AUGUST 24 CURRENT EVENTS

Draft Arunachal Inheritance Bill

Context:

The draft Arunachal Pradesh Marriage and Inheritance of Property Bill, 2021, envisaging land rights for girls has met with stiff opposition in the State.

Experts have asked the Arunachal Pradesh State Commission for Women (APSCW) to scrap certain provisions from the proposed Arunachal Pradesh marriage and inheritance bill, keeping in view the public sentiment and the state’s interest. However, the Arunachal Pradesh State Commission for Women (APSCW) has defended a “contentious” Bill it has drafted for providing equal inheritance rights to women in the State.

Relevance:

GS-II: Social Justice and Governance (Issues related to women, Government Policies and Initiatives)

Dimensions of the Article:

1. Arunachal Pradesh Marriage and Inheritance of Property Bill, 2021
2. Controversial Provisions of the Bill

About the Arunachal Pradesh Marriage and Inheritance of Property Bill, 2021

• Essential conditions of marriage, registration of marriage: The bill is made applicable to any person who belongs to any indigenous scheduled tribe of Arunachal Pradesh. It provides that a marriage between parties may be solemnized according to local customary rites and rituals of the either party.
• Restitution of conjugal rights, void and voidable marriage: The bill also provides for restitution of conjugal rights stating when either of the party has, without reasonable excuse, withdrawn from the society of the other, the aggrieved party may apply by petition to the district court for restitution of conjugal rights.
• Grounds for dissolution of marriage (divorce): Marriage solemnized after the commencement of the act can be dissolved on various grounds.
• Permanent alimony and maintenance: A wife who is unable to maintain herself can file application to the court for maintenance. The court may order that the husband shall pay to her an appropriate lump sum of permanent alimony.
• Bill’s status on polygamy: Every person who, being at the time married, procures a marriage of himself or herself to be solemnized under this act shall be deemed to have committed an offence under Section 494 or Section 495 of the Indian Penal Code (45 of 1860), as the case may be, and the marriage so solemnized shall be void.

Controversial Provisions of the Bill

• An Arunachal Pradesh Scheduled Tribe (APST) woman married to non-APST man shall enjoy any immovable property inherited from the head of the family in her lifetime.
• In the event of her death, her husband and her heirs would have full rights of it for disposal and alienation to any indigenous tribe of Arunachal Pradesh.
• Because of these Provisions, the draft Bill is termed as “anti-tribal”, “anti-Arunachal”, violative of customary laws and an invitation to outsiders to take over tribal land through marriage.

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RBI, IRDAI nod must for FDI in bank-led insurance

Context:

Applications for foreign direct investment in an insurance company promoted by a private bank would be cleared by the RBI and IRDAI to ensure that the 74% limit of overseas investment is not breached.

Relevance:

GS-III: Indian Economy (Economic Development in India, Government Initiatives to overcome Challenges in Economic Development)

Dimensions of the Article:

1. What is Insurance?
2. Insurance sector of India
3. About the Insurance Amendment Bill 2021
4. Impacts of the Amendment 
5. About IRDAI

What is Insurance?

• Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.
• Insurance is a capital-intensive business so has to maintain a solvency ratio. The solvency ratio is the excess of assets over liabilities.
• Simply put, as an insurance company sells more policies and collects premiums from policyholders, it needs higher capital to ensure that it is able to meet future claims.

Insurance sector of India

• The insurance regulator, the Insurance Regulatory and Development Authority of India (IRDAI), mandates that insurers should maintain a solvency ratio of at least 150 percent.
• Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company.
• In addition to these, there is a sole national re-insurer, namely the General Insurance Corporation of India (GIC Re).
• Other stakeholders in the Indian Insurance market include agents (individual and corporate), brokers, surveyors, and third-party administrators servicing health insurance claims.
• Nationalization of life (LIC Act 1956) and non-life sectors (GIC Act 1972) and the constitution of the Insurance Regulatory and Development Authority of India (IRDAI) in 1999 are the major legislation’s regarding insurance sector in India.
• The opening up of insurance sector to both private and foreign players in 2000 and the increase in the foreign investment cap to 26% from 49% in 2015 are the first steps towards privatisation of the insurance sector.
• The notification of 100% foreign direct investment (FDI) for insurance intermediaries (announced in the Union Budget of 2019-20) has further liberalised the sector.

About the Insurance Amendment Bill, 2021

• The Insurance Amendment Bill, 2021, seeks to amend the Insurance Act, 1938.
• The Insurance Act, 1938 provided the framework for functioning of insurance businesses and regulates the relationship between an insurer, its policyholders and its shareholders. It also had provisions regarding the regulator (the Insurance Regulatory and Development Authority of India).

Amendments in the Bill

• The Bill seeks to increase the maximum foreign investment allowed in an Indian insurance company.
• The Act allows foreign investors to hold up to 49% of the capital in an Indian insurance company, which must be owned and controlled by an Indian entity.
• The Bill increases the limit on foreign investment in an Indian insurance company from 49% to 74%, and removes restrictions on ownership and control. However, such foreign investment may be subject to additional conditions as prescribed by the central government.
• The Act requires insurers to hold a minimum investment in assets which would be sufficient to clear their insurance claim liabilities.
• If the insurer is incorporated or domiciled outside India, such assets must be held in India in a trust and vested with trustees who must be residents of India. The Act specifies in an explanation that this will also apply to an insurer incorporated in India – and the Amendment removes this explanation.

Impacts of the Amendment

• The FDI limit increase is also expected to provide access to fresh capital to some of the insurance companies, which are struggling to raise capital from their existing promoters.
• This would not only increase the solvency position for some insurers but would provide long-term growth capital for other companies to invest in newer technologies.
• These technologies would not only help in managing losses but also in customer acquisition and thus insurance penetration.
• The additional funds could be used to invest in technology to adapt to the evolving customer needs like responsive service through digital platforms.
• It is an important shift in stance as the increase in the FDI cap means insurance companies can now be foreign-owned and -controlled as against the current situation wherein they are only Indian-owned and -controlled.
• The move is expected to increase India’s insurance penetration or premiums as a percentage of GDP, which is currently only 3.76 per cent, as against a global average of more than 7 per cent.

How this impacts Indian promoters of insurance companies?

• Most of the Indian promoters of insurance companies are either Indian business houses or financial institutions like banks.
• Many entered into the insurance space when they were financially strong but are now struggling to cater to the constant need to infuse capital into their insurance joint ventures.
• Over the years, the sector has seen large-scale consolidation and exits of many promoters.
• A higher FDI cap will mean that more promoters could now completely exit or bring down their stakes in their insurance joint ventures.

What higher does FDI mean for policyholders?

• Higher FDI limits could see more global insurance firms and their best practices entering India.
• This could mean higher competition and better pricing of insurance products.
• Policyholders will get a wide choice, access to more innovative products, and a better customer service and claims settlement experience.

About IRDAI

• The Insurance Regulatory and Development Authority of India or the IRDAI is the apex body responsible for regulating and developing the insurance industry in India.
• It is an autonomous body. It was established by an act of Parliament known as the Insurance Regulatory and Development Authority Act, 1999. Hence, it is a statutory body.
• The IRDAI is headquartered in Hyderabad in Telangana. Prior to 2001, it was headquartered in New Delhi. 

Functions of IRDA

• Its primary purpose is to protect the rights of the policyholders in India. 
• It gives the registration certificate to insurance companies in the country.
• It also engages in the renewal, modification, cancellation, etc. of this registration.
• It also creates regulations to protect policyholders’ interests in India.

Composition of IRDA

The Section 4 of the Insurance Regulatory Development Authority (IRDA) Act, 1999 specifies the composition of authority which consists of 10 member team appointed by the government of India which includes.

• One chairman
• Five whole time members
• Four part time members

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Fusion Ignition for the first time in U.S.

Context:

Recently, researchers in the U.S. appeared to have demonstrated “fusion ignition” for the first time.

This breakthrough has brought the world closer to the dream of near-limitless clean energy through nuclear fusion.

Relevance:

Prelims, GS-III: Science and Technology (Nuclear Technology)

Dimensions of the Article:

1. Nuclear Fusion
2. Advantages of Nuclear Fusion
3. About the Fusion Ignition experiment in the U.S.

Nuclear Fusion

• Nuclear Fusion is defined as the combining of two lighter nuclei into a heavier one.
• Such nuclear fusion reactions are the source of energy in the Sun and other stars.
• It takes considerable energy to force the nuclei to fuse. The conditions needed for this process are extreme – millions of degrees of temperature and millions of pascals of pressure.
• The hydrogen bomb is based on a thermonuclear fusion reaction. However, a nuclear bomb based on the fission of uranium or plutonium is placed at the core of the hydrogen bomb to provide initial energy.

Advantages of Nuclear Fusion

• Fusing atoms together in a controlled way releases nearly four million times more energy than a chemical reaction such as the burning of coal, oil or gas and four times as much as nuclear fission reactions (at equal mass). 
• Fusion has the potential to provide the kind of baseload energy needed to provide electricity to the cities and the industries.
• Fusion fuels are widely available and nearly inexhaustible. Deuterium can be distilled from all forms of water, while tritium will be produced during the fusion reaction as fusion neutrons interact with lithium.
• Fusion doesn’t emit harmful toxins like carbon dioxide or other greenhouse gases into the atmosphere. Its major by-product is helium: an inert, non-toxic gas.
• Nuclear fusion reactors produce no high activity, long-lived nuclear waste.
• Fusion doesn’t employ fissile materials like uranium and plutonium (Radioactive tritium is neither a fissile nor a fissionable material).
• It is difficult enough to reach and maintain the precise conditions necessary for fusion—if any disturbance occurs, the plasma cools within seconds and the reaction stops.

About the Nuclear Fusion Ignition experiment in the U.S.

• The U.S. researchers applied laser energy on fuel pellets to heat and pressurise them at conditions similar to that at the centre of our Sun which triggered the fusion reactions.
• These reactions released positively charged particles called alpha particles (helium), which in turn heated the surrounding plasma.
• The heated plasma also released alpha particles and a self-sustaining reaction called ignition took place.
• Ignition helps amplify the energy output from the nuclear fusion reaction and this could help provide clean energy for the future.
• Reproducing the conditions at the centre of the Sun will allow studying:
  1. Plasma, the state of matter that has never been created in the lab before.
  2. Gain insights into quantum states of matter.
  3. Conditions closer and closer to the beginning of the Big Bang.

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Ubharte Sitaare fund

Context:

Union Finance Minister Nirmala Sitharaman is set to launch a Rs 250 crore worth alternate investment fund (AIF) on August 2021 for small and mid-sized export-oriented companies.

Relevance:

GS-III: Indian Economy (Growth and Development of Indian Economy, Industrial Development, Government Policies and Initiatives)

Dimensions of the Article:

1. “Ubharte Sitaare”: Alternate Investment Fund
2. Other Initiatives to Promote MSME Sector

“Ubharte Sitaare”: Alternate Investment Fund

• The Alternate Investment Fund named Ubharte Sitaare will be jointly sponsored by the Exim Bank of India and SIDBI. While the fund size is Rs 250 crore, it will have a greenshoe option of Rs 250 crore.
• Exim Bank of India and SIDBI will invest in the fund by way of equity and equity-like products in export-oriented units, in both manufacturing and services sectors.
• A greenshoe option is an over-allotment option, which is a term that is commonly used to describe a special arrangement in a share offering for example an initial public offering (IPO) that will enable the investment bank to support the share price after the offering without putting their own capital at risk. 
• The Alternate Investment Fund will identify Indian enterprises with potential advantages that are currently underperforming or unable to tap their latent potential to grow.
• It will offer a mix of both financial and advisory services and structured support through investments in equity or equity-like instruments, debt (funded and non-funded) and technical assistance (advisory services, grants and soft loans) to the Indian companies.
• A press release from Exim Bank’s Ubharte Sitaare Programme (USP) identified Indian companies that have the potential to be future champions in the domestic arena while meeting global demands.
• Exim Bank and SIDBI have together already developed a robust pipeline of over 100 potential proposals across a range of sectors, such as pharma, auto components, engineering solutions, agriculture and software.

Other Initiatives to Promote MSME Sector

1. Scheme of Fund for Regeneration of Traditional Industries (SFURTI): It aims to properly organize the artisans and the traditional industries into clusters and thus provide financial assistance to make them competitive in today’s market scenario.
2. A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE): The scheme promotes innovation & rural entrepreneurship through rural Livelihood Business Incubator (LBI), Technology Business Incubator (TBI) and Fund of Funds for start-up creation in the agro-based industry.
3. Interest Subvention Scheme for Incremental Credit to MSMEs: It was introduced by the Reserve Bank of India wherein relief is provided upto 2% of interest to all the legal MSMEs on their outstanding fresh/incremental term loan/working capital during the period of its validity.
4. Credit Guarantee Scheme for Micro and Small Enterprises: Launched to facilitate easy flow of credit, guarantee cover is provided for collateral free credit extended to MSMEs.