Current Affairs 12 January 2024

CONTENTS

1. Challenges in the Implementation of Insolvency and Bankruptcy Code (IBC)
2. Clean Air Targets: Cities Falling Short
3. Surge in Website Blocking Orders: 2013 to October 2023
4. DRDO Advancements: Counter-Drone System and UAVs
5. Carbon Border Adjustment Mechanism
6. Henley Passport Index 2024
7. Momentum Investing
8. Kateel Yakshagana mela

Challenges in the Implementation of Insolvency and Bankruptcy Code (IBC)

Context:

The Insolvency and Bankruptcy Code (IBC), enacted in 2016, aimed to fulfill diverse objectives, yet recent events have sparked concerns regarding its efficacy and the resolution process.

Relevance:

GS III: Indian Economy

Dimensions of the Article:

1. Key Concerns with the Implementation of IBC
2. Regulatory Concerns in Corporate Insolvency Process
3. Key Highlights of the Insolvency and Bankruptcy Code, 2016

Key Concerns with the Implementation of IBC

The Insolvency and Bankruptcy Code (IBC), designed to achieve various objectives, faces critical issues in its implementation, raising doubts about its effectiveness. Here are the key concerns:

Delayed and Ineffective Repayment Process:

• The resolution plan approval process involves approximately 15% payment by the purchaser.
• Repayment periods extend for years, with no additional interest collected by banks.

Low Settlement Amounts and Prolonged Resolutions:

• Recent cases, like Reliance Communications Infrastructure Ltd. (RCIL), witnessed low settlement amounts and extended resolution periods.
• RCIL settlement amounted to only 0.92% of the debt and took four years, exceeding the stipulated maximum of 330 days.
• Financial creditors (FCs) ideally expect principal and interest.

Challenges in Identifying and Acknowledging Defaults:

• Time-consuming processes in recognizing defaults lead to reduced recovery rates.
• Timely initiation of resolution proceedings is hampered.

Promoters Exploiting “Haircuts” Concept:

• “Haircuts” involving loan and interest write-offs are being exploited by promoters.
• Promoters benefit significantly, leaving lenders with reduced recovery rates.

Low Realizable Value to Creditors:

• The RBI’s 2023 Financial Stability Report (FSR) highlights low realizable value to creditors.
• Banks recover only 10-15% in NCLT-settled cases, while creditors realize 168.5% of liquidation value and 86.3% of fair value.
• Out of 597 liquidations, only 3% of the admitted claims were realized against the claim of Rs 1,32,888 crore.

Discrimination in Interest Collection:

• Banks treat corporates differently in interest collection, raising concerns about fairness.
• The amount realized from liquidations is minimal, affecting the overall recovery process.

Regulatory Concerns in Corporate Insolvency Process

The Corporate Insolvency Process (CIRP) under the Insolvency and Bankruptcy Code (IBC) faces significant regulatory concerns, as highlighted by various reports and authorities:

Admitted Claims Discrepancy:

• The Financial Stability Report (FSR) identifies concerns about CIRP, revealing that admitted claims fall short of dues.
• Banks or financial creditors recover only a fraction of the liquidation value and fair value.

Parliamentary Standing Committee Report:

• The 32nd report of the Parliamentary Standing Committee on Finance expresses apprehensions about the CIRP.
• Raises concerns about low recovery rates with haircuts reaching up to 95%.
• Highlights delays in the resolution process, with over 71% of cases pending for more than 180 days.
• Points to a deviation from the original objectives of the code intended by Parliament.
• Recommends the necessity for a professional code of conduct for the Committee of Creditors (COCs) and advocates fixing a ceiling on haircuts.

Issues with Resolution and Insolvency Professionals:

• The report identifies concerns related to Resolution Professionals (RPs) and Insolvency Professionals (IPs).
• Emphasizes the need for addressing issues within these professional roles.

Judicial Shortage Impact:

• A shortage of judges in the IBC resolution process contributes to a slowdown in case processing.
• The shortage hampers the expeditious resolution of cases, leading to prolonged resolution times.

Key Highlights of the Insolvency and Bankruptcy Code, 2016

The Insolvency and Bankruptcy Code (IBC), 2016 is a comprehensive framework designed to address bankruptcy and insolvency concerns across various entities. Here are the key highlights:

Definition of Insolvency and Bankruptcy:

• IBC deals with resolving bankruptcy and insolvency issues of companies, individuals, and partnerships promptly.
• Insolvency refers to a state where liabilities exceed assets, hindering payment obligations.
• Bankruptcy is the legal declaration of an entity’s inability to pay due bills.

Amendment Act, 2021:

• The Insolvency and Bankruptcy Code (Amendment) Act, 2021 focuses on an alternative resolution framework for micro, small, and medium enterprises (MSMEs).
• Aims for efficient, cost-effective, and value-maximizing outcomes for stakeholders.

Objectives:

• Maximizing debtor’s asset value.
• Promoting entrepreneurship.
• Ensuring timely resolution.
• Balancing stakeholder interests.
• Facilitating a competitive market.
• Providing a framework for cross-border insolvency.

IBC Proceedings:

• Insolvency and Bankruptcy Board of India (IBBI):
  • Regulatory authority overseeing insolvency proceedings.
  • IBBI members, including the Chairperson, appointed by the government, possess expertise in finance, law, and insolvency.

Adjudication of Proceedings:

• National Companies Law Tribunal (NCLT):
  • Adjudicates proceedings for companies.
• Debt Recovery Tribunal (DRT):
  • Handles proceedings for individuals.
• Courts play a crucial role in approving resolution initiation, professional appointments, and endorsing final decisions.

Insolvency Resolution Procedure:

• Initiated by debtor or creditor upon default.
• Insolvency professionals manage the process, providing financial information and overseeing asset management.
• A 180-day period prevents legal actions against the debtor during resolution.

Committee of Creditors (CoC):

• Formed by insolvency professionals, CoC includes financial creditors.
• Determines outstanding debts’ fate, deciding on revival, repayment schedule changes, or asset liquidation.
• Failure to decide within 180 days leads to asset liquidation.

Liquidation Process:

• Proceeds from asset sale distributed in order: insolvency resolution costs, secured creditors, dues to workers, other employees, and unsecured creditors.

-Source: The Hindu

Clean Air Targets: Cities Falling Short

Context:

A study conducted by Climate Trends and Respirer Living Sciences indicates that a significant majority of cities are falling short of India’s National Clean Air Programme (NCAP) targets for clean air.

Relevance:

GS III: Environment and Ecology

Dimensions of the Article:

1. Key Highlights of the Study
2. National Clean Air Programme (NCAP)

Key Highlights of the Study

The study presents significant findings regarding air quality in Indian cities, emphasizing various aspects:

PM2.5 Reductions:

• Among 49 cities with consistent PM2.5 data, only 27 demonstrated a decline, and merely four met or surpassed the targeted reduction set by the National Clean Air Campaign (NCAP) Goals.
• NCAP aims for a 40% reduction in average PM concentrations by 2026 in 131 cities.

City-Specific Trends:

• Varanasi, Agra, and Jodhpur exhibited notable reductions, while Delhi reported marginal declines (5.9%) or increased pollution loads.
• Varanasi showcased the most substantial reduction, with a 72% average decrease in PM2.5 levels and a 69% reduction in PM10 levels from 2019 to 2023.

Indo-Gangetic Plain (IGP) Vulnerability:

The IGP, housing 18 of the top 20 most polluted cities for PM2.5, remains highly vulnerable to elevated particulate matter concentrations.

Guwahati and Rourkela, outside the IGP, were among the 20 most polluted cities for PM2.5.

Monitoring Station Disparities:

• The availability and distribution of continuous ambient air quality monitors significantly influence annual pollutant concentrations.
• Many Indian cities lack an adequate number of monitoring stations, with only four out of 92 cities having more than 10 such stations.
• Mumbai and Delhi, in contrast, boast several monitoring stations.

Factors Influencing Pollution Levels:

• Variations in pollution levels are attributed to geographical locations, diverse emission sources, meteorological influences, and the complex interplay between emissions and meteorology, necessitating further investigation.

National Clean Air Programme (NCAP)

The National Clean Air Programme (NCAP), launched by the Ministry of Environment, Forests and Climate Change (MoEFCC) in January 2019, represents a pioneering initiative in India for comprehensive air quality management. Key features include:

Objective:

• The primary objective is to establish a national framework for air quality management with a targeted reduction in average particulate matter (PM) concentrations.
• Aiming for a 40% reduction by 2026, the program initially set a goal of 20-40% reduction by 2024, later extending the timeline.

Coverage:

• The program encompasses 131 non-attainment cities identified by the Central Pollution Control Board (CPCB).
• Non-attainment cities are those failing to meet National Ambient Air Quality Standards (NAAQS) for over five years.

NAAQS Standards:

• NAAQS, established by the CPCB under the Air (Prevention and Control of Pollution) Act, 1981, defines standards for ambient air quality.
• Monitored pollutants include PM10, PM2.5, SO2, NO2, CO, NH3, Ozone, Lead, Benzene, Benzo-Pyrene, Arsenic, and Nickel.

PRANA Portal:

• The implementation of NCAP is monitored through the PRANA (Portal for Regulation of Air-pollution in Non-Attainment cities) portal.
• This portal serves as a central platform for tracking the progress of NCAP initiatives and regulatory measures.

-Source: The Hindu

Surge in Website Blocking Orders: 2013 to October 2023

Context:

The number of website blocking orders has witnessed an exponential increase, surging over 100 times from 2013 to October 2023, as revealed in response to a Right to Information (RTI) application.

Relevance:

GS III: Cyber Security

Dimensions of the Article:

1. Trends in Website Blocking Orders in India
2. Government Website Blocking: Reasons and Challenges
3. Implications of Government Website Blocking

Trends in Website Blocking Orders in India

• The number of website blocking orders in India has surged from 62 in 2013 to 6,954 by October 2023.
• These orders are executed under Section 69A of the Information Technology (IT) Act, 2000.
• The escalation aligns with the substantial growth in internet usage, particularly after a significant reduction in mobile data prices in 2016.

Scope and Nature:

• Most blocked web pages likely pertain to individual posts, videos, or profiles.
• Immediate tracing of the location of web/application servers is undertaken when non-compliance with laws or court orders is identified.

Legal Framework for Website Blocking:

Information Technology Act, 2000:

• Governs activities related to computer resource usage in India.
• Encompasses ‘intermediaries’ involved in computer resource and electronic record utilization.
• The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021, issued by the Ministry of Electronics and Information Technology under the IT Act 2000, regulate content and conduct of intermediaries and digital media platforms, leading to the blocking of websites and channels violating rules.

Section 69 of the IT Act:

• Empowers the Central and State governments to issue directions for intercepting, monitoring, or decrypting information in any computer resource.
• Grounds for exercising these powers include:
  • Interest in the sovereignty or integrity of India, defence of India, or state security.
  • Maintenance of friendly relations with foreign states.
  • Preservation of public order or prevention of incitement to cognizable offences.

Government Website Blocking: Reasons and Challenges

Government’s Motivations for Blocking Websites:

• Driven by concerns related to national security, public order, and adherence to legal regulations.
• Aims to counter threats such as terrorism, hate speech, or the dissemination of illegal content.

Challenges in Website Blocking:

• Users can easily bypass blocks using tools like Virtual Private Networks (VPNs), making enforcement challenging.
• Evolution in encryption technologies employed by web browsers and companies complicates the level of visibility that Internet providers have on user activity.

Implications of Government Website Blocking:

Freedom of Expression Concerns:

• Raises concerns about freedom of expression, necessitating a balance between protecting national interests and citizens’ rights to express opinions.

Limitation of Information and Perspectives:

• Hinders access to valuable information and diverse perspectives, limiting the public’s ability to stay informed and make well-rounded decisions.

Economic Repercussions:

• May have economic implications, affecting legitimate businesses hosted on blocked platforms, potentially stifling innovation and economic growth.

Trust and Perception:

• Shapes public perception and trust in government’s commitment to democratic values.
• Arbitrary or unjustified website blocking can lead to a loss of trust in government institutions, impacting civic engagement.

-Source: The Hindu

DRDO Advancements: Counter-Drone System and UAVs

Context:

The Defence Research and Development Organisation (DRDO) has achieved notable progress in the development of an extensive counter-drone system and is concurrently emphasizing the advancement of high-endurance Unmanned Aerial Vehicles (UAVs).

Relevance:

GS III: Science and Technology

Dimensions of the Article:

1. Recent Advances in Counter-Drone Technology and UAV Development
2. Defence Research and Development Organization (DRDO): A Overview

Recent Advances in Counter-Drone Technology and UAV Development

Counter-Drone Technology:

DRDO’s Comprehensive Anti-Drone System:

• Developed by the Defence Research and Development Organisation (DRDO).
• Encompasses detection, identification, and neutralization of drones.
• Capable of countering various drone types, including micro drones.
• Addresses soft kill and hard kill scenarios for effective countermeasures.
• Technology transferred to private companies like BEL, L&T, and Icom for mass production.

UAV Development:

Tapas Medium Altitude Long Endurance (MALE) UAV:

• Developed for Intelligence, Surveillance, Target Acquisition, and Reconnaissance (ISTAR) applications.
• In an advanced stage of developmental trials.
• Features a Lithium Ion-based battery with an indigenous battery management system.
• Collaborative effort between DRDO and a private vendor.

Archer UAV:

• Short-range armed UAV designed for reconnaissance, surveillance, and low-intensity conflict scenarios.
• Currently undergoing developmental flight trials.

Defence Research and Development Organization (DRDO): A Overview

Mission and Vision:

• DRDO is the Research and Development (R&D) wing of the Ministry of Defence, Government of India.
• Vision: Empower India with cutting-edge defense technologies.
• Mission: Achieve self-reliance in critical defense technologies.

Core Principle:

• “Balasya Mulam Vigyanam” (Science is the source of strength).

Foundation:

• Established in 1958 through the amalgamation of existing establishments from the Indian Army and Directorate of Technical Development & Production.

Significant Contributions:

Strategic Systems and Platforms:

• Developed key strategic systems and platforms:
  • Agni and Prithvi series of missiles.
  • Tejas (Light Combat Aircraft).
  • Pinaka (Multi-barrel Rocket Launcher).
  • Akash (Air Defence System).
  • Radars and electronic warfare systems.

-Source: The Hindu

Carbon Border Adjustment Mechanism

Context:

India recently flagged concerns relating to sensitive and confidential trade data of its exporters getting compromised while complying with the European Union’s Carbon Border Adjustment Mechanism (CBAM).

Relevance:

GS II: International Relations

Dimensions of the Article:

1. CBAM – A Policy Tool to Reduce Carbon Emissions
2. Objectives and Significance of CBAM
3. Impact of CBAM on India
4. Conclusion

CBAM – A Policy Tool to Reduce Carbon Emissions

• CBAM is part of the “Fit for 55 in 2030 package,” which aims to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels in line with the European Climate Law.
• It is a policy tool aimed at reducing carbon emissions.

How does CBAM work?

• CBAM will ensure that imported goods are subject to the same carbon costs as products produced within the EU.
• CBAM will translate into a 20-35 % tax on select imports into the EU starting 1st January 2026.
• Importers will be required to declare the quantity of goods imported into the EU and their embedded Greenhouse Gas (GHG) emissions on an annual basis.
• To offset these emissions, importers will need to surrender a corresponding number of CBAM certificates.
• The price of CBAM certificates will be based on the weekly average auction price of EU Emission Trading System (ETS) allowances in €/tonne of CO2 emitted.

Objectives and Significance of CBAM

Objectives:

• CBAM aims to ensure that the EU’s climate objectives are not undermined by carbon-intensive imports.
• It intends to promote cleaner production practices worldwide.

Significance:

• CBAM can encourage non-EU countries to adopt more stringent environmental regulations to reduce global carbon emissions.
• It can help prevent carbon leakage by discouraging companies from relocating to countries with weaker environmental regulations.
• The revenue generated from CBAM will be used to support EU climate policies, which can serve as an example for other countries to support green energy initiatives.

Impact of CBAM on India

CBAM is likely to have a significant impact on India’s exports to the EU, particularly in the following ways:

Adverse impact on exports:

• India’s exports of metals such as Iron, Steel and aluminum products to the EU will face extra scrutiny under CBAM.
• India’s major exports to the EU, such as iron ore and steel, face a significant threat due to the carbon levies ranging from 19.8% to 52.7%.

Direct and Indirect Emissions:

• The carbon intensity of Indian products is significantly higher than that of the EU and many other countries due to coal dominating the overall energy consumption.
• The proportion of coal-fired power in India is much higher than the EU (15%) and the global average (36%).
• Therefore, direct and indirect emissions from iron and steel and aluminium are a major concern for India, as higher emissions would translate to higher carbon tariffs to be paid to the EU.

Impact on other sectors:

• While the impact will initially be felt in a few sectors, it may expand to other sectors in the future, such as refined petroleum products, organic chemicals, pharma medicaments, and textiles, which are among the top 20 goods imported from India by the EU.

Competitive disadvantage:

• Since India has no domestic carbon pricing scheme in place, it poses a greater risk to export competitiveness, as other countries with a carbon pricing system in place might have to pay less carbon tax or get exemptions.

Conclusion

• The CBAM is a significant policy initiative aimed at reducing carbon emissions from imported goods and creating a fair-trade environment.
• While it may have an adverse impact on the exports of some countries, it is intended to promote cleaner production practices worldwide and encourage other countries to adopt stricter environmental regulations.
• In the long run, it has the potential to reduce global carbon emissions and create a more sustainable future.

-Source: The Hindu

Henley Passport Index 2024

Context:

The average number of visa-free destinations has nearly doubled since 2006, according to the 2024 Henley Passport Index.

Relevance:

GS II: International Relations

Dimensions of the Article:

1. About Henley Passport Index
2. Henley Passport Index 2023: Key Rankings
3. Henley Openness Index: Top Findings

About Henley Passport Index:

• Henley Passport Index is a comprehensive global ranking that assesses the travel freedom of citizens based on their passports.
• Initially known as Henley & Partners Visa Restrictions Index (HVRI), it was established in 2006.
• The index evaluates all the world’s passports based on the number of countries their holders can access without requiring a prior visa.
• It covers 199 different passports and 227 travel destinations.
• The “visa-free score” of a passport corresponds to the number of countries its holders can visit without a visa.
• Henley & Partners collaborates with the International Air Transport Association (IATA) and utilizes official data from their global database to analyze visa regulations worldwide.

International Air Transport Association (IATA)

• IATA is a trade association that represents the world’s airlines and was founded in 1945.
• The primary purpose of IATA is to support and promote airline activity, as well as to facilitate the formulation of industry policies and standards.
• The association’s headquarters is located in Montreal, Canada.

Henley Passport Index 2024: Key Highlights

Top-Ranked Passports:

• France, Germany, Italy, Japan, Singapore, and Spain secure the top position as the world’s most powerful passports.
• These passports enable visa-free entry to 194 global destinations.

European Dominance:

• The top 10 positions are predominantly occupied by European countries.

Global Access Trends:

• The average number of destinations accessible without a visa has nearly doubled, rising from 58 in 2006 to 111 in 2024.

Indian Passport Ranking:

• India’s passport holds the 80th position.
• Indian citizens enjoy visa-free travel to 62 countries.

Lowest-Ranked Passports:

• Afghanistan ranks at the bottom, with access to only 28 countries without a visa.
• Syria, Iraq, and Pakistan follow with limited visa-free access (29, 31, and 34 destinations, respectively).

UAE’s Notable Rise:

• The United Arab Emirates has experienced significant progress, climbing to the 11th position.
• UAE passports offer visa-free access to 183 destinations.

-Source: Indian Express

Momentum Investing

Context:

Many academic studies have shown that momentum investing can generate high returns that comfortably beat the benchmark indices.

Relevance:

GS III: Indian Economy

Momentum Investing: Key Characteristics

Definition:

• Momentum investing involves purchasing assets, like stocks or bonds, that exhibit a consistent uptrend in prices while divesting assets experiencing a downtrend.

Strategy Basis:

• Investors following this strategy anticipate that assets with current upward momentum will continue their ascent, enabling profitable selling in the future.

Trend Recognition:

• Rooted in the belief that discernible trends exist in asset prices and that these trends have a tendency to persist over time.

Profit Objective:

• Investors aim to capitalize on the continuation of established trends, either upward or downward, to generate substantial profits.

Analytical Approach:

• Momentum investors typically do not conduct in-depth analyses of fundamental or intrinsic asset values. Decisions are primarily based on observable price trends.

Buy High, Sell Higher:

• This strategy contradicts the conventional advice of “buy low, sell high.” Momentum investors follow a “buy high, sell higher” approach.

Philosophical Contrast:

• Highlights a departure from traditional investment wisdom, emphasizing the exploitation of existing price trends rather than seeking undervalued assets.

-Source: The Hindu

Kateel Yakshagana Mela

Context:

A century-old Yakshagana mela in Dakshina Kannada will resume its all-night performances following approval from the Karnataka High Court.

Relevance:

GS I: Art and Culture

Dimensions of the Article:

1. Kateel Yakshagana Mela: Preserving Tradition and Devotion
2. Key Facts about Yakshagana

Kateel Yakshagana Mela: Preserving Tradition and Devotion

• Inception: Founded in the mid-19th century, it is a renowned Yakshagana troupe known as Kateel Sri Durgaparameshwari Yakshagaana Dashavatara Mandali, affectionately called Kateel Mela.
• Purpose: A significant ‘Harake Seva’ troupe, offering Yakshagana performances upon devotees’ requests as a vow (Harake) for wish fulfillment or as a devotional service.

Key Facts about Yakshagana:

• Origin: Traditional folk-dance form prevalent in Coastal Karnataka.
• Composition: A unique blend of dance, music, song, scholarly dialogues, and vibrant costumes.
• Tradition: Historically, all roles, including female characters, were portrayed by men, though contemporary troupes may include women.
• Troupe Structure: Typically comprises 15 to 20 actors and a Bhagawatha, serving as the master of ceremonies and primary storyteller.

Elements of Yakshagana:

• The Act: Each performance focuses on a sub-story (‘Prasanga’) from ancient Hindu epics like Ramayana or Mahabharata.
• Presentation: Combines stage performances by talented artists with commentary by the lead singer (Bhagawatha), accompanied by traditional music.
• Musical Instruments: Chande (drums), Harmonium, Maddale, Taala (mini metal clappers), and flute, among others.
• Costumes: Distinctive and elaborate, featuring large headgear, colored faces, intricate costumes, and musical beads on the legs (Gejje).

-Source: The Hindu