6th February 2021

Index

A) Polity, Bills, Acts and Judgments

1. Inter-state border disputes in India (TH)

B) Economic Developments: India and World

2. The National Bank for Financing Infrastructure and Development (NaBFID) (TH)

C) International Relations

3. South China Sea dispute and the United Nations Convention on the Law of the Sea (UNCLOS) (TH)

D) Agriculture, Geography, Environment and Biodiversity

4. World’s first energy island in the North Sea (IE)

E) Miscellaneous

5. What is a Toolkit? (TH)

A) Polity, Bills, Acts and Judgments

1. Inter-state border disputes in India (TH)

Context: The Opposition parties came down heavily on the Naveen Patnaik government, saying it failed to protect its own land with neighbouring Andhra Pradesh reportedly conducting panchayat elections in three of Odisha villages.

  • Both Odisha and Andhra Pradesh have been at loggerhead over the jurisdiction pertaining to Kotia gram panchayat in Odisha’s Koraput district for several decades.

Analysis

  • Karnataka, Kerala and Maharashtra’s borders were specified in the State Reorganisation Act of 1956. But Karnataka and Maharashtra disagree, with the latter wanting Marathi-speaking border areas.
  • Karnataka and Kerala have a dispute over Kasargod district in Kerala.
  • Belagavi is a district in Karnataka, which borders Maharashtra’s Kohlapur district and the people living in Belagavi, also known as Belgaum, comprises both Kannada and Marathi speakers. 
  • After India became independent of the British rule, these areas around Belagavi became a part of Karnataka, when the state was formed in 1956. The area has been under dispute since then.
  1. The state of Maharashtra then petitioned the Centre, which in 1966 constituted the Mahajan Commission led by a retired judge which in 1967 recommended that some villages that are under Karnataka be given to Maharashtra. However, it left the city of Belagavi, then known as Belgaum, out and retained it in Karnataka.
  2. It also additionally stated that Sholapur in Maharashtra and Kasaragode, which is in Kerala, be given to Karnataka. Its verdict was not accepted by Karnataka.
  • The inter-state boundary between Bihar and Uttar Pradesh continued to fluctuate due to the frequent change in the course of rivers, “giving rise to problems in the field of revenue administration and law and order.”
  • Likewise, Haryana and Uttar Pradesh’s fluctuating boundary was sought to be solved in the 1970s.
  • But some private parties have been approaching the courts over cases pertaining to tenancy disputes.
  • Between Orissa and Andhra Pradesh, the boundary dispute relates to 63 villages falling presently in Orissa. But neither government has asked for Central intervention.
  • Similarly, Orissa and Jharkhand have a boundary dispute relating to seven villages of Mayurbhang and Keonjhar districts.
  • Orissa has claimed territories in the former princely states of Seraikela and Kharsuan, now in Jharkhand.
  • Orissa is locked with Chhattisgarh over three villages of Naupada district.
  • Orissa and West Bengal are also stalemated over five villages of Balasore and Mayurbhanj districts of Orissa.
  • In the northwest, Punjab and Haryana are locked over the transfer of Chandigarh to Punjab, and part of Fazilka sub-district of Punjab to Haryana.
  • Himachal Pradesh is contesting Uttarakhand over six places of Dehradun district, adjoining its Shimla district.
  • Arunachal Pradesh claims territory in Assam on the basis of history.
  • In September 2006, the Supreme Court appointed a local commission headed by retired judge SN Variava to identify the boundary there.
  • Assam and Meghalaya don’t have a major boundary dispute.
  1. Langpih, a border village, is claimed by both Assam and Meghalaya.
  2. Arunachal Pradesh and Mizoram were carved out of Assam.
  • Nagaland claims 5,000 sq miles of territory in Assam “on historical grounds”.
  • Mizoram used to be the Lushai Hills district of Assam before being made a Union Territory in 1972 and a State in 1987.

B) Economic Developments: India and World

2. The National Bank for Financing Infrastructure and Development (NaBFID) (TH)

Context: The government plans to set up a Development Finance Institution (DFI) in the next three to four months with a view to mobilise the ?111 lakh crore required for funding of the ambitious national infrastructure pipeline as infra financing needs patient capital, and banks are currently not suited for lending for long-term projects which do not generate any cash for years.

  • The Budget Session of Parliament will consider a new bill to set up a development financial institution (DFI) for the purpose of funding infrastructure projects across their lifespan. While details of the bill are not yet available, the session schedule notes that a law will be introduced to set up The National Bank for Financing Infrastructure and Development “as a provider, enabler and catalyst for infrastructure financing and as the principal financial institution and development bank for building and sustaining a supportive ecosystem across the life-cycle of infrastructure projects.”

Analysis

  • Even deepening the bond market with regard to infrastructure financing was a matter receiving the Centre’s attention and there was a need to do something more in order to have a robust bond market for infrastructure financing.
  • The DFI will be a catalyst, and would fund projects where others are not willing to enter because of the risks involved.
  • About 7,000 projects have been identified under the National Infrastructure Pipeline with projected investment of ?111 lakh crore during 2020-25.
  • The DFI would have a key developmental role apart from the financing role.
  1. Prior to liberalisation, India had DFIs engaged in development of industry.
  2. ICICI and IDBI, in their previous avatars, were DFIs.
  3. The country’s oldest financial institution IFCI Ltd. too had acted as a DFI.

What are Development Finance Institutions (DFIs) Or Development Banks?

  • Development banks are financial institutions that provide long-term credit for capital-intensive investments spread over a long period and yielding low rates of return, such as urban infrastructure, mining and heavy industry, and irrigation systems.
  • Such banks often lend at low and stable rates of interest to promote long-term investments with considerable social benefits.
  • To lend for long term, development banks require correspondingly long-term sources of finance, usually obtained by issuing long-dated securities in capital market, subscribed by long-term savings institutions such as pension and life insurance funds and post office deposits.
  • Considering the social benefits of such investments, and uncertainties associated with them, development banks are often supported by governments or international institutions.
  • Such support can be in the form of tax incentives and administrative mandates for private sector banks and financial institutions to invest in securities issued by development banks.
  • Development banks are different from commercial banks which mobilise short- to medium-term deposits and lend for similar maturities to avoid a maturity mismatch — a potential cause for a bank’s liquidity and solvency.
  • The capital market complements commercial banks in providing long-term finance.
  • IFCI, the Industrial Finance Corporation of India, was set up in 1949. This was probably India’s first development bank for financing industrial investments.
  • In 1964, IDBI, the Industrial Development Bank of India, was set up as an apex body of all development finance institutions.
  • As the domestic saving rate was low, and capital market was absent, development finance institutions were financed by:

(i) lines of credit from the Reserve Bank of India (that is, some of its profits were channelled as long-term credit); and

(ii) Statutory Liquidity Ratio bonds, into which commercial banks had to invest a proportion of their deposits.

  • However, development banks got discredited for mounting non-performing assets, allegedly caused by politically motivated lending and inadequate professionalism in assessing investment projects for economic, technical and financial viability.
  • The earlier generation of DFIs also ran into the problem of financing because retail deposit access was cornered by banks and availability of long-term financing without government guarantees was limited.
  • This has changed to some extent and may permit DFIs to succeed. Today we have a robust capital market so there is access to funds. We have global access, as India is a strong investment proposition. So, we have access there. This development bank could also borrow from multilateral development banks and the government could also give a cover.
  • After 1991, following the Narasimham Committee reports on financial sector reforms, development finance institutions were disbanded and got converted to commercial banks.
  • The result was a steep fall in long-term credit from a tenure of 10-15 years to five years.
  • Some of the existing central public sector DFIs, are:
  1. Power Finance Corporation Ltd (PFC),
  2. Indian Renewable Energy Development Agency (IREDA),
  3. National Housing Bank (NHB),
  4. Housing and Urban Development Corporation Ltd (HUDCO) etc.

C) International Relations

3. South China Sea dispute and the United Nations Convention on the Law of the Sea (UNCLOS) (TH)

Context: China on Friday warned off a U.S. warship sailing near contested islands in the South China Sea, Beijing said, the first such encounter made public since the inauguration of President Joe Biden.

Analysis

South China Sea dispute: Some recent events

15 July 2020: U.S. rejects Beijing’s claims in S. China Sea

  • The United States has said it rejects Beijing’s claims in the waters surrounding Vanguard Bank off Vietnam, Lucania Shoals off Malaysia, waters considered in Brunei’s exclusive economic zone and Natuna Besar off Indonesia.
  • U.S. also rejected Beijing’s southernmost claim of Malaysian-administered James Shoal, which is 1,800 km (1,150 miles) from the Chinese mainland.
  • Most of the China’s claims in the South China were dismissed by the 2016 decision which was issued by a tribunal under the UN Convention on the Law of the Sea.
  • U.S. noted that China is a party to it and called the ruling legally binding.
  • The United States, however, is one of the few countries that is not part of the convention, with conservatives opposing any loss of autonomy to a global body.

24 April 2020: Response of Various Countries against Chinese Aggression in the South China Sea

  • Even as several countries struggle to cope with the challenges posed by COVID-19, Beijing’s military moves in the contested South China Sea (through which one-third of the world’s maritime trade flows) continue to take place unabated.
  • The Vietnamese Ministry of Foreign Affairs reported early this month that a Chinese Coast Guard vessel “rammed and sunk” a Vietnamese fishing boat carrying eight Vietnamese fishermen in the Paracel Islands in the South China Sea.
  • There have been incidents involving Chinese fishing vessels and the Chinese Coast Guard with Indonesian fishing vessels in waters around the Natuna Sea as well.
  • There are also reports that China recently opened a research station on Kagitingan and Zamora Reef, in the West Philippine Sea, to gather data on the ecology, geology, and environment in the Spratlys.
  • Vietnam has been an ardent supporter of the U.S.’s freedom of navigation operations (FONOPS) carried out in the South China Sea.
  1. China has always taken a strong stand against these FONOPS of the U.S.
  2. In that direction, China also recently conducted anti-submarine drills in the disputed areas soon after the Pentagon deployed the U.S.-guided missile destroyer USS McCampbell in a FONOP in the South China Sea before the pandemic hit the U.S. mainland with full force.
  • At present, Vietnam is the chair of the ASEAN and will be presiding over the discussions on the Code of Conduct in South China Sea which has been a work in progress for long.
  • Vietnam has always been in favour of non-claimant countries or external players having an active voice and calling out China for its growing assertiveness in these contested waters. 
  • Unlike the Philippines, which has changed its stance quite often with respect to Chinese activities in the South China Sea, and Indonesia, which recognised the Chinese threat in the Natuna Sea rather late, Vietnam has held a firm stand against Chinese actions in the South China Sea.

1 April 2020: China chases Indonesia’s fishing fleets, staking claim to sea’s riches

  • Backed by Chinese coast guard ships, Chinese fishing fleets have been raiding the rich waters around the Natuna Islands (in the South China Sea), which are within Jakarta’s exclusive economic zone to fish but are also claimed by China.
  • Wary of offending its largest trading partner, Indonesian officials have played down incursions by Chinese fishing boats.
  • Jakarta’s exclusive economic zone, a 200-nautical-mile zone within its afforded special rights to exploit marine resources, overlaps with China’s capacious nine-dash line claim, under which Beijing asserts rights over nearly 90 per cent of the critical waterway.
  • That means the core of the ongoing dispute between the two countries boils down to resource exploitation rights within a section of the South China Sea northeast of the Natuna Islands.
  • While Indonesia’s claim is founded in the United Nations Convention on the Law of the Sea – a convention both Beijing and Jakarta have signed and ratified – the Chinese claim dates back to questionable territorial assertions first made in the latter part of the first half of the 20th century.
  • In 2016, the Philippines received a favorable judgment from The Hague-based international tribunal invalidating China’s nine-dash line claim in the South China Sea.

South China Sea Dispute

  • Different parts of South China Sea are claimed by China, Taiwan, Vietnam, the Philippines, Malaysia, and Brunei.
  • China’s claim to the South China Sea is based in history, dating back to records from the Xia and Han dynasties.
  • Nine-dash line: Boundary of the South China Sea as claimed by China.
  • The United States contends that the South China Sea is international water, and sovereignty in the area should be determined by the United Nations Convention on Laws of the Sea (UNCLOS).
  • UNCLOS states that countries can’t claim sovereignty over any land masses that are submerged at high tide, or that were previously submerged but have been raised above high tide level by construction.

Why does China want to control the South China Sea?

  • Control of the South China Sea would allow China to dominate a major trade route through which most of its imported oil flows.
  • The floor of the South China Sea may contain massive oil and natural gas reserves.
  • Sovereignty over the region could give China a level of energy security and independence far beyond what it currently possesses.

Some disputed islands in South China Sea that are frequently in news:

  1. Spratly Islands 
  2. Thomas Shoal
  3. Woody Islands
  4. Paracel Islands

Note: Ties between China and Japan have been strained by a territorial row over a group of islands, known as the Senkaku islands in Japan and the Diaoyu islands in China located in the East China Sea.

Kuril Islands

  • These islands are controlled by Russia and claimed by Japan.
  • The dispute over this volcano-intensive archipelago of 56 islands is the primary reason Japan and Russia have never signed a peace treaty to formalize the end of World War II.
  • At the end of the war, the Soviet Union invaded the Kuril Islands, some of which Imperial Russia had previously controlled.
  • While the transfer of the islands to the Soviet Union was included in the Yalta agreements, Japan continued to claim historical rights to the southern-most islands.

The United Nations Convention on the Law of the Sea (UNCLOS)

  • It is an international treaty which was adopted and signed in 1982.
  • The Convention has created three new institutions on the international scene:
  1. The International Tribunal for the Law of the Sea,
  2. The International Seabed Authority,
  3. The Commission on the Limits of the Continental Shelf.

Some of the key features of the Convention are the following:

  1. Coastal States exercise sovereignty over their territorial sea up to a limit not to exceed 12 nautical miles;
  2. foreign vessels are allowed “innocent passage” through those waters;
  • States bordering the straits used for international navigation can regulate navigational and other aspects of passage;
  • Coastal States have sovereign rights in a 200-nautical mile exclusive economic zone (EEZ) with respect to natural resources;
  • All other States have freedom of navigation and overflight in the EEZ, as well as freedom to lay submarine cables and pipelines;
    • Land-locked and geographically disadvantaged States have the right to participate on an equitable basis in exploitation of an appropriate part of the surplus of the living resources of the EEZs;
  • Highly migratory species of fish and marine mammals are accorded special protection;
    • Coastal States have sovereign rights over the continental shelf (the national area of the seabed) for exploring and exploiting it;
    • the shelf can extend at least 200 nautical miles from the shore, and more under specified circumstances;
    • Coastal States share with the international community part of the revenue derived from exploiting resources from any part of their shelf beyond 200 nautical miles;
    • The Commission on the Limits of the Continental Shelf shall make recommendations to States on the shelf’s outer boundaries when it extends beyond 200 miles;
  • The limits of the territorial sea, the exclusive economic zone and continental shelf of islands are determined in accordance with rules applicable to land territory, but rocks which could not sustain human habitation or economic life of their own would have no economic zone or continental shelf;
  • All marine scientific research in the EEZ and on the continental shelf is subject to the consent of the coastal State;
  • Disputes can be submitted to the International Tribunal for the Law of the Sea, to the International Court of Justice, to arbitration or conciliation.
  • The Tribunal has exclusive jurisdiction over deep seabed mining disputes.

D) Agriculture, Geography, Environment and Biodiversity

4. World’s first energy island in the North Sea (IE)

Context: Denmark has approved a plan to build the world’s first energy island in the North Sea that will produce and store enough green energy to cover the electricity needs of three million European households.

Analysis

  • The artificial island will be linked to hundreds of offshore wind turbines and will supply both power to households and green hydrogen for use in shipping, aviation, industry and heavy transport. It will connect to several European countries.
  • The island, to be located 80km off Denmark’s west coast, and its surrounding wind turbines will have an initial capacity of three gigawatts and be operational around 2033.

North Sea, a hub for renewable energy

  • In December, it decided to halt the search for oil and gas in the Danish part of the North Sea and hopes instead to make it a hub for renewable energy and carbon storage.
  • Denmark also has plans for an energy island in the Baltic Sea (the island of Bornholm).
  • The reason that the sea has been chosen as the location for future energy generation is that offshore wind turbines can provide the most sustainable form of energy in comparison to onshore wind and solar energy.
  • An island needs to be created in the North Sea for this. That is because this energy generation is subject to too much fluctuation. And because not every electricity grid is robust enough to process all of this (simultaneously) generated energy in the future. There should then be enough scope for converting wind energy from alternating current to direct current.
  • There also needs to be storage capacity for energy so that it does not need to be sent directly to the onshore electricity grid. Storage can be provided either through batteries or by hydrogen production by means of electrolysis. Gas pipelines can be used to transport hydrogen. This, in turn, can be converted back into electricity on land as soon as there is a demand for it.

Energy storage and distribution station in the Dogger Bank nature reserve

  • The question now is where that energy island should be located. The shallowest part in the middle of the North Sea lies between the waters of the Netherlands, Denmark, Germany, and the United Kingdom. That area is called the Dogger Bank.
  • An advantage of that location is that wind farms off the coast of Denmark, Germany and the United Kingdom can transport their energy to there and store it there too.
  • The upside is that if the wind is strong in those areas, but not or not so strong off the Dutch coast, this energy can then be sent to the Netherlands. The fluctuation in the supply of wind energy could level off as a result of such a distribution station in the middle of the North Sea.
  • The advantage of the location on the Dogger Bank is that it is relatively shallow. The only problem is that fish also find that area attractive for that purpose.
  • What effect electromagnetic fields and infrasonic noise coming from wind farms and power lines across the seabed have on the fish population over the longer term has so far not yet been studied.

Note: The higher the turbine, the larger the blades and the more energy they generate.

E) Miscellaneous

5. What is a Toolkit? (TH)

  • Sweden’s climate activist Greta Thunberg has been writing on social media in favour of the farmer movement in India. Recently, she also shared a toolkit document.
  • Now the Delhi Police has registered an FIR against the creators of this toolkit

What is a Toolkit?

  • A toolkit is a document which generally provides detailed information about an issue and how to act on it. Volunteers participating in a large movement or campaign are instructed to do so. This toolkit is of great help to volunteers who want to participate in the campaign. It helps to work in the same direction at the same time, collectively, in any campaign, whether online or offline.
  • Last year in the US, a black was killed on the street by the police. After this, the ‘Black Life Matter’ campaign was started. People all over the world, including India, raised their voice in favour of black people. A toolkit was prepared by those who ran this movement.

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