SYNOPSIS : IASbaba’s Current Affairs Focus (CAF) Mains 2017: Day 3

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1. Financing infrastructure projects has always been a challenge in India. Some initiatives have been taken in this direction to ease and promote the flow of investment in the infrastructure sector. Identify these initiatives and comment on their suitability in the context of twin balance sheet problem that India is facing.

Introduction:

Infrastructure is very important part of economic development of country. But finance is even more important for infrastructure to be set up. Due to non-availability of easy and affordable loans several projects gets struck which in turn blocks revenue flow leading to NPAs causing bigger problems.

Body:

Initiatives taken:

• Public private partnership: Developing infrastructure with participation from private sector. Here public sector also invests to create, so it will reduce dependence on bank.
• BOLT: Here private sectors with huge cash reserves are invited to build public infrastructure and later transfer it to government after fixed period of time.
• FDI: 100% FDI through automatic route for construction sectors have increased finance.
• Viability Gap Funding: Onetime payment or deferred payment for projects which are important for public.
• Masala Bonds: Issue of rupee dominated bonds in foreign markets to rise funding for infra sector.
• 5/25: Extending the repayment period to 25 years and refinancing them every 5 years for long term projects.
• Green bonds: Raising funds through green bonds for environmentally sustainable brownfield and green field projects.

Conclusion:

Above are some of the initiatives taken by government to ease the burden of financing infrastructure sector in country. This will also reduce the burden on banks to provide loans which take lot of time in repayment and loans being turned into NPAs which is very critical issue affecting the public sector banks of country.

2. Natural gas is one of the cleanest and most environment-friendly fuels having extremely low Carbon Dioxide emissions compared to other fuels like coal and oil. In this light discuss the measures taken by the government to transform India into a natural gas based economy.

Introduction:

With increase effort to contain global climate change, Natural gas has been the natural choice for its environment friendly nature and it is also known to be cleanest fuel among all other non-renewable sources of energy. So government has actively pursued to exploit this resource for commercial use.

Body:

Measure taken by government to promote natural gas based economy:

• TAPI pipeline: Government is constructing a pipeline from Turkmenistan, a gas rich nation to supply natural gas.
• Undersea pipeline: From Gas rich west Asia to supply 24/7 Natural gas.
• Urja Ganga: Gas pipeline to all households in Varanasi as pilot project which will be implemented all over country.
• UjjwalaYojana: Free gas connection to 50 million below poverty women households.
• Gas4India: Campaign aimed at promoting use of Natural gas in country.
• Hydrocarbon exploration policy: Changes in exploration policy to encourage exploration before obtaining license.
• CNG vehicles: Promotion of automobiles especially public transport vehicles like Buses and auto rickshaws to run on CNG.
• Subsidies: To set up bio gas plants and encourage agricultural communities to set up bio gas plants in fields by providing technical training and subsidies.

Conclusion:

Also government is planning to build a massive pipeline project from Natural gas rich Russia to India with investment of 25 billion to secure its energy needs and move towards gas based economy. These initiatives if implemented can help the country in achieving its dream of limiting carbon emission and adhering to Paris climate accord.

3. Critically examine the significance of regional connectivity for a developing economy like India. Also discuss the features of the UDAN scheme launched by the government.

Introduction:

The UDAN scheme aims to stimulate regional connectivity with flights covering distances up to 800 km through a market-based mechanism. The scheme is a component of the National Civil Aviation Policy (NCAP). The government aims at making flying affordable by capping fares at Rs. 2500 per seat per hour.

Features of UDAN scheme:

• The business model of the scheme is based on Government subsidy and viability gap funding (VGF).
• The fund for this scheme would come from a Regional Connectivity Fund (RCF) created by levying certain charges on certain flights. States will need to contribute around 20% to this fund.
• For balanced regional growth, the allocations will be spread equitably across five regions in the country viz. North, South, East, West and North East with a cap of 25%.
• The States will make available sufficient land; ensure adequate security; and provide essential services at concessional rates for the airports or air strips.

Pic credt:http://www.thehindu.com/news/national/article18252051.ece/alternates/FREE_615/Udaanfinajpg

Significance:

• It will help promote airline sector.
• Make air transport in reach of common man.
• Tier 2 and tier 3 cities are being focused upon. This will attract investments in such regions and generate employment. Thus, it will lead to improvement of economy of smaller states.
• The scheme will give boost to various other sectors including tourism, travel etc.

4. The IPR is often seen overriding the Competition law in India. It has necessitated to balance competition and protection of intellectual property rights in India. Elucidate.

Introduction:
Intellectual property rights refer to the general term for the assignment of property rights through patents, copyrights and trademarks. These property rights allow the holder to exercise a monopoly on the use of the item for a specified period.

IPR in conflict with Competition Law:

• IPR prohibits duplication of ideas or products thus creating monopolistic environment.
• Dominance of a particular sector by one company may disallow competition as it would be difficult for a new player to enter into the same sector.
• IPR, on one hand, allows IPR holders to exercise exclusivity over their work, whereas Competition Law on the other hand, restricts any kind of monopoly in the market by holding restrains as earlier mentioned. Thus, in a way, it can be said IPR holders abuse their position by creating dominance in the market.

Need for balance between the two:

• When intervening in IPR related markets, it is important to strike a careful balance so as not to undermine incentives to innovate.
• It was later understood that competition law can provide a boost to IPR since the market would be unpredictable, less complacent, more innovative and grow faster due to the impact of competition law.
• By creating and protecting an “idea” or “expression”, IPR helps introduction of diverse products and services in the market, which only enhances competition. This competition would involve creating the best product in the market in terms of innovation, price, consumer growth etc.

Way forward:

• The real concern that competition law has with IPR is not with the existence of IPR but with its exercise.
• The role of Competition Commission of India must be strengthened.
  In India, the IPR laws have over riding powers over the Competition Act in matters related to any abuse of IPR. If an anti-competitive result arises from the exercise of the rights by the patent holder, the Patent Amendment Act (2005) provides for issue of licenses to stop such anticompetitive activity.
• Instead, an amalgamation of the two Acts can be made, where tie-in arrangements, prohibiting or revoking license in case of any infringed competing technology, patent pooling, royalty payment, measures to be taken after the patent has expired, and so on.
• Competition Law needs to override the IPR Acts when it comes to handling any market abuse of the later.

Conclusion:

Despite the fact that IPR and Competition Law are seen as overlapping fields of law with conflicting purposes, it is prominent for them to work in tandem to maintain balance in the market. Conflict between IPR and Competition Law cannot be changed, but ensuring their co-existence is the only way forward.

5. Discuss the provisions of the SHAKTI scheme launched for the coal sector. Discuss the factors that necessitated the launch of this scheme. Also examine its provisions and significance.

Union Cabinet approved a Coal linkage policy named SHAKTI or the Scheme to Harness and Allocate Koyla (Coal) Transparently in India.

Objective: To auction long-term coal linkages to power companies.

Salient Features of the policy

a)This policy will award fuel supply agreements to coal plants already holding letters of assurance (LoAs). It is issued to new consumers on being approved by the appropriate authority, based on recommendation of a committee constituted Specific terms & conditions of the LOA to be complied with within a stipulated time period for being eligible to enter into FSA for commencing coal supply.

b)Thermal plants holding LoAs will be eligible to sign fuel supply pacts under the new policy after ensuring that all the conditions are met.

c)Coal linkages would be awarded to state-owned power distribution companies (discoms). These, in turn, would assign linkages to

I.state or central power generation companies via allocation, and

II.Private units through auction.

d)The independent power producers (IPPs) participating in the auction will bid for discounts on the existing tariff and this would be adjusted from the gross coal bills.

e)Power plants will have to give discount on their tariffs to get linkages. This could lead to under-recovery by the units, but it is still better than no fuel supply.

Benefits of the policy

a)It will ensure adequate supply of fuel to power plants, which are awaiting fuel supply.

 b)It will help power producers ensure fuel supplies in a coordinated manner.

 c)It is expected to reduce power costs to consumers.

 d)It will cut down on the use of imported coal.

 e)Fuel supply pact will help banks exposed to the power sector to cut down on NPAs.

Why Needed?

Though, the government’s initiatives and prevailing market conditions to a large extent has helped to bring down the prices of the dry fuel and boosted the domestic production, a proper mechanism for providing coal linkages to power plants at competitive rates was lacking. The new policy will address this issue and will ensure proper sourcing of the dry fuel by the power plants as per their schedules.

Inadequate availability of domestic coal coupled with high price for imported coal requires the government to allocate the available coal rationally among the power plants. This is especially necessary as the coal producing firms are public sector companies. Also, the pricing of coal is an another different issue. In this context, the government designates coal linkage policies to allocate coal among different thermal power plants.