1)Chinese Yuan may get reserve currency status:-
- Reserve Currency:- A foreign currency held by central banks and other major financial institutions as a means to pay off international debt obligations, or to influence their domestic exchange rate. A large percentage of commodities, such as gold and oil, are usually priced in the reserve currency, causing other countries to hold this currency to pay for these goods. Holding currency reserves, therefore, minimizes exchange rate risk, as the purchasing nation will not have to exchange their currency for the current reserve currency in order to make the purchase.
- Major Reserve Currency :-
- United States dollar
- Euro
- Pound Sterling
- Japanese Yen
- Swiss Franc
- Canadian Dollar
- Chinese Yuan:-The Chinese yuan or renminbi (RMB) cannot be used as a reserve currency as long as the Chinese government maintains capital controls on the conversion of its currency.Holding the currency would not be attractive to central banks unless China develops a strong open bond market.The Bank for International Settlements estimates that in 2010 around 0.9% of all currency market transactions were carried out in renminbi.
- International Monetary Fund representatives have given China strong signals that the yuan is likely to soon join the fund’s basket of reserve currencies, known as Special Drawing Rights.
-
What is a Special Drawing Right?
The fund created the SDR in 1969 to boost global liquidity as the Bretton Woods system of fixed exchange rates unraveled. While the SDR is not technically a currency, it gives IMF member countries who hold it the right to obtain any of the currencies in the basket — currently the dollar, euro, yen and pound — to meet balance-of-payments needs. So the ability to convert SDRs into yuan on demand is crucial. Its value is currently based on weighted rates for the four currencies.
-
Why is the IMF likely to approve this?
Global use of the yuan has surged since the IMF rejected SDR inclusion in the last review in 2010. By one measure, the currency became the fourth most-used in global payments with a 2.79 percent share in August, surpassing the yen, according to the Society for Worldwide Interbank Financial Telecommunication, known as Swift.
- Once the Chinese yuan becomes part of the SDR, central-bank reserve managers and institutional investors will automatically want to accumulate yuan-denominated assets.
2) Particulate Matter :-
- News:- Delhi air Pollution has been a major cause of worry for the past years. The issue is compounded as Diwali is around the corner.
What is Particulate Matter (PM):-
Airborne particulate matter, which includes dust,dirt, soot, smoke, and liquid droplets emitted into the air, is small enough to be suspended in the atmosphere. Airborne particulates may be a complex mixture of organic and inorganic substances.They can be characterized by their physical attributes, which influence their transport and deposition, and their chemical composition,which influences their effect on health.
The physical attributes of airborne particulates include mass concentration and size distribution.Ambient levels of mass concentration are measured in micro grams per cubic meter (μg/m3); size attributes are usually measured in aerodynamic diameter
PM10 and PM2.5:-
Particulate matter (PM) exceeding 2.5 microns (μm) in aerodynamic diameter is generally defined as coarse particles, while particles smaller than 2.5 microns (PM2.5) are called fine particles.
Particles interact with various substances in the air to form organic or inorganic chemical compounds. The most common combinations of fine particles are those with sulfates.Additionally,atmospheric reactions of nitrogen oxides produce nitric acid vapor (HNO3) that may accumulate as nitrate particles in both fine and coarse forms.The
most common combination of coarse particles consists of oxides of silicon, aluminum, calcium, and iron.
Total suspended particulates (TSP) includes particles of various sizes. Some proportion of TSP consists of particles too large to enter the human respiratory tract; therefore, TSP is not a good indicator of health-related exposure.
The particles most likely to cause adverse health effects are the fine particulates PM10 and PM2.5 —particles smaller than 10 microns and 2.5 microns in aerodynamic diameter, respectively.
While all particles smaller than 10 microns in diameter can reach the human lungs, the retention rate is largest for the finer particles. PM10 can be jettisoned from body by coughing, sneezing etc but PM2.5 has a deeper penetration hence it is more dangerous.
Black Smoke:-
Black smoke (BS) is a particulate measure that typically contains at least 50% respirable particulates smaller than 4.5 mm in aerodynamic diameter.
Sources of Particulates:-
Some particulates come from natural sources such as evaporated sea spray, wind-borne pollen, dust, and volcanic or other geothermal eruptions. Particulates from natural sources tend to be coarse.
Almost all fine particulates are generated as a result of combustion processes, including the burning of fossil fuels for steam generation, heating and household cooking, agricultural field burning, diesel-fueled engine combustion, and various industrial processes.
Emissions from these anthropogenic sources tend to be in fine fractions. However, some industrial and other processes that produce large amounts of dust, such as cement
manufacturing, mining, stone crushing, and flour milling, tend to generate particles larger than 1 micron and mostly larger than 2.5 microns.
The largest stationary sources of particulate emissions include fossil-fuel-based thermal power plants, metallurgical processes, and cement manufacturing. The physical and chemical composition of particulate emissions is determined by the nature of pollution sources. Most particles emitted by anthropogenic sources are less than 2.5 microns in diameter and include a larger variety of toxic elements than particles emitted by natural sources.
Ground Level Ozone:-
Ground level or “bad” ozone is not emitted directly into the air, but is created by chemical reactions between oxides of nitrogen (NOx) and volatile organic compounds (VOC) in the presence of sunlight. Emissions from industrial facilities and electric utilities, motor vehicle exhaust, gasoline vapors, and chemical solvents are some of the major sources of NOx and VOC. Breathing ozone can trigger a variety of health problems, particularly for children, the elderly, and people of all ages who have lung diseases such as asthma. Ground level ozone can also have harmful effects on sensitive vegetation and ecosystems.
3)Reforms in FDI:-
Government has brought in FDI related Reforms and liberalisation touching upon 15 major Sectors of the Economy. The salient measures are:
- Limited Liability Partnerships, downstream investment and approval conditions.
- Investment by companies owned and controlled by Non-Resident Indians (NRIs)
- Establishment and transfer of ownership and control of Indian companies
- Agriculture and Animal Husbandry
- Plantation
- Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities
- Defence
- Broadcasting Sector
- Civil Aviation
- Increase of sectoral cap
- Construction development sector
- Cash and Carry Wholesale Trading / Wholesale Trading (including sourcing from MSEs)
- Single Brand Retail Trading and Duty free shops
- Banking-Private Sector; and
- Manufacturing Sector
The Crux of these reforms is to further ease, rationalise and simplify the process of foreign investments in the country and to put more and more FDI proposals on automatic route instead of Government route where time and energy of the investors is wasted.
4)UDAY :-Ujjwal Discom Assurance Yojana
UDAY provides for the financial turnaround and revival of Power Distribution companies (DISCOMs), and importantly also ensures a sustainable permanent solution to the problem.
The weakest link in the value chain is distribution, wherein DISCOMs in the country have accumulated losses of approximately Rs. 3.8 lakh crore and outstanding debt of approximately Rs. 4.3 lakh crore (as on March, 2015)
Financially stressed DISCOMs are not able to supply adequate power at affordable rates, which hampers quality of life and overall economic growth and development. Efforts towards 100% village electrification, 24X7 power supply and clean energy cannot be achieved without performing DISCOMs. Power outages also adversely affect national priorities like “Make in India” and “Digital India”. In addition, default on bank loans by financially stressed DISCOMs has the potential to seriously impact the banking sector and the economy at large.
UDAY assures the rise of vibrant and efficient DISCOMs through a permanent resolution of past as well as potential future issues of the sector. It empowers DISCOMs with the opportunity to break even in the next 2-3 years. This is through four initiatives:-
(i) Improving operational efficiencies of DISCOMs;
(ii) Reduction of cost of power;
(iii) Reduction in interest cost of DISCOMs;
(iv) Enforcing financial discipline on DISCOMs through alignment with State finances
Salient Features of UDAY :-
- States shall take over 75% of DISCOM debt as on 30 September 2015 over two years – 50% of DISCOM debt shall be taken over in 2015-16 and 25% in 2016-17.
- Government of India will not include the debt taken over by the States as per the above scheme in the calculation of fiscal deficit of respective States in the financial years 2015-16 and 2016-17.
- States will issue non-SLR including SDL bonds in the market or directly to the respective banks / Financial Institutions (FIs) holding the DISCOM debt to the appropriate extent.
- DISCOM debt not taken over by the State shall be converted by the Banks / FIs into loans or bonds with interest rate not more than the bank’s base rate plus 0.1%. Alternately, this debt may be fully or partly issued by the DISCOM as State guaranteed DISCOM bonds at the prevailing market rates which shall be equal to or less than bank base rate plus 0.1%.
- States shall take over the future losses of DISCOMs in a graded manner and shall fund them.
- State DISCOMs will comply with the Renewable Purchase Obligation (RPO) outstanding since 1st April, 2012, within a period to be decided in consultation with Ministry of Power.
- States accepting UDAY and performing as per operational milestones will be given additional / priority funding through Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY),Integrated Power Development Scheme (IPDS), Power Sector Development Fund (PSDF) or other such schemes of Ministry of Power and Ministry of New and Renewable Energy
- Such States shall also be supported with additional coal at notified prices and, in case of availability through higher capacity utilization, low cost power from NTPC and other Central Public Sector Undertakings (CPSUs).
- States not meeting operational milestones will be liable to forfeit their claim on IPDS and DDUGJY grants.
- UDAY is optional for all States. However, States are encouraged to take the benefit at the earliest as benefits are dependent on the performance.
Receive Daily Updates
Recent Posts
Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.