Today Current Affairs English 27 January 2022

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In People-to-People Initiatives and India-Pakistan Ties, we must maintain our optimism.

Why in news?

A proposal has been made by the Pakistan Hindu Council, which has been forwarded to India, to allow pilgrims from both nations to go by air to avoid the arduous travels that would otherwise be required.

 

What is the current status of Islamabad-Delhi ties?

The relationship between Islamabad and Delhi is at its lowest point in peacetime, with no political conversation taking place at the bilateral or multilateral level for more than five years.Following a series of terrorist strikes in India, the country has suspended routine communications and cultural interactions.Pakistan has suspended all trade relations with the United States following the government’s actions on Article 370 in Jammu and Kashmir.Both countries have reduced the size of their diplomatic delegations.The COVID-19 epidemic has resulted in the borders being virtually locked for the past two years, with only a few direct routes connecting them operating between them.The Pakistani government has been delaying approvals for several months on an Indian request to transport 500,000 MT of wheat as humanitarian aid to Afghanistan through the Wagah border.The few confidence-building measures (CBMs) that remain in place between India and Pakistan are as follows:The opening of the Kartarpur corridor for Sikh pilgrims is scheduled to take place in 2019.The exchange of lists of inmates held by both sides of their respective citizens’ prisons.

 

How are religious exchanges governed?

The religious exchanges, which mostly involve Muslim pilgrims from Pakistan and Hindus and Sikhs from India, are overseen under a 1974 convention signed by the two countries’ governments. As a result of the arrangement, hundreds of Indian and Pakistani pilgrims cross the border at Wagah/Atari to travel to the shrines through more roundabout paths, rather than the traditional route.It also adds to the amount of time spent travelling.As a result, the Pakistan Hindu Council has signed a Memorandum of Understanding (MoU) with Pakistan International Airlines (PIA) to facilitate religious trip groups.The Council has requested that Pakistan International Airlines (PIA) charters from Karachi and Lahore be permitted to travel directly to Indian destinations in order to facilitate reciprocal air charters from India.

 

What is the significance of this proposal?

If all of the necessary permits are obtained, this would be the first PIA flight to travel to India since operations were ceased in 2019. It would also be the first trip to transport pilgrims from either side of the border since 1947.In March 2008, the old Indian Airlines made its final flight to Pakistan.Travel to shrines like as the Hinglaj Mata Mandir in Balochistan, the Paramhans Mandir in Khyber Pakhtunkhwa, the Ajmer Sharif dargah in Rajasthan, the Nizamuddin Aulia in Delhi, and other such places will be encouraged as a result.Starting with religion tourism and progressing to additional tourism, trade, and regular travel are all possibilities.People-to-people initiatives can contribute to the development of a small amount of goodwill.

Unleash the potential of India's food processing industry

What is the Issue?

Increased human population and unfettered use of natural resources must force nations to develop a more efficient food value chain in order to survive.

 

Why India has launched PLISFPI?
The problem of feeding 10 billion people by the middle of the century necessitates the development of efficient production methods that are both economically viable and environmentally friendly.

 

In addition, the pandemic has increased the demand for ready-to-eat foods and beverages. The good news is that emerging technologies are transforming the traditional strategy of farm to fork while leaving a smaller environmental imprint.India, which is one of the world’s top producers of fruits and vegetables, has developed a one-of-a-kind Production-Linked Incentive Scheme (PLIS) to encourage the production of processed foods in huge amounts. The scheme’s goal is to encourage customers to make more purchases.PLIS hopes to establish an enabling ecosystem for innovation in both food items and food manufacturing processes by welcoming new brands into the sector with open arms.

 

What is the progress so far?
A total of Rs. 10,900 crore has been set aside for the project.Category 1 has already selected 60 applications from within the pool of applicants.These companies are rewarded for increased revenue as well as for branding and marketing actions carried out in foreign markets. Beneficiaries have been required to make a minimum investment in order to be eligible to participate in the programme. As a result, the sector is expected to get at least Rs. 6,500 crore in investment over the next two years.

 

Why branding and marketing is important?
Sales promotion is positively connected to increasing sales volume in the exports market, but it is inversely related to profitability in the same market.For this reason, the ‘Food Processing PLIS’ allocates a distinct Category 3 for supporting branding and marketing operations in international markets, among the 13 major sectors that have been identified for inclusion in the PLIS.This assures that India’s share of value-added products in the world’s export basket continues to increase.Using its advantageous geographic closeness to unexplored markets in Europe, the Middle East/Western Asia, Africa, the Pacific Rim, and Japan, it has the potential to grow.

Why investment in public infrastructure is necessary?

  • With higher public investments Andhra Pradesh, Gujarat, Maharashtra, Tamil Nadu and Uttar Pradesh have ranked among the highest in the ‘Public Infrastructure and Utilities’ parameter by the Good Governance Index 2020-21.
  • With good connectivity to Rural Habitations these states show the highest improvement.
  • A 1% increase in public infrastructure is expected to increase the food manufacturing output by 0.06% in the longer run.

How do we perform in case of credit availability?

Access to finance for micro, small, and medium-sized enterprises (MSMEs) is a persistent concern in the country, owing to a lack of a robust credit history process for MSMEs. Smart financing alternatives, such as peer-to-peer (P2P) lending, have the potential to be beneficial to small and medium-sized food producers.In total, MUDRA Bank has assisted more than 1,18,000 small enterprises in gaining access to capital.Improvements are necessary – Tredia is an online platform for easing the financing and discounting of trade receivables of micro, small, and medium-sized enterprises (MSMEs) by a number of different financiers.The platform will require significant scaling-up, as well as the simultaneous execution of severe procedures to ensure that corporate compliance.Integrating it with the GST Network’s e-invoicing portal will make TReDS more appealing to investors while also providing relief to financial institutions.

 

What is the way forward?

Nutritional Supplements – The pandemic has increased consumer demand for nutritional supplements.Health-oriented start-ups and micro-food processing units are expected to benefit from the facility, which is set to open in 2019.A variety of new alternatives to the staples of rice and wheat, such as Nutri-cereals, plant-based proteins (fermented foods), health bars, and even fresh fortified foods for dogs, must be researched as alternatives to rice and wheat. Countries must join together and put out a road plan for a common efficient food value chain in the face of rising populations, shifting eating patterns, and unrestrained exploitation of natural resources.

GEO-Political Implications of Natural Gas Pipelines

What is the issue?

When everyone’s attention was focused on the drama surrounding European and American objections to the Nord Stream II pipeline from Russia to Germany, a European pipeline project (EastMed) died in relative obscurity, according to the media.

 

What is the European Pipeline Project?

The Eastern Mediterranean (EastMed) pipeline project is a 1,900-kilometer-long natural gas pipeline that will link the gas reserves of the eastern Mediterranean with Greece.The European Commission recognised the pipeline as a “Project of Common Interest” in 2013. It was expected that the pipeline will transport up to 20 billion cubic metres of natural gas to Europe each year.The pipeline consists of 1,300 kilometres of offshore and 600 kilometres of onshore sections.It will transport natural gas from Israel’s Levantine Basin as well as from the gas deposits in Cypriot waters to Greece and Italy, where it will be used for power generation.During their meetings in January 2020, energy ministers from Greece, Israel, and Cyprus signed the final agreement for the pipeline project.After a year of deliberation, Congress authorised legislation that included funding for the construction of pipelines and liquefied natural gas terminals, as well as the establishment of a United States-Eastern Mediterranean Energy Center.

 

What is the significance of the project?

In addition to increasing Europe’s energy security by diversifying its routes and sources, the East Med pipeline will also provide direct interconnection to the continent’s energy production sectors.Because of this, Cyprus will have the possibility to join the European gas system, which will further improve gas trading in the south-east European region.The project will also aid in the economic development of Cyprus and Greece by creating a stable market for the sale of natural gas to the two countries’ markets.Gas trading centres in Greece and Italy will be able to emerge as a result of this agreement, which will facilitate gas trading throughout south-east Europe.

 

What is the issue now?

The United States Department of State has announced that it would no longer fund the EastMed natural gas pipeline due to environmental concerns. Financial viability is important. Concerns about the environmentTensions on the political front Financial viability- The United States believes that the project is financially unviable because it appears to be too ambitious and complicated.When it comes to construction costs, the EastMed is prohibitively expensive. If built, it will operate in a market with lower demand and increasing competition from alternative less expensive natural gas supplies.It is anticipated that it will become a stranded asset with a significant carbon footprint, resulting in billions of euros in losses.Carbon dioxide and methane emissions from the extraction and combustion of natural gas are two of the most important greenhouse gases, according to environmentalists.Natural gas has such a low environmental impact that the European Investment Bank (EIB) will no longer fund natural gas projects starting in 2022 as part of its goal to phase out assistance for hydrocarbon infrastructure.A number of obstacles have prevented exploratory drilling from being carried out in the gas resources located in the sea shelf south of the country.Turbulent political relations: The Turkish government has made it plain that the EastMed initiative will not be possible without its participation.A significant part of natural gas earnings for the northern Turkish Cypriot enclave that it has controlled since 1974 through a puppet government, as well as for itself, has been a major focus of the Turkish government’s efforts.Turkey wields immense power in Washington as a result of its NATO membership and its position as a vital gateway to the Black Sea.

 

What is Russia’s game plan?

In the past, Russian natural gas exports to Europe have been accomplished through pipelines that traverse through Ukraine and Eastern Europe.These pipelines have been under increasing pressure as a result of the United States’ expanding influence on eastern European countries, most recently over the Ukrainian government,Belarus, a Russian ally and gas transit country, is also subject to Western sanctions at the moment. Because of this, Russia opted to bypass both Ukraine and Belarus in order to develop a direct pipeline to Germany, investing more than $9 billion in the building of the Nord Stream pipeline project.However, authorisation from German regulators for this pipeline to become operational has been halted since the United States has expanded its LPG exports to Europe in an attempt to seize control of the market.Russia has also shifted its focus eastward, and the Power of Siberia pipeline, which will transport natural gas from its Arctic gas resources to China, is currently under construction.

 

Does this have any relevance to India?

India imports LPG from open markets in big tankers, which are towed behind enormous ships.The most important suppliers to India are Qatar, Australia, and the United States.In the future, India is quite likely to purchase LPG from Russia, where the country has made significant investments in petrocarbon production in recent years.The Indian government has secured energy security by diversifying its sourcing and placing its bets on dependable and major gas exporters, among other measures.The EastMed was of negligible significance to world gas markets, and as a result, it was of no significance to India.TAPI pipeline (Transportation Authority of Pakistan and India) The TAPI (Turkmenistan Afghanistan Pakistan India) pipeline, which is currently the sole relevant pipeline from the Indian perspective, may one day become relevant.The pipeline runs from Turkmenistan’s Galkynish gas fields, which are the world’s second-largest proved natural gas field in terms of proven reserves.It is expected to transport 33 billion cubic metres (1.2 trillion cubic feet) of natural gas per year to Afghanistan, Pakistan, and India if the pipeline is finished in its current state.However, despite the political turmoil in Afghanistan and the difficult relations between India and Pakistan, this pipeline is far more important to India than the EastMed pipeline is to the Middle East.

The Taxing Drama—The Tax Disputes that are retroactive

What is the issue?

In a statement, the Cairn Energy company stated that it had completed all measures required by the Indian government in order to be eligible for a refund of retroactive tax levied and that it expects to get a refund of Rs. 7,900 crore.

 

What is a retrospective tax?

A retrospective tax is one that is applied to a transaction that occurred before the law was enacted.It could be a new charge or an addition to a charge for transactions that have already occurred.By the Finance Act of 2012, India became the first country to implement a retrospective tax provision.It granted the government the authority to tax corporations on mergers and acquisitions (M&As) that occurred before to 2012.To put it another way, it sought to bring prior indirect transfers of Indian assets into the purview of taxation.

 

What cases challenged the provision of retrospective taxation?

Example: Vodafone Purchase of 67 percent of Hutchison Whampoa for $11 billion. Vodafone is a British telecommunications behemoth that operates in Hong Kong.The Indian government made a demand for Rs 7,990 crore in capital gain in connection with this transaction.In their complaint, the business claimed that the tax should have been withheld at source before making a payment to Hutchison.The dispute was brought before the Supreme Court by the firm.The Court found in favour of Vodafone, holding that the company could not be taxed retroactively under the law.The law on retrospective taxes was enacted in order to get around the legal obstacle.Vodafone India was issued a Rs 3,100 crore tax notice by the Income Tax Department as a result of this.Conflict with Cairn Energy- Cairn Energy was ordered to pay Rs. 10,247 crore in 2014 as a result of a 2006 decision to consolidate its assets under a single holding company, which was reversed in 2015.Cairn asserted that the government had broken the Bilateral Investment Treaty between India and the United Kingdom (BIT).Cairn and Vodafone have both filed petitions with the Permanent Court of Arbitration in The Hague (PCA).

 

What was the court’s ruling?

The International Court of Justice found in Cairn’s favour. In the case of Cairn, the taxman was able to recoup a portion of its debt by forcibly selling the company’s stock while arbitration processes were still ongoing.

As a result of this case, the International Court of Justice awarded it 1.2 billion dollars in punitive damages.

 

What happened aftermath the international court’s ruling?

The Taxation Laws (Amendment) Bill was submitted by the government in 2021 in order to repeal the retrospective tax provisions that were implemented in 2012.According to the proposed modifications, any tax demands made on transactions that occurred prior to May 2012 will be waived entirely. Furthermore, any taxes that have already been collected will be refunded without interest.Taxpayers who wish to be considered for the programme would be required to withdraw any pending lawsuits against the government. It’s also important that they commit not to make any claims for damages or charges.Both the Cairn and Vodafone took use of these benefits.

 

What must the government do now?

To ensure that their paperwork is processed as quickly as possible and that their dues are sent before the end of the fiscal year, the government should operate quickly.Hopefully, this will be the first step in repairing some of the harm done to the image of the country.India must abandon the volatility of its laws and regulations and display better consistency and predictability across all aspects of its economic policy in order to strengthen its reputation as an attractive investment destination.

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