Daily Mains Newsletter for UPSC 20 Jun 2022

Daily Mains Newsletter For
UPSC | RaghukulCS

20 June 2022 - Monday

Index

Table of Contents

Nepal West Seti Power Project

Why in the news?

  • China withdrew from the West Seti Hydropower Project over four years ago, terminating a six-year commitment between 2012 and 2018.
  • Earlier, the Indian Prime Minister visited Lumbini to commemorate the 2566th Buddha Jayanti, and Nepal requested India to invest in the West Seti Hydropower Project.

What precisely is the West Seti Power Project?

  • It is a projected 750-megawatt hydropower project on the Seti river in far-western Nepal that has been on the drawing board for the last six decades.
  • Recently, the government renamed the project West Seti and Seti River (SR-6), a joint storage facility with a capacity of 1,200 megawatts.
  • During the monsoon season, this storage or reservoir will fill, and the water will be pulled to generate power throughout peak hours each day during the dry season.
  • Its success is likely to improve India’s reputation in Nepal and give it weight in future hydropower project evaluations, when competition is expected to be fierce. As a result, West Seti has the potential to be a defining model for Nepal-India power relations in the future.

How have India-Nepal Power relations been?

  • Nepal is abundant in electricity resources, with over 6,000 rivers and an estimated capacity of 83,000 MW.
  • The Mahakali Treaty was signed in 1996 to create 6,480 MW, but India has yet to provide the Detailed Project Report.
  • For years, little progress has been made on the Upper Karnali project, for which the multinational GMR signed a contract.
  • India’s performance in completing the 900-MW Arun Three project in eastern Nepal’s Sankhuwa Sabha, whose foundation was laid in 2018 and is scheduled for completion in 2023, has recently helped create trust in India.
  • During his 2014 visit to Nepal, Indian Prime Minister Narendra Modi stated that India must begin implementing its projects on time.
  • The Nepalese Constitution states that any treaty or agreement on natural resources with another country must be ratified by Parliament with a two-thirds majority. That also means that homework will be necessary before any hydro project is signed and given the go-ahead.
  • Nepal has a significant power deficit, generating only about 900 MW despite having an installed capacity of approximately 2,000 MW. Although it is now supplying 364 MW of power to India, it has imported from India in the past.

How have India-Nepal diplomatic ties fared?

  • Once a dispute between Nepal and India resulted in the 2015 economic blockade, dynamics shifted after the new PM Deuba took over Oli, who recently visited India and vowed to create fraternal ties with India.
  • Nepal is an important neighbour of India and holds special relevance in its foreign policy due to centuries of geographic, historical, cultural, and economic relations.
  • In terms of Hinduism and Buddhism, India and Nepal are comparable, with Buddha’s birthplace Lumbini located in modern-day Nepal.
  • Not only do the two countries have an open border and free movement of people, but they also have intimate relationships through marriages and familial ties, which are popularly known as Roti-Beti ka Rishta.
  • The India-Nepal Treaty of Peace and Friendship of 1950 serves as the foundation of India-Nepal special ties.
  • In terms of ecological and hydropower potential, rivers originating in Nepal feed the perennial river systems of India.
  • The border dispute began in November 2019 when Nepal produced a new political map claiming Kalapani, Limpiyadhura, and Lipulekh in Uttarakhand as part of Nepal’s jurisdiction. Susta (West Champaran district, Bihar) is also marked on the new map.

The Way Forward

  • Mutual distrust will continue to overshadow both sides’ long-term progress potential until India decides to value Nepal’s water and the current concentration on power is reassessed.
  • Once the projects are multipurpose — with flood control, navigation, fisheries, irrigation contributing to agricultural expansion, and so on — the cost of power will be substantially lower compared to current rates, and people on both sides will benefit in a variety of ways.
  • The electricity trade deal must be structured in such a way that India can gain Nepal’s trust. Despite the fact that additional renewable energy projects (solar) are being developed in India, hydropower is the only source capable of meeting peak demand.

Bonds of Surety

Why in the news?

  • Recently, the Ministry of Road Transport and Highways (MORTH) requested that the Insurance Regulatory and Development Authority (IRDAI) create a model product on Surety Bonds in cooperation with general insurers.
  • Several difficult difficulties that made Surety Bonds a non-starter with insurers were also reviewed, and it was suggested to IRDAI that it build a model product.
  • Changes to the Indian Contract Act as well as the Insolvency and Bankruptcy Code (IBC) are also being explored, so that Surety Bonds are on the same footing as bank guarantees when it comes to remedy accessible to them in the event of default.

What exactly is a surety bond?

  • In its most basic form, a surety bond is a written agreement that guarantees compliance, payment, or completion of an act.
  • Because it entails a three-party agreement, surety is a unique sort of insurance. A surety agreement has three parties:
  • The principal is the party who purchases the bond and agrees to perform an act as promised.
  • Surety – the insurance or surety company that guarantees that the obligation will be met. If the principal fails to complete the act as promised, the surety is contractually obligated to make up the difference.
  • Obligee – the person who needs and frequently obtains the benefit of a surety bond. The obligee for most surety bonds is a local, state, or federal government institution.
  • The insurance firm provides a surety bond on behalf of the contractor to the body awarding the project.
  • Aim: Surety bonds are primarily used in infrastructure construction to lower indirect costs for suppliers and work-contractors, expanding their options and serving as a substitute for bank guarantees.
  • Benefits: Surety bonds safeguard the beneficiary from acts or occurrences that jeopardise the principal’s underlying obligations.
  • They guarantee the fulfilment of a wide range of duties, from building and service contracts to licencing and commercial ventures.

What are the problems with Surety Bonds?

  • Surety bonds, a novel idea, are risky, and Indian insurance companies have yet to develop experience in risk assessment in such transactions.
  • There is also no clarity on pricing, recourse against defaulting contractors, or reinsurance possibilities.
  • These are crucial and may inhibit the development of surety-related skills and capacities, ultimately discouraging insurers from writing this type of business.

How will it help the Infra Project?

  • The attempt to establish guidelines for surety contracts will aid in meeting the infrastructure sector’s significant liquidity and financial needs.
  • It will level the playing field for major, mid-sized, and small contractors.
  • The Surety insurance industry will contribute to the development of an alternative to bank guarantees for construction projects.
  • This will allow for more efficient use of working capital and a reduction in the amount of collateral required from construction businesses.
  • Insurers and financial institutions must collaborate to share risk information.
  • As a result, this will aid in the release of liquidity in the infrastructure domain while minimising risk.

What are the IRDAI Surety Bond Guidelines?

  • In April 2022, the IRDAI (Surety Insurance Contracts) Guidelines, 2022 went into effect.
  • The regulator has stated that the premium charged for all surety insurance policies underwritten in a fiscal year, including all payments due for those policies in following years, shall not exceed 10% of the total gross written premium for that year, subject to a limit of Rs 500 crore.
  • According to the Insurance Regulatory and Development Authority of India (IRDAI), insurers can offer contract bonds to assure public entities, developers, subcontractors, and suppliers that the contractor would fulfil its contractual obligations when conducting the project.
  • Bid bonds, performance bonds, advance payment bonds, and retention money are all examples of contract bonds.
  • Bid Bonds: These bonds protect an obligee financially if a bidder is awarded a contract based on the bid documents but fails to sign the contract and furnish the requisite performance and payment bonds.
  • It guarantees that the obligee will be protected if the principal or contractor fails to perform the bonded contract. If the obligee deems the principal or contractor in default and terminates the contract, the Surety may be called upon to fulfil the Surety’s duties under the bond.
  • Advance Payment Bond: This is a pledge by the Surety provider to pay the outstanding balance of the advance payment if the contractor fails to finish the contract as specified or fails to adhere to the contract’s scope.
  • Retention Money: This is a portion of the contract payment that is retained and payable at the end once the contract is successfully completed.
  • The guarantee limit should not exceed 30% of the contract value.
  • Contracts for Surety Insurance should be given exclusively for specific projects and not for many projects.

Scheme for Sovereign Gold Bonds

Why in the news?

  • In cooperation with the Reserve Bank of India, the Government of India would issue Sovereign Gold Bonds in tranches for 2022-23.
  • Investment in SGBs increased substantially during Covid-impacted years as investors sought safer options amid equity market volatility, with 2020-21 and 2021-22 accounting for approximately 75 percent of overall sales of the bonds since the scheme’s commencement in November 2015.

So, what exactly is the Sovereign Gold Bond Scheme?

  • The SGB scheme was introduced in November 2015 with the goal of reducing demand for physical gold and redirecting a portion of domestic savings formerly used to purchase gold into financial savings.
  • Issuance:
  • Under the Government Securities (GS) Act of 2006, the gold bonds are issued as Government of India stock.
  • The Reserve Bank of India (RBI) issues these on behalf of the Government of India.
  • Bonds are offered either directly or through agents through commercial banks, the Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognised stock exchanges such as the National Stock Exchange of India Limited and the Bombay Stock Exchange.
  • Eligibility: 
  • The bonds are only available for purchase by residents, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions.
  • Features:
  • Gold bond prices are tied to the price of 999 pure gold (24 carats) released by the India Bullion and Jewellers Association (IBJA) in Mumbai.
  • Gold bonds can be purchased in multiples of one unit up to particular investment requirements for different investors.
  • Retail (individual) investors and HUFs are limited to 4 kilos (4,000 units) every fiscal year. A maximum of 20 kg per fiscal year applies to trusts and similar organisations.
  • The smallest amount of gold that can be invested is one gramme.
  • Term: 
  • The gold bonds have an eight-year maturity duration, with the option to quit the investment after the first five years.
  • Interest Rate: 
  • The scheme has a set interest rate of 2.5 percent per year, payable semi-annually.
  • The interest on gold bonds is taxable under the provisions of the Income Tax Act of 1961.
  • Benefit: 
  • Bonds can be used as loan collateral.
  • The capital gains tax on SGB redemption to a person has been waived.
  • The act of an issuer repurchasing a bond at or before maturity is known as redemption.
  • The profit made on the selling of an asset such as stocks, bonds, or real estate is referred to as capital gain. It occurs when an asset’s selling price exceeds its purchasing price.

Disadvantages of Investing in SGB:

  • Unlike real gold, which can be sold quickly, SGB is a long-term investment.
  • Sovereign gold bonds are traded on exchanges, but trading volumes are low, making it difficult to exit before maturity.

Mission Amrit Sarovar

Why in the news?

The Union government has directed the Ministry of Railways and the National Highways Authority of India (NHAI) to use soil/silt excavated from Amrit Sarovar Mission ponds/tanks in all districts across the country for infrastructural projects.

What exactly is the Amrit Sarovar Mission?

The Amrit Sarovar Mission was begun on April 24, 2022, with the goal of conserving water for the future.

Aim:

  • As part of the Azadi ka Amrit Mahotsav celebrations, the Mission aims to develop and revitalise 75 water bodies in each district in the country.
  • It would result in the production of 50,000 water bodies the size of an acre or more.
  • The Mission promotes the mobilisation of citizen and non-governmental resources to augment these efforts.

Ministries Involved: 

This mission was begun with a whole-government approach, involving six Ministries/Departments:

  • Rural Development Department
  • Land Resources Department Drinking Water and Sanitation Department
  • Water Resources Department
  • Panchayati Raj Ministry
  • Forest, Environment, and Climate Change Ministry
  • Bhaskaracharya National Institute for Space Application and Geo-informatics (BISAG-N) has been appointed as the Mission’s technical partner.

Refocusing on Numerous Schemes: The Mission operates through states and districts, refocusing on various schemes like as Mahatma Gandhi NREGS, XV Finance Commission Grants, PMKSY sub-schemes such as Watershed Development Component, Har Khet Ko Pani, as well as state-specific schemes.

Target:

  • Mission Amrit Sarovar is scheduled to be completed on August 15, 2023.
  • Around 50,000 Amrit Sarovars could be built in the country.
  • Each of these Amrit Sarovars will cover around one acre and have a water capacity of 10,000 cubic metres.
  • The primary point is people’s participation in the Mission.
  • Local liberation fighters, their families, Martyrs’ families, Padma Awardees, and inhabitants of the area where an Amrit Sarovar is to be built would be involved at all stages.
  • Every 15th of August, a National Flag hoisting ceremony will be held at each Amrit Sarovar location.
  • Achievements: States/Districts have finalised 12,241 sites for the construction of Amrit Sarovars, with 4,856 Amrit Sarovars already under development.

What exactly is the Azadi Ka Amrit Mahotsav?

  • Azadi Ka Amrit Mahotsav is a government of India programme to celebrate and commemorate 75 years of independence, as well as the beautiful history of its people, culture, and achievements.
  • This Mahotsav is dedicated to the people of India, who have not only been instrumental in bringing India this far in its evolutionary journey, but also possess the power and potential to realise Prime Minister Narendra Modi’s vision of activating India 2.0, fuelled by the spirit of Aatmanirbhar Bharat.
  • The formal journey of Azadi ka Amrit Mahotsav began on March 12, 2021, beginning a 75-week countdown to our 75th anniversary of independence and will end a year later on August 15, 2023.

District Aspirational Program

Why in the news?

The Prime Minister recently stated his ambition to expand the Aspirational District Programme to the block and city levels.

What exactly is the Aspirational Districts Programme?

  • It was founded in 2018 with the goal of transforming districts that have made very little development in crucial social sectors.
  • Aspirational districts are those in India that suffer from low socioeconomic indicators.
  • The Program’s Broad Contours: 
  • Convergence (of Central & State Schemes)
  • Collaboration (of Central, State-level ‘Prabhari’ Officers and District Collectors), District competition via monthly delta ranking.
  • The Aspirational Districts’ delta ranking blends creative data use with pragmatic administration, placing the district at the forefront of inclusive development.
  • It focuses on each district’s strengths, selecting low-hanging fruit for quick improvement, and monitoring success by ranking districts on a monthly basis.
  • Districts are urged and encouraged to first catch up with the best district in their state, and then aspire to be among the best in the country by competing with and learning from others in the spirit of competitive and cooperative federalism.
  • The government is dedicated to improving citizens’ living standards and fostering inclusive progress for all — “Sabka Saath Sabka Vikas aur Sabka Vishwas.”
  • The ADP is primarily intended at localising Sustainable Development Goals, which will lead to national progress.
  • The ranking is based on incremental improvement made across 49 Key Performance Indicators (KPIs) across 5 main socioeconomic topics – Health & Nutrition (30 percent )
  • Schooling (30 percent )
  • Water Resources and Agriculture (20 percent )
  • Inclusion in Finance and Skill Development (10 percent )
  • The infrastructure (10 percent )
  • Several Programs:
  • NITI Aayog has undertaken several major programmes in this direction, including Saksham Bitiyan Abhiyan, Anemia Mukt Bharat, and Surakshit Hum Surakshit Tum.

ADP-Related Difficulties

  • Lack Budgetary Resources: The issue of insufficient budgetary resources affects ADP.
  • Coordination Issues: Because ADP is administered by various ministries, there is a lack of coordination.
  • Data Administrative data of high quality: High-quality administrative data is crucial for improving local programme implementation and planning.
  • Method of Rating: The Delta ranking is mostly concerned with quantity (access coverage) rather than quality.
  • Quality of Education: According to the ASER report, the quality of education in India is also deplorable.

The Way Forward

  • A more simple ranking index with a few carefully selected output and outcome measures that can more clearly express national development aspirations is required.
  • Local governments should be given financial liberty.
  • Independent surveys can be used to validate administrative data, which will aid in data quality improvement.
  • Building each district’s internal capacity to produce reliable and meaningful data, as well as encouraging a data-use culture, can be prioritised by the ADP.
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RaghukulCS

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