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Daily Current affairs 9 NOVEMBER 2018

UPSC - Daily Current Affair

Paper 1:

Topic: Important Geophysical phenomena such as earthquakes, Tsunami, Volcanic activity, cyclone etc., geographical features and their location- changes in critical geographical features (including water-bodies and ice-caps) and in flora and fauna and the effects of such changes.

 

EARTH’S WATER A RESULT OF ASTEROID IMPACTS AND LEFTOVER GAS FROM SUN’S BIRTH

 

What to study?

For Prelims and Mains: Highlights and significance of the study.

 

Context: According to a recent study, Earth’s global ocean water may have originated from both asteroidal material and gas left over from the formation of the Sun. The study gives insights about the development of other planets and their potential to support life.

  • The study notes that since comets contain a lot of ices, it could have supplied some water. Asteroids, which are not as water-rich yet still plentiful, could be a source as well.

 

Background:

The early ocean known as Arabia was formed 4 billion years ago on Mars, while the Deuteronilus ocean was formed 3.6 billion years ago. Both coexisted with the massive volcanic province Tharsis, located on the unseen side of the planet, which may have helped support the existence of liquid water; the water is now gone, perhaps frozen underground and partially lost to space, while the ancient seabed is known as the northern plains.

The study challenges widely-accepted ideas about hydrogen in Earth’s water by suggesting the element partially came from clouds of dust and gas remaining after the Sun’s formation, called the solar nebula.

 

Significance:

The new finding fits neatly into current theories of how the Sun and the planets formed. It also has implications for habitable planets beyond the solar system. Astronomers have discovered more than 3,800 planets orbiting other stars, and many appear to be rocky bodies not greatly different from our own.

 

Sources: the hindu.


 

Paper 2:

Topic: Statutory, regulatory and various quasi-judicial bodies.

 

Dredging Corporation Of India

 

What to study?

For Prelims and Mains: About Dredging Corporation of India- composition, objectives and functions.

 

Context: Cabinet Committee on Economic Affairs (CCEA) has approved strategic disinvestment of 100% Government of India’s shares in Dredging Corporation of India Limited (DCIL) to consortium of four ports.

  • The consortium of four ports consists of Vishakhapatnam Port Trust (Andhra Pradesh), Paradeep Port Trust (Odisha), Jawahar Lal Nehru Port Trust (Maharashtra) and Kandla Port Trust (Gujarat).

 

Present status:

Presently, Central Government holds 73.44% shares in DCIL.

 

Benefits:

  • Strategic sale of DCIL will further facilitate linkage of dredging activities with ports, keeping in view the role of DCIL in expansion of dredging activity in the country as well as potential scope for diversification of ports into third party dredging.
  • The co-sharing of facilities between company as well as ports shall lead to savings for ports. This will also further provide opportunities for larger investment in DCIL as integration with ports shall help ineffective vertical linkage in value chain.

 

About Dredging Corporation of India Limited (DCIL):

  • It is miniratna public sector unit (PSU) engaged in the business of dredging. It was established in March 1976 and is headquartered in Visakhapatnam, Andhra Pradesh. It reports to the Ministry of Shipping.
  • It does dredging for Indian seaports exclusively. It is involved in capital dredging, beach nourishment, and land reclamation.

 

Sources: the hindu.


Topic: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

 

Strategic Petroleum Reserves (SPR)

 

What to study?

  • For Prelims: India’s strategic oil reserves- locations, ISPRL.
  • For Mains: Energy security, need for SPR.

 

Context: The Union Cabinet has approved the filling of Padur Strategic Petroleum Reserves (SPR) in Karnataka by overseas National Oil Companies (NOCs).

 

Key facts:

The filling of the SPR will be under PPP model and is being undertaken to reduce budgetary support of Union Government. The SPR facility at Padur is underground rock cavern with total capacity of 2.5 million metric tonnes (MMT) having four compartments of 0.625 MMT each.

 

Background:

India has built 5.33 million tons of underground reserves in three locations, including Padur, under an earlier phase that can meet 9.5 days of the country’s oil needs. The government purchased crude to fill the caverns in Visakhapatnam in Andhra Pradesh and half of another facility in Mangalore in Karnataka, while leasing out the other half to Abu Dhabi National Oil Co.

 

About SPR programme:

To ensure energy security, the Government of India had decided to set up 5 million metric tons (MMT) of strategic crude oil storages at three locations namely, Visakhapatnam, Mangalore and Padur (near Udupi). These strategic storages would be in addition to the existing storages of crude oil and petroleum products with the oil companies and would serve as a cushion during any external supply disruptions.

  • In the 2017-18 budget, it was announced that two more such caverns will be set up Chandikhole in Jajpur district of Odisha and Bikaner in Rajasthan as part of the second phase.
  • The construction of the Strategic Crude Oil Storage facilities is being managed by Indian Strategic Petroleum Reserves Limited (ISPRL), a Special Purpose Vehicle, which is a wholly owned subsidiary of Oil Industry Development Board (OIDB) under the Ministry of Petroleum & Natural Gas.

 

Need for strategic oil reserves:

In 1990, as the Gulf war engulfed West Asia, India was in the throes of a major energy crisis. By all accounts India’s oil reserves at the time were adequate for only three days. While India managed to avert the crisis then, the threat of energy disruption continues to present a real danger even today.

  • It is unlikely that India’s energy needs will dramatically move away from fossil fuels in the near future. Over 80% of these fuels come from imports, a majority of which is sourced from West Asia. This is a major strategic risk and poses a massive financial drain for an embattled economy and its growing current account deficit.
  • To address energy insecurity, the Atal Bihari Vajpayee government mooted the concept of strategic petroleum reserves in 1998. Today, with India consuming upwards of four million barrels of crude every day (January 2015 figures), the case for creating such reserves grows stronger.

 

Sources: pib.


Topic: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

 

Government approves mechanism for sale of enemy shares

 

What to study?

  • For Prelims: Meaning of enemy properties and key features of the enemy properties act.
  • For Mains: Significance and key features of the act.

 

Context: The Union Cabinet has approved a mechanism for sale of enemy shares which at the current price is estimated at around Rs 3,000 crore. Sale proceeds are to be deposited as disinvestment proceeds in the government account maintained by the Ministry of Finance. The Department of Investment and Public Asset Management has been authorised to sell the shares.

  • A total number of 6,50,75,877 shares in 996 companies of 20,323 shareholders are under the custody of Custodian of Enemy Property of India (CEPI).

 

Significance:

The decision will lead to monetisation of movable enemy property lying dormant for decades and the proceeds will be used for development and social welfare programmes.

 

Background:

Total shares, known as “enemy shares numbering 6,50,75,877 worth Rs 3,000 crore, are lying unutilised because enemy property act includes movable and immovable property. Of these 996 companies, 588 are functional/ active companies, 139 of these are listed with remaining being unlisted.

 

What are enemy properties?

When wars broke out between India and China in 1962, and India and Pakistan in 1965 and 1971, the central government took over properties of citizens of China and Pakistan in India under the Defence of India Acts. These Acts defined an ‘enemy’ as a country that committed an act of aggression against India, and its citizens.

The properties of enemies in India were classified as enemy property. The properties included land, buildings, shares held in companies, gold and jewellery of the citizens of enemy countries. The responsibility of the administration of enemy properties was handed over to the Custodian of Enemy Property, an office under the central government.

 

Enemy properties Act:

  • After the Indo-Pakistan War of 1965, the Enemy Property Act was enacted in 1968, which regulates such properties and lists the custodian’s powers.
  • The government amended the Act in the wake of a claim laid by the heirs of Raja Mohammad Amir Mohammad Khan, known as Raja of Mahmudabad, on his properties spread across Uttar Pradesh and Uttarakhand.
  • The government has vested these properties in the Custodian of Enemy Property for India, an office instituted under the Central government.

 

Sources: pib.


 

Paper 3:

Topic: Awareness in the fields of IT, Space, Computers, robotics, nano-technology, bio-technology and issues relating to intellectual property rights.

 

Bionic mushrooms

 

What to study?

For Prelims and Mains: Bionic mushrooms- meaning, significance and applications.

 

Context: In their latest feat of engineering, researchers at Stevens Institute of Technology have taken an ordinary white button mushroom from a grocery store and made it bionic, supercharging it with 3D-printed clusters of cyanobacteria that generate electricity and swirls of graphene nanoribbons that can collect the current.

 

How was it developed?

Researchers used a robotic arm-based 3D printer to first print an “electronic ink” containing the graphene nanoribbons. This printed branched network serves as an electricity-collecting network atop the mushroom’s cap by acting like a nano-probe — to access bio-electrons generated inside the cyanobacterial cells.

Next, they printed a” bio-ink” containing cyanobacteria onto the mushroom’s cap in a spiral pattern intersecting with the electronic ink at multiple contact points. At these locations, electrons could transfer through the outer membranes of the cyanobacteria to the conductive network of graphene nanoribbons. Shining a light on the mushrooms activated cyanobacterial photosynthesis, generating a photocurrent.

 

Significance and applications of Bionic mushrooms:

This bionic mushroom produces electricity. By integrating cyanobacteria that can produce electricity, with nanoscale materials capable of collecting the current, researchers were able to better access the unique properties of both, augment them, and create an entirely new functional bionic system.

The amount of electricity these bacteria produce can vary depending on the density and alignment with which they are packed, such that the more densely packed together they are, the more electricity they produce.

 

Sources: the hindu.


Topic: Awareness in space.

 

NASA’s Ralph and Lucy

 

What to study?

For Prelims and Mains: NASA’s Ralph and Lucy- objectives and significance of the mission.

 

Context: NASA’s Ralph and Lucy are all set to explore Jupiter’s Trojan asteroids, which are remnants from the earliest days of our solar system.

 

What are they?

Ralph is a space instrument that has travelled as far as Pluto, while Lucy is a mission payload, or the spacecraft which would be carrying various scientific instruments including Ralph to study the properties of the asteroids.

The mission will be launched in 2021 and would be the very first space mission to study the Trojans.

 

About Jupiter’s Trojan asteroids:

The Trojan asteroids are orbit Sun in two loose groups — one group is always ahead of Jupiter (called the Greek camp) in its path while the other is always behind (called the Trojan camp). The two clusters are stabilized at these two Lagrange points in a gravitational balancing act between the Sun and Jupiter.

  • As per the NASA all of the Trojans are thought to be abundant in dark carbon compounds. Below an insulating blanket of dust, they are probably rich in water and other volatile substances.
  • The Trojan asteroids in Jupiter’s orbit could be made from the same material as the outer planets which were formed during the birth of the solar system more than 4 billion years ago.

 

What are Lagrange points?

Lagrange points are sweet spots in a planetary orbit where the pull of gravity working from two opposing celestial bodies is balanced due to the centripetal force of their orbits.

 

About mission Lucy to Jupiter’s Trojan asteroids:

The name Lucy’ was taken from the name of the fossil of the earliest human ancestor yet discovered. Just like the finding of this skeleton had provided important insight into human evolution, scientists hope the Lucy mission will also be able to tell us more about our planetary origins.

The Lucy mission will comprise a 12-year journey with a fly-by to seven different asteroids — six Trojan asteroids and a Main Belt asteroid — more than any other previous asteroid mission. The mission will get us up-close with both the clusters of Trojan asteroids.

 

The Lucy mission payload will explore the Trojan asteroids using:

  1. The Long Range Reconnaissance Imager (L’LORRI).
  2. The Thermal Emission Spectrometer (L’TES).
  3. L’Ralph.

 

L’LORRI will take high-definition photos of the Trojans, and L’TES will analyze the heat given off of the Trojans’ surface structures.

 

About NASA’s scientific instrument Ralph:

  • Ralph first launched aboard the New Horizons spacecraft in 2006 and obtained stunning flyby images of Jupiter and its moons. This was followed by a visit to Pluto where Ralph took the first high-definition pictures of the iconic minor planet.
  • The instrument will fly by another Kuiper Belt object called 2014 MU69 — nicknamed Ultima Thule — in January 2019. Ralph’s observations of 2014 MU69 will provide unique insights into this small, icy world.
  • Ralph enables the study of the composition and atmospheres of celestial objects.

 

Sources: toi.


Topic: Awareness in space.

 

China unveils ‘Heavenly Palace’ space station

 

What to study?

For Prelims and Mains: Key features of Heavenly Palace and ISS.

 

Context: China has unveiled a replica of its first permanently-crewed space station, which would replace the international community’s orbiting laboratory- the International Space Station (ISS) and symbolises the country’s major ambitions beyond Earth.

 

About China’s space station:

  • It is a 17-metre core module. Three astronauts will be permanently stationed in the 60-tonne orbiting lab, which will enable the crew to conduct biological and microgravity research.
  • Assembly is expected to be completed around 2022 and the station would have a lifespan of around 10 years.

 

Significance:

  • The International Space Station – a collaboration between the United States, Russia, Canada, Europe and Japan – has been in operation since 1998 and is due to be retired in 2024.
  • China will then have the only space station in orbit, though it will be much smaller than the ISS which weighs 400 tonnes and is as large as a football pitch.

 

About the International Space Station (ISS):

  • The International Space Station (ISS) is a space station, or a habitable artificial satellite, in low Earth orbit. The ISS is now the largest artificial body in orbit.
  • The ISS consists of pressurised modules, external trusses, solar arrays and other components. ISS components have been launched by Russian Proton and Soyuz rockets as well as American Space Shuttles.
  • The ISS serves as a microgravity and space environment research laboratory in which crew members conduct experiments in biology, human biology, physics, astronomy, meteorology and other fields.
  • The station is suited for the testing of spacecraft systems and equipment required for missions to the Moon and Mars.
  • The ISS maintains an orbit with an altitude of between 330 and 435 km by means of reboost manoeuvres using the engines of the Zvezda module or visiting spacecraft. It completes 15.54 orbits per day.
  • ISS is the ninth space station to be inhabited by crews, following the Soviet and later Russian Salyut, Almaz, and Mir stations as well as Skylab from the US.
  • The ISS programme is a joint project among five participating space agencies: NASA, Roscosmos, JAXA, ESA, and CSA.
  • The ownership and use of the space station is established by intergovernmental treaties and agreements. The station is divided into two sections, the Russian Orbital Segment (ROS) and the United States Orbital Segment (USOS), which is shared by many nations.

 

Sources: the hindu.


 

Facts for Prelims:

 

Earliest cave paintings of animal discovered in Indonesia, dating back 40,000 years:

  • What? The world’s earliest-known cave painting of an animal has been discovered.
  • Where? On Borneo in Indonesia.
  • When? It dates back to at least 40,000 years ago.

 

Central Tribal University:

  • What? Union Cabinet has approved setting up of Central Tribal University.
  • Where? The proposed university will come up in Andhra Pradesh after necessary amendment in the Central Universities Act, 2009.

About Central Tribal University:

It will be set up in Relli village of Vizianagaram District of Andhra Pradesh. It will be established under Thirteenth Schedule to Andhra Pradesh Reorganisation Act, 2014.

 

Beyond Fake News Project:

What is it? The British Broadcasting Corporation (BBC) has devised a new campaign that is aimed at fighting back against disinformation and fake news. It lays a major focus on global media literacy, including workshops and debates in countries like India.

The most highlighted initiatives under the Project includes:

  • In-depth research of Funding
  • Sharing online behaviors,
  • Rolling out media literacy workshops globally
  • BBC Reality Check for upcoming elections

[op-ed snap] Reinterpreting public interest broadcasting

POSTED ONNOVEMBER 9, 2018 | LIVE MINT

Note4students

Mains Paper 2: Governance | Government policies & interventions for development in various sectors & issues arising out of their design & implementation

From the UPSC perspective, the following things are important:

Prelims level: Sports Broadcasting Signals Act, 2007

Mains level: Governance of TV broadcasts in India and how private sector participation is being culled in the name of public interest


Context

Public policy discourse in India

  1. Populist politics tends to lead to short-term policy goals in most democracies
  2. This is why many economic policies aim at instant consumer gratification in India
  3. Part of the job of a responsible bureaucracy is to espouse more balanced public interest objectives
  4. This includes acknowledging the fact that the long-term welfare of market participants such as producers and intermediaries also affects consumers

failure in performing this duty

  1. Ministries like the ministry of information and broadcasting (MIB) often fail to perform this balancing act for the markets they govern
  2. The MIB functions as a licensor in a broadcasting market where there are hundreds of private operators spanning print, television and radio
  3. The need for economic liberalization three decades ago had already confirmed that licences are inimical to market growth
  4. Today, licencing is reminiscent of a bygone era of acute market scarcities
  5. The MIB shows a persistent bias toward licencing-inspired interventions to stay relevant

Recent move to regulate broadcasting

  1. MIB’s latest rulemaking initiative may permanently distort the market for sports broadcasting in India
  2. The MIB plans to introduce a legislative amendment to force content owners to share live sports signals deemed to be of “National Importance” with the public broadcaster, Prasar Bharati, for re-transmission over private TV distribution networks
  3. It would do so through the relevant Doordarshan channels
  4. A public consultation document has been floated by the MIB in mid-October to this effect

Current process for transmitting sports broadcast

  1. TV broadcasts are carried to over 150 million homes by private cable and satellite distribution networks
  2. Another 30 million homes access public-service broadcasts through direct to home and terrestrial networks owned by Prasar Bharati
  3. The Sports Broadcasting Signals Act, 2007 was promulgated to make sports-broadcasts of “national importance” available to low-income homes
  4. Simultaneously, all distributors are mandated to carry Doordarshan channels by an older law governing private networks
  5. Until recently, Prasar Bharati chose to employ a combined interpretation of both laws to retransmit sports broadcasts acquired under the Act through public and private networks

Bypassing SC judgment

  1. In August 2017, the Supreme Court clarified the obligation of content owners as being limited to sharing of sports signals for re-transmission only over Prasar Bharati’s networks
  2. The MIB now seeks to bypass this judicial interpretation, in order “to ensure access to the largest number of viewers” by amending the SBS Act
  3. This motive is suspect because free sports programming of national interest is already made available on the airwaves under the Act
  4. Any lack of consumption of free programming is simply a function of consumer choice in favour of private networks

Loss of revenue for various stakeholders

  1. It is safe to assume that households which can pay for private networks can easily put an additional dish or antenna to access free sports programming
  2. Conversely, if live signal is carried simultaneously on both paid and free TV, advertisers would naturally pay less for their time slots on private networks, eroding the margins of businesses which own the underlying content
  3. Prasar Bharati would see a windfall without taking any production risk because live sporting events would draw greater advertising revenues than its usual repertoire of content
  4. Reducing the scope for monetising privately-held intellectual property (IP) is akin to throttling the lifeline of the sports economy in India

Narrow mindset

  1. The creation of market value spurs predatory impulses within corresponding line ministries
  2. The MIB is interpreting public interest narrowly and in self-interest—by forcibly acquiring private IP for profit
  3. Re-transmitting the IP owned by others will perpetuate culture of handouts rather than stimulate any impetus towards creating quality public-service content

Way forward

  1. Prasar Bharati barely generates enough revenue to cover its own programming costs—and is dependent on heavy grants from the MIB
  2. Prasar Bharati may soon become completely unable to overcome its structural deficits, like many other publicly-owned body corporates
  3. This would leave Indian consumers worse-off in the long run, even as the proposed legislative amendment nips the growth of the nascent sports economy in the bud

 

 

[op-ed snap] Protecting against polio

POSTED ON NOVEMBER 9, 2018 | THE HINDU

Note4students

Mains Paper 2: Governance | Issues relating to development & management of Social Sector/Services relating to Health, Education, Human Resources

From the UPSC perspective, the following things are important:

Prelims level: Poliovirus and its immunisation

Mains level: Need of using IPV instead of OPV to eradicate Polio in India


Context

Eliminating Polio

  1. With wild poliovirus strains reduced by 99.9% since 1988, the world is inching towards eradicating polio
  2. But unfortunately, more children today are affected by the live, weakened virus contained in the oral polio vaccine (OPV) that is meant to protect them.
  3. The weakened virus in the vaccine can circulate in the environment, occasionally turn neurovirulent and cause vaccine-derived poliovirus (VDPV) in unprotected children

Less awareness about VAPP

  1. While circulating VDPV strains are tracked, and outbreaks and cases are recorded and shared, little is known about vaccine-associated paralytic poliomyelitis (VAPP) cases, particularly in India
  2. VAPP occurs when the virus turns virulent within the body of a recently vaccinated child and causes polio
  3. With high-income countries switching to the inactivated polio vaccine (IPV) that uses the dead virus to immunise children, the VAPP burden is concentrated in low-income countries which continue to use the OPV
  4. In spite of the World Health Organisation asking all countries using the OPV to include a “continuous and effective system of surveillance” to monitor the frequency of VAPP in 1982, India did not comply
  5. Data on VAPP became available only years after active polio surveillance was initiated in 1997
  6. Even after 1997, India did not count VAPP cases

Use of OPV main culprit

  1. The decision to use only the OPV was faulty
  2. Vaccination (using OPV) has become the main source of polio paralysis in the world
  3. Despite knowing that there is a higher burden of polio caused by oral vaccines, India continued to use the OPV
  4. OPV fared poorly on two important counts: safety and efficacy
  5. The primary objective of polio vaccination is to prevent the disease, which the OPV failed to fully achieve
  6. The OPV was used for eradicating purposes but without fully protecting the children
  7. Parents were obliged to accept the OPV and face the consequences of VAPP as well as VDVP

Resoning behind the use of OPV

  1. India’s goal was to eradicate polio, and the OPV was crucial for that
  2. The IPV produces humoral immunity (involving antibodies in body fluids) so the immunised child does not get paralysis, but it can’t stop the circulation of wild polioviruses
  3. For instance, no polio cases were seen in Israel but wild polioviruses were detected in the environment
  4. The viruses will continue to circulate in the community
  5. It is easier to administer the OPV than the IPV and the cost per dose of OPV is also lower than that of the IPV
  6. Another reason given for not switching over to the IPV was that global production was too low to meet India’s demand. India is the largest cohort. It needs 48 million doses per year to immunise all children

Need for IPV

  1. The IPV is essential for post-wild-type poliovirus eradication, to get rid of VDPV and VAPP
  2. A single dose of the IPV given before the OPV prevents VAPP cases
  3. A single dose of the IPV primes the immune system and the antibodies against the polio virus, seen in more than 90% of immunised infants
  4. The globally synchronised switch from trivalent to bivalent OPV in mid-2016 was accompanied by administering a single dose of the IPV prior to administering the OPV

Way forward

  1. The justification that VAPP cases can be ignored as they are “sporadic and pose little or no threat to others” is ethically flawed
  2. The stand that VAPP cases are epidemiologically irrelevant is ethically problematic

 

 

 

[op-ed snap] Embers of hope: on India-Pakistan relations

POSTED ONNOVEMBER 9, 2018 | THE HINDU

Note4students

Mains Paper 2: IR | India & its neighborhood- relations

From the UPSC perspective, the following things are important:

Prelims level: Kartarpur Sahib (Location, importance)

Mains level: How sports and cultural connect can be used to rebuild India Pakistan ties


 Context

Indo Pak ties

  1. With tension permeating the India-Pakistan military and diplomatic relationship for the larger part of seven decades, people-to-people and economic links have borne the brunt of this mutual aggression
  2. In September, bilateral tensions further soured after the killing of a Border Security Force soldier and the cancellation of a meeting between the two Foreign Ministers

Rays of hope

Two other developments have rekindled hopes of creative collaborations

  • Pakistan’s willingness to open the Kartarpur corridor
  1. This would connect Dera Baba Nanak in India with a historic Sikh shrine, the Darbar Sahib, Narowal, in the town of Kartarpur, Pakistan
  2. Darbar Sahib is where Guru Nanak Dev, the first Guru of the Sikhs, spent the last few years of his life
  3. Various ministers of Pakistan’s newly formed government have given assurance about the opening of the corridor as well as willingness to provide visa-free access to the Kartarpur Sahib Gurdwara
  4. This has been a long-standing demand of the Sikh community
  5. This issue is relevant not merely to the Sikh community but to all those who believe in Guru Nanak’s message of peace and compassion
  • India-Pakistan trade
  1. The U.S. Ambassador to Afghanistan spoke of Pakistan’s willingness to allow India-Afghanistan trade via Pakistan
  2. Bilateral trade with Afghanistan through Pakistan matters strategically to New Delhi and Kabul
  3. With this move, Pakistan could change the narrative in South Asia

Learning from China

  1. The India-Pakistan relationship could use the India-China relationship as a template
  2. Despite tensions such as the Doklam standoff, bilateral trade rose in 2017-18
  3. People-to-people linkages (for example, in terms of pilgrimages to Kailash Mansarovar through Nathu La) have not been affected

Way forward

  1. It is unfortunate that steps such as opening up the Kartarpur corridor, which can help in building better ties, get relegated to the background once political tensions rise
  2. Such steps could act as the game changer in the process of bringing Indo Pak ties back on track

 

 

RBI relaxes ECB norms for infra companies

POSTED ONNOVEMBER 9, 2018 | THE HINDU

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy

From UPSC perspective, the following things are important:

Prelims level: ECBs, Hedging

Mains level: Factors affecting India’s BoP


News

  • The RBI has liberalized the norms governing foreign borrowings for infrastructure creation in consultation with the Government.

External Commercial Borrowings

  1. Lack of domestic capital and deficit in the current account compels any government to go after foreign capital.
  2. ECBs are loans in India made by non-resident lenders in foreign currency to Indian borrowers.
  3. They are used widely in India to facilitate access to foreign money by Indian corporations and PSUs.
  4. Most of these loans are provided by foreign commercial banks and other institutions. It is a loan availed of from non-resident lenders with a minimum average maturity of 3 years.
  5. The significance of ECBs their size in India’s balance of payment account. In the post reform period, ECBs have emerged a major form of foreign capital like FDI and FII.
  6. ECBs includes commercial bank loans, buyers’ credit, suppliers’ credit, securitized instruments such as Floating Rate Notes and Fixed Rate Bonds etc., credit from official export credit agencies and commercial borrowings from Multilateral Financial Institutions.

Advantages of ECBs 

  • ECBs provide opportunity to borrow large volume of funds
  • The funds are available for relatively long term
  • Interest rate are also lower compared to domestic funds
  • ECBs are in the form of foreign currencies. Hence, they enable the corporate to have foreign currency to meet the import of machineries etc.
  • Corporate can raise ECBs from internationally recognised sources such as banks, export credit agencies, international capital markets etc.

What’s new in the ECB norms?

  1. The minimum average maturity requirement for ECBs (external commercial borrowings) in the infrastructure space raised by eligible borrowers has been reduced to three years from earlier five years.
  2. Additionally, the average maturity requirement for mandatory hedging (an investment to reduce the risk of adverse price movements in an asset) has been reduced to five years from earlier ten years.

Raising