05-February-2025-Daily-Current-Affairs

SHRINKING STATES’ TAX SHARE DUE TO CESS AND SURCHARGE

TOPIC: (GS3) ECONOMY: THE HINDU

The increasing collection of cesses and surcharges by the central government has led to a reduction in the divisible tax pool shared with States. This has particularly impacted southern States, whose share in the pool has declined over the years.

Cess, Surcharge, and Cost of Collection

• The Union government collects a portion of taxes as cesses and surcharges, which are not included in the divisible pool.
• Since 2020-21, ₹10-11 per ₹100 collected as tax is through cesses and surcharges.
• Additionally, ₹1-2 per ₹100 is spent on tax collection, further reducing the amount available for distribution.
• The share of cesses and surcharges peaked at ₹13.5 per ₹100 in 2021-22 and has since slightly declined.
• Before the pandemic, this share was ₹5-7 per ₹100, making more funds available for States.

Impact on the Divisible Pool

• Due to the increasing reliance on cesses and surcharges, the divisible pool has shrunk to below ₹90 per ₹100 collected.
• Before 2020-21, the divisible pool was ₹91-95 per ₹100, allowing for a higher share to be allocated to States.
• The 15th Finance Commission fixed 41% of the divisible pool for States from FY21-26, down from 42% during FY16-20.
• While a formula determines devolution, the shrinking pool means States receive less than expected.
• Some non-BJP States have demanded an increase to 50% to compensate for the reduction.

Misuse of Cesses and Surcharges

• Cesses and surcharges are often not fully utilized for their intended purpose.
• CAG reports have highlighted ₹2.19 lakh crore (FY20-FY22) of cesses meant for reserve funds not being transferred.
• Example: The crude oil cess is supposed to support oil industry development but is not properly allocated.

Declining Share of Southern States

• The allocation for individual States is based on income distance, population, demographic performance, area, forest cover, and tax efficiency.
• Southern and eastern States have experienced a decline in their share, affecting development funding.
• Kerala’s share fell from 3.08% (FY02) to 1.9% (FY26).
• Tamil Nadu’s share dropped from 5.46% (FY02) to 4.02% (FY26).
• Karnataka’s share reduced from 4.98% (FY02) to 3.6% (FY26).
• Andhra Pradesh & Telangana’s combined share fell from 7.7% (FY02) to 6.1% (FY26).
• West Bengal and Odisha also saw declines, whereas Madhya Pradesh, Maharashtra, Rajasthan, and Gujarat gained.

Conclusion

The rising share of cesses and surcharges is reducing States’ tax share, with southern and eastern States particularly affected. The demand to increase States’ share to 50% reflects growing concerns about fairness in tax distribution.

WHY TAX CUTS ARE A ONE-WAY GAMBLE

TOPIC: (GS3) ECONOMY: THE HINDU

The government’s decision to cut income tax rates significantly impacts revenue collection and public expenditure. While the move benefits a small section of taxpayers, it also creates financial risks, potentially leading to reduced government spending on essential services.

Key Points

Impact of Tax Cuts on Revenue

• The Union Budget has introduced one of the largest tax reductions for the middle class.
• The effective tax rate has declined by 8%, yet the government expects direct tax collection to increase by 14%.
• This projection relies on an optimistic assumption that income levels will rise by 24%.

Beneficiaries of Tax Cuts

• The new tax rebate covers incomes between ₹7 lakh and ₹12 lakh, previously limited to earnings below ₹7 lakh.
• The exemption threshold has risen from ₹3 lakh to ₹4 lakh for individuals earning more than ₹12 lakh.
• These benefits apply to a limited portion of the population, approximately 2-3%.

Optimistic Scenario: Economic Growth and Rising Incomes

• If the government’s expectations hold, a surge in taxpayers’ income or an increase in high-income earners will drive tax revenue.
• However, such growth could widen income inequality, leading to a K-shaped economic recovery where the rich benefit more than the poor.

Pessimistic Scenario: Revenue Shortfall and Spending Cuts

• If tax revenue falls short, public expenditure will likely be reduced to maintain the fiscal deficit target.
• The Fiscal Responsibility and Budget Management (FRBM) Act restricts excessive government borrowing, forcing spending adjustments.
• Budget cuts could disproportionately affect welfare programs, impacting the disadvantaged sections of society.

Fiscal Consolidation vs. Economic Growth

• The government has revised the fiscal deficit target down from 5% to 4.8%, leading to reduced spending.
• The revised estimates from the previous year show that actual government spending was ₹1 lakh crore lower than budgeted.
• Many flagship schemes faced funding cuts, reflecting the government’s strict adherence to fiscal discipline.

Economic Risks of Lower Deficit Targets

• The new deficit target is further reduced to 4.4% for 2025, signaling fiscal contraction rather than growth support.
• Reduced government spending may weaken economic recovery, especially when corporate investment and exports remain sluggish.
• The government’s strategy depends on tax cuts boosting consumer demand, which may not be enough to drive sustainable economic growth.

Conclusion

By heavily relying on tax cuts to fuel growth, the government is taking a one-sided risk. If revenue expectations are not met, the burden will shift to reduced public spending, affecting welfare programs and economic stability.

INDIA’S ATOMIC ENERGY SECTOR: CHALLENGES AND THE WAY FORWARD

TOPIC: (GS3) SCIENCE AND TECHNOLOGY: THE HINDU

India was once a pioneer in nuclear power but has struggled to expand its nuclear energy capacity over the decades. The recent Budget announcement to amend two key atomic laws aims to revive the sector and attract investment for nuclear energy growth.

India’s Declining Nuclear Power Growth

• India was the second Asian country to build a nuclear power plant in 1969 at Tarapur, after Japan.
• Despite early progress, nuclear power growth has stagnated, with an installed capacity of around 8,200 MW.
• China and South Korea, once behind India, now lead in nuclear power capacity and reactor exports.
• Successive governments have revised nuclear power targets but failed to meet them.
• The government has now set an ambitious target of 1,00,000 MW nuclear capacity by 2047.

Key Challenges in India’s Nuclear Energy Development

Global Nuclear Restrictions

• The Nuclear Non-Proliferation Treaty (NPT) (1970) restricted nuclear technology transfers to non-nuclear weapon states.
• India’s refusal to sign the NPT led to restrictions on nuclear cooperation.
• The 1974 nuclear test worsened India’s situation, leading to global sanctions.

Domestic Policy Mistakes

• India delayed conducting nuclear tests before the NPT deadline, losing the opportunity to be recognized as a nuclear power.
• The 1998 nuclear tests helped establish India’s nuclear status but led to more international sanctions.
• The US-India nuclear deal (2005-08) provided a breakthrough in global acceptance of India’s nuclear program.

The Civil Liability for Nuclear Damage Act (CLNDA), 2010

• The CLNDA placed liability on equipment suppliers, unlike global norms that hold plant operators responsible.
• This discouraged private and foreign investment in India’s nuclear sector.
• The government attempted to address concerns but failed to attract significant investment.

Need for Atomic Energy Act Amendments

• Government Monopoly: The Atomic Energy Act (1962) grants the government complete control, limiting private sector participation.
• Funding Issues: The Department of Atomic Energy (DAE) relies entirely on government funding, restricting large-scale expansion.
• Lack of Ecosystem: Private companies like Tata, L&T, and BHEL contribute to nuclear projects but lack operational control.

Way Forward

• Amending the Atomic Energy Act to allow private sector participation in power plant operations.
• Reforming the CLNDA to align with international liability standards and attract foreign investment.
• Replicating space sector reforms, which encouraged private participation, in nuclear energy.
• Encouraging DAE, ISRO, and DRDO to focus on research while private firms handle production and expansion.

Conclusion

By reforming outdated policies, India can unlock the potential of nuclear power, ensuring energy security and meeting climate goals. Private sector involvement and regulatory reforms are essential for achieving the ambitious nuclear targets.

ACCESS TO PM GATI SHAKTI PORTAL FOR PRIVATE SECTOR

TOPIC: (GS3) ECONOMY: THE HINDU

The government is set to issue guidelines for private sector access to data and mapping services from the PM Gati Shakti portal. This initiative aims to enhance infrastructure planning and reduce logistics costs through better decision-making.

About PM Gati Shakti:

Launched in October 2021, it is a national master plan for integrated infrastructure development.

• The goal is to reduce logistics costs and improve efficiency in project planning.
• It provides comprehensive data and mapping facilities for infrastructure projects.

Government’s Plan for Private Sector Access

• DPIIT (Department for Promotion of Industry and Internal Trade) will issue detailed guidelines on data-sharing norms.
• Multiple options are under consideration for securely sharing information with private entities.
• One key proposal is to provide data based on project-specific queries from private companies.

Benefits for Private Sector

• Helps in optimizing logistics and infrastructure planning.
• Can be used for last-mile delivery improvements and other infrastructure-based applications.
• Supports Public-Private Partnerships (PPPs) by assisting in project planning.
• Finance Minister Nirmala Sitharaman highlighted its importance in the Union Budget speech.

Use Cases of PM Gati Shakti Data

• Coal Mining: Companies can identify the most efficient routes for extraction.
• Telecom Sector: Helps in determining ideal locations for setting up telecom towers.
• Transport & Logistics: Assists in route planning for goods movement and connectivity.

Current Status & Future Developments

• DPIIT has conducted consultations with multiple government departments.
• Several technical aspects of data sharing have been analyzed.
• Final guidelines are expected soon, as it is a budget-announced initiative.

Conclusion

Providing private sector access to the PM Gati Shakti portal will help in better infrastructure development and logistics planning. The move is expected to enhance efficiency, support PPP projects, and contribute to economic growth.

INDIA’S PLAN TO ENTER THE SMALL MODULAR REACTOR (SMR) MARKET

TOPIC: (GS3) SCIENCE AND TECHNOLOGY: THE HINDU

India is taking steps to become a key player in the global Small Modular Reactor (SMR) industry. The 2025 Budget has introduced three major policy measures to encourage private sector participation and boost nuclear energy development.

Key Policy Measures

Encouraging Private Sector Involvement

• A new division will be set up within the Department of Atomic Energy to promote private participation.
• Similar to the space sector reforms, this move aims to leverage private expertise in reactor design and manufacturing.
• Private companies can negotiate technology transfer deals with global nuclear firms and manufacture SMRs in India.

Amendment to the Atomic Energy Act, 1962

• Currently, private companies can only supply equipment to nuclear projects.
• Proposed amendments will allow private firms to operate SMRs, expanding beyond state-owned NPCIL and its joint ventures.

Changes to the Civil Liability for Nuclear Damage Act, 2010

• The current law places liability on equipment suppliers in case of a nuclear accident.
• Foreign firms see this as a barrier to investment in India’s nuclear sector.
• Modifications aim to attract global players like GE-Hitachi, Westinghouse, and Areva.

Reasons Behind the Policy Push

Balancing Energy Needs

• India aims to reduce reliance on coal while increasing renewable energy capacity.
• Nuclear energy provides stable, 24/7 power, overcoming challenges faced by solar and wind energy.

Positioning India as a Global SMR Hub

• India has extensive experience in small reactors and cost-effective manufacturing.
• China is aggressively expanding its SMR program, making it necessary for India to compete.
• SMRs can be used as a diplomatic tool for engaging with developing nations.

The Potential of SMRs

• SMRs are nuclear reactors with a power output of 30-300 MWe, offering a flexible and cost-efficient alternative to large reactors.
• India is in talks with Holtec International, a leading nuclear technology company, for possible collaborations.
• Globally, only two SMR projects are operational:
  • Akademik Lomonosov (Russia) – A floating power unit with two 35 MWe reactors, operational since May 2020.
  • HTR-PM (China) – A high-temperature gas-cooled reactor, operational since December 2023.
• Western firms like Rolls-Royce, NuScale, and GE-Hitachi are working on their own SMR designs.

Conclusion

India’s strategic push into the SMR sector through policy reforms, private participation, and global collaborations can position it as a major nuclear technology provider. This move supports energy security, economic growth, and clean energy commitments.

DEPORTATION CHALLENGES OF ‘FOREIGNERS’ IN ASSAM

TOPIC: (GS2) POLITY: INDIAN EXPRESS

The Supreme Court of India has raised concerns about the detention and deportation of individuals declared as ‘foreigners’ in Assam. The state faces legal and diplomatic hurdles in repatriating 63 detainees who have not disclosed their nationality or address.

Who are the Detainees?

• The Matia transit camp in Assam houses 270 individuals categorized as “illegal foreigners.”
• Among them, 103 are Rohingyas, 32 are from the Chin community, and one is from Senegal.
• These individuals were convicted under the Foreigners Act, Citizenship Act, and Passports Act and are awaiting deportation.
• The remaining 133 were declared foreigners by Assam’s Foreigners Tribunals.
• Of these, 70 have admitted to being Bangladeshi nationals, while one was granted bail.
• The remaining 63 individuals have not disclosed their nationality or address.

Challenges in Deportation

• Diplomatic Issues: Deportation falls under the jurisdiction of the central government and requires coordination with the Ministry of External Affairs (MEA).
• Verification Process: The state government must submit nationality verification reports to the MEA, which then liaises with foreign embassies for confirmation.
• Lack of Address Proof: The 63 individuals have not provided addresses, making it difficult to verify their nationality.
• Legal Complications:
  • The Foreigners Tribunals only determine if a person is an Indian citizen but do not confirm their actual nationality.
  • Bangladesh may not accept individuals without proof of citizenship.
  • Myanmar does not recognize Rohingyas as its citizens, complicating their deportation.
• Pending Appeals: Some individuals still have the option to challenge their tribunal verdicts in higher courts.
• Prolonged Detention: Three detainees have been in detention for over six years, with two confined for nearly a decade.
• Bail Constraints: Despite a 2020 Supreme Court order allowing detainees held for over two years to seek bail, some remain imprisoned due to an inability to secure financial bonds and sureties.

Supreme Court’s Intervention

• The Supreme Court has questioned the Union government on how it plans to handle cases where nationality remains unverified.
• Following the court’s criticism, the Assam government is now considering listing “Bangladesh” as the country of origin for the 63 detainees.
• The legal system must address the issue of stateless individuals who lack documentation for repatriation.

Conclusion

The deportation of declared foreigners in Assam remains a complex issue due to legal, diplomatic, and procedural challenges. Without verified nationality, the government faces difficulties in repatriating these individuals while ensuring compliance with legal and humanitarian standards.

KOLLERU LAKE

TOPIC: (GS3) ENVIRONMENT: PIB

Kolleru Lake, a significant freshwater lake in Andhra Pradesh, plays a crucial role in water regulation and biodiversity. Recently, the National Green Tribunal (NGT) halted six infrastructure projects in the wetland area.

About Kolleru Lake

• A large, shallow freshwater lake located in northeastern Andhra Pradesh.
• Lies between the Krishna and Godavari deltas, near Eluru city.
• Recognized as Asia’s largest shallow freshwater lake.
• Spans an area of 308 sq. km.
• Functions as a natural flood control reservoir for Krishna and Godavari rivers.
• Water from the lake flows into the Bay of Bengal via the Upputeru river.
• Occasionally, small amounts of saltwater enter through the Upputeru river.

Environmental Importance

• Declared a wildlife sanctuary in 1999 and designated a Ramsar Site in 2002.
• An important habitat for migratory birds, hosting over 50,000 waterfowl.
• Identified as an Important Bird Area (IBA) due to its rich avian diversity.
• Located on the Central Asian Flyway (CAF), a key migratory route.
• Major bird species include Siberian cranes, pelicans, and painted storks.

FAQs on Kolleru Lake

• Which rivers are connected to Kolleru Lake? It lies between the Krishna and Godavari deltas.
• Is Kolleru Lake man-made? No, it is a natural freshwater lake.
• Is Kolleru Lake a Ramsar Site? Yes, it was designated as a Ramsar Site in 2002.

BANDHAVGARH TIGER RESERVE

TOPIC: (GS3) ENVIRONMENT: PIB

Bandhavgarh Tiger Reserve, located in Madhya Pradesh, is known for its high tiger population and rich biodiversity. Recently, a well-known tiger named ‘Chhota Bheem’ passed away while receiving treatment for fractures.

About Bandhavgarh Tiger Reserve

• Situated in Umaria district, Madhya Pradesh, within the Satpura and Vindhya ranges.
• Named after Bandhavgarh Fort, which is believed to have been gifted by Lord Rama to Lakshmana, according to mythology.
• Covers an area of 1,536 sq. km, comprising:
  • Core zone: 716 sq. km.
  • Buffer zone: 820 sq. km.
• Recognized for one of the world’s highest tiger densities.
• Features a diverse landscape of hills, valleys, and plains, with Bandhavgarh Fort as a prominent landmark.

Flora and Fauna

• Flora: Dominated by evergreen Sal forests, mixed vegetation, and vast grasslands.
• Fauna:
  • Home to tigers, leopards, sloth bears, and Indian bison (gaur).
  • Hosts Asiatic elephants and various deer species such as sambar and chital.

FAQs on Bandhavgarh Tiger Reserve

• Where is Bandhavgarh Tiger Reserve located? In Umaria district, Madhya Pradesh.
• Which is India’s smallest tiger reserve? Bor Tiger Reserve in Maharashtra is the smallest.
• Which temple is near Bandhavgarh National Park? The Bandhavdheesh Temple is inside the Tala safari zone of the park.