Note4Students
From UPSC perspective, the following things are important :
Prelims level: NARCL
Mains level: Paper 3- NARCL-challenges and opportunities
Context
The newly-created National Asset Reconstruction Company (NARCL) in the public sector offers hopes for the faster clean up of lenders’ balance sheets.
Features of National Asset Reconstruction Company (NARCL)
- The newly-minted ARC, NARCL is not a bank, but a specialised financial institution to help resolve the distressed assets of banks.
- Faster aggregation: Its greatest virtue lies in the faster aggregation of distressed assets that lie scattered across several lenders.
- Soverign assurance: Its securitised receipts (SRs) carry sovereign assurance.
- This is of particular comfort to PSU banks as price discovery would not be subject to later investigations.
- Focus on large accounts: It would initially focus on large accounts with debts over Rs 500 crore.
- IDRCL: All eyes will be focused on IDRCL (Indian Debt Resolution Company), the operating arm, which would be in the private sector.
Past policy measures to resolve the bad debts
- Institutional measures include BIFR (Board for Industrial and Financial Reconstruction, 1987), Lokadalat, DRT (Debt Recovery Tribunal, 1993), CDR (Corporate Debt Restructure, 2001), SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement, 2002), ARC (Asset Recovery Company, 2002).
- The RBI has also launched a slew of measures during 2013-14 to resolve, reconstruct and restructure stressed assets.
Why the measures to resolve the bad debt failed?
- Of the 28 ARCs (private sector) in operation, many are bit players.
- Dominance of few ARC: The top five ARCs account for over 70 per cent of the asset under management (AUM) and nearly 65 per cent of the capital.
- Restructuring as an exception: Financial and business restructuring appears to be more an exception than the norm.
- Nearly one-third of debts are rescheduled.
- This is not much value addition to what lenders would have otherwise done at no additional cost.
- Success and shortcomings of IBC: The IBC, introduced in 2016, was landmark legislation and marked a welcome departure from the earlier measures, with a legally time-bound resolution.
- The focus is on resolution rather than recovery.
- It nearly put an end to evergreening.
- Even though there are delays under this newfound promise, they are counted in terms of days and not years and decades.
- The NCLT (National Company Law Tribunal) is the backbone of the IBC, but lamentably is starved of infrastructure and over 50 per cent (34 out of 63) of NCLT benches were bereft of regular judges.
- Even the parliamentary committee has expressed indignation on a large number of positions left vacant.
- This lack of adequate infrastructure, coupled with the poor quality of its decisions, has proved to be the IBC’s Achilles’ heel.
- We need judicial reforms for early and final resolutions.
- Issue of delayed recognition and resolution: Forty-seven per cent of the cases referred to the IBC, representing over 1,349 cases, have been ordered for liquidation.
- Against the aggregate claims of the creditors of about Rs 6.9 lakh crore, the liquidation value was estimated at a paltry Rs 0.49 lakh crore.
Suggestions to make IBC more effective
- Delayed recognition and resolution: Lenders and regulators need to address the issue of delayed recognition and resolution.
- Business stress and/or financial stress needs to be recognised even prior to regulatory norms on NPA classification.
- Dealing with anchoring bias: The tendency to make decisions on the basis of first available information is called “anchoring bias”.
- The first available information in bidding for distressed assets is the cost of acquisition to ARCs.
- Potential bidders would quote prices nearer to this anchor.
- Nobel Laureate Daniel Kahneman has suggests a three-step process to mitigate anchor bias: One, acknowledge the bias; two, seek more and new sources of information, and three, drop your anchor on the basis of new information.
Way forward for NARC
- Forbid wilful defaulters from taking back distressed asset: The IBC has made considerable progress in bringing about behavioural change in errant and wilful defaulters by forbidding them to take back distressed assets.
- Otherwise, the credit culture suffers.
- The NARC should uphold this principle, not dilute it
- Introduce Sunset clause: It should have a sunset clause of three to five years.
- This will avoid the perpetuation of moral hazard and also encourage expeditious resolution.
- Deal with anchor bias: Anchor bias needs to be mitigated by better extrinsic value discovery.
- Avoid selling to other ARCs: It should avoid selling to other ARCs.
Conclusion
The RBI has recently released (November 2) a report on the working of ARCs and makes 42 recommendations to improve the performance of ARCs. This article incidentally makes an effort to identify some constraints and offer solutions to improve the performance of ARCs.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: HGV missile
Mains level: Paper 2- HGV test by China and its implications
Context
On October 27 Chairman of the Joint Chiefs of Staff of the US, reacted to China testing its nuclear-capable hypersonic weapons system by drawing an analogy with a Sputnik moment.
How US’s Ballistic Missile Defence led to the recent Sputnik moment
- Since the US withdrawal from the Anti-Ballistic Missile (ABM) treaty in 2002, both Russia and China have been wary of Washington’s Ballistic Missile Defence (BMD) programme.
- It undermines strategic stability: Missile defence is inherently destabilising — it undermines “strategic stability”.
- A robust BMD would compromise the second strike capability of the adversary by neutralising the surviving incoming missiles in case of a near-decapitating first strike
- Both Russia and China thus view the US BMD as undermining their deterrence and have sought ways to restore their retaliatory strike capability by investing in new technologies such as Hypersonic Glide Vehicles (HGVs).
- HGVs can escape the missile defence systems.
- HGVs fly at lower altitudes than ballistic missiles, which means they could potentially escape early warning systems, aided by the earth’s curvature.
Implications of Chinese test
- It can set off competition: The Chinese tests have the potential to set off an aggressive competition among the nuclear powers to modernise their nuclear arsenals and add new, potentially destabilising capabilities to their arsenal.
- Global and regional arms race: In the present era of minimal arms control measures, the Chinese hypersonic missile system test will trigger an intense arms race both at the global and regional levels.
- With the Chinese test, the US may be forced to expand its hypersonic programme and further modernise its missile defence systems.
What should be the course of action for India
- China’s nuclear-tipped hypersonic weapon systems, though not particularly India-focused, could nudge New Delhi to adopt two courses of action.
- Missile program: First, accelerate its hypersonic missiles programme.
- Develop missile defence system: Second, consider erecting an equally robust missile defence.
- Chinese advancement in stealth technologies will drive New Delhi to seek similar capabilities but also develop effective countermeasures.
- This can then set off a regional arms race, a sign that is not particularly encouraging for regional peace.
Consider the question “Examine the implications of recent hypersonic missile test by China for the region and global arms race control efforts? What should be the course of action for India? “
Conclusion
China’s hypersonic missile test may not have come with a Sputnik-like surprise, but it has the potential to set off a post-Sputnik-like arms race that does not augur well for the strategic stability both at the global and regional level.
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Back2Basics: Hypersonic Glide Vehicles (HGVs)
- A hypersonic missile is a vehicle that achieves a speed five times faster than the speed of sound, crossing Mach 5.
- These missiles travel at a speed of around 6,115 km per hour, with a combination of technology and manoeuvrability of ballistic missiles and cruise missiles.
Fractional Orbital Bombardment System (FOBS)
- A Fractional Orbital Bombardment System is a warhead delivery system that uses a low earth orbit towards its target destination.
- Just before reaching the target, it deorbits through a retrograde engine burn.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Article 222
Mains level: Issues with Judicial Transfer
The transfer of Chief Justice Sanjib Banerjee from the Madras High Court to the Meghalaya High Court has given rise to a controversy over the question of whether judicial transfers are made only for administrative reasons or have any element of ‘punishment’ behind them.
Transfer of judges and the Constitution
- Article 222 of the Constitution provides for the transfer of High Court judges, including the Chief Justice.
- It says the President, after consultation with the Chief Justice of India, may transfer a judge from one High Court to any other High Court.
- It also provides for a compensatory allowance to the transferred judge.
- This means that the executive could transfer a judge, but only after consulting the Chief Justice of India.
- From time to time, there have been proposals that one-third of the composition of every High Court should have judges from other States.
What is the Supreme Court’s view on the issue?
Union of India vs. Sankalchand Himatlal Sheth (1977)
- The Supreme Court rejected the idea that High Court judges can be transferred only with their consent.
- It reasoned that the transfer of power can be exercised only in public interest.
- It held that the President is under an obligation to consult the CJI, which meant that all relevant facts must be placed before the CJI.
- It ruled CJI had the right and duty to elicit and ascertain further facts from the judge concerned or others.
S.P. Gupta vs. President of India, 1981 (First Judges Case)
- It considered the validity of the transfer Judges as well as a circular from the Law Ministry.
- The Ministry had put that additional judge in all High Courts may be asked for their consent to be appointed as permanent judges in any other High Court, and to name three preferences.
- The Minister’s reasoning was that such transfers would promote national integration and help avoid parochial tendencies bred by caste, kinship and other local links and affiliations.
- The majority ruled that consultation with the CJI did not mean ‘concurrence’ with respect to appointments.
SCARA Vs Union of India, 1993 (Second Judges Case)
- In effect, it emphasized the primacy of the executive in the matter of appointments and transfers.
- However, this position was overruled in the ‘Second Judges Case’ (1993).
- The opinion of the CJI, formed after taking into account the views of senior-most judges, was to have primacy.
- Since then, appointments are being made by the Collegium.
Current procedure for transfers
- As one of the points made by the ‘Second Judges Case’ was that the opinion of the CJI ought to mean the views of a plurality of judges, the concept of a ‘Collegium of Judges’ came into being.
- In the collegium era, the proposal for transferring a High Court judge, including a Chief Justice, should be initiated by the Chief Justice of India, “whose opinion in this regard is determinative”.
- The consent of the judge is not required.
- All transfers are to be made in public interest, i.e. for promoting better administration of justice throughout the country.
- For transferring a judge other than the Chief Justice, the CJI should take the views of the CJ of the court concerned, as well as the CJ of the court to which the transfer is taking place.
- The CJI should also take into account the views of one or more Supreme Court judges who are in a position to offer their views.
- In the case of transfer of a Chief Justice, only the views of one or more knowledgeable Supreme Court judges need to be taken into account.
Provision for Written Recommendation
- The views should all be expressed in writing, and they should be considered by the CJI and four senior-most judges of the Supreme Court, which means, the full Collegium of five.
- The recommendation is sent to the Union Law Minister who should submit the relevant papers to the Prime Minister.
- The PM then advises the President on approving the transfer.
What makes transfers controversial?
- Punitive intent: Transfer orders become controversial when the Bar or sections of the public feel that there is a punitive element behind the decision to move a judge from one High Court to another.
- No disclosure of reasons: As a matter of practice, the Supreme Court and the government do not disclose the reason for a transfer.
- Adverse opinions behind: For, if the reason is because of some adverse opinion on a judge’s functioning, disclosure would impinge on the judge’s performance and independence in the court to which he is transferred.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Repealing of a law
Mains level: Farmers protests and related issues
PM after repealing the farm laws has said that the process of repealing the laws — which are currently stayed by the Supreme Court — will take place in the upcoming Winter Session of Parliament.
Repealing a Law
- Repealing a law is one of the ways to nullify a law.
- A law is reversed when Parliament thinks there is no longer a need for the law to exist.
- Legislation can also have a “sunset” clause, a particular date after which they cease to exist.
- For example, the anti-terror legislation Terrorist and Disruptive Activities (Prevention) Act 1987, commonly known as TADA, had a sunset clause, and was allowed to lapse in 1995.
- For laws that do not have a sunset clause, Parliament has to pass another legislation to repeal the law.
(Sunset Clause: A law shall cease to have effect after a specific date, unless further legislative action is taken to extend the law.)
How can the government repeal a law?
- Article 245 of the Constitution gives Parliament the power to make laws for the whole or any part of India, and state legislatures the power to make laws for the state.
- Parliament draws its power to repeal a law from the same provision.
- A law can be repealed either in its entirety, in part, or even just to the extent that it is in contravention of other laws.
What is the process for repealing a law?
- Laws can be repealed in two ways — either through an ordinance, or through legislation.
- In case an ordinance is used, it would need to be replaced by a law passed by Parliament within six months.
- If the ordinance lapses because it is not approved by Parliament, the repealed law can be revived.
- The government can also bring legislation to repeal the farm laws.
- It will have to be passed by both Houses of Parliament, and receive the President’s assent before it comes into effect.
Legislations required
- All three farm laws can be repealed through a single legislation.
- Usually, Bills titled Repealing and Amendment are introduced for this purpose.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: HomoSEP
Mains level: Manual scavenging in India
IIT Madras has developed a robot that can, if deployed extensively, put an end to this practice of sending people into septic tanks.
HomoSEP
- HomoSEP stands for “homogenizer of septic tanks”.
- It has a shaft attached to blades that can open like an inverted umbrella when introduced into a septic tank.
- This is helpful as the openings of the septic tanks are small and the tank interiors are bigger.
- The sludge inside a septic tank contains faecal matter that has thickened like hard clay and settled at the bottom.
- This needs to be shredded and homogenized so that it can be sucked out and the septic tank cleaned. The whirring blades of the robot achieve precisely this.
Manual scavenging deaths in India
- A statement by the Social Justice and Empowerment Ministry conveyed that in the five years till December 31, 2020, there have been 340 deaths due to manual scavenging.
- Uttar Pradesh (52), Tamil Nadu (43) and Delhi (36) leads in the list. Maharashtra had 34 and Gujarat and Haryana had 31 each.
- This is despite bans and prohibitory orders.
Various policy initiatives
- Prohibition of Employment as Manual Scavengers and their Rehabilitation (Amendment) Bill, 2020: It proposes to completely mechanise sewer cleaning, introduce ways for ‘on-site’ protection and provide compensation to manual scavengers in case of sewer deaths.
- Prohibition of Employment as Manual Scavengers and their Rehabilitation Act, 2013: Superseding the 1993 Act, the 2013 Act goes beyond prohibitions on dry latrines, and outlaws all manual excrement cleaning of insanitary latrines, open drains, or pits.
- Rashtriya Garima Abhiyan: It started national wide march “Maila Mukti Yatra” for total eradication of manual scavenging from 30th November 2012 from Bhopal.
- Prevention of Atrocities Act: In 1989, the Prevention of Atrocities Act became an integrated guard for sanitation workers since majority of the manual scavengers belonged to the Scheduled Caste.
- Judicial intervention: In 2014, a Supreme Court order made it mandatory for the government to identify all those who died in sewage work since 1993 and provide Rs. 10 lakh each as compensation to their families.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Healthcare scenario in urban areas
The report on ‘Health Care Equity in Urban India’ exploring health vulnerabilities and inequalities in cities in India was recently released.
About the report
- The report is released recently by Azim Premji University in collaboration with 17 regional NGOs across India.
- It notes that a third of India’s people now live in urban areas, with this segment seeing rapid growth from about 18% (1960) to 28.53% (2001) to 34% (in 2019).
- The study draws insights from data collected through detailed interactions with civil society organizations in major cities and towns.
- This also included an analysis of the National Family and Health Surveys (NHFS), the Census of India, and inputs from State-level health officials on the provision of health care.
- It also looks at the availability, accessibility, and cost of healthcare facilities, and possibilities in future-proofing services in the next decade.
Key highlights of the report
- Urban poverty on rise: Close to 30% of people living in urban areas are poor.
- Declining life expectancy: Life expectancy among the poorest is lower by 9.1 years and 6.2 years among men and women, respectively, compared to the richest in urban areas.
- Chaotic health governance: The report, besides finding disproportionate disease burden on the poor, also pointed to a chaotic urban health governance.
- Multiplicity and non-coordination: The multiplicity of healthcare providers both within and outside the government without coordination challenges to urban health governance.
- Lack of political attention: Urban healthcare has received relatively less research and policy attention.
Major recommendations
The report calls for:
- Strengthening community participation and governance
- Building a comprehensive and dynamic database on the health and nutrition status, including co-morbidities of the diverse, vulnerable populations
- Strengthening healthcare provisioning through the National Urban Health Mission, especially for primary healthcare services
- Putting in place policy measures to reduce the financial burden of the poor
- A better mechanism for coordinated public healthcare services and better governed private healthcare institutions
Conclusion
- As urbanization is happening rapidly, the number of the urban poor is only expected to increase.
- A well-functioning, better coordinated, and governed health care system is crucial at this point.
- The pandemic has brought to attention the need for a robust and resourced healthcare system.
- Addressing this will benefit the most vulnerable and offer critical services to city dwellers across income groups.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Semiconductor, Rare earth elements
Mains level: Semiconductor industry
Chips or processors power every possible product on the market from high-end cars to washing machines. There is a worldwide shortage of semiconductor chips.
What are Semiconductors?
- A semiconductor sits between a conductor and an insulator and is commonly used in the development of electronic chips, computing components, and devices.
- It’s generally created using silicon, germanium, or other pure elements.
- Semiconductors are created by adding impurities to the element.
Giants of global chip industry
- Semiconductor manufacturing is now dominated by Taiwan Semiconductor Manufacturing Company (TSMC) in Taiwan and Samsung Electronics in South Korea.
- American chipmaker Intel now plans to spend $20 billion to build two new chip factories in Chandler, Arizona.
- These new fabs will also manufacture chips designed by Amazon, Qualcomm, and other customers.
Why is there a semiconductor shortage?
- During the pandemic, manufacturing came to a standstill impacting the supply chains of products that need one or more of these.
- As the automotive sector almost shut down last year, chip makers shifted capacity to cater to increased demand for electronics items such as cell phones and laptops.
- Since orders for advanced chips are placed well in advance, manufacturers have not yet been able to come back to pre-pandemic production schedules to cater to all sectors.
- The automotive chips are of medium-level complexity, compared to the really small and extremely complicated ones on smartphones and personal computers.
- Building something this small, featuring billions of transistors is an expensive process.
Has India missed the bus in setting up chip factories?
- There is a lot of risks involved in setting up a chip plant.
- Past initiatives to set up chip manufacturing units in the country never took off due to lack of long-term vision, lack of government incentives, and poor planning.
- Now the government is keen to promote manufacturing and has even proposed tax incentives under Production Linked Incentive Scheme.
- Things are progressing slowly, but the recent announcement of Tata Group entering semiconductor manufacturing is being seen positively.
How is the chip crisis playing out in geopolitics?
- The global chip crisis and geopolitical tensions with China have shifted focus back on semiconductors.
- The US, which was once a leader in chip manufacturing, wants the crown back.
- The protectionist US is looking to bring manufacturing back to America and reduce its dependency on a handful of chipmakers mostly concentrated in Taiwan and South Korea.
- China’s renewed aggression on Taiwan is also being seen in light of the chip crisis.
Impact
- The crisis is expected to cost the global automotive industry $210 billion in revenue in 2021.
- The global semiconductor shortage has affected many industries for more than a year and because of that, they are either forced to pay more for products or being asked to wait a little more.
- The consumption of integrated circuits in products is ever increasing and a large manufacturing sector for these kinds of integrated circuits are a part of the supply chain.
- The shortage has affected smartphones, personal computers, game consoles, automobiles, and medical devices.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Majuli Island
Mains level: Not Much
Soil erosion, coupled with changing climatic conditions, has been writing a cruel destiny for the inhabitants of Majuli in Assam, the largest river island in the world.
About Majuli Island
- Majuli is a riverine island in the Brahmaputra River, Assam and in 2016 it became the first island to be made a district in India.
- Majuli has shrunk as the river surrounding it has grown.
- It had an area of 880 square kilometers (340 sq mi) at the beginning of the 20th century but having lost significantly to erosion it covers 553 square kilometers as at 2014.
- It is the abode of the Assamese neo-Vaishnavite culture.
Its formation
- The island is formed by the Brahmaputra River in the south and the Kherkutia Xuti, an anabranch of the Brahmaputra, joined by the Subansiri River in the north.
- It was formed due to course changes by the river Brahmaputra and its tributaries, mainly the Lohit.
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