Today's Headlines

Today's Headlines - 17 March 2023

Deadline of the Smart Cities Mission

GS Paper - 3 (Emerging Technology)

As the June 2023 deadline for completing the Smart Cities Mission approaches, the government has asked 20 of the worst performing cities — ones that have completed the fewest projects under the mission — to buck up. Among the laggards are six cities from the Northeastfive Union Territories, and three state capitals. “The cities have been instructed and offered guidance to complete the projects within the stipulated time frame,” the Smart Cities Mission said.

What is the Smart Cities Mission?

  1. The Smart Cities Mission is an initiative of the Union Housing and Urban Affairs Ministry that was launched by Prime Minister Narendra Modi on 25 June 2015.

  2. Cities across the country were asked to submit proposals for projects to improve municipal services and to make their jurisdictions more liveable.

  3. Between January 2016 and June 2018 (when the last city, Shillong, was chosen), the Ministry selected 100 cities for the Mission over five rounds.

  4. The projects were supposed to be completed within five years of the selection of the city, but in 2021 the Ministry changed the deadline of all cities to June 2023, which was earlier the deadline for Shillong alone.

What kinds of projects were proposed?

  1. After the Ministry gave broad guidelines to the participating cities, the project proposals ranged from making certain stretches of roads more accessible and pedestrian-friendly to the more capital-intensive ones like laying water pipelines and constructing sewage treatment plants.

  2. All 100 cities have also constructed Integrated Command and Control Centres to monitor all security, emergency and civic services.

  3. During the peak of the Covid-19 pandemic, these centres were converted into emergency response units by many of the cities.

What is the status of the projects?

  1. As of 3 March 2023, the 100 cities have issued work orders for 7,799 projects worth Rs 1.80 lakh crore, the government told Parliament on 13 March 2023.

  2. Out of these, 5,399 projects worth Rs.1.02 lakh crore have been completed, and the rest are ongoing.

  3. Only around 20 cities are likely to meet the June deadline; the rest will need more time.

  4. Cities selected in January and June 2018 have achieved 44% of their targets, while those selected in 2016 in the second round are not much farther ahead with 46% completion. Shillong has completed just one of its 18 proposed projects.

Foreign lawyers can practise in India

GS Paper - 2 (Judiciary)

In a move that could potentially change the landscape of legal practice in the country, the Bar Council of India (BCI) has allowed foreign lawyers and law firms to practise in India. Although they cannot appear in court, they can advise clients on foreign law and work on corporate transactions.

What is the BCI decision?

  1. On 13 March 2023, the BCI notified in the official gazette the Rules for Registration and Regulation of Foreign Lawyers and Foreign Law Firms in India, 2022.

  2. The BCI is a statutory body established under the Advocates Act, 1961, and it regulates legal practice and legal education in India. For over a decade, BCI was opposed to allowing foreign law firms in India.

  3. Now, the BCI has reasoned that its move will address concerns about the flow of Foreign Direct Investment in the country and make India a hub of International Commercial Arbitration.

  4. The rules bring legal clarity to foreign law firms that currently operate in a very limited way in India.

What do the new rules allow?

  1. According to the Advocates Actadvocates enrolled with the Bar Council alone are entitled to practise law in India.

  2. All others, such as a litigant, can appear only with the permission of the court, authority or person before whom the proceedings are pending.

  3. The notification essentially allows foreign lawyers and law firms to register with BCI to practise in India if they are entitled to practise law in their home countries. However, they cannot practise Indian law.

  4. The foreign lawyers or foreign Law Firms shall not be permitted to appear before any courts, tribunals or other statutory or regulatory authorities.

  5. They shall be allowed to practise transactional work /corporate work such as joint ventures, mergers and acquisitions, intellectual property matters, drafting of contracts and other related matters on a reciprocal basis.

  6. They shall not be involved or permitted to do any work pertaining to the conveyancing of propertyTitle investigation or other similar works, the notification states.

  7. Indian lawyers working with foreign law firms will also be subject to the same restriction of engaging only in “non-litigious practice.”

Failure of waste-to-energy plants:

GS Paper -3 (Environment)

The Kerala government recently announced the State’s first waste-to-energy project in Kozhikode. The planned facility is expected to be built in two years and generate about 6 MW of power. There are around 100 waste-to-energy projects around the country but only a handful of them are operational, thanks to various production and operation challenges.

Functions of waste-to-energy projects:

ü  Waste-to-energy projects use non-recyclable dry waste to generate electricity. The process increases the State’s power generation capacity and eases the solid waste management (SWM) burden.

ü  Solid waste in India is 55-60% biodegradable organic waste, which can be converted into organic compost or biogas; 25-30% non-biodegradable dry waste; and around 15% silt, stones, and drain waste.

Why do waste-to-energy plants often fail?

  • Due to improper segregation, there is low calorific value of solid waste in India. The calorific value of mixed Indian waste is about 1500 kcal/kg, which is not suitable for power generation.

  • Due to the high costs of energy production. The cost of generating power from waste is around Rs 7-8/unit, while the cost at which the States’ electricity boards buy power from coal, hydroelectric, and solar power plants is around Rs 3-4/unit.

  • Many waste-to-energy projects have failed because of improper assessments, high expectations, improper characterisation studies, and other on-ground conditions.

  • The quantity of waste generated by cities varies due to multiple factors, including season, rainfall, and the floating population.

  • Waste-to-energy projects can consume only non-recyclable dry waste, which is about 25% of the waste; they are expected to only use segregated non-recyclable dry waste as well, which is the only type of waste with a sufficiently high calorific value.

To overcome these challenges:

v  Waste-to-energy projects consume 50 TPD of material to generate 1 MW of power. At this rate, the potential to generate power from Kozhikode’s and other ULBs’ waste is around 3 MW. A higher capacity than this, such as the planned 6 MW, will be risky because enough material may not be available.

v  Operating waste-to-energy projects also depends on parameters like the municipal collection efficiency, waste segregation, moisture content, and the operational efficiency of existing biodegradable-waste-processing plants.

v  If these plants have operational woes (as is common), the nature of waste will change drastically to have high moisture content and low calorific value, which will compromise power generation.

v  Setting up waste-to-energy projects is complex and needs the full support of the municipality, the State and the people. To overcome its various challenges, the municipality must ensure that only non-biodegradable dry waste is sent to the plant and separately manage the other kinds of waste.

Too-Big-To-Fail’ banks and safety of Indian banks

GS Paper -3 (Economy)

India remained a safe haven during the global financial crisis triggered by the collapse of investment bank Lehman Brothers in 2008, with domestic banks, backed by sound regulatory practices, showing strength and resilience. A decade and a half on, Indian banks remained unaffected by the failure of Silicon Valley Bank (SVB) and Signature Bank in the US last week, despite the global interconnectedness in the financial sector.

More about the news:

The basis for the confidence in the resilience of Indian banks:

ü  A reason why an SVB-like failure is unlikely in India is that domestic banks have a different balance sheet structure, In India we don’t have a system where deposits are withdrawn in such bulk quantities.

ü  Household savings constitute a major part of bank deposits in India; this is different from the US, where a large portion of bank deposits are from corporates.

ü  A large chunk of Indian deposits is with public sector banks, and most of the rest is with very strong private sector lenders such as HDFC Bank, ICICI Bank, and Axis Bank.

Which banks are classified as D-SIBs?

v  Under the D-SIB framework announced by RBI on July 22, 2014, the central bank was required, from 2015, to disclose the names of banks designated as D-SIBs, and to place them in appropriate buckets depending upon their Systemic Importance Scores (SISs).

v  Depending on the bucket in which a D-SIB is placed, an additional common equity requirement is applicable to it.

v  The additional CET1 requirement was in addition to the capital conservation buffer. It means that these banks have to earmark additional capital and provisions to safeguard their operations.

v  RBI has classified SBI, ICICI Bank, and HDFC Bank as D-SIBs. The additional Common Equity Tier 1 (CET1) requirement for D-SIBs was phased-in from April 1, 2016, and became fully effective from April 1, 2019.

v  The Basel, Switzerland-based Financial Stability Board (FSB), an initiative of G20 nations, has identified, in consultation with the Basel Committee on Banking Supervision (BCBS) and Swiss national authorities, a list of global systemically important banks (G-SIBs).

How does RBI select D-SIBs?

The RBI follows a two-step process to assess the systemic importance of banks:

  • sample of banks to be assessed for their systemic importance is decided. All banks are not considered, many smaller banks would be of lower systemic importance, and burdening them with onerous data requirements on a regular basis may not be prudent.

  • Banks are selected for computation of systemic importance based on an analysis of their size (based on Basel-III Leverage Ratio Exposure Measure) as a percentage of GDP. Banks having a size beyond 2% of GDP will be selected in the sample.

  • Once the sample of banks is selected, a detailed study to compute their systemic importance is initiated. Based on a range of indicators, a composite score of systemic importance is computed for each bank. Banks that have a systemic importance above a certain threshold are designated as D-SIBs.

Why was it felt important to create SIBs?

ü  During the 2008 crisis, problems faced by certain large and highly interconnected financial institutions hampered the orderly functioning of the global financial system, which negatively impacted the real economy.

ü  Government intervention was considered necessary to ensure financial stability in many jurisdictions.

ü  RBI says that the cost of public sector intervention, and the consequential increase in moral hazard, required that future regulatory policies should aim at reducing the probability and the impact of the failure of SIBs.

ü  In October 2010, the FSB recommended that all member countries should put in place a frame-work to reduce risks attributable to Systemically Important Financial Institutions (SIFIs) in their jurisdictions.

ü  SIBs are perceived as banks that are ‘Too Big to Fail (TBTF)’, due to which these banks enjoy certain advantages in the funding markets.

Why are precautions necessary?

  • The failure of a large bank anywhere can have a contagion effect around the world.

  • It will likely cause greater damage to the domestic real economy if its activities constitute a significantly large share of domestic banking activities.

  • It is also likely to damage confidence in the banking system as a whole.

  • It could potentially increase the probability of impairment or failure of other banks if there is a high degree of interconnectedness (contractual obligations) between them.

  • The greater the role of a bank as a service provider in underlying market infrastructure like payment systems, the larger is the disruption it is likely to cause in terms of availability and range of services and infrastructure liquidity in case of failure.