UPSC Essentials | Daily subject-wise quiz : Economy MCQs on sustainable aviation fuel, MCLR and more (Week 124)

QUESTION 1

With reference to the sustainable aviation fuel (SAF), consider the following statements:

1. SAF is a biofuel that is produced from sustainable feedstocks and has chemistry similar to conventional aviation turbine fuel (ATF).

2. In line with the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) framework, India’s National Biofuel Coordination Committee (NBCC) has set the initial indicative targets for blending of SAF with jet fuel from 2025 onwards, starting with domestic flights.

3. The Hindustan Petroleum Corporation Limited (HPCL) became the first company in India to receive the ISCC CORSIA certification for SAF production.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Explanation

— Air India, a Tata group airline, and India’s largest refiner and fuel supplier, Indian Oil Corporation (IOC), have signed a memorandum of understanding to supply Air India with sustainable aviation fuel (SAF) manufactured by IOC. Hence, statement 3 is not correct.

— IOC was the first firm in India to acquire ISCC CORSIA certification for SAF production at its Panipat refinery in Haryana. ISCC CORSIA is a certification method for SAF that ensures compliance with the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) requirements. It is a requirement for commercial SAF manufacture. According to IOC, the certification serves as a baseline for other domestic refiners and industry participants looking to increase SAF production.

— SAF is a biofuel that is produced from sustainable feedstocks and has chemistry similar to conventional aviation turbine fuel (ATF) or jet fuel, which is derived from crude oil. This means that existing aircraft engines can easily use the SAF-ATF blend. For instance, Airbus claims that all its aircraft are capable of flying on a maximum 50 per cent blend of SAF and conventional fuel. Various Indian airlines have already operated successfully a few test and demonstration flights using jet fuel doped with SAF in various proportions. According to aviation industry and energy experts, SAF alone is likely to account for over 60 per cent of the global aviation industry’s decarbonisation efforts. Hence, statement 1 is correct.

— With the mandatory phase of CORSIA beginning in 2027, the year 2027 will be a watershed moment for global SAF implementation. CORSIA, which applies to international flights, would mandate airlines worldwide to offset any increase in CO2 emissions above 2020 levels. Using jet fuel blended with SAF is one option for carriers to keep their emissions under acceptable levels.

— India, too, will have to comply with the mandatory phase starting 2027. In line with the CORSIA framework, India’s National Biofuel Coordination Committee (NBCC) has set the initial indicative targets for blending of SAF with jet fuel 2027 onwards, starting with international flights. The indicative targets are: 1 per cent blending in 2027 and 2 per cent in 2028. The government is expected to announce SAF blending mandates for domestic flights in India as well, but only after blending for international flights begins 2027 onwards. Hence, statement 2 is not correct.

Therefore, option (a) is the correct answer.

QUESTION 2

Consider the following countries:

1. United Arab Emirates (UAE)

2. United Kingdom (UK)

3. United States of America (USA)

4. Singapore

What is the correct order of non-residents from the above countries (from high to low) who own a share of domestic mutual fund (MF) units in terms of face value?

(a) 3—2—1—4

(b) 3—4—1—2

(c) 1—3—4—2

(d) 1—3—2—4

Explanation

— Domestic mutual fund industry’s foreign liabilities surged 19.9 per cent to $30.5 billion, in market value terms during financial year 2025, primarily driven by an increase in units issued to non-residents, a Reserve Bank of India survey showed.

— Among major countries, non-residents of the United Arab Emirates (UAE) held the largest share in mutual fund (MF) units, both in terms of face value (21.2 per cent) as well as at market value (20.2 per cent) during fiscal 2025. In face value terms, foreign liabilities in units of MFs held by non-residents of UAE increased by 32.8 per cent to Rs 3,305 crore in FY25, while in market value terms, they rose by 28 per cent to Rs 11,508 crore.

— The non-residents of other countries that own a large share of domestic MF units, in face value terms, include the United States of America (USA) – 11.2 per cent, the United Kingdom (UK) – 10.8, and Singapore – 6.6 per cent.

— The survey showed that overseas assets of MFs declined by 5.6 per cent and stood at $8.3 billion in March 2025, due to lower holdings of foreign equity securities.

Therefore, option (d) is the correct answer.

QUESTION 3

Consider the following statements:

1. Indian coffee exporters have benefitted from global ending stocks for 2024-25 due to subpar crops in Brazil and Vietnam.

2. India mostly exports arabica beans.

3. In India, Kerala is the largest coffee-producing state.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Explanation

— India exported goods valued at $437.4 billion during 2024-25, which was 0.1% higher than the $437.1 billion in the previous financial year ended March 31, 2025. During April-June 2025, total exports, at $112 billion, were 1.7% up over the $110.1 billion for April-June 2024.

— Indian coffee exporters have benefitted from global ending stocks for 2024-25 depleting to their lowest since 1999-2000, mainly courtesy of subpar crops in Brazil and Vietnam, the world’s biggest producers of arabica and robusta varieties respectively. India mostly exports robusta beans and powder used in instant coffee and espresso blends. Tobacco exports have similarly got a boost from output shortfalls in Brazil and Zimbabwe. Hence, statement 1 is correct and statement 2 is not correct.

— Karnataka leads in production followed by Kerala and Tamil Nadu. Hence, statement 3 is not correct.

Therefore, option (a) is the correct answer.

(Other Source: http://www.pib.gov.in)

QUESTION 4

Consider the following statements:

1. Eliminating the duty on cotton imports could soften the impact of high US tariffs on the labour-intensive sector.

2. The elimination of duty is largely aimed at addressing the challenges faced by the industry.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Explanation

— The government agreed to a long-standing demand of the textile industry to eliminate the 11 per cent duty on cotton imports, in a bid to soften the impact of high US tariffs on the labour-intensive sector, which is expected to take the hardest hit from the 50 per cent US levy. Hence, statement 1 is correct.

— However, the calibrated relief measure to eliminate the duty until September 30 could also help ease trade tensions with the US, as Washington is the second-largest cotton exporter to India and has been pushing for broader access to the Indian market during negotiations for a trade deal.

— While the elimination of duty is largely aimed at addressing the challenges faced by the industry — ranging from steep US tariffs to high cotton prices — it also acts as a signal to US negotiators that India could be willing to negotiate imports of cotton from Washington, an industry executive said. Hence, statement 2 is correct.

— New Delhi-based think tank Global Trade Research Initiative (GTRI) said that almost all of India’s $1.20 billion cotton imports in FY2025 were of staple length 28 mm or above and that under the India-Australia Economic Cooperation and Trade Agreement, 51,000 MT of such cotton already enters duty-free. This means the biggest winner from India’s new duty-free window will be the US, GTRI said.

Therefore, option (c) is the correct answer.

QUESTION 5

MCLR, or Marginal Cost of Funds based Lending Rate, is a:

(a) benchmark interest rate set by the Reserve Bank of India (RBI) for banks to determine the minimum interest rate they can charge on loans.

(b) Rate fixed by RBI at which it lends money to commercial banks.

(c) Interest rate paid by the government on its borrowings from the public.

(d) Benchmark rate at which banks borrow from international financial institutions.

Explanation

— Public sector lenders, including the State Bank of India (SBI), Bank of Baroda (BoB) and Indian Overseas Bank (IOB) have reduced their marginal cost of funds-based lending rates (MCLR) by up to 35 basis points (bps) across various tenors.

— The reduction follows a cumulative reduction of 100 bps in the repo rate to 5.5 per cent by the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) between February and June. In the August monetary policy meeting, the six-member MPC left the repo rate unchanged. One basis point is one hundredth of one percentage point.

— MCLR, or Marginal Cost of Funds based Lending Rate, is a benchmark interest rate set by the Reserve Bank of India (RBI) for banks to determine the minimum interest rate they can charge on loans.

Therefore, option (a) is the correct answer.

Previous Daily Subject-Wise-Quiz

Daily Subject-wise quiz — History, Culture, and Social Issues (Week 122)

Daily subject-wise quiz — Polity and Governance (Week 124)

Daily subject-wise quiz —  Science and Technology (Week 124)

Daily subject-wise quiz — Economy (Week 123)

Daily subject-wise quiz — Environment and Geography (Week 123)

Daily subject-wise quiz – International Relations (Week 123)

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