📰 Centre-RBI tussle: Balance of power, in the balance
Any attempt by the Centre to override the RBI Governor using the RBI Act would be ill-advised
•The role of the Board of Directors of the Reserve Bank of India (RBI) and its powers vis-à-vis the RBI Governor have come into focus in the ongoing tussle between the Centre and the central bank. The Centre has hinted that it is examining the option of using the powers of the RBI Board to override the Governor.
•There are several questions that arise from this unprecedented attempt by the Centre to use powers under the Reserve Bank of India Act, 1934. The most important of these is: Where does the balance of power lie between the Governor and the board? What is the legal position of the board in relation to the Governor? Does the latter draw his powers from the board as in a corporate set-up? Can the board give directions to the Governor on issues of policy and management of the central bank?
•Before we get to answering these, let’s get this out of the way first. The relationship between the board and the Governor is not comparable to a corporate set-up where the managing director (the corporate equivalent of the Governor) reports to the board and draws his powers from it.
•While a managing director is an agent of the board in a company, in the RBI, the Governor is not. He draws his powers from the RBI Act and not from the Board of Directors. He is appointed by the Prime Minister in consultation with the Finance Minister. The RBI Board has no say whatsoever in his appointment. In a company, the board of directors chooses one of its own to be appointed as the managing director. In the RBI, the Governor secures board membership only after he is appointed to the post. It is, thus, wrong to compare a corporate board to the RBI’s and suggest that the Governor is subservient to it.
Constitution of the board
•But what is the constitution of the RBI board like? As per the RBI Act, the board is made up of the following members: the Governor and four Deputy Governors, four directors (one each from the four regional boards of the RBI), 10 directors to be nominated by the Centre, and one government official who is also to be nominated by the Centre.
•The present board is made up of 18 members, which is the Governor and four Deputy Governors, four regional board members and nine nominees from the Centre who include two officials, the Economic Affairs Secretary and the Secretary, Department of Financial Services.
•So, where does the balance of power lie between the Governor and the board? The sections in the RBI Act dealing with this subject are rather vaguely worded. Eminent past Governors have interpreted Section 7, the relevant one, to mean that the powers of the board and that of the Governor are concurrent. The Governor draws his powers from Section 7(3) of the Act. He can exercise all powers and do all things that may be exercised and done by the RBI.
•This is subject to a caveat though. The board, under Section 58, can make regulations that will give it the powers to override those of the Governor’s. But this is subject to two important conditions. First, the regulations have to be consistent with the provisions of the RBI Act, which essentially means that the board has to act within the framework of the Act. Second, these regulations have to go through an elaborate approval process before they become law (Section 58(4)). The board has to forward the regulations to the Centre, which will have to table them in both Houses of Parliament. Members have a period of 30 days within which they can either suggest modifications to the regulations or annul them.
•And then, there is the brahmastra of Section 7(1) which confers powers on the Centre to issue directions to the RBI “from time to time” in the public interest after consultations with the Governor. All bets will be off if this section is invoked as it will become untenable for the Governor to continue in his position.
Convention
•This is the framework of the law but what has been the convention till now? The RBI Board has always functioned in an advisory role with the understanding that the Governor would consider its advice while making policy decisions. In other words, there was mutual respect between the board and the Governor, with both operating in a spirit of accommodation.
•The fact is that neither Section 7(1) nor Section 7(3) has been unleashed in the 83-year existence of the RBI. Not even when the RBI was privately owned between 1935 and 1949.
•It is not as if there have not been any disagreements between RBI Governors and governments before this. You only have to read the memoirs of the former Governors, Y.V. Reddy and Duvvuri Subbarao, to understand the extent of meddling by the Centre in the RBI’s affairs. Yet, things did not reach the brink and were sorted out quietly behind the scenes.
•Another former Governor, C. Rangarajan, has spoken about how the RBI, under Governor R.N. Malhotra, was forced by the Centre to withdraw a circular freeing short-term rates of banks. Yet, there was no chatter of invocation of Section 7 or of the board arming itself with governance powers.
•What’s the difference between then and now? The short answer is that the spirit of accommodation, which flows out of mutual respect and understanding of each other’s compulsions between the RBI and the Centre, and which was evident then, is absent now. And the blame for this has to be shared by the players involved in the current tussle.
•It may not be very difficult for the Centre to have its way by using the board’s powers to frame regulations overriding the Governor but this will necessarily come with a price. Such a move will not only set a bad precedent but also lead to several ticklish situations.
•The RBI Board has several representatives from industry. The present board includes N. Chandrasekaran, Chairman of Tata Sons, Dilip Shanghvi, MD of Sun Pharma, and Manish Sabharwal, founder of Teamlease. There will be a conflict of interest if industrialists are members of committees that run the affairs of the monetary authority of the country (and we are not for a moment suggesting that they will behave in any manner favourable to their interests).
•Second, there is a good reason why the RBI has been kept at arm’s length from the Centre and bestowed with a certain independence. That is because the Centre is the spender and the RBI is the creator of money, and there has to be a natural separation between the two. The Centre arming itself with powers to run the RBI runs afoul of this precept.
•Whichever way we look at it, such a move by the Centre would be ill-advised and will take its relations with the monetary authority into uncharted territory. There will be no winners in this dangerous game.
•Enough dirty linen has been washed in public in the past month and it is time for the Centre and the RBI to behave like the mature entities that they are, uphold time-tested conventions, and act with mutual respect and a spirit of accommodation.
•The board meeting today, November 19, will set a crucial precedent in the economic history of India, and one can only hope that it will be the right one.
📰 India steps up agro-diplomacy with China
New Delhi feels that Beijing will focus on food security by diversifying imports in view of trade war
•As the trade war with the United States continues to bite — with only a slim chance that the world’s two biggest economies can go past a possible truce — China appears to be opening up to non-U.S. imports.
•Smelling an unexpected opportunity to export more to the Middle Kingdom, India is quietly squeezing in the door. The focus so far has been on pushing agri-products into the Chinese market. Sensing that China would look first at its food security by diversifying imports in view of the trade war, New Delhi has stepped up its agro-diplomacy with Beijing.
•Over the past two months, Indian food and beverage producers have been conducting seminars and road shows in the Chinese capital.
Soya source
•Though Indian soya bean exports are apparently a priority, especially after the China imposed a 25% levy on U.S. imports, success in the huge Chinese soya bean market is yet to materialise, though some progress may have registered during talks. Visiting Commerce Secretary Anup Wadhawan in a conversation with his Chinese counterpart Wang Shouwen earlier in November “expressed satisfaction over progress on soya bean meal and pomegranate and related issues,” an Indian Embassy press statement said.
•However, other agri-products may have stolen a march over soya beans in finding a niche in the Chinese market. On November 6, Jay Shree Tea and Industries Ltd. signed a $1-million black tea export contract with State-owned COFCO. Assam tea, in particular, has good prospects in China as it blends well with milk-based tea drinks. “China has been traditionally a green tea market. But of late, its young people are developing a taste for milk infused bubble tea, potentially opening a larger market for Indian black teas,” said Arun Kumar Ray, Deputy Chairman of the Tea Board, on a visit to Beijing.
•India’s efforts to export sugar to China, which began in earnest in June, also appear to have paid dividends. Earlier this month, a Commerce Ministry statement said the Indian Sugar Mills Association had signed its first sugar export contract of 50,000 tonnes with COFCO. During his visit, Mr. Wadhawan briefed the China Sugar Association about India’s proven capacity to meet China’s sugar needs over the long haul.
•China has also opened up imports of non-Basmati rice from India in June on the sidelines of the Qingdao summit of the Shanghai Cooperation Organisation (SCO). Officials say China is a lucrative $1.5-$2 billion market for Indian rice. A delegation of Indian rice traders was in Beijing in October on a follow-up visit after China, in principle, opened its doors to 24 India-based rice mills.
•Efforts to tap the Chinese agri-market, in view of the China-U.S. trade war, was flagged in April. In his opening remarks at the fifth China-India Strategic Economic Dialogue, NITI Aayog Vice-Chairman Rajiv Kumar said India was ready to step in and supply soya beans to China. “I was noticing that there were some tariffs that were issued on farmers from Iowa and Ohio, etc. Maybe India can substitute for something like soya beans and sugar if we could have access to those exports with all the due quality considerations that you might have,” Mr. Kumar had said.
Trade imbalance
•Despite signs of incremental progress, India’s $63-billion trade imbalance with China is alarming. In his meetings in Shanghai, Mr. Wadhawan stressed that pharmaceuticals, information technology services and tourism, in which India has a significant global footprint, had a “minuscule presence” in China.
•Earlier this year, India had raised the red flag about its adverse trade balance during China’s trade policy review at the WTO, specifically citing hindrances that Indian exporters of rice, meat, pharmaceuticals and IT products were encountering to access the Chinese market.
•“There are some positive developments... but we want that to be reflected in concrete trade figures before we can conclude that there has been a turnaround in our commercial ties with China,” an Indian diplomat told The Hindu.
📰 Govt. directions to RBI under Section 7 unlikely
Easing of PCA framework on the cards at board meeting
•The Union government may not invoke Section 7 of the RBI Act to issue directions to the central bank, in a bid to reduce the tension between North Block and Mint Road, sources privy to the government’s thinking told The Hindu.
•“It is understood that the government has decided that it will not issue directions to the RBI… it is felt that there is no need for escalating the tension,” said a source.
•The central board of the RBI will meet on Monday to discuss contentious issues that figured at the last board meeting — economic capital, governance issues of the central bank, boost for the micro, small and medium-sized enterprises and the prompt corrective action (PCA) framework for banks.
•The October 23 board meeting failed to reach a consensus on any of the issues and was adjourned after an eight-hour discussion.
•Though the government had ‘referred’ Section 7 of the RBI Act for ‘consultation’ on these issues, it may refrain from issuing directions as such a move will have wide ramifications.
•Section 7 has never been used in the 83-year history of the bank. Invoking it would be interpreted as interference in the central bank’s autonomy. It would also have a bearing on international agencies such as the International Monetary Fund (IMF) that issue ratings for central banks.
•“These agencies have been raising the issue of Section 7 for sometime now, saying ‘if such a provision exists, how can RBI be independent?’ However, the RBI has been telling them that though that provision exists, it has never been used,” said an another source.
📰 A forest filled with butterflies
Survey spots 221 varieties in Parambikulam Tiger Reserve
•As dawn breaks, Parambikulam Tiger Reserve, one of India’s protected forest areas, turns a garden with dream flowers floating all over. The sight repeats as dusk falls in. Wafer thin canvases bearing a splash of colours flutter all around, filling the reserve with a splendour that matches the aura of a forest full of butterflies.
•A recent survey held in the reserve spotted 221 varieties of butterflies, 11 of which were endemic to the area.
•With such a rich spread, the reserve could also hit spotlight as a haven of butterflies.
•The survey, initiated jointly by the Department of Forest and Wildlife, Parambikulam Tiger Conservation Foundation, and the Wayanad-based Ferns Naturalists Society, was held between November 9 and 12.
•Sixty experts and 50 forest protection staff participated in the survey in the reserve.
Major species
•According to butterfly expert V.K. Chandrasekharan, the major species spotted during the four-day initiative include Small Palm Bob, Silverstreak Blue, Orange-tail Awl, and Red-disc Bushbrown. Among them, Orange-tail Awl gets active only during early morning hours and late in the evening.
•The survey was held in different topographies and forest areas, including evergreen forests, dry deciduous forests, moist deciduous forests, shrubs and meadows, which lie in areas such as Aanapanthi, Parambikulam, Kuriarkutty and Nelliampathy.
•Seventeen separate camps were arranged in these areas to ensure comprehensive surveying.
Surprise find
•“One of the biggest surprises of the survey is the spotting of Red-disc Bushbrown, a high-altitude species endemic to Western Ghats. We found them in an area of Nelliampathy region at an altitude of 1,320 m. It would be difficult to spot them in any part further north of Western Ghats,” said Mr Chandrasekharan.
•The survey team had also recorded migration patterns of the rare species — Dark Blue Tiger and Common Crow.
•Buddha Peacock or Buddha Mayoori, which was recently declared as State butterfly of Kerala, was found in abundance in some areas of the forest. The survey had also recorded over 100 butterfly host plants in the reserve.
•The survey team included members of the Travancore Natural History Society, Malabar Natural History Society, and students of Kerala Veterinary and Animal Sciences University in Wayanad.
•This is the fourth consecutive year that the butterfly survey is being organised in Parambikulam.
Involvement of tribes
•A pioneer in community-based ecotourism, Parambikulam tries to ensure foolproof conservation with the active involvement of 234 members of six tribal settlements inside its limits. The reserve has many firsts to its credit, made possible through the participation of tribespeople.
•Being a protected forest area, the reserve has nearly five endemic flora varieties and has had 29 direct sightings of tigers. Ever since the Joint Forest Participatory Management was introduced, there have been no incidents of poaching in the reserve.
📰 Rare bird sighted in Kerala’s Chinnar sanctuary
Sri Lankan Frogmouth is usually found on the western side of the Ghats
•The sighting of a rare bird species in the Chinnar Wildlife Sanctuary has sparked much interest among ornithologists since its presence was noticed on the eastern side of the Western Ghats for the first time.
•The Sri Lankan Frogmouth, belonging to the Batrachostomus moniliger species, which was sighted at the sanctuary is usually confined to its habitation in the western side of the Western Ghats forests.
•It is a relative of Nightjar, a crepuscular and nocturnal bird breeding in Europe and temperate Asia.
•Its preferred habitat is a dry and open area with some small trees or bushes.
•A few ornithologists who were on a trekking trip, accidentally noticed the bird’s presence in the forest. Initially, they thought it was Nightjar, but a closer scrutiny confirmed it to be the Sri Lankan Frogmouth, said Assistant Wildlife Warden P.M. Prabhu.
Only one egg a year
•The first one was noticed by ornithologist and Thattekkad resident Vimal, while he was trekking with another person, Vijayan. The second sighting was near the Chinnar river. The bird, like the Nightjar, eats insects and mainly seeks prey during night time.
•The main feature is that it lays only one egg a year after the mating season in April-May. The nest is made using moss or leaves of soft plants and the bark of the trees. The male bird destroys the nest and flies away with the new born bird.
•Ornithologists say that the bird has a unique habitat in Sri Lanka and is also believed to be present in the Thattekad bird sanctuary. It is also found in Karnataka, Goa, and Maharashtra.
At Thattekad in 1976
•It was believed that the species had gone extinct in the State after its presence was not noticed for a long period. Ornithologist Sugathan had found it at Thattekad in 1976. The Chinnar Wildlife Sanctuary is on a project to study its habitat and make a favourable environment for it.
•The Sri Lankan Frogmouth usually rests on small tree branches during daytime. Because of its silent presence, it is hardly noticed.
📰 Further stressed by thermal power
The energy sector must be required to report its water consumption
•The Composite Water Management Index (CWMI) by the NITI Aayog, which was released this June, shows that 600 million people face high to extreme water stress in India. The report, which was published in association with the Ministry of Water Resources, Ministry of Drinking Water and Sanitation and the Ministry of Rural Development, places India at a dismal 120 among 122 countries in the water quality index. It predicts that a persistent water crisis will lead to an eventual 6% loss in the country’s Gross Domestic Product by 2030.
•A significant key to this stress is the vast gulf — of about 1498 billion cubic metres (BCM) versus 744 BCM — that has been predicted between the demand and supply of fresh water, by 2030. In the projections that the Central Water Commission (CWC) released in 2015, the sector-wise requirement of water (that is, for drinking and domestic use, industry and energy) will rise steeply between 2030 and 2050.
•This mounting rise in demand is starkly evident in the energy sector, which is key to India’s ambitious developmental plan. The share of water consumed by this sector was 0.62% in 2010, which is pegged to rise up to 1.37% in 2030 and 8.98% in 2050.
•The CWMI report covers these broad themes — ground water and surface-water restoration; major and medium irrigation; watershed development; participatory irrigation management; on-farm water use; rural and urban water supply; and policy and governance. The projected water demand of the energy sector makes it an important point for the NITI Aayog to consider while bringing out future iterations of the CWMI.
Competition inevitable
•Here are some facts to mull over. As per the Central Electricity Authority (CEA), March 2018, thermal electricity accounts for more than 86% of India’s total power generation. Analysis shows that 77% of India’s total electricity comes from thermal power plants that are dependent on freshwater sources. Of all the freshwater-cooled thermal plants, 38.9% of generation capacity is installed in areas with high or extremely high water-stress. By 2030, more than 70% of India’s existing thermal power utilities are likely to experience an increased level of water competition from agricultural, urban, and other industrial demands.
•As the power sector consumes more water, competition between power and the other thirsty players is only likely to increase — a factor that future editions of the CWMI will have to consider.
•The CWMI also raises three main issues related to data: limited coverage, unreliable data and limited coordination and sharing. Measuring water consumption by power plants has been a challenge for long. However, it can easily be tackled by using the existing CEA reporting mechanism for daily generation. To do so, daily water withdrawal and consumption reporting should be mandated. These can be measured with existing technology and added into this reporting framework.
•Such information will also help in implementation of the Ministry of Environment, Forest and Climate Change Notification (dated December 7, 2015), which mandates specific water consumption norms for existing and new thermal power plants.
Seamless sharing
•In addition, information about water stress, power plant siting (location) and so on must be shared seamlessly across departments — a service that the CWMI could perform. The NITI Aayog alludes to this while describing the CWMI: “This Index is expected to establish a public, national platform providing information on key water indicators across states. This platform will help in monitoring performance, improving transparency, and encouraging competition, thereby boosting the country’s water achievements by fostering the spirit of ‘competitive and cooperative federalism’ among the states. Further, the data can also be used by researchers, entrepreneurs, and policymakers to enable broader ecosystem innovation for water in India.”
•The CWMI concludes by noting that water-scarce States such as Gujarat, Madhya Pradesh, Andhra Pradesh, Karnataka, Maharashtra and Telangana are leaders in the Index. It notes that this is “likely driven by necessity in the face of looming water shortages”. Factoring in the water-energy nexus linkages, especially the metrics around power plant water withdrawal and consumption, will only help make the Index better and the States better prepared to manage their water and power resources.
📰 Cyclone Gaja: Being prepared against extreme events
Coastal districts must continue to strengthen resilience against extreme weather events
•Tamil Nadu was more prepared than before to deal with Cyclone Gaja when it made landfall between Nagapattinam and Vedaranyam on November 16, but it still took a toll of at least 45 lives. The severe cyclonic storm damaged infrastructure, property and agriculture. Even so, the effort to professionalise disaster management through a dedicated national and State organisation initiated more than 15 years ago appears to be paying off, with bureaucracies acquiring higher efficiency in providing early warning and in mitigating the impact of cyclones. The National Cyclone Risk Mitigation Project started by the Ministry of Home Affairs has been working to reduce the impact of such catastrophic events on Andhra Pradesh, Odisha, West Bengal, Tamil Nadu and Gujarat, classified as States with higher vulnerability; most western coastal States are in the next category. However, there is a lot to be done to upgrade infrastructure and housing in coastal districts to meet higher standards of resilience in an era of extreme weather events. The lead taken by the State Disaster Management Authority in issuing a stream of alerts ahead of Gaja helped coastal residents move to camps and adopt safety measures. The active measures taken by the State after the cyclone, notably to clear roads, remove fallen trees and repair power infrastructure and communications, helped restore some stability. In its destructive exit path, the cyclone has affected some southern districts, felling tens of thousands of trees and also 30,000 electricity poles along the coast. It also hit residents in some central Kerala districts.
•Tamil Nadu’s political parties have acted in a mature manner and kept partisan criticism from getting in the way of relief and rehabilitation after Gaja. This is in contrast to some earlier instances, such as the Chennai flood of 2015, when the distribution of relief became politicised. Today, if any pressure on the government machinery is necessary, it is to secure without delay the financial relief of ₹10 lakh that has been promised for families of the dead, compensation for lost crops, trees and livestock, provision of emergency health intervention and rehabilitation assistance to rebuild lives. The larger question, of course, is whether the coastal States have equipped themselves for an even bigger event, such as the super cyclone that hit Odisha in 1999 that killed about 10,000 people. Even with far fewer casualties, Cyclone Phailin in 2013 required reconstruction estimated at $1.5 billion. India’s coastline experiences a lower frequency of tropical cyclones compared to many other regions, but the loss of life and destruction is much higher. Coastal States must, therefore, focus on reducing the hazard through policies that expand resilient housing, build better storm shelters and create financial mechanisms for insurance and compensation.
📰 New space industry emerges: servicing satellites on orbit
Fixing them in space is more profitable to companies than relaunching new ones
•Imagine an airport where thousands of planes, empty of fuel, are left abandoned on the tarmac. That is what has been happening for decades with satellites that circle the Earth.
•When satellites run out of fuel, they can no longer maintain their precise orbit, rendering them useless even if their hardware is still intact.
•In recent years, new aerospace companies have been founded to try and extend the lifespan of satellites, on the hunch that many clients would find this more profitable than relaunching new ones.
•“It’s literally throwing away hundreds of millions of dollars,” Al Tadros, vice president of space infrastructure and civil Space at a company called SSL, said.
•In 2021, his company will launch a vehicle that is capable of servicing two to three dozen satellites in a distant geostationary orbit, some 36,000 km from the earth.
•This unmanned spacecraft will be able to latch onto a satellite to inspect it, refuel it, and possibly even repair it or change components, and put it back in the correct orbit.
•Mr. Tadros describes it as “equivalent to a AAA servicing truck in geostationary orbit.”
•“It’s financially a very, very big opportunity,” said Mr. Tadros.
•Intelsat, which operates 50 geostationary satellites, chose a different option and signed a contract with Space Logistics for its Mission Extension Vehicle.
•When it launches in 2019, the spacecraft will attach itself to a broken down satellite, and reposition it in its correct orbit. The MEV will stay attached and use its own engine to stay in orbit.
•On-orbit servicing could also help cut down on the perplexing problem of mounting space debris.
•Of the 23,000 space objects counted by the U.S. military, just 1,900 are active satellites.
Too much debris
•The rest includes nearly 3,000 inactive satellites, 2,000 pieces of rockets and thousands of fragments produced by two key events: the deliberate missile explosion of a Chinese satellite in 2007, and the 2009 collision of an Iridium satellite with an ageing Russian one.
•No short term solution has been identified for small-scale space junk, but some companies would like to be able to remove defunct satellites from orbit.
•Since 2008, France has required satellite operators to take steps to “deorbit” their spacecrafts by programming them to re-enter the earth’s atmosphere in 25 years so that they burn up, according to the French National Center for Space Studies (CNES).
•When it comes to satellites in geostationary orbits, their end-of-life option is to go farther from the earth to a “graveyard orbit” 200 miles (300 kilometers) further away.
•“We are trying to promote these principles” in other countries, Francillout told AFP.
•A small Japanese company founded in 2013, Astroscale, is developing a system to approach and capture space debris and broken satellites.
•Though it doesn’t have a clientele yet, director of operations Chris Blackerby anticipates the business would be “very viable.”
•A test launch is planned for 2020.
•Airbus’s future “Space Tug,” planned for 2023, is being built to grab old satellites and push them down to 125 miles (200 kilometers) above Earth so they burn up.
•The problem of space junk is only getting worse.
•The number of satellites in space has already risen 50 percent in five years, according to the Satellite Industry Association, and growth continues.
•Meanwhile, debate is roiling in the United States over the need for better international regulation of space traffic, aimed at avoiding accidents and managing future conflicts.
•“We don’t want the Wild West,” said Fred Kennedy, director of the Tactical Technology Office at DARPA, the technological research arm of the Pentagon, noting that the United States, with its fleet of military satellites, is keen to establish sound practices beyond the boundaries of Earth.
