LIQUIFIED NATURAL GAS (LNG)
1. Context
The death sentence given to eight former personnel of the Indian Navy by a court in Qatar presents the biggest challenge yet to New Delhi’s historically friendly ties with Doha. In the relationship between nations, trade relations play a significant role. In the case of India and Qatar, the balance of trade is tilted heavily in the latter’s favour — which means imports from Qatar far outweigh India’s exports.
It is India’s largest source of liquefied natural gas (LNG) — gas that has been supercooled to liquid form so that it can be transported by sea
2. What is liquid natural gas (LNG)?
Liquefied Natural Gas (LNG) is a natural gas that has been cooled to extremely low temperatures to convert it from a gaseous state into a liquid state. This process makes natural gas more compact and transportable, facilitating its storage and transportation over long distances
2.1. Key Aspects of LNG
Natural Gas Composition: Natural gas is primarily composed of methane, but it can also contain small amounts of other hydrocarbons like ethane, propane, and butane, as well as impurities like sulfur compounds.
Liquefaction Process: LNG is created through a process known as liquefaction. In this process, natural gas is cooled to temperatures around -162 degrees Celsius (-260 degrees Fahrenheit). This extreme cooling causes the gas to change from a gaseous form into a dense, stable liquid.
Reduced Volume: The liquefaction process reduces the volume of natural gas to approximately 1/600th of its volume in its gaseous state. This reduction in volume makes it more practical and cost-effective to store and transport natural gas over long distances, whether by ship, truck, or pipeline.
Storage and Transportation: LNG is stored and transported in specially designed cryogenic tanks and ships. These tanks and ships are insulated to maintain the extremely low temperatures required to keep LNG in its liquid state. LNG carriers are designed to handle the safe transport of LNG from production facilities to import terminals around the world.
3. Uses of liquified natural gas (LNG)
- LNG can be used to generate electricity. It is often used in natural gas power plants to produce electricity, especially in regions with limited access to other energy sources.
- LNG can be regasified and used for heating purposes in homes, businesses, and industrial facilities
- LNG is used as a fuel source in various industrial and commercial applications, including in the manufacturing, chemical, and transportation sectors.
- Some ships and vessels, especially in the maritime industry, use LNG as a cleaner and more environmentally friendly alternative to traditional marine fuels
- LNG is considered a relatively cleaner fuel source compared to coal and oil because it produces fewer emissions of greenhouse gases, sulfur dioxide, and other pollutants when burned. This has made it a popular choice for reducing emissions in power generation and transportation
- LNG is traded globally, with significant producers including countries like Qatar, the United States, Australia, and Russia. It is transported across oceans to meet the energy needs of various regions and countries
4. India, Qatar, and LNG
- India’s total imports from Qatar in FY2022-23 were valued at $16.81 billion, of which LNG imports alone were worth $8.32 billion, or 49.5%, an analysis of official trade data shows
- India’s other major imports from Qatar are also fossil fuel-linked commodities and products, such as liquefied petroleum gas (LPG), plastics, and other petrochemicals.
- India’s exports to Qatar were valued at just $1.97 billion in FY2022-23. The major exports include cereals, copper articles, iron and steel articles, vegetables, fruits, spices, and processed food products
- India imported a total 19.85 million tonnes of LNG in FY23, of which 10.74 million tonnes, or 54%, came from Qatar, the trade data show.
- This means that apart from the 8.5 million tonnes of LNG that Qatar supplied as part of the Petronet LNG term contract, nearly 2.25 million tonnes of additional gas was purchased from Qatar on spot basis last year.
- While Indian LNG importers — predominantly the public sector oil and gas companies — continue to make efforts to diversify sourcing, it could be years before the high reliance on Qatar can be reduced to a meaningful extent
5. Global LNG Market
- The global LNG market is a seller’s market after Russia’s invasion of Ukraine and the sanctions that have disrupted Russian natural gas supplies to Europe. After the war broke out, prices, particularly of LNG spot cargoes, surged globally
- Compared with term contracts (such as the one Petronet has with Qatar), the spot LNG market is prone to higher price volatility.
- In a supply glut, spot prices tend to fall more steeply than term contracts, as pricing in the latter is based on an agreed formula between the buyer and the seller. And when supplies are tight, spot prices tend to rise much more than term contract rates
- The war has put Qatar, the world’s largest exporter of LNG, in a unique position of strength. According to industry experts, the extreme price volatility of the past couple of years in global LNG markets has established that term contracts, and not spot purchases, are the more viable option to secure supplies at a reasonable and stable price
- This has pushed LNG importers all over the world, including India, to scout for long-term contracts with major suppliers, of whom Qatar is the foremost. Over the past few weeks, Doha has announced 27-year LNG supply deals with French, Dutch, and Italian energy majors. In the preceding months, it had signed long-term contracts to supply LNG to China and Germany
6. India's dependence on LNG
- India relies on LNG imports to fulfil nearly 50% of its natural gas demand, with close to 60% of these supplies traditionally passing through the strategically significant Strait of Hormuz. Most of these imports originate from Qatar — India’s largest LNG supplier — along with the UAE. However, due to the ongoing conflict in West Asia, shipping activity through the Strait has come to a near standstill. The Strait of Hormuz remains one of the world’s most vital energy transit routes, facilitating almost one-fifth of global oil and LNG trade.
- India has not received a single LNG shipment from the Persian Gulf for more than two months, severely affecting domestic gas availability despite efforts to secure supplies from alternative international sources. In response to the supply crunch, the government has prioritised natural gas distribution for essential sectors such as household cooking and transportation, while restricting allocations to certain industrial users.
- Energy experts argue that larger LNG storage reserves could have reduced the severity of the disruption caused by the unexpected blockade of the Strait of Hormuz — an event once viewed as highly unlikely. At present, India possesses 23 LNG storage tanks across different import terminals, with Petronet LNG operating 10 of them.
- Since LNG must be stored at extremely low temperatures to remain in liquid form, the storage tanks require specialised cryogenic technology. As a result, constructing such facilities is both capital-intensive and time-consuming compared to conventional liquid fuel storage infrastructure.
- Natural gas is converted into LNG by cooling it to ultra-low temperatures, after which it is transported via specially designed cryogenic ships. Upon arrival at regasification terminals, the LNG is unloaded into cryogenic storage tanks and reconverted into gaseous form before being distributed to end-users through pipeline networks
7. Way forward
Petronet LNG itself is looking at adding storage tanks at its LNG terminals. It has eight LNG tanks at its flagship Dahej terminal and two at its other terminal at Kochi. Singh said that the under-execution Gopalpur terminal project will add two tanks, and the company is looking to add another tank at the Kochi terminal. As for Dahej, Petronet LNG is looking to add four LNG tanks, and is looking at land availability for the same
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For Prelims: Current events of national and international importance
For Mains: General Studies III: Infrastructure: Energy, Ports, Roads, Airports, Railways etc.
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Previous Year Questions
1.Consider the following statements: (UPSC CSE 2020)
Which of the statements given above is/are correct? (a) 1 only Answer: (d) 2.With reference to Indian economy, demand-pull inflation can be caused/increased by which of the following? (UPSC CSE 2021)
Select the correct answer using the code given below: (a) 1, 2 and 4 only Answer: (a) 3. Consider the following statements: (2020)
Which of the statements given above is/are correct? (a) 1 and 2 only Answer: (a) |
Source: indianexpress
MODEL CODE OF CONDUCT (MCC)
1. Context
The Model Code of Conduct (MCC), which guides political parties and candidates during elections, was first drafted by the Kerala government in 1960. The Election Commission (EC) formalised it in 1968, revised it in 1974, and added Part VII on the “party in power” in 1979. Former Chief Election Commissioner T.N. Seshan enforced it with unprecedented rigour from 1991. Prime Minister Narendra Modi’s April 18 address has raised questions about whether the address violated the Code.
2.How Election Commission describe MCC?
- The Model Code of Conduct (MCC) is a set of guidelines issued by the Election Commission of India (ECI) for political parties and candidates during elections.
- The MCC is designed to ensure free and fair elections by preventing the misuse of government machinery, maintaining a level playing field for all candidates, and avoiding any activities that could unduly influence voters.
- The Election Commission describes the Model Code of Conduct as a set of norms and rules that political parties and candidates must adhere to during the election process.
- The MCC comes into effect as soon as the election dates are announced and remains in force until the results are declared.
- It includes guidelines on various aspects of electioneering, such as campaigning, speeches, processions, polling day activities, and the content of election manifestos.
- The goal is to promote a fair and ethical electoral process, minimizing the chances of corrupt practices and ensuring that the democratic principles are upheld during elections
3.What is the Model Code of Conduct?
- The Model Code of Conduct, issued by the Election Commission, serves as a set of guidelines to oversee the conduct of political parties and candidates before elections.
- These guidelines encompass various aspects such as speeches, polling day procedures, polling booths, ministerial portfolios, election manifesto content, processions, and overall behavior. The aim is to ensure the integrity of elections.
- According to information from the Press Information Bureau, a version of the MCC was initially introduced during the 1960 state assembly elections in Kerala.
- It gained widespread adherence in the 1962 elections and has been consistently followed in subsequent general elections. In October 1979, the Election Commission expanded the MCC to include a section regulating the conduct of the 'party in power' to prevent any undue advantage during elections.
- The MCC is activated from the announcement of the election schedule until the declaration of results. Consequently, it comes into effect from the present evening and remains applicable until the conclusion of the entire election process.
- The MCC comprises eight provisions addressing general conduct, meetings, processions, polling day, polling booths, observers, the party in power, and election manifestos
4.When does the Model Code of Conduct come into effect?
- Once the code comes into effect, the governing party, whether at the national or state level, must ensure that its official position is not exploited for campaign purposes.
- Consequently, no policies, projects, or schemes should be announced that could sway voting behavior. The party is also prohibited from utilizing public funds for advertising or using official media platforms to publicize achievements with the intention of enhancing electoral prospects.
- The guidelines further dictate that ministers should refrain from combining official visits with election-related activities or utilizing official resources for such purposes.
- The ruling party is barred from employing government transportation or machinery for campaign activities. Additionally, it is mandated to provide opposition parties with equal access to public spaces like grounds for conducting election meetings, as well as amenities such as helipads, under the same terms and conditions applied to the ruling party.
- Any advertisements at the expense of the public treasury in newspapers and other media outlets are considered an offense. The ruling government is also restricted from making ad-hoc appointments in governmental bodies and public enterprises that may unduly influence voters.
- The Model Code of Conduct strictly prohibits the use of caste and communal sentiments to attract voters, allowing criticism of political parties or candidates solely based on their track record. Places of worship, including mosques, churches, and temples, are not to be employed for election propaganda.
- Practices such as bribery, intimidation, and voter impersonation are explicitly forbidden. Public meetings within the 48-hour period leading up to the poll closing time are also proscribed, known as the "election silence," aiming to provide voters with a campaign-free environment for reflection before casting their votes
5.Is the Model Code of Conduct legally binding?
- The Model Code of Conduct (MCC) is not a legally binding document in the sense that it is not enforceable by law. It is a set of guidelines and ethical standards issued by election management bodies, such as the Election Commission of India, to ensure fair play and ethical behavior during elections.
- The MCC is followed by political parties and candidates on a voluntary basis, and adherence is more a matter of political ethics and a commitment to maintaining the integrity of the electoral process.
- While the MCC itself does not have statutory backing, certain aspects of it may be supported by legal provisions. For example, if a political party or candidate violates specific principles outlined in the MCC, they may be subject to legal action under relevant electoral laws. However, the MCC, as a whole, is more of a moral and ethical code that relies on the cooperation and voluntary compliance of political participants.
- The Election Commission, as the custodian of the MCC, can take various actions against those who violate its principles.
- These actions may include issuing warnings, reprimands, and, in severe cases, canceling candidature or disqualification. The idea behind the MCC is to foster a fair and transparent electoral process and to prevent the misuse of power during election campaigns
6. Way forward
The ECI can issue a notice to a politician or a party for alleged breach of the MCC either on its own or on the basis of a complaint by another party or individual. Once a notice is issued, the person or party must reply in writing — either accepting fault and tendering an unconditional apology or rebutting the allegation. In the latter case, if the person or party is found guilty subsequently, he/it can attract a written censure from the ECI — something that many see as a mere slap on the wrist
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For Prelims: Current events of national and international importance. For Mains: General Studies II: Salient features of the Representation of People’s Act. |
Source: Indianexpress
GREAT NICOBAR ISLAND PROJECT
1. Context
Countering the Union government’s claim that the Great Nicobar Island Development Project will be undertaken with “due diligence”, the Congress on Sunday said the government had failed to address concerns surrounding the project, and called for a parliamentary review of the initiative.
2.What is the Great Nicobar Island Project?
- The Great Nicobar Island Project is a significant infrastructure development initiative undertaken by the Indian government on Great Nicobar Island, part of the Andaman and Nicobar Islands in the Indian Ocean. The project aims to transform the island into a strategic and economic hub.
- A deep-draft international container transshipment terminal is planned to be developed at Galathea Bay. This port is expected to serve as a key shipping hub in the region, facilitating trade and reducing dependency on transshipment ports in other countries
- An international airport is proposed to improve connectivity to the island, both for tourism and strategic purposes. This airport will be capable of handling wide-bodied aircraft and will enhance the island's accessibility
- To support the infrastructure and population growth, a gas- and solar-based power plant will be developed. This plant aims to provide a reliable and sustainable energy source for the island's needs
- A modern township with residential, commercial, and recreational facilities is planned to accommodate the increased population and workforce that the project will attract. This township is expected to have state-of-the-art amenities and infrastructure
Strategic and Economic Importance
- Great Nicobar Island is situated near the Malacca Strait, one of the world's busiest shipping lanes. Developing this island will enhance India's strategic presence in the Indian Ocean Region, particularly in terms of maritime security and trade control
- The project aims to boost the local economy by creating job opportunities and attracting investments. Improved infrastructure and connectivity are expected to stimulate tourism and other economic activities on the island
- Enhancing connectivity through the transhipment port and international airport will integrate Great Nicobar Island more closely with the global and regional trade networks, potentially making it a key logistical and commercial hub
Environmental and Social Considerations
- The project has raised concerns about its potential impact on the island's rich biodiversity and ecosystems. Great Nicobar Island is home to unique flora and fauna, including endangered species. Ensuring sustainable development practices and environmental protection measures will be crucial
- There are concerns about the impact on local communities, particularly indigenous tribes such as the Nicobarese and Shompen. Ensuring that their rights and livelihoods are protected is a key consideration for the project
- The project's emphasis on using renewable energy sources like solar power and promoting eco-friendly practices is an effort to mitigate environmental concerns. However, balancing development with conservation will be an ongoing challenge
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Great Nicobar
Great Nicobar is the largest of the Nicobar Islands, part of the Union Territory of Andaman and Nicobar Islands in India. It is located in the Indian Ocean, near the western entrance of the Malacca Strait, which is a key maritime route for international trade.
Here are some key aspects of Great Nicobar:
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3. Strategic Importance
- The Bay of Bengal and Indian Ocean region are critically important for India's strategic and security interests, especially as the Chinese People’s Liberation Army Navy aims to increase its presence in these waters.
- India is concerned about the buildup of Chinese naval forces at key Indo-Pacific chokepoints, particularly Malacca, Sunda, and Lombok. China's efforts to extend its influence in the area include constructing a military facility on the Coco Islands in Myanmar, located just 55 km north of the Andaman & Nicobar Islands.
- Earlier this year, The Indian Express reported significant upgrades to the military infrastructure on the Andaman & Nicobar Islands.
- This includes modernizing airfields and jetties, creating new logistics and storage facilities, establishing a base for military personnel, and enhancing surveillance capabilities.
- The goal of these upgrades is to support the deployment of more military forces, larger warships, aircraft, missile batteries, and troops.
- Maintaining close surveillance over the area surrounding the archipelago and establishing a strong military presence on Great Nicobar is crucial for India's national security
4. Environmental Concerns
- The proposed infrastructure upgrade has faced opposition due to its potential ecological threat to the islands. Wildlife conservation researchers, anthropologists, scholars, civil society members, and the Congress party have raised concerns about the devastating impact on the Shompen, a particularly vulnerable tribal group (PVTG) of hunter-gatherers, who have an estimated population of a few hundred individuals residing in a tribal reserve on the island.
- Critics claim the project infringes on the rights of the tribal population and will harm the island’s ecology, including the felling of nearly a million trees. There are fears that the port project will damage coral reefs, affecting the local marine ecosystem, and pose a threat to terrestrial species like the Nicobar Megapode bird and leatherback turtles, which nest in the Galathea Bay area.
- A statement by senior Congress leader and former Environment Minister Jairam Ramesh highlighted that the proposed port is in a seismically active zone, which experienced permanent subsidence of about 15 feet during the 2004 tsunami.
- The statement also accused the local administration of insufficiently consulting the Tribal Council of Great and Little Nicobar Islands as required by law.
- In November 2022, the tribal council withdrew a no-objection certificate it had issued for the diversion of about 160 sq km of forest land, citing inadequate information provided to them.
- In April 2023, the Kolkata Bench of the National Green Tribunal (NGT) chose not to interfere with the environmental and forest clearances granted to the project. However, the Tribunal ordered the formation of a high-power committee to review the clearances. There is still no clarity on whether the committee, mainly composed of government representatives, has submitted its report
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For Prelims: National Green Tribunal (NGT), Great Nicobar Island, Coastal Regulation Zones, Turtles, Dolphins, Particularly Vulnerable Tribal Groups (PVTGs), Mangroves, Great Nicobar Biosphere Reserve
For Mains: Significance and Issues Related to Great Nicobar Island Project
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Previous Year Questions
1. Which one of the following pairs of islands is separated from each other by the ‘Ten Degree Channel’? (2014) (a) Andaman and Nicobar Answer (a) 2. Which of the following have coral reefs? (2014)
Select the correct answer using the code given below: (a) 1, 2 and 3 only Answer (a) 3. In which one of the following places is the Shompen tribe found? (2009) (a) Nilgiri Hills Answer (b) |
Source: indianexpress
FOREIGN EXCHANGE MANAGEMENT ACT (FEMA)
1. Context
The decision to ease foreign direct investment norms for overseas companies with up to 10% stake in Chinese companies will be notified soon under the FEMA law, a senior government official said on Thursday. After that, the changes will come into effect
2.Foreign Exchange Management Act(FEMA)
The Foreign Exchange Management Act (FEMA) is an important piece of legislation in India that governs foreign exchange and payments.
Here is an overview of FEMA and its history:
FEMA replaced the Foreign Exchange Regulation Act (FERA) of 1973. FERA was considered stringent and primarily aimed at controlling and regulating foreign exchange in India. However, it was felt that the economic environment required a more liberalized and contemporary approach
FEMA was introduced in 1999 to replace FERA, aligning with the economic reforms and liberalization measures undertaken by the Indian government in the early 1990s. The primary objective was to promote external trade and payments and to facilitate foreign investment in India.
3.Key Features of FEMA
- FEMA brought about a more liberalized approach compared to its predecessor. It aimed to simplify and rationalize foreign exchange management, making it more conducive for foreign trade and investment
- FEMA distinguishes between current account transactions (related to trade in goods, services, and short-term financial transactions) and capital account transactions (related to long-term investments and capital movements)
- FEMA provides a comprehensive regulatory framework for foreign exchange transactions and seeks to manage and regulate various aspects, including dealings in foreign exchange, export and import of currency, and opening and maintenance of foreign currency accounts
- The act empowers the Reserve Bank of India (RBI) to regulate foreign exchange transactions. It also prescribes penalties for contravention of its provisions to ensure compliance.
- FEMA establishes adjudicating authorities to hear cases related to violations. It also provides for the establishment of the Foreign Exchange Appellate Tribunal to hear appeals against the orders of the adjudicating authorities
- Since its enactment, FEMA has undergone several amendments to keep pace with changing economic scenarios and to address emerging challenges. Amendments have been made to enhance regulatory measures, facilitate ease of doing business, and align with international best practices
4.Foreign Exchange Management Act: Objectives
The Foreign Exchange Management Act (FEMA) in India was enacted with several objectives, aiming to govern and facilitate foreign exchange transactions while aligning with the broader economic goals of liberalization and globalization.
The key objectives of FEMA include:
- One of the primary objectives of FEMA is to liberalize and facilitate foreign exchange transactions. It aims to simplify procedures and create a conducive environment for foreign trade and investment
- FEMA seeks to promote external trade and payments by providing a regulatory framework that governs the flow of foreign exchange in and out of the country. This includes facilitating imports and exports of goods and services
- FEMA is designed to encourage foreign direct investment (FDI) and foreign portfolio investment (FPI) by providing a transparent and predictable regulatory environment. The act lays down the rules and regulations governing the acquisition and transfer of immovable property by non-residents
- FEMA empowers the Reserve Bank of India (RBI) to manage and regulate the country's foreign exchange reserves effectively. This involves maintaining stability in the foreign exchange market and ensuring the availability of adequate reserves to meet external obligations
- FEMA distinguishes between current account transactions (related to day-to-day trade in goods, services, and short-term financial transactions) and capital account transactions (related to long-term investments and capital movements). This helps in applying appropriate regulations to different types of transactions
- The act aims to establish a robust adjudication and enforcement mechanism to ensure compliance with its provisions. It provides for penalties and adjudicating authorities to address violations and maintain the integrity of the foreign exchange management system
- FEMA is designed to align with international best practices in the field of foreign exchange management. This alignment is essential for integrating India into the global economy and ensuring compatibility with international norms and standards
- The act allows for amendments to be made to its provisions to adapt to changing economic conditions and emerging challenges. This ensures that the regulatory framework remains relevant and effective in a dynamic global economic environment.
5.Foreign Exchange Management Act: Applicability
The Foreign Exchange Management Act (FEMA) in India has a wide applicability, covering various individuals, entities, and transactions involved in foreign exchange dealings. Here's a breakdown of its applicability:
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Residents and Non-Residents: FEMA applies to both residents and non-residents of India. Residents are individuals or entities ordinarily resident in India, while non-residents are those residing outside India.
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Indian Entities: Indian entities, including companies, partnerships, trusts, and other forms of organizations, are subject to FEMA regulations concerning foreign exchange transactions.
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Foreign Entities: Foreign entities, including companies, branches, subsidiaries, and other organizations, are also subject to FEMA regulations when conducting transactions involving Indian currency or assets in India.
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Foreign Exchange Transactions: FEMA governs various foreign exchange transactions, including the acquisition and transfer of foreign exchange, remittances, import and export of goods and services, external commercial borrowings, and investments in India by non-residents.
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Current and Capital Account Transactions: FEMA distinguishes between current account transactions and capital account transactions. Current account transactions include day-to-day trade in goods and services, while capital account transactions involve long-term investments and capital movements. FEMA applies different regulations to these types of transactions.
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Authorized Persons: FEMA designates certain individuals and entities as authorized persons, such as authorized dealers, authorized banks, and other financial institutions. These authorized persons play a crucial role in facilitating foreign exchange transactions and are responsible for complying with FEMA regulations.
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Regulatory Authorities: The Reserve Bank of India (RBI) is the primary regulatory authority responsible for administering FEMA and enforcing its provisions. The RBI issues regulations, notifications, and guidelines to ensure compliance with FEMA requirements.
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Penalties and Enforcement: FEMA establishes penalties for contravention of its provisions, including fines, confiscation of assets, and imprisonment. Adjudicating authorities and appellate tribunals are designated to hear cases related to violations and enforce compliance with FEMA regulations.
6.Categories of Authorised Persons under FEMA
| Category | Description | Examples |
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| Authorized Dealers (ADs) | Broadest category, authorized for a wide range of forex transactions. | State banks, commercial banks, co-operative banks, foreign banks. |
| Full-Fledged Money Changers (FFMCs) | Authorized to buy and sell foreign currency notes, travelers' cheques and foreign currency instruments. | Money exchange companies, authorized hotels. |
| Authorised Money Changers (AMCs) | Limited scope compared to FFMCs, can only buy and sell foreign currency notes and travelers' cheques. | Small money exchange booths, airport counters. |
| Authorized Banks | Specific banks authorized for limited forex transactions, like specific export-import transactions. | Export houses, financial institutions engaged in specific foreign exchange activities. |
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Previous Year Questions
1.Which one of the following groups of items is included in India’s foreign-exchange reserves? (UPSC CSE 2013) (a) Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries Answer: (b) Mains
1.Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels. (2021) |
Source: The Hindu
COMPOSITE BACKWARDNESS INDEX (CBI)
1. Context
Poor General Caste children access private education eight times more than equally poor SC and ST children. Pick four equally poor households from each broad caste group, and the gap in their CBI scores mirrors that of four richer households from each.
2. What is the Composite Backwardness Index (CBI)?
- The Composite Backwardness Index (CBI) is a method used by governments and expert committees to identify how socially, educationally, and economically disadvantaged a particular community or group is when compared to the rest of society.
- Instead of looking at only one factor such as income or literacy, the index combines several indicators together to measure “backwardness” in a more comprehensive way. That is why it is called a composite index.
- In India, the idea of such an index became important mainly in the context of identifying Socially and Educationally Backward Classes (SEBCs) for reservation policies and welfare measures.
- Different commissions and state governments have used versions of a backwardness index to determine which communities require special support under the constitutional principle of social justice.
- The basic logic behind the CBI is that backwardness is not caused by a single problem. A community may suffer from low literacy, poor representation in government jobs, lack of land ownership, low income levels, inadequate housing, poor access to education, social discrimination, or low participation in professional occupations.
- If only one indicator is used, the real condition of the community may not be fully understood. Therefore, the index combines multiple indicators and assigns weightage to them.
- Each indicator is given marks or weightage. After calculating the total score, communities with higher backwardness scores are identified as more disadvantaged
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For example, a backwardness index may include factors such as:
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3. Mandal Commission
- One of the most well-known uses of such an approach in India was by the Mandal Commission (Second Backward Classes Commission) established in 1979 under the chairmanship of B.P. Mandal.
- The commission developed a method to identify Other Backward Classes (OBCs) using social, educational, and economic indicators. It used multiple criteria and assigned points to determine the relative backwardness of communities.
- This became the basis for extending reservation benefits to OBCs in central government jobs and educational institutions.
- The importance of the Composite Backwardness Index lies in making welfare policies more evidence-based and objective. Rather than relying only on political demands or historical perceptions, the index attempts to scientifically measure deprivation.
- It also helps governments prioritize development schemes and affirmative action policies for communities that genuinely need support.
- However, the CBI is not free from criticism. Some scholars argue that backwardness cannot be fully captured through numerical indicators because social discrimination and historical exclusion are complex realities.
- Others argue that the data used for calculating the index may become outdated over time, especially since caste-wise socio-economic data in India is limited.
- There are also debates about the weightage given to different indicators and whether economic criteria should receive greater importance than caste-based disadvantages.
- Despite these debates, the Composite Backwardness Index remains an important tool in India’s social justice framework because it provides a structured mechanism to identify disadvantaged groups and support inclusive development
4. Telangana's Caste and Socio-Economic Survey
- A caste and socio-economic survey carried out in Telangana has highlighted deep disparities among various communities in the state. The findings, prepared by the Independent Expert Working Group on Telangana’s Socio, Economic, Educational, Employment, Political and Caste (SEEEPC) Survey, were made public on April 15. The survey itself was undertaken in 2024.
- According to the report, Backward Classes (BCs), excluding Muslim minorities, represent the largest social category in the state, accounting for 46.3% of the population. When combined with Scheduled Castes (17.4%) and Scheduled Tribes (10.4%), these groups together constitute 74.1% of Telangana’s population. Muslim minorities account for 12.6%, while Other Castes comprise 13.3%.
- Even though BCs, SCs, and STs form a majority, the survey revealed that 135 communities — including 69 BC castes, 41 SC groups, and 25 ST communities — remain more disadvantaged than earlier estimates suggested.
- In contrast, the OC category, despite making up only 13.3% of the population, enjoys a dominant presence in private-sector employment and higher education, receives comparatively better salaries, occupies larger houses, and generally experiences a superior standard of living.
- Since Telangana was formed as a separate state in June 2014, the government has made substantial investments in the education sector, with a strong emphasis on expanding English-medium learning.
- Programmes such as Mana Vooru Mana Badi focused on improving school infrastructure, introducing digital classrooms with English-medium instruction, and providing essential facilities like toilets and safe drinking water. Teacher training initiatives were also strengthened.
- These measures have led to a major generational transformation over the last decade. Among individuals in the 6–29 age group, 60.5% are now studying in English-medium institutions, whereas 35.3% continue to receive education in Telugu medium. This shift is especially visible in urban centres and among economically better-off sections of society
5. Statistics in the Composite Backwardness Index (CBI)
- Several states have argued that representation in Parliament should not be determined solely by population figures, but should also take into account a state’s contribution to the national economy.
- In a similar manner, social justice policies may need to consider the actual extent of backwardness experienced by a caste, rather than relying only on its numerical strength. While economic contribution can be quantified relatively easily, assessing the degree of caste-based backwardness is far more complex.
- To address this challenge, an independent expert panel appointed by the Government of Telangana designed an evidence-based framework known as the Composite Backwardness Index (CBI) to scientifically assess the relative backwardness of different caste groups.
- The framework evaluated 242 caste communities using data collected from nearly 35 million individuals through the caste survey, with each individual mapped across 75 categories of information.
- Since backwardness is a relative social condition, the index seeks to compare whether one community is placed at a greater disadvantage than another. The broader objective of social justice, therefore, is to enable historically marginalised groups to bridge these inequalities.
- Under this methodology, all 242 castes — comprising 133 BCs, 59 SCs, 32 STs, and 18 General category groups — were assessed on 42 diverse indicators.
- These included factors such as dependence on daily wage labour, access to English-medium education, availability of toilets, ownership of irrigated land, and experiences of discrimination at religious places.
- Based on these indicators, a relative backwardness score was calculated using quartile distribution techniques.
- The study is far more detailed than the framework used by the Mandal Commission in its 1980 report, which relied on only 11 indicators.
- The findings statistically confirm long-standing social observations: Scheduled Castes and Scheduled Tribes are nearly three times more backward than General category groups, while Backward Classes are about 2.7 times more disadvantaged.
- The report also demonstrates that levels of deprivation vary significantly even among historically oppressed communities, providing measurable and scientific validation for these differences.
- Within the 133 BC communities studied, 69 were found to be more backward than the state average, whereas 64 performed relatively better. Among Scheduled Castes, 18 out of 59 communities were placed above the state average, while seven of the 32 Scheduled Tribe groups were similarly better positioned.
- However, these comparatively advanced groups constitute only a very small share of their overall populations. In population terms, around 99% of STs, 97% of SCs, and 71% of BCs continue to remain more backward than the state average.
- The report further concludes that access to English-medium and private education has emerged as the strongest factor influencing social advancement, outweighing even land or asset ownership.
- Communities such as Gouds, Goldsmiths, and Christians may possess limited land resources, yet perform better because of stronger access to private education.
- In contrast, groups like the Lambadi tribes, along with Mudiraj and Valmiki communities, may own relatively larger areas of irrigated land but still remain socially disadvantaged due to weaker educational access.
- The findings underline that backwardness is shaped by multiple interconnected factors, including birth-based inequalities, regional conditions, and overall living standards
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For Prelims: Current events of national and international importance
For Mains: General Studies I: population and associated issues and Social empowerment
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Previous Year Questions
1.Despite comprehensive policies for equity and social justice, underprivileged sections are not yet getting the full benefits of affirmative action envisaged by the Constitution. Comment. (2024)
2.Why is caste identity in India both fluid and static? (2023) 3.“Caste system is assuming new identities and associational forms. Hence caste system cannot be eradicated in India.” Comment. (2018) |
Source: Indianexpress
FREE TRADE AGREEMENT
1. Context
India and New Zealand on Monday signed a Free Trade Agreement (FTA) that Prime Ministers of both the countries hailed as a “historic” step towards deepening trade, investment, and people-to-people ties.
2. About the Free Trade Agreement
- A Free Trade Agreement (FTA) is an agreement between two or more countries to reduce or eliminate barriers to trade, such as tariffs, quotas, and subsidies.
- FTAs can also include provisions on other issues, such as investment, intellectual property, and labour standards.
- The goal of an FTA is to promote trade and economic growth between the signatory countries.
- By reducing or eliminating trade barriers, FTAs can make it easier for businesses to export their goods and services to other countries, which can lead to increased production, employment, and innovation.
3. Types of Free Trade Agreement
- Bilateral Free Trade Agreement (BFTA) involves two countries, aiming to promote trade and eliminate tariffs on goods and services between them. It establishes a direct trade relationship, allowing for a more focused and tailored agreement between the two nations.
- Multilateral Free Trade Agreement (MFTA) Involving three or more countries, an MFTA seeks to create a comprehensive trade bloc, promoting economic integration on a larger scale. It requires coordination among multiple parties, addressing diverse economic interests and fostering a broader regional economic landscape.
- Regional Free Trade Agreement (RFTA) involves countries within a specific geographic region, aiming to enhance economic cooperation and integration within that particular area. It focuses on addressing regional economic challenges and fostering collaboration among neighbouring nations.
- Preferential Trade Agreement (PTA) involves a reciprocal reduction of tariffs and trade barriers between participating countries, granting preferential treatment to each other's goods and services. It allows countries to enjoy trading advantages with specific partners while maintaining autonomy in their trade policies with non-participating nations.
- Comprehensive Economic Partnership Agreement (CEPA) is a broad and advanced form of FTA that goes beyond traditional trade barriers, encompassing various economic aspects such as investment, intellectual property, and services. It aims for a more comprehensive economic partnership, encouraging deeper integration and collaboration between participating countries.
- Customs Union While not strictly an FTA, a Customs Union involves the elimination of tariffs among member countries and the establishment of a common external tariff against non-member nations. It goes beyond standard FTAs by harmonizing external trade policies, creating a unified approach to trade with the rest of the world.
- Free Trade Area (FTA) with Trade in Goods (TIG) and Trade in Services (TIS): Some FTAs specifically emphasize either trade in goods or trade in services, tailoring the agreement to the specific economic strengths and priorities of the participating countries. This approach allows nations to focus on areas where they have a comparative advantage, fostering specialization and efficiency.
4. India's Free Trade Agreements
India is a member of several free trade agreements (FTAs) and is currently negotiating others. India's FTAs have helped to reduce trade barriers and promote trade and economic growth. They have also helped to attract foreign investment and create jobs.
- The South Asian Free Trade Agreement (SAFTA) was signed in 1995 by the seven countries of the South Asian Association for Regional Cooperation (SAARC). SAFTA aims to reduce or eliminate tariffs on trade between the member countries.
- The India-Bangladesh FTA was signed in 2010 and came into force in 2011. It is a comprehensive FTA that covers goods, services, and investments.
- The India-Sri Lanka FTA was signed in 1999 and came into force in 2000. It is a comprehensive FTA that covers goods, services, and investments.
- The India-ASEAN Free Trade Agreement was signed in 2002 and came into force in 2010. It is a comprehensive FTA that covers goods, services, and investments.
- The India-Korea Comprehensive Economic Partnership Agreement (CEPA) was signed in 2010 and came into force in 2011. It is a comprehensive FTA that covers goods, services, and investments.
- The India-Japan Comprehensive Economic Partnership Agreement(CEPA) was signed in 2022 and came into effect in 2023. It is a comprehensive FTA that covers goods, services, and investments.
- The India-UAE Comprehensive Partnership Agreement (CEPA) was signed in 2022 and came into effect in 2022. It is a comprehensive FTA that covers goods, services, and investments.
- The India-Australia Economic Cooperation and Trade Agreement (ECTA) was signed in 2022 and came into effect in 2022. It is a comprehensive FTA that covers goods, services, and investments.
- The India-Malaysia Comprehensive Economic Cooperation Agreement (CECA) was signed in 2010 and aims to enhance economic ties by addressing trade in goods and services, as well as investment and other areas of economic cooperation.
- The India-Thailand Free Trade Agreement was signed in 2003 and focuses on reducing tariffs and promoting trade in goods and services between India and Thailand.
- The India-Singapore Comprehensive Economic Cooperation Agreement (CECA) has been operational since 2005, this agreement covers trade in goods and services, as well as investment and intellectual property.
- The India-Nepal Trade Treaty While not a comprehensive FTA, India and Nepal have a trade treaty that facilitates the exchange of goods between the two countries.
- The India-Chile Preferential Trade Agreement was signed in 2006 and aims to enhance economic cooperation and reduce tariffs on certain products traded between India and Chile.
5. India - UK Free Trade Agreement
5.1. Background
- Both countries have agreed to avoid sensitive issues in the negotiations.
- The interim (early harvest agreement) aims to achieve up to 65 per cent coverage for goods and up to 40 per cent coverage for services.
- By the time the final agreement is inked, the coverage for goods is expected to go up to "90 plus a percentage" of goods.
- India is also negotiating a similar early harvest agreement with Australia, which is supposed to set the stage for a long-pending Comprehensive Economic Cooperation Agreement that both countries have been pursuing for nearly a decade.
- While the commencement of negotiations does mark a step forward in the otherwise rigid stance adopted and when it comes to trade liberalisation, experts point to impediments and the potential for legal challenges going ahead.
5.2. GATT (General Agreement on Trade and Tariffs)
- The exception to the rule is full-scale FTAs, subject to some conditions.
- One rider, incorporated in Article XXIV.8 (b) of GATT, stipulates that a deal should aim to eliminate customs duties and other trade barriers on "Substantially all the trade" between the WTO member countries that are signatories to an FTA.
- For this Agreement, a free-trade area shall be understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce are eliminated on substantially all the trade between the constituent territories in products originating in such territories.
- It is often beneficial to negotiate the entire deal together, as an early harvest deal may reduce the incentive for one side to work towards a full FTA.
- These agreements are not just about goods and services but also issues like investment.
- If you are trying to weigh the costs and benefits, it is always better to have the larger picture in front of you.
- In the case of the early harvest agreement inked with Thailand, automobile industry associations had complained that relaxations extended to Bangkok in the early harvest had reduced the incentive for Thailand to work towards a full FTA.
- Early harvest agreements may serve the function of keeping trading partners interested as they promise some benefits without long delays, as India becomes known for long-drawn negotiations for FTAs.
- Government emphasis on interim agreements may be tactical so that a deal may be achieved with minimum commitments and would allow for contentious issues to be resolved later.
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For Prelims: Free Trade Agreement, India-U.K, Bilateral Free Trade Agreement, G-20 Summit, Agenda 2030, Covid-19 Pandemic, SAARC, General Agreement on Trade and Tariffs, Comprehensive Economic Partnership Agreement, Multilateral Free Trade Agreement, Regional Free Trade Agreement, Preferential Trade Agreement, Customs Union,
For Mains:
1. Evaluate the potential impact of the India-UK FTA on the Indian economy, considering both positive and negative aspects (250 Words)
2. Critically evaluate the significance of Free Trade Agreements (FTAs) in promoting trade and economic growth, considering their potential benefits and drawbacks. (250 Words)
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Previous Year Questions
1. Consider the following countries:
1. Australia
2. Canada
3. China
4. India
5. Japan
6. USA
Which of the above are among the free-trade partners' of ASEAN? (UPSC 2018)
A. 1, 2, 4 and 5 B. 3, 4, 5 and 6 C. 1, 3, 4 and 5 D. 2, 3, 4 and 6
Answer: C
2. Increase in absolute and per capita real GNP do not connote a higher level of economic development, if (UPSC 2018) (a) Industrial output fails to keep pace with agricultural output. Answer: C 3. The SEZ Act, 2005 which came into effect in February 2006 has certain objectives. In this context, consider the following: (2010)
Which of the above are the objectives of this Act? (a) 1 and 2 only (b) 3 only (c) 2 and 3 only (d) 1, 2 and 3 Answer: A 4. A “closed economy” is an economy in which (UPSC 2011) (a) the money supply is fully controlled Answer: D 5. With reference to the “G20 Common Framework”, consider the following statements: (UPSC 2022)
1. It is an initiative endorsed by the G20 together with the Paris Club. 2. It is an initiative to support Low Income Countries with unsustainable debt. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Answer: C
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Source: The Hindu
