Relevance IN - Prelims (about WTI +OPEC+ Brent Crude Grade) + Mains (GS III Economic development + GS II Bilateral, regional and global groupings and agreements involving India and/or affecting India's interests + Effect of policies and politics of developed and developing countries on India's interests + facts to substantiate your answer writing)
What's the News

• The United States oil markets created history when prices of West Texas Intermediate (WTI), the best quality of crude oil in the world, fell to "minus" $40.32 a barrel in interlay trade in New York. At this price, the seller of crude oil would be paying the buyer $40 for each barrel that is bought.

• There are different grades of crude oil depending the different regions these are produced from. For Example, the USA produces the West Texas Intermediate (WTI) grade of crude oil, Oil Field of the North Sea uses the Brent Crude grade, while oil field of Dubai, Oman and Abu Dhabi uses the Dubai/Oman crude. The USA, that uses the WTI grade is currently the world largest producer of crude oil.

• The recent negative dip in the oil price was the lowest ever recorded. The previous lowest was immediately before the World War II- also well below the zero mark.

• There have been instances of commodities being sold at negative prices. For instance, natural gas hit negative prices in May 2019 in the US.
• The banking industry has seen negative interest rates - where one pays the bank to keep one's money - and bonds have been known to have negative yield, in which a bondholder makes a loss by lending money.

• Even before the COVID-19 outbreak induced lockdowns across the world, crude oil prices had been falling over the past few months. They were close to $60 a barrel at the start of 2020 and, by March-end, they were closer to $20 a barrel.
• The reason was straightforward: Too much supply and too little demand (see Chart 1). To a great extent, oil markets, globally and more so in the US, are facing an enormous glut.
  
  

Understanding the oil pricing mechanism

• It must be understood that cutting production or completely shutting down an oil well is a difficult decision, because restarting it is both immensely costly and cumbersome. Moreover, if one country cuts production, it risks losing market share if others do not follow suit.
• The global oil pricing is by no stretch an example of a well-functioning competitive market. In fact, its seamless operations crucially depend on oil exporters acting in consort.
• Historically, the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, which is the largest exporter of crude oil in the world (single-handedly exporting 10% of the global demand), used to work as a cartel and fix prices in a favourable band. It could bring down prices by increasing oil production and raise prices by cutting production.
• In the recent past, the OPEC has been working with Russia, as OPEC+, to fix the global prices and supply. In early March, this happy accord came to an end as Saudi Arabia and Russia disagreed over the production cuts required to keep prices stable.
• As a result, oil-exporting countries, led by Saudi Arabia, started undercutting each other on price while continuing to produce the same quantities of oil. This was an unsustainable strategy under normal circumstances but what made it even more calamitous was the growing spread of novel coronavirus disease, which, in turn, was sharply reducing economic activity and the demand for oil.

What Triggered the Negative Dip

• Oil is traded in future price. This means the order of oil for the month of May is placed a month before, that is, April. Order for the moth June is placed in May, and so on. Thus the negative price of $37.63 was for the month May, as the expiry date for placing contracts was 21st April.

As the deadline approached, prices started plummeting. This was for two broad reasons.

1. From producer's side: By Monday (21 April- the deadline) there were many oil producers who wanted to get rid of their oil even at unbelievably low prices rather than choose the other option - shutting production, which would have been costlier to restart when compared to the marginal loss on May sales.

2. From consumer's side: From the consumer side, that is those holding these contracts, it was an equally big headache. Contract holders wanted to get wriggle out of the compulsion to buy more oil as they realised, quite late in hindsight, that there was no space to store the oil if they were to take the delivery.

• They figured that it would be more costly for them to accept the oil delivery, pay for its transportation and then pay for storing it (possibly for a longish period, given the circumstances) especially when there was no storage available, than to simply take a hit on the contract price.
• This desperation from both sides - buyers and sellers - to get rid of oil meant the WTI oil contract prices not only plummeted to zero but also went deep into the negative territory.
• In the short term, for both the holders of the delivery contract and the oil producers, it was less costly to pay $40 a barrel and get rid of the oil instead of storing it (buyers) or stopping production (producers).

The Possible Future Trajectory of Oil Price

• It is possible that this was a one-off event where prices dropped below zero because of an existing glut in WTI oil, which is found inland, and there was no space to store or transport it in a hurry.
• Investment budgets of exploration and production companies are expected to drop in the face financial turmoil due to low shale oil prices. Normally, this should force oil exporting countries to cut back production and negate the excess supply, restoring some balance in the oil markets.
• But one cannot rule out a repeat of Monday's trend because, with COVID-19 continuing to spread, global oil demand is falling every day.
• In the coming quarter, some estimates claim that total demand will fall by 30%.In the end, it would be the demand-supply mismatch (adjusted for how much can be stored away) that will decide the fate of oil prices.

Possible Impact on India

• The Indian crude oil basket does not comprise WTI - it only has Brent and oil from some of the Gulf countries - so there is no direct impact. But oil is traded globally and weakness in WTI is mirrored in the falling prices of the Indian basket as well

There are two ways in which this lower price can help India.

• If the government passes on the lower prices to consumers, then, whenever the economic recovery starts in India, individual consumption will be boosted.
• If, on the other hand, governments (both at the Centre and the states) decide to levy higher taxes on oil, it can boost government revenues.

Government Schemes
Swamitva Yojana

Relevance IN - Prelims ( about Swamitva Yojana -objective and benefits) + Mains ( GS II Governance -transparency and accountability + Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

What's the NEWS

• The Prime Minister launches Swamitva Yojana to boost rural economy
• Swamitva Yojana is aimed to create property ownership record of land in villages and empower rural population with grant of official document confirming their ownership of land titles.
• Swamitva Yojana or Ownership Scheme to map residential land ownership in the rural sector using modern technology like the use of drones.

Know about the ‘Swamitva Yojana' (salient features)

• Swamitva Yojana is meant to create a record of land ownership in rural areas using modern technology.
• The scheme is piloted by the Panchayati Raj ministry of the Union government and has been launched on April 24 2020, the Panchayati Raj Diwas.
• The need for this Yojana was felt since several villagers in the rural areas don't have papers proving ownership of their land.
• Swamitva Yojana is aimed to fill the above gap to provide ownership rights to people in the villages. It is expected to go a long way in settling property rights in rural hinterlands
• The residential land in villages will be measured using drones to create a non-disputable record. It is the latest technology for surveying and measuring of land.
• The scheme will be carried out in close coordination with the Central Panchayati Raj ministry, Survey of India, Panchayati Raj departments and Revenue departments of various states.
• Property card for every property in the village will be prepared by states using accurate measurements delivered by drone-mapping. These cards will be given to property owners and will be recognised by the land revenue records department.
• The delivery of property rights through an official document will enable villagers to access bank finance using their property as collateral.
• The accurate property records can be used for facilitating tax collection, new building and structure plan, issuing of permits and for thwarting attempts at property grabbing

Governance
E-Gram Swaraj Portal/App

Relevance IN - Prelims (about E-Gram Swaraj online portal and eGramSwaraj mobile app. -objective and benefits + Mains (GS II Governance -Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential; citizens charters, transparency & accountability and institutional and other measures.

What's the NEWS

• In order to strengthen e-governance in rural areas, govt. has now launched PM Swamitva Yojana, E-Gram Swaraj online portal and eGramSwaraj mobile app.
• The E-Gram Swaraj Portal will mark the complete digitization of the villages to strengthen e-governance in Panchayati Raj institutions in the whole country.

Know! all about e-Gram Swaraj Portal/App

• The egramswaraj.gov.in portal is one single interface on which the details will be listed panchayat wise.
• The platform will provide records of work from planning to the implementation in every village panchayat under Gram Panchayati Development Plan (GPDP).

Know! the benefit of e-Gram Swaraj Portal/App

• Monitoring and recording all the work via Gram Swaraj Portal/App will help speed-up the implementation of projects in village areas.
• One can access and know about the groundwork as it will contain the details of ongoing development works and the fund allocated for the projects
• All the details related to Panchayat Sachiv and Panch can be viewed on Gram Swaraj Portal.
• The works of the Ministry of Panchayati Raj will be accessible through Gram Swaraj Portal.
• The Gram Swaraj Portal and application will provide a boost in transparency by decentralized planning of development projects, with progress reports updates and increased accountability.
• Anybody can create an account on the Gram Swaraj Portal and know about the developmental works of villages.

Know! about Panchayati Raj Diwas

• Prime Minister Narendra Modi interacts with Sarpanchs from across the nation via video conferencing, on the occasion of Panchayati Raj Diwas
• The Constitution (73^rd Amendment) Act, 1992 that came into force with effect from 24^th April, 1993 has vested constitutional status on Panchayati Raj institutions.
• This date thus marks a defining moment in the history of decentralization of political power to the grassroots level.
• The impact of the 73^rd Amendment in rural India is very visible as it has changed power equations irreversibly.
• Accordingly, the Government of India decided in consultation with the States to celebrate 24^th April as National Panchayati Raj Day.
• The commemoration is being anchored by the Ministry of Panchayati Raj. The National Panchayati Raj Day (NPRD) is being celebrated on 24 April since 2010.
• The Constitution of India recognizes Panchayats as 'Institutions of self government'.
• There are 2.51 lakh Panchayats in our country, which include 2.39 lakh Gram Panchayats, 6904 Block Panchayats and 589 District Panchayats.
• Every year on this occasion, Ministry of Panchayati Raj has been awarding the best performing Panchayats/ States/ UTs across the country under the Incentivization of Panchayats in recognition of their good work for improving delivery of services and public goods.

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