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AUGUST 7, 2017

Subsidise rail losses: PMO

  • The Prime Minister’s Office (PMO) has directed the Ministry of Finance to fund the losses incurred by the Indian Railways in operating non-profitable trains on strategic lines and backward areas.
  • Every year, the Ministry of Finance reimburses the Indian Railways operational losses incurred on six strategic lines and railway lines in hilly, coastal and backward areas.
  • However, following the Budget merger, the Ministry of Finance argued that since the ‘capital-at-charge’ of the Railways, which represents the total investment made by the central government in the Railways, would be wiped-off, the subsidy payment in the form of reimbursement of losses on strategic lines and other concessions will be discontinued. “However, the PMO found this argument unviable,” the official said.
  • The directive ends a tussle that began following the merger of the Railway and Union Budgets, as the Ministry of Finance had discontinued the practice of providing an annual subsidy to the Railways.

Protect teachers in private colleges: SC

  • “The teacher alone can bring out the skills and intellectual capabilities of students. He is the ‘engine’ of the educational system,” a young, former professor of a Tamil Nadu college said, reminding a Bench of Chief Justice of India J.S. Khehar and Justice D.Y. Chandrachud of a 1994 judgment of the court.

Remedial action

  • Moved by the petition, the court ordered that the AICTE shall take a conscious decision of issues canvassed, and take such remedial action, as may be called for, in consonance with law”.
  • The court, after a brief but thoughtful consideration, also ordered the AICTE to treat the petition as a representation.
  • The court’s order was in response to Mr. Yadav’s fervent argument that the “malpractices are hampering the technical education system of India [which] thereby has a direct impact on the development of the country”.
  • The petitioner argued that “the present scenario of unemployable students coming out of private colleges is a direct result of unmotivated professors who are at the mercy of their managements”.
  • “Private engineering colleges are in the practice of confiscating the original degrees and certificates of the recruited staff, withholding the salaries of the faculty/staff for months with an intention to blackmail and harass the staff. Colleges do not maintain the required student-staff ratio during entire terms. Another malpractice is the appointment of fake faculty at the time inspections for affiliation,” Mr. Yadav argued.

After SC order, focus on chemicals in firecrackers

  • The Supreme Court ban on the use of antimony, lithium, mercury, arsenic and lead in the manufacture of firecrackers to prevent air pollution has turned the focus on what chemicals are used to produce spectacular visual effects and noise.
  • The Tamil Nadu Fireworks and Amorces Manufacturers’ Association, which produces most of the fireworks in the country, says none of the specific products banned by the court are used.
  • The court entrusted the Petroleum and Explosive Safety Organisation (PESO) with the responsibility of ensuring compliance particularly in Sivakasi. Over 90% of cracker production is done in Sivakasi.
  • Incidentally, the court also noted it appeared that no standards have been laid down by the Central Pollution Control Board (CPCB) with regard to air pollution caused by the bursting of firecrackers.
  • Aluminium powder, sulphur and potassium nitrate go into noise-making crackers, while barium nitrate (green) and strontium nitrate (red) emit light. Aluminium powder is used in sparklers. “A combination of barium nitrate and strontium nitrate in varying proportions produces different colours,” Tamil Nadu Fireworks and Amorces Manufacturers’ Association secretary K. Mariappan said.

Doubt over strontium

  • Significantly, the Supreme Court, observed that there seems to be some doubt about strontium and its compound used in crackers, and has posted the case to August 23 to hear submissions about the use of strontium.
  • Where do the chemicals for the firecracker industry come from? Sources in the industry and the PESO claim that the chemicals are domestically procured
  • But a PESO source said the procurement of raw materials for fireworks does not come under the purview of the Explosives Act. The PESO has been testing samples of crackers only for adherence to the sound limit of 125 decibels at a distance of four metres.

China’s RCEP push veils grand plan

  • Community social media platform ‘LocalCircles’ recently did a survey on the Indian consumer’s perception about items imported from China.
    • It showed 52% of participants were of the opinion that for the same product, the quality of a ‘Made in India’ version was superior to the one from China.
    • However, 83% said they buy Chinese products as those items were the cheapest.
    • On the issue of addressing ‘quality concerns’ about imported Chinese items, 98% said there should be better screening of such products before they enter the Indian market — including ensuring that only those imports meeting the Indian (BIS) standards are allowed.


  • The poll assumes significance as it comes amid ongoing negotiations for a mega-regional Free Trade Agreement (FTA) among 16 Asia-Pacific nations, including China and India. Known as the Regional Comprehensive Economic Partnership (RCEP), the proposed FTA, aims to boost goods trade by eliminating most tariff and non-tariff barriers — a move that is expected to provide the region’s consumers greater choice of quality products at affordable rates. It also seeks to liberalise investment norms and do away with services trade restrictions.
  • The RCEP is billed as an FTA between the 10-member ASEAN bloc and its six FTA partners — India, China, Japan, South Korea, Australia and New Zealand. When inked, it would become the world’s biggest free trade pact.
    • This is because the 16 nations account for a total GDP (Purchasing Power Parity, or PPP basis) of about $50 trillion (or about 40% of the global GDP) and house close to 3.5 billion people (about half the world’s population).
    • India (GDP-PPP worth $9.5 trillion and population of 1.3 billion) and China (GDP-PPP of $23.2 trillion and population of 1.4 billion) together comprise the RCEP’s biggest component in terms of market size.
  • The RCEP ‘guiding principles and objectives’ state that the “negotiations on trade in goods, trade in services, investment and other areas will be conducted in parallel to ensure a comprehensive and balanced outcome.”
  • However, it is learnt that China, using its influence as the global leader in goods exports, has been deploying quiet diplomacy to ensure consistent focus on attempts to obtain commitments on elimination of tariffs on most traded goods.

Duty impact on India

  • A highly ambitious level of tariff elimination without enough flexibility would affect India the most on the goods side.
    • This is because in the RCEP group (except Myanmar, Cambodia and Lao PDR), India has the highest average ‘Most Favoured Nation (MFN) tariff’ level at 13.5%. MFN tariff, as per the WTO, refers to normal, non-discriminatory tariff charged on imports — excluding preferential tariffs under FTAs and other schemes or tariffs charged inside quotas.
  • The main worry is that the proposed FTA, owing to the possibility of elimination of duties across most sectors, could lead to a surge in inflow of low-priced goods, mainly from China.
    • This, India Inc. feared, would result in their share in the domestic market contracting, and consequent downsizing/closure of operations, as well as job losses. This could lead to lower incomes and reduced consumer spending.
  • Also, since India already has separate FTAs with the 10-member ASEAN bloc, Japan and Korea, India Inc. feels that on account of the RCEP, India may not gain much on the goods side with existing FTA partners.
  • India is also negotiating separate FTAs with Australia and New Zealand.
    • However, be it through a separate FTA or via RCEP, India’s gains on the goods segment from Australia and New Zealand will be limited as MFN tariff levels of those two countries are already low.
  • China is the only RCEP country with which India neither has an FTA, nor is in talks for one. Therefore, Indian industry sees RCEP as an indirect FTA with China, especially since, given sensitivities involved, there could be a hue and cry if the India opts for a direct FTA with that country.

Trade deficit woes

  • Ajit Ranade, chief economist, Aditya Birla Group, said even without a bilateral FTA, India was already affected by China’s overhang of excess capacity in sectors including metals, chemicals and textiles.
  • Goods imports from China have been far outpacing India’s shipments to that country (India’s exports are mainly troubled by China’s non-tariff barriers).
  • This has led to goods trade deficit with China widening from just $1.1 billion in 2003-04 to a whopping $52.7 billion in 2015-16, though easing slightly to $51.1 billion in 2016-17.
  • Ranade said India’s FTA strategy has to be guided by the ‘Make In India’ initiative that aims to boost domestic manufacturing and job creation within India.
  • In return for greater market access in goods, India, with its large pool of skilled workers and professionals, might be trying to use the RCEP to gain on the services side, by securing commitments from the other nations to mutually ease norms on movement of such people across borders for short-term work.
  • However, the RCEP is just one element of China’s grander plans for global dominance.
    • With the U.S. withdrawing from the Trans Pacific Partnership — a mega-regional FTA not involving India and China — that similarly aimed to help establish the Free Trade Area of the Asia-Pacific (FTAAP), the path is clear for China to push ahead with this strategic initiative to its advantage through the RCEP.