1.  Objections overruled, Forest Bill goes to House unchanged

Parliamentary committee endorses proposed amendments to Forest (Conservation) Act, 1980 in its entirety; Environment Ministry denies charge that changes dilute various protections in the law 

A parliamentary committee, set up to examine the controversial proposed amendments to the Forest (Conservation) Act, 1980, has endorsed the amendment Bill in its entirety.

The Hindu has viewed a draft copy of the report prepared by the 31-member joint committee on the Forest (Conservation) Amendment Bill, 2023, which is expected to be tabled in Parliament during the Monsoon Session starting on July 20.

The Bill seeks to amend the pivotal 1980 law which was enacted to ensure that India’s forest land is not wantonly usurped for non-forestry purposes.

The Act empowers the Centre to require that any forest land diverted for non-forestry purposes be duly compensated. It also extends its remit to land which is not officially classified as “forest” in State or Union government records.

The report states that the joint committee, chaired by BJP MP Rajendra Agrawal, analysed the Bill “clause by clause” and invited representations from 10 Union Ministries and views from Chhattisgarh, Maharashtra and Telangana governments and from experts, individuals and representatives of public sector units.

It notes that objections were raised to various aspects of the Bill, including complaints that the proposed amendments “diluted” the Supreme Court’s 1996 judgment in the Godavarman case that extended protection to wide tracts of forests, even if they were not recorded as forests.

2. LVM-3: the other ISRO rocket

The Indian Space Research Organisation (ISRO) has three classes of launch vehicles: the Polar Satellite Launch Vehicle (PSLV), the Geosynchronous Satellite Launch Vehicle (GSLV), and the new Small Satellite Launch Vehicle (SSLV). Of these, ISRO has launched the PSLV the most. It has a famous reputation as a “workhorse”, with a very low failure rate. The PSLV can lift up to 3.8 tonnes to low-earth orbit.

ISRO developed and uses the GSLV to launch heavier payloads, and if required into higher orbits. Like the PSLV, the GSLV also has multiple configurations. The most powerful configuration is LVM-3, short for ‘Launch Vehicle Mark 3’; it can lift up to 10 tonnes to low-earth orbit.

The LVM-3 has three stages. The first (or bottom-most) stage is in the form of two S200 boosters strapped to the sides of the rocket body. They combust a solid fuel called hydroxyl-terminated polybutadiene. The second stage is powered by two Vikas engines, which combust a liquid fuel – either nitrogen tetroxide or unsymmetrical dimethylhydrazine.

The uppermost final stage is powered by a cryogenic engine. It combusts liquefied hydrogen with liquefied oxygen.

Hydrogen has a very high specific impulse as rocket fuels go, but using it in an engine requires it to be liquefied first, which in turn means it must be stored at very low temperature, and with special pumping and transport systems.

ISRO will launch its Chandrayaan 3 mission on July 14 onboard an LVM-3.

3. Report highlights impact of pandemic on education

The pandemic led to a decline in educational performance of many districts in the country, reveals a report from the Education Ministry.

The Performance Grading Index for Districts (PGI-D) released by the Ministry on Sunday as a combined report for 2020-21 and 2021-22 assesses the performance of school education system at the district level.

Much like the PGI for States released earlier, this report too has 10 grades under which districts are categorised, with Daksh being the highest grade (above 90%), followed by Utkarsh (81%-90%); Ati-Uttam (71%-80%); Uttam (61%-70%); Prachesta-1 (51%-60%); Prachesta-2 (41%-50%); Prachesta-3 (31%-40%); Akanshi-1 (21% to 30%); and Akanshi-2 (11% to 20%). The lowest grade is Akanshi-3, for districts that score less than 10%.

While none of the districts were able to earn Daksh and Utkarsh, in the latest report, 121 districts were graded as Ati-Uttam for 2020-21, though this number fell by more than half in 2021-22, with just 51 districts making the grade. Further attesting to the pandemic effect, while 2020-21 had 86 districts under Prachesta-2 (sixth-highest grade), this number rose to 117 in 2021-22.

In 2021-22, Chandigarh retained its Ati-Uttam status, as well as some districts of Delhi and Gujarat. In Maharashtra, Satara, Kolhapur, Nashik and Mumbai achieved this status as did Kolkata.

Tamil Nadu has several districts in the fourth-best grade (Uttam) and three — Ramanathapuram, Pudukkottai and Theni — in Prachesta-1. Uttar Pradesh has several districts under Uttam and Prachesta-1, and four under Prachesta-2. Most of the districts of Jammu and Kashmir fall under the Prachesta 1 and 2 grades. South Salmara-Mankachar district was the only district in Assam under Akanshi-1 for 2021-22, grade) while the two grades at the bottom had no districts.

The PGI-D report is expected to help State education departments identify gaps at the district level and improve their performance in a decentralised manner. There are indicator-wise PGI scores that show the areas where a district needs to improve. The PGI-D structure has a total weightage of 600 points comprising 83 indicators under six categories: outcomes; effective classroom transaction; infrastructure and student entitlements; school safety and child protection; digital learning; and governance process.

These categories are further divided into 12 domains: learning outcomes and quality; access outcome, teacher availability and professional development outcomes; learning management; learning enrichment activities; infrastructure; facilities; student entitlement; school safety and child protection; digital learning; funds convergence and utilisation; attendance monitoring systems; and school leadership development. “The ultimate objective of PGI-D is to help the districts to prioritise areas for intervention in school education and thus improve to reach the highest grade,” a Ministry spokesperson said.

4. How to choose the right fund to boost returns

With the new taxation in place for debt funds where they lose indexation benefits, hybrid funds are being sold as substitutes in terms of superior taxation as how debt funds used to be earlier

Wherever there is a tax angle to draw investors in, you can be sure that it is going to be put to excessive use! The case in point here is balanced advantage, multi-asset allocation, and other hybrid funds.

With the new taxation for debt funds (where they lose indexation benefits), hybrid funds are now being sold as substitutes for debt funds in terms of superior taxation (like equity, or with indexation benefits like debt funds used to be earlier). Besides, they have the seeming advantage of being an all-in-one category (equity, debt, gold). So, should you make the switch on these grounds?

What these funds are

All hybrid funds invest in two or more asset classes – equity (stocks), debt (bonds), and gold. Gold and debt balance equity risk. Equity helps generate superior returns. This equity that hybrid funds invest in comprises plain old stocks as well as stock or index derivatives, i.e., futures and options.

Funds take derivative exposure only on stocks already held in the portfolio and index derivatives. These are used to make the opposite call of what the fund takes in its stocks – what this does, essentially, is to neutralise or negate the equity risk.

The higher the derivative component of the portfolio (called hedged equity), the lower the equity risk.

The split between gold, debt, equity and derivatives changes with each fund category. Aggressive hybrid funds invest only in equity and debt with no derivatives. Balanced advantage and equity savings funds invest in debt and equity including derivatives. Multi-asset funds invest in all of them.

Funds decide how much to allocate to which asset class or derivative based on equity and debt market conditions. Aggressive hybrid funds are fairly stable and don’t change the equity-debt split much.

Multi-asset funds can, in theory, swing from very low to very high equity (and so in debt), and hold very low to even above 10-15% in gold. If stock markets correct, for example, funds can up equity allocation to take advantage of cheaper valuations. If debt markets show more promise, the fund can raise debt to go where returns are best.

Similarly, balanced advantage and equity savings funds can neutralise a large or entire part of their equity exposure with derivatives if markets are volatile and keep derivatives lower when markets perk up.

They offer better returns than debt funds and without full equity risk.

Taxation in all these categories is far lower than in debt funds.

All sounds good! But don’t jump just yet. Note these points first.

Not substitutes for debt

One, consider risks. As balanced advantage funds hedge equity risk, they may seem a low-risk product. But remember, the fund has unhedged equity at all times.

This can cause volatility and even losses in the short to medium term. They cannot, therefore, offer the kind of downside cushion diversification that a debt fund provides.

Multi-asset funds will aim to keep equity allocation steadily at 35% or more to maintain their equity-like tax status regardless of what equity markets do. In other words, they may not necessarily protect your portfolio when equity nosedives. Replacing them for debt might end up increasing your portfolio risk.

Further, within a category, each fund varies widely in allocations as fund manager views on markets differ.

So unless you choose a fund that is closest to your risk profile, it may turn out to be a bad fit.

Two, take diversification. Debt funds offer a variety of strategies and ways to invest in the opportunities that debt markets provide; equity funds, too, have a host of different styles all of which help build a diversified portfolio. Most hybrid funds, other than aggressive hybrid, are narrower in terms of strategies – for them, the primary point is the shift between asset classes and not different styles of picking stocks or bonds.

Three, take asset allocation. The equity-debt proportion is a call you should take based on your risk and timeframe. It is different for each person. It cannot be dynamic and cannot be left to a fund to decide on your behalf. And you cannot hope to achieve the all-in-one diversification that categories like multi-asset funds boast of, unless you put your entire money in this category!

How to use these funds

So, view these funds only as lower-risk ways of investing in equity. You can use them to reduce the risk of your otherwise high-risk equity portfolio. You can also use them for medium time frames where the risk of loss in this category is low and tax efficiency is also achieved. Remember that these funds need longer holding periods – minimum of 1.5-2 years for balanced advantage or equity savings funds and minimum of 3 years for multi-asset funds.

So don’t go by taxation alone to make investment decisions. Go by what that fund will do for your portfolio!

5. Global tropical primary forest cover continued to decline unabated in 2022

Primary forests are mature, natural forests that have remained undisturbed in recent history. They often store more carbon than other forests and are rich sources of biodiversity. Primary forest loss is almost irreversible in nature. A secondary forest is unlikely to match its carbon sequestering capabilities

Tropical areas lost 4.1 million hectares of forest cover – equivalent to losing an area of 11 football fields per minute – in 2022, new research quoted by the World Resources Institute’s (WRI) Global Forest Watch has said. This forest loss produced 2.7 billion tonnes of carbon dioxide emissions, which is around the same as India’s annual emissions due to the combustion of fossil fuels.

According to the University of Maryland, primary forest cover loss in tropical areas in 2022 was 10% more than in 2021.

Primary forests are mature, natural forests that have remained undisturbed in recent history. They often store more carbon than other forests and are rich sources of biodiversity. Primary forest loss is almost irreversible in nature: even if the green cover regrows, a secondary forest is unlikely to match the extent of biodiversity and carbon sequestering capabilities of a primary forest.

Global Forest Watch findings

The world is not on track to meet most of its forest-related commitments. WRI measures progress on two goals – ending deforestation by 2030, and restoring 350 million hectares (mha) of lost and degraded forests by 2030 – that represent multiple global forest pledges.

We need to reduce global deforestation by at least 10% every year to meet the 2030 target. In 2022, although the global deforestation rate was 3.1% lower than the baseline from 2018-2020, it was still over one million hectares above the level needed. This puts the world off track to meet the 2030 goal.

To meet the target of restoring 350 mha of forests globally by 2030, the world needs to increase tree cover by 22 mha per year, between 2021 and 2030.

Despite registering some gains, the overall change in tree cover in the past 20 years was a net loss of 100 mha. This means that we are still losing forests and not restoring them at the required rate.

Brazil and the Democratic Republic of Congo are the two countries with the most tropical forest cover, and both registered losses of this resource in 2022. Ghana and Bolivia also rapidly lost their primary forest cover.

On the other hand, Indonesia and Malaysia managed to keep their primary forest cover loss to record-low levels in 2022.

Brazil’s high rate of primary forest cover loss occurred in the last year of Jair Bolsonaro’s presidency, WRI noted. In his term, Bolsonaro faced international criticism for presiding over a surge of destruction in the world’s biggest rainforest, along the Amazon river.

The rate of primary forest cover loss in the country increased by 15% from 2021 to 2022. Non-fire-related losses in 2022 also reached the highest rate since 2005.

Forest loss in the Amazon basin not only affects carbon but also regional rainfall. If deforestation continues at the current rate, it may eventually lead to a tipping point that, if crossed, could convert most of the ecosystem into a savanna.

The Democratic Republic of Congo lost more than half a million hectares of primary forest cover in 2022.

This rate of loss has continued to increase in recent years. As the population of the country grows, there is more demand for food, which in turn is leading to an expansion of area under agriculture and encroachment of land hosting primary forests.

Primary forests are burned for short-term cultivation and then left fallow for regeneration of soil nutrients. However, increased demand for food has shortened the fallow periods, destroying more forests.

A $500 million agreement was signed at the United Nations Climate Change Conference in 2021, in Glasgow, to protect the Democratic Republic of Congo’s forests, but it is yet to have an impact on the deforestation rate in the country.

Indonesia, on the other hand, reduced its primary forest loss rate more than any other country has in recent years. Malaysia also managed to keep its primary forest loss level low in 2022, alongside Costa Rica, China, Cote d’Ivoire, Vietnam, Gabon, Madagascar, Nicaragua, and Equatorial Guinea.

According to Global Forest Watch, India lost 43.9 thousand hectares of humid primary forest between 2021 and 2022, which accounts for 17% of the country’s total tree cover loss in the period. The total tree cover loss in India between 2021 and 2022 was 255, 000 hectares.

The total global tree cover loss in 2022 declined by 10%. This includes primary, secondary, and planted forests.

This decrease, according to Global Forest Watch, is a direct result of a decrease in fire-related forest losses which decreased 28% from 2021. Non-fire losses in 2022 increased by slightly less than 1%.