IAS UPSC Prelims and Mains Exam – 3rd June 2019

(MAINS FOCUS)

NATIONAL/ECONOMY

TOPIC: General studies 2 and 3

Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Making India energy robust

Introduction:

India faces a variety of challenges related to energy and environment. Below are some initiatives that the next government could contemplate early on its term.

Initiatives to make India energy robust:

(On the policy front)

Integrating energy and environment policy: This will help doing away with the current siloed approach to energy policy and enable the new government to view the sector through an integrated and holistic lens. It could more easily track and evaluate the systemic implications of changes in any one or more component variable.
An “Energy and Environment Security Act” should be passed at the earliest possible opportunity. The objective of such an act should be to bring energy and environment into the national narrative; to set out the road map for managing and mitigating the emergent challenge of balancing economic development and energy demands with the goal of environmental protection; and, to mobilise public support for the policy and regulatory changes required to hasten the transition to a non-fossil fuel based energy system.
Decarbonisation, demand management and efficiency should be the watchwords of the new government’s energy policy. The focus should be on generating electricity from solar and wind, incentivising electric vehicles, curtailing diesel consumption in agriculture, enforcing standards and emission norms, redesigning buildings and factories to make them carbon neutral and influencing behavioural change towards energy conservation.
The “clean energy fund” which is currently funded through a cess on coal production should be augmented through the issuance of “green bonds” and a clean energy tax. This is to intensify research and development on clean energy technologies (battery storage, carbon capture and sequestration, hydrogen, coal gasification, modular nuclear reactors, etc.) and to fund the transmission and distribution infrastructure required for absorbing the flow of clean energy.
The fund is currently managed by the ministry of finance. It should be managed by those who have domain expertise.
Energy data is scattered across various government departments. This hinders policy and investment. The new government should establish an integrated energy data centre, whose data should be regularly updated and made available to all players on commercial terms.

On International front:

Energy diplomacy:

The levers of energy and, in particular, oil policy, are today in the hands of autocratic leaders. The local actions of leaders now have global, supply-related ramifications.
The new government should, therefore, look to develop a specialised cadre of “energy diplomats.”
Unshackling the energy public sector units from intrusive bureaucratic oversight will enable their management to respond with agility to unexpected market developments.
Establishing strong personal relations with the leaders of oil exporting states.

Increasing domestic capabilities:

Intensifying exploration and enhancing recovery:

The government should replace the current revenue-sharing model with a production-sharing model for new exploration.
It should link investment in the marginal and smaller discovered fields with access to the domestic retail market.
It should contemplate bidding out Mumbai High and other major producing oil and gas fields to international players with proven enhanced oil recovery technologies. The current recovery rates of production from these fields are well below the global average.

Increasing competition:

Coal India Limited (CIL) is a major producer of coal but faces huge legacy issues (labour unions, mafia, politics and organisation) which constrain its ability to fully and efficiently harness the country’s indigenous coal reserves.
The new government can allow private sector companies into commercial coal mining. The consequent pressure of competition will bear positively on the performance of CIL.

Natural gas:

Gas Authority of India Limited (GAIL) should be unbundled into a monopoly gas pipeline company. It should be divested of its upstream (production/ re-gassification of LNG) and downstream (petrochemicals) operations.
The “common access” principle must be fairly enforced. Every player, private or public, must have equal access to gas pipelines.
The price of gas should be determined on the basis of market and competitive principles.
A gas trading hub should be expeditiously established.
Special energy courts should be established to expedite adjudication of disputes and ensure sanctity of contracts.

Connecting the dots:

India faces a variety of challenges related to energy and environment. In order to make India energy robust actions needs to be taken on policy front. Comment.

INTERNATIONAL

TOPIC: General studies 2

India and the World

International Relations

Policies of developed and developing countries and their impact on India’s interests

Indian Economy and related issues

India and RCEP

Background:

India’s participation in the mega-trade agreement, Regional Comprehensive Economic Partnership (RCEP) has long been debated.

If finalised, the RCEP will result in the largest free trade bloc in the world accounting for 25 per cent of global GDP and 30 per cent of world trade.

Issues:

India’s trade deficits with nations have always widened after signing free-trade-agreements (FTAs) with them, citing the cases with ASEAN, Japan, Korea, and Singapore, most of which are RCEP nations.
It has also been pointed out that India’s vulnerable agriculture and dairy sectors, which are not in positions to compete with Australia and New Zealand, will be exposed to vagaries of global trade.
Indian manufacturing is not competitive enough to face the vagaries of a free trade regime. Even after 27 years of liberalisation, inefficiency prevails due to a host of unimplemented reforms in the product and the factor markets. On the factor side, labour market reforms are incomplete. Labour productivity in manufacturing is still one of the lowest in the world with spatially fragmented labour laws are escalating the costs of doing business. Given this, Indian industry is hardly in a position to compete in the level-playing ground in a free-trade region.

Differences:

India apprehends that, given its $60-billion trade deficit with China, the RCEP demand to reduce tariffs on 90 per cent of the traded goods to zero will have a disastrous effect on its already struggling MSME sector. India is especially apprehensive about Chinese goods swamping its market, forcing domestic producers to cut production or shut down.
India has expressed its reservations over inclusion of e-commerce in the RCEP talks. The RCEP draft is opposed to data localisation, while India fears the monopoly power of digital giants which includes the likes of Tencent and Alibaba.

ASEAN+3:

India could be out of the mega trade deal (RCEP).
China has started pushing for a free trade pact between ASEAN + 3 (which includes the ten-member ASEAN, China, Japan and South Korea).
This would effectively mean that among the 16 countries negotiating the Regional Comprehensive Economic Partnership (RCEP), all except India, Australia and New Zealand would get included in the proposed pact.
China may be trying to push for an ASEAN + 3 arrangement to speedily create a new order in the region with itself at the helm to counter the challenge posed by the US with which it is engaged in a trade war.

Conclusion:

India’s trade diplomacy needs to be reviewed, with both the US and China applying pressure to secure access to its markets. The earlier multilateral consensus has collapsed. India must support exporters through WTO-compatible means in these uncertain times.

Connecting the dots:

India’s participation in the mega-trade agreement, Regional Comprehensive Economic Partnership (RCEP) has long been debated. Discuss the issues around it.

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