The Montreal Protocol, is an international treaty, adopted in Montreal in 1987, that aimed to regulate the production and use of substances that contribute to ozone depletion.

Achievements of the Montreal Protocol

• Truly global participation: In 2009, the Montreal Protocol became the first UN treaty to achieve universal ratification, demonstrating the world’s commitment to ozone protection, and global environmental protection.
• Healing the ozone layer: Global observations have verified that atmospheric levels of key Ozone Depleting Substances (ODS) are going down and it is believed that with implementation of the Protocol’s provisions, the ozone layer should return to pre-1980 levels by the middle of this century.
• Supporting developing countries: With the assistance of the Multilateral Fund for the Implementation of the Montreal Protocol, developing countries had, by mid 2010, permanently phased out over 270,000 tonnes of Ozone Depleting Substances (ODS) that had been used to produce various products and have eliminated virtually all of their production of CFCs and halons.
• High rates of compliance: Taking into account all the Parties and all their phase-out commitments, the Parties to the Montreal Protocol have achieved a compliance rate of over 98%. Further, in the process of phasing-out, many countries, both developed and developing, have met their phase-out targets well ahead of the schedule.
• 2010 phase-out milestone: 1 January 2010 was the date by which all the Parties phased-out the consumption and production of chlorofluorocarbons, halons, carbon tetrachloride and other fully hydrogenated Ozone Depleting Substances (ODS).

Thus, the Montreal Protocol has indeed been successful in protecting the ozone layer. The reasons behind the success of the Montreal Protocol can be attributed to following factors which are generally absent in other environmental treaties:

• Cooperative approach: Much negotiation was held in small, informal groups leading to a genuine exchange of views amongst credible people.
• Principles based: The “precautionary principle and the concept of common, but differentiated, responsibility (CBDR) took root in the Montreal Protocol when developing countries were given longer time to phase-out ODS.
• Flexibility to accommodate newer information: The protocol could be amended to include stricter controls ie. more Ozone Depleting Substances (ODS) were added to the control list and ensure total phase out, rather than partial phase-out.
• Trade Provisions and restrictions: These limited the supplies of CFCs and other Ozone Depleting Substances (ODS) to non-signatories which forced them to ratify the Protocol.
• Clear List of Targeted Sectors: Clear articulation of chemicals and sectors allowed governments to prioritise the main sectors early.
• Institutional Support: An expert and independent Technology and Economic Assessment Panel (and its predecessors) helped signatories reach solid and timely decisions on often- complex matters.
• Compliance Procedure: It prioritised helping wayward countries back into compliance. If necessary, resources from the Multilateral Fund are available for some short-term projects.

Thus, the flexible and agile approach to the Montreal Protocol helped it become successful, which is also evident from the Kigali Agreement, which amended the Montreal Protocol to also include phasing out Hydrofluorocarbons (HFCs) as one of aims of the Protocol.

Development Financial institutions (DFI) are institutions that provide long-term development finance to various sectors like industry, agriculture, housing and infrastructure. The Industrial Finance Corporation of India (IFCI) was the first DFI set up after independence in 1948, followed by IDBI, NABARD, EXIM Bank, SIDBI, etc. DFIs can be either wholly or partially owned by the government and few have majority private ownership, determined by the nature of the activities being financed, and their associated risk-returns profile.
Challenges faced by Development Financial institutions in India:

• Attracting and retaining the best staff: DFIs are in competition with the private sector to attract talent. They are often at a disadvantage when it comes to absolute levels of remuneration. This may erode efficiency, motivation and competence.
• Actionable strategy: DFIs are expected to operate at the forefront of societal and economic change and need a strategy to guide them towards meeting their objectives. This becomes more difficult due to the nature of their governance, which is often complex and prone to political interference.
• Credit decisions: Avoiding a high level of non-performing loans is as important for DFIs as it is for commercial banks. Moreover, making good credit decisions has other dimensions and faces specific challenges like underwriting weak loans for the sake of volume targets and corruption.
• Counter-productive competition: With respect to resource allocation, there are cases of too much money chasing too few good projects, resulting in poor resource allocation and counter- productive competition.
• Balance between private and public sectors: A DFI with a private sector character will require the government to believe and trust the private sector and still extend such benefits to the institution as it would normally to a state-owned DFI.
• Lack of a sustainable source of funds: Subsidised credit from the government and the Reserve Bank of India (RBI) has not proved to be a sustainable source in the past. Lack of sustainable source of funds can prove to be a serious constraint to the proposed DFIs.
  • Moreover, maintaining the cost advantage over a period of time is also a challenge, as the resources raised would have a fixed (specified) coupon with long maturity, which may not be flexible.

Considering the challenges being faced by the DFIs, steps like establishment of standardised and streamlined regulatory frameworks, advocating performance-based remuneration to retain staff and vocational training to keep the technical competence and maintain efficiency of DFI, need to be undertaken. Also, consultation and coordination among DFIs should be encouraged to make sure that overlaps are avoided and eventual market gaps are covered. Further, there is a need of cultivating a strong culture of innovation to increase value-addition and catalyse private investment. Allowing DFI to raise long-term financing from external markets and from multilateral financial institutions would also go a long way towards the success of DFIs.