📰 Anti-smog guns installed at 14 large project sites in Delhi
The device sprays nebulised water droplets into the air through high-pressure propellers to curb dust pollution
•More than two months after the Supreme Court ordered the installation of anti-smog guns at all large construction sites among other locations to reduce dust pollution, the devices have been installed at 14 of the 47 large projects in Delhi.
•But most of the government agencies, including the municipal corporations and the Public Works Department, are yet to comply to letters sent by the Delhi Pollution Control Board (DPCC) to instal anti-smog guns, said officials.
•The anti-smog gun sprays nebulised water droplets into the air through high-pressure propellers, which help dust particles settle down. “The remaining 33 sites have informed us that they will instal the anti-smog guns as soon as they get the supply,” a Delhi government official told The Hindu.
•On January 13, the Supreme Court had said that anti-smog guns should be mandatory in projects that require environmental clearance from the State or Centre, and have a built-up area of over 20,000 square metres.
•The DPCC then made a list of all projects that have taken an environmental clearance and wrote to them on January 22, asking them to come up with a plan in 30 days, and then gave them a deadline of March 18 to instal the devices. “We will analyse the condition and give a fresh deadline to the remaining 33 projects,” the official said.
•The DPCC wrote to all the five municipal bodies in Delhi, the Public Works Department, National Highways Authority of India (NHAI), National Buildings Construction Corporation (NBCC), Delhi Development Authority (DDA), and Delhi Jal Board (DJB) on January 16, and instructed them to issue directions to contractors who carry out the latter’s works to instal anti-smog guns.
•“Most of them are yet to respond to us except for NHAI and NBCC. All the municipal corporations said that they are busy with dealing with the COVID-19 outbreak. We will send them reminders,” the official said.
•An anti-smog gun has been parked at the construction site in India Trade Promotion Organisation (ITPO). But it has been used only at one spot.
•“For the last few days, it has been at this spot. We need a tractor to pull it as the 500-litre tank makes it heavy for even two people to move it. So, we have been using it only at this part of the site,” a worker told The Hindu.
•Though the site had rented two such devices, one was not functioning and the other was taken out of operation, according to officials at the site. The device was not able to control dust at the site as it was stationed only spot in the vast area.
•The issue of the short supply of essential items made the headlines after nurses and doctors sent video messages to Mr. Modi, urging for lifesaving devices. However, at the last weekend, Serbia purchased medical items from India, prompting a debate.
•The official, however, clarified that the supplies to the Serbian government did not include the prohibited items.
•Along with the other countries of the SAARC region, India has set up the SAARC-COVID-19 Emergency Fund for helping the front-line health workers with the personal protective equipment. Mr. Modi took up similar issues and urged for a global approach at a videoconference with G20 leaders.
•The official indicated that India would be open to having the issue discussed at the United Nations Security Council. “However, it is a matter to be taken up by the members of the Security Council,” he said.
•The Ministry of External Affairs has set up a dedicated wing for communications with the Indians abroad, many of whom are eager to return home. The wing has so far received 3,300 phone calls and 2,500 emails.
📰 India welcomes Ghani’s talk team
Govt. calls Afghan leader’s decision to form a team for dialogue a ‘positive step’
•Welcoming Afghanistan President Ashraf Ghani’s decision to form a team for intra-Afghan negotiations that will include the Taliban, the government said this is a “positive step” for the process of reconciliation in the country.
•“We view the formation of the team as a positive step which would lead to a peaceful and stable future for Afghanistan free from the scourge of externally sponsored terrorism,” said a statement issued by the Ministry of External Affairs. The statement followed a conversation between External Affairs Minister S. Jaishankar and U.S. Secretary of State Mike Pompeo to discuss cooperation on the COVID-19 pandemic.
•MEA sources said there had also been a “discussion on the situation in Afghanistan”. They said Mr. Pompeo had condoled with Mr. Jaishankar on the death of an Indian national in the March 25 Kabul gurdwara attack, and both leaders resolved to keep exchanging notes on the developing situation.
•India’s statement also follows similar statements by the UN’s mission in Afghanistan UNAMA, other countries and even Mr. Ghani’s arch political rival former Chief Executive Abdullah Abdullah, that have all hailed his announcement on March 27 of a 21-member negotiating team that included five women, to talk to the Taliban.
•Although the Taliban rejected the announcement initially, claiming that it was not “inclusive enough”, the group sent a delegation to the Bagram Base outside Kabul on Tuesday to talk about the release of prisoners that had been decided in the U.S.-Taliban agreement in February.
Technical measures
•"They (the Taliban delegation) will pursue the issue of release of the prisoners and will conduct the necessary technical measures,” Taliban spokesman Zabihullah Mujahid, tweeted.
•The issue of the prisoners release, including 5,000 held by the government and 1,000 by the Taliban, has been a sticking point in the deal, and has meant that intra-Afghan talks planned for March 12 had to be put off.
•India sent its envoy to witness the signing of the U.S.-Taliban deal but has been cautious in welcoming its content and sceptical of dealing with the Taliban.
📰 RBI relaxes export rules, allows States and UTs to borrow more
Sets up panel to review ways and means advances limit for States
•The Reserve Bank of India (RBI) has announced more measures to fight economic disruptions caused by COVID-19, including extension of the realisation period of export proceeds and allowing States to borrow more.
•“Presently, the value of the goods or software exports made by exporters is required to be realised fully and repatriated to the country within nine months from the date of exports.
•“In view of the disruption caused by the pandemic, the time period for realisation and repatriation of export proceeds for exports made up to or on July 31, 2020, has been extended to 15 months from the date of export,” the RBI said. The measure will enable exporters to realise their receipts, especially from COVID-19 affected countries, within the extended period, and also provide greater flexibility to exporters to negotiate future export contracts with buyers abroad.
•The central bank has also formed an advisory committee to review the ways and means limit for State governments and union territories. Till the panel submits its report, the central bank has increased the ways and means advances limit by 30% for States and union territories.
•“Pending submission of the final recommendations by the Committee, it has been decided to increase the WMA limit by 30% from the existing limit for all States/UTs to enable State governments to tide over the situation arising from the outbreak of the COVID-19 pandemic. The revised limits will come into force with effect from April 1, 2020 and will be valid till September 30, 2020, the RBI said.
•The ‘Ways and Means Advances’ is a scheme that helps meet mismatches in receipts and payments of the government. Under this scheme, a government can avail itself of immediate cash from the RBI.
•The central bank has also deferred the implementation of counter cyclical capital buffer (CCyB) for banks.
•“Based on the review and empirical analysis of CCyB indicators, it has been decided that it is not necessary to activate CCyB for a period of one year or earlier, as may be necessary,” the RBI said.
📰 March GST revenue drops below Rs. 1 lakh cr.
COVID-19 impact to be seen from Apr.
•Goods and Services Tax (GST) collections for March 2020 stood at Rs. 97,597 crore, dropping below the Rs. 1 lakh-crore mark after four months.
•Gross GST revenue for the month was 8% lower than that of March 2019, according to Finance Ministry data released on Wednesday.
•For the full financial year 2019-20, gross GST collections grew 4% in comparison to the previous year.
•As the March revenue collections are based on the business conducted in February, these figures do not take into account the full impact of COVID-19 and the consequent shutdown of many business sectors in India. Analysts warn that next month’s revenues are likely to dip much further.
•Although GST revenue from domestic transactions dropped 4% in comparison with March 2019, there was a 23% fall in the tax collected on import of goods. “Global trade was affected by COVID-19 in February itself, so we could be seeing the result of that,” said Sachin Menon, national head, indrect taxes, KPMG in India.
•There has also been a sharp 7% decline in the filing of February GSTR-3B returns, with only 76.5 lakh returns being filed till March 31 in comparison with the more than 83 lakh filed in the previous two months. “It seems that many businesses may not have been able to pay GST because of the liquidity issues being faced after the lockdown,” said Pratik Jain, partner and indirect tax leader at PwC India.
•The situation is likely to worsen. “With most businesses being non-operational for a considerable period in March and the relaxation of delayed payments allowed, collections in the coming quarter would see quite a fall,” said Abhishek Jain, tax partner at Ernst and Young. Small businesses have been allowed a three-month deferment of GST payments due to the COVID-19 situation, and there is a wider industry demand for a moratorium on payments and reduction in rates.
•“At this stage, it is necessary for businesses to conserve cash in order to enable resumption of operations once the lockdown ends. Any deferral of the GST payment timelines by a few months would significantly assist them in this process,” said M.S. Mani, partner, Deloitte India.
📰 Thinking national, acting local
A planning institution must be a systems reformer and a force of persuasion, not just a control centre
•The attack by the SARS-CoV-2 virus has highlighted, once again, both the bad shape of the Indian economy and the precariousness in the lives of millions of people. Citizens have been ordered to stay in their homes to prevent the pandemic. But many have no homes. They are being urged to wash their hands frequently, when many do not have access to enough clean water to drink. The public health system is woefully inadequate. GDP growth rates may have been good for sometime. But many systems in the country are fragile.
•National planning, by whatever name it is called (Planning Commission or NITI Aayog), has failed to produce all-round development of India’s economy so far. An all-round plan for recovery from the pandemic is required. As Einstein said, “you cannot solve intractable problems with the same thinking that produced the problems”. Therefore, it is time to consider the weakness in India’s national planning.
•Any planning institution in a federal and democratic system faces two basic challenges when it comes to performing a long-term role — a constitutional challenge, and the challenge of competence.
The constitutional question
•The fundamental issues a national plan must address, such as the condition of the environment, the shape of the economy, and pace of human development, need consistent action over decades. Therefore, policies must continue beyond the terms of governments that change in shorter spans in electoral democracies. Moreover, if the planning body does not have constitutional status independent from that of the government, it will be forced to bend to the will of the latter. Planning in China does not face this disruption.
•Short-termism in policymaking is a weakness of electoral democracies everywhere, as citizens of California have realised. California is suffering from great environmental stress. Its vaunted public education system has been underfunded for years. A group of concerned citizens in California, convened by the Berggruen Institute, formed a Think Long Committee. They studied the systems of governance in many countries and examined how long-term planning fits in them. China, whose remarkable economic progress can provide some lessons for planners everywhere, received special attention. With their insights, they have proposed a few changes to constitutional structures in California.
•Debates have begun amongst economists about the inefficacy of long-term planning in India and the performance of NITI Aayog. They say that planning is weak when planners do not have the powers to allocate money for national priorities, which NITI Aayog does not have. They forget that the Planning Commission had such powers and yet was considered ineffective in bringing about all-round progress.
•Moreover, they glide over constitutional issues in granting powers to institutions that allocate public money in democracies. A fundamental principle of democratic governance is that the power to allocate public money must be supervised by elected representatives. Therefore, a planning body that allocates money must be backed by a constitutional charter, and also accountable to Parliament.
•India’s national planning process must address the constitutional relationship between the Centre and the States. In India’s constitutional structure, elected governments in the States are accountable to the people. They are expected to improve human development, create infrastructure, and make it easy to do business in the State. They must manage their financial resources efficiently and balance their budgets. Constitutionally established Finance Commissions determine the sharing of Centrally raised resources with the States. What then is the role of a national planning commission?
•Indeed, this was the question that several State Chief Ministers had raised during the UPA-II period.
•States who were becoming self-sufficient in their resources questioned the value they were getting from their interactions with the Planning Commission. They said the Commission was out of touch with their ground realities and had little experience of how to get things done to produce outcomes. Moreover, it was becoming apparent that the model based on which the Commission seemed to been forming its advice was inadequate.
Need for competence
•Whether a planning institution allocates money, or advises others how to, it must have the necessary competence. A national planning institution must guide all-round progress. It must assist in achieving not just faster GDP growth, but also more socially inclusive, and more environmentally sustainable growth. For this, it needs a good model in which societal and environmental forces are within the model. Economists who have been advising policymakers do not have comprehensive models of socio-environmental systems. Their models are inadequate even to explain economic growth, because they have not incorporated the implications of economic growth on inequality, for example, which has become a contentious issue.
•An economy is a complex system, which sits within an even larger and more complex system of human society and the natural environment. The globalisation agenda has been driven by an economic agenda, with policies promoting global trade and finance to maximise global economic output. It has paid too little attention to the impact of the ‘GDP agenda’ on the well-being of communities where employment declines when production moves to lower cost sources elsewhere. Or to the total environmental impact of global supply chains. Now the system is reacting and stalling globalisation.
•A feature of complex systems, in which all the parts are connected, is that the system cannot be healthy if any part becomes very sick — even if the others are in robust health. Even if all other organs in a human body are functioning, if one fails, the whole body dies. Therefore, a healthy global system must help its weaker members to become stronger. Another feature of complex systems with many interacting forces is that the forces combine in unique ways in different parts of the system. For example, the conditions of livelihoods, the natural environment, and infrastructure, combine in different ways in different localities and States. Therefore, systems solutions must be local too.
•These insights into systems structures, as well as considerations of democratic governance in which governance should be devolved to national governments, and, within them, to State governments, and even to the third tier of city and district governance, have implications for the role and competencies of a national planning institution for India. It must be a systems reformer, not fund allocator. And a force for persuasion, not control centre. Because its role must be to promote local systems solutions to national problems.
📰 Still no bullseye, in volume and value
India’s defence model faces challenges despite the positive trends generated by ‘Make in India’
•The emergence of evidence of a rise in Indian defence exports, also accompanied by a decline in imports, is a welcome development though the reasons for both are not identical. Based on the latest estimates released by the Stockholm International Peace Research Institute (SIPRI) in the period between 2009-13 and 2014-18, Indian defence imports fell even as exports increased.
•Broadly, two factors appear to be driving this shift. The first is the ‘Make in India’ initiative, as part of which a number of components from Indian private and public sector enterprises have been prioritised by the government. The second set of factors is extraneous to India in the form of delays in supplying equipment by vendors and the outright cancellation of contracts by the Indian government or at least a diminution of existing contracts.
•Under the Narendra Modi government’s ‘Make in India’ initiative, the Defence Procurement Procedure (DPP) lays out the terms, regulations and requirements for defence acquisitions as well as the measures necessary for building India’s defence industry. It created a new procurement category in the revised DPP of 2016 dubbed ‘Buy Indian Indigenously Designed, Developed and Manufactured’ (IDDM). The ‘Make’ procedure has undergone simplification “earmarking projects not exceeding ten crores” that are government funded and Rs. 3 crore for Micro, Small and Medium Enterprises (MSMEs) that are industry funded. In addition, the government has also introduced provisions in the DPP that make private industry production agencies and partners for technology transfers. Small and Medium Enterprises (SMEs) until 2016 accounted for a 17.5% share of the Indian defence market. According to government of India data for the financial year 2018-19, the three armed services for their combined capital and revenue expenditures sourced 54% of their defence equipment from Indian industry.
Public sector driven
•Among arms producers, India has four companies among the top 100 biggest arms producers of the world. It is estimated, according to SIPRI, their combined sales were $7.5 billion in 2017, representing a 6.1% jump from 2016. The largest Indian arms producers are the Indian ordnance factories and the Hindustan Aeronautics Limited (HAL), which are placed 37th and 38th, respectively, followed by Bharat Electronics Limited (BEL) and Bharat Dynamics Limited (BDL). All four of these companies are public sector enterprises and account for the bulk of the domestic armament demand.
Explaining falling imports
•To be sure, not all this growing indigenisation and reduction in imports can be attributed to ‘Make in India’. Indian defence acquisitions have also fallen due to the cancellation of big-ticket items. Take for instance the India-Russia joint venture for the development of the advanced Su-57 stealth Fifth Generation Fighter Aircraft (FGFA). India cancelled involvement in 2018 due to rising dissatisfaction in delays with the project as well as the absence of capabilities that would befit a fifth generation fighter jet. In 2015, the Modi government also reduced the size of the original acquisition of 126 Rafale Medium Multi-Role Combat Aircraft (MMRCA) from Dassault to 36 aircraft, which is also responsible for significantly driving down the import bill. That apart, the delays in the supplies of T-90 battle tanks, and Su-30 combat aircraft from Russia and submarines from France, in 2009-13 and 2014-18, also depressed imports.
•Further, India’s defence model faces challenges despite the positive trends generated by ‘Make in India’. SMEs still face stunted growth because India’s defence industrial model is at odds with global trends in that it tends to create disincentives for the private sector. Governments, including the incumbent, have tended to privilege Defence Public Sector Units (DPSUs) over the private sector, despite ‘Make in India’. This model is highly skewed, undermining the growth of private players and diminishes the strength of research and development.
Export trends
•Nevertheless, on the exports front, trends do look promising. Indeed, the period between 2012 and 2019 saw Indian defence exports experiencing a considerable jump sourced from Indian public and private sector enterprises. In the last two fiscal years, 2017-18 and 2018-19, exports have witnessed a surge from Rs. 7,500 crore to Rs. 11,000 crore, representing a 40% increase in exports. While this initial increase started during the previous United Progressive Alliance (UPA) government, the sharpest rise in defence export products can be attributed to the measures introduced by the National Democratic Alliance (NDA) government under Mr. Modi, which in 2014, delisted or removed several products that were restricted from exports. It dispensed with the erstwhile No Objection Certificate (NOC) under the DPP restricting exports of aerospace products, several dual-use items and did away with two-thirds of all products under these heads. According to the Ministry of Commerce and the Industry, Export-Import Data Bank export of defence items in the aerospace category has witnessed an increase in value. Small naval crafts account for the bulk of India’s major defence exports. However, export of ammunition and arms remain low. As a percentage of total Indian trade, defence-related exports for the fiscal years 2017-18 and 2018-19 were 0.8 and 0.73%, respectively.
•Thus, from a volume and value standpoint, Indian defence exports, while showing a promising upward trend, still remain uncompetitive globally. It is likely that Indian defence exports will take several years before they are considered attractive by external buyers. But green shoots are emerging in a sector that has long been devoid of any dynamism and Indian policymakers should make the most of the opportunities this represents.
📰 The battle to set oil prices
Russia’s move to reject production cuts is driven by its strategy of denying market share to U.S. shale producers
•The global economy, grappling with the COVID-19 pandemic, is now facing an energy war, with crude oil prices crashing in the international market. Crude oil prices tanked, as the Organization of the Petroleum Exporting Countries (OPEC) and its alliance partners failed to reach any consensus on cutting back production to levels that would enable prices to remain stable. The U.S., as the largest oil producer today, has stayed away from the OPEC-plus arrangement, hoping that production cuts by OPEC-plus countries will help it increase its market share.
•Russia refused any production cuts, unleashing an energy war with Saudi Arabia. There has been a spectacular fall of around 30% in crude oil prices. The International Energy Agency (IEA) has scaled down global demand for oil, a move not taken by the energy watchdog since 2009. Demand for oil had already weakened owing to the global economic slowdown, and this weakening has become more pronounced due to the COVID-19 pandemic, which has hit China’s economy and reduced consumption by the world’s largest importer.
•Russia’s decision to reject any production cuts is driven directly by its strategy of denying market share to American shale oil producers. The latter rely on higher prices in the range of $50-$60 to remain profitable because of higher production costs. At $31 per barrel, not more than five American shale oil producers can remain profitable.
Sanctions on Rosneft
•Russia also remains resentful of sanctions imposed on Rosneft, which is building the gas pipeline project Nord Stream 2 across the Baltic Sea, carrying Siberian gas to Germany, a major consumer. This pipeline was delayed due to opposition from Denmark’s environmental activists and could not be completed before the U.S. sanctions kicked in. Moscow has accused Washington of using geopolitical tools for commercial reasons.
•Russia had promised to retaliate at a time of its own choosing. The energy war over prices is Russia’s revenge, to cripple the American shale oil industry. President Donald Trump has scrambled to put together a rescue package for the shale oil companies. Russia is also signaling to Saudi Arabia that its American patrons can do little to protect its oil interests and it would be prudent for Saudi Arabia to reach some understanding with Russia. Both Saudi Arabia and Russia depend heavily on oil revenues — upwards of 80% of export revenues accrue from crude oil. Both are also fighting to retain market share. It has been reported that Saudi Arabia has agreed to supply crude oil at lower rates to refiners in India and China, two primary customers, but refused to supply to other refiners in Asia. This will impact on India’s oil procurement from the U.S..
Benefit to importing countries
•Lower crude oil prices are not necessarily bad news for oil importing countries like India, which is the world’s third-largest importer of crude oil and the fourth largest importer of LNG. There are, however, collateral adverse consequences like the battering of the stock markets worldwide. The global economy, already impacted by President Donald Trump’s trade war with China and other countries, including India, and the COVID-19 pandemic, may find lower energy costs helpful in overall growth.
•From a high of $147 per barrel in 2008, crude oil prices have fallen to around $24 per barrel and may even go further southwards. India, with 80% of its energy requirements met by imports from the international market, stands to save Rs. 10,700 crores for every $1 drop in prices. While this may help manage the current account deficit, fiscal deficit and inflation, there are non-oil related collateral factors that can cause countervailing adverse economic impact.
•There is no doubt that India will benefit from lower oil prices, if the cost of fuel at the pump is passed on to consumers. It will reduce transportation costs and boost demand. The consumer, however, may not benefit much since the government may choose to use this financial windfall for other purposes, like bailing out banks which have been hollowed out by NPAs to leading Indian companies.
•Can Russia and Saudi Arabia sustain the energy war for long? Unlikely. Saudi Arabia’s production cost is the cheapest in the world and it can ramp up production to around 12 million barrels a day. By offering discounts, it can undercut other producers, including Russia. Domestic considerations also matter.
•Meanwhile, oil importing countries, like India, can enjoy a breather and cushion the adverse impact of COVID-19 and other factors.
