1. What is the Retail Direct Scheme for investors in government securities?

Relevant for GS Prelims & Mains Paper III; Economics

The RBI had in February announced proposals for the Retail Direct Scheme for investors in government securities and the Integrated Ombudsman Scheme. The schemes were unveiled by the Prime Minister on November 12.

What is the Retail Direct Scheme?

Under the Retail Direct Scheme, small investors can now buy or sell government securities (G-Secs), or bonds, directly without having to go through an intermediary like a mutual fund. It is similar to placing funds in debt instruments such as fixed deposits in banks. However, the same tax rules apply to income from G-Secs. But, with the Government being the borrower, there is a sovereign guarantee for the funds and hence zero risk of default. Also, government securities may offer better interest rates than bank fixed deposits, depending on prevailing interest rate trends. For example, the latest yield on the benchmark 10-year government securities is 6.366%. India’s largest lender, State Bank of India, offers 5.4% on deposits of less than ₹2 crore for a tenure of five to 10 years.

How can individuals access G-Sec offerings?

Investors wishing to open a Retail Direct Gilt account directly with the RBI can do so through an online portal set up for the purpose of the scheme. Once the account is activated with the aid of a password sent to the user’s mobile phone, investors will be permitted to buy securities either in the primary market or in the secondary market. The minimum amount for a bid is ₹10,000 and in multiples of ₹10,000 thereafter. Payments may be made through Net banking or the UPI platform. Retail participants would be bidding for the securities under the “non-competitive segment of primary auctions of Government Securities and Treasury Bills”, the RBI said in a November 12 notification.

Why was it necessary to introduce this scheme?

The RBI said the scheme would help “broaden the investor base and provide retail investors with enhanced access to the government securities market — both primary and secondary.” It said the scheme was a “major structural reform placing India among select few countries which have similar facilities”. This scheme, among others, would “facilitate smooth completion of the Government borrowing programme in 2021-22”.

The Government intends to borrow up to ₹12 lakh crore this year ending March 31, 2022. The significant spike in borrowing — that is expected to spur infrastructure and social funding — follows a steep decline in the economy last fiscal. The Union Government, hence, wishes to broaden the base of investors signing up for bond purchases. The added benefit of the Government accessing retail investors could be the freeing up of room for companies to mop up funds from institutional investors; funds that may otherwise have been cornered by the government to fund its expenses.

Why is the RBI setting up an Integrated Ombudsman?

Prior to the introduction of this scheme, the RBI had three different ombudsman schemes to aid dispute resolution with respect to banks, NBFCs, and non-bank pre-paid payment issuers (PPIs). They were operated by the RBI through 22 ombudsman offices. With the introduction of the integrated scheme, the earlier ones stand repealed. When the regulator unveiled the proposal for an Integrated Ombudsman in February, it said it wished to make dispute resolution more “simpler, efficient and responsive”. Hence the proposal to integrate the three ombudsman schemes and introduce the centralised processing of grievances. This, it said, was intended to make the process of redress of grievances easier “by enabling customers to register their complaints under the integrated scheme, with one centralised reference point”. The RBI would appoint the Ombudsman and a Deputy Ombudsman for three years. Complaints may be made either physically to the Centralised Receipt and Processing Centre or the RBI’s offices; or electronically through the regulator’s complaint management system (https://cms.rbi.org.in/).

What about grievances pending adjudication?

Though the three earlier schemes have been repealed, the RBI clarified that the adjudication of pending complaints, appeals and execution of the awards passed “shall continue to be governed by the provisions of the respective Ombudsman Schemes and instructions of the Reserve Bank issued thereunder”.

Source: The Hindu

2. Will India be sanctioned for S-400 purchase?

Relevant for GS Prelims & Mains Paper II; Bilateral Relations

India is preparing for a visit from Russian President Vladimir Putin for an annual bilateral meeting with Prime Minister Narendra Modi in early December, but it is the arrival of the $5.4-billion Russian long-range surface-to-air missile defence shield “S-400”, also expected next month, that is likely to generate more international headlines. The United States Government has made it clear that the delivery of the five S-400 systems is considered a “significant transaction” under its Countering America’s Adversaries Through Sanctions Act (CAATSA) of 2017, which could trigger sanctions against Indian officials and the Government.

What kind of sanctions?

The CAATSA is designed to ensure that no country is able to increase military engagement with Iran, North Korea and Russia without facing deterrent punitive action from the U.S. The sanctions are unilateral, and not part of any United Nations decision, and therefore no country is bound to accept them. The law that was pushed through by Democrat Congress representatives was signed by President Donald Trump under some protest, as he was keen at the time on improving relations with Russia, and was hoping to broker a deal between the Koreas as well. Section 231 says the President shall impose no fewer than five different sanctions on any Government that enters into a significant defence or intelligence deal with the Russian Government. Section 235 lists 12 options, including stopping credit lines from U.S. and international banks such as the IMF, blocking sales of licensed goods and technology, banning banks, manufacturers and suppliers, property transactions and even financial and visa sanctions on specific officials. However, the law empowers the President to waive sanctions or delay them if he/she certifies that the deal is not a threat to the U.S. and allies, that waiver of sanctions is in the U.S.’s “vital national security interests” or that the country being sanctioned promises to reduce its future dependence on the “adversary country”.

Has the U.S. used CAATSA before for S-400 sales?

The U.S. has already placed sanctions on China and Turkey for purchase of the S-400. In 2018, the State Department said it, along with the Department of the Treasury, would impose sanctions on the People’s Liberation Army’s Equipment Development Department, and in particular its Director, Li Shangfu, for the purchase of the S-400 system-related equipment and Sukhoi-35 combat aircraft from Russian defence exporter Rosoboronexport. The sanctions included denial of export licences, ban on foreign exchange transactions, blocking of all property and interests in property within the U.S. jurisdiction and a visa ban. In 2020, the U.S. sanctioned its NATO partner Turkey, which it had warned about CAATSA sanctions for years, besides cancelling a deal to sell Ankara F-35 jets. The sanctions on Turkey’s main defence procurement agency, SSB, also included a ban on licences and loans, and blocking of credit and visas to SSB president Ismail Demir and other officials. While U.S. officials hope the sanctions and the promise of a sale of F-16 jets would stave off Turkish President Recep Erdogan’s plans to deploy S-400, a deadlock continues.

Which way is the Biden administration leaning on India?

The Biden administration has not given any firm indication on where it leans on India’s case yet. Last month, during a visit to Delhi, U.S. Deputy Secretary of State Wendy Sherman said the U.S. had made it clear that the S-400 is “dangerous and not in anybody’s security interest”, but left the determination on sanctions after India takes delivery of the missiles to President Biden himself. In subsequent weeks, Congress representatives, including the Chairman of the powerful House of Representatives Foreign Affairs Committee (HFAC), Gregory Meeks, a Democrat, as well as several Republicans have called upon the Biden administration to consider a special waiver for India, given India’s importance as a defence partner, and as a strategic partner on U.S. concerns over China and in the Quad. “Taking a long view, the potential of our long-term strategic partnership with India, and its positive impact on our own security interests, certainly outweighs any kind of benefit from sanctioning India because of its purchase of the S-400.”

On the other hand, in April 2021, ahead of U.S. Defence Secretary Lloyd Austin’s visit to Delhi, Chairman of the Senate Foreign Relations Committee Bob Menendez (also a Democrat) had urged Mr. Austin to raise the S-400 issue with Indian officials, and make it clear that the purchase would lead to sanctions. “If India chooses to go forward with its purchase of the S-400, that act will clearly constitute a significant, and therefore sanctionable, transaction with the Russian defense sector under Section 231 of CAATSA. It will also limit India’s ability to work with the U.S. on development and procurement of sensitive military technology,” Mr. Menendez wrote in his letter.

Saudi Arabia has also reportedly negotiated with Russia for the S-400, and some experts in the U.S. feel that giving a waiver to India would be the wrong signal for others seeking to go ahead with similar deals. New Delhi may receive a clearer picture on which way the U.S. will go when External Affairs Minister S. Jaishankar and Defence Minister Rajnath Singh are due to meet their American counterparts in the next few weeks in Washington.

What is India’s position?

India has not backed down in the face of U.S. opposition thus far, however, and is scheduled to receive the first S-400 deliveries in December. In preparation for the induction, two teams of technicians from the Indian Air Force were trained on the system by the manufacturer, Almaz Antey, in Russia this year. After signing the deal in October 2018, during Mr. Putin’s last visit to Delhi, India and Russia had protected the advance payments from triggering U.S. sanctions by ensuring a rupee-rouble transfer. In response to questions about Ms. Sherman’s tough remarks on the S-400, the Ministry of External Affairs conceded that the issue was “under discussion” between India and the U.S. for some time. “It was raised, and we have discussed it and explained our perspective. And discussions on this are ongoing,” External Affairs Ministry spokesperson Arindam Bagchi said in a non-committal response in October.

Why is the S-400 deal so important to India?

Senior Indian officials have held firm that S-400 is very important for India’s national security considerations, especially as it faces new threats from China, Pakistan and Afghanistan, calling it a “game changer”. The system will also offset the air defence capability gaps due to the IAF’s dwindling fighter squadron strength. Integrating the S-400 into the national air defence architecture will be much easier as India has a large number of legacy Russian air defence systems, a major reason India did not consider the U.S. air defence systems as a viable alternative. For both political as well as operational reasons, the deal is at a point of no return. When asked about the threat of U.S. sanctions, the outgoing Indian Ambassador to Russia, D.B. Venkatesh Varma, told The Hindu that India “will do what we have to do and is necessary for India to preserve and protect its national security interests”. In addition, buying the S-400 is a way for the Narendra Modi Government to assert its ‘strategic autonomy’. This stated principle of Indian foreign policy wavered under pressure from the Trump administration, when India agreed to stop buying Iranian oil over the threat of sanctions in 2019, a move that caused India both financial and reputational damage. Not giving in to the U.S.’s unilateral sanctions over the S-400 would be one way to restore some of that.

Source: The Hindu

3. Will MPLADS be changed for post-pandemic needs?

Relevant for GS Prelims & Mains Paper II; Polity & Governance

Under the Member of Parliament Local Area Development Scheme, every MP is entitled to ₹5 crore a year, adding up to ₹3,950 crore for the 790 members. The fund is to be utilised for “creation of durable community assets and for provision of basic facilities, including community infrastructure, based on locally felt needs”. This money does not directly go to the account of the MPs. They can only recommend works. Thereafter, it is the responsibility of the district authorities to sanction, execute and complete the works within the stipulated period. More money is released only on receipt of the completion certificate. The Ministry of Statistics and Programme Implementation monitors the scheme.

When was the scheme started?

It was launched during the Narasimha Rao Government in 1993 with the grant of ₹50 lakh a year to each MP. This sum was increased to ₹1 crore during 1994-95. The third revision to ₹2 crore happened in 1997-98. The United Progressive Alliance Government in 2011-12 raised the annual entitlement to ₹5 crore. There have been regular demands from MPs across party lines to increase the amount further.

How does it work?

Each Lok Sabha member has to designate a district as the nodal district. The District Magistrate is responsible for handling the funds and monitoring the projects sanctioned under the scheme. A Lok Sabha member can recommend works in his constituency alone, while a Rajya Sabha member can use the funds for works anywhere in a State.

In case of a natural calamity, the MPs from non-affected areas in both Houses of Parliament can recommend works estimated at a maximum of ₹25 lakh a year in disaster-hit places.

What are the controversies?

The scheme was first challenged in 1999 by Jammu and Kashmir National Panthers Party chief Bhim Singh and an NGO, Common Cause. They alleged that in the absence of any guidelines, the funds were misused by MPs. In 2005, a sting operation showed some MPs allegedly demanding money from contractors to award work for projects under the scheme. The exposé led to the expulsion of members from both Houses. In 2006, the scheme made the headlines because of the allegations that a Trust run by the family of the then Election Commissioner, Navin Chawla, got funds under the scheme. Finally, on May 6, 2010, the scheme’s constitutional validity was upheld. The Supreme Court said in its judgment that mere allegations that the funds were prone to misuse could not be the ground for scrapping the scheme. However, it suggested improvements to the scheme.

When was the scheme suspended?

On April 6, 2020, the scheme was suspended for two years. The Government argued that it needed every last penny to tackle the COVID-19 pandemic. The scheme’s budget of ₹7,900 crore for two years was to be subsumed under the Consolidated Fund of India. This move was severely criticised by the Opposition MPs, who said the State Governments had already been cash-strapped, and they were in a dire need of the funds under the scheme. Senior Congress leader Shashi Tharoor argued that the scheme was the only means for an MP to direct development resources to his constituency. “Now the money will be allocated by the Centre and will follow the priorities and preferences of New Delhi, rather than reflect 543 sets of local needs,” he wrote on Twitter.

When and why was it restored?

Last Wednesday, the Union Cabinet brought back the scheme, almost six months before its expected restoration. According to a statement from the Government, the country is on the road to economic recovery, and the scheme continues to be beneficial to the creation of durable community assets, the fulfilment of the aspirations of the locally felt needs of the community, the skill development and creation of jobs across the country, thus helping to achieve the objective of Atamnirbhar Bharat. For 2021-22, it is only a partial restoration, since instead of ₹5 crore for each MP, the sum will only be ₹2 crore.

What are the changes expected?

The COVID-19 pandemic has forced a significant change in the policy decisions. The Government may refine the scheme to suit the post-pandemic world. Currently, the funds are only to be spent on “durable assets”, but many MPs have demanded that the guidelines be altered for the funds to be spent on smartphones and laptops for poor students to ensure that they did not miss out on online education in future as they did during the pandemic. This issue was also raised at a meeting of the Rajya Sabha Standing Committee on MPLADS on Friday.

Source: The Hindu

4. Habibganj to Rani Kamlapati: How a railway station’s name is changed

Relevant for GS Prelims & Mains Paper II; Polity & Governance

The name of Bhopal’s Habibganj railway station has been changed to Rani Kamlapati station. The BJP government of Madhya Pradesh proposed this to the Centre last week, which gave the clearance without any delay. This is to coincide with the inauguration of the station, which has been redeveloped at a cost of around Rs 100 crore with private participation — a first such large-scale PPP model in station redevelopment in India, in the works for the past few years.

The station is to be inaugurated by Prime Minister Narendra Modi on Monday.

According to the state government, the renaming is to honour the memory and sacrifices made by a queen of the Gond community.

Who was queen Kamlapati?

Rani Kamlapati was the widow of Nizam Shah, whose Gond dynasty ruled the then Ginnorgarh, 55 km from Bhopal, in the 18th century. Nizam Shah built the famous seven-storeyed Kamlapati Palace in her name in Bhopal.

According to the state government, Kampalati is known to have shown great bravery in facing aggressors during her reign after her husband was killed. Chief Minister Shivraj Singh Chouhan has claimed that Kamlapati was the “last Hindu queen of Bhopal”, who did great work in the area of water management and set up parks and temples.

The Gond are one of the largest tribal communities in India, spread across Madhya Pradesh, Maharashtra, Chhattisgarh, Andhra Pradesh, Telangana, Bihar and Odisha. The renamed and redeveloped railway station is being inaugurated on November 15, the birth anniversary of the iconic 19th century tribal freedom fighter Birsa Munda.

Why does a railway station’s name change?

Changing of railway station names is not new. There are times when state governments decide to go for a name change to represent long-standing popular demand or history, or as part of a political project pushing for a wider iconography.

For instance, in 1996, the city of Madras was officially rechristened ‘Chennai’ to underline history and local sentiments. The name of the railway station, too, changed from Madras to Chennai as a result.

Since 2014, a number of stations have got new names. The most notable among them was Mughalsarai Junction, which became Pandit Deen Dayal Upadhyay Junction in 2018 to honour the right-wing ideologue who was found dead in Mughalsarai in 1968.

In the same year, Allahabad was renamed Prayagraj by the Yogi Adiyanath government.

Of late, the Manduadih station in Varanasi in Uttar Pradesh was renamed Benaras to reflect the name by which the city is known. The larger station representing the city is already called Varanasi Junction.

Again this year, on Diwali, the Faizabad Junction station next to Ayodhya was renamed Ayodhya Cantonment station.

How are railway station names changed?

It is a common misconception that Indian Railways can change the name of its stations. That is not the case. While Indian Railways may own the station, it does not get involved in the business of naming it. This is left to the discretion of the state government concerned. Change of station names is entirely a state subject even though Railways belong to the Union government.

The state governments send the request to the Ministry of Home Affairs, the nodal ministry for these matters, which then accords its approval, keeping the Ministry of Railways in the loop. Usually, it is ensured that no other station with the new name proposed exists anywhere in India. If a state government wants to change the name of a city, generally, there is little reason for the Centre to come in the way or keep an old name in circulation, including in the signage of its properties there.

Indian Railways receives regular representations from civil society groups, political parties and others to change the names of stations, citing historical reasons or local sentiments. In most cases, it replies that it is a matter for the state government and the Home ministry.

What happens when a name is changed?

Once the name change is notified by the state government following all due process, Indian Railways steps in to do the necessary work. A new station “code” for railway operation purposes may need to be invented. For instance Faizabad Junction’s code used to be “FD” but post the name change, the new code is “AYC”. The name change is then fed into its ticketing system so that the new name along with the code is reflected on its tickets and reservation and train information.

Lastly, it physically changes the name written at the station — building, platform signage, etc, and also in its communication materials for all practical purposes.

How are the languages, spellings to be displayed on the signboard decided?

This aspect is governed by what is known as the Indian Railway Works Manual— a 260-odd-page document that codifies everything related to civil engineering construction works. Traditionally, station names were written only in Hindi and English. Over time, it was instructed that a third language, which is the local language, should be included.

Even then, the matter is not simple. Paragraph 424 of the Manual says that Railways should obtain approval of the state government concerned on the spelling of the names (in all three languages) before putting them on its signboards.

“The station names shall be exhibited in the following order: Regional Language, Hindi and English, except for Tamil Nadu where the use of Hindi will be restricted to important stations and pilgrim centres as determined by the Commercial Department. Where the Regional language is Hindi, the name boards will be in two languages, Hindi and English…,” the Manual says.

Source: The Indian Express

5. The significance of DNLA militants laying down arms in Assam

Relevant for GS Prelims & Mains Paper III; Internal Security

On Monday, 46 cadres of the Dimasa National Liberation Army (DNLA), along with Commander-in-Chief Mushrang, laid down arms in Assam’s Dima Hasao district to join the mainstream. Assam Chief Minister Himanta Biswa Sarma said that the surrender had given an “impetus to the process of peace” in Assam.

What is the DNLA?

A relatively new insurgent group, the DNLA, operating in Dima Hasao and Karbi Anglong districts, was formed in 2019. A release by the group at the time of formation said it was “committed to revamp the national struggle and fight for the liberation of a sovereign, independent Dimasa Nation”. It aimed to “develop a sense of brotherhood among the Dimasa and also to rebuild the trust and faith among the Dimasa society for regaining the Dimasa Kingdom”.

The group had run on a model of ‘extortion and taxation’ and was believed to have drawn its support and sustenance from the NSCN(IM) of Nagaland.

Active in the last two years, the DNLA came to limelight when they were suspected to be behind the attack that killed five truck drivers in Dima Hasao in August, after the truck owners allegedly failed to pay extortion money. The attack came at a time when the government had been making efforts to bring militant groups to the mainstream.

What led the group coming overground?

In September, barely a fortnight after the truck attack, the group’s top leaders came overground to hold talks with CM Sarma. The leaders included self-styled ‘chairman’ Edika Diphusa alias Kharmindao Dimasa, ‘deputy chairman’ Juddychan Haflongbar alias America Dimasa and ‘general secretary’, Prithamjit Jidongsa alias Galao Dimasa.

After talks, they signed a suspension of operations agreement. Following that, on Saturday, along with Mushrang, 46 cadres laid down arms in the presence of Hiren Nath, ADGP (Special Branch), Jayant Singh, SP, Dima Hasao, Debolal Garlosa, Chief Executive Member of North Cachar Hills Autonomous Council (NCHAC). They are currently in a camp in Maibang, 100 km from district headquarters Halflong.

The police said that there were about 300 more DNLA cadres, and they, too, would come overground soon.

SP Singh said that arms the group surrendered included an AK 47 and M16 rifles, among others.

Who are the Dimasas? What is the Dimasa kingdom?

The Dimasas (or Dimasa-Kacharis) are the earliest known rulers and settlers of Assam, and now live in Dima Hasao, Karbi Anglong, Cachar, Hojai and Nagaon districts of central and southern Assam, as well as parts of Nagaland.

Prior to Ahom rule, the powerful Dimasa kings — believed to be the descendants of the rulers of the ancient Kamarupa kingdom — ruled large parts of Assam along the south bank of the Brahmaputra between the 13th and 16th centuries. Their earliest historically known capital was Dimapur (now in Nagaland), and later Maibang in North Cachar Hills.

What about militancy in Dima Hasao?

The hill districts of Assam — Karbi Anglong and Dima Hasao (earlier North Cachar Hills) — have had a long history of insurgency by Karbi and Dimasa groups which peaked in the mid-1990s, and was rooted in a core demand of statehood. Both districts are now protected under the Sixth Schedule of the Constitution, and are run by the North Cachar Hills Autonomous Council and the Karbi Anglong Autonomous Council, respectively.

While the demand for statehood began in the 1960, it took a violent turn when a demand for a full-fledged state, ‘Dimaraji’, gathered steam, and led to the formation of the militant Dimasa National Security Force (DNSF) in 1991. The group surrendered in 1995, but its commander-in-chief, Jewel Gorlosa, broke away and formed the Dima Halam Daogah (DHD).

After the DHD began talks with the government in 2003, Gorlosa broke away again and formed the Dima Halam Daogah (Jewel) (DHD-J), with an armed wing called Black Widow. Gorlosa was arrested in 2009, signed a ceasefire agreement in 2012, and thereafter joined mainstream politics.

Dima Hasao was a hotbed of insurgency in 1994-95 and again in 2003-2009, but has been largely peaceful in the last decade. DNLA was the newest group to have taken up arms in Dima Hasao.

Is the DNLA surrender significant?

SP Singh said that they were the last active militant group in the district. “As of now no more groups are active,” he said, adding that their surrender was a “step towards peace.” ADGP Nath added that this was especially significant because the hill districts have had a long history of militancy. “Considering they were the last active group, it is noteworthy they have joined the peace process,” he said.

Special DGP GP Singh said that the surrender comes at a time when most groups in Assam have joined the mainstream, including all Bodo and Karbi militant outfits. “This leaves out the United Liberation Front of Asom-Independent (ULFA-I),” he said, adding that the government was already in the process of reaching out to them. “We are hopeful they will come overground too and there will be peace in Assam,” he said.

In September CM Sarma said that Union Home minister Amit Shah had authorised him to hold preliminary talks with the ULFA-I. On Sunday, the group extended its unilateral ceasefire for three more months.

Source: The Indian Express

6. Why are tech startups going for IPOs and how has regulatory framework changed to enable easier listing?

Relevant for GS Prelims & Mains Paper III; Economics

India’s startup sector has seen a flurry of IPOs in 2021, including that of One97 Communications (Paytm) which recently closed its offering with an issue size of Rs 18,300 crore making it the largest ever IPO of an Indian company. Other major IPOs announced in 2021 include those of Food aggregator Zomato, online insurance broker Policy Bazaar, online pharmacy PharmEasy and fashion retail company Nykaa.

We examine the trend behind IPOs in India and how the regulatory framework has changed to enable easier listing for tech startups in India.

Why are so many tech startups going for IPOs?

A key reason for Indian firms going for IPOs is the perception of a large appetite for investment in India’s tech firms among global institutional investors. Paytm CEO Vijay Shekhar Sharma said in a recent press conference that international investors are looking to invest in Indian startups through both public offerings and private investments. Companies are also looking to leverage stock markets that are bullish about a strong recovery from the pandemic to secure enough capital for expansion plans for a longer timeframe preferring IPOs to further investments from existing shareholders. The Sensex, which closed at 60,687 on Friday, crossed the 61,000 mark for the first time in October and is trading at 40 per cent over year-ago levels.

How has the response been to public offerings of tech companies this year?

Among the recent offerings, while Paytm’s IPO was subscribed 1.89 times, that of FSN E-Commerce Ventures (the company behind Nykaa) was subscribed more than 82 times at the end of its final day of bidding. The profit-making cosmetics company listed on the bourses at a 79.4% premium to the IPO price of Rs 1,125. Insurance-tech company Policybazaar’s parent firm PB Fintech saw its offering being oversubscribed by 16.6 times on the final day of bidding on November 3.

How should investors assess the IPOs on offer?

Research analysts say that each startup should be seen as a separate business and investors should not see them as belonging to one basket. “Tech companies or startups have to be seen from the larger perspective of how wide their business opportunity is and what they can do in future,” said the research head of a leading brokerage firm. Investment experts also say that investors should carefully evaluate fintech companies going for IPOs as banks have also enhanced their digital presence and have done technology upgrades. “For companies that have not been able to clearly define their business model and keep changing their focus, investors need to practice caution,” said a senior official with a financial services firm.

How has the regulatory environment encouraged startups to go for IPOs?

The Securities and Exchange Board of India (SEBI) has relaxed a number of norms to make it easier for startups to get listed on Indian exchanges. Earlier this year, SEBI reduced the time that early stage investors need to hold 25 per cent of the pre-issue capital to one years from two years earlier. SEBI also amended regulations which previously barred startups that are going public from making discretionary allotments to allow startups to allocate up to 60% of the issue size of the IPO to an eligible investor subject to a lock-in period of 30 days on such shares.

Company Issue Size (Rs crore)
One97 Communications (Paytm)* 18300
Cartrade Tech Ltd 2998.5
Zomato* 9375
Easy Trip Planners (EaseMyTrip)* 510
FSN E-Commerce Ventures (Nykaa)* 5352
API Holdings (PharmEasy) 6250
Droom Technology 3000
PB Fintech (Policybazaar)* 5700
One Mobikwik (Mobikwik) 1900
Le Travenues (ixigo) 1600
Delhivery 7460

Note: * indicates IPO has already closed

Source: The Indian Express

7. What COP26 achieved and didn’t achieved

Relevant for GS Prelims & Mains Paper III; Environment

After two weeks of hard negotiations with governments squabbling over provisions on phasing out coal, cutting greenhouse gas emissions and providing money to the poor world, the annual climate change summit came to an end on Saturday night with the adoption of a weaker-than-expected agreement called the Glasgow Climate Pact.

While most countries insisted that the agreement was an important, though small, step in keeping alive the hopes of achieving the 1.5 degree Celsius temperature goal, observers and civil society groups saw it as a missed opportunity to enhance global climate action.

The Context

The Glasgow meeting was the 26th session of the Conference of Parties to the UN Framework Convention on Climate Change, or COP26. These meetings are held every year to construct a global response to climate change. Each of these meetings produce a set of decisions which are given different names. In the current case, this has been called the Glasgow Climate Pact.

Earlier, these meetings have also delivered two treaty-like international agreements, the Kyoto Protocol in 1997 and the Paris Agreement in 2015, which form the global architecture for actions to be taken to tackle climate change. While the Kyoto Protocol expired last year, the Paris Agreement is now the active instrument to fight climate change.

The main task for COP26 was to finalise the rules and procedures for implementation of the Paris Agreement. Most of these rules had been finalized by 2018, but a few provisions, like the one relating to creation of new carbon markets, had remained unresolved. However, due to clear evidence of worsening of the climate crisis in the six years since the Paris Agreement was finalized, host country United Kingdom was keen to ensure that Glasgow, instead of becoming merely a “procedural” COP, was a turning point in enhancing climate actions. The effort was to push for an agreement that could put the world on a 1.5 degree Celsius pathway, instead of the 2 degree Celsius trajectory which is the main objective of the Paris Agreement.

Hence, more than 100 heads of states and governments were invited to attend the meeting and lend their political weight behind the process. So many leaders have assembled on only two earlier occasions, at the climate meetings in Copenhagen in 2009 and Paris in 2015. On both those occasions, the COPs were aiming to deliver a major agreement. Copenhagen had failed in that, but Paris had succeeded.

Glasgow did benefit from the presence as many of them also announced new and enhanced climate actions. However, the final agreement was a mixed bag, as most such pacts invariably are.

What was achieved

Mitigation: The Glasgow agreement has emphasised that stronger action in the current decade was most critical to achieving the 1.5-degree target. Accordingly, it has:

Asked countries to strengthen their 2030 climate action plans, or NDCs (nationally-determined contributions), by next year

Established a work programme to urgently scale-up mitigation ambition and implementation

Decided to convene an annual meeting of ministers to raise ambition of 2030 climate actions

Called for an annual synthesis report on what countries were doing

Requested the UN Secretary General to convene a meeting of world leaders in 2023 to scale-up ambition of climate action

Asked countries to make efforts to reduce usage of coal as a source of fuel, and abolish “inefficient” subsidies on fossil fuels

Has called for a phase-down of coal, and phase-out of fossil fuels. This is the first time that coal has been explicitly mentioned in any COP decision. It also led to big fracas at the end, with a group of countries led by India and China forcing an amendment to the word “phase-out” in relation to coal changed to “phase-down”. The initial language on this provision was much more direct. It called on all parties to accelerate phase-out of coal and fossil fuel subsidies. It was watered down in subsequent drafts to read phase-out of “unabated” coal power and “inefficient” fossil fuel subsidies. But even this was not liking to the developing countries who then got it changed to “phase down unabated coal power and phase out inefficient fossil fuel subsidies while providing targeted support to the poorest and the most vulnerable in line with national circumstances…”. Despite the dilution, the inclusion of language on reduction of coal power is being seen as a significant movement forward.

Adaptation: Most of the countries, especially the smaller and poorer ones, and the small island states, consider adaptation to be the most important component of climate action. These countries, due to their lower capacities, are already facing the worst impacts of climate change, and require immediate money, technology and capacity building for their adaptation activities. As such, the Glasgow Climate Pact has:

Asked the developed countries to at least double the money being provided for adaptation by 2025 from the 2019 levels. In 2019, about $15 billion was made available for adaptation that was less than 20 per cent of the total climate finance flows. Developing countries have been demanding that at least half of all climate finance should be directed towards adaptation efforts.

Created a two-year work programme to define a global goal on adaptation. The Paris Agreement has a global goal on mitigation — reduce greenhouse gas emissions deep enough to keep the temperature rise within 2 degree Celsius of pre-industrial times. A similar global goal on adaptation has been missing, primarily because of the difficulty in defining such a target. Unlike mitigation efforts that bring global benefits, the benefits from adaptation are local or regional. There are no uniform global criteria against which adaptation targets can be set and measured. However, this has been a long-pending demand of developing countries and the Paris Agreement also asks for defining such a goal.

Finance: Every climate action has financial implications. It is now estimated that trillions of dollars are required every year to fund all the actions necessary to achieve the climate targets. But, money has been in short supply. Developed countries are under an obligation, due to their historical responsibility in emitting greenhouse gases, to provide finance and technology to the developing nations to help them deal with climate change. In 2009, developed countries had promised to mobilise at least $100 billion every year from 2020. This promise was reaffirmed during the Paris Agreement, which also asked the developed countries to scale up this amount from 2025. The 2020 deadline has long passed but the $100 billion promise has not been fulfilled. The developed nations have now said that they will arrange this amount by 2023.

What does the Glasgow Agreement say?

A deal aimed at staving off dangerous climate change has been struck at the COP26 summit in Glasgow. The pact has:

Expressed “deep regrets” over the failure of the developed countries to deliver on their $100 billion promise. It has asked them to arrange this money urgently and in every year till 2025

Initiated discussions on setting the new target for climate finance, beyond $100 billion for the post-2025 period

Asked the developed countries to provide transparent information about the money they plan to provide

Loss and Damage: The frequency of climate disasters has been rising rapidly, and many of these cause largescale devastation. The worst affected are the poor and small countries, and the island states. There is no institutional mechanism to compensate these nations for the losses, or provide them help in the form of relief and rehabilitation. The loss and damage provision in the Paris Agreement seeks to address that.

Introduced eight years ago in Warsaw, the provision hasn’t received much attention at the COPs, mainly because it was seen as an effort requiring huge sums of money. However, the affected countries have been demanding some meaningful action on this front. Thanks to a push from many nations, substantive discussions on loss and damage could take place in Glasgow. One of the earlier drafts included a provision for setting up of a facility to coordinate loss and damage activities. However, the final agreement, which has acknowledged the problem and dealt with the subject at substantial length, has only established a “dialogue” to discuss arrangements for funding of such activities. This is being seen as a major let-down.

Carbon Markets: Carbon markets facilitate the trading of emission reductions. Such a market allows countries, or industries, to earn carbon credits for the emission reductions they make in excess of their targets. These carbon credits can be traded to the highest bidder in exchange of money. The buyers of carbon credits can show the emission reductions as their own and use them to meet their reduction targets. Carbon markets are considered a very important and effective instrument to reduce overall emissions.

A carbon market existed under Kyoto Protocol but is no longer there because the Protocol itself expired last year. A new market under Paris Agreement is yet to become functional. Developing countries like India, China or Brazil have large amounts of carbon credits left over because of the lack of demand as many countries abandoned their emission reduction targets. The developing countries wanted their unused carbon credits to be transitioned to the new market, something that the developed nations had been opposing on the grounds that the quality of these credits — the question whether these credits represent actual emission reductions — was a suspect. A deadlock over this had been holding up the finalisation of the rules and procedures of the Paris Agreement.

The Glasgow Pact has offered some reprieve to the developing nations. It has allowed these carbon credits to be used in meeting countries’ first NDC targets. These cannot be used for meeting targets in subsequent NDCs. That means, if a developed country wants to buy these credits to meet its own emission reduction targets, it can do so till 2025. Most countries have presented climate targets for 2025 in their first NDCs.

The resolution of the deadlock over carbon markets represents one of the major successes of COP26.

Parallel Processes

A lot of substantial action in Glasgow happened in parallel processes that were not a part of the official COP discussions. The announcements made by Prime Minister Narendra Modi about increased climate action from India fall in this category. These do not form part of the final agreed outcome, but Glasgow can certainly claim credit for facilitating these actions.

India announced a Panchamitra (a mixture of five elements) of climate actions. It raised the targets for two of its existing climate targets, announced two new ones, and also promised to turn net-zero by the year 2070. India’s new commitments created the maximum buzz on the first two days of the Glasgow meeting.

Several other countries also announced enhanced climate actions. Brazil, for example, said it would advance its net-zero target year from 2060 to 2050. China promised to come out with a detailed roadmap for its commitment to let emissions peak in 2030, and also for its 2060 net-zero target. Israel announced a net zero target for 2050.

Over 100 countries pledged to reduce methane emissions by at least 30 per cent from present levels by 2030. Methane is a dangerous greenhouse gas, with a global warming potential nearly 80 times that of carbon dioxide over a 20-year time period. This pledge, if achieved, is estimated to avoid about 0.2 degree Celsius temperature rise by the middle of the century. The methane pledge is being seen as one of the biggest successes at COP26.

Another set of over 100 countries promised to arrest and reverse deforestation by 2030.

Over 30 countries signed on to a declaration promising to work towards a transition to 100 per cent zero-emission cars by the year 2040, at least in the leading car markets of the world.

Source: The Indian Express

8. What are the two initiatives of the RBI that PM Modi has launched?

Relevant for GS Prelims & Mains Paper III; Economics

Prime Minister Narendra Modi on Friday launched two customer-centric initiatives of the Reserve Bank of India (RBI) — the RBI Retail Direct Scheme and the Integrated Ombudsman Scheme. With this, India has opened up the government bond market for retail investors.

“RBI has been leveraging technology & innovation for enhancing the efficiency of its services. RBI’s developmental role is focused on further deepening of financial inclusion and undertaking people centric initiatives,” RBI Governor Shaktikanta Das, who was also present during the virtual launch of the scheme said.

Das had first flagged this initiative in a February policy review while calling it a “major structural reform”. In July, the central bank said investors will have access to bidding in primary auctions as well as the central bank’s trading platform for government securities called Negotiated Dealing System-Order Matching Segment, or NDS-OM.

So, what exactly are these two schemes about? We explain.

RBI Retail Direct Scheme

The scheme allows retail investors to buy and sell government securities (G-Sec) online, both in the primary and secondary markets. According to details provided by RBI, these small investors can now invest in G-Secs by opening a gilt securities account with the RBI. The account opened will be called Retail Direct Gilt (RDG) Account.

According to notification issued by the RBI, a retail investor can open the RDG account if they have following — a Rupee savings bank account maintained in India, PAN card, any official valid document such as Aadhaar, Voter ID for KYC purpose, a valid email ID and a registered mobile number.

Participation and allotment of securities will be as per the non-competitive scheme. Only one bid per security is permitted. On submission of the bid, the total amount payable will be displayed. Payment to the aggregator/receiving office can be made through using the net-banking or UPI facility from the linked bank account, whereby funds will be debited at the time of submission of bids on the portal.

Registered investors can access the secondary market transaction link on the online portal to buy or sell government securities through NDS-OM.

For buying of government bonds, payment can be made through either of the following ways: before start of trading hours or during the day, the investor should transfer funds to the designated account of CCIL (Clearing Corporation of India NDS-OM). Based on the actual transfer/success message, a funding limit (buying limit) will be given for placing the ‘Buy’ orders. At the end of the trading session, any excess funds lying to the credit of the investor will be refunded.

RBI Integrated Ombudsman Scheme

This will help in improving the grievance redress mechanism for resolving customer complaints against RBI’s regulated entities. According to the PMO, the scheme is based on “One Nation-One Ombudsman” with one portal, one email, and one address for the customers to lodge their complaints.

Customers will be able to file complaints, submit documents, track status, and give feedback through a single email address. There will also be a multilingual toll-free number that will provide all relevant information on grievance redress.

Now, there will be a single point of reference for customers to file their complaints, submit the documents, track status, and provide feedback.  Under this scheme, there will be a multilingual toll-free number that will provide all relevant information on grievance redress and assistance for filing complaints. The redressal will continue to be cost-free for customers of banks and members of the public.

Importance of the schemes

The move comes at a time when rising inflation adds pressure on the RBI to lift rates. Tighter monetary policy is likely to weaken the demand for bonds, making it challenging for the government to execute its near-record borrowing program. Other emerging-market nations in Asia, like the Philippines, have also sought to raise funds from citizens to battle the pandemic.

Yields on India’s benchmark 10-year government bonds have risen in the past five months amid surging crude oil prices. They eased in November after the Narendra Modi-led government cut tax on retail fuels.

Source: The Indian Express