Mitras Analysis of News : 22-6-2017

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1.Bringing GM to the table (The Hindu)

2.Charting banking sector’s future (The Live mint)

3.New class of bacterium found in Sunder bans (Times of India)

 

1.Bringing GM to the table (The Hindu) 

Synoptic line: It throws light on recent controversy related to the genetically modified (GM) crops in India. (GS paper III)

Overview

  • Recently the Genetic Engineering Appraisal Committee (GEAC), the scientific committee of the Ministry of Environment, Forests and Climate Change, that regulates genetically modified (GM) crops in India had cleared GM mustard for commercial production.
  • Opponents of GM crops has appealed to the Minister for Environment, who gives the final clearance, not to accept the GEAC’s recommendation. Opposition to GM crops is driven by irrational fears of harm to human health and having an environmental impact and accuse opposing environmental groups of misrepresenting facts.
  • While the debate is complex, involving a wide range of scientific, socio-economic, and political factors, it is important to understand the core issue involved.

Issue

  • The debate to allow GM crops for commercial purpose has been one of the more enduring

public policy debates over the last decade-and-a-half. Starting from Bt cotton in 2002 and the attempt to bring Bt Brinjal into commercial production faced serious resistance in 2010.

  • One of the principal reasons for opposition to GM crops is the potential for serious, irreversible damage to human health and the environment. Issue was main related to Bt Brinjal which involve direct consumption by humans, unlike Bt cotton.

Reasons cited for opposition

  • Two related issues that are fundamental to the opposition is invoking the precautionary principle for regulatory decision-making and a lack of trust in government and industry that promotes and benefits from GM technologies.
  • While GM supporters claim that there is little scientific evidence of adverse impacts so far, GM opponents cite the need for longer term assessment of adverse impacts and more concrete evidence of no adverse effects.
  • Regulations in Europe, where GM crops face similar opposition, explicitly invoke the precautionary principle as the basis for deciding whether GM foods should be allowed. GM opponents are invoking the precautionary principle, which is a widely incorporated one in several international agreements and treaties on the environment. In the context of technologies such as GM crops, there is significant scientific uncertainty over their safety.
  • All the safety tests for regulatory approvals are typically conducted by the same party that applies for commercialisation of GM crops, for example whether it is Mahyco on Bt Brinjal or Delhi University on GM mustard.
  • The tendency to operate in secrecy has not only created a serious distrust of the government and the promoters of GM crops but is also fuelling the conflict, at the time of rejecting Bt Brinjal, the then Environment Minister outlined the need for the GEAC “to draw up a fresh protocol for the specific tests that will have to be conducted in order to generate public confidence”.
  • The GM mustard case does not provide much evidence that anything has changed since the moratorium on Bt Brinjal.
  • If there is a genuine case that GM crops can improve yields and address India’s food security, then the GM supporters should start cultivating it in an environment of openness and transparency to allay genuine fears instead of dismissing GM opponents as being “irrational”.

Way ahead

  • There is need for the government to adopt a participatory approach to bring together all stakeholders to develop regulatory protocols that restore trust in the process. The promoters of GM technology should persuade consumers, farmers and activists that among various alternatives available for sustainable food production like organic farming, use of bio pesticides, GM technology is at least a serious option that we should embrace.
  • Promoters of GM food need to reach out to consumers in a transparent, engaging manner.

Question:  What are the issues involved with the use of GM crops for commercial purpose? Whether the GM crops is really sustainable? Give your views.

 

2.Charting banking sector’s future (The Live mint) 

Synoptic line: It throws light on the possible resolution of banking sector in India along with its problems. (GS paper III)

Overview

  • The Indian banking sector is at a critical juncture in its evolution. It is now clear that the slump in credit growth and increase in stressed assets has affected the profitability of all banks, and threatens the very survival of some of them.

Stress in Public sector banks

  • State-owned banks account for more than three-fourths of the stressed asset load, which is now far higher than their net worth.
  • Provision levels are inadequate, as the banks hold only 28% of gross non-performing assets and restructured assets, as provisions.
  • There is a $110 billion gap between the stressed assets in the system and the provisions made. Shifts in consumer preferences, combined with changes in technology and regulations, have created a perfect storm.
  • The way out will depend to a large extent on the speed and direction of stakeholder reactions.

Challenges to banks

  • The core challenge is that many of the public sector banks (PSBs) are undifferentiated, sub-scale, and with limited capabilities to be full universal banks. About 80% of them own only 25% of the assets.
  • They also operate in virtually every market segment with very limited sector or vertical-focused specialization. In fact, they focus on the same customer segments, offer similar products, and very often compete only on price.
  • Some of this is because PSBs face challenges that impede them from competing effectively. They have to shoulder a disproportionate share of social and nation-building obligations.
  • Policies on compensation and human resources reduce management autonomy, and inhibit their ability to attract and manage talent.
  • The recent bank consolidation debates often ignore the underlying challenges of India’s banking industry structure. While it is clear that an industry with over 20 undifferentiated, state-owned banks is not working, a country of India’s scale and diversity needs more and varied banks.
  • The industry plays a fundamental role in the delivery of social schemes which are critical at this stage of India’s economic development.

Evidences from other parts of world

  • Empirical evidence from bad-loan crises in other parts of the world suggests that resolution often coincides with a consolidation of the banks. To that extent, it is probably inevitable in India.
  • The perils of force-fitting state-owned institutions are well documented; a lasting solution will need to offer the banks more freedom with capital and talent.
  • Targeting a robust “end-state” industry structure and thinking beyond consolidation, are necessary for this to happen. And even as consolidation happens, innovation from existing and new players need to be encouraged to serve the large and diverse needs of the country.
  • If well executed, such a restructuring could catalyse a transformation of India’s banking sector.

Some possible solutions

  • PSB reform is a complex issue and there could be several paths to building a robust industry structure. One option could be to continue the status quo, where the 21 PSBs (after the merger of State Bank of India with its associates and Bharatiya Mahila Bank) operate as before, but with greater autonomy for their boards.
  • This option will have limited impact on improving the stability and performance of the system. A far more effective but disruptive option, would be to create mega-PSBs by consolidating entities into three or four players. While this would enhance their performance, it would be extremely challenging to implement.
  • Given the ground realities, the target end-state of the industry could well be a hybrid approach, creating one or two global banks and two to three large national banks through mergers. This would ensure that India has three to five banks, each with sizeable global or national presence. These large banks would offer a full-range of commercial banking services to corporate, small and medium enterprises (SMEs), retail, mass banking and international customers.
  • The remaining banks could continue under government ownership, but eschew lending to large corporates. They could specialize, with focus on select products or geographies, largely for retail and SME customers. Alternatively, they could shed their public ownership and chart a growth plan that best suits their expertise.
  • Identifying anchor banks for consolidation would be a logical first step to restructuring. The top three or four high-performing PSBs with sizeable scale (including international presence), better balance sheets, progressive management and global aspirations, could be the anchors.
  • National-scale players could be anchored by PSBs with strong national or regional brands, a multi-state presence and stronger balance sheets than regional counterparts.

Way ahead

  • While consolidation is required to address the challenges, it is not a solution by itself. The merged entities will need more oxygen to survive and thrive. Capital infusion to address stressed assets challenges, building a motivated and capable leadership team to ensure successful integration, and forging strategic partnerships to build new capabilities are crucial for success.
  • Alongside the mergers, avenues for privatization need to be explored for at least a few PSBs. The Bank Investment Company (BIC) with a holding structure that provides greater autonomy to boards and reduces government shareholding to below 51% in select PSBs has been talked about earlier. Overall, rationalizing the PSB industry-structure is as essential as consolidation to make sure India’s banks are able to thrive in a tough environment.

Question:  What should be the strategy to treat the ailing banking sector in India so that treatment is sustainable and affordable?

 

3.New class of bacterium found in Sunder bans (Times of India)

 Synoptic line: It throws light on the discovery of new class of bacteria which can have implications for industrial processes. (GS paper II)

Overview

  • New bacterial species could have wider applications in industrial sectors such as leather and textile industry

Discovery of new bacteria

  • Researchers in Kolkata have found a new species of bacteria that can grow in very high salt conditions. Named Streptomyces euryhalinusStrain MS3/20Tsp. nov, the new bacteria could be a potential source of novel bioactive compounds including drugs.
  • It belongs to the same Streptomycesfamily which has yielded several useful compounds in the past.
  • Researchers isolated this new bacterium from Lothian Island in the Sundarbans, which is home to mangrove trees known for specialised aerial roots that spread in open air to breathe.
  • Gene sequence studies have indicated that it is different from the reference type strains and is a new species, scientists claim in their study published in the Journal of Antibiotics.
  • Unlike other known bacteria of the same family, this new bacterium was capable of growing in water containing as high as 20 per cent salt.
  • Seawater, where it naturally occurs, has a salinity of only 3.5 per cent. Another characteristic of this organism is that it can be killed by most antibiotics, which signifies that its use is unlikely to pose environmental hazards. The bacteria is easy to grow in the lab at 28°C in an artificial medium.

Way ahead

  • Finding a new bacterial species from mangrove forests could have wider applications in industrial sectors such as leather, fermentation, textile, and paper processing industry.
  • Some novel microorganisms in found natural environment can be used as source for drug discovery as well.

Question:  What are industrial bacteria? What are their utility for the industrial processes?

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