Insights Daily Current Events, November 21, 2013

ARCHIVES

Novembers 21, 2013

NATIONAL

National Green Tribunal directive to Assam government to protect Kaziranga Sanctuary

• The National Green Tribunal (NGT) has directed the Assam government to suggest ways to protect the environment in the Kaziranga sanctuary, which is being adversely hit due to traffic movement on NH 37.

• NGT was primarily concerned with the environmental impact of the traffic on this National Highway (NH) on sanctuary relating to air and other pollutions and most importantly on the environmental dynamics therein.

• The NGT was hearing a plea filed by RTI activist Rohit Choudhury opposing expansion of the NH 37 stretch running through the national park, claiming that ‘continued unregulated use of NH 37 is leading to death of wild animals and reptiles in large numbers in road accidents’.

• Measures like ensuring that no overloaded vehicles moved on that road; prohibition of use of horns and sirens in that area; and installation of cameras and speedo-meters should also be looked into.

INTERNATIONAL

India and Vietnam ink pacts

• Eight pacts were signed after delegation-level talks that focused on defence, energy and investments.

Defence:

• With regard to defence pact, the two countries have agreed to have greater cooperation in capacity building, joint projects and training.

• An agreement was signed between the two countries ‘on the protection of information’ — the enabling clause will lead to the transfer of defence hardware as well as training of 500 Vietnamese submariners, a process that has already begun.

• India would continue assisting Vietnam in modernisation and training of its defence and security forces, including through a $100-million line of credit for defence purchases.

• In a joint statement, both leaders termed defence cooperation as a significant pillar of strategic partnership between the two countries. They also made mention of the increase, in recent years, in cooperation by way of regular defence dialogue, training exercises, Navy and Coast Guard ship visits, capacity-building, exchange of think tanks and other exchanges between relevant agencies of both countries.

Energy:

• A MoU between Vietnam Oil and ONGC Videsh Limited that would lead to India getting a new block after its expected departure from Block 128, located in Vietnam, on grounds of uneconomic potential was among the 8 pacts between the two countries.

• Vietnam has offered India seven oil blocks in South China Sea, including three on an exclusive basis, and joint prospecting in some Central Asian countries with which both Vietnam and India have good political ties.

• Earlier, China had not objected to Vietnam allotting the lucrative Block 6.1 to India during the Cold War years in Nam Con Son Basin of South China Sea. But it had objections on India taking up exploration in blocks 127 and 128 in PhuKanh Basin. Chinese objections included – pressurising companies not to sell equipment to India and the alleged buzzing of an Indian warship that had transited through the disputed portion of South China Sea.

• India had returned block 127 some years ago after no oil was found and will return 128 in 2014 after a financially disastrous experience with putting equipment in place.

Investment:

• On the economic front, Vietnam has decided to award Tata Power a $1.8-billion thermal power project after the company suffered a failed bid for a $5-billion steel plant.

• Investment and trade is slated for further boost with the signing of an air services agreement that will facilitate direct flights between the two countries.

G77+China group walks out of Loss and Damage talks

• The G77+China group of 134 countries walked out of negotiations on Loss and Damage after the developed countries refused to budge from their position that the subject should be discussed only after 2015.

Reasons behind the walk-out:

• This is a rare event in climate talks, which happens only when there is absolute lack of trust between countries.

• The U.S., Australia and Canada have been the most vocal against setting up a separate mechanism on Loss and Damage while the European Union (EU) has not only been aggressive but also tried to make sure it did not materialise at the Warsaw meeting.

• While several parallel streams of negotiations are on at the moment, including on finance for poor countries and the basic elements of the 2015 agreement, a walkout from even one stream of talks in the U.N. Framework Convention on Climate Change (UNFCCC) threatens to bring all negotiations to a halt.

• According to U.S., loss and damage should remain at worst another stream under the ‘adaptation’ mechanisms and not be allowed to be a separate independent system to pay compensation or reparation to poor countries.

• While poor countries look upon Loss and Damage reparation for the damage caused by inevitable climate change which any amount of adaptation cannot avoid, the developed countries desire that the issue be removed from any kind of legal liability it may impose upon the key countries with highest historic emissions.

• The developing countries wanted to create a new system to deal with new types of loss and damage such as sea level rise, loss of territory, biodiversity and other non-economic losses.

• According to the G77 group the draft was shifting the loss and damage issue out of UNFCCC to the Rio+20 process, which is not binding.

• As a practice in the UN climate negotiations, contact groups of key parties and groups are formed on contentious issues to find common ground and then bring it back to the full set of 190 countries to take a formal decision. This contact group on loss and damage had been working on guidelines which could reflect this common ground.

India’s stand:

• India on its part has retaliated that the proposal was weak and unacceptable and has supported the G77 walkout at talks on Loss and Damage.

• As a short term measure, India has supported creating a window under the existing Green Climate Fund to provide quick resources for Loss and Damage but in the long-run, India too was with the rest of the G77+ China countries to ask for a separate mechanism apart from the ‘adaptation’ mechanisms under the UN climate convention.

For a deal in Bali, India wants permissible levels of MSPs updated

• India has asserted that, the permissible levels of minimum support prices (MSPs) be either updated or reinterpreted for the at the World Trade Organisation(WTO) 9th Ministerial scheduled from 3rd  to 6th  December, 2013 in Bali

• Indian negotiators are arguing that a major factor for the sharp rise in MSPs is the recent spurt in global food price inflation while the existing caps and formulas are calibrated to food prices in the 1980s. So India is arguing for either use of ‘more recent base year’ for arriving at the caps or use of an appropriate deflator for removing the impact of inflation on our administered support prices.

• This would be a permanent solution to the problem of India violating WTO rules and it also forms part of the G33 proposal of the developing countries on agriculture that India is leading. The developed nations are fiercely opposing it and have not allowed it in to the draft for Bali. The draft contains their long-standing offer of an interim ‘peace clause’.

• The peace clause is proposed be kept in place till the 11th Ministerial. These conferences are held every two years. This clause is conditional on additional transparency on public stock holdings of food.

• The Bali summit is seen as the last chance to revive the WTO’s Doha Round, launched in 2001 in Qatar, since WTO’s rules require proposals to be passed unanimously and a single country can veto a deal in Bali.

• WTO Director General Roberto Azevedo had extended the deadline, originally set for 12th November, 2013 putting together a Bali package as a last resort to rescue the talks after the two opposing sides – the G33 led by India and the developed countries held their respective positions.

Significance of the Proposal:

• This proposal is very important from India’s perspective as it would impact agricultural subsidies and affect over 60 core Indian farmers. Since 2004, the government had doubled the administered MSP for both wheat and rice.

• Moreover, the ‘food security law’ would lead to a significant increase in India’s domestic support through the increased procurement of food grains.

Criticism:

• Former Union Secretary E.A.S. Sarma has criticized the Govt. of India saying that, rather than agreeing to the WTO’s “peace clause” conditionality for limiting food subsidies to only four years against the provisions of the Parliament-enacted National Food Security Act, India should come out of the negotiations.

• His arguments are based on the lines that, the government has tacitly accepted the contention that the food subsidy is a “market distorting subsidy.” Instead the concept of food security should be outside WTO protocols on ‘free trade’.

• India which heads the G-33 group of 46 developing nations is seeking amendments to the WTO Agreement on Agriculture (AoA) to allow procurement of food grains from marginal and subsistence farmers. Grains procured to fight hunger should not be included under WTO-restricted subsidies.

• The agreement allows “market distorting subsidies” to be restricted to 10 per cent of the total production. India apprehends that its recently-enacted food subsidy law which provides for cheap food grains to nearly two-thirds of the population could push food subsidy beyond the 10% limit.

(For more information on this issue & WTO refer our ‘INSIGHTS CURRENT EVENTS ANALYSIS OCTOBER – 2013’ MAGAZINE)

Many forces at play as nuclear talks with Iran begin

• Iran and the six global powers have re-commenced talks in Geneva, which could become a litmus test for Israel’s ability to weaken a nuclear deal, which was well within grasp when the two sides last met at the same venue earlier in November, 2013.

• Israel has vociferously opposed any deal with Iran, which would allow Iran to enrich uranium, as well as pursue other activities that could make it capable of producing atomic bombs.

• On the contrary, Iran has made it explicit that it would not give up its right to enrichment under rules defined by the Nuclear Non-Proliferation Treaty (NPT) that it has signed.

• Advocates of the nuclear programme say Iran must be allowed less than 5% enrichment, which is necessary to fuel its atomic power plants in future.

• Israel has been accused of continuing with its efforts to impede the emergence of an agreement between Iran and the global powers.

• France has argued that Iran must suspend construction of the heavy water reactor in Arak, halt uranium enrichment to 20% and reduce its stockpile of enriched uranium.

America, Afghanistan on collision course

• The U.S. and Afghan governments appeared to be on a collision course in their struggle to negotiate a Bilateral Security Agreement (BSA), with the thorny issues of western troops ‘night raids’ on Afghan homes and the Afghan demand for an apology from Washington threatening to overshadow the prospect of a deal being worked out.

• The failure to halt these raids, which have been a source of anti-American sentiment, has been a ‘major obstacle’ holding up a security agreement aimed at letting American forces stay in the country beyond 2014 withdrawal deadline.

• Another issue between the two countries was that, Afghanistan was demanding for an apology for U.S. actions in Afghanistan that wounded Afghan sensitivities.

• The killings of innocent Afghan civilians, the abuse of Afghan corpses and the burning of Korans by U.S. personnel have inflamed tensions in the past.

• If these points hinder the completion of the BSA, the U.S. has warned that it may be compelled to ‘withdraw all of its troops by the end of 2014 and leave Afghan forces to fight alone against a Taliban-led insurgency’.

Arab-African economic cooperation stressed

• Arab and African leaders (meeting in Kuwait) wound up their first summit since the region’s uprisings in 2011 by calling for closer economic and security cooperation.

• The leaders issued the ‘Kuwait Declaration’ which underlined the need to accelerate economic integration in the Arab world, which includes oil-rich Gulf states, and investment-thirsty African states.

Kuwait Declaration: Agenda & Proposals of the Summit

• The leaders at the Kuwait summit have called for the creation of a joint “Africa-Arab Financing Mechanism” to fund programmes and projects, under a plan adopted at the last Arab-African summit in Libya three years ago (2010).

• They have also called on the African Union and Arab League to coordinate with financial institutions and funds in the two regions to form a “working team” to finance the implementation of projects. But there was no mention of any moves for an Africa-Arab common market, as recommended by businessmen.

• The Kuwait Declaration strongly condemned terrorism. It urged member states to ‘enhance cooperation and coordination to combat terrorism in all its forms’, and to criminalise the payment of ransoms to terrorists.

• Kuwait would coordinate with the World Bank to enter joint investments in infrastructure projects in accordance with a plan to be announced soon.

• Africa has huge resources of raw materials, agriculture and energy but lacks investments. It has 12 % of global oil reserves and 42% of its gold deposits. The discovery of large quantities of natural gas off its east coast has added to the continent’s economic potential. According to the World Bank, the continent needs about $30 billion a year just to develop its energy sector.

• On the other hand, states of the energy-rich Gulf Cooperation Council have accumulated surpluses of $2.0 trillion due to persistently high oil prices. A majority of the assets are invested in the United States and Europe.

• The leaders called for the need to boost cooperation in the agricultural field to achieve food security. They also decided to hold the next summit in 2016 in Africa.

• The summit was the third of its kind, and the first since 2010, when leaders met in Libya prior to the Arab Spring uprisings that toppled longstanding dictatorships there and elsewhere in North Africa and West Asia.

ECONOMICS

No to Retrospective amendment to raise revenue

• Finance Minister’s advisor Parthasarathi Shome (is also the chairman of the Tax Administration Reform Commission (TARC)) has said that, the government should not use retrospective amendment of tax laws to raise revenues.(For instance, Brazil and Sweden have constitutionally removed retrospective taxation)

Retrospective issue:

• Vodafone is facing a tax liability of over Rs.11,200 crore, along with interest, for its 2007 acquisition of Hong Kong-based Hutchison Whampoa’s stake in Hutchison Essar, an Indian telecom company.

• A committee was set up under Dr. Shome to recommend measures to deal with the retrospective amendment of income tax laws and suggest ways of treating taxation cases which involve indirect transfer of Indian assets, of the likes of the Vodafone-Hutchison deal.

• The committee had recommended in 2012 that either the retrospective tax amendment should be withdrawn or penalty/ interest, if covered under taxes should be waived off.