Dam Rehabilitation and Improvement Project (DRIP) Phase II

• Dam Rehabilitation and Improvement Project (DRIP) is a State sector scheme formulated to bridge the funding gap and provide urgent finance to States for the repair and maintenance of Dams.
• The scheme closed on 31st March 2021.
• It facilitated loans from World Bank to participating states when they agreed to the terms and conditions of the lending agency.
• Andhra Pradesh did not choose to be a part of it.
• The next phase of DRIP i.e. DRIP Phase – II & III approved by the Cabinet, is at an advanced preparatory stage.
• The government of Andhra Pradesh has expressed willingness to be a part of DRIP Phase -II & III and submitted an estimate of 667 crores to rehabilitate 31 dams. However, they are yet to fulfil the Project Readiness Criteria of World Bank to merit sanction and disbursement of loans.

Issue of Ageing dams

• Dams and reservoirs are believed to secure our water needs for the future. However, data and studies show that they can threaten our water security. Here is how.
• It is not a secret anymore that India’s dams are now ageing and concomitantly, reservoir water is being replaced by soil, technically known as silt or sediment.

Becoming obsolete

• India is ranked third in the world in terms of building large dams. Of the over 5,200 large dams built so far, about 1,100 large dams have already reached 50 years of age and some are older than 120 years.
• The number of such dams will increase to 4,400 by 2050. This means that 80% of the nation’s large dams face the prospect of becoming obsolete as they will be 50 years to over 150 years old.
• The situation with hundreds of thousands of medium and minor dams is even more precarious as their shelf life is even lower than that of large dams.
• Krishna Raja Sagar dam was built in 1931 and is now 90 years old. Similarly, Mettur dam was constructed in 1934 and is now 87 years old. Both these reservoirs are located in the water-scarce Cauvery river basin.
• As dams age, soil replaces the water in the reservoirs. Therefore, the storage capacity cannot be claimed to be the same as it was in the 1900s and 1950s.
• To make matters worse, studies show that the design of many of our reservoirs is flawed.
• In a paper, ‘Supply-side Hydrology: Last gasp’, published in 2003 in Economic & Political Weekly, Rohan D’Souza writes that the observed siltation rate in India’s iconic Bhakra dam is 139.86% higher than originally assumed. At this rate, he wrote, “the Bhakra dam is now expected to function for merely 47 years, virtually halved from the original estimate of 88 years”.
• Similarly, the actual siltation rate observed for the Hirakud, Maithan and Ghod dams is way higher at 141.67%, 808.64% and 426.59%, respectively. Studies in later years showed similar findings.
• Almost every scholarly study on reservoir sedimentation shows that Indian reservoirs are designed with a poor understanding of sedimentation science. The designs underestimate the rate of siltation and overestimate the live storage capacity created.
• Therefore, the storage space in Indian reservoirs is receding at a rate faster than anticipated. Reservoirs are poised to become extinct in less than a few decades with untold consequences already underway.

Consequences

• When soil replaces the water in reservoirs, the supply gets choked. The cropped area begins receiving less and less water as time progresses. The net sown water area either shrink in size or depends on rains or groundwater, which is over-exploited.
• Crop yield gets affected severely and disrupts the farmer’s income.
• In fact, the farmer’s income may get reduced as water is one of the crucial factors for crop yield along with a credit, crop insurance and investment.
• It is important to note that no plan for climate change adaptation will succeed with sediment-packed dams.
• The flawed siltation rates demonstrated by a number of scholarly studies reinforce the argument that the designed flood cushion within several reservoirs across many river basins may have already depleted substantially due to which floods have become more frequent downstream of dams.
• The flooding of Bharuch in 2020, Kerala in 2018 and Chennai in 2015 are a few examples attributed to downstream releases from reservoirs.
• The nation will eventually be unable to find sufficient water in the 21st century to feed the rising population by 2050, grow abundant crops, create sustainable cities, or ensure growth.
• Therefore, it is imperative for all stakeholders to come together to address this situation urgently.

Solution for Water crisis in India

Steps taken by the Central Government to control water depletion and promote rain water harvesting / conservation are as under:

1) Jal Shakti Abhiyan (JSA)

• JSA was launched in 2019, a time bound campaign with a mission mode approach intended to improve water availability including ground water conditions in the water stressed blocks of 256 districts in India having overexploited groundwater levels.
• In addition, ‘Jal Shakti Abhiyan – Catch the Rain’ campaign has been launched on 22 March 2021.
• To make water conservation a people's movement through schemes like MGNREGA.
• JSA is partly modelled and driven by some success stories like NGO Tarun Bharat Sangh's experiment in Alwar, RJ and Anna Hazare led efforts in Ralegaon Siddhi, MH.
• These projects involved building tanks and ponds to capture rainwater and building recharge wells to recharge groundwater.

2) National Water Policy (2012)

• NWP has been formulated by Department of Water Resources, RD & GR. It advocates rainwater harvesting and conservation of water and highlights the need for augmenting the availability of water through direct use of rainfall.
• It also inter-alia, advocates conservation of river, river bodies and infrastructure should be undertaken in a scientifically planned manner through community participation.
• Further, encroachment and diversion of water bodies and drainage channels must not be allowed and wherever, it has taken place, it should be restored to the extent feasible and maintained properly.

3) Central Ground Water Authority (CGWA)

• CGWA has been constituted under Section 3 (3) of the “Environment (Protection) Act, 1986” for the purpose of regulation and control of ground water development and management in the Country.
• CGWA has advised States/UTs to take measures to promote/adopt artificial recharge to ground water / rain water harvesting. CGWA grants No Objection Certificates (NOCs) for ground water abstraction to Industries, Infrastructure units and Mining projects in feasible areas in certain States/UTs where regulation is not being done by the respective State/UTs.
• The latest guidelines for control and regulation of groundwater extraction with pan-India applicability was notified by the Ministry on 24 September 2020.

4) Master Plan for Artificial Recharge to Groundwater- 2020

• It has been prepared by CGWB in consultation with States/UTs which is a macro level plan indicating various structures for the different terrain conditions of the country including estimated cost.
• The Master Plan envisages construction of about 1.42 crore Rain water harvesting and artificial recharge structures in the Country to harness 185 Billion Cubic Metre (BCM) of monsoon rainfall.

5) Aquifer Mapping and Management Programme

• CGWB has taken up Aquifer Mapping and Management Programme during XII Plan, under the scheme of Ground Water Management and Regulation.
• The Aquifer Mapping is aimed to delineate aquifer disposition and their characterization for preparation of aquifer/ area specific ground water management plans with community participation.
• The management plans are shared with the respective State governments for taking appropriate measures / implementation.

6) Atal Bhujal Yojana (ABHY)

• It is a Central Sector Scheme to improve groundwater management through community participation. Funding pattern is 50:50 between India and World Bank.
• Outlay is of Rs. 6000 crore. Implemented over 5 years i.e. 2020-21 to 2024-25.
• Ministry of Jal Shakti is adopting a mix of top down and bottom up approach to identify groundwater stressed blocks in8350 Gram Panchayats in 7 States (not all India) = UP, Haryana, Rajasthan, Gujarat, MP, Maharashtra and Karnataka.
• It will focus on participatory groundwater management, behavioral change in areas where groundwater is low. We should go for Crop diversification. Promote microirrigation.
• It has 2 components: Institutional strengthening and capacity building component and Incentive component for incentivizing States.
• ABY envisages active participation of the communities in various activities such as the formation of ‘Water User  Associations’, monitoring and disseminating ground water data, water budgeting, preparation & implementation of  Gram-panchayat-wise water security plans and IEC activities related to sustainable groundwater management.

7) Mission Water Conservation

• The Ministry of Rural Development in consultation and agreement with the Department of Water Resources, RD & GR and the Ministry of Agriculture & Farmers’ Welfare has developed an actionable framework for Natural Resources Management (NRM), titled ‘Mission Water Conservation” to ensure gainful utilization of funds.
• The Framework strives to ensure synergies in Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), erstwhile integrated Watershed Management Programme (IWMP) now PMKSY Watershed Development Component and Command Area Development & Water Management (CADWM), given their common objectives.
• Types of common works undertaken under these programmes/ schemes are water conservation and management, water harvesting, soil and moisture conservation, groundwater recharge, flood protection, land development, Command Area Development & Watershed Management.

Other measures

• An ‘Inter Ministerial Committee’ under the Chairmanship of Secretary (WR, RD & GR) has been constituted to take forward the subject of ‘Push on Water Conservation Related Activities for Optimum Utilization of Monsoon Rainfall’.
• Ministry has circulated a Model Bill to all the States/UTs to enable them to enact suitable ground water legislation for regulation of its development, which also includes provision of rain water harvesting. So far, 19 States/UTs have adopted and implemented the ground water legislation.
• Best practices of water conservation by various entities including private persons, NGOs, PSUs etc have been compiled and put on the web site of the Ministry for the benefit of general public. An interactive link on best practices has also been created for receiving inputs from public, which, after necessary evaluation/validation are put on the website for the benefit of the public.
• Department of Water Resources, RD& GR has instituted National Water awards to incentivize good practices in water conservation and ground water recharge.
• Mass awareness programmes (Trainings, Seminars, Workshops, Exhibitions, Trade Fares and Painting Competitions etc.) are conducted from time to time each year under the information, Education & Communication (IEC) Scheme of DoWR, RD & GR in various parts of the Country to promote rain water harvesting and artificial recharge to ground water.
• Central Government supports construction of water harvesting and conservation works primarily through Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and Pradhan Mantri Krishi Sinchayee Yojana – Watershed Development Component (PMKSY-WDC).
• Model Building Bye Laws (MBBL) 2016 circulated by Ministry of Housing & Urban Affairs include provisions for Rainwater Harvesting and it has been shared with all the States / UTs. So far 32 States / UTs have adopted the provisions of rainwater harvesting of MBBL-2016.

Initiatives for the MSME sector in India

• The Ministry of MSME implements various schemes and programmes for the growth and development of the MSME Sector in the country.
• These schemes and programmes include the Prime Minister’s Employment Generation programme (PMEGP), Scheme of Fund for Regeneration of Traditional Industries (SFURTI), A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE), Interest Subvention Scheme for Incremental Credit to MSMEs, Credit Guarantee Scheme for Micro and Small Enterprises, Micro and Small Enterprises Cluster Development Programme (MSE-CDP), Credit Linked Capital Subsidy  and Technology Upgradation Scheme (CLCS-TUS).

Post Covid-19, Government has taken a number of initiatives under AatmaNirbhar Bharat Abhiyan to support the MSME Sector in the country, especially in the Covid-19 pandemic. Some of them are:

• Rs 20,000 crore Subordinate Debt for MSMEs.
• Rs. 3 lakh crores Collateral free Automatic Loans for business, including MSMEs.
• Rs. 50,000 crore equity infusion through MSME Fund of Funds.
• Newly revised criteria for the classification of MSMEs.
• New Registration of MSMEs through 'Udyam Registration' for Ease of Doing Business.
• No global tenders for procurement up to Rs. 200 crores, this will help MSME.
• An online Portal “Champions” has been launched on 01.06.2020. This covers many aspects of e-governance including grievance redressal and handholding of MSMEs. Through the portal, total of 35,361 grievances have been redressed up to 12.07.2021.
• Studies have been conducted by National Small Industries Corporation (NSIC) and Khadi and Village Industries Commission (KVIC) to assess the impact of the COVID-19 Pandemic on MSMEs including units set up under the Prime Minister’s Employment Generation Programme (PMEGP).

The main findings of the online study conducted by NSIC to understand the operational capabilities and difficulties faced by the beneficiaries of NSIC schemes amid the Covid-19 pandemic are as follows:

• 91% of MSMEs were found to be functional.
• The five most critical problems faced by MSMEs were identified as Liquidity (55% units), Fresh Orders (17% units), Labour (9% units), Logistics (12% units) and availability of Raw Material (8% units.)

The findings of the study conducted by KVIC are as under:

• 88% of the beneficiaries of PMEGP scheme reported that they were negatively affected due to Covid-19 while the remaining 12% stated that they were benefitted during Covid-19 Pandemic.
• Among the 88% who were affected, 57% stated that their units were shut down for some time during this period, while 30% reported a drop in production and revenue.
• Among the 12% who had benefitted, 65% stated that their business increased as they had units in the retail and health sector and around 25% stated that their units benefitted as they were dealing with essential commodities or services.
• On the question of regular payment of salaries to the employees, around 46.60% respondents stated that they had paid the salaries in full, 42.54% reported to have partially paid and 10.86% reported to have not paid salary for some time during this period.
• Majority of the beneficiaries expressed the need for additional financial support, relaxation of waiver of interest and marketing support for their products.

• The Government of India has announced Fund of Funds with the nomenclature Self Reliant India (SRI) Fund to infuse  Rs. 50,000 crores as equity funding in those MSMEs which have the potential and viability to grow and become large units. Under this scheme total size of the fund of Rs. 50,000 Crore has a provision of Rs.10,000 Crore from the Government of India and Rs.40,000 Crore leverage through Private Equity / Venture Capital funds.

Every scheme for Employment generation in India

The government of India has taken a number of initiatives for promoting employment generation in the country during the corona pandemic.

1) Financial package

• Financial package of more than rupees twenty seven lakh crore under “Aatma Nirbhar Bharat” has been launched interalia, to create employment opportunities for migrant workers, workers of organized and unorganized sectors, strengthen of MSME sector and promote the rural economy. It includes a number of initiatives for all these sectors.

2) Aatmanirbhar Bharat Rojgar Yojana (ABRY)

• Aatmanirbhar Bharat Rojgar Yojana (ABRY) has been launched w.e.f. 1st October 2020 to incentivize employers for the creation of new employment along with social security benefits and restoration of employment.
• This scheme is implemented through EPFO seeks to reduce the financial burden of employers and encourage them to hire more workers.
• Under ABRY, the Government of India is providing for a period of two years, both the employees’ share (12% of wages) and employers share’ (12% of wages) of contribution or only employees’ share of contribution depending on employment strength of the EPFO registered establishments, for new employees whose monthly wage is less than Rs. 15,000/- per month.
• The new employees under the scheme include those who lost their jobs during Covid-19 and didn’t join any EPF-covered establishment up to 30.09.2020.
• The terminal date for registration of beneficiaries under the scheme has been extended from 30th June, 2021 to 31st March, 2022.

3) Pradhan Mantri Garib Kalyan Yojana (PMGKY)

• Under Pradhan Mantri Garib Kalyan Yojana (PMGKY), the Government of India has contributed both 12% employer’s share and 12% employee’s share under the Employees Provident Fund (EPF), totalling 24% of the wage for the wage month from March to August 2020 for the establishments having up to 100 employees with 90% of such employees earning less than Rs. 15000/-.       
• This has helped in providing employment in EPFO registered establishments during post Covid period.
• Statutory PF contribution of both employer and employee was reduced to 10% each from the existing 12% each for all establishments covered by EPFO for three months i.e. May to July 2020.

4) PM- SVANidhi Scheme

• PM SVANidhi was launched by the Ministry of Housing and Urban Affairs, on June 01, 2020.
• Its objective is to provide affordable Working Capital loans to street vendors to resume their livelihoods that have been adversely affected due to the Covid-19 lockdown.
• Under the Scheme, the vendors can avail of a working capital loan of up to Rs. 10,000, which is repayable in monthly instalments in the tenure of one year.
• On timely/ early repayment of the loan, an interest subsidy @ 7% per annum will be credited to the bank accounts of beneficiaries through Direct Benefit Transfer on a quarterly basis.
• There will be no penalty on early repayment of loan.
• SIDBI will implement the PM SVANidhi Scheme under the guidance of the Ministry of Housing & Urban Affairs (MoHUA). It will also manage the credit guarantee to the lending institutions through Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
• PM- SVANidhi Scheme has facilitated collateral-free working capital loan up to Rs.10,000/- for one-year tenure to street vendors, to help them resume their businesses.
• RBI and the Government of India have introduced measures to infuse liquidity in the economy to sustain the market economy and raise the level of employment.

Other Schemes

• Besides the above, Government has taken various other steps for generating employment in the country encouraging various projects involving substantial investment and through public expenditure on schemes like Prime Minister’s Employment Generation Programme (PMEGP), Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), Pt. Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) and Deendayal Antodaya Yojana-National Urban Livelihoods Mission (DAY-NULM). Wage under MGNREGS has been increased from Rs. 182 per day to Rs. 202 per day.

• Pradhan Mantri Mudra Yojana (PMMY) is being implemented by the Government inter alia, for facilitating self-employment. Under PMMY collateral free loans upto Rs. 10 lakh, are extended to micro/small business enterprises and to individuals to enable them to setup or expand their business activities.

• Earlier Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) was launched to incentivise employers for creation of new employment. Under the scheme, Government of India is paying Employer’s contribution i.e. 12% for a period of three years to the new employees earning upto Rs. 15,000/- through EPFO. The terminal date for registration of beneficiary through establishment was 31st March 2019. The beneficiaries registered upto 31st March, 2019 will continue to receive the benefit for 3 years from the date of registration under the scheme i.e. upto 31st March, 2022.

• Besides these initiatives, flagship programmes of the Government such as Make in India , Digital India , Swachh Bharat Mission , Smart City Mission, AMRUT or Atal Mission for Rejuvenation and Urban Transformation , Housing for All , Infrastructure development and Industrial corridors have the potential to generate productive employment opportunities.

For detailed analysis and explanation by Ankit Sir: click here

Bad Bank launched for stressed assets as a measure to clean up bank books

What is a ‘bad bank’?

• A bad bank is a financial entity set up to buy non-performing assets (NPAs), or bad loans, from banks.
• The aim of setting up a bad bank is to help ease the burden on banks by taking bad loans off their balance sheets and get them to lend again to customers without constraints.
• After the purchase of a bad loan from a bank, the bad bank may later try to restructure and sell the NPA to investors who might be interested in purchasing it.
• A bad bank makes a profit in its operations if it manages to sell the loan at a price higher than what it paid to acquire the loan from a commercial bank.
• However, generating profits is usually not the primary purpose of a bad bank — the objective is to ease the burden on banks, holding a large pile of stressed assets, and get them to lend more actively.

What is the extent of the crisis faced by banks?

• According to the latest figures released by the RBI, the total size of bad loans in the balance sheets of Indian banks at a gross level was just around 9 lakh crore as of March 31, 2020, down significantly from over 10 lakh crore two years ago.
• Analysts point out that it is mostly the result of larger write-offs rather than improved recovery of bad loans or a slowdown in the accumulation of fresh bad loans.
• The size of bad loan write-offs by banks has steadily increased since the RBI launched its asset quality review procedure in 2015, from around 70,000 crores in 2015-16 to nearly 2.4 lakh crore in 2019-20, while the size of fresh bad loans accumulated by banks increased last year to over 2 lakh crore from about 1.3 lakh crore in the previous year.
• So, the Indian banking sector’s woes seem to be far from over.
• Further, due to the lockdown imposed last year, the proportion of banks’ gross non-performing assets is expected to rise sharply from 7.5% of gross advances in September 2020 to at least 13.5% of gross advances in September 2021.

What are the pros and cons of setting up a bad bank?

• A supposed advantage in setting up a bad bank, it is argued, is that it can help consolidate all bad loans of banks under a single exclusive entity.
• The idea of a bad bank has been tried out in countries such as the United States, Germany, Japan and others in the past.
• The troubled asset relief program, also known as TARP, implemented by the U.S. Treasury in the aftermath of the 2008 financial crisis, was modelled around the idea of a bad bank.
• Under the program, the U.S. Treasury bought troubled assets, such as mortgage-backed securities, from U.S. banks at the peak of the crisis, and later resold them when market conditions improved.
• According to reports, it is estimated that the Treasury through its operations earned nominal profits.
• Many critics, however, have pointed to several problems with the idea of a bad bank to deal with bad loans.
• Former RBI governor Raghuram Rajan has been one of the critics, arguing that a bad bank backed by the government will merely shift bad assets from the hands of public sector banks, which are owned by the government, to the hands of a bad bank, which is again owned by the government.
• There is little reason to believe that a mere transfer of assets from one pocket of the government to another will lead to a successful resolution of these bad debts when the set of incentives facing these entities is essentially the same.
• Other analysts believe that unlike a bad bank set up by the private sector, a bad bank backed by the government is likely to pay too much for stressed assets.
• While this may be good news for public sector banks, which have been reluctant to incur losses by selling off their bad loans at cheap prices, it is bad news for taxpayers, who will once again have to foot the bill for bailing out troubled banks.

Will a ‘bad bank’ help ease the bad loan crisis?

• Unlike private banks, which are owned by individuals who have strong financial incentives to manage them well, public sector banks are managed by bureaucrats who may often not have the same commitment to ensuring these lenders’ profitability.
• To that extent, bailing out banks through a bad bank does not really address the root problem of the bad loan crisis.
• Commercial banks that are bailed out by a bad bank are likely to have little reason to mend their ways.
• After all, the safety net provided by a bad bank gives these banks more reason to lend recklessly, and thus, further exacerbate the bad loan crisis.

Will it help revive credit flow in the economy?

• Some experts believe that by taking bad loans off the books of troubled banks, a bad bank can help free capital of over ?5 lakh crore that is locked in by banks as provisions against these bad loans.
• This, they say, will give banks the freedom to use the freed-up capital to extend more loans to their customers.
• This gives the impression that banks have unused funds lying in their balance sheets that they could use if only they could get rid of their bad loans.
• It is, however, important not to mistake banks’ reserve requirements for their capital position.
• This is because what may be stopping banks from lending more aggressively may not be the lack of sufficient reserves, which banks need to maintain against their loans.
• Instead, it may simply be the precarious capital position that many public sector banks find themselves in at the moment.
• In fact, many public sector banks may be considered to be technically insolvent as an accurate recognition of the true scale of their bad loans would show their liabilities as far exceeding their assets.

What is the news?

• The Government has launched a Bad Bank with all the regulatory approvals in place.
• The high level of provisioning by public sector banks of their stressed assets calls for measures to clean up the bank books. An Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt and then manage and dispose of the assets to Alternate Investment Funds and other potential investors for eventual value realization
• Finance Minister in her Budget speech on Monday revived the idea of a ‘bad bank’ by stating that the Centre proposes to set up an asset reconstruction company to acquire bad loans from banks.
• The Reserve Bank of India, being the regulator of Asset Reconstruction Companies (ARCs), has already prescribed a regulatory framework for the functioning of ARCs and there are well-laid norms for transfer of stressed assets by banks and non-banking finance companies to ARCs. Identification of non-performing assets by an ARC is an ongoing process, the Minister stated.

Conclusion

• So, a bad bank, in reality, could help improve bank lending not by shoring up bank reserves, but by improving banks’ capital buffers.
• To the extent that a new bad bank set up by the government can improve banks’ capital buffers by freeing up capital, it could help banks feel more confident to start lending again.

How do boost indigenous capacities in Defense production?

The Government has taken several policy initiatives and brought in reforms to promote indigenisation and self-reliance in defence manufacturing, under AatmaNirbhar Bharat Mission in the defence sector. Important policy initiatives are as under:-

• Positive Indigenisation List:

1. Ministry of Defence has notified a ‘First Positive Indigenisation list’ of 101 items on 21st August 2020 and a ‘2nd Positive Indigenisation list’ of 108 items on 31st May, 2021 for which there would be an embargo on the import beyond the timelines indicated against them. This is a big step to promote indigenisation in the defence sector.
2. This offers a great opportunity to the Indian defence industry to manufacture these items using their own design and development capabilities to meet the requirements of the Indian Armed Forces.
3. These lists include some high-technology weapon systems like artillery guns, assault rifles, corvettes, sonar systems, transport aircraft, light combat helicopters (LCHs), radars, wheeled armoured platforms, rockets, bombs, armoured command post vehicles, armoured dozor and many other items to fulfill the needs of our Defence Services.

• SRIJAN portal to promote indigenisation was launched on 14 August, 2020. As on date, 10,929 items, which were earlier imported, have been displayed on the portal for indigenisation.
• 1,776 components & spares have been indigenised in the year 2020-21 as a result of efforts of indigenisation by DPSUs, OFB & SHQs through their own process of indigenisation (In-house, Make-II & Other than Make-II).
• DPP-2016 has been revised as Defence Acquisition Procedure (DAP)-2020, which is driven by the tenets of Defence Reforms announced as part of ‘AatmaNirbhar Bharat Abhiyan’.
• In order to promote indigenous design and development of defence equipment ‘Buy {Indian-IDDM (Indigenously Designed, Developed and Manufactured)}’ category has been accorded top most priority for procurement of capital equipment.
• The ‘Make’ Procedure of capital procurement has been simplified. There is a provision for funding up to 70% of development cost by the Government to Indian industry under Make-I category. In addition, there are specific reservations for MSMEs under the ‘Make’ procedure.
• Procedure for ‘Make-II’ category (Industry funded), introduced in DPP-2016 to encourage indigenous development and manufacture of defence equipment has number of industry friendly provisions such as relaxation of eligibility criterion, minimal documentation, provision for considering proposals suggested by industry/individual etc. So far, 58 projects relating to Army, Navy & Air Force, have been accorded ‘Approval in Principle’.
• FDI: The Government of India has enhanced FDI in Defence Sector up to 74% through the Automatic Route for companies seeking new defence industrial license and up to 100% by Government Route.
• An innovation ecosystem for Defence titled ‘Innovations for Defence Excellence (iDEX)’ has been launched in April, 2018. iDEX is aimed at creation of an ecosystem to foster innovation and technology development in Defence and Aerospace by engaging Industries including MSMEs, startups, individual innovators, R&D institutes and academia and provide them grants/funding and other support to carry out R&D which has potential for future adoption for Indian defence and aerospace needs.
• Reforms in Offset policy have been included in DAP-2020, with thrust on attracting investment and Transfer of Technology for Defence manufacturing, by assigning higher multipliers to them.
• Government has notified the ‘Strategic Partnership (SP)’ Model in May, 2017, which envisages establishment of long-term strategic partnerships with Indian entities through a transparent and competitive process, wherein they would tie up with global Original Equipment Manufacturers (OEMs) to seek technology transfers to set up domestic manufacturing infrastructure and supply chains.
• Government has notified a ‘Policy for indigenisation of components and spares used in Defence Platforms’ in March 2019 with the objective to create an industry ecosystem which is able to indigenise the imported components (including alloys & special materials) and sub-assemblies for defence equipment and platform manufactured in India.
• Government has established two Defence Industrial Corridors, one each in the States of Uttar Pradesh and Tamil Nadu. The investments of Rs 20,000 crore are planned in Defence corridors of Uttar Pradesh and Tamil Nadu by year 2024. The progress is reviewed regularly at apex level. So far, investment of approx. Rs 3,342 crore have been made in both the corridors by public as well private sector companies. Moreover, the respective State Governments have also announced their Aerospace & Defence Policies to attract private players as well as foreign companies including Original Equipment Manufacturers (OEMs) in these two corridors.
• An Inter-Governmental Agreement (IGA) on ‘Mutual Cooperation in Joint Manufacturing of Spares, Components, Aggregates and other material related to Russian/Soviet Origin Arms and Defence Equipment’ was signed in September 2019. The objective of the IGA is to enhance the After Sales Support and operational availability of Russian origin equipment currently in service in Indian Armed Forces by organising production of spares and components in the territory of India by Indian Industry by way of creation of Joint Ventures/Partnership with Russian Original Equipment Manufacturers (OEMs) under the framework of the ‘Make in India’ initiative.
• Defence Products list requiring Industrial Licences has been rationalised and manufacture of most of parts or components does not require Industrial License. The initial validity of the Industrial Licence granted under the IDR Act has been increased from 03 years to 15 years with a provision to further extend it by 03 years on a case-to-case basis.
• Department of Defence Production has notified 46 items under the latest Public Procurement Order 2017 notified by Department for Promotion of Industry and Internal Trade (DPIIT), for which there is sufficient local capacity and competition and procurement of these items shall be done from local suppliers only irrespective of the purchase value.
• Defence Investor Cell (DIC) has been created in Feb-2018 the Ministry to provide all necessary information including addressing queries related to investment opportunities, procedures and regulatory requirements for investment in the sector. As on date, 1,176 queries had been received and addressed by Defence Investor Cell.
• Technology Development Fund (TDF) has been created under DRDO to promote self reliance in Defence Technology through participation of Public/Private industries especially MSMEs and startups.
• For the year 2021-22, the allocation for domestic procurement has been enhanced compared to previous years and is about 64.09% i.e. Rs 71438.36 crore of the allocated amount for military modernisation.

For 20 Defense reforms in 2020: Click here

Shipping sector UPSC

• Ministry of Shipping was formed in 2009. India has a coastline of 7517 km, spread on the western and eastern shelves of the mainland and also along the Islands. There are 12 major ports and 200 non-major ports.
• 12 Major Ports (PT Pointers)

1. 1. Kolkata Port is the only major riverine major port in India.
   2. Paradip Port is the 1st major port in East India after independence.
   3. Chennai Port is an artificial harbour. Vishakhapatnam port is a Natural harbour.

Sagarmala

• The major economies of the world have always realised the potential of shipping as a contributor to economic growth.
• Today, for instance, control of the seas is a key component of China’s Belt and Road Initiative (BRI). China is trying to take control of the Bay of Bengal and the Indian Ocean Region.
• However, geographically, China is not as blessed as India. It has a great variety of climates and it has a coast only in the east; yet, seven of the top 10 container ports in the world are in China, according to the World Shipping Council. What aided China’s growth are strong merchant marine and infrastructure to carry and handle merchandise all over the world.
• Prior to the 16th century, both India and China were equal competitors on GDP. Historical records prove that India had maritime supremacy in the world. But over the past 70 years, India has lost its global eminence in shipping due to poor legislation and politics.

Helping foreign shipping liners

• Starting from the establishment of new ports in independent India to the establishment of the present-day Chabahar Port in Iran, all of India’s actions on the shipping front have been counter-effective.
• This is due to a visionless administration. All the shipping infrastructure in peninsular India only helps foreign shipping liners. India has concentrated only on short-term solutions.
• In the past, colonial traders had a strong merchant marine, but they also developed optimum shore-based infrastructure with road and rail connectivity to facilitate their trade.
• There was balanced infrastructure onshore and at sea. Shore-based infrastructure was developed to cater to the carrying capacity. This needs to be understood with a clear economic sense.
• Foreign ship owners carry our inbound and outbound cargo. This is the case in container shipping too. As a country, we have still not optimised our carrying capacity.
• Foreign carriers and their agents continue to ransack EXIM trade with enormous hidden charges in the logistics cycle. Much of foreign currency is drained as transhipment and handling cost every day.
• Given this state of affairs, members of our maritime business community have also preferred to be agents for foreign ship owners or container liners rather than becoming ship owners or container liners themselves.
• This is a historical mistake and a major economic failure of the country. As a result, there is a wide gap between carrying capacity and multi-folded cargo growth in the country.
• Today, Ministry officials are happily relaxing “Cabotage” regulation in the name of coastal shipping. This benefits only the foreign container-carrying companies and not Indian shipowners.

• Official actions allow foreign carriers to enjoy the situation here and push the Indian tonnage owners to vanish from the scene. Starting from the Swadeshi Steam Navigation Company of V.O. Chidambaram Pillai to the Scindia Steam Navigation Company of our times, Indian owners have not got the blessings of successive governments.
• In the port sector, instead of creating regional cargo-specific ports in peninsular India, the bureaucracy has repeatedly allowed similar infrastructural developments in multiple cargo-handling ports.
• As a result, Indian ports compete for the same cargo. If we make our major ports cargo-specific, develop infrastructure on a par with global standards, and connect them with the hinterlands as well as international sea routes, they will automatically become transhipment hubs.
• We need to only concentrate on developing the contributing ports to serve the regional transhipment hubs for which improving small ship coastal operations is mandatory.
• It is our long-cherished dream to be competent and cost-effective in international supply chain logistics. We need quality products to be available in global markets at a competitive price. This will happen only if we develop balanced infrastructure onshore as well as at sea.

A ray of hope

• Sagarmala, a government programme to enhance the performance of the country’s logistics sector, provides hope.
• Its aims are port-led industrialisation, development of world-class logistics institutions, and coastal community development.
• When Sagarmala initiates infrastructural development on the shorefront, this will also get reflected in domestic carrying capacity.

• As of now, shipbuilding, repair and ownership are not preferred businesses in peninsular India.
• The small ship-owning community in India also prefers foreign registry for their ships instead of domestic registration.
• If this has to change, there needs to be a change in the mindset of the authorities and the maritime business community.
• With the call for ‘Make in India’ growing louder and with simultaneous multi-folded cargo growth in the country, we need ships to cater to domestic and international trade.
• Short sea and river voyages should be encouraged. The ship-owning spirit of the Indian merchant marine entrepreneur has to be restored. Shipbuilding and owning should be encouraged by the Ministry.
• The National Shipping Board is an independent advisory body for the Ministry of Shipping, where the Directorate General of Shipping (DGS) is a member.
• The NSB should be able to question the functioning of the DGS, which is responsible for promoting carrying capacity in the country.
• Sagarmala should include coastal communities and consider evolving schemes to harness the century-old ship-owning spirit and sailing skills of peninsular India.
• Coastal communities should be made ship owners. This will initiate carriage of cargo by shallow drafted small ships through coast and inland waterways.
• All minor ports in peninsular India will emerge as contributing ports to the existing major ports and become transhipment hubs on their own. Old sailing vessel owners should be encouraged to become small ship owners.
• It is sad that most of the global shipping companies which depend on Indian cargo for their business have Indians as either commercial heads or Indian crew onboard their ships. The creamy layer from management and nautical institutions are employed out of India. When the most creative human resource is not used in the country, what is the point of declaring that India has the number one youth population in the world?

A youth population is merely a number, not a skill-based strength. In the coastal region, their strength has not been tapped. This is a point of concern and Sagarmala should concentrate on consolidating the strength of the coastal youth and make them contribute to the nation’s economy with pride.

The government has encouraged setting up Ethanol plants

• The entrepreneurs/project proponents are free to set up ethanol plants in any part of the country without seeking any formal approval from the Government of India.

• However, various statutory clearances from States/ Ministry of Environment Forest and Climate Change (MoEF&CC)/State Pollution Control Boards (SPCBs), etc. are required to be obtained during the course of setting up of the ethanol plant.
• Besides, DFPD is implementing a scheme for extending interest subvention @ 6% p.a. or 50% of the interest charged by the banks whichever is lower, for 5 years including 1 year moratorium period.
• The Central Government does not set up ethanol plants on its own in any part of the country. Central Government is however encouraging the setting up Ethanol Plants.

About Ethanol:

• About 5% of the ethanol produced in the world in 2003 was actually a petroleum product.
• It is made by the catalytic hydration of ethylene with sulfuric acid as the catalyst.
• It can also be obtained via ethylene or acetylene, from calcium carbide, coal, oil gas, and other sources.
• Bio-ethanol is usually obtained from the conversion of carbon-based feedstock. Agricultural feedstocks are considered renewable because they get energy from the sun using photosynthesis, provided that all minerals required for growth (such as nitrogen and phosphorus) are returned to the land.
• Ethanol can be produced from a variety of feedstocks such as sugar cane, bagasse, miscanthus, sugar beet, sorghum, grain, switchgrass, barley, hemp, kenaf, potatoes, sweet potatoes, cassava, sunflower, fruit, molasses, corn, stover, grain, wheat, straw, cotton, other biomass, as well as many types of cellulose waste and harvesting, whichever has the best well-to-wheel assessment.
• An alternative process to produce bio-ethanol from algae is being developed by the company Algenol.

National Policy on Biofuels-2018

The National Policy on Biofuels-2018 approved by the Government envisages an indicative target of 20% blending of ethanol in petrol and 5% blending of bio-diesel in diesel by 2030.

National Policy on biofuels- salient features:

• Categorization: The Policy categorises biofuels as “Basic Biofuels” viz. First Generation (1G) bioethanol & biodiesel and “Advanced Biofuels” – Second Generation (2G) ethanol, Municipal Solid Waste (MSW) to drop-in fuels, Third Generation (3G) biofuels, bio-CNG etc. to enable extension of appropriate financial and fiscal incentives under each category.
• Scope of raw materials: The Policy expands the scope of raw material for ethanol production by allowing use of Sugarcane Juice, Sugar containing materials like Sugar Beet, Sweet Sorghum, Starch containing materials like Corn, Cassava, Damaged food grains like wheat, broken rice, Rotten Potatoes, unfit for human consumption for ethanol production.
• Protection to farmers: Farmers are at a risk of not getting appropriate price for their produce during the surplus production phase. Taking this into account, the Policy allows use of surplus food grains for production of ethanol for blending with petrol with the approval of National Biofuel Coordination Committee.
• Viability gap funding: With a thrust on Advanced Biofuels, the Policy indicates a viability gap funding scheme for 2G ethanol Bio refineries of Rs.5000 crore in 6 years in addition to additional tax incentives, higher purchase price as compared to 1G biofuels.
• Boost to biodiesel production: The Policy encourages setting up of supply chain mechanisms for biodiesel production from non-edible oilseeds, Used Cooking Oil, short gestation crops.

Expected benefits:

• Import dependency: The policy aims at reducing import dependency.
• Cleaner environment: By reducing crop burning & conversion of agricultural residues/wastes to biofuels there will be further reduction in Green House Gas emissions.
• Health benefits: Prolonged reuse of Cooking Oil for preparing food, particularly in deep-frying is a potential health hazard and can lead to many diseases. Used Cooking Oil is a potential feedstock for biodiesel and its use for making biodiesel will prevent diversion of used cooking oil in the food industry.
• Employment Generation: One 100klpd 2G bio refinery can contribute 1200 jobs in Plant Operations, Village Level Entrepreneurs and Supply Chain Management.
• Additional Income to Farmers: By adopting 2G technologies, agricultural residues/waste which otherwise are burnt by the farmers can be converted to ethanol and can fetch a price for these waste if a market is developed for the same.

Significance of Biofuels:

• Globally, biofuels have caught the attention in last decade and it is imperative to keep up with the pace of developments in the field of biofuels.
• Biofuels in India are of strategic importance as it augers well with the ongoing initiatives of the Government such as Make in India, Swachh Bharat Abhiyan, Skill Development and offers great opportunity to integrate with the ambitious targets of doubling of Farmers Income, Import Reduction, Employment Generation, Waste to Wealth Creation.

Classification of Biofuels:

• 1st generation biofuels are also called conventional biofuels. They are made from things like sugar, starch, or vegetable oil. Note that these are all food products. Any biofuel made from a feedstock that can also be consumed as a human food is considered a first generation biofuel.
• 2nd generation biofuels are produced from sustainable feedstock. The sustainability of a feedstock is defined by its availability, its impact on greenhouse gas emissions, its impact on land use, and by its potential to threaten the food supply. No second generation biofuel is also a food crop, though certain food products can become second generation fuels when they are no longer useful for consumption. Second generation biofuels are often called “advanced biofuels.”
• 3rd generation biofuels are biofuel derived from algae. These biofuels are given their own separate class because of their unique production mechanism and their potential to mitigate most of the drawbacks of 1st and 2nd generation biofuels.

Major Types of Biofuels

Bioethanol

• It is derived from corn and sugarcane using fermentation process.
• A litre of ethanol contains approximately two thirds of the energy provided by a litre of petrol.
• When mixed with petrol, it improves the combustion performance and lowers the emissions of carbon monoxide and sulphur oxide.

Biodiesel

• It is derived from vegetable oils like soybean oil or palm oil, vegetable waste oils, and animal fats by a biochemical process called “Transesterification.”
• It produces very less or no amount of harmful gases as compared to diesel.
• It can be used as an alternative for the conventional diesel fuel.

Biogas

• It is produced by anaerobic decomposition of organic matter like sewage from animals and humans.
• Major proportion of biogas is methane and carbon dioxide, though it also has small proportions of hydrogen sulfide, hydrogen, carbon monoxide and siloxanes.
• It is commonly used for heating, electricity and for automobiles.

Biobutanol

• It is produced in the same way as bioethanol i.e.through the fermentation of starch.
• The energy content in butanol is the highest among the other gasoline alternatives. It can be added to diesel to reduce emissions.
• It serves as a solvent in textile industry and is also used as a base in perfumes.

Biohydrogen

• Biohydrogen, like biogas, can be produced using a number of processes such as pyrolysis, gasification or biological fermentation.
• It can be the perfect alternative for fossil fuel.

Ethanol Blending Policy

• With the vision to boost agricultural economy, to reduce dependence on imported fossil fuel, to save foreign exchange on account of crude oil import bill & to reduce the air pollution, Government has fixed target of 10% blending of fuel grade ethanol with petrol by 2022 & 20% blending by 2025.
• With a view to support sugar sector and in the interest of sugarcane farmers, the Government has also allowed production of ethanol from B-Heavy Molasses, sugarcane juice, sugar syrup and sugar; and encouraging sugar mills to divert excess sugarcane to ethanol.
• In previous sugar season 2019-20 about 9 LMT of sugar was diverted to ethanol. In current sugar season 2020-21, it is likely that more than 20 LMT of excess sugar would be diverted to ethanol.
• By 2025, it is targeted to divert 50-60 LMT of excess sugar to ethanol, which would solve the problem of high inventories of sugar, improve liquidity of mills thereby help in timely payment of cane dues of farmers.  In past 3 sugar seasons about Rs. 22,000 cr revenue was generated by sugar mills/ distilleries from sale of ethanol to OMCs.
• To increase production of fuel grade ethanol and to achieve blending targets, the Govt of India has allowed use of maize and rice with FCI for production of ethanol.
• Government has declared that rice available with FCI would continue to be made available to distilleries in coming years.
• The extra consumption of surplus food grains would ultimately benefit the farmers as they will get better price for their produce and assured buyers; and thus will also increase the income of crores of farmers across the country.
• Government has fixed price of ethanol from maize as Rs 51.55/litre & rice available with FCI as Rs 56.87/litre for ethanol supply year 2020-21. For FY 2020-21, Government has fixed the price of FCI rice to Rs 2000/quintal for production of ethanol.
• For FY 2021-22, Government has decided to continue the price of FCI rice to Rs 2000/quintal for production of ethanol.
• This will give confidence to industry about the stability in raw material price and its availability. For the purpose of supply of surplus rice for the production of ethanol, distilleries are at liberty to choose the nearest FCI depot as per requirement/logistics.
• In current ethanol supply year (ESY) 2020-21 (December to November) to achieve 8.5% blending target, about 325 Cr ltrs ethanol is required to be supplied to OMCs.
• As on 26.04.2021, about 349 cr ltrs ethanol have been allocated by OMCs to sugar mills/ distilleries,  out of which  contracts of about 302 cr ltrs have been signed by distilleries &124 cr ltrs have been supplied. Efforts are being made by DFPD &MoPNG / OMCs to ensure achievement of blending target. Also, in next ESY 2021-22, it is likely to supply more than 400 cr ltrs of ethanol to OMCs to achieve 10 % blending.
• With a view to increase existing capacities further, DFPD has notified modified interest subvention scheme on 14.01.2021 for setting up new grain-based distilleries/ expansion of existing grain-based distilleries, dual feed distilleries & molasses-based distilleries to produce ethanol & production of ethanol from other 1G feed stocks.  422 proposals with a capacity of 1684 cr ltrs for a loan amount Rs. 42000 crore have been approved by DFPD. It is expected that from the proposals approved, more than 600 cr ltrs may come up in next 2 to 4 years. Thus, the ethanol distillation capacity from these projects and ongoing projects may reach to 1500 cr ltrs by 2024-25 which would be sufficient to achieve 20% blending target.
• Sugarcane and ethanol is produced mainly in three states viz Uttar Pradesh, Maharashtra and Karnataka. Transporting ethanol to far flung States from these three states involves huge transportation cost. 
• By bringing new grain based distilleries in the entire country would result in distributed production of ethanol and would save a lot of transportation cost and thus prevent delays in meeting the blending target & would benefit the farmers across the country.
• For production of ethanol, there is sufficient availability of feed stocks; & Govt. has also fixed remunerative prices of ethanol derived from various feed stocks. Moreover, OMCs being the assured buyer for ethanol has given comfort for purchase of ethanol from distilleries for next 10-15 years.
• Hence, these ethanol projects are viable. Ministry of Environment, Forest & Climate Change has also streamlined the process of getting environment clearance (EC) for ethanol projects. Department of Financial Services and State Bank of India have also issued Standard Operating Procedure (SOP) for sanctioning and disbursal of loans for ethanol projects which would expedite sanctioning and disbursal of loans.
• Production of ethanol would not only facilitate diversion of excess sugar to ethanol but would also encourage farmers to diversify their crops to cultivate particularly maize/corn which needs lesser water.
• It would enhance production of ethanol from various feed stocks thereby, facilitate in achieving blending targets of ethanol with petrol and would reduce import dependency on crude oil, thereby, realizing the goal of Atmanirbhar Bharat.
• It will also enhance income of farmers as setting up of new distilleries would not only increase demand of their crops but would assure farmers of getting better price for their crops.

Critical Analysis of Ethanol Blending

• E-100 pilot projects has been launched at Pune city by Public Sector Oil Marketing Companies (OMCs) on June 05, 2021.
• With a view to enhance fuel choice and facilitate sale of E-100 fuel, MoP&NG vide its order dated March 22, 2021 has amended the Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 2005 by permitting the direct sale of Bio-ethanol (E100) by an oil company for use as standalone fuel or blending with motor spirit, for compatible automobiles to all consumers, in accordance with the standards specified by the Bureau of Indian Standards.
• The Notified National Policy on Biofuels – 2018, provided an indicative target of blending 20% ethanol in petrol by 2030.
• Government has undertaken several supply and demand side interventions since 2014 which has enabled improvement in ethanol blending from average 1.53% during Ethanol Supply Year (ESY) 2013-14 to 7.93% during ongoing ESY 2020-21 as on July 12, 2021.
• An Interdepartmental Expert Committee under the Chairmanship of Additional Secretary NITI Aayog has submitted a “Roadmap for Ethanol Blending in India 2020-25” which outlines the journey for 20% ethanol blending in the country.
• Ministry of Petroleum and Natural Gas has published a Notification dated June 02, 2021, wherein, it has been stated that OMCs shall sell ethanol blended petrol with percentage of ethanol upto 20% as per BIS Specifications in the whole of India and Union Territories and shall come into effect from April 01, 2023.