Economic Development
National Asset Reconstruction Company Limited (NARCL)

Relevance IN - Prelims ( about the role of NARCL) + Mains ( GS III Economic reforms)
What's the NEWS

• Central Government guarantee of Rs.30,600 crore to back Security Receipts issued by National Asset Reconstruction Company Limited (NARCL) for acquiring stressed loan assets was approved

Know! all about Central Government's guarantee to back Security Receipts

• The Reserve Bank of India is in the process of granting a licence for the National Asset Reconstruction Company Limited (NARCL), following which toxic assets worth Rs.90,000 crore that banks have already fully provided for will move to the NARCL
• NARCL proposes to acquire stressed assets of about Rs. 2 Lakh crore in phases within extant regulations of RBI.
• It intends to acquire these through 15% Cash and 85% in Security Receipts (SRs).
• The Cabinet's decision, to extend a five-year guarantee for NARCL-issued security receipts to banks, completed the entire cycle of cleaning up India's banking system that began with the recognition of the extent of bad loans in 2015.
• Under the mechanism, the NARCL will acquire assets by making an offer to the lead bank.
• Private sector asset reconstruction firms(ARCs) may also be allowed to outbid the NARCL.
• Separately, public and private lenders would combine forces to set up an India Debt Resolution Company (IDRC) that would manage these assets and try to raise their value for final resolution.

National Asset Reconstruction Company Limited (NARCL

• NARCL has been incorporated under the Companies Act and has applied to Reserve Bank of India for license as an Asset Reconstruction Company (ARC).
• NARCL has been set up by banks to aggregate and consolidate stressed assets for their subsequent resolution. PSBs will maintain51% ownership in NARCL.

India Debt Resolution Company Ltd. (IDRCL)

• It is a service company/operational entity which will manage the asset and engage market professionals and turnaround experts.
• Public Sector Banks (PSBs) and Public FIs will hold a maximum of 49% stake and the rest will be with private sector lenders.

NARCL-IRDCL structure

• Existing ARCs have been helpful in resolution of stressed assets especially for smaller value loans.
• Various available resolution mechanisms, including IBC have proved to be useful.
• Considering the large stock of legacy NPAs, additional options/alternatives are needed and the NARCL-IRDCL structure announced in the Union Budget is this initiative.

The role of NARCL and IDRCL

• The NARCL will acquire assets by making an offer to the lead bank. Once NARCL's offer is accepted, then, IDRCL will be engaged for management and value addition.

Backstop from Government.

• Resolution mechanisms of this nature which deal with a backlog of NPAs typically require a backstop from Government.
• This imparts credibility and provides for contingency buffers.
• Hence, GoI Guarantee of up to Rs 30,600 crore will back Security Receipts (SRs) issued by NARCL.
• The guarantee will be valid for 5 years.
• The condition precedent for invocation of guarantee would be resolution or liquidation.
• The guarantee shall cover the shortfall between the face value of the SR and the actual realisation.
• GoI's guarantee will also enhance liquidity of SRs as such SRs are tradable.

Benefit

• It will incentivize quicker action on resolving stressed assets thereby helping in better value realization.
• This approach will also permit freeing up of personnel in banks to focus on increasing business and credit growth.
• As the holders of these stressed assets and SRs, banks will receive the gains. Further, it will bring about improvement in bank's valuation and enhance their ability to raise market capital.

International Relations
AUKUS

Relevance IN - Prelims ( about the role of AUKUS + Mains ( GS II international organisations)
What's the NEWS

• United States announced a new trilateral security partnership for the Indo-Pacific between Australia, the U.K. and the U.S. (AUKUS).

Trilateral framework - AUKUS ( objective)

• A central feature of the partnership would involve a trilateral 18-month effort to help Australia acquire nuclear-powered submarines which are quieter, more capable (than their conventional counterparts) and can be deployed for longer periods, needing to surface less frequently.
• The partnership would also involve a new architecture of meetings and engagements between the three countries and also cooperation across emerging technologies (applied AI, quantum technologies and undersea capabilities).
• The U.S. sharing this kind of technology on nuclear submarines had been done only once before - with the U.K. and almost 70 years ago.

Reasons of establishing trilateral framework

• Australia has felt increasing pressure from an assertive China, like other countries in the region, and has sought to strengthen its partnerships with India, the U.S. and the U.K., including through ‘plurilateral' forums.
• Australia wanted to step up its game with regard to maritime security in the Indo-Pacific region, and the partnership was a "down-payment" the U.K. was making on its decision to engage more deeply with the Indo-Pacific.

Governance
Relief Measures announced for Telecom Sector

Relevance IN - Prelims ( about the reforms announce + about AGR issue) + Mains ( GS II government policies and interventions)
What's the NEWS

• The Cabinet approved several measures to extend a lifeline to the cash-strapped telecom sector, including a redefinition of the much-litigated concept of adjusted gross revenue (AGR) to exclude non-telecom revenue and a four-year moratorium on players' dues to the government.

Reforms announced (Nine structural reforms and five procedural reforms for the sector)

• Four-year moratorium on payment of the spectrum dues of telecom service providers (TSPs).
• The government has excluded non-telecom revenues from the definition of AGR prospectively.
• Telecom companies have to pay a pre-fixed percentage of AGR to the government as statutory levies but this will apply prospectively.
• All non-telecom revenue will be removed from the AGR,
• 100% FDI via automatic route approved.
• Till now, only 49 per cent was allowed via automatic route and anything above that had to necessarily go through the government route.
• Interest rates rationalized/ penalties removed - The interest which is compounded monthly on the spectrum usage charges (SUC) will now be compounded annually and also the interest rate will be lowed, based on SBI's MCLR + 2 per cent instead of MCLR plus 4 per cent. Additionally, the penalty and interest on penalty stand removed.
• Spectrum tenure hiked to 30 years- The future spectrum auctions will be done for a period of 30 years instead of the current 20 years. Apart from this, a telco will be allowed to surrender its spectrum after completing a 10-year lock-in period from the date of purchase.
• Fixed calendar for spectrum auction
• KYC reforms -App-based self-KYC will be permitted and the e-KYC rate revised to only Re 1. Switching from prepaid to postpaid and vice-versa will not require a fresh KYC.

The AGR issue

• The earlier definition of AGR, backed by the Telecom Department and upheld by the Supreme Court in 2019, had made telcos liable to pay ₹1.6 lakh crore.
• Last September, the top court granted players 10 years to pay up, starting April 2021.
• The change in definition that will reduce the burden on telcos, applies only prospectively, so past dues remain payable.
• Interest on those dues will now be compounded annually instead of monthly and the interest would be charged at a ‘reasonable' rate of MCLR plus 2%.
• MCLR refers to the lowest lending rate banks are permitted to offer.

Kow! about AGR

• Telecom operators are required to pay licence fee and spectrum charges in the form of ‘revenue share' to the Centre.
• The revenue amount used to calculate this revenue share is termed as the AGR. According to the DoT, the calculations should incorporate all revenues earned by a telecom company - including from non-telecom sources such as deposit interests and sale of assets.
• The companies, however, have been of the view that AGR should comprise the revenues generated from telecom services only and non-telecom revenues should be kept out of it.
  
  

Know! the History of ADR

• The telecom sector was liberalised under the National Telecom Policy, 1994 after which licenses were issued to companies in return for a fixed license fee.
• To provide relief from the steep fixed license fee, the government in 1999 gave an option to the licensees to migrate to the revenue sharing fee model.
• Under this, mobile telephone operators were required to share a percentage of their AGR with the government as annual license fee (LF) and spectrum usage charges (SUC).
• The dispute between DoT and the mobile operators was mainly on the definition of AGR.
• The DoT argued that AGR includes all revenues (before discounts) from both telecom and non-telecom services.
• The companies claimed that AGR should comprise just the revenue accrued from core services and not dividend, interest income or profit on sale of any investment or fixed assets.
• In 2005, Cellular Operators Association of India (COAI) challenged the government's definition for AGR calculation.
• In 2015, the TDSAT (Telecom Disputes Settlement and Appellate Tribunal) stayed the case in favour of telecom companies and held that AGR includes all receipts except capital receipts and revenue from non-core sources such as rent, profit on the sale of fixed assets, dividend, interest and miscellaneous income.
• However, setting aside TDSAT's order, Supreme Court on October 24, 2019 upheld the definition of AGR as stipulated by the DoT.
• Last year the Supreme Court of India allowed telecom companies (telcos) 10 years' time to pay their Adjusted Gross Revenue (AGR) dues to the government.

Prelims Factoids
Prof. S.K. Joshi Laboratory Excellence Award

Relevance IN - Prelims ( about .K. Joshi Laboratory Excellence Award
What's the NEWS

• QCI launched the Prof. S.K. Joshi Laboratory Excellence Award
• This is country's first-of-its- kind Laboratory Excellence Award.
• This Award has been instituted to promote Laboratory Quality and performance improvement in the country.

Know! more about the AWARD

• The award has been incepted to ensure the laboratory's commitment to achieve excellence in providing high precision testing and calibration services in line with the prevalent national/international quality systems legislations, including Health, Safety & Environment.
• This award will be open to all currently operational Laboratories pertaining to Testing, Calibration & Medical including their Proficiency Testing Providers & Reference Material Producers located in India.
• The goal of this award is to locate India's best labs and to demonstrate to the rest of the world that our labs have the highest standards in the world".
• There are three Trophies (Gold, Silver, Bronze) in each category of Laboratory (Testing, Medical and Calibration) accompanied with cash award.

Economic Development
White Goods
Relevance IN - Prelims ( about White goods + PLI Scheme on White Goods
What's the NEWS

• The Union Cabinet has given approval to the Production-Linked Incentive (PLI) Scheme for White Goods (Air Conditioners and LED lights) to be implemented over FY 2021-22 to FY 2028-29 with an outlay of Rs. 6238 Crore on 7th April 2021.
• A total of 52 companies have filed their application under the PLI scheme to incentivize the domestic manufacturing of components of White Goods (Air conditioners and LED lights), applications
• Several companies have applied for manufacturing critical components of Air conditioners and LED Lights.
• Applications have been filed for production of components which are not manufactured in India presently with sufficient capacity.

The PLI Scheme on White Goods

• It is designed to create complete component ecosystem for Air Conditioners and LED Lights Industry in India and make India an integral part of the global supply chains.
• The Scheme shall extend an incentive of 4% to 6% on incremental sales for a period of five (5) years subsequent to the base year and one year of gestation period.
• Only manufacturing of components of ACs and LED Lights will be incentivized under the Scheme.
• The Scheme will incentivize manufacturing of components of ACs and LED Lights. 90% Bill of Material (BoM) of ACs and 87% of BoM of LED Lights are covered under PLI Scheme.
• It will lead to increase in value addition in Country from 20% to 80-85% and developing a robust component eco-system for AC Industry and LED Lights Industry.

White goods

• The white goods industry consists of air conditioners, refrigerators, washing machines and dryers, dishwashers, and LED Lights.

Economic Development
Government has approved Production Linked Incentive (PLI) Scheme for Auto Industry and Drone Industry to enhance India's manufacturing capabilities

Relevance IN - Prelims ( about PLI scheme for the auto sector and Drones and Drone components + Mains ( GS II governance + government policies and interventions + GS III Economic developments)
What's the NEWS

• The Union government has approved the PLI Scheme for Automobile Industry and Drone Industry with a budgetary outlay of Rs.26,058 crore.
• The PLI scheme for the auto sector will incentivize high value Advanced Automotive Technology vehicles and products.
• It will herald a new age in higher technology, more efficient and green automotive manufacturing.
• PLI Scheme for Automobile Industry and Drone Industry is part of the overall announcement of PLI Schemes for 13 sectors made earlier during the Union Budget 2021-22, with an outlay of Rs.1.97 lakh crore.
• With the announcement of PLI Schemes for 13 sectors, minimum additional production in India is expected to be around Rs.37.5 lakh crore over 5 years and minimum expected additional employment over 5 years is nearly 1 crore.

PLI scheme for the auto sector

• The PLI Scheme for the auto sector envisages to overcome the cost disabilities to the industry for manufacture of Advanced Automotive Technology products in India.
• The incentive structure will encourage industry to make fresh investments for indigenous global supply chain of Advanced Automotive Technology products.
• The PLI Scheme for auto sector is open to existing automotive companies as well as new investors who are currently not in automobile or auto component manufacturing business.

The scheme has two components viz

1. Champion OEM Incentive Scheme
2. Component Champion Incentive Scheme.

• The Champion OEM Incentive scheme is a ‘sales value linked' scheme, applicable on Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles of all segments.
• The Component Champion Incentive scheme is a ‘sales value linked' scheme, applicable on Advanced Automotive Technology components of vehicles, Completely Knocked Down (CKD)/ Semi Knocked Down (SKD) kits, Vehicle aggregates of 2-Wheelers, 3-Wheelers, passenger vehicles, commercial vehicles and tractors etc.
• This PLI Scheme for automotive sector along with the already launched PLI scheme for Advanced Chemistry Cell (ACC) (Rs.18,100 crore) and Faster Adaption of Manufacturing of Electric Vehicles (FAME) (Rs.10,000 crore) will enable India to leapfrog from traditional fossil fuel based automobile transportation system to environmentally cleaner, sustainable, advanced and more efficient Electric Vehicles (EV) based system.

The PLI Scheme for the Drones and Drone components

• The PLI Scheme for the Drones and Drone components industry addresses the strategic, tactical and operational uses of this revolutionary technology.
• A product specific PLI scheme for drones with clear revenue targets and focus on domestic value addition is key to building capacity and making these key drivers of India's growth strategy.

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