RBI announces 50,000crore Special Liquidity Facility for Mutual Funds

Part of: GS-III- Economy-Capital markets (PT-MAINS-PERSONALITY TEST)

The Reserve Bank of India announced a Special Liquidity Facility for Mutual Funds (SLF-MF) of 50,000 crore rupees with a view to easing liquidity pressures on Mutual Funds. The RBI has stated that it remains vigilant and will take whatever steps are necessary to mitigate the economic impact of COVID-19 and preserve financial stability.

Imp points

1. The Apex bank has said that under the Special Liquidity Facility for Mutual Funds (SLF-MF), the RBI shall conduct repo operations of 90 days tenor at the fixed repo rate.
2. The SLF-MF is on-tap and open-ended and banks can submit their bids to avail funding on any day from Monday to Friday (excluding holidays).
3. The scheme is available from today till the 11th of May or up to utilization of the allocated amount, whichever is earlier. The Reserve Bank will review the timeline and amount, depending upon market conditions.
4. Funds availed under this facility will be used by banks exclusively for meeting the liquidity requirements of MFs by extending loans, and undertaking the outright purchase of and/or repos against the collateral of investment grade corporate bonds, commercial papers (CPs), debentures and certificates of Deposit (CDs) held by MFs, the central bank said.

Franklin Templeton

The move comes after Franklin Templeton Mutual Fund decided to wind up six debt funds that have combined assets under management of nearly 26,000 crores on account of illiquid, low-rated instruments in their portfolio last weak.

The fund house had said it decided to wind up the schemes to preserve the value at least at the current levels, as the value was getting eroded due to a combination of redemption pressures and mark-to-market losses due to lack of liquidity on account of the coronavirus impact on the markets.

“RBI move is very timely. This move will first improve the confidence; second, it can help in providing the necessary liquidity to the mutual fund industry if anyone needs to avail of it. With the yields dropping, one would assume banks may go down the credit curve and extend facilities,” s

“Heightened volatility in capital markets in reaction to COVID-19 has imposed liquidity strains on mutual funds (MFs), which have intensified in the wake of redemption pressures related to the closure of some debt MFs and potential contagious effects therefrom. The stress is, however, confined to the high-risk debt MF segment at this stage; the larger industry remains liquid,” the central bank said.

“With excess liquidity of around 4.85 trillion as on April 24, 2020, banks, however, continue to remain largely risk-averse. We expect the liquidity of the higher-rated papers to improve on the back of this facility. Accordingly, active participation from the banks will be key to the success of this scheme,”

About Mutual FUNDS and PAST news

1. The markets regulator Securities and Exchange Board of India (SEBI) has tightened norms on investments by mutual funds (MFs).

• MF schemes can now invest only in listed debt or equity.
• Valuation of securities in debt funds will now be on mark-to-market basis instead of the earlier practice of considering it on an amortisation basis.
• Liquid funds can now invest a maximum of 20% of their assets in a single sector as against the current cap of 25%, and must keep aside at least a fifth of their assets in cash equivalents to meet sudden redemption pressures.

Mutual Fund: A mutual fund collects money from investors and invests the money, on their behalf, in securities (debt, equity or both). It charges a small fee for managing the money.

Liquid Funds: These are debt mutual funds that invest in securities up to a maturity of 91 days.

2. The redemption issues faced by fixed maturity plans (FMPs) of mutual funds due to their exposure towards Essel Group entities have only begun as there are nearly 80 FMP schemes with such exposure towards the corporate entity. The cumulative amount at stake is about 1,400 crores with more than 40 schemes maturing later this year. More importantly, about 14 schemes, with an exposure of nearly 475 crores (April 2019), will mature this month.

Background:

• A mutual fund collects money from investors and invests the money on their behalf.
• It charges a small fee for managing the money. Mutual funds are an ideal investment vehicle for regular investors who do not know much about investing.
• Investors can choose a mutual fund scheme based on their financial goal and start investing to achieve the goal.

How to Invest in Mutual funds?

• You can either invest directly with a mutual fund or hire the services of a mutual fund advisor. If you are investing directly, you will invest in the direct plan of a mutual fund scheme. If you are investing through an advisor or intermediary, you will invest in the regular plan of the scheme.
• If you want to invest directly, you will have to visit the website of the mutual fund or its authorized branches with relevant documents.
• The advantage of investing in a direct plan is that you save on the commission and the money invested would add sizeable returns over a long period.
• The biggest drawback of this method is that you will have to complete the formalities, do the research, and monitor your investment all by yourself. Types of Mutual Funds in India – The Securities and Exchange Board of India has categorised mutual funds in India under four broad categories:
  • Equity Mutual Funds
  • Debt Mutual Funds
  • Hybrid Mutual Funds
  • Solution-oriented Mutual Funds

Equity Mutual fund scheme:

• These schemes invest directly in stocks. These schemes can give superior returns but can be risky in the short term as their fortunes depend on how the stock market performs. Investors should look for a longer investment horizon of at least five to 10 years to invest in these schemes. There are 10 different types of equity schemes.

Debt Mutual fund schemes:

• These schemes invest in debt securities. Investors should opt for debt schemes to achieve their short-term goals that are below five years. These schemes are safer than equity schemes and provide modest returns. There are 16 sub-categories under the debt mutual fund category.

Hybrid Mutual fund Schemes:

• These schemes invest in a mix of equity and debt, and an investor must pick a scheme based on his risk appetite. Based on their allocation and investing style, hybrid schemes are categorised into six types.

Solution-Oriented Schemes:

• These schemes are devised for particular solutions or goals like retirement and child’s
• education. These schemes have a mandatory lock-in period of five years.

Mutual Fund Charges:

• The total expenses incurred by your mutual fund scheme are collectively called expense ratio. The expense ratio measures the per unit cost of managing a fund. The expense ratio is generally in between 1.5-2.5 per cent of the average weekly net assets of the schemes.

Mutual fund redemption

Mutual fund redemption is how investors sell their fund units. However, if there is an exit load, then the investors necessarily pay it on redeeming their units. When investors redeem their units, they earn taxable capital gains. The taxability of capital gains depends on the type of fund and the period of holding. Here, investors should mandatorily consider all the expenses that they would incur on redeeming their units.

When to exit and redeem a fund

The right time to sell or redeem mutual funds depends on investors’ financial goals. One might be invested in a mutual fund for ten years to fifteen years to purchase a house or finance their child’s wedding. In some cases, it could also be a short-term goal, such as buying a car or an appliance. Once an investor gets close to realising his/her financial goal, then he/she should consider redeeming their fund units irrespective of the state of the market.

Digital India programme

Part of: GS-III- S&T (PT-MAINS-PERSONALITY TEST)

India is amongst the top 2 countries globally, just behind China on many dimensions of digital adoption. By 2022, India’s digital economy is likely to cross $1 trillion. This was the focus at the India Digital Summit 2019, held in New Delhi. The summit deliberated on what India needs to become a trillion dollar digital economy, the challenges on the way forward as well as the threats to cybersecurity.

Imp Points

Digital India programme

• Vision Areas
  • Digital infrastructure as Utility to Every Citizen
  • Governance and services on demand
  • Digital empowerment of citizens
• Objectives
  • To prepare India for a knowledge future.
  • For being transformative that is to realize IT (Indian Talent) + IT (Information Technology) = IT (India Tomorrow).
  • Making technology central to enabling change.
  • On being an Umbrella Programme – covering many departments.
  • The programme weaves together a large number of ideas and thoughts into a single, comprehensive vision so that each of them is seen as part of a larger goal.
  • The Digital India Programme will pull together many existing schemes which would be restructured and re-focused and implemented in a synchronized manner.

Nine pillars of Digital India

• • Broadband Highways
  • Universal Access to Mobile Connectivity
  • Public Internet Access Programme
  • e-Governance: Reforming Government through Technology
  • e-Kranti - Electronic Delivery of Services
  • Information for All
  • Electronics Manufacturing
  • IT for Jobs
  • Early Harvest Programmes

Progress and Impact of Digital India Programme

• Overall 12000 rural post office branches have been linked electronically.
• Increased in electronic transactions related to e-governance as it is estimated that there are more than 100 cr mobile phones in India.
• 2, 74,246 km of optical fiber network has connected over 1.15lakh Gram Panchayats under the Bharat Net programme.

*Common Service Center

• A Common Service Center (CSC) is an information and communication technology (ICT) access point created under the National e-Governance Project of the Indian government.
• A CSC is essentially a kiosk with a personal computer, a wireless connection, and other equipment. Through computer and Internet access, the CSCs provide multimedia content related to e-governance, education, health, telemedicine, entertainment, and other government and private services.
• There is a rapid expansion in the network of Common Service Centers.
• DigiGaon or Digital Village conceptualized as the connected village where the citizen can avail various e-services. These DigiGaons are projected to be change agents, promoting rural entrepreneurship, building rural capacities and livelihoods through community participation.
• Digital villages have been equipped with solar lighting facility, LED assembly unit, sanitary napkin production unit, Wi-Fi choupal.
• The aim of the programme is to turn each village into a self-sustaining unit.
• It has been estimated that the internet service sector is expected to reach $74 billion in 2022. Internet data has become the major tool for the delivery of the services.
• India till Dec 2017 had made tremendous progress in urban internet penetration with 64%. However, four fifth of rural India is yet to get access to the internet.
• Presently, there are 300 million daily active users which have risen from 10-15 million daily users in 2011. And, it is estimated that by 2020 the number would double.

Initiatives launched by the Government of India

• Digilockers—it is a "digital locker" service operated by the Government of India that enables Indian citizens to store certain official documents on the cloud. The service is aimed towards reducing the need to carry physical documents.
• BHIM app—It is an app to enable digital payments. BHIM app was used to facilitate 913 million transactions in 2017-18.
• Pradhan Mantri Gramin Digital Saksharta Abhiyan to make citizen digitally literate. The project is expected to be one of the largest initiatives of the country with an overall target of training 6 crore students until the financial year, 2019. The government has accepted 250,000 Gram Panchayats to register at least 200-300 candidates each.

India’s Digital Economy

• India’s digital economy will touch $1 trillion by the year 2022. India would be $10 trillion economy by 2030 and half of it would be the digital economy.
• Fintech sector—the Fintech sector in a recent couple of years has seen a huge jump in growth. Digital currency and online payments platforms have played a major role in financial inclusion.
• Public Services Sector—steady and efficient digital transformation across areas like e-governance and this has also considerably brought down leakages and corruption. In recent years India performed well in transparency index.
• Health care sector—it is catching up to meet the demands of its tech-savvy population. Demand is shifting now to quality and affordable healthcare, much of it being fulfilled by a public-private partnership.
• Digital healthcare startups are playing a major role in addressing areas like preventive healthcare, analytics, emergency services and engage with super-aggregation platforms like Facebook and Google.
• Enterprise and Deep Technology sector—startups in this sector have made their presence felt globally with their success. The IT services in the country are set to reach USD 13.2 billion by the end of this year.
• E-commerce and Consumer internet sector—India’s e-commerce market is set to grow three times to surpass USD 100 billion by 2022.
• Travel and Hospitality sector—this sector has enjoyed rapid online growth since the beginning of this century. The growth is also attributed to the increase in disposable income, especially, among the millennials, who are changing decades of traditional travel trends.

Challenges

Slow roll-out of Wi-Fi hotspots and the slow speed, in comparison to other developed nation. Most small and medium scale industry is struggling to adapt to modern technology. Entry level smartphones have limited capabilities for smooth internet access, and the outreach of the ‘smartphones’ is limited. There is an absence of enough skilled manpower in digital technology. Lack of user education and there are limited facilities to train personnel. India needs over one million cybersecurity experts to check and monitor the growing menace of digital crime.

National Digital Literacy Mission

• National Digital Literacy Mission (NDLM) has been initiated with the vision to empower at least one person per household with crucial digital literacy skills by 2020.
• NDLM is an effort to complement the government’s vision to transform one from each household as digitally literate.
• The project aims at helping adults with low technological literacy develop the skills they need to interact in an increasingly digital world.

Bharat Broadband Network Limited

• It is a Special Purpose Vehicle set up by the Government of India under the Companies Act, 1956 with an authorized capital of ?1000 crore.
• It comes under the Ministry of Communications and Information Technology.
• In 2011, it was mandated to create the National Optical Fiber Network (NOFN) in India which was later renamed as the BharatNet project In 2015.

Digital Learning Resources

Context:

The Class Central (a free online course aka MOOC aggregator from top universities like Stanford, MIT, Harvard, etc.) has released the list of best 30 online courses of 2019 out of which 6 courses are from SWAYAM.

ICT in Education:

About SWAYAM

• SWAYAM (Study Webs of Active–Learning for Young Aspiring Minds) is a programme initiated by Government of India and designed to achieve the three cardinal principles of Education Policy viz., access, equity and quality.
• The objective of this effort is to take the best teaching learning resources to all, including the most disadvantaged.
• SWAYAM seeks to bridge the digital divide for students who have hitherto remained untouched by the digital revolution and have not been able to join the mainstream of the knowledge economy.
• This is done through an indigenous developed IT platform that facilitates hosting of all the courses taught in classrooms to be accessed by anyone, anywhere at any time.
• All the courses are interactive, prepared by the best teachers in the country and are available, free of cost to the residents in India.
• SWAYAM platform is developed by Ministry of Human Resource Development (MHRD) and NPTEL, IIT Madras with the help of Google Inc. and Persistent Systems Ltd.
• It would be ultimately capable of hosting 2000 courses and 80000 hours of learning: covering school, under-graduate, post-graduate, engineering, law and other professional courses.
• The ‘Study Webs of Active Learning for Young Aspiring Minds' (SWAYAM) an integrated platform for online courses, using information and communication technology (ICT) which covers school (9th to 12th) to Post Graduate Level.
• It also offers online courses for students, teachers and teacher educators. It may be accessed on swayam.gov.in.

Other Digital resources available as part of various MHRD supported programmes

• It provides access to digital textbooks for all classes, graded learning materials and enables participation in exhibitions, contests, festivals, workshops, etc.
• NPTEL provides E-learning through online Web and Video courses in Engineering, Science and humanities streams. The mission of NPTEL is to enhance the quality of Engineering education in the country by providing free online courseware. NPTEL is an acronym for National Programme on Technology Enhanced Learning which is an initiative by seven Indian Institutes of Technology (IIT Bombay, Delhi, Guwahati, Kanpur, Kharagpur, Madras and Roorkee) and Indian Institute of Science (IISc) for creating course contents in engineering and science.
• SWAYAM Online courses provides access to best teaching learning resources which were earlier delivered on the SWAYAM Platform may be now viewed by any learner free of cost without any registration.
• UG/PG MOOCs : learning material of the SWAYAM UG and PG ( Non-Technology ) archived courses.
• https://www.swayamprabha.gov.in/ : A group of 32 DTH channels providing high quality educational curriculum based course contents covering diverse disciplines such as arts, science, commerce, performing arts, social sciences and humanities subjects, engineering, technology, law, medicine, agriculture etc to all teachers, students and citizens across the country interested in lifelong learning. These channels are free to air and can also be accessed through your cable operator. The telecasted videos/lectures are also as archived videos on the Swayamprabha portal.
• National Digital Library is a digital repository of a vast amount of academic content in different formats and provides interface support for leading Indian languages for all academic levels including researchers and life-long learners, all disciplines, all popular form of access devices and differently-abled learners.
• Virtual Labs - objective is to provide remote-access to Labs in various disciplines of Science and Engineering. These Virtual Labs would cater to students at the undergraduate level, post graduate level as well as to research scholars.
• Spoken Tutorial - An initiative of the ‘Talk to a Teacher’ activity of the National Mission on Education through Information and Communication Technology (ICT), launched by the Ministry of Human Resources and Development, Government of India. On this site, one can find a variety of spoken tutorials that will help you to learn and use open source software.
• The Consortium for Educational Communication - Popularly known as CEC is one of the Inter University Centres set up by the University Grants Commission of India. It has been established with the goal of addressing the needs of Higher Education through the use of powerful medium of Television along with the appropriate use of emerging Information Communication Technology (ICT).
• e-Yantra - An initiative to incorporate Robotics into engineering education with the objective of engaging students and teachers through exciting hands-on application of math, computer science, and engineering principles
• e-ShodhSindhu - Consortium for Higher Education Electronic Resources - Provides access to e-resources to Universities, Colleges and Centrally Funded Technical Institutions in India.
• FOSSEE (Free and Open Software in Education) - A project promotes the use of FOSS tools to improve the quality of education in our country. It aims to reduce dependency on proprietary software in educational institutions.
• Vidwan is a database of experts which provides information about experts to peers, prospective collaborators, funding agencies policy makers and research scholar in the country. Faculty members are requested to register on the Vidwan portal to help expand the database of experts.

ITI makes the low-cost aerosol boxes, face shields-Vocational Education in India

The government-run Industrial Training Institute (ITI) in Odisha’s Berhampur has prepared low-cost ‘aerosol boxes’ and ‘face shields’ for the medical staff involved in the treatment of COVID-19 patients.

At the request of the Ganjam district administration, ITI-Berhampur successfully created cost-effective ‘aerosol boxes’ and ‘face shields’. The market price of an ‘aerosol box’ is 10,000, whereas the ITI-Berhampur has made it at a cost of 3,000. Each ‘face shield’ is sold for 200, while its production cost at ITI-Berhampur is just 11.

Aerosol box

• An ‘aerosol box’ is a transparent box with holes to enter gloved hands, which is put over the head of a COVID-19 patient placed on a ventilator in ICU during the intubation process.
• The ‘aerosol box’ serves as a barrier to check possible transmission of COVID-19 droplets from the patient to the treating doctors during intubation.
• The ‘aerosol box’ is made of 4 mm transparent acrylic sheets cut by a laser cutting machine to make the joints completely airtight.
• These are reusable after sanitisation.

Face shields

• A face shield, an item of personal protective equipment (PPE), aims to protect the wearer's entire face (or part of it) from hazards such as flying objects and road debris, chemical splashes (in laboratories or in industry), or potentially infectious materials (in medical and laboratory environments).

What are Industrial Training Institutes (ITIs) ?

• Industrial Training Institutes and Industrial Training Centers are post-secondary schools in India constituted under Directorate General of Employment & Training (DGET), Ministry of Skill Development and Entrepreneurship, Union Government to provide training in various trades.
• The ITIs were initiated in the 1950s.
• In a span of 60 years, until 2007, around 1,896 public and 2,000 private ITIs were set up.
• However, in a 10-year period from 2007, more than 9,000 additional private ITIs were accredited.

Vocational Education in India

Standing Committee on Labour under the chairmanship of Krit Soumiya had submitted its Report on the “Industrial Training Institutes (ITIs) and Skill Development Initiative Scheme”

Vocational training

Vocational Education can be defined as the education that is based on occupation and employment. Vocational Education is also known as career and technical education (CTE) or technical and vocational education and training (TVET).

Vocational Training in India

• The Indian education system recognizes the role of education and particularly Vocational Education. Vocational training in India is provided on a full-time as well as part-time basis.
• Full-time programs are generally offered through Industrial training institutes (ITI). The nodal agency for granting the recognition to the I.T.I. is NCVT, which is under the Ministry of Labour, Govt. of India.
• Part-time programs are offered through state technical education boards or universities who also offer full-time courses.

Brief History of Vocational Education and training

1. 1945: Directorate General of Employment and Training (DGE&T), was set up for re-settling demobilized defence service personnel and discharged war workers in civilian life after World War II
2. 1950: Under the Craftsmen Training Scheme, Industrial Training Institutes (ITIs) were established
3. 1964: vocationalise secondary education recommended by Kothari committee
4. 1986: The National Policy on Education provided for Vocational Education in the Higher Secondary Stage.
5. 2013: National Skill Certification and Monetary Reward Scheme (STAR)
6. 2015: Skill India Mission
7. 2015: The part of DGE&T dealing with Craftsman Training Scheme (CTS) and Apprenticeship Training Scheme (ATS) was transferred to the newly created Ministry of Skill Development and Entrepreneurship (MSDE) and is now known as Directorate General of Training.

Skill India mission

Skill India is a campaign launched by Prime Minister Narendra Modi on 15 July 2015 which aim to train over 40 crore people in India in different skills by 2022. It includes various initiatives of the government like:

1. National Skill Development Mission
2. National Policy for Skill Development and Entrepreneurship, 2015
3. Pradhan Mantri Kaushal Vikas Yojana (PMKVY)
4. Skill Loan scheme

Need for focus on vocational training

• Demographic Dividend: India has 65% of its youth in the working age group. Efficient utilization of these population would promote saving and investment rate
• Meet employer need of skills: The latest India skill Report indicates that only about 47% coming out of educational institutions are employable.
• Prepare workers for a decent livelihood: this improves India’s ranking in HDI
• Boost to Small Medium Enterprises
• World class productivity and quality
• For Make in India – It give big opportunity for MNCs to come to India
• Export of skilled workforce to aging developing countries

The study titled ‘Global Talent Crunch’ highlighted that India would have a talent surplus of around 245.3 million workers by 2030 at a time when the Asia-Pacific region itself would face a talent deficit of 47 million workers.

Issues with Vocational training

1. There is lack of coordination between MSDE and MHRD. In India vocational training is under MSDE while vocational education is under MHRD. The different institutions impact the whole process of vocational education and training
2. Absence of a sound National Vocational Education and Training (VET) System and standard
3. Irrelevance of courses leading to a mismatch between the labour market needs and the training skills.
4. Absence of an integrated in-plant Apprenticeship Training
5. There is a high drop-out rate at Secondary level. Vocational Education is presently offered at Grade 11, 12th
6. Private and Industry Participation is lacking.
7. Less number of Vocational Institutes in the country
8. Inadequate financing of VET system.
9. Shortage of qualified trainers
10. Issues with Recognition of Prior Learning (RPL)
11. Absence of ownership of National Standards: Ministry of Skill Development and Entrepreneurship is the nodal Ministry for Skill Development. However, in addition to MSDE, there are 17 other Ministries/Departments which are doing vocational training.
12. In India vocational training is always about entry level jobs and never counted as aspirational
13. Most of the it is are running only engineering courses while 60% of the GDP is contributed by the services sector
14. Lack of social acceptability

Way Ahead

• Government should incorporate the recommendation of Sharda Prasad committee and Parliamentary Standing committee
• Adequate infrastructure should be provided in schools, and schools also should be properly equipped for teaching and learning.
• Adequate enlightenment campaigns should be carried out in order to educate the society about the importance of technical and vocational education.
• There should be industrial participation in vocational schools and also there should be an arrangement for students to visit the industrial areas.
• Contemporary instructional materials should be provided. Vocational subjects should be taught by using up-to-date modules.

Introduction

The global military expenditure rose to $1917 billion in 2019 with India and China emerging among the top three spenders, according to a report by a Swedish think tank, Stockholm International Peace Research Institute (SIPRI).

SIPRI Report

The annual report ‘Trends in World Military Expenditure, 2019’ was released by the SIPRI

• In 2019, China and India were, respectively, the second- and third-largest military spenders in the world.
• China’s military expenditure reached $261 billion in 2019, a 5.1% increase compared with 2018.
• India’s grew by 6.8% to $71.1 billion.
• In 2019, the top five largest spenders — U.S. ($732 bn), China, India, Russia ($65.1 bn) and Saudi Arabia ($61.9 bn) — accounted for 62% of the global expenditure.

Reason for rise in India’s military expenditure

• India’s tensions and rivalry with both Pakistan and China are among the major drivers for its increased military spending.
• The $71.1 billion spent by India on defence in 2019 was 2.4% of its Gross Domestic Product (GDP). India was at the fourth position in 2018 with Saudi Arabia at the third.
• Military expenditure grew by 259% over the 30-year period of 1990–2019, and by 37% over the decade of 2010–19. However, its military burden fell from 2.7% of GDP in 2010 to 2.4% in 2019.

cluding defence pensions, accounts for about 1.5% of the country’s GDP, the lowest in recent times.

Pak.’s expenditure

In comparison, Pakistan’s military expenditure rose by 70% over the decade 2010–19, to reach $10.3 billion while the military burden increased from 3.4% of GDP in 2010 to 4% in 2019, says the report. Pakistan was at the 24th position in 2019 compared to 19th in 2018.

Global military spending

• Global military spending in 2019 represented 2.2% of the global GDP and this was an increase of 3.6% from 2018 and the largest annual growth in spending since 2010.
• In Asia and Oceania, other than India and China, Japan ($47.6 bn) and South Korea ($43.9 bn) were the largest military spenders.

About SIPRI

SIPRI is an independent international institute dedicated to research into conflict, armaments, arms control and disarmament.

Established in 1966, SIPRI provides data, analysis and recommendations, based on open sources, to policymakers, researchers, media and the interested public.

Based in Stockholm, SIPRI is regularly ranked among the most respected think tanks worldwide.

SIPRI’s mission

• undertake research and activities on security, conflict and peace;
• provide policy analysis and recommendations;
• facilitate dialogue and build capacities;
• promote transparency and accountability; and
• deliver authoritative information to global audiences.

Lockdown impact: Domestic sugar consumption

Part of: GS-III- Economy-Sugar policy (PT-MAINS-PERSONALITY TEST)

According to rating agency Icra, the national lockdown due to the COVID-19 pandemic has adversely impacted the sugar demand, resulting in a decline in sugar prices to closer to minimum support price (MSP) levels of Rs 31 per kg from Rs 32.5 per kg in February 2020.

The demand for sugar has witnessed a significant decline following the nationwide lockdown and the overall adverse impact on sugar consumption would be at least one million tonnes in the domestic market.

The report further said that the sugar mills are unable to fulfil their monthly sales quota allocated by the government owing to the demand squeeze.

The various reasons -

1. With nationwide lockdown, the ice cream, soft drinks and confectionery manufacturers have shut down their operations. In spite of the summer season where the sale is high, they cannot manufacture and sell.
2. With most countries under lockdown globally, the demand has also declined to result in a fall of global sugar prices,
3. Further to the decline in crude prices, Brazil is likely to divert more cane towards sugar production which could exert pressure on global sugar prices.

These factors have consequently led to pressure on the working capital requirements of sugar mills and thus a rise in cane dues to farmers. However, the mills exporting sugar are likely to gain on rupee depreciation to an extent. The domestic sugar mills have already contracted close to 3.5-4 million tonnes for export, it said, adding that the exports are likely to resume from June-July 2020.

In Maharashtra, he said the crushing operations have been impacted due to issues on harvesting and transportation owing to labour shortage with most of the migrant workers returning to their respective states.

Largest hole in the ozone layer heals itself: Is it Coronavirus effect?

Part of: GS-III- S&T-Ozone (PT-MAINS-PERSONALITY TEST)

Scientists believe the closing of the hole is because of the same polar vortex and not because of the lower pollution levels during the coronavirus lockdown.

Earlier this month, scientists reported a strong reduction of ozone concentrations over the Arctic beloved to have been caused by unusual atmospheric conditions. The hole -- first identified in March 2020 -- is now being reported to have closed.

The Copernicus Climate Change Service (C3S) and Copernicus Atmosphere Monitoring Service (CAMS) by the European Centre for Medium-Range Weather Forecasts (ECMWF) confirmed that the largest hole in the Ozone later above the Arctic has closed.

What is ozone layer

The ozone layer is a protective layer of gas in the stratosphere. It shields the planet from Sun’s harmful ultraviolet radiation, which can otherwise cause skin cancer and cataracts along with other environmental issues.

Scientists noticed the unusually strong depletion of ozone over the northern polar regions in March, which is believed to have been the largest hole in the Ozone layer. The hole could have led to a bigger threat had it moved towards the south.

Although mini ozone holes over the North Pole aren’t rare, the depletion over the Arctic this year was much larger compared to previous years. The reason for this year’s ozone hole is said to have occurred due to the polar vortex — a circling whirlpool of stratospheric winds responsible for bringing cold air to the polar. Scientists also believe that the closing of the hole is because of the same polar vortex and not because of the lower pollution levels during the coronavirus lockdown.

‘Proactive steps’: Egypt seeks IMF help to fight coronavirus

Egypt asked for emergency financing to support investor confidence as it suffers an economic hit from the virus.

Egypt has asked the International Monetary Fund for financial assistance to shore up investor confidence in the economy as authorities work to offset the impact of the coronavirus pandemic. The assistance involves the use of the IMF's Rapid Financing Instrument and a Stand-By Arrangement. These lending tools offer rapid and flexible funding without the strings of a full program

The emergency financing under the RFI will allow the Egyptian government to "address any immediate balance of payments needs and support the most affected sectors and vulnerable groups of people", The IMF is also working with the Egyptian government to "support its strong set of macroeconomic policies through an SBA.

Sugar Industry in India

Part of: GS-I- Geography (PT-MAINS-PERSONALITY TEST)

Sugarcane farmers are facing a payments crisis running into thousands of Crores of Rupees. In Maharashtra alone, the state’s sugar mills failed to disburse the entire amount of Rs 7,450.9 crore as payment for the cane to farmers as the ‘fair and remunerative price’(FRP), according to the Maharashtra government’s commissioner of sugar. A similar situation regarding delays in Uttar Pradesh led to recent farmer protests bringing to light the crisis in the sugar industry.

Background

• A major player in the worldwide sugar trade, India produced 33 million metric tons in 2017/2018. The nation is seeing record levels of sugar production and is set to overtake Brazil as the highest sugar producer.
• India’s sugar production rose 11.5% during the 2014 to 2015 season on bumper cane production. This increase in production led to an extensive surplus in Indian sugar with mills struggling to pay fair wages to workers.

Sugar Industry’s Location in India

• The sugar industry is broadly distributed over two major areas of production- Uttar Pradesh, Bihar, Haryana and Punjab in the north and Maharashtra, Karnataka, Tamil Nadu and Andhra Pradesh in the south.
• South India has a tropical climate which is suitable for higher sucrose content giving a higher yield per unit area as compared to north India.

Significance

• Multiple linkages: Sugar is a labour-intensive industry, up the entire value chain from cane-growing to sugar and alcohol production. Across multiple districts of Uttar Pradesh, Maharashtra, Tamil Nadu, Karnataka, and several other states, it is the main source of employment.
• Source of employment: A sugar industry is the source of livelihood for 50 million farmers and their families. It provides direct employment to over 5 lakh skilled labourers but also to semi-skilled labourers in sugar mills and allied industries across the nation.
• Byproducts: The various byproducts of the sugar industry also contribute to economic growth and promote a number of allied industries. Sugarcane has emerged as a multi-product crop used as a basic raw material for the production of sugar, ethanol, paper, electricity and cogeneration of ancillary products.
• For livestock feeding: Molasses from sugar cane is used for alcohol production and livestock feeding since it is highly nutritious.
• Biofuel: In India, the vast majority of ethanol is produced from sugarcane molasses, a by-product of sugar. Ethanol blended fuel can help in reducing crude oil imports.
• Bagasse: Basic utilisation of baggase continues to be as a fuel. But it is also suitable raw material for the paper industry. 30% of cellulose requirement comes from agricultural residues. However, since the mills are scattered all over the country, the collection of surplus baggase poses a problem and makes paper units uneconomical.

Problems of the Sugar Industry

• Uncertain Production Output
  • Sugarcane has to compete with several other foods and cash crops like cotton, oil seeds, rice, etc. This affects the supply of sugarcane to the mills and the production of sugar also varies from year to year causing fluctuations in prices and leading to losses in times of excess production due to low prices.
• Low Yield of Sugarcane
  • India's yield per hectare is extremely low as compared to some of the major sugarcane-producing countries of the world. For example, India’s yield is only 64.5 tonnes/hectare as compared to 90 tonnes in Java and 121 tonnes in Hawaii.
• Short crushing season
  • Sugar production is a seasonal industry with a short crushing season varying normally from 4 to 7 months in a year.
  • It causes financial loss and seasonal employment for workers and lack of full utilization of sugar mills.
• Low Sugar recovery rate
  • The average rate of recovery of sugar from sugarcane in India is less than ten per cent which is quite low as compared to other major sugar-producing countries.
• High Production cost
  • The high cost of sugarcane, inefficient technology, uneconomic process of production and heavy excise duty results in a high cost of manufacturing.
  • Most of the sugar mills in India are of small size with a capacity of 1,000 to 1,500 tonnes per day thus failing to take advantage of economies of scale.
• Government policy and control
  • The government has been controlling sugar prices through various policy interventions like export duty, imposition of a stock limit on sugar mills, change in meteorology rule etc., to balance supply-demand mismatch.
  • But these controls have resulted in unremunerative sugar prices, increasing arrears for sugar mills and dues to be paid to sugarcane farmers.

Government Initiative

• Rangarajan committee (2012) was set up to give recommendations on the regulation of the sugar industry. Its major recommendations:
  • Abolition of the quantitative controls on the export and import of sugar should be replaced by appropriate tariffs.
  • Committee recommended no more outright bans on sugar exports.
  • The central government has prescribed a minimum radial distance of 15 km between any two sugar mills, this criterion often causes a virtual monopoly over a large area and can give the mills power over farmers. The Committee recommended that the distance norm be reviewed.
  • There should be no restrictions on the sale of by-products and prices should be market determined. States should also undertake policy reform to allow mills to harness the power generated from bagasse.
  • Remove the regulations on the release of non-levy sugar. Removal of these controls will improve the financial health of the sugar mills. This, in turn, will lead to timely payments to farmers and a reduction in cane arrears.
• Based on the report, Commission for Agricultural Costs and Prices (CACP) recommended a hybrid approach of fixing sugarcane prices, which involved fair and remunerative prices (FRP).
• The year 2013-14 was a water shed for the sugar industry. The Central Government considered the recommendations of the committee headed by Dr. C. Rangarajan on the de-regulation of the sugar sector and decided to discontinue the system of levy obligations on mills for sugar produced after September 2012 and abolished the regulated release mechanism on open market sale of sugar.
• The de-regulation of the sugar sector was undertaken to improve the financial health of sugar mills, enhance cash flows, reduce inventory costs and also result in timely payments of cane price to sugarcane farmers.
• The recommendations of the Committee relating to Minimum Distance Criteria and adoption of the Cane Price Formula have been left to State Governments for adoption and implementation, as considered appropriate by them.
• With the aim of benefitting Sugar farmers and in order to clear their arrears/cane dues, the Union Government has decided to increase the Minimum Selling Price (MSP) of Sugar from Rs. 29 to Rs. 31 for the year 2019-20.

Fair and Remunerative Price

• FRP is the minimum price that the sugar mills have to pay to farmers.
• It is determined on basis of recommendations of the Commission for Agricultural Costs and Prices (CACP) and after consultation with State Governments and other stakeholders.

State Advised Price (SAP)

• In other key growing states of Uttar Pradesh, Punjab, Haryana, Tamil Nadu and Uttarakhand, farmers get the State Advised Price (SAP) fixed by state governments which is usually higher than FRP.

• Apart from this, the government has also provided incentives on producing ethanol from B-heavy molasses and cane juice to divert the sugar surpluses towards biofuel, thus indirectly supporting sugar prices. The new Biofuel Policy 2018 has fixed a target of achieving 20 per cent ethanol blending with petrol by 2030.

Way Forward

• Mills should be allowed to produce more alcohol (a higher value product with massive industrial demand). Exports of sugar and alcohol should also be decontrolled. It will improve the financial situation of mills and could afford to pay farmers a price based on the market prices of sugar.
• The production cost of sugar in India is one of the highest in the world. Intense research is required to increase sugarcane production in the agricultural field and to introduce new technology for production efficiency in the sugar mills.
• Production costs can also be reduced through proper utilisation of by-products of the industry.
• Government should encourage ethanol production. It will bring down the country’s oil import bill and help in the diversion of sucrose to ethanol and balance out the excess production of sugar.

Conclusion

The sector needs an infusion of capital, but also policy measures and structural changes. Technological upgradation in age-old mills especially in Uttar Pradesh and Bihar to improve efficiency in production. Major sugar-producing States like Maharashtra and Karnataka have migrated to the progressive revenue-sharing formula other states should also introduce revenue-sharing formula to ensure farmers receive a share in the profits. When domestic production is likely to be in excess of domestic consumption government should encourage exports through policy changes.