Daily Current Affairs for UPSC CSE
Topics Covered
- Revised Defence Acquisition Procedure (DAP), 2020
- Issues between Armenia and Azerbaijan
- RBI Borrowing Limit
- Federalism and Farm bills
- Facts for Prelims
1 . Revised Defence Acquisition Procedure (DAP), 2020
Context: The revised Defence Acquisition Procedure (DAP), 2020 was made public recently in which the Union defence ministry has done away with the offset clause in government-to-government, single vendor and inter-governmental agreements (IGAs).
About the news
- The move has come days after the Comptroller and Auditor General (CAG) of India in its report had stated that French defence firms Dassault Aviation and MBDA have till date “not confirmed” the transfer of technology to the Defence Research and Development Organisation under the ₹59,000 crore deal for 36 Rafale multi-role fighter jets.
Background of DPP
- The first Defence Procurement Procedure (DPP) was promulgated in the year 2002 and has since been revised periodically to provide impetus to the growing domestic industry and achieve enhanced self reliance in defence manufacturing.
- Raksha Mantri had approved constitution of Main Review Committee under Chairmanship of DG (Acquisition) Shri Apurva Chandra in Aug 2019 for preparation of DAP-2020.
- DAP 2020 will be applicable with effect from 01 October 2020.
Key Focus areas
- DAP 2020 has been aligned with the vision of the Government of Atmanirbhar Bharat and empowering Indian domestic industry through Make in India initiative with the ultimate aim of turning India into a global manufacturing hub. Specific reforms enunciated in Atmanirbhar Bharat Abhiyan, have been incorporated as under:-
- Notify a List of Weapons/Platforms for Ban on Import. Relevant incorporation has been done in the DAP to ensure that NO equipment as mentioned in the list is procured ex import post timelines notified.
- Indigenisation of Imported Spares.
- Request For Information. RFI stage will explore willingness of the prospective foreign vendors to progressively undertake manufacture and setup an indigenous eco system at the spares/sub component level.
- New Category of Buy (Global – Manufacture in India) : The new category incorporates ‘manufacture of either the entire/part of the equipment or spares/assemblies/sub-assemblies/Maintenance, Repair and Overhaul (MRO) facility for the equipment, through its subsidiary in India.
- Co-production through IGA : This enables establishment of co-production facilities through IGA achieving ‘Import Substitution’ and reduce Life Cycle Cost.
- Contractual Enablement : Buyer’s Right to optimise Life Cycle Support costs and system enhancements through indigenous eco system incorporated
- FDI in Defence Manufacturing. : With the announcement of new FDI Policy, suitable provisions have been incorporated like new category ‘Buy (Global – Manufacture in India)’ done to encourage foreign OEMs to setup ‘manufacturing/maintenance entities’ through its subsidiary in India while enabling requisite protections to domestic industry.
- Time Bound Defence Procurement Process and Faster Decision Making. As part of the Defence Reforms announced in the Atmanirbhar Abhiyan, setting up of a PMU has been mandated to support contract management. The PMU will facilitate obtaining advisory and consultancy support in specified areas to streamline Acquisition process. Other issues included in these reforms are:-
- (i) Realistic Setting of GSQRs of Weapons/Platforms. The process of formulation of SQRs has been further refined with greater emphasis on identifying verifiable parameters based on analysis of ‘Comparative’ equipment available in the World and Domestic markets.
- (ii) Simplification of Trial Procedures. DAP 2020 emphasises the need to conduct trials with an objective to nurture competition based on the principles of transparency, fairness and equal opportunities to all and not as a process of elimination.
- Ease of Doing Business. One of the key focus areas of the review was to implement ‘Ease of Doing Business’ with emphasis on simplification, delegation and making the process industry friendly with certain specific provisions incorporated:-
- Procedural Changes.
- Single stage accord of AoN in all cases upto Rs 500 crores has been instituted thereby reducing time.
- FTP cases, post accord of AoN, will be progressed as per delegated powers thereby reducing the procurement cycle considerably.
- In Planning Process, LTIPP has been re-designated as Integrated Capability Development Plan (ICDP) covering planning period of ten years instead of 15 years.
- Request for Proposal (RFP) and Standard Contract Document (SCD). Certain measures to provide clarity and alignment of requirements as also enabling provisions have been incorporated in the RFP and SCD in terms of Flow Chart driven guidelines, provision of in-storage preservation and termination of contracts in cases where projects are not progressing as per pre–defined milestones.
- Procedural Changes.
Salient features of DAP 2020
Reservation in Categories for Indian Vendors :
- The categories of Buy(Indian-IDDM), Make I, Make II, Production Agency in Design &Development, OFB/DPSU and SP model will be exclusively reserved for Indian Vendors meeting the criteria of Ownership and Control by resident Indian Citizens with FDI not more than 49%. This reservation will provide exclusivity in participation to domestic Indian industry.
Enhancement of Indigenous Content.
- Overall Enhancement in Indigenous Content (IC).
| Ser No | Category | DPP 2016 | DAP 2020 |
| (i) | Buy (Indian-IDDM) | Min 40% | Min 50% |
| (ii) | Buy (Indian) | Min 40% | Indigenous design – Min 50%Otherwise – Min 60% |
| (iii) | Buy & Make (Indian) | Min 50% of Make | Min 50% of Make |
| (iv) | Buy (Global – Manufacture in India) | – | Min 50% of Buy plus Make |
| (v) | Buy (Global) | – | Min 30% for Indian vendors |
- IC Verification : A simple and practical verification process has been instituted and IC will now be calculated on ‘Base Contract Price’ i.e. Total Contract Price less taxes & duties.
- Indigenous Military Material : Promoting use of indigenous military material with provisions for examination of platforms and other equipment/ systems and reward for vendors for using indigenous raw material.
- Indigenous Software : Provision for exploring options for operating base applications like Fire Control System, Radars, Encryption, Communications etc on indigenous software in Buy (Indian- IDDM) & Buy (Indian) cases has been included.
Rationalisation of Trial and Testing Procedures.
- Testing equipment based on its employability and for other conditions appropriate certifications confirming functional effectiveness may be obtained.
- Scope of Trials will be restricted to physical evaluation of core operational parameters, other parameters may be evaluated based on vendor certification, certification by accredited laboratories, computer simulations of parameters..
- Avoid duplication of trials and waiver will be granted based on Certificates of Conformance. Ensure simultaneity of various Trials and wherever feasible, entire trials be conducted by a Combine Trial Team in order to save time.
- Requisite opportunity will be afforded to participating vendors to rectify shortcomings/faults during the Trials with permission to carry out repairs.
- Request For Proposal will apprise vendors to submit draft Acceptance Test Procedure (ATP), to be finalised by QA agency during Technical Trials itself. Sample size for destructive tests including the aspect of cost to be borne by seller will be stated upfront in the RFP for vendor.
- Inspections : No repetition of inspections will be done especially during acceptance of equipment. Third Party Inspections will also be carried out.
Make & Innovation.
- Make I (Government Funded upto 70%). Laying down a cap of Rs 250 crore/DA and selection of DAs based on bidding criteria.
- Make II (Industry Funded) for production of indigenously designed & developed weapons/equipment/systems/platforms along with sub components/assemblies.
- Make III (Indigenously Manufactured) category for manufacture of equipment/platforms or spares/assemblies/sub-assemblies for enabling import substitution.
- Procurement of prototypes developed through ‘Innovation’ under various initiatives like iDEX, Technology Development Fund and Internal Services Organisations has been facilitated.
Design & Development.
- A separate dedicated chapter has been incorporated in the DAP 2020 for acquisition of systems Designed and Developed by DRDO/DPSUs/OFB. A simplified procedure with Integrated Single Stage Trials to reduce timelines and laying greater emphasis on evaluation through certification and simulation. Aspects of Spiral Development have been incorporated.
Address Voids : Certain existing voids have been addressed in the form of new Chapters as under:-
- Information Communication Technology’. Peculiar issues related to procurement of ICT intensive equipment especially of Interoperability & Built-in Upgradability, enhanced security requirements and change management have been included.
- Leasing. A new category introduced to enable operating of assets without owning thereby, substitute huge initial capital outlays.
- Post Contact Management. To formalise procedures post signing of contract with respect to inspections, levying of Liquidity Damages, Contract Amendments etc.
- Other Capital Procurement Procedure. A new procedure has been included as a new chapter in DAP and structured as an enabling provision for Services to procure essential items through Capital Budget under a simplified procedure in a time bound manner.
Industry Friendly Commercial Terms.
- Price Variation Clause has been incorporated for large and protracted contracts in order to avert inflated initial quotes by vendors and arriving at a realistic price of the project.
- Payments to Vendors. Suitable provisions like parallel processing of documents by SHQ/PCDA through digital verification, within laid down timelines, has been included to ensure timely payment to vendors. Payments to Indian industry have been aligned with foreign industry.
Offsets.
- The Offset guidelines have been revised, wherein preference will be given to manufacture of complete defence products over components and various multipliers have been added to give incentivisation in discharge of Offsets.
- There will be no offset clause in government-to-government, single vendor and inter-governmental agreements (IGAs).
- Offset guidelines have also been revised to give preference to manufactures of complete defence products over components and various multipliers. This has been added to give incentivization in the discharge of offsets
2 . Issues between Armenia and Azerbaijan
Context: Turmoil in the South Caucasus is escalating as fighting between Armenia and Azerbaijan continues to spiral over the Nagorno-Karabakh region.
About the issue
- The contested Nagorno-Karabakh region, a mountainous and heavily-forested patch of land, is at the heart of a decades-long armed standoff between neighbours Armenia and Azerbaijan.
- Under international law, Nagorno-Karabakh is recognised as part of Azerbaijan. But the ethnic Armenians who make up the vast majority of the population reject Azerbaijani rule. They have been running their own affairs, with support from Armenia, since Azerbaijan’s forces were pushed out in a war in the 1990s.
- On Sunday, heavy clashes in Nagorno-Karabakh prompted fears that the dispute could spiral once again into all-out war.
Historical Background of the issue
- The status of the region has been disputed at least since 1918, when Armenia and Azerbaijan became independent from the Russian empire.
- In the early 1920s, Soviet rule was imposed in the south Caucasus and the predominantly Armenian-populated Nagorno-Karabakh became an autonomous region within the then-Soviet republic of Azerbaijan, with most decisions being made in Moscow.
- But decades later, as the Soviet Union started to crumble, it became apparent that Nagorno-Karabakh would come under the direct rule of the government in the Azerbaijani capital, Baku. The ethnic Armenians did not accept that.
- In 1988, the Nagorno-Karabakh legislature voted to join the Armenian republic, a demand strongly opposed by both the Azerbaijani Soviet government and Moscow.
- After the collapse of the Soviet Union in 1991, Yerevan-backed Armenian separatists seized the territory, home to a significant Azerbaijani minority, as well as seven adjacent Azerbaijani districts.
- At least 30,000 people were killed and hundreds of thousands were forced from their homes in the fighting.
- Despite an internationally-brokered ceasefire agreed in 1994, peace negotiations have stalled and clashes erupt frequently around Nagorno-Karabakh and along the Azerbaijan-Armenia border.
- In April 2016, dozens of people from both sides were killed in the most serious fighting in Nagorno-Karabakh in years.
- The long-running conflict has concerned the international community in part because of its threat to stability in a region that serves as a corridor for pipelines taking oil and gas to world markets.
Why did things escalate now?
- Armenia’s 2018 “velvet revolution,” which toppled its longtime leader Serzh Sargsyan, briefly raised hopes that long-stalled peace negotiations could resume. But Armenian Prime Minister Nikol Pashinyan, the opposition politician who rose to power after the mass protests, largely ended up sticking by his predecessor’s rhetoric.
- An election organized this spring by the self-declared Armenian government in Karabakh was viewed as a provocation in Azerbaijan and drew international criticism.
- And in July this year, tensions started surging after a series of clashes killed more than a dozen people, with the catalyst still remaining unclear. The fighting prompted thousands of Azerbaijanis to demonstrate for war with Armenia; at the same time, Turkey ratcheted up its rhetoric in support of Baku.
What happened this past weekend?
- Azerbaijan’s Ministry of Defence said three Azerbaijani soldiers were killed on Sunday and one on Monday in the artillery fire near the Tavush region, in northeast Armenia. Five other soldiers were injured. Reports suggested that two Armenian soldiers had also been injured during this incident.
- According to a BBC report, Azerbaijan had said it had destroyed an Armenian fortification and artillery and had inflicted casualties on “hundreds” of Armenian soldiers, a claim that Armenia had denied.
- Azerbaijani president doubled down on his government’s claim that Armenia had started the fighting, saying: “Armenia’s political and military leadership will bear the entire responsibility for the provocation.”
- Armenia in turn said Azerbaijan had triggered the conflict, with Armenian Prime Minister Nikol Pashinyan announcing during a cabinet meeting that Azerbaijani “provocations will not be unanswered”.
- The defence minister had added that Armenian forces “do not shell civilian targets in Azerbaijan and only target the engineering infrastructure and technical facilities of the Azerbaijani armed forces”
What is at stake?
- A gas pipeline completed last November runs close to the conflict front line and stretches across Turkey, and is intended to help ease Europe’s reliance on Russian gas imports.
3 . RBI Borrowing Limit
Context : Amid the ongoing economic woes created by the COVID-19 pandemic, the Reserve Bank has decided to extend by six months the enhanced borrowing facility provided to banks to meet the shortage of liquidity till March 31, 2021.
About the News
- As a temporary measure, the RBI had increased the borrowing limit for scheduled banks under the marginal standing facility (MSF) scheme from 2% to 3% of their net demand and time liabilities (NDTL) with effect from March 27, 2020. The facility, which was initially available up to June 30, 2020 was later extended up to September 30, 2020 in view of the disruptions caused by the pandemic.
- MSF relaxation has been extended for a further period of six months, i.e., up to March 31, 2021,” the RBI said in a statement.
About MSF
- Under the MSF, banks can borrow overnight at their discretion by dipping into the statutory liquidity ratio (SLR).
About High Quality Liquid Assets & Liquidity Coverage Ratio
- Assets are considered to be HQLA if they can be easily and immediately converted into cash at little or no loss of value. The liquidity of an asset depends on the underlying stress scenario, the volume to be monetised and the timeframe considered. Nevertheless, there are certain assets that are more likely to generate funds without incurring large discounts in sale or repurchase agreement (repo) markets due to fire-sales even in times of stress.
- The liquidity coverage ratio is the requirement whereby banks must hold an amount of high-quality liquid assets that’s enough to fund cash outflows for 30 days.
4 . Federalism and Farm bills
Context : President gave assent to the controversial farm Bills passed by Parliament last week. Chhattisgarh, Maharashtra, and Punjab have said they might not implement the new laws, Kerala and Punjab have declared their intention to challenge them in the Supreme Court.
What is the question over the constitutionality of these laws?
- As per Union of India v H.S.Dhillon (1972), constitutionality of parliamentary laws can be challenged only on two grounds — that the subject is in the State List, or that it violates fundamental rights.
- Is invoking parliamentary powers on agriculture consistent with the scheme of federalism and spirit of the Constitution? Does Parliament have the power to enact laws on agricultural markets and lands? Should the Constitution have been amended before enacting these laws?
- These are some of the questions that will be raised in the petitions challenging the constitutionality of the Acts. As per Ram Krishna Dalmia v Justice S R Tendolkar (1958) and other judgments, the Supreme Court will begin hearings after presuming the constitutionality of these laws; therefore, the burden on states and individuals who challenge these Acts will be quite heavy. Generally, the Supreme Court does not stay the implementation of parliamentary laws. CAA and UAPA were not stayed.
- The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, and The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 do not mention, in the Statement of Objects & Reasons, the constitutional provisions under which Parliament has the power to legislate on the subjects covered.
And where does the question of federalism come in?
- Federalism essentially means both the Centre and states have the freedom to operate in their allotted spheres of power, in coordination with each other.
- The Seventh Schedule of the Constitution contains three lists that distribute power between the Centre and states.
- There are 97 subjects in the Union List, on which Parliament has exclusive power to legislate (Article 246); the State List has 66 items on which states alone can legislate; the Concurrent List has 47 subjects on which both the Centre and states can legislate, but in case of a conflict, the law made by Parliament prevails (Article 254). Parliament can legislate on an item in the State List under certain specific circumstances laid down in the Constitution.
- In State of West Bengal v Union of India (1962), the Supreme Court held that the Indian Constitution is not federal. But in S R Bommai v Union of India (1994), a nine-judge Bench held federalism was part of the basic structure of the Constitution. “Neither the relative importance of the legislative entries in Schedule VII, Lists I and II of the Constitution, nor the fiscal control by the Union per se are decisive to conclude the Constitution is unitary.
- Federalism, like constitutionalism and separation of powers, is not mentioned in the Constitution. But it is the very essence of our constitutional scheme.
Where is agriculture in the scheme of legislative powers?
- Terms relating to agriculture occur at 15 places in the Seventh Schedule.
- Entries 82, 86, 87, and 88 in the Union List mention taxes and duties on income and assets, specifically excluding those in respect of agriculture.
- In the State List, eight entries contain terms relating to agriculture: Entry 14 (agricultural education and research, pests, plant diseases); 18 (rights in or over land, land tenures, rents, transfer agricultural land, agricultural loans, etc.); 28 (markets and fairs); 30 (agricultural indebtedness); 45 (land revenue, land records, etc.); 46 (taxes on agricultural income); 47 (succession of agricultural land); and 48 (estate duty in respect of agricultural land).
- In the Concurrent List, Entry 6 mentions transfer of property other than agricultural land; 7 is about various contracts not relating to agricultural land; and 41 deals with evacuee property, including agricultural land.
- It is clear that the Union List and Concurrent List put matters relating to agriculture outside Parliament’s jurisdiction, and give state legislatures exclusive power. No entry in respect of agriculture in the State List is subject to any entry in the Union or Concurrent Lists.
What about Entry 27 of the State List that is subject to Entry 33 of List III (Concurrent)?
- Entry 33 of the Concurrent List mentions trade and commerce, production, supply and distribution of domestic and imported products of an industry over which Parliament has control in the public interest; foodstuffs, including oilseeds and oils; cattle fodder; raw cotton and jute. The Centre could, therefore, argue that it is within its powers to pass laws on contract farming and intra- and inter-state trade, and prohibit states from imposing fees/cesses outside APMC areas.
- However, like education, farming is an occupation, not trade or commerce. If foodstuffs are considered synonymous with agriculture, then all the powers of states in respect of agriculture, listed so elaborately in the Constitution, shall become redundant.
So what happens in case of legislation that covers entries in two Lists?
- In cases such as State of Rajasthan v G Chawla (1959), courts have used the doctrine of “pith and substance” to determine the character of legislation that overlaps between entries. The constitutionality of legislation is upheld if it is largely covered by one list and touches upon the other list only incidentally. But the two new farm Acts o beyond that — they impinge on entries in the State List.
- The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 flies in the face of Entry 28 of the State List (markets and fairs), and The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 impinges on Entries 14, 18, and 46 of the State List, and Entry 7 of the Concurrent List (above). In interpreting the lists, the Supreme Court in State of Bihar v Kameshwar Singh (1952) invoked the doctrine of colourable legislation, which means you cannot do indirectly what you cannot do directly.
- In ITC Ltd v APMC (2002), the Supreme Court upheld the validity of several state laws relating to agricultural produce marketing, and struck down the central Tobacco Board Act, 1975. It interpreted Entry 28 of the State List (markets and fairs) in favour of states, and rejected the Centre’s argument based on Entry 52 of the Union List read with Entry 33 of Concurrent List that tobacco is an industry declared as being under the control of Parliament in public interest. It said raw materials or activity that does not involve manufacture or production cannot be covered under ‘industry’.
What is the government’s stated view on agricultural markets?
- The committees headed by Ashok Dalwai and Ramesh Chand recommended that ‘agricultural market’ be entered in the Concurrent List. It is implicit in the recommendations that “foodstuffs” under Entry 33 of the Concurrent List do not empower Parliament to enact laws on agricultural markets.
- On May 5, 2015, the government told Lok Sabha that the National Commission of Farmers (Swaminathan Commission) had recommended ‘agricultural market’ be added to the Concurrent List. On March 27, 2018, the government yet again told Lok Sabha that it has no intention of inserting ‘agricultural market’ in the Concurrent List.
5 . Facts for Prelims
ESG Investing
- ESG investing is used synonymously with sustainable investing or socially responsible investing. While selecting a stock for investment, the ESG fund shortlists companies that score high on environment, social responsibility and corporate governance, and then looks into financial factors.
- So, the schemes focuses on companies with environment-friendly practices, ethical business practices and an employee-friendly record.
Composition of MPC
- The committee comprises six members – three officials of the Reserve Bank of India and three external members nominated by the Government of India.
- The Governor of Reserve Bank of India is the chairperson ex officio of the committee.
- The government nominees to the MPC will be selected by a Search-cum-Selection Committee under Cabinet Secretary with RBI Governor and Economic Affairs Secretary and three experts in the field of economics or banking or finance or monetary policy as its members.
- Members of the Monetary Policy Committee are to be appointed for a period of four years and shall not be eligible for reappointment.
- Decisions are taken by a majority with the Governor having the casting vote in case of a tie.
- The current mandate of the committee is to maintain 4% annual inflation until 31 March 2021 with an upper tolerance of 6% and a lower tolerance of 2%
- The meetings of the Monetary Policy Committee are held at least 4 times a year (specifically, at least once every quarter) and it publishes its decisions after each such meeting.