RBI to Restart Operation Twist
The Reserve Bank Of India (RBI) has decided to conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for ₹10,000 crore each on April 27, 2020 considering the current and evolving liquidity and market conditions.
Such Open Market Operations are known as ‘Operation Twist,’ which was used by the RBI in December, 2019 for the first time.
Operation Twist is the RBI’s simultaneous selling of short-term securities and buying of long term securities through Open Market Operations (OMO) in order to bring down long-term interest rates and bolster short-term rates.
Operation Twist was first used in 1961 by the US Federal Reserve (central bank) as a way to strengthen the U.S. dollar and stimulate cash flow into the economy.
Under this mechanism, the short-term securities are transitioned into long-term securities.
Impact of Operation Twist:
As the central bank buys long-term securities (bonds), their demand rises which in turn pushes up their prices.
However, the bond yield comes down with an increase in prices (inverse relationship).
Yield is the return an investor gets on his (bond) holding/investment.
The interest rate in an economy is determined by yield. If yield is low, interest rates decrease.
Thus, lower long-term interest rates mean people can avail long-term loans (such as buying houses, cars or financing projects) at lower rates.
This will lead to a boost in consumption and spending in the economy which in turn will revive the growth.
Centre Freezes DA/DR Increase for Staff
The Finance Ministry has frozen the Dearness Allowance (DA) increases for the central government staff and Dearness Relief (DR) increases for pensioners for the period between January 2020 and July 2021.
The move will impact 48 lakh central government employees and 65 lakh pensioners.
However, DA and DR at current rates will continue to be paid to the employees and pensioners.
The 4% DA hike for central government employees announced in March, 2020 . was effective from January 1, 2020.
Since states generally follow the central government on DA and DR decisions, it is expected that states may announce similar decisions.
The savings on account of freezing of increase in DA and DR to central government employees and pensioners would be Rs 37,530 crore in the current financial year and 2021-22.
This would create room for stepping up expenditure on health and welfare measures amid Covid-19 pandemic. Also, the government finances have been strained due to decline in tax and non-tax revenues.
If states follow the Centre, the estimated savings will be Rs 82,566 crore.
Similar steps taken by the government:
Earlier, the Union Cabinet had cleared a 30% salary cut for all MPs, including the Prime Minister and Union Ministers, for a year.
It also decided to suspend all MPLADS (Members of Parliament Local Area Development Scheme) funds for two financial years—starting April 1,2020.
Under MPLADS, each MP gets Rs 5 crore annually for development work in his/her constituency.
Impact of Oil Price Crash and Covid-19 on Sugar
Recently, the prices of raw sugar for May delivery in New York crashed to 9.75 cents/pound, the lowest since June, 2008.
Earlier, the oil prices of West Texas Intermediate grade crude fell to an unprecedented minus $40.32/ barrel in interlay trade in New York (the USA).
Impact of Covid-19 lockdown on Sugar: Subdued economic activity and lockdowns imposed by many countries to combat the Covid-19 pandemic has reduced the demand of many commodities including sugar.
Impact of crude oil prices on production of Sugar: Usually, when oil prices are high, mills (especially in Brazil) tend to divert cane for making ethanol (alcohol of 99%-plus purity) that is used for blending with petrol.
With recent fall in oil prices, mills will not find it attractive to divert cane for ethanol. The juice from crushing sugarcane can be crystallised into sugar or fermented into ethanol.
Impact of low demand in sugar and low oil prices on India: Dip in sugar consumption, together with higher Brazilian output, is bad news for both Indian sugar mills and cane farmers.
Excess stocks of sugar due to low demand and high dumping from Brazil will add to the woes of both farmers and industries.
India is already grappling with high dues to farmers by the sugar industry.
Slow down in exports and not much domestic lifting of sugar by institutional consumers has significantly undermined the ability of mills to make cane payments.
Reduced offtake of alcohol: The lockdown has also reduced offtake of alcohol, be it potable liquor or ethanol for blending with petrol.
Scope of Opportunity:
India can supply sugar to Indonesia’s increased import requirements.
Higher Import Projections: Indonesian refiners are projected to import 3.3 mt of raws this year, up from 2.6 mt in 2019.
Absence of Alternatives: Indonesia buys mostly from Thailand, which is experiencing a bad drought that could lead to its production falling.
Reduced Duty: Indonesia also slashed the duty on Indian raw sugar from 15% to 5% in March.
Press Council of India
Recently, the Press Council of India (PCI) condemned the ‘attack’ on the Republic TV anchor.
The PCI was established under the PCI Act of 1978.
Aim: It aims to preserve the freedom of the press and maintain and improve the standards of newspapers and news agencies in India.
Composition: The PCI consists of a chairman and 28 other members.
The Chairman is selected by the Speaker of the Lok Sabha, the Chairman of the Rajya Sabha and a member elected by the PCI.
Functions: The functions of the PCI include
Helping newspapers maintain their independence.
Build a code of conduct for journalists and news agencies.
Help maintain “high standards of public taste” and foster responsibility among citizens.
Review developments likely to restrict flow of news.
Powers: The PCI has the power to receive complaints of violation of the journalistic ethics, or professional misconduct by an editor or journalist.
The PCI is responsible for enquiring into complaints received.
It may summon witnesses and take evidence under oath, demand copies of public records to be submitted, even issue warnings and admonish the newspaper, news agency, editor or journalist.
Decisions of the PCI are final and cannot be appealed before a court of law.
Limitations on the powers of the PCI : The powers of the PCI are restricted in two ways.
The PCI has limited powers of enforcing the guidelines issued. It cannot penalize newspapers, news agencies, editors and journalists for violation of the guidelines.
The PCI only overviews the functioning of print media. That is, it can enforce standards upon newspapers, journals, magazines and other forms of print media.
It does not have the power to review the functioning of the electronic media like radio, television and internet media.
Kasowal Bridge on River Ravi
The Border Roads Organisation (BRO) has constructed a permanent bridge on the Ravi river to connect Kasowal enclave in Punjab along the India – Pakistan border to the rest of the country.
The 484-meter bridge was built under the Project Chetak of BRO.
This project of the BRO was raised in June 1962 at Dehradun for construction of Joshimath-Malari-Rinkin road.
In 1980, the project was re-raised for expanding and improving the road networks and ditch-cum-bunds.
The jurisdiction of the project is spread across the states of Rajasthan, Haryana and Punjab.
It is one of the five tributaries of the Indus River that give the Punjab (meaning “Five Rivers”) its name. Other tributaries are: Jhelum, Chenab, Beas and Sutlej.
Transboundary River: It rises in the Himalayas in Himachal Pradesh (India) and flows to the Pakistani border and along it for more than 80 km before entering Pakistan’s Punjab province.
Sharing of Water: The Indus Waters Treaty in 1960 allocated the water of the Eastern rivers – Sutlej, Beas and Ravi – to India for unrestricted use. Pakistan has rights of unrestricted use of the waters of the Indus and its western tributaries (Jhelum and Chenab).
India has also been permitted to make from the Western River, domestic non-consumptive uses, uses for run-of-the river hydroelectric plants and specified agricultural use and construction of storage works.
Important Projects: Ujh Multipurpose Project (River Ujh is a tributary of the Ravi), Shahpurkandi Dam Project.