Daily Prelims Notes 3 June 2022

Daily Prelims Notes

3 June 2022

Table Of Contents

1. Under recovery
2. Capital Intensity
3. Barcodes vs Radio-frequency identification (RFID) tags
4. Ribbon weed: largest plant in the world
5. Santoor maestro Pandit Bhajan Sopori passes away
6. Service Charge Norms
7. Rising sea level- a threat to coastal areas

1. Under recovery

Context :

With fuel prices remaining unchanged for almost two months despite a rise in costs, oil companies have started detailing under-recoveries, or losses, which are as high as ₹17.1 per litre on petrol and ₹20.4 on diesel as of Thursday.

Details:

Local pump rates are benchmarked to about $85 per barrel crude oil price while Brent is currently trading at $113. This has resulted in a gap between cost and selling price, referred to as under-recovery, or loss.

Under- Recovery:

Under-recovery is a term used in the Indian Petroleum sector to denote the notional losses that oil companies incur due to the difference between the subsidized price at which the oil marketing companies sell certain products like diesel, LPG and Kerosene and the price which they should have received for meeting their cost of production.

Concept of “Under Recovery” and “Loss” was examined by “Committee on Pricing and Taxation of Petroleum Products” – chaired by Dr. C. Rangarajan, Chairman of Prime Minister’s Economic Advisory Council, in 2006.

The committee observed that: “Refining of crude oil is a process industry where crude oil constitutes around 90% of the total cost. Since value added is relatively small, determination of individual product-wise prices becomes problematic. The oil marketing companies (OMCs) are currently sourcing their products from the refineries on import parity basis which then becomes their cost price. The difference between the cost price and the realized price represents the under-recoveries of the OMCs. The under-recoveries as computed above are different from the actual profits and losses of the oil companies as per their published results. The latter take into account other income streams like dividend income, pipeline income, inventory changes, profits from freely priced products and refining margins in the case of integrated companies.”

Thus, the difference between the required price based on TPP/ IPP parity and actual selling price realized (excluding taxes, dealer commission) represents the under-recoveries. This is different from the concept of Gross Refinery Margin which indicates the difference between the wholesale weighted average price of various products produced by a refiner and the refiner’s composite acquisition cost of crude oil. The “net margin” indicates gross margin minus operating costs of the refiner.

Under recovery and Gross Refinery margin are the two terms often seen in petroleum pricing. With reference to this consider the following statements:

1. Gross Refinery Margin which indicates the difference between the wholesale price of various products produced by a refiner and acquisition cost of crude oil.
2. Under recovery indicates the economic profit which is not the true profit of a refiner.
3. Under recovery also  indicates the difference between the subsidized price at which the oil marketing companies sell certain products like diesel, LPG and Kerosene and the price which they should have received for meeting their cost of production.

2. Capital Intensity

Context:

Capital intensity in India is on the increase as  the average value of output per unit of net capital stock for the economy as a whole declined from 0.626 in 2011-12 to 0.576 in 2019-20.

Details:

• Capital intensity remained in the narrow range
• There have been significant inter sector differences in the capital intensity
  • Capital intensity has increased for the mining, construction and road transport sector.
  • Capital intensity has declined for professional and other services.
  • Utility services and manufacturing have surprisingly witnessed decline in capital intensity.
  • The household sector (informal), witnessed a rise in the capital intensity, as reflected by a decline in average value of output and value added per unit of net capital stock in 2019-20 compared to 2011-12.

Indicates?

Increase in capital intensity in mining, construction and trade indicate a substitution of capital machinery for labour and an increasing shift to digital payments.

Importance of informal sector–

• In an economy with abundant labour and scarce capital, the informal sector plays an important role as the value of output and value added per unit of capital stock in this sector remains to be usually high.
• Informal household sector is also characterised by having a higher ratio of value added to value of output as the labour (own or hired) is the principal input.
• Increase in the capital intensity in this sector would reduce the future employment opportunities in this sector.

Concept:

Capital intensity is the amount of fixed or real capital present in relation to other factors of production, especially labour. At the level of either a production process or the aggregate economy, it may be estimated by the capital to labour ratio.

The use of tools and machinery makes labour more effective, so rising capital intensity (or “capital deepening”) pushes up the productivity of labour. Capital intensive societies tend to have a higher standard of living over the long run.

However in an economy with abundant labour and scarce capital, raising capital intensity i.e. raising capital to labour ratio have following consequences: 

• Rise in the surplus labour and hence unemployment.
• Rising unemployment leads to the decline in total production as measured by low average value of output per unit of net capital stock, low ratio of value added to value of output.
• Structural unemployment -Structural unemployment occurs because workers lack the requisite job skills or live too far from regions where jobs are available and cannot move closer. Jobs are available, but there is a serious mismatch between what companies need and what workers can offer.

3. Barcodes vs Radio-frequency identification (RFID) tags

Subject: Science and Technology

Section: Computers

Baggage tags equipped with radio-frequency identification will soon be available at Delhi’s Indira Gandhi International Airport.

Radio-frequency identification (RFID) technology

• Radio-frequency identification (RFID) is a technology that uses radio waves to automatically identify various tagged objects.
• Radio Frequency Identification (RFID) is a wireless tracking method that uses tags and readers to track objects.
• Transponder, receiver, and transmitter are the three components of an RFID system.
• The RFID reader continually sends radio waves of a specific frequency in the RFID system.
• If the object to which the RFID tag is attached is within the range of the radio waves, it provides feedback to the RFID reader, which then identifies the object based on the feedback.
• There are three types of RFID tags:
  • Passive tags: There is no power supply for passive tags. They acquire their power from the readers’ incoming radio waves.
  • Semi-passive tags: They comprise an internal circuit with a power source, but rely on the radio waves received from the reader to transmit the response.
  • Active tags: Their internal circuit is powered by a power source. It also utilises its own power supply to send the response to the reader.
• The Low Frequency, High Frequency, and Ultra-High Frequency bands are used by RFID systems.

Barcode

• A barcode is a printed series of parallel bars or lines of varying width used for entering data into a computer system.
• The bars are black on a white background and vary in width and quantity depending on the application.
• The bars represent the binary digits zero and one, which represent the digits zero to nine processed by a digital computer.
• These barcodes are scanned using special optical scanners known as barcode readers.
• The majority of these codes use only two different widths of bars, however some use four.
• Example: QR code

Difference between Barcode And RFID 

4. Ribbon weed: largest plant in the world

Subject: Environment

Section: Biodiversity

• The world’s largest plant has recently been discovered off the West Coast of Australia: a seagrass 180 km in length.
• The plant is called the ribbon weed, or Posidonia australis.
• The plant is 4,500 years old, is sterile, has double the number of chromosomes than other similar plants, and has managed to survive the volatile atmosphere of the shallow Shark Bay, Australia.
• The ribbon weed covers an area of 20,000 hectares.
• The second largest plant, is the clonal colony of a quaking Aspen tree in Utah, which covers 43.6 hectares.
• The largest tree in India, the Great Banyan in Howrah’s Botanical Garden, covers 1.41 hectares.

How did it survive

• Sometime in the Harappan era, a plant took root in Shark Bay. Then it kept spreading through its rhizomes.
• The researchers found that the ribbon weed cannot spread its seeds, something that helps plants overcome environmental threats.
• Also because it is a polyploid – instead of taking half-half genome from both parents, it took 100 percent, something not unheard of in plants.
• Therefore, this ribbon weed has twice the number of chromosomes other plants of the same variety have.

5. Santoor maestro Pandit Bhajan Sopori passes away

• Sopori’s death comes just weeks after santoor virtuoso Pandit Shiv Kumar Sharma, who also belonged to Kashmir and took the stringed instrument to the classical music stage, died on May 10.
• The musician-composer belonged to north Kashmir’s Sopore district and came from the ‘Sufiana Gharana’.

Indian Santoor

• The Indian santoor instrument is a trapezoid-shaped hammered dulcimer, and a variation of the Iranian Santur.
• The Indian santoor is more rectangular and can have more strings than its Persian counterpart, which generally has 72 strings.
• The instrument is generally made of walnut and has 25 bridges.
• Each bridge has 4 strings, making for a total of 100 strings. It is a traditional instrument in Jammu and Kashmir, and dates back to ancient times.
• It was called Shatha Tantri Veena in ancient Sanskrit texts.
• It is played in a style of music known as the SufianaMausiqi.
• Some researchers slot it as an improvised version of a primitive instrument played in the Mesopotamian times (1600–900 B.C.)
• The santoor is played while sitting in an asana called ardha-padmasana and placing it on the lap
• In the NatyaShastra, compiled by Bharat Muni dated 200 B.C.-200 A.D., musical instruments have been divided into four main categories on the basis of how sound is produced.

(i) The Tata Vadya or Chordophones- Stringed instruments
(ii) The SushiraVadya or Aerophones- Wind instruments
(iii) The AvanaddhaVadya or Membranophones- Percussion instruments
(iv) The Ghana Vadya or Idiophones- Solid instruments which do not require tuning.

6. Service Charge Norms

Subject :Polity

Section :Governance

• In a bid to protect consumer interest, the Department of Consumer Affairs on Thursday said that it will bring out a “robust framework” to ensure compliance with norms relating to the service charge levied by hotels and restaurants.
• This issue regarding service charge included “compulsory” levy of service charge by restaurants and hotels, addition of the service charge by default without consent of consumers and suppressing the fact that such a charge is “optional and voluntary”.
• DoCA also reiterated the guidelines on fair trade practices related to charging of service charge by hotels and restaurants, that were issued in 2017, should be followed.
• The guidelines state that a customer placing an order amounts to agreement to pay the prices on the menu along with applicable taxes.
• However, charging more amounts to “unfair trade practice” under the Consumer Protection Act.
• Restaurants claim that a major chunk of the service charge thus collected goes to the staff, while the rest goes towards a welfare fund to help them out during good and bad times.
• A service charge ensures all staff members are rewarded evenly.

7. Rising sea level- a threat to coastal areas

Subject: Environment

Section: Climate Change

Context: An increase in sea level as a result of global warming, according to data, poses athreat to millions of coastal dwellers across the world.

• States such as Gujarat, Tamil Nadu and West Bengal have been witnessing rapid coastal erosion and face greater risk.
• The Global Mean Sea Level (GMSL) reached a new record high in 2021, increasing at an average 4.5 mm per year over the period 2013 -2021.
• This is more than double the rate at which sea levels rose between 1993 and 2002.
• GMSL integrates changes occurring in many components of the climate system, these include ocean warming via thermal expansion of seawater, melting of land ice and exchange of water with water bodies on land.

Rise not uniform

• Although the sea level has risen almost everywhere since 1993, it has not risen equally everywhere.
• Several regions continue to be affected by a rate of sea-level rise substantially faster than the global mean which shows the difference between local and global sea levels.
• This is particularly the case in the western Tropical Pacific, the Southwest Pacific, the North Pacific, the South-west Indian Ocean and the South Atlantic.

Affect on Indian coasts

• National Centre for Coastal Research (NCCR), Chennai under Ministry of Earth science is monitoring shoreline erosion since 1990 using remote sensing data and GIS mapping techniques.
• The approximately 6,907.18 km long Indian coastline of the mainland has been inspected from 1990 to 2018, and it has been noted that about 34 percent of the coastline is facing erosion in varying degrees.
• West Bengal has reported the highest 60.5 percent erosion followed by Puducherry (56.2 percent).
• The 15th Finance Commission has suggested that the National Disaster Management Authority and or Ministry of Home Affairs develop suitable norms as mitigation measures to prevent erosion, and that the Union and States develop a policy to deal with the extensive displacement of people due to coastal and river erosion.