Daily Current Affairs for UPSC IAS | 27th August 2021

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1.  Risk and rewards

UPSC Syllabus: Prelims GS paper III : Economy
Sub Theme: National Monetisation Pipeline  |UPSC

The NMP estimates aggregate monetisation potential of Rs 6 lakh crores through core assets of the Central Government, over a four-year period, from FY 2022 to FY 2025.

The plan is in line with Prime Minister’s strategic divestment policy, under which the government will retain presence in only a few identified areas with the rest tapping the private sector.

Key Points

About the NMP:

  • It aims to unlock value in brownfield projects by engaging the private sector, transferring to them revenue rights and not ownership in the projects, and using the funds generated for infrastructure creation across the country.
  • The NMP has been announced to provide a clear framework for monetisation and give potential investors a ready list of assets to generate investment interest.
  • Union Budget 2021-22 has identified monetisation of operating public infrastructure assets as a key means for sustainable infrastructure financing.
  • Currently, only assets of central government line ministries and Central Public Sector Enterprises (CPSEs) in infrastructure sectors have been included.
  • The government has stressed that these are brownfield assets, which have been “de-risked” from execution risks, and therefore should encourage private investment.
  • Roads, railways and power sector assets will comprise over 66% of the total estimated value of the assets to be monetised, with the remaining upcoming sectors including telecom, mining, aviation, ports, natural gas and petroleum product pipelines, warehouses and stadiums.
  • In terms of annual phasing by value, 15% of assets with an indicative value of Rs 0.88 lakh crore are envisaged for rollout in the current financial year.
  • The NMP will run co-terminus with the Rs 100 lakh crore National Infrastructure Pipeline (NIP) announced in December 2019.
  • The estimated amount to be raised through monetisation is around 14% of the proposed outlay for the Centre of Rs 43 lakh crore under NIP.
  • NIP will enable a forward outlook on infrastructure projects which will create jobs, improve ease of living, and provide equitable access to infrastructure for all, thereby making growth more inclusive. NIP includes economic and social infrastructure projects.
  • Other Initiatives for Infrastructure Development include Scheme of Financial Assistance to States for Capital Expenditure, Industrial corridors, etc.

What is Monetisation

In a monetisation transaction, the government is basically transferring revenue rights to private parties for a specified transaction period in return for upfront money, a revenue share, and commitment of investments in the assets.

How to monetise: Real Estate Investment Trusts (Reits) and Infrastructure Investment Trusts (Invits), for instance, are the key structures used to monetise assets in the roads and power sectors. These are also listed on stock exchanges, providing investors liquidity through secondary markets as well.

While these are a structured financing vehicle, other monetisation models on PPP (Public Private Partnership) basis include:

Operate Maintain Transfer (OMT),

Toll Operate Transfer (TOT), and

Operations, Maintenance & Development (OMD).

What is Greenfield vs Brownfield Investment?

  • Greenfield Project (New)

It refers to investment in a manufacturing, office, or other physical company-related structure or group of structures in an area where no previous facilities exist.

  • Brownfield investment (Existing)

The projects which are modified or upgraded are called brownfield projects.

The term is used for purchasing or leasing existing production facilities to launch a new production activity.

Challenges with NMP:

  • Lack of identifiable revenue streams in various assets.
  • The slow pace of privatisation in government companies including Air India and BPCL.
  • Low Level of capacity utilisation in gas and petroleum pipeline networks.
  • Regulated tariffs in power sector assets.
  • Low interest among investors in national highways below four lanes.
  • Konkan Railway, for instance, has multiple stakeholders, including state governments, which own stake in the entity.
  • NMP deals, by contrast, could pose a long-term headache if they are not structured with end-user interests in mind, balancing the profit and utility motives.
  • sharing of risk and rewards between the public and private partners needs to be weighed carefully for each sector.
  • Lack of Checks and balances for actual infrastructure usage.
  • Revenue projections for PPP assets could be deflated now leading to lower bids followed by super-normal gains for the operator in the future.

Possible way forward:

  1. Central government can roll out a separate agency for the oversight of asset monetisation.
  2. Clear distinction between what to monetise and what not.
  3. Attractive asset valuation to keep investors interest in the projects.
  4. Greater participation of state governments to raise local funds through monetisation. This would ensure cooperative federalism and higher revenues for infrastructural growth.
  5. Price of assets to be linked to the inflation of the year.

 

Issues with infrastructure financing in general:

  1. Fiscal Burden: Almost half of the total investment in the infrastructure sector is done by the
    Government through budget allocations. But Government funds have competing demands, such as, education, health, employment generation, among others.
  2. Asset-Liability Mismatch of Commercial Banks: Commercial banking sector’s ability to extend long-term loans to the infrastructure sector is limited.
  3. Subdued Investments in PPP Projects: Private sector investment is yet to revive in the backdrop of subdued interest from potential stakeholders. Legacy issues and weak balance sheets have led to limited participation from existing infrastructure players in India.
  4. Investment Obligations of Insurance and Pension Funds: Insurance and pension funds are constrained by their obligation to invest a substantial portion of their funds in Government securities.
  5. Need for an Efficient and Vibrant Corporate Bond Market: The corporate bond market is still a long way to go in providing adequate financing to the infrastructure sector in India.
  6. Insufficiency of User Charges: A large part of the infrastructure sector in India especially irrigation, water supply, urban sanitation, and state road transport is not amenable to commercialisation for various reasons. Due to this, the Government is not in a position to levy sufficient user charges on these services.
  7. Legal and Procedural Issues: Issues relating to land acquisition and environmental clearances add uncertainty which affects the risk appetite of investors as well as banks.

 

Various steps have been taken by the government to address these issues:

  1. Public-Private Partnership: Government is making efforts towards Public-Private Partnership Projects especially in Infrastructure.
  2. Viability Gap Funding: Government has made provision to financially support the viability gap to the tune of 20% of the cost of the project in the form of capital grant from its viability gap fund.
  3. Foreign Direct Investment and Infrastructure Development: 100% FDI is allowed under the automatic route in some of the sectors such as mining, power etc. Further, FDI is also allowed through the approval route in some sectors such as the civil aviation sector etc.
  4. India Infrastructure Finance Company Limited (IIFCL): IIFCL is a wholly-owned Government of India company to provide long term finance to viable infrastructure projects through the Scheme for Financing Viable Infrastructure Projects through a Special Purpose Vehicle.
  5. Infrastructure Debt Funds: IDF is a distinctive attempt to address the issue of sourcing long term debt for infrastructure projects in India.
  6. Reducing bottlenecks: With Initiatives such as ‘Housing for All’ and ‘Smart Cities,’ the government is working on reducing the bottlenecks that impede growth in the infrastructure sector.
  7. UDAY scheme: Under UDAY scheme the government has taken steps to improve operational and financial parameters of discoms.
  8. Masala Bonds: The National Highways Authority of India (NHAI) launched Masala Bonds in May 2017, for raising capital for funding the infrastructure projects in India.
  9. National Infrastructure Investment Fund: National Infrastructure Investment Fund (NIIF) with an initial corpus of Rs 40,000 crore was launched.
  10. National Infrastructure Pipeline: The National Infrastructure Pipeline is a group of social and economic infrastructure projects in India over a period of five years with a sanctioned amount of ₹102 lakh crore.

 

Other Government Initiative and investment

In Union Budget 2021, the government has given a massive push to the infrastructure sector by allocating Rs. 233,083 crore (US$ 32.02 billion) to enhance the transport infrastructure. The government expanded the ‘National Infrastructure Pipeline (NIP)’ to 7,400 projects. ~217 projects worth Rs. 1.10 lakh crore (US$ 15.09 billion) were completed as of 2020. The key highlights of the Budget 2021 are as follows:

  • In June 2021, the NTPC floated a global Expression of Interest (EOI) to set up two pilot projects for standalone fuel cell-based backup power system and a standalone fuel cell-based microgrid system with hydrogen production using electrolyser at NTPC premises. Through the projects, NTPC is looking to further strengthen its footprint in green and clean fuel. The NTPC will collaborate for implementation and further commercialisation of the projects.
  • In May 2021, Minister for Road Transport & Highways and Micro, Small and Medium Enterprises, Mr. Nitin Gadkari stated that the government is giving utmost priority to infrastructure development and has set a target of road construction of worth Rs.15 lakh crore (US$ 206 billion) in the next two years.
  • The Ministry of Railways plans to monetise assets including Eastern and Western Dedicated Freight Corridors after commissioning, induction of 150 modern rakes through PPP, station redevelopment through PPP, railway land parcels, multifunctional complexes (MFC), railway colonies, hill railways and stadiums.
  • In March 2021, the government announced a long-term US$ 82 billion plan to invest in the country’s seaports. ~574 projects have been identified, under the Sagarmala project, for implementation through 2035.
  • In April 2021, the Ministry of Power (MoP) released the draft National Electricity Policy (NEP) 2021. The MoP created an expert committee including members from state governments, the Ministry of New and Renewable Energy (MNRE), NITI Aayog and the Central Electricity Authority (CEA).
  • In March 2021, the Parliament passed a bill to set up the National Bank for Financing Infrastructure and Development (NaBFID) to fund infrastructure projects in India.
  • Indian railways received Rs. 1,10,055 crore (US$ 15.09 billion), of which Rs. 1,07,100 crore (US$ 14.69 billion) is for capital expenditure.
  • Rs. 1,18,101 crore (US$ 16.20 billion) has been allocated towards road transport and highway sector.
  • The government announced Rs. 18,998 crore (US$ 2.61 billion) for metro projects.
  • Mega Investment Textiles Parks (MITRA) scheme was launched to establish world-class infrastructure in the textile sector and establish seven textile parks over three years.
  • The government announced Rs. 305,984 crore (US$ 42 billion) over the next five years for a revamped, reforms-based and result-linked new power distribution sector scheme.

 

2.  PM-CARES to help COVID19 victims

UPSC Syllabus: GS Paper II : Polity & Governance
Sub Theme: PM Cares Fund | UPSC

Context: Supreme Court has asked the Union government if it can immediately release money from

the PM-Cares Fund for the education of children who have been orphaned or have lost legal guardians or either of their parents during the COVID-19 pandemic.

This brings us to an important discussion on what is PM-CARES and how it is different from other important fund i.e. Prime minister National relief fund.

 

The major differences between PMNRF and PM CARES Fund are:

PMNRF (Prime Minister National Relief Fund) PM CARES Fund [Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund]
PMNRF (Prime Minister National Relief Fund) was established in January 1948. PM CARES Fund was established on 27th March 2020.
PMNRF was established by the first Prime Minister of India, Jawaharlal Nehru. The PM CARES Fund was established by the current Prime Minister of India, Narendra Modi.
The initial purpose of establishing PMNRF (Prime Minister National Relief Fund) was to help the people displaced due to partition of India and Pakistan. The PM CARES fund was established with the objective of helping people affected by COVID-19 pandemic.
Chairman of the Prime Minister National Relief Fund (PMNRF) is the Prime Minister of India. Other members are from Tata Trusts, representatives of FICCI, Congress President. Chairman of the PM-CARES fund is the Prime Minister of India. The Prime Minister has the power to nominate members. The other members of the PM CARES Fund are the Defence Minister, Home Minister and Finance Minister.
The minimum amount one can donate in the Prime Minister National Relief Fund (PMNRF) is Rs 100. PM CARES Fund allows option for Micro donation, one can donate as low as Rs 10 in the PM CARES Fund.
PMNRF has been attached with all Centre and State-run hospitals and many private hospitals as well. With respect to PM CARES Fund there is no clarity on its network with hospitals.
PMNRF focuses on all kinds of natural disasters and calamities like Cyclones, Earthquakes, Floods, Tsunamis etc. The PMNRF funds are also utilised for acid attack victims, cancer treatments, kidney transplants etc. PM CARES fund is exclusively used for COVID-19 purposes.
As per reports, there is low liquidity of only 15% in the PMNRF, which makes it difficult to utilise it in case of emergency. As per reports, bulk of the corpus is invested in State Development Loans, Fixed Deposits etc. There are no reports of low liquidity in PM CARES Fund, hence there won’t be constraints in using the funds.
PMNRF (Prime Minister National Relief Fund) accepts only voluntary donations by institutions and individuals. Contributions flowing out of the balance sheets of the Public Sector Undertakings (PSU’s) or from the budgetary sources of Government are not accepted. In the modes of fund collection mechanisms of PM CARES, the words –  “contributions flowing out of budgetary sources of government or from the balance sheets of the Public Sector Undertakings are not accepted” – has been dropped in the PM CARES Fund. In other words PM CARES Fund can receive contributions from Public Sector Undertakings. PM-CARES Fund consists entirely of voluntary contributions from individuals or organisations and does not get any budgetary support.

Similarities between PMNRF and PM CARES Fund

  • Spending from both the PM CARES Fund and PMNRF does not require approval from Parliament.
  • Donations to both PMNRF and PM CARES Fund will be exempted from Income Tax under Section 80G. The contribution towards PMNRF is 100 % tax deductible under Section 80 G of the Income Tax Act. As per the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 issued by the Finance Ministry on 31 March 2020, donations made to ‘PM CARES’ fund would be 100% tax exempt under Section 80(G).
  • Funds from both PM Cares and PMNRF cannot be utilised without the directions of the Prime Minister.
  • M/S SARC Associates Chartered Accountants, New Delhi are the auditors of both PMNRF and PM CARES fund.
  • Donations by companies to both PMNRF and PM CARES Fund are classified as Corporate Social Responsibility (CSR) under Companies Act 2013.
  • Both PMNRF and PM CARES do not receive budgetary support.
  • Both PMNRF and PM CARES are set up as trusts.
  • Both PM CARES and PMNRF can receive foreign contributions. They are exempted from the Foreign Contribution Regulation Act (FCRA).
  • Both PM CARES and PMNRF are not audited by Comptroller and Auditor General (CAG). This is one of the criticisms of both the Funds, despite both of them being audited by an Independent third-party auditor.
  • PMNRF does not come under the Right to Information (RTI). It is not clear whether PM CARES comes under the ambit of the Right to Information (RTI) Act. Recently, when information on the PM CARES fund was sought through RTI, the information was declined on some technicalities.

3.  Sambhar Lake needs faster restoration

UPSC Syllabus:  Prelims – GS paper 1 : Environment
Sub Theme: Sambhar lake | UPSC

Sambhar Lake needs faster restoration, says expert study

Sambhar Salt Lake is constantly shrinking with the degradation of soil and water quality.

  • The Sambhar Salt Lake is India’s largest inland saltwater body, situated 80 km south-west of Jaipur.
  • The lake has been designated as a Ramsar site.
  • It represents the depression of the Aravalli Range.
  • The wetland is a key wintering area for tens of thousands of flamingos and other birds that migrate from northern Asia. Flamingoes, pelicans and the waterfowls are commonly sighted at the Sambhar Lake.
  • It has salt brine worth $300 million
  • The Lake forms part of the desert circuit in the Centre’s Swadesh Darshan Scheme.
  • It receives water from six rivers, namely Samaod, Khari, Mantha, Khandela, Medtha, and Roopangarh.
  • There has been a decline in the population of migratory birds. More than 20,000 birds belonging to about 10 species which migrate annually to the lake died in 2019 due to avian botulism.
  • Threat of illegal mining on the ecosystem of the lake – 30% of the Sambhar Lake’s area had been lost to mining and other activities, including the illegal salt pan encroachments. It has also threatened the livelihoods of local people who have always lived in harmony with the lake and its ecology.

Rajasthan state government plan for conservation & sustainable development of region around Sambhar Lake

  • New tourist points for witnessing the flora and fauna and having a glimpse of salt harvesting will be identified at the Sambhar Lake.
  • A “salt train”, which transported salt from the pans to a nearby refinery, will also be restarted.
  • New destinations around the lake, including salt museum, caravan park, bicycle track and gardens, are planned to attract a large number of tourists to the region.
  • A constant monitoring for protection of migratory birds would be ensured at the lake, where the mass death of birds had occurred in 2019 because of avian botulism.
  • The illegal salt production in the lake will be stopped through action against unauthorised borewells and pipelines laid in the region.

 

4. The most efficient soldier of Swatch Bharat Abhiyan

UPSC Syllabus: Prelims – GS paper 1 – Environment
Sub Theme: Vultures  | UPSC

                                                    Vultures

                  (The most efficient soldier of Swatch Bharat Abhiyan)

Characteristics of Vultures:

  • They are relatively social birds with an average lifespan of 10-30 years in the wild.
  • Being bulky, they nest on tall trees or rocky cliffs.
  • Vultures are slow breeders (so the survival of every individual is very crucial)
  • With their excellent eyesight and strong sense of smell, vultures can detect the presence of dead animals from great distances.
  • Generally, vultures rely on other carnivores to open carcasses. Their powerful bills and long slender necks are designed to help them tear off the meat chunks from inside the carcass
  • Vultures have a highly acidic stomach that helps them digest rotting carcass
  • Since they have weak legs and claws. They do not carry food; instead, they regurgitate food and feed their young ones

India has nine species of vultures and few of them are critically endangered.

The Union Environment Minister says the population of three species of endangered resident Gyps vultures – white-backed vulture, long-billed vulture and slender-billed vulture together has come down from 40 million to 19,000 in a span of over three decades

Threats to Vultures:

    • Use of the drug, diclofenac: Diclofenac, which relieves cattle of pain, is toxic to vultures even in small doses and causes kidney failure and death
    • Hunting and trading: Myths about the medicinal healing powers of vultures’ body parts has led to the hunting of vultures
    • Habitat destruction: Rapid urbanisation and Quarrying and blasting of stones, where vultures nest, has also caused their decline

 

  • Electrocution: vultures are susceptible to electrocution, especially in areas where there are few trees for them to rest and spend the night

 

Consequences of declining population of Vultures:

    • Removing vultures from the ecosystem leads to inefficient clearing of carcasses and contaminates water systems
    • If dead animals are left to rot for long durations, it may give rise to disease-causing pathogens. The animals that consume such flesh become further carriers of disease.

 

  • Increase in the feral dog population. Studies showed that decreasing vulture population has led to the increase in feral dog population, which is a cause of concern from the diseases point of view

 

Thus, vultures play a role of scavengers and helps in maintaining the health of the ecosystem

Steps taken by the govt and conservation groups to conserve Vultures:

 

  • Indian govt banned veterinary use of Diclofenac drug in 2006

 

  • Vulture restaurants were set up by many state govts. In these ‘restaurants’, diclofenac-free carcasses of cattle are dumped in designated areas where vultures gather to feed

Ex: Himachal Pradesh saved many vulture species from declining through vulture restaurant in pong dam lake wildlife sanctuary

  • The Protection status of White-backed, Long-Billed and Slender Billed Vultures was upgraded from Schedule IV to Schedule I of the Wild Life (Protection) Act, 1972
  • Vulture safe zones- To conserve the remaining population of vultures in the country and to facilitate the reintroduction of vultures into the wild from Vulture Conservation Breeding Centres (VCBCs), attempts to create Vulture Safe Zones in the areas are being made
  • Initiatives to strengthen the mass education and awareness for vulture conservation in the country are also being taken up
  • The MoEF has reconstituted the “National Vulture Recovery Committee” to oversee and guide vulture conservation and recovery efforts

Action plan for Vulture conservation (2020-25):

MoEF launched Action plan for vulture conservation 2020-25 with the following objectives

  • Prevention of poisoning of cattle carcasses, the principal food of Vultures
  • Enhancement of Conservation Breeding Programme
  • Regular monitoring of vulture populations across the country
  • Enhancing the Vulture Safe Zone (VSZ) Network
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