Last nail in the Investment coffin

Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

News: The last remaining engine of India’s capital expenditure cycle, state government capex, is losing steam and could slow down further as state finances come under increasing strain, posing a risk to a capex revival in the country.

Prelims and Mains focus: about capital expenditure; the recent economic slowdown and its impact on various sectors of Indian economy

Background:

Over the past two decades, state governments have led public investments in India. As private investments dried up in the past few years, the role of state governments became even more central to sustaining investments in the country.

However, with state finances under stress, state CAPEX plans have been trimmed, further dampening a subdued CAPEX cycle in the country. Rising expenditure on the revenue account, including populist spending on farm loan waivers, has crimped the ability of state governments to drive the CAPEX cycle. The past couple of quarters saw a sharp drop in new project announcements, data from the project tracking database of the Centre for Monitoring Indian Economy (CMIE) shows.

The value of new state government projects saw a 75% decline from the year-ago period in the June-ended quarter of 2019, settling at the lowest in 15 years.

If the 15th Finance Commission decides to give in to the exorbitant demands of the central government, state finances would be hit badly and their capex plans will likely be trimmed further.

Why is state govt-led CAPEX expenditure crucial?

• How important state government-funded capex has become in the past few years can be understood by comparing the shares of government-funded CAPEX and privately-funded CAPEX over the years.
• Five years ago, private investments accounted for the bulk of investment projects. Now, the shares have reversed, with government-funded projects dominating investments across states.

Reasons for downfall in investments:

• One big reason for the decline in private investments relates to the rise in stalled projects. If projects were getting stalled largely because of lack of clearances earlier, now they are stalled because of lack of finances. Investments have declined the most in states such as Jharkhand, Chhattisgarh, West Bengal, Punjab, and Kerala and in all of these states stalling rates, expressed as a share of projects under implementation, have shot up considerably.
• So far, government-funded projects kept the CAPEX cycle going, even if at a tepid pace. Now with state finances facing rising strain, this channel of investment finance has also been jeopardized.
• Policy failures have contributed to the investment squeeze. The prime example of this is the Ujwal DISCOM Assurance Yojana (UDAY) under which states were allowed to breach their fiscal deficit targets to facilitate a one-time bailout of debt-laden power distribution companies (discoms).
• States were also supposed to enact power sector reforms to bring down losses and to revise power tariffs so that power companies turned viable and did not need life support in future. This was supposed to have led to a revival in the power sector and thus paved the way for new investments in the sector. The reality has been pretty disappointing.
• Power sector investments have dried up across states that implemented the scheme, CMIE data shows.

Conclusion:

With state finances being hit because of UDAY-related as well as other commitments, room for capex funding is likely to remain low. With the last remaining capex driver in the country being hit, a sustained revival in India’s investment cycle is likely to be further delayed.

Syllabus subtopic: Conservation, environmental pollution and degradation, environmental impact assessment

News: The Supreme Court on Monday lashed out at the Punjab and Haryana governments for their inability to prevent pollution from stubble burning despite orders from the court, saying the smog from the fires had made Delhi a living hell.

Prelims and Mains focus: about delhi’s pollution and the impact of stubble burning, challenges to tackle it

Remarks of the judges:

• A visibly agitated Bench of Justices Arun Mishra and Deepak Gupta said toxic fumes washing over Delhi from stubble burnt in Punjab and Haryana is reminiscent of an internal war.
• Using explosives to finish all is better than slow death from pollutants, Justice Mishra admonished the Chief Secretaries of Punjab and Haryana. “Should this be tolerated? Is this not worse than internal war? You better finish them all with explosives,” the court said.
• Choking city Justice Mishra highlighted the plight of people living in Delhi­NCR. They choke on polluted air day in and out.
• “Delhi is worse than narak [hell]. The world is laughing at us. You are reducing the life span of people. Why are people being forced to live in gas chambers. Get explosive and kill them all in one go... How much should each person be paid for suffering air pollution?” Justice Mishra slammed the authorities.
• Taking suo motu cognisance of allegations of water pollution in Delhi, the court said people have a right to get pure drinking water.
• The Bench directed the Delhi government and the Central Pollution Control Board to provide a status report on the impact of industries on pollution in Delhi.
• The court expressed its keenness to explore the law of torts to fix liability on polluters and direct compensation to be payable to ordinary citizens.
• The court issued notices to all the States for their responses on why they should not be made liable to pay compensation to people for not providing clean air and water. The Supreme Court also asked the Delhi government and the Centre to finalise a plan within 10 days for the setting up of air purifiers in the city.

What is suo motu cognisance?

• It means on its own motion; is a Latin legal term. The term used where a government agency acts on its own cognizance, as in the Commission took suo motu control over the matter.
• This term generally used in Indian legal parlance. A court takes suo moto action means it starts a legal process on its own.
• In Indian law Article 32 of the Indian constitution, contains a tool which directly joins the public with the judiciary. A PIL may be introduced in a court of law by the court itself (suo motu) rather than the aggrieved party or another third party.

Central Pollution Control Board (CPCB):

Central Pollution Control Board (CPCB), statutory organisation, was constituted in September, 1974 under the Water (Prevention and Control of Pollution) Act, 1974. Further, CPCB was entrusted with the powers and functions under the Air (Prevention and Control of Pollution) Act, 1981.

Functions:

• To promote cleanliness of streams and wells in different areas of the States by prevention, control and abatement of water pollution.
• To improve the quality of air and to prevent, control or abate air pollution in the country.

Syllabus subtopic: Conservation, environmental pollution and degradation, environmental impact assessment

News: Greenhouse gases in the atmosphere hit a new record in 2018, exceeding the average yearly increase of the last decade and reinforcing increasingly damaging weather patterns, the World Meteorological Organization (WMO) said on Monday.

Prelims and Mains focus: About WMO, green house gases and their impact on the environment, ways to tackle their harmful effects

Key highlights of the report:

• The concentration of carbon dioxide surged from 405.5ppm in 2017 to 407.8ppm in 2018, exceeding the average annual increase of 2.06ppm in 2005-2015. The annual increase in methane was the highest since 1998.

• The UN agency’s Greenhouse Gas Bulletin is one of a series of studies to be published ahead of a UN climate change summit being held in Madrid next week, and is expected to guide discussions there. It measures the atmospheric concentration of the gases responsible for global warming, rather than emissions.

• Irrespective of future policy, carbon dioxide stays in the atmosphere for centuries, locking in warming trends.

About WMO:

• The World Meteorological Organization (WMO) is a specialized agency of the United Nations dedicated to meteorology (weather), climatology (climate), operational hydrology (water) and other related geophysical sciences such as oceanography and atmospheric chemistry.
• Predecessor organization — International Meteorological Organization (IMO) — founded in 1873.

Reports published by WMO:

1. Greenhouse Gas Bulletin.
2. Status of the World Climate.

Functions:

1. WMO coordinates the activities of National Meteorological and Hydrological Services in 191 States and Territories so that basic weather, climate and water services are made available to anyone who needs them, when they need them.
2. WMO guarantees the publication of observations and statistics and furthers the application of meteorology and hydrology (including the monitoring and predictions of climate change and ozone) to all aspects of human activities such as aviation, shipping, water management and agriculture.
3. WMO also encourages research and training in meteorology and hydrology and their related applications and contributes towards reducing the impact of weather- and climate-related hazards. This is accomplished through regular, reliable forecasts and early warnings on flooding, drought, tropical cyclones, tornadoes and other extreme events.
4. Predictions concerning locust swarms and the transport of pollutants (nuclear and toxic substances, volcanic ash) are also provided by WMO Members.

Syllabus subtopic: Various Security forces and agencies and their mandate

News: Minister of State for Home G Kishan Reddy on Monday introduced the Special Protection Group (Amendment) Bill, 2019 in the Lok Sabha

Prelims and Mains focus: about the key features of the Bill and its significance

Purpose of the Bill:

The statement of objects and reasons of the Bill said that it is “considered to amend the Act to focus on core mandate, as the security of the Prime Minister, as Head of the Government, is of paramount importance for Government, governance and national security.”

Key features of the amending Bill:

• As per the Bill, “SPG shall provide proximate security to the Prime Minister and his immediate family members residing with him at his official residence.”

• The Bill says that family members of a former PM who do not reside with him at his official residence will not be guarded by SPG commandos and those who reside with him will get security cover of the SPG only for five years.

• The Bill says that in the existing Act there is no cut­off period for providing SPG protection to former PMs or members of their immediate families. “Thus, the number of individuals to be provided SPG cover can potentially become quite large. In such a scenario, there can be severe constraint on resources, training and related infrastructure of the SPG,” the statement of objects and reasons said.

Origins of SPG:

1. In March 1985, following the recommendations of a committee set up by the Home Ministry, a special unit was created for this purpose under the Cabinet Secretariat. This unit, initially called the Special Protection Unit, was renamed as Special Protection Group in April 1985.
2. Subsequently, the Parliament passed The Special Protection Group (SPG) Act, which was notified in June 1988 “to provide for the constitution and regulation of an armed force of the Union for providing proximate security to the Prime Minister of India and for matters connected therewith”.
3. The SPG Act defined “proximate security” as “protection provided from close quarters, during journey by road, rail, aircraft, watercraft or on foot or any other means of transport” and to “include the places of functions, engagements, residence or halt”.
4. Coverage: SPG protection was extended, apart from the Prime Minister, to “former Prime Ministers of India and members of their immediate families” through an amendment in the Act in the aftermath of the assassination of Rajiv Gandhi in May 1991.

Categories of security:

Besides the SPG, VIPs in India are protected by other security forces as well. The levels of security cover are determined by the threat perception around the individual.

1. The highest level of security cover is the Z-plus category, followed by Z, Y, and X categories.
2. The higher the level of cover, the larger the number of personnel protecting the individual.
3. Roughly 24-36 personnel with automatic weapons are deployed for Z-plus category protectees and 16-20 personnel guard Z-category protectees.
4. The elite ‘Black Cat’ commandos of the NSG are deployed to protect VIPs for whom the threat perception is the highest.