Daily Prelims Notes 8 August 2023

Daily Prelims Notes

8 August 2023

Table Of Contents

1. With extension, Rajiv Gauba set to become longest-serving Cabinet Secretary
2. Kerala LoP objects to SHRC chief appointment
3. How to check if a material is a superconductor
4. The push to bring the private sector into mineral exploration
5. US Boosts Military Presence in Red Sea Amidst Iran Tensions
6. IND­-AS accounting framework partial rollout from April 2024
7. Poverty alleviation: Public goods vs private goods
8. Trade policy: Protectionism on the rise
9. SEBI asks FPIs to trade 10% of corporate bonds via RFQ

1. With extension, Rajiv Gauba set to become longest-serving Cabinet Secretary

Subject: Polity

Section: Executive

Context:

This is his third extension and by the end of this stint, he would be the longest-serving Cabinet Secretary (five years). His predecessor, Pradeep Kumar Sinha, served four years and 79 days, while the second Cabinet Secretary of independent India, YN Sukthankar, was in the post for four years years and 78 days.

Normally, a CS can be given an extension beyond the fixed tenure of two years for another two years, but in two tranches. During Sinha’s tenure, the rule was amended to extend it beyond four years, and he was given an extension for three months. Now, again, the rule has been relaxed.

What is the maximum tenure?

• According to All India Services (Death-cum-Retirement Benefits) Rules, 1958, the Central government may, if it considers necessary in the public interest to do so, give an extension in service to the incumbents of the posts of the Cabinet Secretary; Defence Secretary; Home Secretary; Director, Intelligence Bureau; Secretary, Research and Analysis Wing; and Director, Central Bureau of Investigation, for such period as it may deem proper.
• However, the total term of the CS, who is granted such extensions of service, shall not exceed four years. The Fourth Proviso of Rule 56 (D) of the Fundamental Rules also prescribes a total term of four years for the CS.
• As per the modified rules, the central government may give an extension in servicefor a further period not exceeding three months, beyond the period of four years to a cabinet secretary.
• The ACC is headed by the Prime Minister and such an order does not mention a reason for the extension. However, it is believed that the present government is entering the election phase and wants status quo in the top bureaucracy to ensure continuity.

Cabinet Secretary

• The Cabinet Secretary is the top-most executive official and senior-most civil servant of the Government of India.

Cabinet Secretary

• is the ex-officio head of the Civil Services Board, the Cabinet Secretariat, the IAS, and all civil services under the rules of business of the government.
• ranks eleventh on the Indian order of precedence.
• is under the direct charge of the PM and is appointed for a fixed tenure of two years.
• The Cabinet Secretariat is responsible for the administration of the Transaction of Business and the Allocation of Business Rules 1961.

Functions

• Ca facilitates smooth transaction of business in Ministries/ Departments of the Government.

This Secretariat provides:

• Secretarial assistance to the Cabinet and its Committees
• Assists in decision-making in Government by ensuring Inter-Ministerial coordination ,
• Ironing out differences amongst Ministries/ Departments
• Evolving consensus through the instrumentality of the standing/ adhoc Committees of Secretaries

2. Kerala LoP objects to SHRC chief appointment

Subject :Polity

Section: National body

Context:

Leader of the Opposition V.D. Satheesan has disagreed with the government’s purported move to appoint retired Chief Justice S. Manikumar as State Human Rights Commission (SHRC) chairperson.

Concerns Over Selection Process:

Exclusion of Opposition Leader:

• V.D. Satheesan, Leader of the Opposition, objects to being left out of the decision-making process.
• Claims that the government’s decision lacks political propriety by not involving all panel members.

Lack of Transparency:

• Criticizes the government for presenting only one name instead of a panel of candidates for consideration.
• Alleges the government’s approach is arbitrary and lacks democratic principles.

Protection of Human Rights Act, 1993, NHRC, and SHRC

Protection of Human Rights Act, 1993:

Introduction:

• Enacted to safeguard human rights.
• Came into force with retrospective effect from September 28, 1993.

Mandate:

• Establish National Human Rights Commission (NHRC).
• Establish State Human Rights Commissions (SHRCs).
• Establish Human Rights Courts for the protection of human rights.

National Human Rights Commission (NHRC):

About:

• Watchdog for human rights.
• Enforces rights guaranteed by Indian Constitution and international covenants.

Establishment:

• Founded on October 12, 1993.
• Established under the Protection of Human Rights Act, 1993.
• Conforms to Paris Principles for human rights protection.

Composition:

• Chairperson and four members.
• Chairperson: Retired Chief Justice or Supreme Court judge.
• Members: Eminent persons with experience in human rights, law, public administration, etc.
• Appointment by the president on the recommendation of a six-member committee.
• Committee for Appointment:
  • Six-member committee headed by the Prime Minister.
  • Committee includes
    • Speaker of Lok Sabha,
    • Deputy Chairman of Rajya Sabha,
    • Leaders of the Opposition in both Houses, and
    • Union Home Minister.

Tenure:

• Chairperson and members hold office for three years or until they attain the age of 70 years, whichever is earlier.
• Reappointment is possible for members if not yet 70 years old.
• Not eligible for further employment under union/state government.

Role and Powers:

• Investigate human rights violations, suo motu, or complaints.
• Intervene in court proceedings related to human rights.
• Monitor jails, and recommend improvements.
• Review safeguards and recommend measures.
• Study treaties and promote human rights literacy.
• Collaborate with NGOs and international bodies.

Limitations:

• Recommendations are not binding on the government.
• Limited investigation mechanism.
• The time limit for complaint registration (within one year of occurrence).
• No enforcement power.

State Human Rights Commission (SHRC):

Introduction and Composition:

• Inquires into human rights violations in state matters.
• Chairperson and two members.
• Chairperson: Retired Chief Justice or High Court judge.
• Members: Serving/retired HC judge or district judge with at least seven years of experience as a District Judge..

Appointment:

• Governor appoints based on the recommendation of a committee.
• The committee consists of:
  • Chief Minister (chairperson).
  • State Home Minister
  • Speaker of Legislative Assembly
  • Leader of the Opposition in the State Legislative Assembly
  • In the case of the Legislative Council:
    • Chairman of the Legislative Council
    • Leader of the Opposition in the Legislative Council

Tenure and Removal:

• Three years or age 70, whichever comes first.
• Removal only by President.

Powers:

• Similar to NHRC.
• Can recommend compensation and prosecution.

Limitations: Selection & Appointment

1. Transparency and Criteria:
   1. Lack of transparent selection process.
   2. Unclear criteria for member selection.
2. Political Influence:
   1. Political considerations influence appointments.
   2. Presence of political figures in selection.
3. Expertise and Qualifications:
   1. Appointments may lack the required expertise.
   2. Qualifications are not consistently prioritized.
4. Conflicts of Interest:
   1. Members appointed to other roles post-tenure.
   2. Potential conflicts of interest arise.
5. Public Engagement Gap:
   1. Limited civil society and public involvement.
   2. Lack of diverse voices in selection.
6. Appointment Delays:
   1. Delays affect commission effectiveness.
   2. Quorum issues may arise.
7. Politicization Concerns:
   1. Allegations of bias due to political affiliations.
   2. Impartiality could be compromised.

3. How to check if a material is a superconductor

Subject: Science and technology

Section: Msc

Introduction

In recent news, South Korean researchers claim to have discovered LK-99, a potential room-temperature superconductor, which could revolutionize various industries. However, independent verification is required before confirming its legitimacy.

Identifying a Room-Temperature Superconductor

• To establish LK-99 as a superconductor, researchers need to observe four key effects associated with the superconducting state:

1. Electronic Effect

• Zero Resistance: A true superconductor exhibits zero electrical resistance.
• Testing this requires advanced equipment, especially for small sample sizes.

2. Magnetic Effect

• Meissner Effect (Type I Superconductors):
  • Below a critical magnetic field strength, type I superconductors expel magnetic fields from their bodies.
  • This is observed as a magnet placed near the material is repelled.
• Flux Pinning (Type II Superconductors):
  • Type II superconductors allow magnetic fields to penetrate partially but prevent their movement within the material.
  • Flux pinning enables the material to return to its original position when moved within a magnetic field.

3. Thermodynamic Effect

• Change in Specific Heat:
  • Superconductors undergo a drastic change in electronic-specific heat at their transition temperature.
  • The electronic-specific heat decreases as the material enters the superconducting state and increases when warmed back to its non-superconducting state.
  • The specific heat is the heat required to increase the temperature of the electrons in the material by 1 degree Celsius.

4. Spectroscopic Effect

• Energy Level Gap:
  • In a superconductor, certain energy levels become inaccessible for electrons.
  • Scientists can map these forbidden energy levels as a distinctive ‘gap’ in the material’s energy spectrum.

Bardeen-Cooper-Schrieffer theory of superconductivity:

Discovery and Scientists: In 1957, John Bardeen, Leon Cooper, and John Robert Schrieffer formulated the BCS theory, earning them the 1972 Nobel Prize in Physics.

Explanation of Superconductivity: The BCS theory explains how electrons in certain materials can overcome their natural repulsion by forming pairs (Cooper pairs) at low temperatures through lattice vibrations (phonons).

Cooper Pairs: These pairs consist of electrons with opposite spins and zero net momentum, enabling them to move through the lattice without resistance.

Energy Gap: Cooper pairs create an energy gap in the electronic energy spectrum, preventing individual electrons from occupying specific energy levels.

Zero Resistance: Due to Cooper pairs moving unimpeded, superconductors exhibit zero electrical resistance, enabling efficient current flow.

Meissner Effect: The BCS theory accounts for the Meissner effect, where superconductors expel magnetic fields from their interiors when cooled below a critical temperature, leading to magnetic levitation.

Significance: The theory revolutionized the understanding of zero resistance and magnetic field expulsion in superconductors, with widespread implications for technology.

Limitations and Unconventional Superconductors:

Although successful for conventional superconductors, the BCS theory falls short in explaining unconventional superconductors, spurring ongoing research in the field.

4. The push to bring the private sector into mineral exploration

Subject: Geography

Section: Economic geography

Context:

On August 2, Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2023, in a bid to attract private sector investment in the exploration of critical and deep-seated minerals in the country.

How do imported critical minerals affect India’s manufacturing, clean energy, and technology sectors?

• Global Supply Chain Vulnerabilities:
  • The Russian-Ukrainian conflict emphasized the susceptibility of global supply chains to shocks, resulting in scarcity and price surges.
• Mineral Significance:
  • Minerals are pivotal for manufacturing, infrastructure, and clean energy transitions.
• Importance of Critical Minerals:
  • Essential minerals such as lithium (referred to as ‘white gold‘), cobalt, graphite, and rare earth elements (REEs) underpin electric vehicle batteries, electronics, defense systems, and renewable energy technologies.
• Projected Demand:
  • A World Bank study forecasts an astounding 500% surge in demand for critical metals, like lithium and cobalt, by 2050.
• China’s Dominance and Dependency:
  • China’s significant ownership of cobalt mines in the Democratic Republic of Congo and its substantial REE reserves accentuate the world’s reliance on specific supply sources.
• India’s Reserves and Production Gap:
  • Despite holding 6% of global rare earth reserves, India contributes just 1% to global output.
• Mineral Security Partnership (MSP):
  • Major economies, including the US, UK, and EU, have formed the MSP to secure supply chains and reduce reliance on specific countries like China.

Why is private sector participation needed for the exploration of critical and deep-seated minerals?

• Geological Potential:
  • India’s geological history and tectonic context offer similar mineral exploration prospects to resource-rich regions like Western Australia and Eastern Africa.
  • India has explored only 10% of its Obvious Geological Potential (OGP), less than 2% of which is mined.
• Stages of Mineral Exploration:
  • Mineral exploration comprises several stages:
    • reconnaissance, prospecting, general exploration, and detailed exploration.
• Government Monopoly and Limitations:
  • Historically, government entities dominated mineral exploration, hampering private sector involvement.
• Role of the Private Sector:
  • The Mines and Minerals Amendment Bill seeks to expedite exploration by fostering private-sector engagement.
• Global Model:
  • Countries like Australia leverage private mining companies, often called “junior explorers,” to assume exploration risks and discover potential mines.
• Bill’s Objective:
  • The Bill aims to align India’s exploration practices with developed nations by bolstering private sector participation.
• Global Trend:
  • Prominent economies strive to safeguard critical mineral supply chains and reduce reliance on specific countries.

Has India’s existing mining policy encouraged private participation?

• Early Recognition of Private Investment:
  • India acknowledged the significance of private and foreign investment in mining since 1993.
• Private Exploration Momentum:
  • Corporations like Rio Tinto India, Hindustan Zinc, and De Beers India engaged in exploration ventures targeting diamonds, zinc, copper, and bulk metals.
• Exploration Slump and Supreme Court Intervention:
  • Exploration activities waned after 2010 due to apprehensions about favoritism and misuse of resource allocation.
• Supreme Court’s Ruling:
  • In 2012, the Supreme Court mandated transparent and reasonable methods, like auctions, for resource distribution.
• Amendments to MMDR Act:
  • The 2015 amendments allowed private firms to acquire Mining Leases or Composite licenses via government auctions.
• Challenges in Auctions:
  • The Evidence of Mineral content (EMT) rule restricted private participation in early-stage exploration.

How does the Mines and Minerals Bill 2023 encourage private players?

• Opening Up Exploration:
  • The Bill excludes six atomic minerals from the restricted list, enabling private exploration and mining.
• Expanded Activities:
  • Prohibited activities during reconnaissance, such as pitting, trenching, drilling, and sub-surface excavation, are now permitted.
• Exploration License (EL):
  • The Bill introduces the Exploration License (EL), granted by state governments through competitive bidding.
• Auction Mechanism:
  • Explorers bid for a percentage of the auction premium, with the lowest bid winning the exploration license.
• Mineral Scope of EL:
  • The EL covers 29 minerals, including critical, strategic, and deep-seated minerals.
• Exploration Guidelines:
  • The Bill provides guidelines on exploration areas, retention, and related activities.
• Central Government Involvement:
  • The central government reserves auctions for specified critical and strategic minerals.

What are some of the possible issues with the Bill’s proposals?

• Revenue Generation Uncertainty:
  • The primary revenue source for private exploration licenses relies on operationalized mines, leading to revenue delays due to regulatory clearance timelines.
• Operational Delays:
  • Complex regulatory clearances can extend the timeline for revenue generation.
• Auction Suitability for Exploration:
  • The auction mechanism might not be suitable for early-stage exploration licenses.
• Investment Hesitation:
  • Private explorers might hesitate to invest without assurance of resource utilization.
• Divergence from Global Practices: The Bill’s approach diverges from international practices, where private explorers can directly sell their discoveries to mining companies.

United Nations Resources Classification and Why is Lithium called ‘White Gold’?

• UN Classification:
  • The United Nations Framework for Classification of Resources
    • G1 (Detailed Exploration),
    • G2 (General Exploration),
    • G3 (Prospecting), and
    • G4 (Reconnaissance).
• Lithium as ‘White Gold’:
  • Due to its importance in technologies such as lithium-ion batteries, electric vehicles, and renewable energy storage solutions.
  • This nickname reflects its economic significance akin to traditional precious metals.

Which minerals, are designated as “critical and strategic” and are now open for private-sector exploration?

• Lithium
• Beryllium
• Niobium
• Titanium
• Tantalum
• Zirconium

These minerals were previously classified as atomic minerals and were restricted to government-owned entities for exploration and mining.

5. US Boosts Military Presence in Red Sea Amidst Iran Tensions

Subject: International relations

Section: Places in news

Context:

More than 3,000 United States military personnel have arrived in the Red Sea aboard two warships, part of a beefed-up response from Washington after tanker seizures by Iran, the US Navy said.

Deployment and Intent

• Over 3,000 US military personnel arrived in the Red Sea on two warships as a response to Iran’s recent tanker seizures.
• This reinforcement strengthens the US military presence in the Gulf region, essential for global oil trade.

Escalating Tensions and Implications

• Iran’s attempts to control about 20 international ships in the region heighten tensions.
• Iran accuses the US of worsening regional instability with its military deployment.

Deployment Details

• US Navy’s Fifth Fleet confirms the arrival of sailors and Marines after transiting through the Suez Canal on USS Bataan and USS Carter Hall warships.
• The deployment bolsters the maritime capability of the Fifth Fleet, based in Bahrain.

Warship Roles

• USS Bataan, an amphibious assault ship, carries fixed-wing and rotary aircraft along with landing craft.
• USS Carter Hall, a dock landing ship, transports Marines, and equipment, and supports landing operations.

Changing Dynamics

• Amidst US actions, China’s increased engagement and mediation between Saudi Arabia and Iran impact the region.
• Iran’s relations with other Arab Gulf states, such as the UAE and Kuwait, are showing signs of improvement.

Red Sea Region

Geographical and Geological Features:

• Separates northeastern Africa from southwestern Asia.
• Afro-Asian Rift Valley location; part of the East African Rift System.
• Approximately 2,250 km (1,400 miles) long and 200-355 km (125-220 miles) wide.
• The average depth of 490 meters (1,608 feet), a maximum depth of 3,040 meters (9,970 feet).
• The salinity of about 40 parts per thousand, among the world’s saltiest seas.
• Islands include the Dahlak Archipelago, the Farasan Islands, and Zubair Archipelago.
• Unique volcanic and tectonic origins shape the sea’s landscape.

Countries, Ports, and Cities:

• Borders (proper) Saudi Arabia, Egypt, Sudan, Eritrea, Djibouti, and Yemen.
• Key ports: Jeddah (Saudi Arabia), Port Sudan (Sudan), Djibouti Port (Djibouti), Aqaba Port (Jordan).
• Major cities: Jeddah (Saudi Arabia), Port Sudan (Sudan), Aqaba (Jordan), Djibouti City (Djibouti).

Straits:

• Bab el Mandeb Strait: Located at the southern entrance of the Red Sea, connecting it to the Gulf of Aden and the Indian Ocean.
• Strait of Tiran: Situated at the northern end of the Red Sea, separating the Sinai Peninsula from the Saudi Arabian coastline and providing access to the Gulf of Aqaba.

6. IND­-AS accounting framework partial rollout from April 2024

Subject: Economy

Section: Capital market

Context:: Top 15 insurance companies, across life and non-life, to adopt the new IND-AS accounting framework from April 1, 2024.

Key Points:

• Insurance Regulatory and Development Authority of India (IRDAI)  has announced partial roll-out of new accounting standards for the insurance industry.
• The government is expected to roll out IND-AS 117 following recommendations received from the National Financial Reporting Authority (NFRA) based on the proposals by the ICAI (Institute of Chartered Accountants of India). The new accounting standard will replace Ind AS 104, Insurance Contracts.
• The move is aimed at bringing Indian accounting practices closer to global standards. It will enable stakeholders to understand insurers’ risk exposure, profitability, and financial position accurately.
• The move is set to take the insurance industry towards a risk-based capital regime from the current factor-based solvency regime and will also bring the industry closer to the new IND-AS.
• Designed in coordination with IFRS-17, the revised standard under IND-AS 117 will mandate insurers to explicitly declare unbiased estimates of future cash flows, discount rates reflecting the contracts’ cash flows, and adjustments for non-financial risk. Further, revenue will no longer be equal to written premiums but to the change in contract liability.

Why limited rollout ?

• The identified 15 companies that have foreign equity partners and/or strategic collaborations for the purpose. The reason here is that these entities may have estimates of the financials as per parallel IFRS-17 for their consolidated balance sheets.
• Decision taken to allow more time to smaller insurers for adopting the accounting standard. This is because their solvency is more likely to be impacted, leading to higher capital requirements, industry sources said, adding that implementation for PSU insurers is also expected to take some time.
• The transition is expected to hurt insurance companies with a higher share of relatively riskier products such as ULIPs (unit-linked insurance plans).

7. Poverty alleviation: Public goods vs private goods

Subject: Economy

Section: National Income

Context:

• NITI Aayog put out a report two weeks ago on multidimensional poverty. The index measures deprivation across three equally weighted dimensions – Health, Education, and Standard of living.
• These three dimensions are represented by 12 indicators such as nutrition, child and adolescent mortality, maternal health, years of schooling, school attendance, cooking fuel, sanitation, drinking water, electricity, housing, assets, and bank accounts.

So should the government provide all these goods to alleviate poverty?

• Economics defines public goods as those whose marginal cost of production is zero, meaning that one person’s consumption does not reduce that of the other. Police, justice, clean air are examples of this.
• Health, drinking water, roads and education on the other hand are quasi-public goods. But cooking fuels and other such things aren’t. They are purely private.
•  The problem arises from the political practice of making the provision of these things the responsibility of the government. In other words, private goods have been turned into public or quasi-public goods disregarding the definitions of such goods in economics.

What happens when private goods are provided by government:

• It has a direct impact on the levels of taxation, investment and borrowing by governments.
• Basically, turning private into public goods increases the consumption expenditure of governments at the expense of investment expenditures, much of which is intended precisely to increase the supply of higher order or original public goods like defence, police, justice, etc.
• That is why the answer lies in increasing incomes so that private goods can remain private and expanding the tax base so that the output of real public goods can be expanded.

8. Trade policy: Protectionism on the rise

Subject: Economy

Section: Capital market

Context: Government mandates licensing for laptop, tablet imports.

Key Points.

• Government is set to impose a licensing requirement for imports of laptops, tablets and personal computers with immediate effect, a move that could hit hard the likes of Apple, Dell and Samsung and force them to boost local manufacturing.
• Current regulations in India allow companies to import laptops freely, but the new rule mandates a special licence for these products similar to restrictions India imposed in 2020 for inbound TV shipments.

What is the motive behind this move:

• While the justification hints about national security concerns, the more plausible reason could be that the Centre’s revised production linked incentive (PLI) scheme for IT hardware was failing to find traction.
• Additionally the policy is to address the substitution of certain goods that are imported heavily.

What is the WTO norm on licensing and tariffs:

• WTO allows licensing subject to fair and equitable application and administration, and to prevent procedures that have restrictive or distortive effects on imports.
• Countries can implement custom tariffs as long as they are within WTO-mandated “bound rates”.

India’s tariff scenario:

• Prior to the large-scale hikes, India’s peak customs duty — the highest of the normal tariff rates — on non-agriculture products had been coming down steeply from 150% in 1991-92 to to 10% in 2007-08.
• This has seen a progressive reversal since 2016. India’s Trade Policy Review at the World Trade Organisation (WTO) in 2021 made a clear note of this trend.
• In some cases where customs duty hikes are close to or have effectively crossed the WTO-mandated “bound rates”.

Impact of high customs/tariffs:

• The direct result of high tariffs is trade diversion. This means switching from a less-costly source to a more-costly source.
• The hike in import duties also render India’s exports uncompetitive too, given that a significant portion of exports are import-intensive.
• Trade barriers end up promoting the inefficiencies of domestic manufacturing, at the cost of hurting consumers.

9. SEBI asks FPIs to trade 10% of corporate bonds via RFQ

Subject: Economy

Section: Capital market

Context: SEBI mandates foreign portfolio investors (FPIs) to place at least 10% of their trades in corporate bonds through the Request For Quote (RFQ) platform of stock exchanges.

Key Points:

• The move is aimed at increasing the liquidity on the RFQ platform and enhancing the transparency and disclosures pertaining to investments in corporate bonds, which in turn will encourage investment by FPIs in the corporate bond segment.
• What is the RFQ platform?
  • RFQ, which was launched on BSE and NSE in February 2020, is an electronic platform that enables multi-lateral negotiations to take place on a centralised online trading platform with straight-through processing of clearing and settlement to complete the trade. A wide variety of debt securities are available for trading on the RFQ platform.
• While the overall corporate bond investment by FPIs is low, the percentage of such trades carried out on the RFQ platform is even lower.
• Now FPIs will have to undertake at least 10 percent of their total secondary market trades in corporate bonds by value by placing/seeking quotes on the RFQ platform of stock exchanges.
• The move is aimed at increasing the liquidity on the RFQ platform of stock exchanges and to enhance the transparency and disclosure pertaining to trading in the secondary market in corporate bonds.
• SEBI said that it already provided a similar mandate for other intermediaries such as alternative investment funds (AIFs), portfolio management services (PMS) and stock brokers.