Daily Prelims Notes 2 July 2022
- July 2, 2022
- Posted by: OptimizeIAS Team
- Category: DPN
Daily Prelims Notes
2 July 2022
Table Of Contents
- Law & precedent on clubbing of cases
- Dhruva Space tests satellite orbital deployer onboard PSLV
- The new variants of coronavirus in circulation currently
- DRDO carries out test flight of autonomous UAV
- Maharashtra releases water for Telangana
- Centre to set up FSIB to make selection recommendations
- Australia honey bees put in lockdown due to deadly varroa parasite
- WB loan to PM Ayushman Bharat
- Sri Lanka is counting on the IMF to bail its economy out of crisis, with an Extended Fund Facility
- Tax classification under GST
- What are G-Sec yields, and how and why do they go up and down?
- Special additional excise duty or SAED or windfall tax
- What does the unchanged small savings rates mean?
- US complaints WTO over non GMO
Subject : Polity
Section : Law
- The Supreme Court declined a plea by former BJP spokesperson Nupur Sharma to club the hate speech cases filed against her across the country. It also refused to grant interim relief.
What was the plea?
- Recently , when she was still BJP spokesperson, Sharma had made derogatory remarks about the Prophet and the Muslim community on several television debates.
- Several FIRs were registered against her including in Delhi, Mumbai, West Bengal and Assam. Sharma moved the Supreme Court seeking a transfer of all cases of hate speech against her to a court in Delhi.
What did the Supreme Court say?
- The court refused to grant interim relief to Sharma and instead asked her to approach the High Courts.
On what grounds are such cases clubbed?
- A person cannot be prosecuted more than once for the same offence.
- Article 20(2) of the Constitution guarantees the right against double jeopardy.
- Multiple FIRs on the same incident would virtually mean multiple trials.
- Approaching the Supreme Court in such situations is a procedural safeguard against excessive litigation.
- In T T Anthony v State of Kerala, a 2001 verdict, the Supreme Court held that there cannot be a “second FIR” on the same issue.
- “There can be no second F.I.R. and consequently there can be no fresh investigation on receipt of every subsequent information in respect of the same cognizable offence or the same occurrence or incident giving rise to one or more cognizable offences.
- On receipt of information about a cognizable offence or an incident giving rise to a cognizable offence or offences and on entering the F.I.R. in the station house diary, the officer in charge of a Police Station has to investigate not merely the cognizable offence reported in the FIR but also other connected offences found to have been committed in the course of the same transaction or the same occurrence and file one or more reports as provided in Section 173 of the CrPC.
- In 2020, the Supreme Court in the case of Arnab Goswami v Union of India expanded this ruling and said that similar FIRs in different jurisdictions also violate fundamental rights.
- The court said that in such a situation, the petitioner can approach the Supreme Court to club the proceedings.
Why did the Supreme Court deny Sharma’s plea?
- The SC distinguished Sharma’s case from the precedent in the Arnab Goswami case.
- It indicated that the court had granted relief to Goswami since he was a journalist and the same status cannot be extended to Sharma who was a party spokesperson.
- Although the SC in Goswami’s case emphasised press freedom, it noted that the Constitution guarantees the same free speech rights to all citizens.
- The Goswami and Anthony rulings are both valid precedents that were binding on the vacation Bench.
- However, in an oral observation, the vacation Bench said that “if the conscience of the Court is not satisfied, the law can be moulded”.
Subject : Science and Technology
- The Polar Satellite Launch Vehicle (PSLV) C53 mission that placed in orbit three foreign satellites, also proved to be a testbed for Dhruva Space’s Satellite Orbital Deployer (DSOD-1U).
Dhruva Space tests satellite
- Homegrown space sector start-up Dhruva Space has tested and space-qualified its satellite orbital deployer, setting the stage for its plans to launch indigenously built satellites soon.
- The Polar Satellite Launch Vehicle (PSLV) C53 mission that placed in orbit three foreign satellites, also proved to be a testbed for Dhruva Space’s Satellite Orbital Deployer (DSOD-1U), that holds the satellites on the launch vehicle and releases them in orbit.
- The successful test of DSOD-1U has cleared the way for launch of Dhruva Space’s satellite missions Thybolt-1 and Thybolt-2 onboard PSLV’s C54 mission.
- The deployer testing and review support from Vikram Sarabhai Space Centre (VSSC), commercial launch opportunity through New Space India limited (NSIL) and authorisation support from Indian National Space Promotion and Authorization Center (IN-SPACe) in efforts to build indigenous capability in the domain of small satellite technology has been invaluable to the success of this space-qualification.
- Dhruva Space Private Limited is an Indian private aerospace manufacturer headquartered in Hyderabad, India.
- The company is engaged in the development of small satellites in the commercial, governmental and academic markets. It provides full-stack space-engineering solutions across launch, space and ground segments.
What is PSLV-C53 mission?
- The mission injected three Singaporean satellites into their intended orbits.
- The mission also served an additional purpose for ISRO, which decided to use the fourth stage, the PS4, as a stationary platform in orbit to conduct scientific experiments.
- It is the third generation launch vehicle of India. It is the first Indian launch vehicle to be equipped with liquid stages. It consists of four stages.
- The country’s current surge in Covid-19 cases is because of the BA.2 sub-variant of Omicron — which drove the third wave in January, along with BA.1 — and another sub-variant that has branched off from it, called BA.2.38.
The new variants and current surge in cases:
- The biggest difference between the current surge and the one in January is that there is no cluster formation with any of the emerging sub-variants.
- Delhi reported its first couple of cases of the BA.5 sub-variant of Omicron — this was one of the sub-variants that led to an increase in cases in South Africa a couple of months ago.
- The first BA.5 case in India was reported in late May in Telangana. experts believe that there is no clinical significance of this change.
Which Covid-19 variants are currently the most in circulation?
- Genome sequences uploaded to the global database GISAID show that
- BA.2.38 — which branched off from BA.2 — is dominant in the country, accounting for 30% of all sequences over the last 30 days.
- This was followed by the BA.2 sub-variant itself, accounting for 28% of samples.
- Although BA.4 and BA.5 were detected in the country at almost the same time ,BA.5 has been spreading faster, accounting for 7% of the sequences uploaded to the global database in the last 30 days.
What has changed between the January wave and the current wave?
- The biggest difference is that there is no cluster formation with any of the emerging sub-variants.
- When Omicron was on the rise in December-end and January, there was clear cluster formation, which helped researchers quickly connect the dots that the increase was driven by the new variant.
What does coronavirus cluster mean?
- Cluster: It refers to an aggregation of cases of a disease. A coronavirus cluster occurs when there is a concentration of infections in the same area at the same time.
- In general, the World Health Organization (WHO) uses the following categories (PDF) to describe transmission patterns: sporadic cases, clusters of cases and community transmission.
Subject: Science and Technology
Context: The Defence Research and Development Organisation (DRDO) successfully carried out the maiden test flight of a new Unmanned Aerial Vehicle (UAV), an autonomous Flying Wing Technology Demonstrator, from the Aeronautical Test Range, Chitradurga, Karnataka.
- Unmanned Aerial Vehicle is a reduced sized autonomous aircraft and is proving various technologies for autonomous aircraft to be built in future
- The Unmanned Aerial Vehicle (UAV) is powered by a small turbofan engine
- The engine is Russian TRDD-50MT originally designed for cruise missiles. “A small turbo fan engine is being developed indigenously for meeting the requirement
- The UAV was designed and developed by Aeronautical Development Establishment (ADE), Bengaluru, a premier research laboratory of DRDO
- Operating in a fully autonomous mode, the aircraft exhibited a perfect flight, including take-off, way point navigation and a smooth touchdown
- DRDO is in the process of developing UAVs of different classes to met the requirements of the armed forces
- Rustom-2, the indigenous Medium Altitude Long Endurance (MALE) UAV under development, had crossed a milestone by reaching an altitude of 25,000 feet and an endurance of 10 hours in December 2021 and is being designed to reach an altitude of 30,000 feet and 18 hours endurance
- It is the R&D wing of Ministry of Defence
- DRDO was formed in 1958 from the amalgamation of the then already functioning Technical Development Establishment (TDEs) of the Indian Army and the Directorate of Technical Development & Production (DTDP) with the Defence Science Organization (DSO)
- Its vision is to empower the nation with state of the art indigenous Defence technologies and systems
Section : Mapping
Context: The Godavari water started flowing towards Sriramsagar project in Nizamabad district of Telangana from the upstream Babli Barrage in Maharashtra as the gates of the reservoir were lifted by the authorities of the Maharashtra Water Resources Department
What is Sriram Sagar Project?
- Sriramsagar is an irrigation project across river Godavari in Telangana to serve irrigational needs in Karimnagar, Warangal, Adilabad, Nalgonda and Khammam districts.
- It also provides drinking water to Warangal city
- It is India’s second longest river after the Ganga and third largest in India
- The Godavari originates in the Western Ghats of central India near Nashik in Maharashtra
- It drains the states of Maharashtra, Telangana, Andhra Pradesh, Chhattisgarh and Odisha.
- In terms of length, catchment area and discharge, the Godavari is the largest in peninsular India, and had been dubbed as the Dakshina Ganga(Ganges of the South)
Left bank Tributaries:
Pranahita, Indravati, Sabari, Purna, Taliperu, Kadam, Kadva, Shivana
Right bank Tributaries:
Nasardi, Pravara, Sindphana, Manjira, Manair, Kinnerasani
Context: The Appointments Committee of the Cabinet (ACC) on June 30 approved a proposal by the department of financial services (DFS) to appoint former BBB chairman Sharma to head the new body for two years or until further orders
Financial Services Institution Bureau (FSIB):
- It act as a single entity for making recommendations for the appointments of whole-time directors, non-executive chairmen in public sector banks (PSBs), state-run non-life insurance companies and other financial institutions
- It replaces the Bank Board Bureau
- It will be headed by Bhanu Pratap Sharma former Bank Board Bureau Chairman for two years
- The Department of Financial Services (DFS) is now expected to carry out necessary modifications in the Nationalized Banks (Management and Miscellaneous Provisions) Scheme of 1970/1980.
- FSIB that would not just do the same job but also have a much larger, legally tenable mandate to carry out its functions without hiccups
Banks Board Bureau:
- It was formed in April 1, 2016,
- It is an autonomous body to search and select personages for the Board of PSBs, public sector FIs and PSIs, and recommends measures to improve corporate governance
Department of Financial Services (DFS)
- The mandate of the Department of Financial Services covers the functioning of Banks, Financial Institutions, Insurance Companies and the National Pension System.
- The Department is headed by the Secretary (FS) who is assisted by three Additional Secretary (AS), seven Joint Secretaries (JS), one Economic Advisers (EA) and a Deputy Director General (DDG).
- The Department of Financial Services (DFS) oversees several key programs/initiatives and reforms of the Government concerning the Banking Sector, the Insurance Sector and the Pension Sector in India. Initiatives and reforms relating to Financial Inclusion, Social Security, and Insurance as a Risk Transfer mechanism; Credit Flow to the key sectors of the economy/ farmers/ common man are some of the key focus areas being dealt by the Department.
- The key flagship schemes being currently run/managed by the Department include the Pradhan Mantri Jan Dhan Yojana (PMJDY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Mudra Yojana (PMMY), Atal Pension Yojana (APY), Pradhan Mantri Vaya Vandana Yojana (PMVVY) and the Stand Up India Scheme.
- The Department provides policy support to the Public Sector banks (PSBs), Public Sector Insurance Companies (PSICs) and Development Financial Institutions (DFIs) like National Bank for Agriculture and Rural Development (NABARD), Small Industries Development Bank of India (SIDBI), India Infrastructure Finance Company Ltd. (IIFCL), National Housing Bank (NHB), Export-Import Bank of India (EXIM Bank), Industrial Finance Corporation of India (IFCI).
- It also monitors the performance of these PSBs, PSICs and DFIs and undertakes policy formulation in respect of the Banking and Insurance Sector in India.
- This Department deals with legislative and policy issues pertaining to the concerned regulatory bodies i.e. the Reserve Bank of India (RBI), the Insurance Regulatory and Development Authority of India (IRDAI) and the Pension Fund Regulatory and Development Authority (PFRDA). DFS also deals with the legislative framework relating to debt recovery.
- The major Acts administered by the DFS that are being considered for rationalisation of compliances are: the Reserve Bank of India (RBI) Act, 1934; the Banking Regulation (BR) Act, 1949; the Insurance Regulatory and Development Authority of India (IRDAI) Act, 1999; the Insurance Act, 1938; the Credit Information Companies (Regulation) Act, 2005; and the National Housing Bank (NHB) Act, 1987.
- Matters relating to International Banking relations are also dealt by the Department.
Context: Millions of Australian bees are in “lockdown” and thousands will be destroyed after a deadly parasite was detected in the country.
The Varroa mite, or Varroa destructor, is a parasitic insect that lives off honey bee larvae and adult honey bees. These tiny red pests look similar to ticks and like ticks can carry harmful viruses. If a honey bee contracts a virus in the larval stage, adult honey bees can emerge malformed and weak. If each new generation continues to emerge weak, this can lead to the colony collapsing.
Varroa mites are an invasive species that originated in Asia, and spread to all continents where honey bees reside, except for Australia.
- The varroa destructor was first found at a port near Sydney last week but has since been spotted in hives 100km away.
- The outbreak threatens to cost the honey and food production industries millions of dollars.
- Keepers inside a new biosecurity zone will not be able to move hives, bees or honeycombs until further notice.
- Australia was the only continent free of the varroamites, which are the biggest threat to bees worldwide.
- The pests – which are about the size of a sesame seed – weaken and kill colonies by feasting on them and transmitting viruses.
Why it is important?
Bees are vital to our survival. They help pollinate our food and keep our ecosystem in balance. Without them, there would be massive food shortages and ecological collapse.
Subject : Governance
The World Bank has approved loans totalling USD 1.75 billion (about Rs 13,834.54 crore) to fund India’s PM Ayushman Bharat scheme and private investment to boost the economic growth.
Of the total loan, USD 1 billion will go towards the health sector, while the rest USD 750 million will be in the form of development policy loan (DPL) to fill the financing gaps through private sector investment in the economy.
The World Bank Board of Executive Directors approved two complementary loans of USD 500 million each to support and enhance India’s health sector.
Through this combined financing of USD 1 billion, the World Bank will support India’s flagship Pradhan Mantri-Ayushman Bharat Health Infrastructure Mission (PM-ABHIM), launched in October 2021
Pradhan Mantri-Ayushman Bharat Health Infrastructure Mission (PM-ABHIM):
PM Ayushman Bharat Health Infrastructure Mission aims to produce robust outcomes in Public Health leapfrogging India to one of the most advanced countries in the world in terms of management of Public Health outbreaks.
The Scheme is a Centrally Sponsored Scheme with some Central Sector components. The Scheme has following components:
- Centrally Sponsored Scheme (CSS) Components:
- Ayushman Bharat – Health & Wellness Centres (AB-HWCs) in rural areas: Support for infrastructure development for 17788 Sub-Health Centres is proposed in 7 High Focus States (Bihar, Jharkhand, Odisha, Punjab, Rajasthan, Uttar Pradesh and West Bengal) and 3 North Eastern States (Assam, Manipur and Meghalaya).
For the remaining States, the infrastructure support for building-less SHCs is already being provided under FC-XV Health Grants through Local Governments and through NHM as well. For the UTs, the support is provided through NHM. This arrangement will continue.
Ayushman Bharat – Health & Wellness Centres (AB-HWCs) in Urban areas: Support for 11044 Urban Health & Wellness Centres across the country is proposed under this component.
- Block Public Health Units (BPHUs): Support for 3382 BPHUs in 11 High Focus States/ UTs (Assam, Bihar, Chhattisgarh, Himachal Pradesh, UT – Jammu and Kashmir, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, Uttar Pradesh and Uttarakhand), is proposed under this component. • For the remaining States, the support for establishing BPHUs is being provided under FC-XV Health Grants through Local Governments. • For the UTs, the proposed District Integrated Public Health Labs under the PM Ayushman Bharat Health Infrastructure Mission at the Districts will be catering the needs of the Blocks in the UTs.
- Integrated District Public Health Laboratories in all districts.
- Critical Care Hospital Blocks in all districts with a population more than 5 lakhs, in state government medical colleges / District Hospitals. Out of the five CSS Components, the components of Ayushman Bharat – Health and Wellness Centres (AB-HWCs) in rural areas, Ayushman Bharat – Health and Wellness Centres (AB-HWCs) in urban areas and Block Public Health Units are partially financed through the ‘FC-XV Health Grants through Local Governments’
- Central Sector (CS) Components
The PM Ayushman Bharat Health Infrastructure Mission has the following CS components:
- Critical Care Hospital Blocks in 12 Central Institutions.
- Strengthening surveillance of infectious diseases and outbreak response. Support for 20 Metropolitan Surveillance Units, 5 Regional NCDCs and implementation of IHIP in all states.
- Strengthening surveillance capacities at Points of Entry. Support for 17 new Points of Entry Health Units and Strengthening of 33 existing Units.
- Strengthening Disaster and Epidemic Preparedness. Support for 15 Health Emergency Operation Centres & 2 Container based mobile hospitals.
- Bio-security preparedness and strengthening Pandemic Research and MultiSector, National Institutions and Platforms for One Health. Support for setting up of a National Institution for One Health, a Regional Research Platform for WHO South East Asia Region, 9 Bio-Safety Level III Laboratories and 4 new Regional National Institutes of Virology (NIVs). The Central Sector components of the proposed Scheme will be implemented by the central agencies/ subordinate offices/ autonomous bodies under the Department of Health & Family Welfare and the Department of Health Research, by following the existing procedure.
Subject :International relations
Section: International Body
Context: Sri Lanka is counting on the IMF to bail its economy out of crisis, with an Extended Fund Facility
Extended Fund Facility (EFF)
When a country faces serious medium-term balance of payments problems because of structural weaknesses that require time to address, the IMF can assist through an Extended Fund Facility (EFF). Compared to assistance provided under the Stand-by Arrangement, assistance under an extended arrangement features longer program engagement—to help countries implement medium-term structural reforms—and a longer repayment period.
What is the EFF designed for?
The EFF was established to provide assistance to countries experiencing serious payment imbalances because of structural impediments or slow growth and an inherently weak balance-of-payments position. An EFF provides support for comprehensive programs including the policies needed to correct structural imbalances over an extended period.
Longer engagement and repayment periods
As structural reforms to correct deep-rooted weaknesses often take time to implement and bear fruit, EFF engagement and repayment cover longer periods than most Fund arrangements.
Extended arrangements are typically approved for periods of three years, but may be approved for periods as long as 4 years to implement deep and sustained structural reforms. Amounts drawn under an EFF are to be repaid over 4½–10 years in 12 equal semi-annual instalments. By contrast, credits under a Stand-By Arrangement (SBA) are repaid over 3¼–5 years.
Other support system of IMF
- Poverty Reduction and Growth Trust-concessional financial support (currently at zero interest rates) available through the Poverty Reduction and Growth Trust
- Stand-By Arrangements (SBAs)- in case of emerging and advanced market economies in crises, the bulk of IMF assistance has been provided through Stand-By Arrangements to address short-term or potential balance of payments problems.
- Standby Credit Facility (SCF) -Financing for LICs with actual or potential short-term balance of payments and adjustment needs caused by domestic or external shocks, or policy slippages—can also be used on a precautionary basis during times of increased risk and uncertainty.
- The Extended Fund Facility (EFF) -Fund’s main tool for medium-term support to emerging and advanced countries facing protracted balance of payments problems
- Extended Credit Facility (ECF) for low-income countries are the Fund’s main tools for medium-term support to countries facing protracted balance of payments problems
- Flexible Credit Line (FCL) or the Precautionary and Liquidity Line (PLL)-To help prevent or mitigate crises and boost market confidence during periods of heightened risks, members with already strong policies can use the Flexible Credit Line (FCL) or the Precautionary and Liquidity Line (PLL).
- The Rapid Financing Instrument (RFI) –for emerging and advanced countries provide rapid assistance to countries with urgent balance of payments needs, including from commodity price shocks, natural disasters, and domestic fragilities.
- Rapid Credit Facility (RCF)-Rapid financial support as a single up-front payout for low-income countries facing urgent balance of payments needs—possible repeated disbursements over a (limited) period in case of recurring or ongoing balance of payments needs.
- Catastrophe Containment and Relief Trust-In February 2015, the IMF repurposed the Post-Catastrophe Debt Relief Trust, into the Catastrophe Containment and Relief Trust. Under the new trust the IMF can join international debt relief efforts for poor countries hit by the most catastrophic of natural disasters. It can also assist countries battling public health disasters—such as infectious disease epidemics—with grants for debt service relief.
Section: Fiscal Policy
With the introduction of GST, the goods and services have been classified into Nil Rated, Exempted, Zero Rated and Non-GST supplies.
- Nil Rated
- This type of supply attracts a GST of 0%.
- Input tax credit cannot be claimed on such supplies.
- Example-grains, salt, jaggery, etc.
- This supply includes items which are used for everyday purposes.
- They are basic essentials, and do not attract any GST at all.
- Input tax credit cannot be claimed on such supplies.
- Some examples include bread, fresh fruits, milk, curd, etc.
- Supplies made overseas and to Special Economic Zones (SEZs) or SEZ Developers come under the zero-rated supplies.
- This supply attracts a GST of 0%.
- Input tax credit can be claimed on such supplies.
- Supplies which don’t come under the scope of the GST are termed as Non-GST supplies.
- These supplies can attract taxes other than the GST as per the jurisdiction of the state or the country.
- Some examples of such supplies include alcohol for human consumption, Petroleum products such as petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel etc., electricity has been kept outside the purview of GST at present.
What is Input Credit?
“Input Tax Credit” is an aggregate total amount of tax paid by a registered dealer on the total purchases made by him within the State from other dealers.
Salient features of Input tax credit:
Section: Money Market
The government said that it had decided to keep interest rates on small savings instruments unchanged for the July-September quarter, defying expectations of a hike in rates given the sharp rise in government security (G-sec) yields over the last three months.
Government bonds and bond yield:
- G-secs, or government securities or government bonds, are instruments that governments use to borrow money.
- Safest of all-the chances of the government not paying back your money are almost zero. It is thus the safest investment one can make.
- Constant fluctuating yield–
- Every G-sec has a face value, a coupon payment and price. The price of the bond may or may not be equal to the face value of the bond.
- Suppose the government floats a 10-year G-sec with a face value of Rs 100 and a coupon payment of Rs 5-it would mean that one will give Rs 100 to the government today and the government will promises to
- return the sum of Rs 100 at the end of tenure (10 years), and
- pay Rs 5 each year until the end of this tenure.
- However, these bonds are further traded in the secondary market-Imagine two people want to buy it, given the competitive bidding- the price of the bond may rise from Rs 100 to Rs 105. If demand for bonds further rises, the price further rises to Rs 110, the coupon payment on the G-sec remaining at Rs 5.
- So, if the price of the bond goes up to Rs 105 then the yield will fall; it will become 4.76% because the second person will be getting Rs 5 over an investment of Rs 105.
What do G-sec yields show?
- G-sec yield is the lowest risk-free interest rate in any economy. As such, they are a good way to figure out the broader trend of interest rates in the economy.
- If G-sec yields (say for a 10-year bond) are going up, it would imply that lenders are demanding even more from private sector firms or individuals; that’s because anyone else is riskier when compared to the government.
- It is also known that when it comes to lending, interest rates rise with the rise in risk profile. As such, if G-sec yields start going up, it means lending to the government is becoming riskier.
- The G-sec yields rising suggests that the bond prices are falling. But the prices are falling because fewer people want to lend to the government. And that in turn happens when people are worried about the government’s ability to pay back .
- If a government’s finances are sorted, more and more people want to lend money to such a G-sec. This in turn, leads to bond prices going up and yields coming down.
Government securities can be both short term (treasury bills — with original maturities of less than one year) or long term (government bonds or dated securities — with original maturity of one year or more).
Since they are issued by the government, they carry no risk of default, and hence, are called risk-free gilt-edged instruments.
FPIs are also allowed to participate in the G-Secs market within the quantitative limits prescribed from time to time.
Section: Fiscal Policy
In a series of measures to regulate the import and export of items such as crude oil and gold the government has imposed special additional excise duty/ cesses on exports of these items.
- A special additional excise duty/ cess on exports of petrol and diesel of Rs 6 per litre and Rs 13 per litre respectively has been imposed.
- The import duty on gold has been hiked to 15 per cent from 10.75 per cent to curb imports of gold.
- A SAED of Rs 6 per litre has also been imposed on exports of aviation turbine fuel (ATF) or jet fuel
- To regulate the import and export of these items and increase domestic supply on the backdrop of reducing supply and mounting international crude oil prices.
- The petroleum refiners import crude oil at international parity and export the petroleum products at globally prevailing prices, which are very high.
- As exports are becoming highly remunerative, it has been seen that certain refiners are drying out their pumps in the domestic market.
- The cesses of Rs 6 per litre on petrol and Rs 13 per litre on diesel have been imposed to disincentive their exports.
- The Directorate General of Foreign Trade (DGFT) has imposed an export policy condition that exporters would be required to declare at the time of export that 50% of the quantity mentioned in the shipping bill has been/ will be supplied in the domestic market during the current fiscal.
- Earlier, the basic customs duty on gold was 7.5 per cent, now it will be 12.5 per cent. Along with agriculture infrastructure development cess (AIDC) of 2.5 per cent will take effective gold customs duty to 15 per cent.
What is Excise Duty?
- Excise duty is a form of indirect tax imposed on goods for their production, licensing and sale.
- It is the opposite of Customs duty in the sense that it applies to goods manufactured domestically in the country, while Customs is levied on those coming from outside of the country.
- At the central level, excise duty earlier used to be levied as Central Excise Duty, Additional Excise Duty, etc.
- The GST introduction in July 2017 subsumed many types of excise duty. Today, excise duty applies only on petroleum and liquor.
Types of excise duty in India-
- Basic Excise Duty
- Basic excise duty is also known as the Central Value Added Tax (CENVAT). This category of excise duty was levied on goods that were classified under the first schedule of the Central Excise Tariff Act, 1985.
- This duty was levied under Section 3 (1) (a) of the Central Excise Act, 1944. This duty applied on all goods except salt.
- Additional Excise Duty
- Additional excise duty was levied on goods of high importance, under the Additional Excise under Additional Duties of Excise (Goods of Special Importance) Act, 1957.
- This duty was levied on some special category of goods.
- Special Excise Duty
- This type of excise duty was levied on special goods classified under the Second Schedule to the Central Excise Tariff Act, 1985.
Presently the central excise duty comprises a Basic Excise Duty, Special Additional Excise Duty and Additional Excise Duty (Road and Infrastructure Cess) on auto fuels.
|Pricing of petroleum products:|
1. Base price-India imports almost no petrol or diesel. It imports crude. But the price paid on fuel is based largely on import parity price, or the price you would pay if India were to be actually importing petrol or diesel
Oil refiners, who make these products( petrol and diesel ) in India, are paid what is called a Refinery Gate Price (RGP) based on the Trade Parity Price (TPP) which is a weighted average of the Import Parity Price (IPP) and the Export Parity Price (EPP). IPP is the price importers would pay if they actually imported the product. So, it includes not just the cost of the fuel itself, but also freight charges, insurance, customs duty and port charges. EPP is what somebody actually exporting the product would get. IPP has an 80% weight and EPP only 20% in the TPP.
Implication-Indian refiners would get this benefit without incurring the duty itself. This partly explains why they have actually become more profitable at a time when their raw material (crude oil) is becoming more expensive.
2. The Centre charges excise duty on the base price –accounting for 26 per cent and 23 percent of the final price of petrol and diesel, respectively. There are four components of the Central Excise Duty on petrol and diesel.
Among these four components, money collected through the Basic Excise Duty is part of the Devolution Pool.
3. The dealer’s commission-amounts to another 4 and 3 percent of the selling price of the two petroleum products.
4. The States levy value-added tax (VAT) -on the cost of petrol and diesel, including excise duty and dealer’s commission.
Subject : Economy
Section: Monetary Policy
Why in the news?
The government said that it had decided to keep interest rates on small savings instruments unchanged for the July-September quarter.
- Schemes like Public Provident Fund (PPF) and the National Savings Certificate (NSC) will continue to carry an annual interest rate of 7.1% and 6.8%, respectively.
- The one-year term deposit scheme will continue to earn 5.5% interest.
- Term Deposits of one to five years will fetch a rate in the range of 5.5-6.7%, to be paid quarterly, while five-year recurring deposits will earn higher interest of 5.8%.
- Small savings rates are linked to yields on benchmark government bonds, but despite the upward movement in G-Sec yields, the government has not increased interest rates
- Negative real rate of return for small savers and pensioners- Barring PPF and Sukanya Samriddhi Yojana, all other small saving instruments are currently fetching negative real returns amid high inflation.
- Banks reduce deposit rate- as small saving instruments are competitive instruments to bank deposits, a lower interest rate on small savings instruments would also cause decline in deposit rates of banks.
- Reduce investment-Technically, negative real rates discourage savings and boost consumption. This, in turn, may fuel more inflation and lead to even more negative real rates.
|Small saving instruments|
The interest rate on small savings instruments is reset every quarter, based on market yields on government securities (G-secs) with a lag, at a spread ranging from 0-100 basis points over and above yields of comparable maturities.
However, political factors also influence the rate change.
The Shyamala Gopinath panel (2010) constituted on the Small Saving Scheme had suggested a market-linked interest rate system for small savings schemes.
Small Savings Schemes are a set of savings instruments managed by the central government with an aim to encourage citizens to save regularly irrespective of their age. They are popular as they not only provide returns that are generally higher than bank fixed deposits but also come with a sovereign guarantee and tax benefits.
All deposits received under various small savings schemes are pooled in the National Small Savings Fund. The money in the fund is used by the central government to finance its fiscal deficit.
They are of two types viz fixed-rate products and variable products.
The schemes can be grouped under three heads – Post office deposits, savings certificates and social security schemes.
NSCs are available in 2 fixed maturity periods – 5 years and 10 years. There is no maximum limit on the purchase of NSCs, but only investments of up to Rs 1.5 lakh can entitle you a tax exemption under Section 80C of the Income Tax Act, 1961.
o The Kisan Vikas Patra, which is open to everyone, doubles the one-time investment at the end of 124 months signifying a return of 6.9% compounded annually. The minimum investment amount is Rs 1000 while there is no upper limit.
Subject : Economy
Section: External Sector
Why in the news?
The US has complained at the WTO that, despite several requests from trade partners, India has provided “neither scientific justification nor a risk assessment’’ supporting its mandatory requirement for non-GMO (genetically modified origin) and GM-free status certificates for certain agriculture imports.
- The tolerance limit, specified by FSSAI, for the accidental presence of GM is 1 percent of the imported food crop consignments.
- American companies find it difficult to adhere to the certification requirement as the US has no restrictions on GM food.
- The US had requested India to provide the scientific justification for establishing the tolerance at this level and provide relevant risk assessments or international standards on which this tolerance is based.
- The US further highlighted that it leads negative impacts on trade and inefficient biosafety regulation in India
WTO members follow different approaches to managing GMOs in food and animal feed, including when informing consumers through labeling and this sometimes creates trade challenges.
WTO members use the Agreement on the Technical Barriers to Trade (TBT) and Agreement on the Application of Sanitary and Phytosanitary Measures to discuss each other’s product regulations and standards, which are at times problematic for producers and traders.
Agreement on the Application of Sanitary and Phytosanitary Measures
- It entered into force with the establishment of the World Trade Organization on 1 January 1995.
- It sets out the basic rules on food safety and animal and plant health standards that governments are required to follow.
- Together with the Technical Barriers to Trade Agreement, it seeks to identify how to meet the need to apply standards while avoiding disguised protectionism.
- The basic aim of the SPS Agreement is to maintain the sovereign right of any government to provide the level of health protection it deems appropriate, but to ensure that these sovereign rights are not misused for protectionist purposes and do not result in unnecessary barriers to international trade.
- The SPS Agreement allows WTO members to set their own standards on food safety and animal and plant health. But these standards must be based on science, applied only to the extent necessary to protect human, animal or plant life or health, and not arbitrarily or unjustifiably discriminate between countries where identical or similar conditions prevail.
- Members are encouraged to use international standards, guidelines and recommendations but may adopt higher levels of protection if there is scientific justification for it, or if they are based on appropriate assessment of risks.
- The SPS Agreement allows countries to use different methods of control, inspection and approval procedures to verify compliance with adopted standards. Transparency regarding governments’ SPS regulations is a key provision to avoid unnecessary barriers to trade.
- According to Article 7 of the SPS Agreement, members shall notify changes in their sanitary or phytosanitary measures and provide information on their sanitary or phytosanitary measures in accordance with the provisions of Annex B. The Members’ transparency toolkit contains all the relevant information for members to fulfill their transparency obligations regarding SPS measures.
Committee on Sanitary and Phytosanitary Measures-The SPS Committee is the forum where WTO members discuss issues related to the implementation of the SPS Agreement and potential trade concerns. All decisions are reached by consensus. The Agreement also mandates the SPS Committee to develop a procedure to monitor the process of international harmonization and to coordinate with the relevant organizations.
- Which are the relevant standard-setting organizations for the SPS Agreement?
- FAO/WHO Codex Alimentarius Commission (Codex): for food safety
- World Organization for Animal Health (OIE): for animal health and zoonoses
- FAO International Plant Protection Convention (IPPC): for plant protection.
Agreement on the Application of Sanitary and Phytosanitary Measures v/s Agreement on Technical Barriers to Trade
The SPS Agreement covers all measures whose purpose is to protect:
- human or animal health from food-borne risks;
- human health from animal- or plant-carried diseases;
- animals and plants from pests or diseases;
- whether or not these are technical requirements.
The TBT (Technical Barriers to Trade) Agreement covers all technical regulations, voluntary standards and the procedures to ensure that these are met, except when these are sanitary or phytosanitary measures as defined by the SPS Agreement.
SPS Agreement the only justification for not using such standards for food safety and animal/plant health protection are scientific arguments resulting from an assessment of the potential health risks. In contrast, under the TBT Agreement governments may decide that international standards are not appropriate for other reasons, including fundamental technological problems or geographical factors.
TBT measures could cover any subject, from car safety to energy-saving devices, to the shape of food cartons.
- TBT measures could include pharmaceutical restrictions, or the labelling of cigarettes.
- Most measures related to human disease control are under the TBT Agreement, except for the diseases which are carried by plants or animals .
- In terms of food, labelling requirements, nutrition claims and concerns, quality and packaging regulations are generally not considered to be sanitary or phytosanitary measures and hence are normally subject to the TBT Agreement.
- Regulations which address microbiological contamination of food, or set allowable levels of pesticide or veterinary drug residues, or identify permitted food additives, fall under the SPS Agreement.
- Some packaging and labelling requirements, if directly related to the safety of the food, are also subject to the SPS Agreement.
Thus, the sanitary and phytosanitary measures may be imposed only to the extent necessary to protect human, animal or plant health, on the basis of scientific information. Governments may, however, introduce TBT regulations when necessary to meet a number of objectives, such as national security or the prevention of deceptive practices.