Answers: GS Mains Test Series – 2016 : GS Paper-3 (Set-2)

1.       Many suggest that Government should dismantle the minimum support price regime and Indian futures/spot markets should be used for estimating prices and enabling price discovery. Keeping in view the NSSO survey finding that only a small fraction of farmers sell their produce to FCI, discuss if there is an economic rationale behind this suggestion.

It is believed that the concept of MSP and the way it is calculatedare both fundamentally flawed.

The prices of commodities cannot be “fixed” as prices fluctuate. When a commodity is treated and traded in the market, only then the price is discovered. Announcement of MSPs, amounts to a speculative attempt by the government to manage the commodity markets.  India’s MSP policy is an ascending-road model with no scope for downside correction.

Therefore, rational pricing through Indian futures/spot markets, even if imperfect should be used for estimating prices and enabling price discovery. This can also be supplemented by e-tendering on a daily basis if the mega-procurement under PDS is to be retained. Farmers can work directly or through arthiyas, brokers and commission agents for the e-tendering for the stock earmarked for sale to the government agencies. Crop insurance schemes may be put in place for extreme exigencies.

When the country is fully ready for income support subsidisation through the Jan Dhan Yojna, the government must free itself of the onerous public distribution system and let the private players take over and deal with the farming community at all levels.

2.       To what extent, the institutional reforms in Indian agriculture have complemented the influence of technological changes in India? Do you see any divergence or convergence in the two? What are its implications? Discuss.

The technological and institutional changes initiated in India to improve the condition of farmers include:

• The land reforms initiated in the first five-year plan which aimed to abolish zamindari andconsolidate land holdings.
• Agricultural reforms in the 1960s and 1970s known as the green revolution in India which aimed at providing high yielding varieties of seeds and fertilisers to farmers, and also developing large-scale irrigation facilities to allow them to grow two crops in a year.
• The government launched a comprehensive land development programme in the 1980s and 1990s such as insurance cover to farmers against damage to crops and setting up of rural banks and cooperative societies to provide them loans on easy rates of interest.
• The government also started broadcasting radio and television programmes to educate farmers about new techniques of agriculture and give them prior warning about weather conditions. To stop the exploitation of farmers by middlemen, the government announced the procurement, remunerative and minimum support prices of all the major crops in India.

The government also launched personal benefit schemes for farmers, like the Kisan Credit Card and the Personal Accident Insurance Scheme. Under the Land Ceiling Act by government no individual or family could own more than a certain quantum of land.

There has been a convergence of the efforts of the government in this respect. It has led to better consolidation of land and increased productivity.

3.       India is largest producer, consumer as well as importer of pulses. While analysing what ails the pulses agriculture in the country, suggest steps to make India self-sufficient in production of pulses.

The General Assembly of United Nations had proclaimed 2016 as the International Year of Pulses (IYP). This makes pulses an important concern.

India is the biggest producer, as well as the largest consumer and importer of pulses. However, the country has not been able to increase productivity.

The current crisis can be attributed largely to decrease in farm area, as farmers opt for high-yielding crops with higher MSP, such as paddy and wheat. This has resulted in pulses getting pushed to being grown in marginal, poorly-irrigated and low-quality soils, resulting in lower yield. Moreover, the fact that pulses in India are mostly grown in rain-fed areas with unstable and uncertain rainfall conditions, this increases the risk of crop failure. Poor access to storage and milling facilities causes further risk to farmers, as unshelled pulses have a low shelf life. Additionally, poor market linkages cause constrains in effectively meeting market demand.

To increase the productivity of pulses, the recent announcement by the NITI Aayog to create a buffer stock for pulses is welcome. Further, alongside creating a buffer, if pulses are included in PDS, it will go a long way to improve the food and nutrition security of the country.

The International Crops ResearchInstitute for the Semi-Arid Tropics (ICRISAT) released high-yielding pigeon pea hybrid suitable for irrigated areas, which may induce farmers to take up cultivation of pulses in irrigated areas, provided there are remunerative prices.

Also, an area expansion to bring more pulses under the cropping systems can be adopted.

4.      To what extent have National Wind Energy Mission and National Solar Mission contributed in setting up green energy “corridors” in India? What are major impediments in achieving the same? Discuss.

The Government in 2013 announced a National Green Corridor Program (NGCP) worth Rs. 43,000 Crore to enable the flow of renewable energy into the National Grid Network. The green energy corridor is grid connected network for the transmission of renewable energy produced from various renewable energy projects. The project was envisaged by Power Grid Corporation of India Limited (PGCIL) in its innovative report titled ‘Green Energy Corridors’. It was proposed as a dedicated transmission network for renewable energy across different renewable energy potential states.

The first phase of the program is designed to support 33 GW of solar and wind power, while the second phase will link 22 GW capacity.

The government aims to create an ambitious 175 GW of renewable energy capacity by 2022.

The major bottleneck to achieve the target is infrastructure. Developing new renewable resources will require large initial investments to build infrastructure. These investments increase the cost of providing renewable electricity, especially during early years. For instance, developers must find publicly acceptable sites with good resources and with access to transmission lines. Potential wind sites can require several years of monitoring to determine whether they are suitable.

5.       Despite the huge strategic and commercial importance of Beach and Sand Minerals sector, the myopic government policies have been a major constrain for the sector functioning well below potential. Discuss in light of the Atomic Minerals Concession Rules, 2016.

Beach Sand Minerals (BSM) sector is hugely constrained and is functioning below potential despite its high and rising strategic and commercial importance. BSM are a group of deposits, namely ilmenite, rutile, zircon, monazite, leucoxene, garnet and sillimanite, found across beaches in peninsular India.

However, they are misclassified as “atomic minerals” in law, which results in lengthy approvals ranging 7-8 years, requiring green signal from as many as 28 departments both at the Centre and states

The Atomic Minerals Concession Rules, 2016, has proposed to abruptly restrict BSM mining only for the public sector if the deposits have equal or more than 0.75% monazite. This is draconian and worse for its complete utilisation.

6.      The “net-metering system” though has high potential to help India achieve its energy security targets by 2022, but continuous reluctance of both DISCOMs and end-consumers to adopt net-metering has proved to be a major impediment in achieving the same. Discuss citing various reasons for reluctance of DISCOMs and end-consumers towards “net metering system”.

Net metering is an agreement that allows the solar PV system owner to sell excess solar energy to the utility company or buy deficit energy from the utility company using a meter to track this energy exchange.

Net Metering is an eco-friendly idea that encourages the power consumers to adopt the generation of solar power to manage their demand and supply of electricity. In this process, the consumers not only generate power for their own needs but also get paid for the excess power generated by their solar PV systems. The excess electricity is send to the central grid which pays for the energy thus generated. This will assure grid parity.

However, there is reluctance shown by the DISCOM companies and the end consumers. DISCOMs fear that rooftop solar projects will reduce the consumption levels of their existing customers, who will start generating electricity.
Another point of contention is the cumulative capacity of solar installations in the service area of a transformer. If the penetration of solar power exceeds a certain limit, balancing the grid can be a problem.

High upfront cost of installing the rooftop solar system has been the biggest hurdle in its adoption from the consumers end. It costs around Rs 1 lakh for 1 kW solar power system. This proves to be expensive for households.

7.       What is the significance of Delta Wing Configuration in Tejas Light Combat Aircraft? Why Tejas is considered inferior to various fifth generation fighters? What are the major impediments for the Defence Ministry to provide Final Operation Clearance for aircraft?

The Tejas LCA is considered to be unique for its aerodynamically unstable tailless compound delta-wing configuration which is optimised primarily for manoeuvrability and agility. In simple terms, this means it can be manoeuvred in any direction regardless of pure aerodynamic principles.

One of the significant problems which makes Tejas inferior in comparison to other Fifth generation fighters is the electronic self protection suite. HAL has not been able to construct the jammer into the plane. Also the lightweight Tejas cannot fulfil the role of a medium multi-role combat aircraft (MMRCA) like Rafael or a “heavyweight” Sukhoi-30MKI. With a reach of just about 400-km, Tejas has just one-third the range and weapon-load capacity of a Rafale or a Sukhoi. So, Tejas cannot be used for deep bombing strikes, for example targets in China.

The reason why FOC is being delayed is due to integration of Air-to- Air Refuelling probe with LCA Tejas and its trials. Some more tests of Beyond-Visual- Range Air-to- Air Missile (BVRAAM) Derby missile are still remaining. The FOC basically implies the jet is now capable of firing guns, rockets, laser-guided bombs and BVR (beyond visual range) missiles as well as undergo mid-air refuelling.

8.      “Freeing up of Potassium and Phosphorus from subsidies and reduction in urea prices can be some of the major reforms required in farm sector”. Critically Analyze.

Fertilisers provide 3 major nutrients- NPK which helps to increase agricultural yield.  The urea sector is highly regulated which: creates a black market that burdens small farmers disproportionately; incentivises production inefficiency; and leads to over-use, depleting soil quality and damaging human health.

Indiscriminate use of urea has led to the problem of salinity and alkalinity.

The objective of the government is to support the farmers but the question is exactly how much of that really goes to the pocket of the farmers and how much is siphoned by the companies. It has been debated that the beneficiaries have been the large farmers and not small & marginal farmers.

However, the neem-coating of urea,which has likely reduced the diversion offertiliser meant for Indian farmers is a good solution in this regard. Also, the kind of Pahal-DBT available in LPG must be implemented in the fertilizer sector in order to avoid diversion of subsidies meant for the real beneficiaries.

9.      Examine the importance of Iran-Pakistan-China Gas pipeline project? How is it different from TAPI? With Iran rejecting India’s bid to develop the Farzad B gas field, and leaning more towards the China-dominated Shanghai Cooperation Organisation, can it be a problem for India’s strategic Chabahar Project?

Originally known as the Iran-Pakistan (IP) gas pipeline which would transport gas from Iran to Pakistan, is including China in the project as well. It holds important as it would further the bilateral relations between the three countries and would enable China to capture its position in the strategic location of Iran.

TAPI project includes Turkmenistan, Afghanistan, Pakistan and India. Pakistan is the common partner player in both the projects- TAPI and IPG. The major difference between the two pipelines is the length of the pipelines.

The Chabahar Port in Iran which gives India to explore it and feed its energy needs holds very important not from the perspective of energy requirement for India but also from strategic perspective. Pakistan’s Gwadar port, which is took over by China for development is geographically located close to Chabahar port. Since 2003, India sought to construct the Chabahar Port but the economic sanctions become a major hurdle. Iran provoked India by offering development contract of Chabahar port to China. When the signs of reconciliation between Iran and western powers appeared in 2015, India expressed again its interest to be engaged in Chabahar port project. Although Iran initially rejected India’s proposal, political considerations, as well as commercial interests, encouraged Iran to accept India’s proposal. Therefore, with so much difficulty has India achieved Chabaharport.

Also Farzad B gas field is home to one of the largest amount of natural gas in the Persian Gulf.

Therefore, if Iran leans towards China and its intention towards SCO, it holds India from both aspects- Farzad B and Chabahar.

10.   Explain the “The Bank Holding and Investment Company” Model. How can it help to unfold the present banking crisis in India?

In the Budget 2015-16, had announced setting up of an autonomous Bank Board Bureau, which was to be transformed into a The Bank Holding and Investment Company (BHIC).

BHIC is in line with PJ Nayak Committee report, commissioned by the RBI, that was submitted in mid-2014. The committee had reviewed the working of bank boards in the country and commented on the miserable governance in the PSBs, which account for almost 70% of the banking sector.

The proposed BHIC would hold the equity of all public sector banks. It is intended to raise capital for the PSBs and thus reduce the Central Government’s burden of capitalizing State-owned banks. According to the Finance Ministry estimates, the rate at which NPAs exist, the PSBs would need ₹1.80 lakh crore by March 2019 to meet Basel III norms. However, the CG plans to provide only ₹70,000 crore and the rest would have to be raised from the market.

However, this is not the only reason for creation of the BHIC. In fact, the BHIC is intended to distance the government from the functioning of PSBs. It is expected to reform and empower banks boards while protecting the government’s investment in the PSBs.

However, RBI looks upon the proposed BHIC as a “Sub-optimal” solution, because investors “will not like” the idea. The central bank feels it will be difficult for the BHIC to define clear criteria for distributing capital among the PSBs.

However, the success of the BHIC would depend upon the quality of personnel chosen by the Central Government to be a part of BHIC as well as the freedom provided to it.

11.    Define African Nuclear Weapon-Free Zone Treaty (ANWFZT) or Treaty of Pelindaba? How is the treaty prohibiting African Nations from trading in uranium with India? What are the other constraints for India in getting Uranium supplies from other parts of World?

Treaty of Pelindaba establishes a Nuclear-Weapon-Free Zone in Africa. The treaty was signed in 1996 and came into effect in 2009.

The Treaty prohibits the research, development, manufacture, stockpiling, acquisition, testing, possession, control or stationing of nuclear explosive devices in the territory of parties to the Treaty and the dumping of radioactive wastes in the African zone by Treaty parties. The Treaty also prohibits any attack against nuclear installations in the zone by Treaty parties and requires them to maintain the highest standards of physical protection of nuclear material, facilities and equipment, which are to be used exclusively for peaceful purposes. The Treaty requires all parties to apply full-scope International Atomic Energy Agencysafeguards to all their peaceful nuclear activities.

The Pelindaba treaty prohibits Namibia, fourth largest producer of uranium to implement nuclear agreement with India as it not the signatory of Nuclear Non Proliferation treaty (NPT). India and Namibia had signed an agreement on nuclear energy i.e. deal to supply Uranium for civil use in 2009.
The major constraints which stand as obstacles for India getting uranium from other parts of the world is largely due to the fact that India is not a signatory to NPT. However, a waiver from the NSG can prove to beneficial to India in order to obtain uranium from worldwide.

12.    How is “NamamiGange Plan” different from previous Ganga Action Plan Phase -I and II. Discuss the success of Government’s flagship “Clean Ganga Programme”. What role has been played by National Ganga River Basin Authority (NGRBA) in its success?

Namami Ganga Yojanais an ambitious Union Government Project which integrates the efforts to clean and protect the Ganga river in a comprehensive manner.
The erstwhile Ganga Action Plan was launched in two phase manner by then PM Mr. Rajiv Gandhi:

• Phase I 1985: Covered 25 Ganga towns in three states over Rs 862.59 crore were spent.
• Phase II: Covered 59 towns in five states over Rs 505.31 cr were spent.
  National Ganga River Basin Authority (NGRBA) has started the Mission Clean Ganga with a changed and comprehensive approach to champion the challenges posed to Ganga through four different sectors, namely, of wastewater management, solid waste management, industrial pollution and river front development.

NGRBA was established in 2009 with the objectives of:

(a) ensuring effective abatement of pollution and conservation of the river Ganga by adopting a river basin approach to promote inter-sectoral co-ordination for comprehensive planning and management.

(b) maintaining environmental flows in the river Ganga with the aim of ensuring water quality and environmentally sustainable development.

With respect to the role played by NGRBA towards Namami Ganga Yojna, the NGRBA has taken the task to maintain ecological flows in the river Ganga and abate pollution through planning, financing and execution of programmes including that of –

1) Augmentation of Sewerage Infrastructure

2) Catchment Area Treatment

3) Protection of Flood Plains

4) Creating Public Awareness

13.    Examine the role, functions and significance of recently constituted the “National Company Law Tribunal”.

The National Company Law Tribunal (NCLT) is a quasi-judicial authority created under the Companies Act, 2013 to handle corporate civil disputes arising under the Act. It is an entity that has powers and procedures like those vested in a court of law or judge. NCLT is obliged to objectively determine facts, decide cases in accordance with the principles of natural justice and draw conclusions from them in the form of orders. Such orders can remedy a situation, correct a wrong or impose legal penalties/costs and may affect the legal rights, duties or privileges of the specific parties. The Tribunal is not bound by the strict judicial rules of evidence and procedure. It can decide cases by following the principles of natural justice.

The proposed NCLT will have judicial and technical experts who will handle all matters presently being handled by CLB, Company Court and BIFR with much wider jurisdiction in terms of scope of the subjects.

Other powers:

• Most of the powers of the Company Law Board under the Companies Act, 1956.
• All the powers of BIFR for revival and rehabilitation of sick industrial companies.
• Power of High Court in the matters of mergers, demergers, amalgamations, winding up, etc.
• Power to order repayment of deposits accepted by Non-Banking Financial Companies.
• Power to wind up companies.
• Power to Review its own orders.

14. Critically discuss the Urban Flood Management and Disaster Risk Mitigation techniques adopted by India in Recent Years.

India has been traditionally vulnerable to natural disasters on account of its unique geo-climatic conditions. Floods, droughts, cyclones, earthquakes and landslides have been a recurrent phenomenon.

A National Disaster Framework covering institutional mechanisms, disaster prevention strategy, early warning system, disaster mitigation, preparedness and response and human resource development has been adopted by India.

At the national level, the Ministry of Home Affairs is the nodal Ministry for all matters concerning disaster management.

In 2005, the National Disaster Management Act was passed in order to approach any sort of disasters expeditiously.

After the enactment of the act, NDMA was created in order to co-ordinate disaster management initiatives across the country.

In 2009, National Disaster Policy on Disaster Managementwas formulated. It has helped to strengthen as well as create institutional mechanisms in every state in order to tackle disasters.

Recently, the NDMA has positively adopted the Sendai Framework for Disaster Reduction 2015-2030 wherein rich pool of global practices to tackle disasters would be adopted.

Lastly, the NDMA brought out the National Disaster Management Plan in 2016 in order to make India disaster resilient. However, to make the plan a reality, there is serious participation from all the stakeholders- Central government, state government, local government and people to participate and work as a team in order to reduce the disaster risks and increase our preparedness for any sort of disaster.

With respect to urban floods the certain techniques adopted include:

• In 2010, the NDMA published separate guidelines for UFDM.
• Preparation of comprehensive Urban Storm Drainage Design Manual (USDDM) by the MoUD for urban flooding.
• Urban Flood Education and Training wherein MoUD, MoHRD, MoHFW and CBSE are stakeholders. Introduce UFDM modules in school curricula through CBSE.

15.    Critically examine the government’s proposal to set a nuclear energy park and hub along coastal Andhra Pradesh? What are the major safety issues associated to it?

Nuclear Power Project (NPP) was planned in Gujarat’s MithiVirdi. However, it was moved to Andhra Pradesh.

The main reasons why AP is being developed as a nuclear hub are:

• AP’s huge requirement of power as it shifts gear from agriculture to industrialization.
• The ready availability of government land
• Virtually no resistance from the people, there is some kind of resistance but not as severe as seen in other states.

However, the major concerns include:

• No scientific criteria were adopted in site selection.
• Four fault lines run through the region.
• A Fukushima-like disaster cannot be ruled out. The suffering is for generations.
• Exposure to radioactivity could lead to genetic disorders and cancer.

16.   What do you understand by virtual private network (VPN)? Discuss the Virtual private network issues using satellite based networks.

A virtual private network, also known as a VPN, is a private network that extends across a public network or internet. It enables users to send and receive data across shared or public networks as if their computing devices were directly connected to the private network.

VPN and satellite Internet technologies were not designed to work together. These two technical limitations of satellite Internet greatly affect the performance of a VPN:

• Virtual private networks (VPN) require a high-bandwidth, low-latency network to function efficiently. Satellite Internet services, on the other hand, normally suffer very high latencies due to the long distance satellite signals must travel.
• Satellite Internet also tends to support low upstream bandwidth. Specifically, satellite bandwidth for uploads is comparable to that of dial-up Internet services. VPNs demand high bandwidth for both uploads and downloads.

17.    What do you understand by high throughput satellite (HTS)? What is its importance in communication?

High Throughput Satellites (HTS) are poised to deliver much higher capacity than traditional satellite services at a mere fraction of the cost. Today, HTS can provide more than 100 GBps of capacity this is more than 100 times the capacity offered by conventional Ku-band satellites. HTS is based on spot beam technology which enables frequency re-use across multiple narrowly focused spot beams. This results in a very significant increase in capacity for the same amount of allocated spectrum, allowing satellite operators and providers to lower costs.

With an increase in consumer-driven demand for broadband anywhere on any devise, HTP satellite can be of great importance.

HTP can also enable basic connectivity in remote areas.

Connectivity in schools and Cellular backhaul can be well served by HTP.

18.   What is significance of NSG (Nuclear Suppliers Group) membership for India? Do you agree with the view that failure to get NSG membership in recent plenary was a diplomatic failure for India? Argue.

India is keen to become a member of the NSG and also other export control regimes such as the Wassenaar Agreement and Australia Group as it seeks to significantly expand its nuclear power generation and also enter the export market in the coming years.

The 2008 NSG waiver does provide significant possibilities for India to engage in civilian nuclear trade with other countries, but a membership of the NSG will provide greater certainty and a legal foundation for India’s nuclear regime and thus greater confidence for those countries investing billions of dollars to set up ambitious nuclear power projects in India. Moreover, as India’s international political, economic, military and strategic profile and clout increases, India would like to move into the category of international rule-creating nations rather than stay in the ranks of rule-adhering nations. For this, it is essential that India gets due recognition and a place on the NSG high table.

Therefore, India’s membership of NSG is of vital significance.

Critics look upon India not attaining NSG membership in the recent meet a diplomatic failure. However, it would be wrong to state that. It is because, India has applied for being a member and the NSG has not approved the application as yet. But more important, India’s application has not been rejected as yet. And as suggested by nearly 40 NSG member- countries, there will be now efforts to start a process towards developing a consensus on how a non-signatory to the NPT can be considered for membership.

As long as India’s application has not been formally rejected, it will be inappropriate to talk of its NSG bid as a diplomatic failure. That the application could not be approved in Seoul itself could at the most be described as a “setback” in the process of getting the NSG approval. A failure would mean the disapproval of the application, which has not been the case.

19.   Discuss the role and performance of initiatives like Strategic Debt restructuring (SDR) and Joint Lenders Forum (JLF) towards tackling the menace of Nonperforming assets in India’s banking sector.

With mounting NPAs, Reserve Bank of India had introduced Strategic Debt restructuring (SDR) scheme in June 2015 to let banks recover their loans from the ailing companies. It lets the Joint Lenders Forum (JLF) or simply the consortium of lenders to convert a part of their loan in an ailing company into equity. The SDR scheme will provide more power to the banks in managing the loan defaulted company so that they can recover their dues.
JLF is a committee of bankers who have given loans to a stressed borrower. JLF can be constituted if the borrower has not paid any money in the last 60 days (Special Mention Account2).

The JLF have the following options when a loan is restructured:

• Transfer equity of the company by promoters to the lenders to compensate for their sacrifices.
• Infuse more equity into the companies.
• Transfer the holdings of the promoters’ to a security or an escrow arrangement till turnaround of company.

20.  Why conditions of deflation are considered more problematic for economy in comparison to inflation? Explain while elucidating the options for a central bank to respond to deflationary conditions.

While inflation is rise in general price level of goods and services; deflation is fall in general price level of goods and services. In comparison to inflation, deflation is considered to be problematic for the economy. This is because falling prices result in lowering of the national income, unemployment, less efficient capital, reduction in production etc.

During recession and deflationary periods, the central bank of a country adopts policies like zero interest rates and quantitative easing to pull the economies out of recession. These policies are adopted with a goal of stimulating the economy and increasing the money supply.

One of the popular method adopted by central banks and which has been adopted by Federal Reserve is Quantitative Easing (QE) in order to respond to deflationary condition.

Quantitative Easing essentially involves a central bank creating new money and using it to buy securities from the nation’s banks so as to pump liquidity into the economy and drive down long-term interest rates. This ripples through to other interest rates across the economy, and the broad decline in interest rates stimulates demand for loans from consumers and businesses. Banks are able to meet this higher demand for loans because of the funds they have received from the central bank in exchange for their security holdings.