GS Paper 3

ESMA to penalise but let EU banks deal with India CCPs

European Union's financial market regulator, European Securities and Markets Authority (ESMA) has proposed derecognising 6 Indian counterparty clearing corporations (CCPs) from April 30, 2023. However, now ESMA has said that it will allow European banks to deal with Indian Central Counterparties (CCPs), even after its April 30 deadline, by imposing a penal capital charge.

Six Central Counterparties to be Derecognised by ESMA are:

Clearing Corporation of India.
Indian Clearing Corporation Limited
NSE Clearing Limited.
India International Clearing Corporation Limited
Multi-Commodity Exchange Clearing Corporation Limited
NSE IFSC Clearing Corporation.

Reasons for Derecognition

European Market Infrastructure Regulation (EMIR) which regulates the recognition of third country central counterparties by ESMA mandates that:
ESMA enter into agreement with regulators of other national jurisdictions and mandates conditions such as audits and counterparties in other countries.
Regulators in India have not agreed to external audits and supervise by ESMA and want ESMA to have faith in Indian regulators.

Impact of Derecognition

As per the decisions these Third Country-CCPs will not be able to provide services to the clearing members and trading venues established in European Union.
Some of the Major Banks dealing in the domestic forex, forward, swap and equities and commodities markets include Societe Generale, Deutsche Bank and BNP Paribas (European Banks).
The de-recognition will impact these lenders as they will not be able to provide clearing and settlement facilities to their clients.
They will also have to set aside additional capital to trade in the domestic market, reports suggest. Of the total foreign portfolio investors (FPI) registered in India, close to 20 per cent are from Europe,
Banks would be able to continue doing business but would face increased capital costs as they would only be able to do bilateral trades and not go through the clearing houses.
Well India has earlier also faced such controversies wherein Europe has tried to tighten its standards across all types of markets from carbon credit, green hydrogen , which has led to improvements in Indian standards .

Central Counterparties (CCPs)

They are system providers who interpose between counterparties to contracts traded, becoming the buyer to every seller and the seller to every buyer.
CCPs perform two main functions as the intermediary in a transaction - Clearing and Settlement – Guarantee the terms of trade.
Facilitates trading and works towards efficiency and stability in the financial markets.
Reduces risk related to the counterparty and other risks like operational, settlement, market and legal risks.
Counterparty Clearing house or CCP is important in the trading world as it collects money from both the trading parties including the buyers and sellers which ensures that both parties will follow through the said agreement.
The money collected is enough to cover the potential losses in case any party fails to follow through the contract.
A CCP is authorised by RBI to operate in India under Payment & Settlement Act, 2007.
Clearing Corporation of India, Indian Clearing Corporation, NSE Clearing, Multi Commodity Exchange Clearing, India International Clearing Corporation and NSE IFSC Clearing Corporation.

Clearing Corporation of India

Clearing Corporation of India has established in 2001 to provide guaranteed clearing and settlement functions for transactions in Money, G-Secs, Foreign Exchange and Derivative Markets.
Clearing Corporation of India acts as central counterparty for all trades in G-Sec markets, Forex markets,
Promoters: Commercial banks (SBI, IDBI, ICICI Bank, Bank of Baroda and HDFC Bank) have 66%, Financial Institutions etc. holding others.

Supreme Court directs govt. to clear ₹28,000crore OROP arrears by February next year

Context:

The Supreme Court on March 20 gave the government leeway to pay in installments ₹28,000 crore in arrears due to veterans under the One Rank One Pension (OROP) scheme.
The staggered payment of OROP arrears would be made to various categories of eligible pensioners, totaling 21 lakh persons, from April 2023 till February 2024.
The entirety of the arrears was supposed to be paid by March 2023, according to an earlier deadline given by the court.

What is One rank, one pension?

OROP means that any two military personnel retiring at the same rank, with the same years of service, must get an equal pension.
While this might appear almost obvious, there are several reasons why two military personnel who may have retired at the same rank with the same years of service, may get different pensions.
Military personnel across the three services fall under two categories:
- The officers and the other ranks.
- The other ranks, which are soldiers, usually retire at age 35. Unlike government employees who retire close to 60, soldiers can thus miss out on the benefits from subsequent pay commissions. And since pensions are based on the last drawn salary, pensions, too are impacted adversely.
- Similarly, the age when officers in the military retire depends upon their ranks. The lower the rank, the earlier they superannuate. But the problem is not just that.
Benefits of Pay commissions not reaching Servicemen:
- The benefits of the successive pay commissions were not passed to servicemen who had retired earlier.
- Pensions differed for those who had retired at the same rank, with the same years of service, but years apart.

Why is there an issue with OROP arrears?

After the government’s December 2022 decision — further reiterated by a government order issued in January this year — a group of ex-servicemen moved the apex court seeking that the arrears be paid in a single instalment instead of four instalments.
The January order stated that the OROP arrears would be paid in four half-yearly installments.

The ex-servicemen in its plea said the Centre, by issuing this order, subverted the apex court’s March 2022 order, in which it had said that arrears payable to all eligible pensioners of the armed forces shall be computed and paid over accordingly within a period of three months.

What are the Centre’s issues with clearing OROP arrears in one go?

As per officials in the government, the cabinet note, which was approved by the union cabinet last year, had mentioned that installments be cleared in four installments, barring exceptions.
While the government did make an appropriation of 28,138 crores in the budget for 2023-24 for payment of OROP arrears, officials explained this does not mean that this entire budget is available to the government for a lump sum payment.
They said for every installment paid, the Ministry of Finance will have to balance cash inflows and outflows — in the absence of which the government might need to go for additional borrowings to fill the deficit. Currently, the government is not in favour of such a move.

World sparrow day

Context - National Zoological Park, New Delhi (Delhi Zoo) celebrated World Sparrow Day today.

Key Facts:

Theme – ‘I love sparrows.’
Emphasis - The role of individuals and communities in sparrow conservation.
Six sparrow species found in India:

Theme – ‘I love sparrows.’
Emphasis - The role of individuals and communities in sparrow conservation.

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Ecological significance of Sparrows:

Seed dispersion: Sparrows spread seeds to places away from the fruit tree. This is important for germination of the seeds, because if the seeds fall close to the parent plant, they would have to compete for nutrition with the mature plant. This would reduce the chance of germination of the seed as well as growth of the plant.
Biodiversity: Although primarily seed-eaters, sparrows also feed on small insects and worms such as caterpillars, beetles and aphids. Some of these creatures destroy certain plants. Sparrows keep their population in check; otherwise, the insects would have eaten certain plant species to extinction. Here also sparrows play an important role in preserving the ecosystem.
Food chain: Most birds of prey, such as eagles and falcons, eat other smaller birds. Snakes, which are also secondary consumers, are known to eat sparrows. For example, sharp-shinned hawks prefer sparrows for food. Hence they provide food for the secondary consumers.

The wide disparities in human development

Today’s Hindu newspaper (21st march 2023) has an article on disparities in human development. with the help of this article, we will analyse the various aspect of human development in India.

What is Human Development?

The United Nations Development Programme defines human development as "the process of enlarging people's choices", said choices allowing them to "lead a long and healthy life, to be educated, to enjoy a decent standard of living", as well as "political freedom, other guaranteed human rights and various ingredients of self-respect".

How to measure human development?

United Nations Development Programme created Human Development Index to evaluate and compare the level of human development in different regions around the world. It was introduced in 1990 as an alternative to conventional economic measures such as Gross Domestic Product (GDP), which do not consider the broader aspects of human development.

The HDI assesses a country’s average accomplishment in three aspects:

long and healthy life (life expectancy at birth)
knowledge (Mean year of schooling, expected years of schooling)
a decent standard of living (Gross national income per capita)

Disparities in Human development in India

The five States with the highest HDI scores are Delhi, Goa, Kerala, Sikkim, and Chandigarh. Delhi and Goa have HDI scores above 0.799, which makes them equivalent to countries in Eastern Europe with a very high level of human development.

The bottom five States are Bihar, Uttar Pradesh, Madhya Pradesh, Jharkhand, and Assam, with medium levels of human development. This category also includes States such as Odisha, Rajasthan, and West Bengal, which have HDI scores below the national average. The scores of these low-performing States resemble those of African countries such as Congo, Kenya, Ghana, and Namibia.

Does high GDP necessarily translate into high HDI?

No, it is not true because despite having the highest SGDP per capita among larger States, Gujarat and Haryana have failed to translate this advantage into human development and rank 21 and 10, respectively.

Conversely, Kerala stands out with consistently high HDI values over the years, which can be attributed to its high literacy rates, robust healthcare infrastructure, and relatively high-income levels.

Bihar, however, has consistently held the lowest HDI value among the States, with high poverty levels, low literacy rates, and poor healthcare infrastructure being the contributing factors.

What are the reasons behind regional disparities in India?

Unevenly distributed economic growth: The top 10% of the Indian population holds over 77% of the wealth. This has resulted in significant disparities in access to basic amenities, healthcare and education.

Poor quality of services: While India has made significant progress in reducing poverty and increasing access to healthcare and education, the quality of such services remains a concern. For example, while the country has achieved near-universal enrolment in primary education, the quality of education remains low.

How to reduce these disparities in human development?

This requires a multifaceted approach which includes

Address income inequality and gender inequality;
Improve access to quality social services;
Address environmental challenges;
Greater investment in social infrastructure such as healthcare, education, and basic household amenities including access to clean water, improved sanitation facilities, clean fuel, electricity and Internet in underdeveloped States.
Investment in human development and job creation, particularly for its youth

Charges Against President Putin of Russia fixed by ICC

ICC has held him responsible for the war crime of unlawful deportation of the population (children) and unlawful transfer of the population (children) from occupied areas of Ukraine to the Russian Federation for violation of the Rome Statute.
These children were taken away from orphanages and childcare homes. Many of these children have been given for adoption in Russian Federation. Law was changed in Russia, by Presidential decrees by President Putin, to expedite the conferral of Russian citizenship.
The war crimes were allegedly committed in Ukrainian occupied territory by Russian Forces on 24 February 2022.
While not a United Nations organization, the Court has a cooperation agreement with the United Nations. When a situation is not within the Court’s jurisdiction, the United Nations Security Council can refer the situation to the ICC granting it jurisdiction.

About International Criminal Court

International Criminal Court (ICC) investigates and where warranted tries individuals charged with gravest crimes of concern to international community, genocide, war crimes, crimes against humanity and crime of aggression.
ICC came into existence by the Rome Statute which established ICC as the world's first permanent international criminal court.
ICC aims to end impunity through international criminal justice, holds those responsible accountable for their crimes and helps prevent these crimes from happening again.
As a court of last resort, ICC seeks to complement, not replace, national courts.
The seat of ICC is in the Hague, Netherlands.

Rome Statute grants ICC jurisdiction over four main cases:

Crime of Genocide: Characterised by specific intent to destroy in whole or in part a national, ethnic, racial or religious group by killing its members or by others means; causing serious bodily or mental harm to members of the group; deliberately inflicting on the group conditions of life to bring about its physical destruction; imposing measures intended to prevent births within the group; or forcibly transferring children of the group to another group.
Crimes against humanity: These crimes constitute serious violations committed as part of large-scale attach against any civilian population. 15 forms of crimes against humanity listed in Rome Statute include offences such as murder, rape, imprisonment, enforced disappearances, enslavement - particularly of women and children, sexual slavery, torture, apartheid and deportation.
War crimes: They are grave breaches of Geneva conventions in context of armed conflict and include, for ex., use of child soldiers, killing of torture of persons such as civilians or prisoners of war; intentionally directing attacks against hospitals, historic monuments, or buildings dedicated to religion, education, art, science or charitable purposes.
Crime of aggression: These consists of armed force by a State against sovereignty, integrity or independence of another State. The definition of this crime was adopted through amending the Rome Statute in 2010.

Geneva Conventions

Geneva Conventions and their Additional Protocols are international treaties that contain the most important rules limiting the barbarity of war. They protect people who do not take part in the fighting and those who can no longer fight.

First Geneva Convention: Protects wounded and sick soldiers on land during war.
Second Geneva Convention: Protects wounded, sick and shipwrecked military personnel at sea during war.
Third Geneva Convention: Applies to prisoner of war.
Fourth Geneva Convention: Affords protection to civilians, including in occupied territory.
Common Article 3: Covers situations of non-international armed conflicts like traditional civil wars, internal armed conflicts that spill over into other States or internal conflicts in which third States or a multinational force intervenes alongside the government.

Additional Protocols to Geneva Conventions

Additional Protocol I: Strengthen the protection of victims of international armed conflicts.
Additional Protocol II: Strengthen the protection of victims of non-international armed conflicts.
Additional Protocol III: Created an additional emblem, the Red Crystal, which has the same international status as the Red Cross and Red Crescent emblems.

Jurisdiction with respect to State Parties

123 countries are State Parties to the Rome Statute of the International Criminal Court. Out of them 33 are African States, 19 are Asia-Pacific States, 18 are from Eastern Europe, 28 are from Latin America and Caribbean and 25 from Western Europe and other States.
ICC has jurisdiction only with respect to crimes committed after the entry into force of this Statute. ICC may exercise jurisdiction only with respect to crimes committed after the entry into force of Rome Statute for that State, unless that State has made a declaration.
A State which becomes a Party to Rome Statute accepts jurisdiction of ICC with respect to crimes listed above.
ICC may exercise its jurisdiction if one or more of the following States are Parties to this Statute or have accepted the jurisdiction of ICC:
1. State on the territory of which the conduct in question occurred or, if the crime was committed on board a vessel or aircraft, the State of registration of that vessel or aircraft.
1. State of which the person accused of the crime is a national.
Acceptance of a State which is not a party to ICC: A State may by declaration lodged with Registrar accept the jurisdiction of ICC with respect to the crime in question. (Ukraine was a not a State Party to ICC. However, Ukraine has accepted jurisdiction of ICC throughout the territory of Ukraine from 20th February 2014 onwards.)

Jurisdiction of ICC

ICC exercises jurisdiction in a situation of genocide, crimes against humanity or war crimes committed on or after 1st July 2002 and:

Crimes were committed by a State Party National, in the territory of a State Party or in a State that has accepted the jurisdiction of ICC. (Since in the present case, the alleged crimes were committed in the territory of Ukraine which is not a State party but has accepted the jurisdiction of ICC, hence ICC has jurisdiction in the present case, despite Russia not being a party to ICC).
Crimes were referred to ICC Prosecutor by the UN Security Council (UNSC) under a resolution adopted under Chapter VII of UN Charter.

New Genetic data suggest origin of COVID in animals

A new analysis of genetic samples collected from a seafood market in central China's Wuhan city shows the presence of the SARS-CoV-2 virus in raccoon dogs sold at the venue, strengthening the case for the natural origin of the COVID-19 pandemic.
Analysis established that raccoon dogs that are related to foxes and are known to be able to transmit the coronavirus deposited genetic signatures.
However, the final results could not be reached as the uploaded gene sequences now have been removed from the international scientific database, GISAID (Global Initiative on Sharing Avian Influenza Data).

UK Government backs plan to build N-Reactor on Moon

The UK Space Agency (UKSA) has backed research by Rolls-Royce looking at the use of nuclear power on the moon.

Major Highlights:

Researchers from Rolls-Royce are working on a Micro-Reactor program to develop technology that will provide the power needed for humans to live and work on the Moon.
The UKSA will provide £2.9 million ($3.52 million) of funding for the project and the firm has been asked to demonstrate how nuclear microreactors could extend the duration of future missions to the Moon.
Rolls has forecasted that its first car-sized reactor would be ready to be sent to the Moon by 2029. Relatively small and lightweight compared to other power systems, a nuclear micro-reactor for the Moon could enable continuous power regardless of location, available sunlight, and other environmental conditions.

Vaccination against Foot & Mouth disease

Department of Animal Husbandry and Dairying has reached a milestone by vaccinating around 24 crore cattle and buffaloes in the country out of a targeted population of 25.8 crores; reaching a near-universal coverage of cattle (over 95%) which is well beyond the herd immunity level.

Foot and Mouth Disease:

Foot and Mouth Disease (FMD) is a highly contagious viral vesicular disease of cloven-hoofed animals such as cattle, buffaloes, sheep, goats and pigs etc.
Once contracted, it causes abscesses and ulcers to the mouth and foot that prevent the animal from eating and walking. It does not affect humans.
FMD leads to reduction in milk yield, decreased growth rate, infertility, reduced working capacity in bullocks, trade embargo in the international market.

National Animal Disease Control Programme:

Department of Animal Husbandry and Dairying (DAHD) launched the National Animal Disease Control Programme (NADCP) in 2019, a part of the Livestock Health & Disease Control Programme.
The program aims to control Foot & Mouth Disease (FMD) through vaccination leading to its eventual eradication by 2030. Currently under this program vaccination is carried out in all cattle and buffaloes.
The program is 100% funded by the Government of India which is centrally procuring vaccines against FMD and supplying them to States.
The livestock owners are sensitized and made aware through various information, education and communication measures to get their animals vaccinated and requested to contact the nearest livestock health workers/ veterinarians to avail of the facility.
Significance: It will help in increasing the income of livestock farmers/ keepers and boost India’s trade in livestock products.

Current Influenza spike

As per the latest data from the Ministry of Health and Family Welfare, there have been 3,038 laboratory-confirmed cases of the flu in India until March 9, 2023. The majority of the flu cases are linked to the H3N2 influenza virus.

About H3N2 Influenza:

Influenza (flu) is a highly contagious respiratory illness caused by influenza viruses. H3N2 influenza, also known as the "Hong Kong flu," is a type of influenza virus that can cause respiratory illness in humans.
- Influenza viruses, which cause the infectious disease known as flu, are of four different types: A, B, C and D.
- H3N2 and H1N1 viruses are a subtype of the Influenza A virus. Influenza A is usually associated with more severe diseases and deaths.
Symptoms: H3N2 patients display symptomssimilar to COVID-19: fever, cough, breathlessness, wheezing and pneumonia. The infection usually lasts for about five to seven days.
Spread: This contagious virus can be transmitted from person to person through droplets of cough, sneezing, and physical contact after contacting a contaminated surface.Young children and people with co-morbidities like asthma, diabetes, heart disease, weakened immune systems and neurological or neurodevelopmental conditions are at a higher risk.
Prevention and cure: Self-hygiene, Social distancing and wearing masks to prevent the spread of the virus. Oseltamivir, a drug used to treat H1N1 (swine flu), has been recommended by the World Health Organization for the treatment of H3N2 cases as well. The drug is made available through the public health system free of cost.

Reasons for the spike in cases:

The virus spreads as the season changes. India usually sees two flu peaks every year — between January and March and, post-monsoon, between August and October.
Fewer flu infections during the COVID-19 pandemic has resulted in a large reservoir of people with lower immunity.
The flu virus is prone to changing its structure, i.e., an increase in flu cases can be seen usually every other year.
India’s burden of conditions like diabetes and heart disease — which are risk factors for influenza— is huge even among the young. Further, the yearly flu shot is not readily available in government set-ups, and its uptake is not high.

New NASA Space suit

NASA has upgraded its spacesuit for the upcoming Artemis III mission – NASA’s first attempt at landing astronauts on the moon since 1972. The new suit, called the AxEMU (Axiom Extravehicular Mobility Unit), will be more comfortable and designed to fit a broader array of body types and provide improved mobility.

Utility of Spacesuit:

Spacesuits help astronauts survive even in the harshest conditions of space and perform experiments and fulfil the objectives of their mission.

Spacesuits protect the human body from the extreme temperature fluctuations of space. In absence of an atmosphere, areas which receive direct sunlight become extremely hot whereas areas in the dark are frigid.
Spacesuits provide astronauts with a constant supply of air and optimum air pressure around their bodies.
Spacesuits protect astronauts from space radiation which can be extremely harmful, as well as micrometeorites and other particles moving across space, often at incredible speeds.
On the lunar surface, suits also protect astronauts from lunar dust. Much more abrasive than dust on the earth, it tends to corrode everything it comes into contact with and can potentially cause lung diseases.

Improvements made in the new spacesuit:

Increased mobility and specifically designed to deal with lunar dust.
Large clear bubble around the head provides a wider range of visibility as well as lighting, important to step into shadowed craters near the lunar south pole. The headpiece has a mount for a high-definition camera.

Indian Institute of Astrophysics researchers develop low-cost star sensor

Researchers at the Indian Institute of Astrophysics (IIA) have developed a low-cost star sensor for astronomy and CubeSat and other small satellite missions in the future.

About the star-sensor:

The star sensor named Starberry-Sense can help small CubeSat class satellite missions find their orientation in space.
Based on commercial/off-the-shelf components, this star sensor costs less than 10% of those available in the market. The brain of the instrument is a single-board Linux computer called Raspberry Pi.

Star-sensor:

The star sensor is essentially a celestial compass. Any satellite needs to know where it is pointed in space, and the instrument used for this purpose is called a star sensor.

The position of stars in the sky is fixed relative to each other and can be used as a stable reference frame to calculate the orientation of a satellite in orbit. This is done by correctly identifying the stars in the sky towards which the star sensor is pointed.

Protection of the ecology of western ghats

The Supreme Court on Friday directed the Environment Ministry to file its counter-affidavit to a petition filed by a minor, M. Kaviya, a resident of Nilgiris, seeking judicial intervention to protect the Western Ghats from destruction.

Several environmental activists and NGOs such as the Goa Foundation and Peaceful Society, Bandora, from across six Western Ghats States have joined hands with Ms Kaviya to seek judicial intervention to reinstate the recommendations of the Dr Madhav Gadgil led Western Ghats Ecology Expert Panel’s report.

Intergenerational Inequality

Ms Kaviya and seven other children have sought “justice in terms of intergenerational equity”, saying that unbridled “development” in the ancient mountain system would leave their generation without a future or a livelihood.

They have sought an “effective, sustainable and credible conservation regime for the Western Ghats, its diverse ecosystems and ecologically sensitive zones”.

Importance of western ghat

Goa Foundation said the petition concerned a total land area of 1,29,037 sq. km. While 50 million people were directly dependent on the Western Ghats and its ecology, another 200 million were indirectly dependent. The future of the entire southern India was intimately linked with the healthy survival of the Western Ghats.

Gadgil committee recommendations: It recommended variable protection to 100% area of western ghats i.e., Protected areas, ESZ1, ESZ2, ESZ3.

ESZ1 almost all developmental activities to be restricted in it.

It asked for a bottom-up approach rather than a top-down approach to planning.

It also asked for decentralisation and more powers to local authorities.

It recommended constituting a statutory body Western Ghat Ecology Authority under EPA 1986 at central and state levels.

Problems with the Gadgil report:

Its recommendations were not realistic in nature as it limits the developmental need of the country

Hence government constituted a new committee under Kasturi Rangan and it recommended (2013):

Only 37% area of the western ghats is under ESA.

Highly polluting industries should be banned by ESA.

No thermal power is allowed and hydropower projects are allowed only after a detailed study.

Mining in ESA areas should be phased out within the next five years or at the time of the expiry of the mining lease, whichever is earlier.

But this report has many lacunas;

It gave more power to bureaucrats as compared to local bodies.

Many fear that farmers would get evicted if the Kasturi Rangan Committee report is implemented. Under this report, the mining and quarry lobbies are expected to flourish. When these lobbies and tourism flourish, it will be disastrous to the environment.

The panel used remote sensing and aerial survey methods for zonal demarcation of land in the western ghats it led to the inclusion of ecologically non-sensitive areas under ESA and left out many ecologically sensitive areas.

Due to erroneous recommendations of the Kasturi Rangan report, people turned violent due to fear of their eviction if their village fall under the purview of ESA (123 villages were under ESA as per Kasturi Rangan report), hence Kerala’s CM (Oommen Chandy) appointed another committee to study the Kasturi Rangan Report.

Recommendations of Oommen Chandy report:

It recommended stopping land acquisition proceedings according to the Kasturi Rangan committee report.

Exclusion of inhabited regions and plantations from the purview of ecologically sensitive areas while the Kasturi Rangan report had said 123 villages fall under ESA purview.

MoEF recently came out with the order barring mining in ecologically fragile areas (EFA not to be confused with ESA), setting up of thermal power plants and restricting buildings to less than 20,000 sq. ft in 123 villages mentioned in the Kasturi Rangan report.