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Daily Current AFfairs 12.01.2022 (Treating the planet well can aid progress, BrahMos advanced variant test fired, Govt. set to hold 35.8% in Vodafone Idea, Election Campaign Funding by political parties, The Government bailout of Vodafone Idea)

Daily Current AFfairs 12.01.2022 (Treating the planet well can aid progress, BrahMos advanced variant test fired, Govt. set to hold 35.8% in Vodafone Idea, Election Campaign Funding by political parties, The Government bailout of Vodafone Idea)

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1. Treating the planet well can aid progress

An integrated perspective is necessary as social and environmental problems cannot be addressed in isolation anymore

The 2020 Human Development Report of the United Nations Development Programme (UNDP), titled “The Next Frontier – Human Development and the Anthropocene” proposed a planetary pressure-adjusted Human Development Index (HDI). Ever since the UNDP took up computation of the HDI driven by the vision of Mahbub ul Haq and articulated by Amartya Sen in 1990, there have been adjustments such as inequality-adjusted HDI. Besides, there was computation of several other indices such as Gender Development Index, Gender Inequality Index, and Multidimensional Poverty Index to flag the issues that warranted the attention of policymakers.

Human-induced change

The environment is one such issue now considered to be an essential component to be factored in to measure human development. The concept of the planetary boundary was introduced by a group of scientists across the world, led by J. Rockström of the Stockholm Resilience Centre in 2009. This was to highlight that human-induced environmental change can irrevocably destabilise the long-term dynamics of the earth system, thereby disrupting the life-supporting system of the planet. Both global and local evidence indicate that biodiversity loss, climate change, land system/land-use change, disruption of biogeochemical cycles, and scarcity of freshwater availability are a threat and increase the vulnerability of society. The purpose of the planetary pressure adjusted HDI, or PHDI, is to communicate to the larger society the risk involved in continuing with existing practices in our resource use and environmental management, and the retarding effect that environmental stress can perpetuate on development.

Impact on country rankings

When planetary pressure is adjusted, the world average of HDI in 2019 came down from 0.737 to 0.683. This adjustment has been worked out by factoring per capita carbon dioxide (CO2) emission (production), and per capita material footprint. The average per capita global CO2 emission (production) is 4.6 tonnes and the per capita material footprint is 12.3 tonnes.

The global ranking of several countries was altered, in a positive and negative sense, with adjustment of planetary pressure. Switzerland is the only country in the group of high human development countries whose world rank has not changed with adjustment of planetary pressure, although the HDI value of 0.955 has come down to 0.825 after the necessary adjustment. Among 66 very high human development countries, 30 countries recorded a fall in rank values ranging from minus 1 for Germany and Montenegro to minus 131 for Luxembourg. It succinctly brings out the nature of planetary pressure generated by the developed countries and indirectly indicates their responsibility in combating the situation.

In the case of India, the PHDI is 0.626 against an HDI of 0.645 with an average per capita CO2 emission (production) and material footprints of 2.0 tonnes and 4.6 tonnes, respectively. India gained in global rankings by eight points (131st rank under HDI and 123rd rank under PHDI), and its per capita carbon emission (production) and material footprint are well below the global average.

Challenges in India, SDGs

Nevertheless, India’s natural resource use is far from efficient, environmental problems are growing, and the onslaught on nature goes on unabated with little concern about its fallout — as evident from a number of ongoing and proposed projects. At the same time, India has 27.9% people under the Multidimensional Poverty Index ranging from 1.10% in Kerala to 52.50% in Bihar, and a sizable section of them directly depend on natural resources for their sustenance. Kerala has an exemplary achievement in human development with an HDI value of 0.775, well above the all-India average. However, on the environmental front there are several challenges which warrant concrete actions; otherwise, the gains of human development may not be sustained.

The twin challenges of poverty alleviation and environmental safeguarding that former Prime Minister Indira Gandhi first articulated in her lecture during the Stockholm conference on the human environment in 1972 still remain unattended. Fifty years have passed. There is little change in the scenario. In fact, the situation is much more complex now.

Since the Stockholm conference was held, there have been several summits and initiatives by the United Nations, the latest being the adoption of 17 Sustainable Development Goals (SDG) with a specific target to meet by 2030. The SDGs have acquired high priority in the context of the issue of climate change and its impact on society. Human-induced climate change has emerged as an important issue of global deliberations. The Sixth Assessment Report (AR6) of the Intergovernmental Panel on Climate Change (IPCC) 2021 laid stress on limiting global temperature rise at the 1.5° C level and strengthening the global response to the threat of climate change,sustainable development, and efforts to eradicate poverty. This was reaffirmed in the Conference of Parties (COP) 26 at Glasgow in 2021.

‘No poverty’ and ‘Zero hunger’ are the first and second SDGs. According to NITI Aayog (2020-21), out of 100 points set for the grade of Achiever, India scored 60 (Performer grade, score 50-64) for no poverty and 47 (Aspirant grade, score 0-49) for zero hunger, with wide State-level variations. India’s score in the SDGs of 8, 9, and 12 (‘Decent work and economic growth’; ‘Industry, Innovation and Infrastructure’ and ‘Responsible Consumption and Production’, respectively) — considered for working out planetary pressure — are 61 (performer), 55 (performer) and 74 (front runner), respectively.

Better awareness now

There are wide gaps in managing the environment. The Chipko movement (1973) in Uttarakhand and the Silent Valley movement (the late 1970s) in Kerala are two of the most well-known modern-day people’s movements for environmental protection in India that inspired several other environmental movements during the last five decades. Subsequently, there is now widespread awareness about the environment and several initiatives both at the level of the government and the community.

However, standalone environmental safeguarding actions are not sufficient to navigate the Anthropocene (the “unofficial unit of geologic time to describe the most recent period in earth’s history when human activity started to have a significant impact on the planet’s climate and ecosystems”). It is now well established that there are interdependencies of earth system processes including social processes, and their relationships are non-linear and dialectic. Therefore, the central challenge is to nest human development including social and economic systems into the ecosystem, and biosphere building on a systematic approach to nature-based solutions that put people at the core.

Local level involvement

It is now essential to consider people and the planet as being a part of an interconnected social-ecological system. Social and environmental problems cannot be addressed in isolation anymore; an integrated perspective is necessary. This can be conceived and addressed at the local level, for which India has constitutional provisions in the form of the 73rd and 74th Amendments.

The remarkable advances in earth system science and sustainability research along with enabling technology of remote sensing and geographic information system have helped to document and explain the impact of human activities at the ground level and stimulate new interdisciplinary work encompassing the natural and social sciences. They also provide insights into how to mitigate these impacts and improve life. What is required is a reorientation of the planning process, adoption of a decentralised approach, a plan for proper institutional arrangements, and steps to enable political decisions.

What is the Human Development Index (HDI)?

It is a composite index which measures average achievement in three basic dimensions of human development– a long and healthy life, knowledge and a decent standard of living. 

1- Long and healthy life: For Indian’s, life expectancy at birth is 69.7 years in the report. This is slightly lower than the South Asian average of 69.9 years. Also, between 1990 and 2019, India’s life expectancy at birth increased by 11.8 years.

2-  Knowledge: The expected years of schooling in India was 12.2 years in the report. Also, between 1990 and 2019, India’s mean years of schooling increased by 3.5 years, and expected years of schooling increased by 4.5 years.

3-  Standard of living: India’s Gross National Income (GNI) per capita is USD 6,681 which increased by about 273.9% between 1990 and 2019.

Structure of the 2020 Human Development Report

1- Renewing human development for the Anthropocene.
2- Mechanisms of change to catalyse action.
3- Exploring new metrics. 

Human Development Index 2020: India’s Ranking

India ranked at 131st position out of 189 countries in the index, felling in the medium human development category with an HDI value of 0.645. In the year 2019, India ranked at 129th position. 

It is to be noted that between 1990 and 2019, India’s HDI value increased from 0.429 to 0.645, an increase of 50.3%.

Human Development Index (HDI) 2020: Other indexes and India’s performance

IndexesValue (India’s performance)
Inequality-adjusted Human Development Index (IHDI)0.475
 Gender Development Index (GDI)0.820
Gender Inequality Index (GII)0.488
Multidimensional Poverty Index (MPI)0.123

Definitions: 

1- Inequality-adjusted Human Development Index (IHDI): It is the HDI value adjusted for inequalities in the three basic dimensions of human development. 2- Gender Development Index (GDI): It is the ratio of female to male HDI values. 3- Gender Inequality Index (GII): It is a composite measure reflecting inequality in achievement between women and men in three dimensions: reproductive health, empowerment and the labour market. 4- Multidimensional Poverty Index (MPI): It is the percentage of the population that is multidimensionally poor adjusted by the intensity of the deprivations.

2. BrahMos advanced variant test fired

The extended range naval version of the missile was launched from a destroyer

An extended range sea-to-sea variant of the BrahMos supersonic cruise missile was test fired on Tuesday from the recently commissioned stealth guided missile destroyer INSVisakhapatnam.

“Advanced sea-to-sea variant of BrahMos supersonic cruise missile was tested from INSVisakhapatnam today. Missile hit the designated target ship precisely,” the Defence Research and Development Organisation (DRDO) said.

The successful test-firing certifies the accuracy of the ship’s combat system and armament complex and also validates a new capability the missile provides the Navy and the nation, the Navy said. “Augurs very well for Aatma Nirbhar Bharat and provides the Navy yet another shot in the arm,” it added.

Mission readiness

Congratulating scientists on the successful test firing, Defence Minister Rajnath Singh said on social media, “The robustness of Indian Navy mission readiness is reconfirmed today after successful launch of the advanced version of BrahMos Missile from INSVishakhapatnam today.”

BrahMos is joint collaboration between India and Russia and is capable of being launched from land, sea, sub-sea and air against surface and sea-based targets, with a range capped at 290 km initially.

The range of the missile was originally capped at 290 km as per obligations of the Missile Technology Control Regime (MTCR). Following India’s entry into the club in June 2016, officials said the range would be extended to 450 km and to 600km at a later stage. An extended range missile had been tested earlier.

INS Visakhapatnam, with a displacement of 7,400 tonnes, is the first of four ingenuously designed and built Project-15B class stealth guided missile destroyers and was commissioned in November 2021.

What is the Naval Variant of Brahmos Missile?

The Naval Variant of the BrahMos supersonic cruise missile has an extended range of 350 to 400 km. The missile can fly at 2.8 Mach speed which is almost three times the speed of sound.

What is Brahmos Missile?

BrahMos is a joint collaboration between India and Russia.

It is capable of being launched from land, sea, sub-sea and air against the surface and sea-based targets.

The range of the missile was originally capped at 290 km as per obligations of the Missile Technology Control Regime (MTCR).

Following India’s entry into the MTCR club in 2016, the range has been extended to 450 km and to 600 km.

What is INS Visakhapatnam?

INS Visakhapatnam is the first of four indigenously designed and built Project-15B class stealth guided-missile destroyers. It was commissioned in November 2021

Ballistic Missile

  • A ballistic missile follows a ballistic trajectory to deliver one or more warheads on a predetermined target.
  • A ballistic trajectory is the path of an object that is launched but has no active propulsion during its actual flight (these weapons are guided only during relatively brief periods of flight).
  • Consequently, the trajectory is fully determined by a given initial velocity, effects of gravity, air resistance, and motion of the earth (Coriolis Force).
  • Shorter range ballistic missiles stay within the Earth’s atmosphere.
  • Longer-ranged intercontinental ballistic missiles (ICBMs), are launched on a sub-orbital flight trajectory and spend most of their flight out of the atmosphere.

Types of ballistic missiles based on the range

  • Short-range (tactical) ballistic missile (SRBM): Range between 300 km and 1,000 km.
  • Medium-range (theatre) ballistic missile (MRBM): 1,000 km to 3,500 km.
  • Intermediate-range (Long-Range) ballistic missile (IRBM or LRBM): 3,500 km and 5,500 km.
  • Intercontinental ballistic missile (ICBM): 5,500 km +

Cruise missile

  • A cruise missile is a guided missile (target has to be pre-set) used against terrestrial targets.
  • It remains in the atmosphere throughout its flight.
  • It flies the major portion of its flight path at approximately constant speed.
  • Cruise missiles are designed to deliver a large warhead over long distances with high precision.
  • Modern cruise missiles are capable of travelling at supersonic or high subsonic speeds, are self-navigating, and are able to fly on a non-ballistic, extremely low-altitude trajectory.

Types of cruise missiles based on speed

  • Hypersonic (Mach 5): these missiles would travel at least five times the speed of sound (Mach 5). E.g. BrahMos-II.
  • Supersonic (Mach 2-3): these missiles travel faster than the speed of sound. E.g. BrahMos.
  • Subsonic (Mach 0.8): these missiles travel slower than the speed of sound. E.g. Nirbhay.

Differences between Ballistic Missile and Cruise Missile

Ballistic MissileCruise Missile
It is propelled only for a brief duration after the launch.Self-propelled till the end of its flight.
Similar to a rocket engine.Similar to a jet engine.
Long-range missiles leave the earth’s atmosphere and reenter it.The flight path is within the earth’s atmosphere.
Low precision as it is unguided for most of its path and its trajectory depends on gravity, air resistance and Coriolis Force.Hits targets with high precision as it is constantly propelled.
Can have a very long range (300 km to 12,000 km) as there is no fuel requirement after its initial trajectory.The range is small (below 500 km) as it needs to be constantly propelled to hit the target with high precision.
Heavy payload carrying capacity.Payload capacity is limited.
Can carry multiple payloads (Multiple Independently targetable Re-entry Vehicle)Usually carries a single payload.
Developed primarily to carry nuclear warheads.Developed primarily to carry conventional warheads.
E.g. Prithvi I, Prithvi II, Agni I, Agni II and Dhanush missiles.E.g. BrahMos missiles

Integrated Guided Missile Development Programme (IGMDP)

  • IGMDP was conceived by Dr. A P J Abdul Kalam to enable India attain self-sufficiency in missile technology.
  • IGMDP was conceived in response to the Missile Technology Control Regime that decided to restrict access to any technology that would help India in its missile development program.
  • To counter the MTCR, the IGMDP team formed a consortium of DRDO laboratories, industries and academic institutions to build these sub-systems, components and materials.
Missile Technology Control Regime (MTCR) MTCR an informal grouping established in 1987 by Canada, France, Germany, Italy, Japan, the United Kingdom and the United States to limit the proliferation of missiles and missile technology.The MTCR seeks to limit the risks of proliferation of weapons of mass destruction (WMD).MTCR places particular focus on rockets and unmanned aerial vehicles capable of delivering a payload of at least 500 kg to a range of at least 300 km.The MTCR is not a treaty and does not impose any legally binding obligations.
  • IGMDP was started in 1983 and completed in March 2012.
  • Keeping in mind the requirements of various types of missiles by the defence forces, the development of five missile systems was taken up.
  • Prithvi: Short-range surface-to-surface ballistic missile (Prithivi means Earth Surface to Surface)
  • Agni: Intermediate-range surface-to-surface ballistic missile
  • Trishul: Short-range low-level surface-to-air missile
  • Akash: Medium-range surface-to-air missile (Akash means Sky Surface to Air)
  • Nag: Third generation anti-tank missile (Nag means Snake Nag slithers like a Snake to hit a tank!)
  • After its success, the Agni missile program was separated from the IGMDP upon realizing its strategic importance.

India’s Missile Systems

MissileTypeRange
Astraair-to-air80 km
Trishulsurface-to-air9 km
Akash30 km
Prithvi Air Defence (PAD)2000 km
Nagsurface-to-surface Anti-tank missile4 km
Prahaarsurface-to-surfaceSRBM150 km
BrahMosland, naval, airSupersonic Cruise Missile300 km
Nirbhayland, naval, airSubsonic Cruise Missile1000 km
K-15 Sagarikaunderwater-to-surfaceSLBM700 km
Dhanushsea-to-sea/surfaceSRBM350 km
Shauryasurface-to-surfaceSLBM1900

SLBM: Sub-marine launched ballistic missile

MissileFeatures
AstraAstra is a beyond-visual-range (BVR) air-to-air missile (AAM).In terms of size and weight, the Astra is the smallest missile developed by the DRDO.It was envisaged to intercept and destroy enemy aircraft at supersonic speeds.
TrishulUsed as anti-sea skimmer (to fly low to avoid radar) from ships against low-flying attacks.
AkashIt has the capability to “neutralize aerial targets like fighter jets, cruise missiles and air-to-surface missiles” as well as ballistic missiles.
PADAnti-ballistic missile developed to intercept incoming ballistic missiles outside the atmosphere (exo-atmospheric).
Nag3rd generation anti-tank ‘fire and forget’ guided missile (lock-on before launch system) where the target is identified and designated before the weapon is launched.
PrahaarHigh manoeuvrability.Primarily a battlefield support system for the Army.
BrahMosIt is a supersonic cruise missile developed as a joint venture between Indian and Russia.It is the fastest supersonic cruise missile in the world.It is the world’s fastest anti-ship cruise missile in operation.
NirbhaySubsonic missile which is ancillary (providing necessary support) to the BrahMos range.
K-15 SagarikaIt forms the crucial third leg of India’s nuclear deterrent vis-à-vis its submarine-launched ballistic missile (SLBM) capability.It was subsequently integrated with India’s nuclear-powered Arihant class submarine.
DhanushIt is capable of carrying nuclear warheads.It carries forward the legacy of the K-15 Sagarika.
ShauryaSurface-to-surface ballistic missile (SSM) variant of the K-15 Sagarika.The nuclear capability of the missile enhances India’s second-strike capability.It reduces the dependence on the K-15 which was built with Russian assistance.

Prithvi Missiles

All the Prithvi variants are surface-to-surface SRBMs.

NameVersionRangePayload in kg
Prithvi IArmy version150 km1000
Prithvi IIAir force version350 km500
Prithvi IIINaval version600 km1000

Agni Missiles

NameTypeRangePayload in kg
Agni-IMRBM700 – 900 km1,000
Agni-IIMRBM2,000 – 3,000 km750 – 1,000
Agni-IIIIRBM3,500 – 5,000 km2,000 – 2,500
Agni-IVIRBM3,000 – 4,000  km800 – 1,000
Agni-VICBM5,000 – 8,000 km (Testing)1,500 (3 – 10 MIRV)
Agni-VIICBM8,000 – 10,000 km (Under development)1,000 (10 MIRV)

MIRV: Multiple Independently targetable Re-entry Vehicle

Anti-satellite weapons (ASAT)

  • In March 2019, India successfully tested its ASAT missile.
  • The ASAT missile destroyed a live satellite in Low Earth orbit (283-kilometre).
  • As per DRDO, the missile is capable of shooting down targets moving at a speed of 10 km per second at an altitude as high as 1200 km.

3. Govt. set to hold 35.8% in Vodafone Idea

Conversion of interest on dues into equity set to trigger change in holding; move follows DoT package

The board of directors of Vodafone Idea Ltd. late on Monday approved the conversion of interest — related to spectrum auction instalments and on AGR (adjusted gross revenue) dues to the government — into equity.

This means that after conversion, the government would own 35.8% of the telecom carrier.

This is as per a scheme offered by the Department of Telecommunications (DoT) for settlement of dues.

“The Net Present Value (NPV) of this interest [on spectrum auction instalments and AGR dues] is expected to be about ₹16,000 crore as per the company’s best estimates, subject to confirmation by the DoT,” Vodafone Idea said in a filing. “Since the average price of the company’s shares at the relevant date of 14.08.2021 was below par value, the equity shares will be issued to the government at par value of ₹10 per share, subject to final confirmation by the DoT.” The conversion will result in dilution to all existing shareholders, including promoters.

“Following conversion… promoter shareholders would hold around 28.5% (Vodafone Group) and around 17.8% (Aditya Birla Group), respectively,” it added. In light of the conversion of interest into equity, the company added, the promoters had mutually agreed to amend the existing Shareholders’ Agreement for “reducing the minimum qualifying threshold from 21% to 13% for the purpose of exercising certain governing rights, such as appointment of directors and of certain key officials”.

Earlier, the DoT had provided various options to the company, including deferring payment of Spectrum Auction Instalments due up to four years, excluding the instalments due in respect of Spectrum Auction 2021; one-time opportunity to opt for deferment of AGR related dues as determined by the Supreme Court in the AGR case, by a period of four years with immediate effect; one-time opportunity to exercise the option of paying interest for the four years of deferment on the deferred spectrum instalments and AGR dues via conversion into equity of the NPV of the interest amount.

In October, the telco had opted for deferment of spectrum auction instalments and of AGR-related dues.

Shares slide

On Tuesday, shares of Vodafone Idea plummeted to 21% to ₹11.80 on the BSE.

Separately, Tata Teleservices (Maharashtra) on Tuesday said it would opt for conversion of interest related to AGR dues into equity and that post-conversion, the Centre’s holding in the telco is expected to be about 9.5%.

The NPV of the interest amount is about ₹850 crore, the company said in a filing.

4. Election Campaign Funding by political parties

Where do political entities get money for canvassing and campaigning? What are the rules around election fundraising?

Voters vote for political parties so that they deliver benefits to the citizens. If election funds are obtained from other sources, the Governments in power are obliged to the funders more than the voters.

For instance, the Government Budget reports that in 2019-20 the loss to the Government on account of incentives to companies and reduction in duties and taxes was ₹2. 24 lakh crore. The voters do not know this.

Transparency in funding is absent after the introduction of Electoral Bonds. In spite of the CIC ruling, all political parties have refused to submit themselves to the transparency that comes with Right to Information. Limits on funding are also not well defined.

The story so far: With several Assembly elections coming up, one issue may need more attention than others. Elections are fought with huge funds nowadays. Estimates vary, but a candidate may spend in crores in just one constituency. This vital issue is neglected by voters in the noise and din of campaigns, leaders, celebrities and media coverage.

Why is this issue important for the voter?

Voters vote for candidates, political parties and leaders so that they deliver benefits to the citizens. If election funds are obtained from other sources, the Governments in power are obliged to the funders more than the voters. Government may take decisions that benefit the donors rather than the voters. Even if a rich candidate funds his own election, the focus is on recovering the investment made rather on public service.

Campaign funding reforms is one of the biggest issues in electoral reforms worldwide. Several countries like the U.S., the EU countries and so on have a set of laws to address this issue.

Does spending in elections affect public interest?

Publicly the Government never announces any scheme that is against public interest. Even if they do, the message to the public is always that it is for them. In recent times the most dramatic example is that of the Farm Laws which are being repealed. Many other decisions on infrastructure, roads, SEZs, incentives to corporates are not known to the public. For instance, the Government Budget reports that in 2019-20 the loss to the Government on account of incentives to companies and reduction in duties and taxes was ₹2. 24 lakh crore. The voters do not know this. But any funds required for public spending is known. If some of the income the Government lost could be recovered, the pattern of spending by the Government would change. Even schemes like MNREGA which many support and others oppose, had a budget allocation of less than ₹75,000 crore.

What are the remedies for this?

This subject has been studied at length by Government commissions and scholars. There is also much to learn from international experience. Broadly there are three classes of remedies. First is to make all election funding completely transparent so that voters know who is funding whom. Second is to prevent private interests from unduly influencing elections or Governments. This is done by a set of rules on limiting funding. Third is to try and have a more level playing field so that good politicians, candidates and parties with less funds also stand a chance of competing in elections. In the U.S. for instance, every citizen has the option of letting a small part of his taxes be used for election funding. This is done only with his or her consent.

What is the situation in India on election funding?

It is not yet an important issue with proper legislation. Transparency in funding is absent after the introduction of Electoral Bonds. Now citizens cannot know who is funding the political parties. In spite of the Central Information Commission (CIC) ruling, all political parties have refused to submit themselves to the transparency that comes with Right to Information. Limits on funding are also not well defined. For instance, there was a cap on how much funds a corporate can donate to a political party out of the profits it earns. That upper limit has been removed. There is no move towards a level playing field. Today as per information available with the EC and the Income Tax Department, and as reported by the political parties, 90% of the funds go to just one party. This does not allow for a level playing field. Another important issue on electoral funding is that of Electoral Bonds. Some Public Interest Litigations (PILs) have been filed and even admitted in the Supreme Court. The appeal to the Court is to make the Electoral Bonds completely transparent so that voters know where political parties are getting their funds from. Such information is available in all other leading democracies worldwide like the U.S. and the EU countries. But the Government refuses to amend the law and the case has not yet been heard in the Supreme Court. Another important issue is transparency in political parties. The CIC ruling was ignored by all political parties. This has now been challenged through another set of PILs in the Supreme Court. Here also the case has been admitted but no hearing has taken place. Such transparency is there in all other countries.

What can I do as a citizen and voter?

First and foremost is to vote, and equally important, make an informed choice. This means gathering all relevant information about the candidate, funding, spending and so on. There are so many rumours floating around. Some of them are true and some are false. There is a lot of exaggeration as well. It becomes difficult to separate fact from fiction. But official websites of political parties, the Election Commission and some nonpartisan NGOs have information. It would also help if such information is shared widely with friends. Voting for any candidate or party that spends too much should be considered very carefully. It may go against the voter’s own interest.

Another long term solution is to fund political parties or one’s favourite candidate with small donations of ₹10 to ₹500. If the money is raised from voters then the winner will work for the people. Such large scale experiments have succeeded in hundreds of panchayat elections where elections were won by spending one hundredth of the other candidates.

This was because the voters funded the winning candidate.

5. The Government bailout of Vodafone Idea

What changes have been approved for Vodafone Idea? How much of a role will the Government play in the functioning of the telecom operator?

Vodafone Idea’s board approved the conversion of interest on the Adjusted Gross Revenue (AGR) and on spectrum instalments during the four-year moratorium period into equity issuable to the Government. This means that the Government will likely hold 35.8% in the company.

The move will help Vodafone Idea address near-term liquidity concerns by significantly reducing its payment burden. It will also help the company free up funds for investments in improving network quality as well as for investments in 5G.

Vodafone Idea is now in a better financial position to raise external funds and possibility of future flexibility in payments to the Government is also possible. On the other hand, this raises some concerns on how much the Government would get involved.

The story so far: Struggling telecom operator Vodafone Idea’s board on Tuesday approved the conversion of interest on the Adjusted Gross Revenue (AGR) and on spectrum instalments during the four-year moratorium period into equity issuable to the Government. This is in line with the telecom package approved by the Union Cabinet in September. The company had in October opted to exercise the option to defer the AGR-related dues as well as spectrum auction instalments by a period of four years.

As per Vodafone Idea estimates, the Net Present Value (NPV) of the interest is expected to be about ₹16,000 crore. The equity shares will be issued to the Government at par value of ₹10 per share. Both are subject to confirmation by the Department of Telecommunications (DoT).

Following the conversion, the Government will likely hold 35.8% in the company. This will result in dilution to all existing shareholders of the telco, including promoters. Vodafone Group holding will go down to 28.5% from 44.4% and for the Birla Group, to 17.8% from 27.7%.

What does the telecom package say about conversion of dues into equity?

One of the major decisions in the telecom relief package was to offer telcos a moratorium of up to four years in annual payment of dues arising out of the Supreme Court’s judgment on AGR as well as on dues payments for spectrum previously purchased.

The Government also gave telcos a one-time opportunity to exercise the option of paying interest for the four years on deferred spectrum instalments and AGR dues by way of conversion into equity of the NPV of such interest amount. Details of the interest amount furnished by the company will have to be certified by the DoT. Equity shares will be issued to the Government on a preferential basis as the relevant date for pricing was 14.08.2021. Edelweiss Securities notes that the pricing at which shares will be issued is lower than the current market price, but come at a 58% premium to the relevant date of pricing.

Industry analysts had termed the flexibility offered by the Government as crucial for the survival of debt-laden Vodafone Idea, which ensures that India remains a three-private player market, while also blunting the urgency to raise tariffs.

How will the move help Vodafone?

Vodafone Idea’s total gross debt stood at ₹1,947.8 billion as of September 30, 2021, comprising deferred spectrum payment obligations of ₹1,086.1 billion, AGR liability of ₹634 billion and debt from banks and financial institutions of ₹227.7 billion, the company had said.

The move will help Vodafone Idea address near-term liquidity concerns by significantly reducing its payment burden. It also eases some concerns over the debt burden even though it remains a major issue.

As per analysts, this will help the company free up funds for investments in improving network quality as well as for investments in 5G. The move is also likely to improve the company’s ability to secure long-term funding.

What will the Government’s role be?

Following the conversion, the Government will become the largest shareholder in Vodafone Idea. At the same time, it will be the largest creditor of the company. This may have both positive and negative fallouts.

While there is no immediate clarity on the extent of Government’s involvement in the running of the business, Vodafone MD and CEO Ravinder Thakkar had previously said that in all conversations with the Government leading up to the reforms, the Centre had made it clear that it had no interest in owning, acquiring or running any telecom company afresh.

UBS in a note pointed out that Vodafone Idea is now in a better financial position to raise external funds and possibility of future flexibility in payments to the Government is also possible; for, it would be in the Government’s interests to protect the equity value of the company. On the other hand, this raises some concerns in management style and governance, depending on how much the Government would get involved in operations.

Vodafone Idea has also said that it would be amending the Shareholders Agreement (SHA) for reducing the minimum qualifying threshold from 21% to 13%. This means existing promoters will continue to exercise certain governing rights e.g. appointment of directors and relating to appointment of certain key officials, despite their decline in holdings.

Are tariff increases in the offing?

Deutsche Bank Research said that an increase in tariffs is more likely now as “as operators realise that waiting out VI’s demise is now a much longer and less likely event”. It also said there was greater regulatory protection possible and the two other private operators – Bharti Airtel and Reliance Jio – will need to be careful to not offend the Government with fierce promotions that undermine Vodafone Idea. Further, it added that the Government as owner of a large portion of the industry will be getting more feedback on the economic impact of its policies, and will probably be more sensitive of policy impact on operators.

This may be just what the company had been seeking. As per the company’s latest investor presentation, its subscriber base stood at 253 million for the quarter ended September 2021 with a market share of 23.7% —behind Bharti Airtel and Reliance Jio. Its subscriber base totalled 272 million a year earlier. When Vodafone India and Idea Cellular announced their intent to merge in March 2017, the combined entity was the largest telecom player with close to 400 million customers and 35% customer market share.

What lies ahead?

Though the move brings temporary relief to the company, significant growth in average revenue per use (ARPU) remains a critical to the company’s long-term viability. “ARPU needs to increase to ₹250, from its current ₹109, over the next 3-4 years for it to sustain the leverage,” Edelweiss said.

Likewise, Citi Research added that while the near-term existential concerns had been addressed, the onus is on the company to successfully complete its capital raise, accelerate network investments, and stem subscriber losses. There is also still considerable uncertainty on the ability of the company to meet its enhanced payments to the Government after the moratorium period ends, which would require far more meaningful tariff increases and potentially further Government relief.

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