Economic Development: December 2023 Current Affairs | Current Affairs: Daily, Weekly & Monthly - CLAT PDF Download

Curb on Sugar Diversion for Ethanol

Context: This article, derived from the Indian Express news titled "Food versus Fuel: The Current Scenario of the Centre's Ethanol Blending Scheme," discusses the government's recent decision to limit the use of sweeteners for ethanol production as a means to bolster domestic supply following the prohibition of sugar exports.

Government Prohibits Sugarcane Usage for Ethanol Production

• Directive Banning Sugarcane Use for Ethanol Manufacturing: The Ministry of Consumer Affairs, Food, and Public Distribution has instructed all mills and distilleries to immediately cease using sugarcane juice or syrup for producing ethanol.

Sugar (Control) Order of 1966

• Under the Sugar (Control) Order of 1966, the Government holds authority to regulate sugar production, restrict sales by producers, etc., granting this power to any Central or State Government officer or authority.
• Consequently, concerns have arisen among producers regarding the potential adverse effects on the Ethanol Blending Programme (EBP) due to this ban.
• Sugar (Control) Order of 1966: This directive was issued in accordance with clauses 4 and 5 of the Sugar (Control) Order of 1966.
  • Nevertheless, the government has permitted the utilization of 'B-molasses' for ethanol production in the year 2023-24.
• Addressing Price Escalation: This action is anticipated to release 1.8-2 million tonnes (MT) of sugar into the domestic market, aiding in controlling price hikes amidst reports of reduced sugar production in Maharashtra and Karnataka during this season.

Why was the decision made to ban sugarcane for ethanol production?

• Estimated Fall in sugar production: The decision comes in the backdrop of an estimated fall in sugar production in the 2023-24 marketing year (October-September).
  • The sugar stocks at the end of the 2022–2023 sugar year were significantly lower than the record 143.3lakh tonnes (lt) of 2018–19 and the lowest since 39.4 lakh tonnes of 2016–17.
  • It aims to maintain adequate sugar availability for domestic consumption and to keep prices under check.

What concerns have been raised about the Ethanol Blending Targets?

• Impact on Ethanol Blending Targets:  The Oil-marketing companies (OMCs-BPCL, HPCL, IOCL, etc) published a tender for the delivery of about 825 crore liters of ethanol for 2023–2024 to meet their 15% blending objective. 
  • They got offers for about 559 crore litres in the first round of bids, of which 135 crore litres were made of ethanol made from sugarcane juice or syrup. 
  • The recent restrictions will impact further supply of ethanol impacting the Ethanol blending targets of OMCs. 
  • It might cause the blending objective for the ethanol supply year 2023–24 (ESY24), which runs from 1 November 2023 to 31 October 2024, to be missed.
  • The 12% ethanol blend goal for ESY23 was accomplished. The goal is 15% ethanol for ESY24 and 20% ethanol for ESY26. 
• Setback for Companies: It will prove a setback for the industry as the companies have set up capacities to produce ethanol directly from cane juice/syrup.
  • However, the government decision may impact the supply of feedstock, creating stranded capacities.
• Impact on revenue of Sugar Mills: Ethanol distillation provides large listed sugar mills with additional revenue sources however the current restriction has limited the revenue generation of the companies.
• Decrease in Crushing Capacity: As per the India Sugar Mills Association (ISMA),  this may lead to a supply halt, which will result in decreased crushing capacity and higher costs.
  • ISMA is an apex body of private sugar industries in India.
  • Crushing capacity means the estimated maximum rate of crushing at which a mill can operate continuously while maintaining a proper level of efficiency.

Ethanol Blending Programme: Objectives, Objectives, and Present State

• Background: The ethanol blending programme was initiated in January 2003.
• Objectives: The initiative aimed to encourage the use of eco-friendly alternative fuels while reducing reliance on energy imports.
• Ethanol Production Sources: Major ethanol sources in India include sugarcane and its by-products like B molasses. Additional sources encompass corn, rice, and barley.
  • Approximately 25-30% of the ethanol derived from cane for fuel blending is sourced from cane juice and syrup.
  • Another 45% originates from B-heavy molasses, the residue post two rounds of sugar processing. The remaining portion is derived from C-heavy molasses, the residue after three sugar processing rounds. Besides cane, ethanol is also distilled from broken maize and rice.
• Current Ethanol Blending Objective: The Indian government aims to achieve a 20% ethanol blending target by 2025-26, known as E20. This target indicates that by 2025, a liter of fuel oil might contain 200 ml of ethanol and 800 ml of petroleum.
• Present Status: During the 2022-23 ethanol supply year (November-October), the government accomplished a 12% blending of ethanol with petrol.
  • The current-year target stands at 15%, requiring 690 liters of ethanol. In June 2022, the Government successfully attained the goal of a 10% average ethanol blending in petrol nationwide under the EBP Programme.
• Significance: India has met the initial target of 10 percent ethanol blending in mid-2022, ahead of the targeted timelines of November 2022. This has led to a forex increase of over Rs 41,500 crore, and reduced greenhouse gas emissions of 2.7 million metric tonnes.

Ethanol Blending Programme: Advantages 

• Greenhouse gas emissions (GHG):  According to the US Department of Energy’s Argonne National Laboratory, grain-based ethanol cuts greenhouse gas emissions by 44 to 52% compared to gasoline.
  • Corn ethanol offers an average GHG reduction of 46% versus gasoline. 
• Reducing Import Dependency: With E20 (20% ethanol blending with petrol) implementation by 2025, India will save about `45,000 crore in oil imports and 63 MT of oil annually.
• Further Potential: According to the International Energy Agency (IEA), there will be 3.5-5x biofuels growth potential by 2050 due to net zero targets, creating a huge opportunity for India.
• Net-Zero: It means cutting greenhouse gas emissions to as close to zero as possible, with any remaining emissions re-absorbed from the atmosphere, by oceans and forests.
• Growth in Ethanol Market: As per the estimates of the Ministry of Petroleum and Natural Gas, the global ethanol market was valued at $99.06 billion in 2022 and is predicted to grow at a CAGR of 5.1% by 2032 and surpass $162.12 billion by 2032.

Ethanol Blending Programme: Challenges

• Risks of Food security: The EBP diverts foodgrains for ethanol production meant for the poor.
  • In the 2023 Global Hunger Index, India ranks 111th out of the 125 countries revealing serious hunger concerns.
  • According to the Food and Agriculture Organization, about 209 million Indians, or about 15% of its population, were undernourished between 2018 and 2020. 
• Focus on water-intensive crops:  Currently, most of the ethanol being produced uses either sugarcane or rice as its raw material. Both these crops are water intensive.
  • Rice and sugarcane, along with wheat, consume about 80% of India’s irrigation water.

Government Interventions for Ethanol Blending

• Global Biofuels Alliance (GBA): To promote the development and deployment of biofuels as a low-carbon pathway to sustainable energy.
• NITI Aayog Roadmap for Ethanol Blending in India 2020-25:  It suggested an annual roadmap for the production and supply of ethanol till 2025-26, and systems for country-wide marketing of ethanol. 
• National policy on biofuels 2018: It aims to:
  • Advance the blending target of 20% bioethanol in petrol, from 2030 to 2025-26. 
  • Make additional feedstocks eligible for the production of biofuels.
• E100 Pilot Project: It aims to set up a network for the production and distribution of ethanol across the nation.
• RUCO project: It aims to convert vegetable oils, animal fats, or restaurant grease that have already been used in cooking into biodiesel for running diesel vehicles, or indeed any equipment that uses diesel.
• Pradhan Mantri JI-VAN Yojana, 2019: It aims to create an ecosystem for setting up commercial projects and to boost Research and Development in the 2G Ethanol sector.
• Inefficient Subsidy Mechanism: FCI is currently purchasing broken rice for PDS, but is supplying it to distilleries at half the price.
  • This process is highly inefficient as the burden of subsidies to distilleries  is passed to the taxpayers.
  • Competition between the distilleries and the public distribution system for subsidized food grains could have adverse consequences for the rural poor and expose them to enhanced risk of hunger.
• Priority to Food-based Feedstocks:  The ethanol blending target of India primarily focuses on food-based feedstocks. 
  • This is against the 2018 National Policy on Biofuels, which prioritized grasses and algae; cellulosic material such as bagasse, farm and forestry residue; and, items like straw from rice, wheat, and corn.
• Logistics Issues: Currently, the entire quantity of ethanol is being transported by road on truck tankers. 
  • This is not only expensive but also requires burning fuel to carry fuel, which releases GHGs into the atmosphere.
• Infrastructural challenges: Need for additional storage tanks for ethanol at marketing terminals/depots
  • Need for ethanol-compliant dispensing units
  • Need for an additional underground tank, pipes/hoses, and dispensing units for ethanol blended gasoline supply at retail outlets

Path Ahead to Achieve Ethanol Blending Goals

• Utilization of Non-Food Feedstock: Encouraging the adoption of technology for producing ethanol from "Advanced Biofuels," particularly second-generation (2G), is vital to prevent any conflict with the food production system.
• Emphasis on B-Heavy Molasses: Allowing the conversion of residual juice quantity into B-Heavy Molasses is essential to augment ethanol supply while minimizing the impact on sugar production.
• Compensatory Increase in Ethanol Pricing: It is imperative to implement a compensatory rise in ethanol pricing from B and C heavy molasses to ensure adequate cash flow for sugar mills. This step would also help prevent potential delays or defaults in farmer payments due to reduced ethanol production from juice and syrup.
• Priority to Food Crops: The focus on food production should take precedence over fuel crops due to diminishing groundwater reserves, limited arable land, unpredictable monsoons, and declining agricultural yields caused by climate change.
• Biofuels from Waste: India's emphasis on ethanol derived from waste materials could position it as a global leader in sustainable biofuels policy. This shift would yield significant climate and air quality benefits by reducing waste burning contributing to smog.
• Moving Away from Water-Intensive Crops: The ethanol strategy should ensure that farmers aren't compelled to cultivate water-intensive crops, preventing a potential water crisis.
• Alternative Transportation Methods: Exploring alternative transportation modes for ethanol, such as specialized pipelines, rail tank wagons, and coastal vessels or ferries, could prove beneficial. Consideration of the RORO (roll-on/roll-off) model for moving ethanol truck tankers via rail is also suggested.
• Adopting the Brazil Model: Learning from Brazil's transportation model, where fuel and ethanol movement to depots occurs predominantly via pipelines, rail, or coastal ships, could offer insights into effective transportation methods.

Conclusion

Addressing challenges within the Ethanol Blending Programme requires a balanced approach that prioritizes food security, explores non-food feedstocks, and embraces sustainable technologies. This approach aims to achieve India's ethanol blending targets while mitigating potential adverse impacts on agriculture and food availability.

Countervailing Duties on Four Indian Products

Context: The USA and EU recently levied countervailing duties (CVDs) on four Indian products in response to India's implementation of the Remission of Duties and Taxes on Export Products (RoDTEP) scheme for outbound shipments starting January 2021.

What is the RoDTEP Scheme?

• The RoDTEP (Remission of Duties or Taxes on Export Products) Scheme is formulated to assist Indian exporters by refunding various taxes and duties on exported goods. Its primary goal is to enhance the competitiveness of Indian products in the global market. 
• This scheme encompasses the reimbursement of both direct and indirect taxes incurred during the manufacturing and distribution processes of exported goods.

What is Countervailing Duty?

• Countervailing Duty (CVD) is a tariff imposed on imported goods to counteract subsidies provided to producers of these goods in the exporting nation. The aim of CVDs is to restore fairness between local and foreign producers. When foreign producers can sell their products at a lower price due to government subsidies, CVDs are employed to rebalance the situation. 
• The WTO’s Agreement on Subsidies and Countervailing Measures (SCM Agreement) permits member nations to levy these duties as a means of upholding equitable trade practices.
• The SCM Agreement defines a "subsidy" as a financial contribution by a government that confers a benefit. While certain subsidies are permissible, others are prohibited or subject to dispute. Prohibited subsidies include specific types of export and local content subsidies. Actionable subsidies, which can cause harm or negate benefits, are subject to challenge or countervailing measures.

Who Implements Countervailing Measures in India?

• Countervailing measures in India are imposed by the Directorate General of Trade Remedies (DGTR), operating under the Ministry of Commerce & Industry. 
• This governing body oversees trade remedial measures such as countervailing duties, anti-dumping duties, and safeguard measures. The DGTR conducts independent investigations and furnishes recommendations to the Central Government concerning these measures.

India Imposes Onion Export Ban

Context: Recently, the Director General of Foreign Trade (DGFT) made an announcement prohibiting onion exports until March 2024 by converting the export policy of onions from 'Free' to 'Prohibited'.

• The existing shortage in supply, resulting from the premature exhaustion of stocks from the 2022-23 rabi season and an anticipated reduction in kharif 2023 output, alongside heightened demand during festivals, has caused a notable surge in onion prices.
• Additionally, the government has adjusted the stock limit for wheat, reducing the limit by half to 1,000 tonnes for wholesalers and 5 tonnes for retailers.

Why has the Government Banned Export of Onion Price?

Price Control:

• By restricting onion exports, the government aims to prevent price surges or fluctuations within the domestic market.
• To combat spiraling prices, the Centre had imposed a Minimum Export Price of USD 800 per tonne on onions in October 2023. Earlier, in August, the government imposed a 40% export duty on onions.
• Onions have a history of significant price volatility, and an export ban helps in stabilizing prices, making them more affordable for local consumers.

Addressing Scarcity:

• Factors like adverse weather conditions, lower production, or increased demand can lead to a scarcity of onions within the country.
• By banning exports, the government ensures that the available supply is directed towards meeting domestic demands first.

Food Security:

• Onions are a staple in Indian cuisine, and any scarcity can impact food security. By curbing exports, the government ensures that the population has access to this essential food item without facing shortages or unaffordable prices.

What are the Key Facts About Onion?

• Onion is an important horticultural commodities grown worldwide for their culinary purposes and medicinal values.
• India is the second largest producer of onion after China.
• Maharashtra, Karnataka, Orissa, Uttar Pradesh, Gujarat, Andhra Pradesh and Tamil Nadu are the major onion producing states.
• Maharashtra ranks first in Onion production with a share of 42.53% followed by Madhya Pradesh with a share of 15.16% in 2021-22 (3rd Advance Estimate).

Why Has the Government Enforced Stock Limits on Wheat?

• The revised stock limits aim to deter entities engaged in wheat stocking from engaging in hoarding practices. By implementing stricter constraints, the government aims to discourage artificial shortages and ensure equitable distribution of wheat among various stakeholders.
• Excessive hoarding has the potential to disrupt the balance between supply and demand, leading to price fluctuations that can adversely affect consumers.
• Regulating wheat stocks is essential to maintain adequate quantities available in the market, meeting the nation's food requirements. This measure safeguards food security by averting shortages and ensuring consumers have access to this essential food commodity.

What is the Present State of Wheat Distribution Nationwide?

• India ranks as the world's second-largest wheat producer following China. However, it contributes less than 1% to the global wheat trade, often maintaining substantial reserves to provide subsidized food for the underprivileged.
• Key wheat-producing states in India include Uttar Pradesh, Punjab, Haryana, Madhya Pradesh, Rajasthan, Bihar, and Gujarat.
  • Primary Export Destinations (2022-23): Bangladesh, Indonesia, Korea Republic, United Arab Emirates, and Yemen Republic.

Monetary Policy Committee Decisions: RBI

Context: In the most recent bimonthly meeting of the Monetary Policy Committee (MPC), the Reserve Bank of India (RBI) opted to maintain the benchmark interest rates at the current level, marking the fifth consecutive time without any changes.

• The key repo rate has been stagnant at 6.5% for five consecutive reviews.

Key Highlights from the MPC Meeting:

Policy Rates:

• Policy Repo Rate: 6.5%: The repo rate represents the rate at which the country's central bank (RBI) lends money to commercial banks, aiding in resolving any fund shortages. It involves the central bank buying securities.
• Standing Deposit Facility (SDF): 6.25%: The SDF serves as a liquidity channel allowing banks to park surplus funds with the RBI. Unlike the reverse repo facility, it doesn't mandate banks to provide collateral when depositing funds.
• Marginal Standing Facility Rate: 6.75%: The MSF acts as an avenue for scheduled banks to borrow overnight from the RBI in urgent situations where interbank liquidity is entirely depleted. Banks typically lend funds to each other for specific terms under interbank lending.
• Cash Reserve Ratio (CRR): 4.50%: Under CRR, commercial banks are required to maintain a specific minimum deposit amount (NDTL) as reserves with the central bank.
• Statutory Liquidity Ratio (SLR): 18.00%: SLR denotes the minimum percentage of deposits that commercial banks must maintain in liquid cash, gold, or other securities.

Projections:

• Elevated Growth Projection: The GDP growth projection for 2023-24 was elevated to 7% from the earlier estimate of 6.5%, buoyed by a robust 7.6% growth in the second quarter of the fiscal year 2023-24.
• Inflation Forecast: The Consumer Price Index (CPI) based inflation forecast for the fiscal year 2023-24 remains unchanged at 5.4%.

What are Other Initiatives Taken by the RBI?

• Hiked in UPI Limit for Health and Education: RBI has hiked the UPI limit for Health and Education transactions from Rs 1 lakh to Rs 5 lakh per transaction in order to yield substantial operational advantages for both healthcare institutions and patients, according to industry experts.
• Recurring e-Payment Mandates: The RBI has expanded the limit on recurring e-payment mandates for credit card, insurance premia payments, and mutual fund investments to Rs 1 lakh from Rs 15,000 allows for more substantial periodic transactions.
• Regulatory Framework for Web-Aggregation: RBI is planning to establish a regulatory framework for web-aggregation of loan products to improve customer-centricity and transparency in digital lending.
• Partnerships with Fintechs: The RBI has sought to get a better grip on the growing incidence of banks and non-banking finance companies (NBFCs) partnering with Fintechs by proposing the creation of a Fintech Repository by April 2024.
  • FinTechs would be encouraged to provide relevant information voluntarily to this Repository.

Note

• Inflation: It refers to the sustained increase in the general price level of goods and services in an economy over a period of time, leading to a decrease in the purchasing power of money.
• Headline Inflation: It is the total inflation for the period, comprising a basket of commodities.
  • The food and fuel inflation form one of the components of headline inflation in India.
• Core Inflation: It excludes volatile goods from the basket of commodities tracking Headline Inflation. These volatile commodities mainly comprise food and beverages (including vegetables) and fuel and light (crude oil).
  • Core inflation = Headline inflation – (Food and Fuel) inflation.
• Inflation Targeting: It is a monetary policy framework aimed at maintaining a specific target range for inflation.
  • The Urjit Patel Committee recommended CPI (Consumer Price Index) over WPI (Wholesale Price Index) as a measure for inflation targeting.
  • The current inflation target also aligns with the committee's recommendation to establish a target inflation rate of 4%, accompanied by an acceptable range of deviation of +/- 2%.
  • The central government, in consultation with the RBI, sets an inflation target, and an upper and lower tolerance level for retail inflation.
• Liquidity refers to the ease with which an asset or security can be quickly bought or sold in the market without significantly affecting its price.
  • It signifies the availability of cash or liquid assets to meet financial obligations or make investments. In simpler terms, liquidity is to get your money whenever you need it.

Critical Minerals

Context: This article focuses on the news published in the Indian Express titled "Mining for Critical Minerals: Understanding the Auction Process and Its Significance." India has initiated the initial round of auctions for critical and strategic minerals valued at approximately ₹45,000 crore.

Government Initiates Auction Process for Critical Minerals

• The bidding process began after the government declared 30 minerals as “critical”, and amended the Mines and Minerals (Development And Regulation) Act to allow commercial mining of lithium and a few other minerals. 
• The bid for each block will be awarded on the highest percentage of mineral dispatch value quoted by the bidder. 
• After the ongoing auction is over, the process of auctioning a second tranche of critical mineral blocks is expected to begin.
• It is currently unclear if this second tranche includes new lithium reserves in Rajasthan and Jharkhand. 

Mines and Minerals (Development & Regulation) Amendment Act, 2023: 

• Lifting ban: The amendment lifts the ban on commercial mining of six critical minerals which are Lithium, beryllium, titanium, niobium, tantalum and zirconium.
• Critical minerals: The government declared 30 minerals as critical for the country, including the above six minerals. 
• Monetising assets: The amendment allows the Central government to auction these minerals while the royalty will go to the states.

What are the critical minerals?

• Critical Minerals: These minerals play a pivotal role in supporting clean energy initiatives, fostering economic development, and ensuring national security.
  • Vital for the progress of various sectors such as high-tech electronics, telecommunications, transportation, and defense, these minerals hold significant importance.
• Identified Critical Minerals: A committee of experts operating under the Ministry of Mines has recognized a roster of 30 critical minerals essential for India's requirements.
  • This list includes Antimony, Beryllium, Bismuth, Cobalt, Copper, Gallium, Germanium, Graphite, Hafnium, Indium, Lithium, Molybdenum, Niobium, Nickel, PGE (Platinum Group Elements), Phosphorous, Potash, Rare Earth Elements (REE), Rhenium, Silicon, Strontium, Tantalum, Tellurium, Tin, Titanium, Tungsten, Vanadium, Zirconium, Selenium, and Cadmium.
• Lithium Reserves: India's maiden official discovery of lithium was found in the Salal Haimna block situated in the Reasi district of Jammu and Kashmir, which has undergone auctioning. Additionally, the Katghora block in Chhattisgarh, containing lithium and rare earth elements (REE), is also currently up for auction.

How is the auction process conducted for critical minerals in India?

• Minerals in Auction: Around 20 mineral blocks covering lithium and REE (rare earth elements), nickel, copper, chromium, phosphorite, potash, glauconite, graphite, manganese, and molybdenum were put under the auction.
• Location: The blocks are located across 8 States, namely Odisha, Jharkhand, Uttar Pradesh, Bihar, Chhattisgarh, Tamil Nadu, Gujarat, and Jammu & Kashmir.
• Duration: The entire auction process will be completed within 103 days from the date of launch of the auction. Further, the Government is committed to bringing more critical mineral blocks to auction in a phased manner.
• Types of Agreement: Of the 20 blocks, 16 are Composite Licences (CL) blocks, while 4 are Mining Leases (ML).
• Mining Lease: It allows mining for specified minerals and conducts other activities associated with mining or promoting the activity of mining. Under ML, once the license is granted, the licensee can begin mining operations after obtaining the requisite clearances.
• Composite Licence: It means the prospecting licence-cum-mining lease which is a two-stage concession granted to undertake prospecting operations followed by mining operations in a seamless manner. CL allows the licensee to conduct further geological exploration of the area to ascertain evidence of mineral contents.
• Exploration Period Under CL: The Licensee can make an application to the relevant state government to convert their CL to an ML to begin mining operations pending requisite clearances. 
  • The licensee has 3-5 years to complete the prescribed level of exploration, failing which the licence will be withdrawn.
• Clearances Required: Out of the total concession area of 7,197 hectares (for all 20 blocks), 17% of the area is forest land with status. 
  • Once granted a licence, the licensee will have to obtain 15 approvals and clearances  including forest clearance, environmental clearance, Gram Sabha consent, etc. before beginning operations. 

What is the Importance of Critical Mineral Mining in India?

• Advancing Self-Reliant India: Critical minerals form the cornerstone of the manufacturing sector, significantly contributing to economic growth. Industries heavily rely on these minerals for producing components and advanced technologies. Once mining operations commence, it will aid in reducing mineral imports, aligning with the vision of Aatmanirbhar Bharat and promoting growth in strategic sectors.
• Ensuring Critical Mineral Security: With India and the global community emphasizing the expansion of renewable energy capacities, the demand for specific critical minerals is projected to soar. Initiatives such as the establishment of KABIL (Khanij Bidesh India Limited) aim to bolster the nation's mineral security.
• Diminishing Import Dependency: India presently depends entirely on imports for its lithium and nickel needs and approximately 93% for copper. Enhancing domestic mining capacities can significantly decrease this reliance, fortifying the nation against global market fluctuations and fostering self-reliance. In August 2023, India imported 2,145 tonnes of lithium carbonate and lithium oxide, totaling Rs 732 crore. Additionally, in 2022-23, imports included 32,000 tonnes of unwrought nickel worth Rs 6,549 crore and 1.2 million tonnes of copper ore valued at Rs 27,374 crore.
• National Security: Critical minerals play a pivotal role in the defense industry, essential for the production of advanced weaponry, communication systems, and strategic technologies. Securing a domestic supply of these minerals is imperative to mitigate risks associated with reliance on foreign sources during geopolitical uncertainties.
• Employment Generation and Local Development: Mining and processing of critical minerals offer significant potential for job creation, particularly in regions where these minerals are abundant, fostering opportunities for local infrastructure development.
• Environmental Sustainability: Critical minerals play a crucial role in transitioning towards cleaner energy sources, reducing dependence on fossil fuels and consequent greenhouse gas emissions. Achieving the target of 500GW renewable energy capacity by 2030 necessitates these minerals. Green technologies like solar panels, wind turbines, batteries, and electric vehicles rely heavily on critical minerals.
• International Collaboration: Collaborating internationally is vital to diversify import sources and secure supply chains. India's participation in the Mineral Security Partnership (MSP) since June 2023 strengthens its position and offers a platform to advocate for developing countries, reflecting a strategic decision.

Estimated Reserves: 

• Lithium Reserve: The blocks of lithium reserves in J&K and Chhattisgarh are up for auction for a CL.
• J&K Block: It has an inferred reserve of a 5.9 million tonne (mt) of bauxite column, which contains more than 3,400 tonnes of lithium metal content and it also contains more than 70,000 tonnes of titanium metal content.
• Chhattisgarh Block: It contains lithium and REEs, but no drilling has been conducted yet to estimate total reserves.
• Nickel Ore Reserves: These have been found in Bihar, Gujarat, and Odisha. 
• Odisha Block: An inferred value of 2.05 mt of nickel ore, which amounts to 3,908 tonnes of nickel metal content.
• Bihar and Gujarat Block: No drilling has been conducted. 
• Copper Reserves: The Odisha block is the only block among the 20 that contains deposits of copper, amounting to 6.09 mt of copper ore and 28,884 tonnes of copper metal content.

What are the challenges India faces in assuring resilient critical minerals supply chains?

Global Challenges:

• China: The dominant player in critical mineral supply chains faces disruptions due to COVID-19 lockdowns, potentially impacting extraction, processing, and exports.
• Russia-Ukraine War: Russia is one of the significant producers of nickel, palladium, titanium sponge metal, and the rare earth element scandium. Ukraine is one of the major producers of titanium.
  • Disruptions in production and supply of critical minerals like nickel, palladium, titanium, and rare earth elements due to the war.
• Geopolitical Shifts: A strategic partnership between China and Russia could further affect critical mineral supply chains, especially as developed countries form rival alliances.
  • For example: the Minerals Security Partnership (MSP) and G7’s Sustainable Critical Minerals Alliance.
• Increased Demand: Transition to renewable energy and electric vehicles requires more minerals like copper, lithium, cobalt, and rare earth elements, exceeding current global production.

Domestic Challenges:

• Limited Domestic Reserves: India lacks sufficient reserves of many critical minerals, necessitating reliance on imports.
  • However, India does not have in significant amounts, the reserves of nickel, cobalt, molybdenum, rare earth elements, neodymium, and indium, and the country’s requirement of copper and silver are higher than its current reserves.
• High Demand: India’s growing economy and ambitious green energy goals place high demands on critical mineral resources.

Way Forward 

• Increasing Mineral Exploration: Conducting thorough assessments to identify and quantify critical mineral deposits across the country, investing in advanced geological surveys and exploration of technologies to locate potential reserves is crucial.
  • For instance, as per the Geographical Survey of India’s (GSI) field season 2023-24 report, lithium exploration projects are underway in at least three states, including Korba district in Chhattisgarh, South Garo Hills and East Garo Hills in Meghalaya, and Jammu, Ramban, Resai, Rajouri and Udhampur in Jammu and Kashmir. 
• Investment Promotion: Create a conducive investment environment by offering incentives, tax breaks, and streamlined regulatory processes to attract domestic and foreign investment in critical mineral mining projects. 
  • Further, facilitate public-private partnerships to share the risks and rewards of critical mineral exploration and production.
  • The government specified new royalty rates for critical minerals by matching global benchmarks to attract investment in mining.
• Environmental and Social Responsibility: Minimize the ecological impact of mining activities while implementing community engagement programs to address the concerns of local communities and ensure that the benefits of mining are shared equitably.
• Technology Adoption: Embrace and invest in advanced technologies such as automation, artificial intelligence, and robotics to improve efficiency, reduce costs, and enhance safety in mining operations.

National Strategy:

• Develop a comprehensive national strategy for critical minerals, aiming for self-reliance in these resources.
• Address environmental concerns and protect affected communities through sustainable mining practices.
• International Cooperation:  India must actively engage in bilateral and plurilateral arrangements for building assured and resilient critical mineral supply chains. 
• Collaboration with countries like Australia and Canada can leverage their advanced exploration technologies and expertise, leading to faster and more efficient resource discovery.

Conclusion

The auction process for critical minerals in India, marked by the Mines and Minerals (Development & Regulation) Amendment Act, 2023, is a crucial step towards reducing import dependency.

Primary Agricultural Credit Societies

Context: The Ministry of Cooperation has recently launched Model Bye-laws designed to rejuvenate Primary Agricultural Credit Societies (PACS).

• These Bye-laws comprise a set of directives established by the Ministry of Cooperation to regulate and oversee the operations and activities of PACS operating at the local level.

What is the Purpose of these Bye-Laws?

• These Byelaws are designed to outline the structure, activities, and functioning of PACS, aiming to enhance their economic viability and expand their role in rural areas.
• The Model Byelaws will enable PACS to diversify their business activities by undertaking more than 25 business activities, including dairy, fishery, floriculture, setting up godowns, procurement of foodgrains, fertilizers, seeds, short-term & long-term credit, custom hiring centers, Fair Price Shops (FPS), community irrigation, Business Correspondent activities, etc.
• Provisions have been made to make the membership of PACS more inclusive and broad-based, giving adequate representation to women and Scheduled Castes/Schedules Tribes.

What are Primary Agricultural Credit Societies (PACS)?

Overview:

• PACS represent local cooperative credit societies situated at the village level, forming the final tier within a cooperative credit structure led by the State Cooperative Banks (SCB) at the state level.
• Credit extended by the SCBs is channeled to the District Central Cooperative Banks (DCCBs) functioning at the district level. These DCCBs collaborate with PACS, which directly engage with farmers.
• PACSs offer short-term and medium-term agricultural loans to farmers, supporting various agricultural and farming activities.
• The inception of the first PACS dates back to 1904.

Current Status:

• As of December 2022, a report from the Reserve Bank of India indicated the presence of 1.02 lakh PACS across the country. However, only 47,297 of these PACS reported profits by the conclusion of March 2021.

Importance of PACS:

• PACS play a crucial role in granting small-scale farmers access to credit, enabling them to procure seeds, fertilizers, and other farming essentials. This aids in enhancing their production output and augmenting their earnings.
• Positioned in rural areas, PACS are conveniently accessible to farmers seeking their services.
• PACS possess the capability to extend credit swiftly with minimal paperwork, facilitating efficient lending processes.

What are the Issues with the PACS?

Inadequate Coverage:

• Though geographically active PACS cover about 90% of 5.8 Lakh villages, there are parts of the country, especially in the north-east, where this coverage is very low.
• Further, the rural population covered as members is only 50% of all the rural households.

Inadequate Resources:

• The resources of the PACS are much too inadequate in relation to the short-and medium-term credit needs of the rural economy.
• The bulk of even these inadequate funds come from higher financing agencies and not through owned funds of societies or deposit mobilization by them.

Overdues and NPAs:

• Large over-dues have become a big problem for the PACS.
• As per the RBI report, PACS had reported lending worth Rs 1,43,044 crore and NPAs of Rs 72,550 crore. Maharashtra has 20,897 PACS of which 11,326 are in losses
• They curb the circulation of loanable funds, reduce the borrowing as well as lending power of societies, and give them the bad image that the societies of defaulting debtors are willful.

Way Forward

• These more than a century-old institutions deserve another policy push and can occupy a prominent space in the vision of Atmanirbhar Bharat as well as Vocal for Local of the Government of India, as they have the potential to be the building blocks of an Atmanirbhar village economy.
• PACS have played a crucial role in the rural financial sector and have the potential to play an even greater role in the future. To achieve this, PACS must be made more efficient, financially sustainable, and accessible to farmers.
• At the same time, the regulatory framework must be strengthened to ensure that PACS are effectively governed and able to serve the needs of farmers.

GDP Growth Surprise

Context: On Thursday, the Ministry of Statistics and Programme Implementation (MoSPI) delivered an unexpected revelation by unveiling the economic growth figures for the second quarter, spanning July, August, and September of the ongoing financial year (2023-24 or FY24). India's Gross Domestic Product (GDP), the metric for economic productivity, demonstrated a 7.6% growth in Q2.

What is the significance?

• This is welcome news because not only is this a fairly impressive level of economic growth, it also beats all market expectations. The first significance of the news is that it has triggered a flurry of upward revisions in the GDP forecast for the full financial year.
• Secondly, it seems to be vindicating the growth projections of India’s central bank. At the start of the financial year, the Reserve Bank of India looked like an outlier when it forecast a full-year GDP growth rate of 6.5% while most other professional economists had pegged it close to 6%; some even lower — as low as 5.5%.
• With most others now pushing up the FY24 projection to 6.5%, the RBI looks like it got its forecast spot on.
• Thirdly, this also means that RBI is unlikely to cut interest rates sooner than expected. Had the growth rate been below market expectations, the probability of a rate cut would have heightened.
• Lastly, it is noteworthy that it was exactly three years ago — when MoSPI announced the Q2 GDP data for 2020-21 — that India went into a technical recession. The upside surprise on growth has given hope that India’s economic recovery is now gathering momentum.

What to Consider: GDP or GVA?

• Two methods are employed to compute GDP. One approach examines how individuals expend their finances, known as the expenditure side of the economy, while the other analyzes the income side of the economy. The former is denoted as GDP, while the latter is represented by Gross Value Added (GVA).
• According to the RBI, a sector's GVA is determined by the output's value minus the value of its intermediary inputs. This "value added" is distributed among the primary factors of production, namely labor and capital.
• GDP can also be obtained through the GVA route by incorporating the indirect taxes collected by the government and deducting the subsidies provided by the government.
• Discrepancies between the two methods of calculating GDP can sometimes lead to significant controversies, as was observed when the GDP data for the first quarter was released.
• Due to the availability of pertinent data, the conventional wisdom suggests closer scrutiny of GVA figures for understanding quarterly economic growth trends, while examining GDP (expenditure data) is more pertinent for analyzing annual trends.

What does the GVA data show?

• The first thing to note is that the contribution of Agriculture and allied sectors has seen a steady decline. In the current Q2, agriculture grew by just 1.2% — a far cry from the 4.3% it grew in the year of the Covid pandemic, when the rest of the economy contracted. Last year, the same quarter saw 2.5% growth — half of the year before.
• This steady deceleration points to a likely increase in economic stress in rural India. Most experts expect farm production to not recover in the second half of the current financial year.
• The second noteworthy aspect is the spike in industrial GVA growth rate. It has grown by over 13%. In particular, manufacturing has grown by close to 14%. These spectacular growth numbers are reminiscent of the high growth phase that India witnessed between 2004 and 2008. However, it may be too early to claim that India’s manufacturing has completed a revival.
• For one, the latest growth rates for both industry and manufacturing benefit heavily from a fairly low base.
• Improved corporate performance was another reason apart from the low base effect for the overall industrial GVA surprise.
• As one looks at the third sector of the economy — services — the picture again turns. At a growth rate of 5.8%, the services economy has experienced a sharp deceleration over the same quarter last year.
• Data suggests that businesses involved in sub-sectors such as “trade, hotels, transport, communication and broadcasting services” grew by just over 4% — the kind of growth rate one associates with agriculture, which is typically the slowest-growing sector.

Conclusion

While the Q2 data was a pleasant surprise, few economists are convinced as yet to take this as conclusive evidence of a sustained momentum. Most economists expect growth to moderate a bit in the remaining two quarters, and possibly continue to moderate over FY25.

SEBI Board Approves Regulatory Framework

Context: The board of the Securities & Exchange Board of India (SEBI) has endorsed a framework for Index Providers aimed at improving transparency and accountability in the management and regulation of financial benchmarks within the securities market.

What are the New Regulations Framed by SEBI?

Framework for Registration of Index Providers:

• SEBI announced the approval of regulations establishing a framework for the registration of Index Providers. This framework will be applicable specifically to 'Significant Indices,' which SEBI will identify based on objective criteria.
• The regulatory structure aligns with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks.

Dematerialization Requirement for AIF Investments:

• SEBI introduced a requirement for Alternative Investment Funds (AIFs) to hold fresh investments made after September 2024 in dematerialized form.
• However, existing investments are exempt, except in cases mandated by applicable law or when the AIF, alone or with other SEBI-registered entities, has control in the investee company.
• The mandate for the appointment of custodians, previously applicable to specific AIF categories, will now extend to all AIFs.

Amendments to SEBI (Real Estate Investment Trusts) Regulations:

• The SEBI board approved amendments to the Real Estate Investment Trusts (REITs) Regulations, creating a regulatory framework for Small & Medium REITs (SM REITs) with an asset value of at least ₹50 crore.
• SM REITs will be able to establish separate schemes for owning real estate assets through special purpose vehicles (SPVs).

Flexibility in Social Stock Exchange (SSE) Framework:

• SEBI provided flexibility in the framework for the Social Stock Exchange (SSE) to boost fundraising by Not-for-Profit Organizations (NPOs).
• This includes a reduction in the minimum issue size and application size for public issuance of Zero Coupon Zero Principal Instruments (ZCZP) by NPOs on SSE, encouraging wider participation, including retail investors.

Nomenclature Change and Comfort Measures for NPOs:

• SEBI approved a change in the nomenclature from "Social Auditor" to "Social Impact Assessor" to convey a positive approach toward the social sector.
• This measure is intended to provide comfort to NPOs involved in the SSE and reinforce SEBI's support for social impact initiatives.

Key Terminologies

• Index Providers: These entities are accountable for formulating, sustaining, and computing the values of financial indices, which serve as statistical gauges measuring the performance of distinct segments within financial markets.
• Alternative Investment Fund (AIF): An AIF pertains to any fund established in India, serving as a privately pooled investment vehicle that gathers funds from sophisticated investors, either domestic or foreign. These funds are then invested in accordance with a defined investment policy for the benefit of its investors.

Categories:

• Category I AIFs: Typically, these funds invest in start-ups or early-stage ventures that the government or regulators consider socially or economically beneficial. Examples include venture capital funds and infrastructure funds.
• Category II AIFs: These funds fall outside the purview of Categories I and III and do not undertake leverage or borrowing, except for meeting day-to-day operational requirements, as permitted in the SEBI (Alternative Investment Funds) Regulations, 2012. Examples include real estate funds and private equity funds.
• Category III AIFs: These funds employ diverse or complex trading strategies and may involve leverage, including investment in listed or unlisted derivatives. Examples include hedge funds and private investment in Public Equity Funds.
• Real Estate Investment Trusts (REITs): REITs function as investment vehicles enabling individuals to invest in large-scale, income-generating real estate without the direct ownership or management of the properties. These trusts pool capital from multiple investors to invest in a diversified portfolio of real estate assets, such as residential or commercial properties, shopping centers, office buildings, hotels, etc.
• Social Stock Exchange (SSE): The SSE operates as a distinct segment within existing stock exchanges, facilitating social enterprises in raising funds from the public through its platform. It serves as a conduit for enterprises to seek finance for their social initiatives, gain visibility, and provide enhanced transparency regarding fund mobilization and utilization.

What is SEBI?

About:

• SEBI is a Statutory Body (a Non-Constitutional body which is set up by a Parliament) established in 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992.
• The basic functions of SEBI is to protect the interests of investors in securities and to promote and regulate the securities market.
• The headquarters of SEBI is situated in Mumbai. The regional offices of SEBI are located in Ahmedabad, Kolkata, Chennai and Delhi.

Background:

• Before SEBI came into existence, Controller of Capital Issues was the regulatory authority, it derived authority from the Capital Issues (Control) Act, 1947.
• In 1988, the SEBI was constituted as the regulator of capital markets in India under a resolution of the Government of India.
• Initially SEBI was a non statutory body without any statutory power but became autonomous and given statutory powers by SEBI Act 1992.

Structure:

• SEBI Board consists of a Chairman and several other whole time and part time members.
• SEBI also appoints various committees, whenever required to look into the pressing issues of that time.
• Further, a Securities Appellate Tribunal (SAT) has been constituted to protect the interest of entities that feel aggrieved by SEBI’s decision.
• SAT consists of a Presiding Officer and two other Members.
• It has the same powers as vested in a civil court. Further, if any person feels aggrieved by SAT’s decision or order can appeal to the Supreme Court.

What is IOSCO?

• IOSCO, the International Organization of Securities Commissions, was established in April 1983 and is headquartered in Madrid, Spain, with its Asia Pacific Hub situated in Kuala Lumpur, Malaysia. It functions as the global assembly of securities regulators, encompassing over 95% of the world’s securities markets and serving as the universal standard-setter for the securities sector.
• Working closely with influential entities such as the G20 (Group of Twenty) and the Financial Stability Board (FSB), IOSCO plays a pivotal role in establishing the benchmarks for fortifying securities markets. The FSB, an international body monitoring and offering recommendations on the global financial system, has endorsed IOSCO’s Objectives and Principles of Securities Regulation as a key standard for robust financial systems.
• IOSCO holds an enforcement role concerning the interpretation of International Financial Reporting Standards (IFRS). It maintains a confidential database of enforcement actions taken by member agencies in this domain. IFRS, an accounting standard issued by the International Accounting Standards Board (IASB), aims to provide a universal accounting language, enhancing transparency in financial information presentation.

Objectives:

• Foster cooperation in developing, implementing, and advocating internationally recognized and uniform standards of regulation, oversight, and enforcement to safeguard investors, sustain equitable, effective, and transparent markets, and address systemic risks.
• Strengthen investor protection and bolster investor confidence in the credibility of securities markets by enhancing information exchange and enforcement cooperation against misconduct, along with market and intermediary supervision.
• Facilitate the exchange of information at global and regional levels to aid market development, reinforce market infrastructure, and implement appropriate regulations.

Membership:

• IOSCO membership offers a platform for global and regional information exchange on mutual interests among its members. SEBI, the Securities and Exchange Board of India, holds an ordinary membership status within IOSCO.