Daily Current Affairs 21.07.2020 (Privatisation, Railways, Non Aligned Movement)

Daily Current Affairs 21.07.2020 (Privatisation, Railways, Non Aligned Movement)

1. Editorial – Big reform on the wrong track

The planned privatisation of some services of the Indian Railways could impact maintenance, operations and welfare & V. Carmelus

  • The Indian Railways is the lifeline of India. With its vast network across the length and breadth of India, it is not just a mere transporter of passengers and goods but also a social welfare organisation.
  • While the addition of more trains with high technology coaches to meet passenger expectations is a welcome feature, it is the way of privatising these trains that is the problem.
  • The Railway Board says the “objective of the initiative was to introduce modern technology rolling stock with reduced maintenance, reduced transit time, boost job creation, provide enhanced safety, provide world class travel experience to passengers, and also reduce demand supply deficit in the passenger transportation sector”. But this is a step which will lead to dual control and split responsibility, resulting in higher fares, depriving the common man of travel by these trains, and repercussions in terms of maintenance and operations.
  • The United Kingdom and Japan have privatised their rail systems completely and not partially, but most countries have retained their rail networks for public convenience.
  • In India, the selection of private parties using the tendering process is now under way and proposes two-stage competitive bidding. While short listing will be based on financial capacity (with sharing of gross revenue), the selected parties can fix fares by themselves. These parties have to pay fixed haulage charges, energy charges based on actual consumption, and a share in gross revenue through the bidding process.
  • The main criterion is procurement of coaches by the concessionaire and form them into rakes of 16 coaches each, with maintenance at 10 major stations from where the trains will operate to their destinations. For maintenance, existing depots and yard facilities at different stations will be made use of. But this will result in conflict as it is a daily exercise. Only where adequate facilities are not available, the concessionaire has to invest in creating the required facilities. The project entails a total investment of ₹30,000 crore by private enterprises. The cost of investment at each of those stations varies from ₹2,300 crore to ₹3,500 crore.

Fixing responsibility

  • According to the project information memorandum issued by the Railway Board, railway crew will work the trains (151 trains in 109 routes) which will be maintained by the private investor. All the other infrastructure (track and associated structures, stations, signalling, security and their daily maintenance) owned by the Railways will be fully utilised in running trains. Thus, the responsibility of the private investor ends with investment in the procurement and maintenance of coaches. Train operation, safety and dealing with every day problems rests with the Railways. In case of an unfortunate event, how do we fix responsibility when the coaches are owned by the investor but operated by the Railways and its staff? Provision of an independent regulator to resolve disagreement, discords and disputes will not solve day-to-day problems of dichotomy unless the basic issue is resolved.
  • Coaches in India are not of international standard (ICF Design – 1955 Swiss design or LHB Design (German 2000 design). At the time of introduction, these technologies were 20 years old. There have been sea changes in coach designs and the Indian Railways should go in for state-of-the-art coach designs using ‘transfer of technology (ToT) with world leaders. Our coach building units are capable of building such train sets with ToT.

Speed and changes

  • While raising the maximum running speed to 160 kmph is welcome measure, accomplishing this in the timeframe given will be difficult. Nearly all trunk routes in the existing network are speed limited to 110 kmph (maximum speed); very few permit speeds of upto 120-130 kmph. To raise it to 160 kmph, as proposed, there has to be track strengthening, elimination of curves and level crossing gates and strengthening of bridges. It also calls for track fencing especially in densely populated areas. Also, from the timings for different trains given by the Railway Board there is no appreciable reduction in transit time for most trains when compared with the timings of the fastest train now operating on that route. This requires a critical review.
  • It is surprising to note in the proposal that the Railways or government have no role in fixing passenger fares. This is an unacceptable situation. On the contrary, full liberty is being given to the concessionaire to unilaterally fix fares for these proposed trains that are on a par with air and air conditioned bus fares. It will be beyond the common man’s reach. Fare concessions extended to several categories of people will not be made available by the private investor. The very objective of commissioning the Railways as a public welfare transport organisation is defeated.
  • In the private sector, operations are run with an eye on staff costs which can endanger safety. Also, the private investor is not bound to follow reservation regulations in employment, in turn depriving employment opportunities for those who are on the margins of society.
  • In this context, the message of the then Prime Minister, after Independence, and at the time of the inauguration of the Central and Western Railways is apt: “The Railways are and will continue to be our greatest national undertaking. They deal intimately with scores of millions of people in the country and have to look after their comfort and convenience. They deal also with a very large number of employees whose welfare should always should be their concern.”
  • There should be no need for the government to take a dual role of a facilitator as well as a participant. In the case of the metro railway services (Hyderabad, for example), an ideal PPP project, the concessionaire is solely responsible for daily maintenance, operation, passenger amenities and staff issues. The State government steps in when it comes to land, power, permissions, law and order, etc. Fare determination is in consultation with the government.


  • Instead of a private entrepreneur, who would be new to the job, why not entrust this to the Indian Railway Catering and Tourism Corporation, a government undertaking which has gained experience in running the Tejas Express trains? There will be ‘unity of command’ in maintenance, operation and passenger services under the single administration of the Railways and its undertaking. As per the Eligibility Conditions specified in “Request for Qualification (RFQ)” Para [graph] 2.2.1(b), Public Undertakings such as the IRCTC are eligible to participate in tendering for this project. Para [graph] 2.2.3 stipulates operation & maintenance experience in maintaining rolling stock. The IRCTC is well-suited for this role.
  • When the government of India is prepared to invest over a lakh-crore rupees to introduce the Bullet train on a single sector and which would cater to the elite, why not invest in the IRCTC, a government undertaking, in the new project, which will serve crores of people across the country?
  • This project of privatisation of trains should not result in the common man being deprived of travel facilities. We wish to reiterate that the Indian Railways is a strategic resource for the nation and provides a vital public good. Hence, it should not be judged solely on its profit-generating capability or market-based return on investment.
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2. India will never be a part of an alliance system: Jaishankar

‘Global shifts opening spaces for middle powers like India’

  • Non-alignment is an old concept today, but India will never be a part of an alliance system, according to External Affairs Minister S. Jaishankar.
  • Speaking about the consequences of global shifts, including the United States and the assertiveness of China, he said they were opening spaces for middle powers like India, Japan, the European Union and others.
  • “Non-alignment was a term of a particular era and geopolitical landscape. One aspect was independence, which remains a factor of continuity for us,” Mr. Jaishankar said at a virtual conference organised by CNBC-TV18 on the “Geopolitics of opportunity: as the world rebalances, how should India capitalise?”
  • “The consequence of repositioning of the United States, that the big umbrella is now smaller than it used to be, has allowed many other countries to play more autonomous roles. It doesn’t affect us as much because we were never part of an alliance system and we will never be. But countries who depended more on the U.S. are finding they have to take a call themselves on many issues,” he noted.
  • India must now take more “risks”, as the world expected it to take a more proactive stance on the “big issues” of the day, including connectivity, maritime security, terrorism, climate change and terrorism, he stated.
  • While he didn’t comment on the ongoing tensions over the Line of Actual control (LAC), the Minister said that India had moved slowly in comparison to China on the economic front, and that China’s economy was now five times that of India’s despite them being the same size in 1988.
  • “In comparison with China and with South East Asia, we could have done better. We didn’t intensively industrialise and push manufacturing, we opened up much later, a full decade and a half after China, and then didn’t commit to full reforms the way China did,” Mr. Jaishankar said, speaking with Singapore-based academic C. Rajamohan and businessman Sunil Munjal.
Non-Aligned Movement (NAM)
The NAM is an international forum of 120 developing countries that believe in the ideal of non-alignment with the major power blocs. It was established in 1961 in Belgrade, former Yugoslavia under the leadership of the then Indian Prime Minister Pandit Jawaharlal Nehru, President of Egypt Gamal Abdel Nasser and the President of Yugoslavia Josip Broz Tito.In the aftermath of the Second World War and the decolonisation process, many countries in the developing world in Asia and Africa felt the need for a strong movement towards securing peace and prosperity, and establishing security for all countries.This was when the world was divided into two power blocs, that of the USA and the Soviet Union, especially after the signing of the NATO and the Warsaw Pact.Most of these countries felt the need for mutual cooperation and coordination with respect to not formally aligning with or against any of the power blocs.The collapse of colonialism and the cold war led to the need for improved coordination among the Global South.It is interesting to note that the term ‘third world’ arose during the cold war era to denote countries that were not aligned to either of the two power blocs. Functions
NAM does not have a permanent secretariat or a formal hierarchy. Its administration is rotational and non-hierarchy. NAM takes decisions by consensus, which need not be universal, but only requires substantial agreement.It has a Coordinating Bureau which is based at the UN in New York City.NAM meets every three years at the NAM Summit Conference of Heads of State.At the Summit, a chair is chosen, which is a post held for three years.In NAM, every member country has equal weight.The current chairperson of NAM is Ilham Aliyev, the President of Azerbaijan. He holds the post till 2022.
NAM Member Countries
The list of NAM member countries are given in the table below: There are currently 120 member countries in the NAM. India is a founding member of the organisation. Our neighbours Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan, Myanmar and Afghanistan are also members. China has an observer status. All African countries except Western Sahara and South Sudan are members of NAM.In the Americas, many South and Central American nations are members.Among European countries, Azerbaijan and Belarus are members of NAM.There are many organisations and countries that are given the observer status. Some of them are the United Nations, African Union, Arab League, Commonwealth Secretariat, Organisation of Islamic Cooperation, etc.It is the largest inter-country organisation outside of the UN.
NAM Objectives
One of the chief objectives of NAM was “to create an independent path in world politics that would not result in member States becoming pawns in the struggles between the major powers.” The three elements that define the approach of the organisation are: Right of independent judgementStruggle against imperialism and neo-colonialismUse of moderation in relations with all big powers In the current times, an objective of the organisation is restructuring the international economic order. NAM espouses ideals such as the right to self-determination, anti-aparthied, anti-colonialism, national independence, territorial integrity and sovereignty of nations, anti-imperialism in all forms, non-adherence to multilateral military pacts, disarmament, against racism, against foreign occupation and domination, peaceful coexistence among all countries, strengthening the UN, no use of threat or force in international relations, socio-economic development, etc.
Evolution of NAM
Most historians agree that the most important antecedent to the formation of the Non-Aligned Movement was the Bandung Conference of 1955.The Bandung Asian African Conference brought together 29 heads of state/government of the first post-colonial generation of leadership from Africa and Asia.This gathered Nehru, Nasser, Tito, Kwame Nkrumah of Ghana and Sukarno of Indonesia under one umbrella. They were leaders of international standing and attracted many other countries of Asia and Africa into the NAM.In this conference, the Ten Principles of Bandung were adopted and these would be the guiding principles of NAM.
The 10 Principles of Bandung are:
1. Respect of fundamental human rights and of the objectives and principles of the Charter of the United Nations.
2. Respect for the sovereignty and territorial integrity of all countries.
3. Recognition of the equality among all races and of the equality among all nations, both large and small.
4. Non-interference or non-intervention into the internal affairs of another country.
5. Respect the right of every nation to defend itself, either individually or collectively, in conformity with the Charter of the UN.
6. Non-use of collective defence pacts to benefit the specific interests of any of the great powers.
7. Refraining from acts or threats of aggression and use of force against the territorial integrity or political independence of any nation.
8. Settlement of all international disputes by peaceful means.
9. Promotion of mutual interest and cooperation.
10. Respect for justice and international obligations.

The formal establishment of NAM took place in Belgrade in Yugoslavia in 1961 with 25 developing countries. This is when the first NAM Summit Conference took place. India is a founding member.One of the ideals behind NAM was that the newly-independent nations, that had just come out of the yoke of colonialism, should not lose their independence by aligning with either one of the Great Powers (USA and USSR).The founding fathers of NAM were keen to call it a movement and not an organisation so as to avoid the bureaucratic implications of the term ‘organisation’.The founding members also stressed on the fact that NAM did not mean the members were to be passive or neutral to world affairs, but rather, it affirmed the belief that all countries were free to have an independent opinion on international affairs.
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3. India aims to pare PSU bank count to just five: sources

Plan entails privatising lenders including Bank of India, IOB

  • India is looking to privatise more than half of its state-owned banks to reduce the number of government-owned lenders to just five as part of an overhaul of the banking industry, government and banking sources said.
  • The first part of the plan would be to sell majority stakes in Bank of India, Central Bank of India, Indian Overseas Bank, UCO Bank, Bank of Maharashtra and Punjab & Sind Bank, leading to an effective privatisation of these state-owned lenders, a government official said.
  • “The idea is to have 4-5 government owned banks,” said one senior government official. At present, India has 12 state-owned banks.

New privatisation plan

  • The official said that such a plan would be laid out in a new privatisation proposal the government is currently formulating, and this would be put before the Cabinet for approval.
  • India’s Finance ministry declined to comment.
  • The Centre is working on a privatisation plan to help raise money by selling assets in non-core companies and sectors when the country is strapped for funds due to lack of economic growth caused by the COVID-19 pandemic.
  • Several government panels and the RBI have recommended a maximum of five state-owned banks.
  • “The government has already said that there will be no more mergers (between PSBs) so the only option for them is to divest stakes,” a senior official at a state-owned bank said.
  • Last year, the government had merged 10 state-owned banks into four.
  • The divestment may not happen in this financial year due to unfavourable market conditions, the sources said.
  • India expects bad loans at its banks could double after the crisis brought the economy to a standstill.
  • As a result, the Centre may need to pump in nearly $20 billion into the PSBs.
Why Privatising Banks Bulk of NPAs: The banking system is overburdened with the non-performing assets (NPAs) and the majority of which lies in the public sector banks.
Issue of Dual Control: PSBs are dually controlled by RBI (under the RBI Act, 1934) and Finance Ministry (under the Banking Regulation Act, 1949) Thus, RBI does not have all the powers over PSBs that it has over private sector banks, such as the power to revoke a banking licence, merge a bank, shut down a bank, or penalize the board of directors.
Lack of Autonomy: Public sector bank boards are still not adequately professionalized, as the government still decides board appointments (as the Bank Bureau board is not fully functional). This creates an issue of politicization and interference in the normal functioning of Banks.
Difference of Incentives: Private and public sector banks are driven by different incentives. For example, Private banks are profit-driven whereas the business of PSBs is disrupted by governments schemes like farm loan waivers etc. Also, in the private sector, the shareholders’ effective control over banks may explain the absence of large-scale frauds like in public sector banks such as the Punjab National Bank episode.
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