1. RBI’s first purchase under G-SAP 1.0 set for April 15

Eyes securities worth ₹25,000 crore

A day after announcing the introduction of the G-sec Acquisition Programme (G-SAP 1.0), the Reserve Bank of India (RBI) on Thursday announced the Open Market Purchase of Government of India Securities under the programme.

“The Reserve Bank will conduct open market purchase of government securities of ₹1 lakh crore under the G-sec Acquisition Programme (G-SAP 1.0) in Q1 2021-22 with a view to enabling a stable and orderly evolution of the yield curve. The first purchase of government securities for an aggregate amount of ₹25,000 crore under G-SAP 1.0 will be conducted on April 15, 2021,” the RBI said in a circular. The central bank will purchase five types of government securities via a multi-security auction using multiple price methods. The dates of maturity vary from November 2, 2023 to March 16, 2035.

Government Security (G-Sec)

A Government Security (G-Sec) is a tradable instrument issued by the Central Government or the State Governments. It acknowledges the Government’s debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more).

In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs). G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.

i. Treasury Bills (T-bills)

Treasury bills or T-bills, which are money market instruments, are short term debt instruments issued by the Government of India and are presently issued in three tenors, namely, 91 day, 182 day and 364 day. Treasury bills are zero coupon securities and pay no interest. They are issued at a discount and redeemed at the face value at maturity.

ii. Cash Management Bills (CMBs)

In 2010, Government of India, in consultation with RBI introduced a new short-term instrument, known as Cash Management Bills (CMBs), to meet the temporary mismatches in the cash flow of the Government of India. The CMBs have the generic character of T-bills but are issued for maturities less than 91 days.

iii. Dated G-Secs

Dated G-Secs are securities which carry a fixed or floating interest rate which is paid on the face value, on half-yearly basis. Generally, the tenor of dated securities is between 5 years and 30 years. In the recent auction calendar for dated G-Secs, there is a plan to issue 40 year dated security in 2015-16.

How are the G-Secs issued?

G-Secs are issued through auctions conducted by RBI. Auctions are conducted on the electronic platform called the E-Kuber, the Core Banking Solution (CBS) platform of RBI. Commercial banks, scheduled UCBs, Primary Dealers, insurance companies and provident funds, who maintain funds account and securities accounts with RBI, are members of this electronic platform. All members of E-Kuber can place their bids in the auction through this electronic platform.

2. Biden govt. restores aid to Palestinians

It includes $75 mn in economic aid for the West Bank & Gaza, $10 mn for peacebuilding programmes

In a significant reversal to the Trump administration’s policy towards the Palestine, the U.S. State Department on Wednesday announced the restoration of at least $235 million in financial assistance to the Palestinians. The administration had already announced $15 million in coronavirus relief to the Palestinians in March.

Economic assistance

Wednesday’s announcement includes $75 million in economic assistance to the West Bank and Gaza, $10 million towards ‘peacebuilding’ programmes of the U.S. Agency for International Development (USAID) and $150 million in humanitarian assistance to the UN Relief and Works Agency (UNRWA).

The UNRWA funds, the State Department said, would include educational assistance for at least 5,00,000 Palestinian children living in West Asia.

The Trump administration had almost ended all funding to the organisation in 2018.

Mr. Trump’s policies towards West Asia — which included the relocation of the U.S. Embassy to Jerusalem — were criticised for being heavily tilted towards Israel.

“The United States is committed to advancing prosperity, security, and freedom for both Israelis and Palestinians in tangible ways in the immediate term, which is important in its own right, but also as a means to advance towards a negotiated two-state solution,” Secretary of State Antony Blinken said in a statement released on Wednesday.

‘New political path’

The UN welcomed the move, hoping it would attract more funds to the body.

“We hope that others will now follow suit. There were a number of countries that had greatly reduced or halted contributions to UNRWA,” Stéphane Dujarric, spokesperson for the Secretary General said on Wednesday.

Welcoming the move, the Prime Minister of the Palestine Authority, Mohammed Shtayyeh, called for “a new political path that meets the rights and aspirations of the Palestinian people based on international law and UN resolutions” in a tweet.

Israel, which has accused UNRWA of anti-Semitism, objected to the funding plans. “Israel’s position is that the organisation in its current form perpetuates the conflict and does not contribute to its resolution,” the Israeli Foreign Ministry said as per the Associated Press.

Israel-Palestine Conflict

• The seeds of the conflict were laid in 1917 when the then British Foreign Secretary Arthur James Balfour expressed official support of Britain for a Jewish “national home” in Palestine under the Balfour Declaration. The lack of concern for the “rights of existing non-Jewish communities” i.e. the Arabs led to prolonged violence.
• Unable to contain Arab and Jewish violence, Britain withdrew its forces from Palestine in 1948, leaving responsibility for resolving the competing claims to the newly created United Nations. The UN presented a partition plan to create independent Jewish and Arab states in Palestine. Most Jews in Palestine accepted the partition but most Arabs did not.
• In 1948, the Jewish declaration of Israel’s independence prompted surrounding Arab states to attack. At the end of the war, Israel controlled about 50 percent more territory than originally envisioned UN partition plan. Jordan controlled the West Bank and Jerusalem’s holy sites, and Egypt controlled the Gaza Strip.
• 1964: Founding of the Palestine Liberation Organization (PLO)
• 1967: In Six-day Arab- Israeli war, Israeli forces seize the Golan Heights from Syria, the West Bank & East Jerusalem from Jordan and Sinai Peninsula & Gaza strip from Egypt.
• The United Nations grants the PLO observer status in 1975 and recognizes Palestinians’ right to self-determination.
• Camp David Accords (1978): “Framework for Peace in the Middle East” brokered by U.S. set the stage for peace talks between Israel and its neighbors and a resolution to the “Palestinian problem”. This however remained unfulfilled.
• 1981: Israel effectively annexes the Golan but this is not recognized by the United States or the international community.
• 1987: Founding of Hamas, a violent offshoot of Egypt’s Muslim Brotherhood seeking “to raise the banner of Allah over every inch of Palestine” through violent jihad.
• 1987: Tensions in the occupied territories of West Bank and Gaza reached boiling point resulting in the First Intifada (Palestinian Uprising). It grew into a small war between Palestinian militants and the Israeli army.
• 1988: Jordan cedes to the PLO all the country’s territorial claims in the West Bank and Eastern Jerusalem.
• 1993: Under the Oslo Accords Israel and the PLO agree to officially recognize each other and renounce the use of violence. The Oslo Accords also established the Palestinian Authority, which received limited autonomy in the Gaza Strip and parts of the West Bank.
• 2005: Israel begins a unilateral withdrawal of Jews from settlements in Gaza. However, Israel kept tight control over all border crossings (blockade).
• 2006: Hamas scores a victory in Palestinian Authority elections. The vote leaves the Palestinian house divided between Fatah movement, represented by President Mahmoud Abbas, and Hamas, which will control the cabinet and parliament. Efforts at cohabitation fail almost immediately.
• 2007: Palestinian Movement Splits after few months of formation of a joint Fatah-Hamas government. Hamas militants drive Fatah from Gaza. Palestinian Authority President Mahmoud Abbas appoints a new government in Ramallah (West Bank), which is quickly recognized by the United States and European Union. Gaza remains under Hamas control.
• 2012- UN upgrades Palestinian representation to that of “non-member observer state”.
• 2014- Israel responds to the kidnapping and murder of three Jewish teenagers in the West Bank by arresting numerous Hamas members. Militants respond by firing rockets from Gaza. Clashes end in uneasy Egyptian-brokered ceasefire.
• 2014- Fatah and Hamas form a unity government, though distrust remains between the two factions.

The Territorial Puzzle

• West Bank: The West Bank is sandwiched between Israel and Jordan. One of its major cities is Ramallah, the de facto administrative capital of Palestine. Israel took control of it in the 1967 war and has over the years established settlements there.
• Gaza: The Gaza Strip located between Israel and Egypt. Israel occupied the strip after 1967, but relinquished control of Gaza City and day-to-day administration in most of the territory during the Oslo peace process. In 2005, Israel unilaterally removed Jewish settlements from the territory, though it continues to control international access to it.
• Golan Heights: The Golan Heights is a strategic plateau that Israel captured from Syria in the 1967 war. Israel effectively annexed the territory in 1981. Recently, the USA has officially recognized Jerusalem and Golan Heights a part of Israel.
• Palestinian Authority- Created by the 1993 Olso Accords, it is the official governing body of the Palestinian people, led by President Mahmoud Abbas of the Fatah faction. Hobbled by corruption and by political infighting, the PA has failed to become the stable negotiating partner its creators had hoped.
• Fatah- Founded by the late Yasir Arafat in the 1950s, Fatah is the largest Palestinian political faction. Unlike Hamas, Fatah is a secular movement, has nominally recognized Israel, and has actively participated in the peace process.
• Hamas- Hamas is regarded as a terrorist organization by the U.S. government. In 2006, Hamas won the Palestinian Authority’s legislative elections. It ejected Fatah from Gaza in 2007, splitting the Palestinian movement geographically, as well.

Two-State Solution

• The “two state solution” is based on a UN resolution of 1947 which proposed two states – one would be a state where Zionist Jews constituted a majority, the other where the Palestinian Arabs would be a majority of the population. The idea was however rejected by the Arabs.
• For decades, it has been held by the international community as the only realistic deal to end the Israeli-Palestinian conflict.

Why is the solution so difficult to achieve?

• Borders: There is no consensus about precisely where to draw the line – with Israel building settlements and constructing barriers in areas like the West Bank that creates a de facto border. This makes it difficult to establish that land as part of an independent Palestine, breaking it up into non-contiguous pieces.
• Jerusalem: Both sides claim Jerusalem as their capital and consider it a center of religious worship and cultural heritage making its division difficult.
  
  
  • In December 2017, Israel declared Jerusalem as its capital and the step found support from the USA, intensifying the situation in the region.
• Refugees: Large numbers of Palestinians who fled their homes in what is now Israel, during the preceding wars as well as their descendants believe they deserve the right to return but Israel is against it.
• Divided Political Leadership on Both sides: The Palestinian leadership is divided – two-state solution is supported by Palestinian nationalists in West Bank but the leadership in Gaza does not even recognize Israel. Further, while successive Israeli Prime Ministers – Ehud Barak, Ariel Sharon, Ehud Olmert and Benjamin Netanyahu – have all accepted the idea of a Palestinian state, they have differed in terms of what it should actually comprise.

Global Stand on Israel -Palestine Conflict

• Nearly 83% of world countries have officially recognized Israel as a sovereign state and maintain diplomatic relations with it.
• However, at the same time, many countries are sympathetic to Palestine.

What do both parties want?

• Palestine wants Israeli to halt all expansionary activities and retreat to pre-1967 borders. It wants to establish a sovereign Palestine state in West Bank and Gaza with East Jerusalem as its capital.
• Palestine wants Palestine refugees who lost their homes in 1948 be able to come back.
• Israel wants it to be recognised as a Jewish state. It wants the Palestine refugees to return only to Palestine, not to Israel.

India’s Stand

• India was one of the few countries to oppose the UN’s partition plan in November 1947, echoing its own experience during independence a few months earlier. In the decades that followed, the Indian political leadership actively supported the Palestinian cause and withheld full diplomatic relations with Israel.
• India recognised Israel in 1950 but it is also the first non-Arab country to recognise Palestine Liberation Organisation (PLO) as the sole representative of the Palestinian. India is also one of the first countries to recognise the statehood of Palestine in 1988.
• In the 2014, India favored UNHRC’s resolution to probe Israel’s human rights violations in Gaza. Despite supporting probe, India abstained from voting against Israel in UNHRC IN 2015.
• As a part of Link West Policy, India has de-hyphenated its relationship with Israel and Palestine in 2018 to treat both the countries mutually independent and exclusive.
• In June 2019, India voted in favor of a decision introduced by Israel in the UN Economic and Social Council (ECOSOC) that objected to granting consultative status to a Palestinian non-governmental organization
• So far India has tried to maintain the image of its historical moral supporter for Palestinian self-determination, and at the same time to engage in the military, economic, and other strategic relations with Israel.

3. ‘No ad hoc judges in place of regular recommendations’

Supreme Court Collegium should be kept in the loop: Bench

The Supreme Court on Thursday agreed that a plan to appoint retired judges on an ad hoc basis to reduce pendency in the High Courts should not become an excuse to stop or further delay the appointment process of regular judges.

As on April 1, the High Courts have a total vacancy of 411 regular judges against the sanctioned judicial strength of 1,080. The working strength in the High Courts is 669.

For one, the Chief Justices of the High Courts should opt for ad hoc judges only if their efforts to fill the judicial vacancies in their respective High Courts have hit a wall, even as pendency has reached the red zone.

“Ad hoc judges should not be appointed in lieu of regular recommendations,” Chief Justice of India (CJI) Sharad A. Bobde, heading a Special Bench of Justices S.K. Kaul and Surya Kant, noted.

“Yes, there should not be a move for the appointment of ad hoc judges unless a Chief Justice has made the recommendations for all the existing vacancies in his or her High Court,” senior advocate Vikas Singh submitted. “That is why we want the Supreme Court Collegium to be kept in the loop about the ad hoc judges’ appointments,” the CJI said.

“The procedure should explain when a Chief Justice can initiate the appointment of an ad hoc judge; what should be the threshold of pendency for such appointments; for how long should such ad hoc judges continue; what should be their allowances, etc.,” Chief Justice Bobde remarked.

The Bench asked senior members of the Bar appearing for various High Courts, Additional Solicitor-General R.S. Suri and senior advocates Arvind Datar and R. Basant, among other Bar leaders, to convene a meeting and prepare a draft plan on the procedure.

Ad-hoc Judges

• Article 127 says that if at any time there may not be a quorum of the Judges of the Supreme Court available to hold or continue any session of the Court, the Chief Justice of India can appoint a Judge of a High Court as an adhoc Judge of the Supreme Court for a temporary period.
• He can do so only with the previous consent of the President and after consultation with the Chief Justice of the High Court concerned.
• The Judge so appointed should be qualified for appointment as a Judge of the Supreme Court.
• It shall be the duty of the Judge who has been so designated, in priority to other duties of his office, to attend the sittings of the Supreme Court at the time and for the period for which his attendance is required, and while so attending he shall have all the jurisdiction, powers and privileges, and shall discharge the duties, of a Judge of the Supreme Court.

Retired Judges

• Article 128 says that the Chief Justice of India may at any time, with the previous consent of the President request a retired judge of the Supreme Court or a Retired Judge of High Court who is duly qualified for appointment as a judge of the Supreme Court, to act as a Judge of the Supreme Court for a temporary period.
• Such judge while so sitting and acting be entitled to such allowances as the President may determine and has all the jurisdiction, powers and privileges of a Judge of Supreme Court.
• But he/ she will not otherwise be deemed to be a Judge of the Supreme Court.

Additional and Acting Judges

• The President can appoint duly qualified persons as additional judges of a high court for a temporary period not exceeding two years when:
  • There is a temporary increase in the business of the high court; or
  • There are arrears of work in the high court.
• The President can also appoint a duly qualified person as an acting judge of a high court when a judge of that high court (other than the chief justice) is:
  • Unable to perform the duties of his office due to absence or any other reason; or
  • Appointed to act temporarily as chief justice of that high court .
• An acting judge holds office until the permanent judge resumes his office. However, both the additional and acting judge cannot hold office after attaining the age of 62 years.

4. Biden will restore credibility on climate change, says U.S. envoy

Kerry promises to fulfil commitments towards developing countries

The Trump administration damaged the U.S.’s credibility on climate change issues, which the Biden administration is trying to restore now, said U.S. special envoy John Kerry here on Thursday. He promised to fulfil Washington’s earlier commitments towards developing countries, including a $3 billion contribution to the Green Climate Fund.

The issue about U.S. commitments had been raised by Finance Minister Nirmala Sitharaman during a meeting with Mr. Kerry this week, as the U.S. envoy pushed for more ambitious targets on cutting emissions.

“[Former President Trump] shot America’s credibility in the head and turned his back on science,” Mr. Kerry said in response to a question from The Hindu at a media roundtable at the end of his visit, referring to the U.S. decision to pull out of the Paris agreement (UNFCCC) on climate change in 2017.

“The United States comes back to the table understanding this obligation, understanding what we need to do. We come back with humility. We come back knowing that for the last four years we’ve disappointed people,” he added, but pointed out that many U.S. states and cities had stayed the course on climate change mitigation despite Mr. Trump’s pull-out from the agreement. During his visit, where he met Prime Minister Narendra Modi, Mr. Kerry said he stressed the need to bring forward the commitments for carbon emission cuts from the earlier timeline of 2050 to the next decade, where he said “decisive actions” will be taken.

“Prime Minister Modi and special envoy Kerry agreed to collaborate on a 2030 agenda with a focus on a clean and green agenda through enhancing the availability of climate finance, building resilient infrastructure, energy storage and green hydrogen,” said Ministry of External Affairs spokesperson Arindam Bagchi, when asked about the meetings and whether India had given any specific commitments on emissions.

United Nations Framework Convention on Climate Change (UNFCCC) .

Origin

• The UNFCCC, signed in 1992 at the United Nations Conference on Environment and Development also known as the Earth Summit, the Rio Summit or the Rio Conference
• The UNFCCC entered into force on March 21, 1994, and has been ratified by 197 countries.

The WMO and UNEP established the Intergovernmental Panel on Climate Change (IPCC) in 1988, to assess the magnitude and timing of changes, estimate their impacts, present strategies for how to respond and to provide an authoritative source of up-to-date interdisciplinary knowledge on climate change.

Objective

• According to Article 2, the Convention’s ultimate objective is “to achieve, stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system”.
• This objective is qualified in that it “should be achieved within a time frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner”.

Institutional Arrangements

• The Conference of the Parties (COP)
  • Article 7.2 defines the COP as the “supreme body” of the Convention, as it is its highest decision-making authority. The climate change process revolves around the annual sessions of the COP.
• COP President and Bureau
  • The office of the COP President normally rotates among the five United Nations regional groups. The President is usually the environment minister of his or her home country. S/he is elected by acclamation immediately after the opening of a COP session. Their role is to facilitate the work of the COP and promote agreements among Parties.
  • The work of the COP and each subsidiary body is guided by an elected Bureau. To ensure continuity, it serves not only during sessions, but between sessions as well.
• Subsidiary Bodies (SBs)
  • The Convention establishes two permanent subsidiary bodies (SBs), namely the Subsidiary Body for Scientific and Technological Advice (SBSTA), by Article 9, and the Subsidiary Body for Implementation (SBI), by Article 10. These bodies advise the COP.
  • The SBSTA’s task is to provide the COP “with timely advice on scientific and technological matters relating to the Convention”.
  • The SBI’s task is to assist the COP “in the assessment and review of the effective implementation of the Convention”
• The Secretariat
  • The secretariat, also known as the Climate Change Secretariat, services the COP, the SBs, the Bureau and other bodies established by the COP.
• Other Bodies
  • Other bodies have been set up by the COP to undertake specific tasks. These bodies report back to the COP when they complete their work
  • COP 1 established two ad hoc groups to conduct negotiations on specific issues.
  • COP 11 established the “Dialogue” to exchange experiences and analyse strategic approaches for long-term cooperative action to address climate change.

Shortcomings

• Non-inclusive: Most scientists agree the most dangerous environmental air pollutants today are microscopic particulates that come from car engines and combustion-based power plants, but these pollutants are largely ignored by the Kyoto Protocol.
• Slow progress: It took a long time for COP to bring Russia to agree into participating in the Kyoto Protocol. (until 2005)
• UNFCCC failed to persuade USA to ratify the Kyoto protocol thereby keeping one of the largest emitter of greenhouse gases away from commitments.
• Unsustainable targets: The world reached at almost 1degree Celsius warming post industrialization and the Paris contributions are not enough to maintain 2 degree Celsius levels.
• Unsatisfactory Response: Many countries argued for a tougher target of 1.5C – including leaders of low-lying countries that face unsustainable sea levels rises in a warming world.
• Financial Constraints: The agreement requires rich nations to maintain a $100bn a year funding pledge beyond 2020, which is not enough as highlighted by several pacific island countries.
• Non-binding agreement: The US withdrawal from the 2015 Paris climate agreement, citing, that the deal punished” the US and would cost millions of American jobs”, has created new barriers and more pressure on rest of the nations in achieving the targets of Paris agreement.
  • As part of the US withdrawal, USA has stopped the payment of the extra $2bn that had been promised in to the Green Climate Fund.
• No enforcement mechanism: Under the Paris agreement, each country determines, plans, and reports its own efforts to mitigate global warming. The only penalty for non-compliance is a so-called “name and shame” — or “name and encourage” — system whereby countries that fall out of compliance are called out and encouraged to improve.

Achievements

• Kyoto protocol only required wealthy nations to cut emissions, which was a bone of contention; however this anomaly was corrected with the signing of Paris agreement in 2015.
• UNFCCC initiatives helped create Public awareness regarding climate change, which is much higher today than in the late 90s.
• Although climate science in the late 90s was certainly strong enough—to negotiate an international treaty, it is hard to deny that the scientific understanding of the climate crisis has improved considerably over the past two decades in which UNFCCC played a significant role.
• UNFCCC has enabled planning and implementation of concrete adaptation activities under the National Adaptations Programme of Action (NAPAs) and the Nairobi work programme.
• UNFCCC helped create innovative ideas in mitigating climate change like the Clean Development mechanism (CDM) under which developing country’s projects that reduce emissions earn credits that can be sold to countries or companies with a commitment to reduce emissions.
• Since the establishment of UNFCCC national governments have encouraged and increased cooperation on the development and transfer of technology.
• UNFCCC efforts support the developing countries in combating climate change by providing a platform for finance, technology transfers, discussions, global partnerships, etc.

5. Editorial-1: Plough to plate, hand held by the Indian state

The distinct characteristics of India’s agriculture require that a reformed state must ensure farmer, consumer welfare

For at least four decades now, economic policy making globally has dogmatically adhered to the notion that a progressively reduced role of the state would automatically deliver greater economic growth and welfare to the people. Since reform, by definition, is taken to mean only one thing, sector after sector is compulsively sought to be moved in this direction, even if overwhelming evidence, over many years from all over the world, indicates that it is the state that has played the leading role in provisioning the most critical aspects of life: water, sanitation, education, health, food and nutrition. There are very specific characteristics of agriculture, as also crucial elements of the socio-historical context, which imply that the Indian state must continue to intervene in multiple markets, and make critical investments, to ensure the welfare of both farmers and consumers.

Specificities of agriculture

Due to a variety of limiting factors, from uncertainties of the weather to soil fertility and water availability, increasing returns to scale are very difficult to achieve in farming. This underscores the need for the right kind of public investment in agriculture. Again, economies of scale allow producers in industry to make profits by cutting unit costs, even as prices fall, while those who fail to make the cut, get eliminated from competition. But in agriculture, members of the family can be drafted to work on the family’s farm, as also in other farm and non-farm work. This phenomenon is quite widespread in India today: of the nine crore rural families who draw their main income from unskilled manual labour, four crore are small and marginal farmers. Through overwork and self-exploitation, peasant farmers are able to cling on to their land.

Again, production processes in agriculture cannot be organised in an assembly line; they need to begin at the appropriate phase of the climatic annual cycle. This means that all farmers harvest their crop at the very same time; 86% of India’s farmers are ‘small and marginal’, too poor to afford warehousing facilities and are, therefore, compelled to bring their harvest to the market at around the same time. Since demand for food crops is typically price inelastic, during a bumper crop, while prices fall, the resulting rise in demand is not enough to salvage farmer incomes. Correspondingly, for poor consumers, unregulated markets for foodgrains mean that during a drought they either starve or get pauperised, being forced to buy very expensive commodities, conveniently hoarded up by traders.

Balance of power

These traders double up as moneylenders and the operation of a deeply exploitative grid of interlocked markets afflicts most farmers. In the credit market, usurious interest rates (often as high as 60%-120% per annum) create a debt trap from which it is virtually impossible to escape. The repayments due are ‘adjusted’ through exploitative practices in the input, output, labour and land-lease markets. The moneylender combines the roles of input supplier, crop buyer, labour employer and land lessor. This interlocked grid works in tandem with the oppressive caste system, with the poorer, ‘lower’ caste farmers, facing a cumulative and cascading spiral of expropriation. All the above reasons provide a strong case for state intervention in multiple agricultural markets.

Diversify public procurement

The Food Corporation of India and the Agricultural Prices Commission (Commission for Agricultural Costs and Prices, or CACP since 1985) were set up in 1965. The idea was that as farm output rises with the Green Revolution, farmers are assured that their surplus would be bought by the government at a price high enough to leave them a margin. The crops procured were then made available to consumers at subsidised rates through the Public Distribution System (PDS). Thus, government intervention protected farmers during bumper crops and dipped into the buffer stock to protect consumers during droughts. This is how India got its much vaunted food security over the past several decades.

However, the Green Revolution also sowed the seeds of its own destruction. More than 300,000 farmers have committed suicide in the last 30 years, a phenomenon completely unprecedented in Indian history. There is growing evidence of a steady decline in water tables and water quality. The yield response to application of increasingly expensive chemical inputs is falling, which has meant higher costs of cultivation, without a corresponding rise in output. Around 90% of India’s water is consumed in farming, and of this, 80% is used up by rice, wheat and sugarcane. Farmers continue to grow these water-intensive crops even in water-short regions primarily because of an assured market — for rice and wheat in the form of public procurement, which still covers only a very low proportion of India’s crops, regions and farmers.

Thus, we need to greatly expand the basket of public procurement to include more crops, more regions and more farmers. If done right, this single reform would secure multiple win-wins: higher and more sustainable farmer incomes, greater water security and better consumer health. Procurement must be local and follow the logic of regional agro-ecology. Huge volumes of water could be saved if cropping patterns are diversified to include a variety of millets (rightly called ‘nutri-cereals’ now), pulses and oilseeds.

Ensuring a steady market

To incentivise farmers to make this change, governments must include them in procurement operations. A useful benchmark could be 25% of the actual production of the commodity for that particular season (to be expanded up to 40%, if the commodity is part of the PDS), as proposed under the 2018 Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA) scheme.

The locally procured crops should then be incorporated into anganwadi supplementary nutrition and school mid-day meal programmes. This would mean a large and steady market for farmers, while also making a huge contribution to tackling India’s twin syndemic of malnutrition and diabetes, since these crops have a much lower glycemic index, while providing higher content of dietary fibre, vitamins, minerals, protein and antioxidants. Public investment in specific infrastructure required for millets and pulses, especially those grown through natural farming, would also help expand their cultivation.

India has a network of 2,477 mandis and 4,843 sub-mandis to safeguard farmers from exploitation by large retailers. This network needs to be greatly expanded as today, only 17% of farm produce passes through mandis. To provide farmers access within a radius of five kilometres, India needs 42,000 mandis, which are also in need of urgent reform. Rather than moving in the direction of weakening or dismantling mandis, we need to make their functioning more transparent and farmer-friendly.

Rural India will be focal point

Ever since the Second Five Year Plan initiated in 1956, the central plank of Indian economic policy has been to get people off the land and move them into industry and urban areas. However, even after all these efforts, the United Nations estimates that in the year 2050, around 800 million people will continue to live in rural India. Given this unique Indian demographic transition, agriculture will need to be greatly strengthened, especially bearing in mind the complete nightmare our urban metropolises are, for current and future migrants. In a context characterised by grave and growing inequalities, as also a historically skewed balance of power, no reform can succeed that does not strengthen the weak and the excluded. Agriculture can only be reformed by radically enhanced state capacities and qualitatively better regulatory oversight, rather than by opening up spaces for more predatory action by those already entrenched in positions of overwhelming power in the economy.

6. Editorial-2: Explaining Pakistan’s flip-flop on trade with India

The shadow of politics still looms over trade, which runs contrary to Islamabad’s statements on the need for better ties

Pakistan’s double U-turn on resuming trade with India highlights the internal differences within Ministries, between business and political communities, and the emphasis on politics over economy and trade. It also signifies Pakistan cabinet’s grandstanding, linking normalisation of ties with India to Jammu and Kashmir.

On March 31, Pakistan’s new Finance Minister Hammad Azhar, announced Pakistan’s Economic Coordination Committee (ECC)’s decision to import cotton, yarn, and 500,000 metric tons of sugar from India. The media dubbed it as a political breakthrough but the ECC’s decision was not on bilateral trade; it was about importing only three items — cotton, yarn and sugar.

A day later, Pakistan’s cabinet overruled the decision; the meeting was chaired by Prime Minister Imran Khan and which included Shah Mohammad Qureshi (Foreign Affairs Minister), Fawad Chaudhry (Science and Technology Minister) and Shireen M. Mazari (Human Rights Minister). The Dawn quoted Mr. Qureshi as saying, “A perception was emerging that relations with India have moved towards normalization and trade has been opened… there was a unanimous opinion …as long as India does not review the unilateral steps it took on August 5, 2019, normalising relations with India will not be possible.”

Mr. Hammad Azhar, whose Ministry proposed the idea, accepted the cabinet’s decision as the working of “economic and political interface in a democracy”, and it was left with the Prime Minister and the cabinet to “endorse, reject or modify” the ECC’s proposals. However, Pakistan’s textile industry has not taken the cabinet’s decision kindly; for them, importing cotton yarn from India is an immediate need; else, it would impact their export potential.

Three takeaways can be identified from the above. The first relates to the ECC’s decision to import only three items from India, namely cotton, yarn and sugar. It was based on Pakistan’s immediate economic needs and not designed as a political confidence-building measure to normalise relations with India.

Practical and economic

For the textile and sugar industries in Pakistan, importing from India is imperative, practical and is the most economic. According to the latest Pakistan Economic Survey, 2019-20, though the agriculture sector witnessed a growth of 2.67% (with an increase in rice and maize production), cotton and sugarcane production declined by 6.9% and 0.4%, respectively. Sugar exports came down substantially last year, by over 50% in 2019-20, when compared to 2018-19. Yarn, cotton cloth, knitwear, bedwear and readymade garments form the core of Pakistan’s textile basket in the export sector. By February 2020, there was a steep decline in the textile sector due to disruptions in supply and domestic production. When compared to the last fiscal year (2019-20), there has been a 30% decline (2020-21) in cotton production.

According to State Bank of Pakistan’s latest quarterly report, the decline in cotton production is also due to fewer areas (the lowest since 1982) of cotton cultivation. By the end of 2020, there was a sharp decline (around 40%) in cotton production. Besides the decline in the area of cotton cultivation, there was also a decline in yield per acre. The ginning industry estimates that in 2021, it would receive less than half of what was projected. In 2019-20, Pakistan produced around nine billion bales; this year, the ginning industry estimates only around seven million bales. This would mean, Pakistan’s cotton export would reduce, creating a domino effect on what goes into Pakistan’s garment industry. Pakistan is the fifth-largest exporter of cotton globally, and the cotton-related products (raw and value-added) earn close to half of the country’s foreign exchange.

Another industry in crisis

The sugar industry in Pakistan is also in crisis. When compared to cotton, the sugar industry’s problem stem from different issues — the availability for local consumption and the steep price increase. The sugar industry has prioritised exports over local distribution. Increased government subsidy and a few related administrative decisions resulted in the sugar industry attempting to make a considerable profit by exporting it. By early 2019, the sugar prices started increasing, and in 2020, there was a crisis due to shortage and cost.

In February 2020, Mr. Imran Khan announced an investigation and constituted a commission of inquiry into Pakistan’s sugar crisis, 2019-20. According to the report, sugarcane was purchased off-the-books by the sugar mills, and sugar sold off-the-books. The report also noticed market manipulation and hoarding resulting in increased sugar price within Pakistan. In short, the subsidies, cheap bank loans, a few administrative decisions, manipulation and greed, especially by the sugar mill owners, mean high cost paid by the consumers.

As a result, importing sugar from India would be cheaper for the consumer market in Pakistan. Clearly, the crises in cotton and sugar industries played a role in the ECC’s decision to import cotton, yarn and sugar from India. It would not only be cheaper but also help Pakistan’s exports. This is also imperative for Pakistan to earn foreign exchange.

Politics first

The second takeaway from the two U-turns — is the supremacy of politics over trade and economy, even if the latter is beneficial to the importing country. For the cabinet, the interests of its own business community and its export potential have become secondary. However, Pakistan need not be singled out; this is a curse in South Asia, where politics play supreme over trade and economy. The meagre percentage of intra-South Asian Association for Regional Cooperation (SAARC) trade and the success (or the failure) of SAARC engaging in bilateral or regional trade would underline the above. Trade is unlikely to triumph over politics in South Asia; especially in India-Pakistan relations.

The Kashmir link

The third takeaway is the emphasis on Jammu and Kashmir by Pakistan to make any meaningful start in bilateral relations. This goes against what it has been telling the rest of the world that India should begin dialogue with Pakistan. Recently, both Pakistan’s Prime Minister and the Chief of Army Staff, Qamar Javed Bajwa, were on record stating the need to build peace in the region. Gen. Bajwa even talked about “burying the past” and moving forward. There were also reports that Pakistan agreeing to re-establish the ceasefire along the Line of Control (LoC) was a part of this new strategy.

The latest statement by Pakistan’s cabinet that unless India rescinds the decision of August 5, 2019 in Jammu and Kashmir, there would be no forward movement, goes against what Mr. Imran Khan and Gen. Bajwa have been stating in public. This position also hints at Pakistan’s precondition (revoking the August 2019 decision on Jammu and Kashmir) to engage with India.

Pakistan has been saying that the onus is on India to normalise the process. Perhaps, it is New Delhi’s turn to tell Islamabad that it is willing, but without any preconditions, and start with trade. It may even allow New Delhi to inform Pakistan’s stakeholders about who is willing to trade and who is reluctant.