Weekly Current Affairs (8th to 14th January 2024) Part - 2 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Concerns over Insolvency and Bankruptcy Code, 2016

Context: In recent developments, concerns have been raised regarding the effectiveness of the Insolvency and Bankruptcy Code (IBC), which was enacted in 2016 with the aim of achieving various objectives. These goals include maximizing the value of debtor's assets, fostering entrepreneurship, ensuring prompt resolution of cases, and striking a balance among the interests of stakeholders.

What are the Principal Concerns with the IBC?

Repayment Percentage:

• The approval process for resolution plans typically involves a purchaser making only about 15% payment, and as per the 2023 financial stability report (FSR) from the Reserve Bank of India (RBI), banks may not collect further interest for several years. This has raised doubts about the efficacy of the repayment process.

Settlement and Recovery:

• Recent settlement cases, like the Reliance Communications Infrastructure Ltd. (RCIL) case, have prompted concerns due to the low settlement amounts and prolonged resolution periods. The RCIL settlement amounted to a mere 0.92% of the debt and took four years, well beyond the stipulated maximum of 330 days. Delays in identifying and acknowledging defaults contribute to reduced recovery rates.

Haircuts and Recovery Rates:

• The concept of "haircuts," involving the write-off of loans and accrued interest, has become prominent. Promoters benefit by taking advantage, leaving lenders with substantial haircuts, leading to low recovery rates for financial creditors, sometimes as low as 5% of the outstanding loan.

Realizable Value:

• The 2023 FSR by the RBI highlights low realizable values for creditors, with banks recovering an average of just 10-15% in NCLT-settled cases of large corporates. The report raises concerns about the recovery process, citing minimal amounts realized from liquidations.

Regulatory Concerns:

• Reports from regulatory bodies, including the FSR and the Parliamentary Standing Committee on Finance, express concerns about the CIRP. The admitted claims are reportedly less than the dues, with financial creditors recovering only a fraction of the liquidation value and fair value. There are recommendations for a professional code of conduct for the Committee of Creditors (COCs) and fixing a ceiling on haircuts. Limited judicial bench strength contributes to delays in the resolution process.

What are the Key Highlights of the Insolvency and Bankruptcy Code, 2016?

About:

• The Insolvency and Bankruptcy Code (IBC), 2016 provides a framework for resolving the bankruptcy and insolvency of companies, individuals, and partnerships in a time bound manner.
• Insolvency is a state where the liabilities of an individual or an organization exceeds its asset and that entity is unable to raise enough cash to meet its obligations or debts as they become due for payment.
• Bankruptcy is when a person or company is legally declared incapable of paying their due and payable bills.
• The Insolvency and Bankruptcy Code (Amendment) Act, 2021 amends the Insolvency and Bankruptcy Code, 2016.
• This amendment aims to provide an efficient alternative insolvency resolution framework for corporate persons classified as micro, small and medium enterprises (MSMEs) under the code.
• It aims for ensuring quicker, cost-effective and value maximizing outcomes for all the stakeholders.

Objectives:

• Maximizing the value of debtor’s assets.
• Promoting entrepreneurship.
• Ensuring timely and effective resolution of cases.
• Balancing the interests of all stakeholders.
• Facilitating a competitive market and economy.
• Providing a framework for cross-border insolvency cases.

IBC Proceedings:

Insolvency and Bankruptcy Board of India (IBBI):

• IBBI serves as the regulatory authority overseeing insolvency proceedings in India.
• The IBBI's Chairperson and three whole-time members are appointed by the government and are experts in the fields of finance, law, and insolvency.
• It also has ex-officio members.

Adjudication of Proceedings:

• National Companies Law Tribunal (NCLT) adjudicates proceedings for companies.
• Debt Recovery Tribunal (DRT) handles proceedings for individuals.
• Courts play a pivotal role in approving the initiation of the resolution process, appointing professionals, and endorsing the final decisions of creditors.

Procedure for Insolvency Resolution under the Code:

• Initiated by either the debtor or creditor upon default.
• Insolvency professionals manage the process, providing financial information to creditors and overseeing debtor asset management.
• A 180-day period prohibits legal action against the debtor during the resolution process.

Committee of Creditors (CoC):

• Formed by insolvency professionals, the CoC comprises financial creditors.
• The CoC determines the fate of outstanding debts, deciding on debt revival, repayment schedule changes, or asset liquidation.
• Failure to decide within 180 days leads to the debtor's assets going into liquidation.

Liquidation Process:

• Proceeds from the sale of the debtor’s assets are distributed in the following order of order:
• First insolvency resolution costs, including the remuneration to the insolvency professional, second secured creditors, whose loans are backed by collateral and third dues to workers, other employees, forth unsecured creditors.

Way Forward

Enhance Repayment Percentage:

• Implement measures to ensure a higher repayment percentage in resolution plans.
• Introduce stricter evaluation criteria for plan approval.
• Emphasize the necessity for a substantial upfront payment by purchasers.
• Incentivize timely repayments to improve overall repayment rates.

Regulatory Measures by RBI:

• Acknowledge the significance of the RBI's decision to impose a maximum ceiling of credit to a single corporate house at Rs 10,000 crore.
• Recognize this as a crucial step in alleviating the burden on banks during write-offs.

Comprehensive Review of IBC and NCLTs:

• Given that the original objectives of the IBC have not been met, urgently conduct a thorough review of both the Insolvency and Bankruptcy Code (IBC) and the National Company Law Tribunals (NCLTs).

Reevaluate "Haircuts" Concept:

• Reevaluate the concept of "haircuts" and institute measures to prevent abuse by promoters.
• Introduce safeguards to ensure a fair distribution of losses between promoters and financial creditors.

Improve Transparency:

• Enhance transparency in the resolution process by providing regular updates on case statuses.
• Offer explanations for any delays encountered during the resolution process.

Varied Progress in Clean Air Target

Context: In recent developments, a study conducted by Climate Trends and Respirer Living Sciences has brought to light that the majority of cities are falling short of the clean air targets outlined in India's National Clean Air Programme (NCAP).

Note: It is noteworthy that both Climate Trends and Respirer Living Sciences actively participate in the NCAP Tracker, serving as an online hub for updates on India's clean air policy. 

• Climate Trends operates as a research-based consulting and capacity building initiative with a focus on environment, climate change, and sustainable development. 
• On the other hand, Respirer Living Sciences functions as a climate-tech startup partner to the Government of India, contributing to the Centre of Excellence ATMAN on Clean Air Technologies established at IIT Kanpur.

What are the Key Findings of the Study?

Disparities in PM2.5 Reduction:

• Out of 49 cities with consistent PM2.5 data over five years, only 27 witnessed a decline in PM2.5 levels. Merely four cities achieved or surpassed the targeted decline set by the National Clean Air Campaign (NCAP) Goals. The NCAP aims to reduce average particulate matter (PM) concentrations by 40% by 2026 in 131 cities, initially targeting a 20-40% reduction by 2024.

Mixed Progress Among Cities:

• While cities like Varanasi, Agra, and Jodhpur demonstrated significant reductions in PM2.5 levels, others, including Delhi, reported marginal declines (only 5.9%) or even increased pollution loads. Varanasi exhibited the most substantial reduction with a 72% average decrease in PM2.5 levels and a 69% reduction in PM10 levels from 2019 to 2023.

Regional Vulnerabilities:

• The Indo-Gangetic Plain (IGP) continues to be highly vulnerable to elevated particulate matter concentrations, hosting approximately 18 of the top 20 most polluted cities for PM2.5. Outside the IGP, only Guwahati and Rourkela were among the 20 most polluted cities for PM 2.5.

Monitoring Challenges:

• The availability and distribution of continuous ambient air quality monitors significantly impact annual pollutant concentrations. However, many Indian cities lack an adequate number of such monitoring stations. While cities like Mumbai and Delhi have several stations, most Indian cities only have a handful, with only four out of 92 cities having more than 10 such stations.

Factors Influencing Pollution:

• Variations in pollution levels can be attributed to geographical locations, diverse emission sources, meteorological influences, and the intricate interplay between emissions and meteorology. Further investigations are needed to understand these complex factors impacting pollution levels.

What are the Key Findings of the Study?

Discrepancies in PM2.5 Reduction:

• Among 49 cities consistently monitored for PM2.5 levels over five years, only 27 experienced a reduction, with merely four surpassing or meeting the specified decline goals outlined by the National Clean Air Campaign (NCAP). The NCAP aims to achieve a 40% reduction in average particulate matter (PM) concentrations by 2026 in 131 cities, initially targeting a 20-40% reduction by 2024.

Diverse Progress Across Cities:

• While cities like Varanasi, Agra, and Jodhpur displayed noteworthy declines in PM2.5 levels, others, including Delhi, reported marginal reductions (only 5.9%) or even witnessed an increase in pollution levels. Varanasi stood out with a remarkable 72% average decrease in PM2.5 levels and a 69% reduction in PM10 levels from 2019 to 2023.

Regional Susceptibilities:

• The Indo-Gangetic Plain (IGP) remains highly susceptible to heightened particulate matter concentrations, hosting approximately 18 of the top 20 most polluted cities for PM2.5. Outside the IGP, only Guwahati and Rourkela featured among the 20 most polluted cities for PM2.5.

Challenges in Monitoring:

• The availability and distribution of continuous ambient air quality monitors significantly impact the measurement of annual pollutant concentrations. However, many Indian cities lack a sufficient number of such monitoring stations. While cities like Mumbai and Delhi boast several monitoring stations, most Indian cities have only a limited number, with just four out of 92 cities having more than 10 such stations.

Influential Factors on Pollution:

• Differences in pollution levels are influenced by geographical locations, various emission sources, meteorological conditions, and the intricate interplay between emissions and meteorology. Further investigations are imperative to comprehend the intricate factors that impact pollution levels.

Rock Glaciers

Context: Recent developments have brought attention to the existence of more than 100 active permafrost structures, termed rock glaciers, in the Jhelum basin of the Kashmir Himalayas. The presence of these structures holds notable implications for the region's hydrology and raises potential concerns as the climate undergoes warming trends.

What is a Rock Glacier?

Overview:

• Rock glaciers represent a distinct landform composed of a combination of rock fragments and ice.
• Typically found in mountainous terrains, these formations result from the interplay of permafrost, rock debris, and ice.
• Permafrost, characterized by a perennially frozen layer of soil, gravel, and sand bound together by ice, plays a crucial role in the formation of rock glaciers.
• One common scenario involves the transformation of a pre-existing glacier, accumulating debris and rocks during its movement. As the glacier recedes or thaws, the ice-covered with debris can evolve into a rock glacier.
• These formations thrive in elevated regions with steep slopes and often require a geomorphological perspective for accurate identification.

Classification:

• Rock glaciers are categorized as either active or relict, based on their ice content and movement. Active rock glaciers exhibit more dynamism and potential hazards, while relict rock glaciers are relatively stable and inert.

Significance:

• As indicators of mountain permafrost, rock glaciers offer valuable insights into the permanently frozen ground underlying high-altitude areas.
• Additionally, these formations store substantial amounts of water within their frozen cores, presenting a potential resource amid challenges such as water scarcity and glacial retreat.

What are the Potential Impacts of the Active Rock Glaciers on the Region?

Glacial lake outburst floods (GLOFs):

• These are sudden and catastrophic floods that occur when a glacial lake bursts its natural or artificial dam, releasing large volumes of water and debris downstream.
• The active rock glaciers could increase the risk of GLOFs by destabilizing the slopes or the dams of glacial lakes.
• Rock glaciers near glacial lakes, such as Chirsar Lake and Bramsar Lake, increase the risk of GLOFs.

Landslides:

• These are the rapid movements of soil, rock, or snow down a slope, often triggered by earthquakes, rainfall, or human activities.
• The active rock glaciers could cause landslides by weakening the slope stability or by melting and releasing water that could lubricate the sliding mass.
• The melting permafrost makes these areas unstable, posing risks to nearby settlements and critical infrastructure.
• For example, the Nunavik area in Quebec was mostly built on permafrost ground many years ago. In the last decades, the ice in the underlying layers began to melt due to global warming, increasing the frequency of mudslides and other dangers.

Thermokarst:

• This is a type of terrain that is characterized by irregular surfaces of marshy hollows and small hummocks (ridges), formed by the thawing of ice-rich permafrost.
• The active rock glaciers could lead to the formation of thermokarst features, such as ponds or lakes, that could alter the hydrology, ecology, and carbon cycle of the region.
• The presence of water bodies near Kulgam town, Jammu and Kashmir suggests the existence of permafrost underground, resembling 'thermokarst lakes', which can pose further risks.
• The melting of ice underneath the earth’s surface is a high risk of collapse. The collapse leads to formation of a landscape whose features are sinkholes, hummocks, caverns, and tunnels.
• The Batagaika crater is an example of thermokarst, it is the biggest permafrost crater in the world, it belongs to the Sakha Republic, Russia.

Way Forward

• The path ahead involves recognizing the crucial role of permafrost research in comprehending and addressing the repercussions of climate change in the Himalayan region.
• Allocate resources to conduct further investigations into the hydrological potential of active rock glaciers, exploring strategies to harness the stored water for sustainable use in areas grappling with water scarcity.
• Develop and put into operation early warning systems in regions identified with active rock glaciers to promptly alert communities and authorities about potential disasters.
• Incorporate insights from permafrost studies into regional and national climate change adaptation plans, taking into account the specific challenges arising from the transition from glaciers to rock glaciers.
• There is an imperative need to enhance awareness among local communities, planners, and policymakers regarding the risks associated with permafrost degradation.

Project Tiger

Context: The tiger conservation effort has undergone developments, leading to the creation of Tiger Reserves (55) and the enforcement of vital wildlife protection laws.

• Nevertheless, conflicts within Tiger Reserves between the forest bureaucracy and forest dwellers have escalated, stemming from breaches of the Wildlife (Protection) Act, 1972, and the Forest Rights Act, 2006.
• The Ministry of Environment, Forest and Climate Change has declared the amalgamation of the two primary initiatives, Project Tiger (PT) and Project Elephant, now unified as Project Tiger and Elephant (PTE).

What are the Limitations in Tiger Conservation?

• The Wildlife Protection (Amendment) Act, 2006 did not prohibit the diversion of a "tiger's forest" for development projects and allowed wildlife to be killed as a last resort if they posed threats to human lives.
• Although the government aimed to notify the Forest Rights Act (FRA) Rules in 2009 and operationalize the Act, in November 2007, the National Tiger Conservation Authority (NTCA) issued an order requiring Chief Wildlife Wardens to submit proposals delineating Critical Tiger Habitats (CTHs) within 13 days, each with an area of 800-1,000 sq. km.
• Consequently, the government ended up notifying 26 Tiger Reserves in 12 states under Section 38 (V) of the Wildlife Protection Act (WLPA) without adhering to its provisions.
• In the case of Similipal Tiger Reserves in Odisha, the Critical Tiger Habitats (CTHs) lacked a Buffer Area until 2012, as directed by the Supreme Court, giving the National Tiger Conservation Authority (NTCA) a three-month ultimatum.
• The Tiger Task Force concluded that the strategy of relying on guns, guards, and fences was ineffective in protecting tigers. The escalating conflict between the forest/wildlife bureaucracy and those coexisting with tigers was identified as a potential disaster.

What are Initiatives Taken for Tiger Conservation?

Project Tiger:

About:

• Project Tiger is a wildlife conservation initiative in India that was launched in 1973.
• The primary objective of Project Tiger is to ensure the survival and maintenance of the tiger population in their natural habitats by creating dedicated Tiger Reserves.
• Starting with only nine reserves covering 9,115 sq. km, the project marked a paradigm shift in wildlife conservation efforts.

Method of Tiger Census:

• The unreliable pug-mark method of the first tiger census in 1972 gave way to more accurate techniques like the camera-trap method.

Growth Rate in Tiger Population:

• The first tiger census, in 1972, used the unreliable pug-mark method to count 1,827 tigers.
• As of 2022, the tiger population is estimated at 3,167-3,925, showcasing a growth rate of 6.1% per year.
• India is now home to three-quarters of the world’s tigers.

Tiger Reserve:

• In 1973, Project Tiger began with nine reserves covering 9,115 sq. km. By 2018, it had grown to 55 reserves in different states, totalling 78,135.956 sq. km or 2.38% of India's land area.

Wildlife (Protection) Act,1972:

• The Wild Life (Protection) Act, 1972 provides a legal framework for the protection of various species of wild animals and plants, management of their habitats, regulation, and control of trade in wild animals, plants, and products made from them.
• The Wildlife (Protection) Act (WLPA), 1972 laid the groundwork for tiger conservation. It established National Parks and Wildlife Sanctuaries, segregating rights in favour of State governments and introducing the concept of Critical Tiger Habitats (CTH).
• The amendment to WLPA in 2006 led to the creation of the National Tiger Conservation Authority (NTCA) and a comprehensive tiger conservation plan.
• This marked a departure from the earlier fortress conservation approach, acknowledging the inseparable link between tiger protection, forest conservation, and the well-being of local communities.

Tiger Task Force:

• In 2005, the formation of the Tiger Task Force, prompted by concerns about tiger conservation, emphasized the necessity for a reassessment. The task force pointed out flaws in the existing strategy that heavily depended on weapons, guards, and fences.

What does the Recognition of Forest Rights Act, 2006 entail?

• The enactment of the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 acknowledges the customary and traditional forest rights within communities. This grants Gram Sabhas the authority to democratically manage forest resources and biodiversity within their territorial limits.
• Critical Wildlife Habitat (CWH): The Forest Rights Act (FRA) introduced the concept of 'Critical Wildlife Habitat' (CWH), akin to the Critical Tiger Habitat (CTH) outlined in the Wildlife Protection Act (WLPA). Notably, once a CWH is designated, it cannot be diverted for non-forestry purposes, a stipulation advocated by Adivasi movements during negotiations.
• Critical Tiger Habitats (CTH) encompass 42,913.37 sq. km, constituting 26% of the area within National Parks and Wildlife Sanctuaries. Gram Sabhas are entrusted with the responsibility to protect, preserve, and supervise the forest, wildlife, and biodiversity within their customary boundaries.

Conclusion

The evolution from Project Tiger in 1973 to the establishment of the NTCA through the 2006 amendments underscores India's dedication to tiger conservation and sustainable coexistence. The incorporation of community empowerment, acknowledgment of forest rights, and a nuanced approach to wildlife protection epitomize a comprehensive paradigm in wildlife conservation.

Global Risks Report 2024: WEF

Context: The World Economic Forum (WEF) has recently unveiled the Global Risk Report 2024, shedding light on some of the most significant risks anticipated in the coming decade. 

• This forecast is set against the backdrop of swift technological advancements, economic unpredictability, a warming planet, and potential conflicts. 
• The insights presented in the report are derived from a survey encompassing input from approximately 1,500 experts, industry leaders, and policymakers.

What are the Key Highlights of the Global Risk Report 2024?

Deteriorating Global Outlook:

• The outlook for the world has taken a negative turn due to various global events in 2023, encompassing lethal conflicts, extreme weather conditions, and societal discontent.

AI-Powered Misinformation and Disinformation:

• Identified as the most severe risks in the coming two years, misinformation and disinformation underscore how rapid technological advancements are introducing new challenges or exacerbating existing ones. 
• The proliferation of Generative AI chatbots, like ChatGPT, raises concerns as it enables the creation of sophisticated synthetic content, posing a risk for manipulation on a broader scale, no longer limited to those with specialized skills. 
• This issue is particularly worrying as it coincides with elections in several countries, including major economies such as the United States, Britain, Indonesia, India, Mexico, and Pakistan, scheduled for 2024 and beyond.

Structural Forces Shaping Global Risks:

• Four overarching structural forces will shape global risks in the next decade: climate change, demographic bifurcation, technological acceleration, and geostrategic shifts. These forces represent long-term shifts in the global landscape, contributing to increased uncertainty and volatility.

Environmental Risks at the Forefront:

• Environmental risks, particularly those associated with extreme weather, dominate the risk landscape across all time frames. Apprehensions regarding climate change, biodiversity loss, and critical alterations to Earth systems are evident, carrying the potential for irreversible consequences.

Economic Strains and Inequality:

• For 2024, significant concerns revolve around the cost-of-living crisis and economic risks such as inflation and economic downturn. Economic uncertainties will disproportionately impact low- and middle-income countries, potentially leading to digital isolation and exacerbating societal and environmental challenges.

Security Risks and Technological Advances:

• A new entrant into the top risk rankings over the next two years is interstate armed conflict. Technological advances, particularly in artificial intelligence, introduce security risks by providing non-state actors with access to disruptive tools, potentially escalating conflicts and criminal activities.

Geopolitical Shifts and Governance Challenges:

• The report highlights a deepening divide between global powers, especially between the Global North and South, posing challenges to international governance. The increasing influence of states in the Global South, coupled with geopolitical tensions, may reshape security dynamics and impact global risks.

What are the Recommendations?

• Localized strategies leveraging investment and regulation can reduce the impact of those inevitable risks that we can prepare for, and both the public and private sector can play a key role to extend these benefits to all.
• Single breakthrough endeavors, grown through efforts to prioritize the future and focus on research and development, can similarly help make the world a safer place.
• The collective actions of individual citizens, companies and countries may seem insignificant on their own, but at critical mass they can move the needle on global risk reduction.
• Even in a world that is increasingly fragmented, cross-border collaboration at scale remains critical for risks that are decisive for human security and prosperity.

What is Global Risk?

• Global risk is defined as the possibility of the occurrence of an event or condition which, if it occurs, would negatively impact a significant proportion of global gross domestic product, population or natural resources.
• The Global Risks Report is an annual study published by the World Economic Forum ahead of the Forum’s Annual Meeting in Davos, Switzerland.