IAS UPSC Prelims and Mains Exam – 20th August 2019

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(PRELIMS + MAINS FOCUS)

Sulphur dioxide Pollution

Part of: GS Prelims and GS Mains III – Environmental Pollution

In News

• A new report by Greenpeace India shows that India is the largest emitter of sulphur dioxide in the world
• More than 15% of all the anthropogenic sulphur dioxide hotspots detected by the NASA OMI satellite (Ozone Monitoring Instrument) lies in India
• Almost all of these emissions in India are because of coal-burning
• The vast majority of coal-based power plants in India lack flue-gas desulphurisation technology to reduce air pollution
• The Singrauli, Neyveli, Talcher, Jharsuguda, Korba, Kutch, Chennai, Ramagundam, Chandrapur and Koradi thermal power plants or clusters are the major emission hotspots in India
• India had introduced, for the first time, sulphur dioxide emission limits for coal-fired power plants in December 2015. 
• But the deadline for the installation of flue-gas desulphurisation (FGD) in power plants has been extended from 2017 to 2022.
• Of the world’s major emitters, China and the United States have been able to reduce emissions rapidly. They have achieved this feat by switching to clean energy sources.

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Direct Tax Code 2.0

Part of: GS Prelims and GS Mains III – Economy

In News

• The Task force headed by Akhilesh Ranjan submitted its Direct tax code (DTC) report to Finance Minister 
• In order to review the Income-tax Act, 1961 and to draft a new direct tax law in consonance with the economic needs of the country, a Task Force was constituted by the Government in November, 2017.
• Proposed DTC to have far fewer sections than over 700 in the Income Tax Act
• Addressing disruption caused by the US tax reforms last year, the panel has pressed for a corporate tax cut for domestic and foreign firms to 25 per cent. Presently it is 30 per cent for large companies and 40 per cent for foreign firms.
• However, foreign firms may have to pay branch profits tax on the amount repatriated to their foreign partner. 
• The panel has recommended Dividend distribution tax may be done away with.
• The task force suggested replacing the concept of assessing officer with assessment units, besides faceless scrutiny of cases picked through centrally and randomly allotted mechanism.
• Aimed at reducing tax litigation, it proposes a new concept of settling disputes through mediation between the taxpayer and a collegium of officers.

Do You know?

• The US had cut the rate from 35 per cent to 21 per cent last year
• FM in 2019-20 Union budget had cut corporate tax for firms with an annual turnover of up to Rs 400 crore to 25 per cent from 30 per cent, covering 99.3 per cent companies. 
• Large companies (turnover larger than Rs 400 Crore) continue to be taxed at 30% along with surcharges & cess.

Legislative Councils

Part of: GS Prelims and GS Mains II – Indian Federalism

In News

• The Madhya Pradesh government has indicated that it plans to initiate steps towards creation of a Legislative Council. 
• Currently, only six states have Legislative Councils 
• Under Article 169, Union Parliament has the power to create or abolish the Legislative Council on the basis of resolutions adopted by special majority in the Assembly of the concerned State.
• Under Article 171 of the Constitution, the Legislative Council of a state shall not have more than one-third of the number of MLAs of the state, and not less than 40 members. 
• Like Rajya Sabha, it is a permanent House and its members are elected indirectly by people
• Favour of Second House: It can help check hasty actions by the directly elected House, and also enable non-elected individuals to contribute to the legislative process
• Against Second House: A Legislative Council can be used to delay legislation, and to park leaders who have not been able to win an election.

Do You Know?

• Unlike Rajya Sabha which has substantial powers to shape non-financial legislation, Legislative Councils lack a constitutional mandate to do so; Assemblies can override suggestions/amendments made to a legislation by the Council
• Andhra Pradesh’s Legislative Council, set up in 1958, was abolished in 1985, then reconstituted in 2007.

• The Odisha Assembly recently passed a resolution for a Legislative Council. 
• Proposals to create Councils in Rajasthan and Assam are pending in Parliament.

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Parker Solar Probe

Part of: GS Prelims and Mains GS III – Science and Technology

In News

• On August 12, NASA’s Parker Solar Probe completed a year in service.
• It is part of NASA’s “Living With a Star” programme that explores different aspects of the Sun-Earth system.
• The probe seeks to gather information about the Sun’s atmosphere which will help better understand Sun
• It is also the closest a human-made object has ever gone to the Sun.
• The mission’s central aim is to trace how energy and heat move through the Sun’s corona and to study the source of the solar wind’s acceleration.
• The mission is likely to last for seven years during which it will complete 24 orbits

Do You know?

• Arranged in layers, the sun varies in temperature: It is hottest at its center, and cooler in its outer layers — until it strangely reheats at the fringes of the sun’s atmosphere (Corona)
• The centre of the Sun: about 15 million kelvin (K).
• Radiative Zone: Temperature falls from about 7 million to about 2 million K across this zone.
• Convection Zone: drops from 2 million K to 5800K in this zone.
• Photosphere: about 5800K, although sunspots are about 3800 K 
• Chromosphere: 4300 to 8300 K from inside edge to outside edge
• Corona (outermost layer of the Sun): about 2 million K

(MAINS FOCUS)

ENERGY

TOPIC:

• General Studies 2: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests
• General Studies 3: Infrastructure: Energy

Renewable hybrid energy systems as a game changer

 Context:

• India recently conducted two auctions for wind/solar hybrid projects. Both the auctions were under-subscribed, with bids totalling 1.56GW awarded to SB Energy, Adani Green Energy and Renew Power, against a total of 2.4GW on offer.
• Renewable hybrids can play a key role in helping India accelerate the decarbonisation of power generation and lowering the cost of electricity in the medium term.

India has added 65-70GW of wind and solar capacity so far, with wind and solar contributing 9.5% of generated energy in May 2019. If the government target of 175GW is achieved by 2022, this share could exceed 15-16%.

Renewable energy has three inherent challenges

• First, it relies on intermittent sources, producing energy only when the sun is shining or wind is blowing
• Second, its output is constrained to specific hours of the day; 
• Third, its use leads to lower utilization of transmission lines. This can create issues in matching peak power demand with renewable output (e.g. in evening hours when solar energy is not available), and raise costs of transmission. 

Renewable hybrids can be one solution to the above issues. 

• A hybrid system can combine wind, solar with an additional resource of generation or storage.
• Let us take an example: in India, we observe that solar output is maximum between 11am and 3pm, while wind output is highest in late evening and early morning. Peak demand for power is reached in the evening hours of 6-9pm, which cannot be catered to by either wind or solar. If we can store some energy during excess renewable generation hours and release it into the grid during peak demand hours, the combined “hybrid” system can produce 24×7 clean energy in response to varying levels of demand through the day.
• The storage can take many forms, such as batteries, pumped hydro or mechanical storage through flywheels. 
• The intermittency of wind and solar could also be balanced by adding a fast ramping source of power; for example, an open cycle gas turbine. 
• The overall output of the hybrid system can thus be matched against a required load on an hourly basis. In this way, it can provide both base load and flexible power.

Key notes:

• Hybrid systems are expected to become increasingly cost competitive, driven by reducing costs of battery storage and solar energy.
• India’s ministry of new and renewable energy released a solar-wind hybrid policy in 2018. This provides a framework to promote grid-connected hybrid energy through set-ups that would use land and transmission infrastructure optimally and also manage the variability of renewable resources to some extent.
• India is not the only country planning hybrid projects; 50-plus hybrid projects of MW-scale have already been announced or are under construction globally, with Australia and US being the leaders. 
• For larger capacities or longer duration balancing, pumped hydro is a viable storage solution, but is restricted by the lack of suitable physical locations.
• If the economics of hybrid systems do approach the above levels, our analysis indicates that they can potentially be competitive with 30-40% of existing coal-fired stations in India. 
• They can therefore become a viable solution to meeting future baseload power requirements, all at zero carbon emissions and future cost-inflation proof.
• Several leading Indian corporates are also showing active interest in increasing their usage of clean power if round-the-clock solutions are available.

Connecting the dots:

1. What policy and regulatory changes need to be made so that India can fully capture the potential of this interesting disruption in the energy sector?
2. Should India continue to build new coal-fired plants to meet base load requirements, or could renewable hybrids take a significant share? Discuss.

ECONOMY

TOPIC: General Studies 2

• Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

Bonds, yields, and inversions

As talk of a recession gets louder globally, bond yields are being keenly watched. A government bond yield curve most accurately reflects what investors think about current and future economic growth prospects.

What are bonds?

• A bond is an instrument to borrow money. It is like an IOU. 
• A bond could be floated/issued by a country’s government or by a company to raise funds. Since government bonds (referred to as G-secs in India, Treasury in the US, and Gilts in the UK) come with the sovereign’s guarantee, they are considered one of the safest investments. 
• As a result, they also give the lowest returns on investment (or yield). Investments in corporate bonds tend to be riskier because the chances of failure (and, therefore, the chances of the company not repaying the loan) are higher.

What are bonds yields?

• Simply put, the yield of a bond is the effective rate of return that it earns. But the rate of return is not fixed — it changes with the price of the bond.
• But to understand that, one must first understand how bonds are structured. Every bond has a face value and a coupon payment. There is also the price of the bond, which may or may not be equal to the face value of the bond.

What is happening to US govt bond yields at present? What does it signify?

• The global economy has been slowing down for the better part of the last two years. Some of the biggest economies are either growing at a slower rate (such as the US and China) or actually contracting (such as Germany).
• As a result, last week, US Treasury bond yields fell sharply as there was confirmation of slowdown in Germany and China.
• Reason: investors, both inside the US and outside, figured that if growth prospects are plummeting, it makes little sense to invest in stocks or even riskier assets. It made more sense rather, to invest in something that was both safe and liquid (that is, something that can be converted in to cash quickly). US Treasury bonds are the safest bet in this regard. So, many investors lined up to buy US Treasury bonds, which led to their prices going up, and their yields falling sharply.
• The fall in the yields of 10-year government bonds showed that the bond investors expected the demand for money in the future to fall. That is why future interest rates are likely to be lower.
• A lower demand for money in the future, in turn, will happen only when growth falters further. 
• So government bond yields falling typically suggest that economic participants “expect” growth to slow down in the future.

And what is a yield curve, and what does it signify?

• A yield curve is a graphical representation of yields for bonds (with an equal credit rating) over different time horizons. Typically, the term is used for government bonds — which come with the same sovereign guarantee. So the yield curve for US treasuries shows how yields change when the tenure (or the time for which one lends to the government) changes.
• If bond investors expect the US economy to grow normally, then they would expect to be rewarded more (that is, get more yield) when they lend for a longer period. This gives rise to a normal — upward sloping — yield curve 

What then is yield inversion, and what does it mean?

• Yield inversion happens when the yield on a longer tenure bond becomes less than the yield for a shorter tenure bond. This, too, happened last week when the 10-year Treasury yield fell below the 2-year Treasury yield.
• A yield inversion typically portends a recession. An inverted yield curve shows that investors expect the future growth to fall sharply; in other words, the demand for money would be much lower than what it is today and hence the yields are also lower.

How good is yield inversion at predicting a recession?

• Although US Commerce Secretary Wilbur Ross was quoted as saying Monday that “eventually there’ll be a recession but this inversion is not as reliable, in my view, as people think”, yet US data show historically that barring one episode in the mid-1960s, a yield inversion has always been followed by a recession.

Connecting the dots:

• What are bond yields? Why are bond yields tumbling around the world? How rising bond yields will impact the savings?

(TEST YOUR KNOWLEDGE)

Model questions: (You can now post your answers in comment section)

Note: 

• Featured Comments and comments Up-voted by IASbaba are the “correct answers”.
• IASbaba App users – Team IASbaba will provide correct answers in comment section. Kindly refer to it and update your answers.

Q.1) Consider the following statements

Assertion (A): India is the largest emitter of sulphur dioxide in the world

Reason (R): India does not have sulphur dioxide emission limits for coal-fired power plants.

Select the correct answer from the codes given below?

1. Both A and R are true and R is the correct explanation for A
2. Both A and R are true but R is not the correct explanation of A
3. A is true but R is false.
4. A is false but R is true.

Q.2) Consider the following statements

1. Nearly half of all States in India have legislative Council
2. Under Article 169, President has the power to create or abolish Legislative Council

Which of the statement(s) given above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

Q.3) Consider the following statements about Parker Solar Probe

1. It is launched by NASA as part of “Living With a Star” programme
2. It is the closest a human-made object has ever gone to the Sun 
3. The mission’s central aim is to trace how energy and heat move through the Sun’s corona

Which of the statement(s) given above is/are correct?

1. 1 and 2 only
2. 2 only
3. 1 and 3 only
4. 1,2 and 3

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