Exam View: Climate financing, State of climate financing, Solutions to climate financing, Catalytic funding, Blended finance.

In News: India needs to develop its own paradigm of climate finance. It cannot allow itself to be boxed in by the watertight categories of ‘green’ and ‘brown’ projects being laid down by the western world as a precondition to secure green funds.

State of climate financing:

• Framework of climate finance is inappropriate.
• The absence of funds coming from the West, which has not kept to its commitment of raising $100 billion annually for the developing countries, is also a problem.
• Both of these will have to be homegrown.
• The Climate Finance Working Group has estimated a funds requirement of ₹118 trillion, available resources of ₹64 trillion and a gap of ₹54 trillion. This gap has to be met by Indian development financial institutions (DFIs) and commercial banks who will have to contribute by raising domestic funds and channelling resources from abroad.
• Government(s) and private sector will have to work in tandem. While investments for renewable power and green mobility will flow commercially, finance for climate proofing agriculture and allied sectors have to be influenced only through policy.

Solutions to climate financing:

• Catalytic funding: Re-purposing, supported by a simple and inviolable classification framework, oversight and capacity building mechanisms can transform existing economic activities to green activities, crucially with smaller amounts of investments.
  • The banking system, left to itself, is unlikely to finance mitigation and adaptation investments, as they are of lower commercial appeal, compared to other lending opportunities. The priority sector should be sharply defined by including climate finance. This is similar to the RBI’s Priority Sector Lending.
  • The large financing gap gives rise to the need for long-term resources, that have to be raised from abroad, especially by the DFIs. In the recent past, DFIs have avoided foreign currency loans on account of competitive domestic funds and high hedging costs. Given the requirements, the government may have to step in to manage hedging costs.
  • When the return on investment and financial rate of returns (FRR) are low, there is a need for either subsidising capital costs or the rate of interest or even both. A farmer taking up soil remediation may not get a return that can service his loan and sustain the investment.
  • Investments from the private sector are equally important for financing mitigation and adaptation projects. The government will need to consider spending part of its budget earmarked for CC for subventions and subsidies to the private sector to compensate for the loss of income to the sector; hence the necessity of ‘blended finance’.
• Blended Finance
  • The need for ‘blended finance’ arises from investments which have a ‘development payoff’ but low/no revenue streams. While FRR is the most important determinant of investment decisions, most CC related investments will not be able to meet the FRR thresholds.
  • Hence economic rate of return (ERR) methodology which will take on board development payoffs is necessary to justify investments relating to mitigation and adaptation investments related to CC. Blended finance, through reduction of interest costs can improve FRR in the hands of the project holder.
  • Another critical revenue stream is that of carbon credits. The revenue from carbon credits can offset the low CC project revenues and make the investments feasible. The government has demonstrated its commitment, by successfully mobilising ₹16,000 crore through sovereign green bonds.

Coordinated strategy between governments, the RBI and the financial sector can manage the concerns of green lending to commercial and marginalized sectors alike.We need to be atmanirbhar in climate finance.

Source:

https://www.thehindubusinessline.com/opinion/being-atmanirbhar-in-climate-finance/article66560960.ece

In News: Union Ministry of Home Affairs (MHA) has decided to start the process of seeking the states’ comments on the Punchhi Commission’s report afresh.

About Punchhi Commission Report:

• The Punchhi Commission was constituted by the then UPA government in 2007, under the chairmanship of former Chief Justice of India (CJI) Madan Mohan Punchhi. In 2010, the Commission submitted its report to the Centre in seven volumes.
• The panel’s recommendations were considered by the Inter-State Council’s (ISC) Standing Committee at its meetings held in 2017 and 2018.
• Following the meeting of the ISC’s Standing Committee in May 2018, the Centre announced completion of work on the Punchhi Commission Report with deliberations on all the 273 recommendations.
• However, the report is yet to be implementedand the government has said that it will seek the state’s view on the report again.

What were the recommendations of the Punchhi Commission report?

The major recommendations of the Punchhi Commission on different subjects were:

Post of Governor:

• The appointment of the Governor must be done by a panel which includes the State Chief minister.
• The report prescribed certain conditions while appointing a governor.
  • He should be eminent in some walk of life.
  • He should be a person from outside of the state
  • He should be a detached figure and not connected with local politics.
  • He should not be connected to local politics in the recent past.
• Repeal of the constitution's doctrine of pleasure and guaranteed tenure of the governor.
• Provision for the procedure of impeachment of the governor by the state legislature on the line of impeachment of the president.

Inter-State Council (ISC)

• ISC needs to be “substantially strengthened. The council must meet at least thrice a year on an agenda evolved after proper consultation with states.
• Inter-state council should be made more use of to further centre-state relations.

Economic Federalism

• Efficient inclusion of States in the formulation of final terms of the contract
• Review of current cesses and surcharges to reduce contribution to gross tax income.
• The Finance Commission and the Planning Commission (now NITI Aayog) should work much closer together.

Selection of Chief Minister by the Governor: The report suggests principles for selecting Chief Minister (number-wise priority):

• Broadest support in the Legislative Assembly.
• Head of the party with an absolute majority.
• A coalition of parties established before elections.
• Largest single party with the backing of other parties.
• A post-election coalition of parties with members forming a government and others supporting from outside.

Imposition of President’s rule:

• Panel suggested that all alternative courses available to the Union government for discharging its responsibility under Article 355 should be exhausted to contain the situation and the exercise of the power under Article 356 should be limited strictly to rectifying a “failure of the Constitutional machinery in the State”.

Source:

https://indianexpress.com/article/political-pulse/punchhi-panel-work-centre-state-views-8472376/

In News: National Stock Exchange of India received the final approval from the markets regulator Securities and Exchange Board of India (SEBI) to set up a Social Stock Exchange (SSE).

About SSE

• The SSE would function as a separate segment within the existing stock exchange and help social enterprises raise funds from the public through its mechanism.
• It would serve as a medium for enterprises to seek finance for their social initiatives , acquire visibility and provide increased transparency about fund mobilisation and utilisation.
• Retail investors are restricted to investing in securities issued by for-profit social enterprises (SEs) listed on the Main Board. Securities offered by other SEs can only be purchased by institutional and non-institutional investors.

Non Profit Organisation (NPO’s) Money Raising:

• Non-profit organizations have the option to raise funds through the issuance of Zero Coupon Zero Principal (ZCZP) Instruments via private placement or public issue, or through donations from mutual funds. ZCZP bonds are distinct from traditional bonds in that they do not involve any coupon payments or principal repayment at maturity.
• To issue ZCZP instruments, the minimum issue size is presently set at Rs 1 crore and the minimum application size for subscription is Rs 2 lakhs. Additionally, Development Impact Bonds are available upon the completion of a project and are delivered based on pre-agreed social metrics at pre-agreed costs or rates.

For Profit Enterprises (FPE’s) Money Raising:

• FPEs need not register with SSE before raising funds through SSE.
• It can raise money through issue of equity shares or issuing equity shares to an Alternative Investment Fund including Social Impact Fund or issue of debt instruments.

Disclosure need to be made:

• SEBI’s regulations state that a social enterprise should submit an annual impact report in a prescribed format. The report must be audited by a social audit firm and has to be submitted within 90 days from the end of the financial year.
• Listed NPOs, on a quarterly basis, are specifically required to furnish details about the money they have raised category-wise, how they have been utilised and the unutilised balance amount. The latter needs to be furbished until the proceeds are fully utilised or the purpose has been achieved.

https://www.thehindu.com/business/Economy/explained-combining-social-welfare-and-capital-markets-through-sse/article66569251.ece

In News:

• Cancer patients in India face twin challenges when it comes to accessing proton beam therapy (PBT) as there are not enough treatment facilities plus the cost can run into tens of lakhs of rupees.
• The PBT is considered a viable alternative to radiation for treating solid tumours, especially for head and neck cancers.

Key points:

• Proton beam therapy can target cancer cells precisely, thus saving adjoining organs.
• It can be helpful in cases of young women whose ovaries and reproductive function could be salvaged through therapy.
• Patients with brain tumors, as well as cancers of the prostate, ovaries, breast, lungs, bones, and soft tissues, have seen promising results with PBT.
• PBT uses protons to destroy cancer cells precisely, saving adjoining organs, unlike radiation which can be toxic to the whole body.
• Establishing PBT Centres in India costs around ₹500 crore for each machine which requires huge initial capital investment.
• There are also safety concerns with PBT, as hydrogen is a highly volatile element and requires daily checks to prevent leaks.

https://www.thehindu.com/sci-tech/health/demand-supply-gap-of-proton-beam-therapy-machines-leaves-cancer-patients-in-lurch/article66564195.ece#:~:text=The%20PBT%20is%20considered%20a,of%20cases%20are%20brain%20tumours

In News

• Government e-Marketplace (GeM) of the Ministry of Commerce & Industry has recently commemorated the success of the “SWAYATT” initiative in New Delhi.
• It is an initiative to promote Start-ups, Women, and Youth Advantage through e-Transactions on GeM.

SWAYATT Initiative:

• It is an initiative launched by the government in 2019 to promote the inclusiveness of various categories of sellers and service providers on the Government e Marketplace (GeM) portal.
• Major objectives:
  • Take proactive steps to facilitate the training and registration of specific categories of manufacturers and sellers,
  • Develop women entrepreneurship and encourage the participation of the MSME sector and startups in public procurement.
  • Promoting social and financial inclusion by increasing participation from under-served sellers who face challenges in public procurement.
• The initiative is primarily focused on ramping up the presence of underserved seller groups such as MSEs, women, Divyangjans, and tribal entrepreneurs and giving them direct access to Government Procurement.

https://pib.gov.in/PressReleasePage.aspx?PRID=1903442

In News:

• Recently, the Ministry of Health in India issued a show cause notice to companies for selling medicines online.
• India contributes 20% to global pharmaceutical exports, and the e-pharmacy market is expected to reach above INR 25,000 crores by 2023.

Regulatory Framework for Pharmacy in India:

• Drugs and Cosmetics Act of 1940: This act provides the legal framework for the regulation of drugs, cosmetics, medical devices, and other related products in India including the approval, manufacture, distribution, sale, and import/export of pharmaceutical products and those sold online.
• Drugs and Cosmetics Rules of 1945: These rules provide guidelines for the implementation of the Drugs and Cosmetics Act and defines the various classes of drugs, their labeling and packaging requirements, and the conditions under which drugs can be sold or marketed in India.
• Other Acts: Pharmacy Act of 1948, Indian Medical Act of 1956, Code of Ethics Regulations of 2002, Narcotic Drugs and Psychotropic Substances Act of 1985 and Drugs and Magic Remedies (Objectionable Advertisement) Act of 1954

https://www.thehindu.com/news/national/explained-on-regulating-online-sale-of-drugs-in-india/article66565041.ece#:~:text=The%20Ministry%20of%20Health%20has,them%20to%20continue%20to%20operate

Why in news? Recently, Italian Prime Minister arrived in New Delhi to attend the eighth edition of Raisina Dialogue.

About:

• It is a multilateral conference committed to addressing the most challenging issues facing the global community, held annually in New Delhi since 2016.
• It takes its name from Raisina Hill- the seat of the Indian government.
• It is hosted by the Observer Research Foundation in collaboration with the Ministry of External Affairs.
• During the dialogue, different stakeholders such as researchers, scholars, students, and journalists share their knowledge.
• Dialogue mostly focuses on international relations, foreign policies, nuclear issues, and geopolitics.

https://timesofindia.indiatimes.com/india/italian-pm-giorgia-meloni-arrives-in-new-delhi-to-attend-raisina-dialogue/articleshow/98351908.cms

Why in news? India called upon G-20 Nations to adopt multilateral action for faster extradition of fugitive economic offenders (FEO) and recovery of assets both on the domestic front and abroad.

About:

• Government has enacted the Fugitive Economic Offenders Act, 2018, to deal with FEOs.
• Fugitive economic offender’ (FEO) is defined as an individual against whom a warrant of arrest in relation to scheduled offence has been issued by any court in India and who has left the country so as to avoid criminal prosecution; or the FEO abroad, refuses to return to face criminal prosecution”.
  • An arrest warrant has been issued against him for any specified offenses where the value involved is over Rs 100 crore.

https://www.thehindu.com/news/national/india-calls-upon-g-20-countries-for-faster-extradition-of-fugitive-economic-offenders/article66567960.ece

Why in news? Recently, the Director General of Foreign Trade (DGFT) further simplified the process of Composition Fee for Export Obligation Extension to include more cases under the Advance Authorization Scheme.

About:

• The scheme is implemented by the Director General of Foreign Trade.
• AAS allows duty-free import of inputs, which are physically incorporated in an export product.
• In addition to any inputs, packaging material, fuel, oil, and catalyst which is consumed/utilized in the process of production of export products, is also allowed.
• The quantity of inputs allowed for a given product is based on specific norms defined for that export product, which considers the waste generated in the manufacturing process.
• DGFT provides a sector-wise list of Standard Input-Output Norms (SION) under which the exporters may choose to apply.
• Alternatively, exporters may apply for their own ad-hoc norms in cases where the SION does not suit the exporter.

https://pib.gov.in/PressReleasePage.aspx?PRID=1903374

Why in news? Recently, Prime Minister paid tribute to India's first non-Congress prime minister Morarji Desai.

About:

• Shri Morarji Desai was born on 29th February 1896 in Bhadeli village, now in the Bulsar district of Gujarat.
• After graduating in 1918 from the Wilson Civil Service in Bombay, he served as a Deputy Collector for twelve years.
• In 1931, he became a Member of All India Congress Committee.
• Post-independence, he served India in various capacities including as Prime Minister of India in 1977-79.
• He received highest civilian award of India (Bharat Ratna) and of Pakistan (Nishan-e-Pakistan).
• Virtues: An outstanding administrator, he is known for virtues of truthfulness and strong conviction.

https://timesofindia.indiatimes.com/india/pm-modi-pays-tribute-to-morarji-desai/articleshow/98291288.cms

Why in news? NTPC has commissioned India's first air-cooled condenser at North Karanpura super critical thermal plant in Jharkhand.

About:

• An Air-cooled condenser is a direct dry cooling system where steam is condensed inside air-cooled finned tubes.
• Air cooled condenser has almost 1/3rd water footprint as compared to a conventional Water-Cooled Condenser (WCC).
• This would result in water saving of around 30.5 mcm annually.

https://energy.economictimes.indiatimes.com/news/coal/ntpc-commissions-indias-first-air-cooled-condenser-at-north-karanpura-plant/98350709

Why in news? The government has decided to discontinue imports of crude sunflower seed oil under tariff rate quota (TRQ).

About:

• A TRQ is a mechanism that allows a set quantity of specific products to be imported at a low or zero rate of duty.
• They are established under trade agreements between countries.
• TRQ commitment does not apply any limits on the quantity of the import products.
• But it applies a higher rate of duty for that specific product exceeding quota limit.

https://www.financialexpress.com/economy/govt-discontinues-imports-of-crude-sunflower-seed-oil-under-tariff-rate-quota-from-april-1/2997041/