Offset clause goes for IGAs

Paper:

Mains: General Studies-III: Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management

Why in news?

The Defence Ministry has removed the offset clause requirement in Inter-Governmental Agreements (IGA) in the new Defence Acquisition Procedure (DAC) 2020, which was released recently. It also introduced a new category for leasing of military equipment.

Key details

  • Recently, the Comptroller and Auditor General (CAG) observed that French defence majors Dassault Aviation and MBDA have till date “not confirmed” the transfer of technology to the Defence Research and Development Organisation (DRDO) under the ₹60,000 crore deal for 36 Rafale fighter jets.
  • The deal has a 50% offset clause to be executed by the French companies.
  • Under offset clause, foreign companies are required to invest part of their deal value in the country and meant to improve the domestic defence manufacturing.
  • No offset has led to a transfer of technology and many of them had to do with product purchase, these observations have been brought out in a recent CAG report.
  • Changes to the defence procurement policy will not be retrospective and ongoing deals will not be impacted
  • The Comptroller and Auditor General (CAG) of Indiais an authority, established by Article 148 of the Constitution of India, which audits all receipts and expenditure of the Government of India and the state governments, including those of bodies and authorities substantially financed by the government.
  • The CAG is also the external auditor of Government-owned corporations and conducts supplementary audit of government companies, i.e., any non-banking company in which Union Government has an equity share of at least 51 per cent or subsidiary companies of existing government companies.
  • In 1971 the central government enacted the Comptroller and Auditor General (Duties, Powers, and Conditions of Service) Act, 1971.
  • The act made CAG responsible for both accounting and auditing duties for central and state governments. In 1976 CAG was relieved from accounting functions.

Defence Procurement Policy 2020

  • It will come in effect from October 2020.
  • It allows for lease of defence equipment, pushes for more indigenous content and brings in after-sales support under the contract of capital acquisition.
  • DPP 2020 has been aligned with the vision of Atmanirbhar Bharat and empowering the Indian domestic industry through Make in India initiative with the ultimate aim of turning India into a global manufacturing hub.

  • Leasing is introduced as a new category for acquisition in addition to the existing ”Buy and Make” category to substitute huge initial capital outlays with periodical rental payments.

“Leasing is permitted under two categories i.e. lease (Indian), where the lessor is an Indian entity and the owner of the assets, and lease (global), where the lessor is a global entity.

  • The offset guidelines have also 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 offset.
  • Other proposed measures include making after sales support part of capital acquisition contract, higher indigenous content in acquisitions and incentives for local material and software and emphasis on product export under offsets.
  • The DPP 2020 has adequately included provisions to encourage FDI to establish manufacturing hubs both for import substitution and exports while protecting the interests of Indian domestic industry

OFFSET CLAUSE

  • Offsets can be defined as provisions to an import agreement, between an exporting foreign company, or possibly a government acting as intermediary, and an importing public entity.
  • Under offset clause, foreign firms are required to invest part of their deal value – 30%-50% — in India to boost domestic defence manufacturing.
  • The incentive for the exporter results from the conditioning of the core transaction to the acceptance of the offset obligation.
  • Offset agreements often involve trade in military goods and services and are alternatively called: industrial compensations, industrial cooperation, offsets, industrial and regional benefits, balances, juste retour or equilibrium, to define mechanisms more complex than counter-trade.
  • Counter-trade can also be considered one of the many forms of defense offset, to compensate a purchasing country. In counter-trade, goods are paid through barters or other mechanisms without the exchange of money.

New science policy: institutes to be rated on support for women staff

Paper:

Mains: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations.

General Studies-III: Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management

Why in news?

AIMING TO create women leaders, the Department of Science and Technology is developing a framework to rate and rank science institutes depending on the proportion of women employed.

Need for New Policy changes

  • The representation of women in engineering courses at IITs is around 10-12 per cent.
  • In departments all the committees must have at least 25 per cent women.
  • A Task Force on Women in Science, set up by the government in 2005, had found that there has been a growth in enrolment of women at the university level, from 10.9 per cent in 1950-51 to 39.4 per cent in 2000-2001.

Sustainable Development Goal 4 (SDG 4)

It aims to “ensure inclusive and equitable quality education and promote lifelong learning opportunities for all.”

  • However, it also found marked regional differences with women representing over 50 per cent enrolment in Goa, Kerala, Pondicherry and Punjab, and less than 35 per cent in Bihar, Rajasthan, Odisha and Arunachal Pradesh.
  • The task force found that the “situation in the IITs is particularly dismal’’ and that there was a drastic drop in women from the doctoral level to that of scientist or faculty, indicating bottlenecks at the employment stage.
  • The number of women scientists occupying faculty positions in research institutes and prestigious universities was less than 15 per cent.

Provisions of New science policy 2020

  • The various committees looking at women’s issues, including that of sexual harassment complaints, will be strengthened.
  • The framework will also look at how to create interventions that will help female entrepreneurs as well as other communities that are cut off from science due to geographical and regional reasons and as well as that of privilege.

  • The initiative, under the new Science and Technology Policy 2020, will cover government and private institutes, which will be rated on a number of parameters that includes promotion opportunities, leadership positions and support structure, such as creches.
  • The framework is being conceptualised as a part of the new policy’s push towards “inclusivity, equity and diversity’’.

Need for more clarity on ruling in land acquisition matter: Supreme Court

Paper:

Mains: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations.

Why in news?

Chief Justice of India S A Bobde recently said that there is a need for more clarity on the Constitution bench ruling in the case regarding interpretation of the land acquisition Act.

Key details

  • The bench, was hearing some individual petitions that involve interpretation of Section 24(2) of the Act.
  • There were several pending cases with a different factual situation and the Constitution bench judgment will operate differently depending upon the facts of each… like the date of taking possession, nature of possession, date of award etc.

Court’s statements

  • The Constitution bench judgment had held that proceedings under the land acquisition Act, 1894 will not lapse if the compensation payable to the land owner is tendered by depositing in the treasury even if the land owner refuses to accept the same.
  • “Similarly, if compensation has been paid, possession has not been taken then there is no lapse.
  • Section 24(2) of the Act said that an acquisition would lapse if the physical possession of the land has not been taken “or” the compensation has not been paid.

  • But the Constitution Bench said the word “or” must be read as “and”, meaning thereby that the acquisition will lapse only if the physical possession has not been taken “and” compensation not paid.

Background

  • The Land acquisition 2013 Act replaced the Land Acquisition Act, 1894 (1894 Act)
  • It provided for higher compensation to those deprived of land by the government for both public and private sector projects.
  • It also mandated consent of a majority of land-owners and contains provisions for rehabilitation and resettlement.

  • Under Section 24(2) of the 2013 Act, land acquisition made under the old law of 1894 lapses if the award of compensation had been made five years before the new Act came into force, but has not been paid.

Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, (LARR)

  • The law was drafted with the intention to discourage land acquisition.
  • It was drafted so that land acquisition would become a route of last resort”
  • It deals with a controversial and highly emotive issue that has huge political implications and replaces a colonial-era law of 1894.
  • Land acquisition has led to large-scale protests against projects like the Sardar Sarovar dam in Gujarat; a special economic zone in Nandigram and a Tata Motors plant in Singur (both in West Bengal) as well as Vedanta’s bauxite mining plans in Niyamgiri etc.
  • Under LARR, public-private partnership projects need the consent of 70% of affected families and private projects need 80%. But government projects do need not consent
  • In the case of a land acquisition (irrespective of the ownership of project), Social Impact Assessment is necessary unless and until there is an urgency.
  • If the project is for irrigation, then Environmental Impact Assessment is required.
  • In case the land in question is irrigated multi-cropped, it cannot be acquired beyond a limit specified by the state government.
  • State Governments have to set up dispute settlement Chairman and he should be a district judge or practising as a lawyer for 7 years.
  • The Act also has provision for the establishment of Land Acquisition, Rehabilitation and Resettlement Authority for speedy disposal of disputes.

Environmental Social and Governance (ESG) funds

Paper:

Mains: General Studies-III: Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management

Why in news?

ESG funds — which imbibe environment, social responsibility and corporate governance in their investing process— are witnessing growing interest in the Indian mutual fund industry too.

What is ESG?

  • ESG investing is used synonymously with sustainable investing or socially responsible
  • 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.

focus on ESG:

  • Fund houses say modern investors are re-evaluating traditional approaches, and look at the impact their investment has on the planet.
  • As a result of this paradigm change, asset managers have started incorporating ESG factors into investment practices.
  • In the coming years, ESG way of investing will be the new normal in India as most of the millennial and young population in India are more conscious while making an investment decision.

How big is ESG?

  • There are over 3,300 ESG funds globally and the number has tripled over the last decade. The value of assets applying ESG to investment decisions today is $40.5 trillion.
  • In India, as of now there are three schemes —
  • SBI Magnum Equity ESG (Rs 2,772 crore),
  • Axis ESG (Rs 1,755 crore) and
  • Quantum India ESG Equity (Rs 18 cr) — following the ESG investment strategy.
  • While ICICI Prudential’s scheme launched its NFO last week, Kotak Mahindra AMC is expected to launch its NFO soon and more are expected to follow.

What change can it bring?

  • As ESG funds gain momentum in India, fund managers say companies will be forced to follow better governance, ethical practices, environment-friendly measures and social responsibility.
  • Globally there has been a big shift as many pension funds, sovereign wealth funds etc don’t invest in companies that are seen as polluting, don’t follow social responsibility or are tobacco companies.
  • Companies need to do it responsibly, utilise the technology available, effluent treatment, should not discharge untreated waste in soil, water or air, and should also take care of their minority shareholders and society.
  • In coming years, companies that do not follow sustainable business models will find it tough to raise both equity and debt.
  • Industry insiders say tobacco companies and companies in the coal business may find it tough to make the cut; so will companies that generate hazardous waste and do not manage them properly.
  • Besides, sectors that use a lot of water and do not follow best practices on its reuse, or companies that discharge untreated waste in soil, water or air will find it tough to get funds parked in them.

TRAI opposes DoT on mandatory registration of data-based other service providers

Paper:

Mains: General Studies-III: Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management

Why in news?

The Telecom Regulatory Authority of India (TRAI) has rejected the telecom department’s call to extend mandatory registration and scrutiny formalities to data-based other service providers (OSPs), saying such a move would hurt efforts to ring in ease of doing business in the telecoms and BPO sectors.

Key details

  • The DoT said since the present scenario was such that both voice and data are transported as data packets over internet protocol networks, the categorisation of OSPs on the basis of voice and data/internet may not be relevant.
  • It may lead to misuse by OSPs based on data/internet for transiting voice calls.
  • However, TRAI maintained its stance that not forcing such data-based OSPs to register would “give a boost to and encourage faster roll out of data based OSPs, resulting in ease of doing such businesses”.
  • “Many other countries are coming up to grab a larger share of this market. It is essentially desirable to keep the entry level barriers low to attract the BPO business in the country,”
  • The Telecom Regulatory Authority of India (TRAI) is a statutory body set up by the Government of India under section 3 of the Telecom Regulatory Authority of India Act, 1997.
  • It is the regulator of the telecommunications sector in India.
  • It consists of a Chairperson and not more than two full-time members and not more than two part-time members.
  • The TRAI Act was amended by an ordinance, effective from 24 January 2000, establishing a Telecom Disputes Settlement and Appellate Tribunal (TDSAT) to take over the adjudicatory and disputes functions from TRAI.
  • TRAI is administered through a Secretariat headed by a secretary.
  • All proposals are processed by the secretary, who organises the agenda for Authority meetings (consulting with the Chairman), prepares the minutes and issues regulations in accordance to the meetings.

What are OSP

  • OSP is an abbreviated term of “Other Service Providers”.
  • Other Service Provider is a company that provides applications services that entail IT enabled services like Tele-Banking, Tele-Marketing, Tele-medicine and a plethora of others.
  • Other Service Providers are providers of IT Enabled services, or application services to be exact.
  • These purveyors are basically companies who engage with services such as BPOs, Call Centres, Tele trading, telemarketing, network operation centres, E-commerce, Tele Banking and other IT Enabled services.
  • Now, all of these services are provided through telecom resources that in turn, are provided by the Authorized telecom service providers only.
  • An OSP License is a form of registration where a company becomes eligible to provide Other Services.