Bills/Act/Laws | Economics | Mains Paper 3: Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: AERA Act

In the recent monsoon session, Parliament passed the Airports Economic Regulatory Authority of India (Amendment) Bill, 2021.

Key features of the AERA Bill, 2021

It seeks to amend the Airports Economic Regulatory Authority of India Act, 2008.
The 2008 Act established the Airport Economic Regulatory Authority (AERA).
AERA regulates tariffs and other charges (such as airport development fees) for aeronautical services rendered at major airports in India.
The 2008 Act designates an airport as a major airport if it has an annual passenger traffic of at least 35 lakh.
The central government may also designate any airport as a major airport by a notification.
The Bill adds that the central government may group airports and notify the group as a major airport.

Why has the definition of a major airport been amended?

The Amendment has changed the definition of a major airport to include “a group of airports” after the words “any other airport”.
The government hopes the move will encourage the development of smaller airports and make bidding for airports with less passenger traffic attractive.
It plans to club profitable airports with non-profitable ones and offer them as a package for development in public-private partnership mode to expand connectivity.

Was there a need to amend the AERA Act?

The Airports Authority of India (AAI) awarded six airports — Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram and Guwahati — for operations, management and development in public-private partnership mode in February 2019.
In 2020 too, the AAI has approved leasing of another six airports — Bhubaneswar, Varanasi, Amritsar, Raipur, Indore and Tiruchi.
The Ministry of Civil Aviation plans to club each of these airports with nearby smaller airports for joint development.
The move follows FM’s Budget Speech this year, in which she said the government planned to monetize airports in tier-2 and tier-3 cities.

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Renewable Energy – Wind, Tidal, Geothermal, etc.

[pib] Simhadri PV Project: Largest floating Solar Project in the country

PIB Prelims Only | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.

Note4Students

From UPSC perspective, the following things are important :

Prelims level: India's largest solar PV Project

Mains level: Renewable Energy in India

The National Thermal Power Corporation (NTPC) has commissioned the largest floating solar PV project of 25MW on the reservoir of its Simhadri thermal station in Visakhapatnam, Andhra Pradesh.

Simhadri PV Project

The 2000MW coal-based Simhadri Station is the first power project to implement an open sea intake from the Bay of Bengal which has been functional for more than 20 years.
This is the first solar project to be set up under the flexibilization scheme of coal-powered plant, notified in 2018.
The floating solar installation which has a unique anchoring design is spread over 75 acres in an RW reservoir.
This floating solar project has the potential to generate electricity from more than 1 lakh solar PV modules.
This would not only help to light around 7,000 households but also ensure at least 46,000 tons of CO2e are kept at arm’s length every year during the lifespan of this project.
The project is also expected to save 1,364 million litres of water per annum. This would be adequate to meet the yearly water requirements of 6,700 households.

Other important facts you must know

As of May 2021, India has 95.7 GW of renewable energy capacity, and represents ~ 25% of the overall installed power capacity.
The government plans to establish renewable energy capacity of 523 GW (including 73 GW from Hydro) by 2030.
India was the world’s 3rd largest renewable energy producer with 38% (136 GW out of 373 GW) of total installed energy capacity in 2020 from renewable sources.
Tamil Nadu has the highest installed solar power capacity in India. Kamuthi Solar Power Project near Madurai is the world’s second-largest solar park.

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Back2Basics: NTPC

NTPC is an Indian statutory corporation engaged in the generation of electricity and allied activities.
It is incorporated under the Companies Act 1956 and is under the jurisdiction of the Ministry of Power.
NTPC’s core function is the generation and distribution of electricity to State Electricity Boards in India.
It is the largest power company in India with an electric power generating capacity of 62,086 MW.
It has also ventured into oil and gas exploration and coal mining activities.
In May 2010, NTPC was conferred Maharatna status by GoI, one of the only four companies to be awarded this status.

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[pib] Exercise Malabar

PIB | Security Issues | Mains Paper 3: Various Security Forces, Agencies & Their Mandates

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Ex Malabar

Mains level: QUAD security Dialogue

Indian Naval Ships Shivalik and Kadmatt have arrived at Guam, an Island Territory of the USA to participate in the annual Exercise MALABAR-21.

Also read:

[Prelims Spotlight] Various Defence Exercises in News

Ex Malabar

MALABAR series of maritime exercises commenced in 1992 as a bilateral IN-USN exercise and has grown in stature over the years to include four prominent navies in the Pacific and Indian Ocean Region.
It is carried out between navies of Australia, India, Japan, and the USA
The exercise provides an opportunity for common-minded navies to enhance inter-operability, gain from best practices and develop a common understanding of procedures for Maritime Security Operations.

Significance

The exercise will see the participation of all four Quad countries.
Indian Navy also conducted a number of Passage Exercises (PASSEX) with navies from Japan, Australia and the US.

Another Exercise in news: Ex Konkan 2021

Exercise Konkan 2021 was held between INS Tabar and HMS Westminster on 16 Aug 21 in the English Channel.

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Back2Basics: Quad Security Dialogue

QSD is a strategic dialogue between the United States, Japan, Australia and India that is maintained by talks between member countries.
The dialogue is paralleled by joint military exercises of an unprecedented scale, titled Exercise Malabar.
Quad is widely viewed as a response to increased Chinese economic and military power.

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Agmark, Hallmark, ISI, BIS, BEE and Other Ratings

[pib] HUID System in Jewellery Industry

PIB | Economics | Mains Paper 3:

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Hallmark Gold

Mains level: Not Much

Hallmarking scheme is turning out to be a grand success with more than 1 crore pieces of Jewellery hallmarked in a quick time” with more than 90000 Jewelers registered in a same time period.

What is Hallmark Gold?

The process of certifying the purity and fineness of gold is called hallmarking.
Bureau of Indian Standards, the National Standards Body of India, is responsible for hallmarking gold as well as silver jewellery under the BIS Act.
If you see the BIS hallmark on the gold jewellery/gold coin, it means it conforms to a set of standards laid by the BIS. Hallmarking gives consumers assurance regarding the purity of the gold they bought.
That is, if you are buying hallmarked 18K gold jewellery, it will actually mean that 18/24 parts are gold and the rest is alloy.
At present, only 30% of Indian Gold Jewellery is hallmarked.

Here are the four components one must look at the time of buying gold (they are mentioned in the laser engraving of a hallmark seal):

BIS Hallmark: Indicates that its purity is verified in one of its licensed laboratories
Purity in carat and fineness (corresponding to given caratage KT)

22K916 (91.6% Purity)
18K750 (75% Purity)
14K585 (58.5% Purity)

What is HUID?

HUID is a unique code that will be given to every piece of jewellery at the time of hallmarking.
It will be helpful in identifying the jeweller or the Assaying and Hallmarking Centres (AHCs) which had hallmarked the jewellery.
It will be a six-digit alphanumeric code, with which every piece of jewellery will be tagged.
At the hallmarking centre, the jewellery is stamped with the unique number manually.

What are the new hallmarking rules?

The government has made it mandatory for jewellers to hallmark gold jewellery, but with some relaxation.
Jewellers with an annual turnover of up to Rs 40 lakh will be exempted from mandatory hallmarking.
Similarly, jewellery for international exhibitions and government-approved business-to-business domestic exhibitions will also be exempted.
It will also allow hallmarking of additional carats — 20, 23, and 24.

Issues with HUID

Jewellers say the HUID process has increased the time required to get the hallmarking on jewels and this has created huge backlogs at AHCs.
Since the process is being done manually, there are also chances of a mismatch of the code, he adds.
The inventory pile-up at the centres is also raising concerns about the security of the jewellery.
Several industry stakeholders point out the limited number of AHCs, which will not be enough to hallmark the large number of pieces that are sold in India every year.

Answer this PYQ from CSP 2017

Q.Consider the following statements:

The Standard Mark of the Bureau of Indian Standards (BIS) is mandatory for automotive tyres and tubes.

AGMARK is a quality Certification Mark issued by the Food and Agriculture Organisation (FAO).

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Post your answers here.

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AYUSH – Indian Medicine System

Colourful molecules of turmeric

Prelims Only | Science Tech | Mains Paper 3: Awareness in various sc and tech fields

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Turmeric

Mains level: NA

Researchers have come forward with some interesting findings on Turmeric.

Turmeric

Turmeric has about 3% of the active component molecule called curcumin, a polyphenol diketone (and not a steroid).
Researchers point out that there is another molecule in turmeric called piperine, which is an alkaloid, responsible for the pungency of pepper that we use every day in our cooking, along with turmeric.
Piperine enhances curcumin absorption in the body. It gives turmeric its multivariate healing and protective power.

Benefits of turmeric consumption

Turmeric has been known for over 4,000 years in the Indian subcontinent, West Asia, Burma, Indonesia and China, and is used as an essential part of our daily food – what the colonials called curry powder.
It has also been known as a medicine for ages, and to have anti-bacterial, anti-oxidant and anti-inflammatory properties.
Herbal medicine experts have used turmeric to treat painful symptoms of arthritis, joint stiffness, and joint pain.
They have also claimed that turmeric helps cure acute kidney injuries. Some of these claims need to be checked using controlled trials.

Against COVID-19

Most recently, an exciting study has recently been published by a group in Mumbai which shows that turmeric aids in the treatment of COVID-19 patients.
The researchers did a trial of about 40 COVID-19 patients and found that turmeric could substantially reduce morbidity and mortality.

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Capital Markets: Challenges and Developments

Indian bond trading is in need of better market making

| Economics | Mains Paper 3: Indian Economy

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Bond market

Mains level: Paper 3- Issues with bond markets in India

Context

The Indian market for corporate debt needs buoyancy and this has been high on the agenda of our regulator

Background

The Reserve Bank of India (RBI) stopped the automatic monetization of the fiscal deficit in 1997 and made the government borrow money from the market.
There are primary dealers or PDs, who pick up the Centre’s bond and provide buy and sell quotes in the secondary market for government bonds and thus help ensure sufficient liquidity.
The PDs came to be known as market makers and are paid a commission for playing that role.

Liquidity challenge in the corporate bond market

Unlike the market for government bonds, in the case of the country’s corporate bond market, the challenge is different.
It’s typically remunerative for a buyer to buy a security and hold on to it till its maturity.
Therefore, insurance companies, provident funds, and pension funds hold such long-term paper, as they can match the tenure of their assets with liabilities.
But this does not add liquidity to the market, and anyone buying a corporate bond today may not find someone to sell it to tomorrow as this market has little trading depth.
Even in the G-Sec market, where we assume plenty of liquidity, it is a thinly-traded market, even though the perception is that it is very liquid.

Why do we need market makers for the corporate bond market

To deal with the lack of depth and liquidity in the corporate debt market, the Securities and Exchange Board of India’s (Sebi) idea of creating market makers holds immense significance.
The fundamental problem here is that a bond is different from a share.
A company’s share can be exchanged seamlessly because every share in the market is the same slice of ownership.
Lack of quotes for different bonds of different tenure: In the case of bonds, however, there are several issuances of a company.
A single financial institution or non-bank financial company could have as many as 10 issuances a year of varying maturities and interest rates, making each of them a unique instrument.
Company XYZ may have issued in October 2015 a bond with a face value of ₹100 that pays 6% interest and is due for redemption in 2030, which will be quoted on exchanges for trading (if it’s being traded).
But, in 2021, it is no longer a 15-year bond, but a 9-year paper.
Therefore, the security loses importance, as the market normally uses benchmarks like 5 or 10 or 15 years; and every bond drops in the pecking order once it crosses these thresholds.
Therefore, we need to have market makers who will offer quotes for all major securities and thereby ensure that critical bonds are still available for trading.

Suggestions

Provide waivers: Playing market maker will involve a cost and hence there should be certain waivers provided to them on trading fees.
Preferential access: They can be given preferential access to new issuances, so as to build up an inventory.
Waiver of mark-to-market: The mark-to-market (MTM) rules could be waived for a specified period, as valuation differences can affect their profit and loss accounts.
Capital at lower cost: Capital can be made available at a lower cost to market makers, as they require funding for the same.
Fifth, trade among market makers can be awarded benefits in terms of fees or easier taxes on gains made.
Create bond index: We need to have tradable-bond indices that reflect the price movements of a basket of bonds that they track.
Made public, such indices will provide appropriate arbitrage opportunities for investors to come in, and this should generate liquidity in the market for these bonds.

Consider the question “Why bond market in India lacks the depth as compared to equity markets. What are the factors responsible for this? Suggest the way forward.”

Conclusion

Market makers are a way out. While success cannot be guaranteed, the idea should be adopted nonetheless, as with credit default swaps. It’s a work-in-progress. Let’s speed it up.

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Back2Basics: Automatic monetization of deficit

The monetization of deficit was in practice in India till 1997, whereby the central bank automatically monetized government deficit through the issuance of ad-hoc treasury bills.
Two agreements were signed between the government and RBI in 1994 and 1997 to completely phase out funding through ad-hoc treasury bills.
And later on, with the enactment of the FRBM Act, 2003, RBI was completely barred from subscribing to the primary issuances of the government from April 1, 2006.

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Foreign Policy Watch: India-Afghanistan

The fall of Kabul, the future of regional geopolitics

op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 2- Afghanistan issue and its implications for India

Context

The fall of Kabul in the wake of the American withdrawal from Afghanistan will prove to be a defining moment for the region and the future shape of its geopolitics.

Implications of the US withdrawal for India

1) Increase in threat from China

The manner in which the United States withdrew from Afghanist created the regional power vacuum in the Eurasian heartland.
An axis of regional powers such as China, Pakistan, Iran, Russia, and the Taliban, have already started filling this power vacuum.
Advantageous for China: The post-American power vacuum in the region will be primarily advantageous to China and its grand strategic plans for the region.
BRI expansion: Beijing will further strengthen its efforts to bring every country in the region, except India, on the Chinese Belt and Road Initiative bandwagon, thereby altering the geopolitical and geoeconomic foundations of the region
The much-feared Chinese encirclement of India will become ever more pronounced.
Even in trade, given the sorry state of the post-COVID-19 Indian economy, India needs trade with China more than the other way round.
Unless India can find ways of ensuring a rapprochement with China, it must expect Beijing to challenge India on occasion, and be prepared for it.

2) Terror and extremism

The U.S. presence in Afghanistan, international pressure on the Taliban, and Financial Action Task Force worries in Pakistan had a relatively moderating effect on the region’s terror ecosystem.
There is little appetite for a regional approach to curbing terrorism from a Taliban-led Afghanistan.
This enables the Taliban to engage in a selective treatment towards terror outfits present there or they have relations with.
It is unlikely that the Taliban will proactively export terror to other countries unless of course for tactical purposes, for instance, Pakistan against India.
The real worry, however, is the inspiration that disgruntled elements in the region will draw from the Taliban’s victory against the world’s sole superpower.

3) Impact on India’s regional interests and outreach to Central Asia

The return of the Taliban to Kabul has effectively laid India’s ‘mission Central Asia’ to rest.
India’s diplomatic and civilian presence as well as its civilian investments will now be at the mercy of the Taliban, and to some extent Pakistan.
Had India cultivated deeper relations with the Taliban, Indian interests would have been more secure in a post-American Afghanistan.

4) Impact on India’s foreign policy choices

Shift to Indo-Pacific: Given the little physical access India has to its north-western landmass, its focus is bound to shift more to the Indo-Pacific even though a maritime grand strategy may not necessarily be an answer to its continental challenges.
Improving relations with neighbours: India might also seek to cultivate more friendly relations with its neighbours.
India has already indicated that it would not challenge the junta on the coup and its widespread human rights violations.
The last thing India needs now is an angry neighbour rushing to China.
Stability in relations with Pakistan: The developments in Afghanistan could nudge India to seek stability, if not peace, with Pakistan.
Both sides might refrain from indulging in competitive risk-taking unless something dramatic happens which is always a possibility between the two rivals.
That said, stability between India and Pakistan depends a great deal on how politics in Kashmir plays out, and whether India is able to pacify the aggrieved sections in the Valley.

Consider the question “What would be the fallout of the Taliban’s return in Afghanistan for India? What steps India needs to take to mitigate the impact on its interests?”

Conclusion

The lesson for India in the wake of these developments is clear: It will have to fight its own battles. So it must make enemies wisely, choose friends carefully, rekindle flickering friendships, and make peace while it can.

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Parliament – Sessions, Procedures, Motions, Committees etc

How are Rajya Sabha members punished for misconduct in the House?

op-ed snap | Polity | Mains Paper 2: Parliament & State Legislatures

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Article 20

Mains level: Paper 2- Provision for punishing the Members of Rajya Sabha for misconduct inside House

Context

The Chairman of the Rajya Sabha is reportedly contemplating action against MPs who, he thinks, were involved in the fracas in the House.

Provisions in House Rules of Rajya Sabha for punishing members

1) For conduct inside the House

Ground for punishment: Rule 256 of the Rajya Sabha’s Rules of Procedure specifies the acts of misconduct: Disregarding the authority of the chair, abusing the rules of the council by persistently and willfully obstructing the business thereof.
However, the power to suspend a member is vested in the House, not in the chairman.
Under the rule, the maximum period of suspension is for the remainder of the session.
By convention, a suspended member loses his right to get replies to his questions.
Thus, suspension from the service of the House is regarded as a serious punishment.
But, surprisingly, the rules do not spell out the disabilities of a suspended member.
These are imposed on them as per conventions or precedent.
Suspension for the remainder of the session makes sense only when they are suspended immediately after the misconduct has been noticed by the chair.
The rules of the House do not empower Parliament to inflict any punishment on its members other than suspension for creating disorder in the House.

2) Misconduct outside the House

For the acts of misconduct by the MPs outside the House, which constitute a breach of privilege or contempt of the House, usually the privilege committee investigates the matter and recommends the course of action and the House acts on it.
A special committee is appointed usually when the misconduct is so serious that the House may consider expelling the member.
Special committee was appointed in 2005 to inquire into the issue of MPs accepting money for raising questions in Parliament.
So, special ad-hoc committees are appointed only to investigate serious misconduct by MPs outside the House.

Issue in the present context

It appears that the Rajya Sabha secretariat has prepared a report on the incident in the Rajya Sabhi, which accuses some MPs of assaulting security personnel.
But special ad-hoc committees are appointed only to investigate serious misconduct by MPs outside the House.
No special committee is required to go into what happens before the eyes of the presiding officer inside the House.
As per the rules of the House, they need to be dealt with then and there.
The rules do not recognise any punishment other than suspension for a specific period and in this case, the Session is already over.
Article 20 of the Constitution prohibits a greater penalty than what the law provided at the time of committing the offence.

Conclusion

Punishing the MPs for their misconduct in the House is restricted by the provision in the House rules. These restrictions need to be looked into in the face of growing disruption by the members.

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Freedom of Speech – Defamation, Sedition, etc.

Arrest is not always a must, says Supreme Court

| Polity | Mains Paper 2: Indian Constitution - historical underpinnings, evolution, features, amendments, significant provisions and basic structure

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Issues over arbitrary detention

The Supreme Court has held that merely because the law allows arrest does not mean the State can use the power indiscriminately to crush personal liberty.

What is an Arrest?

An arrest is a procedure in a criminal justice system.
It is the act of apprehending and taking a person into custody (legal protection or control), usually because the person has been suspected of or observed committing a crime.
After being taken into custody, the person can be questioned further and/or charged.

Distinction between arrest and detention

There exists a distinction between an investigatory stop or detention and an arrest.
The distinction tends to be whether or not the stop is “brief and cursory” in nature, and whether or not a reasonable individual would feel free to leave.

Article 21 of the Indian Constitution guarantees the protection of life and personal liberty to every individual and states that, “No person shall be deprived of his life and personal liberty except according to procedure established by law.”

Logic behind arresting

The Supreme Court has noted that:

The occasion to arrest an accused during investigation arises when the custodial investigation becomes necessary.
Or it is a heinous crime or where there is a possibility of influencing the witnesses or accused may abscond.
The court was emphatic that a distinction must be made between the existence of the power to arrest and the justification for the exercise of this power.

Sanctions for arrest as outlined by the Supreme Court

The Supreme Court clarified that:

(A) Avoiding arrests

Arrest isn’t a compulsion: Merely because an arrest can be made because it is lawful does not mandate that arrest must be made.
Justification for arrest: A distinction must be made between the existence of the power to arrest and the justification for the exercise of it, it noted.
Dignity of the undertrial: If an arrest is made routine, it can cause incalculable harm to the reputation and self-esteem of a person.
Evidence protection: There should not be a compulsion on the officer to arrest the accused since many times there is no apprehension that an accused would abscond or tamper with evidence.

(B) Broad implications of Sec. 170 CrPC

Narrow interpretation: Section 170 of the Code of Criminal Procedure (CrPC) has been wrongly interpreted by the police and trial courts to make an arrest of the accused mandatory at the time of filing of the charge sheet.
Custody, not arrest: The word “custody” in Section 170 had been wrongly interpreted as ‘arrest’.The word ‘custody’ appearing in Section 170 does not contemplate either police or judicial custody.

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FDI in Indian economy

RBI, IRDAI nod must for FDI in bank-led insurance

| Economics | Mains Paper 3: Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: FDI in insurance

Applications for foreign direct investment in an insurance company promoted by a private bank would be cleared by the RBI and IRDAI to ensure that the 74% limit of overseas investment is not breached.

What does one mean by Insurance?

Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.
The company pools clients’ risks to make payments more affordable for the insured.
Insurance is a capital-intensive business so has to maintain a solvency ratio. The solvency ratio is the excess of assets over liabilities.
Simply put, as an insurance company sells more policies and collects premiums from policyholders, it needs higher capital to ensure that it is able to meet future claims.
In addition, insurance is a long gestation business. It takes companies 7-10 years to break even and start becoming profitable.

Types of Insurance

Insurance sector of India

The insurance regulator, the Insurance Regulatory and Development Authority of India (IRDAI), mandates that insurers should maintain a solvency ratio of at least 150 percent.
The insurance industry of India has 57 insurance companies 24 are in the life insurance business, while 34 are non-life insurers.
Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company.
In addition to these, there is a sole national re-insurer, namely the General Insurance Corporation of India (GIC Re).
Other stakeholders in the Indian Insurance market include agents (individual and corporate), brokers, surveyors, and third-party administrators servicing health insurance claims.
In India, the overall market size of the insurance sector is expected to be $280 billion in 2020.

Recent developments

The chronological order of events:

Nationalization of life (LIC Act 1956) and non-life sectors (GIC Act 1972)
Constitution of the Insurance Regulatory and Development Authority of India (IRDAI) in 1999
Opening up of the sector to both private and foreign players in 2000
Increase in the foreign investment cap to 26% from 49% in 2015
Increase in FDI limit from 49% to 74% in March 2020

Issues with India’s insurance sector

Insurance is considered a sensitive sector as it holds the long-term money of people. Various attempts were made in the past to open up the sector but without much success.

Lower insurance penetration due to various economic reasons such as poverty, etc.
Domination of the Public Sector ex. LIC
Trust issues in private insurances due to insolvency of private players
Saving habits of the public

Significance of the recent amendment

The current amendment is an enabling amendment that gives companies access to foreign capital if they need it.
It is an important shift instance as the increase in the FDI cap means insurance companies can now be foreign-owned and -controlled as against the current situation wherein they are only Indian-owned and -controlled.
The move is expected to increase India’s insurance penetration or premiums as a percentage of GDP, which is currently only 3.76 percent, as against a global average of more than 7 percent.

What does this mean for Indian insurance companies?

India has more than 60 insurance companies specializing in life insurance, non-life insurance, and health insurance.
The number of state-owned firms is only six and the remaining are in the private sector.
A higher FDI limit will help insurance companies access foreign capital to meet their growth requirements.

How does this impact Indian promoters of insurance companies?

Most of the Indian promoters of insurance companies are either Indian business houses or financial institutions like banks.
Many entered into the insurance space when they were financially strong but are now struggling to cater to the constant need to infuse capital into their insurance joint ventures.
Over the years, the sector has seen large-scale consolidation and exits of many promoters.
A higher FDI cap will mean that more promoters could now completely exit or bring down their stakes in their insurance joint ventures.

What higher does FDI mean for policyholders?

Higher FDI limits could see more global insurance firms and their best practices entering India.
This could mean higher competition and better pricing of insurance products.
Policyholders will get a wide choice, access to more innovative products, and a better customer service and claims settlement experience.

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Back2Basics: Foreign Direct Investment

An FDI is an investment in the form of controlling ownership in a business in one country by an entity based in another country.
It is thus distinguished from a foreign portfolio investment by a notion of direct control.
FDI may be made either “inorganically” by buying a company in the target country or “organically” by expanding the operations of an existing business in that country.
Broadly, FDI includes “mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations, and intra company loans”.
In a narrow sense, it refers just to building a new facility, and lasting management interest.

FDI in India

Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven by then FM Manmohan Singh.
There are two routes by which India gets FDI.

1) Automatic route: By this route, FDI is allowed without prior approval by Government or RBI.

2) Government route: Prior approval by the government is needed via this route. The application needs to be made through the Foreign Investment Facilitation Portal, which will facilitate the single-window clearance of the FDI application under the Approval Route.

India imposes a cap on equity holding by foreign investors in various sectors, current FDI in aviation and insurance sectors is limited to a maximum of 49%.
In 2015 India overtook China and the US as the top destination for Foreign Direct Investment.

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Foreign Policy Watch: India-Afghanistan

What is Shariah Law?

IOCR | International Relations | Mains Paper 2: India & Its Neighborhood - Relations

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Taliban seize of Afghanistan

The Taliban have pledged that women in Afghanistan will have rights “within the bounds of Islamic law,” or Shariah, under their newly established rule.

What is Shariah?

Shariah is based on the Quran, stories of the Prophet Muhammad’s life, and the rulings of religious scholars, forming the moral and legal framework of Islam.
The Quran details a path to a moral life, but not a specific set of laws.

Interpreting Shariah

The interpretations of Shariah are a matter of debate across the Muslim world, and all groups and governments that base their legal systems on Shariah have done so differently.
One interpretation of Shariah could afford women extensive rights, while another could leave women with few.
Critics have said that some of the Taliban restrictions on women under the guise of Islamic law actually went beyond the bounds of Shariah.
When the Taliban say they are instituting Shariah law, that does not mean they are doing so in ways that Islamic scholars or other Islamic authorities would agree with.

What does Shariah prescribe?

Shariah lists some specific crimes, such as theft and adultery, and punishments if accusations meet a standard of proof.
It also offers moral and spiritual guidance, such as when and how to pray, or how to marry and divorce.
It does not forbid women to leave home without a male escort or bar them from working in most jobs.

How has the Taliban previously interpreted Shariah?

When the Taliban controlled Afghanistan from 1996 to 2001, they banned television and most musical instruments.
They established a department for the Promotion of Virtue and the Prevention of Vice based on a Saudi model.

Restrictions imposed on Women

Restrictions on behavior, dress, and movement were enforced by morality police officers, who drove around in pickup trucks, publicly humiliating and whipping women who did not adhere to their rules.
In 1996, a woman in Kabul, Afghanistan, had the end of her thumb cut off for wearing nail polish, according to Amnesty International.
Other restrictions include a ban on schooling for girls, and publicly bashing people who violated the group’s morality code.
Women accused of adultery are stoned to death.

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Modern Indian History-Events and Personalities

Malabar Rebellion of 1921

Prelims Only | | Mains Paper 1: Modern Indian History

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Moplah Revolt

Mains level: Various tribal uprisings in India

This August 20, marked the centenary of the Malabar rebellion, which is also known as the Moplah riots.

Try this question from CSP 2020:

Q. With reference to the history of India, “Ulgulan” or the Great Tumult is the description of which of the following event?

(a) The Revolt of 1857

(b) The Mappila Rebellion of 1921

(c) The Indigo Revolt of 1859-60

(d) Birsa Munda’s Revolt of 1899-1900

Sign-in to post your answers here.

Malabar Rebellion

The Malabar Rebellion in 1921 started as resistance against the British colonial rule and the feudal system in southern Malabar but ended in communal violence between Hindus and Muslims.
There were a series of clashes between Mappila peasantry and their landlords, supported by the British, throughout the 19th and early 20th centuries.
It began as a reaction against a heavy-handed crackdown on the Khilafat Movement, a campaign in defence of the Ottoman Caliphate by the British authorities in the Eranad and Valluvanad taluks of Malabar.
The Mappilas attacked and took control of police stations, British government offices, courts and government treasuries.

Who was Variyankunna Kunjahammed Haji?

He was one of the leaders of the Malabar Rebellion of 1921.
He raised 75000 natives, seized control of large territory from the British rule and set up a parallel government.
In January 1922, under the guise of a treaty, the British betrayed Haji through his close friend Unyan Musaliyar, arresting him from his hideout and producing him before a British judge.
He was sentenced to death along with his compatriots.

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Also read

Important Rebellion

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Climate Change Impact on India and World – International Reports, Key Observations, etc.

Melting of the Greenland’s Snow Cover

Prelims Only | Enviro & Biodiversity | Mains Paper 1: Climatic Change

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Greenland

Mains level: Not Much

Recently the summit of Greenland received rain and not snow. This has sparked fear as scientists are pointing to it as evidence that Greenland is warming rapidly.

About Greenland

Greenland is the world’s largest island located between the Arctic and Atlantic oceans, east of the Canadian Arctic Archipelago.
It is an autonomous territory within the Kingdom of Denmark.
Though physiographically a part of the continent of North America, Greenland has been politically and culturally associated with Europe (specifically Norway and Denmark, the colonial powers).
The majority of its residents are Inuit, whose ancestors migrated from Alaska through Northern Canada, gradually settling across the island by the 13th century.
It has three-quarters of its surface covered with a permanent ice sheet, which is increasingly coming under threat because of climate change.

Rain at Greenland: The rarest phenomenon

At the highest point on Greenland’s ice sheet, the US maintains a Summit Station, a research facility that observes changes occurring over the island as well as in Arctic weather.
Researchers observed rain at the normally frigid summit, with the precipitation extending up to Greenland’s southeast coast.
The rain, coupled with warm conditions, caused a major melting event at the summit.
This led to rapid ice melting running off into the ocean in volumes, thus accelerating global sea-level rise.

A cause of worry

Greenland, which is two-thirds the size of India, already witnessed one of its most severe melting events.
It has lost 8.5 billion tons of surface mass in one day– the third such extreme event in the past decade.
The UN’s “code red” climate report released last week concluded that the burning of fossil fuels led to Greenland melting in the last 20 years.
The rapid melting is also threatening polar bears, which now have to make their way hundreds of kilometers towards Greenland’s interior from the coasts, where they usually find enough food.

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Modern Indian History-Events and Personalities

Places in news: Panjshir Valley

Prelims Only | International Relations | Mains Paper 2: India & Its Neighborhood - Relations

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Panjshir Valley

Mains level: Not Much

The Taliban has sent hundreds of its fighters to the Panjshir Valley, one of the few parts of Afghanistan not yet controlled by the group.

Panjshir Valley

Located 150 km north of Kabul, the Valley is near the Hindu Kush Mountain range.
It’s divided by the Panjshir river and ringed by the Panjshir mountains in the north and the Kuhestan mountains in the south.
The mountain tops are covered by snow throughout the year.
This difficult terrain makes the Valley a nightmare for invaders.

Why is it significant?

The Valley has repeatedly played a decisive role in Afghanistan’s military history, as its geographical position almost completely closes it off from the rest of the country.
The only access point to the region is through a narrow passage created by the Panjshir River, which can be easily defended militarily.
Famed for its natural defenses, the region tucked into the Hindu Kush mountains never fell to the Taliban during the civil war of the 1990s, nor was it conquered by the Soviets a decade earlier.
Panjshir Valley was among the safest regions in the country during the time of the NATO-backed government from 2001 to 2021.
The valley is also known for its emeralds, which were used in the past to finance the resistance movements against those in power.

Answer this PYQ:

Consider the following pairs

Towns: Country in news

Aleppo: Syria

Kirkuk: Yemen

Mosul: Palestine

Mazar-i-sharif: Afghanistan

Which of the pairs given above are correctly matched? (CSP 2018)

(a) 1 and 2

(b) 1 and 4

(c) 2 and 3

(d) 3 and 4

Post your answers here.

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Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Liberalizing Trade in Agriculture Machinery

| Economics | Mains Paper 3: Agriculture and related issues,Indian Economy

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 3- Significance of mechnisation of agriculture

Context

On July 15, the Centre issued a notification moving power tillers (PT) and their components from the “free” to “restricted” category indicating a clear intent to provide protection to the domestic industry.

How heterodox opening policies affects farming

Heterodox opening policies, being open on the export side while being closed on the import side, have long-term unintended consequences.

Productivity loss: One impact of heterodox policies is subpar mechanisation and productivity loss in agriculture.
India’s mechanisation coverage is around 40-45 per cent, compared to 90 per cent in developed countries.
At present, only Punjab, Haryana and western UP have mechanisation rates between 70 and 80 per cent whereas in eastern and southern states it is between 35 and 45 per cent, with even smaller coverage in North-Eastern states.
Comparatively high tariffs on agricultural machinery, placement under restricted trade hits the cog in the wheel of mechanisation.
Uncertainty and lower trade: A shift to restricted category and frequently changing tariffs engenders uncertainty and lowers trade.
Disincentivise innovation: Such policies also disincentivises domestic machine manufacturers to invest and innovate — the perils of protection.

What India can learn from Bangladesh on farm mechanisation

Starting lower, Bangladesh overtook India in mechanisation by 2006.
A perfect example of orthodox opening in the late 1980s, Bangladesh removed import bans on Power Tiller and other machinery like diesel engines.
By 1995, PT were made duty free and credit support was provided for purchases.
Studies have credited PT in increasing the rice yield in Bangladeh, which grew 2.1 per cent annually from 1990, compared to 1.6 per cent between 1960 and 1989.

Way forward

If productivity in agriculture and incomes of farmers were to go up significantly, Indian agriculture must hit the mechanisation frontier.

Liberal and Stable trade policies: Liberal and stable trade policies will increase access, competition will expand varieties and bring down the prices.
New trade economics teaches us that farmers would be successful in trading or accessing markets only when highly productive, which beckons large scale and intensive mechanisation.
Credit support: Bangladesh also shows the role of complementary policies such as credit support.
Once the farmers achieve sufficiently high productivity, they can access markets and even integrate with global value chains (GVC) if allowed by policy as intended in the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020.

Conclusion

Liberal trade in machinery presents an opportunity to access distant and international markets. The key is to be both ways open.

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Foreign Policy Watch: India-Middle East

The Abraham Accords as India’s West Asia bridge

op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 2- Implications of Abrahams Accord for India

Context

The recent visit by the Indian Air Force chief, to Israel offers a window to study how India is taking advantage of the Abraham Accords deal signed between Israel and a consortium of Arab States led by the United Arab Emirates (UAE) in 2020.

Increasing defence cooperation between India and West Asia region

India’s trajectory towards an increased strategic footprint in West Asia has been in development for some time now.
Starting from the relatively low-key staging visit to Saudi Arabia conducted by the IAF in 2015.
India hosted visiting Iranian naval warships in 2018.
India takes an active part in the defence of the critical waterways in and around the Persian Gulf, the Arabian Sea and the extended Indian Ocean Region (IOR).
An Indian contingent of the Indian Air Force (IAF) will visit Israel in October to take part in multilateral military exercises.
India also conducted the ‘Zayed Talwar’ naval exercises with the UAE off the coast of Abu Dhabi, further deepening the fast-developing strategic cooperation between the two countries.
In December 2020, Indian Army chief visited the UAE and Saudi Arabia, becoming the first chief of the Indian Army to do so.
In 2017, India signed a deal with Oman, the home to Duqm Port for access to the facility, including dry dock use by the Indian Navy.

How Abraham Accords accelerated India’s engagement with West Asia region?

No need for balancing act: The signing of the Accords has removed a significant strategic obstacle for India — delicate balancing act India has had to play out between the Arab Gulf and Israel over the decades.
India had welcomed the Accords, highlighting its support for mechanisms that offer peace and stability in the region.
From the UAE’s perspective, Accords were to make sure the emirate along with its international centres of trade such as Dubai and Abu Dhabi do not become targets between Jerusalem and Tehran.
However, not all Arab States have been on board with the geopolitical shifts the Accords have pushed through.
Saudi Arabia has maintained a distance from this arrangement.

India’s West Asia construct and relations with Iran

Iran, as part of India’s ‘West Asia’ construct, will also play a significant part in India’s outreach in the months to come as the crisis in Afghanistan deepens.
Connectivity projects such as Chabahar Port and Chabahar-Zahedan rail project (project discussions are still on) amongst others remain critical.
Recently, strategic cooperation revitalised despite multiple obstacles in the bilateral relations, led by U.S. sanctions against Tehran and the general tensions between Israel, the Gulf and Iran via proxy battles in theatres such as Yemen, Syria and beyond.

Conclusion

India’s strategic play in West Asia will be reflective of its economic growth, and by association, an increasingly important place in the global order.

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Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

What India’s informal sector needs right now

op-ed snap | Economics | Mains Paper 3: Indian Economy

Note4Students

From UPSC perspective, the following things are important :

Prelims level: MGNREGA

Mains level: Paper 3- Issues of informal sector

Context

Informal sector workers suffered far more from the national lockdown in 2020 than their formal sector counterparts.

Significance of informal sector

India’s large informal sector, which employs around 80 per cent of the labour force and produces about 50 per cent of GDP.
Of the 384 million employed in the informal sector, half work in agriculture, living mostly in rural India, and the other half are in non-agricultural sectors.
Of those, about half live in rural India and the remaining in urban areas.
Ignoring problems in the informal sector can be costly as it can lead to job and wage losses, higher inflation and even risk the livelihood of migrant workers.

Impact of pandemic on informal sector workers

Informal sector workers suffered far more from the national lockdown in 2020 than their formal sector counterparts.
Such disruptions can be inflationary too.
India was one of the few countries with high inflation throughout pandemic-stricken 2020.
The 40 per cent in the informal non-agricultural sector is the most affected by the pandemic.
These workers are most vulnerable as they have borne the brunt of the economic disruption that the pandemic has unleashed.

Impact on the informal sector

Nominal GDP growth has been a good indicator of the formal sector corporate sales.
But during the pandemic and also during events like demonetisation, formal corporate sales have exceeded nominal GDP growth.
This means that some demand, which was previously supplied by the informal sector, began to be supplied by the formal sector.
Several surveys over this time also show a rise in urban unemployment and self-employment, with the latter category seeing the highest earnings loss.

Way forward

Formalisation on the back of policy changes: While traditionally associated with efficiency gains, if it comes at the cost of putting small informal firms out of business.
Formalisation that comes only on the back of external pressure or leads to deep distress in the informal sector, may not be sustainable.
By contrast, formalisation that happens on the back of policy changes that help small and informal firms grow over time into medium or larger formal sector firms is more sustainable.
Social welfare scheme: We need protection for informal sector workers via social welfare schemes so that the disruption they are facing does not lead to a permanent fall in demand.
There is a case for remaining generous with programmes such as the rural MGNREGA scheme for longer.
India doesn’t have an MGNREGA equivalent urban social welfare scheme.
Reforms: Steps to promote reforms that are needed to help small businesses grow are critical.
For example, lowering the regulatory burden associated with growing firms.

Conclusion

Bringing the informal sector to the forefront of policy decisions can lead to a significant payoff for the entire economy for years to come.

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Minority Issues – SC, ST, Dalits, OBC, Reservations, etc.

Is a caste census desirable?

| Indian Society | Mains Paper 1: Salient features of Indian Society

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Caste Census

Mains level: Need for and issues with Caste Census

With the 2021 Census coming up, several political parties have demanded a nationwide caste census.

What is Caste Census?

Every Census in independent India from 1951 to 2011 has published data on Scheduled Castes and Scheduled Tribes, but not on other castes.
Before that, every Census until 1931 had data on caste.
However, in 1941, caste-based data was collected but not published.
In the absence of such a census, there is no proper estimate for the population of OBCs, various groups within the OBCs, and others.
The Mandal Commission estimated the OBC population at 52%, some other estimates have been based on National Sample Survey data.
Some political parties make their own estimates in states and Lok Sabha and Assembly seats during elections.

Arguments for caste census

A caste census is not merely geared to the reservation issue.

Enumerating the marginalized: A caste census would actually bring to the particular the number of people who are at the margins, or who are deprived, or the kind of occupations they pursue, or the kind of hold that institutions like caste have on them.
Data for Policymaking: This information is absolutely necessary for any democratic policymaking.
Judicial backing: The courts in India have often emphatically said that it is important to have adequate data with regard to the reservation.
Caste offers privilege: Caste is not only a source of disadvantage; it is also a very important source of privilege and advantage in our society.
Caste doesn’t marginalize: We need to do away with the idea of caste being applicable to only disadvantaged people, poor people, people who are somehow lacking.
Rids away caste rigidities: Counting of caste doesn’t necessarily perpetuate caste or the caste system. Myths of caste elitisms can be debunked through a caste census.

Arguments against caste census

50% breach: It is argued that a Socio-Economic Caste Census is the only way to make a case to breach the 50% cap on reservation and rationalize the reservation matrix in the country.
Rising assertiveness: More the State ignores out caste, the more is the tendency to preserve caste, protect it. This has been observed in many states.
Chaos: Data gathering itself is a big problem because it can become very, very invasive. But we need to actually balance it with enabling people and asserting citizen equality.
Social friction: Caste identification can lead to friction amongst various classes.

Breaching the 50% cap

Judicial Substantiation: The 50% cap, as introduced by the court, has not really been argued through.
Questioning the sacrosanctity: Some feel that nothing sacrosanct about the 50% limit − it can be exceeded, if necessary, but a clear argument should be given for why this is being done.

Inefficacy of reservations

Fractional benefits: The way reservation is practiced has invariably led to elites among castes and communities.
Domination: These elites within the castes have tended to exercise their dominance over their very communities and not let them exercise the kind of freedoms, or search for equality, which any democratic polity deserves.
Welfare isn’t reservation: The state has helped privileged communities far more, even though this help has not taken the explicit form of programs like reservation.

Why is a caste census always controversial?

Data manipulation: This is a manifestation of the principle that those in power control data and information.
Censoring of data: We have had instances where this data has been collected but has not been made public.
Relative deprivation: Since a caste census is a necessity, it is not a happy thing, it is not a great achievement, it is just something that the State has to do circumstantially.
Vote bank politics: Vested interests of particular state governments in hunt for vote banks are also visible these days.

SECC has the solution

We have got locked into a mindset where we think only those communities which want welfare benefits from the state must be enumerated.
Many have argued that a Socio-Economic Caste Census would be the best way to rationalize reservation based on data and make a strong case for breaching this gap.
Earlier governments argued that counting caste will perpetuate it.

Conclusion

Favoring one caste becomes a disfavor for others. This is an undeniable fact of Indian society.
It seems that the caste census will happen unless something extraordinary happens in our polity.
There are also important questions of demands coming up because of mismatches between the numbers that we come out with and the share in resources that different communities have.
This is a kind of nightmare that all governments fear. So, they would much rather leave things vague.
The Backward Classes are more than 50% of the population. And this dispensation knows that it cannot afford to lose the support of the Backward Classes.

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Foreign Policy Watch: India-Middle East

Abraham Accords as India’s West Asia bridge

IOCR | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Abraham Accord

Mains level: India's West-Asia plan

The recent visit by the Indian Air Force chief to Israel offers a window to study how New Delhi is taking advantage of the Abraham Accords deal signed between Israel and a consortium of Arab States.

Try this question:

What are Abraham Accords? Discuss how the Israel-Gulf synergy could impact India’s relations with Israel.

What are Abraham Accords?

The Israel–UAE normalization agreement is officially called the Abraham Accords Peace Agreement.
It was initially agreed to in a joint statement by the United States, Israel and the United Arab Emirates (UAE) on August 13, 2020.
The UAE thus became the third Arab country, after Egypt in 1979 and Jordan in 1994, to agree to formally normalize its relationship with Israel as well as the first Persian Gulf country to do so.
Concurrently, Israel agreed to suspend plans for annexing parts of the West Bank. The agreement normalized what had long been informal but robust foreign relations between the two countries.

Do you know?

Abraham was the first of the Hebrew patriarchs and a figure revered by the three great monotheistic religions—Judaism, Christianity, and Islam.

New friendships

For common enemy: Externally, Israel, the UAE and Bahrain share the common threat perception of Iran.
Upholding modern values: They are relatively more modern societies that share the overarching and immediate priority of post-pandemic economic resuscitation.
Extended cooperation: They have lost no time to set up logistics such as Internet connectivity and direct flights to pave the way for more active economic engagement.

India and the Gulf

Now India has stronger, multifaceted and growing socioeconomic engagements with Israel and the Gulf countries.
With over eight million Indian diasporas in the Gulf remitting annually nearly $50 billion, annual merchandise trade of over $150 billion.
It sources nearly two-thirds of India’s hydrocarbon imports, major investments, etc. Hence it is natural to ask how the new regional dynamic would affect India.
India has acquired a large and rewarding regional footprint, particularly as the preferred source of manpower, food products, pharmaceuticals, gem and jewellery, light engineering items, etc.
Indians are also the biggest stakeholders in Dubai’s real estate, tourism, and Free Economic Zones.
In the evolving scenario, there may be scope for a profitable trilateral synergy, but India cannot take its preponderance as a given.

The Israel-GCC synergy

Culture: Even the Israeli Arabs may find career opportunities to bridge the cultural divide. Israel is known as the start-up nation and its stakeholders could easily fit in the various duty-free incubators in the UAE.
Tourism: Tourism, real estate and financial service sectors on both sides have suffered due to the pandemic and hope for a positive spin-off from the peer-to-peer interactions.
Defense: Israel has niche strengths in defence, security and surveillance equipment, arid farming, solar power, horticultural products, high-tech, gem and jewellery, and pharmaceuticals.
Technology: Further, Israel has the potential to supply skilled and semi-skilled manpower to the GCC states, particularly from the Sephardim and Mizrahim ethnicities, many of whom speak Arabic.

The Iran link

Iran, as part of India’s ‘West Asia’ construct, will also play a significant part in India’s outreach in the months to come as the crisis in Afghanistan deepens.
The fact that New Delhi used Iranian airspace and facilities when evacuating its diplomatic staff from Kandahar in July showcases a level of strategic commonality.
Keeping this in mind, connectivity projects such as Chabahar Port and Chabahar-Zahedan rail project (project discussions are still on) amongst others remain critical.

Conclusion

India’s strategic play in West Asia will be reflective of its economic growth, and by association, an increasingly important place in the global order.

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Sugar Industry – FRP, SAP, Rangarajan Committee, EBP, MIEQ, etc.

Sugarcane Pricing in India

| Economics | Mains Paper 3: Issues Related To Farm Subsidies & Msp

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Sugarcane pricing mechanism

Mains level: Not Much

Earlier this month, the Supreme Court issued notices to States and major sugar producers to develop a mechanism to ensure that farmers are paid on time.

Who determines Sugarcane prices?

Sugarcane prices are determined by the Centre as well as States.

The Centre announces Fair and Remunerative Prices which are determined on the recommendation of the Commission for Agricultural Costs and Prices (CACP) and are announced by the Cabinet Committee on Economic Affairs, which is chaired by Prime Minister.
The State Advised Prices (SAP) are announced by key sugarcane producing states which are generally higher than FRP.

Minimum Selling Price (MSP) for Sugar

The price of sugar is market-driven & depends on the demand & supply of sugar.
However, with a view to protecting the interests of farmers, the concept of MSP of sugar has been introduced since 2018.
MSP of sugar has been fixed taking into account the components of Fair & Remunerative Price (FRP) of sugarcane and minimum conversion cost of the most efficient mills.

Basis of price determination

With the amendment of the Sugarcane (Control) Order, 1966, the concept of Statutory Minimum Price (SMP) of sugarcane was replaced with the Fair and Remunerative Price (FRP)’ of sugarcane in 2009-10.
The cane price announced by the Central Government is decided on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
This is done in consultation with the State Governments and after taking feedback from associations of the sugar industry.

Try this PYQ:

Q.The Fair and Remunerative Price (FRP) of sugarcane is approved by the:

(a) Cabinet Committee on Economic Affairs

(b) Commission for Agricultural Costs and Prices

(c) Directorate of Marketing and Inspection, Ministry of Agriculture

(d) Agricultural Produce Market Committee

Post your answers here.

What is FRP?

FRP is fixed under a sugarcane control order, 1966.
It is the minimum price that sugar mills are supposed to pay to the farmers.
However, states determine their own State Agreed Price (SAP) which is generally higher than the FRP.

Factors considered for FRP:

The amended provisions of the Sugarcane (Control) Order, 1966 provides for fixation of FRP of sugarcane having regard to the following factors:

a) cost of production of sugarcane;

b) return to the growers from alternative crops and the general trend of prices of agricultural commodities;

c) availability of sugar to consumers at a fair price;

d) price at which sugar produced from sugarcane is sold by sugar producers;

e) recovery of sugar from sugarcane;

f) the realization made from the sale of by-products viz. molasses, bagasse, and press mud or their imputed value;

g) reasonable margins for the growers of sugarcane on account of risk and profits.

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