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MAINS Q/A 06-06-2018

Q1.What are the Issues with private sector handling MSP?

Private sector and MSP:-

  • There have been signals recently that the cotton MSP may become the price at which mills will have to buy the crop. Hence, instead of the government bearing the cost as happens with public procurement of rice and wheatthe burden could be transferred to yarn/textile mills.
  • The logic can then be extended topulses where mills can be made to buy pulses at the MSP in case market prices come down due to surplus production.
  • The same can also hold foroilseeds where the edible oil manufacturers will be forced to buy oilseeds at MSP.

Issues with private sector handling MSP:-

  • Sugar experience:-
    • Price of sugar is determined by the market, and the high production of cane leads to fall in prices. But, farmers have to be paid the SAP or FRP, andmills cannot honour this commitment unless they are able to sell the sugar in the market at price that offsets the SAP/FRP. This is the core problem facing the sugar industry where such mismatch has led to the build-up of large areas that are due to farmers
    • Mills also have had to borrow to honour these contracts when they are unable to sell sugar at remunerative prices.
  • Many say the concept itself is fraught with dangers andcould minimise the role of the Food Corporation of India (FCI) in procurement operations.
  • Encouraging private players to procure commodities other than wheat and rice on behalf of the government has its own challengesincluding storing and transportation.
    • Storage :-
      • For paddy and wheat, FCI has built adequate storage capacity in all the states, except Bihar, Jharkhand, West Bengal and the north-eastern states, so procurement of wheat and paddy is possible and storage is not a major problem.
      • However,if other commodities are to be procured at MSP, there will surely be shortage of space in almost all the states as the storage requirement assessed by FCI for each district took into account only the procurement of wheat and paddy.
    • Reimbursement of losses in procurement to private parties:-
      • Private sector won’t procure wheat, rice or any other commodity at MSP for free andif their commission is less than cost, then they won’t come.
      • MSP operations are likely to result in losses and unless the government of India gives and assurance that it will bear the losses, private sector is unlikely to come forward.
    • Textiles and related products account for around 12% of exports, and artificially higher cotton prices could make them less competitive. Further, to ensure that the MSP is paid, the government will have to necessarily tweak trade policy because the MSP regime will not be effective in case companies import cotton at a lower cost. Thiswill affect the competitiveness of industry, considering that the entire textile chain in an important component of Indian exports.

Way forward:-

  • A better way out is to actuallymake use of hedging offered via commodity exchanges.
    • To begin with, farmers must be allowed to have the entire array of commodities available on futures trading platforms.
    • In the case of sugar, if all the mills hedged part of their output on, say, NCDEX where there are active contracts, then the risk of falling prices would have been mitigated. For this to be effective, there is the requirement of long-term contracts in all these products.
  • Creating a solid structure where farmers and companies deal on commodity futures platforms to hedge the price risk is the perfect solution and the effort must be on deepening these markets.This will be a win-win solution and the constant concerns that keep governments worried about whether the farmer is realising remunerative prices and whether the consumer is paying a comfortable price is answered by the markets.


Q2. What are the challenges faced by the farmers in availing the benefits under PMFBY?


  • Making the insurance business sustainable with actuarial premium rates is not going to help raise farmers incomes.
  • Insufficient reach and the issue of penetration.
  • Most states failed to provide smart phones to revenue staff to capture and upload data of crop cutting, which continues to come with enormous delay.
  • There is hardly any use of modern technology in assessing crop damages.
  • Gaps in assessment of crop loss:
    • The sample size in each village was not large enough to capture the scale and diversity of crop losses.
    • In many cases, district or block level agricultural department officials do not conduct such sampling on ground and complete the formalities only on paper.
    • There is lack of trained outsourced agencies, scope of corruption during implementation and the non-utilisation of technologies like smart phones and drones to improve reliability of such sampling
    • Less number of notified crops than can avail insurance
  • Inadequate and delayed claim payment:
    • Insurance companies, in many cases, did not investigate losses due to a localised calamity and, therefore, did not pay claims.
    • Only 32 per cent of the reported claims were paid out by insurance companies, even when in many states the governments had paid their part of premium.
  • High actuarial premium rates
    • Insurance companies charged high actuarial premium rates
  • Massive profits for insurance companies
    • If states delay notifications, or payment of premiums, or crop cutting data, companies cannot pay compensation to the farmers in time.
    • There have been farmers protests in various states against compulsory coverage of loanee farmers under this scheme. Farmer activists fear that this scheme might end up benefitting insurance companies more than the farmers.
  • Coverage only for loanee farmers:
    • PMFBY remains a scheme for loanee farmers who take loans from banks are mandatorily required to take insurance. Like previous crop insurance schemes, PMFBY fails to cover sharecropper and tenant farmers
  • Poor capacity to deliver:
    • There has been no concerted effort by the state government and insurance companies to build awareness of farmers on PMFBY.
    • Insurance companies have failed to set-up infrastructure for proper implementation of PMFBY.
    • There is still no direct linkage between insurance companies and farmers.
    • Insured farmers receive no insurance policy document or receipt.
    • Delayed notification by state governments
  • PMBY is not beneficial for farmers in vulnerable regions as factors like low indemnity levels, low threshold yields, low sum insured and default on loans make it a poor scheme to safeguard against extreme weather events.
  • However, merely increasing the budget allocation for PMFBY scheme might not help the farmers.
  • CAG report:-
    • Private companies are not properly monitored and premium subsidy is released to them simply on the basis of affidavits provided by these companies without checking actual situation on the ground.


Q3. Is plastic pollution the biggest menace in India? Throw light on how it can be managed?

Plastic pollution in India:-

  • According to Plastic Infrastructure Report, 2017,India consumes close to 12.8 million tonnes of plastic per annum, of which, close to 5 million tonnes is rendered as waste every year.
  • Seventy per cent of the plastic waste industry is informal in nature and no action plan for formalising the industry has been pushed in the last two years.

Measures undertaken:-

  • ThePlastic Waste Management (PWM) Rules 2011, introduced under the Environment Protection Act, 1986, established a framework that assigned responsibilities for plastic waste management to the urban local body (ULB) and set up a state level monitoring committee.
    • The rules also addressed the issue of carry bags by setting minimum standards for thickness and a mandate for retailers to charge a fee for each plastic bag made available.
  • The 2011 rules were succeeded by the PWM Rules 2016, which tighten the rules (for example, banning plastic bags of less than 50 microns thickness), and also lay the foundation for accountability across the value-chain.
    • The new rules require producers and brand-owners to devise a plan in consultation with the local bodies to introduce a collect-back system.
    • The extended producers responsibility (EPR), would assist the municipalities in tackling the plastic waste issue.
    • The rules also state that the manufacture and use of multi-layered plastics that are hard to recycle must be phased out.
  • Under theGood and Service Tax (GST), plastic waste was put under a 5 per cent bracket, hurting the informal sector, which already lacks a concrete action plan.
  • Latest amendments to plastic management rules 2016:-
    • Rule 15 (Explicit pricing of carrying bags) has been omitted in the amendment. It earlier required every vendor, who sold commodities in a carry bag, to register with their respective urban local body and pay a minimum fee of Rs 48,000 annum (4000/month) after the announcement of the bye-laws.
    • Other minor amendments include the addition of two more definitions: one on ‘alternate use’ and one on ‘energy recovery’.
    • The section13(2) now requires all brand owners and producers to register or renew registration with the concerned State Pollution Control Board (SPCB) or Pollution Control Committee if operational only in one or two states or union territories.
      • They have to do the same with the Central Pollution Control Board (CPCB), if the producers/brand owners are operating in more than two states or union territories.

Concerns :-

  • Section 9 (3) of the latest amendment to plastic management rules 2016 gives plastic producers a scope to argue that their products can be put to some other use, if not recycled.
    • This move  tantamounts to revoking a complete ban, which it had implied earlier.
    • This type of plastic was supposed to be banned by March 2018, but it is nowhere near a phase-out.
  • Implementation of the rules has been poor in all aspects and the amendment says nothing to strengthen it.:-
    • The status of plastic waste management in the country is grim even after the rules gave emphasis on banning plastics below 50 microns, phasing out use of multilayered packaging and introducing extended producer responsibility (EPR) for producers, importers and brand owners to ensure environmentally sound management of plastic products until the end of their lives.
  • Theidea of extended producer responsibility (EPR), which was introduced in the rules of 2016, still remains nowhere close to being implemented even after two years.
    • EPR targets have to be accounted for at the national level, irrespective of which state the products are sold or consumed in.The amendment does not address these issues. Moreover, no example of deposit refund scheme system has been implemented in any state.
  • Lack of adequate infrastructure for segregation and collectionis the key reason for inefficient plastic waste disposal.
    • Most municipal corporations still do not have a proper system of collection and segregation, given their lack of access to technology and infrastructure, which are needed to dispose of plastic waste in a cost- and resource-efficient way.
  • The Solid Waste Management Rules, 2016, mandate ULBs to set up facilities for processing sorted dry waste.However, the implementation has been rather bleak, owing to available land/space concerns.
  • Source separation of waste, coupled with segregated collection and transportation, have been weak links in the waste supply-
  • Imposing penalties or fines is easier said than done in a democratic setup.
  • Plastic in oceans and forests are choking flora and fauna. In fact, plastic trash is expected to exceed the fish population in 2050.
  • Microplastics has ability to enter food chain with the highest concentration of the pollutants


Q4. What is Electoral bond scheme? How it brings opacity in political funding.


Electoral bonds scheme :-

  • Electoral bonds would be a bearer instrument in the nature of a promissory note and an interest-free banking instrument.
  • A citizen of India or a body incorporated in India will be eligible to purchase the bond.
  • Electoral bonds can be purchased for any value in multiples of Rs. 1,000, Rs. 10,000, Rs. 10 lakh, and Rs. 1 crore from any of the specified branches of the State Bank of India.
  • Electoral bonds for political funding can be purchased from SBI for 10 days in January, April, July and October.
  • The bond shall be encashed by an eligible political party only through a designated bank account with the authorised bank
  • The bonds will have a life of 15 days during which they can be used to make donations to registered political parties that have secured not less than 1% of the votes polled in the last election to the Lok Sabha or Assembly.
  • Every political party will have to file returns to the Election Commission on how much funds have been received
  • Electoral bonds are essentially bearer bonds that ensure donor anonymity.

How it brings opacity in political funding :-

  • Analysts said the move could be misused, given thelack of disclosure requirements for individuals purchasing electoral bonds.
  • Electoral bonds make electoral funding even more opaque.It will bring more and more black money into the political system.
  • With electoral bondsthere can be a legal channel for companies to round-trip their tax haven cash to a political party. If this could be arranged, then a businessman could lobby for a change in policy, and legally funnel a part of the profits accruing from this policy change to the politician or party that brought it about.
  • These bondsshare two characteristics with tax havens e,secrecy and anonymity.
  • Electoral bonds eliminate the 7.5% cap on company donations which means even loss-making companies can make unlimited donations.
  • The requirement for a company to have been in existence for three years (paving the way for fly-by-night shell companies) is also removed
  • Companies no longer need to declare the names of the parties to which they have donated so shareholders won’t know where their money has gone.
  • As for political parties, they no longer need to reveal the donor’s name for contributions above ₹20,000, provided these are in the form of electoral bonds. So a foreign company can anonymously donate unlimited sums to an Indian political party without the EC or the IT department ever getting to know.
  • They have potentialto load the dice heavily in favour of the ruling party as the donor bank and the receiver bank know the identity of the person. But both the banks report to the RBI which, in turn, is subject to the Central government’s will to know.



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