Insights Daily Current Events, October 30, 2013

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NATIONAL

JPC report on 2G submitted to Speaker

• The report of the 30-member Joint Parliamentary Committee (JPC) on “allocation and pricing of telecom licences and 2G Spectrum during 1998-2009” was presented to Lok Sabha Speaker Meira Kumar and has also been made available to the public in the Lok Sabha website www.loksabha.nic.in

• According to the report, Prime Minister Manmohan Singh was misled by then Communications Minister A. Raja on the procedure to be followed by the Department of Telecommunications (DoT) regarding issuance of the Unified Access Services (UAS) licences.

• The First-come, first-served (FCFS) criteria followed while allocating the spectrum was a misrepresentation of facts and in tactic deviation from the existing procedure.

(As per this policy, the applications which were received first in the DoT were issued Letter of Intent (LOI) first. The applications received later were not considered till the applications received earlier were decided and allocated LOI. In case approvals for more than one LOI in the same Telecom Circle was received simultaneously, the earlier applicant was issued LOI first and the latter one was issued LOI at least a day after, in order to maintain the same priority for signing of UAS licence as well as allocation of spectrum)

• The report has also criticized CAG’s “presumptive loss theory” and has noted that all indicators and calculations used by it to reach the loss figures ranging between Rs.57,666 crore and Rs.1.76-lakh crore were “untenable” and “unrealistic.” The CAG had accused the government for causing a massive loss to the exchequer by granting 122 licences in 2008 at a price discovered in 2001.

Rational behind the Criticism over CAG’s “presumptive loss theory”:

1. The CAG’s calculation of loss was based on FDI attracted by the new entrants in the telecom market. According to the JPC report, the DoT was of the view that the investment brought in by strategic foreign partners were to be utilised for rolling out the services in the licensed service areas and that issuing additional equity for bringing in foreign investment was a normal practice in the corporate world.

Therefore loss calculation and determination of value of licences and spectrum on the basis of legitimate infusion of FDI by means of fresh equity by the telecom companies was illogical.

2. Another criteria, for CAG’s loss calculations was on the basis of revenue realised through 3G auction. This presumption has been criticized since the 3G spectrum was auctioned for the first time in India in early 2010. So the revenue realised in 2010 for 3G was no where comparable to the revenue generated by the 2G spectrum allocated as far back as in 2008 where the demand-supply position was also very different.

3. Hence calculation of value of spectrum in retrospect by any agency could be error prone with a misleading outcome.

4. According to the report, calculation of presumptive loss comes under the domain of the policy perspective of the government and CAG has not taken into consideration the benefits which accrued to the people of the nation at the grass-roots level as a result of implementation of the policy. By any standards, the benefits far outweigh any possible revenue forgone by the government in the process of sustained policy intervention with the broad objective of increasing tele-density and maximising welfare of the people.

Conclusion:

• The report has termed spectrum as “a precious national asset,” and that it was necessary for all spectrum users, whether government or private, work in the spirit of mutual understanding and cooperation and utilise the resource optimally with self-discipline.

• The Committee has suggested that, in order to ensure optimal utilisation of assigned bandwidth, the TRAI, as regulator, should undertake spectrum audit for which details should be finalised at the earliest. It added that, the guidelines for spectrum audit should contain a provision for penalty for hoarding of excess spectrum and also for taking back excess spectrum, if found.

What next?

• The JPC report will be presented to the Parliament in the coming winter session and a discussion is expected in both the Houses.

Government’s opposition to CBI’s autonomy

• The CBI’s request for granting its Director ex-officio powers of Secretary, government of India has been strongly opposed in the Supreme Court by the Centre.

Government’s point of View:

• Solicitor-General Mohan Parasaran said the government was not agreeable to this. The CBI had already been conferred a lot of functional autonomy and vesting Secretary-level powers would go against the spirit of Vineet Narain judgment.

• The Solicitor-General also added that the present arrangement had various checks and balances. And moreover, it would set a wrong precedent or it would have serious repercussions on other authorities in the country as well. That is to say, there would be similar requests from RAW, BSF & CRPF.

CBI’s point of view:

• However, a Senior counsel representing CBI, refuted the above rational saying that- ‘the political parties in power wanted a strong hold on CBI. And the Secretary-level powers will only help CBI to bypass the red-tapism and attain functional efficacy. Moreover CBI is accountable to the Supreme court and the government.

• Justifying the demand, the counsel said there had been occasions when well-thought-out proposals given by the CBI were returned by desk officers. For instance, the request seeking the appointment of 22 public prosecutors was yet to be cleared.

• ‘Functional autonomy’ is of utmost importance. By giving the autonomy, the Director would be permitted to report to the Minister and not through the bureaucracy. Hitherto, the agency had been facing hurdles at every stage in its administrative functioning and it needed freedom from government control.

Privatisation of railway passenger segment finally

• The Railways has taken its first-step on privatization of its passenger segment on its existing infrastructure with the launch of the High Speed Rail Corporation (HSRC).

• The Railway Minister Mallikarjun Kharge launched the HSRC as a fully-owned subsidiary of Rail Vikas Nigam Limited, which his predecessor Nitish Kumar had set up with the objective of raising extra budgetary resources from the market and private investors.

• HSRC is the implementing agency. It would contribute in the joint venture to be formed under the Public Private Partnership(PPP) mode. The other stakeholders would be the State governments and private investors.

• The Railways have identified seven routes, all commercially viable on which the mini high speed trains with a speed of 160 km per hour to 200 km per hour would be operated under the PPP mode.

India slips in ‘ease of doing business’ list

• According to the World Bank, India has slipped three positions to 134th spot (out of 189 countries) in the latest ‘ease of doing business’ list.

• Singapore topped the list, which was followed by Hong Kong, New Zealand.

• India has been ranked lower at 179 in terms of ease of starting a business in the 2014 list at a time when its government is making efforts to improve the country’s business climate. Last year, based on this criteria India was placed at 177th spot.

Criteria for ranking:

• The ranking of countries are based on various parameters including starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

• However these indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy.

• But still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business.

INTERNATIONAL

India denies charge of involvement in illicit nuclear trade

• It has taken steps to ensure harmonise export, procurement lists with those of NSG

• Institute of Science and International Security (ISIS) report has categorized India with half a dozen countries, including Pakistan, China, North Korea and Syria as “illicit nuclear trade suppliers of concern.”

• Such charges could hurt India’s bid for membership in four nuclear export control regimes.

• India is working on the issue, to convince members of these organisations because it has not signed a prerequisite for membership — the Nuclear Non-Proliferation Treaty (NPT) and does not plan to do so in the near future.

What is India’s stand on the Issue?

• India has refuted charges of involvement in covert nuclear trade, saying that a single suspect case of export of a dual use item to Iran was due to difference in perception.

• Firstly, the case pertains to an Indian company sending four shipments of valves that finally made their way to Iran’s Arak Heavy Reactor. The company was within its rights not to seek a licence because its valves had nickel content of 10 to 15 %, whereas a licence is required for nickel content of over 60 %. This provision is identical in the India’s Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) and the NSG lists.

• Secondly, the valves were exported to Germany and Turkey, both NSG members and legitimate export destinations. This aspect underlines the need for greater cooperation between transit countries such as Turkey and countries with high-tech capabilities of which India is one, because these countries are beginning to become targets of procurement to legitimate destinations. Also, one would have presumed that Turkey being a part of North Atlantic Treaty Organisation (NATO) would also have done some careful examination before importing from India.

• Since the past decade, India has taken several steps to ensure that “nothing slips the licensing list.” These include harmonising the export and procurement lists with those of the NSG and the Missile Technology Control Regime(MTCR), implementing all the UNSC resolutions on Iran, North Korea and Syria, an extensive overhaul of own processes and out-reach to the industry and improved coordination between licensing and implementing agencies.

• India also has enacted the Weapons of Mass Destruction (WMD) Act that gives authority to intercept suspect shipments of goods besides services and technology.

• It has taken India 10 to 15 years of sustained effort to get back into the civil nuclear mainstream and working with regulators. So this categorization of India into ‘illicit nuclear trade supplier’ is unreasonable or farfetched.

More about the four nuclear export control regimes?

• The United Nations Security Council (UNSC) Resolution 1540, the 2005 India-United States (US) Civil Nuclear Initiative—which resulted in the 2008 India-specific waiver in the Nuclear Suppliers Group (NSG) guidelines

• And the 2010 India-US joint statement, re-defined India’s relationship with the global export controls system. Of these, the November 2010 joint statement issued during President Obama’s visit heralded India’s new rendezvous with the key element of the global export controls system.

• The Statement endorsed India’s candidature for the four multilateral export controls regimes—the NSG, the Missile Technology Control Regime (MTCR), the Australia Group, and the Wassenaar Arrangement.

• These regimes have emerged as the leading forums of the global export controls system and are the oldest multilateral bodies for export controls. Though these are small informal groupings, they derive their importance from the nature of their membership. Most of the major suppliers of high technology or sensitive technology, mostly dual use in nature, are members of these regimes.

Courtesy – idsa website

Indo-US defence tie-up set for a major boost

• India and the U.S. are set to give a big boost to defence collaboration and co-development under the Defence Trade Initiative (DTI) and take it to a new level in areas of technology transfer, licensing agreements, license exceptions, end-use monitoring and related fields.

• The new initiative called the DTI Carter, named after US Deputy Secretary of Defence, Ashton Carteri, seeks a review of the various existing bilateral working groups on technology security and export controls, suggesting consolidation into a single strategic technology working group.

• Co-development and co-production will become a necessity as competitiveness will demand lower costs and higher quality. ISRO’s collaboration with NASA will be a win-win situation for both sides especially in times of US fiscal stress and the capabilities in India.

• There were doubts whether the NASA Space Launch System (SLS) programme will go the distance because of its very high cost and very doubtful purpose. The debut launch of the SLS – now slated for 2017 is likely to be delayed by a year or two because NASA does not have the budget to complete the rocket and its accompanying crew capsule on time.

• The remarkable achievements and capabilities of ISRO in launching satellites has had it flooded with offers from all over the world to launch their satellites. In view of the pressure, ISRO is likely to opt for partnership in various verticals with the private sector that could throw up number of opportunities for both India and US players.

On Space Security threat:

• US satellites are expected to face an increasing number of threats ranging from interceptor weapons to jamming equipment and lasers. These threats range from reversible to the very destructive. The US military will have to develop technologies to fight through jamming. Perhaps, resilient or resistant antenna designs can help this effort.

• On the emerging scenario of militarisation of space – though international agreements bar the militarisation of space, development of weapons that could be used in space is ongoing. As envisioned by scientists, a space-based laser could send a powerful destructive beam at enemy weapon deployments such as ballistic missile site a few thousand miles away. Another possible application would be to use a space laser to provide protection against attacks made on own satellites in orbit.

• For example, NASA’s CubeSat programme has been proposed to enable a constellation of 35, eight Kg Earth-imaging satellites to replace a constellation of five 156 Kg Rapid-Eye Earth imaging satellites, with significantly increased revisit time to enhance surveillance capabilities for military use and GPS. Every area of the globe can be imaged every 3.5 hours rather than the once per 24 hours with Rapid Eye constellation.

Iran, IAEA discuss framework for nuclear inspections

• Iran and the International Atomic Energy Agency (IAEA) have kick-started a fresh round of nuclear talks and are currently working on a framework for inspections – which would allow IAEA inspectors to access suspected sites inside Iran.

• This could allay western apprehensions about Tehran’s (Iran) suspected pursuit of nuclear weapons.

• Iran has denied accusations that it’s Parchin military facility may have been used to carry out high-explosives-testing, which has applications in triggering a nuclear explosion.

• The current engagement with the IAEA, would answer [the IAEA’s] questions, remove the ambiguities, and lead to further cooperation (Earlier in September, 2013 Iran had declared its readiness to work out an agreement on nuclear inspections, following talks in Vienna)

• Iran is keen on success in talks with the West for phased removal of current sanctions. Besides, with the suspicions of weapons programme out of the way, Iran would launch its ambitious programme of atomic power generation along its Persian Gulf and Caspian Sea coastlines.

• In three months, Iran will establish a production line for enriched uranium dioxide for use in Iran’s lone, Russian-built, Bushehr atomic power plant.

• Iran had taken over Bushehr from the Russians in September, 2013. However, Russian engineers would provide backup support for two years, following which the facility would fall under independent Iranian control. Iran will source atomic fuel for the 1,000-MWe plant from Russia till 2017. Spent fuel, which can be processed to yield fissile material for a bomb, will be returned to Russia, according to an agreement that the two countries have previously signed.

U.S., India step up efforts to end Bangladesh crisis

• The U.S. and India have stepped up efforts for a negotiated settlement to the crisis in Bangladesh even as the Opposition alliance ended a three-day violent hartal to force the Sheikh Hasina government to concede its demand for a neutral caretaker government to conduct elections.

• U.S and India have common concerns on Bangladesh- like re-emergence of fundamentalism, counter-terrorism, connectivity and energy cooperation.

Paris celebrates Indian cinema

• The Musée Guimet in Paris, the world’s best-known museum devoted exclusively to Asian art, brings its 10th Indian Summer cinema festival to a close, marking the end of a two-month-long celebration of India’s century-old love affair with films (It was also the 100th anniversary of Indian cinema).

• The fest concluded with showing Shyam Benegal’s film Bhumika. It’s about the story of a strong Indian woman, Hansa Wadkar, and it was at the same time a homage to Smita Patil, the film’s extraordinary heroine.

• The festival has screened a vast panorama of Indian films since September, especially landmark pictures like Dadasaheb Phalke’s earliest fictions made as of 1913, Mother India, Aawara, Sholay, Mughal-e-Azam, films from Bengal, Kerala, Tamil Nadu and Bollywood.

• Shyam Benegal, whose cycle of films chronicling the lives of Muslim families in India including Mammo , Zubeida, or Well Done Abba were screened along with his more political work like The Making of the Mahatma (Paris held a particular fascination for him).

• The Director, (himself, was a parliamentarian) is currently working on a ten-part mini-series on the making of the Indian Constitution. The mini-series would give more insights on Indians’ knowledge of Constitution, which is both a stable foundation and a guide for our democracy and how it should be practiced

ECONOMICS

Steps to counter inflation: RBI

• To counter rising inflation RBI, in its 2nd quarter review of the monetary policy for the current financial year has hiked interest rates by 0.25 percentage points for the second time over a month. Consequently, the policy repo rate (i.e., the rate at which banks borrow from the RBI) will go up to 7.75% from 7.50% earlier.

• Concurrently, RBI has reduced the Marginal Standing Facility (MSF) rate from 9 to 8.75 per cent. This, along with the central bank’s (RBI) decision to increase the short-term 7 and 14-day borrowing limits for banks, is likely to ease liquidity pressure, and also bring down the cost of funds for banks.

• The RBI also lowered its expected GDP growth to 5 % for this fiscal from 5.5 % earlier. The revival of large stalled projects and the pipeline cleared by the Cabinet Committee on Investment would help in more investment and increase in overall activity towards the close of the year

• With regard to the external sector, narrowing of the trade deficit, coupled with policy interventions, had brought some calm to the foreign exchange market. But then normalcy was yet to be restored, though the RBI is comfortable with the current exchange rate of the rupee, which is hovering around 61-62 per dollar.

What is MSF?

• Marginal Standing Facility is the rate at which banks borrow funds overnight from the RBI. The MSF is usually pegged at 100bps or some percent above the repo rate.

• Banks can borrow funds through MSF when there is a liquidity crunch. This measure has been introduced by RBI to regulate short-term asset liability mismatches more effectively

RBI’s Second Quarter Review of Monetary Policy 2013-14

• Following were the outcomes of the RBI’s Second Quarter Review of Monetary Policy 2013-14.

SMS alerts on Usage Basis:

• RBI has asked banks to charge customers for transaction SMS alerts on the basis of usage, instead of imposing a fixed fee, to ensure equity and to be reasonable.

• In March 2011, the RBI had set guidelines for banks to send online alerts to customers for all types of transactions, irrespective of the amount. However, the central bank had not issued rules on charging customers for these alerts.

Inflation-linked 10-year savings scheme

• RBI on consultation with the government plans to launch a 10-year savings instrument- ‘Inflation-Indexed National Saving Securities (IINSSs) for retail investors’ that will offer inflation-linked returns to small investors as an alternative to investing in gold.

• IINSS will be linked to the new (combined) Consumer Price Index (CPI). The interest on these securities would comprise a fixed rate plus inflation.

• Interest would be compounded half-yearly and paid cumulatively at redemption. These securities will be distributed through banks to reach out to the masses( Eligible investors : individuals, Hindu Undivided Families, trusts and charitable institutions)

Banks can pay interest at shorter intervals

• Savings bank account and term deposit holders can now earn interest at shorter intervals (compared to the present ‘quarterly intervals’), with the RBI allowing banks to revise the periodicity of interest payments.

• At present, banks are required to pay interest on savings and term deposits at quarterly or longer intervals.

• The savings deposit rate for most banks is 4 % per annum, while in some cases, it is as high as 7%.The interest rate on savings bank accounts is calculated on a daily basis. Term deposit rates are 8-9 % for tenures of one year and above.

• In 2011, the RBI had decided to give freedom to commercial banks to fix savings bank deposit rates, the last mainstay of the regulated interest-rate regime. While giving banks this freedom, the RBI had said a uniform rate will have to be offered on deposits of up to Rs.1 lakh. On higher amounts, banks are allowed to offer differential rates to depositors.

Only Rs.50,000 in cash for at-par cheques

• To mitigate the risk of money laundering and terror funding, RBI has asked banks not to pay more than Rs.50,000 in cash to customers holding at-par cheques.

• Regional rural banks (RRBs) and co-operative banks are advised to utilise the at-par cheque facility only for their own use and payment of cash should not exceed Rs.50,000. All transactions of Rs.50,000 or more should be strictly by debit to the customer’s account.

Guidelines on foreign banks coming

• The Reserve Bank will soon come out with comprehensive guidelines on foreign banks to encourage them to convert into wholly-owned subsidiaries (WOSs) and enjoy near-national treatment.

• While it will not be mandatory for existing foreign banks (that is, banks set up before August, 2010) to convert into WOSs, they will be incentivised to convert into WOSs by the attractiveness of the near-national treatment afforded to WOSs.

• The initial minimum paid-up voting equity capital or net worth for a WOS shall be Rs.500 crore, Such WOSs would be treated on a par with domestic banks, including in the matter of opening branches.

• The RBI is working to persuade large foreign banks with 30 or more branches in India to get incorporated locally. These banks are open to the idea of local incorporation provided they get a level-playing field with local banks and a waiver on stamp duty.

Expert group meeting on new bank licences

• Former RBI Governor Bimal Jalan-led high-level panel, which was set-up to scrutinise applications for new bank licences, will hold its first meeting on 1st November, 2013.

• There are 26 applicants for new bank licences, including Tata Sons, and firms controlled by Anil Ambani and Kumar Mangalam Birla. Among public sector units, the India Post and IFCI have submitted applications.

Courtesy – Hindu Newspaper

TIT-BITS

Kannur to be first zero landless district

• The Kannur district in Kerala would be declared as the first zero landless district in the country.

Critically endangered turtles to be released in Sunderbans

• The Sunderban Tiger Reserve will introduce the Batagur basa, a rare species of riverine turtle that has been declared critically endangered by the International Union for the Conservation of Nature (2014), into the wild next year.

• Captive breeding for the turtle started in the Sajnekhali Wildlife Sanctuary in the tiger reserve from 2012.

• The Sunderbans is a repository of biodiversity and along with 60 species of reptiles; about a dozen species of turtles are also found in the deltas. Turtles like the Olive Ridley, leatherback turtles, green turtles and hawksbill turtle are found in the archipelago.

(From the prelims point of view- be aware of the critically endangered and endangered species and their location in India .One such example is given above. Also refer Orient BlackSwan Atlas (pg no. 35)