05 TH FEBRUARY 2021

SPECIAL SERIES BUDGET, SURVEY AND FINANCE COMMISSION

iv) Banking, Insurance and financial services

TOPIC 2 (financial services)

GOVERNMENT ANNOUNCED
THE DISINVESTMENT
POLICY IN THE BUDGET
HIGHLIGHTS OF
DISINVESTMENT/STRATEGIC
DISINVESTMENT POLICY
Objectives
a. Minimising presence of Central Government
Public Sector Enterprises including financial
institutions and creating new investment
space for private sector
b. Post disinvestment, economic growth of
Central Public Sector Enterprises (CPSEs)/
financial institutions will be through
infusion of private capital, technology and
best management practices.
c. Will contribute to economic growth and
new jobs.
d. Disinvestment proceeds to finance various
social sector and developmental
programmes of the government.
Policy features
e. Policy covers existing CPSEs, Public Sector
Banks and Public Sector Insurance
Companies.
f. Various sectors will be classified as strategic
and non-strategic sectors.
g. The strategic sectors have been classified in
four broad baskets:
i) Atomic energy, Space and Defence
(national security)
ii) Transport and Telecommunications
(critical infrastructure)
iii) Power, Petroleum, Coal and other
minerals (energy and minerals)
h. In strategic sectors, there will be bare
minimum presence of the public sector
enterprises. The remaining CPSEs in the
strategic sector will be privatised or merged
or subsidiarized with other CPSEs or closed.
i. In non-strategic sectors, CPSEs will be
privatised, otherwise shall be closed.
OTHER BUDGET
ANNOUNCEMENTS WITH
REGARDS TO DISINVESTMENT
• The government has set a disinvestment
target of Rs 1.75 lakh crore for 2021-22.
• This includes strategic sale of IDBI Bank,
BPCL, Air India, among others.
• Besides IDBI Bank, the government would
also privatise two public sector banks and
one general insurance company in this
financial year.
• Government also plans to bring the IPO of
LIC along with minority share sale in other
PSUs.
BASICS
Disinvestment means the sale or liquidation of
assets by the government, usually of Central and
state public sector enterprises, projects, or other
fixed assets. The government undertakes
disinvestment to reduce the fiscal burden on the
exchequer, or to raise money for meeting
specific needs, such as to bridge the revenue
shortfall from other regular sources.
Strategic disinvestment is the transfer of the
ownership and control of a public sector entity
to some other entity (mostly to a private sector
entity). It includes both Majority Disinvestment
and Complete Privatisation. Department of
Investment and Public Asset Management
(DIPAM) has been made the nodal department
for the strategic stake sale in the Public Sector
Undertakings (PSUs).

1

Different approaches to disinvestments:
• Minority Disinvestment: the government
retains a majority stake in the company,
typically greater than 51%, thus ensuring
management control.
• Majority Disinvestment: Government, post
disinvestment, retains a minority stake in the
company i.e. it sells off a majority stake.
• Complete Privatisation: Complete
privatisation is a form of majority
disinvestment wherein 100% control of the
company is passed on to a buyer.
WHY DISINVEST?
• Strategic disinvestment in India has
been guided by the basic economic
principle that the government should not be
in the business to engage itself in
manufacturing/producing goods and services
in sectors where competitive markets have
come of age.
• The economic potential of such entities may
be better discovered in the hands of the
strategic investors due to various factors, e.g.
infusion of capital, technology up-gradation
and efficient management practices etc.
Model Question - Mention some of the features of the recently announced Disinvestment Policy. Also,
bring out the rationale behind opting for disinvestment
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05 TH FEBRUARY 2021
• Disinvestment is aimed at reducing the
financial burden on the government due to
inefficient PSUs and to improve public
finances.
• It introduces competition and market
discipline and helps to depoliticise non-
essential services as well as free up resources
for government to focus on essential services
like education and health.
WAY FORWARD
• It needs to be ensured that Privatisation
(Strategic Disinvestment) leads to greater
competition in all cases.
• It should be ensured that the proceeds of
such strategic sales aren’t frittered away in
interest or salary pay-outs but are reinvested
prudently in long-term infrastructure assets
that can yield enduring returns to the
economy.
• To allay concerns of cronyism, the strategic
sale process needs to be fair and transparent
with a minimum reserve price that does
justice to the valuable assets being auctioned
off. A third-party valuation of every PSU’s
assets and a minimum number of bidders,
should be necessary pre-conditions to going
ahead with each sale.

FEATURED NEWS OF THE DAY
#1
INDIA CAN BE THE NET
SECURITY PROVIDER IN
INDIAN OCEAN REGION:
RAJNATH
In News
Defence Minister Rajnath Singh recently said that India
can take on the role of being the net security provider
in the Indian Ocean Region as geopolitically it is a
reliable partner in the IOR.
WHAT IS MEANT BY THE TERM
NET SECURITY PROVIDER?
The term net security provider is usually meant as
enhancing mutual security of more than one country by
addressing common security concerns, including
dealing with transnational piracy, or responding to
disasters, etc. Specifically, it encompasses four different
activities: (i) capacity building; (ii) military diplomacy;
(iii) military assistance; and (iv) direct deployment of
military forces to aid or stabilise a situation.
• Modernisation of defence forces - Over the last
decade or more India has spent a lot of money on
modernising its defence forces. This includes buying
aircraft carriers, submarines and aircraft that give it
the ability to respond to security problems
throughout much of the Indian Ocean region.
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05 TH FEBRUARY 2021
•
Mission based deployment of the Indian Navy
- The MBD concept deploys mission-ready
ships at seven key locations in the IOR,
overseeing all entry and exit points in the
•
region. (see map below)
Humanitarian assistance to the IOR countries -
India has been one of the first responders in
case of any natural disasters in the region.
Other initiatives in the IOR
• Security and Growth for all the Region
(SAGAR): India seeks to deepen economic
and security cooperation with its
maritime neighbours and assist in building
their maritime security capabilities
• Information fusion centre- Indian Ocean
Region: To improve information sharing
along the sea lanes of communication.
• Logistics agreements: Logistics
agreements with France and USA to get
access to important ports like Djibouti,
Reunion Island etc.
FACTORS THAT INHIBIT INDIA
FROM EMERGING AS A NET
SECURITY PROVIDER
• Reluctance to be part of military alliances -
India has not been comfortable with the idea of
military alliances or even multilateral groupings
under some dominant power. Moreover
partnering exclusively with the United States is
highly contentious in domestic politics and
requires deft political handling. This factor
explains to a large extent, Indian opposition to
U.S. led initiatives or even bilateral issues
emphasising interoperability including the
Logistical Support Agreement.
• Performance and capacity of the Indian
defence industry - India’s state owned defence
industry has often been criticised for its
products and its performance. A downturn in
the Indian economy also affects its ability to
invest in the military modernisation of partner
countries.

WAY AHEAD FOR INDIA
• Improved information exchange - It must work
out the modalities of sharing information with
partner countries and using the available data.
Delhi must work with the Regional Maritime
Information Fusion Centre (RMIFC) hosted in
Madagascar and the Information Fusion Centre
(IFC) in Singapore.
• Ensure presence of Indian Navy at key
locations - Indian presence at key locations
such as the Andaman and Nicobar Islands, La
Reunion, and Cocos Keeling would allow for
effective monitoring and surveillance of key
chokepoints. This presence is crucial in India’s
quest to remain a leading power in the IOR.
• Other include – engaging with actors outside
the traditional IOR, focusing on speedy
completion of its commitments etc.
NEWS SNAPSHOT
#1
LITHIUM DISCOVERED IN INDIA
In News
The Government in a written reply to Lok
Sabha said that the preliminary surveys have
shown presence of lithium deposits of 1,600
tonnes in Mandya district of Karnataka.
IMPORTANCE OF DISCOVERY
• With increasing focus on renewable energy,
sustainable batteries are a gaining traction
as a viable alternative to conventional, fuel
run batteries.
• The growing demand for Lithium in India is
driven by the goal of Indian government to
increase the number of electric vehicles by
30 percent by 2030.
• India is spending a considerable amount of
money
• on Lithium import, which acts as a
drain to the Forex.
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05 TH FEBRUARY 2021
USES OF LITHIUM
• Lithium is a key element for new
technologies and finds its use in ceramics,
glass, telecommunication and aerospace
industries.
• Lithium is also used in psychiatric
medications and in dental imprints.
• The well-known uses of lithium are in
lithium ion batteries, lubricating grease,
high energy additives to rocket propellants,
optical modulators for mobile phones and
as a converter to tritium used as a raw
material for thermonuclear reactions i.e.
fusion.
OTHER STEPS TAKEN BY INDIA
• Khanij Bidesh India Limited had got into an
agreement with an Argentinian firm to
jointly prospect lithium in Argentina. The
company has the specific mandate to
acquire strategic mineral assets like lithium
and cobalt abroad.
• India’s first Lithium plant has been set up at
Gujarat in 2021. The refinery will use
Lithium ore to produce base battery
material. India currently relies on other
nations like China, Japan, and Taiwan for its
electric battery supply.
• TATA is working on 100% made in India Li-
ion batteries for Electric mobility and Energy
Storage Systems.
• India and Australia have signed an
agreement with respect to Lithium trade in
2019.
Note: Bolivia is the leading producer with 2.10
crore tonnes lithium reserves, and Argentina is
second largest with 1.7 crore tonnes reserves of
lithium.

#2
CENTENARY ANNIVERSARY OF
THE CHAURI CHAURA INCIDENT
In News
Prime Minister inaugurated the Chauri Chaura
Centenary Celebrations at Chauri Chaura,
Gorakhpur, Uttar Pradesh. Prime Minister also
released a postal stamp dedicated to the Chauri
Chaura centenary during the event.
CHAURI CHAURA INCIDENT
• On 2 February 1922, Non-cooperation
Movement was led by a retired Army soldier
Bhagwan Ahir against high food prices and
liquor sale. The protestors were beaten by the
local police and several leaders were
imprisoned at the Chauri Chaura police station.
• In response to this incident, on 4 February 1922,
a group of protestors gathered in front of the
local police station, demanding the release of
their leader and clashed with police.
• To control the situation, the sub-inspector in
charge ordered the police to open fire on the
advancing crowd-- killing three and injuring
others.
• In the ensuing chaos, angry mob advanced and
set the police station ablaze, killing all of its
occupants. The incident resulted in the death of
22 policemen.
• In view of this incident, Martial law was imposed
by the British administration in and around the
Chauri Chaura area.
• On 12 February 1922, reacting upon the
incident, Mahatma Gandhi halted the non-
cooperation movement at the national level. In
connection with the incident, Mahatma Gandhi
was also arrested and sentenced to six years of
imprisonment. However, he was later released
on grounds of ill health in February 1924.
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05 TH FEBRUARY 2021
#3
CORPUS FOR MICRO
IRRIGATION FUND IS
PROPOSED TO BE DOUBLED
In News
Budget announcement has been made to double
the initial corpus of Micro Irrigation Fund of Rs.
5000 created under NABARD, by augmenting it
by another Rs. 5,000 crores. Micro Irrigation is a
component of the Pradhan Mantri Krishi
Sinchayee Yojana which has the objective of
‘more crop per drop.’
ABOUT MICRO IRRIGATION
In the ensuing chaos, angry mob advanced and
set the police station ablaze, killing all of its
occupants. The incident resulted in the death of
22 policemen.
Importance of Micro Irrigation:
• Improves on-farm water use efficiency
• Enhances crop productivity
• Ensures better returns to farmers due to
reduced labour cost and fertilizer use
OBJECTIVE OF THE MICRO
IRRIGATION FUND
• Facilitate the States in mobilizing the
resources to provide additional incentives to
farmers for adopting micro irrigation
practices.
• States may also access MIF exclusively for
innovative integrated projects like high water
duty crops (like solar linked systems,
including projects in PPP mode.
• The central government provides 3% interest
subvention on loans extended to the State
Government under MIF.

TERMS AND CONCEPTS
#1 BRITISH NATIONAL OVERSEAS
(BNO) CITIZENSHIP
• It is a type of British nationality created in
1985 that people in Hong Kong could apply for
before the 1997 handover to China to retain a
link with the UK.
• The lifelong status, which cannot be passed
down to family members, did not give holders
any special rights.
• It meant only they could visit the UK for six
months without a visa.
• But the new system, in place from 31 January
2021, allows these BNO citizens and their
close family to apply for two periods of five
years to live and work in the UK.
• After the first five years, they are able to
choose to apply for indefinite leave to remain,
which means an individual can live and work
without reapplying for a visa.
• China in response has declared that it will “no
longer recognize” the British National
(Overseas) passport for Hong-Kongers.
#2 STARDUST 1.0
• Stardust 1.0 has become the first commercial
space launch powered by biofuel, which is
non-toxic and carbon neutral for the
environment as opposed to traditionally used
rocket fuels and was launched recently from
Loring Commerce Centre in Maine, US.
• The rocket is manufactured by Maine-based
aerospace company bluShift.
• It can carry a maximum payload mass of 8kg
and during its first launch carried three
payloads.
• It reached a height of 1,219 metres in the
space before parachuting back to Earth.
• These rockets will help to launch small
satellites called cubesats into space.
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05 TH FEBRUARY 2021
EDITORIAL OF THE DAY
#1 INDIA-CHINA ECONOMIC TIES:
IMPACT OF GALWAN ORF
Essence- As we go through current trade
scenario, it gets clear that the nationalistic
notions of bringing China to its knees — by
boycotting Chinese goods — has not been
fruitful. India-China economic ties are so
intertwined that historical animosities and
border disputes though crucial but passes onto
back seat of this relationship drive.
WHY YOU SHOULD READ THIS ARTICLE?
• To know about attempts that have been
made to reduce the India-China trade deficit.
• To get fodder on areas where Indian
industries & their export is dependent on
China’s inputs like India’s pharmaceutical
industry for which 2/3rds of its key
ingredients come from China.
• To understand sector wise impact on Indo-
China trade due to lockdown & Galwan valley
issue.
• It also cover steps taken by govt. to support
Aatma Nirbhar Bharat - mandated all
products to have the Country of Origin tag for
products on the Government e-Marketplace,
specifically restricting Chinese companies in
several sectors and networks import from
China citing cyber and security threats.
 05 TH FEBRUARY 2021

CASE STUDY OF THE DAY

Dhara Vikas: Ensuring Water Security through Spring-shed development in Sikkim

• Nearly 80% of the Sikkim’s rural households depend on springs for drinking water and
irrigation
• To ensure water security, Government of Sikkim has conceptualised Dhara Vikas initiative
• It is innovative programme to revive and maintain drying springs in Sikkim by spring-shed
development, developing a Village Spring Atlas and a Water Source Atlas for the state.
• It allows more water to percolate down to recharge underground aquifers.
• It has helped to alleviate the problem of rural water scarcity by reducing surface runoff of
rainwater.
• It has significant impact on crop patterns and yields and has improved sanitation practices
within the state.