INDIAN EXPRESS EXPLAINED 28/05/2020

INDIA AND THE NEIGHBOURHOOD RELATIONS:-

Context: India and China are engaged in a confrontation in eastern Ladakh along the Line of Actual Control (LAC).

Latest Developments:

  • Hotspots: Two hotspots along the LAC (in Ladakh and Sikkim) threaten to turn into military flashpoints.
  • Alert: Indian armed forces are said to be on alert and diplomacy is expected to dial down tensions. The US President has offered to “mediate or arbitrate” the dispute.
  • Rise in defencebudget by China: China’s troop build-up and incursive attempts—in Ladakh’s Galwan areas seem threatening in the context of Chinese President asking his country’s army to raise its battle-readiness shortly after Beijing upped its defence budget by 6.6% this year to nearly $180 billion.

Issues in Chinese increase in defence expenditure:

1.How does the current increase compare with the budgetary increases of the past? 

  1. Though not as high as last year, it does represent an important increase especially during the time of a pandemic when most countries are under fiscal distress.
  2. According to the Stockholm International Peace Research Institute, Chinese military spending in 2019 was 5.1% higher than in 2018 and rose by 85% between 2010 and 2019.
  3. From 1994 to 2019, the PRC has sustained year-on-year increases in spending.

2.The extent of motivations behind China’s accumulation of defencecapabilities: It will pose a threat to its immediate neighbours, including India.

  1. Compelled by: China is trying to keep key military industries afloat and ensuring the continued loyalty of the People’s Liberation Army (PLA) to the Xi Jingping-led Communist Party of China.
  2. Covid-19 Backlash against the China: This has affected Xi’s hold on power under stress. The pandemic has compelled him to keep select internal constituencies sufficiently placated and mollified.
  3. To press its claims against its immediate neighboursThere are potentially adverse continental and maritime consequences for China’s immediate neighbours. For example- the latest round of tensions between India and the PRC are an instructive revelation of the extent to which China is ready to push ahead with its territorial claims along its contested boundary with India.
  4. Issue linkages: It has gained currency in Beijing as it steps up its confrontation along the LAC in a quest to prevent New Delhi’s support for a global investigation of the origins of the coronavirus.

3.Despite experiencing negative growth for the first time since 1976, the PRC has hardly shown any doubt about its defencerequirements: It is evident in its latest increase in defence

  1. Nationalism: It has been the source of Chinese aggression and the continued budgetary increases for defence, despite its shrinking economy.
  2. China is picking fights with multiple actors because of what it sees as a nationalist imperative.

Reasons for China’s geopolitical actions:

  • China bending towards Hegemony: China has been flexing muscle along the LAC and elsewhere too. Its defencepolicy envisions a high-tech ground military force to go with an enhanced capacity to project maritime force across the high seas of the Indo- Pacific.
  • Diversionary tactic: It is seen as a diversionary tactic to relieve Xi of pressure over the regime’s handling of the global response to its role in the covidIIt could be a convenient way for the regime to rally nationalistic support back home.
  • Accusing India of ulterior motives: In India’s recent moves to close the asymmetry in terms of border-area road access. For example, India opened the country’s highest altitude all-weather bridge in eastern Ladakh which is some 45km from Chinese territory.
  • Trust deficit: China is being discussed around the world for its not so clear efforts to leverage its relatively quick corona recovery to exercise greater sway over world affairs. Beijing’s bad designs on Europe in terms of an aid provider appear to have weakened Sino-European ties.Way Forward

In a time of covid pandemic, it is clearly in the interests of both New Delhi and Beijing to avoid any confrontation along the 3,500-km-long Line of Actual Control (LAC).

2)What are the solutions to the problems plaguing Indian agriculture?

Context: The government announced a few farmer-friendly reforms as part of the financial relief package.

Possible solutions for the Indian agriculture Sector:

  1. Securing livelihood:The agriculture sector employs more than 50% of total workforce in India. Securing livelihood farmers by increasing their incomes is important to reduce poverty and farmer distress.The government’s proposal to double the income of farmers by 2022 is a welcome step.  This would require action in the following fronts:
  • improve technologies by strengthening the seed sector and knowledge dissemination system,
  • agricultural diversification in favour of high value commodities
  • development of value chains
  • Ensuring minimum support price
  1. Strengthening other sectors:A major problem crippling the agricultural sector is disguised unemployment. It is important to strengthen other sectors, especially the manufacturing sector to generate employment.  This would help raise standard of living of farming families.
  2. Addressing regional and local needs:India has rich agro-climatic diversity. Thus, a one-in all policy is not suitable to address the challenges across regions. Government policies should thus adhere to regional and local needs.
  3. Strengthening agricultural markets: It is important to strengthen the functioning of Agricultural Produce Marketing Committees (APMCs). Production and marketing centres should be linked and supplements to APMCs should be set up near farms through PPP.
  4. Credit to tenant farmers: In India, most farmers are tenant farmers with no access to credit. It is important to ensure credit delivery to tenant farmers. Kalia scheme of Odisha government and PM-KISAN of the central government are welcome initiatives.
  5. Addressing land fragmentation: Small size of land holdings and land fragmentation is major issue in Indian agriculture.  Land pooling and cooperative farming should be encouraged to address the issue.

Conclusion: The Indian agriculture sector has immense potential to drive economic growth and its high time to revive and boost the sector with local solutions and revamping policies.

3)Challenges in ensuring national Energy Security:-

Context – As part of relief package under Atmanirbhar mission there is proposal to amend the Electricity Act, 2003

Present challenges of Discom segment – Power purchase agreement (PPA)

  1. Idle fixed cost -Discoms must purchase electricity from generating companies under long term PPA’s. This makes them pay a fixed cost to the power generator, irrespective of whether Discoms draws the power or not, and a variable charge for fuel when it draws power.
  2. Over-estimation of energy requirement– These PPAs signed by DISCOMs were based on over-optimistic projection of power demand  estimated by the Central Electricity Authority (CEA).
  3. Falling demand due to lockdown– Now due to overestimation and fall in demand amid lockdown (industries and commercial sector consumed 50% of total power) DISCOMs are locked into long-term contracts paying idle cost for power not drawn.

Implication – All this increases their dues and thus the Discom debt rises which in turn affects the availability of working capital, its investment, quality of services to households as well as NPA in banks.

Proposed Amendments

  1. Entry of private sub-franchisee in Distribution (Discom) segment– This is a challenge to existing discoms which are already bleeding due to multiple issues as sub-franchisee can tap on existing discoms profitable market and erode profit made by Discoms.
  2. More Concessions to renewable power developers– Discoms are already obliged to absorb all renewable power generated by renewable power developers and pay idle charges to thermal power even when not utilizing its production. With more concessions, renewable energy ‘s production will shoot up which will lead to more burden on discoms.
  3. Elimination of cross-subsidies– The elimination of cross-subsidies will raise service charge for each consumer category (agriculture, household, industry and commercial sector). Since, rural households require long lines and numerous step-down transformers, thus their service cost will be higher than any other category.
  4. Against principle of cooperative federalism– There are two proposed amendments which violate the spirit of cooperative federalism:
  5. Central selection committee to appoint state regulators– This committee has distorted composition:
  6. majority of members from Centre and
  7. only 2 representatives of state government

This committee and its selection,hence, jeopardize the concurrent status of the electricity sector.

  1. Establishment of a centralized Electricity Contract Enforcement Authority– The members and chairman of this authority will again be selected by the same selection committee referred to above. The power to adjudicate upon disputes relating to contracts will be taken away from State Electricity Regulatory Commissions and vested in this new authority. This will leave no space for state and its discoms to challenge the rising centralization in electricity sector.

Way Forward – States need Centre’s support to settle dues of discoms and strengthen electricity sector which will also bear the brunt of pandemic. Electricity bill 2020 instead of supporting states puts more burdens on State discoms. Thus there is a need to revisit the bill to ensure energy security with resilient sector.

Editorial 4:- Agri-Marketing Reforms

Context – Due to distress sale by farmers in the lockdown, State governments are reforming APMC

Agriculture Produce Market Committee

APMC Act, 1955 was enacted to ensure that farmers mandatorily sell their produce in market yard (mandi) through auction and they do not depend on informal channels to sell their produce.

APMC Act, 1955Model APMC Act,2003Model APLM Act,2017
1. Mandatory for farmers to sell produce in mandi established under the act.Exporters, retailers not allowed to trade directly with farmers. This led to monopoly of traders in mandi who formed cartels and bought produce from farmers at throwaway price. They also engaged in hoarding of produce and profited during lean season by exploiting consumers. 1. Farmer can sell produce to anyone including retailers and exporters.   This is to destroy the monopoly of traders and give freedom to farmers for selling their produce at better rates. 1. Farmer can sell produce to anyone including retailers and exporters.   This is to destroy the monopoly of traders and give freedom to farmers for selling their produce at better rates. 
2. Mandi traders delayed payment to farmers and in case payment is made, receipts were denied to them.Difficult for farmers to prove their income and get working capital from banks.2. Mandatory for traders to make payment same day otherwise seizure of the produce from trader. It provides for transparency in pricing and transactions. Also farmer gets the receipt and can avail loans from banks.2. Mandatory for traders to make payment same day otherwise seizure of the produce from trader. It provides for transparency in pricing and transactions. Also farmer gets the receipt and can avail loans from banks.
3. No Public- Private Partnership allowed in management and development of mandi. Thus no infrastructure for grading and sorting was developed. This lead to post-harvest losses of several commodities, especially perishables.3. Allowed PPP allowed in management and development of mandi. Promotes value-addition and prevent post-harvest losses.3. Allowed PPP allowed in management and development of mandi.
4. Contractual agreements for Contract farming are recorded with the APMCs which can also resolve disputes arising out of these contracts.  Further, market fees and levies are paid to the APMC to undertake contract farming.

Other features of Model Agricultural Produce and Livestock Marketing (Promotion & Facilitation) Act, 2017

  1. Creation of a national market with provision for interstate trading license.
  2. Cap on market fee – 2% for fruits and vegetables and 1% for grains.
  3. Promotion of e-trading through e- National Agriculture Market.

Recently many states have adopted the model APLM Act,2018 as lockdown forced farmers into distressed sale of their produce:

  1. Rajasthan has allowed farmers to sell their produce directly to traders;
  2. Chhattisgarh is rolling out a direct cash transfer of a maximum of Rs. 10,000 per acre subject

Issues with Model APLM act

  1. Protection to farmers not ensured– There would be no record of the price at which a farmer has managed to sell the produce thus there is no clarity on know how the farmers will be protected.
  2. State’s overregulation of mandis– Agriculture is on the State List and so as to achieve efficiency in agricultural markets, state governments have enacted their own legislation. They have built a monopoly in mandis and earn significant cess from transactions taking place in these markets.

Way Forward – Agriculture sector is in urgent need of structural reforms including in marketing of produce which will ensure positive growth rate in FY21, provide better income to farmers and strengthen food security for billion of Indians.

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