News-Sep 2013

• India has decided not to give in to U.S. pressure to agree to discussions on phasing out refrigerant gases under the Montreal Protocol.
  • To do so, the Indian government has agreed to set up a Indo-U.S. working group on climate change, which will discuss the issue of refrigerant gases, besides other areas of collaboration and discussions. The joint working group will be headed by Union Environment Minister Jayanthi Natarajan on the Indian side, while Todd Stern, Special Envoy on Climate Change, will lead the U.S. team.
  • Since 2009, India has stood firm that the HFCs — used for refrigeration — should be dealt with like all other greenhouse gases under the U.N. Framework Convention on Climate Change. They have contested that the Montreal Protocol is only meant to address ozone-depleting substances and argued that the developed world is keen on pushing costly and not fully tested proprietary technologies to fast growing economies through this route.
  • But the Indian position was weakened when New Delhi signed the recent G20 communiqué that welcomed bringing mitigation of HFC emissions under the Montreal Protocol. 

Judicial Appointments Commission Bill, 2013

• A Bill which seeks to scrap the collegium system of appointment of judges to the higher judiciary and give executive a say in the matter has been referred to a Parliamentary committee for further consultations.
• Law Minister Kapil Sibal had introduced an enabling bill — the Constitution (120th) Amendment Bill — and the Judicial Appointments Commission Bill, 2013, which defines the establishment of the proposed body to recommend appointment and transfer of judges.
• The government and the Opposition were united in seeking to scrap the collegium system of appointing judges to higher courts, saying it was essential to restore the delicate balance of power which has been disturbed.
• Under the present collegium system, the Chief Justice of India and four senior most judges of Supreme Court recommend to the government the names of judges for appointment to the High Courts and to the apex court.
• The government can return the file to the collegium only once for its reconsideration, but cannot refuse the recommendation. India perhaps is the only country where judges appoint judges
• The bill seeks to set up a Judicial Appointments Commission to recommend the appointment and transfer of Supreme Court and High Court judges.
•  The bill seeks to set up a panel headed by the CJI to recommend the appointment and transfer of senior judges.The other members of the proposed Commission would be two senior-most judges of Supreme Court, the Law Minister and two eminent persons, along with the Secretary (Justice) in the Law Ministry as its convener.The two eminent persons will be selected by a panel headed by the Prime Minister with the CJI and the Leader of the Opposition in the Lok Sabha as its members.
• The Judiciary is opposed to the proposal and has defended the collegium system for appointment of judges in higher judiciary.

News : 8 -15 Sep 2013

• The United Nations has formally accepted Syria’s application to join the chemical weapons convention
• Microsoft is making its Xbox Music streaming service available for free on the Web even to those who don’t use Windows 8.
• India has decided not to give in to U.S. pressure to agree to discussions on phasing out refrigerant gases under the Montreal Protocol.More 
• The agreement signed between the Rubber Board and the National Institute for Research and Development in Defence Ship Building (NIRDESH), Kozhikode, is for developing rubber-based mountings for use in indigenously built submarines at Mazagon Dock Ltd., Mumbai.
• After Kazakhstan’s promise of 2,000 tonnes of the mineral, Uzbekistan has now offered to provide a similar quantity for fuelling nuclear plants in India.
• German scientists say they have discovered indicators of gold deposits at hotspots in the Pacific Ocean and measured the highest temperature ever recorded in the ocean at one of them.According to Germany’s Federal Institute for Geosciences and Natural Resources (BGR), 378 degrees celsius was registered at a depth of 1,850 metres near the island nation of Vanuatu, about 1,750 kilometres east of northern Australia.The only spot on the ocean floor ever found to be hotter — 403 degrees celsius — is in the Atlantic.
• China  welcomed a Russia-U.S. agreement on securing and destroying Syria’s chemical weapons, saying it was a peaceful solution to the stockpile issue that could ease the tense situation in the war-torn country.
• NASA’s Voyager 1 spacecraft, launched 36 years ago – and now 19 billion kilometres from the Sun – has become the first man-made object to venture into interstellar space
• The Chinese Academy of Sciences (CAS) has launched a deep ultraviolet (DUV) solid-state laser device, making the country first-ever in the world to possess such technology
• Tamu Massif, as the megavolcano is called, may be as voluminous as Olympus Mons on Mars, which is regarded as the Solar System’s largest known volcano found at the bottom of Pacific ocean.Tamu Massif, the inactive volcano, was previously thought to be a string of volcanoes rather than one enormous feature. It is part of an underwater mountain range called the Shatsky Rise.
• The World Association of Newspapers and News Publishers, WAN-IFRA, has chosen The Hindu, along with seven other newspapers in India, for a prize for excellence in youth engagement. It has also named India the World Young Reader Country of the Year.
• The Ministry of Science & Technology(DBT & DST) ,Govt. of India and RIKEN, Japan’s largest research organization have signied MOUs to day for Launching joint Research programs in the fields of Biology, Life sciences and material sciences. (Genome–related research including systems Biology, Computational science including development of bioinformatics tools, Detection tools (e.g. spectroscopy) for security and other areas of mutual interest)
• India-Chile to Enhance Cooperation in Renewable Energy
• A Centre of Excellence and Ethics to be Set up at Ajmer
  • The Institute of Company Secretaries of India,
  • The Institute of Cost Accountants of India, and
  • The Institute of Chartered Accountants of India Sign MOU with the Ministry of Corporate Affairs
• The National Highways Authority of India (Amendment) Bill, 2013 Receives the Assent of the President
• Vice President Releases Prof. K.N. Pannikar’s Book “History as A Site of Struggle” at Thiruvananthpuram
• International Olympics Committee decided to include wresting as 26th sport in 2020 Olympics at Tokyo.
• After three days of intensive talks in Geneva, Russia and the United States have reached an agreement on a timetable for the swift elimination of Syria’s stockpiles of chemical weapons, with the provision that the non-compliance by Damascus would mean that the United Nations Security Council will steer the future course of action.
• Ray Dolby, an American inventor and audio pioneer who founded Dolby Laboratories, has died at the age of 80
• BJP on Friday named Gujarat Chief Minister Narendra Modi as its prime ministerial candidate for the 2014 Lok Sabha election.
• Indira Gandhi Prize for Peace, Disarmament and Development for 2012 to  Liberian president Ellen Johnson Sirleaf.
• The landmark Food Security Bill, aimed at giving a legal right on highly subsidised foodgrains to 67 per cent of the country’s population, on sep 12 received the President’s nod.
• The Board of Control for Cricket in India (BCCI)  imposed life ban on pacer S. Sreesanth and Mumbai left-arm spinner Ankeet Chavan for having brought disrepute to the game by indulging in spot-fixing in the last edition of the Indian Premier League.
  Also punished were Rajasthan Royals players Amit Singh, banned for five years, and Siddharth Trivedi, for a year as he did not inform the BCCI that he was approached by bookmakers. Harmeet Singh, however, was reprieved for lack of evidence.
• South East Asian countries have decided to eliminate measles and control rubella and congenital syndrome by the year 2020. The World Health Organisation (WHO) estimates that $ 800 million is needed to achieve this goal.
• Knowing about a candidate is the voter’s natural right in a democracy(the fundamental right of the citizens under Article 19(1) (a) of the Constitution.), and non- disclosure of information by a contestant in his/her affidavit, leaving the relevant columns blank, will result in rejection of the nomination by the Election Commission, the Supreme Court ruled .
  (At present, the EC has no power to reject nominations if candidates either leave some columns blank or give false information. However, a case can be registered against them under the Indian Penal Code for providing false information.)
• India joined the leaders of the Shanghai Cooperation Organisation (SCO) in strongly opposing foreign military intervention in Syria and welcoming the Russian proposal for putting the chemical arsenals under international control.
• India’s upcoming Mars Orbiter Mission (MOM) seeks to reveal whether there is methane, considered a “precursor chemical” for life, on the Red Planet.
• Verizon raised $49 billion in the largest corporate bond deal ever.
• Software services company iGate Corporation announced the appointment of Ashok Vemuri as its president and CEO
• India has also the highest number of female millionaires in the world as the country boasts of over 1,250 UHNW women with a combined fortune of $95 billion.Notwithstanding the continuing economic gloom, India has recorded the largest increase in its Ultra-High Net worth Individual (HNIW) club among the BRICS nations in the last one year, with a total of 7,850 super rich people in the country
• Russia has lifted the ban on import of non-basmati rice and oilseeds from India
• US agrees to UN discussion on Syria.After its deft diplomatic manoeuvre that has already coaxed the United States to delay its decision on attacking Syria, Russia — the architect of a widely supported proposal to disarm Syria of chemical weapons — has said that it would soon submit an action plan that would result in an internationally supervised destruction of the Syrian arsenal of poison gas.
• The UK coalition government has confirmed plans to privatise the country’s 500-year-old Royal Mail this fall.
• Russia has taken a “principled” decision to sell Iran an improved version of the S-300 air defence missiles and to build a second nuclear reactor at Bushehr,
• Iran sanctions eased to allow cultural exchanges by US.
• Mamnoon Hussain was sworn  as Pakistan’s 12th President by Chief Justice Iftikhar Muhammad Chaudhry.
• Following the successful $50 billion currency swap agreement with Japan, a task force set up to identify key trading nations for local currency swap arrangement by the Commerce Ministry will meet on 11 sep 2013, and deliberate on how to take forward the issue of shortlisting countries.
• Hewlett-Packard on Tuesday launched the platform ‘HAVEn’, designed to enable organisations to gain better insight into their data and deliver real-time outcomes.
• The annual Miss World beauty pageant will open on Sunday on the Indonesian island of Bali, despite weeks of opposition from conservative Islamic groups. But the finale, which was to take place near the capital Jakarta later this month, has also been shifted to Bali owing to the protest.
• In a vote in Buenos Aires this weekend, the International Olympic Committee (IOC) has granted Tokyo the right to hold the 2020 Olympics and Paralympics.
• A new government prepared to take control of Australia ,with policies to cut pledges in foreign aid and to wind back greenhouse gas reduction measures in an effort to balance the nation’s books.Prime Minister-elect Tony Abbot’s conservative Liberal party-led coalition won a crushing victory at elections against the center-left Labour Party.
• Pakistan President Asif Ali Zardari was given a ceremonial guard of honour on his last day as he became the first democratically elected head of state to complete a full five-year term.
• India-born Mamnoon Hussain, a close aide of Prime Minister Nawaz Sharif,  sworn in as the President of Pakistan in sep 2013.Supreme Court Chief Justice Iftikhar Chaudhry administered the oath at a ceremony
• A proposal to force Reliance Industries to give up 86 per cent of eastern offshore KG-D6 gas block, including 8 gas discoveries worth at least $8 billion, has been put up to Petroleum Minister M. Veerappa Moily.
• Tripura surged ahead of Kerala to achieve top position in literacy chart in India. The state fell short to become fully literate state, but as of date stands at 94.65 percent.
• A Bill seeking to prohibit employment of individuals as manual scavengers by prescribing stringent punishment, including imprisonment up to five years, was passed by Parliament . It has provisions for rehabilitation of manual scavengers and their family members as well.

EPCG Scheme

History

• The Export Promotion Capital Goods (EPCG) scheme was one of the several export-promotion initiatives launched by the government in the early ’90s. The basic purpose of the scheme was to allow exporters to import machinery and equipment at affordable prices so that they can produce quality products for the export market.
• The import duty on capital goods — like all other items — was high during that period, inflating the cost of capital goods nearly 50%, so the government allowed exporters to import capital goods at only 25% import duty. For waiver of the remaining portion of import duty, exporters were supposed to undertake an ‘export obligation’ (a promise to export) which was worked out on the basis of the duty concession obtained.
• Exporters were given eight years to carry out their commitment to export. Once the ‘export obligation’ was fulfilled, the owner of the capital goods concerned could sell them or transfer them to another facility. Till the promised export materialised, the owners of the machinery or equipment were barred from even moving the goods concerned out of their manufacturing unit.

Did liberalisation of imports have an impact on EPCG?

• Gradual reduction in import duties, particularly in the case of capital goods, has been rendering EPCG scheme less attractive. However, till last year, EPCG was preferred by many since the exemption also included 4% special additional duty of customs (SAD) which has been abolished now.

Two windows

• The first change was the introduction of two windows — the first one attracting 15% duty while the second one attracted 25%. Those who preferred to pay higher duty under the second window had a lower export obligation. In ’95, the government offered duty-free imports under the first window while the duty under the second was 15%. This was the first time duty-free imports were made available under EPCG.
• Since the purpose of the scheme was to allow exporters compete internationally, it was decided to allow them to buy machinery at internationally-competitive rates. The pent-up demand for imported machinery had peaked at this point and the domestic industry’s initial trouble with competing imports had come to an end. Thereafter, the government even reduced the import duty on capital goods under the second window to 10% while the first remained duty-free. Subsequently, the policy was changed in ’00 to merge the two windows into one — import capital goods by paying 5% and undertake uniform export commitment.

Russia-India Ties

• Russia has lifted the ban on import of non-basmati rice and oilseeds from India

Russia-Iran Ties

• Russia has taken a “principled” decision to sell Iran an improved version of the S-300 air defence missiles and to build a second nuclear reactor at Bushehr,
• President Vladimir Putin instructed the government to prepare the two proposals for his meeting with his Iranian counterpart, Hassan Rouhani, in Sep 2013 on the sidelines of a Shanghai Cooperation Organisation summit in Bishkek, Kyrgyzstan.

Economics – Sep 2013

Swapping foreign currency

• The Reserve Bank of India allowed banks to swap funds mobilised through foreign currency deposits to attract overseas funds.
• It has been decided accordingly to offer such a window to the banks to swap the fresh foreign currency non-resident (banks) FCNR(B) dollar funds, mobilised for a minimum tenor of three years and over at a fixed rate of 3.5 per cent per annum for the tenor of the deposit.
• The RBI has decided that the current overseas borrowing limit of 50 per cent of the unimpaired Tier I capital will be raised to 100 per cent and that the borrowings mobilized under this provision can be swapped with RBI at the option of the bank at a concessional rate of 100 basis points below the ongoing swap rate prevailing in the market. These schemes will be open up to November 30, 2013, which coincides with when the relaxations on NRI deposits expire.

Swap Funds

• In finance, a swap is a derivative in which counterparties exchange cash flows of one party’s financial instrument for those of the other party’s financial instrument.
• Swaps were first introduced to the public in 1981 when IBM and the World Bank entered into a swap agreement

Types of Swaps 

Interest Rate Swap

• The most common type of swap is a “plain Vanilla” interest rate swap. It is the exchange of a fixed rate loan to a floating rate loan. The life of the swap can range from 2 years to over 15 years. The reason for this exchange is to take benefit from comparative advantage.
• Some companies may have comparative advantage in fixed rate markets, while other companies have a comparative advantage in floating rate markets.
• A swap has the effect of transforming a fixed rate loan into a floating rate loan or vice versa.
• In this only INTEREST on predetermined principal at predetermined rate (variable or fixed) is exchanged / swap.
• For example, party B makes periodic interest payments to party A based on a variable interest rate of LIBOR +70 basis points. Party A in return makes periodic interest payments based on a fixed rate of 8.65%.

Currency Swaps

• A currency swap involves exchanging principal and fixed rate interest payments on a loan in one currency for principal and fixed rate interest payments on an equal loan in another currency.
• Just like interest rate swaps, the currency swaps are also motivated by comparative advantage.
• Currency swaps entail swapping both principal and interest between the parties, with the cashflows in one direction being in a different currency than those in the opposite direction.

Credit Default Swaps

• A credit default swap (CDS) is a contract in which the buyer of the CDS makes a series of payments to the seller and, in exchange, receives a payoff if an instrument, typically a bond or loan, goes into default (fails to pay).
• Less commonly, the credit event that triggers the payoff can be a company undergoing restructuring, bankruptcy or even just having its credit rating downgraded.
• CDS contracts have been compared with insurance, because the buyer pays a premium and, in return, receives a sum of money if one of the events specified in the contract occur. Unlike an actual insurance contract the buyer is allowed to profit from the contract and may also cover an asset to which the buyer has no direct exposure.

Patents in Medicines

• An expert committee on compulsory licensing has recommended that the department of industrial policy and promotion (DIPP) issue a compulsory licence for the manufacture of Bristol-Myers Squibb Co.’s anti-cancer drug Dasatinib to two companies
• It will be India’s second compulsory licence and a significant blow to the New York-based drug maker. A compulsory licence would allow the government to produce a generic version of the patented medicine and sell it at a cheaper price.
• In March 2012, India issued its first compulsory licence to Natco Pharma Ltd for the manufacture of Bayer AG’s Nexavar, another anti-cancer drug.
• Under the Indian patents Act, a compulsory licence for manufacture of a patented pharmaceutical product can be issued if the drug is considered unaffordable by the government.
• The World Trade Organization’s (WTO’s) TRIPS (Trade-Related Aspects of Intellectual Property Rights) agreement allows a country to issue a compulsory licence without the consent of the innovator if it is in public interest.
• In January 2013, the health ministry approached DIPP for issuance of compulsory licences for three anti-cancer drugs —Roche Holding AG’s breast cancer treatment Herceptin (Trastuzumab); and Bristol-Myers Squibb’s leukaemia medicine Sprycel (Dasatinib) and chemotherapy drug Ixempra (Ixabepilone). India’s patent office comes under the purview of DIPP.
• DIPP forwarded this request to the committee on compulsory licensing, which has reached a decision on all three drugs. A single 50ml vial of 40mg Trastuzumab costs Rs.1.24 lakh, a 45mg vial of Ixempra costs Rs.66,430.60 and 60 tablets of 20mg each of Dasatinib are priced at Rs.1.17 lakh.

Patents in India : Under protection or over protection

• The Indian Supreme Court, in a landmark judgment in April, turned down a request by the pharmaceutical company Novartis to retain the patent on a cancer drug because it judged the drug to be an extension of existing medications, not a groundbreaking advancement.
• In fact, a U.S. court invalidated a Pfizer patent covering a blood pressure medication (Norvasc) on grounds very similar to the Novartis decision, i.e. mere physical advantages cited for the salt form such as increased stability and solubility were not good enough to merit patent protection.
• Between 2005 and 2011, more than 4,000 patents for pharmaceutical inventions were issued by the Patent Office. Of these, more than 85 per cent were awarded to multinational drug companies.

 

National Facts

• While India as a whole has 31 per cent of its population under the age of 14, the corresponding number for U.P. is 35.69 per cent and an astounding 40.1 per cent for Bihar.Today’s children, who come overwhelmingly from U.P. and Bihar, will form the workforce of the future.
• The office of the Registrar General of India and Census Commissioner released ‘single year age data’ for the 2011 Census ,which refers to the number of people at each year of age in the population. The data shows that India’s working age population (15-64 years) is now 63.4% of the total, as against just short of 60% in 2001. The numbers also show that the ‘dependency ratio’ — the ratio of children (0-14) and the elderly (65-100) to those in the working age — has shrunk further to 0.55.
• Tripura surged ahead of Kerala to achieve top position in literacy chart in India. The state fell short to become fully literate state, but as of date stands at 94.65 percent.
• India has also the highest number of female millionaires in the world as the country boasts of over 1,250 UHNW women with a combined fortune of $95 billion.Notwithstanding the continuing economic gloom, India has recorded the largest increase in its Ultra-High Net worth Individual (HNIW) club among the BRICS nations in the last one year, with a total of 7,850 super rich people in the country
• Only 15 states have so far set up their own respective State Disaster Response Force following direction from the National Disaster Management Authority (NDMA) earlier 2013.