May 20, 2023 - Compass by Rau's IAS (2023)

Context: The Central Board of Directors of the Reserve Bank of India (RBI) recently approved the transfer of ₹87,416 crore as surplus to the Union government for the accounting year 2022-23, almost thrice the ₹30,307 crore transferred for the previous fiscal year. The RBI’s board also decided to raise the Contingency Risk Buffer to 6%, from 5.5% in the preceding year.

Source of Earnings for RBI:

• Interest on Government securities held
• Interests on loans and advances made
• Interest earned on Liquid Adjustment Facility operations
• Interest income from foreign currency assets held
• Earnings from forex swaps
• Seigniorage

• Capital reserves: Two important components are

• Contingency fund: The fund is set aside by RBI for meeting unforeseen contingencies like risks arising out of monetary policy operations, exchange rate risks or systemic risks.
• Asset development fund: This fund is set aside for investments in subsidiaries and associate institutions and to meet internal capital expenditure.

These two funds are considered as Risk provisions of the RBI and provisioned from the earnings of RBI. Such capital required to withstand risks is also known as Economic Capital.

• Revaluation Accounts: RBI maintains revaluation accounts to insulate its assets (Gold, foreign currency, Investments in domestic and foreign securities) from prevailing market trends. They include Currency and Gold Revaluation Account (CGRA), Investment Revaluation Account (IRA) and Foreign Exchange Forward Contracts Valuation Account (FCVA).
• Deposits: In its traditional role as a banker to the government, RBI usually accepts government deposits, which constitutes a liability for the central bank. The central bank also accepts deposits from other banks and other financial instituions.
• Currency notes in circulation is a liability of the central bank.

How surplus is shared with Central government?

After meeting the risk provisions and other operational expenditures (salaries etc.) from the earnings of RBI, the surplus is transferred to the central government in the form of dividends. Surplus transfer from the Reserve Bank is an important component of non-tax revenues to the central government. However, the quantum of dividends shared with the central government depends upon the amount of money provided for risk provisioning, especially for contingency fund.

There occurred a controversy regarding the excess capital reserves accumulated with the RBI and sharing of dividend with the central government in 2018. To sort out this controversy a committee (Bimal Jalan committee) was appointed to review the Economic Capital Framework. The Committee had prescribed a Contingency Risk Buffer in the range of 5.5% to 6.5% of its balance sheet.

Q) Which of the following is/are considered as assets of Reserve Bank of India?

1. Loans given to Banks

2. Foreign currency held

3. Currency notes in Circulation

Select the correct answer using the code given below:

(a) 2 only

(b) 1 and 3 only

(c) 1 and 2 only

(d) 1, 2 and 3

Scroll down for answer

Answer: c

Context: Radiocarbon dating is currently under the spotlight as the Supreme Court deferred the implementation of a direction given by the Allahabad High Court to conduct carbon dating and scientific survey of the ‘Shivling’ allegedly found on the Gyanvapi mosque premises in Varanasi.

Radiocarbon dating:

• Radiocarbon dating is a technique developed to determine the age of certain archaeological artefactsof a biological origin (bone, cloth, wood and plant fibres).
  • It was developed in the late 1940s by University of Chicago professor Willard Libby (who won the Nobel Prize for Chemistry in 1960).
• The method utilises the properties of radiocarbon (carbon 14) which is an isotope of carbon that is unstable and weakly radioactive. The method is designed to measure residual radioactivity

The process:

• It is based on the amount of radioactive carbon and non-radioactive carbon measured in an organic sample. These amounts exist in a fixed ratio in all living organisms, but the ratio changes over time after death.
• Plants absorb carbon from the atmosphere as part of carbon dioxide and pass it on to other organisms across the food chain. The proportion between radioactive and non-radioactive carbon in all these organisms, therefore, is the same as their proportion in the atmosphere.
• This ratio does not change throughout an organism’s lifetime. Although radioactive carbon decays over time, it gets replenished continuously as the organism regenerates tissue. After the organism dies, however, radioactive carbon decays without being replenished.

See Also

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• For dating an organic sample, researchers measure both radioactive carbon (called C14) and the commonest form of non-radioactive carbon (C12). They calculate the ratio between the two amounts and compare this with the known ratio in living organisms. This tells them how much C14 has decayed.
• Since, the rate at which C14 decays is already known. Having worked out how much has decayed in the sample, researchers can calculate the time it would have taken for that amount of decay – in effect, the age of the sample.
• Radiocarbon dating does not, however, work with samples older than 55,000 years. By then, so much C14 would have decayed that it would no longer be possible to measure whatever remains.

Uses:

• Radiocarbon dating works only onorganic samples from the past, or something that was once alive and is now dead. That puts certain materials – such as rock – beyond its scope.
  • If the structure is made of rock, radiometric dating of various isotopes can determine the rock’s geological age – but not when it was sculpted, carved, or otherwise worked on by human hands
• It may work on cement or mortar if there is an organic material trapped inside it, based on measuring the decay in the organic material.
• It can also be done on paint, which contains a mix of organic and inorganic pigments.

Context: As per a latest study, even low levels of Arsenic consumption may impact cognitive function in children, adolescents, and young adults.

Those exposed to Arsenic had reduced grey matter (brain tissue that is vital to cognitive functions) and weaker connections within key regions of the brain that enable concentration, switching between tasks, and temporary storage of information.

Arsenic contamination of water:

• Arsenic is a natural component of the earth’s crust and is widely distributed throughout the environment in the air, water and land. Highly toxic in its inorganic form, it is introduced into soil and groundwater during weathering of rocks and minerals followed by subsequent leaching and runoff.
• People are also exposed to elevated levels of inorganic Arsenic through:
  • Drinking or using contaminated water in food preparation and irrigation of food crops
  • Industrial processes (Arsenic is used industrially as an alloying agent, and in the processing of glass, pigments, textiles, paper, metal adhesives, wood preservatives and ammunition)
  • Smoking tobacco (tobacco plants can take up Arsenic naturally present in the soil).

Impacts:

• Long-term exposure can lead to mortality due to chronic Arsenic poisoning, multiple cancers (skin lesions and skin cancer), lung disease, heart attacks, kidney failure and diseases of the skin (colour changes, and hard patches on palms and soles).
• Negative impacts of Arsenic exposure on cognitive development, intelligence and memory.
• Adverse pregnancy outcomes, infant mortality and impacts on child health.

Management of Arsenic contamination:

• A common strategy employed is to encourage piped water access rather than groundwater extraction, adopting rainwater harvesting/ watershed management practices and installing Arsenic removal plants.

Context: Retiring Supreme Court judge, Justice K.M. Joseph, said in his farewell address on Friday that the independence of the Supreme Court is integral to the democratic way of life.

“The independence of the Supreme Court is integral to the maintenance of a democratic way of life and rule of law. It is not very difficult for a nation which is a democracy having a Constitution to slip into chaos, into just the opposite of democracy,” Justice Joseph said.

Syllabus:

• General Studies- II: Governance, Constitution, Polity, Social Justice and International relations:
  • Separation of powers between various organs dispute redressal mechanisms and institutions.

We are first going to understand:

• What is Rule of Law?
• Why the Judiciary needs to be Independent?
• Independence of Indian Judiciary

Rule of Law and its relation with Independence of Judiciary?

• It would be appropriate to discuss the views of Dicey, as he is known to be the main exponent of the concept of rule of law.
• According to Dicey’s theory, rule of law has three pillars based on the concept that “a government should be based on principles of law and not of men”, these are-
  • Supremacy of Law;
  • Equality before the Law; and
  • Predominance of Legal spirit.
    • According to Dicey, for the prevalence of the rule of law there should be an enforcing authority and that authority he found in the courts. He believed that the courts are the enforcer of the rule of law and hence it should be free from impartiality and external influence.
• The rule of law provides two basic protections against arbitrary or discriminatory government action.
  • It provides that the rule applied to a particular case must be reasonably predictable.
  • And it provides that the rule must be predictable without regard for the identity of the parties.

Judicial independence ensures, in particular, that judges are free to conclude that actions taken, or decisions made by the Government (or even by others) are in breach of the law, and that they are in particular in breach of individual’s rights, including of course their fundamental, or human, rights – and to decide on the appropriate remedy.

Why the Judiciary needs to be Independent?

Independence of Judiciary is sine qua non of democracy. In a democratic polity, the supreme power of state is shared among the three principal organs. The constitutional task assigned to the Judiciary is no way less than that of other functionaries, legislature and executive. Indeed it is the role of the Judiciary to carry out the constitutional message and it is its responsibility to keep a vigilant watch over the functioning of democracy in accordance with the dictates, directives, and imperative commands of the constitution by checking excessive authority of other constitutional functionaries. Our Constitution does not strictly adhere to the doctrine of separation of powers but it does provide for distribution of power to ensure that one organ of the government does not trench on the constitutional powers of other organs.

The concept of distribution of powers assumes the existence of judicial system free from external as well as internal pressures. Under our constitution, the Judiciary has been assigned the onerous task of safeguarding the fundamental rights of our citizens and upholding the Rule of Law. Perhaps the most important power of the Supreme Court is the power of judicial review.

Judicial Review means the power of the Supreme Court (or High Courts) to examine the constitutionality of any law if the Court arrives at the conclusion that the law is inconsistent with the provisions of the Constitution, such a law is declared as unconstitutional and inapplicable. The term judicial review is nowhere mentioned in the Constitution. However, the fact that India has a written constitution and the Supreme Court can strike down a law that goes against fundamental rights, implicitly gives the Supreme Court the power of judicial review. Together, the writ powers and the review power of the Court make judiciary very powerful. In particular, the review power means that the judiciary can interpret the Constitution and the laws passed by the legislature. Many people think that this feature enables the judiciary to protect the Constitution effectively and also to protect the rights of citizens. The practice of entertaining PILs has further added to the powers of the judiciary in protecting rights of citizens.

Since the courts are entrusted the duty to uphold the constitution and the laws, it very often comes in conflict with the state when it tries to enforce orders. Therefore, the need for an independent and impartial Judiciary manned by persons of sterling quality and character, underlying courage and determination and resolution impartiality and independence who would dispense Justice without fear or favor, ill will or affection, is the cordial creed of our constitution and a solemn assurance of every Judge to the people of this great country. The Judiciary cannot remain a mere bystander or spectator but it must become an active participant in the judicial process ready to use law in the service of social justice through a proactive goal oriented approach. But this cannot be achieved unless we have judicial cadres who share the fighting faith of the constitution and are imbued with constitutional values.

Judicial independence ensures, in particular, that judges are free to conclude that actions taken, or decisions made by the Government (or even by others) are in breach of the law, and that they are in particular in breach of individual’s rights, including of course their fundamental, or human, rights – and to decide on the appropriate remedy.

Independence of Indian Judiciary

The constitution of India adopts diverse devices to ensure the independence of the judiciary in keeping with both the doctrines of constitutional and Parliamentary sovereignty. Elaborated provision are in place for ensuring the independent position of the Judges of the Supreme Court and the High Courts.

• Firstly, the judges of the Supreme Court and the High Courts have to take an oath before entering once that they will faithfully perform their duties without fear, favour, affection, ill-will, and defend the constitution of India and the laws. Recognition of the doctrine of constitutional sovereignty is implicit in this oath.
• Secondly, the process of appointment of judges also ensures the independence of judiciary in India. The judges of the Supreme Court and the High Courts are appointed by the President. The constitution of India has made it obligatory on the President to make the appointments in consultation with the highest judicial authorities. He, of course, takes advice of the Cabinet. The constitution also prescribes necessary qualifications for such appointments. The constitution tries to make the appointments unbiased by political considerations.
• Thirdly, the Constitution provides for the Security of Tenure of Judges. The judges of the Supreme Court and the High Courts serve “during good behavior” and not during the pleasure of the President, as is the case with other high Government officials. They cannot be arbitrarily removed by the President. They may be removed from office only through impeachment. A Judge can be removed on the ground of proved misbehavior or incapacity on a report by both Houses of the Parliament supported by a special majority.
• Fourthly, the salaries and allowances of judges are charged upon the Consolidated Fund of India. Further, the salaries and allowances of Judges of Supreme court and High courts cannot be reduced during their tenure, except during a financial emergency under Article 360 of the Constitution.
• Fifthly, the activities of the Judges cannot be discussed by the executive or the legislature, except in case of their removal.
• Sixth, the retirement age is 65 years for Supreme Court judges and 62 years for High court judges. Such long tenure enables the judges to function impartially and independently.
• Independence of judiciary and rule of law are the basic features of the Constitution and cannot be abrogated even by constitutional amendments as observed by the Hon’ble Supreme Court in S.P. Gupta v Union of India; AIR 1982.

The constitution provides for a judiciary, which is independent. Independence of judiciary is important for the purpose of fair justice. There should be no interference by the legislature or the executive in the proceedings of the judiciary so that it may pass a judgment that seems reasonably fair. In case of intervention, there may be an element of bias on the part of the judges in taking a fair decision. It is difficult to suggest any other way to make the Indian courts more self-reliant and keep them away from the influence of the other two organs.

Context: The International Solar Alliance (ISA) is engaging in discussions with member-countries, such as India and European nations, regarding contributions to its payment guarantee fund and insurance fund.

Solar Payment Guarantee Fund:

• It aims to provide essential support to solar energy projects in the event of default, mitigating the risk of premature closures or bankruptcy.
• To benefit from this fund, projects will contribute a premium, ensuring their coverage. By doing so, the fund effectively alleviates concerns among lenders, making financing more accessible for projects that may have otherwise struggled to secure funding.
• The payment guarantee fund will offer only partial coverage. This intentional limitation is designed to discourage opportunistic behaviour and prevent the inclusion of subpar projects.
• By minimizing the possibility of default, the fund opens up opportunities for short-term investments in regions that have historically received limited investment.
• It allows investors to participate in solar projects without relying on the guarantee fund for recourse.

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Solar Insurance Fund:

• It aims to alleviate the burden of insurance premiums for solar developers specifically during the pre-revenue phase or construction phase of the project.
• The goal is to enhance the bankability of solar projects by mitigating the impact of high insurance premiums.
• It would collaborate with reputable project insurance organizations, such as Multilateral Investment Guarantee Agency (MIGA), to provide insurance coverage.
• During the specified period, the fund would cover a portion or the entirety of the insurance premium, effectively reducing the financial strain on developers.
• To recover the covered insurance premium, projects could incorporate an additional tariff during the revenue phase, allowing them to recoup the costs incurred during the pre-revenue stage.

About International Solar Alliance (ISA):

• It is an action-oriented, member-driven, collaborative platform for increased deployment of solar energy technologies as a means for bringing energy access, ensuring energy security, and driving energy transition in its member countries.
• The ISA was conceived as a joint effort by India and France to mobilize efforts against climate change through deployment of solar energy solutions.
• It was conceptualized on the side-lines of the 21st Conference of Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC) held in Paris in 2015.
• Its headquarter is located at Gurugram.
• The ISA’s Framework Agreement was amended in 2020, making all member states of the United Nations eligible to join.
• The ISA is guided by its ‘Towards 1000’ strategy which aims to mobilise USD 1,000 billions of investments in solar energy solutions by 2030, while delivering energy access to 1,000 million people using clean energy solutions and resulting in installation of 1,000 GW of solar energy capacity. This would help mitigate global solar emissions to the tune of 1,000 million tonnes of CO2 every year.
• Activities under the programmes focuses on 4 priority areas – Analytics & Advocacy, Capacity Building, Programmatic Support, and readiness and enabling activities, that help create a favourable environment for solar energy investments to take root in the country.

Practice MCQ:

With reference to International Solar Alliance (ISA), which of the following statements is/are correct?

1. All the member states of United Nations are eligible to become member of ISA.

2. ISA established Solar Payment Guarantee Fund to alleviate the burden of insurance premiums for solar developers.

3. ISA is guided by ‘Towards 1000 Strategy’ which aims to mobilise USD 1,000 billions of investments in solar energy solutions by 2030.

Select the correct answer using the codes given below:

(a) 1 only

(b) 2 only

(c) 1 and 3 only

(d) 1,2 and 3

Scroll down for answer

Ans. (c)

UPSC Prelims 2016

Consider the following statements:

1. The International Solar Alliance was launched at the United Nations Climate Change Conference in 2015.

2. The Alliance includes all the member countries of the United Nations. Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Scroll down for answer

Ans. (a)

Context: During the two-day National Ayush Mission Conclave 2023 important roundtable discussion was held for participating Health and Ayush Ministers from states and UTs governments. The major thrust of the discussion was to strengthen Ayush infrastructure through National Ayush Mission in states and UTs.

About National Ayush Mission:

• The flagship program of the National Ayush Mission was launched in 2014 by the Ministry of Ayush.
• It has played a crucial role in preserving and promoting India’s traditional systems of medicine and their integration into the mainstream healthcare system.
• It aims to enhance the availability, accessibility, and quality of Ayush healthcare services across the country through Ayush Health Wellness Centers (AHWCs) as part of the Government of India’s Ayushman Bharat scheme.
• The NAM comprises the components of Ayush Services and Ayush Educational Institutions in addition to newly introduced Ayush Public Health Programs.

Practice MCQ

Which of the following is one of the components of the National Ayush Mission (NAM)

1. Ayush Services

2. Ayush Educational Institutions

3. Ayush Public Health Programs

Select the Correct answer using the code given below

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Scroll down for answer

Ans. D

Context: Preliminary estimates conducted for Paris Agreement suggest that at least US$ 2.5 trillion (at 2014-15 prices) will be required for meeting its climate change actions between 2015 and 2030 (Government of India, 2015). India’s ambition of generating 175 gigawatts of renewable energy by 2022 also entails massive funding. The financial sector can play a pivotal role in mobilizing resources and their allocation in green activities/projects. Green finance is also progressively gaining traction in India. However, there are some challenges to green financing in India.

Challenges to Green financing:

• Lack of clear definition: There is no clear-cut definition for “Green Finance” in India. Various terms such as Climate finance, sustainable finance is used interchangeably with green finance. It led to misunderstanding among stakeholders and made it problematic to keep track of capital invested in green sectors.
• Green Washing: Greenwashing is the practice of channelling proceeds from green finance towards projects that have negligible environmental benefits and providing misleading information to the investors and public about the environmental impacts of the company. Such practises discourage green financing.
• Failure to internalize externalities: Infrastructure investments in India didn’t efficiently internalise the environmental externalities (Positive externalities are benefits arisen to third parties due to green investments and negative externalities are damages inflicted on third parties due to polluting investments). This resulted in insufficient capitalization of “green” projects and excessive investment in “brown” projects.
• Maturity mismatches: Generally green projects require long-term financing with low returns in the initial years. This results in mismatch between long-term green investment and relatively short-term interests of investors.
• Information asymmetry: Lack of information on commercial viability of green technologies and uncertain policies on green investments resulted in risk aversion by investors in projects of renewable energies.

Government’s Steps:

• Sovereign green bonds:
  • Sovereign green bonds are fixed interest-bearing financial instruments issued by any sovereign entity / inter-governmental organisation /corporation. The proceeds of these bonds are used only for environmentally conscious, climate-resilient projects.
  • The Reserve Bank of India (RBI) recently auctioned its maiden sovereign green bonds worth ₹8,000 crore under its Sovereign green bond framework.
  • There is no cap on foreign investment in these bonds because these instruments are considered as specified securities under the fully accessible route.

Green deposits: With a view to fostering and developing green finance ecosystem in the country further, RBI has put in place a Framework for acceptance of Green Deposits by the banks.

1. Which of the following statements about recently issued Sovereign Green Bonds is/are

correct?

1. Sovereign green bonds are fixed interest-bearing financial instruments
2. Only domestic investments are allowed to invest in these Bonds
3. These bonds are issued at a premium and hence yields are higher
4. Tax benefits are provided for investment in sovereign green bonds

Select the correct answer using the code given below:

(a) 1 only

(b) 1 and 2 only

(c) 1 and 3 only

(d) 2 and 4 only

Scroll down for answer

Answer: a