Author: Explains

Why in News?

In recent times there are various instances of the forest fire in India, which has huge consequences.

Regions where forest fires occur in India

1. The bulk of forest fires in India happens in the tropical dry forests.
2. About 70% of forests in India composed of scrub, grassland, dry and moist deciduous forests.
3. Every year in March, forest fires happen in the dry deciduous forests in India, especially in A.P, M.P, Chhattisgarh, Jharkhand, Karnataka, Maharashtra, Odisha and Assam

Causes of forest fires

Natural causes

1. Temperature, level of moisture in soil and atmosphere, duration of dry spells, lightning, spontaneous combustion and volcanic eruption.
2. The friction of tree branches swaying due to high-velocity wind or rolling stones that causes sparks and ignites fires in leaf litter.

Man-made Causes

1. Arson or open flame, discarded cigarettes, power-line sparks and sparks from equipment.
2. Ignition of wildfires through contact with hot rifle-bullet fragments.
3. It can also be ignited in shifting cultivation areas such as north-eastern regions and eastern coastal regions.
4. It has been estimated that 90% of forest fires in India are man-made, when people enter forests to graze cattle, collect fuelwood, timber and other minor forest produce.

How is policy responsible?

1. The main cause of the forest fire crisis is due to the blanket implementation of no-fire forest policy.
2. This approach of fire protection is not suitable to the ecology of India’s tropical dry forests.
3. For example, the fires in Bandipur Reserve were difficult to control because of sufficient fuel supplied by the invasive species Lantana Camara.
4. The no-fire policy was responsible for the spread of Lantana in the first place.
5. Regular, low-intensity forest fires could have stopped the spread of Lantana in the past.
6. But for now, the future forest fires will be difficult to control until Lantana is physically reduced first.

Consequences

1. Forest fires cause serious health hazards by causing smoke and noxious gases by affecting the local climatic setup.
2. They also result in increased CO2 levels and contribute to climate change.
3. Loss of biodiversity and wildlife habitat affects the ecological setup that may cause problems with other natural resources like drying up of water resources, loss of soil fertility etc.
4. Frequent forest fires in forested areas decrease the natural regeneration capacity of the environment.

Way forward

1. Awareness should be created among the villagers residing near the forests with respect to the long-term ill effects of forest fires.
2. Measures to prevent forest fires have to be taken before summer season when fires are prevalent.
3. Local people should be given skills to use online portals or mobile apps in order to monitor the forests for fires and inform forest authorities regarding the same.
4. The government should make available the alternatives for greener pastures.
5. Village people should have access to employment and sustainable livelihood opportunities through better connectivity and infrastructure.
6. Officers at ground level shall work together with local people to bring a holistic solution

Practice question

1. There are growing instances of frequent fires in the forest regions of India. What do you think are the causes and what measures would you suggest to resolve it?

Why in news?

Recently rupee witnessed a significant depreciation in its value. It’s value against the dollar has fallen by more than 5% since the start of 2018 and the fall is continuing to gain momentum. India is not the only country to face currency depreciation, but also others like Indonesia, Argentina, Mexico, and Turkey.

Causes of depreciation

The U.S. Federal Reserve is expected to tighten its monetary policy stance further through slowing down the growth in U.S. money supply is considered as the main reason. The slowdown in the growth of U.S. money supply affects the value of other currencies in two ways

• 1. Interest rates in the U.S. will begin to rise as the Federal Reserve’s demand for different assets begins to decrease. This causes a rush among investors to sell their assets in other countries and invest the money back in the U.S. where they could earn higher returns. The resultant flow of capital from emerging markets to the U.S. rise the selling pressure on emerging market currencies and buying pressure on the dollar.
  2. When the Fed tightens the money supply, the availability of dollars in the global market begins to decrease which increases the demand for dollars among speculative traders and a decrease in demand for other currencies.

Negative Impacts

1. It keeps the cost of oil imports high. India imports more than 70% of its crude oil requirements. Thus fall in rupee value, means India have to give a higher amount to buy oil from suppliers.
2. Falling rupee increases current account deficit since import expenditure will be higher than export earnings.
3. It will increase inflation in the country since the increase in oil import costs would mean higher fuel costs and it will cause pressure on overall economic activity, thus increasing inflation.
4. The declining rupee would impact corporate revenue due to higher import costs. This would means lower wages or salaries for employees, thus affecting the standard of living.
5. Fall in rupee value will affect the inflow of foreign investments.
6. Importers and oil marketing companies are the biggest losers since they import their main raw material, that is, crude oil.

Positive impacts

1. A cheaper rupee will incentivise Indian companies to export more. It will also help them substitute some of the costlier imported goods in the domestic market with local products. Thus, rupee depreciation can help in developing the manufacturing base of the economy.
2. Travel to India gets cheaper and the tourism industry may benefit from it.
3. Indians working abroad can gain more on remitting money to their family in India. Ultimately, this will result in reducing the current account deficit to an extent.

Way forward

1. To solve the currency problem, Reserve Bank of India (RBI) can influence the value of rupee through effective regulation of money supply through its monetary policy stance.
2. Benchmark interest rate can be used effectively to attract the foreign capital into the country and in result increasing the value of the currency.
3. Direct intervention of RBI in the forex market can also help reduce the selling pressure on the rupee

Practice question

1. What do you understand by the currency depreciation? How does the fall in rupee affect Indian economy? Discuss.

Why in News?

1. Recently, the central government had formed a task force to draft a new Direct Tax law which seeks to replace the existing Income Tax Act, 1961.
2. The Task Force will submit its report to the government on how to fix the more-than-50-year-old Income Tax Act, 1961.

What is the flat tax rate?

It is an income tax system in which everyone pays the same tax rate irrespective of income level. Therefore it is also named as proportional taxation system.

What is the Need?

1. India’s current tax system is progressive in nature, with tax rates going up when the income level goes up. To meet the changing economic needs of the country, and to fix the more than 50-year-old Income Tax Act, 1961 which is not consistent with present times, a flat tax rate system is necessary.
2. To reinstate the Direct Tax Code (DTC) in a new structure.

Arguments in favour

1. A flat tax rate of 12% would be appealing even for low-income people.
2. The compliance rate will increase by eight percentage points to 33%.
3. While simplification and better administration of the law are major reforms that India needs, according to economists, some even suggest going for a flat tax system or lower tax system.
4. The classic case of the flat tax system is of Hong Kong, Russia and New Zealand.

• One of the poorest country during the World War II, Hong Kong adopted a flat tax in 1947 which led to higher compliance and dramatic economic growth.
• Russia adopted a 13% flat tax, which went into effect in 2001 and Russia’s economy has expanded by about 10 percent since then. Russia’s income tax revenue has grown to more than 50% as people found it fair and easier to pay.
• New Zealand is called BBLR — broader bases and lower rates — country. In New Zealand, the tax law experts focus on taking a lot of actions at a low rate, or flat rate and most importantly at the simpler tax code. New Zealand in 1980 did away with deductions and write-offs and instead applied the lowest rates on average workers. With higher compliance, New Zealand is one of the countries with the best income tax practices. Instead of imposing a progressive tax scheme, it gives it as an option for people.

Arguments against

1. India’s current tax system is progressive in nature, with tax rates going up when the income level goes up. India is a democratic country and is expected to invest in social welfare and infrastructure. Hence progressive tax rate is necessary.
2. For a developing country like India, which is in the lower middle-income bracket, a flat tax structure may not be an equitable one. Income inequality in India is one of the highest, with 22 per cent of the national income going to top 1 per cent.
3. Only with a progressive tax system, such wide income inequalities can be addressed. Hence a flat tax system will be regressive, considering India’s current situation.
4. A system prescribing the higher rate of income tax for a higher income group helps garner revenue without becoming burdensome on lower income taxpayers
5. The great success of Russia not just through the imposition of flat tax rate but through several changes in both the structure and the administration of taxes. The reforms widened the tax base by eliminating many exemptions and deductions as well as increasing taxes on capital income.

India’s attempts to impose a flat rate

1. An attempt to redraft the Income Tax Act made by the ex-finance minister P. Chidambaram in 2009 through the Direct Taxes Code (DTC). It proposed a simpler tax code and did away with unnecessary exemptions and created space for lower tax rates. However, the bill lapsed with the dissolution of the 15th Lok Sabha in 2014.
2. The NDA government, since coming to power in 2014, has already implemented general anti-avoidance rules GAAR.
3. In 2016 Finance Minister promised to lower corporate tax rate to 25% in 5 years.
4. Currently, income up to Rs 2.5 lakh per annum is exempt from tax for individuals.

Way forward

Flat income tax rate has many success stories from many countries. Hence it is high time that India also adopts it. However, it should be implemented as a pilot project to monitor various impacts and come up with effective solution to prevent various challenges in the actual implementation. And the government should also ensure that the poor are not affected from this reform.

Practice question

1. What do you understand by the flat income tax rate? Discuss whether implementing a flat income tax rate in a democratic country like India is feasible or not.

Why in News?

India ranks 177 among 180 countries in the Environmental Performance Index 2018.

A drop in the rank from the last index demands a relook at the country’s environmental policy.

About Environmental Performance Index?

1. It is a biennial report published by Yale and Columbia Universities in collaboration with the World Economic Forum.
2. It ranks 180 countries based on 24 performance indicators.
3. It is divided into 10 categories covering environmental health and ecosystem validity.
4. Top rank in sustainability taken by Switzerland, followed by France, Denmark, Malta and Sweden in the recent EPI.

India’s status

1. India at the 177th place is one of the bottom 5 countries on the index.
2. The 177th place is a drop of 36 points from 141 in 2016.
3. Emerging economies like Brazil and China ranks at 69 and 120.
4. India is at the bottom of the environmental health category.
5. In terms of air quality, India is at third last.
6. Poor performance in the environmental health policy and high pollution-related deaths are the major factors in the overall drop.
7. Other major causes include pollution from solid fuels, coal and crop residue burning and emissions from motor vehicles.
8. Increasingly degrading air quality in India is attributed to the growth in population, industrial production, and automotive transportation.

Concerns

Health

1. Air quality is the leading environmental threat to public health
2. Over the past decade, the deaths due to a large rise in ultra-fine PM 2.5 particles in the country.
3. An estimated 1.4 million premature deaths in India is due to Air pollution.

Economy

1. Health impacts cause a serious loss in welfare equivalent to about 8% of GDP in 2013.
2. The cost of labor productivity became 1.8% of GDP.
3. Environmental degradation particularly affects the poor and further degrades their standard of living.

Measures taken

Over the past few years, the government has set some ambitious targets for environmental protection as follows

1. Strict environmental standards for coal-fired power plants.
2. Bharat Stage VI emission norms to be implemented from April 1, 2020.
3. Initiatives to manufacture and sell electric vehicles in the country by 2030.
4. Revision of National Solar Mission.
5. Encouraging transition to renewable energy.
6. The target for solar capacity revised from 20GW to 100 GW by 2022.
7. Target to clean highly polluted Ganga by 2018.

Challenges

1. There is a huge gap between policy goals and enforcement.
2. On solar targets, India seems to be moving in the right path. However, balancing it with other goals is seriously lacking.
3. For example,

• The government has relaxed its promise of implementing strict power plant emission norms by December 2017.
• The 30% annual E-waste collection target by manufacturers has been relaxed to 10%.

1. The automobile industry has stated that full conversion to electric vehicles is possible only by 2047 which is in contrast to the government’s targets.
2. In the clean Ganga initiative, there have been delays in creating an action plan and lack of proper fund utilization.

Way forward

1. In order to address the environmental problems, there is a need to recognize the environmental costs of development.
2. Subsidies shall be given in order to accelerate the transition to renewable, particularly solar energy.
3. More polluting fuels should be priced higher.
4. The environmental standards for coal power plants should be strict.
5. Petrol and Diesel should be priced higher in order to aid the transition to electric vehicles.
6. More political will is required to effectively implement the existing environmental laws and regulations.
7. Considering India’s poor performance in the index, the government should take forward the environmental targets seriously.

Practice question

1. “India’s performance in the recent Environmental Performance Index was poor”. Discuss various reasons for the same and suggest suitable measures to improve India’s ranking.

Why in News?

1. Recently, India’s draft space activity bill, 2017 was unveiled
2. It aims at promoting and regulating the space activities in India
3. The legislation is expected to encourage both public and private players to participate in India’s space programme.

Why is there a need for a space law?

1. Currently, space activities are regulated by policies like Satellite communication policy, 2000 and Remote Sensing Data Policy, 2011. But there is a need for the proper legal environment for orderly performance and growth of the space sector.
2. Nations such as the USA, Russia, UK, etc. have their own space legislation. Even China and Japan are in the process of formulating their own domestic space legislation.
3. Earlier, ISRO was the sole player in the space sector. However lately, there have been many start-ups mushrooming in this sector, which calls for a regulatory mechanism and legislation to govern their activities.
4. Furthermore, the demand for Indian space products has been growing both in the country and outside the country. So it is necessary to include Indian industry and service providers in space activities under the technical guidance of the Department of Space (DOS) and the growth of the Indian space sector.
5. A legislation is required as India is obligated to UN outer space treaties which require signatories to have a national legislation in place.

What are the key features of the bill?

1. The provisions would be applicable to all citizens and also to those sectors which are engaged in space activity either inside or outside the country.
2. It provides for the grant of a non-transferrable license to those people engaged in commercial space activity.
3. It provides for the appropriate mechanisms for licensing, eligibility criteria and fees for the license.
4. Union government will have to maintain a register of space objects that are launched or to be launched around the earth.
5. It provides for technical support in order to facilitate commercial space activity.
6. It also provides for regulatory procedures for conduct and operation of space activity.
7. It provides for restrictions in sharing of details regarding the pricing of products created through space activity with any person or agency.
8. It provides for punishment for persons involved in illegal commercial space activities with imprisonment up to 3 years or fine more than Rs 1 crore or both
9. It also has provisions for the protection of IPR created through space activity.

Arguments favouring the bill

1. Definition: The bill clearly defines space players, licenses, violations, objects, people, and geography. It is also proposed to define detailed guidelines in consultation with stakeholders and industry bodies.
2. Promotion: The bill encourages non-governmental players to take the risk and invest in space activities in India. This will make India a commercial hub for space activities and generate jobs in the country.

Arguments against the bill

1. Clarity: Experts have criticized the bill for its lack of clarity on the use of space objects.
2. Regulation: It gives arbitrary power to the government for monitoring the research activities. This would scare away international investors from investing in the space sector of India.
3. Liability: The bill made the government non-liable for any harm caused by the commercial activities by the non-governmental players in space even though the government gives clearance for their involvement in the space activities.

Way forward

The bill is a welcome step in promoting the space sector. But to enable competitive ecosystem in the space sector there is a need to conduct a review of international best practices in managing the space value chain and inducting them within the Act.

Why in News

Recently, the Union and State governments agreed to implement the direct benefit transfer (DBT) scheme in the power sector for better targeting of electricity subsidies.

Key features

1. Under the scheme, electricity will be provided to consumers at market rates and those eligible get the subsidy amount directly in their bank accounts.
2. The cash payment under DBT will be equivalent to the level of payment announced by the state government for per unit of electricity consumption.
3. The state would decide the subsidy based on average consumption data of a particular set of consumers.
4. It is to be first launched under a pilot project and the full launch by 2019 when state discoms cleared their losses and started generating profit under UDAY.
5. To make discoms more responsive, any disruption in electricity will be penalized after March 2019.
6. For achieving efficiency and reduce losses, 100% metering will be done and there will be no human interface in consumer sides such as metering, billing, and collections.

Need for DBT in the power sector

1. India’s electricity distribution sector has been facing huge loss over the years even after the launch of UDAY (Ujwal Discom Assurance Yojana).
2. Currently, discoms provide subsidy by the cross-subsidization method. Cross-subsidization is done by subsidizing the electricity tariff of households while keeping the tariff for commercial and industrial consumers high.
3. People who are capable of paying the tariff benefits from cross-subsidization, but people who can’t pay (small business) are affected due to high electricity costs. Hence, DBT would solve the problem by direct targeting.
4. India’s per capita power consumption is around 1200 kilowatt-hour (kWh) which is among the lowest in the world. The government has the vision to provide 24×7 power to all by 2019. So power leakage and inefficient distribution shall be minimized with DBT and provide power to all households particularly those who lack.
5. In 2016, NITI Aayog recommended launching DBT in power distribution.

Benefits

1. DBT in power sector will result in better targeting of subsidies without any leakages and delays.
2. It will result in savings to the government exchequer.
3. The tariff rationalization under the proposed reforms would help discoms escape from losses and recover input costs.
4. It would result in the development of small industries who were earlier affected by cross-subsidization.

Challenges

1. Unless metering is done at the lowest levels (backward and rural areas), the power sector will not survive.
2. DBT is done through Aadhaar. However, the biometric authentication of poor people has not complete.
3. There is also the need to remove the ghost beneficiaries.

Way forward

DBT in the power sector is a welcome move which would help India achieve 24×7 power for all target. However, the implementation should also be effective in ensuring the success of this scheme with proper monitoring, prompt payments, grievance redressal mechanisms for non-payments or delayed payments, removing ghost beneficiaries etc.

Practice questions

Do you think that the Direct Benefit Transfer (DBT) in the power sector would help the government in achieving the 24×7 power for all target? Critically examine.