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Current Affairs Analysis

27th May 2016 Current Affairs Analysis

Krishi Kalyan Cess; AMRUT scheme; RAIL HAMSAFAR SAPTAAH; green energy jobs; Coast Guard ship ‘Arush’; etc.
By IT's Current Affairs Analysis Team
May 27, 2016

Contents

Polity & Governance

  • Government approves over Rs 5,530 crore for infra boost in 111 cities under Atal Mission
  • Ministry of Railways to Launch ‘RAIL HAMSAFAR SAPTAAH’

Economy

  • Retrospective tax impact of Krishi Kalyan Cess worries India Inc
  • Bankruptcy Code of limited use for current asset woes: Moody’s
  • India global 5th in green energy jobs, China on top
  • ATMs to have chip-and-pin based infra: RBI

International Relations

  • China signs deals with Sudan to build nuclear reactor

Defence & Security Issues

  • Coast Guard ship ‘Arush’ commissioned
  • Three new defence ministry committees search for radical reform

 

Polity & Governance

Government approves over Rs 5,530 crore for infra boost in 111 cities under Atal Mission

The Centre has approved an investment of Rs. 5,534 crore in basic urban infrastructure in 111 cities in the states of Madhya Pradesh, Gujarat, Rajasthan, Odisha, Jharkhand and Meghalaya under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT).

  • The investment will cover services such as provision of household water taps, improving water supply, sewerage networks/septage management, storm water drains, urban transport and provision of open and green spaces in the 111 cities.

About AMRUT scheme:

The scheme was launched by Prime Minister Narendra Modi in June 2015 with the focus of the urban renewal projects is to establish infrastructure that could ensure adequate robust sewerage networks and water supply for urban transformation. 

  • Rajasthan was the first state in the country to submit State Annual Action Plan under Atal Mission for Rejuvenation and Urban Transformation (AMRUT).
  • AMRUT is the new avatar of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM).
  • The scheme is dependent with public private partnership model(PPP) model.
  • AMRUT adopts a project approach to ensure basic infrastructure services relating to water supply, sewerage, storm-water drains, transportation and development of green spaces and parks with special provision for meeting the needs of children.
  • AMRUT will be implemented in 500 locations with a population of one lakh and above. It would cover some cities situated on stems of main rivers, a few state capitals and important cities located in hilly areas, islands and tourist areas.
  • Under this mission, 10% of the budget allocation will be given to states and union territories as incentive based on the achievement of reforms during the previous year.
  • Central assistance will be to the extent of 50% of project cost for cities and towns with a population of up to 10 lakhs and one-third of the project cost for those with a population of above 10 lakhs.
  • Under this mission, states get the flexibility of designing schemes based on the needs of identified cities and in their execution and monitoring.
  • States will only submit state annual action Plans to the centre for broad concurrence based on which funds will be released. But, in a significant departure from JNNURM, the central government will not appraise individual projects.

What is the difference between Smart Cities Project and AMRUT?

  • Atal Mission for Rejuvenation and Urban Transformation (AMRUT) has a wider reach in terms of the number of cities (500 cities and towns) covered and therefore the funds available for each city would be proportionately less.
  • Whereas the Smart Cities Mission will focus on developing 100 select Smart cities by focusing on optimising efficiencies in urban services and infrastructure management, with proactive use of technology and people participation. The Mission will support each selected city with Rs 100 crore per year, for a period of five years.
[Ref: PIB, Wiki]

 

Ministry of Railways to Launch RAIL HAMSAFAR SAPTAAH’

Ministry of Railways has decided to undertake a week long RAIL HAMSAFAR SAPTAAH’ from 26th May to 1st June, 2016.

Details:

  • Each day of the week will focus on a particular theme and hence the days have been named as

Day-1 (26th May): Swachchta Diwas
Day-2 (27th May): Satkar Diwas
Day-3 (28th May): Sewa Diwas
Day-4 (29th May): Satarkata Diwas
Day-5 (30th May): Saamanjasya Diwas
Day-6 (31st May): Sanyojan Diwas 
Day-7 (1st June): Sanchaar Diwas

  • Issues such as cleanliness, punctuality, catering, ticket checking, interaction with customers, etc. will receive attention and feedback will be taken from rail users.
  • All Zonal Railways have been directed to ensure that various passenger amenities work nearing completion would be commissioned during this week.
[Ref: PIB]

 

Economy

Retrospective tax impact of Krishi Kalyan Cess worries India Inc

A retrospective tax impact has crept into the realm of service tax due to the 0.5 per cent Krishi Kalyan Cess (KKC), even though it comes into effect from June 1, 2016.

Background:

Few days ago, apex industry body ASSOCHAM has suggested the Finance Ministry to reconsider imposition of Krishi Kalyan Cess at 0.5 % on all taxable services.

Various suggestions put forth by ASSOCHAM: 

  • ASSOCHAM has urged the government to permit refund of service tax, including Krishi Kalyan Cess, paid by entities engaged in agriculture sector in cases where CENVAT credit cannot be availed due to exemption of output product/service.
  • ASSOCHAM has said that denial of input tax credit of Krishi Kalyan Cess to manufacturers is contrary to objectives of ‘Make in India,’ since this cess will only serve to increase manufacturing cost in the country.
  • ASSOCHAM has suggested that entities engaged in agri sector should not be burdened with additional taxes as Krishi Kalyan Cess will push production costs further.

What is Krishi Kalyan Cess?

The Krishi Kalyan Cess is a new cess introduced by the Union Finance Minister Arun Jaitley while presenting the budget for the ongoing fiscal, 2016-17. It will come into effect from 1st June 2016.

  • The new cess is supposed to be levied at a rate of 0.5% on all goods and services where the government can levy service taxes.
  • This cess would be applicable above and over Swachh Bharat Cess and service tax.
  • The objective of Krishi Kalyan Cess is to provide support to agriculture sector in India together with entities engaged in the sector by training cultivators through introduction of sustainable agricultural techniques and practices, providing high quality seeds, crop development and procurement of agri-inputs.
  • The government already charges service taxes at the rate of 14% and the Swachh Bharat Cess is applied at a rate of 0.5%. With the KKC, the total service tax rate would effectively go up to 15%.

Areas where Krishi Kalyan Cess be applicable:

Areas where Krishi Kalyan Cess be applicable includes, but is not restricted to, the following:

  • Telephone bills
  • Property under construction
  • Internet bills
  • Air travel agent
  • Payment of rents
  • Digital advertisements
  • Payment of restaurant bills

It needs to be noted in this context that the service provider who is collecting the tax will not have the luxury of just mentioning 15% in the service tax column. He will need to mention the entire breakup in the said bills.

[Ref: BS, ET]

 

Bankruptcy Code of limited use for current asset woes: Moody’s

Pointing to the limited legal infrastructure at hand, rating agency Moody’s said banks in India may get limited help from the new Bankruptcy Code to solve current asset quality woes.

Important observations made by Moody’s:

According to the Moody’s, banks in India would still have limited avenues available to dispose of distressed assets. The lenders would, in general, remain reluctant to make appropriate haircuts to reflect their current weak operating conditions.

  • Moody’s said that the bankruptcy law was credit positive for Indian banks, but challenges remained.
  • India’s new Bankruptcy Code would significantly boost the bargaining power of creditors against large debtors for the resolution of distressed assets.
  • The current weak legal framework for asset resolution has been a key structural credit weakness for Indian banks.
  • The proposed new rules address several key inefficiencies in the current resolution regime.
  • Moody’s also pointed out significant infrastructure constraints needed to be overcome before the framework could become fully operational. Legal resources and information utilities have to be built to support the new restructuring procedure.
  • Another constraint that had to be dealt with was the time required for various stakeholders to accumulate the requisite legal experience and precedents for the new system to be fully up and running.
  • Thought also had to be given to the limited impact that the new law may have on the liquidation process.

About Insolvency and Bankruptcy Code:

For our detailed article click here  

[Ref: BS]

 

India global 5th in green energy jobs, China on top

According to the International Renewable Energy Agency’s (Irena) Annual Review 2016, India ranks fifth in the world in renewable energy (RE) job creation, with 416,000 employed in the sector during 2015.

  • Nearly 90 companies from about 40 countries participated, representing the entire value chain of the sector.

Key facts:

  • According to the review report, in the world, 8.1 million persons are employed in the clean energy space. China tops the list with 3.5 million, followed by Brazil with 918,000.
  • Countries with the most RE jobs in 2015 were China, Brazil, America, India, Japan and Germany.
  • The solar PV sector remains the largest RE employer worldwide, with jobs in manufacturing, installation and operations & maintenance. Liquid biofuels was the second largest global employer, followed by wind power.
  • Japan’s loss in jobs after a period of significant growth could be China’s gain in terms of increasing market share as Japan loses its competitive advantage on solar PV.
  • Among the companies that responded, women represent an average of 35 per cent of the workforce. This is a significant finding, considering women only account for 20-25 per cent of the workforce in the overall energy industry.
  • According to the World Bank, this might reflect greater interest among women in sustainability related fields. Yet, the percentage remains lower than women’s economy-wide share in employment, which is 40-50% for most OECD countries.
[Ref: BS]

 

ATMs to have chip-and-pin based infra: RBI

RBI has directed all banks and white-label ATM operators to have chip-and-pin based card infrastructure.

  • Earlier, RBI had directed banks to issue only chip-and-pin based cards and migrate old cardholders to these new cards.
  • RBI said though the cards comply with the new norms, ATMs continue to process card transactions based on data from the magnetic stripe, the old system. As a result, cards being used in ATMs are more prone to skimming frauds.
  • It has, therefore, become necessary to mandate EMV chip and pin card acceptance and processing at ATMs also.
  • Also, the new ATMs being set up have to necessarily comply with these rules.

Benefits:

As and when it comes into effect, contact chip processing of EMV chip and pin cards at ATMs would not only enhance the safety and security of transactions at ATMs, but also facilitate preparedness of the banks for the proposed ‘EMV Liability Shift’ for ATM transactions.

[Ref: BS]

 

International Relations

China signs deals with Sudan to build nuclear reactor

China has signed agreements with Sudan, its close ally in Africa to build 600-megawatt atomic reactor, the first such project in the African country.

  • China is looking to popularise this nuclear technology at home and abroad.
  • With the world’s largest number of reactors under construction, China plans to develop this experience into nuclear exports.

China’s nuclear projects abroad:

  • China already is having a long standing nuclear cooperation with Pakistan as it has built several nuclear power reactors and is currently building two 1100 mw reactors in Karachi.
  • Chinese nuclear companies are making huge inroads in global nuclear markets, including Britain and Argentina.

Reasons for the deal:

  • Sudan has faced power shortages in recent years and is seeking to build two 600-mw pressurised water reactors to meet the growing demand for electricity, with construction on the first one starting in 2021.
[Ref: Hindu]

 

Defence & Security Issues

Coast Guard ship ‘Arush’ commissioned

The Indian Coast Guard ship ‘Arush’, the 17th in the series of 20 fast patrol vessels was commissioned.

Key facts:

  • It was designed and built by Cochin Shipyard Ltd.
  • The ship has been named ICGS ‘Arush’, meaning “first ray of sun”, and will be based at Porbandar under the administrative and operational control of the Commander, Coast Guard Region (NW).
  • It is equipped with state-of-the-art weaponry and advanced communication and navigational equipment which make it an ideal platform for undertaking multifarious close-coast missions such as surveillance, search and rescue and medical evacuation.
  • The special features include an integrated bridge management system and integrated machinery control system.
[Ref: PIB]

 

Three new defence ministry committees search for radical reform

Defence Minister Manohar Parrikar has convened a set of independent committees to recommend reforms in the defence sector.

The committees include:

  1. The first committee will recommend measures to “rebalance” defence allocations between revenue and capital expenditure. With just 25 per cent of the defence budget available for equipment modernization after 75 per cent goes on running expenses, especially on a bloated manpower bill, the committee will look at how to cut down manpower without reducing the military’s combat capability.
  2. A second committee has been constituted to studythe setting up of a Defence Procurement Organisation in the Government of India.” The committee is required to suggest the functional mandate of the proposed procurement body, its organisation and staffing, and to suggest how autonomously it could function.
  3. A third group of sub-committees has been constituted to salvage the “strategic partners” (SPs) model for private sector participation in “Make in India”, which the Dhirendra Singh committee had recommended last year and which was further given shape by the VK Aatre Task Force early this year.
[Ref: BS]

 

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