GS – 2
Government policies and Interventions
Electricity Amendment Bill 2020:
- The power Ministry has released a revised draft of the Electricity Amendment Bill 2020, which calls for the creation of an Electricity Contract Enforcement Authority (ECEA), proposes a National Renewable Energy Policy and mandates payment security as necessary for Scheduling of Electricity and facilitates cross border electricity trade.
- The draft seeks privatisation of discoms (distribution companies) by way of sub-licensing & franchisees.
- According to the draft, state commissions will determine tariff for retail sale of electricity without any subsidy under Section 65 of the Act and the tariff should reflect the cost of supply of electricity and cross-subsidies to be reduced.
- The bill proposes that the ECEA would adjudicate on matters regarding performance of obligations under a contract related to sale, purchase or transmission of electricity. It proposes to empower load dispatch centre to oversee the payment security mechanism before scheduling dispatch of electricity, and suggested National Renewable Energy Policy for the promotion of generation of electricity from renewable sources.
GS – 3
Economic
Ways and Means Advances:
- The Ways and Means Advances (WMA) window is intended only to tide over temporary mismatches in cash flow of receipts and payments.
What is WMA?
- It is a facility for both the Centre and states to borrow from the RBI.
- These borrowings are meant purely to help them to tide over temporary mismatches in cash flows of their receipts and expenditures.
- In that sense, they aren’t a source of finance per se. Section 17(5) of the RBI Act, 1934 authorises the central bank to lend to the Centre and state governments subject to their being repayable “not later than three months from the date of the making of the advance.
How much does the RBI charge on these advances?
- The interest rate on WMA is the RBI’s repo rate, which is basically the rate at which it lends short-term money to banks.
- That rate is currently 4.4%. The governments are, however, allowed to draw amounts in excess of their WMA limits.
- The interest on such overdraft is 2 percentage points above the repo rate, which now works out to 6.4%. Further, no state can run an overdraft with the RBI for more than a certain period.
What are the existing WMA limits and overdraft conditions?
- For the Centre, the WMA limit during the first half of 2020-21 (April-September) has been fixed at Rs 120,000 crore.
- This is 60% higher than the Rs 75,000 crore limit for the same period of 2019-20. The limit for the second half of the last fiscal (October-March) was Rs 35,000 crore. For the states, the aggregate WMA limit was Rs 32,225 crore till March 31, 2020.
- On April 1, the RBI announced a 30% hike in this limit, which has now been enhanced to 60%, taking it to Rs 51,560 crore.
- The higher limit will be valid till September 30. The central bank, on April 7, also extended the period for which a state can be in overdraft from 14 to 21 consecutive working days, and from 36 to 50 working days during a quarter.
Why have all these relaxations been made?
- Government finances are in a mess today. The lockdown has resulted in revenues drying up, and it is the states that are actually feeling the heat. With economic activity at a near standstill, there is hardly any money coming in from GST, petroleum products, liquor, motor vehicles, stamp duty or registration fee.
- At the same time, the states are also incurring the bulk of the on-the-ground expenditures for combating the novel coronavirus. These extend not only to purchases of testing kits, personal protective equipment and ventilators or deployment of healthcare and police personnel, but even to providing food, shelter and other relief measures to those worst hit by the lockdown.
- In a scenario where their expenses are real, mounting and cannot be deferred, even as revenues are collapsing and uncertain, the states are facing an unprecedented cash crunch.
- Most of them have resorted to slashing expenditures of other departments in order to meet COVID-19 exigencies, with some even deferring or cutting salaries of employees. But all these measures haven’t really addressed the underlying problem of liquidity and cash flow mismatches.
Can’t they borrow from the market?
- The financial position of states was precarious even before the lockdown. The gross fiscal deficit of 22 states, as per latest available data, rose from 2.4% of their GSDP (gross state domestic product) in 2018-19 to 2.9% in 2019-20, with the corresponding revenue deficit ratio also climbing from 0.1% to 0.7%. Moreover, gross government market borrowings shot up from Rs 10,49,323 crore (Centre: Rs 571,000 crore, States: Rs 478,323 crore) in 2018-19 to Rs 13,44,521 crore (Centre: Rs 710,000 crore, States: Rs 634,521 crore) in 2019-20.
Science and Technology
New Li – rich red giants:
- Indian Institute of Astrophysics (IIA) researchers have discovered hundreds of Lithium (Li)-rich giant stars.
- This discovery proves Li is being produced in the stars and accounts for its abundance in the interstellar medium.
- The researches have also associated such Li enhancement with central He-burning stars, also known as red clump giants which opened up new vistas in the evolution of the red giant stars.
- The team cracked the long-standing problem in stellar astrophysics.
- The researchers followed a two-fold strategy by increasing the sample by systematically searching for high Lithium among low mass evolved stars in the Galaxy and determining the exact evolutionary phase of these high Li abundance stars.
- By employing data from large scale ground and space missions, they discovered hundreds of Li-rich giants.
- The researchers determined the evolutionary phase of the giant-Li by analyzing relative positions of thousands of stars using their temperature and luminosity and also subjecting their independent data set to atmospheric oscillations analysis using data from Kepler Space Telescope, a NASA mission for discovering planets.
- The discovery will eliminate many proposed theories such as planet engulfment or nucleo synthesis during the red giant evolution in which helium at the center is not burning.
Future Officers 