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Daily Prelims Notes 25 August 2023

  • August 25, 2023
  • Posted by: OptimizeIAS Team
  • Category: DPN
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Daily Prelims Notes

25 August 2023

Table Of Contents

  1. India and the Northern Sea Route
  2. The eyes and ears of Pragyan that help rover find its way on moon
  3. Battling a deliberately-acquired infection to help find a cure
  4. UK’s first successful womb transplant
  5. What is anorthosite and what is so special about it?
  6. BRICS expands from 5 to 11
  7. College of Military Engineering Pune: The First Carbon Negative Garrison of India
  8. Start-up AR4 Tech, Sodium tie up to make sodium-ion battery packs
  9. Funds crunch: Banks and NBFCs rush to the money market
  10. At $350 b, India’s fossil fuel  sop ‘among top 5 in the world

 

 

1. India and the Northern Sea Route

Subject :Geography

Section: Places in news

Context:

  • Murmansk, popularly called the capital of the Arctic region and the beginning point of the Northern Sea Route (NSR), is witnessing the rising trend of Indian involvement in cargo traffic.
  • In the first seven months of 2023, India got the lion’s share with 35% of eight million tonnes of cargo handled by the Murmansk port, which is about 2,000 km northwest of Moscow.

Why is the Arctic region significant to India ?

  • Arctic region: above the Arctic Circle and includes the Arctic Ocean with the North Pole at its centre.
  • The region constitutes the largest unexplored prospective area for hydrocarbons remaining on the earth.
  • It is estimated that the region may hold over 40 percent of the current global reserves of oil and gas.
  • There may also be significant reserves of coal, zinc and silver.
  • The Indian government’s Arctic Policy of 2022 mentions that the country’s approach to economic development of the region is guided by UN Sustainable Development Goals.

How old is India’s engagement with the Arctic?

  • India’s engagement with the Arctic can be traced to the signing of the Svalbard Treaty in February 1920 in Paris.
  • India’s engagement in the Arctic encompasses atmospheric, biological, marine, hydrological and glaciological studies.
  • India has set up a research station Himadri at Ny-Ålesund, Svalbard, in 2008.
  • In May 2013, India became an observer-state of the Arctic Council along with five others including China.
  • India launched its inaugural multi-sensor moored observatory and northernmost atmospheric laboratory in 2014 and 2016 respectively.
  • Till last year, thirteen expeditions to the Arctic were successfully conducted.

What is NSR?

  • The Northern Sea Route (NSR), the shortest shipping route for freight transportation between Europe and countries of the Asia-Pacific region, straddles four seas of the Arctic Ocean.
  • Running to 5,600 km, the Route begins at the boundary between the Barents and the Kara seas (Kara Strait) and ends in the Bering Strait (Provideniya Bay).
  • The distance savings along the NSR can be as high as 50% compared to the currently used shipping lanes via Suez or Panama.

How is Russia making the NSR navigable ?

  • As the seas of the Arctic Ocean remain icebound during most of the year, the icebreaking assistance is organized to ensure safe navigation along the NSR.
  • Russia is the only country in the world with a nuclear-powered icebreaker fleet.
  • In December 1959, the world’s first nuclear icebreaker, “Lenin,” was put into operation.
  • It was decommissioned 30 years later.
  • Today, FSUE Atomflot, a subsidiary of Rosatom, acts as the fleet operator of nuclear-powered icebreakers.

What are the driving factors for India to participate in the NSR development ?

  1. The growth in cargo traffic along the NSR is on the constant rise and during 2018-2022, the growth rate was around 73%.
  2. The NSR, as a transit route, assumes importance, given India’s geographical position and the major share of its trade associated with sea transportation.
  3. The Chennai-Vladivostok Maritime Corridor (CVMC) project, an outcome of the signing of the memorandum of intent between the two countries in September 2019.
    • The 10,500 km-long CVMC, passing through the Sea of Japan, the South China Sea and Malacca Strait, will bring down transport time to 12 days, almost a third of what is taken under the existing St. Petersburg-Mumbai route of 16,000 km.
    • A study commissioned by Chennai Port Trust reveals that coking coal [used by steel companies], crude oil, Liquified Natural Gas (LNG) and fertilisers are some of the cargo that can be imported from Russia to India through CVMC.
  4. Experts are discussing the possibility of China and Russia gaining collective influence over the NSR.

For more details on NSR and Murmansk port: https://optimizeias.com/india-accounts-for-35-of-cargo-handled-by-murmansk-this-year/

2. The eyes and ears of Pragyan that help rover find its way on moon

Subject :Science and technology

Section: Space technology

Context:

  • With the Chandrayaan-3’s lander module Vikram successfully making a touchdown on the moon and the rover Pragyan ramping down, one camera developed by Laboratory for Electro-Optics Systems (LEOS) in Bengaluru has already made an impact while another would be guiding the Pragyan as it traverses the moon’s surface.

About Pragyan rover:

  • Weight: 26 kg
  • Speed: 1 cm per second
  • Landing Location: Between the craters Manzinus C and Simpelius N.
  • Rover Pragyan cannot move more than 500m away from the lander Vikram, to ensure that they are able to send signals between each other. The rover can communicate only with the lander.
  • What will it do?
    • It will move around the moon’s surface in low gravity and a thin atmosphere in a semi-autonomous way and avoiding hazards.
    • Its instruments will study what the materials on the moon’s surface near the landing site are made of.
  • Other features:
    • Its solar panel produces 50W of power.
    • Has rocker- bogie suspension
    • The rover has six wheels. The wheel treads will imprint ISRO logo and Ashoka lions emblem on the ground.
  • Why does it have a short life-Span?
    • When the sun sets on the moon, an area will become dark and very cold. This can damage the battery and other electronic components.
    • When the sun rises again after 14 days, the rover can return to life if the components have survived. This is unlikely.

Lander Horizontal Velocity Camera (LHVC):

  • LHVC, which was initially developed for the Chandrayaan-2 mission, has also been adopted for the Chandrayaan-3 mission.
  • LHVC has an important role of measuring horizontal velocity during the Lander descent phase.
  • It does a complex algorithm calculating the velocity in which the lander is travelling.

Navigation Camera (NAVCAM):

  • The second camera is the Navigation camera (NAVCAM) and two of them will be the eyes of the Rover, guiding it as it traverses the moon’s surface.
  • Both NAVCAMs are fitted in the front of the rover for path planning and obstacle avoidance for the rover.
  • Both the cameras were developed for the Chandrayaan-2 lander and rover.

Laser-Induced Breakdown Spectroscope (LIBS):

  • Its weight is 1.5kg and consumes 5W of power.
  • A powerful laser is shined on a target sample, until it blow off a few atoms and causes the sample to emit some radiation
  • Detectors study this radiation to understand what the same is made of.

Alpha Particle X-Ray Spectrometer (APXS):

  • Its weight is 0.7 kg and consumes 4W.
  • Blasts a target sample with X-rays emitted by radioactive material (curium-244).
  • Atoms in the sample absorb the X-rays and then release them at a different frequency.
  • Based on this frequency, scientists can say which elements the sample contains

3. Battling a deliberately-acquired infection to help find a cure

Subject :Science and technology

Section: Health

Context:

Researchers at the University of Maryland had conducted a “controlled human infection study” (CHIS), also called a human challenge study to test a new vaccine that one day may hopefully prevent Shigellosis.

Details:

  • A CHIS is a relatively quick and efficient way to assess if a vaccine might work.
  • India is likewise considering introducing CHIS.

ICMR’s proposal for CHIS:

  • CHIS is a research model that intentionally exposes healthy volunteers to pathogens under controlled conditions.
  • The CHIS is proposed by the Indian Council of Medical Research’s (ICMR) Bioethics Unit.
  • Outside of India, this relatively new research model which involves intentionally exposing healthy volunteers to pathogens in a controlled environment, has been used to study malaria, typhoid, dengue, etc.
  • The deterrents include technical, clinical, ethical and legal contentions, amid unique socio-cultural context.
  • Concerns include:
    • India has so far stayed away from CHIS, because regardless of the potential scientific benefits, these studies are ethically sensitive and raise concerns about contentious research ethics issues like:
      • deliberate harm,
      • possible disproportionate payment and hence inducements,
      • third-party risk,
      • withdrawal from the study and research with vulnerable participants.

Need for the CHIS:

  • India carries a high burden of morbidity and mortality from infectious diseases.
  • They contribute about 30% of the disease burden in the country.
  • Finding novel, efficient, and cost-effective alternatives to existing methods of research in these diseases and their prevention is imperative to reduce this burden.
  • CHIS helps provide unique insights into disease pathogenesis and can accelerate the development of novel medical interventions.
  • CHIS offers accelerated, cost-effective, and efficient outcomes using smaller sample sizes in comparison to large clinical trials.
  • Its social value includes:
    • potential contributions to public health response to diseases of concern,
    • healthcare decision-making,
    • policies and economic benefits,
    • improved pandemic preparedness, and
    • community empowerment.
  • ICMR has also cautioned that CHIS is a highly complex area and may require collaborations at different levels between researchers, institutions, organisations and/or between different countries.

What is the fundamental difference between human clinical trials and human challenge studies?

Sr.No.Human Clinical trialsHuman Challenge Trials or CHIS
1.Participants are strongly advised to adopt and adhere to safety measures to avoid getting infected and any exposure to the microbes and infection arising in the participants from such an exposure is left to chance.Volunteers are deliberately exposed to disease-causing pathogens.
2.Undertaken to study the safety and efficacy of drugs and vaccinesCarried out to understand the various facets of infection and disease pathogenesis besides selecting the best candidate drug or vaccine.
3.Adverse effects of the candidate drugs or vaccines are not knownThough adverse effects of the candidate drugs or vaccines are not known, volunteers face an additional risk when deliberately exposed to the pathogen
4.Undertaken to study all kinds of diseases.Often undertaken to study “less deadly diseases” such as influenza, dengue, typhoid, cholera and malaria.

4. UK’s first successful womb transplant

Subject :Science and technology

Section: Health

Context:

  • The first successful UK womb transplant has been performed at the Churchill Hospital in Oxford, United Kingdom.

Details:

  • The recipient is a 34-year-old woman born without a womb, and the donor is her elder sister, who already has children of her own.
    • The patient was born with Mayer-Rokitansky-Küster-Hauser syndrome (MRKH), a rare condition affecting about one in every 5,000 women.
    • With MRKH, women have an underdeveloped or missing womb.
    • However, their ovaries are intact and still function to produce eggs and female hormones, making conceiving via fertility treatment a possibility.
  • The operation was funded by Womb Transplant UK, a charity trust.
  • The first successful womb transplantation was performed in 2012 in Gothenburg in Sweden, since then Sweden and the US have been particularly successful in pioneering the technique.
  • More than 90 womb transplants have been carried out internationally, including in Sweden, the US, Saudi Arabia, Turkey, China, Czech Republic, Brazil, Germany, Serbia and India, with most involving a living donor. About 50 babies have been born as a result.

What is the procedure involved?

  • One team of surgeons removes the womb from the donor and a second team transplants it into the recipient.
  • Donor and recipient undergo extensive counseling before the transplant to ensure psychological suitability, and the recipient must take drugs that suppress the immune system afterwards to prevent her body from rejecting the new organ.
  • Once the recipient has finished “using” the womb she has further surgery to remove it, so that the immunosuppressant drugs can be discontinued.

Concerns involved:

  • The procedure is medically safe for donor and recipient.
  • Alarming reports of organ black markets and vulnerable people being trafficked for their organs.

India:

  • The first uterine transplant performed in India took place on 18 May 2017 at the Galaxy Care Hospital in Pune, Maharashtra.
  • India’s first uterine transplant baby, weighing 1.45 kg, was delivered through a Caesarean section at Galaxy Care Hospital in Pune.

5. What is anorthosite and what is so special about it?

Subject: Geography

Section: Physical geography

Context: The lunar surface has ‘Anorthosite’

[a type of intrusive igneous rock] type of soil.

What is anorthosite?

  • The term anorthosite was introduced by T.S. Hunt (1863).
  • Anorthosites are rocks dominated by plagioclase feldspars..
  • Feldspars, together with quartz, are the most common rock forming minerals. The family of feldspars has three “extreme” members:
  1. K-containing orthoclase or microcline (KAlSi3O8)
  2. Na-containing albite (NaAlSi3O8), and
  3. Ca-containing anorthite (CaO·Al2O32SiO2)
  • The mixture of albite with anorthite is creating the family of plagioclase feldspars.
  • Anorthosites are igneous rocks consisting of 90% or more plagioclase feldspar.
  • Categorized into six basic types:
  1. Archean megacrystic anorthosites,
  2. Proterozoic (massif-type) anorthosites,
  3. Anorthosites of layered mafic complexes,
  4. Anorthosites of oceanic settings,
  5. Anorthosite inclusion in other rock types, and
  6. Extra-terrestrial anorthosites.

Where is it found?

  • Anorthosites dominate some planetary crusts such as that of the moon and mercury.
  • On Earth they are abundant in a few places like:
    • The Grenville Province of the eastern Canadian Shield (Ashwall 2010),
    • In Norway (Scanofennic Shield),
    • In Greenland,
    • In South Africa and
    • In the center of big tectonic plates, where rocks are really old.
    • The two largest anorthosite complexes in Western Europe are situated in Western Norway: the Inner Sogn-Voss province, and the Rogaland province.
  • In India, this soil is available in abundance in places like Sithampoondi and Kunnamalai villages surrounding Namakkal, and also in some areas in Andhra Pradesh and northern parts of the country.

Why is it special?

  • Anorthosite formula: CaO·Al2O3·2SiO2.
  • It contains Aluminium, Silicon and Calcium, minerals which are high in demand.
  • Aluminum production from Anorthosite will reduce cost, lessen the procedure and reduce CO2 emissions compared to Bayer’s process of aluminum extraction from Bauxite mineral.

6. BRICS expands from 5 to 11

Subject :International Relations

Section: International Groupings

Context: Leaders of the BRICS decided to expand the grouping and admit six new members.

More about the news:

  • BRICS member countries declared expansion of the grouping by welcoming six new countries into the fold.
  • Saudi Arabia, Iran, UAE, Egypt, Ethiopia and Argentina will become part of BRICS with effect from January 1, 2024.

More about 15th BRICS Summit:

  • The 15th BRICS Summit was scheduled to be held in Johannesburg, South-Africa.
  • The theme of the Summit was “BRICS and Africa: Partnership for Mutually Accelerated Growth, Sustainable Development, and Inclusive Multilateralism” 
  • This was the first in­-person summit since 2019 ,the COVID­19 pandemic and  Russian invasion of Ukraine.

What’s the big item on the agenda:

  • The main items on the agenda were to attract attention for their potential for a greater geopolitical consolidation of the grouping,and a plan to expand the membership of BRICS.
  • Over 40 countries have expressed interest in joining BRICS, and at least 19 have formally applied for membership such as Argentina, Mexico from Latin America; Nigeria, Algeria, from Africa; Saudi Arabia, UAE, from West Asia; Kazakhstan from Central Asia; Bangladesh and Afghanistan from South Asia.
  • The leaders also took forward the earlier talks on intra­ BRICS trading in national currencies, 

What is BRICS:

  • BRICS is an acronym for the grouping of the world’s leading emerging economies, namely Brazil, Russia, India, China, and South Africa.
  • In 2001, the British Economist Jim O’Neill coined the term BRIC to describe the four emerging economies of Brazil, Russia, India, and China.
  • The grouping was formalized during the first meeting of BRIC Foreign Ministers’ in
  • South Africa was invited to join BRIC in December 2010, after which the group adopted the acronym BRICS

Some Facts about BRICS:

  • BRICS is an important grouping bringing together the major emerging economies from the world, comprising:
  • 41% of the world population.
  • 24% of the world GDP 
  • Over 16% share in world trade.
  • Total combined area of 29.3% of the total land surface of the world

What are Few Initiatives of the BRICS:

  • New Development Bank:
  • During the Sixth BRICS Summit in Fortaleza (Brazil) in 2014, the leaders agreed to set up NDB.
  • The NDB became fully operational in 2016 with headquarters established in Shanghai.
  • Each member holds an equal amount of shares 20% in the NDB.
  • Contingent Reserve Arrangement:
  • In 2014, the BRICS governments had signed a treaty on the setting up of the contingent reserve arrangement
  • The arrangement is aimed at forestalling short-term balance of payments pressures, providing mutual support and strengthening financial stability of the BRICS nations.
  • BRICS Payment System:
  • BRICS countries are trying to create a payment system as an alternative to the SWIFT payment system.
  • This has taken on a new urgency as post Ukraine war, Russia has been frozen out of SWIFT.
  • Customs Agreements:
  • Customs agreement were signed to coordinate and ease trade transport between BRICS countries
  • Launched of Remote Sensing Satellite:
  • A Remote Sensing constellation of satellites has been launched – with 6 satellites including 2 from India, 2 from China, 1 from Russia, and 1 Brazil-China collaboration

7. College of Military Engineering Pune: The First Carbon Negative Garrison of India

Subject : Environment

Section: Climate change

Context:

The College of Military Engineering (CME), Pune has achieved the status of India’s first carbon-negative military unit by adding a 5 MW solar plant, increasing its total solar capacity to 7 MW.

College of Military Engineering (CME) 

  • Founded in 1948, CME stands as a prominent training institution catering to the Indian Army, Navy, Air Force, and Friendly Foreign Countries.
  • CME specializes in providing technical and tactical training, equipping personnel to adeptly respond to changing warfare tactics and strategies.

Carbon Footprint Reduction at CME

  • The Military Engineering Services, through the office of GE(CME) Khadki, initiated various projects at CME to combat climate change and reduce carbon footprint.
  • Key Projects:
    • Implementation of a 7 MW Solar Power Plant in two phases.
    • Solar steam cooking plants for community cooking for troops.
    • Retrofitting Emission Control Devices (RECDs) on DG Sets.

Indian Armed Forces’ Environmental Responsibility

  • Global Greenhouse Gas Emissions: Worldwide, militaries contribute 5.5% of global greenhouse gas emissions (Conflict and Environment Observatory Report, 2022).
  • Indian Armed Forces’ Initiatives: The Indian armed forces are actively reducing their carbon footprint, showcasing their commitment to the motto “Service before Self“.
CARBON NEGATIVE:

Being carbon negative means we offset or remove more carbon from the atmosphere than we emit.

National Solar Mission

  • Also known as Jawaharlal Nehru National Solar Mission (JNNSM), is a joint initiative by the Central and State Governments of India.
  • It focuses on advancing solar power within the nation and is part of the National Action Plan on Climate Change (NAPCC) strategy.
  • Introduced in January 2010, the mission has undergone two revisions.
  • The ambitious goal is to achieve 100 GW of solar PV capacity by 2022.
  • The 100GW solar power capacity has been divided into the following 4 parts:
    • The rooftop solar energy generation of 40 GW.
    • Large and medium-scale grid-connected solar projects of 60 GW.
    • To achieve 15 million square meters of solar thermal collector area by 2017 and 20 million by 2022.
    • To deploy 20 million solar lighting systems for rural areas by 2022.

Other initiatives:

  • Kisan Urja Suraksha evam Utthaan Mahabhiyan (KUSUM) Scheme:
    • Distribution of off-grid solar pumps, installation of solar panels on barren land, and DISCOMS purchasing excess solar energy.
  • International Solar Alliance (ISA):
    • A joint initiative of India and France to promote solar energy globally.
  • One Sun, One World, One Grid (OSOWOG):
    • Proposed global electricity grid to distribute solar power worldwide.
  • Rooftop Solar Scheme:
    • Ministry’s program promoting rooftop solar installations.
    • Offers subsidies for solar panels, cost-sharing with residential customers, and vendor incentives.
    • Sustainable Rooftop Implementation of Solar Transfiguration of India (SRISTI) initiative
  • Solar Park Scheme:
    • Aims to establish solar parks with around 500 MW capacity in various states.
    • Focuses on aggregating solar power generation through large-scale parks.

8. Start-up AR4 Tech, Sodium tie up to make sodium-ion battery packs

Subject :Science and technology

Section: Chemistry

Context:

Coimbatore’s AR4 Tech partners with Singapore’s Sodion Energy to build a sodium-ion battery factory, targeting vehicle electrification.

Sodium-Ion Batteries: Overview and Components

  • Sodium-ion batteries (Na-ion batteries or NIBs) are an emerging battery technology that utilizes sodium ions (Na+) as charge carriers.
  • They share similarities with lithium-ion batteries but offer the advantage of using more abundant and cost-effective sodium.

Components of Sodium-Ion Batteries:

  • Anode:
    • Typically employs carbon-based materials like hard carbon or graphite.
    • Sodium ions are absorbed during charging and released during discharging.
  • Cathode:
    • Consists of transition metal oxides such as NaFePO4 or NaMnO2.
    • Sodium ions intercalate into the cathode material during discharging and deintercalate during charging.
  • Electrolyte:
    • Facilitates the movement of sodium ions between the anode and cathode.
    • Requires stability and good ionic conductivity.
    • It can be in liquid or solid-state form.
  • Separator:
    • Prevents direct contact between the anode and cathode.
    • It permits the flow of sodium ions while preventing short circuits.

Advantages and Considerations:

Advantages:

  • Abundance: Sodium is more abundant and widely available than lithium.
    • Sodium is the sixth most abundant element worldwide.
    • 500 times more abundant than lithium.
  • Cost-Effectiveness: Sodium-ion batteries have the potential to be more affordable due to sodium’s lower cost. Costs 1-2% of lithium’s price.
  • Environmental Impact: Reduced dependence on lithium can mitigate ecological concerns related to its extraction.
  • Safety: Lower risk of thermal runaway.
    • Thermal runaway refers to a self-reinforcing and uncontrolled increase in temperature within a system
  • Sustainability and Eco-Friendliness: Sodium-ion batteries don’t rely on rare metals like cobalt or nickel.

Considerations:

  • Energy Density: Sodium-ion batteries generally have lower energy densities than lithium-ion batteries, affecting applications where compactness matters.
  • Cycle Life: Cathode materials can degrade over numerous charge-discharge cycles, impacting long-term performance.

Electrolyte Challenges: Developing stable and highly conductive electrolytes for sodium ions is essential.

9. Funds crunch: Banks and NBFCs rush to the money market

Subject: Economy

Section: Capital Market

Context: Banks raising short term finance due to liquidity crunch caused by the incremental CRR (I-CRR) norm.

Key Points:

  • Liquidity tightening in the banking system following the introduction of the incremental CRR (I-CRR) has prompted banks and NBFCs to raise short-term funds from money markets to manage their immediate fund requirements.
  • Apart from liquidity shortage in the banking system caused by ICRR and GST collections, robust credit growth is further making it necessary to secure short term funds.
  • Funds are being raised via certificates of deposit (CDs) and bulk deposits. CD rates have gone up by about 10-15 bps in the last fortnight. Banks will be paying much more than CD rates for high value bulk deposits.
  • The situation is expected to last till the end of September when government spending kicks in.
Certificate of Deposit (CD)

  • A Certificate of Deposit (CD) is a financial instrument issued by banks and financial institutions to raise funds from the public.
  • It’s a fixed-term deposit that offers a higher interest rate compared to regular savings accounts. CDs cannot be withdrawn before maturity without incurring a penalty.
  • They are tradable and can be sold in the secondary market before maturity. The minimum deposit amount and the tenure of CDs can vary among banks.
  • Certificate of Deposits (CDs) typically offer higher returns than savings deposits due to several factors:
    • Fixed Term and Illiquidity: CDs have a fixed term or maturity period, during which the deposited amount remains locked. Since the funds are illiquid until the maturity date, banks can offer higher interest rates as they can use these funds for longer-term lending or investment activities.
    • Lower Liquidity Risk: Since customers can’t easily withdraw funds from a CD before maturity without incurring penalties, banks have more certainty about the availability of funds for a longer period. This reduced liquidity risk allows banks to offer higher interest rates.
    • Market Rates: Interest rates on CDs are more influenced by market conditions and the prevailing interest rate environment. When market interest rates are higher, banks may offer higher rates on CDs to attract funds.
    • Investment Options: Banks often invest the funds obtained through CDs in longer-term assets, such as loans, mortgages, or bonds. These investments can potentially generate higher returns, which banks can then pass on to CD holders in the form of higher interest rates.

10. At $350 b, India’s fossil fuel  sop ‘among top 5 in the world

Subject: Economy

Section: Fiscal Policy 

Context: India ranks fourth among the top five nations in fossil fuel subsidies with around $350 billion (over ₹28-lakh crore)

Key Points:

  • According to a working paper of the International Monetary Fund (IMF) India is ranked 4th in terms of fossil fuel subsidies.
  • China is at the top, followed by the US and Russia. The European Union and Japan share the fifth spot.
  • Globally, total fossil fuel subsidies amounted to $7 trillion in 2022, equivalent to nearly 7.1 per cent of global GDP.
  • Here total subsidy means sum of explicit subsidies (undercharging for the supply costs of fossil fuels) and implicit subsidies (undercharging for environmental costs and forgone consumption tax revenues).
  • The full gap between efficient prices (the sum of supply, environmental, and other costs) and retail prices multiplied by consumption equals the total fossil fuel subsidy.
  • In India, explicit or direct subsidy is given for domestic LPG under a scheme called ‘Ujjawala’ while some transport subsidy is also give to take various types of fuel to remote locations.
  • The paper said sum of both implicit and explicit subsidy in India is estimated at $346 billion which is over 10 per cent of the GDP.
  • Providing a blueprint to lower subsidy, the paper said fully reforming fossil fuel prices by removing explicit fuel subsidies and imposing corrective taxes such as a carbon tax would reduce global carbon dioxide (CO2) emissions by 43 percent below ‘business as usual’ levels in 2030.
  • Benefits of cutting fuel subsidies?
    •  Full fuel price reform would also raise substantial revenues, worth about 3.6 per cent of global GDP.
    • These revenues could be used to cut more burdensome taxes such as on those labour, help with debt sustainability, or fund productive investments.
    • Further, fuel price reform would avert about 1.6 million pre-mature deaths per year from local air pollution by 2030. Reforming fossil fuel subsidies is in countries’ own interest, even when excluding climate benefits.
Explicit and Implicit Fuel Subsidies

Explicit Subsidies:

  • Explicit subsidies are direct financial transfers from the government to consumers or producers of fuel.
  • These subsidies are easily visible in government budgets and are typically administered through mechanisms such as reduced fuel prices, cash payments, or vouchers.
  • Explicit subsidies are transparent and can have immediate effects on reducing the cost of fuel for consumers.
  • Advantages:
    • Explicit subsidies can provide immediate relief to consumers by reducing the price they pay for fuel.
    • They are transparent and can be tracked through government budgets.
  • Disadvantages:
    • Explicit subsidies can strain government budgets, especially during periods of high global oil prices.
    • Subsidies might lead to overconsumption of fuel, increasing demand and potentially contributing to environmental issues.
    • Subsidies can also distort market dynamics and discourage investment in renewable energy sources.

Implicit subsidies:

  • Implicit subsidies, also known as hidden subsidies, are not as transparent as explicit subsidies and are often more complex to measure.
  • They occur when governments intervene in the energy market through policies that affect the cost of production, distribution, or consumption of fuel, without directly providing financial transfers.
  • Advantages:
    • Implicit subsidies might not strain government budgets as directly as explicit subsidies.
    • They can promote local production and reduce reliance on imports.
  • Disadvantages:
    • Implicit subsidies can be harder to identify and quantify, making it challenging to assess their impact.
    • They can distort market signals, leading to inefficiencies and market imbalances.
    • Like explicit subsidies, implicit subsidies can also encourage overconsumption and hinder the transition to cleaner energy sources.
    • Examples of implicit subsidies include tax breaks for fuel producers, regulations that keep fuel prices below market rates, and inadequate pricing of externalities like environmental pollution.

Both types of subsidies can have significant economic, social, and environmental implications. While explicit subsidies directly impact government budgets, implicit subsidies can influence market behaviors and environmental sustainability in less obvious ways.

Note: Externality refers to the unintended impact of economic activities on the environment, where the costs or benefits are not fully reflected in market prices.

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