IAS UPSC Prelims and Mains Exam – 23rd August 2019

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(PRELIMS + MAINS FOCUS)

Amazon Wildfires

Part of: GS Prelims and GS Mains II- Environmental Conservati

In News

• Man-made fires in the world’s largest rainforest have sent smoke to populated cities and the Atlantic coast
• It is not unusual to see fires in Amazon forests at this time of year due to high temperatures and low humidity which creates dry favourable conditions for natural wild fires.
• However, wildfires raging in the Amazon rainforest have hit a record number this year, with 72,843 fires detected so far. Forest fires in the region have doubled since 2013, and increased by 84% compared to the same period last year.
• Environmental activists blamed President Bolsonaro for the current situation, saying he encouraged loggers and farmers to clear the land by burning down the forests.
• The largest rainforest in the world, the Amazon is a vital carbon store that slows down the pace of global warming. 
• The Amazon rainforest produces approximately 20% of oxygen in the Earth’s atmosphere.
• It is also home to about three million species of plants and animals, and one million indigenous people, which is now under threat due to encroachment by the Brazil government, foreign corporations and governments with economic interests in the resource-rich region, and local farmers

• https://www.ibtimes.com/brazils-bolsonaro-blames-amazon-fires-ngos-twitter-erupts-2816406

Sabka Vishwas Scheme

Part of: GS Prelims and GS Mains III – Indian Economy

In News

• Union Government had announced the Sabka Vishwas (Legacy Dispute Resolution) Scheme in its 2019-20 budget, which will be operationalised from September 1 till December 31, 2019.
• The two main components of the scheme are dispute resolution and amnesty
• The dispute resolution component is aimed at liquidating the legacy cases of central excise and service tax that are subsumed in GST and are pending in litigation at various forums
• The amnesty component of the scheme offers taxpayers the opportunity to pay any outstanding tax and be free of any other consequence under the law
• It provides substantial relief in the tax dues for all categories of cases as well as full waiver of interest, fine, penalty and complete amnesty from prosecution
• The scheme offers a relief of 70% from the duty demand if it is less than ₹50 lakh and 50% if it is more than ₹50 lakh for all cases pending adjudication or appeal in any forum.
• The scheme aims at reducing tax litigation and improving ease of doing business, needed at this time where businesses are facing an economic downturn.

Ordnance factory Board (OFB)

Part of: GS Prelims and GS Mains III – Indian Economy

In News

• More than 80,000 workers of the 41 ordnance factories across the country are on strike, protesting against the proposed restructuring of the OFB

• • The OFB established in 1775 is currently a department under the Defence Ministry. 
  • These factories manufacture weapons, ammunition, explosives and other equipment like armoured vehicles for the defence forces as well as foreign clients
  • OFB in its present structure of a departmental organisation is not efficient in utilization of resources and competing with rivals in the private sector who have all the managerial and technical flexibility

• The government plans to convert it into one or more corporate entities fully owned by the government, like the other public sector units

• At least three expert committees — T K S Nair Committee (2000), Vijay Kelkar Committee on Defence Reforms (2005), and the Raman Puri Committee (2015) — had suggested such a move
• The argument is that corporatisation would improve efficiency, make products cost-competitive, enhance quality, provide operational freedom and flexibility to the OFB 
• One of the fears of employees is that corporatisation is a step towards privatisation and they fear job losses

One Nation, One Ration Card (ONORC)

Part of: GS Prelims and GS Mains II – Issues relating to Public Distribution System

In News

• Last week, the government launched the pilot project for the inter-state portability of ration cards between Telangana and Andhra Pradesh, and between Maharashtra and Gujarat, as part of its ‘One Nation, One Ration Card’ scheme
•  A ration card is issued to the head of the family, depending on the number of members in a family and the financial status of the applicant.
• It is used by households to get essential food grains at subsidised prices from designated ration shops (also called fair price shops) under the Targeted Public Distribution System (TPDS).
• Over the years, different types of ration cards were issued depending on the level of deprivation
• However, in 2013, when the National Food Security Bill was passed, different ration cards were compressed to just two — priority and Antyodaya (for the most poor). 
• The responsibility of identifying eligible families and issuing ration cards to them rests with the state/UT government.
• This implied that beneficiaries could procure food grains only from the designated ration shops within the concerned state
• ONORC scheme has been launched keeping in mind the internal migration of our country, since people keep moving to different states in search of better job opportunities and higher standards of living.
• ONORC scheme helps the beneficiary to buy food grains from ration shops located in any part of the country

Do You Know?

• Ration shops can be privately owned or owned by cooperative societies or by the government. 
• Ownership licenses are issued by the concerned state government. 
• Presently, commodities including wheat, sugar, rice and kerosene are being allocated as part of the TPDS. State governments have the discretion to provide additional commodities

(MAINS FOCUS)

FORESTS/ENVIRONMENT

Topic: General studies 3

• Conservation, environmental pollution and degradation, environmental impact assessment Disaster and disaster management.

Why Amazon fires are worrying

Context:

• Man-made fires in the world’s largest rainforest have sent smoke to populated cities and the Atlantic coast. 

Concern:

• Over the last several days, the Amazon rainforest has been burning at a rate that has alarmed environmentalists and governments worldwide. Mostly caused by farmers clearing land, the fires have thrown the spotlight on Brazil President Jair Bolsonaro’s policies and anti-environment stance

Where are the Amazon fires happening?

• Started in the Amazonian rainforests, the fires have impacted populated areas in the north, such as the states of Rondonia and Acre, blocking sunlight and enveloping the region in smoke. 
• The smoke has wafted thousands of miles to the Atlantic coast and São Paulo, according to the World Meteorological Organization.
• Brazil’s National Institute for Space Research (INPE) has reported that forest fires in the region have doubled since 2013, and increased by 84% compared to the same period last year. 
• This year alone there have been 72,843 fires, it said, and more than 9,500 of those have happened over the past few days.

How did the Amazon fires start?

• The weekly Brasil de fato reported that Bolsonaro’s anti-environment rhetoric has emboldened farmers, who organised a “fire day” along BR-163, a highway that runs through the heart of the rainforest. The weekly quoted a report by local newspaper Folha do Progresso, that local farmers had set fire to sections of the rainforest a few days ago to get the government’s attention. “We need to show the President that we want to work and the only way is to knock it down. And to form and clear our pastures, it is with fire,” Folha do Progresso quoted one farmer as saying.
• Alberto Setzer, a researcher at INPE, told Reuters that this year, the region did not experience extreme dry weather. “The dry season creates the favourable conditions for the use and spread of fire, but starting a fire is the work of humans, either deliberately or by accident.”
• The Amazon fires are so large that they are visible from space. NASA released images on August 11 showing the spread of fires and reported that its satellites had detected heightened fire activity in July and August.

Why are the Amazon fires a cause for concern?

• The Amazon rainforest is a repository of rich biodiversity and produces approximately 20 per cent of oxygen in the Earth’s atmosphere. 
• It is also home to indigenous communities whose lives and homelands are under threat due to encroachment by the Brazil government, foreign corporations and governments with economic interests in the resource-rich region, and local farmers.
• In a 2017 study, the University of Leeds found that carbon intake by the Amazon basin matches the emissions released by nations in the basin.
• The burning of forests, therefore, implies additional carbon emissions. Research by scientists Carlos Nobre and Thomas E Lovejoy suggests that further deforestation could lead to the Amazon’s transformation from the world’s largest rainforest to a savanna, which would reverse the region’s ecology.
• A National Geographic report said the Amazon rainforest influences the water cycle not only on a regional scale, but also on a global scale. 
• The rain produced by the Amazon travels through the region and even reaches the Andes mountain range. Moisture from the Atlantic falls on the rainforest, and eventually evaporates back into the atmosphere. 
• The report said the Amazon rainforest has the ability to produce at least half of the rain it receives. This cycle is a delicate balance.

What environmental protections do Brazil’s laws provide, and what has changed in recent times?

• Under Brazil’s Forest Code of 1965, farmers could purchase Amazon land but could farm only 20% of it. Following the collapse of the military dictatorship in 1988, a new constitution gave indigenous populations legal ownership of their land and the right to reject development of their land. 
• In 2012, the Forest Code was revised to reduce the area of deforested land required to be restored, and to reduce penalties for illegal deforesting.
• In 2018, Brazil’s Supreme Court upheld these changes.
• Bolsonaro, who took office in January 2019, had promised during his election campaign that his government would open up the Amazon region for business.
• The Amazon has large reserves of gold and other minerals. Along with aggressive policies of promoting agribusiness, Bolsonaro has opposed protections for indigenous tribal land. A few months before he won, The Washington Post reported that Bolsonaro had recommended exploiting the country’s natural resources by tapping into the Amazon basin. 
• After the victory, he was quoted as saying: “Brazil should not sit on its natural reserves because a handful of Indians want to conserve it.”
• Since the 1960s, the Amazon has witnessed large-scale deforestation because of cattle-ranching, logging, power projects, mining and farming. Agribusiness products in 2016 represented 46% of Brazil’s exports. Conservationists believe that for Brazil’s government, short-term economic interests pushed by lobbies take precedence over environmental concerns.

How has the government reacted to the concerns over the fires?

• Bolsonaro has dismissed the INPE findings and said it was the time of the year when farmers burn the land for farming. 
• In July, he fired INPE scientist Ricardo Galvao for publishing agency data that showed the accelerated rate of deforestation, calling the figures a lie and the images manipulated. Al Jazeera English quoted Bolsonaro as saying that “a report like this one that does not match the truth can cause a great damage to the image of Brazil”. INPE has defended its data

How has the international community reacted?

• Germany and Norway have suspended funding for programmes that aim to stop deforestation in the Amazon and have accused Brazil of doing little to protect the forests. Indigenous groups and environment activists have led protests and criticised Bolsonaro for his comments and policies.

Connecting the dots:

1. What are the causes for forest fires. Discuss the measures to prevent Forest fires

ECONOMY

Topic: General studies 3

• Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.Inclusive growth and issues arising from it.

Government Budgeting.

New FPI norms by SBI

Context:

• SEBI has relaxed the FPI norms to check the outflows of FPIs from India. SEBI relaxes Foreign Portfolio Investors (FPI) norms by easing the regulatory framework for FPI with simplifies KYC requirements for them and allow FPIs to carry out an off-market transfer of securities. Apart from this SEBI classified FPIs into two categories instead of three. SEBI relaxes the norms on the basis of a committee headed by H R Khan (Former RBI Deputy Governor).

Who are Foreign Portfolio Investors?

• FPI are those investors who hold a short term view of a company, unlike Foreign Direct Investors who invest with a long term view.  They participate in the stock markets in the economy. FPI doesn’t have direct control over the businesses. FPIs are easier to sell than the FDIs due to high liquidity. Generally, the FPI route is preferred for laundering black money. In India, FPIs are regulated by SEBI.

Need of Committee:

• Both the FPIs and the investors had serious concern over the SEBI norms and want to review the norms by SEBI. FPIs shows concern over that the FPIs norms will result in restrictions on investments however SEBI dismissed any such fears. Accordingly, SEBI constitutes H R Khan Committee to review FPI norms and concern raised by the investors.

Recommendation of H R Khan Committee:

• The committee categorized the recommendation into four buckets i.e. FPI Registration process, KYC and documentation, Investment permission and limits and other aspects.
• The committee recommends that OCIs, NRIs, and RIs should be allowed for holding a non-controlling stake in FPIs and no restrictions should be imposed on them for managing non-investing FPIs or SEBI registered offshore funds.
• The committee recommends for easing KYC requirements for beneficial owners in case of government-related FPIs.
• The committee recommended that erstwhile PIOs should not be subjected to any restrictions and clubbing of investment limits should be allowed for well regulated and publicly held FPIs that have common control.
• The committee also suggests that the time for compliance with the new norms should be extended by six months after the finalization and the non-compliant investors should be given another 180 days to reconcile their existing positions.
• According to the committee, NRI will be allowed to invest as FPIs if the single holding is under 25% and group holding under 50% in a fund.
• The panel also recommends that the new rules should be equally applied to the investors using participatory notes (P-notes).
• The panel also suggested for changes in the norms pertaining to the identification of senior managing officials of FPIs and for beneficial owners of listed entities.

New FPI norms by SEBI:

• SEBI rationalizes the requirements for issuance and subscription of offshore derivative instruments (ODIs).
• SEBI said that the offshore funds floated by the mutual funds would be allowed to invest in the country after the registration.
• Those entities which are established under the International Financial Services Centre must meet the criteria for FPIs.
• SEBI permits FPIs for off-market transfer of securities which are unlisted, suspended or illiquid to a domestic or foreign investor.
• Structure for Multiple Investment Manager also has been simplified.
• Those central banks who are not the members of Bank for International Settlements would be eligible for registration as FPIs to attract more overseas funds to the market.
• The FPIs are classified into two categories earlier it was two.
• SEBI said it would rationalize the framework for issuance of participatory notes (P-notes)
• The board also clarified on the debt to equity ratio, companies need to maintain it as 2:1 to be eligible for buybacks however the Non-banking financial companies (NBFC) arms would be exempt from the rule.
• To crack down insider trading a new whistleblower mechanism will be implemented.
• Rewarding informants up to Rs. 1 crore for providing “credible and original information” on insider trading.
• Mutual funds are now allowed to invest in unlisted non-convertible debentures.

Reasons for Outflow of FPIs from India:

India is the fastest-growing country in the world and there are certain issues which stress the overall economic performance of the country.

 One of the main challenges recently is the outflow of FPIs from India. Reasons for the outflow of FPIs are:

• Introducing Higher tax surcharge in the Budget 2019 by the government.
• Continue Depreciation of Indian Rupee
• The trade war between the U.S and China
• Reduced rating and default of NBFCs
• Rising of crude oil prices

Differences between FPI and FDI

• FPI lets investor purchase stocks, bonds or other financial assets in foreign country.
• In this case, investor does not actively manage investments or companies that issue investment.
• It also does not have control over securities or business.
• In contrast, FDI lets investor purchase direct business interest in foreign country.
• The investor also controls his monetary investments and actively manages company into which he puts money.
• FPI is more liquid and less risky than FDI.

Conclusion:

• Easing of FPI norms could give a boost to the overseas investment in the country which is an important source of economic growth and development in India. These changed norms will make the regulatory framework more investor-friendly for FPIs and a multidimensional approach is needed to resolve the concerns of FPIs and reasons of outflows.

(TEST YOUR KNOWLEDGE)

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

Note: 

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Q.1) Consider the following statements with regard to Amazon Rainforest

1. The Amazon rainforest produces approximately 20% of oxygen in the Earth’s atmosphere
2. The largest rainforest in the world, the Amazon is a vital carbon store that slows down the pace of global warming. 
3. Wildfires in amazon forests have decreased by 44% compared to the same period last year due to el-nino effect.

Which of the statements given above are correct?

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

Q.2) Consider the following statements

1. The responsibility of identifying eligible families and issuing ration cards to them rests with Panchayats/Urban Local bodies
2. The One Nation One Ration Card scheme helps the beneficiary to buy food grains from ration shops located in any part of the country

Which of the above 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 with regard to Sabka Vishwas Scheme

1. The two main components of the scheme are dispute resolution and amnesty
2. The scheme aimed at reducing tax litigation will be operationalised from September 1, 2019 till March 31, 2020.

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

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

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