📰 ‘India’s coal mines are severely under-utilised amid push for new ones’
Though the country experienced supply crunch twice last year, a report suggests new projects under development could be ‘unnecessary’ as only two-thirds of the current capacity is under use
•On average, India’s coal mines use only two-thirds of the capacity, with some large ones using only 1%, says an analysis by Global Energy Monitor (GEM), a firm that tracks utilisation of the fuel-source internationally.
•This suggests that 99 of India’s coal mine projects, expected to yield 427 million tonnes per annum (MTPA), under development are unnecessary, and opening new coal mines would not contribute to easing short-term supply-crunches.
•At least twice last year, India experienced severe coal crises, with more than 100 of 285 thermal power plants witnessing coal stocks fall below the critical mark of 25% of the required stock. In over 50 plants, it fell below 10%. This led to power shortages in several States, including Andhra Pradesh, Jharkhand, Uttarakhand and Madhya Pradesh.
•GEM performed its analysis by surveying annual reports of Coal India, the largest coal producer in the world, and its subsidiaries and underlines that the company has not listed capacity constraints as among the reasons it fails to reach production targets.
•Instead, it blames “..competition from renewables, infrastructure impasses, and land-use concerns for hindering output...” the report notes.
•Coal mines under development threaten to displace at least 165 villages and affect 87,630 families, of which 41,508 live in areas where the predominant population is tribal communities. These also threaten 22,686 hectares (ha) of agricultural land and 19,297 ha of forest, and will consume at least 168,041 kilolitres of water per day, comparable to the daily water needs of over one million people, according to GEM.
•On the heels of Prime Minister Narendra Modi’s announcement of a net zero target of 2070, these new mines “... increase India’s likelihood of stranded assets, delay a clean energy future — and in the process pose irreversible impacts on India’s rural communities and environments for the sake of economically precarious mining ventures”, the report underlines.
‘Warning signs ignored’
•“The signs warning against the massive expansion of coal mining are easy to see, but the Indian government is not heeding them,” Ryan Driskell Tate, project manager for GEM’s Global Coal Mine Tracker, said in a statement.
•“New mines can’t make the industry’s old problems go away. The irony of this expansion is that opening new mines today could intensify the sector’s weaknesses and inefficiencies tomorrow, especially as competition from renewables and conflicts over land use continue to emerge.”
📰 Food day as a reminder to ‘leave no one behind’
•Globally, food and nutrition security continue to be undermined by the impacts of the COVID-19 pandemic, climate change, spiralling food inflation, conflict, and inequality. Today, around 828 million people worldwide do not have enough to eat, and over 50 million people are facing severe hunger.
•The Hunger Hotspots Outlook (2022-23) — a report by the Food and Agriculture Organization of the United Nations (FAO) and the World Food Programme (WFP) — forebodes escalating hunger, as over 205 million people across 45 countries will need emergency food assistance to survive.
•This year’s World Food Day (October 16) has been a reminder to ensure that the most vulnerable people within our communities have easy access to safe and nutritious food. The promise to end hunger by 2030 is possible only through collective and transformational action to strengthen agri-food systems; better production, better nutrition, a better environment, and a better life.
Better production, better nutrition
•India has had an inspiring journey towards better production and achieving self-sufficiency and is now one of the largest agricultural product exporters. During 2021-22, it recorded $49.6 billion in total agriculture exports — a 20% increase from 2020-21. However, recent climate shocks have raised concerns about India’s wheat and rice production over the next year. Therefore, it is important to place a greater focus on climate adaptation and resilience building.
•By 2030, India’s population is expected to rise to 1.5 billion. Agri-food systems will need to provide for and sustainably support an increasing population. There is increased recognition to move away from conventional input-intensive agriculture towards more inclusive, effective, and sustainable agri-food systems that would facilitate better production. There have also been a series of initiatives by the Government of India on better production and improving food access, especially for vulnerable populations.
•Since 1948, the FAO has continued to play a catalytic role in India’s progress in the areas of crops, livestock, fisheries, food security, and management of natural resources through the promotion of sustainable practices.
•World Food Day is a reminder to ‘Leave No One Behind’, and is an opportunity — perhaps the most urgent one in recent history — for nations to strengthen food security nets, provide access to essential nutrition for millions and promote livelihood for vulnerable communities.
•One of India’s greatest contributions to equity in food is its National Food Security Act (NFSA) 2013 which anchors the Targeted Public Distribution System (TPDS), the PM POSHAN scheme (earlier known as the Mid-Day Meals scheme), and the Integrated Child Development Services (ICDS). Today, India’s food safety nets collectively reach over a billion people. The WFP works with State and national governments to strengthen these systems to reach the people who need them most. The Government continues to take various measures to improve these programmes with digitisation and measures such as rice fortification, better health, and sanitation.
•Food safety nets and inclusion are linked with public procurement and buffer stock policy — visible during the global food crisis (2008-12) and the COVID-19 pandemic fallout, whereby vulnerable and marginalised families in India continued to be buffered by the TPDS which became a lifeline. An International Monetary Fund paper titled ‘Pandemic, Poverty, and Inequality: Evidence from India’ asserted that ‘extreme poverty was maintained below 1% in 2020 due to the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY). India’s upcoming G20 presidency is an opportunity to bring food and nutrition security to the very centre of a resilient and equitable future.
A better environment
•Nutrition and agricultural production are not only impacted by climate change but also linked to environmental sustainability. Soil degradation by the excessive use of chemicals, non-judicious water use, and declining nutritional value of food products need urgent attention.
•Millets have received renewed attention as crops that are good for nutrition, health, and the planet. As climate-smart crops, they are hardier than other cereals. Since they need fewer inputs, they are less extractive for the soil and can revive soil health. Additionally, their genetic diversity ensures that agrobiodiversity is preserved.
•India has led the global conversation on reviving millet production for better lives, nutrition, and the environment, including at the UN General Assembly, where it appealed to declare 2023 as the International Year of Millets. It is the world’s leading producer of millets, producing around 41% of total production in 2020. The national government is also implementing a Sub-Mission on Nutri-Cereals (Millets) as part of the National Food Security Mission. State-level missions in Odisha, Madhya Pradesh, and Andhra Pradesh are a testament to India’s resolve to revive these indigenous crops.
•Millet conservation and promotion contribute to addressing food security, improved nutrition, and sustainable agriculture, which aligns with the Sustainable Development Goals (SDG) agenda. Millet production has been proven to enhance biodiversity and increase yields for smallholder farmers, including rural women. The International Fund for Agricultural Development’s (IFAD’s) Tejaswini programme with Madhya Pradesh showed that growing millets meant a nearly 10 times increase in income (₹1,800 per month in 2013-14 to ₹16,277 in 2020-21), with better food security because millet crops were not impacted by excessive rainfall.
•A study by the FAO on millets in India emphasises strengthening value chains for enhancing nutritional benefits and increasing farmers’ incomes.
A better life
•It is clear that the path to a better life resides in transforming food systems, making them more resilient and sustainable with a focus on equity, including by incentivising the protection of the commons; enhancing food and nutrition security and social protection networks, including by providing non-distortionary income support; promoting production and consumption of nutritious native foods such as millets, by investing in consumer sensitisation; investing in making the global and regional supply chain robust and responsive by strengthening transparency in the agricultural system through systems that promote labelling, traceability, etc.; and increasing cooperation for leveraging solutions and innovations. India can lead the global discourse on food and nutrition security by showcasing home-grown solutions and best practices, and championing the principle of leaving no one behind — working continuously to make its food system more equitable, empowering, and inclusive.
📰 Understanding the Global Hunger Index
On what indicators is the GHI computed? Why did the Ministry of Women and Child Development reject the report and call it “an erroneous measure of hunger”? Why are child-centric metrics used to calculate global hunger?
•The Ministry of Women and Child Development on Saturday rejected the Global Hunger Index (GHI) that ranked India 107 among 121 countries. The GHI is a peer-reviewed annual report that endeavours to “comprehensively measure and track hunger at the global, regional, and country levels”.
•As per the Ministry, the report lowers India’s rank based on the estimates of the Proportion of Undernourished (PoU) population. It elaborates that the U.S. Food and Agriculture Organisation (FAO) estimate is based on the ‘Food Insecurity Experience Scale (FIES)’ survey module that bears a sample size of 3,000 respondents. It stated that the data represented a miniscule proportion for a country of India’s size.
•The GHI website explains that while FAO uses a suite of indicators on food security, the GHI only uses the PoU obtained through food balance sheets based on data reported by member countries, including India.
The story so far:
•For the second time in two years, the Ministry of Women and Child Development on Saturday rejected the Global Hunger Index (GHI) that ranked India 107 among 121 countries. India was accorded a score of 29.1 out of 100 (with 0 representing no hunger), placing it behind Sri Lanka (66), Myanmar (71), Nepal (81) and Bangladesh (84). It referred to the index as “an erroneous measure of hunger”.
What is the Global Hunger Index?
•The GHI, is a peer-reviewed annual report that endeavours to “comprehensively measure and track hunger at the global, regional, and country levels”. Authors of the report primarily refer to the United Nations’ Sustainable Development Goal 2 (SDG 2) that endeavours to achieve ‘Zero Hunger’ by 2030. According to them, the report attempts to “raise awareness and understanding of the struggle against hunger”. The GHI score is computed using four broad indicators — undernourishment (measure of the proportion of the population facing chronic deficiency of dietary energy intake), child stunting (low height for age), child wasting (low weight for height) and child mortality (death of a child under the age of five).
Why these four metrics?
•Undernourishment, as per the authors, provides a basis to measure inadequate access to food and is among the lead indicators for international hunger targets, including the UN SDG 2. Child stunting and mortality, offers perspective about the child’s vulnerability to nutritional deficiencies, access to food and quality of nutrition. Since children (especially below five) are at a developmental age there is a greater and urgent requirement for nutrition with results particularly visible. This forms the basis of assessing nutritional requirement among children. Adults are at a sustainable age — they are not growing but rather subsisting on nutrition for healthy survival. And lastly, on the same rationale, child mortality indicates the serious consequences of hunger.
What allegations are we looking at?
•As per the Ministry for Women and Child Development, the report lowers India’s rank based on the estimates of the Proportion of Undernourished (PoU) population. It elaborates that the U.S. Food and Agriculture Organisation (FAO) estimate is based on the ‘Food Insecurity Experience Scale (FIES)’ survey module conducted using the Gallup World Poll, that bears a sample size of 3,000 respondents being asked eight questions. It stated that the data represented a miniscule proportion for a country of India’s size. It countered the assertions in the report pointing to India’s per capita dietary energy supply increasing year-on-year due to enhanced production of major agricultural commodities in the country over the years.
•The GHI website provides important clarifications on these points raised by the government. It explains that while FAO uses a suite of indicators on food security, including two important indicators — prevalence of undernourishment and prevalence of moderate or severe food insecurity based on FIES — the GHI only uses the PoU obtained through food balance sheets based on data reported by member countries, including India. A food balance sheet provides a comprehensive picture of the pattern of a country’s food supply during a specified reference period. It lists down the source of the supply and its utilisation specific to each food category.
•On why the GHI uses three child-specific indicators out of the four to calculate hunger for a country’s population, the website explains, “By combining the proportion of undernourished in the population (1/3 of the GHI score) with the indicators relating to children under age five (2/3 of the GHI score), the GHI ensures that both the food supply situation of the population as a whole and the effects of inadequate nutrition within a vulnerable subset of the population are captured.” In fact, a Senior Policy Officer at the GHI said that, “All four indicators used in the calculation of the global hunger are recognised by the international community, including India, and used for measuring progress towards the UN SDGs.”
Why the controversy?
•According to the Ministry, the report is not only disconnected from ground reality but also chooses to ignore the food security efforts of the Central government especially during the pandemic. The Union Cabinet through the Pradhan Mantri Garib Kalyan Ann Yojna (PM-GKAY), provisioned an additional 5 kg ration per person each month in addition to their normal quota of foodgrains. According to Professor of Economics at the Ambedkar University, Dipa Sinha, the schemes definitely helped ease the situation but fell short of being adequate.
If the more favourable Old Pension Scheme is to be financially sound, the focus should be on increasing revenues to fund it
•After Rajasthan and Chhattisgarh, Punjab is the latest State that has announced its plan to revert to the Old Pension Scheme (OPS). Many have argued that this is a fiscally irresponsible move. We argue why and how we must go back to the OPS.
•The OPS is an assured inflation-indexed monthly family pension till you (and your spouse) live(s). The OPS level is linked to the last pay you drew. The NPS is a corpus from which you can draw a pension after retirement. Its value is determined by the market prices in which the corpus is invested.
•There are many issues with the NPS. One, as Chart 1 shows, the amount of monthly pension you would draw (for the same contribution during service) with three hypothetical market rates of return is significantly lower for NPS.
•Two, it is dependent on the vagaries of the market prices of equity/bonds in which the corpus is invested. To be sure, the markets do not crash often and in the long run they go up rather than down. But it is still a lottery. If there is a crash, the downside has to be absorbed by the retirees. According to a 2008 OECD study, the global financial crisis had wiped a total of $5 trillion off the value of private pension funds in rich countries compared to the start of the year. It’s true that this is the value of assets on paper, but such a fall can, and did, induce withdrawals among panic-stricken retirees who didn’t have age on their side to be in the long game of speculation.
•Three, the OPS is a fixed government expenditure irrespective of an economic slowdown or a stock market crash, which makes it a good counter-cyclical policy measure during a crisis. In fact, the Sixth Pay Commission in India did precisely this during the Great Recession of 2008.
•It has been argued that the OPS is a big hole in the exchequer’s pocket (25% of the States’ budget). This number is misleading because three other parts of States’ revenue receipts — tax the Centre collects on behalf of the States (SGST, a part of direct taxes, etc.); non-tax revenue that the States collect; and non-tax grant that the Centre shares with the States — have not been taken into account. Chart 2A shows that the OPS outlays, when calculated correctly, are less than half of 25%. Additionally, as Chart 2B shows, when the revenues (as a share of State GDP) go up, the share of pensions falls. So, shouldn’t the focus then be on mobilising revenues instead of cutting expenditures? But how?
•Chart 3 plots the tax-GDP ratio (State plus Centre’s taxes) for 18 of the G20 countries. India is the fifth country from the bottom and performs poorly among BRICS nations. Even within that, two out of three rupees comes from indirect taxes, for which the poor have to pay the same as the rich for a commodity. So, by increasing direct taxes — in particular corporate taxes — enough room can be created to ensure decent pensions for all.
•Not only is there enough room in corporate taxes, a lot more can be mobilised if India were to target property and wealth taxes, which are almost zero (Chart 4A). Not surprisingly, India ranks the lowest among the 18 of G-20 countries. At one point, India did have some property tax, however insignificant, which rose between 2005 to 2012 but has fallen precipitously since (Chart 4B).
•Perhaps there is a need to rationalise the level of pensions under the OPS to make room for non-permanent workers. But doing away with the old pension altogether is like throwing the baby with the bath water.
📰 Why does the SC Collegium hold primacy over transfers?
The government’s unilateral delaying or segregating of names, recommended by the Supreme Court Collegium, is affecting effective justice administration as posts remain vacant without end
•Appointments and transfers of judges in the constitutional courts is a participatory consultative process between the Supreme Court and the government. But there is a disturbing pattern of the government unilaterally delaying or segregating names recommended by the Supreme Court Collegium.
•The Three Judges Case establishes the primacy of the Collegium, led by the CJI, in making judicial appointments. ‘Chief Justice of India’ here means the collective opinion of the Collegium.
•The executive element in the appointment process of judges to senior positions is reduced to the minimum so that any undue influence is eliminated. It was for this reason that the word ‘consultation’ instead of ‘concurrence’ was used in the Constitution.
•Appointments and transfers of judges in the constitutional courts is a participatory consultative process between the Supreme Court and the government. But there is an increasing trend, if not a disturbing pattern, of the government unilaterally delaying or segregating names recommended by the Supreme Court Collegium. While the need of the hour is to fill up judicial vacancies for effective justice administration, the primacy of the Collegium to recommend names for elevation to the Supreme Court and appointments and transfers in high courts, is affected by what some legal experts term as “cherry-picking” on the part of the executive.
Constant segregation and delays
•Justice Muralidhar’s transfer as the Chief Justice of the Madras High Court was recommended by the Collegium to the government along with the name of Jammu and Kashmir High Court Chief Justice Pankaj Mithal on September 28. Both names were proposed jointly in a single batch. However, the government chose to notify Justice Mithal’s transfer to the Rajasthan High Court while keeping an ominous silence about Justice Muralidhar. The split in the batch had a ripple effect. The name of Justice Jaswant Singh, who was recommended to replace Justice Muralidhar as the Orissa High Court Chief Justice, was also segregated. Justice Singh’s recommendation lies in limbo with the government while the other judges recommended by the Collegium in the same batch for elevation were notified by the government on October 11. The juggling of names at the government’s end not only affects the primacy of the Collegium, but also impacts the seniority of a judge and even his/her prospects to be appointed to the Supreme Court. But Justice Muralidhar’s case is not the first such incident. In the past, the government has unilaterally segregated names recommended by the Collegium. In 2014, the Collegium headed by then Chief Justice of India (CJI) R. M. Lodha had recommended former Solicitor General Gopal Subramanium for direct appointment to the Supreme Court Bench. The government turned down Mr. Subramanium’s name while clearing the names of senior advocates such as Rohinton F. Nariman, Justices Arun Kumar Mishra and A.K. Goel. Chief Justice Lodha, in an interview to The Hindu, said the collegium was the “final arbiter of judicial appointments”. He said segregation with the Collegium’s list amounted to “tinkering”. He had maintained that prior consultation with the CJI before segregation was the “integral component of the primacy of the Collegium”.
The mandate of the Collegium
•The Three Judges Case establishes the primacy of the Collegium, led by the CJI, in making judicial appointments. ‘Chief Justice of India’ here means the collective opinion of the Collegium. Giving primacy meant the ‘CJI’ was best equipped to know and assess the worth of a candidate for appointment as a superior judge. The executive had at best the power to act as a “mere check on the exercise of power by the Chief Justice of India, to achieve the constitutional purpose”. Thus, the executive element in the appointment process was reduced to the minimum and any political influence was eliminated. It was for this reason that the word ‘consultation’ instead of ‘concurrence’ was used in the Constitution. The way out of the imbroglio would be to introduce checks through the Memorandum of Procedure (MoP) against unilateral segregation by the government. A new MoP could also bring in a clause to clear names for judicial appointments within a reasonable time to avoid delay.
📰 The bigger picture of intermediation, financial crises
•The financial sector plays a major role in modern economies and banks are the cornerstone of the financial system. They mobilise savings for investments, create opportunities to pool risks, improve allocative efficiencies, and lower transaction costs when funds exchange hands between borrowers and lenders. Interestingly, the very mechanisms that enable banks to offer these valuable services are also those which, at times, make banks vulnerable to small shocks and market sentiments, triggering a financial crisis and/or bank run with severe consequences. This year’s Nobel Memorial Prize in Economic Sciences has been awarded to three American economists — Ben S. Bernanke, the former Federal Reserve Chair; Douglas W. Diamond at the University of Chicago; and Philip H. Dybvig at Washington University in St. Louis for offering a deeper understanding of the genesis, the propagation, and the management of financial crises. Explaining the ideas of Diamond and Dybvig in their 1983 seminal paper on bank runs is a good beginning.
Even the ideal situation has a risk
•Consider an ideal situation where banks and firms are honest, banks are healthy with a small volume of non-performing loans, and that the economy is not facing any significant adverse events such as wars, floods, etc. Now, ask yourself if your deposits in a bank are safe under this ideal condition. According to Diamond and Dybvig, even in this ideal environment banks may fail to meet obligations to depositors due to a different kind of risk — the risk associated with maturity transformation which banks have to undertake to be viable.
•Their argument goes as follows. Consider a bank that takes deposits from many small savers, like you and me. We may face a sudden need for cash due to unforeseen circumstances. Therefore, we prefer to put our savings in liquid deposit accounts from which we can withdraw at minimum notice. On the other hand, the firms that borrow from the bank prefer loans with longer maturity since they want to invest the money in business activities. To make its operation viable, a bank has to pay attention to the needs of both sets of customers. Thus, a bank has to turn short-term deposits into long-term lending. Under ordinary circumstances, a bank’s day-to-day operation remains unaffected by this mismatch of its assets (loans) and liabilities (deposits) because withdrawals by depositors largely uncorrelated. On a given day, only a fraction of depositors (you and me) faces an unforeseen need for cash and the need to withdraw money from their accounts.
A framework used as an explainer
•Repeated observations of borrower behaviour allows banks to set aside (technically by appealing to the law of large numbers) a fraction of deposits needed to meet the daily demand for withdrawal and safely give out the rest as loans with longer maturities. This process works well as long as each depositor expects other depositors to withdraw only when they have real expenditure needs. But suppose something changes for the depositors (economic or political events for example). This could trigger a belief among the depositors that their deposits are at risk. Such expectations could be wholly unfounded or based on a minor event. Now depositors like you and me are informed and smart. They know that a bank has locked a significant fraction of its deposits in loans that cannot be quickly called in, and also anticipating that other depositors will want to withdraw their funds.
•Consequently, the best strategy for a depositor under these circumstances would be to withdraw his/her own money before it runs out. Since all of us are smart and we think alike, what emerges is a perfect recipe for a bank run that can potentially trigger a financial crisis. Incidentally, a way to prevent such crises and runs is to offer deposit insurance, which many governments have implemented. One does not have to be a trained economist to see the beauty and creativity in this explanation — it helped that both Diamond and Dybvig were graduate students at Yale in the late 1970s. Additionally, the Diamond-Dybvig framework has been used to explain how financial development affects the rest of the economy and to understand the effects of monetary policy on banks’ portfolio choices. It is one of the few papers to have its own Wikipedia page.
Credit market’s role
•The other winner Ben Bernanke, made significant contributions to our understanding of the credit market’s role in propagating and accentuating the effects of shocks. During the great depression of the 1930s, nearly 7,000 banks in the United States failed taking with them $7 billion in depositors’ assets. One can view bank failures at this scale as a consequence of a deep economic downturn and stop there. However, Bernanke in a 1983 paper argued that the disruptions of 1930-33 reduced the effectiveness of the financial sector as a whole by increasing the real costs of intermediating in the market and making credit more expensive and difficult to obtain.
•Consequently, bank runs played an important role in converting the severe but not unprecedented downturn of 1929-30 into a protracted depression. Bernanke’s research on the banking sector upholds the belief that favourable credit market conditions are essential for moderating shocks. He did put this belief to work as the Federal Chair during the 2008 recession. Overall, the three winners cover different but complementary aspects of financial intermediation and banking.
