DAILY NEWS ANALYSIS

Syllabus subtopic: Bilateral, Regional and Global Groupings and Agreements involving India and/or affecting India’s interests.

Prelims and Mains focus: about the move and its significance; about IOC

News: India has joined as an observer of the Indian Ocean Commission.

About the move

With this, India joins China, which was made an observer in 2016, as well as the “International Organisation of the Francophonie” or the 54-nation French-speaking collective, the European Union (EU) and Malta, which were all admitted in 2017.

Background

• The decision to join the IOC marks a part of the government’s push for greater salience in the whole Indian Ocean Region (IOR), including what is called the Western or African Indian Ocean.

• In December 2019, the Ministry of External Affairs decided to include Madagascar, Comoros and Reunion as part of the IOR desk along with Sri Lanka, Maldives, Mauritius, and Seychelles.

• Subsequently, they have been incorporated into one single division under the additional Secretary (Indo-Pacific).

Significance of the move

• The Western Indian Ocean (WIO) is a strategic sub-theatre of the Indian Ocean linking the Southeastern coast of Africa to the wider Indian Ocean and beyond. It is home to one of the key chokepoints in the Indian Ocean- the Mozambique Channel.

• This move has strategic importance as the Commission is an important regional institution in the Western Indian Ocean. It facilitates collective engagement with the islands in Western Indian Ocean that are becoming strategically significant. It boosts cooperation with France that has strong presence in the Western Indian Ocean and lends depth to India's SAGAR policy of PM Modi 2015.

• The move also strengthens western flank of the Indo-Pacific and is a stepping stone to security cooperation with East Africa.

• While Comoros sits at the northern mouth of the Mozambique Channel, Madagascar borders the channel to its west. While the channel lost its significance post the opening of the Suez Canal, the recent hostilities near the Strait of Hormuz brought the channel back into focus as the original route for bigger commercial vessels (especially for oil tankers).

• Additionally, the growing importance of Africa in Indo-Pacific engagements combined with potential natural gas reserves in the Mozambique Channel will only continue to raise the significance of this region in wider maritime security. Keeping in mind the importance of geography for maritime power projection and naval dominance, there is little doubt about the rising significance of the islands in a new geo-political environment in the Indian Ocean.

About IOC

• The Indian Ocean Commission is an inter-governmental organisation that coordinates maritime governance in the south-western Indian Ocean.

• It was created in 1982 at Port Louis, Mauritius and institutionalized in 1984 by the Victoria Agreement in Seychelles.

• The COI is composed of five African Indian Ocean nations: Comoros, Madagascar, Mauritius, Réunion (an overseas region of France), and Seychelles.

• Notwithstanding their different characteristics (Reunion as a French overseas region; Mauritius and Seychelles as Middle-Income Countries whereas Comoros and Madagascar are amongst the Least-Developed Countries), the five islands share geographic proximity, historical and demographic relationships, natural resources and common development issues.

The COI works on four pillars which have been adopted in 2005 by the Summit of Heads of States:

• Political and diplomatic cooperation,
• Economic and commercial cooperation
• Sustainable development in a globalisation context, cooperation in the field of agriculture, maritime fishing, and the conservation of resources and ecosystems
• Strengthening of the regional cultural identity, cooperation in cultural, scientific, technical, educational and judicial fields.

Syllabus subtopic: Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation.

Prelims and Mains focus: about the key features of the bill

News: The Lok Sabha passed the Mines and Mineral Laws (Amendment) Bill amid sloganeering by Opposition members over the Delhi violence and other issues.

Key features of the Bill

• The Bill amends the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) and the Coal Mines (Special Provisions) Act, 2015 (CMSP Act).

• Removal of restriction on end-use of coal: Currently, companies acquiring Schedule II and Schedule III coal mines through auctions can use the coal produced only for specified end-uses such as power generation and steel production. The Bill removes this restriction on the use of coal mined by such companies. Companies will be allowed to carry on coal mining operation for own consumption, sale or for any other purposes, as may be specified by the central government.

• Eligibility for auction of coal and lignite blocks: The Bill clarifies that the companies need not possess any prior coal mining experience in India in order to participate in the auction of coal and lignite blocks. Further, the competitive bidding process for auction of coal and lignite blocks will not apply to mines considered for allotment to: (i) a government company or its joint venture for own consumption, sale or any other specified purpose; and (ii) a company that has been awarded a power project on the basis of a competitive bid for tariff.

• Composite license for prospecting and mining: Currently, separate licenses are provided for prospecting and mining of coal and lignite, called prospecting license, and mining lease, respectively. Prospecting includes exploring, locating, or finding mineral deposit. The Bill adds a new type of license, called prospecting license-cum-mining lease. This will be a composite license providing for both prospecting and mining activities.

• Non-exclusive reconnaissance permit holders to get other licenses: Currently, the holders of non-exclusive reconnaissance permit for exploration of certain specified minerals are not entitled to obtain a prospecting license or mining lease. Reconnaissance means preliminary prospecting of a mineral through certain surveys. The Bill provides that the holders of such permits may apply for a prospecting license-cum-mining lease or mining lease. This will apply to certain licensees as prescribed in the Bill.

• Transfer of statutory clearances to new bidders: Currently, upon expiry, mining leases for specified minerals (minerals other than coal, lignite, and atomic minerals) can be transferred to new persons through auction. This new lessee is required to obtain statutory clearances before starting mining operations. The Bill provides that the various approvals, licenses, and clearances given to the previous lessee will be extended to the successful bidder for a period of two years. During this period, the new lessee will be allowed to continue mining operations. However, the new lessee must obtain all the required clearances within this two-year period.

• Reallocation after termination of the allocations: The CMSP Act provides for the termination of allotment orders of coal mines in certain cases. The Bill adds that such mines may be reallocated through auction or allotment as may be determined by the central government. The central government will appoint a designated custodian to manage these mines until they are reallocated.

• Prior approval from the central government: Under the MMDR Act, state governments require prior approval of the central government for granting reconnaissance permit, prospecting license, or mining lease for coal and lignite. The Bill provides that prior approval of the central government will not be required in granting these licenses for coal and lignite, in certain cases. These include cases where: (i) the allocation has been done by the central government, and (ii) the mining block has been reserved to conserve a mineral.

• Advance action for auction: Under the MMDR Act, mining leases for specified minerals (minerals other than coal, lignite, and atomic minerals) are auctioned on the expiry of the lease period. The Bill provides that state governments can take advance action for auction of a mining lease before its expiry.

Syllabus subtopic: Important Aspects of Governance, Transparency and Accountability

Prelims and Mains focus: about the issue and recommendations of the committee

News: The parliamentary panel on Personnel, Public Grievances, Law and Justice has pulled up the government for “dismal implementation” of the reservation policy.

About the issue

• In six key ministries, over 7,000 posts reserved for Scheduled Castes, over 6,000 for Scheduled Tribes and over 10,000 for Other Backward Classes remain unfilled.

• The standing committee, said the statistics point to a serious malaise afflicting the entire recruitment system as a whole,” the report states.

• The panel has directed the Centre to hold special recruitment drives to fill the vacancies without further delay.

• The top six ministries that the committee has highlighted are the Departments of Posts, Atomic Energy, Defence, Railways, Housing & Urban Affairs and Home. The highest backlog of unfilled posts in reserved category is in the Home Ministry, where 5,850 posts for SCs, 5,383 posts for STs and 6,260 posts for OBCs remain vacant.

• The Central Bureau of Investigation has 1,281 vacancies, the Committee noted, which could increase pendency, hamper quality of investigations and reduce the efficiency of the agency. Of the total, 789 posts in the executive ranks, 77 posts of law officers and 415 posts of technical officers and staff are vacant.

Recommendations

• The Committee has recommended that there should be no random posting of the IAS officers suggesting instead that they should be categorised according to their skill set, aptitude and interest. Clusters like rural, social, financial should be made.

• “Once assigned to a particular sector, the civil servant will spend the rest of his career within the sector concerned. This system will enable civil servants to acquire skills, expertise and professional excellence in a particular domain. The Committee thinks that this administrative reform can usher in Good governance,” the committee said.

Syllabus subtopic: Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation.

Prelims and Mains focus: key highlights of the bill and its significance

News: The Lok Sabha passed the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019.

Background

The Bill was first tabled in Lok Sabha on December 12, 2019, but was referred to the Standing Committee on Finance before being reintroduced in Parliament on 6^th February. The Bill is set to replace an ordinance which had brought provisions of the Bill into effect on December 28, 2019.

Key highlights of the Bill

• The Code allows creditors to initiate an insolvency resolution process if a company defaults on its payments. The Bill introduces an additional threshold for certain classes of financial creditors, including allottees of real estate projects, for initiating the resolution process. At least 10% of them or 100 such persons have to jointly initiate the process.

• The Bill empowers the resolution professional to require suppliers to continue providing goods and services. This provision will not apply if the debtor has unpaid dues arising from such supplies during the moratorium period. The Bill provides that the company will not be liable for any offense committed prior to the insolvency resolution process if there is a change in the management or control of the company.

• Under the Code, the insolvency resolution process commences when the Insolvency Resolution Professional (IRP) is appointed. The Bill states that the IRP must be appointed on the date of admission of the application by NCLT, which will be considered as the insolvency commencement date.

Key Issues and Analysis

• In the case of defaults by real estate developers, the insolvency resolution application should be filed jointly by at least 100 homebuyers or 10% of their total number. The move is aimed at preventing speculative homebuyers from dragging otherwise viable rreal estate projects through the IBC. Further, a homebuyer wishing to initiate the process may not have details of other allottees.

• The Bill empowers the resolution professional to require suppliers to continue providing goods and services during the moratorium period. This provision overrides the agency of suppliers to negotiate and decide whether to continue a contractual arrangement. It may also force the supply of goods and services even if the supplier finds it risky or unviable.

• In order to balance the rights of the suppliers, the Bill provides that suppliers have to continue supplying only if their current dues are paid. In other countries, additional safeguards are available. These include the right to seek a payment guarantee, and court-granted permission to terminate the contract in cases where the supplier demonstrates that continuation will cause hardship.

Syllabus subtopic: Effects of Liberalization on the Economy, Changes in Industrial Policy and their Effects on Industrial Growth.

Prelims and Mains focus: about the currency swap agreement and its significance

News: Reserve Bank of India (RBI) governor made a case for international multilateral agencies like the International Monetary Fund (IMF) launching currency swaps for countries affected by the spread of COVID-19, also known as coronavirus.

Need

A swap line was critical from the point of view of preserving global financial stability. The global economy has been hit hard by COVID-19. According to IMF projections, the outbreak’s impact on the global economy will be 0.1 per cent and 0.4 per cent on the Chinese economy.

What is the benefit?

A coordinated swap line would act as a second line of defence to bolster national reserves across nations.

What is a currency swap agreement?

• The word swap means exchange. A currency swap between two countries is an agreement or contract to exchange currencies (of the two countries or any hard currency) with predetermined terms and conditions.

• Often the popular form of currency swap is between two central banks. Here, the main purpose of currency swap by a central bank like the RBI is to get the foreign currency form the issuing foreign central bank at the predetermined conditions (like exchange rate and the volume of currency) for the swap. Besides supporting the domestic currency and foreign exchange market, another main purpose of currency swap is to keep the value of the foreign exchange reserves kept with the central bank.

What is the purpose of currency swap?

• As mentioned, the main purpose of currency swaps is to avoid turbulence and other risks in the foreign exchange market and exchange rate. Central banks and governments engage in currency swaps with foreign counterparts to ensure adequate foreign currency during the time of foreign currency scarcity. Both works with the same objective and through similar mechanism.

• Often, the turbulence comes when a country faces scarcity of foreign currency which may led to currency crisis and steep depreciation of the domestic currency. In such a scenario, if the central bank/government is able to get sizable foreign currency by exchanging domestic currency, it ensures availability of foreign currency. Hence the turbulence in the foreign exchange market or depreciation of the domestic currency/currency crisis can be avoided.

• Besides currency or exchange rate stability, currency swaps between governments also have supplementary objectives like promotion of bilateral trade, maintaining the value of foreign exchange reserves with the central bank and ensuring financial stability (protecting the health of the banking system).

• It is always desirable for a developing country like India to reach currency swap agreement with countries like USA/UK/EU/Japan whose currencies are hard currencies (used in international trade as medium of exchange).

• Currency swap agreement can be bilateral or multilateral. The earliest currency swap was between U.S. Federal Reserve and the Central Bank of France signed on February 28, 1962.

• Usually, currency swap agreements are of five types depending upon the nature and the status of the currencies swapped.

1) Exchange cash for cash vs cash for securities;

2) Exchange conditional vs unconditional swaps;

3) Exchange reserve currencies on both sides;

4) Exchange reserve currency for non-reserve currency; and

5) Exchange non-reserve currencies on both sides.

Syllabus subtopic: Challenges to Internal Security through Communication Networks, Role of Media and Social Networking Sites in Internal Security Challenges, Basics of Cyber Security

Prelims and Mains focus: about the cyber security threat concerning India; about NTRO

News: Although India is the fifth most important target of cyber threats, the country does not focus enough on security during the technology development process, National Technical Research Organisation (NTRO) chairman told an audience of cyber security experts at the cyber security Nullcon conference at Dona Paula in Goa.

Need of the hour

• India needs to be more proactive to common cyber threats, such as data breaches, supply chain contamination and “malicious actors using social media for violent extremist ideologies.

• There is hardly any coordination among nations on how to police cyber space. And messaging applications complicate the problem even more.

• Cyber tactics have become more state-sponsored but executed by non-state actors in locations outside their home countries, making attribution difficult.

About NTRO

• NTRO, established in 2004, is housed under the National Security Advisor in the Prime Minister’s Office and focuses on intelligence gathering.

• Under the agency is the National Critical Information Infrastructure Protection Centre (NCIIPC) which focuses on threats to information infrastructure.

• NTRO has the same “norms of conduct” as the Intelligence Bureau (IB) and the Research and Analysis Wing (R&AW).