Daily Prelims Notes 25 May 2022

Daily Prelims Notes

25 May 2022

Table Of Contents

1. External Commercial Borrowing
2. Integrated Coal Gasification Combined Cycle (IGCC) plant and green hydrogen
3. The Prevention of Corruption Act 1988 (PCA 1988)
4. Removal of Minister
5. The G20 Common Framework for Debt Treatments
6. Engineering Exports Promotion Council

1. External Commercial Borrowing

Subject: Economy

Section: External sector

Context:

The rise in global interest rates and the depreciation of the rupee is likely to reduce the appetite of India Inc to mobilise funds through external commercial borrowings (ECBs) in the coming months.

ECBs play an important role in India by supplementing the funding needs of corporations. ECBs account for a major share of India’s external debt and form for 36.8 per cent of India’s external debt as of end of December 2021

Concept:

External Commercial Borrowings are commercial loans raised by eligible resident entities from recognised non-resident entities and should conform to parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc.

The framework for raising loans through ECB comprises the following two options:

Recognised lenders:

The lender should be a resident of a Financial Action Task Force (FATF) or International Organisation of Securities Commission’s (IOSCO’s)  compliant country.  Further:

• Multilateral and Regional Financial Institutions where India is a member country will also be considered as recognised lenders;
• Individuals as lenders can only be permitted if they are foreign equity holders or for subscription to bonds/debentures listed abroad; and
• Foreign branches / subsidiaries of Indian banks are permitted as recognised lenders only for FCY ECB (except FCCBs and FCEBs).

Minimum Average Maturity Period (MAMP):

MAMP for ECB will be 3 years.

End-uses (Negative list):

The negative list, for which the ECB proceeds cannot be utilised, would include the following:

•  Real estate activities.
•  Investment in the capital market.
•  Equity investment.
• Working capital purposes, except in some cases
• General corporate purposes, except in some cases
• Repayment of Rupee loans, except in some cases
• On-lending to entities for the above activities, except in some cases

2. Integrated Coal Gasification Combined Cycle (IGCC) plant and green hydrogen

Subject: Environment

Section: Climate Change

Context:

Emphasising that green hydrogen will play a crucial role in India’s energy transition, noted scientist and NITI Aayog Member VK Saraswat said it is the future fuel.

• Green hydrogen is not economical, but with technologies such as Carbon Capture Utilisation and Storage (CCUS), grey hydrogen can be made environment friendly

Green Hydrogen:

• Hydrogen is one of the most abundant elements on earth for a cleaner alternative fuel option.
• Green hydrogen is produced by electrolysis of water using renewable energy (like Solar, Wind).
• Electricity splits water into hydrogen and oxygen.
• By Products : Water, Water Vapor.
• Green hydrogen can drive India’s transition to clean energy, combat climate change.
• India has a favourable geographic location and abundance of sunlight and wind for the production of green hydrogen.

How to reduce CO2 emissions for energy transition?

• From models developed by bodies like the IEA or the NITI Aayog, it is clear that thermal power plants(TPP) are still relevant for meeting demand. Since India does not have large quantities of gas, our thermal power will have to come from coal.
• g , the estimation is that even by 2070, around 8-10 per cent of power will come from coal. It can not be wished away, but it pollutes.
• To check emissions is to increase the efficiency of plants. One way is that instead of running subcritical power plants, India should go for super critical, ultra-supercritical, and advanced ultra-supercritical plants. India has already developed the technology for advanced ultra-supercritical plants.
• India can replace aged TPPs, with an installed capacity of around 25 gigawatts (GW), with new plants. Since the base load issue is there, replacement will be with Integrated Coal Gasification Combined Cycle (IGCC) plants and advanced ultra-supercritical plants.
• With this, India’s efficiency will be more than 45 per cent and emissions will go down by 40- 50 per cent, as far as TPPs are con- cerned.
• India should also integrate the thermal plants with carbon capture utilisation and storage. With this green- house gas emissions, particulate matter etc will reduce to less than 1 percent.

What is Integrated Coal Gasification Combined Cycle (IGCC) plants?

• An integrated gasification combined cycle (IGCC) is a technology using a high pressure gasifier to turn coal and other carbon based fuels into pressurized gas—synthesis gas (syngas). It can then remove impurities from the syngas prior to the electricity generation cycle.
• It is a technology that aims to extract the maximum energy out of a fuel that is burnt. In the case of coal, the carbon conversion efficiency in an IGCC plant is significantly higher than that in a conventional pulverised coal (P.C.) fired power plant.
• This is achieved by gasification, which converts coal into synthetic gas or syngas. Syngas is a mixture containing mainly carbon monoxide (CO) and hydrogen (H2) and some carbon dioxide as well.
• In an IGCC plant, high temperature syngas from the gasifier is used to run a gas turbine (G.T.) that generates power. This syngas may also be blended with natural gas, if required, to improve its calorific value.
• The waste heat in gasification and the hot gas coming out of the G.T. are further utilised to produce steam by heating water, which in turn runs a steam turbine to produce additional electricity.

3. The Prevention of Corruption Act, 1988 (PCA 1988)

Subject: Polity

Section: Acts

Context:

Punjab Health Minister Dr Vijay Singla sacked on corruption charges, arrested

Prevention of Corruption Act

The Prevention of Corruption Act, 1988 (PCA, 1988) is an Act of the Parliament of India enacted to combat corruption in government agencies and public sector businesses in India.

The PCA 1988 has gone through many amendments in order to better implement it.

Highlights of Prevention of Corruption Act, 1988

• The Prevention of Corruption Act was enacted in order to fight corruption and other malpractices in government and public sector business in India. Under PCA, 1988 the Central Government has the power to appoint judges to investigate and try those cases where the following offences have been committed.
  • Offences punishable under the act
  • A conspiracy to commit or an attempt to commit the offences specified under the act
• The following are the offences specified under the Prevention of Corruption Act as well as their subsequent punishments:

• Investigation shall be done by a police officer not below the rank of:
  • In the case of Delhi, of an Inspector of Police.
  • In metropolitan areas, of an Assistant Commissioner of Police.
  • Elsewhere, a Deputy Superintendent of Police or an officer of equivalent rank shall investigate any offence punishable under this Act without the order of a Metropolitan Magistrate or a magistrate of first class, or make any arrest therefore without a warrant.

2018 Amendments to the Prevention of Corruption Act, 1988

• Bribery is a specific and a direct offence
• Anyone taking bribes will face imprisonment for 3 to 7 years along with being levied a fine
• Those giving bribes can also be punished with imprisonment for upto 7 years and levied a fine.
• The 2018 amendment creates a provision to protect those who have been forced to pay a bribe in the event the matter is reported to law enforcement agencies within 7 days.
• It redefines criminal misconduct and will now only cover misappropriation of property and possession of disproportionate assets.
• It proposes a ‘shield’ for government servants, including those retired, from prosecution by making it mandatory for investigating agencies such as the Central Bureau of Investigation to take prior approval from a competent authority before conducting an inquiry against them.
• However, it states that such permissions shall not be necessary for cases involving the arrest of a person on the spot on the charge of accepting or attempting to accept any undue advantage for himself or for any other person.
• In any corruption case against a public servant, the factor of “undue advantage” will have to be established.
• The trial in cases pertaining to the exchange of bribes and corruption should be completed within two years. Further, even after reasoned delays, the trial cannot exceed four years.
• It covers bribe-giving commercial organisations to be liable for punishment or prosecution. However, charitable institutions have been left out of their ambit.
• It provides powers and procedures for the attachment and forfeiture of a corruption-accused public servant’s property.

4. Removal of Minister

Subject: Polity

Section: Executive

Context:

In India, the minister can be removed in following ways:

• Upon death.
• Upon self resignation, or resignation or death of the Prime Minister.
• Upon dismissal by the President for the minister’s unconstitutional acts per Article 75(2).
• Upon direction from the Judiciary for committing violation of law.
• Upon ceasing eligibility to be a Member of Parliament.
• Under the provision of “Collective Responsibility” under Article 75, the Prime Minister and the entire Council of Ministers resign if a Vote of No Confidence is passed in the Lower House (Lok Sabha) of the Indian Parliament

Similarly, every state in India is governed by its council of ministers with rules and procedures similar to the union council of ministers per Articles 163, 164 and 167(c).

In March 2020, the Supreme Court of India used its powers for the first time to do “complete justice” under Article 142 of the Indian Constitution to remove a minister functioning in the state of Manipur

Article 142 – Enforcement of decrees and orders of Supreme Court and unless as to discovery, etc  (1) The Supreme Court in the exercise of its jurisdiction may pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it, and any decree so passed or orders so made shall be enforceable throughout the territory of India in such manner as may be prescribed by or under any law made by Parliament and, until provision in that behalf is so made, in such manner as the President may by order prescribe

(2) Subject to the provisions of any law made in this behalf by Parliament, the Supreme Court shall, as respects the whole of the territory of India, have all and every power to make any order for the purpose of securing the attendance of any person, the discovery or production of any documents, or the investigation or punishment of any contempt of itself

Article 75 (2): The Minister shall hold office during the pleasure of the President.

Article 164 (1):  The chief Minister shall be appointed by the Governor and the other Ministers shall be appointed by the Governor on the advice of the Chief Minister, and the Ministers shall hold office during the pleasure of the Governor: Provided that in the State of Bihar, Madhya Pradesh and Orissa, there shall be a Minister in charge of tribal welfare who may in addition be in charge of the welfare of the Scheduled Castes and backward classes or any other work

5. The G20 Common Framework for Debt Treatments

Subject: IR

Section: International body

Context:

• Despite significant relief measures brought on by the COVID-19 crisis, about 60 percent of low-income countries are at high risk or already in debt distress. In 2015 that number was below 30 percent.
• New variants are causing further disruptions to economic activity. COVID-related initiatives such as the G20 Debt Service Suspension Initiative (DSSI) are ending.
• We may see economic collapse in some countries unless G20 creditors and other private sector creditors agree to accelerate debt restructurings and suspend debt service while the restructurings are being negotiated.
• In such a scenario, the Common Framework for debt treatment beyond the DSSI (Common Framework) is an important program.
• It is an initiative endorsed by the G20, together with the Paris Club, to support, in a structural manner, Low Income Countries with unsustainable debt.
• The Common Framework considers debt treatment, on a case-by-case basis, driven by requests from eligible debtor countries.
• In response to a request for debt treatment, a Creditor Committee is convened. Negotiations are supported by the IMF and the World Bank, including through their Debt Sustainability Analysis.
• The idea is that the debt treatment under the Common Framework should be accompanied by reforms ensuring the future sustainability of public debt, and consistent with the parameters of an Upper Credit Tranche (UCT) IMF-supported program.

Problems faced

• But so far, only three countries—Chad, Ethiopia, and Zambia—have made requests for debt relief under the Common Framework. And each case has experienced significant delays.
• In part, these delays reflect the problems that motivated the creation of the Common Framework in the first place.
• These include coordinating Paris Club and other creditors, as well as multiple government institutions and agencies within creditor countries, which can slow down decisions.

Steps to be taken to speed up G20 Common Framework for Debt Treatments

• With policy space tightening for highly indebted countries, the framework can and must deliver more quickly.
• First, greater clarity on the different steps and timelines in the Common Framework process is vital. Alongside earlier engagement of official creditors with the debtor and with private creditors, this would help accelerate decision making.
• Second, a comprehensive and sustained debt service payment standstill for the duration of the negotiation would provide relief to the debtor at a time when it is under stress, as well as incentivize faster procedures to get to the actual debt restructuring.
• Third, the Common Framework should clarify further how the comparability of treatment will be effectively enforced, including as needed through implementation of the IMF arrears policies, so as to give greater comfort to creditors and debtors.
• Last but not least, the Common Framework should be expanded to other highly-indebted countries that can benefit from creditor coordination. Timely and orderly debt resolution is in the interest of both debtors and creditors.

6. Engineering Exports Promotion Council

Subject: Economy

Section: External sector

Context:

• EEPC India is the trade and investment promotion organization for the engineering sector sponsored by the Ministry of Commerce & Industry. Set up in 1955, EEPC India now has a membership base of over 12,000 out of whom 60% are SMEs.
• As an advisory body it actively contributes to the policies of the Government of India and acts as an interface between the engineering industry and the Government.
• EEPC India organizes promotional activities such as buyer-seller meets (BSM) – both in India and abroad, overseas trade fairs/exhibitions, and India pavilion/information booths in selected overseas exhibitions. EEPC sponsors the India Engineering Exhibition (INDEE)
• EEPC India facilitates sourcing from India and boosts the SMEs to raise their standard at par with the international best practices. It also encourages the SMEs to integrate their business to the global value chain.
• EEPC India organizes India Engineering Sourcing Show (IESS), This is recognized as the only sourcing event in India – showcasing technology and providing a meeting place for global buyers and sellers.
• EEPC India publishes several reports/studies on the international trends and opportunities.
• EEPC India aims to raise $900 billion with the implementation of New Foreign Trade Policy (2015-2020)
• EEPC India started a monthly magazine named “ie2” on 10 November 2006 by Shri Nirupam Sen, Minister of Industries, and Government of West Bengal. It covers current trends of the global economy, international trade and the Indian Economy. It also has Success Stories from exporters.
• The association has signed an MoU with state-owned Punjab National Bank for loans, and advisory support to its members.
• EEPC in India has opened two technology centres in Bangalore and Calcutta and conducts regular programmes on technology developments and modules.