THE ECONOMIC DEVELOPMENTS

1. ‘WORLD FOOD PRICES ROSE TO A NEW RECORD IN MARCH 2022’: FAO

THE CONTEXT: World food prices jumped to a new record high in March 2022 as the war in Ukraine caused turmoil in markets for staple grains and edible oils, the U.N. food agency.

THE EXPLANATION:

• The Food and Agriculture Organization’s (FAO) food price index, which tracks the most globally-traded food commodities, averaged 159.3 points last month versus an upwardly revised 141.4 for February 2022.
• FAO said Russia was the world’s largest exporter of wheat and Ukraine was the fifth largest. Together, they provide 19% of the world’s barley supply, 14% of wheat, and 4% of maize, making up more than one-third of global cereal exports.
• They both are major exporters of sunflower oil via the Black Sea, and Moscow’s six-week-old invasion of its neighbour has stalled Ukrainian exports.
• FAO warned last month (March 2022)that food and feed prices could rise by up to 20% as a result of the conflict in Ukraine, triggering a jump in global mal nourishment.
• FAO also cut its estimate of world wheat production in 2022 to 784 million tonnes from a forecast of 790 million last month (March 2022) as it factored in the possibility that at least 20% of Ukraine’s winter crop area would not be harvested. It also lowered its projection of global cereals trade in the 2021/22 marketing year.
• Also, the UN agency highlighted the fact, Russia is also a world leader in fertilizer exports.”The likely disruptions to agricultural activities of these two major exporters of staple commodities could seriously escalate food insecurity globally.

Food Price Index  •        It was introduced in 1996 as a public good to help in monitoring developments in the global agricultural commodity markets. •        The FAO Food Price Index (FFPI) is a measure of the monthly change in international prices of a basket of food commodities. •        It measures changes for a basket of cereals, oil seeds, dairy products, meat and sugar. •        Base Period:2014-16.

 2. CENTRE SETS UP TASK FORCE TO PROMOTE ANIMATION, GAMING

THE CONTEXT: The Information and Broadcasting Ministry has constituted an Animation, Visual Effects, Gaming and Comics (AVGC) promotion task force. Headed by the I&B Secretary, the task force will submit its first action plan within 90 days.

THE EXPLANATION:

• It has representation from the industry, academia and State governments.Earlier, Union Finance in her Budget speech, had announced the creation of AVGC promotion task force.
• The body will frame a national AVGC policy; recommend national curriculum framework for graduation, post-graduation and doctoral courses in AVGC-related sectors; and facilitate skilling initiatives in collaboration with academic institutions, vocational training centres and industry.
• It will boost employment opportunities and help in the promotion and market development activities to extend global reach. of the Indian industry; enhance exports and recommend incentives to attract foreign direct investment in the sector.
• The I&B Ministry said the AVGC sector in the country had the potential to become the torch bearer of “Create in India” and “Brand India”. “India has the potential to capture 5% of the global market share by 2025, with an annual growth of around 25-30% and creating over 1,60,000 new jobs annually”.
• The task force comprises Secretaries of the Ministry of Skill Development and Entrepreneurship, Department of Higher Education, Ministry of Education, Ministry of Electronics and Information Technology, and the Department for Promotion of Industry and Internal Trade.

VALUE ADDITION: SCOPE OF AVGC Contribution in Revenue: •        The number of gamers in India grew to about 400 million by mid of 2020 from about 250 million gamers at the end of fiscal year 2018-19. •        This makes it the second largest base of online gamers in the world after China. •        Online casual gaming, which forms a large chunk of the total gaming revenue, is projected to grow at a Compound Annual Growth Rate (CAGR) of about 29% over the next four years to reach revenues of Rs 169 billion by FY25. Employment Generation: •        The potential for job opportunities in the AVGC sector is humongous. •        The number would vary between around 70,000 to 1.2 lakh job opportunities for the entire space.

 3. SC UPHOLDS NEW RESTRICTIONS ON RECEIVING FOREIGN FUNDS

THE CONTEXT: The Supreme Court upheld amendments introducing restrictions in the Foreign Contribution (Regulation) Act (FCRA) while holding that no one has a fundamental or absolute right to receive foreign contributions.

THE EXPLANATION:

• In a judgment that may hit non-governmental organisations (NGOs) working at the grass-root level with no direct link to foreign donors, the court reasoned that unbridled inflow of foreign funds may destabilise the sovereignty of the nation.
• The restrictions involve a bar on using operational FCRA accounts to get foreign contributions and mandatory production of the Aadhaar card for registration under the FCRA. They require NGOs and recipients to open a new FCRA account at a specified branch of the State Bank of India in New Delhi as a “one-point entry” for foreign donations.
• The petitioners, including individuals and NGOs engaged in cultural, educational, religious activities, argued that the amendments suffered from the “vice of ambiguity, over-breadth or over-governance” and violated their fundamental rights. They said the new regime amounts to a blanket ban on the capacity of intermediary organisations in India to distribute foreign donations to smaller and less visible NGOs. But the court countered that the amendments only provide a strict regulatory framework to moderate the inflow of foreign funds.

‘No absolute right’

• According to the three bench judge, “No one can be heard to claim a vested right to accept foreign donations, much less an absolute right”.
• Free and uncontrolled inflow of foreign funds has the potential to impact the socio-economic structure and polity of the country. “Philosophically, foreign contribution (donation) is akin to gratifying intoxicant replete with medicinal properties and may work like a nectar,” the ruling said.

Value Addition:

Foreign Contribution (Regulation) Act:

• It is an act of Parliament enacted in 1976 and amended in 2010. It was to regulate foreign donations and to ensure that such contributions do not adversely affect internal security.
• Coverage: It is applicable to all associations, groups, and NGOs which intend to receive foreign donations.
• Registration: It is mandatory for all such NGOs to register themselves under the FCRA. The registration is initially valid for five years. Further, it can be renewed subsequently if they comply with all norms.
• Registered NGOs can receive foreign contributions for five purposes — social, educational, religious, economic, and cultural. There are 22,591 FCRA registered NGOs.

Foreign Contribution Regulation (Amendment) Rules 2020:

• New rules require any organization that wants to register itself under the FCRA to have existed for at least three years. Further, it should have spent a minimum of Rs. 15 lakh on its core activities during the last three financial years for the benefit of society.
• Office bearers of the NGOs seeking registration under the Foreign Contribution (Regulation) Act must submit a specific commitment letter from the donor. It should indicate the amount of foreign contribution and the purpose for which it is proposed to be given.
• Any NGO or person making an application for obtaining prior permission to receive foreign funds shall have an FCRA Account.

 4. RBI TO ‘FOCUS’ ON INFLATION

THE CONTEXT: The Reserve Bank of India’s Monetary Policy Committee raised its estimate for inflation in FY23 to 5.7%, from the 4.5% forecast in February 2022 before Russia invaded Ukraine, and stressed that it would now turn its focus to the “withdrawal of accommodation to ensure that inflation remains within the target going forward”.

THE EXPLANATION:

• According to RBI Governor, “For the last three years growth was ahead of inflation in sequence. This time we have reversed it because we thought the time is appropriate.

 ‘War-induced factors’

• Also the Governor noted, MPC had decided to revise the inflation projections for FY23 upwards with the estimate for Q1 at 6.3%; Q2 at 5.8%; Q3 at 5.4%; and Q4 at 5.1% due to “war-induced factors”.
• He pointed to the sharp increase in crude oil, edible oil and wheat prices, and the cost of feed — which has pushed prices of poultry, egg and dairy products — as reason for the higher estimates.
• Earlier, the MPC voted unanimously to keep the policy repo rate unchanged at 4%.
• He also noted, the escalating geopolitical tensions had cast a shadow on India’s economic outlook. As a result, real GDP growth for FY23 has been projected at 7.2%, compared with 7.8% estimated earlier.

VALUE ADDITION:

What is Monetary Policy Committee?

The Monetary Policy Committee (MPC) is a committee constituted by the Central Government and led by the Governor of RBI. Monetary Policy Committee was formed with the mission of fixing the benchmark policy interest rate (repo rate) to restrain inflation within the particular target level. The RBI governor controls the monetary policy decisions with the support and advice of the internal team and the technical advisory committee.

Initially, the main decisions related to interest rates were taken by the Governor of RBI alone before the establishment of the committee. MPC was constituted under the Reserve Bank of India Act, 1934 as an initiative to bring more transparency and accountability in fixing the Monetary Policy of India. MPC conducts meetings at least 4 times a year and the monetary policy is published after every meeting with each member explaining his opinions.

Instruments of Monetary Policy

There are both direct and indirect instruments used for implementing monetary policy. Few include:

• Repo rate
• Reverse Repo rate
• Liquidity Adjustment Facility (LAF)
• Marginal Standing Facility (MSF)
• Corridor
• Bank Rate
• Cash Reserve Ratio (CRR)
• Statutory Liquidity Ratio (SLR)
• Open Market Operations (OMOs)
• Market Stabilisation Scheme (MSS)

 THE SCIENCE AND TECHNOLOGY

5. INDIA SUCCESSFULLY FLIGHT TESTS MISSILE SYSTEM SFDR BOOSTER

THE CONTEXT: The Defence Research and Development Organisation (DRDO) achieved yet another feat by successfully testing the solid fuel ducted ramjet (SFDR) booster from a defence facility off the Odisha coast. The new technology will help develop long-range air-to-air missiles.

THE EXPLANATION:

• The test has successfully demonstrated the reliable functioning of all critical components involved in the complex missile system and met all the mission objectives.
• According to DRDO, “After the ground booster phase the missile was guided to high altitude to simulate aircraft release conditions. Subsequently, the nozzle-less booster was ignited and it accelerated the system to the required Mach number for ramjet operation.”
• The performance of the system has been confirmed from the data captured by a number of range instruments like telemetry, radar and electro optical tracking systems (EOTS) deployed by ITR.
• Developed by Hyderabad-based Defence Research and Development Laboratory (DRDL) in collaboration with other DRDO laboratories, the SFDR based propulsion enables the missile to intercept aerial threats at supersonic speeds at very long range.
• All the subsystems including the booster and nozzle-less motor performed as expected. So far, the technology was available only with a handful of countries in the world. The successful validation of the technology will enable DRDO to develop
  long range air-to-air missiles.
• The air breathing ramjet technology will propel long range air-to-air missiles to engage with targets at supersonic speed and high accuracy. The missiles will provide a multi-layered aerial protection to important establishments from hostile.

Value Addition:

Solid Fuel Ducted Ramjet (SFDR)

• The Solid Fuel Ducted Ramjet (SFDR) developed under a joint Indo-Russian R&D project achieved a speed of Mach 3 on its first flight.
• The ramjet propulsion system used in the SFDR acts as an oxidizer and the solid propellant reacts as air flows through a solid propellant duct.
• Unlike conventional rockets that carry propellant and oxidizer, Ramjet uses the air as an oxidizer just like a jet engine.
• Possible usage of SFDR: These are to be used in the future variants of missiles, including an advanced version of the ASTRA, Beyond Visual Range AAM (BVRAAM) expected to extend the range to 150 km in the Mk-3 version.
• According to the DRDO, the SFDR has a range of 120 km with a speed range of 2.3-2.5 Mach.
• Unbound by the diameter of aerial weapons, a ground-launched SFDR would accelerate a missile over 250 km. A potential application of the Indo-Russian SFDR is extended range SAM – such as the futuristic Indian SAM-X.

 THE PRELIMS PRACTICE QUESTIONS

QUESTION OF THE DAY

Q. Consider the following statements about Standing Deposit Facility (SDF):

1. It is a tool available with RBI to inject liquidity in the economy.
2. It replaces the earlier Marginal Standing Facility (MSF).

Which of the statements given above is/are incorrect?

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

ANSWER FOR 8TH APRIL 2022

Answer: B

Explanation:

• The Human Rights Council is an inter-governmental body within the United Nations system made up of 47 States responsible for the promotion and protection of all human rights around the globe.
• The Council was created by the United Nations General Assembly on 15 March 2006.
• It meets at the UN Office at Geneva.
• The Council is made up of 47 United Nations Member States which are elected by the UN General Assembly. Each elected member serves for a term of three years. (Statement 1 is correct and 2 is incorrect).
• Countries are disallowed from occupying a seat for more than two consecutive terms.(Statement 3 is correct).
• Human Rights Council replaced the former United Nations Commission on Human Rights.The UNHRC passes non-binding resolutions on human rights issues through a periodic review of all 193 UN member states called the Universal Periodic Review (UPR).

THE INTERNATIONAL RELATIONS

1. INDIA-NETHERLANDS BILATERAL RELATIONS

THE CONTEXT: The three-day visit of President to the Netherlands is also significant as the two nations celebrate 75 years of diplomatic relations. President during his visit to the Netherlands also visited Keukenh of- the world’s largest flower garden.

THE EXPLANATION:

Celebration of 75 years of India’s Independence in Netherlands

The President also met the members of the Indian community living in the Netherlands. As part of the 75 years of India’s Independence celebrations, President hosted a cultural performance which will be graced by Queen Maxima and King Willem-Alexander of the Netherlands. The performance will be by Kalakshetra Foundation and a 25 member troop will enact a piece from Ramayan.

India-Netherlands relations: Background

In 2022, the diplomatic relations between India and Netherlands will complete 75 years which were established back in 1947. As India developed into a rapidly expanding economy, the bilateral trade between India and Netherlands continued to gather momentum. This was despite the slow economic growth of the Netherlands. The Netherlands is also among the top 10 partners of India in terms of trade volume.

Trade and Commercial Relations: The Netherlands was the fifth largest investor in India for FY 2020-21 with FDI inflows of USD 2.8 billion. For the same period, the Netherlands was the third largest destination for overseas direct investment from India (approx. USD 1.22 billion). The Netherlands was India’s 3rd largest trading partner in the Europe in FY 2020-2021. During FY 2020-2021, total two-way trade stood at US$13 billion with export from India amounting to US$ 8.85 billion and imports from the Netherlands at US$ 4.1 billion.

Indian Community and Diaspora: The Netherlands hosts the largest Indian Diaspora on mainland Europe, including 2,00,000 strong Surinami-Hindustani community of Indian origin. Descendants up to sixth generation of the original Indian immigrants who had arrived in Suriname and later migrated to the Netherlands can avail OCI facility. The approximate 48,000 NRIs/PIOs are mainly businessmen, knowledge workers, professionals and students. Indian students are amongst the top 3 in terms of numbers amongst non-EU foreign students in the Netherlands.

Renewable Energy: The Netherlands signed the Framework Agreement of the International Solar Alliance (ISA) in May 2018. India is one of the convening countries of the Global Commission on Adaptation. The Netherlands joined the Coalition for Disaster Resilient Infrastructure (CDRI) in 2021. India invited the Netherlands to support CDRI’s Technical Assistance Facility (TAF) for Small Island Developing States. Cooperation in the area of renewable energy continues under an MoU singed in 2014. In the virtual Dutch Trade Mission held in February 2021 solar energy, hydrogen, biofuels, energy transition and e-mobility were a core theme.

THE HEALTH AND SOCIAL ISSUES

2. INDIA’S FIRST CASE OF CORONAVIRUS VARIANT XE REPORTED FROM MUMBAI

THE CONTEXT: India’s first case of Coronavirus variant XE was reported in Mumbai, also one case of the Kappa variant has also been detected.

THE EXPLANATION:

The Brihanmumbai Municipal Corporation (BMC) announced that a 50-year-old woman with a travel history to South Africa may have been infected with the newly discovered ‘XE’ variant of the coronavirus.

What is the XE variant of coronavirus?

• The Omicron variant, which is responsible for over 90 percent of the infections detected this year, has two prominent sub-variants, called BA.1 and BA.2. There is a BA.3 sub-variant as well, but that is less common.
• During the initial phase, the BA.1 sub-variant was the most widespread. In India, however, it was the BA.2 that was the most dominant during the third wave.
• 2 was found to be slightly more transmissible than BA.1, even though it was not more dangerous. In the last couple of months, the BA.2 variety has become the most widespread across the globe, accounting for almost 94 percent of all Omicron infections in the last month, according to the World Health Organisation (WHO). The incidence of the BA.1 variety is declining sharply.

Also known as Recombinant:

• The XE variant is what is called a ‘recombinant’. This means it contains the mutations found in BA.1 as well as BA.2 varieties of Omicron. This was first discovered in the United Kingdom in January, and so far more than 600 samples of XE have been found in different countries.
• Recombinant variants are not uncommon. Variants that contain mutations characteristics of two or more known variants occur all the time. In fact, variants that contain the characteristic mutations of Delta and Omicron have also been identified.
• The random process of genetic mutations in viruses and other organisms keeps happening continuously. But only a small fraction of these mutations significantly alter the abilities of the virus to infect, or to cause severe diseases.

Will the XE variant of Covid-19 come to India?

• It would not be surprising if the XE variant is indeed found in India — in the Mumbai woman, or in some other patient at a later stage. Travel restrictions have been mostly done away with, and international air travel is back to almost where it was in the pre-pandemic period.
• Also, the possibility of XE, or any other recombinant variety of Omicron, developing within the Indian population cannot be ruled out. It is also possible that the XE variant is already circulating in the Indian population, but is yet to be detected.

3. THE MANACLES OF CASTE IN SANITATION WORK

THE CONTEXT: According to the Social Justice and Empowerment Ministry, a total of 971 people lost their lives while cleaning sewers or septic tanks since 1993, the year law prohibiting the employment of manual scavengers was enacted.

THE EXPLANATION:

• Even in 2020, the Indian government and our civil society continue to grapple with the inhuman nature of manual scavenging. While civil society started a movement in the 1990s to abolish dry latrines, the focus now is on manhole deaths and the provision of safety equipment to sanitation workers.
• The movement has been demanding the abolition of the dehumanizing practice of the manual removal of human excreta and calls for the introduction of mechanization for handling waste. Various State governments and the previous Central governments have responded to these civil society demands by introducing different laws to stop manual scavenging and provide incentives to build toilets.
• If, on the one hand, the civil society has tended to approach this issue as a collective problem that needs to be addressed by the State, on the other, the current ruling dispensation seems to be framing the issue as a spectacle in the form of Swachh Bharat Abhiyan and is addressing the problem in terms of an obstacle in the way of tourism promotion.

Background:

Manual Scavenging

• It is defined as the removal of human excrement from public streets and dry latrines, cleaning septic tanks, gutters and sewers.
• In the past, this referred to the practice of removing excreta from dry latrines.
• However, new modern sanitation technologies brought new forms of manual scavenging work, which include manual and unsafe cleaning of drains, sewer lines, septic tanks and latrine pits.

Concerns 

• Scavenging is mostly carried out by a subgroup of the Dalits, an outcast community also known as “untouchables” within India’s ancient system of caste hierarchies.
  • “Untouchables” are often impoverished, shunned by society and forbidden from touching Indians of other castes, or even their food.
• Scavenging continues in parts of India largely due to governmental indifference and social prejudice.
• There is a complete absence of planning for the maintenance of sewerage, septic tanks, and waste disposal systems in the urban policies made for the city by the state and private companies.
• The number of people killed while cleaning sewers and septic tanks has increased over the last few years.
• 2019 saw the highest number of manual scavenging deaths in the past five years.

Measures to tackle the Manual Scavenging:

Employment of Manual Scavengers and Construction of Dry Latrines (Prohibition) Act in 1993

• The  Act prohibited the construction of unsanitary dry latrines and employing manual scavengers.
• The Act had defined ‘manual scavenger’ as a person engaged in or employed for manually carrying human excreta.
• However, the government’s description of the dry latrine was a problem, as it defined dry latrine as “latrine other than a water-seal latrine”.
• Manual scavenging was not just a practice related to dry latrines, but also to insanitary latrines and open defecation.

Safai Karamchari Andolan

• The Safai Karamchari Andolan, a social movement that campaigned against manual scavenging, along with other organizations, filed public interest litigation(PIL) in the Supreme Court.
• The demand was to direct State governments and Union Territories to strictly enforce the law to stop the practice of manual removal of human excreta.

Prohibition of Employment as Manual Scavengers and their Rehabilitation Act,2013

• Though the construction of dry latrines has drastically reduced, thenumber of deaths in manholes, sewers and septic tanks continues to remain high.
• The Indian government had plans to amend the 2013 Act to completely mechanize the cleaning of sewers and manholes and build new sewers.
• However,neither the past nor the present amendment addresses the issue of labor safety.

Swachh Bharat Abhiyan

• The same is the case with the Swachh Bharat Abhiyan, which skirts the issue of labor rights and the stigma attached to sanitation.
• Also, not only toilets but even cleaning work is seen as a lowly job in India.
• Most sanitation contracts are given to private contractors or self-help groups, and such staff hardly have ID cards, leave alone the protection of medical insurance policies.

What lies ahead?

• The Swachh Bharat Abhiyan should make expansion of the sewer network a top priority and come up with a scheme for scientific maintenance that will end the manual cleaning of septic tanks.
• The laws should be enforced vigorously to eliminate manual scavenging in its entirety.
• There should be trials and testing of protective gears and provisions for better healthcare facilities, insurance cover, pension plans and regulations on preventive and social medicine education for the manual scavengers.

THE ECONOMIC DEVELOPMENTS

4. EXPLAINED: WHAT IS SDF, THE RBI’S NEW TOOL TO ABSORB EXCESS LIQUIDITY TO CONTROL INFLATION?

THE CONTEXT: While retaining the reverse repo rate at 3.35 per cent, the Reserve Bank of India (RBI) introduced the Standing Deposit Facility (SDF), an additional tool for absorbing liquidity, at an interest rate of 3.75 per cent.

THE EXPLANATION:

What is a Standing Deposit Facility (SDF)?

A Standing Deposit Facility or SDF allows the RBI to absorb liquidity (deposit) from commercial banks without giving government securities in return to the banks.

Role of SDF

• The main purpose of SDF is to reduce the excess liquidity of Rs 8.5 lakh crore in the system, and control inflation.
• In 2018, the amended Section 17 of the RBI Act empowered the Reserve Bank to introduce the SDF – an additional tool for absorbing liquidity without any collateral. By removing the binding collateral constraint on the RBI, the SDF strengthens the operating framework of monetary policy. The SDF is also a financial stability tool in addition to its role in liquidity management.

The SDF will replace the fixed rate reverse repo (FRRR) as the floor of the liquidity adjustment facility corridor. Both the standing facilities — the MSF (marginal standing facility) and the SDF will be available on all days of the week, throughout the year.

How it will operate

The SDF rate will be 25 bps below the policy rate (Repo rate), and it will be applicable to overnight deposits at this stage. It would, however, retain the flexibility to absorb liquidity of longer tenors as and when the need arises, with appropriate pricing. The RBI’s plan is to restore the size of the liquidity surplus in the system to a level consistent with the prevailing stance of monetary policy.

Reverse repo rate

The fixed rate reverse repo (FRRR) rate which is retained at 3.35 per cent will remain part of the RBI’s toolkit, and its operation will be at the discretion of the RBI for purposes specified from time to time. The FRRR along with the SDF will impart flexibility to the RBI’s liquidity management framework, the RBI said.

Question of liquidity

• The “extraordinary” liquidity measures undertaken in the wake of the pandemic, combined with the liquidity injected through various other operations of the RBI, have left a liquidity overhang of the order of Rs 8.5 lakh crore in the system.
• This has pushed up the retail inflation level in the system. “The RBI will engage in a gradual and calibrated withdrawal of this liquidity over a multi-year time frame in a non-disruptive manner beginning this year.

5. EXPLAINED: INDONESIA’S PALM OIL CRISIS, AND ITS IMPLICATIONS FOR INDIA

THE CONTEXT: The world’s largest producer and exporter of palm oil is facing domestic shortages, leading to price controls and export curbs.

 

THE EXPLANATION:

• It’s rare for any country that is the largest producer and exporter of a product to experience domestic shortages of the same product — so much so as to force its government to introduce price controls and curbs on shipments.
• But that is precisely the story of Indonesia vis-à-vis palm oil. The US Department of Agriculture (USDA) has estimated the archipelago’s palm oil production for 2021-22 (October-September) at 45.5 million tonnes (mt). That’s almost 60% of the total global output and way ahead of the next bigger producer: Malaysia (18.7 mt). It is also the world’s No. 1 exporter of the commodity, at 29 mt, followed by Malaysia (16.22 mt).

Plausible factors

How does one explain this conundrum — consumers unable to access or paying through the nose for a commodity in which their country is the preeminent producer and exporter?

There are two possible reasons.

The first has to do supply disruptions — man made and natural — in other cooking oils, especially sunflower and soyabean.

• Ukraine and Russia together account for nearly 80% of the global trade in sunflower oil, quite comparable to the 90% share of Indonesia and Malaysia in palm. Russia’s invasion of Ukraine which is ongoing, has resulted in port closures and exporters avoiding Black Sea shipping routes.
• Sanctions against Russia have further curtailed trade in sunflower oil, the world’s third most exported vegetable oil (12.17 mt, according to USDA estimates for 2021-22) after palm (49.63 mt) and soyabean (12.39 mt).
• Soyabean oil, too, is facing supply issues due to dry weather in South America. The USDA has projected the combined soyabean output of Brazil, Argentina and Paraguay for 2021-22 to fall by 9.4%, translating into the continent’s lowest harvest in six years. Supply tightness in sunflower and soyabean — from war and drought, respectively — has, in turn, transmitted to palm oil.

The second factor is linked to petroleum, more specifically the use of palm oil as a bio-fuel.

• The Indonesian government has, since 2020, made 30% blending of diesel with palm oil mandatory as part of a plan to slash fossil fuel imports. The country’s domestic consumption of palm oil is forecast at 17.1 mt, of which 7.5 mt is for bio-diesel and the balance 9.6 mt towards household and other use.

Impact on India

• India is the world’s biggest vegetable oils importer. Out of its annual imports of 14-15 mt, the lion’s share is of palm oil (8-9 mt), followed by soyabean (3-3.5 mt) and sunflower (2.5). Indonesia has been India’s top supplier of palm oil, though it was overtaken by Malaysia in 2021-22 (see table).
• On March 2022, the Indonesian government lifted its retail price caps on palm oil along with the 30% domestic market sale obligation on exporters. At the same time, it levied a progressive tax on exports, linked to a reference price for CPO. These rates range from $175 per tonne (when the reference export price is $1,000-1,050) to $375 (when prices are above $1,500).

The restrictions on exports, even in the form of levy, take into cognizance Indonesia’s higher population (27.5 crore, against Malaysia’s 3.25 crore) as well as its ambitious bio-fuel programme (Malaysia is still to fully implement even 20% palm oil admixture in diesel). To that extent, the world – more so, the bigger importer India – will have to get used to lower supplies from Indonesia.

Meanwhile, import prices of edible oils have eased from March 2022  peaks, although higher than one year back. That should provide some relief, both for households and industrial consumers (including soap and cosmetic makers) in India.

Landed prices of CPO (cost plus freight, Mumbai) are currently ruling around $1,750 per tonne, as against $2,000 and $1,175 in March 2021, respectively. The corresponding import prices (current versus month-ago and year-ago) stood at $1,690 ($1,960 and $1,115) for RBD palmolein and $1,800 ($1,925 and $1,290) for crude de-gummed soyabean oil.

THE PRELIMS PRACTICE QUESTIONS

QUESTION OF THE DAY

Q. Consider the following statements about UNHRC:

1. 1. It is made up of 47 United Nations Member States elected by the UN General Assembly.
   2. Each elected member serves for a term of two years.
   3. Countries are disallowed from occupying a seat for more than two consecutive terms.

Which of the statements given above is/are correct?

a) 1 only

b) 1 and 3

c) 2 and 3

d) 1, 2 and 3

ANSWER FOR 7TH APRIL 2022

Answer: B

Explanation:

The Lokpal and Lokayuktas Act (2013) amended the Delhi Special Police Establishment Act (1946) and made the following changes to the composition of CBI:

The Central Government shall appoint the Director of CBI on the recommendation of a three-member committee consisting of the Prime Minister as Chairperson, the Leader of Opposition in the Lok Sabha and the Chief Justice of India or Judge of the Supreme Court nominated by him.

THE CONTEXT: Recently in March 2022, the concerns have been raised that consumers may have to pay more for medicines and medical devices if the National Pharmaceutical Pricing Authority (NPPA) allows a price hike of over 10% in the drugs and devices listed under the National List of Essential Medicines (NLEM). The following article explains everything about the pricing of essential drugs in India.

WORKING OF PRICING MECHANISM

• All medicines under the NLEM are under price regulation. The NLEM lists drugs used to treat fever, infection, heart disease, hypertension, anemia, etc, and includes commonly used medicines like paracetamol, azithromycin, Cardiac Stents, Knee implants, etc.
• The Health Ministry prepares a list of drugs eligible for price regulation, following which the Department of Pharmaceuticals incorporates them into Schedule 1 of DPCO.
• The Standing Committee on Affordable Medicines and Health Products (SCAMHP) will advise the drug price regulator the National Pharmaceutical Pricing Authority (NPPA) on vetting the list. The NPPA then fixes the prices of drugs in this Schedule.
• As per the Drugs (Prices) Control Order 2013, scheduled drugs, about 15% of the pharma market, are allowed an increase by the government as per the WPI (Wholesale Price Index) while the rest 85% are allowed an automatic increase of 10% every year.
• The annual change in prices of scheduled drugs is controlled and rarely crosses 5%.
• Under the Drugs and Cosmetics Act 1940, the drugs are classified in schedules, and regulations are laid down for their storage, display, sale, dispensing, leveling, prescribing, etc.

Essential Medicines List:

• As per the World Health Organisation (WHO), Essential Medicines are those that satisfy the priority health care needs of the population. The list is made with consideration of disease prevalence, efficacy, safety, and comparative cost-effectiveness of the medicines.
• Such medicines are intended to be available in adequate amounts, inappropriate dosage forms, and strengths with assured quality. They should be available in such a way that an individual or community can afford them.

National List of Essential Medicines of India:

• The WHO EML is a model list, the decision about which medicines are essential and remains a national responsibility based on the country’s disease burden, priority health concerns, affordability concerns, etc.
• Ministry of Health and Family Welfare, Government of India hence prepared and released the first National List of Essential Medicines of India in 1996 consisting of 279 medicines. This list was subsequently revised in 2003, 2011, and 2021.

ABOUT THE NATIONAL PHARMACEUTICAL PRICING AUTHORITY

The National Pharmaceutical Pricing Authority (NPPA) is a government regulatory agency that controls the prices of pharmaceutical drugs in India. It was constituted by a Government of India Resolution dated 29th August 1997 as an attached office of the Department of Pharmaceuticals (DoP), Ministry of Chemicals and Fertilizers as an independent regulator for pricing of drugs and to ensure availability and accessibility of medicines at affordable prices with Headquarter at New Delhi, India.

Drugs (Prices) Control Order 2013:

• The Drugs Prices Control Order is an order issued by the Government of India under Sec. 3 of Essential Commodities Act, 1955 to regulate the prices of drugs.
• The Order provides the list of price-controlled drugs, procedures for fixation of prices of drugs, method of implementation of prices fixed by Govt., penalties for contravention of provisions, etc.
• For the purpose of implementing provisions of DPCO, powers of Govt. have been vested in NPPA.
• The DPCO 2013 contains more than 600 scheduled drug formulations spread across 27 therapeutic groups. However, the prices of other drugs can be regulated, if warranted in the public interest.

KEY FUNCTIONS OF NPPA

NPPA INITIATIVES

• The National Pharmaceutical Pricing Authority (NPPA) is headquartered in New Delhi and to increase its reach across the country, NPPA has set up a Price Monitoring and Resource Unit (PMRU) in the various Indian States and Union Territories.
• These PMRUs have been set up under the Consumer Awareness, Publicity, and Price Monitoring (CAPPM) scheme.
• As of March 2022, there are 23 states/UTs with the most recent addition of Himachal Pradesh on 23^rd March 2022 as the 23rd Price Monitoring and Resource Unit (PMRU). The pharmaceutical authority aims to set up a price monitoring unit in each and every state and union territory across India.

SIGNIFICANCE OF NPPA

• It is important to fix the prices of certain important drugs so that they are affordable and accessible to every citizen of the county and the National Pharmaceutical Pricing Authority ensures the same.
• It mandates that no supplier can sell a drug for more than its Maximum Retail Price (MRP).
• NPPA also played a crucial role during the pandemic time in the country by either fixing or regulating the prices of essential drugs and devices.

 AN ANALYSIS OF THE ISSUE

• The pharma lobby is asking for at least a 10% increase for scheduled drugs too rather than going by the WPI. Over the past few years, input costs have flared up and one of the reasons being 60%-70% of the country’s medical needs, are dependent on China.
• NPPA has been receiving applications for upward price revision under para 19 of DPCO, 2013, for the last two years citing reasons like “increase in Active Pharmaceutical Ingredient – API (key ingredient) cost, increase in the cost of production, exchange rates, etc. resulting in unavailability in sustainable production and marketing of the drugs.
• India is dependent on China for over 60% of its API requirement; higher API costs for price-controlled medicines reduce profits and sometimes even make the production of these drugs unviable in India.

THE WAY FORWARD

• We all are aware of the shortage of Remdevisir injections in May 2021 and black marketing and hoarding which led to skyrocketing prices. In this context, Bombay HC has asked the Centre to include Remdesivir in the list of Scheduled Drugs and regulate its price. Such steps should be proactively taken by the government with the foresight of emerging situations.
• The interests of pharmaceutical companies shall not be put ahead of the lives of ordinary citizens. As of 23^rd March 2022, only 14% of people in low-income countries have received at least one vaccine dose against COVID-19. India and South Africa have thus, taken a firm position that when lives are at stake, such essential products should be treated as global public goods and IPRs under TRIPS Agreement must be waived.
• NPPA shall also revise the list of essential medicines at short and regular intervals to have a positive impact on the availability and rational use of medicines.
• In the longer term, India needs to build capabilities to manufacture the key ingredients for these medicines.

THE CONCLUSION: Having an Essential Medicines List (EML) results in a better quality of medical care, better management of medicines, and cost-effective use of health care resources. This is especially important for a resource-limited country like India. The decision is to ensure, that life-saving essential drugs remain available to the general public at all times. To avoid a situation where drugs become unavailable in the market and the public is forced to switch to costly alternatives this is the first time the NPPA, known to slash prices of essential and life-saving medicines, is increasing prices in the public interest.

MAINS QUESTIONS:

1. Elaborate on the role of the National Pharmaceutical Pricing Authority (NPPA) in ensuring the availability of life-saving essential drugs to the general public at all times.