Daily Prelims Notes 16 February 2023

February 16, 2023
Posted by: OptimizeIAS Team
Category: DPN

Daily Prelims Notes

16 February 2023

Table Of Contents

1. State Bank of India has upped its benchmark lending rates by 1025 basis points, following the 25-bps increase in the policy repo rate

Subject: Economy

Section: Monetary Policy

Concept:

MCLR, was instituted by the RBI with effect from April 1, 2016
The marginal cost of funds-based lending rate (MCLR) refers to the minimum interest rate of a bank below which it cannot lend, except in some cases allowed by the RBI.
It is an internal benchmark or reference rate for the bank. MCLR actually describes the method by which the minimum interest rate for loans is determined by a bank – on the basis of marginal cost or the additional or incremental cost of arranging one more rupee to the prospective borrower.
It is applicable to fresh corporate loans and floating rate loans taken before October 2019

Reasons for introducing MCLR

RBI decided to shift from base rate to MCLR because the rates based on marginal cost of funds are more sensitive to changes in the policy rates. This is very essential for the effective implementation of monetary policy. Prior to MCLR system, different banks were following different methodology for calculation of base rate /minimum rate – that is either on the basis of average cost of funds or marginal cost of funds or blended cost of funds. Thus, MCLR aims

To improve the transmission of policy rates into the lending rates of banks.
To bring transparency in the methodology followed by banks for determining interest rates on advances.
To ensure availability of bank credit at interest rates which are fair to borrowers as well as banks.
To enable banks to become more competitive and enhance their long run value and contribution to economic growth.

Calculation of MCLR

The MCLR is a tenor linked internal benchmark (tenor means the amount of time left for the repayment of a loan). The actual lending rates are determined by adding the components of spread to the MCLR. Banks will review and publish their MCLR of different maturities, every month, on a pre-announced date.

The MCLR comprises of the following:

a) Marginal cost of funds which is a novel concept under the MCLR methodology comprises of Marginal cost of borrowings and return on net worth, appropriately weighed.

i.e.,

Marginal cost of funds = (92% x Marginal cost of borrowings) + (8% x Return on net worth)

Thus, marginal cost of borrowings has a weightage of 92% while return on net worth has 8% weightage in the marginal cost of funds. Here, the weight given to return on net worth is set equivalent to the 8% of risk weighted assets prescribed as Tier I capital for the bank. The marginal cost of borrowing refers to the average rates at which deposits of a similar maturity were raised in the specified period preceding the date of review, weighed by their outstanding balance in the bank’s books.

i.e,

Rates offered on deposits of a similar maturity on the date of review/ rates at which funds raised x Balance outstanding as a percentage of total funds (other than equity) as on any day, but not more than seven calendar days prior to the date from which the MCLR becomes effective.

b) Negative carry on account of’ Cash reserve ratio (CRR)- Negative carry on the mandatory CRR arises because the return on CRR balances is nil. Negative carry on mandatory Statutory Liquidity Ratio (SLR) balances may arise if the actual return thereon is less than the cost of funds.

c) Operating Cost associated with providing the loan product, including cost of raising funds, but excluding those costs which are separately recovered by way of service charges.

d) Tenor Premium–The change in tenor premium cannot be borrower specific or loan class specific. In other words, the tenor premium will be uniform for all types of loans for a given residual tenor. Banks may publish every month the internal benchmark/ MCLR for the following maturities:

Overnight MCLR,
One-month MCLR,
Three-month MCLR,
Six month MCLR,
One year MCLR.
MCLR for any other maturity which the bank considers fit.

Banks have the freedom to offer all categories of advances on fixed or floating interest rates. Banks have to determine their actual lending rates on floating rate advances in all cases by adding the components of spread to the MCLR. Accordingly, there cannot be lending below the MCLR of a particular maturity, for all loans linked to that benchmark. Fixed rate loans upto three years are also priced with reference to MCLR.

However, certain loans like Fixed rate loans of tenor above three years, special loan schemes formulated by Government of India, Advances to banks’ depositors against their own deposits, Advances to banks’ own employees etc. are not linked to MCLR.

Base Rate vs MCLR

Base rate calculation is based on cost of funds, minimum rate of return, i.e margin or profit, operating expenses and cost of maintaining cash reserve ratio while the MCLR is based on marginal cost of funds, tenor premium, operating expenses and cost of maintaining cash reserve ratio. The main factor of difference is the calculation of marginal cost under MCLR. Marginal cost is charged on the basis of following factors- interest rate for various types of deposits, borrowings and return on net worth. Therefore MCLR is largely determined by marginal cost of funds and especially by deposit rates and REPO RATE.

Impact:

As a result of the increase in MCLR, borrowers who have taken home, vehicle, and personal loans will find their equated monthly instalments (EMIs) rising in the coming months.

MCLR-linked loans had the largest share (53.1%) of the loan portfolio of banks as of December 2021.The rise in MCLR will cause resetting such loans at higher rates, due to the rise in WALR(weighted average lending rate) on outstanding rupee loans more than the policy repo rate cuts during the EBLR period.

Note: MCLR is one of the internal benchmark lending rate

External Benchmark Lending Rate-

To ensure complete transparency and standardization, RBI mandated the banks to adopt a uniform external benchmark within a loan category, effective 1st October, 2019. Unlike MCLR which was internal system for each bank, RBI has offered banks the options to choose from 4 external benchmarking mechanisms:

The RBI repo rate
The 91-day T-bill yield
The 182-day T-bill yield
Anny other benchmark market interest rate as developed by the Financial Benchmarks India Pvt. Ltd.

When the RBI hikes the repo rate, EBLR will go up and vice-versa.

2. Off budget finance

Subject: Economy

Section :Fiscal Policy

Concept

What is off budget financing?

off budget financing also known as ‘extra’ budget borrowing is used by the Centre to finance its expenditures while keeping the debt off from its annual statement. Such borrowings are not counted in the calculation of the fiscal deficit.
Off-budget borrowings are loans that are taken not by the Centre directly, but by another public institution which borrows on the directions of the central government. Such borrowings are used to fulfil the government’s expenditure needs.
But since the liability of the loan is not formally on the Centre, the loan is not included in the national fiscal deficit. This helps keep the country’s fiscal deficit within acceptable limits.
As a result, as a Comptroller and Auditor General report of 2019 points out, this route of financing puts major sources of funds outside the control of Parliament. Such off-budget financing is not part of the calculation of the fiscal indicators despite fiscal implications.
In India, the off-budget financing is also excluded from the Fiscal Responsibility and Budget Management (FRBM) Act, which intends to bring transparency and accountability to the monetary actions of the government.

The off-budget borrowings are loans that government does not take directly, but public institutions borrow after the Centre’s order. These borrowings are intended to fulfill the government’s expenditure needs.

How are off-budget borrowings raised?

The government can ask an implementing agency to raise the required funds from the market through loans or by issuing bonds.
Other public sector undertakings have also borrowed for the government.
Public sector banks are also used to fund off-budget expenses.

3. Tackling Antimicrobial Resistance (AMR)

Subject : Science and technology

Section: Health

Concept :

The COVID-19 pandemic has highlighted the urgent need for governments to prioritize health care and respond quickly to a crisis.
The silent pandemic of Antimicrobial Resistance (AMR) is thriving with poor response from governments across the globe.
AMR threatens global public health due to the misuse and overuse of antibiotics in humans and animals.
India’s role is critical in ensuring that AMR remains high on the global public health agenda as it is currently the G-20 president and a country vulnerable to this silent pandemic.
Recent UNEP report on antimicrobial resistance report states that the AMR crisis is disproportionately affecting countries in the Global South countries.

Burden of AMR:

AMR happens when microorganisms (such as bacteria, fungi, viruses, and parasites) develop the ability to continue to grow, even when they are exposed to antimicrobial medicines that are meant to kill them or limit their growth (such as antibiotics, antifungals, antivirals, antimalarials, and anthelmintics).
As a result, the medicines become ineffective and infections persist in the body, increasing the risk of spreading to others.
Superbugs is a term used to describe strains of bacteria that are resistant to the majority of antibiotics commonly used today.
Microbial resistance to antibiotics has made it harder to treat infections such as pneumonia, tuberculosis (TB), blood poisoning (septicaemia) and several food-borne diseases.
The global epidemic of TB has been severely impacted by multidrug resistance – patients have less than a 60% chance of recovery.
According to WHO, resistance to ciprofloxacin (an antibiotic commonly used to treat urinary tract infections) varied from 8.4% to 92.9% for Escherichia coli (E. coli) and from 4.1% to 79.4% for Klebsiella pneumoniae (a bacteria that can cause life-threatening infections such as pneumonia and intensive care unit- related infections).
An Indian Network for Surveillance of Antimicrobial Resistance (INSAR) study indicated a high rate of resistance to commonly used drugs such as ciprofloxacin, gentamicin, co-trimoxazole, erythromycin and clindamycin.
AMR also imposes a huge health cost on the patient in the form of longer hospitalisation, health complications and delayed recovery.
It puts patients undergoing major surgeries and treatments, such as chemotherapy, at a greater risk.
It is estimated to cause 10 million deaths per year and an overall cost of $100 trillion to the global economy by 2050.
AMR adds to the burden of communicable diseases and strains the health systems of a country.
AMR in human and animal pathogens is among the top ten threats compromising global health, the WHO said in 2021.

Spread of AMR

AMR spread is not confined to point sources.
Transient and diffuse sources, which include water (rivers, lakes and sediments), overflows, agricultural runoff, soil, airborne transmission and wildlife migration (such as the movement of migratory birds) can also be important.
Other critical factors are globalisation, climate change and the mobility of people and goods, and wildlife.
AMR challenges are closely linked to the triple planetary crisis of climate change, biodiversity loss and pollution and waste, all of which are driven by human activity, including unsustainable consumption and production patterns.

Antimicrobials in Agri-food system

Antimicrobials including antibiotics, antivirals and fungicides have helped treat numerous infectious diseases in people and animals and are also used to improve crop and animal production.
However, their effectiveness is fast waning because microbes have developed resistance to them, and continue to do so.

Global High-Level Ministerial Conference on AMR:

The Third Global High-Level Ministerial Conference on Antimicrobial Resistance (November 24-25, 2022) held in Muscat, Oman, saw over 30 countries adopt the Muscat Ministerial Manifesto on AMR.
The Muscat Manifesto recognised the need to accelerate political commitments in the implementation of the One Health approach to effectively prevent, predict and detect the health crisis induced by AMR.
It also recognised the need to address the impact of AMR not only on humans but also on animals, and in areas of environmental health, food security and economic growth and development.
The conference focused on three health targets:
Reduce the total amount of antimicrobials used in the agri-food system at least by 30-50% by 2030.
Eliminate the use in animals and food production of antimicrobials that are medically important for human health.
Ensure that by 2030 at least 60% of overall antibiotic consumption in humans is from the WHO “Access” group of antibiotics.

India against AMR:

India’s bacterial disease burden is the highest in the world.
A large population in India suffers from diseases like diabetes, heart ailments and cancer, making them prone to infections.
40% of children are malnourished and at risk of infection.
An Indian Council of Medical Research (ICMR) study in 2022 showed that the resistance level increases from 5% to 10% every year for broad-spectrum antimicrobials.
The National Action Plan on Antimicrobial Resistance (2017-21) emphasised the effectiveness of the government’s initiatives for hand hygiene and sanitation programmes such as Swachh Bharat Abhiyan, Kayakalp and Swachh Swasth Sarvatra.
India has committed to strengthening surveillance and promoting research on newer drugs.
It also plans to strengthen private sector engagement and the reporting of data to the WHO Global Antimicrobial Resistance and Use Surveillance System (GLASS) and other standardised systems.
The government has also attempted to increase community awareness about healthier and better food production practices, especially in the animal food industry.
The National Health Policy 2017 has guidelines to limit the use of antibiotics as over-the-counter medications and restrict the use of antibiotics for growth promotion in livestock.

One Health Approach

The One Health approach requires all stakeholders to work together towards an integrated programme linking challenges of humans, terrestrial and aquatic animal, plant health, food and feed production and the environment.
This approach will enable the world to effectively prevent, predict and detect the health crisis induced by AMR.

Global Antimicrobial Resistance and Use Surveillance System (GLASS):

WHO launched the GLASS in 2015 to continue filling knowledge gaps and to inform strategies at all levels.
GLASS has been conceived to progressively incorporate data from surveillance of AMR in humans, surveillance of the use of antimicrobial medicines, AMR in the food chain and in the environment.

National Action Plan on Antimicrobial Resistance (2017-21 )

National Action Plan on Antimicrobial Resistance (NAP-AMR) focusing on One Health approach was launched on 19th April 2017 with the aim of involving various stakeholder ministries/departments.
Delhi Declaration on AMR– an inter-ministerial consensus was signed by the ministers of the concerned ministries pledging their support in AMR containment. In the line with NAP-AMR various states have launched their state action plan.

Kindly refer concept notes on AMR – https://optimizeias.com/anti-microbial-resistance-

4. Lavani dance

Subject: History

Section: Art and Culture

Concept:

NCP leader Ajit Pawar has directed members of his party to not organise raunchy public shows in the name of Lavani, a folk song-and-dance performance that is popular in Maharashtra.

Lavani folk art form

The word Lavani comes from ‘lavanya’ or beauty.
Lavani is a traditional folk-art form in which women dancers wearing nine-yard-long sarees in bright colours, make-up, and ghunghroos perform on dholak beats on a stage before a live audience.
As an indigenous art form, Lavani has a history going back several centuries, and it attained particular popularity in the Peshwa era in the 18th century.
Traditionally, performances were held in front of kings or lords, and for the entertainment of tired soldiers resting during breaks in fighting.

Genres of Lavani

There are several types of Lavani, of which the most popular is the Shringarik (erotic) kind, in which the lyrics are often teasing, with sensuous dance steps and delicate gestures employed to convey erotic meaning.
Over the years, Lavani has gained more acceptability among the people, even though certain taboos around it continue.
The audience has historically been all-male, but in recent years, some women too have begun to attend performances.

Reasons for the controversy

Lost its original form: Some also argue that the commercialization of Lavani has led to a loss of authenticity and cultural significance.
Objectifying women: The criticism of Lavani dance centres on the traditional dance form’s alleged objectification and commodification of women’s bodies.
Public obscenity: It has been accused of promoting obscenity and vulgarity and reinforcing patriarchal attitudes towards women.
Communalizing/Stereotyping: Critics have also argued that the dance form perpetuates negative stereotypes of women from marginalized communities, such as the notion that Dalit women are “loose” or sexually promiscuous.

5. Ring around a dwarf planet

Subject: Science and technology

Section: Space technology

Concept:

Astronomers have found a ring around a dwarf planet, located in the Kuiper Belt at the solar system’s edge, called Quaoar, according to a new study.
The ring, however, is positioned much further away from the planet than is usual and defies theoretical explanations.

Quaoar dwarf planet

With an estimated radius of 555 km, Quaoar is roughly half the size of Pluto and orbits beyond Neptune.
It also has a moon of its own, which is known as Weywot.
As the dwarf planet is too small and too distant to be observed directly, the researchers detected the ring with the help of a phenomenon called stellar occultation.

Occultation

An occultation is an event that occurs when one object is hidden by another object that passes between it and the observer. The term is often used in astronomy.
If the closer body does not entirely conceal the farther one, the event is called a transit.
Both transit and occultation may be referred to generally as occlusion; and if a shadow is cast onto the observer, it is called an eclipse.
The term occultation is most frequently used to describe those relatively frequent occasions when the Moon passes in front of a star during the course of its orbital motion around the Earth.

How was the ring discovered?

A stellar occultation occurs when, as seen from Earth, a bright star passes behind a planet.
This allows astronomers or anybody on Earth to observe the sharp silhouette of the planet for a brief period of time.
The phenomenon, which rarely occurs, is used by researchers to analyze a planet’s atmosphere and determine if it has a ring around it — in 1977, scientists discovered the Uranian ring system with the help of stellar occultation.

Roche limit

Located 2,500 miles away from the dwarf planet, the ring is around 1,400 miles further away from the Roche limit, as per the calculations of the scientists.
It suggests that at such a distance, the particles of the ring should have come together to form a moon.
Roche limit refers to the distance from any celestial body within which its tidal forces prevent the formation of natural satellites.
Material in orbit outside the Roche limit would be aggregating to become natural satellites.
The rings of other planets lie within the Roche limit.

Earth and Moon Example

For a further understanding of the Roche limit, let’s look at the Earth and the moon. The Earth’s gravity pulls on the moon.
However, one side of the moon is closer to the planet and hence, the pull is stronger on the side facing the Earth.
The result is the so-called tidal force, which either stretches or compresses the moon from all sides.

What is the reason behind Quaoar’s far-out ring?

As of now, nobody exactly knows how Quaoar’s ring has managed to remain stable at such a distance from the Roche limit.
The researchers said that there can be a variety of possible explanations but they aren’t sure about any one of them.
It might be possible that Quaoar’s moon, Weywot, or some other unseen moon contributes gravity that somehow holds the ring stable.
Another potential explanation can be that the particles of the ring are colliding with each other in such a way that they are avoiding to coalesce into a moon.

6. Agristack: The New Digital Push in Agriculture

Subject: Science and Technology

Section: Agriculture

Concept:

The government is working on a digital ‘stack’ of agricultural datasets, with its core as land records

About AgriStack:

It is a collection of technologies and digital databases that focuses on farmers and the agricultural sector.
AgriStack will create a unified platform for farmers to provide them end to end services across the agriculture food value chain.
It is in line with the Centre’s Digital India programme, aimed at providing a broader push to digitise data in India, from land titles to medical records.
The government is also implementing the National Land Records Modernisation Programme (NRLMP).
Under the programme, each farmer will have a unique digital identification (farmers’ ID) that contains personal details, information about the land they farm, as well as production and financial details.
Each ID will be linked to the individual’s digital national ID Aadhaar.

Need:

At present, the majority of farmers across India are small and marginal farmers with limited access to advanced technologies or formal credit that can help improve output and fetch better prices.
Among the new proposed digital farming technologies and services under the programme include sensors to monitor cattle, drones to analyse soil and apply pesticide, may significantly improve the farm yields and boost farmers’ incomes.

Potential Benefits:

Problems such as inadequate access to credit and information, pest infestation, crop wastage, poor price discovery and yield forecasting can be sufficiently addressed by use of digital technology.
It will also fuel innovation and breed investment towards the agricultural sector and augment research towards more resilient crops.

Issues with the move:

Agriculture has become the latest sector getting a boost of ‘techno solutionism’ by the government.
But it has, since then, also become the latest sector to enter the whole debate about data privacy and surveillance.
The project was being implemented in the absence of a data protection legislation.
Since the signing of the MoUs, several concerns related to sharing farmers’ data with private companies are raised.
The development has raised serious concerns about information asymmetry, data privacy and consent, profiling of farmers, mismanaged land records and corporatization of agriculture.
The formation of ‘Agristack’ also implies commercialization of agriculture extension activities as they will shift into a digital and private sphere.

7. India will emerge as a lighthouse for the world in the field of innovation: Rajnath Singh

Subject : Governance

Concept :

Defence Minister Rajnath Singh on Wednesday expressed confidence that India will soon be among the leading countries in the field of innovation and emerge as the “lighthouse” to the entire world.
Speaking after inaugurating the annual defence innovation event ‘Manthan’ during Aero India here, he said, if we want to bring the next generation industrial revolution, then we should either do new things or try to do the existing things in a new way.

Manthan Platform

Organised by Innovations for Defence Excellence (iDEX), the Manthan platform brings leading innovators, start-ups, MSMEs, incubators, academia and investors from the defence & aerospace ecosystem under one roof.

Innovation for Defence Ecosystem (iDEX)

iDEX, launched in 2018, is an ecosystem to foster innovation & technology development in Defence and Aerospace by engaging innovators & entrepreneurs to deliver technologically advanced solutions for modernizing the Indian Military.
The Government has approved a central sector scheme for iDEX with budgetary support of Rs. 498.78 crore for the next 5 years from 2021-22 to 2025-26.

Core Objectives:

Indigenization: Rapid development of new, indigenized and innovative technology.
Innovation: Creates a culture of engagement with innovative startups to encourage co-creation.
It provides funding/grants to MSMEs, start-ups, individual innovators, R&D institutes and academia to carry out research and development.
The iDEX-Prime aims to support projects requiring support beyond Rs 1.5 crore up to Rs 10 crore, to help ever-growing start-ups in the defence sector.
iDEX is funded and managed by “Defence Innovation Organisation”.
iDEX portal was launched to provide wider publicity and better visibility of iDEX activities and enable more efficient running of future challenges through better information management.

Defence Innovation Organisation (DIO)

DIO is established by the Department of Defence Production (DDP) is aimed at promoting innovation and indigenisation in the aerospace and defence sector at the start-up level.
DIO is a not for profit organisation formed under section 8 of the Companies Act 2013.
It is funded by Hindustan Aeronautics Limited (HAL) and Bharat Electronics Limited (BEL).
It provides high-level policy guidance to iDEX.

8. China faces grilling in review of key rights by UN committee

Subject: International Relations

Concept:

Chinese Ambassador Chen Xu and a delegation of about 40 envoys from China, Hong Kong and Macau faced questions from the N. Committee on Economic, Social and Cultural Rights, which reviews respect of those rights in nearly all U.N. member states every few years.
The hearing was built around questions from submissions from nearly 20 nongovernmental groups, and conducted by independent experts working with the U.N. who make up the committee, which aims to help countries uphold their commitments under the International Covenant on Economic, Social and Cultural Rights.

About UN Committee on Economic, Social and Cultural Rights (CESCR):

The CESCR was set up in 1985 by the Economic and Social Council (ECOSOC) of the United Nations.
It was constituted with an aim to monitor on its behalf the implementation of the International Covenant on Economic, Social and Cultural Rights (ICESR), which has been ratified by 169 countries.
The countries that are parties to the covenant are required to submit reports to the CESCR every five years on how they protect the economic, social and cultural rights.
The committee examines each report and addresses its concerns and recommendations to the State party in the form of concluding observations.
The Members of the CESCR serve in their personal capacities as experts and do not represent their countries even though they may be nominated by their own nation.
The CECSR meets in Geneva and holds two sessions per year, consisting of a three-week plenary and a one-week pre-sessional working group.

International Covenant on Economic, Social and Cultural Rights (ICESCR)

The International Covenant on Economic, Social and Cultural Rights (ICESCR) is a multilateral treaty adopted by the United Nations General Assembly (GA).
It commits its parties to work toward the granting of economic, social, and cultural rights (ESCR) to the Non-Self-Governing and Trust Territories and individuals, including labour rights and the right to health, the right to education, and the right to an adequate standard of living.
As of July 2020, the Covenant has 171 parties. India ratified the treaty in 1979.
A further four countries, including the United States, have signed but not ratified the Covenant.
The ICESCR (and its Optional Protocol) is part of the International Bill of Human Rights, along with the Universal Declaration of Human Rights (UDHR) and the International Covenant on Civil and Political Rights (ICCPR), including the latter’s first and second Optional Protocols.
The Covenant is monitored by the UN Committee on Economic, Social and Cultural Rights.
Optional Protocol :
The Optional Protocol to the International Covenant on Economic, Social and Cultural Rights is a side-agreement to the Covenant which allows its parties to recognise the competence of the Committee on Economic Social and Cultural Rights to consider complaints from individuals.

9. International organization for migration

Subject : International Relations

Section: International Organizations

Concept :

At least 73 Europe-bound migrants are missing and presumed dead in a shipwreck off Libya, the United Nations migration agency said Wednesday.
The U.N. International Organization for Migration said in a statement that the wreck took place Tuesday, and that Libya authorities have retrieved at least 11 bodies.

International Organization for Migration

IOM is an intergovernmental organization that provides services and advice concerning migration to governments and migrants, including refugees, internally displaced persons and migrant workers.
IOM was established in 1951 as Intergovernmental Committee for European Migration (ICEM) to help resettle people displaced by World War II.
It was granted Permanent Observer status to UN General Assembly in 1992.
Cooperation agreement between IOM and the UN was signed in 1996.
World Migration Report is published every year by International Organization for Migration (IOM) of the UN.
IOM works in four broad areas of migration management:
- Migration and development,
- Facilitating migration,
- Regulating migration and
- Forced migration.
It has 166 member states, a further 8 states holding observer status and offices in over 100 countries.
India is a member of IOM.

10. Maintenance, Repair and Overhaul (MRO)

Subject: Science and Technology

Section: Defence

Concept:

HAL to provide maintenance and overhaul support for MQ9B drone engines in India.
As India looks to purchase armed Predator Remotely Piloted Aircraft Systems (RPAS) from the U.S., Hindustan Aeronautics Ltd.
(HAL) and General Atomics announced at Aero India on Wednesday that the turbo propeller engines that power the MQ9B Guardian High Altitude Long Endurance (HALE) RPAS will be supported by the HAL engine division for the Indian market.

Maintenance, Repair, and Overhaul (MRO) in Aviation Industry

Maintenance, Repair, and Overhaul (MRO) services are essential for any industry that uses machinery to run operations.
In the aviation sector, the term MRO aviation refers to all the activities that are aimed at ensuring that the aircrafts remain ready to fly at all times.
Maintenance – When work is done to ensure that the aircraft is in prime condition. There are no snags or failures observed, but the aircraft is serviced to simply keep it in functional readiness.
Repair – Aircraft often require repairs as they are complex machines with thousands of moving parts and software integrated. If an instrument panel doesn’t respond the way it should or there is a dent, an engine failure, or a broken window, repairs are carried out.
Overhaul – With a high wear and tear rate, most aircrafts undergo overhaul after a specific duration of flight operations. As a part of the overhaul process, aircrafts are dismantled piece by piece, each part inspected and reassembled.
The overhaul process allows detailed inspection of all surface and internal parts of the plane and is a key element of the aircraft’s lifecycle management and enhancement.

11. Debt-for-nature swaps

Subject: Environment

Section: Climate Change

Context: With many developing nations facing a triple whammy of rising debt loads, climate change and nature loss, conservationists say the answer could lie with a financial instrument enabling them to tackle all three at once: “debt-for-environment swaps”.

More on the News:

The world’s poorest countries owe $62 billion in annual debt service, a year-on-year increase of 35%, the World Bank said in December, warning of a rising risk of defaults.
But even as debt burdens grow, there is now an urgent need for countries to invest more in climate and biodiversity protection to meet their international and national commitments.
In a bid to deal with these problems across the board, Portugal and Cape Verde sealed an agreement for a “debt-for-nature” swap last month, just days after Zambia said it too was looking at a similar proposal from green group WWF.
These types of debt swap are likely to increase in the coming years, analysts predict – with Ecuador and Sri Lanka also reportedly exploring similar deals.

What are green debt swaps and how do they work?

Debt swaps are one way to change the terms of a country’s borrowing – with bilateral government lenders, development finance institutions or private banks – either by giving states more time to repay loans or reducing interest rates and the amounts they must pay back.
With the agreement of creditors, debt swaps can help the world’s low-income countries avoid default and enable them to redeploy part of their debt repayments to invest in measures to tackle climate change, nature protection, health or education.
For creditors, debt swaps can reduce their risk through additional guarantees and ensure that at least part of a loan is eventually repaid.

Who is pushing debt-for-nature swaps and why?

Developing nations that are struggling to pay back creditors or defaulting on their debt – and thus cannot invest in greening their economies and protecting their rich biodiversity – are pushing for these swaps.
Egypt presented a swap with Germany as a model for others seeking to raise money for clean energy projects when it hosted the U.N. climate summit.
Multilateral development banks also see potential in green debt swaps.

How can green debt swaps be encouraged?

A global framework or standard that sets the rules for green debt swaps would enable more creditors to join such initiatives and help increase the size of deals.
A public campaign, similar to the huge push to cut debt and poverty in the 1990s and 2000s, could also help.

12. Farmers accuse a pesticide production company for distorting their crops

Subject: Environment

Section : Pollution

Context: Cotton farmers of Bharuch district in Gujarat have accused Meghmani Organics Limited for causing deformities and distortions to their crops.

More on the News:

During the cotton farming season of 2021, over 18000 farmers from 280 villages of Bharuch district suffered from economic losses due to crop damage, covering thousands of acres of land.
They say that the excessive production of a herbicide called 2,4-Dichlorophenoxyacetic acid is distorting the growth of leaves and the plant.
Losing faith in the state authorities, the farmers have filed a petition in the Gujarat high court against the state bodies and the private company, demanding compensation and remedial action which they are still awaiting.

2,4 Dichlorophenoxyacetic acid

2,4 Dichlorophenoxyacetic acid, commonly known as 2,4-D, is a herbicide that is widely used in agriculture, forestry, and lawn care to control broadleaf weeds.
It is a synthetic compound that belongs to the group of phenoxy herbicides, which also includes other herbicides such as 2,4,5-T and MCPA.
It is registered for use in terrestrial and aquatic environments
It is a plant growth regulator, and mimics auxin, the natural plant growth hormone. Unlike auxin, which regulates, 2,4-D stays within plant tissues in high quantities and does not fluctuate. As a result, it causes rapid cell growth and plants die when their transport system is blocked and destroyed by abnormally fast growth.
The herbicide is effective against many types of broadleaf weeds, but has little to no effect on grasses.
2,4-D has been in use since the 1940s and is one of the most widely used herbicides in the world.
In high doses, 2,4-D can be toxic to humans, causing skin and eye irritation, respiratory problems, and other health issues. Some studies show that 2,4-D is possibly a carcinogen and an endocrine disruptor in humans.
It can also contaminate water and harm aquatic ecosystems.
On May 14 2020, the government of India had released a draft order prohibiting the import, manufacture, sale, transport, distribution and use of 27 insecticides. 2,4-D was in the list.

13. Green finance

Subject: Environment

Section : Climate change

Context: Green finance is fast emerging as a priority for public policy.

Green finance

Green finance refers to the financial arrangements that are specific to the use for projects that are environmentally sustainable or projects that adopt the aspects of climate change. Environmentally sustainable projects include the production of energy from renewable sources like solar, wind, biogas, etc.; clean transportation that involves lower greenhouse gas emission; energy efficient projects like green building; waste management that includes recycling, efficient disposal and conversion to energy, etc.
Moreover, project defined sustainable under the disclosure requirement for Green Debt Securities include climate change adaptation, sustainable waste and water managements, sustainable land use including sustainable forestry and agriculture, and biodiversity conservation (SEBI 2017).
In order to meet the financial needs for these types of projects, new financial instruments such as green bonds; carbon market instruments (e.g. carbon tax); and new financial institutions (e.g. green banks and green funds) are being established. They together constitute green finance.
Rapid economic development is often achieved at the cost of environment. Dwindling natural resources, degraded environment and rampant pollution are hazardous to public health and pose challenges to the sustainable economic growth.
In order to protect and substantially improve the environment, nations around the world have been increasingly focusing on the use of eco-friendly technologies. However, it requires appropriate incentive structure for increased allocation of funds towards setting up or adopting environmentally sustainable projects.

Public Policy towards Green Finance

1. International best practices

Major flagship programmes like Principles for Responsible Investment (PRI), Equator Principles (EP) for financial institutions, United Nation’s Environment Programme (UNEP) and Statement of Commitment by financial institutions on sustainable development suggest ways for implementing green finance among the signatories. Several entities from India are signatory to these programmes.
Sustainable Stock Exchange is an initiative that recommends the signatory countries’ stock exchanges to come up with stock price indices that track the stock performance of a set of companies operating in these countries, which are leaders in recognising the Environmental, Social and Governance (ESG) principles into their financing aspects .

2. Public policy in India

India has started emphasizing on green finance as early as 2007. In 2008, The National Action Plan on Climate Change (NAPCC) was formulated with a vision to outline the broad policy framework for mitigating the impact of climate change.
The Climate Change Finance Unit (CCFU) was formed in 2011 within the Ministry of Finance as a coordinating agency for the various institutions responsible for green finance in India.
Security and Exchange Board of India (SEBI) made it mandatory for top 100 listed entities based on market capitalisation at BSE and NSE to publish annual business responsibility reports since 2012 and revised it from time to time.
In May 2017, SEBI issued guidelines for green bond issuance specifying the disclosure requirements.
In addition, the Ministry of Corporate Affairs imposed mandatory reporting of the progress on Corporate Social Responsibilities (CSR) under the Companies Act, 2013.
In October 2017, Report of the Committee on Corporate Governance has proposed that the board of directors shall meet at least once a year to specifically discuss strategy, budgets, board evaluation, risk management, ESG and succession planning.
Incentives/Subsidy
- The Government of India (GoI) offers 30 per cent of the installation cost of the rooftop solar panels as subsidy to the institutional, residential and social sectors in most states. In some of the special category states, the subsidy is up to 70 per cent of the installation cost.
- In addition, beneficiaries can avail a generation-based incentive wherein they can receive ₹ 2 per unit of generation, if the generation exceeds 1100kWh-1500kWh per year. Further, the excess power can be sold at a tariff set by the government.
- GoI launched two phases of Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme in 2015 and 2019, to enhance the flow of credit, reducing the up-front purchase price of all vehicles and developing the infrastructures (such as charging stations) to encourage green vehicle production and sales.
- In order to counter the high up-front cost of such vehicles, the State Bank of India has introduced a ‘green car loans’ scheme for electric vehicles with 20 basis points lower interest rate and longer repayment window, compared to the existing car loans .
- The Government has also brought in a Production Linked Incentive (PLI) Scheme for manufacturing of high efficiency modules in the arena of renewable energy.
- RBI has included the small renewable energy sector under its Priority Sector Lending (PSL) scheme in 2015. Under this scheme, firms in renewable energy sector are eligible for loans upto ₹ 30 crore (increased from ₹ 15 Crore since September 4, 2020) while the households are eligible for loans upto ₹ 10 lakh for investing into renewable energy.
- Reserve Bank has mentioned the findings of the G20 Green Finance Study Group (GFSG14) on the need for development of local green bond markets, facilitating cross-border investments in green bonds, knowledge sharing on environmental risks, and improving overall green finance activities. The annual report further mentions definition of green activities, aspects of intellectual property rights in development and transfer of technology from developed countries, and environmental risk assessment by the banks.
- In the context of green financial institutions, Indian Renewable Energy Development Agency (IREDA), a government-backed agency for promoting clean energy investments, announced plans to become India’s first Green bank in May 2016.
- India Infrastructure Finance Corporation Limited (IIFCL) also launched a dedicated scheme known as the ‘credit enhancement scheme’ for funding viable infrastructure projects with bond tenors above five years.

Progress of Green Finance in India

Green lending
- As at end-march 2020, the aggregate outstanding bank credit to the non-conventional energy sector was around ₹36,543 crore, constituting 7.9 per cent of the outstanding bank credit to the power generation compared to 5.4 per cent in March 2015.
Green bonds
- Green bonds are the bonds issued by any sovereign entity, inter-governmental groups or alliances and corporates with the aim that the proceeds of the bonds are utilised for projects classified as environmentally sustainable
- India started issuing green bonds since 2015. As of February 12, 2020, the outstanding amount of green bonds in India was US$16.3 billion India issued green bonds of about US$8 billion since January 1, 2018, which constituted about 7 per cent of all the bonds issued in the Indian financial market.
- Around 76 per cent of the green bonds issued in India since 2015 were denominated in US$.
- Most of the green bonds issued since 2015 had maturities of five years or above, but less than 10 years.

Challenges in Green Finance

RBI acknowledges the challenges in the development of green finance, such as “greenwashing” or false claims of environmental compliance, plurality of definitions, maturity mismatches between long-term green investment and short-term interests of investors.
Borrowing costs: The cost of issuing green bonds has generally remained higher than the other bonds in India. It may be mentioned that most of the green bonds in India are issued by the public sector units or corporates with better financial health.

14. G20 for greater climate finance support for farmers, suggests incentives

Subject : Environment

Section: Climate Change

Context: The G20 meeting also discussed the impact of climate change on agriculture and its productivity.

The G-20 members have stressed on the need to boost climate finance to support farmers who make an effort to mitigate the adverse impact of climate change on the farm sector
farmers can be financially incentivised if they adopt climate-friendly farming or green agriculture.
The carbon farming programme in the country has been initiated by a private entity Grow Indigo, a joint venture between seed major Mahyco and US-based Indigo
Farmers who adopt farming techniques – direct seeded rice, which improves water use efficiency and no tillage practice which conserves soil organic biomass, prior to planting of paddy could register for the programme for getting carbon credit.
India shared the measures taken towards ‘climate smart agriculture’ like mapping the vulnerable areas and conducting research in the meet.
On the issue of food security and nutrition, agriculture secretary Ahuja said, there was a discussion on achieving one of the Sustainable Development Goals (SDG) of ‘zero hunger’ by 2030.

Carbon farming :

Carbon farming (also known as carbon sequestration) is a system of agricultural management that helps the land store more carbon and reduce the amount of greenhouse gases that it releases into the atmosphere. Sustainable forest management practices do similar good by minimizing greenhouse gases and accumulating carbon dioxide in wood. For example, Indian agriculture producers can manage their grazing lands to conserve and restore vegetation, including tree cover along waterways. This practice helps the land store carbon and remove greenhouse gases from the atmosphere, as well as provides benefits to nearby water sources. Landowners can also implement fertilizer reduction strategies, such as applying compost or biochar (charcoal used as a soil additive to improve crop yield), that reduce the amount of greenhouse gases tied up in vegetation.

Carbon farming is a system of agricultural management that helps the land accumulate and store more greenhouse gases instead of releasing those gases into the atmosphere.

Common Methods

Forest Management

Healthy forests absorb and hold carbon dioxide emissions produced from other sources and are an important source of greenhouse gas (GHG) sequestration. Carbon offsets can be created through a variety of strategies including: avoided deforestation and permanent land conservation, reforestation and replanting activities, and improved forest management and stewardship in working forests where harvesting occurs. Improved forest management focuses on long-term, sustainable practices to ensure that forests continue to remove CO2 from the atmosphere since deforestation accounts for between 15 and 20 percent of the global increase in GHG levels. Activities include thinning out, selective harvest, regeneration and planting, and fertilization to enable productive and sustainable forest growth.

Grasslands Conservation

Similar to forestry, native grasses and other vegetation provide a natural source of greenhouse gas (GHG) absorption and sequestration. Carbon offsets from this category focus on maintaining native plant life through permanent land conservation and avoided conversion for commercial development or intensive agriculture.

Renewable Energy Production

Renewable energy facilities, such as wind or solar, generate carbon offsets by displacing fossil fuel-based electricity production sources within the power grid. The carbon offsets derived from a certified third-party project generates the carbon credit, which is owned by the entity that develops the project..