UPSC Essentials | Weekly news express with MCQs: Adani-Hindenburg saga, Myanmar coup, Sri Lanka’s debt, and more

— An assurance from the Paris Club, as well as other bilateral creditors, is one of the conditions that Sri Lanka has to fulfil for the IMF to begin disbursing a $2.9 bn bailout package to the beleaguered nation that all but collapsed last year under a severe economic crisis.

What is the Paris Club?

— The Paris Club is a group of mostly western creditor countries that grew from a 1956 meeting in which Argentina agreed to meet its public creditors in Paris. Their objective is to find sustainable debt-relief solutions for countries that are unable to repay their bilateral loans.

— It describes itself as a forum where official creditors meet to solve payment difficulties faced by debtor countries. All 22 are members of the group called Organisation for Economic Co-operation and Development (OECD).

Map showing Paris Club countries highlighted in green. (Via Wikimedia Commons)

— The members are: Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, Netherlands, Norway, Russia, South Korea, Spain, Sweden, Switzerland, the United Kingdom and the United States.

How has Paris Club been involved in debt agreements?

— It operates on the principles of consensus and solidarity. Any agreement reached with the debtor country will apply equally to all its Paris Club creditors.

— A debtor country that signs an agreement with its Paris Club creditors, should not then accept from its non-Paris Club commercial and bilateral creditors such terms of treatment of its debt that are less favourable to the debtor than those agreed with the Paris Club.

The role of the Paris Club over time

— The Paris group countries dominated bilateral lending in the last century, but their importance has receded over the last two decades or so with the emergence of China as the world’s biggest bilateral lender.

— In Sri Lanka’s case, for instance, China, Japan and India are the largest bilateral creditors. Sri Lanka’s debt to China is 52 per cent of its bilateral debt, 19.5 per cent to Japan, and 12 per cent to India. With Japan, a member of the Paris Club, Sri Lanka needed assurances from China and India as well.

— The Paris Club had tried to get both countries on board a centralised effort, but Delhi launched its own bilateral negotiations with Colombo. Last month, during a visit to Colombo, External Affairs Minister S Jaishankar announced that India had written to the IMF providing the necessary financial assurances, adding that it hoped others would follow suit.

— The reported readiness by the Paris Club comes against this background. That still leaves China, whose Exim Bank offered a two-year moratorium on its loans soon after the Indian announcement.

— This has been deemed to be insufficient. Victoria Nuland, the US under-secretary of state who is touring Sri Lanka, said the Chinese offer was “not enough”. The IMF has not commented on the Chinese assurance, but described the Indian submission as a “good development”.

(Source: Paris Club likely to provide financial assurances to IMF on Sri Lanka debt: What is this grouping?)

Point to ponder: What led to Sri Lanka’s economic crisis, and who’s helping?

3. MCQ:

Which country is not a member of Paris Club?

a) Australia

b) Canada

c) India

d) Russia

Myanmar coup and India’s headache 

Syllabus:

Preliminary Examination: Current events of national and international importance

Mains Examination: General Studies II: India and its neighbourhood- relations.

Why in news?

— It is two years since the Myanmar army seized power. The coup took place in the pre-dawn hours of February 1, 2021, the day on which new Members of Parliament were scheduled to meet in an inaugural session to take the oath of office. The National League for Democracy (NLD) led by Aung San Suu Kyi had won a landslide victory. The army, which contested the election through its proxy party, the United Solidarity and Development Party, had fared poorly.

KEY TAKEAWAYS

Nirupama Subramanian Explains:

— To justify the coup, the generals alleged rigging by the NLD, the ruling party of the previous five years in a hybrid civil-military arrangement with the army, though it appears to have been driven by the fear that Suu Kyi, backed by the democratic parties in Parliament would rewrite the 2008 Constitution and write the military out of it. Within a few hours, the military erased 10 years of a so-called “transition to democracy” and returned the country to 1990.

India’s continuing policy tightrope in Myanmar

— In India, which shares a 1,600-km border with Myanmar along four Northeastern states, as well as a maritime boundary in the Bay of Bengal, the failure of the Myanmar state presents a foreign policy dilemma that it is struggling to resolve.

— For some three decades, India has pursued a “dual-track policy”, which essentially means doing business with the junta, which has ruled over Myanmar for all but five years since 1990, with tea and sympathy for the pro-democracy forces.

— The decision to engage with the military rulers was taken in the mid-1990s primarily as a quid pro quo for its help in securing India’s Northeastern borders by denying safe haven on its soil to Northeastern insurgencies. This worked to India’s advantage, and became the touchstone by which the relationship with military-ruled Myanmar was built for several years. Over the last two decades, as China with its deep pockets emerged as a rival in the region, engaging with the junta was also seen as a way to retain Indian influence in Myanmar.

— Delhi had to calibrate this engagement during the “democratic transition” of the last decade and rebalance the dual track. Now it is back to square 1 again. But as the coup enters its third year in this second decade of the 21st century, the limits of the old template — doing business with the military regime, encouraging it restore democracy, and offering sympathy to democratic forces — are becoming apparent, even going by India’s narrowly defined national interests: border security management, and restricting China in Myanmar.

Five ways in which India’s calculations have been upset

— PDFs in the Sagaing region control large parts of the area through which the trilateral highway passes, starting at Tamu checkpost opposite Moreh in Manipur. NUG sources have told The Indian Express that at least on two occasions, its office bearers had to intervene with the local PDF leaders to allow project vehicles to pass.

— In the first week of January, Union Minister of Ports, Shipping & Waterways, Sarbananda Sonowal said that Sittwe port, developed by India as part of the Kaladan project, was ready for operation. Mizzima, a Myanmar news site, also reported three weeks ago, quoting both the military governor in Rakhine and Indian Embassy sources, that the port, which is situated on the Bay of Bengal at the mouth of the Kaladan river, would be inaugurated “soon”. While India-Myanmar maritime trade was one objective, the primary objective of this project, to provide alternate access to India’s landlocked north-east states, now seems like a bridge too far.

— Secondly, the conflict following the coup has spilled over into India. Mizoram is hosting tens of thousands of refugees from the adjoining Chin state in Myanmar. Refugees have come into other Northeastern states, though in fewer numbers. Last month, around 50 Myanmar refugees including some minors were rounded up in Manipur’s border town Moreh and taken to a detention centre. More dangerously, the recent bombing by the Myanmar Air Force of a Chin militia headquarters on the border with Mizoram, with shrapnel hitting the Indian side during this operation, triggered panic in the area. 

— Another potential cross-border spillover is contained in the latest report of the UN Office for Drugs and Crime on Myanmar (Myanmar Opium Survey). The report, covering four states — Shan, Kachin, Kayah and Chin — points to a sharp 33 per cent spike in poppy cultivation in that country. But the sharpest increase has been noticed in Chin state, in an area that borders northern Mizoram and southern Manipur. According to Angshuman Chaudhary, a Myanmar expert and associate fellow at the Centre of Policy Research, the patch coincides with an area in which the Zomi Reunification Organisation, a Myanmar military proxy, is dominant.

— Third, the Indian security establishment is aware that the Myanmar junta has recruited Indian insurgent group (IIGs) in regions adjoining Manipur and Nagaland to fight against the local PDFs and other groups, and that rearmed by the junta for this purpose, these groups are now strengthening themselves. Of these groups, the People’s Liberation Army has been held responsible by India for the deadly attack on an Assam Rifles convoy, in which a colonel, his wife and son, and four AR personnel were killed in November 2021.

— Fourth, the military cannot resolve the Rohingya crisis, another regional destabiliser.

— Fifth, defining national interests more broadly, India itself has changed since the 1990s, and particularly since 2015. It now describes itself as the “mother of democracy” and has projected its year-long presidency of the G20 as an opportunity to project the voice of the global south.

— A question that Myanmar’s 54 million population may ask is what can India do in this year for both its democratic and economic aspirations — the junta has not just ended Myanmar’s democratic experiment, but has also killed its economic development over the years. Instead of “waiting and watching” for the situation to develop, could India play an active role.

The options that New Delhi still retains

— Myanmar watchers in India, including several former diplomats, believe New Delhi is not without options: it can open channels to the democratic forces and to some ethnic groups; it can work more actively with ASEAN; it could open an army to army channel with the junta; increase people to people channels; offer scholarships to Myanmar students like it did for Afghan students in a different era.

— Meanwhile, the junta is mulling elections later this year after rejigging the first-past-the-post system to proportional representation to undermine the NLD’s electoral might. Perhaps the military believes this might make it more acceptable to the international community. But at this point, it seems an election may only worsen Myanmar’s conflict, especially when its most popular leader, the 77-year-old Aung San Suu Kyi, remains imprisoned by a military court on questionable charges.

(Source: Two years after Myanmar coup, how the country is a mess — and India’s headache has worsened by Nirupama Subramanian )

Point to ponder: What determines India’s response to military rule in Myanmar?

4. MCQ: 

With reference to Myanmar, consider the following statements:

1) It is a member of BIMSTEC

2) It is not a member of SAARC

3) It shares boundaries with five Indian states.

How many of the above statements are true?

(a) Only one of the three

(b) Only two of the three

(c) All three statements

(d) None of the statements

High milk prices

Syllabus:

Preliminary Examination: Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc.

Mains Examination: General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Why in news?

— Within the last year, the Gujarat Co-operative Milk Marketing Federation has raised the maximum retail price (MRP) of its Amul brand full-cream milk (containing 6% fat and 9% SNF or solids-not-fat) in Delhi from Rs 58 to Rs 64 per litre. The National Dairy Development Board (NDDB)-owned Mother Dairy went further — from Rs 57 to Rs 66 per litre — between March 5 and December 27, 2022.

KEY TAKEAWAYS

Harish Damodaran Explains:

What explains this recent inflation?

There are multiple factors-

— The most important factor probably has to do with the crash in prices following the Covid-induced lockdowns, which forced the closure of hotels, restaurants, canteens and sweetshops, apart from cancellation of weddings and other public functions. The demand destruction led dairies to slash procurement prices of cow milk (with 3.5 per cent fat and 8.5 per cent SNF) to Rs 18-20 per litre during April-July 2020 and that of buffalo milk (6.5 per cent fat and 9 per cent SNF) to Rs 30-32. This was accompanied by ex-factory prices of skim milk powder (SMP) collapsing to Rs 140-150 per kg, along with Rs 200-225/kg for cow butter and Rs 280-290/kg for ghee.

— Farmers responded first by shrinking — or at least not expanding — the size of their herds, as milk prices would not cover the cost of feeding and maintaining the animals. Two, they underfed them — particularly the calves and the pregnant/ dry cattle not giving milk.

— A newborn crossbred typically reaches puberty and is ready for insemination in 15-18 months. Adding 9-10 months of pregnancy, it will deliver and start lactating after 24-28 months. The age of first calving in buffaloes is higher, at 36-48 months.

— The calves that were underfed during the lockdown — which extended past the second Covid wave until June 2021 and beyond — are today’s cows. Most of them, even if they have survived, would be poor milkers. This is evidenced by dairies across India reporting lower milk procurement, with the year-on-year drop up to 15-20 per cent for the cooperative federations in Karnataka and Tamil Nadu. The same dairies that were refusing to buy from farmers in 2020-21 are at present paying Rs 37-38/litre for cow milk and Rs 54-56/litre for buffalo milk.

Is the legacy of underfed animals the only reason?

There are others too, both on the supply and demand fronts-

— On the supply side, the average cost of cattle feed spiked from Rs 16-17 per kg in 2020-21 to Rs 22-23 by mid-2022, on the back of more expensive ingredients such as cotton-seed, rapeseed and groundnut extractions, soyabean meal, maize, de-oiled rice bran and molasses.

— Availability of straw (particularly wheat, due to a poor 2021-22 crop) and fodder (because of near-incessant rains, especially in the South, from October-December 2021 through 2022, which did not allow the grass to fully come out) has also been an issue. On top of these came the outbreak of lumpy skin disease among cattle in July-September 2022, and seemingly impacted milk output further.

— On the demand side, the lifting of lockdown restrictions and revival of economic activity from late-2021 coincided precisely with the building up of supply pressures. This was exacerbated by India exporting about 33,017 tonnes of milk fat worth Rs 1,281.15 crore in 2021-22 and 13,360 tonnes (Rs 664.82 crore) during April-November 2022, against a mere 15,600 tonnes (Rs 717.17 crore) in 2020-21. Higher exports of butter, ghee, and anhydrous milk fat, enabled by soaring international prices, have added to the domestic shortage — and as noted earlier, full cream milk has become dearer, with branded ghee and butter also disappearing from store shelves.

What’s the current situation and the future outlook?

— In contrast to the 2020 lows, ex-factory per-kg realisations are now at Rs 305-315 for cow SMP, Rs 340-plus for buffalo SMP, Rs 425-430 for cow butter, and Rs 520-525 for ghee. “Milk shortfall is mainly in the South; it is better in Maharashtra. Even in the northern buffalo belt, supply hasn’t picked up as much as one would expect for the flush season,” said Ganesan Palaniappan, a leading Chennai-based dairy commodities trader.

— But worse could lie ahead. The calving season (“flush”) for animals, when more milk flows from their udders, generally begins from September. That’s the time temperature and humidity levels dip, alongside improved fodder-cum-straw availability from the monsoon rain and harvesting of the kharif crop. The calvings peak in the winter and continue until March-April before the onset of summer.

— The “flush” months are also when dairies convert the surplus milk that they procure into SMP, butter, and fat. Those, in turn, are used for reconstitution during the “lean” summer season, when the animals produce less, even as demand for curd, lassi, and ice cream surges.

What can the government do now?

— A shortage of milk, more specifically fat, is a concern at this point when dairies would ordinarily be building up stocks for the summer. Since that’s not happening, it makes sense to allow duty-free imports of butter oil and SMP. The most recent price of $5,337 per tonne (Rs 435/kg) for anhydrous milk fat at New Zealand’s Global Dairy Trade fortnightly auction works out to below the corresponding domestic rate of Rs 520-525/kg. This wasn’t the case in March 2022, when global prices had topped $7,100 per tonne.

— Butter fat imports currently attract 40% duty. For SMP imports, it is 15% up to 10,000 tonnes per year and 60% for quantities beyond that. The government can permit NDDB to import fat and SMP at zero duty for building up a buffer stock necessary for the summer, when milk supplies will dry up in the normal course. Domestic production should hopefully recover by the next “flush” season, when farmers would be enthused enough to milk more animals that have no dearth of feed or fodder.

(Source: Why are milk prices so high, and what can be done about it? by Harish Damodaran)

Point to ponder: Government must consider importing wheat and milk fat to keep food inflation under check. Discuss.

5. MCQ:

The Gerber method determines:

(a) protein percent in milk

(b) purity of water

(c) soil health profile

(d) none of the above

ANSWER TO MCQs: 1 (c), 2 (b), 3 (c), 4 (b), 5 (d)

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