Daily Prelims Notes 20 December 2022

Daily Prelims Notes

20 December 2022

Table Of Contents

1. COP15: Kunming-Montreal Global Biodiversity Framework adopted
2. Black hole of public finance: Unequal fiscal burden on citizens
3. India not joining the Oil & Gas Methane Partnership is a missed opportunity
4. Lancet’s new commission aims to tackle potential public health threats for this century
5. Air quality turns ‘severe’; BJP requests L-G to intervene, call an all-party meeting
6. Ban imposed by coastal States on purse seine fishing not justified, Centre tells SC
7. Betta – Kuruba Tribes included in the ST list of Karnataka
8. K.’s Rwanda asylum seeker deportation plan is lawful, court rules
9. Dutch PM Apologises For 250 Years Of Slavery
10. Delimitation
11. Urban-20
12. The Basel Committee on Banking Supervision
13. Carbon Border Adjustment Mechanism
14. National Test House
15. 18% of Mumbai MSME loans are non-performing assets

1. COP15: Kunming-Montreal Global Biodiversity Framework adopted

Context:

• The 15th Conference of Parties (COP15) to the UN Convention on Biological Diversity (CBD) adopted the Kunming-Montreal Global Biodiversity Framework (GBF) December 19, 2022.

About the Kunming-Montreal Global Biodiversity Framework (GBF):

• The framework has 4 long-term goals to be achieved by 2050 and 23 targets that the world needs to achieve by 2030.
  • In 2020, the world failed to meet the last set of targets, the Aichi Targets.
• The countries will monitor and report every five years or less on a large set of indicators related to progress.
• The CBD will combine national information submitted by late February 2026 and late June 2029 into global trends and progress reports.

4 Long-term goals are:

The 23 targets are:

Creation of a dedicated fund:

• The Global Environment Facility has been requested to establish a Special Trust Fund to support the implementation of the Global Biodiversity Framework (“GBF Fund”).
• Delegates have agreed to establish within the GBF a multilateral fund for the equitable sharing of benefits between providers and users of digital sequence information on genetic resources (DSI), to be finalised at COP16 in Türkiye in 2024.

2. Black hole of public finance: Unequal fiscal burden on citizens

Subject: Economy

Context:

• Economic inequality in India impacts every aspect of our everyday lives, despite the country being a welfare state. The poor citizens of India continue to face increased fiscal burden in the form of inflation and higher taxes, with fewer benefits.

Details:

• The Constitution of India envisaged the state’s role as a welfare one.
• For that, the government is empowered to administer taxes and their transfer.
• However ‘transfers’ are being painted as freebies and the lives of poor citizens are being burdened by regressive “taxes”.
• Inflation acts as a hidden tax on poor and middle-class citizens.

Inequality scenario in India:

• Oxfam observed in its 2021 report that 73 per cent of the wealth generated in India in 2017 went to the richest one per cent, while 670 million Indians, who comprise the poorest half of the population saw only a one per cent increase in their wealth.
• Concept:
  • The Lorenz curve is used to represent economic inequality as well as unequal wealth distribution. The farther away the curved line is way from the straight diagonal line, the higher the level of inequality.
  • The Gini coefficient is the ratio of the area between the line of perfect equality and the observed Lorenz curve to the area between the line of perfect equality and the line of perfect inequality.
  • The value of Gini coefficient varies from zero to one. Zero represents the perfect equality and one represents the perfect unequality.

Inequality in governance: 

• The roadways are meant to be available free of cost, being public goods. However, due to privatisation and PPP models, such services demand a fee.
• In the financial year 2021-2022, the government mopped up Rs 35,000 crore as toll tax. The same is projected to reach Rs 1.34 lakh cr by 2025.
• Diversion of funds:
  • In 2000, the government enacted the Central Road Fund Act (CRF), under which fuel cess was used to fund the construction and maintenance of roads.
  • In 2018, CRF was amended into the Central Road and Infrastructure Fund (CRIF).
  • This allowed water and sanitation schemes, communication, social infrastructure, etc, to be funded from this fund.
  • But the utilisation of CRIF funds for the year 2021-22 ranged from Jal Jeevan Mission to Swacch Bharat Scheme.
  • The government aims to generate Rs 1.6 lakh cr by monetisation of public highways, which will further increase the toll burden on citizens.
  • The monetisation of public spaces portends to weaken the state-citizen relationship.

Increased inequality due to excessive tax burden:

• In the 2020-21 Budget speech, the finance minister announced a public-private partnership (PPP)-based smart cities, railways, and warehouses, amongst others.
• PPP-based infrastructure, user charges and cess have established a parallel framework to raise revenue and are likely to impose a fiscal burden on citizens.
• When citizens pay municipal tax, the municipality is supposed to ensure cleanliness and sanitation facilities.
• But the Ahmedabad Municipal Corporation (AMC) introduced a “User Charge” of Rs 365 per household to make the city clean, which is 15% of the municipal tax amount.

3. India not joining the Oil & Gas Methane Partnership is a missed opportunity

Subject: Environment

Context:

• The Methane Alert and Response System (MARS) initiative was launched by the United Nations Environment Programme (UNEP) at the 27th Conference of Parties (COP27) to the United Nations Framework Convention on Climate Change on November 11, 2022.

About the Methane Alert and Response System (MARS):

• MARS is a satellite-based system to detect methane emissions and help industries and governments in mitigating them.
• It is the first publicly available system for monitoring any greenhouse gas emissions.
• It will map out major methane-detection events that will help UNEP to corroborate methane emissions reported by companies and analyse changes over time.
• The initiative is funded by the European Commission, the US government, Global Methane Hub and the Bezos Earth Fund.

Working mechanism of MARS:

• It works by integrating different satellite systems, starting with the satellite being managed by the European Space Agency called Sentinel 5P. (Sentinel 2 and PRISMA are two other satellite involved in the system.)
  • It has a global coverage on a daily basis that we are going to be using to identify large methane plumes every day.
• It will use the data to generate an enhanced map of methane hotspots.
• MARS will work closely with the Oil and Gas Methane Partnership (OGMP) members.
• There are two systems at work to measure methane emissions.

1. The Quicker one can detect the methane emissions with a rate of 10-15 ton per hour.
2. The slower one can detect the methane emissions of slower rate- around 1 tonne per hour. It will be used for deeper analysis.

Oil and Gas Methane Partnership (OGMP):

• The Oil and Gas Methane Partnership (OGMP), launched at the 2014 United Nations (UN) Secretary General’s Climate Summit, was created by the Climate and Clean Air Coalition (CCAC) and the United Nations Environmental Programme (UNEP) as a voluntary initiative to help companies reduce methane emissions in the oil and gas sector.
• Governments, international organizations, non-government organizations, and the oil and gas industry collaborate through the OGMP to raise awareness and responsibly address methane emissions.
• The OGMP provides a protocol to help companies systematically manage their methane emissions from upstream oil and gas operations, as well as offers a credible platform to help member companies demonstrate actual reductions to industry stakeholders.
• More than 15 percent of global natural gas production is represented by the 10 OGMP member companies: BP, Ecopetrol, Eni, Equinor, Neptune Energy International SA, Pemex, PTT, Repsol, Shell, and Total.
• There are no Indian companies that have joined the OGMP.

Global Methane pledge:

• The global methane pledge was adopted during COP26.
• Under it, countries agreed to reduce global methane emissions by 30 per cent by 2030.
• This will help to limit global warming to 1.5 degrees above pre-industrial levels.
• Methane is around 25 times more potent as a greenhouse gas than carbon dioxide and currently contributes to around a quarter of global warming. Its reduction is, thus, crucial for mitigating climate change.

4. Lancet’s new commission aims to tackle potential public health threats for this century

Subject: Environment

Context:

• Leading general medical journal The Lancet announced a new commission December 15, 2022 to address public health threats.

About the new commission:

• Name: The Lancet Commission on 21st-Century Global Health Threats
• Scope of work: It includes global health threats like:
  • demographic changes and inverted population pyramids,
  • high body mass index,
  • antimicrobial resistance,
  • eroding sexual and reproductive rights for women,
  • food insecurity, and
  • fraying multilateralism
• In 2024, the body will release its recommendations after assessing evidence presented by working groups over the course of the next two years.
• Chairman:
  • Natalia Kanem, the executive director of the United Nations Fund for Population Activities, and Christopher JL Murray, director of the Institute for Health Metrics and Evaluation (IHME), an independent population health research centre at the University of Washington Medicine, United States.
• Members of the commission come from diverse backgrounds:
  • Current and former heads of state,
  • intergovernmental organisation leaders,
    leaders of public health institutions, global health funders, global health thought leaders, and
  • civil society and youth organisations.
• The body will have a four-pronged approach:

1. Utilise available data from the Global Burden of Disease and related reference health forecasts as a foundation for a heterogenous debate on global and regional health threats;
2. explore alternative forecasting options;
3. search for solutions which can be adopted by a diverse population at a global and regional scale; and
4. produce “roadmaps that governments, donors and other stakeholders can use to translate findings into investment priorities”.

Commissions formed in the backdrop of global pandemic:

• Pan-European Commission on Health and Sustainable Development,
• The Independent Panel for Pandemic Preparedness and Response,
• The G20 High Level Independent Panel on Financing,
• The Global Commons for Pandemic Preparedness and Response and
• The Intergovernmental Panel on Climate Change

5. Air quality turns ‘severe’; BJP requests L-G to intervene, call an all-party meeting

Subject: Environment

Context:

• For the second day in a row, dense fog hit Delhi Tuesday morning with visibility falling sharply in parts of the city.
• Experts attributed the increase in the city’s AQI to meteorological factors.

Meteorological factors behind the dense fog in delhi:

• There is a radiative fog due to colder temperatures and higher relative humidity.
• This tends to increase the pollution level as particles are suspended with water molecules in the atmosphere.
• Additionally, mixing layer height is significantly low, restricting the vertical dispersion of pollutants, which also increases pollution.

Fog:

• When the temperature of an air mass containing a large quantity of water vapour falls all of a sudden, condensation takes place within itself on fine dust particles.
  • During condensation, molecules of water vapor combine to make tiny liquid water droplets that hang in the air. One can see fog because of these tiny water droplets.
• So, the fog is a cloud with its base at or very near to the ground. Because of the fog and mist, the visibility becomes poor to zero.

Condition for fog formation:

• In order for fog to form, dust or some kind of air pollution needs to be in the air. Water vapor condenses around these microscopic solid particles.
  • In urban and industrial centers smoke provides plenty of nuclei which help the formation of fog and mist.
  • Such a condition when fog is mixed with smoke, is described as smog.
• Sea fog, which shows up near bodies of salty water, is formed as water vapor condenses around bits of salt.
• Depending on the humidity and temperature, fog can form very suddenly and then disappear just as quickly. This is called flash fog.

Types of fog:

• Radiation fog: It results from radiation, cooling of the ground and adjacent air. These fogs are not very thick. Usual in winters.
• Advectional fog: Fogs formed by condensation of warm air when it moves horizontally over a cold surface, are known as advectional fog.
  • These fogs are thick and persistent.
  • Occurs over warm and cold water mixing zones in oceans.

• Frontal or precipitation fog: It is produced due to convergence of warm and cold air masses where warm air mass is pushed under by the heavier cold air mass.
  • Precipitation in the warm air mass condenses to produce fog at the boundary of the two air masses.
• Valley fog: It forms in mountain valleys, usually during winter. Valley fog develops when mountains prevent the dense air from escaping. The fog is trapped in the bowl of the valley.
  • In 1930, vapor condensed around particles of air pollution in the Meuse Valley, Belgium. More than 60 people died as a result of this deadly valley fog.
• Freezing fog: It happens when the liquid fog droplets freeze to solid surfaces.
  • Mountaintops that are covered by clouds are often covered in freezing fog. As the freezing fog lifts, the ground, the trees, and even objects like spider webs, are blanketed by a layer of frost.
  • The white landscapes of freezing fog are common in places with cold, moist climates, such as Scandinavia or Antarctica.

Fog vs Mist:

• Fog is not the same thing as mist.
• Fog is denser than mist. This means fog is more massive and thicker than mist.
• There are more water molecules in the same amount of space in a fog.
• Fog cuts visibility down to one kilometer, meaning it will prevent you from seeing further away than one kilometer from where you’re standing.
• Mist can reduce visibility to between one and two kilometers.

Grand Banks, Newfoundland, Canada:

• The foggiest place in the world is Grand Banks, a spot in the Atlantic Ocean off the island of Newfoundland, Canada.
• The cold Labrador Current from the north and the warm Gulf Stream current from the east create prime conditions for thick fog to form almost every day.

Pea Souper:

• A “pea souper” is a type of fog that forms when water condenses around microscopic particles of coal.
• This fog is often a brownish-yellow color, leading to the name.
• Pea soupers are common in areas that burn coal for energy.
• The London Fog of 1952, which killed 12,000 people around the urban center of London, England, was a pea souper.
• The Great Fog led to legislation that regulated the coal industry and air pollution in the United Kingdom.

6. Ban imposed by coastal States on purse seine fishing not justified, Centre tells SC

Subject: Environment

Context:

The Union government has told the Supreme Court that a ban imposed by certain coastal States and Union Territories such as Tamil Nadu, Kerala, Puducherry, Odisha, Dadra and Nagar Haveli and Daman and Diu, and Andaman and Nicobar Islands on purse seine fishing is not justified.

About the news

• The Fisheries Department of the Union government has recommended the lifting of the ban on purse seine fishing based on a report submitted by an expert committee which has noted that this mode of fishing has not caused any serious resource depletion according to the available evidence.
• The committee also recommended that the purse seiners can be allowed to fish in territorial waters and the Indian Exclusive Economic Zone (EEZ) which can be subjected to certain conditions.

About purse seine fishing

• Purse seine fishing is a mode of fishing that involves the use of a wide net to draw in not only the targeted fish but also endangered species such as turtles.
• Purse seining is a non-selective fishing method.
• Purse seines (fishing employing a fishing net) are used in the open ocean to target dense schools of single-species pelagic (midwater) fish like tuna and mackerel.
• A vertical net ‘curtain’ is used to surround the school of fish, the bottom of which is then drawn together to enclose the fish.
• The main species fished with purse seine gear are southern bluefin tuna, Australian sardine, blue mackerel and jack mackerel.
• It is not only depriving traditional fishermen of catch but threatening the marine ecosystem as a whole in the region.

Exclusive Economic Zone (EEZ)

• The 1982 United Nations Convention on the Law of the Sea (UNCLOS) defined the EEZ as a zone in the sea over which a sovereign nation has certain special rights with respect to the exploration and usage of marine resources, which includes the generation of energy from wind and water, and also oil and natural gas extraction.
• The EEZ is an area that is adjacent to and beyond the territorial sea.
• It can extend to a maximum of 200 nautical miles from the baseline. The baseline is normally measured is the low-water line along the coast as indicated on large-scale charts officially approved by the coastal state.
• The EEZ does not include the territorial sea and also does not include the continental shelf beyond 200 nautical miles.
• The EEZ includes the contiguous zone.
• Within the EEZ, the country has rights over natural resources. The country has jurisdiction over some activities for the reasons of environmental protection, among others.
• It also has to respect the rights of other countries in the EEZ such as the freedom of navigation.
• The difference between territorial sea and the EEZ is that the former confers full sovereignty over the waters, whereas the latter is merely a “sovereign right” which refers to the coastal nation’s rights below the surface of the sea. The surface waters are international waters.

Rights of the country in the EEZ

The coastal state has the rights to:

• Explore and exploit, conserve and manage the natural resources (living or non-living).
• Produce energy from wind, currents and water.
• Establish and use artificial islands, structures and installations.
• Conduct marine scientific research.
• Protect and preserve the marine environment.

7. Betta – Kuruba Tribes included in the ST list of Karnataka

Subject: Polity

Context:

• The Lok Sabha passed the Constitution (Scheduled Tribes) Order (Fourth Amendment) Bill, 2022 to include Betta-Kuruba in the Scheduled Tribes (STs) list of Karnataka as a synonym for the already categorised Kadu-Kuruba tribe in the State.

Process for inclusion in the ST List

• Under article 341 (2) of the Constitution the power to make changes to the SC and ST list lies with the Parliament and not state legislatures.
• Any change in the lists of the Scheduled Castes and Tribes requires a constitutional amendment.
• In the case of STs, the community must be shown to be a tribe which is isolated, and lives in vulnerable conditions. This has to be proved anthropologically.
• The process to include tribes in the ST list begins with the recommendation from the respective State governments, which are then sent to the Tribal Affairs Ministry, which reviews and sends them to the Registrar General of India for approval.
• This is followed by the National Commission for Scheduled Tribes’ approval before the list is sent to the Cabinet for a final decision.
• Once the cabinet finalizes it, then it introduces a bill in the parliament to amend the Constitution (Scheduled Castes) Order, 1950, and the Constitution (Scheduled Tribes) Order, 1950.

About Betta – Kurua Tribes

• The Betta Kuruba tribe lives in the hilly regions of Karnataka and is one of the few indigenous communities of the Nilgiris.
• They belong to the Hindu caste native to the Indian states of Karnataka, Tamil Nadu, Andhra Pradesh and Telangana.
• Traditionally, the Kuruba people drew sustenance from hunting, gathering and collecting wild honey.
• They practised sheep/goat and cattle pastoralism, in that they either herded exclusively sheep, or a mixed herd of sheep and goats, or cattle.
• They are generally believed to be the descendants of the Pallavas.
• Consanguineous marriages like cross-cousin marriages are preferred among the Kurumbas.

8. U.K.’s Rwanda asylum seeker deportation plan is lawful, court rules

• Britain’s plan to send migrants to Rwanda is lawful, London’s High Court ruled on Monday, in a victory for Prime Minister Rishi Sunak who has made a high-stakes political promise to tackle the record number of migrant arrivals in small boats.
• The asylum policy would involve Britain sending tens of thousands of migrants who arrive on its shores more than 6,400 km to Rwanda.

About Rwanda

• It is a landlocked country in Africa
• It lies towards south of the equator
• Bordering countries:
• Uganda
• Democratic Republic of Congo (DRC)
• Burundi
• Tanzania
• Kenya
• Important lakes: Lake Kivu, one of the Great Lakes of East Africa, lies between Rwanda and the Democratic Republic of the Congo.
• Kigali agreement to curb the use of Hydrofluorocarbons (HFCs) was signed in capital city Kigali in Rwanda

9. Dutch PM Apologises For 250 Years Of Slavery

Subject: History

Context:

• Dutch Prime Minister Mark Rutte on Monday officially apologised for 250 years of the Netherlands’ involvement in slavery, calling it a “crime against humanity”.

About the news

• The apology comes almost 150 years after the end of slavery in the European country’s overseas colonies, which included Suriname and islands like Curacao and Aruba in the Caribbean and Indonesia in the East.
• Dutch ministers have travelled to seven former colonies in South America and the Caribbean for the event.
• The Dutch colonial history is littered with blood and tainted with tales of misery of thousands of slaves who were kidnapped and then sold to markets in Europe and America.
• The Dutch colonized many parts of the world — from America to Asia and Africa to South America; they also occupied many African countries for years.

Dutch Colonialism In Americas

• The Netherlands began its colonization of the Americas with the establishment of trading posts and plantations, which preceded the much wider known colonization activities of the Dutch in Asia.
• While the first Dutch fort in Asia was built in 1600 (in present-day Indonesia), the first forts and settlements along the Essequibo River in Guyana date from the 1590s.
• Actual colonization, with the Dutch settling in the new lands, was not as common as by other European nations.
• Many of the Dutch settlements were lost or abandoned by the end of the 17th century, but the Netherlands managed to retain possession of Suriname until it gained independence in 1975.
• Among its several colonies in the region, only the Dutch Caribbean still remains to be part of the Kingdom of the Netherlands today.
• Some of the important dutch colonies were : Suriname, the Caribbean island of Curacao, Brazil, Chile, Bonaire, Sint Maarten, Aruba, St. Eustatius and Indonesia.

Dutch Colonialism in Africa (‘Golden Age’ of colonialism)

• The Dutch established colonial rule mostly in the coastal areas of Africa and enjoyed a “golden age” of colonialism between the 15th and 17th centuries.
• The Dutch had established colonial territories in Africa before the English and French came to loot the continent; they eventually lost their power and handed over territories to the then British Empire and the French in the 18th century.
• The Dutch first went to Ghana, one of its earliest colonies in the 16th century and exploited underground mines, mainly gold, there. Thousands of Africans were abducted and sold as slaves to America and Europe from Ghana by the Dutch; they were taken through the Elmina Castle built in Ghana in 1642.
• The colonial Dutch arrived in the coast of Namibia in 1793 and seized the port of Walvis Bay, the most popular port of the country, and slaughtered the inhabitants there.
• The port of Walvis Bay, which was seized by the Dutch, was then used as a slave port.

• They colonized colonize many parts of Africa, including Ivory Coast, Ghana, South Africa, Angola, Namibia and Senegal.

Khoikhoi massacre

• The Dutch also carried out massacres to enslave the Khoikhoi tribe in Cape Town in 1659 and 1673 and between 1674 and 1677.
• The massacres of the Khoikhoi people by the Dutch is the most well-known of the Dutch colonial traces in Africa.
• The Dutch had attacked the Khoikhoi tribe with firearms, killing thousands of Africans. They also confiscated their homes and lands, abducted them as slaves and exploited the natural resources of the region.

10. Delimitation

Subject: Polity

Context:

• Recently DMK member Kanimozhi NVN Somu while speaking during the discussion on the supplementary demand for grants for 2022-23 said that delimitation of Lok Sabha seats and devolution of funds to states on the basis of population is unfair to southern states, which have implemented family planning programmes better than the states in North India

What is Delimitation:

• Delimitation is the act of redrawing boundaries of Lok Sabha and Assembly constituencies to represent changes in population and is done on the basis of the preceding Census.
• This exercise is carried out by a Delimitation Commission, whose orders have the force of law and cannot be questioned before any court. 
• Constitutional provisions:
  • Article 82: This provides the Parliament with the authority to enact a Delimitation Act after every Census.
  • Article 170: This provides for the  States to get divided into territorial constituencies as per the Delimitation Act after every Census.
• The Union government sets up a Delimitation Commission once the Act is in force.

What is Delimitation Commission:

• It is appointed by the President of India and works in collaboration with the Election Commission of India.
• Its members are a serving or retired Supreme Court judge, Chief Election Commissioner or an Election Commissioner nominated by CEC and Election Commissioners of the respective state.
• Its function is to determine the number and boundaries of constituencies, to identify seats reserved for SC/ST.
• It is a high power body whose orders have the force of law and cannot be called in question before any court.
• Delimitation Commissions have been set up four times — 1952, 1963, 1973 and 2002 under the Acts of 1952, 1962, 1972 and 2002.

11. Urban-20

Subject :International relations

Context;

• Gujarat Chief Minister Bhupendra Patel on Monday unveiled the logo, website and social media handles of Urban-20 or U20 in Gandhinagar as part of G20 programmes to be held in the state next year.

What is Urban-20:

• Urban 20 (U20) is an initiative developed in 2017 under the leadership of the Mayor of Buenos Aires and Mayor of Paris, and convened by the C40 Cities Climate Leadership Group (C40) in collaboration with United Cities and Local Governments (UCLG).
• It was launched on December 12, 2017 at the One Planet Summit in Paris.
• U20 seeks to develop a joint position and collective messages to inform and enrich the discussions of national leaders at the G20 Summit through unique urban perspectives.
• Urban 20 aims to tackle global challenges by leveraging the potential of cities as hubs of diversity and innovation.
• The U20 brings together mayors from G20 cities under a common framework and coordinates a joint position to inform the discussions of national leaders.
• Contributions from the U20 are shared with the G20 Presidency and Heads of State enhancing the role of cities as global economic and political leaders.

12. The Basel Committee on Banking Supervision

Subject :Economy

Context:

The Group of Governors and Heads of Supervision  endorsed global prudential standards for banks to limit their exposure to crypto.

Details:

• It seeks to limit the exposure of banks to crypto to manage the risks associated with this volatile commodity.
• Crypto assets are categorized into two groups:
  • One that fully meets a set of predetermined conditions and will be subjected to the capital requirements established in the Basel Committee’s existing framework
  • Another that meets none of the conditions-bank’s total exposure will be limited to a maximum of 2% of Tier 1 capital, while less than 1% level of exposure.

The Basel Committee on Banking Supervision: 

• It was established by the Central Bank governors of the Group of Ten countries in 1974.
• The Basel Committee on Banking Supervision is an organization made up of 45 members, comprising central banks and bank supervisors from 28 jurisdictions. 
• It is the primary global standard setter for the prudential regulation of banks. 
• Additionally, it provides a forum for regular cooperation on banking supervisory matters.
• It doesn’t have any formal authority over banks due to their decisions having no legal force, the members work together to achieve the mandate set out by it.
• The Group of Governors and Heads of Supervision (GHOS) overseeing the Basel Committee . This group sets out the general agenda and approves the committee’s charters.

Basel Norms:

• The Basel Committee on Banking Supervision (BCBS) issues Basel Norms for international banking regulations.
• The goal of these norms is to strengthen the international banking system by coordinating banking regulations around the world.
• The Basel Committee has currently issued three guidelines to achieve its goal: Basel I, II, and III.
• Basel I
  • It was introduced in 1988.
  • It was almost entirely concerned with credit risk.
  • It established the capital and risk-weighting structure for banks.
  • The required minimum capital was set at 8% of risk-weighted assets (RWA).
    • RWA refers to assets with varying risk profiles. For example, an asset backed by collateral would be less risky than a personal loan with no collateral.
  • Capital is divided into two categories: Tier 1 capital and Tier 2 capital.
    • Tier 1 capital is the bank’s core capital because it is the primary measure of the bank’s financial strength. The majority of core capital is made up of disclosed reserves (also known as retained earnings) and paid-up capital. It also includes non-cumulative and non-redeemable preferred stock.
    • Tier 2 capital – It is used as supplemental funding since it is less reliable than the first tier.It consists of undisclosed reserves, preference shares, and subordinate debt.
  • In 1999, India adopted the Basel 1 guidelines.
• Basel II
  • In 2004, Basel II guidelines were published by BCBS.
  • These were the refined and reformed versions of Basel I accord.
  • The guidelines were based on three parameters, which the committee calls it as pillars.
    • Capital Adequacy Requirements: Banks should maintain a minimum capital adequacy requirement of 8% of risk assets
    • Supervisory Review: According to this, banks were needed to develop and use better risk management techniques in monitoring and managing all the three types of risks that a bank faces, viz. credit, market and operational risks.
    • Market Discipline: This needs increased disclosure requirements. Banks need to mandatorily disclose their CAR, risk exposure, etc to the central bank.
  • Basel II norms in India and overseas are yet to be fully implemented though India follows these norms.
• Basel III
  • In 2010, Basel III guidelines were released.
  • These guidelines were introduced in response to the financial crisis of 2008.
  • The guidelines aim to promote a more resilient banking system by focusing on four vital banking parameters viz. capital, leverage, funding and liquidity.
    • Capital: The capital adequacy ratio is to be maintained at 12.9%. The minimum Tier 1 capital ratio and the minimum Tier 2 capital ratio have to be maintained at 10.5% and 2% of risk-weighted assets respectively.In addition, banks have to maintain a capital conservation buffer of 2.5%. Counter-cyclical buffer is also to be maintained at 0-2.5%.
    • Leverage: The leverage rate has to be at least 3 %. The leverage rate is the ratio of a bank’s tier-1 capital to average total consolidated assets.
    • Funding and Liquidity: Basel-III created two liquidity ratios: LCR and NSFR.
      • The liquidity coverage ratio (LCR) will require banks to hold a buffer of high-quality liquid assets sufficient to deal with the cash outflows encountered in an acute short term stress scenario as specified by supervisors. The goal is to ensure that banks have enough liquidity for a 30-days stress scenario if it were to happen.
      • The Net Stable Funds Rate (NSFR) requires banks to maintain a stable funding profile in relation to their off-balance-sheet assets and activities. NSFR requires banks to fund their activities with stable sources of finance (reliable over the one-year horizon). The minimum NSFR requirement is 100%.

13. Carbon Border Adjustment Mechanism

Subject :Economy

Context:

European Union governments have reached a deal on the world’s first major carbon border tax to make its economy carbon-neutral by 2050.

Concept: 

Carbon Border Adjustment Mechanism:

• The European Union has proposed a policy — called the Carbon Border Adjustment Mechanism —  to tax products that are extremely carbon intensive, with effect from 2026.
• It is a duty on imports based on the amount of carbon emissions resulting from the production of the product in question. Thus, adds a pollution price on certain imports to the European Union.
• Carbon-intensive industries inside the bloc must comply with strict emissions standards and CBAM is designed to ensure that domestic businesses are not undermined by competitors in countries with weaker rules.
• The measure will apply first to iron and steel, cement, aluminum, fertilizers, electricity production and hydrogen before being extended to other goods.
• It also disincentivizes EU companies from moving production to more tolerant countries called the “carbon leakage.”
• Companies will need to buy certificates to cover emissions generated by the production of goods imported into the European Union based on calculations linked to the EU’s own carbon price.
• It will also incentivize EU’s trading partners to decarbonize their manufacturing industry..

Concerns:

• The EU carbon measure could lead to a “rapid deindustrialization” of African countries that export to the European Union.
• Another risk is that clean energy capacity in poorer countries will simply be shifted to the production of exported goods while industry aimed at local consumption relies on dirty fuels.

Climate policy overhaul

• The carbon border tax is part of a wider deal that reforms the EU carbon market to cut its emissions 62% by 2030, compared to 2005.
• The ETS is now extended to shipping.
  • The EU carbon market, known as the Emissions Trading System (ETS), already caps greenhouse gas emissions from more than 11,000 power and manufacturing plants, as well as all internal EU flights, covering some 500 airlines.
• Under the latest reforms, the quantity of free emissions allowances will be phased out between 2026 and 2034.
• The Carbon Border Adjustment Mechanism will be phased in at the same time, in that way protecting domestic firms from being undercut by foreign competitors.
• A new carbon market for heating and transport fuels starting in 2027, with the option to delay that by one year if energy prices remain at current high levels.

14. National Test House

Subject :Economy

Context:

The Centre’s National Test House (NTH) will set up testing capabilities for testing electric vehicles and EV-charging systems from next fiscal year.

Details:

• It is part of the new initiatives undertaken to make NTH future-ready and garner revenues of ₹30 crore by FY 2024.
• BIS formulates the performance standards for EV batteries.
• Currently, the International Centre for Automotive Technology and the Automatic Research Association of India (ARAI) provide testing facilities for electric vehicles.

Initiatives for NTH:

• Gati Shakti portal will be used to identify gaps in testing infrastructure in the country.
• NTH will set up a state-of-the-art transformer testing facility in Jaipur, Rajasthan.
• NTH is registered in the Government eMarket (GeM) as a service provider in the category “Testing and Calibration Service” to meet the testing needs.
• It is also expanding its services for water testing and fertiliser testing.
• It is also strengthening its presence in the north-eastern region.

National Test House:

• The NTH is the largest multi-location, multi-disciplinary industrial testing laboratory in India. 
• Industries, Institutions and Trade have been extensively using the unique infrastructure and expertise of NTH over the last ten decades.
• NTH departs its services through seven of its regional branches located at Kolkata, Mumbai, Chennai, Ghaziabad, Jaipur, Guwahati and Varanasi (Satellite Centre).
  • In all these branches testing and evaluation facilities of finished products/raw materials of all the branches of engineering disciplines are available under one roof.
• Services:
  • Test & Calibration Facility
  • Dealing with Customers
  • Training Facility
  • Training Calendar
  • Standard followed
  • Research & Development Services
  • Handling of Test & Calibration Samples
  • Training Center
  • BIS Accredited test facilities
  • NABL Accredited Test facilities
  • PTP Accredited Test facilities
  • NABL Accredited Calibration Facilities

15. 18% of Mumbai MSME loans are non-performing assets

Subject: Economy

Context: OutofRs162,874croreloans taken by MSMEs in Mumbai(including suburban region), Rs 22,579 crore involving 46,978 accounts have turned into NPAs, according to data compiled by the State Level Bankers Committee

NPA: A loan becomes NPA when the principal or interest payment remains overdue for 90 days.

Micro enterprise : According to the RBI definition, in a micro enterprise, the investment in plant and machinery or equipment should not exceed Rs one cr and turnover is below Rs5cr

State Level Bankers’ Committee

• It is  set-up as per the Lead Bank Scheme of the Reserve Bank of India, is the highest body of bankers in the state.
• The committee meets once a quarter. In addition to reviewing the activities of the institutional lending, the quarterly meetings discuss various issues concerning the economic development of the state, where banks play a pivotal role.
• The meetings aim at finding solution to the various problems confronting the state. The forum takes the lead in initiating, streamlining and accelerating the process of development in close co-ordination with various government departments, Reserve Bank of India, NABARD and other developmental agencies.
• The quarterly meetings are attended by top-level functionaries of member institutions of SLBC, thereby enabling them for meaningful and purposeful discussions on various matters aimed at solving the various issues.