Current Affairs for IAS Exam 2011 Economy and Energy April 2011 Www.upscportal

8/6/2019 Current Affairs for IAS Exam 2011 Economy and Energy April 2011 Www.upscportal

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Economy & Energy: April 2011

Prepare for long-term climate change impacts on food production: FAO

Potentially catastrophic impacts on food production from slow-onset climate changesare expected to increasingly hit the developing world in the future, and action is requirednow to prepare for those impacts, the Food and Agriculture Organisation (FAO) warnedin a report to the United Nations Framework Convention on Climate Change.

Currently the world is focussed on dealing with shorter-term climate impacts causedmainly by extreme weather events that is absolutely necessary, said FAO AssistantDirector-General for Natural Resources Alexander Mller.

FDI norms fine-tuned to attract more investment

Concerned over the continued decline in foreign direct investment (FDI) over the last fewmonths, the Central Government unveiled a major policy reform allowing flexibility forIndian companies to raise funds from abroad. At the same time, it plugged the loopholesfor backdoor FDI entry breaching sectoral caps.

The new circular issued by the Department of Industrial Policy and Promotion (DIPP)states that under the new norms, Indian companies have been allowed to issue equityagainst import of capital goods and liberalise conditions for seeking foreign investmentfor production and development of agriculture seeds.

The facility of conversion of capital goods import into equity was earlier available forcompanies raising external commercial borrowings (ECBs).

The government also removed the restrictive condition of obtaining prior approval ofIndian companies for making investments in the same field. In order to plug theloopholes in the system, the government has classified companies into two categories companies owned or controlled by foreign investors and companies owned and controlledby Indian investors.

The government has done away with the earlier category of investing companies,operating companies and investing-cum-operating companies.

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It further said that the companies would be free to prescribe a formula for transformingconvertible instruments (like debentures, partly paid shares, preferential shares and thelike) into equity in accordance with the guidelines of FEMA and SEBI.

100 % FDI allowed in some areas of farm sector

Tuning the policy norms further to attract declining foreign investment, in a significantdevelopment, the Centre announced allowing 100 per cent foreign direct investment(FDI) in the agriculture sector, including seeds, plantation, horticulture and cultivation ofvegetables.

According to a circular by the Department of Industrial Policy and Promotion released onConsolidated FDI Policy Circular 1 of 2011, 100 per cent FDI has been nowallowed in development and production of seeds and planting material, floriculture,horticulture, and cultivation of vegetables and mushrooms under controlledconditions. The policy will come into effect from Friday (April 1). Besides, animalhusbandry (including of breeding of dogs), pisciculture, aquaculture under controlled

conditions and services related to agro and allied sectors have been brought under the 100per cent FDI norm. Similarly, the tea sector has also been brought under the 100 per centFDI norm.

The DIPP has imposed certain conditions for companies dealing with development oftransgenic seeds and vegetables wanting to take the 100 per cent FDI route.

Under the 100 per cent FDI in tea sector, it demands compulsory divestment of 26 percent equity of the company in favour of an Indian partner/Indian public within a period offive years prior to approval of the State Government concerned in case of any future landuse change.

GoM to decide Cairn-Vedanta deal

In a setback to U.K.-based Vedanta Resources' attempt to seal the deal' with CairnEnergy Ltd. (CIL), the Cabinet Committee on Economic Affairs (CCEA) decided to referthe matter to a Group of Ministers (GoM) headed by Finance Minister Pranab Mukherjeefollowing sharp differences in the Cabinet over granting approval to the deal.

The deal had become controversial' following the adverse opinion of the SolicitorGeneral of India and the Law and Justice Ministry that London-based Vedanta Resourcesmust agree to equitably share royalty on oil produced from Cairn India's mainstayRajasthan oilfields before the government nod.

TRAI proposes Rs.1-lakh cr infrastructure investment

The Telecom Regulatory Authority of India (TRAI) issued important recommendationsrelated to manufacturing, infrastructure and green telecom to promote structured growthof the sector. It has also proposed investments of over Rs.1-lakh crore for technicalupgradation and improvement of manufacturing capabilities of the sector.

TRAI has recommended preferential market access to domestic manufacturers and taxconcessions in equipment manufacturing policy. It has called for treating telecom





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infrastructure as an essential infrastructure. It has also asked for making green measuresas an integral part of the proposed National Telecom Policy 2011 and ensuring energycertification for all telecom products, equipment and services in the telecom network.

It has also called for setting up of a Telecom Standards Organisation (TSO) for carryingout all works related to telecom standards, driving international standards and drawing up

specifications of the equipment to be used in the Indian telecom networks, includingsecurity standards. Pointing out that Indian market for semiconductor chips is around $8billion, TRAI has recommended setting up of two fabrication units with governmentassistance.

ADB meet to focus on food, fuel prices

Skyrocketing food and fuel prices in Asia and the Pacific was the prime focus ofdiscussion at the annual meeting of the board of governors of the Asian DevelopmentBank (ADB) starting May 3 in Hanoi.

Even as nearly two billion people in the Asia-Pacific region have already been strugglingon less than $2 a day, soaring prices of food and fuel have further complicated economicand monetary policy-making for governments, while floods and earthquakes have addedto the pressure.

Alongside, environmental degradation and climate change, growing and ageingpopulations, and global economic rebalancing are among the myriad other challenges asAsia seeks to cement the foundations for a prosperous future.

Mini Ratna status for Pawan Hans

Pawan Hans Helicopters Limited was conferred the Mini Ratna Category-I status byPresident Pratibha. It has been providing services to the paramilitary forces and support

services for oil exploration. Recently, the company established its own training school.

Indian handicrafts to take part in Hong Kong fair

Seeking to promote its products to a wide range of customers and fight the growingcompetition worldwide, the Export Promotion Council for Handicrafts display 125varieties of products in the three trade fairs held in Hong Kong from April 20.

Exports jump 37 % to $246 billion in 2010-11

Braving the slow economic growth and declining demand from the western markets,India's exports posted an impressive 37.1 per cent rise at $245.9 billion for the fiscalending 2010-11. During March shipments posted an impressive 43.9 per cent growth at$29.1 billion.

Releasing the export figures, Union Commerce and Industry Minister Anand Sharmasaid exports have not only posted a phenomenal growth but have also surpassed thegrowth target of $220 billion set for 2010-11. Exports had suffered in 2009-10 at a mere





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$178 billion under the impact of global slowdown and the government had to interveneto help exporters through different bailout packages.

Engineering goods by far constituted the largest component of the exports entailingconsiderable domestic value addition and engineering exports crossed $60 billion, agrowth of 84.76 per cent. Petroleum products exports were up 50.58 per cent at $42.45

billion. The gems and jewellery sector, which is a considerable employer of people, saw an

export of $33.54 billion showing a growth of 15.34 per cent. Drugs and pharmaceuticalssector for which India has gained a considerable global reputation saw total exports at$10.32 billion a growth of 15.08 per cent. In readymade garments, exports crossed $11.1billion showing a growth of 4.23 per cent. Cotton yarn fabrics exports rose by 42.87 percent to $5.66 billion. Exports of carpet, jute and leather, which are the labour-intensivesectors, assured considerable dynamism in growth. Agricultural exports and alliedsectors, including tea, coffee, tobacco, spices, cashew, oil meals, fruits and vegetablesand marine products, crossed the $12-billion mark to $12.92 billion. Iron ore exportshave actually gone down by 25 per cent to $4.5 billion.

Poverty rate declines from 37.2% to 32%

The latest data of the Planning Commission indicates that poverty has declined to 32 percent in 2009-10 from 37.2 per cent five years ago.

The preliminary estimates are based on the formula suggested by the TendulkarCommittee for computing the number of poor.

Planning Commission Deputy Chairman Montek Singh Ahluwalia said that the 2009-10data shows a decline in poverty from 37.2 per cent in 2004-05 to 32 per cent in 2009-10as the per the preliminary data worked out by the Planning Commission member AbhijitSen.

The Tendulkar Committee had suggested that poverty be estimated on the basis ofconsumption based on the cost of living index instead of caloric intake. It said that thebasket of goods should also include services such as health and education. The newpoverty line, as suggested by the Tendulkar Committee, is different for rich and poorStates, and for rural and urban areas within a State.

12th Plan to target 9-9.5% growth

The full Planning Commission meeting chaired by Prime Minister Manmohan Singhagreed to work towards a growth target of 9.0-9.5 per cent for the 12th Plan (2012-17). Itendorsed the objectives and challenges outlined by the Commission for the five-year

period involving special focus on policy and governance reforms and redesigning ofgovernment programmes.

The Planning Commission gave a presentation on the ongoing 11th Plan and objectivesof the 12th Plan which include 100 per cent literacy, inclusive growth and developmentof physical and social infrastructure within the overall target of fiscal consolidation.

According to the Commission's presentation, for aiming at 100 per cent adult literacy, the12th Plan (2012-17) would have to increase expenditure on health from 1.3 per cent to atleast 2.0-2.5 per cent of GDP (gross domestic product).





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The country was estimated to have recorded an annual growth rate of 8.2 per cent during11th Plan as against the target of nine per cent. In particular, the economic performancewas impacted by the global financial crisis and drought.

Discovers gas in Cauvery-Palar basin

Reliance Industries announced a rich gas and condensate discovery in the very firstwell drilled in the block located in deepwater Cauvery-Palar basin.

The block, with an area of about 8,600 sq. km was awarded to Reliance under NELP-III.It currently holds 100 per cent participating interest in this block.

This is one of the 23 exploration blocks where BP Exploration (Alpha) Limited wouldhave a 30 per cent participating interest, subject to Government approval.

The discovery well, CYPR-D6-SA1, is located in a water depth of 1,194 metres and wasdrilled to a target depth of 3,815 metres and terminated in crystalline basement.

Inter-ministerial group to examine FDI in pharma

With rising demand from the pharmaceutical industry to put a cap on foreign directinvestment (FDI), the Central Government announced its decision to form an inter-ministerial group to examine the issue.

The group will be headed by Planning Commission member Arun Maira, Department ofIndustrial Policy and Promotion (DIPP) Secretary R. P. Singh said.

The government permits 100 per cent foreign direct investment (FDI) via automaticroute.

Mr. Singh said that for brownfield investments, 100 per cent FDI should be permitted butthrough the approval route. However, concerns were raised by the domestic industry andthe Health Ministry over about six takeovers of big Indian pharma companies by globaldrug majors. The DIPP had also raised concerns over the growing dominance ofmultinationals in the sector. The department in its discussion paper on the pharma sectorhas proposed to cap FDI at 49 per cent.

SEBI to set rules for art funds, antique investments

The Securities and Exchange Board of India may soon frame a stringent set of rules forfunds investing in art works, antiques, coins and stamps, with an aim to check black

money flow into these products and safeguard the interest of genuine investors. SEBI considers investment funds focussed on art works, antiques, coins and stamps as

collective investment schemes, which come under the ambit of the capital marketregulator.

Globally, art funds are famous as an alternative class of investments for rich investorsand have started gaining some ground in India over the past few years.

Earlier in 2008, a time when the art funds first became visible in India, the regulator hadissued a public notice to warn the investors against putting their money into art funds or





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schemes of entities not registered with SEBI. At that time, SEBI had said that its analysisof various art funds had found them to be collective investment schemes' and were beinglaunched by various entities without registering with SEBI in accordance with the SEBI(Collective Investment Schemes) Regulations, 1999.

As per the existing regulations, only an entity registered with SEBI as a collectiveinvestment management company is allowed to offer any collective investment fund orscheme, including those focussed on art works.

Record food production in 2010-11

India's food production crossed 235 million tonnes during 2010-11 as per the latestestimates and this is the highest since Independence, S. Ayyappan, Director-General ofthe Indian Council of Agricultural Research, said.

The previous highest production, at nearly 233 million tonnes, was achieved in 2008-09,while the output declined to around 218 million tonnes during 2009-10.

In 2010-11, the country produced 30.2 million tonnes of oilseeds, and 17.2 million tonnesof pulses which had never crossed the 15 million tonne-mark in the past apart from94.5 million tonnes of rice and 84 million tonnes of wheat.

Maize production was 30 million tonnes, sugarcane 340 million tonnes and cotton 39million bales.

Agriculture also recorded a 5.4 per cent growth a first again compared to the fourper cent growth achieved all these years, Dr. Ayyappan said.

DGH to probe decline in gas output from KG-D6 fields

Close on the heels of the Petroleum Ministry directing Reliance Industries Limited (RIL)to stop gas supplies to non-core sectors, the Directorate-General of Hydrocarbons (DGH)

has decided to send a fact-finding team to probe and assess the sudden decline in theoutput of gas from the RIL-operated KG-D fields.

A three-member team lead by Gautam Sinha, Head of Production at the DGH will assessand review well-wise production and reservoir performance of KG-D6 fields on April 27and 28, officials in the Petroleum Ministry said.

Reliance had in 2006 won government award to invest $8.836 billion on Dhirubhai-1 and3 (D1 and D3 fields) in its Eastern offshore KG-D6 block after assuring production of61.88 million metric standard cubic metres per day (mmscmd) of gas from 22 wells byApril 2011 and 80 mmscmd from 31 wells by 2012.

RBI moots deregulation of savings bank interest rate

The Reserve Bank of India (RBI) made a pitch for deregulation of savings bank depositrates, saying that deregulation of interest rates on savings bank (SB) accounts wouldbenefit savers, as it would enable lenders to come out with innovative products to attractmore funds from low-income households.





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While the RBI had deregulated interest rates on fixed deposit schemes in 1997, itcontinues to fix the rate on savings bank deposits. The interest rate on savings bankdeposits has remained unchanged at 3.5 per cent since March 1, 2003.

Savings deposit interest rate has not been deregulated for the reason that a large portionof such deposits are held by low-income households in rural and semi-urban areas.

Both Sudans assure India on energy front

The governments of both Sudans assured India that its investments in the oil sector wouldremain safe despite the formal bifurcation of the country on July 9 into Sudan and SouthSudan.

India is Sudan's third largest partner in the oil sector and its companies account for aquarter of the country's oil off-shore industry. But 70 per cent of oil is produced in thesouth, which voted overwhelmingly to separate and 100 per cent of the facilities such asrefineries and pipelines are in the north. The Indian national oil company, ONGC Videshproduces 1.6 lakh barrels of oil every day but 60 per cent is produced in the southern

parts.




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