Dec. 28, 2018

Article
28 Dec 2018

E-COMMERCE RULES

Union Ministry of Commerce announced new e-commerce rules to provide clarity on FDI policy on e-commerce sector.

 

Key Highlights of the rules:

The following decisions will take effect from 01 February, 2019 –

  • 100% FDI under automatic route is permitted in marketplace model of e-commerce. FDI is not permitted in inventory-based model of e-commerce.

  • E-commerce companies running marketplace platforms — such as Amazon and Flipkart — cannot sell products through companies, and of companies, in which they hold equity stake.

  • Inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25% of purchases of such vendor are from the marketplace entity or its group companies.

  • An e-commerce marketplace will not force any seller to sell any product exclusively on its platform.

  • To curb the practice of deep discounts, the government said they cannot directly or indirectly influence the price of goods and services.

  • E-commerce marketplace entity will be required to furnish a certificate along with a report of statutory auditor to RBI, confirming compliance of the guidelines, by September 30 every year for the preceding financial year.

  • All vendors on the e-commerce platform should be provided services in a “fair and non-discriminatory manner”. Services include fulfilment, logistics, warehousing, advertisement, payments, and financing among others.

Definitions acc. to Circular:

  • E-commerce- E-commerce means buying and selling of goods and services including digital products over digital & electronic network.

  • E-commerce entity- E-commerce entity means a company incorporated under the Companies Act 1956 or the Companies Act 2013.

  • Inventory based model of e-commerce- Inventory based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.

  • Marketplace based model of e-commerce- Marketplace based model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between buyer and seller.

Impact on e-commerce majors:

  • Under the rules, the suppliers will not be permitted to sell their products on the platform run by such marketplace entity. This will impact backend operations, as Group entities would have to be removed from the e-commerce value chain.

  • Also, e-commerce players like Amazon and Flipkart, who have their private labels, will not be able to sell them on their platforms if they hold equity in the company manufacturing them.

  • Industry experts say the changes will have a significant impact on the business model of e-commerce majors such as Amazon and Flipkart, as most of them source goods from sellers who are related party entities.

  • However, the language of the clarification seems to grant leeway, to a certain extent, to entities which are step-down subsidiaries of the entity in which the e-commerce entity or its group companies hold equity.

Impact on consumers and small retailers:

  • Consumers may no longer enjoy the deep discounts offered by retailers that have a close association with marketplace entities.

  • The absence of large retailers will, however, bring relief to small retailers selling on these platforms.

  • Traders running traditional brick-and-mortar stores, who now find it difficult to compete with the large e-commerce retailers with deep pockets, could gain.

Way ahead:

  • Industry experts while welcoming the decision to tighten FDI norms called for forming a regulatory authority to check flouting of e-commerce rules.

  • they have also asked the government to come with an e-commerce policy soon

 

Economics

Dec. 26, 2018

Article
26 Dec 2018

BOGIBEEL BRIDGE

Prime Minister Narendra Modi inaugurated Bogibeel bridge over Brahmaputra at Bogibeel in Assam. He also flagged off the first passenger train Tinsukia-Naharlagun Intercity Express over the bridge.

Boghibeel Bridge:

  • It is built over Brahmaputra River at Bogibeel between Dibrugarh and Dhemaji districts of Assam

  • At 4.94 km, the Bogibeel Bridge is the country’s longest road-cum-rail bridge, and its fourth longest of any kind above water.

    • It was approved by the Cabinet Committee on Economic Affairs in 1997.

    • The foundation stone was laid that year by then Prime Minister H D Deve Gowda, and construction was inaugurated in 2002 by then PM Atal Bihari Vajpayee.

    • Work on the substructure began in 2008.
      Background: The proposal to make the bridge dates back to the Assam Accord of 1985.





    • The Bogibeel Bridge upstages the 4.62-km Vembanad rail Bridge between Edappally and Vallarpadam in Kochi, Kerala, as well as the 4.55-km Digha-Sonpur rail-cum-road Bridge across Ganga in Bihar.

    • In a comparison of all bridges across water, the Bogibeel comes in at fourth, after the neighbouring Dhola-Sadiya road bridge (9.15 km), the Patna-Hajipur road bridge (5.75 km), and the Bandra-Worli Sea Link (5.6 km).

    • In October, the Centre announced a plan for construction of a 19-km bridge over the Brahmaputra from Dhubri in Assam to Phulbari in Meghalaya. Once that happens, three of India’s five longest bridges would be running across the country’s widest river.
      Comparison to other bridges:              





Tinsukia-Naharlagun Intercity Express:

  • On the occasion, PM Modi also flagged off the first passenger train Tinsukia-Naharlagun Intercity Express over the bridge.

  • It will run five days a week and use the bridge to cut down the train-travel time between Tinsukia in Assam to Naharlagun town of Arunachal Pradesh by more than 10 hours.

Significance:

  • The bridge is of immense economic and strategic significance for the nation. The bridge will be the lifeline of North East region and will facilitate connectivity between North and South Banks of river Brahmaputra in the Eastern region of Assam and Arunachal Pradesh.

  • Distance reduction: Within the Northeast, the train journey between Assam and Arunachal Pradesh now reduces from 500 km to 100 km. For the rest of India too, Dibrugarh becomes accessible without travelling via Guwahati.

  • Economic: It also benefits tourists and those involved in trading goods.

  • Health of the residents: It also benefits those seeking medical treatment. Dibrugarh, considered a gateway to parts of Arunachal Pradesh, is home to Assam Medical College. For patients on the north bank, the only crossing into Dibrugarh so far was by ferry.

  • Strategic significance: This boosts the defence forces by facilitating quicker movement of troops and equipment to areas near the India-China border.




 

Economics

Dec. 20, 2018

Article
20 Dec 2018

RAT-HOLE MINING

The Supreme Court questioned the Centre and the State of Meghalaya that how come lives were lost in rat-hole mines.  This comes after 15 coal miners have been trapped in a flooded coal mine in Meghalaya.

 Meghalaya mining accident:

  • The Meghalaya mining accident happened on 13 December 2018, when miners were trapped in a mine in Lumthari village. Lumthari village is located in Saipung Tehsil of Jaintia Hills district in Meghalaya, India.

  • The tunnel of the mines was flooded with water from the nearby Lytein river, thus cutting off the access. The miners are trapped inside the coal mine at a depth of around 370 feet.

  • While five miners managed to escape, rescue efforts for the remaining 15 are going on.

  • Earlier in 2014, The National Green Tribunal (NGT) banned coal mining in Meghalaya, specifically banning mining through the 'rat-hole' technique.

Rat-Hole Mining:

  • Meaning: Rat-hole mining involves digging of very small tunnels, usually only 3-4 feet high, which workers (often children) enter and extract coal.

  • Types: Rat-hole mining is broadly of two types –
    • In side-cutting procedure, narrow tunnels are dug on the hill slopes and workers go inside until they find the coal seam. The coal seam in hills of Meghalaya is very thin, less than 2 m in most cases.

    • In box-cutting procedure, a rectangular opening is made, varying from 10 to 100 sq. m, and through that is dug a vertical pit, 100 to 400 feet deep. Once the coal seam is found, rat-hole-sized tunnels are dug horizontally through which workers can extract the coal.



Debate on Rat-Hole Mining:

  • Criticism:
    • The National Green Tribunal (NGT) banned it in 2014 on grounds of it being unscientific and unsafe for workers.

    • Ecology: Petitioners from Assam have complained to NGT that rat-hole mining in Meghalaya had caused the water in the Kopili river (it flows through Meghalaya and Assam) to turn acidic.

    • Risk to lives: The NGT also observed that there are number of cases where by virtue of rat-hole mining, during the rainy season, water flooded into the mining areas resulting in death of many individuals including employees/workers.



  • Why is it followed?
    • Although banned, it remains the prevalent procedure for coal mining in Meghalaya.

    • Meghalaya has promulgated a mining policy of 2012, which does not deal with rat-hole mining, but on the contrary, deprecates it. It states: “Small and traditional system of mining by local people in their own land shall not be unnecessarily disturbed.”

    • According to experts, no other method would be economically viable in Meghalaya, where the coal seam is extremely thin. Removal of rocks from the hilly terrain and putting up pillars inside the mine to prevent collapse would be costlier.

    • In Jharkhand, for example, the coal layer is extremely thick. So, open-cast mining can be done.



Mining Deaths: Data

  • According to data provided by the Labour and Employment Ministry in the winter session of Lok Sabha, 377 workers involved in mining of coal, minerals and oil were killed in accidents between 2015 and 2017.

  • Of the 377 deaths, 129 occurred in 2017 alone. As many as 145 died in 2016, while the figure was 103 in 2015.

  • Coal mine deaths:
    • Coal mines have accounted for the highest number of casualties due to accidents in mines. Of the 377, more than half, 210, were killed in coal mines.

    • Jharkhand, which recorded 69 deaths in the three years, has accounted for the highest death of coal mine workers in accidents inside mines.

    • Goda in Jharkhand witnessed one of the biggest open cast mine accidents in 2016 when 23 workers died in December that year.



  • Metal mines death:
    • During the period, 152 persons died in accidents in metal mines across the country.

    • Rajasthan, one of highest mineral producing States in the country, accounted for 48 deaths while Andhra Pradesh recorded 29 deaths.



  • Oil mines death:
    • During this period, 15 deaths were reported in oil mines, most of them occurring in Assam and Gujarat.



 

Environment & Ecology

Dec. 17, 2018

Article
17 Dec 2018

LIVING PLANET REPORT 2018

According to the Living Planet Report 2018 released by WWF, Earth is witnessing Great Acceleration, a unique event in Earth’s history characterized by exploding human population and economic growth.

 What is the Living Planet Report?

  • The Living Planet Report is WWF’s flagship publication released every two years.

  • It is a comprehensive study of trends in global biodiversity and the health of the planet.

  • The Living Planet Report 2018 is the 12th edition of the report.

What are the Key findings of the Living Planet Report 2018?

  1. The Great Acceleration:
    1. Since 1950s, we are witnessing Great Acceleration, a unique event in Earth’s history characterized by exploding human population and economic growth. This is leading to increased demand for energy, land and water and interference with Biodiversity.

    2. Due to this, scientists believe that, we are entering Anthropocene, a new geological epoch.



  2. Threats to biodiversity:
    1. The key drivers of biodiversity decline remain overexploitation and agriculture, which are in-turn driven by spiralling human consumption.

    2. Over the past 50 years our Ecological Footprint – one measure of our consumption of natural resources – has increased by about 190%.



  3. Threats and Pressures on Land:
    1. According to the latest Land Degradation and Restoration Assessment (LDRA) released by IPBES in March 2018, only a quarter of land on Earth is substantively free of the impacts of human activities.

    2. Wetlands are the most impacted category, having lost 87% of their extent in modern era.



  4. Soil biodiversity:
    1. The recently published Global Soil Biodiversity Atlas mapped for the first-time potential threats to soil biodiversity across the globe.

    2. The areas with the lowest level of risk are mainly concentrated in the northern part of the northern hemisphere. India, China, several countries in Africa and Europe, and most of North America are faces the highest level of risk to soil biodiversity.



  5. Pollinators:
    1. The majority of flowering plants are pollinated by insects and other animals. Our food production depends heavily upon these pollinators.

    2. But, changing land use due to agricultural intensification and urban expansion is leading to huge pollinator loss.



  6. The Living Planet Index (LPI):
    1. This year’s LPI shows an overall decline of 60% in the population sizes of vertebrates between 1970 and 2014. South and Central America suffered the most dramatic decline (an 89% loss compared to 1970).

    2. In the 20th century, freshwater fish have had the highest extinction rate worldwide among vertebrates.

    3. Almost 20% of the Amazon rainforest has disappeared in just 50 years.



  7. In the last 50 years, global average temperature has risen at 170 times the background rate.

What are the three new indicators included in the report?

  • As measuring biodiversity is complex, so this report also explores three other indicators to complement the Living Planet Index (LPI). These indicators are:
    • Species Habitat Index: tracks changes in species distribution;

    • IUCN Red List Index: tracks extinction risk; and

    • Biodiversity Intactness Index: tracks changes in community composition.



  • All these show the same picture—showing severe declines or changes.

Recommendation:

The report suggests three necessary steps to prevent Biodiversity loss:

  1. Clearly specify the goal for biodiversity recovery,

  2. Develop a set of measurable and relevant indicators of progress, and

  3. Agree a suite of actions that can collectively achieve the goal in the required timeframe.

 

Environment & Ecology

Dec. 14, 2018

Article
14 Dec 2018

STRATEGIC PETROLEUM RESERVES (SPR)

 India’s decision to expand the size of Strategic Petroleum Reserve (SPR) to 87 days’ worth of the country’s net crude oil imports by 2020 is being debated by critiques.

The Government of India is setting Strategic petroleum reserves, which are essentially huge stockpiles of crude oil that would serve as a cushion during any external supply disruptions. What are Strategic Petroleum Reserves?



  • These strategic storages would be in addition to the existing storages of crude oil and petroleum products with the oil companies.

  • Working:
    • In India, these are being constructed near the coastal regions in underground rock caverns (as they are considered the safest means of storing hydrocarbons).

    • Crude oil from these caverns can be supplied to the Refineries either through pipelines or through a combination of pipelines and ships.



Global Scenario:

  • The concept of SPRs were introduced by the International Energy Agency (IEA) in the aftermath of the 1973 oil shock when Arab countries drastically cut production of oil.

  • Subsequently, many major global oil consumers such as the US, China and Japan have built massive strategic reserves of oil over the years.

Indian scenario:

  • ISPRL has constructed three strategic petroleum reserves at Visakhapatnam on the East Coast, and at Mangaluru and Padur (near Udupi) on the West Coast. These facilities, with total capacity of 5.33 million tonnes, can meet 10 days of India’s crude oil requirements.

  • In July 2018, the government approved the construction of two more reserves at Chandikhol in Odisha and Padur in Karnataka, having an aggregate capacity of 6.5 million tonnes. The new facilities can provide additional supply for about 12 days.

  • This year only, the Government of India also announced that it would increase the size of the SPR to 87 days’ worth of the country’s net crude oil imports by 2020.

Criticism:

  1. Globally, there are no perceived shortages envisaged in oil supplies (as there is plenty of oil in the global market), at least in the foreseeable future.

  2. Also, any supply disruption due to any conflict, would not last longer.

  3. Constructing SPRs involves huge capital investment, estimated at Rs. 4098.35 crore for the three original SPR sites alone.

  4. Infact, S. has been debating about reducing its strategic stockpile to half, driven by the shale revolution and the country’s dramatic resurgence as a net oil exporter.

Reasons for enlarging the Indian SPR?

  1. Supply crisis: Notwithstanding the current adequate supply condition, there is little certainty in oil markets. There is a perception that a period of plenty could be followed by a supply crisis. Also, the longevity of shale production is also not certain over the long term.

  2. Price volatility: The issue is not just about availability of oil, but about ‘affordable oil’. g. the world recently witnessed oil price spike due to geo-political standoff (e.g. Iranian sanctions). An expanded SPR would provide some relief from price hikes.

  3. Production manipulation: Price volatility has become a regular feature due to production manipulation by oil producers to protect their market share. E.g. in December 2016 OPEC and non-OPEC producers agreed to curtail production so as to shore up prices.

  4. India’s Oil Dependence: Years of stagnating domestic production and the rising demand for crude (82% of which is imported) is continuously increasing India’s crude oil import bill.

  5. Energy diplomacy: An enlarged SPR can be a key component of India’s energy diplomacy.
    • Countries which cannot afford to maintain SPRs could purchase crude from India in the event of a disruption, which, in turn, could strengthen bilateral relations.

    • India can also provide joint stockpiling opportunities to even producers.g. under an agreement with the UAE’s ADNOC, Two-thirds of the volume at SPR, Mangalore would be available for India, and ADNOC could store the remaining volumes.

    • With India now an associate member of the IEA, it could coordinate with the Agency in times of supply shortages as well as manage demand.



  6. Global Scenario: The global practice is to maintain strategic reserves of at least 90 days of oil imports. Thus, India is on the right path.

In short, Strategic petroleum reserves add a necessary layer to India’s energy security.

Economics
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