating. Hence, the system does not permit publishing a rating without the issuer’s consent.

  • Credit rating agencies in India:

  • The Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 empower SEBI to regulate CRAs operating in India.

  • All the credit agencies need to be registered with SEBI in order to operate in India.

  • There are seven Credit Rating Agencies registered with SEBI, viz. CRISIL, ICRA, CARE, India Ratings and Research, SMERA, Infomerics and Brickworks.

 

Importance of CRAs

  • They provide retail and institutional investors with information that assists them in determining if debtor will be able to meet their obligations.

  • They help investors, customers etc. to get an overall idea of the strength and stability of an organization and enable them to make informed decisions.

  • These agencies also help build trust between the investors and the governments by quantifying the level of risk associated with investing in a particular country. For example-Sovereign credit ratings are given to the national governments which highlight a country’s economic and political environment.

  • CRAs help strengthening of secondary market by increasing borrower pool.

  • Credit ratings ensure a discipline amongst corporate borrowers due to because of this desire to have a good image.

  • Less competition: Credit-rating market in India is oligopolistic, with high barriers to entry. Lack of competition in the market enables CRAs to have longer, well- established relationships with the issuers which can hamper their independence.

  • Poor Rating Quality: Often ratings are provided on limited information. For e.g. If the issuer decides not to answer some determinant questions, the rating may be principally based on public information. Many rating agencies don’t have enough manpower which often leads to poor quality.

  • Independence of the ratings committee: Over the years, the membership of the ratings committee has shifted from external experts to employees of the ratings agency which has raised concerns about their independence.

 

Suggestions for addressing these challenges

  • Removal of conflict of Interest: Moving back to the earlier "subscriber pays" model in which investors pay for the ratings can be a possible approach.

  • More Players: Rules should be made easier for new players to enter the credit rating space and compete against them.

  • Improve Quality of Ratings:

  • SEBI must also assess the predictive ability of the current rating models followed by the agencies. There is a need to invest in high-tech predictive modelling techniques.

  • Increased remuneration for manpower to attract the best talent must be ensured.

  • Cursory disclosure of all ratings: CRAs can be asked to provide briefly in their press release to the ratings given by other CRAs to the same borrower. This can help in discouraging “rating shopping”.

  • Legal protection for CRAs: There are instances of Indian CRAs being sued by the company it rates, in a bid to prevent the rating downgrade. The regulator should consider framing laws that allow CRAs to express their rating opinion without fear of being sued.

  • Awareness among Investors: Investors should be made aware about the rating process and be asked to conduct a review by themselves too and stop relying solely on the ratings.

  • Rotation of rating agencies: SEBI can also explore the possibility of a mandatory rotation of rating agencies by the debt issuers (like corporations are required to change their auditors periodically under the Companies Act, 2013).

 

6. National Financial Reporting Authority

Why the need arises for NFRA?

  • The recent failure of ICAI (Institute of Chartered Accountants of India) to spot corporates fraud, raised the demand for setting up of an independent regulator NFRA.

  • NFRA was one of the key changes brought by the Companies Act 2013 but its provisions were not notified for the last five years.

 

What is NFRA?

  • It is established as an independent regulator to oversee the auditing profession and accounting standards.

  • It consists of a Chairperson, three full time members and nine part-time members.

  • Chairperson and full-time members would be selected through a search-cum-selection committee headed by Cabinet Secretary.

 

About the NFRA Rule 2018

  • It will oversee the auditors of banks, insurers, electricity firms and other entities referred to it by the government.

  • NFRA can investigate the auditors of:

  • Listed entities, unlisted entities with paid-up capital of not less than ₹500 crore or annual turnover of over ₹1,000 crore.

  • Those having aggregate loans, debentures or deposits of not less than ₹500 crore.

  • ICAI (Institute of Chartered Accountants of India)

  • It is a statutory body established by an Act of Parliament, viz. The Chartered Accountants Act, 1949.

  • It functions under the administrative control of the Ministry of Corporate Affairs.

  • It conducts CA exams, registers qualified CAs, issues certificates of practice etc.

  • It investigates the auditors (Charted Accountants) of small listed companies (other then entities notified under NFRA rule 2018)

  • It will provide recommendation to NFRA.

  • International Forum of Independent Audit Regulators (IFIAR)

  • It is an independent audit regulator from 52 jurisdictions representing Africa, North America, South America, Asia, Oceania, and Europe.

  • Its aim is to serve the public interest and to enhance investor protection by improving audit quality globally.

  • It shares knowledge of the evolving audit environment and the practical experience of independent audit regulatory activity.

  • It enables the NFRA to debar erring auditors or audit firms and it can also refer service of an auditors to Quality Review Board under Chartered Accountants Act.

 

Significance of NFRA

  • With the constitution of NFRA, India is now eligible to become a member of the International Forum of Independent Audit Regulators (IFIAR).

  • This shows a distinct shift from self-regulation to an independent oversight of auditors which is line with international best practices.

  • NFRA will strengthen the working mechanism of ICAI because it will provide greater assurance that improper conduct will be punished which would further strengthen the functional credibility of ICAI.

  • The rising challenges of technology require single-minded attention to skill development, now, ICAI will be able to pay more attention to educating and training current and future members.

  • Apart from this, NFRA will have a positive impact oncurrent corporate governance regime in the country.

 

7. Ecb Norms

​​About External Commercial Borrowings

  • It refers to commercial loans raised by eligible Indian resident entities from non-resident lenders with a minimum average maturity of 3 years.

  • It can be in the form of bank loans, buyers’ credit, suppliers’ credit or securitized instruments. If the foreign money is used to finance the Equity Capital, it is termed as Foreign Direct Investment

  • ECBs are governed under the FEMA guidelines. They can be assessed under two routes i.e. Automatic route and approval route. Generally, companies in businesses (such as hotel, hospitals and software) can access the automatic route.

 

Advantages of ECBs

  • o Cost of raising ECBs is lower than domestic borrowings if borrowed from economies with a lower rate of interest. It also improves profitability of company

  • o The borrower can diversify the investor base as it provides access to international markets for the borrowers.

  • o The government can direct inflows into specific sectors by allowing higher ECBs in them, thus promoting development.

  • o It increases the external debt of the country

  • o The borrower lends in trouble if the borrowings are not hedged properly and the currency depreciates sharply.

  • o There is also concern that dependence on ECB is rising to fund the current account deficit which can have negative consequences.

8. LEGAL ENTITY IDENTIFIER

​​What is LEI?

  • It is a 20 character global reference number conceived by G20 that uniquely identifies every legal entity or structure that is party to a financial transaction, in any jurisdiction.

  • Internationally LEI is implemented and maintained by Global Legal Entity Identifier Foundation through Local Operation Units (LOU) established by each country independently and voluntarily.

  • LEI information is publicly available free of charge and It is reviewed, updated and validated annually by LOUs.

 

Global Legal Entity Identifier Foundation:

  • It is a not-for-profit organization established by the Financial Stability Board in June 2014.

  • It is overseen by the LEI Regulatory Oversight Committee, representing public authorities from around the globe.

  • It publishes Global LEI Index.

  • In India entities can obtain LEI from Legal Entity Identifier India Ltd (LEIL) (only LOU of India), subsidiary of The Clearing Corporation of India Ltd, recognized by RBI under Payment and Settlement Systems Act, 2007.

 

Need and benefits of LEI in India:

  • Monitoring debt: Banks are now required to acquire LEI number from the borrower and report it to Central Repository of Information on Large Credit. A consolidated data under LEI mechanism will help banks to monitor debt exposure of corporate borrowers and also prevent multiple loans against the same collateral, thus helping reduce NPAs

  • Money Laundering: Global financial transactions are difficult to track. However, LEI being a unique global identifier, making it mandatory for all transactions regulated by RBI will help identifying the entity party to the transaction easily and accurately.

  • Tool for RBI: To gain better insight into corporate actions (particularly M&A activity).

  • Other benefits: LEI will improve internal data flow and risk monitoring processes and allow the industry to meet regulatory reporting requirements while minimizing costs.

 

9. Blue Economy

​​Sustainable Blue Economy Conference

  • It’s the first global conference on the sustainable blue economy.

  • It was convened by Kenya and co-hosted Canada and Japan.

 

About Blue Economy

  • As per the World Bank, Blue Economy is the sustainable use of ocean resources for economic growth, improved livelihoods, and jobs while preserving the health of ocean ecosystem.

  • It covers several sectors linked directly or indirectly to the oceans such as fishing, minerals, shipping and port infrastructure, marine biotechnology, marine renewable energy, marine tourism, ocean governance and education.

 

Importance of Blue economy

  • India as a Blue Economy

  • India is trying to achieve the potential of Blue Economy by promoting the spirit of ‘SAGAR-Security and Growth for All in the Region’ in Indian Ocean Region. Some initiatives by India are:

  • Sagarmala Project: Sagarmala initiative focus on three pillars of development o Supporting and enabling Port-led Development through appropriate policy and institutional interventions.

  • Port Infrastructure Enhancement, including modernization and setting up of new ports.

  • Efficient Evacuation to and from hinterland by developing new lines/linkages for transport (including roads, rail, inland waterways and coastal routes).

  • Coastal Economic Zones: 14 CEZs are being developed under Sagarmala initiative covering all the Maritime States. o CEZs are spatial economic regions comprising of a group of coastal districts or districts with a strong linkage to the ports in that region.

  • CEZ will help to tap synergies of planned economic corridors.

  • Resource exploration: India in recent times has shifted its focus towards Indian Ocean resource exploration. E.g. India has explored 75000 sq km of Indian Ocean Seabed and is developing technologies (like remotely operated vehicles) for mining the resources

  • International relations and security: India is cooperating with Indian Ocean littoral countries and projecting itself as ‘net security provider’ to ensure a safe, secure and stable Indian Ocean Region (IOR). India is also cooperating with extra regional powers like US, Japan in IOR. E.g. Asia-Africa growth corridor, QUAD etc.

  • Economic:

  • Oceans provide 30 percent of oil and gas resources.

  • 90% of goods trade takes place through Oceans Sea of Line Communication.

  • Ocean contributes $2.5 trillion to world economy with around 60 million people are employed in fisheries and aquaculture.

  • Seabed Mining of polymetallic nodules and polymetallic sulphides to extract nickel, cobalt, manganese and rare earth metals.

  • Environmental:

  • Mangroves and other vegetated ocean habitats sequester 25 percent of the extra CO2 from fossil fuels, i.e., Blue Carbon.

  • Protection of coastal communities from disasters like floods and storms.

  • A Sustainable Blue Economy can help to achieve commitments under UN’s Sustainable Development Goals 2030, Paris climate agreement 2015 and the UN Ocean Conference 2017.

 

Challenges to Blue Economy

  • Unsustainable development near marine areas: Physical alterations and destruction of marine and coastal habitats & landscapes largely due to coastal development, deforestation, & mining.

  • FAO estimates that approximately 57 percent of fish stocks are fully exploited and another 30 percent are over-exploited, depleted, or recovering.

  • Marine pollution: It is in the form of excess nutrients from untreated sewerage, agricultural runoff, and marine debris such as plastics. Deep sea mining can cause long term irreversible ecological damage to marine ecosystem.

  • Impacts of climate change: Threats of both slow-onset events like sea-level rise and more intense and frequent weather events like cyclones. Long-term climate change impacts on ocean systems like changes in sea temperature, acidity, and major oceanic currents.

  • Geopolitical issues: Geopolitical tussle between in various regions like South China Sea, Indian Ocean Region etc. and undermining International Laws like UNCLOS limits the countries from achieving the full potential of Blue Economy.

  • Unfair trade practices: Many times fishing agreements allow access to an EEZ of country to foreign operators.

  • These operators restrict transfer of specific fishing knowledge to national stakeholders leading to low appropriation of fisheries export revenues by national operators. So the potential for national exploitation of those resources is reduced in the long run.

  • Other non-conventional threats: Defense and security related threats like piracy and terrorism combined with natural disasters (Small Island Developing States are particularly vulnerable).

 

Way Forward

  • National investments must be complemented by regional and global cooperation around shared priorities and objectives. Instruments like blue bonds, insurance etc. can be explored.

  • Use of science, data, and technology for governance reforms to ensure long-term change.

  • Capacity development of coastal communities in form of training and skill development in sustainable use of ocean resources, modern fishing techniques and coastal tourism

  • Anticipating and adapting to the impacts of climate change is an essential component of a blue economy approach.

  • The effective implementation of the UNCLOS is a necessary aspect of promoting the blue economy concept worldwide. That convention sets out the legal framework within which all activities in the oceans and seas must be carried out, including the conservation and sustainable use of the oceans and their resources.

 

11. Ending Apmc Monopoly

  • Why do APMCs need reform?

  • About APMCs

  • Presently, the marketing of agricultural commodities is governed by Agricultural Produce Market Committee (APMC) Act enacted by respective State Governments

  • The notifies agricultural commodities as well as livestock covered under its ambit

  • First sale of crops by farmers - after harvesting - can only take place in APMC authorized mandis (not at the farm gates) through auctions

  • Around 6700 principal regulated primary agriculture markets function across the country, each one located at the gap of 462 sq km

  • To remove discrepancies in agricultural markets, Central Government proposed Model APMC Act, 2003 and Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017.

  • Market Segmentation: The monopoly of APMCs in agriculture market reduces buyer competition in comparison to integrated markets, as it limits the geographical range of the mandis, number of buyers and sector specialization of buyers. Thus, it limits the income accrued to the farmers

  • High Spatial Price Dispersion: In India, the ratio of the highest price of a commodity to its lowest price - a measure of price dispersion (Economic Survey 2015-16) - is almost thrice that observed in the US. This indicates that markets are not well integrated and logistics cost is high

  • Cartelization: Cartelization by traders prevents price discovery mechanisms from functioning in mandis.

  • High Degree of Intermediation: According to Ashok Dalwai Committee, farmers’ share in consumer prices range from 15% to 40% (Ashok Dalwai Committee).

  • Missing credit markets (farmers borrow from intermediaries, conditional to sale of harvest), lack of storage, high transportation & processing costs add to the retail-farmgate wedge. This prevents farmers from realizing higher prices and consumers from buying food at lower prices, lowering overall welfare

  • High License fees + APMC Cess and Taxes: High commission levied on both farmers and buyers create artificial inflation. Final price to consumer high but benefit does not reach the farmer.

  • Wastage (poor storage and transportation): APMCs do no value addition in terms of storage and transport facilities leading to high wastage. Tax money is not utilized properly in creating infrastructure (electronic weighing machines, drying yards, grading & assaying facilities, cold storage etc.) in the mandis

 

Changes Proposed

  • The amendment of the Maharashtra Agricultural Produce Marketing (Development and Regulation) Act, 1963 has deregulated the sale of agri-produce. Thus, first point of sale needn’t be an APMC-regulated mandi

  • No cess or market fee can be charged on the trades outside the purview of the mandi

  • It has also done away with the requirement of separate licenses to trade in different mandis, creating single market in the entire state. This would enable farmers and traders to buy and sell at any mandi without the requirement of the mandatory license.

 

Way Forward

  • Creating Market Infrastructure:

  • Physical integration: Railroad expansion changed the landscape of agricultural markets in US Digital integration: e-NAM (National Agricultural Market). Instead of treating state as single market area, the entire country must be treated as unified market

  • Changing the target market: Like Maharashtra & Bihar, other states must also modify laws that constrain farmers to sell in local mandis only, especially for perishables. Some complementary measures such as provision of land & financial incentives for private sector-promoted market yards is needed. Farmers can also realize maximum profits by selling the produce directly to food processing units (less rotting & regular supply)

  • Transport and storage infrastructure for perishables: Currently, only 7000-8000 refrigerated trucks are plying in India, mostly transporting pharmaceuticals & dairy products. Transport of perishable commodities in Reefer trucks & freight subsidy would help in better supply and availability of the produce. At present, India’s cold storage capacity is nearly 3.5 cr tonnes, short by 30-40 lakh tonnes, and it needs to be increased

  • Establishing Markets of National Importance (MNI): At present, Asia’s largest agricultural market at Azadpur, Delhi is the only Market of National Importance (MNI) in the country. More such markets need to be established to boost inter-state trade

  • Setting up Farmer Producer Organizations and Cooperatives: It would provide better avenues at collective bargaining to small & marginal farmers. It could also act as a direct marketing channel to supply produce from ‘surplus’ regions to high demand states

  • Restructure Essential Commodities Act: To incentivize corporate companies to invest in trading of agricultural commodities. The exemptions from stockholding limits must be given to exporters, food processors, multiple outlet retailers, large departmental retailers etc.

  • Alternative marketing options: such as contract farming, direct marketing through FPOs/cooperatives etc, commodity trading through National Commodity and Derivatives Exchange, e-RaKAM (digital spot trading market), NSEL (where warehouse receipts of commodities are traded) etc.

  • Nation-wide Price Dissemination Mechanism: Forward Market Commission (FMC) has set up e-portal AGMARKNET that displays real time wholesale price of agricultural commodities on e-portal connected with APMC markets, Kisan mandis, Kisan Vikas Kendras (KVKs), State Agricultural Boards etc.

November Indian Economy

11. Guidelines For Operations Greens

Major objectives of “Operation Greens”

  • Enhancing value realisation of TOP farmers by targeted interventions to strengthen TOP production clusters and their Farmer Producers Organizations (FPOs), and linking/connecting them with the market.

  • Price stabilisation for producers and consumers by proper production planning in the TOP clusters and introduction of dual use varieties.

  • Reduction in post-harvest losses by creation of farm gate infrastructure, development of suitable agro-logistics, creation of appropriate storage capacity linking consumption centres to increase shell life.

  • Increase in food processing capacities and value addition in TOP value chain with firm linkages with production clusters.

  • Setting up of a market intelligence network to collect and collate real time data on demand and supply and price of TOP crops.

 

Need for Operation Greens

  • Price Stabilisation of essential vegetables like tomatoes, onions and potatoes which is critical for both farmers and consumers.

  • Remunerative prices for farmers for their produce which may lead to achievement of vision to double the income of farmers by the end of 2022.

  • Achieving fair price for consumers as Tomatoes, onions and potatoes are consumed throughout the year across the entire country.

  • Reducing losses due to a lack of storage and transport facilities.

  • Ministry of Food Processing Industries (MoFPI) has approved the operationalisation strategy for Operation Greens (Central Sector Scheme).

 

More on news

  • Operation Greens was announced in the Budget speech of 2018-19 with an outlay of Rs 500 crores to stabilize the supply of Tomato, Onion and Potato (TOP) crops and to ensure availability of TOP crops throughout the country round the year without price volatility.

  • The Centre has identified 17 top producing clusters across 8 states (Maharashtra, Bihar, Gujarat, Andhra Pradesh, Uttar Pradesh, Karnataka, Odisha and West Bengal) for the first phases of this initiative.

  • The government also intends to utilize the 28 centres of excellence under Indo-Israel Cooperation for the demonstration of new technologies in production and the supply of quality planting material and capacity building to farmers under the scheme.

  • Government has laid down special strategy and grants-in-aid under the scheme to ensure enhanced production of TOP crops and to augment value chain.

 

Strategy for Operation Greens

Short term Price Stabilisation Measures:

  • National Agricultural Cooperative Marketing Federation of India Ltd (NAFED) will be the Nodal Agency to implement price stabilisation measures. MoFPI will provide 50% of the subsidy on the following two components: o Transportation of Tomato Onion Potato(TOP) Crops from production to storage;

  • Hiring of appropriate storage facilities for TOP Crops;

  • Long Term Integrated value chain development projects such as Capacity Building of FPOs & their consortium, Quality production, Post-harvest processing facilities, Agri-Logistics, Marketing / Consumption Points, and Creation and Management of e-platform for demand and supply management of TOP Crops.

 

Grants-in-Aid

  • The pattern of assistance will comprise of grants-in-aid at the rate of 50% of the eligible project cost in all areas, subject to maximum Rs. 50 crores per project (For FPOs the grant-in-aid will be at rate of 70%).

  • Eligible Organisation would include State Agriculture and other Marketing Federations, Farmer Producer Organizations (FPO), cooperatives, companies, Self-help groups, food processors, logistic operators, service providers, supply chain operators, retail and wholesale chains and central and state governments and their entities/ organizations which will be eligible to participate in the programme and to avail financial assistance.

 

12. Revival Of Stressed Thermal Power Plants

  • Steps taken by Government to tackle stress in Power Sector

  • Fuel linkages under SHAKTI (Scheme for harnessing & allocating koyla transparently in India).

  • Pilot scheme for procurement of 2500 MW power to address the problem of lack of Power Purchase Agreements (PPAs) in the country on competitive basis.

  • Rationalization of Coal Escalation Index which will largely take care of the issues of under recovery of the generator's dues.

  • Additional cost implication to meet the new environment norms shall be considered for being made pass through in tariff.

  • Allowing pass-through of any change in domestic duties, levies, cess, and taxes imposed by the government.

  • A new App PRAAPTI (Payment Ratification and Analysis in Power Procurement for Bringing Transparency in Invoicing of generators) has been launched to bring more transparency in the payment system by DISCOMs.

  • Other steps include DISCOM reforms, Coal linkage rationalization, etc.

 

Background

  • Following the Electricity Act which came into force in 2003 there were various developments that encouraged investment in the power sector, out pf which 45.48% was installed in private sector. This aggressive capacity addition has led to a widening gap in the overall demand and supply situation.

  • However, an upsurge in demand has been observed, which is growing at more than 6 per cent per year. This is further expected to rise because of various government interventions like Saubhagya, Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), Integrated Power Development Scheme (IPDS), Power for All, etc.

  • Coal is the single largest source of energy for electricity production since 2, 21,803 MW is installed in thermal (including Coal + Lignite).

  • There are various reasons that have been responsible for stress in some coal-based power plants to serve their debt.

 

Reasons for stress in Power Sector

  • The Committee identified following reasons for stress in the power sector.

  • Issues related to coal supply- After the cancellation of 204 coal mines by the Supreme Court in 2014, many of the power projects became stranded without arrangements of adequate fuel supply. In addition, many projects were setup without firm coal linkages from Coal India Limited (CIL) leading to high cost of generation.

  • Slow growth in power demand- Lower than anticipated growth in power demand coupled with a scenario of surplus supply has resulted in under-utilization of thermal power capacity. In addition to this low off-take/ difficulty in selling costlier power are also causing stress in thermal power projects.

  • Delayed payments by DISCOM's- Delay in realization of receivables from DISCOMs impairs the ability of project developers to service debt in a timely manner and leads to exhaustion of working capital. In some cases, the DISCOM's have pressed for renegotiating terms of Power Purchase Agreement (PPA). This, coupled with non-payment of penalties / Late Payment Surcharges (LPS) is causing financial stress for such projects.

  • Inability of the promoter to infuse equity and service debt- Many projects got delayed due to financial reasons and slow implementation by developers leading to project cost overruns.

  • Other Issues include delay in disbursement / non-agreement amongst FIs, Delays in approval of working capital by lenders, Regulatory and contractual disputes, etc.

 

Recommendations of the Committee

  • Recommendations for Coal Allocation/Supply

  • Coal linkage for short term PPA: Linkage coal may be allowed to be used against short term PPAs and power be sold through Discovery of Efficient Energy Price (DEEP) portal following a transparent bidding process.

  • Termination of PPAs: A generator should be able to terminate PPA in case of default in payment from the DISCOM with the facility to use linkage coal for short term PPAs for a period of maximum of 2 years or until they and another buyer of power under long/medium term PPA, whichever is earlier.

  • Procurement by nodal agency: A nodal agency may be designated which may invite bids for procurement of bulk power for medium term for 3 to 5 years in appropriate tranches, against pre-declared linkage by Coal India Limited (CIL).

  • PSU as an aggregator of power: National Thermal Power Corporation (NTPC) can act as an aggregator of power, i.e., procure power through transparent competitive bidding process from such stressed power plants and offer that power to the DISCOMs against PPAs of NTPC till such time as NTPC's own concerned plants/units are commissioned.

  • E-auction of coal: Ministry of Coal may earmark for power, at least 60 per cent of the e-auction coal, and this should be in addition to the regular coal requirement of the power sector.

  • Linkages to be provided at notified prices without bidding: The generator should be required to bid only once, for the procurement of PPA and linkage should be granted at notified price without any further bidding, to the extent of incremental coal production.

  • Recommendations to facilitate sale of power of the stressed power plants- Old and high heat rate plants not complying with new environment norms may be considered for retirement in a phased and timebound manner at the same time avoiding any demand/supply mismatch.

  • Recommendations on Regulatory & DISCOM payment issues-

  • Late Payment Surcharge be mandatorily paid in the event of delay in payment by the DISCOM.

  • PFIs providing the Bill Discounting facility may also be covered by TPA i.e. in case of default by the DISCOM, the RBI may recover the dues from the account of States and make payment to the PFIs.

  • Other recommendations: PPAs, Fuel Supply Agreement and Long Term Open Access for transmission of power, EC/FC clearances, and all other approvals including water, be kept alive and not cancelled by the respective agencies even if the project is referred to NCLT or is acquired by any other entity.

 

More on News

  • MSME Outreach Programme will run for 100 days covering 100 Districts throughout the country.

  • Various Central Ministers are likely to visit these districts in order to apprise the entrepreneurs about various facilities being extended to MSME Sector by the Government and financial institutions and to come forward and make best use of these facilities including access to credit and market, etc.

 

Key challenges being faced by MSMEs

  • A non-level playing field for MSME Sector, facing the odds has pushed them towards the edge. Their threshold tolerance level to alterations of markets and vagaries of banking system is so small that any adverse environment can have serious consequences leading to sickness or even closure. The list of the problems that are faced by existing/new companies in SME sector are as under:

  • Limited capital: Absence of adequate and timely banking finance, as per Economic Survey 2017-18, the MSME received only 17.4 per cent of the total credit outstanding as of November 2017.

  • Lack of technology: Non-availability of suitable technology, creating public perception of products with low quality standards.

  • Low production: due to reasons such as Ineffective marketing strategy, constraints on modernisation & expansions etc.

  • Lack of skilled labour: Non-availability of skilled labour at affordable cost

 

12-Point Action Plan for MSMEs

  • Access to Credit

  • 59 minute loan portal to enable easy access to credit for MSMEs: Loans upto Rs. 1 crore can be granted in-principle approval through this portal, in just 59 minutes. A link to this portal will be made available through the GST portal.

  • Interest Subvention: A 2 percent interest subvention will be provided for all GST registered MSMEs, on fresh or incremental loans. For exporters who receive loans in the pre-shipment and post-shipment period, there will be an increase in interest rebate from 3 percent to 5 percent.

  • Cash flow certainty: All companies with a turnover more than Rs. 500 crore, must now compulsorily be brought on the Trade Receivables e-Discounting System (TReDS). Joining this portal will enable entrepreneurs to access credit from banks, based on their upcoming receivables. This will resolve their problems of cash cycle.

 

Access to Markets

  • Mandatory public procurement: Public sector companies have been mandated to compulsorily procure 25 percent, instead of 20 percent of their total purchases, from MSMEs.

  • Women entrepreneurs: Out of the 25 percent procurement mandated from MSMEs, 3 percent now be reserved for women entrepreneurs.

  • GeM Portal: All public sector undertakings of the Union Government must now compulsorily be a part of GeM. They should also get all their vendors registered on GeM.

 

Technology Upgradation

  • Technology Centres: Tool rooms across the country are a vital part of product design. Considering this, 20 hubs will be formed across the country, and 100 spokes in the form of tool rooms will be established.

  • Ease of Doing Business

  • Support to pharma companies: Clusters will be formed of pharma MSMEs and 70 percent cost of establishing these clusters will be borne by the Union Government.

 

One annual return:

  • The return under 8 labour laws & 10 Union regulations now to be filed only once a year. Other Government schemes to help MSMEs: The primary responsibility of promotion and development of MSMEs is of the State Governments. However, the Government of India, supplements efforts of the State Governments through various initiatives.

  • Credit and Financial Assistances to MSMEs

  • Prime Minister’s Employment Generation Programme (PMEGP) is aimed at generating self-employment opportunities through establishment of micro-enterprises in the non-farm sector by helping traditional artisans and unemployed youth.

  • Credit Guarantee Scheme for Micro and Small Enterprises covers collateral free credit facility (term loan and/or working capital) extended by eligible lending institutions including Non-Banking Financial Company (NBFC) to new and existing micro and small enterprises up to 2 crore per borrowing unit.

  • Credit Linked Capital Subsidy Scheme (CLCSS) aims at facilitating technology upgradation of the MSME sector.

  • The Government has also initiated the Pradhan Mantri Mudra Yojana for development and refinancing activities relating to micro industrial units.

 

Skill Development and Training

  • A Scheme for Promotion of Innovation, Rural Industry & Entrepreneurship (ASPIRE) to create a framework for start-up promotion through Network of Technology Centres and Incubation and commercialisation of Business Idea Programme.

 

Infrastructure

  • Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

  • Scheme for Micro & Small Enterprises Cluster Development Programme (MSE-CDP)

 

Marketing Assistance

  • Scheme for providing financial assistance to Khadi institutions under MPDA (Market Promotion Development Assistance).

  • MSME Delayed Payment Portal – MSME Samadhaan

  • Public Procurement Portal for MSEs – MSME Sambandh

  • Technology Upgradation and Competiveness

  • Financial Support to MSMEs in ZED (Zero Defect and Zero Effect) certification to encourage MSMEs to upgrade their quality standards in products and processes with adoption of Zero Defect production processes and without impacting the environment, etc.

 

Other services

  • National Scheduled Caste and Scheduled Tribe Hub to provide professional support to SC/ST entrepreneurs.

  • No more inspector raj: Now the establishments to be visited by an Inspector will be decided through a computerised random allotment and inspectors must upload reports on portal within 48 hours.

  • Relaxation in environmental clearances: As part of establishing a unit, an entrepreneur needs two clearances namely, environmental clearance and consent to establish. Under air pollution and water pollution laws, now both these have been merged as a single consent. Moreover, the return will be accepted through self-certification.

  • Ordinance and companies Act: An Ordinance has been brought, under which, for minor violations under the Companies Act, the entrepreneur will no longer have to approach the Courts, but can correct them through simple procedures.

  • Apart from the above 12-Point Action Plan, the Prime Minister also stressed on the need of social security for the MSME sector employees. He said that a mission will be launched to ensure that they have Jan Dhan Accounts, provident fund and insurance.

 

Concerns

  • The biggest risk of a credit stimulus is the misallocation of productive economic resources. Pumping extra credit into MSMEs now may well lead to a temporary boom, but it can lead to a painful bust when the stimulus ends some day.

  • Another unintended consequence is the likely deterioration in credit standards as financial institutions are pushed to lend aggressively to MSMEs. Efforts to expedite business loan approvals may be welcome from the point of view of growth and job creation, but they rarely end well when motivated by political reasons.

  • Conceptually, latest credit scheme is no different from the MUDRA loan scheme, which has been troubled by soaring bad loans. Care needs to be taken to see that the new MSME loan scheme does not pose a similar risk in the future.

  • Also, the demand that PSUs must procure a quarter of their inputs from MSMEs could breed further inefficiency in the economy.

 

Significance of the Action Plan

  • MSMEs were hit hard by the twin shocks of demonetisation and the implementation of the Goods and Services Tax over the last couple of years.

  • Further, in the aftermath of the IL&FS crisis, which has affected the amount of lending done by non-banking financial companies to the MSME sector, this scheme would act as a tool to improve credit flow and the pace of job creation in the economy.

  • The scheme aims to ensure a coordination of all the ministries as it inculcate various dimensions ranging from finance, technology and skilling and women entrepreneurs to environmental, legal and social aspects. This will ensure holistic development of MSME sector.

  • Given the leading stature of India in the pharma sector, the scheme would further boost the quality and quantity upgradation in drugs with reduced dependence on imports for APIs (Active Pharma Ingredients).

  • Most importantly, these schemes would act as a bridge to bring large portion of unorganised MSMEs under the formal and organised banner through GST/TReDS and simplified procedures and institutional lending.

 

13. Sez Policy Report

Performance of SEZ

  • Special Economic Zone (SEZ) is a specifically delineated duty-free enclave and deemed to be foreign territory for the purposes of trade operations and duties and tariffs.

  • India’s SEZ Policy was implemented from 1 April, 2000. Subsequently the Special Economic Zones Act, 2005 supported by SEZ Rules 2006.

  • The main objectives of the SEZ Act are:

  • Generation of additional economic activity

  • Promotion of exports of goods and services

  • Promotion of investment from domestic and foreign sources

  • Creation of employment opportunities

  • Development of infrastructure facilities

 

The SEZ Rules provide for:

  • Simplified procedures for development, operation, and maintenance of the Special Economic Zones and for setting up units and conducting business in SEZs;

  • Single window clearance for setting up of an SEZ or a unit within it;

  • Single Window clearance on matters relating to Central as well as State Governments;

  • Simplified compliance procedures and documentation with an emphasis on self certification.

 

Approval mechanism and Administrative set up of SEZs:

  • The developer submits the proposal for establishment of SEZ to the concerned State Government. The State Government has to forward the proposal with its recommendation within 45 days from the date of receipt of such proposal to the Board of Approval. The applicant also has the option to submit the proposal directly to the Board of Approval.

  • The Board of Approval chaired by the Secretary, Department of Commerce has been constituted by the Central Government in exercise of the powers conferred under the SEZ Act.

  • All the decisions are taken in the Board of Approval by consensus.

  • As on 31st March, 2018, there were a total of 223 Operational SEZs against 355 notified SEZs in the country.

  • Total Investment in SEZs (as on 31st March, 2018) amounted 4.75 lakh crore and it has generated close to 20 lakh jobs.

  • Exports from SEZs amounted nearly 5.81 lakh crore in 2017-18, which is higher from 5.23 lakh crore in 2016-17 and 4.67 lakh crore in 2015-16.

 

Major Challenges and Solutions

  • Unutilised land (more than 25,000 hectares) in SEZs which is due to lack of flexibility to utilise land in SEZs for different sectors. The solution to this challenge is “Optimal utilisation of vacant land in SEZ by allowing flexibility of land use and removing sector-specific constraints.”

  • Existence of multiple models of economic zones such as SEZ, coastal economic zone, Delhi-Mumbai Industrial Corridor, National Investment and Manufacturing Zone, food park and textile park.

  • Solution: The group of secretaries of various central government’s departments have recommended “rationalisation” of these models. Moreover, the Department of Industrial Policy and Promotion (DIPP) and the Niti Aayog is going to “develop and master plan for industrial clusters” in order to deal with this challenge.

  • Under-utilisation of existing capacity. Currently, SEZ units are not allowed to do “job work” for domestic tariff area (DTA) units. Any area that lies outside of SEZ or any other custom bonded zone in India is known as the DTA. Goods and services going into the SEZ from DTA is treated as exports and goods coming from the SEZ into DTA is treated as imports. It is recommended that “optimal utilisation of existing capacity in SEZ units” should be done by “allowing job work for DTA”.

  • Domestic sales of SEZs face a disadvantage as “they have to pay full customs duty”, as compared to the lower rates with the Association of Southeast Asian Nations (ASEAN) countries due to free-trade agreement (FTA). It is suggested that the “best FTA rates” should be allowed for domestic sales, too.

  • Imposition of Minimum Alternate Tax (MAT) on SEZs from April 1, 2012, as well as imposition of income tax on new SEZs and new units from April 1, 2017 and April 1, 2020, respectively. The experts advocated restoration of income tax benefit as well as MAT exemption. o Also, there is a need to align changed taxation regime under GST to the SEZ Rules.

  • Another challenge has been the “requirement of payment in foreign exchange for services provided by SEZ units to DTA area”. To deal with this problem, it has been suggested an amendment in the definition of “services” in the SEZ Act, 2005.

  • when it comes to developing effective single-window system for clearances.

  • There are other demands of the business and industrial community. These include- grant infrastructure status to buildings of SEZs and industrial parks, permit external commercial borrowing (ECB) for entire SEZ infrastructure, allow a refinancing option through ECB; relax the “risk weightage norms” for the real estate sector.

  • Moreover, simplification of the process of granting environment clearance by the Union environment ministry and repeal of certain sections of the Urban Land Ceiling Act, 2007 is also demanded.

  • The Commerce ministry has been consistently lobbying with the finance ministry to exempt units in the SEZs from the minimum alternate tax, or MAT, imposed on them in 2011.

  • Some of the incentives offered under the SEZ policy have been and may need to be replaced by other sops.

 

Why China succeeded but India’s SEZ had limited success?

  • There are eight distinguishing features which have contributed to the success of SEZs in China: Unique location, large size, investment friendly attitudes towards non-resident Chinese, attractive incentive packages, liberal Custom procedures, flexible labour laws, a strong domestic market and decentralisation of power in favour of provinces and local authorities for administering the zones.

  • Chinese SEZs had a geographic advantage with most of the SEZs located near the ports unlike the Indian SEZ’s that are more in the mainland. Of the five SEZs, Shenzhen, Shantou and Zhuhai are in the Guangdong province, adjacent to Hong Kong — the gateway to China.

  • Size is another important factor for SEZ success in China. Each SEZ is well over 1,000 hectares, the minimum recommended area. In India, the EPZs converted into SEZs are not even a third of this.

  • Strong domestic market is another important aspect for SEZ success unlike India where Policy impediments to sales in the domestic market hamper large domestic market potential.

  • While in China the thrust of SEZs has been to attract foreign investments and modern technology, in India the emphasis has been on exports.

  • Decentralisation of power was also a major reason for SEZ success in China. Provincial and local authorities were made partners and stakeholders, by delegating to them powers to approve foreign investment.

  • The hire-and-fire policy in SEZs has been one of the biggest attractions for foreign investors in China. All jobs are on labour contract basis, which stand terminated upon the expiry of the terms, which can be fixed/flexible or for a specific job. In contrast, the labour policy in India is worker, rather than investment, oriented.

 

Recommendations of the Committee

  • Reincarnation of SEZs as employment and Economic Enclaves (3Es): The main focus of the recommendations of the SEZ committee is on migration from export focus to economic and employment growth focus. For this to be achieved, incentives for the manufacturing SEZs have to be based on specific parameters including demand, investment, employment and technology, value addition and inclusivity.

  • Other supports for SEZ(3Es)

  • Flexibility to enable 3E units to seamlessly support business outside the zone.

  • Supply of power directly to units from independent power producer (IPPs) at competitive rates to ensure uninterrupted power supply.

  • Fast tracking various approvals through online application process

  • Integrating MSMEs with the 3Es and giving additional incentives to zones focusing on priority industries

  • Infrastructure status to 3E projects to make cheaper finance available to them

  •  Connectivity to remote SEZs: Development of last mile and first mile connectivity infrastructure by government should be provided for land parcels which are far from highways and urban agglomerations.

  • Replicate Success of ITeS: The success seen by services sector like IT and ITES has to be promoted in other services sector like health care, financial services, legal, repair and design services.

  • Tax benefits: For services SEZs, tax benefits must be retained including extension of sunset clause, lowering taxes (such as a MAT of 9 per cent and exemption from DDT) for identified strategic services and allowing supplies to domestic market in Indian currency to bring parity between goods and services.

  • Ease of doing business: The committee has advocated simpler entry and exit processes using time-bound online approval and dispute resolution through robust arbitration and commercial courts.

  • In line with WTO norms and the GST, the Committee recommended to prepare a sunrise list for “focused diversification” such as engineering and design, biotech and healthcare services.

  • Align the policy framework to avoid competition among similar schemes of industrial parks, export oriented units, SEZ, national investment and manufacturing zones and sectoral parks and provide ease of doing business to developers and tenants.

 

14. FIRST MULTI-MODAL TERMINAL ON INLAND WATERWAYS

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  • This is the first of the multi-modal terminals being constructed on the National Waterway-1 as part of the World Bank-aided Jal Marg Vikas project of the Inland Waterways Authority of India.

  • The project of multi-modal terminal and proposed Freight Village at Varanasi are expected to generate 500 direct employment and more than 2000 indirect employment opportunities.

  • Multimodal transport is carried out using different modes of transport such as roadways, railway, waterway, and airway.

 

Key benefits of multimodal transport are:

  • Minimizes time loss at trans-shipment points: Multimodal transport operator maintains its communication links and coordinates that interchange onward carriage smoothly at transhipment points.

  • Provides faster transit of goods: The markets are psychically reduced by faster transit of goods; the distance between origin or source materials and customers is getting insignificant.

  • Reduces the burden of documentation and formalities: The burden of issuing multiple documentation and other formalities connected with each segment of the transport chain is reduced to a minimum.

  • Saves cost: The savings in money from costs resulting from these advantages are usually reflected in the through freight rates charged by the Multimodal transport operator (MTO) and also in cargo insurance cost.

  • Establishes only one agency to deal with: The consignor/ consignee needs to deal with only the Multimodal transport operator in all matters relating to goods, or delay in delivery of goods at destination.

  • Reduces cost of exports: The inherent advantages will help to reduce the cost of exports and improve their competitive position with pricing in the international market segment.

  • Less Congestion: It helps to avoid over- burdening of any particular mode of transport and thus saves space and cost associated with congestion. Moreover, this would save fuel and lessen the pollution.

  • India has witnessed growth in Multimodal transport in the recent times and the sector is still evolving.

  • The advent of containerization along with initiatives from the Government such as passing Multimodal Transport Act, 1993 to the recent implementation of Goods and Services Tax have helped the country to progress towards an integrated transport system.

  • Government is planning a Policy on Multi modal transportation.

  • Economic Survey 2017-18 estimates that Indian Logistics sector which is worth around USD 160 billion is likely to touch USD 215 billion in the next two years with the implementation of GST. In order to realize this potential, the country will need to make effective use of its strengths in IT and look out for collaborations with experts in this field.

  • What primarily constitute inland waterways in India?

  • ivers, lakes, canals, backwaters and reservoirs primarily constitute the source for inland waterways in India.

  • Potential of inland water transport (IWT) in the country: As per National Transport Policy Committee (NTPC) Report of 1980, the approximate length of navigable waterways in the country was 14,500 km.

  • The National Waterways Act, 2016 declares a total of 111 National Waterways with a total navigable length of over 20200 kms. Out of this, 17,980 km of the river and 2,256 km of canals can be used by mechanized crafts.

  • The estimated cargo movement on these waterways by the year 2022 is estimated to be 159 million tonnes according to the report on Integrated National Waterways Transportation Grid submitted by RITES in 2014.

 

Challenges in developing National Waterways

  • Very low level of investment: Lack of convergence between IWT and other modes of transport and more emphasis on development of rail and road networks resulted in low level of expenditure on IWT.

  • Between 1986 and 2010 (25 years) investment in IWT development was just Rs. 1117 crore, i.e., US$ 200 million. Compared to this, the Bharatmala Pariyojana- an umbrella programme for the highway development has a budget of over 5 lakh crore. Similarly the Railways used to have their own separate Budget till last year.

  • High cost of development of Ancillary facilities: Multi-modal and inter- modal terminals are part of the fairway development of an inland waterway. Development of modern day multimodal terminals, jetties, ferry points and river information systems is highly capital intensive.

  • Perception of IWT investment as high-risk investment: This was a disincentive for the banks to advance loans to private players. It discouraged private participation also even through PPP mode.

  • Technical Challenges: such as Development and maintenance of Fairway width of 2.5 m to 3.0 m depth, irregular siltation, Speed Control regulations to avert bank erosion and safety of other users, Safety against cross ferries, Connectivity to Terminal Locations, Clearance at Cross Structures/bridges, Identification of navigational channel in a wide river, Discharge control by regulations, and Difficulty in land acquisition for development of terminals.

 

Benefits of inland waterways

  • Capital Savings: The capacity augmentation of navigation on NW-1 through the Jal Marg Vikas Project estimated to entail a capital expenditure of Rs. 2.53 crore per km only. Compared to this road and rail each cost over 5 crore per km.

  • Savings in transportation costs: IWT would have positive impact on the overall logistics cost.

  • 1 Horse Power energy moves 150 kg on road, 500 kg on rail and 4000 kg on water.

  • 1 litre of fuel moves 24 ton-km on road, 85 ton-km on rail & 105 ton-km on Inland Waterways.

  • As per RITES Report of 2014 on “Integrated National Waterways Transportation Grid (INWTG)” the cost comparison between Inland Water Transport (IWT) mode and other mode of surface transport like rail and road is as below:

  • Environment friendly: Use of modern inland water vessels, with natural gas (LNG/CNG) as fuel will reduce emission of SOx, NOx (70%), particulate matter (95%) and CO2 (25%). Hence will have negligible impact on ambient air quality. Other factors include-

  • It's a non-water consumptive transportation project with minimal resource depletion.

  • Least fuel consumption per ton-km, burden on road and rail transportation will come down resulting in less fuel consumption and consequent environmental pollution

  • Negligible land requirement: Due to minimum requirement of land acquisition (except in few places where terminals are likely to be constructed), there will be insignificant impact on ecology & biodiversity, agricultural activities as well as on the livelihood of the people.

 

Safe mode for hazardous and over-dimensional cargo

  • LNG/CNG engines have lower noise level than diesel engines, hence less impact on ambient noise level.

  • Improved river flow due to improvement / augmentation of navigation facilities will in turn benefit aquatic flora and fauna.

 

Supplementary mode:

  • Increase in economic opportunities in the form of employment and business opportunities (both in relation to cargo movement and peripheral petty business activities).

  • Access to local communities in the form of a mode of transport to conduct activities on both sides of the river.

  • Better water flow through maintenance of minimum water levels will provide for better fish production and catch, which in turn will directly enable enhanced income for the fishing communities along the river stretch.

  • Improved access to trading centres and ancillary infrastructure (cargo handling, etc.) along the rivers and navigation will benefit local, regional and international business.

 

Initiatives to Develop Inland Waterways

  • A total of 111 waterways have been declared as National Waterways under the National Waterways Act, 2016.

  • The ‘Jal Marg Vikas Project’ on National Waterways-I (NW-I) in river Ganga, a large integrated IWT project, has been launched between Varanasi and Haldia covering a distance of 1380 kms at an estimated cost of `5369 crore.

  • On NW-2 (River Brahmaputra), Ro-Ro services have commenced between Dhubri and Hatsingimari in July 2017 on an Inland Waterways Authority of India (IWAI) vessel.

  • Based on techno economic studies, eight new NWs have been taken up for development in 2017-18. These include, NW-16 (Barak river); three in Goa viz. NW 27 - Cumberjua, NW 68 – Mandovi , NW 111 – Zuari; NW-86 ( River Rupnarayan) ; NW 97 (Sunderbans); NW-9 (Alappuzha–Kottayam– Athirampuzha Canal) and NW-37 (River Gandak).

  • In order to reduce the logistics cost of cargo and facilitate passenger movement between North East and mainland, MOUs have been signed with Bangladesh.

  • Construction of Slipway at Pandu in Assam is on, with December, 2018 as the target date of completion. This will be the first dry dock repair facility in the NE Region.

  • On NW-4, Phase-I development of the stretch between Muktyala to Vijayawada (82 kms) has commenced. This will provide an efficient logistics solution to boost the economic growth of the region and facilitate the development of Amravati, the new capital city of Andhra Pradesh as substantial construction material is expected to be transported on this stretch of NW-4.

  • To provide institutional funding, the Government has proposed to allocate 2.5 per cent of the proceeds of Central Road Fund for development and maintenance of National Waterways. In 2017- 18, IWAI raised Rs. 660 crore from the market by issuing ‘GOI fully serviced Bonds’ to meet capital expenditure on development of National Waterways.

  • To promote ship building industry under the "Make in India" initiative, the Government provides financial assistance of up to 20 percent for ships build in the country.

  • IWAI is planning to start the transportation of fertilizers from IFFCO Paradip to various destinations on NW1 by integrating coastal movement with IWT.

  • Integrated National Transportation Waterway Grid Study: It was undertaken by IWAI through RITES with an aim to link first 6 National Waterways to National/ State Highways, Railways (wherever feasible) and Sea Ports (wherever feasible).

 

15. CITY GAS DISTRIBUTION PROJECTS

  • The Petroleum and Natural Gas Regulatory Board (PNGRB) was constituted under The Petroleum and Natural Gas Regulatory Board Act, 2006 with a mandate-

  • To protect the interests of consumers and entities engaged in specified activities relating to petroleum, petroleum products and natural gas and to promote competitive markets and for matters connected therewith or incidental thereto.

  • To regulate the refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas excluding production of crude oil and natural gas so as and to ensure uninterrupted and adequate supply of petroleum, petroleum products and natural gas in all parts of the country.

  • The Prime Minister laid the foundation stone to mark the commencement of work for 9th round of City Gas Distribution (CGD) spanning 129 districts.

 

 

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  • This has expanded the potential coverage of CGDs to about 50% of country’s population spreading over 35% of India's area.

  • In addition, PNGRB has also initiated the process of 10th CGD bidding round for

  • Aims and objectives of National Gas Grid

  • To remove regional imbalance within the country with regard to access of natural gas and provide clean and green fuel throughout the country.

  • To connect gas sources to major demand centres and ensure availability of gas to consumers in various sectors.

  • Development of City Gas Distribution Networks in various cities for supply of CNG and PNG. 

  • additional 50 new GAs covering 124 districts in 14 States to increase the potential coverage to about 53% of the country’s area covering 70% of country’s population.

 

National Gas Grid

  • At present, about 16000 Km long gas pipeline network is under operation and it has formed a partial gas grid by inter-connecting western, northern and south-eastern gas markets in the country.

  • To have a gas-based economy and enhance the share of gas in the energy basket to 15% from currently 6.5%, the Government has envisaged developing additional 15,000 km of gas pipeline network.

  • To provide the clean energy in the Eastern part of the country, the Government is running Pradhan Mantri Urja Ganga Project. These gas pipeline will pass through 50 districts in the State of Uttar Pradesh, Bihar, Jharkhand, Odisha & West Bengal.

  • A pipeline of about 750 Km long from Barauni (Bihar) to Guwahati (Assam) will be the gateway to connect North-eastern States with existing gas grid. A Mini Gas Grid in North East covering 1,500 km and connecting all state capitals, is also being developed by a Joint Venture (JV) of 5 companies. This will also facilitate the completion and creation of a National Gas Grid.

  • City Gas Distribution (CGD) Network: It is the interconnected network of pipelines to make supply of natural gas to domestic, industrial or commercial premises and CNG stations situated in a specified Geographical Area (GA). CGD networks are being developed based on the availability of trunk gas pipeline connectivity or gas sources and techno-commercial feasibility in a GA.

  • Progress made so far: As per Ministry of Petroleum and Natural Gas (MoPNG) Annual Report, 2017-18

  • 31 CGD companies are developing CGD networks in 81 GAs in 21 States/Union Territories.

  • The CGD networks have also connected about 32,500 Industrial & Commercial Units to supply environment friendly fuel i.e. natural gas for energy purpose.

  • 1282 CNG stations have been established to cater the CNG demand of transport sector in the country. 

  • Till September 2018, 96 cities/Districts in different parts of the country were covered for development of CGD networks. About 46.5 lakh households and 32 lakh CNG vehicles are availing the benefit of clean fuel through existing CGD networks.

  • Benefits of CGD Network: Natural gas is a superior fuel as compared with coal and other liquid fuels being an environment friendly, safer and cheaper fuel.

  • Tension free household: Natural Gas is supplied through pipelines without any need to store cylinders in the kitchen and thus saves space. It also ensures uninterrupted supply of cooking fuel and thus lessens the stress on the household of keeping an eye on LPG cylinder and its prior booking.

  • Combating Industrial Pollution: Large number of industries also consume polluting fuels like pet coke and furnace oil which emit polluting CO2. Some of the courts recently ordered for banning use of pet coke in states within their jurisdiction.

 

India’s natural gas market

  • Share of natural gas in the country’s primary energy mix declined from 10% in 2009 to 7% in 2014 compared with the global average of 24%, mainly due to a sharp drop in domestic supplies.

  • India’s 39 cubic meters (cm) per capita of natural gas consumption in 2015 lags far behind the world average of 469 cm per capita.

  • Sector-wise Gas consumption in India in 2017-18: fertilizer (28%), electric power (23%), refinery (12%), city gas distribution, including transport (16%), and petrochemical industries (8%).

  • India’s natural gas demand has been mainly affected by lower availability and price affordability; inadequate transmission and distribution infrastructure; and limited gas import facilities.

  • Saving on cost: Natural Gas (as CNG) is cheaper by 60% as compared with petrol and 45 % w.r.t. Diesel. Similarly, Natural Gas (as PNG) is cheaper by 40 % as compared with market price LPG.

  • Help in Achieving Environmental Commitment: India made a commitment in COP21 Paris Convention to reduce carbon emission by 33-35% of 2005 levels by 2030. Natural gas, supplied through CGD network, as domestic kitchen fuel, as fuel for transport sector as well as a fuel for industries and commercial units, can play a significant role in reducing carbon emission.

  • Moving towards gas based economy: Share of Natural Gas in India’s energy basket is 6.2% as against 23.4% globally. In India - in the state of Gujarat itself, it is 25%. This can be replicated throughout India. In addition, oil-to-gas switching will allow to reduce oil dependency.

  • Employment: Gas networks in cities create a new ecosystem, one that enables gas based industries, generates employment to youth and provides ease of living to citizens.

 

Initiatives taken by the government

  • MoPNG has accorded priority to PNG (Domestic) and CNG (Transport) segments of CGD sector in domestic gas allocation. At present, domestic gas is being supplied to meet entire requirement of CNG (transport) and domestic PNG segments based on last six-month consumption data by the respective CGD networks.

  • State Governments have been advised

  • To standardize the Road Restoration/permission charges along with time bound permission for development of CGD networks.

  • To earmark land plot for development of CNG Stations in their Master Plan.

  • Relevant modification in building by-laws for providing gas pipeline infrastructure in residential & commercial buildings at architectural design stage.

  • CGD networks have been provided the status of “Public Utility” under the Industrial Dispute Act, 1947.

  • Efforts are underway to develop an online portal in consultation with State Government to streamline the process of permissions to develop

 

CGD network.

  • Government has envisaged to connect One crore households with PNG supplies for cooking purpose by 2020. It has also been envisaged to expand the coverage of CGD networks in additional 146 GAs in coming years.

 

16. Petroleum, Chemicals And Petrochemical Investment Region

About PCPIRs

  • PCPIR is based on cluster-based development model for setting up manufacturing facilities for both domestic consumption and exports in Petroleum, Chemicals and Petrochemicals.

  • The cluster is combination of production units, logistics handling, environmental protection mechanism and social infrastructure.

  • It includes Special Economic Zones, Free Trade Zones Warehousing Zones etc.

  • Connectivity to the region is provided by state and central governments through Rail, Road, Ports, Airports and Telecom. The state government will also be responsible for providing facilities of water, road connectivity (state roads), Waste Treatments linkages etc

  • PCPIRs will ensure developing economy of scale in petrochemical sector due to the use of common infrastructure, support services and R&D facilities.

  • Chemical and Petrochemical industries generate concerns over environmental degradation. However, PCPIRs follow a robust Environmental Impact Assessment (EIA) mechanism. 

 

17. ADVANCED MOTOR FUELS TECHNOLOGY COLLABORATION PROGRAMME (AMF-TCP)

About IEA

  • It is an autonomous body within the Organization for Economic Co-operation and Development (OECD) framework established in the wake of 1973 oil crisis.

  • It works to ensure reliable, affordable & clean energy for its member countries and beyond.

  • Its four main areas of focus are energy security, economic development, environmental awareness, and engagement worldwide.

  • An IEA Member country must be a member country of the OECD, but not all OECD members are members of the IEA.

  • Apart from 30 members, it has 8 association members including India.

  • Requirement for membership: o Crude oil reserves equivalent to 90 days of the previous year’s net imports.

  • A demand restraint program to reduce national oil consumption by up to 10%.

  • A national plan for Coordinated Emergency Response Measures.

  • Ensure all oil companies under its jurisdiction report information upon request.

  • Capability of contributing its share of an IEA collective action.

  • Recently, Cabinet was apprised that India is joining Advanced Motor Fuels Technology Collaboration Programme as a member.

 

About AMF TCP

  • It is one of the International Energy Agency’s (IEA) transportation related Technology Collaboration Programme.

  • Its vision is to establish a sustainable transportation system that uses advanced, alternative, and renewable fuels, has reduced emissions and meets needs for personal and goods mobility on a local and global scale.

  • It will help Ministry of Petroleum & Natural Gas to get sound scientific information and technology assessments to make informed decision making about using advanced fuels.

  • Under this, the R&D work is carried out within individual projects called "Annex" which enable members to cooperate in groups that share common interests.

  • Other member countries of AMF TCP are USA, China, Japan, Canada, Chile, Israel, Thailand, Republic of Korea etc.

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