Current Affairs Current Affairs - 8 October 2015 - Vikalp Education

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Current Affairs - 8 October 2015

General Affairs

Cabinet Gives Nod for Blue Economy Cooperation With Seychelles
  • Cabinet Gives Nod for Blue Economy Cooperation With SeychellesNEW DELHI:  The Union Cabinet in a meeting chaired by Prime Minister Narendra Modi today approved the protocol for cooperation between India and Seychelles in "blue economy" signed in August this year.

    An official release said the Cabinet gave its ex-post facto approval to the protocol, laying down modalities of cooperation in ocean studies, scientific exploration and exploitation of sea-based resources for sustainable development and economic purposes, signed during the visit of Seychelles' President James Alix Michel on August 26.

    "Cooperation with Seychelles in blue economy would provide new data on ocean-based resources and also provide for sharing of expertise and technology developed by Indian scientists and research institutes," the release said.

    The protocol would also help domestic innovation in the field of ocean research and technology, it added.

    Officials said blue economy conceptualises oceans as "development spaces" where spatial planning integrates conservation, sustainable use, oil and mineral wealth extraction, bio-prospecting, sustainable energy production and marine transport.

      Core Values of Tolerance, Plurality Cannot be Wasted: President Mukherjee
      • Core Values of Tolerance, Plurality Cannot be Wasted: President MukherjeeNEW DELHI:  President Pranab Mukherjee today said the core values of diversity, tolerance and plurality of Indian civilisation must be kept in mind and cannot be allowed to be wasted, in remarks that come against the backdrop of the Dadri lynching over rumours of beef eating.

        "I firmly believe that we cannot allow the core values of our civilization to be wasted and the core values is what over the years the civilization celebrated diversity, promoted and advocated tolerance, endurance and plurality.

        "These core civilization values keep us together over the centuries. Many ancient civilizations have fallen. But that is right that aggression after aggression, long foreign rule, the Indian civilization has survived because of its core civilizational values and we must keep that in mind. And if we keep those core values in mind, nothing can prevent our democracy to move," he said.

        The President's remarks come in the wake of lynching of a 50-year-old man in Dadri, Uttar Pradesh by an enraged mob over rumours that he stored and consumed beef, which has sparked an outrage across the country.

        The President was handed over a coffee-table book on him at a function at the Rashtrapati Bhawan in New Delhi. The book written by Prabhu Chawla, Editorial Director of New Indian Express, was released by Vice President Hamid Ansari.

        Home Minister Rajnath Singh. Union Minister Mukhtar Abbas Naqvi, Delhi Chief Minister Arvind Kejriwal, Leader of Opposition in Rajya Sabha Ghulam Nabi Azad, fromer Jammu and Kashmir Chief Minister Farooq Abdullah and MPs were also present at the function.

        In his brief 15-minute address, President Mukherjee said being a political leader all along he felt shy speaking at such an occasion where a book on him was written.

        He said the country has made tremendous progress in many sectors and there is no limit to doing more.

        "There is no limit. We will have to do much more," he said.

        He added that there is no end to work in the President's office which is considered strictly Constitutional and recalled how his friends jokingly commented that he would not have anything much to do in the post.

        "I in my own way am making my contribution to make the country more important... After three years of coming here, I recognise that much more is to be done. There is no end to working in the President's office, which is considered strictly constitutional," he said.

        Lauding the strength of democracy in the country, the President said its electorate decisively decided to put an end to the era of coalition and gave a single party government.

        "Despite their diversity and despite having a long period of absence of single party majority, the Indian electorate decisively decided to make an end of that. Many of us thought that perhaps an era of coalition has reached and that no single party would ever come (to power)."

        "In true sense, the marvel of Indian democracy has its own strength and we must celebrate that," he said.

        He said he has closely seen many important events in the country happen before him right from the first election when people wondered how an election covering 350 million people can take place smoothly, to the last one.

        He also recalled his days when he entered Parliament as a member of the Rajya Sabha during a "turbulent period" when Congress faced a major crisis over bank nationalisation and eventually split.

        The President also recalled his mother telling him to go to school walking 10 kms every day and that impacted his mind to strive hard when there is "no option".

        He lauded the work of Prabhu Chawla, who along with his team put the book together, describing it as a "gift" from his friends and near and dear ones.

        Mr Ansari said the book is a small tribute to an eminent personality, who has a range of experience and depth of understanding issues.

        Praising the book, Rajnath Singh said to put President Mukherjee's life in a book is difficult to do so for such a personality who has not been in politics only to be in power and one who had strived successfully to bring about consensus in Parliament on many issues.

        "He played the most important role in bringing about consensus," the Home Minister said.

      Verify Employees' Service Annually: Centre Tells All Departments
      • Verify Employees' Service Annually: Centre Tells All DepartmentsNEW DELHI:  All central government departments have been asked to verify employees' service record annually and inform them of any deficiencies thereof in order to check delay in processing their pension.

        With the objective of eliminating delays in processing of cases of retiring government servants, the Personnel Ministry has asked the departments to immediately undertake an exercise to ensure completion of the entries of service verification and conclude within a defined time-frame.

        "Any gap in the verification of service may be intimated to the employee concerned, and simultaneously appropriate action for ensuring verification of missing spells may be taken by the Head of Office," it said in a directive to all ministries.

        The government servant concerned may also be informed of deficiencies and gaps as regards missing entries relating to verification of service and the period thereof, the order said.

        In order to preclude and cut down on delays in payment of retiral benefits to government servants retiring of superannuation, the ministries may consider annual service verification and intimation to every officer regarding service verification status so that any lapse is timely ascertained and corrective action taken.

        "The exercise of annual verification be monitored by every ministry, department or cadre controlling authority on a quarterly basis," it said.

        There are about 50 lakh central government employees.

        All ministries are requested to issue suitable instructions to all Heads of Offices, and Pay and Accounts Offices for strict compliance of the instructions so as to preclude any delays in disbursement of retiral benefits of government servants, the directive said.

      Aadhar Card Can't Be Used For All Services For Now, Supreme Court Says
      • Aadhar Card Can't Be Used For All Services For Now, Supreme Court SaysNEW DELHI:  The Aadhar Card cannot be used to avail more services, like opening bank accounts and getting phone connections, for now, the Supreme Court ruled today, referring a plea by the Centre to a larger bench.

        Currently, the card can be used only for availing subsidies under the public distribution system and purchasing kerosene and cooking gas and that, too, voluntarily.

        For now the ruling will remain, until a Constitution bench hears the case. The Centre is likely to move the court tomorrow to form the larger bench.

        After a slew of blows to the unique identity or UID programme, the Centre, Reserve Bank of India, stock market watchdog SEBI, telecom regulator TRAI, and a number of states moved the Supreme Court for extending the voluntary use of Aadhar card to other services.

        The government's ambitious UID scheme has been challenged in court over privacy concerns since it uses biometric data like fingerprint and iris scans.

        The court had already referred a related debate over whether privacy is a fundamental right to a constitution bench.

        In a two-hour-long hearing yesterday, high drama unfolded in court with heated exchanges between Attorney General Mukul Rohatgi, representing the Centre, and challenged by lawyer Shyam Diwan.

        The Attorney General argued that when people are prepared to forgo the right to privacy for availing a "larger benefit" why should court "stand in the way?"

        Representing petitioners Justice KS Puttaswamy and an NGO, Nagarik Chetna Manch, lawyer Shyam Diwan argued that Right to Privacy, whether it is for the poor or the illiterate, is "sacrosanct and can't be compromised".

      Knee Implant Designed for Asian Anatomoy Introduced

      • Knee Implant Designed for Asian Anatomoy IntroducedCOIMBATORE:  An Orthopaedic hospital in the city has introduced knee implant, claimed to be designed specifically for Asian anatomy and life style.

        The 'freedom knee' implant, made of cobalt chromium, with hardened polyethylene, would suit the Indian patients, with smaller sizes of knees and hip, compared to those in United States and UK, Dr M Muthu Saravana Kumar, Orthopedic and Joint Replacement surgeon and chief of Muthu's Hospital, told reporters in Coimbatore today.

        The new implant was as part of knowledge exchange program in the field of knee replacement with the hospital and Dr Adam Cote, a renowned orthopedic surgeon from Carlson City, USA, he said.

        Dr Cote, who was  present said this new implant will suit the Indian lie style demands, which needed significant bending (high flexion) of knee many  times beyond 150 degrees.

        It was always been Indian doctor's challenge to provide the joint that was perfect fit for the patient's anatomy, conserves bone and at the same time was able to give high flexion life style, Dr Cote said.

        This implant will also suit the obese people of over 120 KGs weight, he said.

        The objective of the hospital was to exchange experience and expertise in the field of joint replacement with experts like Dr Cote on regular and long term basis, Dr Muthu said.

        A 65-year old woman patient, who was the first to be implanted with new device was present at the press conference.

      Business Affairs 

      Sensex closes 103 points up, Nifty at 8,177 mark
      • Sensex closes 103 points up, Nifty at 8,177 markDomestic markets rose for sixth straight day to close near its one-and-a-half month high after trading rangebound throughout Wednesday.
        The S&P BSE Sensex climbed 102.97 points to end at 27,035.85, while broader 50-share Nifty settled at 8,177.40, up 24.50 points.
        Hindalco and Vedanta were the top Sensex gainers and ended higher by 9.64 and 5.83 per cent, respectively. The sentiment on the Street was positive with 21 out of 30 Sensex stocks ending in green.
        CNX Metal Index ended 3.25 per cent up and was the top sectoral gainer on the NSE.
        Domestic markets also got a boost from Prime Minister Narendra Modi's statement that the Goods and Services Tax (GST) will be rolled out from next year, brokers said.
        The S&P BSE midcap index closed 0.09 per cent higher on Wednesday while the BSE smallcap index rose 0.40 per cent. 
        "Margin expansion would continue to benefit mid-caps in September quarter results while macro data points would continue to showcase marginal improvements," said G Chokkalingam, founder of Equinomics, a Mumbai-based research and fund advisory firm.
        The upcoming earnings reporting season with Infosys due to post July-September results on October 12, and macro data including inflation, industrial output next week would be key domestic data points to watch in the near term.
        Among other Asian markets, Japan's Nikkei closed the day 0.75 per cent up at 18,322.98, while the South Korean Kospi ended with gains of 0.8 per cent. Hong Kong's Hang Seng index settled at 22,515.76, up 3.13 per cent. The Chinese markets were close today on account of public holidays.
        The US Dow Jones Industrial Average ended 0.08 per cent higher in yesterday's trade.

      Govt pushes for made-in-India plane Tejas in Indian Air Force
      • Govt pushes made-in-India plane on reluctant militaryThe government has turned down the military's request to expand the acquisition of 36 fighter planes from Dassault Aviation SA to plug vital gaps, officials said, nudging it to accept an indigenous combat plane 32 years in the making.
        Prime Minister Narendra Modi's decision is in line with his Make-in-India policy to encourage domestic industry.
        Since it took over last year, the Modi administration has repeatedly said its overriding goal is to cut off the military's addiction to foreign arms which has made it the world's top importer.
        The air force wanted the government to clear an additional 44 Rafale medium multirole aircraft on top of the 36 that Modi announced during a visit to Paris this year that are to be bought off-the-shelf to meet its urgent requirements.
        But a defence ministry official said that Defence Minister Manohar Parrikar had told the air force that there weren't enough funds to expand the Rafale acquisition and that it must induct an improved version of the indigenous Tejas-Mark 1A.
        "The IAF (air force) needs to have a minimum number of aircraft at all times. The LCA is our best option at this stage, given our resource constraints. The Rafale is our most expensive acquisition. The LCA is our cheapest in the combat category," the defence official said.
        The air force says it requires 45 fighter squadrons to counter a "two-front collusive threat" from Pakistan and China. But it only has 35 active fighter squadrons, parliament's defence committee said in a report in April citing a presentation by a top air force officer.
        With the drawdown of Soviet-era MiG 21 planes under way, the air force would be down to 25 squadrons by 2022 at the current pace of acquisitions, it told the committee.
        Cleared by the government in 1983, the LCA designed by the government's Defence Research and Development Organisation (DRDO) was meant to be the backbone of the air force due for induction in 1994.
        Instead, it suffered years of delay and chaos with scientists trying to build the world's most modern light combat aircraft from scratch, including the engine.
        Eventually they scrapped the engine, turning to GE Aviation and lowering their ambitions for a state-of-the-art fighter. So far, only one aircraft has been produced and even that is awaiting final operational clearance, now delayed to early 2016.
        "In January this year, they had given one LCA ... which had not completed its flight testing. They handed over the papers to us. We do not make a squadron with one aeroplane. That is where we are," said an air force officer speaking on condition of anonymity.
        An independent investigation by the Comptroller and Auditor General of India into the LCA programme identified 53 "shortfalls" in the plane. In a report in May, the auditor said that the plane wasn't as light as promised, the fuel capacity and speed were lower than required and there were concerns about safety.
        Retired Air Marshal M. Matheswaran, a former deputy chief of the Integrated Defence Staff, said the LCA was obsolete.
        "It is a very short-range aircraft which has no relevance in today's war fighting scenarios. If you are trying to justify this as a replacement for follow-on Rafales, you are comparing apples with oranges," he said.
        He said the plane was at best a technology demonstrator on which engineers could build the next series of aircraft, not something the air force could win a war with.
        "We would like to have the MMRCA (Medium Multi-Role Combat Aircraft) variety of aircraft. At least about six squadrons, to my mind," the head of the air force, Arup Raha, said at the weekend, referring to the Rafale class of fighters.
        But K. Tamilmani, the DRDO's aerospace chief, said the modified version of the Tejas addressed most of the air force concerns. These included electronic warfare system, flight computer, radar and maintenance problems.
        "Almost all the problems get solved with the 1A. There will always be scope for improvement, but there are no flight safety issues," he said.
        State-run Hindustan Aeronautics Limited would be able to ramp production to 16 a year by 2017 to meet the air force's demands, he said.
        "We Indians are extremely good at blaming each other - at blaming it all on Indian production," he said.
        Dassault declined any comment on the government's decision to cap the Rafale fleet.
        A source close to Sweden's Saab, which has been pushing its Gripen light fighter, said that it was respectful of India's decision to try to develop its domestic military base.
        "There's still a huge gap that needs to be filled. We are marketing it (the Gripen) under the Make-in-India umbrella," he said. "Even if you add the seven squadrons of the Tejas, there is still a requirement (with MiGs retiring etc). It's a question of timing. Can they build these for when they need them?" he said.

            PM Narendra Modi to tell states to raise electricity prices
            • PM Modi to tell states to raise electricity pricesPrime Minister Narendra Modi is to tell states to raise electricity prices in return for access to a financial bailout package, a politically contentious move that risks a backlash from farmers and consumers long used to free or cheap power.
              Modi has made overhauling country's largely loss-making utilities , buckling under $66 billion of debts, a priority, convinced that if he can fix their finances he will recover his reputation as an economic reformer willing to take tough decisions.
              State-run electricity distributors are running out of cash and struggling to repay loans, squeezing banks' ability to spur credit growth and undermining Modi's campaign to attract more energy-hungry manufacturers to build new factories.
              Under a rescue package that could go to the Cabinet for approval as early as this week, states will be told they must work with local regulators and utilities to raise tariffs that have been kept artificially low, a senior government source with direct knowledge of the plan told Reuters.
              In return for raising prices, the eight worst affected states will be allowed to absorb up to 75 per cent of the debt on the distributors' books depending on their fiscal position, the source said, requesting anonymity because the plan is not yet public.
              After Cabinet approval, states will need to strike agreements with distributors and the power ministry, the government source said. The source added that it will not be easy and that each deal will need to be tailored individually, with varying tariff rises and performance targets.     
              Sensitive Subject
              In India, the price of power is a sensitive subject and generally decided by individual state regulators. New Delhi's past attempts at instigating reform, including a 2012 rescue plan under Modi's predecessor, have largely failed.
              Many Indians view free or cheap power as a right.
              Politicians appeal to key groups of voters like farmers or the poor by keeping prices low and ignoring theft, prompting scepticism about whether states will agree to any package that forces tariff hikes.
              "There are two things that states completely avoid: raising tariffs for farmers and privatisation. These are hugely political," said Debasish Mishra, a power expert at Deloitte. "The political parties know what sells and what will keep them in power."
              Recent attempts at raising tariffs have proven politically difficult. Rajasthan, whose utilities owe $9 billion, this year postponed an attempt to hike prices after huge opposition from its powerful farming community.
              But Modi successfully overhauled the power sector as chief minister in Gujarat in the mid-2000s. He saw off opposition to metering farmers and clamping down on consumer theft, and the state now enjoys reliable power supplies that the majority pay for, with low levels of theft.
              By linking price rises to reduced debt, the government hopes to give utilities the financial space to purchase more power and end blackouts, and to avoid future losses by ensuring they sell electricity at or above cost.
              Deloitte's Mishra said the government was likely to have more success in states ruled by Bharatiya Janata Party.
              SK Agarwal, finance director at Uttar Pradesh Power Corporation, serving a largely rural state ruled by a regional party, said he was still awaiting details of the plan, but since only the local government could decide tariffs it would object to any proposal imposed by New Delhi.
              He has previously said the utility had no plans to raise prices.

            Snapdeal to invest $20 million in logistics firm gojavas
            • The $20 mn funding will be used by gojavas to expand its footprint to include 100 more cities within the next 6-12 months, Snapdeal saidSnapdeal has invested $20 million (around Rs 130 crore) in logistics firm gojavas to help it expand operations in the country.
              The funding is part of the e-commerce major's plan of investing $200 million to strengthen delivery and logistics operations.
              Snapdeal in March had announced that it will invest $150-200 million in the next one year on expanding its delivery operations as the competition in the booming Indian e-commerce market heats up.
              In the same month, Snapdeal had picked up stake in gojavas. According to sources, the company had picked up stake in the company for about Rs 200 crore.
              The $20 million funding will be used by gojavas to expand its footprint to include 100 more cities within the next 6-12 months, Snapdeal said in a statement today.
              It has invested $100 million (approx Rs 650 crore) in the last six months to improve it delivery timelines by 70 per cent, the statement said.
              The companies have been working together to build capacity and expand reach. gojavas' reach expanded to include 150 more cities within 100 days of having entered into a partnership with Snapdeal.
              gojavas currently delivers to 350 cities up from 150 cities pre-partnership.
              "gojavas is one of our best performing last mile logistics partners. The company s average timeline for delivering Snapdeal orders has reduced by a full 24 hours in the last six months," Snapdeal co-founder and Chief Operating Officer Rohit Bansal said.
              With freshly infused funds, the aim is to help gojavas become more successful and further expand their reach, he added.
              "Our strategic partnership with Snapdeal has helped us become one the largest independent logistics players in the country with current revenue run rate of Rs 500 crore, while keeping our operations sustainable and efficient," gojavas Chief Operating Officer Vijay Ghadge said.

                    THE WEAK LINK
                    • The Weak LinkIf there is one electoral promise that the Indian voter is unlikely to pardon the Narendra Modi government for non-fulfilment by the next Lok Sabha elections, it will probably be 'power for all by 2019'. It's an emotive issue. It evokes anger when it affects children's preparations for exams or is the cause of 'dark' weddings of brethren and that botched surgery because of power failure - all very harsh realities. Four years down the line, the electorate will assess the government not on whether the target has been achieved on paper, but on ground. Rhetoric will have to give way to reality and targets to execution.
                      Successive governments have played with these emotions of the electorate without actually delivering on the promise. India - the world's third largest producer and consumer of power - continues to remain incapable of supplying 24x7 power to its citizens, even 68 years after Independence. Even though 98 per cent of Indian villages have at least a power line, only 80 per cent of households have access to power. There are still 28 crore people who are without electricity. The country's per capita power consumption stands at only 1,010 KWh, which is one-third of China's and less than one-tenth that of the US.
                      But there is hope. With India now sitting on a 31 per cent higher power generation capability than its peak demand of 164 GW (a legacy of the preceding UPA government) and the Piyush Goyal-led power and coal ministries working in tandem to ensure sufficient coal supplies to all power plants (an achievement of the current NDA government), the country is half way there to realise its dream of 24x7 power.
                      The other half remains a gargantuan task - both politically unpalatable and financially debilitating. It involves fixing an enormously inefficient and bankrupt power distribution system that has accumulated losses in excess of Rs 3.19 lakh crore. This explains, why in the last 12 years of reforms, governments considered it too much of a hot potato and left it to be dealt with by the next one.
                      Prime Minister Narendra Modi has been promising 24X7 access to electricity to every Indian by 2019. (Photo: Shekhar Ghosh)
                      Its root cause lies in the inability of state governments to muster up courage and raise power tariffs as power generation and distribution costs continued to rise. That has laid 21 of India's 29 power distribution companies ailing; preventing modernisation of equipment and networks, and creating a vicious cycle that they are now struggling to get out of. According to a study by rating and research firm ICRA, the state discoms likely consumed subsidy worth Rs 72,000 crore in 2014/15. In 2015/16, this is expected to be more than Rs 80,000 crore, expanding the total accumulated losses to nearly Rs 4 lakh crore.
                      Reforms would require states to swallow the bitter pill. But, will they?
                      A Mountain Of Losses
                      Nearly 70 per cent of the Rs 3.19 lakh-crore losses are incurred by eight states (Rajasthan, Uttar Pradesh, Haryana, Jharkhand, Tamil Nadu, Andhra Pradesh, Telangana and Bihar). The NDA government believes that the discoms of the first four states are in dire straits while the situation in the other four is reasonably challenging.
                      The biggest culprit is Rajasthan where the BJP came to power in 2013, after five years in the opposition. Rajasthan Chief Minister Vasundhara Raje Scindia is in a Catch-22 situation. Her state may be the investors' new favourite destination, but Raje must find a way out for the state's power distribution companies that continue to bleed profusely. So far, however, she has failed to break the shackles.
                      'States will have to finance the losses made by their distribution companies. They must not expect public sector banks to fund the deficits', says Finance Minister Arun Jaitley. (Photo: Chandra Deep)
                      The state's three distribution companies had accumulated losses of Rs 77,453 crore by FY14/15. Today, the losses have crossed Rs 81,000 crore - roughly 15 per cent of Rajasthan's gross state domestic product (GSDP) at current prices. Between 2005 and 2011, the state did not raise power tariffs, resulting in a financial loss to discoms. Losses mounted despite the state opting for a financial restructuring plan in 2012, only to witness a marginal fall in 2014/15 (Rs 13,100 crore) against the previous fiscal's Rs 15,643 crore. This year, it is expected to come down to Rs 10,000 crore. Rajasthan's plight is no different from the others, and the discoms are threatening to rein in India's reignited growth story.
                      The PM Modi-led NDA government is working on a plan to push the states for financial and technical restructuring. Finance Minister Arun Jaitley clarifies this would not be a bailout plan like the previous two attempts by the UPA government. Instead, bureaucrats at his ministry say that if the states fail to cut losses and abide by the financial restructuring, they will have to cope with punitive action in the form of curtailed funds from the central pool.
                      Though the Centre's plan is expected to be unveiled in the second week of October after the PMO and cabinet vets it, BT pieced together information from various quarters about how the government is planning this rescue mission.
                      The government has constituted a distribution reforms committee under the power secretary, along with secretary (Banks), chairpersons of Power Finance Corporation and Rural Electrification and representatives of Torrent Power, Tata Power and CESC. But the assistance may not come easy as the distribution companies are been asked to go through a list of must-dos.
                      'Some states were not charging adequate money for power, which was affecting the health of their discoms. Tariffs must reflect the true cost of supply', says Power Minister Piyush Goyal. (Photo: Vikram Sharma)
                      The Centre is likely to push the respective state governments to transfer the debts of their respective discoms on their own books, and raise bonds against a part of the debt every year until most of the loss is wiped out from the books of the power distribution companies. "States will have to finance losses made by their distribution companies. The states must not expect public sector banks to fund the deficits faced by power distribution companies," says Jaitley. These provisions are stringent but Deepak Amitabh, CMD of Power Trade Corporation says: "These are the best solutions at the time with the given scenario (mounting losses)."
                      To give these states some elbow room, the finance ministry may also allow an additional 25 basis point margin under the provisions of Financial Responsibility and Budget Management (FRBM) Act which would limit the states' fiscal deficits to 3 per cent of their GSDP. The new norms may also extend the states' debt ceiling to 10-20 per cent of GSDP. The government is also working out norms for restructuring loans from financial institutions. However, the states do not have the financial wherewithal to absorb or service this enormous debt. For instance, in the case of Rajasthan, the losses are equal to 12 per cent of its GSDP - something that could cripple its economy. And, it may not have the bandwidth to transfer the loans on its books. For instance, even after accounting for the 25 bps extension, Rajasthan would be able to take barely Rs 1,750 crore of additional debt against its accumulated losses of over Rs 81,000 crore.
                      The Centre wants the states to transfer most of these losses over a period of five years. However, given that the states' own finances continue to be fragile, the new proposal might suffer the same fate as the previous government's failed financial restructuring plan introduced in 2012. The other troubled state is Uttar Pradesh, where the total losses of distribution companies stand at around 10 per cent of its GSDP.
                      But, states really don't have an option. "There is a feeling among the leadership in these states that they have reached a point of no return," says PTC's Amitabh. In fact, even the Reserve Bank of India has put the governments of Rajasthan, Uttar Pradesh, Haryana and Jharkhand on notice.
                      A Bitter Pill To Swallow
                      Eventually, however, it will all boil down to whether the state governments have the political capital to swallow the bitter pill and raise tariffs to finance the losses and pay back the bonds. In the last three years, some states have increased tariffs, but the hike has been sub-optimal. In 2012/13 Tamil Nadu raised the tariff by 37 per cent after a gap of almost seven years. In fact, this year, too, the state raised the tariff by 15 per cent, but is yet to cover the cost of supply. "The political leadership needs to take a call on this, and they are left with no other option," says Bakul Dholakia, noted academician and director general of the Delhi-based International Management Institute.
                      While Business Today's issue was being put to bed, power ministry officials were in hectic parleys with states to convince them to adhere to the terms and conditions of revising the tariff regularly and cutting Aggregate Technical and Commercial (AT&C) losses. "Some states were not charging adequate money for power, which was affecting the health of these discoms," Goyal laments.
                      In November 2011, the Appellate Tribunal of Electricity asked all the state regulators to be more proactive in tariff determination. Subsequently, the all-India tariff correction was 12.3 per cent. The worst eight worst performers revised their tariff by 20.9 per cent. But, subsequently, they lost steam. In FY14/15 tariff rationalisation came down to 8.9 per cent and in the following fiscal it was just 7.6 per cent. "Annual tariff hikes of 10 per cent over the next three years and a reduction of at least 200 basis points in AT&C losses are necessary for discoms to break even in the medium-term," says Sudip Sural, Senior Director, CRISIL Ratings.
                      'Barring some exceptions, state-run companies are unable to run the distribution business at levels comparable to the best-run utilities anywhere in the globe', says Anil Sardana, MD & CEO, Tata Power
                      Punjab and Madhya Pradesh decided not to opt for the financial restructuring plan (FRP), but they continue to reel under huge debt. Yet, this year Punjab avoided increasing tariffs as it prepares to go for polls in February 2017. Its average cost of supply is Rs 6.37 per KWh, whereas the average tariff is Rs 5.62 per KWh. This would require a 13 per cent revision in tariff. Punjab's distribution company is expected to incur a loss of Rs 3,269 crore this year. It already has accumulated losses of Rs 8,049 crore.
                      Banking On Goyal
                      The biggest criticism of the new plan is that it may turn out to be another version of the previous government's failed FRP which was grossly ineffective in persuading the states to fall in line. After all, the two plans have a lot in common.
                      In 2012, the erstwhile UPA government's FRP had restructured short-term liabilities of distribution companies and states were asked to take up half of them through state-guaranteed bonds in a phased manner. The other half was converted into long-term loans with a guarantee from the respective states. But the scheme failed miserably. Only eight states took up the proposal, but could not adhere to the terms and conditions, as the total accumulated losses rose from Rs 2.5 lakh crore in 2013/14 to 3.19 lakh crore in 2014/15 and are projected to add another Rs 60,000 crore, annually. "This scheme provided the much-needed liquidity for these companies, but states could not curtail commercial and technical losses, resulting in higher financial losses," says Sural.
                      According to RBI Governor Raghuram Rajan, careful decision-making is key to put the power distribution companies back on track with healthy capital structures and to absorb the debt that has been created over time with the right sort of interest rates. Piyush Goyal's ministry is already working with states on technical and distribution sector reforms to fund the segregation of feeders for agriculture and other use, setting of new feeder stations, and transforming last-mile connectivity.
                      Habitual Offenders
                      Goyal's success or failure will depend on whether he is able to convince the habitual offenders to mend their ways. In 2013, for instance, when states such as UP were busy negotiating the terms of FRP and had promised to reduce power theft and other commercial losses, miles away in Germany, budding documentary makers Deepti Kakkar and Fahad Mustafa premiered Katiyabaaz at the Berlin International Film Festival. The 80-minute documentary captured the ground reality, where a professional Katiyabaaz or illegal connection vendor brings the entire distribution company in Kanpur to its knees. The documentary also focuses on why and how the big ideas to curtail the inefficiencies of distribution companies fail on ground.
                      'There is a need to take a very careful decision to put power distribution companies back on track and absorb the debt that has been created over time in the right place', says RBI Governor Raghuram Rajan. (Photo: Rachit Goswami)
                      UP continues to fare badly on collection efficiency. In 2013, it reported 78 per cent collection against the national average of 94 per cent. Its AT&C losses were around 37 per cent versus the national average of 25.4 per cent. In the first week of September, after a presentation at Delhi, the Uttar Pradesh Chief Secretary Alok Ranjan asked his power secretary Sanjay Agarwal to prepare an internal assessment report of Uttar Pradesh Power Corporation's line losses. The results were startling. For example, losses in PM Modi's Lok Sabha constituency, Varanasi, had increased from 43.18 per cent to 50.13 per cent, while in Azamagarh, a new pocket borough of Mulayam Singh Yadav, it had risen from 56.84 per cent to 63.78 per cent. Both districts are getting 24x7 electricity because of their new VIP status.
                      "This is the problem. 24x7 supplies are assured only because of political considerations, not because of efficiencies. This is a reality in most jurisdictions of the loss-making distribution companies. If they continue to do this, losses are bound to increase," says Shailendra Dubey, Chairman of All India Power Engineers' Federation. Meanwhile, various states, including UP (in mid-September) have issued directives to ensure increased power supply in districts. This shows a consistent improvement in line losses. But there are many like Dubey who remain suspicious of the situation on ground.
                      In comparison to the national average of approximately Rs 0.76 per KWh difference in tariffs, states such as Tamil Nadu, Rajasthan, UP and Jharkhand will still have to bridge the 1.5 per KWh gap. In 2013, it was Rs 1.63 per KWh.
                      Madhya Pradesh Chief Minister Shivraj Singh Chauhan told BT that it requires political willingness to cut down power theft. Madhya Pradesh, in 2012 had accumulated losses of Rs 20,000 crore, but did not opt for FRP. "We asked all applicants who came for renewal and issuance of fire arms and mining licenses to get a no-due certificate from distribution companies. We also changed the law for panchayats, local bodies and co-operatives. All the contestants now need to clear their dues," the CM said, adding: "You have to be tough to deal with power theft." Haryana has also modified its local body laws along these lines.
                      Friends In Need
                      A friend in need is a friend indeed. At least that's what Goyal must be hoping from chief ministers of the BJP-led states. Four out of the eight worst-performing states have chief ministers from parties that are part of the NDA. "Even states governed by parties not aligned to the BJP's ideology are today working towards 24x7 supply," says Goyal. He is referring to UP and Bihar.
                      But has Goyal's plan incorporated the lessons learnt from the failure of FRP? "One of the lessons is poor execution. Today,electricity is a huge political issue. Every CM wants to ensure 24x7 electricity before he goes to poll," says the power minister.
                      Since banks are not playing ball with the troubled distribution companies, they are also finding it difficult to buy electricity. Instead, states, including Delhi, are asking the power ministry to allow revision/cancellation of power purchase agreements, or PPAs, so that they can buy power at a lower price in the spot market. Today's spot market price is at Rs 2.82 per KWh as against Rs 3.67 per KWh two years ago.
                      'It requires political willingness to cut down theft. We changed the law for panchayats, local bodies and co-operatives. All contestants now need to clear their electricity dues', says Shivraj Singh Chauhan/CM, Madhya Pradesh. (Photo: Chandra Deep)
                      So, discoms would rather surrender the unfavourable PPAs of the past. Delhi's discoms, for instance, want to surrender the 2,255 MW provided by 11 NTPC-owned plants, including 693 MW from APPCL Jhajjar (Aravali) and 735 MW from Dadri-II. "The cost from Jhajjar is Rs 10 per unit. The Dadri II power sells at Rs 5.4 per unit," says the CEO of a Delhi discom. The state may save up to Rs 500 crore a year if it can surrender these PPAs. Similarly, in UP, Reliance Infrastructure's Rosa plant sells at Rs 6.05 a unit.
                      For now, Goyal has started with discoms that are in a relatively better financial state. On September 22, it signed an agreement with three states - Meghalaya, Goa and Uttarakhand - that have been asked to cut losses and inefficiencies and revise tariffs accordingly. "These states can ask for financial support but only when their generation, transmission and distribution utilities abide by the rules of the respective state electricity regulatory commissions," a power ministry statement said after the agreement was signed.
                      CRISIL is preparing a similar roadmap for 11 other states, including Uttar Pradesh, Chhattisgarh, Madhya Pradesh, Karnataka, Tripura and Puducherry. While Deloitte has been appointed consultant for Jharkhand, Assam, Maharashtra, West Bengal and Tamil Nadu, Mecon will suggest a roadmap for Bihar, Telangana, Gujarat, Punjab and Delhi.
                      Subsidy Maze
                      The scheme in the works also pushes state governments to rationalise the subsidy payment mechanism. "Tariff is a state subject. Subsidies need to be paid upfront. Delays only add to the inefficiencies of distribution companies," says a senior officer in the power ministry who is privy to these discussions. This is a political hot potato. Every big state gives subsidy support of 20-25 per cent to distribution companies. Some, like Andhra Pradesh and Punjab, provide free power to farmers. Once the amendments in the Electricity Act, 2003, become law, these states would not be able to continue with these freebies. The amendments were tabled in Parliament last year and were referred to a select committee. The report was submitted on May 7. Fresh amendments based on the committee's recommendations will be tabled in the winter session of Parliament.
                      The current tariff rules allow distribution companies to cross-subsidise consumers. For example, domestic consumers pay less and the revenue shortfall is met through higher tariffs on institutional users. The proposed amendments seek to make way for segregation of distribution and transmission businesses. Also, multiple distribution licences could be issued, which means consumers will be able to choose their discoms. But the flip side is that states may have to undergo another round of losses. "The incumbent suppliers, which will be state-owned distribution companies, will have to supply to the rural segment and other low-paying consumers. But there are no provisions for subsidies in the Bill," says Dubey of AIPEF.
                      'Annual tariff hikes of 10 per cent over the next three years and reduction of at least 200 basis points in AT&C losses are necessary for discoms to break even', says Sudip Sural/ Senior Director, CRISIL Ratings.
                      "Today a handful of distribution companies have been privatised. Barring some exceptions, state-run companies are unable to run the distribution business at levels comparable to the best-run utilities anywhere in the globe," says Tata Power CEO Anil Sardana. He cites the example of his company's subsidiary distributing power in North Delhi that reports profits. Rajasthan, too, is in the process of privatising three of its discoms.
                      Meanwhile, it's a tough balancing act for the Centre as it pushes to realise the dream of supplying power 24x7. Though there is always a slip between the cup and the lip, where there is a history of slips, it's anxiety that overwhelms confidence in the system.

                        General Awareness


                          • 1. On 16 September 2015, RBI in-principle granted licenses to how many applicants among 72 applicants to set up small finances banks that are all mainly microfinance and small finance companies?
                            1) 27
                            2) 19
                            3) 14
                            4) 6
                            5) 10

                            2. Which among the following entities did not get license to start the small finance banks?
                            1) Au Financiers (India) Ltd - Jaipur
                            2) Capital Local Area Bank - Jalandhar
                            3) SKS Micro Finance
                            4) Disha Microfin Private Ltd - Ahmedabad
                            5) Equitas Holdings - Chennai

                            3. Which among the following entities did not get license to start the small finance banks?
                            1) ESAF Microfinance and Investments Private Ltd - Chennai
                            2) Janalakshmi Financial Services Private Limited - Bengaluru
                            3) Suryoday Micro Finance Private Ltd - Navi Mumbai
                            4) Ujjivan Financial Services Private Ltd - Bengaluru
                            5) All of the above entities got permission to start small finance banks

                            4. Which of the following activities cannot be done by the new small finance banks as per RBI order?
                            1) Take small deposits and provide loans
                            2) Distribute mutual funds and other simple third-party financial products
                            3) Can be a business correspondent of any other bank
                            4) Distribute insurance products
                            5) All of the activities can be done by Small Finance Banks

                            5. Small Finance Banks must disburse ........ of their total adjusted net bank credit to priority sector.
                            1) 35%
                            2) 25%
                            3) 50%
                            4) 75%
                            5) 45%

                            6. The Small Finance Banks maximum loan size would be ......... of capital funds to single borrower and 15% to a group as per the present RBI rules.
                            1) 20%
                            2) 25%
                            3) 40%
                            4) 50%
                            5) 10%

                            7. Minimum 50% total loans of Small Finance Banks should be up to Rs. ........
                            1) 10 lakh
                            2) 75 lakh
                            3) 25 lakh
                            4) 5 lakh
                            5) 15 lakh

                            8. Which of the following activity the Small Finance Bank cannot do?
                            1) They can't lend to big corporate houses.
                            2) They can't lend to big groups.
                            3) Cannot set up subsidiaries to undertake non-banking financial services activities.
                            4) Other financial activities of the promoter must not mingle with the bank.
                            5) All of the above activities cannot be done by Small Finance Banks.

                            9. In the Small Finance Banks, promoter's minimum initial contribution to the paid-up equity capital shall be at least .........
                            1) 10%
                            2) 20%
                            3) 25%
                            4) 40%
                            5) 74%

                            10. Small Finance Banks minimum paid-up capital would be .........
                            1) Rs.200 cr
                            2) Rs.50 cr
                            3) Rs.10 cr
                            4) Rs.100 cr
                            5) Rs.1000 cr

                            11. For the Small Finance Banks, capital adequacy ratio should be ......... of risk weighted
                            assets where as Tier-I should be 7.5% of the risk weighted assets.
                            1) 15%
                            2) 10%
                            3) 11.5%
                            4) 17%
                            5) 20%

                            12. Foreign shareholding capped at ......... of paid capital of the Small Finance Banks.
                            1) 74%
                            2) 25%
                            3) 40%
                            4) 49%
                            5) 29%

                            13. Foreign Portfolio Investment (FPI) in the Small Finance Banks must not be more than .........
                            1) 24%
                            2) 14%
                            3) 29%
                            4) 74%
                            5) 49%

                            14. Which of the following entity did not get license to start Small Finance Bank?
                            1) Dewan Housing
                            2) IIFL Holdings
                            3) SKS Microfinance
                            4) UAE Exchange
                            5) All of the above did not get license

                            15. Which bank is planning to launch 'green bonds' this year to enable fund raising for investments in projects with environmental benefits?
                            1) SBI
                            2) HDFC
                            3) HSBC India
                            4) YES Bank
                            5) Kotak Mahindra Bank

                            16. RBI launched a module for reporting Foreign FCTRS on eBiz portal of the Ministry of Commerce & Industry on 24 Aug 2015. FCTRS stands for .........
                            1) Foreign Currency Truncation of Shares
                            2) Foreign Custodian Transfer of Shares
                            3) Foreign Currency Transfer of Shares
                            4) First Currency Transfer of Shares
                            5) None

                            17. Indian Railways developed a HVT toilet design that combines the advantages of Vacuum toilets and Bio-toilets. HVT stands for .........
                            1) Hit Travel Toilet
                            2) Hybrid Variety Toilet
                            3) High Vacuum Toilet
                            4) Hybrid Vacuum Toilet
                            5) Hybrid Value Toilet

                            18. International Toilet Day is on .........
                            1) 4 October
                            2) 5 December
                            3) 21 March
                            4) 19 November
                            5) 9 November

                            19. None of the above (NOTA) Option symbol in EVM is .........
                            1) a small ballot paper having BIG Words 'NO' on it
                            2) a small ballot paper having RED LIGHT mark
                            3) a small ballot paper with a green cross on it
                            4) a small ballot paper with a black cross on it
                            5) a small ballot paper with a Red cross on it

                            20. NOTA symbol for EVMs designed by Prof. Tarun Deep Girdher of NID of Ahmadabad. NID stands for .........
                            1) National Initiation of Design
                            2) National Institute of Disaster
                            3) Neonatal Institute of Design
                            4) National Institute of Design
                            5) None of above

                            21. On 1 September 2015, Union government announced to waive the controversial MAT on capital gains made by Foreign Institutional Investors (FIIs) prior to April 1, 2015 on the recommendation of the Justice A.P.Sha Committee. MAT stands for .........
                            1) Minimum Annuity Tax
                            2) Maximum Alternate Tax
                            3) Minimum Asset Tax
                            4) Moderate Alternate Tax
                            5) Minimum alternate tax

                            22. India and which nation on 17 September 2015 jointly created a Joint Challenge Coin to symbolize their unique partnership in creating a next-generation aircraft carrier for the Indian Navy?
                            1) UK
                            2) China
                            3) Russia
                            4) USA
                            5) South Korea

                            23. Nepal's Constituent Assembly on 16 September 2015 approved the new Constitution. The Constituent Assembly headed by .........
                            1) Chiranjivi Nepal
                            2) Rambharan Yadav
                            3) Sushil Koirala
                            4) Subash Nembang
                            5) Parmanand Jha

                            24. Who is invited by UNO Secretary General Ban Ki-moon to serve in UN's High Level Advisory Group on Sustainable Transport (HLAG-ST) for 3 years. He is also called Metro Man of India?
                            1) Suresh Prabhu
                            2) Manoj Sinha
                            3) E. Sreedharan
                            4) A.K. Mittal
                            5) Verghese Kurien

                            25. Which of the following cities named as the World Book Capital for 2017 by UNESCO?
                            1) Oslo
                            2) Beijing
                            3) Conakry
                            4) Valetta
                            5) Paris

                            26. United Nations Champions of the Earth award conferred on which nation prime minister recently. It is the United Nations highest environmental honour recognizing visionary people and organisations all over the world?
                            1) Bangladesh
                            2) India
                            3) Australia
                            4) Russia
                            5) Switzerland

                            27. 2015 Nansen Refugee Award by UNHCR conferred on .........
                            1) Malala
                            2) Aqeela Asifi
                            3) Mohammad Ashraf Ghani
                            4) Mamnoon Hussain
                            5) Abdul Hamid

                            28. Nansen Refugee Award is named after Fridtjof Nansen, the first High Commissioner for Refugees for the League of Nations. The Award instituted in .........
                            1) 1947
                            2) 2001
                            3) 1931
                            4) 1954
                            5) 2004

                            29. Aqeela Asifi is .........
                            1) Afghanistan refugee in Pakistan
                            2) Pakistan refugee in Afghanistan
                            3) Syria refugee in Greece
                            4) Iraq refugee in Hungary
                            5) Sudan refugee in Albania

                            30. The Chairman of the 31 - member Parliamentary standing committee examining the Lokpal Bill is .........
                            1) P.C. Chako
                            2) Shunglu
                            3) S.S. Ahluwalia
                            4) L.K. Advani
                            5) Sudarsana Natchiappan

                            31. Who heads the expert group on land leasing constituted by NITI Aayog?
                            1) Arvind Panagariya
                            2) Bibek Debroy
                            3) T. Haque
                            4) H.R. Khan
                            5) Nitin Gadkari

                            32. India's richest person with a net worth of $ 18.9 billion as per Forbes magazine latest India richest list .........
                            1) Azim Premji
                            2) Hinduja brothers
                            3) Anil Ambani
                            4) Mukesh Ambani
                            5) Dilip Shanghvi

                            33. The Prime Minister Narendra Modi on 18 September 2015 launched the National Integrated Power Development Scheme (IPDS) at .........
                            1) New Delhi
                            2) Panipat
                            3) Kolkata
                            4) Suratgarh
                            5) Varanasi

                            34. How much fund allocated to IPDS as per the statement given by Modi at Varanasi?
                            1) Rs.50,000 crore
                            2) Rs.30,000 crore
                            3) Rs.45,000 crore
                            4) Rs.1500 crore
                            5) Rs.100 crore

                            35. For the welfare of areas and people affected by mining related operations PMKKKY was launched. PMKKKY stands for .........
                            1) Pradhan Mantri Khanij Kshetra Kalyan Yojana
                            2) Pradhan Mantri Koal Kshetra Kalyan Yojana
                            3) Pradhan Modi Khanij Kshetra Kalyan Yojana
                            4) Pradhan Mantri Khanij Kshetra Karao Yojana
                            5) Pradhan Mantri Khasi Kshetra Kalyan Yojana

                            1-5, 2-3, 3-5, 4-3, 5-4, 6-5, 7-3, 8-5, 9-4, 10-4
                            11-1, 12-1, 13-1, 14-5, 15-3, 16-3, 17-4, 18-4, 19-4, 20-4
                            21-5, 22-4, 23-4, 24-3, 25-3, 26-1, 27-2, 28-4, 29-1, 30-5
                            31-3, 32-4, 33-5, 34-3, 35-1

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