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INDIAN EXPRESS EDITORIALS AND EXPLAINED 6TH JANUARY 2020

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ISSUE: FOREST AND CARBON EMISSIONS OF INDIA

WHY IN NEWS? 

The State of Forest Report (SFR) 2019, while showing an increase in the carbon stock trapped in Indian forests in the last two years, also shows why it is going to be an uphill task for India in meeting one of its international obligations on climate change.

India, as part of its contribution to the global fight against climate change, has committed itself to creating an “additional carbon sink of 2.5 to 3 billion tonnes of carbon dioxide equivalent” by 2030.

That is one of the three targets India has set for itself in its climate action plan, called Nationally Determined Contributions, or NDCs, that every country has to submit under the 2015 Paris Agreement.

The other two relate to an improvement in emissions intensity, and an increase in renewable energy deployment. India has said it would reduce its emissions intensity (emissions per unit of GDP) by 33% to 35% by 2030 compared to 2005. It has also promised to ensure that at least 40% of its cumulative electricity generation in 2030 would be done through renewable energy.

What is the relationship between forests and carbon?

Forests, by absorbing carbon dioxide from the atmosphere for the process of photosynthesis, act as a natural sink of carbon. Together with oceans, forests absorb nearly half of global annual carbon dioxide emissions.

An increase in the forest area is thus one of the most effective ways of reducing the emissions that accumulate in the atmosphere every year.

How do the latest forest data translate into carbon equivalent?

The latest forest survey shows that the carbon stock in India’s forests (not including tree cover outside of forest areas) have increased from 7.08 billion tonnes in 2017, when the last such exercise had been done, to 7.124 billion tonnes now. This translates into 26.14 billion tonnes of carbon dioxide equivalent as of now.

It is estimated that India’s tree cover outside of forests would contribute another couple of billion of tonnes of carbon dioxide equivalent.

How challenging does this make it for India in meeting its target?

An assessment by the Forest Survey of India (FSI) last year had projected that, by 2030, the carbon stock in forests as well as tree cover was likely to reach 31.87 billion tonnes of carbon dioxide equivalent in the business as usual scenario. An additional 2.5 to 3 billion tonnes of sink, as India has promised to do, would mean taking the size of the sink close to 35 billion tonnes of carbon dioxide equivalent.

Considering the rate of growth of the carbon sink in the last few years, that is quite a stiff target India has set for itself. In the last two years, the carbon sink has grown by just about 0.6%%. Even compared to 2005, the size of carbon sink has increased by barely 7.5%. To meet its NDC target, even with most optimistic estimates of carbon stock trapped in trees outside of forest areas, the sink has to grow by at least 15% to 20% over the next ten-year period.

ISSUE: NEW CHALLENGES FOR THE INDIAN ECONOMY

RISE IN OIL PRICES

Heightened uncertainty in West Asia following the US airstrike killing Iran’s top military commander might spike the oil prices.

It is true that the US and Russia have displaced Saudi Arabia as the world’s largest crude producers today, with the former’s output especially more than doubling from roughly 5.5 million to 12.9 million barrels per day in the last decade.

But that’s hardly any consolation for India, which cannot, for purely geographical reasons, source crude beyond a point from the likes of the US, Venezuela and Russia.

The Narendra Modi government’s first term was marked by falling international oil prices. It did not, wisely, pass these on fully to consumers and, instead, netted a yearly revenue windfall of some Rs 150,000 crore by raising excise duties on petrol and diesel.

Rising oil prices can also impact India’s balance of payments and the rupee (the domestic currency shed 44 paise against the dollar on Friday), further adding to inflationary pressures.

RISING FOOD INFLATION

Annual consumer food inflation crossed single digits in November, which was for the first time in nearly six years. Many commodities — from onion, potato, pulses and milk to maize and soyabean — have seen prices rising or at least correcting from lows. The reasons for it are partly weather-induced (excess rains during September-October) and partly structural (farmers reducing production in response to the earlier sustained low realisations). Either way, benign food and fuel inflation can no longer be taken for granted.

WHAT SHOULD BE DONE?

The focus has to necessarily shift to structural reforms that have been put off for too long.

The existing system of open-ended procurement of wheat and paddy at minimum support prices has to go. So must super-subsidised physical sales of grain or urea.

These should be replaced by direct cash transfers targeting vulnerable consumers and smallholder farmers.

The resources thus freed, along with those raised through privatisation (inclusive of excess land parcels held by government departments/enterprises), can fund much-needed public investment without creating fiscal or inflationary pressures.

ISSUE: REFORMING THE GRAIN MANAGEMENT SYSTEM

Finance Minister has announced an investment package for infrastructure of about Rs 102 lakh crore over the next five years, which implies more than doubling the growth in infra-investments from its current levels. The legitimate question being asked is: Where will the resources come from? The announcement does not unveil any clear strategy on the resource mobilisation front.

Author suggests a way in which 50,000 crore rupees could be raised:

The prime minister and the finance minister should take a look at the massive inefficiency in the grain management system under the National Food Security Act (NFSA) to find the required resources.

The NFSA gives certain quantities of wheat and rice to 67 per cent of the population at Rs 2/kg and Rs 3/kg respectively, while the economic cost of these to the Food Corporation of India is Rs 25/kg and Rs 35/kg respectively.

This led to a provision of Rs 1.84 lakh crore for food subsidy in the last Union budget.

Not many people know that the FCI had pending bills of Rs 1.86 lakh crore that have not been cleared by the government, and that it has been asked to borrow more and more to finance its operations. The grain stocks with the FCI are far more than double the buffer stock norms as on January 1, every year.

The massive accumulation of grain stocks is the result of a deeply inefficient strategy for food management wherein the procurement for wheat and rice (paddy) remains open-ended, but the disbursal of those stocks remains largely restricted to the public distribution system (PDS).

The open market operations (OMO) are much less compared to what is needed to liquidate the excessive stocks. We don’t have a clear strategy. And now, if the rabi procurement is good, FCI may not have the storage space to accommodate it. The money locked in these excessive stocks (beyond the buffer norm) is more than Rs 1 lakh crore. Even if the government decides to liquidate half of it, it can garner Rs 50,000 crore to finance at least half of its infrastructure projects.

We need bold moves to reform our grain management system. There is no need to set up another expert committee for this. The blueprint for reforming the grain management system was presented to the PM by the Shanta Kumar panel. The report is on the FCI website.

Only three points need reiteration:

First, while the poor under the Antyodaya category should keep getting the maximum food subsidy, for others, the issue price should be fixed at, say, 50 per cent of the procurement price (as was done under Atal Bihari Vaypayee for the BPL category).

Second, limit subsidised grain distribution under NFSA to 40 per cent of the population rather than the current 67 per cent. After all, we must ask: What proportion of the poor cannot afford even the basic rations? The Indian government has not given any number for poverty since 2011 — it was 21 per cent as per the Tendulkar poverty line. It is time for the Modi government to tell the nation what is the level of extreme poverty in India.

Third, limit the procurement of rice particularly in the north-western states of Punjab and Haryana where the groundwater table is depleting fast, and invite private sector participation in grain management.

If the government can implement just these three points, it can save another Rs 50,000 crore annually. On top of this, it will help the government to reduce its fiscal deficit. And if it liquidates stocks fast, it can contain inflation too.

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