GS-III: A polar region we must keep on the radar in a multipolar world

Context

A recent offer by the US president to buy Greenland is indicative of the emerging geopolitics of the Arctic region. Climate change and China are fast destabilizing the status quo and throwing up political, security, legal, and environmental challenges. Autonomous vehicles and robots can populate uninhabitable regions and the next few decades could see the Arctic emerge as a hotspot of great power competition.

Background

• Rising global temperatures are causing the frozen Arctic Ocean to melt, opening up new sea routes and opportunities to extract hydrocarbons and minerals from the seabed and the newly exposed land surfaces.
• Countries of the Arctic are trying to take advantage of these opportunities.
• China declared itself a “near Arctic” country and is making determined efforts to extend its footprint in the polar region. Chinese firms have tried to purchase large tracts of land in Iceland, Norway and Denmark.
• There are concerns that Chinese investments in Greenland’s natural resource economy might persuade the local population to secede from Denmark, creating a Laos-like Chinese satellite state between North America and Europe.

Arctic politics

• How should the region be shared among the eight Arctic countries Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the US as there are overlapping territorial claims among them?
• They have formed the Arctic Council to institutionalize their self-assigned rights, but many in China, the European Union, and India are against conceding sovereignty to the Arctic countries.
• Russia, Canada and Denmark are all claimants to the ownership of the Arctic pole.
• Russia is both building up its military capabilities in the region and promoting the Northern Sea Route (NSR) as a new artery of global shipping. It recently announced that it will impose rules on commercial and naval vessels using the route.
• Both China and the US will contest Russia’s jurisdiction on this water.

GS-III: Mergers of Bank

Context

The Centre announced a mega amalgamation plan, the third in a row, that merged ten public sector banks into four larger entities, this series of mergers the number of state-owned banks is down to 12 from 27.

About Merger:

• There are four new sets of mergers Punjab National Bank, Oriental Bank of Commerce and United Bank of India to merge to form the country’s second-largest lender.
• Canara Bank and Syndicate Bank to amalgamate; Union Bank of India to acquire Andhra Bank and Corporation Bank, and Indian Bank to merge with Allahabad Bank.
• The biggest merger out of the four was Oriental Bank of Commerce and United Bank merging into Punjab National Bank to create the second largest state-owned bank with Rs 17.95 lakh crore business and 11,437 branches.
• These three banks are technologically compatible as they use Finacle Core Banking Solution (CBS) platform.

How does it help the government?

• For decades starting from 1992, the government as the biggest shareholder of over 25 banks had to provide capital for them.
• To grow and lend more, the banks often need a higher amount of capital to set aside also for loans that could go bad.
• With the government not willing to lower its equity holdings and with a large slice of the capital is set aside to cover for bad loans, the burden of infusing capital rests on the majority shareholder.
• This means marking a large amount of money almost every year during the last few years in the Budget for capital infusion at many banks at a time when there is a huge demand for the social sector.
• By reducing the number of banks to a manageable count, the government hopes that the demands for such capital infusion will be lower progressively with increased efficiencies and with more well-capitalised banks.

How have previous bank mergers fared?

• Last year, the government had merged Dena Bank and Vijaya Bank with Bank of Baroda, creating the third-largest bank by loans in the country.
• The government said this merger has been “a good learning experience” as profitability and business of the merged entity has improved.
• Earlier, the State Bank of India had acquired its associate banks.
• Indian Overseas Bank, Uco Bank, Bank of Maharashtra and Punjab and Sind Bank, which have a strong regional focus, will continue as separate entities.

Will this help improve the performance metrics now?

• While the announced consolidation of PSU banks is a credit positive as it enables the consolidated entities to meaningfully improve scale of operations and help their competitive position.
• At the same time, there will not be any immediate improvement in their credit metrics as all of them have relatively weak solvency profiles.
• While asserting that bank consolidation is a good move toward improving the efficiency of the PSBs, he said “it is possible that the current mergers may face more friction than the last one with BoB, Dena and Vijaya”.
• In that case, a large, well-capitalised strong bank absorbed two much smaller entities.
• In the present case, the mergers are mostly among larger banks, with absorbing bank not necessarily in strong health.

GS-III: A new ethics for a sustainable planet

Context

Brazil’s Amazon forests are ablaze with dozens of fires mostly set intentionally by loggers and others seeking greater access to forest land. They are paving the way for a global climate catastrophe.

Climate Change

1. Energy and transport are mainly responsible for the accumulation of greenhouse gases (GHGs) in the atmosphere.
2. Changes in land use patterns also have made significant contributions.
3. Deforestation, industrial agricultural systems and desertification are major drivers of climate change.
4. Agriculture, forestry and other land use activities accounted for a little less than a quarter (23%) of the total net anthropogenic emissions of GHGs between 2007-2016.
5. The Intergovernmental Panel on Climate Change (IPCC) recently brought out a special report on Climate Change and Land that covers desertification, land degradation, sustainable land management, food security and greenhouse gas fluxes in terrestrial ecosystems. It makes it clear that unless land is managed in a sustainable manner, the chances for humanity to survive climate change will become smaller.

Examples of Climate Change

• Many cities in Europe and elsewhere have seen high temperatures never before experienced.
• Heat waves have also accelerated melting of glaciers in Greenland at a rate that was not anticipated by scientific models until much later this century.
• The burning of the world’s largest forest reserves as witnessed in Amazon .

Importance of Land Management:

• Land is part and parcel of people’s lives. It provides food, water, livelihoods, biodiversity and a range of other benefits from its ecosystems.
• Decades of poor land management in the agricultural system destroyed farm systems.
• Soils have become depleted with the heavy use of chemicals
• Farms have few or no friendly insects.

CONCLUSION

Land use policy should incorporate better access to markets for small and marginal farmers, empower women farmers, expand agricultural services and strengthen land tenure systems.