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Here are the topics covered for 8th November 2023:
GS-1: Sugar Industry.
GS-3: Impact of Worker Productivity on Economy, Indo-Pacific Maritime Domain Awareness Initiative, Aquaculture Crop Insurance Scheme
Facts for Prelims: Initial Public Offering (IPO), Green Crackers
- India’s sugar sector is facing a challenging season due to a projected drop in production, primarily caused by deficit rains in key sugarcane-growing states like Karnataka and Maharashtra. While the estimated production decline ranges from 9.4% to 20%, sugar producers maintain that availability will be sufficient for domestic demand.
More about the news:
- Sugarcane cultivation in India is spread across various states, with Uttar Pradesh, Maharashtra, and Karnataka being the top producers. The current season has been impacted by erratic rainfall patterns, particularly in Karnataka and Maharashtra, leading to concerns about cane yield and overall production.
- Despite the anticipated production dip, sugar producers are calling for long-term policy decisions to bring stability to the sector.
Key issues include:
- Fair and Remunerative Price (FRP) for sugarcane farmers: Farmers’ associations are demanding an FRP of ₹4,000 per tonne, citing rising production costs and lower sugar recovery rates.
- Ethanol pricing: The sugar industry is seeking a long-term ethanol pricing formula to provide clarity for mills and encourage ethanol production.
- Export restrictions: The government has placed restrictions on sugar exports to ensure domestic supply and stabilize prices.
- Balancing domestic demand, ethanol production, and exports: Sugar mills are grappling with balancing these competing priorities, particularly with the growing importance of ethanol in India’s energy mix.
- India is the world’s second-largest sugar producer, after Brazil.
- Sugar production in India has been increasing in recent years.
- The Indian sugar industry is a major source of employment in rural India. It employs over 50 million people in India.
- Sugarcane is a multi-product crop that can be used to produce sugar, ethanol, paper, and electricity.
Cultivation in India is concentrated in two main regions:
- Northern region: Uttar Pradesh, Bihar, Haryana, and Punjab
- Southern region: Maharashtra, Karnataka, Tamil Nadu, and Andhra Pradesh
Note: Favorable climatic conditions in southern India, particularly tropical temperatures, contribute to higher sucrose content and improved yield per unit area compared to northern India.
Challenges Regarding the Sugar Industry
- Unpredictable Production: Sugarcane cultivation competes with other food and cash crops like cotton, oil seeds, and rice, impacting sugarcane supply to mills and causing annual production fluctuations. This volatility leads to price swings, resulting in losses during periods of excess production due to low prices.
- Low Sugarcane Yield: India’s sugarcane yield per hectare lags significantly behind major sugarcane-producing nations. For instance, India’s yield is just 64.5 tonnes/hectare compared to 90 tonnes in Java and 121 tonnes in Hawaii.
- Limited Crushing Season: Sugar production is a seasonal industry with a brief crushing season typically ranging from 4 to 7 months a year. This short season leads to financial losses, seasonal employment for workers, and underutilization of sugar mills.
- Low Sugar Recovery Rate: India’s average sugar recovery rate from sugarcane is below 10%, considerably lower than other major sugar-producing countries.
- High Production Costs: High sugarcane costs, outdated technology, inefficient production processes, and heavy excise duties contribute to high manufacturing expenses. Additionally, most Indian sugar mills are relatively small, with capacities of 1,000 to 1,500 tonnes per day, limiting their ability to benefit from economies of scale.
- Government Regulations and Controls: The government has implemented various policy interventions to balance supply and demand, including export duties, stock limits for sugar mills, and changes to meteorology rules. However, these controls have resulted in unremunerative sugar prices, increasing arrears for sugar mills, and unpaid dues to sugarcane farmers.
Initiatives Taken by the Government
The Rangarajan Committee Recommendations (2012):
- Eliminate quantitative controls on sugar exports and imports.
- Permit unhindered sugar exports.
- Review the minimum radial distance requirement between sugar mills.
- Lift restrictions on byproduct sales and allow market-determined pricing.
- Abolish regulations on non-levy sugar release to enhance mill financial health.
Implementation of the Rangarajan Committee Recommendations:
- Discontinuation of levy obligations for sugar produced after September 2012.
- Elimination of regulated release mechanisms for open-market sugar sales.
- Delegation of decisions regarding minimum distance criteria and cane price formula adoption to state governments.
- Increase in Minimum Selling Price (MSP) of sugar to Rs. 31 for the 2019-20 season.
- Provision of incentives for ethanol production from B-heavy molasses and cane juice to divert sugar surpluses towards biofuel.
- Establishment of a 20% ethanol blending target with petrol by 2030.
- Advancement of the ethanol blending target to 20% of petrol-containing ethanol by 2025-26.
Fair and Remunerative Price (FRP): FRP is the minimum price that sugar mills have to pay to farmers. It is determined based on recommendations of the Commission for Agricultural Costs and Prices (CACP).
State Advised Price (SAP): SAP is the price that sugar mills are advised to pay to farmers in some states. It is usually higher than FRP.
Why is the Government Encouraging Sugar Production?
- The government wants to reduce its import bill on crude oil by blending ethanol with petrol which will also help reduce pollution as a green fuel.
- The government wants to make India self-sufficient in petroleum production.
- While the current season presents challenges due to production decline, the Indian sugar sector is seeking long-term policy solutions to ensure stability and sustainability for all stakeholders, including farmers, mills, and consumers. Addressing issues like FRP, ethanol pricing, and export policies is crucial for the sector’s long-term growth.
Impact of Worker Productivity on Economy
- Worker Productivity and its significant role in determining economic growth have become topics of intense discussion in recent times. Its linkage to economic growth, and the various initiatives and schemes implemented by the Indian government to enhance productivity and efficiency in the country.
Defining Worker Productivity:
- Worker productivity distinguishes itself from labour productivity by focusing on mental activities rather than manual work.
- It is typically quantified as the output value per unit of labour cost at a micro level. At a macro level, it is assessed through the labor-output ratio or changes in Net Domestic Product (NDP) per worker in each sector, assuming an 8-hour workday.
Challenges in Measuring Intellectual Worker Productivity:
- Evaluating the output value in sectors involving intellectual labour can be complex, leading to approximations based on worker income.
- This approximation can complicate the correlation between increased working hours and higher productivity, especially if fair compensation is lacking.
The Role of Skill in Productivity:
- Worker productivity is not solely about time but skill as well. Investments in education, training, and health can significantly enhance worker efficiency, leading to greater value creation within the same time frame.
- Working fewer hours doesn’t necessarily decrease output; it can improve workers’ quality of life. Economic growth can still occur with consistent wages if workers become more skilled and productive.
The Complex Link Between Worker Productivity and Economic Growth:
- India’s GDP grew significantly from 1980 to 2015, indicating robust economic growth. However, this growth did not benefit all segments of society uniformly.
- Income distribution during this period saw a decline in the middle-income group’s share, while the low-income group’s share dropped.
- In contrast, the top 10% income group’s share increased, highlighting growing income inequality. This inequality results from poor labour laws, wealth inheritance, and high pay packages, rather than productivity.
Assessing India’s Worker Productivity:
- Despite misconceptions, India’s worker productivity is not necessarily low. Factors contributing to income disparities include informal employment, and unfavourable labour laws, and regulations.
- Kronos, a global workforce management company, recognizes Indian employees as some of the most hardworking globally. Nevertheless, India ranks low in terms of average monthly wages.
Government Schemes to Improve Productivity and Efficiency:
- Skill Development Initiatives: Pradhan Mantri Kaushal Vikas Yojana (PMKVY), National Skills Qualification Framework (NSQF), Recognition of prior learning (RPL).
- Digital India: Enhancing efficiency through digitalization and online services.
- Make in India: Encouraging investment in manufacturing and job creation.
- Startup India: Fostering entrepreneurship and supporting small businesses.
- Ease of Doing Business Reforms: Simplifying regulations and business operations.
- National Industrial Corridor Development: Stimulating economic growth through infrastructure development.
- Incentives for Research and Innovation: Support for innovative endeavours.
- Tax Reforms: Implementation of GST for streamlined taxation.
The Way Forward:
- India’s unique context calls for customized policies, emphasizing social investments and exploring domestic consumption potential to achieve sustainable economic growth.
- International comparisons may not provide a clear picture, given the differences in labour force size, technological trajectories, socio-cultural factors, and political structures. A human-centric approach to development is key to achieving desirable outcomes.
Indo-Pacific Maritime Domain Awareness Initiative
- The commitment to maintaining a free, open, and inclusive Indo-Pacific region is underscored by the Indo-Pacific Maritime Domain Awareness Initiative (IPMDA). This initiative, as emphasized by the Navy Chief, serves as evidence of the dedication to these principles.
Emerging Challenges in Maritime Domain Awareness (MDA):
- In recent times, new challenges have arisen in the domain of Maritime Domain Awareness (MDA). These challenges extend to sub-surface level movements, grey shipping, and dark shipping. These emerging issues require effective solutions to ensure maritime security and stability in the Indo-Pacific region.
IPMDA Initiative’s Origin:
- The Indo-Pacific Maritime Domain Awareness Initiative (IPMDA) was officially introduced during the Quad Leaders’ Summit held in Tokyo in 2022. The primary objective of this initiative is to enhance the tracking and monitoring of “dark shipping” activities in the Indo-Pacific region.
Ship Classification under IPMDA:
To effectively manage and monitor maritime activities, ships are categorized into three distinct classes:
- White Ships: These are commercial vessels engaged in legitimate trade and transportation. India has established exchange agreements with 22 countries to facilitate information sharing related to white ships, promoting transparency and security.
- Grey Ships: This category encompasses military vessels operated by various nations. Monitoring and maintaining awareness of grey shipping activities are vital for regional security.
- Black Ships: Black ships refer to vessels engaged in illegal or unauthorized activities, often associated with various forms of illicit behaviour, including smuggling, piracy, and other criminal actions. Combating black shipping is a significant aspect of maritime security.
QUAD and IPMDA:
- The Quadrilateral Security Dialogue, commonly known as the Quad, comprises four nations: the United States, Japan, India, and Australia.
- The IPMDA initiative aligns with the goals and values of the Quad, emphasizing a shared commitment to preserving a free, open, and inclusive Indo-Pacific region. It also signifies the Quad’s collective effort to address emerging challenges in maritime security, enhance maritime domain awareness, and promote regional stability.
- The Indo-Pacific Maritime Domain Awareness Initiative (IPMDA) plays a crucial role in addressing new challenges in maritime security, with a particular focus on “dark shipping.” By categorizing ships and promoting information exchange, this initiative strengthens the commitment of Quad nations to uphold a free, open, and inclusive Indo-Pacific region, fostering stability and security in the maritime domain.
Aquaculture Crop Insurance Scheme
- In recent developments, the Ministry of Fisheries, Animal Husbandry & Dairying has been addressing the technical challenges associated with the implementation of the Aquaculture Crop Insurance scheme, specifically focusing on shrimp and fish farming.
About the scheme:
- This initiative is part of the broader Pradhan Mantri Matsya Sampada Yojana (PMMSY) scheme, aimed at mitigating the risks faced by aquaculture farmers.
- The National Fisheries Development Board (NFDB) has proposed the implementation of this insurance scheme.
the objective of the Scheme:
- The primary objective of the Aquaculture Crop Insurance scheme is to provide basic insurance coverage for brackish water shrimp and fish farming on a pilot basis.
- This pilot program is set to run for one year and will be implemented in selected states, including Andhra Pradesh, Bihar, Gujarat, Madhya Pradesh, and Odisha.
What is Aquaculture?
- Aquaculture is the practice of cultivating aquatic organisms in controlled aquatic environments, whether for commercial, recreational, or public purposes.
- This includes the breeding, rearing, and harvesting of aquatic plants and animals, and it can occur in various water bodies, including ponds, rivers, lakes, oceans, and closed systems on land.
Importance of Aquaculture Insurance:
- Aquaculture insurance is a specialized form of insurance designed to cater to the unique risks associated with aquaculture operations.
- This sector is susceptible to various risks, including diseases, adverse weather conditions, water quality issues, and natural disasters, all of which can lead to significant financial losses. Insurance helps manage and mitigate these risks by providing financial protection.
Challenges in Implementation:
- Data Collection and Assessment: The aquaculture industry’s risks are influenced by complex environmental and biological factors, making the collection and assessment of relevant data challenging.
- Awareness and Education: Many individuals engaged in aquaculture may not be familiar with the concept and benefits of insurance. Raising awareness and providing education on the scheme is crucial for its success.
- Adverse Selection: There’s a risk of adverse selection, where high-risk participants dominate the scheme, leading to unsustainable premium levels.
- Administrative Complexity: The scheme’s administration, including claims processing and premium payments, can be operationally complex.
Government Initiatives Related to Aquaculture:
- Fisheries and Aquaculture Infrastructure Development Fund (FIDF): A financial assistance program to support fisheries and aquaculture infrastructure development.
- Blue Revolution: An initiative to enhance fish production and productivity through various measures.
- Extension of Kisan Credit Card (KCC): Providing credit facilities to fishers and aquaculture farmers.
- Marine Products Export Development Authority: Supporting the export of marine products.
- Seaweed Park: An initiative to promote seaweed farming.
- The Aquaculture Crop Insurance scheme under PMMSY aims to mitigate risks for fishers and aquaculture farmers, boost investment, and improve food security. However, it faces challenges related to data, awareness, adverse selection, and administration.
- Successful implementation relies on involving key stakeholders and establishing a governing structure to ensure the scheme’s effectiveness for shrimp and fish farming in aquaculture.
FACTS FOR PRELIMS:
Initial Public Offering (IPO)
- An Initial Public Offering (IPO) is a crucial financial event in a company’s journey, involving the sale of shares from a previously private corporation to the general public for the first time.
- Definition: An IPO marks the debut of a private company’s shares in the public stock market, allowing the company to raise capital by selling its shares to the public.
- Requirements: To conduct an IPO, companies must meet specific criteria and comply with regulations set by stock exchanges and the Securities and Exchange Commission (SEC).
- Capital Generation: IPOs provide companies with an opportunity to secure capital by offering shares through the primary market, which can be used to support growth and expansion
- Involvement of Investment Banks: Companies typically engage investment banks to manage the IPO process. These banks help market the offering, assess demand, set the IPO price, and determine the date of the offering.
- Exit Strategy: For a company’s founders and early investors, an IPO can serve as an exit strategy, enabling them to realize profits from their initial private investments.
- Private to Public Transition: The company transitions from private to public ownership.
- Access to Capital: IPOs provide access to substantial capital for growth and improved financing terms.
- Timing: Companies go public when they are ready for SEC compliance, often at a valuation of around $1 billion (unicorn status).
- Share Pricing: IPO share prices are determined through underwriting and due diligence.
- Private Investor Opportunity: Private investors can sell their shares to realize returns.
- Public Investment Opportunity: Millions of investors can buy shares, contributing to shareholders’ equity.
- Share Quantity and Price: The number of shares and price influence the new shareholders’ equity value, boosted by cash infusion in the IPO.
- These are eco-friendly firecrackers designed to produce fewer harmful emissions, particularly of substances like Ammonium Perchlorate (AP) and Nitrocellulose (NP), which are commonly found in traditional fireworks and contribute to pollution.
- The National Environmental Engineering Research Institute (NEERI), under the Council of Scientific and Industrial Research (CSIR), introduced the concept of Green crackers in 2018.
- The aim was to develop firecrackers that maintain the festive spirit of Diwali while being less harmful to the environment and public health.
Types of Green Crackers:
- SWAS (Safe Water Releaser): These crackers contain no Sulphur, Ammonium Perchlorate (AP), or Nitrocellulose (NP). When ignited, they release water vapours and diluents, reducing the emission of harmful substances.
- STAR (Safe Thermite Cracker): Similar to SWAS, STAR crackers are free from Sulphur, Ammonium Perchlorate (AP), and Nitrocellulose (NP). They provide a safe and eco-friendly alternative for celebratory fireworks.
- SAFAL (Safe Minimal Aluminium): SAFAL crackers are designed to have minimal aluminium content, further reducing the environmental impact and health risks associated with traditional firecrackers.