PM IAS OCT 07 NEWS ANALYSIS

US’s No Oil Producing and Exporting Cartels (NOPEC) Bill

In News

• Recently, the No Oil Producing and Exporting Cartels (NOPEC) bill was passed by a Senate committee which intends to protect U.S. consumers and businesses from engineered oil spikes.

Key Points

• Background:
  • Several attempts to pass NOPEC over more than two decades have long worried OPEC’s de facto leader Saudi Arabia, leading Riyadh to lobby hard every time a version of the bill has come up.
• Way to fight high prices of fuels: 
  • US legislation and antitrust lawsuits have emerged as a possible tool to tackle high fuel prices. 
  • But implementing it could also have some dangerous unintended consequences.

What is the NOPEC bill?

• Purpose of the Bill: 
  • The bipartisan NOPEC bill would tweak U.S. antitrust law to revoke the sovereign immunity that has protected OPEC+ members and their national oil companies from lawsuits. 
  • If signed into law, the U.S. attorney general would gain the option to sue the oil cartel or its members, such as Saudi Arabia, in federal court.
• Earlier a similar Bill was introduced but was not passed. What has changed now?
  • Previous versions of the NOPEC bill have failed amid resistance by oil industry groups, including the top U.S. oil lobby group, the American Petroleum Institute (API). 
  • But anger has risen in Congress about gasoline prices that earlier this year helped fuel inflation to the highest level in decades.
• Issue in the Bill: 
  • It is unclear exactly how a federal court could enforce judicial antitrust decisions against a foreign nation. 
  • The United States could also face criticism for its attempts to manipulate markets by its planned release of 165 million barrels of oil from the emergency oil reserve between May and November.
  • NOPEC would create further instability in the marketplace and exacerbate existing challenges in international commerce. 
  •  NOPEC legislation could ultimately lead to overproduction by OPEC, bringing prices so low that U.S. energy companies have difficulty boosting output. Saudi Arabia and other OPEC countries have some of the world’s cheapest and easiest reserves to produce.
  • The Bill could lead to unintended blowback, including the possibility that other countries could take similar action on the United States for withholding agricultural output to support domestic farming.
    • In 2019, for example, Saudi Arabia threatened to sell its oil in currencies other than the dollar if Washington passed a version of the NOPEC bill. 
    • Doing so would undermine the dollar’s status as the world’s main reserve currency, reduce Washington’s clout in global trade, and weaken its ability to enforce sanctions on nation-states.

OPEC

• It is a permanent, intergovernmental Organization, created at the Baghdad Conference on September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.
• The OPEC Secretariat is the executive organ of the Organization of the Petroleum Exporting Countries (OPEC). It is located in Vienna.
• In 2016, OPEC allied with other top non-OPEC oil-exporting nations to form an even more powerful entity named OPEC+ or OPEC Plus.
• OPEC+ came into existence, in part, to counteract other nations’ capacity to produce oil, which could limit OPEC’s ability to control supply and price.
• Objectives:
  • To coordinate and unify the petroleum policies of its Member Countries .
  • To ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.
• OPEC+

• OPEC+, which groups the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia.
• It agreed to steep production cuts, curbing supply in an already tight market. 

Sugar Production in India

In News

• India overtakes other countries to become the world’s largest producer, consumer of Sugar, and second largest exporter of sugar.

Key Points

• Production: 
  • A record amount of sugarcane—more than 5000 Lakh Metric Tons (LMT)—was produced in the nation during the sugar season Oct. to Sep. (2021–22), of which around 3574 LMT was crushed by sugar mills to make about 394 LMT of sugar (Sucrose). 
  • Out of this, 359 LMT of sugar was produced by sugar mills, while 35 LMT of sugar was diverted to the manufacturing of ethanol. 
• Exports: 
  • Exports brought in Rs. 40,000 crores in foreign currency
  • The largest exports of 109.8 LMT, which were made without any financial aid and continued through 2020–21, is another achievement of the season. 
• It became possible because: 
  • This achievement of the Indian sugar industry was made possible by favourable worldwide prices and Indian Government Policy. 
• Employment and Jobs: 
  • In addition to having a significant impact on the rural livelihoods of the approximately 5 lakh directly employed individuals in sugar mills and the 50 million sugarcane farmers, the sugar industry is a major agro-based sector. 
  • Additionally, jobs are created in a number of ancillary activities related to transportation, machine repair, and the provision of agricultural inputs.
• Output from sectors:
  • The current annual output of the Indian sugar industry is approximately Rs. 80,000 crores. As of 31 July 2017, the country had 732 installed sugar factories with enough crushing capacity to generate around 339 lakh MT of sugar. 
  • The capacity is split almost evenly between units in the cooperative and private sectors.
• No financial aid needed till now: 
  • Without any financial help (subsidy) from the government, sugar mills bought sugarcane worth more than 1.18 lakh crore and released payments totaling more than 1.12 lakh crore during Sugar Season(SS) 2021–22. 
  • Therefore, the fact that the cane debt at the end of the sugar season is less than 6,000 crore indicates that 95% of the cane debt has already been paid. 
  • It is also significant that more than 99.9% of the cane dues are paid for SS 2020–21.
• Revenue from Ethanol sale: 
  • The growth of ethanol as a biofuel sector in the last five years has greatly aided the sugar sector.
  • The conversion of sugar to ethanol has resulted in better financial positions for sugar mills due to:
    • Faster payments, 
    • Reduced working capital requirements, and 
    • Less fund blockage due to less surplus sugar with mills.
  • Sugar mills/distilleries made around 18,000 crores in revenue from the sale of ethanol during 2021-22, which also played a role in the early settlement of farmers’ cane dues. 
  • Expansion predicted: 
    • Sugar diversion to ethanol is predicted to expand from 35 LMT to 50 LMT in the upcoming season, generating approximately 25,000 crores in revenue for sugar mills.
    • The government has been encouraging sugar mills to divert sugar to ethanol and export surplus sugar so that sugar mills can pay cane dues to farmers on time and mills can operate in better financial conditions

Sugar

• Pricing policy :
  • The concept of Statutory Minimum Price (SMP) of sugarcane was replaced with the ‘Fair and Remunerative Price (FRP)’ of sugarcane for 2009-10 and subsequent sugar seasons with the amendment of the Sugarcane (Control) Order, 1966 in 2009.
    • Under the FRP system, the farmers are not required to wait till the end of the season or for any announcement of the profits by sugar mills or the Government. 
    • The new system assures margins on account of profit and risk to farmers, irrespective of the fact whether sugar mills generate profit or not and is not dependent on the performance of any individual sugar mill.
    • The FRP has been determined on the basis of recommendations of the Commission for Agricultural Costs and Prices and after consultation with State Governments and other stakeholders.
• Sugar Subsidy:
  • Sugar was distributed through the Targeted Public Distribution System (TPDS) by the States/UTs at subsidized prices for which the Central Government was reimbursing @ 18.50 per kg of sugar distributed by the participating State Governments /UT Administrations. 
  • The scheme was covering all BPL population of the country as per 2001 census and all the population of the North Eastern States / special category/ hilly states and Island territories. 
    • The National Food Security Act, 2013 (NFSA) is now being universally implemented by all 36 States/UTs. Under the NFSA, there is no identified category of BPL; however, the Antyodaya Anna Yojana (AAY) beneficiaries are clearly identified. 
• Location of Sugar Industry in India:
  • Sugar industry is broadly distributed over two major areas of production- Uttar Pradesh, Bihar, Haryana and Punjab in the north and Maharashtra, Karnataka, Tamil Nadu and Andhra Pradesh in the south.
  • South India has tropical climate which is suitable for higher sucrose content giving higher yield per unit area as compared to north India.

Challenges for Sugar Industry in India

• Dependence on Monsoon: Apart from irrigation equipped northern states, Sugarcane is largely grown in rainfed regions of central and southern India. So, a good monsoon becomes extremely important.
• Hurdle for Export of surplus sugar: The international sugar prices are low compared with India’s domestic raw sugar price by almost Rs.12 – Rs.13 a kg, creating low incentive for export of surplus sugar. Due to inadequate exports, farmers are not compensated well for the produce.
• Low Productivity: India has the largest area under sugarcane cultivation in the world but the yield per hectare is extremely low and is even lower in North India than in South India.
• Low Sugar Recovery rate: Average rate of sugar recovery from the sugar cane is less than 10% whereas in other sugar producing areas like Java, Hawaii and Australia, it is 14%.
• Government Pricing Policy: The government policy, based on a dual price system, discourages the entrepreneurs from making investment for further growth and improvement.
• Short smashing season: Sugar creation is an occasional industry with a short smashing season-changing regularly from 4 to 7 months in a year. It causes monetary misfortune and occasional work for laborers and absence of full use of sugar plants.

Way Ahead

• In October, 2021, the government announced an incentive to encourage sugar companies to divert excess sugar cane stock in producing ethanol, which can be blended with petrol and used as fuel in vehicles.
• Besides, this is also a good solution to address the problem of excess sugar production in the country.

Poverty and Shared Prosperity Report 2022

In News

• Recently, the World Bank has released the report titled Poverty and Shared Prosperity 2022: Correcting Course.

Major Highlights of the report

• Poverty
  • The world is unlikely to meet the goal of ending extreme poverty by 2030.
  • 70 million people were plunged into poverty in 2020, the largest one-year increase since global poverty monitoring began in 1990. 
  • An estimated 719 million people subsisted on less than $2.15 a day by the end of 2020. 
• COVID pandemic and the war in Ukraine

• The global poverty reduction has been slowing down since 2015 but the Covid pandemic and the war in Ukraine have completely reversed the outcomes.
• Inequalities

• They too have risen.
• The poorest people bore the steepest costs of the pandemic: income losses averaged 4 per cent for the poorest 40 per cent, double the losses of the wealthiest 20 percent of the income distribution.
• Global inequality rose for the first time in decades.

• Global median income
  • It declined by 4 per cent in 2020, the first decline since measurements of median income began in 1990.
    • The median divides the income distribution into two equal parts: one-half of the cases falling below the median income and one-half above the median. 
• India’s poverty levels
  • Poverty has gone up in India too.
  • Previous estimates suggested a poverty headcount rate at the US$1.90 poverty line of 10.4 percent in 2017.
    • The latest estimate based on Sinha Roy and van der Weide (2022) shows that poverty at the US$1.90 poverty line was 13.6 percent in 2017.

Major challenges as cited by the report

• The report uses data from the Centre for Monitoring Indian Economy (CMIE), because there are no official estimates of poverty available since 2011.
  • The most recent survey data released by the National Sample Survey Office of India used to measure poverty is the 2011/12 National Sample Survey (NSS). 
  • The government decided not to release the 2017/18 NSS round because of concerns about data quality.

• Biggest poor population
  • Lack of data could not have left India out of the poverty estimates simply because India is one of the countries with the biggest poor population.
• Poverty and Shared Prosperity 2020
  • Because of India’s size, the lack of recent survey data for the country significantly affects the measurement of global poverty, as was evident in Poverty and Shared Prosperity 2020.

Way forward

• Fiscal policy
  • Considering the initial country conditions in terms of fiscal space it does offer opportunities for policy makers in developing economies to step up the fight against poverty and inequality.
    • The average poverty rate in developing economies would have been 2.4 percentage points higher without a fiscal response.
• Government spending
  • It proved far more beneficial to poverty reduction in the wealthiest countries, which generally managed to fully offset Covid-19’s impact on poverty through fiscal policy and other emergency support measures.
• Resources
  • Developing economies had fewer resources and therefore spent less and achieved less.
  • Upper-middle-income economies offset just 50 per cent of the poverty impact.
  • Low- and lower-middle income economies offset barely a quarter of the impact. 

What is Poverty?It is a multidimensional concept. It can be defined as a condition in which an individual or household lacks the financial resources to afford a basic minimum standard of living.Economists and policymakers estimate “absolute” poverty as the shortfall in consumption expenditure from a threshold called the “poverty line”. Committees in India so far on poverty estimationThe working group of 1962V N Dandekar and N Rath in 1971Y K Alagh in 1979 D T Lakdawala in 1993 Suresh Tendulkar in 2009 C Rangarajan in 2014. The government did not take a call on the report of the Rangarajan Committee; therefore, poverty is measured using the Tendulkar poverty line.Government’s initiatives in this contextMahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS)Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM) Deen Dayal Upadhyay – Gramin Kaushalya Yojana (DDU-GKY)Pradhan Mantri Awaas Yojana – Gramin (PMAY-G)Pradhan Mantri Gram Sadak Yojana (PMGSY)Shyama Prasad Mukherjee National RuRBAN Mission (SPMRM) and National Social Assistance Programme (NSAP), and programmes of Department of Land Resources, viz., Watershed Development Component of Pradhan Mantri Krishi Sinchai Yojana (WDC-PMKSY).Pradhan Mantri Jan Dhan YojanaSchemes for Financial Assistance:Pradhan Mantri Kisan Samman NidhiPradhan Mantri Jan Dhan YojanaIntegrated Rural Development Programme (IRDP)

Moonlighting

In News

• Moonlighting has been a controversial topic in recent months after a few companies sacked their employees citing it as a reason. 

More about Moonlighting

• What is Moonlighting?
  • Moonlighting — or employees working for remuneration with entities other than their employers.
    • Moonlighting is neither new nor unusual. 
    • The practice has been around for a while with scores of professionals such as doctors, teachers, and consultants, routinely doing so for years. 
• Reasons for surge in Moonlighting in recent years:
  • Upcoming work structure:
    • In the last few years, the prevalence of remote working, and hybrid work structures made it more mainstream in certain industries.
  • Pandemic changing the work dynamic:
    • During the pandemic, those with desk jobs had more time on their hands and thus it was easier to take on a few projects outside of work. 
      • A private study said that at least 60% of 400 employees surveyed said they themselves had or knew someone who had engaged in moonlighting.
  • The superfluous employers:
    • The dispensable attitude that many employers demonstrated during COVID-19 has led to an erosion of job loyalty among employees. 
    • Now more than ever, people are aware that organisations can give up on them, and that they must safeguard their own interests.
  • Skill enhancement:
    • For a lot of professionals, moonlighting has also become a way to upskill, learn new things, and ensure they don’t become redundant in their careers.

• Indian companies reacting to moonlighting:
  • Wipro sacked 300 employees following the discovery that they were working for rival firms on the side, leading to a conflict of interest. 
  • Infosys has warned staff against moonlighting, saying it could lead to termination.
  • On the contrary, a few other companies like for example Swiggy announced a ‘moonlighting policy’ that allows employees “to pursue their passion for economic interests alongside their full-time employment.”
• Issue:
  • Moonlighting in turn has raised larger questions about issues related to job loyalty, employee satisfaction, employer-employee dynamics, and the future of work in a post-pandemic world.

Legalities concerning Moonlighting

• Statute:
  • Moonlighting is not defined in any of the statutes in India.
  • However, there are enactments that deal with double employment. 
  • Factories Act on double employment:
    • Factories Act deals with restriction on double employment stating that “No adult worker shall be required or allowed to work in any factory on any day on which he has already been working in any other factory, save in such circumstances as may be prescribed”. 
    • However, this enactment is applicable only to employees working in factories.
• Court judgments:
  • Moonlighting is subject to the law of the land. 
  • The sphere of employment cannot be extended by the employer beyond working hours and outside his place of employment, which is the principle laid down in the Supreme Court judgment. 
    • In other words, the employee can choose to arrange his affairs as he pleases beyond the working hours of the employer.
• Punitive action against moonlighting:
• Unless an employer is able to prove that an employee acted against the interest of the company, Courts may not uphold severe punishment of termination of employment.

Way Ahead

• The court jurisdiction:
  • The Courts of law in India dealing with employment are Writ Courts and Labour Courts. 
    • These Courts exercise jurisdiction based on equity or fairness. 
  • The Courts may lean in favour of the employee unless the contravention of the employee has led to serious prejudice and loss to the employer.
• For employers:
  • Eventually, organisations need to understand that they don’t own all of their employees’ time, nor should they expect to. 
  • What they pay for are fixed work hours defined by targets, set out in contracts. 
• Call for side gig:
  • Delineating clearly between side gigs for gainful employment versus projects that require data confidentiality, an ethical moonlighting policy could be an effective way for both employees and employers to meet midway.

Gig EconomyAbout:The gig economy is about individual workers carrying out tasks for clients through the intermediation of a platform attributing those tasks and taking care of the transfer of payment on a task-by-task basis.Significance:The gig economy is based on temporary, or freelance jobs, often involving connecting with clients or customers through an online platform. The gig economy can benefit workers, businesses, and consumers by making work more adaptable to the needs of the moment and the demand for flexible lifestyles.Time flexibility: Workers operating in the gig economy are allowed to work any of the hours they desire.Income flexibility: It is an increasingly attractive market due to the sheer flexibility that allows individuals to earn extra income.Platform CompanyAbout:A platform company is a business that creates foundational technology upon which other companies are born and scaled. Companies like Apple, Google, Amazon and Alibaba have used the model to grow exponentially and grab significant market share from established firms. Platforms represent a big change in the way industries have traditionally been organized.Significance:Platform companies offer flexibility and choice of labour to all workers in general, and women in particular, empowering them to monetise their idle assets when and where they want It makes them an attractive opportunity for women and persons with disabilities.Women are more likely to take up platform jobs after their education and marriage.India’s Gig Sector:An estimated 56% of new employment in India is being generated by the gig economy companies across both the blue-collar and white-collar workforce.The gig economy can serve up to 90 million jobs in the non-farm sectors in India with a potential to add 1.25% to the GDP over the “long term”.As India moves towards its stated goal of becoming a USD 5 trillion economy by 2025, the gig economy will be a major building block in bridging the income and unemployment gap.

Strengthening the CSR Framework

Growth and related issues

In News

• Recently, the opinion has emerged that Strengthening the Corporate Social Responsibility (CSR) framework is a profitable idea.

Data of CSR participation of companies

• Rise in spending:
  • Ever since the establishment of the Corporate Social Responsibility (CSR) regime in India (under Section 135 of the Companies Act 2013), CSR spending in India has risen from ?10,065 crores in 2014-15 to ?24,865 crores in 2020-21. 
    • But there is no data to verify whether this increase is commensurate with the increase in profits of Indian and foreign (having a registered arm in India) companies. 
• Zero spendings: 
  • There were 2,926 companies in 2020-21 with zero spending on CSR. 
• Decline:
  • Companies spending less than the prescribed limit of 2% rose from 3,078 in 2015-16 to 3,290 in 2020-21. 
  • There was also a decline in the number of companies participating in CSR — 25,103 in FY2019 to 17,007 in FY2021.

Corporate Social Responsibility (CSR)Rationale:Companies are morally obligated to contribute back to society in addition to their obligations to consumers or shareholders since they rely on societal assets to operate efficiently.Corporate social responsibility enables businesses to participate in a variety of socially responsible initiatives.About:The Companies Act encourages companies to spend 2% of their average net profit in the previous three years on CSR activities.It is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. Statute:The CSR concept in India is governed by Section 135 of the Companies Act, 2013, Schedule VII of the Act and Companies (CSR Policy) Rules, 2014. Monitoring and report filing:Under the existing regulation, monitoring is by a board-led, disclosure-based regime, with companies reporting their CSR spends annually to the Corporate Affairs Ministry (MCA) through filing of an annual report. Key CSR Areas: Environmental management, Eco-efficiency, Responsible sourcing, Stakeholder engagement, Labour standards and working conditions, Employee and community relations, Social equity, Gender balance, Human rights, Good governance, and Anti-corruption measures.Significance of CSR:Helps companies to achieve a balance of economic, environmental and social imperatives (“Triple-Bottom-Line-Approach”);Companies can make a valuable contribution to poverty reduction; Enhanced access to capital and markets, increased sales and profits; Directly enhances the reputation of a company and strengthens its brand image leading to enhanced customer loyalty.

Issues with CSR spending

• Excess spendings:
  • If a company spends an amount in excess of the minimum 2%, as stipulated, the excess amount is liable to be set off against spending in the succeeding three financial years. 
  • The latter provision in the Act weakens the former provision since the requirement of 2% is only a minimum requirement. 
    • Ideally, companies should be encouraged to spend more than this. 
• Companies’ own foundations: 
  • Besides, many private companies have registered their own foundations/trusts to which they transfer the statutory CSR budgets for utilisation. 
  • It is unclear if this is allowed under the Companies Act/CSR rules.
• Skewed spendings: 
  • One of the provisions of the Act is that the company should give preference to local areas/areas around it where it operates. 
  • This is logical. However, a private report says that 
    • 54% of CSR companies are concentrated in Maharashtra, Tamil Nadu, Karnataka, and Gujarat (receiving the largest CSR spends) 
    • While populous Uttar Pradesh and Madhya Pradesh receive little.
  • A high-level committee observed in 2018 that –
    • Although the emphasis on ‘local area’ in the Act is only directionary a balance has to be maintained. 
    • Unfortunately, this ambiguity has left much to the discretion of the boards of these companies in the absence of clear percentages for local spending vis-à-vis other area spending.
• No focus on environmental spendings:
  • The Act deals with broader environmental issues to create a countervailing effect. 
  • However, an analysis of CSR spending (2014-18) reveals that while most CSR spending is in education (37%) and health and sanitation (29%), only 9% was spent on the environment.
• Output rather than quality:
  • A major issue with this design is that it focuses on output rather than quality of the expenditure and its impact. 

Suggestions & way ahead

• Need of a national-level platform:
  • There is a need to curate a national-level platform centralised by the MCA where 
    • All States could list their potential CSR-admissible projects. 
    • Companies can assess where their CSR funds would be most impactful across India. 
    • Companies can also give preferential treatment to areas where they operate. 
  • Invest India’s ‘Corporate Social Responsibility Projects Repository’ on the India Investment Grid (IIG) can serve as a guide for such efforts. 
• Combining with other government schemes:
  • This model would be very useful for supporting deserving projects in the 112 aspirational districts and projects identified by MPs under the Government’s Sansad Adarsh Gram Yojana.
• Focussing on environmental restoration:
  • Companies need to prioritise environmental restoration in the area where they operate, earmarking at least 25% for environment regeneration.
• Community participation:
  • All CSR projects should be selected and implemented with the active involvement of communities, district administration and public representatives.
• Recommendations by the high-level committee in 2018:
  • These recommendations should be incorporated in the current CSR framework to improve the existing monitoring and evaluation regime. 
  • The recommendations include: 
    • Strengthening the reporting mechanisms with enhanced disclosures concerning selection of projects, locations, implementing agencies, etc.; 
    • Bringing CSR within the purview of statutory financial audit with details of CSR expenditure included in the financial statement of a company, and 
    • Mandatory independent third-party impact assessment audits. 

Quality Council of India (QCI)

In News 

• The Union Minister of Commerce and Industry asked the Quality Council of India (QCI) to strive to bring about convergence of all the various quality and standards organisations in the country

About Quality Council of India (QCI)

• It was established as a National body for Accreditation on recommendations of the Expert Mission of EU after consultations in Inter-ministerial Task Force, Committee of Secretaries and Group of Ministers through a Cabinet decision in 1996. 
  • Accordingly, QCI was set up through a PPP model as an independent autonomous organisation with the support of Government of India 
• It is a non-profit organisation registered under the Societies Registration Act XXI of 1860. 
• Ministry : The Department of Industrial Policy and Promotion, Ministry of Commerce and Industry was designated as the nodal point for all matters connected with quality and QCI to structure and help implement the Cabinet decision.   
• Objectives : QCI has been established to create a mechanism for independent third party assessment of products, services and processes. 
  • It plays a pivotal role at the national level in propagating, adoption and adherence to quality standards in all important spheres of activities including education, healthcare, environment protection, governance, social sectors, infrastructure sector and such other areas of organised activities that have significant bearing in improving the quality of life and wellbeing of the citizens of India.