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Newspaper Bits 05-03-2018

compilation of Prelims and Mains related Current Affairs from various Newspapers and PIB

PNB scam hits buyers’ credit

  • The $85-billion buyers’ credit market has come to a grinding halt with Indian banks reluctant to provide guarantees through letters of undertaking (LoUs)
  • interest rates on LoUs were earlier 20-30 basis points (bps) above the London Inter Bank Offered Rate (LIBOR). Following the PNB scam, they have become 50-60 bps above the LIBOR.
  • buyers  credit  is a rate that no other credit product offers. If you take a rupee loan, it comes to around 9-10%, but buyers’ credit interest rate is around 2.5%.

LIBOR or ICE LIBOR (previously BBA LIBOR) is a benchmark rate, which some of the world’s leading banks charge each other for short-term loans. It stands for Intercontinental Exchange London Interbank Offered Rate and serves as the first step to calculating interest rates on various loans throughout the world

For illustration Purpose only

  • When an importer approaches a domestic branch of bank, say AB Bank, seeking overseas credit, the branch issues a letter to another Indian bank located in overseas territory, say YZ Bank, for buyers’ credit with a guarantee to repay YZ bank on the due date. Then, the overseas branch of YZ Bank transfers the fund in the NOSTRO account of AB Bank.

land acquisition

  • Land Acquisition Act, 1894 has been replaced with Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 .
  • Section 24 of the new Act provided that under certain circumstances, acquired land could be returned to affected families.
  • This Section was upheld and imbued with substance by several judges of the Supreme Court and various High Courts, interpreted in favour of securing the land owners’ interests over those of the state
  • in 2015 an ordinance was issued to render this Section inoperative along with many other progressive and pro-farmer provisions in the 2013 law.
  • In 2016 PM  announced the withdrawal of the amendments proposed by his government.
  • In Feb 2018 Supreme Court, in Indore Development Authority v. Shailendra, has effectively implemented the provisions of the lapsed ordinance with regard to the retrospective clause.
  • This judgement is at variance with other Benches on the issue, this has now led to the constitution of a five-judge Bench of the Supreme Court to decide whether the Section has to be interpreted expansively or in a narrow sense.

Necessity of that section 

  • It was clear at the draft stage itself that a new law on land acquisition would necessarily have to address the cases of those who had suffered (and continued to suffer) due to the unacceptable provisions of the 1894 law.

Three categories to return the land 

  • A test had to be laid down to determine in which cases land could be returned to the original owners. finally a formula was arrived at There would be three categories.
    • first category would comprise of those for whom the land acquisition award had been made less than five years prior to the coming into force of the new law (before January 1, 2014 and after January 1, 2009) In such cases, the new law would not apply; the proceedings would continue under the old law.
    • The second would be where the award had not been made (on the date of the new law coming into force) but the acquisition proceedings had been initiated.The proceedings would continue under the new law.
    • The third category would comprise of the cases of those for whom the land acquisition award had been made five years (or more) prior to the new law coming into force and where either compensation had not been paid or there had been no physical possession of the land. It was reasoned that five years was enough time for the acquiring authority to resolve all disputes, failing which it made no sense to hold on to the land.

Trade Wars

  • Learning their lessons from  global trade war of the 1930s world leaders have avoided protectionist trade policies in the aftermath of the Great Recession of 2008.
  • USA announced that it would soon impose tariffs on the import of steel and aluminium for an indefinite period of time, the reason cited is U.S.’s huge trade deficit with the rest of the world .
  • The European Union said that return it would return the favour through retaliatory measures targeting American exporters .

Lessons to learn 

  • major global central banks which have shown enough maturity to avoid using currency wars as a means to settle disputes.

Way forward : 

  • Instead of retaliating with more tariffs, which could cause the current dispute to spiral into a full-fledged global trade war, the U.S.’s trading partners must try to achieve peace through negotiations.

Static revision : 

  • What is Trade deficit , Balance of payments 

Cancer :

  • “We will remove this cancer, says bank head Sunil Mehta” (Feb. 16, 2018), was read widely as the response of the MD and CEO of the Punjab National Bank . The word cancer is used to represent various forms of corruption .
  • A powerful letter from the legendary cancer specialist and Chair of the Cancer Institute (WIA), Chennai, V. Shanta, blew this certitude to smithereens. She was disturbed to read that “cancer” was being used in the context of a scam. She wrote:

“Corruption is a crime and something to be ashamed of; cancer is not. Thousands of patients with cancer cross the portals of our hospital every year; we are proud and happy to say that many of them are leading productive lives today. We do not want the word ‘cancer’ to be associated with guilt, hopelessness or dread. And definitely not with shame.”

Myanmar puts off border pact

  • In January this yer Union Cabinet had approved the agreement between India and Myanmar on land border crossing to enhance economic interaction between people of the two countries.
  • To bring it to action Centre had asked four States that share the unfenced border with Myanmar to distribute “border pass” to all the residents living within 16 km from the border.
  • India and Myanmar share a 1,643 km unfenced border along Arunachal Pradesh (520 km), Nagaland (215 km), Manipur (398 km) and Mizoram (510 km) and permit a ‘free movement’ regime upto 16 km beyond the border.
  • Now, Myanmar has indefinitely deferred signing an agreement with India to streamline the free movement of people within 16 km along the border.

Insurance

  • In the 2018-19 Budget, Finance Minister Arun Jaitley proposed merging three public sector general insurance companies —
    • National Insurance Co. Ltd.,
    • United India Insurance Co. Ltd.
    • and Oriental India Insurance Co. Ltd. — into a single insurance entity.
  • Cash-rich insurers may be asked to buy out the smaller ones where there is perational synergy. A share swap could also be considered

National Financial Reporting Authority

  • Union Cabinet has at last approved the proposal for establishment of the National Financial Reporting Authority

The basis for the move

  • Section 132 of the Companies Act, 2013 gives the Centre the power to set up such an authority
  •  A Parliamentary Standing Committee had also recommended that the National Advisory Committee on Accounting Standards proposed in the Companies Bill, 2009 be institutionalised.It will oversee the functioning of the ICAI and ensure credibility in financial reporting.
  • Since 1948, India’s finances and audit have been left to the care of the The Institute of Chartered Accountants of India (ICAI)
  • ICAI will continue with its advisory role on accounting and auditing standards and policies by making its recommendations to NFRA.
  • The government is answerable for not having notified the law since 2013.

All is not well with auditing ? 

  • PNB scam , Harshad Mehta, Ketan Parikh, the Satyam imbroglio and the latest scam involving our second-largest public sector bank — all exploded in public view, proving that all was not well with the way audits were being conducted.
  • Despite ICAI Guidelines, the CAs did not tally entries made in the SWIFT software with those made in the core banking solution (CBS)

Provisions

  • recommend to the Centre formulation of accounting and auditing standards and polices to be adopted by companies and auditors; monitor and enforce such standards and policies; and oversee quality of services of the professions associated with the compliance of these standards and policies
  • The Companies Act casts a responsibility on auditors to see that corporate accounts are in order. Auditors can choose not to sign the accounts if their concerns are not addressed by the management.
  • The Companies Act also allows auditors to report to the Centre if they believe an offence involving fraud is being committed by the company, by its officers or employees.

Solar goal for 2022 too hot to handle

  • India had been on track to meet its target of 100 Gigawatt (GW) of solar energy capacity by 2022

The Government of India has set a target of 175 GW renewable power installed capacity by the end of 2022. This includes 60 GW from wind power, 100 GW from solar power, 10 GW from biomass power and 5 GW from small hydro power.

but momentum has been severely eroded in the last few months Reasons for losing momentum.

  •  because of Issues such as uncertainty around import duties and future tax rates on existing power purchase agreements have dampened investor sentiment.
  • The Director General (Safeguards) had earlier this year recommended imposing a 70% safeguard duty on imported solar cells, panels and modules for a minimum period of 200 days, leading to fears in the market about rising prices
  • In the pre-GST regime, we had zero tax on solar panels. Now it is 5%. There is a lot of confusion surrounding the GST on project execution.
  • All these leading to VUCA [volatility, uncertainty, complexity and ambiguity] environment for investors and financiers .
  • The utility scale segment has achieved 30% of the 2022 target with four years to go. The rooftop segment has achieved less than 4%.
  • Of the 20 GW solar capacity installed, only 2 GW has come from the rooftop segment.

Smartphone tech most damaging to environment

  • Smartphones and data centres will be the most damaging information and communications technologies to the environment by 2040.
  • ICT has a greater impact on emissions than we thought, and most emissions come from production and operation.
  • “Today it sits at about 1.5%. If trends continue, ICT will account for 14% of the global footprint by 2040
  • while smartphones consume little energy to operate, 85% of their emissions impact comes from production.

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