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Daily Current Affairs 16.09.2021 (Lifeline for telcos as govt. offers four-year moratorium on dues, Hardly the India-China century Deng envisioned)

Daily Current Affairs 16.09.2021 (Lifeline for telcos as govt. offers four-year moratorium on dues, Hardly the India-China century Deng envisioned)

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1.Lifeline for telcos as govt. offers four-year moratorium on dues

Reforms include redefinition of AGR concept; 100% FDI under automatic route

The Cabinet on Wednesday approved several measures to extend a lifeline to the cash-strapped telecom sector, including a redefinition of the much-litigated concept of adjusted gross revenue (AGR) to exclude non-telecom revenue and a four-year moratorium on players’ dues to the government.

Telecom Minister Ashwini Vaishnaw said the government was keen on ensuring that there were more players in the sector and consumers retained choices when asked about the fears of a duopoly emerging with just two major telecom players — Bharti Airtel and Reliance Jio.

In all, Mr. Vaishnaw announced nine structural reforms and five procedural reforms for the sector, including a fixed calendar for spectrum auctions with an extended tenure of 30 years for future spectrum allocations, and a mechanism to surrender and share spectrum. Foreign direct investment (FDI) in the sector has also been allowed up to 100% under the automatic route, from the existing limit of 49%. Together, these measures would pave the way for largescale investments, including for 5G technology deployment, and generate more jobs, he said.

‘Path-breaking reforms’

Aditya Birla Group chairman Kumar Mangalam Birla termed the changes “path-breaking reforms” that could “unshackle” the industry by addressing its “long-standing” issues, while Vodafone group CEO Nick Read called it a “constructive initiative” after the sector “has struggled for many years”.

Experts are, however, not sure the package would be enough to keep their troubled joint venture Vodafone Idea Limited (VIL) afloat as the moratorium on AGR dues, spectrum dues and interest payments would only provide temporary relief with these deferred dues to be payable eventually with interest. The tariff regime still needs a reboot for players to sustain operations, they said, echoing Bharti Airtel top brass.

Mr. Read hinted at the need for further measures, seeking the “continued strong support of the Telecom Minister and the Finance Minister” for VIL to continue to contribute to “India’s digital ambitions”.

“There was a regime of heavy interest, penalty and interest on penalty on payment of licence fees, spectrum user charges and all kinds of charges, which has been rationalised,” the Minister said, adding that AGR calculations would exclude all non-telecom revenue from now, and penalties had been completely scrapped.

The earlier definition of AGR, backed by the Telecom Department and upheld by the Supreme Court in 2019, had made telcos liable to pay ₹1.6 lakh crore. Last September, the top court granted players 10 years to pay up, starting April 2021. The change in definition that will reduce the burden on telcos, applies only prospectively, so past dues remain payable.

Interest on those dues will now be compounded annually instead of monthly and the Minister said interest would be charged at a ‘reasonable’ rate of MCLR plus 2%. MCLR refers to the lowest lending rate banks are permitted to offer.

Foreign Direct Investment

  • Definition: FDI is the process whereby residents of one country (the home country) acquire ownership of assets for the purpose of controlling the production, distribution and other activities of a firm in another country (the host country).
    • It is different from Foreign Portfolio Investment where the foreign entity merely buys stocks and bonds of a company. FPI does not provide the investor with control over the business.
  • Three Components:
    • Equity capital is the foreign direct investor’s purchase of shares of an enterprise in a country other than its own.
    • Reinvested earnings comprise the direct investors’ share of earnings not distributed as dividends by affiliates, or earnings not remitted to the direct investor. Such retained profits by affiliates are reinvested.
    • Intra-company loans or intra-company debt transactions refer to short- or long-term borrowing and lending of funds between direct investors (or enterprises) and affiliate enterprises.
  • Routes through which India gets FDI:
    • Automatic Route: In this, the foreign entity does not require the prior approval of the government or the RBI.
    • Government Route: In this, the foreign entity has to take the approval of the government.
      • The Foreign Investment Facilitation Portal (FIFP) facilitates the single window clearance of applications which are through approval route.
      • It is administered by the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry.
  • Government Measures to Promote FDI:
    • In 2020, factors such as a swift response in combating the Covid crisis, favourable demographics, impressive mobile and internet penetration, massive consumption and technology uptake, played an important role in attracting the investments.
    • Launch of Schemes attracting investments, such as, National technical Textile Mission, Production Linked Incentive Scheme, Pradhan Mantri Kisan SAMPADA Yojana, etc.
      • The government has elaborated upon the initiatives under the Atmanirbhar Bharat to encourage investments in different sectors.
    • As a part of its Make in India initiative to promote domestic manufacturing, India deregulated FDI rules for several sectors over the last few years.

2.Hardly the India-China century Deng envisioned

For the current Chinese leadership, the 21st century is destined to be China’s alone, with India to be shown its place

Fifteen months after the clashes between Chinese and Indian soldiers in the Galwan Valley, India-China relations are at their lowest ebb in living memory.

To be sure, there have always been political tensions even before, both over each country’s territorial claims over land controlled by the other, and over such long-term problems as China’s “all-weather” alliance with our hostile separated sibling, Pakistan, and our hospitality to the Dalai Lama, who was granted refuge when he fled Tibet in 1959. But neither country had allowed these tensions to overwhelm them: China had declared that the border dispute could be left to “future generations” to resolve, and India had endorsed the “One China” policy, refusing to support Tibetan secessionism while limiting official reverence for the Dalai Lama to his status as a spiritual leader.

The line is no provocation

India has usually shown no desire to rock the boat. Its actions and statements have usually been designed not to provoke our northern neighbour, but to relegate the border problem to the back burner while enabling trade relations with China (now worth close to $100 billion) to flourish. India made it clear that it was unwilling to join in any United States-led “containment” of China; its traditional obsession with preserving its “strategic autonomy” after two centuries of colonial rule made it wary of the blandishments of the West.

Ironically, before Galwan, 2020 was supposed to be a landmark year for the two countries’ bilateral relations. In October 2019 in Mahabalipuram, at their 18th meeting in nine years, Chinese President Xi Jinping and Indian Prime Minister Narendra Modi had grandly pledged to take relations between their two countries to “greater heights”. To mark the 70th anniversary of formal diplomatic relations between the two countries, they announced they would conduct 70 joint activities, including further improving their burgeoning trade, supporting scholarly research into their ancient civilizational links, and even exchanging military delegations, in a grand show of Sino-Indian cooperation.

There is much connect

This wasn’t just fluff. The two countries had indeed developed multiple avenues of engagement. From negligible levels till 1991, trade with China had grown to become one of India’s largest trading relationships. Prime Minister Modi, an early enthusiast, had lifted residual restrictions on bilateral Chinese investment in strategic sectors of the Indian economy (notably ports, airports, power generation and telecoms technology), so that by 2020, Chinese investment (current and planned) stood at about $26 billion with infrastructure projects accounting for about half the total. India engages with China diplomatically in the BRICS (an association of Brazil, Russia, India, China, and South Africa), as well as conducting annual summits of RIC (Russia-India-China). India is an enthusiastic partner in the Chinese-led Asian Infrastructure Investment Bank and the New Development Bank (NDB), formerly referred to as the BRICS Development Bank.

But it has become increasingly apparent that the policy of side-stepping contentious issues and encouraging bilateral economic relations has played into Chinese hands. The People’s Liberation Army has used the seemingly benign situation to repeatedly undertake “minor” military incursions, inflict small-scale military setbacks on India, take a few square kilometres of territory along the Line of Actual Control (LAC) for local tactical purposes, and then declare peace. Mutual disengagements are duly announced, both sides claim the crisis is over, but China establishes and fortifies its new deployment. These mini-crises always end with the Chinese in a better position on the ground than before. Each incident establishes a new “normal” on the LAC.

The Chinese strategy

In the Galwan clash, the Chinese troops seem to have been engaged in a tactical move to advance their positions along areas of the LAC that it covets, in order to threaten Indian positions and interdict patrols. After the recent incursions, the Chinese now reportedly control over 900 square kilometres of area in Ladakh along the LAC. They are threatening India’s construction of roads, bridges and similar infrastructure on undisputed Indian territory, a belated effort to mirror similar Chinese efforts near the LAC in Tibet. Rather than merely patrolling, they have established a fixed presence in these areas well beyond China’s own ‘Claim Line’, occupied the “Finger Heights” near Pangong Tso Lake, pitched hundreds of tents, constructed concrete structures and built additional kilometres of road along the LAC. The objective seems to be to extend Chinese troop presence to the intersection of the Galwan river and the Shyok river, which would make the Galwan Valley off bounds to India. The Chinese have constructed permanent structures in the area of their intrusion and issued statements claiming that sovereignty over the Galwan valley has “always belonged” to China.

China’s strategy seems to be to consolidate the LAC where it wants it, so that an eventual border settlement — that takes these new realities into account — will be in its favour. That is the longer-term plan: Beijing keeps saying the border should be left to future generations to settle, knowing full well that each passing year increases China’s relative economic, military and geopolitical strength vis-à-vis India, while shifting the LAC in its favour.

In the meantime, border incidents keep the Indians off balance and demonstrate to the world that India is not capable of challenging China, let alone offering security to other nations. Whereas Deng Xiaoping had told then-Indian Prime Minister Rajiv Gandhi in 1988 (picture) that the 21st century would be “India and China’s century”, the current Chinese leadership has no patience for such pablum. They believe — indeed believe they know — that it is destined to be China’s century alone, and are all too happy to show India its subsidiary place in the pecking order.

India’s options

India’s tactical options are unenviable: it has reinforced its military assets on the LAC to prevent deeper incursions for now, and hopes to press the Chinese to restore the status quo ante through either diplomatic or military means. Chinese and Indian officials are currently engaged in diplomatic and military-to-military dialogue to ease tensions, but de-escalation has been stalled for months, with China behaving as if their disengagement is already complete.

India has responded with largely symbolic acts of economic retaliation, banning Chinese apps in India on grounds of data security. It is likely that Chinese companies will be barred from various lucrative opportunities in the vast Indian market, as two of them, Huawei and ZTE, have been from the ongoing trials to be picked to build India’s 5G telecoms infrastructure. India has also reimposed tighter limits on Chinese investment in projects such as railways, motorways, public-sector construction projects, and telecoms, a reversal of the openness to China that the Modi administration had initially shown.

The economic angle

Yet, India is far too dependent on China for other vital imports — such as pharmaceuticals, and even the active ingredients to make them, automotive parts and microchips, all needed by Indian manufacturers — that many in New Delhi fear it would be shooting itself in the foot if it acted too strongly against China. Today, India’s dependence on China for its non-consumption economy remains high; what is more, imports from China have become indispensable for India’s exports to the rest of the world. Various manufacturing inputs, industrial equipment and components, and even some technological know-how come from China; eliminating them could have a seriously negative effect on India’s economic growth at a time when, thanks mainly to the COVID-19 crisis, our GDP is estimated to have shrunk dramatically. And there are limits to the effectiveness of any Indian retaliation: trade with China may seem substantial from an Indian perspective, but it only represents 3% of China’s exports. Drastically reducing it would not be enough to deter Beijing or cause it to change its behaviour.

This range of considerations seems to leave only two strategic options for New Delhi: reconciling itself to playing second fiddle to an assertive China in the region, or seeking strength and leverage by aligning itself with a broader international coalition against Chinese ambitions. Since the first is indigestible for any democracy, is China de facto pushing India into doing something it has always resisted — allying with the West?

Shashi Tharoor is a third-term Member of Parliament representing Thiruvananthapuram and an award-winning author of 22 books, including most recently, ‘The Battle of Belonging’

Recently, twenty Indian Army personnel, including the Commanding Officer of 16th Bihar Regiment, lost their lives at the hands of Chinese troops in the Galwan Valley of Ladakh.

This was an unprovoked attack by the Chinese border troops on Indian soldiers, after confirming the implementation of the de-escalation plan by the Chinese in Galwan valley. The plan of de-escalation is based on a phased withdrawal of troops to their respective predetermined ground positions, were decided on June 6 during the corps commanders-level talks.

The incident represents a watershed in India’s relations with China and marks the end of a 45-year chapter which saw no armed confrontation involving loss of lives on the Line of Actual Control (LAC).

What is the issue?

  • The Indian and Chinese armies are engaged in the standoff in Pangong Tso, Galwan Valley, Demchok and Daulat Beg Oldie in eastern Ladakh.

    • A sizable number of Chinese Army personnel even transgressed into the Indian side of the de-facto border in several areas including Pangong Tso.
    • The actions on the northern bank of Pangong Tso are not just for territorial gains on land, but enhanced domination of the resource-rich lake.
  • The stand-off at Ladakh’s Galwan Valley has escalated in recent weeks due to the infrastructure projects that India has undertaken in the recent years. India is building a strategic road through the Galwan Valley – close to China – connecting the region to an airstrip.
    • China is opposed to any Indian construction in the area. In 1962, a stand-off in the Galwan area was one of the biggest flashpoints of the 1962 war.
  • The border, or Line of Actual Control, is not demarcated, and China and India have differing ideas of where it should be located, leading to regular border “transgressions.” Often these don’t escalate tensions; a serious border standoff like the current one is less frequent, though this is the fourth since 2013.
    • Both countries’ troops have patrolled this region for decades, as the contested 2,200-mile border is a long-standing subject of competing claims and tensions, including a brief war in 1962.
  • Reasons: The violent clash happened when the Chinese side departed from the consensus to respect the LAC and attempted to unilaterally change the status quo.
    • It is part of China’s ‘nibble and negotiate policy’. Their aim is to ensure that India does not build infrastructure along the LAC. It is their way of attaining a political goal with military might, while gaining more territory in the process.

What is the Line of Actual Control (LAC)?

  • The LAC is the demarcation that separates Indian-controlled territory from Chinese-controlled territory. India considers the LAC to be 3,488 km long, while the Chinese consider it to be only around 2,000 km.
  • The India-China LAC in Ladakh is an outcome of the territory illegally retained by China after the 1962 conflict. The Chinese occupation of parts of Aksai Chin is not supported by historical or legal documents.
  • It is divided into three sectors:
    • the eastern sector which spans Arunachal Pradesh and Sikkim
    • the middle sector in Uttarakhand and Himachal Pradesh
    • the western sector in Ladakh
  • The Galwan Valley area comes under Sub Sector North (SSN), which lies just to the east of the Siachen glacier and is the only point that provides direct access to Aksai Chin from India.

How to Deal with a Problem?

  • Devolution of comprehensive China strategy: Strong political direction, mature deliberation and coherence are keys to handling the situation.
    • The Army can make tactical adjustments and manoeuvres to deter the Chinese, but a comprehensive China strategy and its determination should devolve on those tasked with national security policy in the highest echelons of the Government of India.
  • Strategic communication: The responsibility of effective strategic communication too rests with political leadership. It is important to perceive the signals of transgressions on a serious note and adopt adequate strategy with clear instructions for forces.
  • Clarification on LAC: India should take the initiative to insist on a timely and early clarification of the LAC. Pockets of difference of alignment as perceived by each side have to be clearly identified and these areas demilitarised by both sides through joint agreement pending a settlement of the boundary.
    • Diplomatic channels must continue to be open and should not be fettered in any way because their smooth operability is vital in the current situation.
  • Scaling down of military contact: India must stand resolute and firm in the defence of territory in all four sectors of the border. Contacts between the two militaries through joint exercises and exchanges of visits of senior Commanders should be scaled down for the foreseeable future.
  • Counterbalance for the outside world: India’s leverage and balancing power within the Indo-Pacific and the world beyond stems from its strong democratic credentials, the dynamism of its economy, its leading role in multilateral institutions.
    • The strategic advantage of its maritime geography is an asset possessed by few nations, and which must be deployed much more effectively to counterbalance the Chinese ingress into this oceanic space that surrounds us.
  • Reconsider RCEP engagement: The time has also come for India to reconsider its stand on joining the Regional Comprehensive Economic Partnership.
    • If India is to disengage from economic involvement with China, and build the capacities and capabilities it needs in manufacturing, and in supply chains networks closer home, it cannot be a prisoner of the short term.
    • It is time to boldly take the long view in this area as also on its South Asia policy.

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