Daily Answer Writing

Model Answer

Introduction

The withdrawal of general consent to the Central Bureau of Investigation (CBI) by certain state governments in India poses significant challenges to the spirit of cooperative federalism.

Background on CBI and General Consent

The CBI, established under the Delhi Special Police Establishment Act, 1946, is India’s premier investigative agency, tasked with tackling corruption and high-profile crimes. Traditionally, states have granted general consent to the CBI, allowing it to operate seamlessly within their jurisdictions. However, in recent years, several states have revoked this consent, citing concerns over the CBI’s alleged misuse for political vendetta.

Challenges to Cooperative Federalism

1. Jurisdictional Overlap: The Constitution designates ‘Police’ and ‘Public Order’ as state subjects, granting states exclusive authority over these matters. The CBI’s operations, as a central agency, often conflict with state police functions, leading to jurisdictional disputes and undermining the federal structure.
2. Impact on Investigations: The withdrawal of consent has resulted in significant delays in investigations. For instance, the CBI has been unable to probe over ₹21,000 crores worth of bank fraud cases due to pending requests for consent from various states. This not only hampers the agency’s effectiveness but also erodes public trust in the federal system.
3. Political Tensions: The politicization of the CBI has exacerbated tensions between state and central governments, particularly when different political parties govern at these levels. This has led to accusations of the CBI being used as a tool for political gain, further straining cooperative federalism.

Conclusion

The ongoing withdrawal of general consent by states highlights a critical challenge to cooperative federalism in India. It is essential to address these issues through reforms that enhance the CBI’s independence while respecting state autonomy. Ensuring that the CBI operates free from political interference is vital for maintaining the integrity of federal governance in India.

Model Answer

Introduction

Development Financial Institutions (DFIs) are institutions that provide long-term financial support for development projects across various sectors, including industry, agriculture, housing, and infrastructure. The Industrial Finance Corporation of India (IFCI), established in 1948, was the first DFI in India, followed by others like IDBI, NABARD, EXIM Bank, and SIDBI. DFIs can be wholly or partially government-owned, with some having majority private ownership, depending on the nature of their financing activities and associated risk-return profiles.

Challenges Faced by DFIs in India

1. Attracting Talent: DFIs compete with the private sector for skilled professionals but often struggle to offer competitive salaries, which can impact efficiency and motivation (Source: Industry Reports).
2. Actionable Strategy: DFIs need a clear strategy to navigate societal and economic changes. However, their governance structures can be complex and subject to political interference, complicating effective strategic planning.
3. Credit Decisions: Maintaining low levels of non-performing loans is crucial for DFIs. They face challenges in making sound credit decisions, often underwriting weak loans to meet volume targets, which can lead to issues like corruption.
4. Counter-productive Competition: There are instances where excessive funding chases too few viable projects, leading to poor resource allocation and ineffective competition among institutions.
5. Public-Private Balance: DFIs with private sector characteristics require trust from the government to receive benefits similar to those extended to state-owned DFIs, which can be a delicate balance.
6. Sustainable Funding: Reliance on subsidized credit from the government and the Reserve Bank of India (RBI) has not proven sustainable. The lack of a reliable funding source can severely hinder DFIs’ operations.
7. Cost Management: Maintaining a cost advantage is challenging since funds raised often come with fixed interest rates over long maturities, limiting flexibility.

Recommendations

To address these challenges, it is essential to establish standardized regulatory frameworks, advocate for performance-based remuneration to retain talent, and enhance vocational training. Encouraging consultation among DFIs can help avoid overlaps and fill market gaps. Additionally, fostering a culture of innovation and allowing DFIs to access long-term financing from external markets and multilateral institutions will enhance their effectiveness and sustainability.

Model Answer

Introduction

Infrastructure Investment Trusts (InvITs) are collective investment vehicles that facilitate direct investments in infrastructure projects, similar to mutual funds. Governed by the Securities and Exchange Board of India (SEBI) under the Infrastructure Investment Trusts (Amendment) Regulations, 2016, InvITs allow individual and institutional investors to earn returns from long-term revenue-generating assets. They operate through a tiered structure where a sponsor establishes the InvIT, which invests in eligible projects either directly or through Special Purpose Vehicles (SPVs).

Key Features

1. Hybrid Investment: InvITs combine features of both equity and debt, providing a balanced risk-return profile.
2. Market Tradability: Public InvIT units can be listed and traded on stock exchanges, enhancing liquidity.
3. Regulatory Oversight: InvITs must invest at least 80% of their assets in completed, revenue-generating projects, which minimizes investment risk and ensures stable cash flows.

Importance in India’s Growth and Development

1. Infrastructure Creation: InvITs play a crucial role in mobilizing capital for infrastructure projects, thereby supporting economic development and job creation.
2. Stable Capital Recycling: They allow infrastructure developers to recycle capital from existing projects, facilitating ongoing investments in new ventures.
3. Attracting Foreign Investment: InvITs have become appealing to foreign investors, including pension and sovereign wealth funds, contributing to the inflow of foreign capital.
4. Robust Governance: The regulatory framework ensures high corporate governance standards, promoting investor confidence and ensuring stable, long-term returns.
5. Quality Asset Management: By focusing on high-quality, completed infrastructure assets, InvITs mitigate demand and price-related risks, offering predictable cash flows.

Conclusion

In conclusion, InvITs are pivotal to addressing India’s infrastructure deficit and fostering sustainable economic growth, although they come with certain operational risks that need management (Source: SEBI Regulations, 2016).

Model Answer

Introduction

The National Rail Plan (NRP) for India – 2030 aims to develop a ‘future ready’ railway system by 2030 through a comprehensive strategy that addresses both operational and commercial aspects of railway transport. This initiative is crucial for enhancing the efficiency and capacity of Indian Railways, which is considered the growth engine of the nation.

Key Objectives of the NRP

1. Increase Modal Share in Freight: The NRP aims to increase the modal share of Railways in freight transport to 45%. This is a significant shift from the historical focus on passenger services, addressing the need for a balanced approach to freight and passenger transport.
2. Enhance Speed and Efficiency: One of the critical strategies includes reducing transit times for freight by increasing the average speed of freight trains to 50 km/h. This enhancement is expected to improve the overall efficiency of freight transport.
3. Vision 2024 Initiatives: The NRP includes the Vision 2024 initiative, which focuses on the accelerated implementation of essential projects. These include achieving 100% electrification, multi-tracking congested routes, and upgrading speeds on major routes such as Delhi-Howrah and Delhi-Mumbai to 160 km/h and 130 km/h respectively.
4. Infrastructure Development: The plan emphasizes identifying new Dedicated Freight Corridors and High-Speed Rail Corridors, assessing rolling stock and locomotive requirements, and ensuring sustained private sector involvement in operations and infrastructure development.
5. Investment Assessment: A thorough assessment of the total capital investment required for these initiatives is also part of the NRP, ensuring that financial models, including Public-Private Partnerships (PPP), are explored to support these developments.

Conclusion

The NRP is a forward-looking initiative that not only aims to meet the current demands of the railway system but also prepares for future growth up to 2050. By focusing on both freight and passenger services, the NRP seeks to create a more balanced and efficient railway network in India.

Model Answer

Introduction

India, with a coastline exceeding 7,500 kilometers, is serviced by 13 major ports and over 200 minor ports. Despite this, several key issues obstruct the development of port infrastructure:

1. Financial Constraints

Underinvestment and inadequate financing have led to insufficient port infrastructure, particularly affecting non-major ports.

• Fact: The Economic Survey 2021-22 highlights financial underperformance as a significant challenge in port development.

2. Limited Private Sector Involvement

The financial viability of port projects deters private developers and financiers. Many greenfield projects are located in remote areas, requiring significant government support for basic infrastructure development.

• Fact: Private investment remains low due to high risks associated with initial costs and uncertain returns.

3. Regulatory Issues

Major and non-major ports operate under different jurisdictions, leading to a rigid regulatory framework. Land acquisition challenges and delays in environmental clearances further complicate infrastructure development.

• Fact: These regulatory hurdles can significantly delay project timelines and increase costs.

4. Infrastructure Bottlenecks

High turnover and pre-berthing times make Indian ports less competitive. For example, the average ship turnaround time in Singapore is less than a day, while in India, it exceeds two days.

• Fact: Inefficiencies in port operations lead to higher freight costs for traders.

5. Old Docks and Terminals

Poor maintenance of existing ports and a lack of modernization efforts have resulted in outdated facilities.

• Fact: Many ports suffer from inadequate maintenance, affecting their operational efficiency.

Recent Government Measures

Recognizing the importance of modernizing port infrastructure, the Indian government has undertaken several initiatives:

1. Sagarmala Project

This initiative aims to modernize ports and promote port-led development, enhancing coastal economic growth.

2. Central Port Authority (CPA) Act

Passed in 2016, this act grants greater autonomy to major ports, allowing for improved governance and operation.

3. Revised Model Concession Agreement (MCA)

This agreement incentivizes private sector involvement in port development, including a 10-year tax holiday for companies that maintain and operate ports.

4. Major Port Authorities Act, 2021

This act enables better regulation and planning of major ports by transferring administrative control to port authority boards.

5. New Captive Policy

This policy addresses challenges related to concession renewals, expansion, and creating a business-friendly environment for port-dependent industries.

6. Enhancing Ease of Doing Business

Initiatives like the Enterprise Business System (EBS) and National Logistics Portal (Marine) aim to digitize processes and improve operational efficiency in major ports.

Conclusion

In conclusion, the Maritime Indian Vision 2030 aims to enhance port infrastructure and provide the necessary impetus for the rapid expansion of India’s port sector, crucial for economic competitiveness.